"Globes" reported in June that the Ministry of Communications had not revised Bezeq Israeli Telecommunication Co. Ltd.'s (TASE: BEZQ) tariffs in accordance with the Grunau formula. This is a price control mechanism set by the Grunau committee according to which Bezeq's tariffs should be revised annually on the basis of an efficiency formula, apart from telephone line rental charges that are meant to rise in line with the Consumer Price Index. In response to an inquiry from "Globes", the ministry said, "The tariffs were not revised because of a ban imposed by the Attorney General because of an examination of a conflict of interests. The revised tariff will be signed when a minister is appointed who can sign it."
It now turns out that, in the end, and without any public announcement, Tzachi Hanegbi, the minister responsible, decided not to reduce Bezeq's tariffs. Hanegbi was made responsible for dealing with Bezeq in the Ministry of Communications because of the close relationship between Prime Minister Benjamin Netanyahu, who is also minister of communications, with Bezeq controlling shareholder Shaul Elovitch.
According to a professional document drawn up by a Ministry of Communications official that has reached "Globes", Bezeq's call tariffs should have been reduced by 11.43%, while the line rental charge should have been raised 4.47%, in line with the rise in the Consumer Price Index since the previous revision.
The document also states that raising the line rental charge on the basis of the rise in the Consumer Price Index results in a negligible addition to Bezeq's revenue since most subscribers are on pricing tracks that are not affected by a rise in this charge.
Overall, according to the Ministry of Communications economics division, Bezeq's annual revenue should fall by NIS 5.5 million as a result of the stipulated changes. Clearly, as far as Bezeq is concerned, the amount is not material, but for customers who make a lot of calls, a reduction of 11.43%, which the minister's decision has prevented, could mean a significant saving.
Published by Globes [online], Israel business news - www.globes-online.com - on September 20, 2016
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