2010 Israel - Telecoms, Mobile and Broadband

There has been enormous upheaval in the Israeli telecommunications sector and nearly all players in this very competitive market have changed ownership in the past two years. With the mobile, household broadband and pay-TV markets mostly saturated, they are positioning themselves for the dramatic changes taking place as the hitherto separate sectors converge.

Whilst incumbent Bezeq still has the major share of the domestic fixed-line market, competitors formerly restricted to international calls, Internet provision, cable TV or mobile services are rapidly making an impact using VoIP, or Voice over Broadband as it is usually referred to in Israel. Bezeq’s market share has dropped to a point where restrictions previously in place on it bundling its services via triple play are being lifted.

Further changes are on the way as Bezeq is making great strides in the development of a Fibre to the Curb Next Generation Network. Launched in September 2009, Bezeq is on track to make the NGN available to around 50% of households by end-2010 and 90% of households by end-2012. Over 25% of households were connected by mid-2010. Previously the ADSL network of Bezeq and the cable network of HOT had shared the broadband infrastructure market on a 60/40 basis. The ISP market was shared roughly equally between three major players but with HOT seemingly about to receive an ISP licence and Bezeq able to bundle its services, changes are likely.

Meanwhile the three major mobile providers, plus one smaller provider, are preparing for the introduction of MVNOs and are concentrating their energies on expanding their 3G and HSPA markets and also moving into the fixed-line market. Over 40% of subscribers were 3G subscribers by mid-2010.

Over 80% of Israeli households subscribe to cable or satellite TV, mostly digital, provided by HOT and YES TV respectively. Digital Terrestrial TV (DTTV) was launched in 2009 and appears to be impacting the sector.

Market highlights

• Israel excels at start-up companies and is a leader in new technology. The economy faltered in late 2008/09 due to the Global Financial Crisis but was hit only lightly and has quickly bounced back. In mid-2010 Israel become a member of the OECD.
• The main players in the telecommunications market are almost entirely Israeli owned but are very dynamic and competitive.
• New VoB providers are winning a substantial share of the domestic fixed-line market. The international market was already divided between three major players.
• Falling fixed-line ARPU is offset by rising broadband ARPU.
• Household broadband penetration is already over 75%. Bezeq’s new FttC NGN will impact the broadband access market, currently shared between Bezeq’s ADSL service and HOT’s cable service.
• ARPU is falling in the mobile sector due to intense competition despite rising percentages of revenue from data services.

Estimated market penetration rates in Israel’s telecoms sector – end 2010

Data in this report is the latest available at the time of preparation and may not be for the current year.