05 November 1999

ISRAEL's telecommunications sector is relatively mature by regional standards. Mobile phone and long-distance communications services have been opened up to competition and domestic fixed line calling - the last monopoly enjoyed by the state's Bezeq Israel Telecom - is expected to be liberalised in 2000.

Penetration rates are high. About 40 per cent of Israelis have mobile phones serviced by three operators - the second highest penetration rate worldwide after Nordic countries. Cellcom Israel and Pelephone Communications use the narrow advanced mobile phone system (NAMPS), the system used in the US. The youngest operator, Partner Communications Company, uses the GSM system.

The domestic fixed line market, still the largest in the telecommunications sector, although increasingly under siege from cellular telephony, has a penetration rate of 47 per cent, or 2.8 million telephone lines - well above Middle East standards. The international calling market was opened up to competition in July 1998 when two new operators, Golden Lines and Barak, started operations. Long-distance calling tariffs have since been slashed, while all traffic from Jordan is being channelled through Golden Lines due to a dispute between Bezeq International and Jordan Telecommunications Company.

The liberalisation of the domestic fixed line calling market is likely to occur in 2000, after which Bezeq will be privatised. The 54 per cent stake will not be sold through the local stock exchange, as had previously been envisaged. Instead, control of the company will be sold to strategic investors. However, there are doubts whether a new entrant will be able to compete with Bezeq for domestic telephone services because the charges for local calls are too low and the cost of putting in a separate infrastructure is so great.

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