‘Little Guy Wins’: How One Man Broke Mobile Phone Oligarchy
Israel proves the “little guy” still has a chance and that “social justice" in Israel is alive and kicking after Communications Minister Moshe Kahlon’s one-man war against the former mobile phone oligarchy.
Last year, Cellcom’s stock was $35 a share, and the company paid out more than 100 percent of its profits to shareholders, who enjoyed a whopping dividend equal to more than 12 percent of the stock’s price. The CEO was earning approximately $750,000 a year.
Today, Cellcom’s share are worth less than $10 a share, and the dividend has been cut as profits have plummeted in the wake of Kahlon’s campaign, which he opened up by saying that there was no reason the cellular companies should be earning hundreds of million dollars year on the back of the average Joe.
Kahlon, son of Libyan immigrants and one of seven children, grew up in the not-so-rich area of Hadera, southeast of Haifa.
He was elected to the Knesset in 2003 as Likud MK and worked in the Knesset to pass a bill to reduce electricity charges for poor families and headed an inquiry into bank fees, which Bank of Israel Governor Stanley Fischer said were so complex even he could not figure them out.
“The mobile phone industry was a closed business with three companies who divided up the market and kept prices high,” Kahlon’s spokesman Nadav Sheinberger told Arutz Sheva Monday.
He said the major companies – Pelephone, Orange (Partner) and Cellcom tried to pressure Kahlon to back off his order to open up competition and slice the maximum charges for talking on the phone.
“The companies tried and tried, but they realized there was nothing to talk about,” according to Sheinberger.
The results have been nothing less than spectacular. Phone users no longer have to pay fees of hundreds of dollars to end a contract and move to a different phone service provider, and the cost for a one-minute call has been more than halved through low-cost package options.
With the entry of several new companies in a short time, some of them are bound to fail as a result of too much competition, but after a balance is struck, the companies still will be making money, and the stockholders are still pocketing dividends of 10 percent or more – but a lot less than before.