BDI CODE 2014 - Israel's Leading Companies, Law Firms, Accounting Firms, Best Companies To Work For - page 268

BdiCode 2014
SERVICES
268
Communications
General
2013 continued to present challenges to the companies in the communications
market. The decrease in earnings from activity in the cellular industry continued
to negatively influence the aggregate earnings in the market that were
estimated at NIS 27 billion.
In recent years we have witnessed a number of consumer reforms and
regulatory activism in the Israeli communications market; making the migration
of telephone numbers easier, entry of new operators into the cellular market
and cancellation of exit fines. Continuing in this spirit, the Communications
Ministry, under the leadership of Minister Gilad Ardan has been promoting
reforms in the wholesale market. As part of the efforts of the ministry to
increase competition in the duopolistic landlinemarket, it was decided to initiate
a reform that would enable companies to lease lines from Bezeq (and later
from Hot) at a wholesale price determined by the regulator. Implementation
of the reform is expected to lower the cost to the consumer and ease the
unwieldiness of contracting with two separate companies for Internet service,
one for “infrastructure” and another as the “supplier” (ISP).
The escalation of competition in the communications branch resulted in
deterioration of employment security of employees in the industry. The response
was not slow in coming: 2013 and the beginning of 2014were characterized by
labor organization by employees of almost all the communications companies.
Employees of Pelephone were the forerunners, when in December 2013 the
company was the first of the cellular companies to sign a collective labor
agreement. Employees of Partner, Cellcom, Bezeq International, Hot and Hot
Mobile are also in varying stages of organization or negotiations concerning
collective agreements.
After a number of years of speculation regarding entry of one of the cellular
companies into the realm of television, Cellcom announced officially, in June
2014, that it was entering the world of multi-channel television and would
compete with Hot and Yes to win over the Israeli viewer. As a consequence
of the availability of higher speed Internet and implementation of the reform
in the wholesale market it is anticipated that other companies will join in the
competition.
Cellular Communication
Further to the announcement of Partner and Hot Mobile in November 2013
regarding joint establishment of a fourth generation network, the Antitrust
Authority approved the initiative inMay 2014. That samemonth Golan Telecom
and Cellcom signed a similar agreement according to which Golan would
receive the right to utilize all of Cellcom’s fourth generation technologies as
well as those of older generations.
Consumers in the communications branch continue to benefit from the
possibility to easily migrate their service among the various cellular companies,
however it is possible to notice a slowing down in the rate of migrations: in
2011 (the first year of implementation of the reform relating to migration
of numbers) an increase of 130% was registered in comparison to 2010,
in 2012 an increase of 72% was registered in migrations, and in 2013 1.8
million numbers migrated between the various companies, 29% more than
in 2012. The main losers were the three major cellular companies who lost
240,000 numbers to the other companies in 2013.
In 2013 the major cellular companies continued to lick the wounds inflicted
by the reforms, by reducing expenses and cutting profitability. The aggregate
earnings of the leading cellular companies amounted to NIS 11.4 billion, a
drop of 17% relative to the previous year, which completed a decrease of
36% over the past two years. The amounts of the operational profits also
indicated a decrease, which in 2013 stood at an average amount of 12% as
opposed to 18% in 2012 for the leading companies.
Cellcom concluded 2013 with earnings of NIS 4 billion, a decrease of 18%
compared to 2012. Pelephone with earnings of NIS 3.8 billion and Partner
with earnings of NIS 3.6 billion concluded 2013 with drops of 15% and
20% respectively.
Israelis continue to exploit the “All Included” programs offered in the cellular
market and speak more and more; in 2013 the average number of minutes
per subscriber increased by 13%. Partner’s customers spoke for an average of
522 minutes per month in 2013, an increase of 16% in comparison to 2012.
Pelephone’s customers spoke for 10%more minutes in 2013, an average of
462 minutes per month. Hot Mobile’s customers used the highest number
of minutes - 575, an increase of 10% in relation to last year.
After the average income per subscriber dropped last year below the threshold
of NIS 100 per subscriber, 2013 brought with it an additional milestone for
the industry, when the average income per subscriber settled below the
threshold of NIS 90. Partner experienced the most drastic drop in income per
subscriber, 14%, from NIS 97 in 2012 to NIS 83 in 2013. Cellcom concluded
the year with a drop of 11%, from NIS 87 last year to NIS 78, and Pelephone
registered the most modest decrease, of 9%, to NIS 86 per month.
In the framework of processes to increase efficiency, the major companies
in the industry cut back their aggregate personnel deployment by 20% to
11,700 employees. Partner cut back personnel by 25%and at the end of 2013
deployment stood at 4,000 employees. Cellcom, with the highest number of
positions, 4,400 cut back personnel by 19% and Pelephone concluded 2013
with 3,300 employees, a reduction of 19% in relation to last year.
The parallel import activity and sales in private stores, contributed greatly to
the drop in prices of devices in recent years and those hardest hit were the
cellular companies; earnings from the sale of peripheral equipment continue
to drop and in 2013 the major companies registered a decrease of 23% in
sales of equipment. At Cellcom sales were cut by 31% and amounted to NIS
882 million, at partner a drop of 22%, to NIS 703 million was reported, while
Pelephone concluded the year with sales of a NIS billion, a decrease of 17%
compared to the previous year.
Landline Communications
Use of cellphones is slowly replacing use of landlines and in fact this is the
second year in succession in which the number of subscribers in Israel shrank
by 2%. In 2013 the aggregate number of lines of Bezeq and Hot stood at
2,892 thousand as opposed to 2,944 thousand last year. In 2013 Bezeq
lost 52 thousand subscribers and concluded the year with 2,216 thousand
subscribers, which reflects market share of 77%. Hot maintained the number
of subscribers compared to 2012, 676 thousand subscribers, which reflects
a market share of 23%.
According to the reduction in the aggregate number of subscribers, aggregate
income of Bezeq and Hot from landlines was also impaired, when in 2013 it
was estimated at NIS 6.5 billion, a reduction of 2% relative to 2012. Bezeq is
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COMMUNICATIONS
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