Rami Levi's New Plan Undercuts Prepaid Call Rates

Phone plans generally cater to the poorest sectors of society, and Levi's prices drastically undercut the competition.

Of all the plans being offered by supermarket mogul Rami Levi's new cellular company, one may dramatically affect one of the largest, most neglected market segments: prepaid cell phone cards.

These phone plans generally cater to the poorest sectors of society, and Levi's prices drastically undercut the competition. The catch is that in order to use Levi's virtual network, which buys its talk time from established company Pelephone, customers need to own a 3G phone. These phones start at NIS 400.

Rami Levi - Daniel Bar-On - 01122011
Daniel Bar-On

Sector sources estimate that there are 2 million prepaid cell phones in the Israeli market, or 22% of all cell phones. Under this system, customers pay in advance to load their phones with talk time. Once the money runs out, they cannot make phone calls until they recharge.

Customers have three main reasons for choosing prepaid cards: They require no commitment, require no identification on the part of the customer and bear no fines for breaking a contract; they enable the customer to control his expenses; and the system is simple.

The majority of people with such plans lack the credit card or bank account necessary for getting a regular phone plan. This includes foreign workers, poor Israelis and Palestinians who want an Israeli phone number to maintain contacts within Israel.

However, most prepaid plans in Israel are also quite expensive - customers can pay up to NIS 1.28 per minute of talk time, which is 2.5 times more than the average cost to customers with regular plans (49 agorot ), and about 6 times the rate paid by well-off business customers (21 agorot ). Plus, customers pay NIS 7 for a card to charge their phone, meaning that a NIS 60 card buys in practice only NIS 53 of talk time. They can get around this fee by charging their phone by credit card, but given the factors that draw people to prepaid phones in the first place, this is generally not an option.

In addition, customers with prepaid plans don't have true Internet access - the amount of data transfer involved in merely loading the home page of an Israeli news site costs NIS 13 under most of the existing plans.

Rami Levi's new plan for prepaid cards significantly undercuts those offered by the big three cell phone companies: 39 agorot per minute of talk time, and 29 agorot per SMS. In addition, cards will be sold without a fee, meaning that customers who buy NIS 60 of talk time will get to use the full NIS 60.

However, his prepaid plans also charges a monthly fee of NIS 4.90. Rami Levi's plan also offers web packages that undercut the competitors.

In November, Pelephone took the first step in lowering the market's prepaid rates, with a plan that offered customers calls at 49 agorot per minute. However, Cellcom and Orange (Partner ) did not respond in turn. The apparent reason for this is that customers need a 3G phone in order to use Pelephone's network. The same goes for Rami Levi, which buys talk time from Pelephone.