WorldCom has opened Israeli office in preparation for entering the domestic telecoms market

UUNet is sniffing for Israeli partners in Internet and long-distance calls sectors
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United States communication giant

Worldcom

(Nasdaq:WCOM) is trying to wedge a foot into the door of Israeli communications, TheMarker reveals.

TheMarker, a Hebrew-language monthly magazine of TheMarker.com group, writes that Worldcom is concentrating its efforts on both the regulatory level and the business side, operating through its subsidiary

UUNET

.

UUNet has its eye on providing Internet services to businesses, and probably the international long-distance calling market too, which will open for competition in six months. The company could well be contemplating entry into the domestic Israeli telephone market too.

To date the government-controlled Bezeq is the only company supplying domestic communications. Last week Ofek The New World of the Eurocom group also received a permit to provide domestic communications. But it will be months before Ofek is ready to provide service.

UUNet has already opened an office in Ramat Gan. But the manager of the local office does not reside in Israel. The office is run by Israelsales manager Gal Kohn, previously an executive at international long distance carrier

Barak International Communications

.

WorldCom, previously MCI WorldCom, is the world second largest telco, after

AT&T Corporation

(NYSE:T). It has a large share of the United States long-distance calls market, but does not have its own wireless network. UUNet owns one of the world's largest Internet backbones. It provides Internet services to over 70,000 businesses in over 100 countries worldwide, and now wants in to Israel.

From Internet to long-distance calls

UUNet applied to the Israeli Communications Ministry for an ISP license six months ago. Its intent is to be able to sell Israeli businesses direct access to its Internet backbone.

Israel's telcos, mainly the long-distance carriers, leapt up screaming. They argued that an Israeli license would give UUNet an unfair competitive advantage by enabling UUNet to leapfrog over their exclusive license to provide international long distance communications. "Although the license granted will be an Internet Protocol license, it is clear today that it will be used for voice communications," said one executive.

They also complained that ministry regulations dictate partial Israeli ownership of long-distance providers, but UUNet is entirely non-Israeli.

While negotiating with the Communications Ministry, UUNet also evaluated collaboration with local companies. Beyond examining the possibility of buying communication lines from Israel's long-distance carriers, UUNet looked into buying a local ISP. In October 2000 UUNet ceased negotiating with the Communications Ministry over an ISP license, bolstering the assumption that it may be about to acquire a local ISP.

All Worldcom's activities in Israel have been shrouded in secrecy, especially its moves regarding the regulatory aspect of its entry into the market. Whispers from the Communications Ministry indicate that the government has no great problem with foreign communication entities penetrating the Israeli market, and will support such efforts as long as it doesn't derail competition.

UUNet officials refuse to comment on the company's plans or activities. Sources close to the company business said that it would reveal its intentions in a month or two.

The major allure in Israel for Worldcom is the long-anticipated advent of competition in the long-distance market, scheduled for January 2002. Several global players are sniffing around. One is

Telecom Italia

(NYSE:TI) - which holds stakes in

Internet Gold

(Nasdaq:IGLD) and

MED-1 Submarine Cables

.

Another is

Telefonica

(NYSE:TEF) of Spain, which was close to closing a deal to buy the 50% Motorola (NYSE:MOT) held in Israeli cellular carrier

Pele-Phone Communications

.