Swedish-led Group Raises Capital for Super-fast Internet Network in Israel

Consortium raises NIS 100 million in capital and NIS 200 million in bank guarantees needed for the joint venture, which will enable Internet speeds of one gigabit per second - 100 times more than what is available now.

A plan to develop a super-fast Internet network on top of Israel Electric Corporation's power grid moved a critical step forward on Tuesday when the investor group led by Sweden’s Viaeuropa transfer said it had raised the required capital.

The group, which includes Zisapel Assets, Rapac Communications and Infrastructure, Tamares Knafayim Holdings and BATM Advanced Communications, said it raised NIS 100 million in equity and obtained another NIS 200 million bank guarantee. This is the amount required by the government from the consortium before the joint venture that will operate the network can get underway.

The group, which was the sole bidder in a government tender held last year to develop the network, will hold 60% of the joint venture and the state-owned IEC will hold the rest.

The ability of the Viaeuropa group to raise the money is a vote of confidence in the project, which has been overshadowed by delays and by doubt over its financial viability. The planned network will be competing against Bezeq and Hot Telecommunications, which control 59% and 41% of the market today respectively.

The process was delayed five times and by seven months because of limited participation. These tough circumstances forced the government to sweeten terms, including raising the stake of the winning group from 51% to 60% of the joint venture.

Together with supplier credits of at least NIS 500 million from companies such as Cisco and a NIS 150 million government grant, the new venture will have some NIS 1 billion to roll out the network.

The project will deploy some 25,000 kilometers of fiber optics, 70% of which will be above ground to keep costs down. IEC will perform the construction work. The network will offer Internet speeds of one gigabit per second − 100 times more than what is now available.

Viaeuropa holds half of the consortium, with the four other companies holding 12.5% each.

The biggest winners of the fiber deployment are expected to be Israel’s top mobile phone operators, Cellcom Israel and Partner Communications, both of which bought companies that provide Internet services and seek to develop Internet TV. Right now, however, they rely on the HOT and Bezeq networks, which limits their own offerings.

Yael Engelhart