Photographer: Ahikam Seri/Bloomberg

Israel's Bezeq Weighs Triple Package to Keep Customers

Updated on
  • Telecom giant said to mull TV, internet, fixed-line offering
  • Bezeq said to price plan at about 150 shekels per month

Israel’s largest telecommunications company is holding internal discussions about bundling services to better compete with rivals that have been stripping away clients, according to three people familiar with the matter. 

Bezeq International Ltd., the internet unit of Bezeq Israeli Telecommunication Corp., is considering launching a television, fixed-line and internet package in coming weeks, said the people, who asked to remain anonymous because the talks are private. Two of the people estimated the package would cost about 150 shekels ($43) a month, similar to a plan from Cellcom Israel Ltd., the country’s biggest mobile operator, for 149 shekels per month. Discussions about the issue are still ongoing and management has yet to take a final decision, the three people said.

Israeli regulation bars Bezeq from merging its TV, telephony, mobile and internet units and bundling those services for customers. Bezeq therefore plans to offer the new package through Bezeq International and tack on a cheaper telephony and a new television offering called Sting TV, the people said.

A spokesman for the company referred questions to Bezeq International. Bezeq International spokeswoman Ortal Zohar declined to comment.

Under Pressure

Bezeq’s profits have been under pressure since government measures to introduce competition sparked price wars for mobile, television and internet services. With revenue per mobile user down 60 percent in the past seven years, rivals including Cellcom and Partner Communications Co. have expanded into internet and television.

Bezeq shares have fallen 17 percent since investigators in June began probing Bezeq’s controlling shareholder, Shaul Elovitch, and other top executives for alleged securities fraud and improper ties to the Communications Ministry. On Monday, the Israel Securities Authority said it had found evidence of criminal wrongdoing and was turning over its findings to prosecutors. 

Elovitch and other company executives have denied any wrongdoing. Shares were up 1.9 percent Monday at 5.36 shekels as of 3:16 p.m. in Tel Aviv.

While Bezeq aims to reverse customer turnover, concerns remain about the company’s profit margins. Bezeq risks cannibalizing its own TV revenue after the company launched Sting, a streaming television service that’s cheaper than the company’s satellite services, Barclays Plc analyst Tavy Rosner wrote last month in a note to clients. Bezeq is charging 99 shekels per month for Sting, compared to the 229 shekels users pay on average for its Yes satellite television service.

Bezeq, which owns the majority of Israel’s telecommunications infrastructure, has long dominated the market, taking in 86 percent of profits in the sector last year. The government has tried to correct this imbalance by instituting reforms allowing competitors to offer services of their own using Bezeq’s infrastructure.

Bezeq has lobbied the government to end “structural separation,” which keeps the company from merging its units and reaping the cost savings, arguing that Israel’s telecom sector now is sufficiently competitive. Its rivals say rolling back this regulation would undo any progress and let Bezeq crush them.

For more on "structural separation," click here.

Chances for regulatory reform were derailed when the ISA investigation began. The company acknowledges that the probe delayed a government decision on structural separation, but still expects the law to be changed sometime next year, Interim Chairman David Granot said in August.

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