The response of Hot Telecommunication Systems Ltd. (TASE: HOT.B1) to the Cellcom Israel Ltd.'s (NYSE:CEL; TASE:CEL) entry into the television market has led Cellcom to file a complaint against HOT with the Antitrust Authority and the Ministry of Communications.
Sources inform "Globes" that following the bargain offered by HOT Mobile Ltd. of two cellular lines for NIS 40, plus provision of Internet (a bargain for couples), Cellcom filed a strong complaint, demanding that HOT Mobile's bargain be halted, which it said was aimed at disrupting its entry into the television market.
Cellcom entered the television market two weeks ago, and HOT Mobile offered its bargain for couples the same day. HOT Mobile's campaign came as a surprise, even though Cellcom had taken into account such a scenario.
In its complaint, Cellcom showed why the couples bargain was a money loser from the beginning, and its sole purpose was therefore to detract from Cellcom's core cellular activity. Cellcom sought to demonstrate to the Antitrust Authority that HOT Mobile's campaign was an abuse of its monopoly power in the television market.
The couples bargain price includes VAT, meaning that a rough calculation gives a price of NIS 16.90 per line, while each such line adds to the cost that HOT Mobile is paying to Partner for the use of its network and to its regular costs, and the cost of the Internet provider adds a further NIS 20 a month. It therefore emerges in any reasonable calculation that HOT Mobile is selling lines at a loss, and its sole purpose is to damage Cellcom's cellular business and deliver a message that competition in the television market will intensify the competition in the cellular market.
Cellcom is attempting to convince the Antitrust Authority that HOT Mobile has adopted this improper policy because Cellcom dared to enter the television market and square off against the duopoly of HOT and satellite company DBS Satellite Services (1998) Ltd. (YES). Cellcom also emphasized that HOT Mobile's bargain came on the same day that Cellcom launched its television services, showing that HOT had planned its measure in advance, and instead of lowering its television prices, had cut its prices for cellular services. This response, which includes an extensive advertising campaign, cannot be devised in a single day, and it is therefore obviously the result of planning designed to halt Cellcom in its tracks, and deliver messages already in the opening stage of competition.
One important question that the Antitrust Authority and the Ministry of Communications will have to assess is the fate of the structural separation applying to HOT when the company is using its cellular subsidiary to weaken its television competitors. Under the terms of its license, HOT Mobile is obligated to operate as a separate company, and its response indicates that it is operating as a communications group using its entire arsenal, in contravention of its license.
HOT Mobile said in response, "HOT Mobile challenged the market, and will challenge the market, with no connection to Cellcom's measure. We regret the inconvenience caused for Cellcom by the couples campaign. Cellcom should realize that it is in a competitive market, and will operate on the same playing field as everyone else, instead of turning to the Antitrust Authority director general with baseless assertions. Cellcom's attempt to prevent consumer competition brings us back to the days of limited competition between the veteran players, which is regrettable."
Published by Globes [online], Israel business news - www.globes-online.com - on January 11, 2015
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