JERUSALEM (Reuters) - Bezeq Israel Telecom said on Sunday it had received notice that Israel’s telecoms regulator would likely allow Bezeq to merge its various business units.

Bezeq, Israel’s dominant telecoms operator, had long argued for an end to its “structural separation”, in which it is forced to keep its mobile phone, fixed line, satellite TV and internet units as separate entities.

Permitting an end to structural separation would ultimately allow Bezeq to offer packages of phone, internet and TV. Its smaller competitors, many of which are barely making profit, have urged the regulator to keep the structural separation in tact, arguing that Bezeq will become more powerful.

The Communications Ministry, Bezeq said, hinges on Bezeq’s commitment to invest in infrastructure and accelerate the deployment of a fiber optics broadband network in 2017 and reach 76 percent of households within three years.

Before amending Bezeq’s license, the ministry intends to hold a hearing during 2017 regarding the procedures of the cancellation of the structural separation.

Bezeq said it was examining the prospect of implementing measures to allow it to merge its units.</s>Israeli operator Bezeq is poised to sell its wholesale satellite company Spacecom to a Chinese investor, according to space specialists.

 

 The company has been on the market for at least three years, but the price is believed to have dropped after its latest satellite, Amos 6, was lost in a SpaceX launcher failure in September.

 

 But reports in the past few days say Beijing Xinwei Technology is close to completing its purchase of the operation, through Xinwei’s subsidiary, Luxembourg Space Telecommunications, based in the European grand duchy.

 

 The original price was believed to be $285 million, but reports say Xinwei has been able to knock a third off in order to complete the deal.

 

 Spacecom’s satellites cover the Middle East, central and eastern Europe and parts of North America. Bezeq owns Spacecom through its subsidiary Eurocom.</s>Is it still early days and is the region waiting to see real activity before investing in the new market? This was just one topic discussed in the “Providing Connectivity in Iran: The Telecoms Hub of the Future?” panel at yesterday’s Capacity Eurasia event in Athens, Greece.

As a result of sanctions being dropped there is naturally an increasing demand for wholesale providers to partner up with local players to not only enter the Iranian market, but to do so smoothly utilising existing infrastructure in the country which has invested heavily in landline models.

Capacity panellist Alessandro Talotta, chairman and CEO of Sparkle, said to delegates: “When we were in Iran two weeks ago, we had the opportunity to speak with private enterprises willing to invest and we are in favour of partnering as it creates better opportunities for consumers and enterprises.”

Telecom Italia’s Sparkle signed a deal with the Telecommunication Infrastructure Company (TIC) of Iran earlier this month in Tehran to expand its Seabone global backbone to Iran and provide a point of presence (PoP) in the Iranian capital.

“Finalising our agreement took more than one year to negotiate and understand. The reality is we’re going to launch a PoP in Tehran, but that’s just the first phase of the project,” he said. “The next stage only comes after successfully executing what has been agreed and gaining the partnering firm’s trust.”

Talotta added that although reaching an international agreement was tough, “the Iranian government has a clear vision in terms of broadband and ICT investment, and the population is gaining much better access to internet and ICT as a result”. However, he stressed that the onus on authorities to formulate “clear regulation” is “huge”.

This is needed to create a platform in which companies like Sparkle feel that they can increase FDI into the country knowing their investment is safe and they’ll attain a good ROI. Sparkle started investing in the Middle East eight years ago and Talotta said that as more competition enters the Iranian market over the next 1-2 years, “we still need to be careful with our investment despite becoming stronger in the region”.

Renzo Ravaglia, EVP service provider at Interoute, also attended the aforementioned Tehran conference. He told Capacity delegates the Iranian telecommunications minister had stated: "International capacity in the country, which stands at 5TB today, will need to be 20TB by 2020."

