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STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
License Auctions
Update
Daniel Rosenne
Director General, Ministry of Communications
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONSPresentation Agenda
The Telecommunications Environment:Market overviewFixed servicesMobile services
License Auctions:Fixed wireless access2G/3G mobile.
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
Israel`s Telecommunications
2.8 million main telephone lines(45% penetration).
4.4 million mobile customers, on four networks: Pelephone, Cellcom, Partner/Orange & MIRS (70% penetration).
1.2 million cable-TV & 0.1 million DBS connected households. (Cable: 3 operators, 70% of passed households, 95% household coverage).
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
Internet Services
~40 Internet service providers, 1,000,000 dial-up & 8,000 directly connected customers, 50,000 domains.
Penetration ~ 35% of households, 50% of businesses.
IIX (Israel Internet eXchange) non-profit peering point.
“Hands-off” overall regulatory policy.
High growth ~ 50% annual.
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
Telecommunications Services Market - 1999
InternationalLong-Distance
CableTV
Terminal Equipment& Business Systems
Internet services
FixedServices 35%
MobileServices 44%
10%7% 2%2%
Total telecom services market ~ $ 4.2 billion
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
The Mobile Boom:Israel Telecommunications Services Revenues, 1995-1999 ($US M)
500
1,000
1,500
2,000
1995 1996 1997 1998 19990
ILD
MobileFixed
CATV
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
Fixed servicesDriven by Broadband Demand
Actual competition expected during 2001
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
Fixed Services Competition
Prolonged Delays: Politics: May 1999 elections. Cable companies disputes:
Fulfillment of universal service obligation. Competition - DBS services, content. Finance Ministry seeking payment for granting
telecom license. Justice Ministry seeking limits on content control.
Union disputes - safeguarding ‘employee rights’.
Rough Road Ahead: Telecom law change underway, allowing cable
companies entry into telecom.
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
The Birth of New Entrants
Regulation allowing fixed services licensing - published September 2000.
FWA tender - published October 2000.
‘Ofek’ fixed services license - granted February 2001.
Cable companies restrictions removal - Telecom Law update due during 2001.
Roll out of several competitive fiber-based backbones - IC1, Israel Railways, Ofek, Shavit, Cellcom.
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
Ofek New WorldIsrael’s first licensed CLEC
Owned by Eurocom group (50.33%) & Arison investments (49%).
Fixed services general license – as of 1 February 2001.
Plans for modern IP based infrastructure, utilizing 1000 Km fiber cables.
Covering 27 “natural zones” (out of 52).
Will offer wide range of telephony & broadband data services, for business & households.
Plans for $ 1Bn investment, 1500 employees.
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
IC-1 (Israel Coasting one)
Repeaterless submarine system along the Israeli coastline.
Seven landing points: Nahariyya Haifa Netania Herzliyya Tel Aviv Rishon LeZion Ashkelon.
48 fibers in a double ring festoon arrangements.
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
Mobile Operators
Pelephone Cellcom Partner/Orange MIRS
800 MHz 800 MHz 900 MHz 800 MHz
NAMPS& TDMA GSM iDEN
CDMA (ESMR)
Trunking - 19941987 1995 1999 Cellular - 2001
BellSouth Hutchison Bezeq Safra Brothers Matav Motorola
Motorola Discount Investments Elbit.com Ampal(Shamrock) PEC Eurocom
private investors free float
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
Cellular Telephony
Rapid growth - 125,000 subscribers in January 1995. In November 1999 the number of mobiles (2.9 million) exceeded the number of fixed lines.
Key expansion stimulators: Perceived low tariffs: ~ US $0.11 to 0.23/minute
air time, ~ $11 to 29 monthly charge. ARPU (Average Revenue Per User) - US$50 to 60.
Calling party pays (CPP). Nationwide coverage & “Land-line”quality. Competition & marketing innovations.
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
Average Number of Monthly Usage Minutes
1995 1996 1997 1998 1999 2000
Fixed
Bezeq 687 687 679 699 732
Mobile
Pelephone 530 430 320 300 295
Partner 427 361(Q4) (Q4)
Source: Bezeq Eurobonds Prospectus, August 2000; Partner reports
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
Mobile Competition: key trends - 2001
New services: SMS, WAP, wireless internet. Content: news, media & data services. Location based services.
New pricing models: Regional pricing plans. Pay as you use programs. Low cost position for low usage segments.
Churn reduction plans.
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
Licenses For New Operators
General licenses for fixed domestic services (infrastructure, transmission & data, telephony) are issued to applicants meeting economic and know-how criteria.
General licenses requiring spectrum resources (mobile, FWA) shall be issued through public tenders.
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
Proposed New Frequency Bands Allocations
Band Application Allocation
2 GHz 2G/3G Mobile 175 MHz
3.5 GHz N-FWA/WLL 72 MHz
26 GHz B-FWA/LMDS 1200 MHz
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
Fixed Wireless Access Auctions
Up to 3 operators, selected in combined MSR (Multiple Simultaneous Round) auction.
Frequency Allocations, for each operator: 26 GHz Broadband: 2 x 196 MHz. 3.5 GHz Narrowband: 2 x 12 MHz.
Participation of Bezeq & cable operators in the auction is excluded.
Roll-out obligation: 3 years.
Tender published: 12 October 2000.
Applications deadline: 20 March 2001.
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
2G/3G Mobile License Auctions
MSR (Multiple Simultaneous Round) combined auction for 4 licenses, allowing usage of the following frequency packages: 2G FDD: 2x10 MHz. 3G FDD: 2x10 MHz. 3G TDD: 5 MHz (for 3 packages only).
Reserve price: US $ 100M. 25% reduction for new operators.
Tender publication: 28 March 2001. Applications deadline: 17 July 2001.
STATE OF ISRAEL
MINISTRY OF COMMUNICATIONS
2G/3G Auction: Frequency Allocations
Allocation per License [MHz] : Allocation Date
Frequencies
[MHz] License A License B License C License D
1710-1785 2X6.2: 1/2001 2x6.4: 1/2001 2x10: 1/2001 2x10: 1/2002
& 1805-1880 2x3.8: 1/2004 2x3.6: 1/2004
1920-1980 2x5: 1/2001 2x5: 1/2001 2x5: 1/2001 2x5: 1/2001
& 2110-2170 2x5: 1/2004 2x4.7: 1/2004 2x5: 1/2004 2x5: 1/2004
1900-1920
or 2010-2025 5: 1/2005 - 5: 1/2004 5: 1/2004