After five years of planning and delays, Cellcom Israel, the country’s largest mobile phone operator, said on Tuesday it would offer television services over the Internet as it seeks new sources of revenue amid heavy competition in the cell phone market.
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"Entering a new and penetrated market will require investment and additional operating expenses in order to yield future revenues," Nir Sztern, Cellcom's chief executive, said without elaborating.
Cellcom’s entry is expected to have a huge impact on the Israeli TV market, where there are only two providers of multi-channel TV — Hot, the cable company, and Yes, the digital satellite unit of Bezeq Israel Telecom. Packages offered by Yes and Hot cost more than $60 a month.
The Communications Ministry has been encouraging Cellcom and its chief rival, Partner Communications, to enter the so-called Over the Top TV, or OTT, market to provide competition and lower prices to consumers. Partner has said it plans to launch television services and Golan Telecom is expected to follow suit.
Shares of Cellcom rose 1% to a close of 45.08 shekels ($13.06) in trading on the Tel Aviv Stock Exchange.
Sztern said Cellcom could offer an attractive alternative to HOT and YES. “The company’s OTT TV services are synergetic and complementary to the company’s core business and shall help in retention of customers,” he said.
A month ago, Cellcom reported a 70% jump in first-quarter profit, although its subscriber base fell 3.7% from a year ago to 3.049 million.
Israel’s mobile phone industry was shaken up in 2012 with the entry of six new operators, sparking a price war that led to steep drops in subscribers, revenue and profit at Cellcom, Partner and Bezeq's Pelephone unit.
Communications Minister Gilad Erdan welcomed Cellcom’s decision to enter the OTT TV field, saying it will promote competition in the sector and “facilitate the reduction of the high price currently paid by the Israeli consumer for television services.”