(Adds Bezeq comment, share reaction)
JERUSALEM Jan 16 Israel's Communications Ministry took another step in creating a wholesale telecoms market by establishing prices companies will have to pay for telephone and Internet infrastructure.
There are currently just two companies that own their own infrastructure - Bezeq Israel Telecom, whose services mainly run over copper phone lines, and cable company HOT.
Bezeq said on Thursday the proposed prices will "negatively impact" its financial results and its shares fell 2.7 percent. It also expects, though, that it might be allowed to merge its units and supervision of its rates might be lifted, which could have a positive impact.
The ministry is trying to break the "duopoly" through reforms and by supporting a super-fast fibre optics network, which is in the process of being built by Israel Broadband Co.
It is also trying to enable Cellcom and Partner Communications - Israel's two largest mobile phone operators - to reach consumers and widen their service offerings and launch TV over the Internet (IPTV).
"Opening the possibility to all telecoms companies to use Internet infrastructure of Bezeq and HOT, at wholesale prices, will finally allow for competition in the telecoms market and lower prices the public pays for communications services," said Communications Minister Gilad Erdan.
Pending a Feb. 16 hearing, the ministry set a price of 50 shekels ($14.35) a month for 20 megabits, with higher prices for faster speeds.
Citi analyst Michael Klahr said a market launch is expected in the second half of 2014.
"Pricing ... seems sensible to us, providing some room for new operators at lower bandwidths while leaving the IBC some room to compete at the higher end (100 MB)," Klahr wrote in a client note.
He noted that it is unlikely Cellcom and Partner will compete only for Internet customers.
"Rather we expect greater price competition in a combined ISP and Internet access product and in triple play with fixed telephony and later quad-play that includes IPTV," he said.
UBS analyst Roni Biron said the suggested prices were somewhat more favourable for the wholesalers than for Bezeq.
"We hold on to our view that the actual impact on Bezeq should be mitigated by its video content advantage as well as ability to cross-sell services and streamline its structure once its structural separation is removed," he said.
($1 = 3.4838 Israeli shekels) (Reporting by Steven Scheer)