Ravaglia agreed with Sparkle’s chief that as the country has just opened up it is still difficult to understand and define the Iranian market. He believes that the country, which he predicts will become one of the top three telecoms markets in the future, needs clear rules and legal system. “The entire business community will benefit too not just the telecoms sector," he added.

The Interoute executive stated: “Liberalisation of the market and getting better access to the existing infrastructure will help the market’s growth. We’ll look to use our Turkish open market model. Congratulations to the Sparkle for entering the market, Interoute hopes to be the second one before the end of this year.”

“Since 2012, we have been on a significant campaign of acquisitions. Our next step is to find a partner to work with in Iran, who’ll become part of the Interoute family. GTB</s>In a move that could save Bezeq hundreds of millions of shekels over the next eight years, the Communications Ministry has said it will let the company take the first steps toward merging its business units.

But the decision, which Bezeq reported to the Tel Aviv Stock Exchange on Friday, is still subject to public hearings and is likely to be opposed by both its rivals and the treasury, who contend that Israel’s dominant telecommunications company hasn’t done enough to ensure effective competition in the communications industry.

“This move has the potential of significantly undermining competition in the communications market, certainly if it is undertaken now, before conditions for acting have been met,” treasury budget chief Amir levi said in a letter om Sunday.

Bezeq has been lobbying hard to end the so-called “structural separation” imposed on it in the 1990s as a way to give other companies the chance to compete against it in the then-emerging internet segment.

Since then, the company has had to operate its core landline telephone business, as well as its Pelephone cellular unit, Yes satellite television and internet operations, as separate entities, adding costs and preventing it from offering packages of phone, internet and TV, as its rivals do.

The decision by the Communications Ministry won’t bring a complete end to structural separation at Bezeq. The proposal calls for an interim arrangement, under which Bezeq will be allowed to operate legally and financially as a single company while management and operations of the different units remain separated by Chinese walls.

But the interim measure would give Bezeq one critical benefit: The parent company would be entitled to use the accumulated losses at Yes, amounting to 5.5 billion shekels ($1.4 billion) against future taxes. Under a preliminary agreement reached with the Israel Tax Authority in September, Bezeq agreed it would pay a 462 million-shekel tax bill after purchasing full control of Yes, but would then be able to use Yes’ losses against future taxes over the next eight years.

That works out to as much as 1.3 billion shekels, or an average of 41 million shekels a quarter. Shares of Bezeq finished 4.6% higher at 7.10 shekels in TASE trading on Sunday in heavy trading.

Bezeq said the Communications Ministry decision is conditional on its investing in infrastructure and accelerating deployment of a fiber optics broadband network to 76% of all Israeli households within three years.

Bezeq sources said they expected the hearings over structural separation to be completed by the end of the first quarter next year, but the company will almost certainly face a fight.

Media and advocacy groups are wary about the warm relationship between Prime Minister Benjamin Netanyahu, who is also the communications minister, and Shaul Elovitch, Bezeq’s controlling shareholder. Netanyahu has recused himself from Bezeq-related issues, but the ministry’s director general is a Netanyahu confidante and Regional Affairs Minister Tzahi Hanegbi handles Bezeq.

The timing of the announcement over the weekend and at the end of the year has also raised suspicions. Although the Finance Ministry did not issue a formal statement, treasury officials reacted angrily to the Communications Ministry’s decision and said it would not be approved as formulated.

State Comptroller Joseph Shapira had urged the Communications Ministry to desist from acting on the structural separation issue until he had completed his report on the Bezeq monopoly. On Sunday, the Movement for Quality of Government added its voice to the opponents.

“Making the decision right now, without any justifiable reason to act so quickly and while the State Comptroller is preparing a wide-ranging and relevant report on the landline communications market, is a decision not based on facts, as it should be, and raises questions about the dubious reasons that stand behind it,” the organization said.
Bezeq, an Israeli telecoms company, says that it has received word from the country's telecoms regulator that it will be allowed to end the "structural separation" of its business operations by product (i.e. mobile phone, internet, land lines).