Bezeq CEO slams media coverage, regulatory foot-dragging
Stella Handler defends her firm’s right to merge with its units in FB post that wonders, ‘When will conditions be ripe?’
Shoshanna Solomon was The Times of Israel's Startups and Business reporter
The generally media-shy CEO of Bezeq, Israel’s largest telecommunications provider, has come out in a blazing defense of the company’s right to merge with its units, criticizing regulators for dragging their feet over necessary policy decisions and the media for succumbing to a quest for ratings.
In an unusual post on social media Monday evening, Stella Handler, who has headed Bezeq since April 2013, said (Hebrew) that the company is subject to “archaic regulatory” tools that are not used anywhere else in the world. Bezeq has come under “unprecedented attack” by both a populist media and Israel’s Finance Ministry, and professional considerations have been drowned out by the desire for ratings, she wrote.
Handler’s post, her first as Bezeq CEO on Facebook, follows opposition voiced by the Finance Ministry, Knesset members and watchdog organizations to a Communications Ministry decision that paves the way for Bezeq, the nation’s largest fixed-line provider, to merge with its subsidiaries.
Bezeq said in a filing to the Tel Aviv Stock Exchange last week that it received notification from the Communication Ministry’s director general, Shlomo Filber, that it would be allowed to merge with its units, subject to a hearing and some conditions.
Bezeq, which dominates the local communications market, has been subject to regulation that forces it to keep its mobile, fixed-line, satellite TV and internet subsidiaries as separate business entities. However, as the fixed-line market opens to competition, the ministry said in its notice to Bezeq that it is “advancing the cancellation of the corporate separation in the Bezeq Group,” something the phone provider has been clamoring for.
A merger with its units would enable Bezeq to cut costs by millions of shekels, analysts have estimated, and offer customers packages of phone, internet and TV, similar to those its smaller competitors already provide.
However, Amir Levy, the budget director at the Finance Ministry, opposed the move in a strongly worded letter to the Communications Ministry, saying the state of competition in the fixed-line telephony market wasn’t ripe enough to allow such a move. Levy called for further discussion on the matter before any “significant decisions were made.” The Movement for Quality Government, a watchdog group, along with Knesset member Micky Rosenthal, also expressed opposition to allowing Bezeq to merge with its units at this stage, saying the move raises suspicions of unethical behavior.
Press reports have said that the merger would yield tax benefits to Shaul Elovitz, Bezeq’s chairman and controlling shareholder, who is also a personal friend of Prime Minister Benjamin Netanyahu. Netanyahu currently holds the position of communications minister, but has been instructed to refrain from dealing with matters relating to companies controlled by Elovitz, to avoid a conflict of interest.
The budget director himself says structural separation must be eased out, Handler noted in her post. “So when will conditions be ripe?” she asked. “The state promised Bezeq it would start the process of canceling structural separation already in 2005, when Bezeq was privatized.” Since then, she said, all the committees set up by the Communications Ministry have supported the abolition of structural separation and set out guidelines for when it should happen.
“The structural separation hurts consumers,” Handler wrote. “Bezeq is today the only telecommunication company in the world, yes, the only dinosaur, that sells fixed-line services separately from other services, like TV and Internet… This separation has a cost, so who pays for it? The consumer.”
Since privatization, Bezeq has lost over a million telephony customers to its competitors and its market share has dropped to around 50 percent. Revenues have dropped by almost a billion shekels in the past six years, she wrote, and, as consumer preference shifts to cellular phones, fixed-line has lost its relevance, Handler wrote. Even so, Bezeq has continued to invest in infrastructure and is among the biggest telecom infrastructure spenders globally, as a percentage of revenues.
“How much more does the Finance Ministry want to shrink Bezeq?” she asked. “How much more can we discuss the matter?”
“Our feeling is that all this populist discussion around the subject is not motivated by considerations about what is good for the consumer, competition or investors,” she wrote. “When the main interest is to create ratings, the professional truth is not of interest to anyone.”
