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IEC telecoms venture in doubt as Elbit drops out of tender?

1 Jun 2012

Elbit Systems has reportedly dropped out of the tender for the creation of the telecommunications company which will operate over infrastructure owned by the Israel Electric Corporation (IEC), Globes Online reports. It is understood that Elbit had been reconsidering its decision to bid amid concerns that the venture may prove too risky. With government reassurances failing to persuade it to remain in contention, just two would-be bidders reportedly remain, those being Israel’s BATM Advanced Communications and Sweden’s ViaEuropa. However, BATM’s bid was expected to be made in partnership with Elbit, and the withdrawal of the latter from the process may yet thin the bidding crowd still further, and indeed place the future of the entire tender in doubt. In the wake of the development tenders committee chairman Zvi Harpak was cited as noting that the committee was studying the significance of Elbit’s withdrawal, while saying that he remained optimistic about the tender.

The report notes that, with a view to encouraging bidders, the state has decided to reduce IEC’s holding in the proposed joint venture to 40%, while lower initial investments and longer deployment deadlines have also been introduced as a means to making the proposition more attractive. Despite such moves, a fundamental issue regarding IEC’s relationship with any would-be partner remains, with potential bidders thought to have suggested the powerco’s terms are unreasonable, in part because it has refused to reduce the JV’s planning and work costs, while it refuses to allow private contractors to be used on its infrastructure.

As noted in TeleGeography’s GlobalComms Database, in early October 20111 the Israeli government announced that it was seeking an investor to help build a 25,000km fibre-optic network that would bring ultra-high speed internet to Israel and increase competition. Approximately 65% of the population are expected to be able to access the internet at speeds of 100Mbps by 2018, with the remainder of the country receiving coverage by 2020. Under the initial plans the investor would have taken a 51% stake in a new private company (now raised to 60%, as mentioned above), with the JV originally expected to be formed by April 2012. Registration to participate in the process opened on 10 October 2011.

Israel, Israel Electric Corporation (IEC)

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