Comverse suing to void Bezeq contract with CTI2

With Amir Helmer

Comverse Technology (Nasdaq:CMVT) ( CMVT) is suing to stop the Israeli state-run phone company, Bezeq, from signing a unified-messaging contract with startup CTI2 (CTI Squared).

Comverse claims that Bezeq decided to contract with CTI2 without holding a proper tender process as required by law. Bezeq, Comverse says, claimed the contract was exempt from the tenders regulation. As a government company, Bezeq is obliged to publish tenders for major projects.

The Israeli voicemail company filed an administrative petition against Bezeq, and has meanwhile received a temporary injunction from the District Court blocking the contract until a ruling on its petition is made.

CTI2 has reportedly already provided unified communications to tens of thousands of Bezeq subscribers.

The story began in 1999, when Bezeq published a Request For Information in the Israeli and foreign press, regarding a unified messaging platform, Comverse says in its petition. In its RFI, Bezeq said it wanted to carry out field testing of a UM platform among 5,000 users.

Comverse claims that it responded to the RFI with a proposal that would have cost Bezeq $450,000 to half a million dollars, later amended to $200,000 to provide UM to about 10,000 users. CTI2 also submitted a proposal, Comverse says.

Bezeq opted to carry out the field test with CT12, Comverse says, but the phone company undertook to publish a tender, in compliance with the Tenders Law, if it decided to carry out a commercial UM project.

In May, Comverse says, it learned that Bezeq intended to expand its UM trial with CTI2 to tens of thousands of users. That move could force Bezeq to continue working with CTI2 in the future, Comverse claims, without carrying out an impartial selection process.

A top source at Comverse estimates that the entire project will encompass no more than 50,000 users, resulting in a few million dollars altogether.

Comverse claims that it contacted Bezeq again, asking to present its UM platform for Bezeq's evaluation. But Bezeq refused the opportunity to thoroughly inspect the systems, Comverse charges, agreeing only to "glance" at the technology through a slide show.

After the slide show, Comverse claims, it invited Bezeq representatives to inspect UM systems it had installed around the world, but Bezeq declined.

Lately its representatives met with Bezeq CEO Ilan Biran, Comverse continues, asking him to inspect the Comverse systems properly before making a choice. On July 10, Comverse says, Biran answered that Bezeq had decided to contract with CTI2 for the UM systems, and that Bezeq would check out the Comverse systems only if Comverse undertook not to raise any claims against Bezeq regarding the propriety of the process.

Comverse did not accept the terms, its representatives told the court, and demanded that Bezeq show it documentation regarding its decision-making process for UM and voicemail platforms. Bezeq refused and said it was not obliged to publish a tender in the case of the CTI2 contract, adding that Comverse had no right to demand the documentation.

Comverse claims it continued to try to get the documents, but Bezeq stood firm in its refusal, claiming trade secrets.

In a nutshell, Comverse accuses Bezeq of unfair practice in not giving it the chance to compete on an equitable basis with CTI2 when expanding the trial, in blocking Comverse's access to information on the deal with CTI2, and in refusing to examine how Comverse's systems work in the company's labs in Tel Aviv.

"Bezeq's behavior does not comply with the rules pertaining to government companies, especially ones with a monopolistic status," Comverse claims, which is not for the greater good of the Israeli public.

Comverse already supplies Bezeq with voicemail and related services.

Bezeq responded that Comverse's petition to the courts contravenes regular business practices and that if required, it will prove to the court that Comverse had a fair chance to sell its wares. Bezeq also said that it would have been better if Comverse's chiefs had engaged in business instead of turning to the courts to force Bezeq's moves.

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