Israel spells opportunity for cellular equipment sales

Mobile Phone News,  April 7, 1997  by Aaryn Slafky,  Randy Sukow

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"Israelis like to be in contact with each other," Henig said. "In a country like ours, something can go wrong so people like to . . . get in touch with their families."

Nisso Cohen, managing director of IDC Israel, agreed. "About half of the cellular units sold in Israel are sold to family members. The usage of cellular in the army is quite a phenomenon; parents buy cellular for their 18-year-old children as soon as they are drafted to the army," Cohen said.

Henig also observed that "Israelis like technology. They like gadgets." He recalled that Motorola Inc.'s [MOT] StarTAC, which sells for about $2,500 in Israel, sold very well there. He said the country is a good testing ground for manufacturers to gauge interest in new cellular products.

Another reason why cellular has been so widely adopted - it has a penetration rate of 18 percent - is that airtime prices are low, Henig said. One of the conditions of the second license, awarded to Cellcom Israel Ltd., was that the prices be kept low initially in order to supply a cellular phone to every household, Henig said. Also, the introduction of calling party pays in June 1994 gave "a boost to all sales," Cohen recalled.

The first operator, Pele-Phone, targeted high-end users less concerned about price but sensitive to the quality of the network, Henig said. Cellcom began by targeting consumers who cared more about price than quality. The two operators used quality and price to differentiate themselves, he said.

However, Cellcom has shifted its strategy to address all markets, Henig said. Today, the two operators' messages are the same, which has led to confusion within the market because they are offering so many different packages, he said. Also, even though Cellcom's network is perceived to be not as good as Pele-Phone, Cellcom continuously is improving it with technical upgrades, Henig said. Cellcom is raising its prices gradually as well.

Cellcom and Pele-Phone together have more than a million subscribers, according to the report. Of those, 20 percent have two or more phones, Henig said, while 170,000 users plan to buy a second one. IDC Israel also found that 10 percent of all households - 160,000 people - plan to buy cellular service.

...Tender for Third License Expected Soon

"With this rate of growth, and taking into consideration that the Ministry of Communications is about to debut a tender for a third cellular operator, Israel is again a promising country for providers of cellular infrastructure and handsets," said Cohen. That license is expected to be awarded in 1998, following the opening of the tender this July.

Pele-phone launched a narrowband advanced mobile phone service network in March 1986. It is a joint venture of state-owned phone company Bezeq and Motorola's Network Management Group, which is conducting a six-month trial of code division multiple access technology there through June. Cellcom launched time division multiple access services in December 1994.

COPYRIGHT 1997 Access Intelligence, LLC
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