Subject: [NEXTEL-1] MIRS faces a crisis caused by the entry of wireless companies into push-to-talk (PTT).

From: [email-masked]
Date: Mon, 16 Feb 2004 20:32:48 -0500

MIRS faces a crisis caused by the entry of wireless companies into push-to-talk
(PTT)

"400,000 3G users by year end"

IDC provides pointers to the future of Israel's telecommunications market.

Guy Hadas 3 Feb 04 14:24

The IDC Israel research company predicts that Israeli international telephone
operators’ revenue will plunge 14.8% in 2004. A study by IDC Israel research
director Gideon Lopez indicates that the international carriers had $226.9
million in revenue from calls in 2003, down 4.6% from 2002. Lopez states that
the decline this year will be steeper, amounting to a $194 million drop,
following the opening of the international calls market to competition.

The study found that overseas call minutes from Israel totaled 1.06 billion in
2003, 8.5% less than in 2002. IDC Israel predicts that the number of overseas
calls will rise 1.2% in 2004, despite the expected fall in revenue, indicating
that lower prices and the entry of new companies, which will take market shares
away from the existing companies, will be the cause of the revenue loss.

The international calls market was slated for opening to full competition at the
beginning of 2004, but the Ministry of Communications decided to postpone this.
In addition, Minister of Communications Ehud Olmert has notified the wireless
companies, which constituted the most substantial threat to the current
international calls companies (Barak, Golden Lines, and Bezeq International),
that they would not be allowed to enter the international calls market. The
international carriers have predicted that their revenue would plummet 40% when
the market is opened to full competition.

The IDC study found that Israelis spent $3.94 billion on communications services
in 2003, and that the market is expected to grow by an average of 2.3% a year
through 2008. Until now, voice services have been the killer application,
generating over 90% of the telecommunications companies' revenue.

The IDC study found that the average revenue per user (ARPU) for wireless was
$36.40 per month, of which 9% came from data communications, short messaging
services (SMS) and multimedia messaging services (MMS). The report found that
MIRS Communications had the highest ARPU, at $53.10 per month, and Pele-Phone
the lowest, at $32.30.

Lopez predicts that data communications will rise to 23.8% of revenue by 2008.
"The wireless companies' challenge is to increase revenue from data
communications more than initially thought. I believe that prices for data
communications are too high, preventing greater use of these services, which is
why their growth has been only modest to date," he says. Lopez claims that the
public cannot be expected to spend more on wireless communications without a
reason, and the wireless companies must therefore find new services in sectors
such as retail, in order to attract the public to spend on wireless. "We'll see
hesitant entry into 3G, because data communications haven’t succeeded yet.
Operators are demonstrating prudence. Before they enter 3G, they want to see
demand patterns that will ensure revenue."

IDC predicts there will be 400,000 Israeli 3G subscribers using universal mobile
telecommunications system (UMTS) technology by the end of 2004. This figure will
more than double by the end of 2005 and reach 2.5 million in 2008.

IDC states that MIRS faces a crisis caused by the entry of wireless companies
into push-to-talk (PTT), allowing a handset to be used like a walkie-talkie,
which was unique to MIRS until now. "MIRS has 250,000 ironclad business
customers thanks to PTT, and it's losing its competitive edge. MIRS can either
be acquired by one of the wireless companies - and it’s a suitable target for
all of them - or the other wireless companies will open the hunting season on
MIRS subscribers, and MIRS will disappear. I assume that MIRS shareholders don’t
want that, and they'll agree to sell the company for a reasonable price."

IDC believes that Bezeq (TASE:BZEQ) has several good years ahead to milk revenue
from fixed-line telephony, despite the decline in this market. Bezeq will
therefore continue to maintain this service, despite its erosion. "We definitely
see Bezeq entering VoIP, using its ADSL platform," says Lopez. IDC believes that
Bezeq will dominate telephony, and that the cable companies will not go
head-to-head against it, preferring to make the minimum mandated investment in
telephony.

IDC estimates that revenue from voice services totaled $784 million in 2003,
3.7% less than in 2002, compared with a 7% increase in revenue from data
communications last year to $102.9 million. Revenue from data communications is
expected to increase by a further 9.3% in 2004.

Published by Globes [online] - www.globes.co.il - on February 3, 2004
http://www.globes.co.il/serveen/globes/DocView.asp?did=767474&fid=980

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