In a recent initiation note (March 18th) on Cellcom (CEL), Goldman Sachs provided a brief primer on the Israeli cellular market.

Mobile as % of Overall Communications Industry

According to Israel’s Ministry of Communications, the Israeli cellular market is a US$3.9 billion market and accounts for slightly greater than 50% of Israel’s overall telecommunications industry.

Oligopoly

The market operates as a mature oligopoly—three main competitors with comparable market share, high penetration, and high cellular voice usage.

Churn Rate
Churn rates in Israel remain low as well, with the 2005 rate of 12.6% substantially lower than that of most developed regions.

Market Share

Market shares have remained relatively stable over the last 3-4 years. The companies have seemingly found their respective niches, and little price competition remains.

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In a note published on April 13th, William Blair reiterated their outperform rating on RRSat (RRST), a global communications company that provides content services to the television and radio broadcasting industries. Having just IPOd in late 2006, the stock has kind of gyrated over the past few months.

William Blair cites “the continued global proliferation of entertainment content should provide solid demand for RR’s content distribution and value-added services. The number of worldwide television channels is forecasted to grow at a 13% CAGR from 2005 to 2012. As one of only two distribution service providers with an end-to-end, global distribution network, we believe RR is well positioned to capitalized on these trends.”

RR now has contracts with over 285 television channels and more than 80 radio channels, and has never lost a customer to attrition.

It’s early in the story — let’s keep an eye on this one.

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