Israel government panel opposes Bezeq plan to merge its units

By Steven Scheer

JERUSALEM, July 15 (Reuters) - A government committee on Tuesday recommended Israel's telecoms regulator to reject plans by Bezeq Israel Telecom BEZQ.TA to merge its main land-line infrastructure with its mobile phone, internet and satellite TV units due to its market dominance.

It also made the same recommendation about cable company HOT - controlled by telecoms and cable group Altice Europe ATCA.AS - which has similar plans.

In recommendations to Communications Minister Yoaz Hendel, the panel left open the possibility for such mergers in the future, saying the issue should be examined further "in light of the changes in the market".

Bezeq, Israel's largest telecoms group that owns a nationwide copper phone network, said it was disappointed with the decision.

It has fought regulators over combining its land-line infrastructure business with its three other units, arguing this would cut costs that can be passed on to consumers.

The Communications Ministry had previously rejected the request in order to support smaller rivals Cellcom CEL.TA and Partner Communications PTNR.TA.

But the panel said it would consider allowing Bezeq a merger on a smaller scale between mobile phone operator Pelephone, internet service provider Bezeq International and satellite TV provider YES.

The committee said in a report the time was not ripe to abolish the so-called structural separation given Bezeq's "significant market power and dominance in the telecoms sector".

The panel also found that HOT has significant market power, although less than Bezeq, and rejected a full merger of the company's units but recommended studying the merger of its cable infrastructure business and ISP unit. HOT officials were not immediately available for comment.

Hendel said he would study the alternatives on the issue of structural separation and then make a decision based on ensuring competition is balanced and reducing regulatory costs.

(Reporting by Steven Scheer; editing by Emelia Sithole-Matarise)

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