February 5, 2014 / 3:56 PM / 4 years ago

HOT owner sees consolidation in Israeli mobile sector

* Mobile phone operator says Israel mkt crowded

* HOT is relatively new entrant

* Expects sector to consolidate to 3 players


By Tova Cohen

TEL AVIV, Feb 5 (Reuters) - Israel’s mobile phone sector, which has expanded in the past two years as the government issued new licenses, will eventually consolidate back to about three operators, said the owner of local player HOT.

Reform over the past two years increased Israel’s mobile phone sector to eight operators and sparked a price war that has slashed costs for consumers but sharply reduced profits at Cellcom, Partner and Bezeq Israel Telecom unit Pelephone, which previously each had about a third of the market.

HOT, owned by French cable group Altice, was one of the new entrants to the mobile market but Patrick Drahi, founder of Altice, said the market was now crowded.

“I am happy to be in the mobile industry but like everywhere else in the world we have too many mobile players here,” he said on Wednesday at his first press conference in Israel.

HOT, which also offers fixed-line and Internet services, has 1.2 million of Israel’s 2 million multi-channel TV customers. It accounts for 27 percent of newly listed Altice’s revenue, which totalled 2.4 billion euros in the first nine months of 2013.

Drahi said he expected to see consolidation in the mobile industry around the world and that in Israel the regulator would begin to allow consolidation in about two years and the number of operators would eventually narrow to three.

There was now too much focus on short-term competition instead of long-term investment.

“It’s important the operators are strong enough to invest and to avoid being swallowed up by foreign operators,” he said.

But unlike in the past, when the market was also dominated by three players, consolidation back to three players in future would be different.

Before, the three operators only offered mobile services and did not invest much, he said. But now at least two of the players also have fixed-line services and will have to invest in infrastructure and content.

He declined to comment on any consolidation plans by Altice.

HOT will invest 1 billion shekels ($282 million), or 25 percent of its revenue, this year.

“When you do this kind of investment ... you know you invest for the future so you are less concerned that people are very eager to cash (in) all their money,” he said. ($1 = 3.54 shekels) ($1 = 0.7402 euros) (Editing by Steven Scheer and Susan Fenton)

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