Israel Electric Wins Finance Ministry Approval for Telecom Entry

Israel Electric Corp. won the finance ministry’s approval to build a nationwide fiber-optic network as the government moves closer to opening up the telecommunications infrastructure to competition.

The 5 billion-shekel ($1.3 billion) network seeks to provide fast Internet connectivity and will be set up in a venture between Israel Electric and a private company, the Ministry of Finance said in an e-mailed statement today. The state-run utility would now require permit from the Ministry of Energy and Water Resources.

Israel Electric’s network would compete with incumbent providers Bezeq Israeli Telecommunication Corp. Ltd. (BEZQ) and Hot Telecommunication System Ltd.

“In the eyes of the government this represents an important step in generating competition in the fixed-line sector,” Roni Biron, chief analyst at UBS Securities Israel Ltd., said today by phone. “It is a mid- to long-term risk to Bezeq, but execution of the project and its business model remain to be seen.”

Bezeq shares were trading 1.4 percent lower at 4.337 shekels at 2:36 p.m. in Tel Aviv. The benchmark TA-25 index advanced 0.2 percent.

A group headed by Sweden’s communications operator ViaEuropa AB is the sole bidder in the tender process to establish the high-speed fiber optic network alongside the nationwide electric grid, in conjunction with Israel Electric. Deployment of the network is scheduled to start at the end of 2013, the ministry said today.

To contact the reporters on this story: Shoshanna Solomon in Tel Aviv at ssolomon22@bloomberg.net; Gwen Ackerman in Jerusalem at gackerman@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net

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