Israel's Telecommunications Industry

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Israel'sTelecommunicationsIndustry

• Development and Highlights
• Daniel Rosenne
• rosenned_at_netvision.net.il

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Presentation Agenda

• Telecommunications Services
• Technology Industry
• Telecom Israel 2002 Event

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Israels ICT Sector - 2000(Information
Communications Technology)

• Israeli ICT GDP grew from NIS 8.7 billion in 1990
  to NIS 39 billion in 2000, 20 of business sector
  GDP.
• ICT GDP is 14.3 of total GDP.
• OECD highest - compared to 10-11 in Korea and
  US.
• Investment in ICT research and development is 23
  of the ICT GDP.
• OECD highest - compared to 16-17 in Japan and
  Finland.
• 148,000 employees.

Source CBS, 2001
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Telecommunications Services
5
Israel's Telecommunications

• 3.0 million main telephone lines
• (48 penetration).
• 5.6 million mobile customers, on 4 networks
• (90 penetration).
• 1.5 million households connected to multichannel
  subscriber television (0.7 million - digital)
• Cable 3 operators, 1.2 million subscribers, 70
  of homes passed, 95 household coverage.
• Satellite 1 operator, 0.3 million subscribers.

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Israel Telecom Operators Sales Growth Thousands
NIS, current prices)
25,000
20,000
15,000
10,000
5,000
Source CBS, 2001
0
1994
1996
1998
2000
1990
1988
1992
7
Telecommunications Services Market 2001
Source MOC, Israel, 2002
International Long-Distance
Subscriber TV
Terminal Equipment Business Systems
Internet services
1.7
4.3
8.6
9
Mobile Services
Fixed Services
51
25.4
Total telecom services market NIS 23.1 billion
(12/2001 prices)
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The Mobile BoomIsrael Telecommunications
Services Revenues, 1995-2001NIS million, 12/2001
prices Source MOC, Israel, 2002
14,000
12,000
Mobile
10,000
8,000
Fixed
6,000
ILD
4,000
Multi Channel TV
2,000
Internet
0
1995
1996
1997
1998
1999
2000
2001
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2G/3G Mobile License Auctions

• MSR (Multiple Simultaneous Round) combined
  auction.
• Frequency packages
• 4 Bands 2G FDD, 2x10 MHz.
• 4 Bands 3G FDD, 2x10 MHz.
• 3G TDD 5 MHz (for 3 packages only).
• Reserve price 2G US 45M. 3G US55M.
• Tender published 28 March 2001.
• 18 December 2001 auction produced NIS 1,026
  million.

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Why Will 3G Succeed in Israel?

• Israel is well suited for 3G
• Relatively wealthy country (20K GDP/cap).
• Technology literate.
• High mobile penetration, extremely high usage.
• Favorable auction price - 42/pop
• Germany 544, UK 537, France 287, Italy 211,
  Ireland 211, Austria 91, Denmark 80, Poland
  40, Greece 40, Portugal 35, Czech Republic
  27.
• Light rollout requirements
• Operators do not have to launch services unless
  they are sure they will succeed.
• Each service country-wide availability - 24mo
  after initial commercialization.

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Internet Services

• 40 Internet service providers, 60,000 domains,
  2,000,000 home users.
• Penetration 40 of population, 60 of
  businesses.
• IIX (Israel Internet eXchange) non-profit peering
  point.
• Hands-off overall regulatory policy.
• High growth 50 annual.

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Internet Users Across The World 2002Israel is in
the top 15 high internet penetration countries
(gt40)
70
63
62
61
60
59
58
60
53
52
52
50
50
46
46
44
42
41
39
38
38
37
40
Country average (34)
Percentage of total adult population
29
28
30
24
21
20
18
18
18
18
17
20
16
16
15
12
10
9
10
6
4
0
GB
Italy
India
USA
Spain
Latvia
Korea
Serbia
Ireland
Mexico
Poland
Turkey
France
Israel
Taiwan
Ukraine
Estonia
Norway
Finland
Belgium
Canada
Bulgaria
Hungary
Thailand
Romania
Lithuania
Malaysia
Australia
Germany
Denmark
Indonesia
Argentina
Singapore
Hong Kong
Netherlands
Czech Republic
Slovak Republic
Percentage of the population who have personally
used the Internet during the past month
Source Tayler Nelson Sofres Interactive Global
eCommerce Report 2002
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Bezeq Voice and Internet Minutesmillion minutes
40,000
14,200
Internet minutes
8,257
30,000
3,602
2,093
4.6
9.1
14.5
27.6
40.3
972
20,000
21,666
21.000
20,997
21,319
20,334
95.4
59.7
90.9
85.5
72.4
Voice minutes
10,000
0
1997
1998
1999
2000
2001E

