Israel's Bezeq to lease telecoms infrastructure to rival Partner

JERUSALEM Thu Nov 22, 2012 7:36am EST

JERUSALEM Nov 22 (Reuters) - Bezeq Israel Telecom will give its rivals access to its broadband infrastructure in return for licence concessions from regulators looking to boost competition and lower costs in the sector.

Bezeq said on Thursday it will lease its digital subscriber line (DSL) to Partner Communications enabling its rival to provide a bundled service supporting Internet, voice, media and television.

Bezeq is also in similar talks with Cellcom, Israel's largest mobile phone provider.

In return, Bezeq wants the regulator to relax its restrictions on its licence allowing it to increase its stake in satellite TV provider YES and provide bundled packages to consumers consisting of home and mobile phone, TV and Internet.

In a bid to boost competition and lower telecoms costs, Israel's Communications Ministry has created a wholesale market and is forcing Bezeq - the dominant player in fixed-line telephony - and cable operator HOT, to allow others to lease their infrastructure.

The ministry started with the mobile phone industry, which this year saw the entry of six new operators, sparking a price war and leading many customers to switch companies. That resulted in a steep drop in revenue and profit at Cellcom, Partner and Bezeq unit Pelephone, the third-largest mobile operator.

Partner and Cellcom have long sought to expand their service offerings to multi-channel TV but have always lacked the infrastructure.

"Partner understands that in the end the market will again be divided among three large players, and in the best case for consumers among four players," said Eran Jacoby, an analyst at DS Brokerage.

"Therefore it should sign a contract, save transmission costs and offer a package of services to consumers that will give it an advantage over competitors."

Partner declined to comment on when a final deal would be reached and when it would offer TV over Bezeq's network.

A Bezeq spokesman said it would likely be sometime in 2013.

"Strategically, it's right to advance the wholesale market. From the start we said we are for the wholesale agreement because we know that afterwards we can get an easing of restrictions from the Communications Ministry," he said. (Editing by Mike Nesbit)