The ministry made as a condition to the license that HOT set up a separate company to offer ISP services, similar to its main rival Bezeq Israel Telecom, which is the dominant telecom provider in Israel.
HOT shares closed 3.8% higher at a new year high of NIS 57.42 (about $16).
HOT leads the multichannel TV market with some 889,000 subscribers but it has been losing customers to Bezeq digital satellite TV unit YES, which has 570,000.
HOT already supplies cable lines for the internet to about 741,000 customers but they have needed to use another company as a service provider.
Bezeq offers internet to 1.06 million subscribers via DSL. Its ISP subsidiary, Bezeq International, has a 36% market share in the sector.
Bezeq and HOT also go head-to-head in the fixed line telephone market.
Bezeq has recently been given the green light to offer packages of fixed-line phone, and Internet via DSL and ISP services. HOT, meanwhile, has been offering a triple-play of cable TV, phone and Internet, excluding the ISP.
HOT said separately it had signed an agreement to refinance its debt.
HOT will receive up to NIS 3.4 billion ($940 million) for seven years, with the funds – mostly from Israeli banks – to be used to pay down outstanding credit and finance ongoing operations.
The company said in a statement it would soon pay a dividend of NIS 500 million ($138 million) and another NIS 500 million dividend in 2011.
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