Cellcom set to raise mobile tariffs in response to lower interconnect fees

18 Nov 2010

Israeli mobile network operator Cellcom has become the first cellco to confirm that it will increase its call rates in response to the recently announced enforced reduction of mobile termination rates. As previously reported by CommsUpdate, in September 2010 Israel’s Ministry of Communications (MoC) unveiled proposals of an almost 73% reduction in interconnection rates, despite objection from the country’s cellcos, which claimed that such a move would 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.

In response to the rate changes, Cellcom has said that it is to increase fees across a number of its tariffs, while rates will also rise for subscribers that currently have no long-term contract with it. On average prices will increase by 4%, while some calling plans could see rate rises of as much as 20%. Cellcom, the country’s largest mobile operator by subscribers, had noted on the announcement of the termination fee reduction that the change would ‘have a material impact on company results’; it claimed 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. Commenting on the decision to increase its rates for customers Cellcom said: ‘The rates update was made for only some customers, and is due to higher costs and the erosion of rates. The rate of the increases is substantially less than the erosion in rates in 2010’.

It is widely expected that Cellcom’s two major rivals, Partner Communications and Pelephone, will unveil similar tariff increases in the coming weeks.

Israel, Cellcom