• Note Internet promotion tariffs introduced May
  2000.

Source Foresight/Globes, Dec 2001
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Broadband Deployment

• Triple play
• Voice.
• Data (high speed Internet).
• Video.
• Fixed Operators
• Bezeq
• 35,000 ADSL lines _at_ Dec 2001.
• 83,000 ADSL lines _at_ June 2002.
• Fiber to every business large enough to own a
  PABX.
• Cable
• 400,000 digital subscribers.
• Cable modems BB Internet access _at_ 2002.
• 10,000 cable modems _at_ June 2002.
• Mobile Operators
• Cellcom, Partner GPRS (2.5G) _at_ 2002.
• UMTS (3G) _at_ 2003-4.
• Pelephone CDMA 1X-RTT _at_ 2002.

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MED Nautilus Network

• 3.84 Tb/s DWDM, in restorable ring configuration
  (6 fibers, (64 WL x 10 Gb/s per fiber pair).
• Service initiated November 2001. US 500 M.
• 49 owned by Israeli shareholders.

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Civilian Telecommunications Satellites

• AMOS-1 TV distribution, SNG VSAT
• launched May 1996.
• Geostationary orbit at 4o West.
• 7 transponders, covering Middle East Central
  Europe.
• Designed, manufactured and controlled by Israel
  Aircraft Industries.
• Gurwin-II TechSAT communications, remote sensing
  research
• Launched July 1998.
• 830 km altitude sun-synchronous circular orbit.
• 50 kg, 3-axis stabilized Earth-pointing microsat.
• Designed, manufactured and controlled by the
• Technion - Israel Institute of Technology.

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AMOS 2 Satellite

• Launch Planned for Q1 2003.
• Geostationary orbit at 4o West (co-located with
  AMOS 1).
• 22 active transponders 6 backup transponders,
  36 MHz bandwidth each.
• High power - planned for DTH TV distribution,
  two-way Internet services and broadband VSAT
  networks.
• 3 spot beams
• Middle East - supporting up to 11 transponders.
• Europe - supporting up to 6 transponders.
• US East coast - supporting up to 8 transponders.
• Designed, manufactured and controlled by Israel
  Aircraft Industries.
• Owned operated by Spacecom Ltd.

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Privatization - Bidding for Majority Stake in
Bezeq

• Israels incumbent telecommunications operator.
• 2001 annual sales NIS 8.1 billion.
• 11,000 employees (8,400 in Bezeq, The parent
  company).
• Government holds 54.6 of Bezeq shares (remaining
  shares - publicly held).
• Government issued a formal tender, for private
  sale of 50.01 of the share capital of Bezeq.
• Six groups filed applications at 13 February
  2002.
• The process, planned for 7 to 9 months, is
  delayed due to lengthy governmental deliberations.

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Bezeq Consortium
Bezeq International ILD Internet (100)
Pelephone Mobile Services (50)
Bezeq Fixed Services Infrastructure (Holding
Company)
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Open Sky Broadcasting Policy

• Creating competitive broadcasting market
  changing the operations regime - from limited
  number of concessions, issued by public tenders,
  to licenses, issued to all applicants meeting
  defined criteria.
• Key policy ingredients
• Public broadcasting new definitions - goals,
  structure, finance.
• Commercial broadcasting channel 10, second
  commercial television channel, began services in
  January 2002.
• Multi-channel subscriber television direct
  broadcasting satellite, in competition with cable
  television, began services in July 2000.
• Digital Television cable satellite.

