Bezeq

Bezeq’s Operations

    As of December 31, 2015
Bezeq Group Segments Service Estimated
Market
Share
Market
Position
Bezeq………………………… Fixed-Line Telephony (private sector) 56.0% 1 of 4
Fixed-Line Telephony (business sector)

 

74.0% 1 of 2  

 

Fixed-Line Broadband Internet Infrastructure Access 68.0% 1 of 2
Pelephone……………………. Cellular Telephony 25.6% 3 of 5
Bezeq International…………………. ISP 44.0% 1 of 4
ILD 21.0%
DBS………………………….. Pay Television 44.0% 2 of 2

The Bezeq Group had approximately 2.18 million active fixed telephone lines in its fixed-line telephony business, 1.48 million fixed-line broadband Internet infrastructure access services subscribers (retail and wholesale), 2.65 million cellular telephony services subscribers and 635,000 pay television services subscribers as of December 31, 2015. For the year ended December 31, 2015, the Bezeq Group had revenues of NIS 9.99 billion (approximately $2.56 billion).

The Bezeq Group’s diversified telecommunications services are based on highly advanced nationwide infrastructures and are provided by the following segments of the Bezeq Group:

Domestic Fixed-Line Communications (Bezeq)

Bezeq is the incumbent and largest provider of fixed-line telephony and fixed-line broadband Internet infrastructure access services in Israel. Its products and services include basic telephony services on domestic telephone lines and associated services and fixed-line broadband Internet infrastructure access services through its nationally deployed, high quality infrastructure network. Bezeq also offers, among other services, transmission and data communication services, services to other communications operators and broadcasting services. Bezeq’s new high-speed next generation network, or NGN, is the most advanced fixed-line communications network in Israel. The NGN, which covers 100% of Israeli households, uses VDSL2 technology and enables Bezeq to provide bandwidth of up to 100 Mbps (download) speed, as well as innovative value-added services.

 

Bezeq Domestic Fixed-Line Communications As at and
for the
year ended
December 31,
2015
  (in millions,
except
percentages)
Revenues……………………………………………………………………………………………. NIS 4,407
Fixed-line telephony
Estimated market share(1)………………………………………………………………………………………………. 65%
Active lines…………………………………………………………………………………………………. 2.181
Churn rate…………………………………………………………………………………………………… 10.1%
Fixed-line broadband Internet infrastructure access
Estimated market share…………………………………………………………………………………………………. 68%
Subscribers…………………………………………………………………………………………. 1.479

 

(1)        As of December 31, 2015, Bezeq’s market share in the business and private sectors of the fixed-line telephony market is estimated to be 74% and 56%, respectively.

 

 

Cellular Telephony (Pelephone)

Pelephone is among the leading cellular telephony services providers in Israel. Pelephone provides cellular telephony services, sells handsets and other end-user equipment, and provides repair services for handsets sold by Pelephone. Pelephone’s nationwide 3.5G UMTS/HSPA+ network supports download speeds of up to 42 Mbps and upload speeds of up to 5.7 Mbps, making it one of the fastest, highest quality and most advanced networks in Israel. We believe these network features provide Pelephone with a strong platform to continue to offer a variety of advanced services and products to its customers and to capitalize on the continued increasing demand for smartphones and advanced data services.

The intensified competition in the cellular market has led to subscriber churn and a price war where the operators continuously lower prices to undercut the competition. This has led to substantial erosion of the average revenue per subscriber. This trend continued and even increased in 2015, as the average revenue per subscriber decreased by 19% as compared with 2014.

The opening of the market to parallel imports and multiple stores selling terminal equipment has led to a decline in the sales of cellular handsets and terminal equipment by the cellular operators. To minimize its exposure to decreased revenues, Pelephone increased the range of equipment it sells and also sells non-cellular handset terminal equipment such as tablets, laptops and accessories. Pelephone’s revenue from terminal equipment in 2015 amounted to NIS 891 million, accounting for 31% of its total revenues compared with terminal equipment revenues of NIS 966 million in 2014, accounting for 28% of its total revenues. Most terminal equipment is sold through monthly installments. The decrease in terminal equipment sales over the years has led to a decrease in trade receivables as well as to a decline in trade payables to terminal equipment suppliers.

The cellular market growth rate is lower due to penetration rate saturation. The penetration rate in Israel at December 31, 2015 was 124%.

Pelephone As at and
for the
year ended
December 31,
2015
(in millions,
except percentages)
Revenues……………………………………………………………………………………………. NIS 2,890
Estimated market share…………………………………………………………………………………………………. 25.6%
Active lines…………………………………………………………………………………………………. 2.65
Churn rate…………………………………………………………………………………………………… 25.8%

ISP, ILD, Data Services and ICT (Bezeq International)

Bezeq International is the leading provider of ISP services in Israel and one of Israel’s leading providers of ILD and international and domestic data transfer and network services. Bezeq International provides comprehensive communications solutions that include ISP and related value-added services, international and domestic telephony, PBX supply and support, ICT, cloud computing services, data communications and information security, website server hosting and related managed services. Bezeq International also owns the JONAH high-speed submarine optical fiber communications cable system connecting Israel and Europe, which provides increased bandwidth (capacity and speed) and has positioned Bezeq International as the sole ISP in Israel to own and operate an advanced international network.

 

 

 

Bezeq International As at and
for the
year ended
December 31,
2015
(in millions,
except percentages)
Revenues……………………………………………………………………………………………. NIS 1,578
ISP
Estimated market share…………………………………………………………………………………………………. 44.0%
Churn rate…………………………………………………………………………………………………… 17.3%
ILD
Estimated market share…………………………………………………………………………………………………. 21.0%

Multi-Channel Pay Television (DBS)

DBS offers nationwide coverage through its DTH technology and is the only company in Israel licensed to provide multi-channel pay television broadcasts via satellite and is one of only two companies in Israel licensed to provide multi-channel television services, with nation-wide coverage and innovative and advanced technologies, including PVR, VOD and HD television. DBS focuses on creating clear differentiation from its main competitor, HOT, with respect to brand, content and service quality. In addition, DBS has a strong track record of innovative technology development and is a leading provider of value-added services; including hybrid IP and DTH based set-top boxes (including PVR and VOD).

Apart from DBS, the only other broadcasting licensee in the multi-channel television broadcasting sector is HOT, which provides cable television services to subscribers and has a pronounced monopoly under the Antitrust Law in the multi-channel television broadcasting sector. Cellcom Group’s Cellcom also operates in the multi-channel television sector, providing television services via the Internet in which customers can access to view VOD and a few linear channels (including the DTT content) by either using a special streamer or application.

 

DBS As at and
for the
year ended
December 31,
2015
(in millions,
except
percentages)
Revenues…………………………………………………………………………………………. NIS 1,774
Estimated market share………………………………………………………………………………………………. 44.0%
Subscribers (in thousands) ……………………………………………………………………………………….. 635
Churn rate………………………………………………………………………………………………… 13.9%