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Consortium to Spend $100M on VOIP

Israeli cable consortium issues RFPs for network upgrade worth $100 million

January 5, 2004

2 Min Read
Consortium to Spend $100M on VOIP

Here's some cheery New Year news for VOIP gear makers. An Israeli cable consortium, Hot Telecom Ltd., plans to invest $100 million in VOIP gear in an effort to break into the domestic voice market. It has issued requests for proposals (RFPs) to 20 vendors.

The consortium, comprising Golden Channels (41 percent ownership), International Television Holdings (Tevel) (32 percent), and Matav-Cable Systems Media (Nasdaq: MATV) (27 percent), was formed in November when the three cable operators, which already provide data and broadcast TV services, received telephony licenses. Now they plan to challenge national incumbent operator, Bezeq, in a voice market worth about $1 billion a year.

Hot Telecom CEO Ram Belinkov told the Jerusalem Post that 20 vendors, including Cisco Systems Inc. (Nasdaq: CSCO), Gallery IP Telephony Inc., NetCom Systems Ltd., Nortel Networks Corp. (NYSE/Toronto: NT), and Terayon Communication Systems Inc. (Nasdaq: TERN), have been asked to submit proposals. The vendors, which will be expected to provide end-user equipment as well as network hardware and software systems, have 60 days to respond.

The three operators plan to start integration in June and trial new services by September, with a view to beginning commercial service by January 2005, added Belinkov. Hot Telecom has already trialed VOIP with about 2,000 domestic and 200 business users as well as its own staff, using equipment from Gallery IP Telephony and Terayon.

The level and timing of the investment are key to Hot Telecom meeting licensing and regulatory requirements. Israel's communications ministry awarded the cable operators their telephony licenses under the condition that they will provide universal service to match that of national provider Bezeq within a few years. In addition, the country's competition commission is allowing the three companies to complete a full merger (due by December 15, 2004) under the condition that they start voice services by November 24, 2004, and that they jointly invest at least 350 million new shekels (US$79.6 million) in voice infrastructure by the end of June 2006 ($23.9 million by end of June 2004, a further $31.8 million by end of June 2005, and the remaining $23.9 million by end of June 2006).

Between them, the three cable operators have about 1 million customers, while Bezeq, in which the Israeli government holds nearly 50 percent of the shares, has about 3 million subscribers, though this number is falling.

— Ray Le Maistre, International Editor, Boardwatch

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