Just Released: "Israel Telecommunications Report 2014"

BMI Industry View

The increase in competition in Israel's mobile market, following the arrival of new MNOs and MVNOs, and cuts to interconnection rates in 2012 led to a sharp decline in key operational and financial indicators, notably ARPUs and voice revenues, during FY12 and H113. We expect operators to respond to the erosion of their top line financial results by expanding their high value service offerings and migrating existing customers unto postpaid subscriptions. We also expect mobile operators with high-speed fixed infrastructure to perform strongly in terms of revenue and subscriptions growth during our forecast period, though to 2017, by cross-selling mobile, fixed-line and pay-TV services. This strategy has already proved successful for some operators and will be vital for reducing churn amid intense competition in the market.

Full Report Details at
- http://www.fastmr.com/prod/723467_israel_telecommunications_report_2014.aspx?afid=301

Key Data

* Mobile subscriptions grew marginally by 0.5% y-o-y in the 12 months to June 2013. The slow growth is attributable to net subscription losses of 126,000 during H113.
* The rate of decline of the market share weighted average ARPU is slowing down, following a decline of just 4.7% in H113 compared to a decline of 14% in FY12.
* The fixed telephony and fixed broadband markets recorded positive growth in 2012, despite the high penetration of mobile voice and data services.

Key Trends & Developments

Israel's Ministry of Communications (MoC) has made proposals that will prevent telecoms companies from blocking or limiting network traffic, applications or equipment on their networks. The government has proposed an amendment that even equipment will be included in net neutrality, ensuring all players in the telecoms market are ascribed the same rules. Israel's net neutrality law will prevent operators from prioritising their own services over those provided by third parties and also restricting the use of built in features such as mobile Wi-Fi hotspots or using a device on a different network. The MoC's decision to regulate net neutrality puts Israel with a small group of countries that have legislated on the issue. BMI believes other countries will follow suit, as a move to protect consumers. Nevertheless, the issue remains difficult for telecoms operators as the requirements for network spend are a heavy burden but they are required to ensure their networks can meet the ever growing content demands.

Israel's leading telecoms operators reported mixed financial results for the first six months of 2013. While fixed line incumbent Bezeq reported an increase in profits, driven by its focused policy of initiating streamlining and efficiency measures across all the segments, in salaries and in general operating expenses, Cellcom and Partner reported much weaker results for the same period owing to sharp declines in mobile revenues.

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