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Regulation Ideology

• Free and competitive markets promote growth,
  efficiency, customer satisfaction economic
  advantage.
• Market restructuring, in transition from monopoly
  to open and free market, during a short time
  period, requires active and balanced regulatory
  intervention.
• Once competitive marketplace is achieved, a
  strong regulator will provide unnecessary
  intervention, and should be abolished.

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Proactive Re-regulation

• The end of the access monopoly
• Facilities-based competition.
• Alternative infrastructure fiber, copper, cable,
  fixed wireless, satellite.
• Simple interconnection rules
• Non-discriminatory access, carrier pre-selection
  dialing parity.
• Non-discriminatory interconnection tariffs.
• Minimum compatibility requirements.
• Open access for value-added service providers.
• New numbering plan frequency allocations.

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Israeli Market Structure
Service Providers Today
New market niches are created

• Separation of
• Access from Services
• Transport from Content

ASPs ISPs
ILDs
ILECs
Cable
xCLECs
Mobile

• The giants compete

End Users
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Technology Industry
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Israel's Electronics IndustriesSource IAEI, 2002

• Combined 2001 sales - 14.25 billion, of which
  11.75 billion were exports sales.
• Highly skilled workforce - 62,000 employees,
  including over 63 scientists, engineers
  technicians.
• Output per employee - over 230,000.

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Total 2001 Sales - 14.25 billionSource IAEI,
2002
Telecommunications 29.6
Software 21
Defense Systems 15
Industrial Medical Systems 17.7
Components 16.7
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Industry Excellence Areas

• Telecommunications networking network
  management, billing, Internet, video image
  processing, wireless, satellite communications,
  access networks, broadband photonics, network
  security VPNs, messaging, home networking.
• Computerized production equipment imaging.
• Software.
• Semiconductors photonic components.
• Defense systems missiles, anti-missiles
  guided weapons, opto-electronics, radars, C4I, EW
  (Electronic Warfare), simulation, training.

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Statistical HighlightsSource IAEI, 2002
Electronics All Other Industries
Industries Exports of total
sales 82 25 Added value 68 42 Scientist,
engineers technicians 63 14 Employees in
RD 12 2
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Major RD EffortsStretching Boundaries of
Imagination Ingenuity

• Innovative synergistic industry-academy
  cooperation, supported by the Chief Scientist,
  Ministry of Industry Trade.
• Participation of over 100 industrial corporations
  academic institutions.
• Focused on establishment of the technological
  infrastructure for the next generation.
• Key telecommunications RD activities

• Digital wireless
• Satellite systems
• Broadband optical technology

• Internet Multimedia
• Telemedicine
• Microelectronics
• Network management

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Technology Start-ups

• Israel is one of the largest world centers for
  start-up enterprises, with 2500 active
  start-ups.
• Innovative, technology-intensive activity,
  representing several technology breakthroughs.
• Major international activity
• Strategic alliances and joint ventures.
• Raising capital - venture, seed risk
  investments.

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Venture CapitalSource IVC Research Center
(TheMarker, 27 January 2002)

• Investments by venture capital funds constitute
  an added value above financial contributions - in
  management, world market familiarity, strategic
  guidance and economic credibility.
• During 2001, 526 Israeli companies raised 2.0
  billion (compared to 513 companies 3.1 billion
  during 2000).
• 40 (812 million) was invested by Israeli
  venture capital funds.
• The active sectors are communications (42),
  software (20), life sciences (14) Internet
  (9).

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Telecom Israel 2002 Exhibition and
ConferenceThe Future is Here

• Tel-Aviv, 4-7 November, 2002

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Telecom Israel 2002 Telecom Showcase

• A bi-annual international event
• Expectation of 150,000 participants, 3000 foreign
  visitors, 20 telecom ministers.
• Following the remarkable success of
  Telecom-Israel events
• 1998 - 100,000 participants, 3000 foreign
  visitors.
• 2000 - 140,000 participants, 4000 foreign
  visitors.
• Exhibition (4-7 November 2002)
• 35,000 sqm.
• Over 400 exhibitors, about 100 start-ups stands.
• Conference (5-7 November 2002)
• Over 100 industry leading speakers.
• Combination of market giants with start-up
  entrepreneurs guarantees innovative and
  interesting discussions.

