You don’t have to be a marketing genius to know that the latest sales campaign by Golan Telecom Ltd. is not good news for the mobile carrier. It is true that no one expected the carrier to reap profits so soon after its dramatic launch, but such a sharp reduction in prices just six months later, heralds that the carrier will lose money for every subscriber.
Golan Telecom CEO Michael Golan, as we have already learnt, likes to shock the market. Every time it seems that we've forgotten about him, he reminds us of his existence with a sledgehammer. The last time he wielded his sledgehammer, it was to announce four months free service for subscribers who pay for five phone lines. Today, he announced an all-inclusive plan for NIS 49 per month for six months.
Everyone knows that Golan Telecom's move is intended to break the rules out of distress, because it is losing money, and a lot of it. Telecommunications market sources are convinced that the move is the carrier's death rattle. The proof is that it is impossible to make a profit at such low rates, and it seems that the carrier has given up on building the mobile network that it is required to establish, in which case it will forego the NIS 360 million guarantee deposited for this purpose. Alternatively, the company is trying to recruit as many subscribers as possible to get as a high a price in a sale.
Assuming that Michael Golan and his partners are rational businessmen, one of these possibilities has to materialize: either sell the business; or don’t build the mobile network, and risk losing the carrier's mobile license and switch to a mobile virtual network operator (MVNO) model. Either way, the current situation is unsustainable.
In the end, it seems that economics will do its thing. If networks are consolidating in the UK, there is no chance of five mobile carriers surviving in Israel for long. This is precisely the task of the next communications minister: find a balance between keeping high competition and the government's duty to let the industry build 4G.
Published by Globes [online], Israel business news - www.globes-online.com - on November 25, 2012
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