Israel's telecommunications regulator has ordered mobile operators to cut interconnection fees by nearly 73 percent. Communications Minister Moshe Kahlon said interconnect fees will drop to ILS 0.0687 a minute at the start of 2011 from ILS 0.251 currently. Fees will decline further to ILS 0.0634 per minute from the start of 2012, to ILS 0.0591 from 2013 and to ILS 0.0555 in 2014. Termination fees for text messaging will also fall sharply, from ILS 0.0284 now to ILS 0.0016 from 1 January 2011, to ILS 0.0015 in 2012, to ILS 0.0014 from 2013 and to ILS 0.0013 at the start of 2014.
The reduction is based on the final recommendations by Nera Economic Consulting, which examined the cost pricing model of mobile network components. The cuts to mobile termination rates could have been deeper as the ministry initially said it planned a reduction to as low as ILS 0.0414. Kahlon said reducing interconnection fees will save the public about ILS 1 billion a year, significantly lower the price of a call from landlines to mobile phones and increase competition to support the entry of new mobile companies. Market leader Cellcom said the cuts would reduce its annual EBITDA next year by ILS 420 million and net profit by ILS 320 million. Partner Communications predicted a negative impact of ILS 30-40 million per month on EBITDA and ILS 20-30 million on net profit. Both companies said they will consider legal action against the decision.