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Telecom Israel 2002 ConferenceBroad Perspective
of Industry Challenges

• 3 Plenary Sessions - sober view of Post-Hype
  industries
• Telecom, IT Media at the crossroad challenges
  and opportunities
• Civilian Military information security
• 4 Sessions Technology Track - the changing
  network
• Network infrastructure next generation, all IP,
  all optical network
• Access bottleneck fixed and mobile
• Internet technology what is the next big thing?
• 8 Sessions Services Business, Marketing
  Operations Track - New Business Realities
• Transition from voice to multimedia services
• Convergence of fixed and mobile, telecom and
  media
• New frontiers of interactive entertainment and
  the networked home
• Service and network security
• New business models
• 3 Sessions Markets Regulation Track - brave new
  regulation?
• The future of competition
• Regulation role in developing market growth
• 2 Sessions Israeli Technological Competitive Edge
  Track - technology investments
• New models for value creation by startups and
  venture capital funds
• New methods for government RD incentives.

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Telecom Israel 2002 Conference Program
(preliminary)

• Tuesday, 5 Nov. Wednesday, 6 Nov. Thursday, 7
  Nov.

Telecom, IT Media at the Crossroad Challenges
and Opportunities After the Hype - Sober View of
the IT, Telecoms and Media Industries
Information is Power Civilian Military
Information Security at the Turn of the Century
BB and 3G - is the Future Bright? The Drivers for
Successful Broadband Fixed and Mobile
Implementation
The New Mobile World - Will Mobile Operators Make
the Change From Voice to Multimedia?
Network Infrastructure in a Competitive World -
All Optical Core
Telecom and Content Regulation - Critical Must or
Unnecessary Burden?
Delivering Business Services - The New Generation
Application Service Provider
Broadband Fixed Mobile Access Networks - Will
the Bottleneck Open?
Government Business Collaboration - Government
Incentives and Business Motivation Support for
Technology Development
Intelligent Buildings and Home Networking -
Towards Networked Home?
Interactive Entertainment - Is There More than
Sex, Shopping and Games?
Network Infrastructure in a Competitive World -
Next Generation Network All IP Switching and
Service Delivery
The Future of Fixed Services Competition - Is
There Opportunity for CLECs?
Service and Network Security in an Open Broadband
World
Consumer and Business Applications - The Future
of B2C Retailing and B2B Trading
New Horizons for Internet Technology - What is
the Next Big Thing?
Israel Telecommunications Market - Will the
Growth Continue?
Managing Customer Relationship - Adding Value
Through Customer Management
Startups and Venture Capital - Investments in
the Future of Israels Technology
Fixed Mobile Convergence - Bundling or Bumbling?
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Summary
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Israels Telecoms Future Real and Sustainable
Growth

• Technology enabled evolution
• From simple fixed voice and narrowband to
  broadband, mobile, internet advanced services.
• From circuit switching to IP based
  infrastructure.
• Rapid growth
• Especially in the following areas
• Mobile.
• Internet and broadband.

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Facing Exciting Events

• Broadcasting
• Second commercial TV channel (Channel 10).
• 5 Independent cable/satellite channels.
• Telecommunications
• Mobile 2.5G/3G services.
• Cable companies entry into fixed services.
• Market re-structuring
• Bezeq privatization.
• Cable companies consolidation.
• Further IPOs.

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Telecom-Israel 2002 EventTel-Aviv, 4-7 November,
2002

• Important international exhibition conference
• Exhibition 4-7 November 2002
• Conference 5-7 November 2002
• A showcase of hottest technologies and
  applications.
• The place to see how new technologies, products,
  services and issues are reshaping the world of
  communications.
• The future is here - Wherever you look, across
  the globe, Israels born products stand up.
• We invite you to witness for yourself!

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For more informationTelecom Israel
2002http//www.telecom2002.co.il
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The EndThank you for your attention