Golan Shakes Up Mobile Market With Cheap Plan for Businesses

Upstart operator spooks telecoms stocks with threat of new price war.

Golan Telecom's CEO Michael Golan at the company's offices in Tel Aviv.
Eyal Toueg

Golan Telecom, the upstart mobile carrier, caused joy for businesses and further distress for its rivals on Monday, unveiling a super-cheap plan for business users.

Golan said it would be offering large- and medium-sized companies service for just 25 shekels ($6.40) a month per phone not including value-added tax plus a 250 shekels per month flat fee for all the lines bought by a business up to 500. Business users must buy at least 50 lines.

“We want to lower rates for business, too,” Michael Golan, the company’s French-born founder and CEO, told TheMarker in an interview. “We built a website with self-service functions that lets everyone do things online. It’s appropriate for startup companies, law offices and the like.”

The move marks Golan’s first foray into the business segment since it began operating, in May 2012. It now claims a market share of about 12%, or 655,000 customers. But more important, the move escalates a price war that has been raging among the mobile carriers for some weeks that has caused their share prices to plummet. (See The Ticker on this page.)

Cellcom Israel’s share price, which plunged close to 12% on Monday, is down 35% in the past month. Partner Communications, which fell 7.6% on Monday, is down 39%.

Golan denied he was exerting price pressure on his older, established rivals with the aim of acquiring them cheaply and consolidating the industry. “We’re here for the Israeli consumer and to grow the company,” he said. “We’re not a mergers and acquisitions kind of company but we are focused on organic [internally generated] growth.”

The Golan plan is the business equivalent of the 99-shekel deal it offering private customers, which includes unlimited calls and text messages, 20 gigabytes of 4G Internet and free calls to many foreign countries. While business customers must open an account on the Golan website like private customers, they will each be assigned an account manager.

Golan estimated that business customers account for between 35% and 40% of the Israeli mobile market.

Unlike mobile plans for private customers, prices of which have plummeted since the industry shake-up ordered by the government nearly three years ago, business plans remain relatively profitable for carriers and few big organizations have left Cellcom, Partner or Pelephone — the three veteran companies — for upstarts like Golan.

Hot Mobile, another upstart, entered the business segment about six months ago, causing rates to fall, but Golan’s entry is likely to create a much more fundamental change in the industry. In particular, the veteran companies will feel the loss of business customers, who tend to do more overseas calling, which is a big profit center for them.

Nevertheless one mobile industry executive, who asked not to be named, said he doubted the Golan package would shake things up for at least another half a year.

“Business customers have different needs than private customers and Golan will have a problem trying to fulfil their needs,” he said. “Good service is more important and value-added services like maintenance, equipment upgrades and other things like fast and personal service. Golan’s plan is based entirely on low price. It hard to see a big company like Tnuva, or even a small one with 10 phones, moving to Golan.”

An investor in the segment also expressed optimism about the veteran companies’ ability to fight back in the business segment better than in the consumer segment. “A business customer often buys Internet connections and landlines from carriers. Golan isn’t offering these services,” he said.