Israeli telecom Bezeq hopes for payday from fibre optic network rollout

JERUSALEM: Bezeq Israel Telecom , the country's largest telecoms group, is expecting its long-awaited fibre optic network to boost financial results this year, chief executive David Mizrahi said on Monday.

Bezeq began a full-scale fibre rollout this week but is a late entrant to the market where rivals such as mobile phone operators Cellcom and Partner Communications have already been deploying their own networks in recent years.

The project was delayed by nearly a decade of squabbling with the country's regulator over how much of Israel needed to be covered by the network, but Bezeq said demands were eased after the appointment of a new communications minister last year and the project had become financially viable.

Mizrahi said Bezeq, where the fixed-line business performed well last year despite the pandemic, has connected 250,000 households to fibre. It plans to ramp up deployment to reach some 1 million households by year end, or 40% of Israel's population.

"There's a lot of extra revenue coming from broadband ... and we expect (fibre) to have a very positive effect on our numbers," Mizrahi told Reuters, citing customers upgrading and paying for installation.

Bezeq currently has 1 million internet customers using its traditional copper wire networks offering speeds of up to 200 megabits per second, compared with 500 Mbps for rival cable company HOT.

Partner, meanwhile, has attracted more than 150,000 fibre customers and Cellcom has more than 100,000, with speeds of up to 1 gigabit per second. These firms may also piggyback on Bezeq's network.

Bezeq, which plans to invest billions of shekels in fibre and offer speeds up to 2.5 Gbps, said its prices will be higher than its competitors and it would charge for installation, unlike Partner and Cellcom.

"It remains to be seen if Bezeq's premium prices and installation costs will face pushback given the cheaper competition, or if conversely the competition will take the opportunity to start charging higher prices," said Barclays analyst Tavy Rosner in a note.

Mizrahi said it could take time for customers not familiar with the benefits of fibre to be persuaded to upgrade.

"Most customers do well with 100 mega(bits). But over time, we will see more and more people" moving to fibre, he said.

Bezeq will report fourth-quarter earnings on March 25. It expects a net 2020 profit of 1.05 billion shekels, with a lack of roaming revenue weighing on mobile unit Pelephone.

Its shares are up 16% so far in 2021 after a 42% gain last year.