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Cellcom Israel Announces First Quarter 2012 Results

Regulation

Annulment of Early Termination Fees - In March 2012, the previously reported bill proposing to completely annul Early Termination Fees in relation to new cellular customers with less than a certain number of phone lines, was enacted by the Israeli parliament and will apply retroactively as of November 2011. In addition, this law also prohibits cellular operators to make any linkage between a cellular services transaction and a handset purchase transaction, including by way of offering airtime rebates or refunds for handsets, as of January 1, 2013.

For additional details see the Company's most recent annual report on Form 20-F for the year ended December 31, 2011, under  "Item 3. Key Information - D. Risk Factors - Risks related to our business - We operate in a heavily regulated industry, which can harm our results of operations" as well as under "Item 4. Information on the Company - Competition" and "- Government Regulation - Tariff Supervision".

Additional Cellular Operators    - In May  2012, Golan Telecom Ltd., a new UMTS operator,  and Mirs Communications Ltd., announced the launch of their UMTS services.  Additionally, Home Cellular Ltd. and Alon Cellular Ltd., both mobile virtual operators, commenced operations during April and May 2012, respectively.

For additional details see the Company's most recent annual report on Form 20-F for the year ended December 31, 2011, under "Item 3. Key Information - D. Risk Factors - Risks related to our business - We operate in a heavily regulated industry, which can harm our results of operations" and " - We face intense competition in all aspects of our business" as well as under "Item 4. Information on the Company - B. Business Overview - The Telecommunications Industry in Israel - Cellular services"; "Competition" and "Government Regulations - Mobile Virtual Network Operator" and " - Additional UMTS Operators".

Wholesale market in the wireline communications market - In May 2012, the Israeli Minister of Communications published a policy document in relation to the wholesale market in the wireline communications market in Israel. The document adopts the main recommendations of the public committee appointed by the Ministry of Communications to examine Bezeq's tariffs structure and tariffs for wireline wholesale services. The policy includes mainly the following:
  1. The wholesale market's tariffs and terms of agreement shall be agreed through negotiations between the owners of the wireline infrastructure (Bezeq and Hot) and the other operators. An infrastructure owner that reaches an agreement with such other operator, shall be obligated to offer the same terms, without discrimination, to all operators, including its affiliates. The Ministry of Communications shall intervene in the negotiations or in the terms of the agreement between the parties in case an agreement has not been reached within six months from the date of the policy document or in case the agreement between the parties includes terms that may harm the competition or the public. In addition, the Minister may intervene in a retail tariff that was set by the owner of wireline infrastructure or its affiliate that harms the competition, through changing of the wholesale tariff.
  2. The structural separation between an owner of wireline infrastructure and its international landline operator and internet service provider affiliates shall be annulled within nine months from the date of execution of an agreement between such owner of wireline infrastructure and other operator and shall be replaced by an accounting separation. The Minister shall consider providing leniencies in relation to or annulment of the structural separation between an owner of wireline infrastructure and its cellular operator affiliate according to the pace of development of a wholesale market and the state of competition in the market. In case an effective wholesale market does not develop within twenty four months from the date of the policy document, the Ministry of Communications shall act to impose a structural separation in the owners of the wireline infrastructure between the infrastructure and the services provided through this infrastructure.
  3. The Minister of Communications shall consider to annul the structural separation in relation to television broadcasting services if there is a reasonable possibility to provide a basic package of television services through the internet. The Minister of Communications shall consider imposing a requirement to provide television broadcasting services for the same price within a package of telecommunications services and separately.  

In relation to the supervision of Bezeq's tariffs the policy is similar to the previously reported final recommendations of the committee.

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