The Bottom Line / House of Lords
Bezeq could have been sold 12 years ago. In 1993, British communications concern Cable & Wireless offered to purchase control of the company. But the state refused: It was not willing to part with the power, control and political appointments.
Bezeq could have been sold 12 years ago. In 1993, British communications concern Cable & Wireless offered to purchase control of the company. But the state refused: It was not willing to part with the power, control and political appointments. Lord David Young did not take "no" for an answer: He started picking up shares on the exchange floor. That earned him a tongue-lashing from the government of the late Yitzhak Rabin and his finance minister, Avraham Shochat. Young finally surrendered and gave up. Bezeq was saved; it stayed tucked under Mama State's apron strings.
This week, in a twist of fate, a different British lord bought Bezeq. Sir Ronald Cohen is married to an Israeli, the daughter of Yossi Harel, who commanded the Exodus against five British warships - until he surrendered. Cohen heads investment company Apax. His partner in the deal, Haim Saban, is an amazing success story: from a poor neighborhood in Bat Yam to international media mogul and billionaire.
The sale of Bezeq was not a given. Under a different government, like that of a decade ago, the deal would have been scuttled. Communications Minister Dalia Itzik did squeeze in the comment that "we cannot sell Bezeq at any price." She even booted out Bezeq chair Miriam Mazar in an effort to appoint one of her own cronies.
And as always, this time, too, we heard the usual scare tactics: that private owners would raise prices and reduce the quality of service. There have also been complaints about how the wealthy have again taken over state assets for peanuts. That comment is chock full of ignorance and evil.
The state got an excellent price, close to a market capitalization that has recently soared on the wings of a booming market. With this $972 million, the state will be able to reduce the national debt and improve Israel's sovereign credit rating. That will reduce interest rates, to the benefit of investments, growth and employment. In addition, smaller debt means fewer interest payments, which will leave more money for important projects in the social welfare sphere.
And, most importantly, a privatized Bezeq will be far better, more efficient and more innovative that a state-owned Bezeq. Cohen and Saban will do what it takes - a comprehensive streamlining program - and the company will make more money. Naturally, the backseat drivers will then pop up to claim that the government "sold cheaply." They should buy Bezeq shares on the exchange on Sunday and join the party. But understand this: Bezeq is a sick concern. It has 2,000 unnecessary employees and an outdated and wasteful structure comprising four divisions, which causes duplication. Bezeq has a culture of nepotism and despicable unions. Bezeq is like a sumo wrestler, big and strong, but also cumbersome and slow, and its competitors, fleet-footed samurais, constantly beat it. So privatizing Bezeq was a necessity. Otherwise, the company would have sunk.
When Cohen and Saban put that sumo wrestler on a diet, they will also lower prices and improve service. They have no choice: They will have to compete, or subscribers will jump ship for Partner, Hot and the innovative Internet voice technologies.
That is why it is so hard to understand the critics. What do they want? That we go back to the gay eighties, when Bezeq was completely state-controlled, and 200,000 people waited seven years to get a phone line? Or do they want to go back to the analog rotary phones and mechanical switchboards? Getting Bezeq out from under Mama State's apron saved Israel's communications sector a decade ago. This privatization will march the market forward. Private ownership of a corporation is always, unconditionally, preferable to state ownership. Cohen and Saban are always a better deal than Olmert and Itzik.