Israeli regulator reveals interconnection fee reductions

3 Sep 2010

The Israeli Ministry of Communications (MoC) has unveiled proposals for a reduction in interconnection rates, announcing cuts of almost 73%, Reuters reports. The proposed legislation comes despite much objection from the country’s mobile network operators, which have claimed that the move will damage both their profits and revenue. Under the MoC’s proposals interconnection fees will fall to ILS0.0687 (USD0.018) per minute from the beginning of 2011, down from the current rate of ILS0.251, while a further reduction, to ILS0.055, will come in to force from the start of 2014. While the reductions are significant, they are not as deep as had been considered; initially the MoC had said it could reduce the rate to as low as ILS0.0414 per minute. Commenting on the plans, Moshe Kahlon, the Israeli minister of communications, said: ‘Reducing connect fees will save the public about a billion shekels a year, significantly lower the price of a call from landline to mobile phones and increase competition that will allow the entry of new cellular companies already in the coming months.’

The country’s largest mobile operator by subscribers, Cellcom, has reiterated its opposition to the proposals however, and according to Globes Online the cellco said that the lower fees ‘will have a material impact on company results’, hinting that a legal challenge to the ruling could be forthcoming. Cellcom is claiming it expects to see a EUR420 million (USD538 million) drop in EBITDA and EUR320 million fall in net profit in the first year following the initial fee reduction. The Israeli wireless sector’s other two players, Partner Communications and Pelephone, have meanwhile said they are considering what course of action to take in response to the proposals.