Ofek denies closing, says it has returned operating license

Company slashing 66% of staff after JV talks with Cellcom broke down
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Israeli telecoms startup Ofek Communications, poised to offer state-run Bezeq Israel a challenge in the domestic phone market, said on Sunday it gave back its licence and will slash jobs and activity in Israel.

An Ofek spokeswoman said the company informed the Communications Ministry it would return a licence to provide domestic phone services and that it would not participate in the tender to offer wireless access.

"We are not closing but we sent a letter to the Ministry of Communication withdrawing from a domestic communications licence and a tender for LMDS," the spokeswoman said.

LMDS, or local multipoint distribution systems, rivals fiber connections and allows operators to provide high-speed Internet and data services to customers through radio waves.

She noted Ofek's action, which will include laying off two-thirds of its staff, followed last week's breakdown of talks between Ofek and cellular provider Cellcom, which were to jointly develop alternate local phone services.

Cellcom's decision to balk at a partnership was the second and perhaps final blow to Ofek, which bet heavily on establishing a communications network in Israel to battle Bezeq's monopoly.

Israel's financial press said Cellcom called off the deal due to a dispute among key shareholders.

Initially, Nortel Networks (NYSE:NT) said it would be a partner with Ofek and supply equipment but pulled out when the global telecoms market took a dive.

"The company is left without any resources," the Ofek spokeswoman said.

Ofek was partly funded by Eurocom Communications.