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License Auctions

License Auctions. Update Daniel Rosenne Director General, Ministry of Communications rosenned@moc.gov.il. Presentation Agenda. The Telecommunications Environment: Market overview Fixed services Mobile services License Auctions: Fixed wireless access 2G/3G mobile.

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License Auctions

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  1. License Auctions Update Daniel Rosenne Director General, Ministry of Communications rosenned@moc.gov.il

  2. Presentation Agenda • The Telecommunications Environment: • Market overview • Fixed services • Mobile services • License Auctions: • Fixed wireless access • 2G/3G mobile.

  3. Telecommunications Market Overview

  4. Israel`s Telecommunications • 2.8 million main telephone lines (45% penetration). • 4.4 million mobile customers, on four networks: Pelephone, Cellcom, Partner/Orange & MIRS (70% penetration). • 1.2 million cable-TV & 0.1 million DBS connected households. (Cable: 3 operators, 70% of passed households, 95% household coverage).

  5. Internet Services • ~40 Internet service providers, 1,000,000 dial-up & 8,000 directly connected customers, 50,000 domains. • Penetration ~ 35% of households, 50% of businesses. • IIX (Israel Internet eXchange) non-profit peering point. • “Hands-off” overall regulatory policy. • High growth ~ 50% annual.

  6. Telecommunications Services Market - 1999 Cable TV International Long-Distance Internet services Terminal Equipment & Business Systems 2% 2% 7% Fixed Services 35% 10% Mobile Services 44% Total telecom services market ~ $ 4.2 billion

  7. The Mobile Boom:Israel Telecommunications Services Revenues, 1995-1999 ($US M) 2,000 Mobile Fixed 1,500 1,000 ILD 500 CATV 0 1995 1996 1997 1998 1999

  8. Fixed servicesDriven by Broadband DemandActual competition expected during 2001

  9. Fixed Services Competition Prolonged Delays: • Politics: May 1999 elections. • Cable companies disputes: • Fulfillment of universal service obligation. • Competition - DBS services, content. • Finance Ministry seeking payment for granting telecom license. • Justice Ministry seeking limits on content control. • Union disputes - safeguarding ‘employee rights’. Rough Road Ahead: • Telecom law change underway, allowing cable companies entry into telecom.

  10. The Birth of New Entrants • Regulation allowing fixed services licensing - published September 2000. • FWA tender - published October 2000. • ‘Ofek’ fixed services license - granted February 2001. • Cable companies restrictions removal - Telecom Law update due during 2001. • Roll out of several competitive fiber-based backbones - IC1, Israel Railways, Ofek, Shavit, Cellcom.

  11. Ofek New WorldIsrael’s first licensed CLEC • Owned by Eurocom group (50.33%) & Arison investments (49%). • Fixed services general license – as of 1 February 2001. • Plans for modern IP based infrastructure, utilizing 1000 Km fiber cables. • Covering 27 “natural zones” (out of 52). • Will offer wide range of telephony & broadband data services, for business & households. • Plans for $ 1Bn investment, 1500 employees.

  12. IC-1 (Israel Coasting one) • Repeaterless submarine system along the Israeli coastline. • Seven landing points: • Nahariyya • Haifa • Netania • Herzliyya • Tel Aviv • Rishon LeZion • Ashkelon. • 48 fibers in a double ring festoon arrangements.

  13. Mobile ServicesCompetition Introduced December 1994

  14. Mobile Operators PelephoneCellcomPartner/Orange MIRS 800 MHz 800 MHz 900 MHz 800 MHz NAMPS & TDMA GSM iDEN CDMA (ESMR) Trunking - 1994 1987 1995 1999 Cellular - 2001 BellSouthHutchison Bezeq Safra Brothers Matav Motorola Motorola Discount Investments Elbit.com Ampal (Shamrock) PEC Eurocom private investors free float

  15. Cellular Telephony • Rapid growth - 125,000 subscribers in January 1995. In November 1999 the number of mobiles (2.9 million) exceeded the number of fixed lines. • Key expansion stimulators: • Perceived low tariffs: ~ US $0.11 to 0.23/minute air time, ~ $11 to 29 monthly charge. ARPU (Average Revenue Per User) - US$50 to 60. • Calling party pays (CPP). • Nationwide coverage & “Land-line”quality. • Competition & marketing innovations.

  16. Average Number of Monthly Usage Minutes 1995 1996 1997 1998 1999 2000 Fixed Bezeq 687 687 679 699 732 Mobile Pelephone 530 430 320 300 295 Partner 427 361 (Q4) (Q4) Source: Bezeq Eurobonds Prospectus, August 2000; Partner reports

  17. Mobile Competition: key trends - 2001 • New services: • SMS, WAP, wireless internet. • Content: news, media & data services. • Location based services. • New pricing models: • Regional pricing plans. • Pay as you use programs. • Low cost position for low usage segments. • Churn reduction plans.

  18. License Auctions

  19. Licenses For New Operators • Generallicenses for fixed domestic services (infrastructure, transmission & data, telephony) are issued to applicants meeting economic and know-how criteria. • General licenses requiring spectrum resources (mobile, FWA) shall be issued through public tenders.

  20. Proposed New Frequency Bands Allocations Band Application Allocation 2 GHz 2G/3G Mobile 175 MHz 3.5 GHz N-FWA/WLL 72 MHz 26 GHz B-FWA/LMDS 1200 MHz

  21. Fixed Wireless Access Auctions • Up to 3 operators, selected in combined MSR (Multiple Simultaneous Round) auction. • Frequency Allocations, for each operator: • 26 GHz Broadband: 2 x 196 MHz. • 3.5 GHz Narrowband: 2 x 12 MHz. • Participation of Bezeq & cable operators in the auction is excluded. • Roll-out obligation: 3 years. • Tender published: 12 October 2000. • Applications deadline: 20 March 2001.

  22. 2G/3G Mobile License Auctions • MSR (Multiple Simultaneous Round) combined auction for 4 licenses, allowing usage of the following frequency packages: • 2G FDD: 2x10 MHz. • 3G FDD: 2x10 MHz. • 3G TDD: 5 MHz (for 3 packages only). • Reserve price: US $ 100M. 25% reduction for new operators. • Tender publication: 28 March 2001. Applications deadline: 17 July 2001.

  23. 2G/3G Auction: Frequency Allocations Allocation per License [MHz] : Allocation Date Frequencies [MHz] License A License B License C License D 1710-1785 2X6.2: 1/2001 2x6.4: 1/2001 2x10: 1/2001 2x10: 1/2002 & 1805-1880 2x3.8: 1/2004 2x3.6: 1/2004 1920-1980 2x5: 1/2001 2x5: 1/2001 2x5: 1/2001 2x5: 1/2001 & 2110-2170 2x5: 1/2004 2x4.7: 1/2004 2x5: 1/2004 2x5: 1/2004 1900-1920 or 2010-2025 5: 1/2005 - 5: 1/2004 5: 1/2004

  24. For more informationhttp://www.moc.gov.il

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