רוני בירון
21/05/2014
MoC releases its policy on network sharing
Passive sharing promoted, active sharing allowed selectively
The professional level of the MoC has released its recommended policy on mobile network sharing. According to the document, the MoC supports passive sharing of sites and towers wherever is possible. Active sharing including radio elements and frequency (known as MOCN topology) is likely to be allowed between a new entrant and an incumbent. Active sharing excluding frequency (MORAN) may be allowed under special circumstances. We expect the Anti-Trust authority to announce its decision in the very near-term. We expect the Anti-Trust to be mostly aligned with the MoC but to incorporate certain pre-conditions.
What does it mean for the agreements in hand?
While no formal decision has yet to be given on the specific agreements, the wording of the policy implies that: 1. the Partner-Hot Mobile full 3G/4G (MOCN) agreement is likely to be approved, 2. a similar agreement between Golan and either Cellcom or Pelephone (more likely Cellcom in our view) is likely to be approved if applied for but not the full agreement between the three, 3. the passive sharing agreement between Cellcom and Pelephone is likely to be approved. We believe Pelephone is more likely to roll out an independent 4G network and note that Golan may prefer to pay rights of use to Cellcom over a full network sharing agreement.
Positive news for the sector
We believe the recommendations pave the way for a much needed network consolidation as well as overdue LTE spectrum allocation and are good news for all five players given the potential cost savings. The bear argument would be that the network consolidation will sustain the new entrants keeping pricing pressures elevated; however, we see the cost savings argument as more tangible at this stage.
Valuation:
Our price targets are DCF-derived. We have already incorporated our estimated cost saving assumptions into our models but apply a 10% discount to DCF for Partner and Cellcom pending more clarity on regulatory approvals and execution.
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