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Mirs, Xfone win gov't bid for cell netowrk license
Two new cell service providers launched after winning NIS 700 million bid. Market, users brace for expected price decrease
Mirs Communications and Maraton Telecom's Xfone 018 have won a government tender that grants them the license to establish their own cellular phone infrastructure in 2012.
The two companies bid against Golan Telecom and Select Communications for two 3G frequencies. Select dropped out of the auction when it reached NIS 400 million ($116.3 million).
Xfone 018 is to pay NIS 710 million (approx. $206 million) while Mirs is to pay NIS 705 million ($204.9 million) for their licenses – more than double the initial payments made by existing service providers, Cellcom, Pelephone and Partner, for their 3G frequency bands, excluding annual license fees.
Reform in telecom market
Golan Telecom expressed concern Tuesday, that the exorbitant prices the new carriers have agreed to will raise the prices of consumers services: "We have come to the conclusion that winning the tender today will be a burden to the Israeli customer, who will not get the consumption and communications revolution that he has yearned for, for so long," the statement read.
However, the Communication Ministry is set to return these payments to the companies, minus interest and a NIS 10 million ($2.91 million) license fee, if they manage to win at least a 7% market share within five years.
"This will complete the reform in the communications market, which aims to increase competition in the cellular service branch," Communications Minister Moshe Kahlon said before launching the tender. "The tender's results are expected to transform the cellular market in Israel. A more competitive market will reduce prices, improve consumers services and of course, will upgrade the technological innovation."
The reform, which was launched in 2010, included the introduction of the virtual cell phone networks, reduction in exit fees for customers who wish to switch carriers and reduction in connection fees.
It was the first time since 2001 that such an auction was held. The prices of the new carriers' services are yet to be determined.
Aspiring for 90% coverage in 7 years
Mirs was expected to win the tender, sicne if it did not outbid its competitors it would have lost its right to operate. It now appears that Mirs and Hot will join forces in providing low-priced communication packages.
The new cellular service providers will be required to gradually set up their own networks, and their coverage is expected to reach 10% of the country by February 2012. The carriers will be able to use antennae belonging to existing carriers in regions where they have yet to establish infrastructure.
The carriers are expected to provide coverage to 40% of the country in four years, and 90% in seven years. Kahlon will have the option of extending these deadlines once, for a period no longer than three years.
Calclaist reporter Gilad Nass contributed to the report
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