Netanyahu tightens grip on Israel's communications sector

Reuters News
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Posted: May 20, 2015 7:12 AM

By Steven Scheer and Tova Cohen

JERUSALEM/TEL AVIV (Reuters) - Concerns about Israel's commitment to competition in the telecoms sector have grown after Prime Minister Benjamin Netanyahu dismissed the director-general of communications and took over the ministry himself.

The director-general, Avi Berger, had proposed breaking up the dominance of former state operator Bezeq by requiring it to lease its infrastructure to competitors, a move expected to lower internet, phone and digital TV services.

Berger was appointed by the number two in Netanyahu's Likud party, Gilad Erdan, who is now at odds with the prime minister, raising the risks of a political battle that Netanyahu, with a one-seat majority in parliament, can ill afford.

"The rapid and sharp dismissal raises a lot of questions," said Ilanit Sherf, an analyst at Psagot brokerage, referring to Berger, who Netanyahu fired in a phone call on Sunday. He is expected to appoint a replacement for Berger soon.

"A communications ministry without a director-general, or with an incapable director-general, could delay processes ... and the potential for competition," she said.

Berger and Erdan, the former communications minister who has been given no ministry in Netanyahu's new government, had accused Bezeq, Israel's largest telecoms group, of dragging its feet on reforms in an effort to protect its profits.

Critics of the prime minister have suggested Berger's firing and the taking over of the Communications Ministry are an effort to more closely monitor Israel's media sector, which Netanyahu has said in the past is overly critical of him.

As communications minister, Netanyahu will have to decide the fate of Israel's Channel 10 TV, which has financial problems, and will oversee the broadcasting authority, which is facing liquidation ahead of the creation of a new body.

While Israel has made strides in opening competition in the mobile market, bringing prices down sharply, the delivery of Internet and digital services remains restricted, with Bezeq and cable company HOT controlling the last mile.

Analysts believe Netanyahu's moves will lead to pressure on Bezeq being softened. A spokesman for Bezeq said the company was not involved in internal Communications Ministry issues.

"The removal of Berger could be seen as a signal that Netanyahu is seeking a less confrontational stance vis-à-vis Bezeq," said Citi analyst Michael Klahr.

Netanyahu has given no reason for firing Berger, but in response to criticism he said reforms to open up the fixed-line and Internet sectors would continue. He did not elaborate.

In a sign of further infighting to come, Erdan has said he will submit a new bill to parliament requiring Bezeq to sell off its content and services, leaving it as an infrastructure firm.

While passage of such a bill is unlikely, Netanyahu controls only 61 of the 120 seats in parliament, making it possible.

(Editing by Janet Lawrence)