Israeli Prime Minister Benjamin Netanyahu paused in amazement while delivering a recent speech to business executives and asked incredulously, “Do you know how many cell phones there are in Israel?”
Addressing the Israel-America Chamber of Commerce & Industry, where chirping cellular telephones punctuated the speechmaking, Netanyahu pointed out that Israel now ranks fourth in the world in per-capita use of cell phones, behind Sweden, Norway and Finland. And he vowed, “We’re committed to overtake them very quickly.”
For the record, the answer to Netanyahu’s question is more than 1.4 million. That’s one mobile phone for every four Israelis, and more than double what it was just a year ago. Israelis also have the highest average usage rate in the world: 500 minutes a month.
But most of the 200 executives present at the chamber’s gala awards dinner already knew that, especially the chamber president, Hanan Achsaf, who also is president and chairman of Motorola Israel Ltd., a subsidiary of Schaumburg, Ill.-based Motorola Inc. that helped make it a reality.
In the Holy Land, nearly everyone–Israeli soldiers, Bedouin tent-dwellers, Jewish settlers, Muslim clerics, Christian aid workers, foreign diplomats, Arab schoolchildren, Palestinian officials, even Hamas bombmakers–depends on cell phones.
So annoying has their constant ringing become that the state-owned phone company even put out a special brochure on cell phone manners, including advice to turn them off at movies and funerals.
In perhaps the most infamous and unorthodox use of a mobile phone, the Israeli General Security Service, known as the Shin Bet, was accused by Palestinians last year of using an exploding cell phone to assassinate Hamas bombmaker Yehiya Ayyash.
“We didn’t anticipate this business would grow so much and that the public would be so hungry for use of this technology,” Achsaf noted. “Motorola is doing very well, because our business is also diversified.
“We are the largest service provider in Israel for two-way radio services, paging and paging equipment and services,” Achsaf added, referring to Motorola equipment that is used by businesses, police, firefighters, health services and Israel Defense Forces to keep in touch.
But Motorola’s success in Israel may turn out to be the exception.
Netanyahu’s hard-line policies, which helped derail peace talks with the Palestinians, have led to growing concerns and deepening caution among American executives about the prospects for investment in the Jewish state.
A recent poll showed American investors have soured on Netanyahu’s handling of the peace process in the past few months and would be unlikely to expand their investments if the problems get much worse.
For instance, a first-of-its-kind survey sponsored by the U.S.-based Israel Policy Forum and the Center for Middle East Peace and Economic Cooperation showed 57 percent of respondents felt the Mideast peace deadlock had not yet directly affected their investment decisions.
At least 40 percent said, however, they are less likely to increase investment here because of those problems, and 62 percent said they are likely to hold back on making new personal or business investments in Israel if the peace process begun at Oslo in 1993 in effect collapses.
“Many American investors are clearly unhappy with the current state of the peace process and if things get much worse, they are going to look elsewhere for new investment opportunities,” asserted Stanley Gold, vice president of the Israel Policy Forum and chairman of Koor Industries Ltd. in Israel, the largest corporation in the Jewish state.
Jacob Salei, assistant managing director for Automotive Equipment Ltd., Chrysler Corp.’s distributor in Israel, agreed that for “investors in Israel, because of the unbalanced situation here, and with a bomb going off here and there, it’s making people think twice about investing in Israel.”
Yet executives at Motorola and other Israeli companies, especially those in the booming high-technology sector, are convinced Israel will weather the storm; they remain bullish it remains the best Middle East target for foreign investment.
Motorola Israel, for example, recently passed a milestone with an unprecedented $1 billion in annual sales last year, up 30 percent from its $770 million in 1995 sales.
Established in 1964 as a wholly owned Motorola subsidiary, Achsaf’s company has 3,450 employees, at least eight of its own local subsidiaries and exports last year totaling $295 million, up 27 percent from $233 million in 1995.
In many ways, Israel is a market made for Motorola Inc., which had worldwide sales last year of $27.97 billion. The nation that fought so many wars with Arab neighbors is now struggling to make peace and convert much of its advanced defense and technological knowhow into a knowledge-based, high-tech-driven economy that will integrate it into regional and global markets.
Motorola Israel develops, manufactures, markets and exports cellular telephones, wireless communications systems, command and control systems, cellular infrastructure and software systems, data transmission systems, computers and a variety of electronics equipment. It also operates a design center for microprocessors and markets paging services.
But Achsaf observed that the major reason for Motorola Israel’s record sales over the last year–hitting $1 billion three years before he had predicted it would–was the explosion of cell-phone usage identified by Netanyahu.
Ten years after the United States and Israel struck a free trade agreement, U.S. Ambassador to Israel Martin Indyk pointed out that “our two-way trade has flourished.”
Achsaf acknowledged that new investors may sit on the fence when the problems with the peace process are making headlines, but he pointed out that established U.S. firms doing business for years in Israel are used to this.
“You take the old ones like IBM and General Motors and General Electric and Motorola, and they are immune,” he declared, occasionally answering his own Motorola cell phone, a tiny Star TAC, the latest and lightest in the world.
“We were here since the beginning,” Achsaf said, noting that Motorola’s Israeli distributors started marketing their products in 1948. “We were the first international distributor of Motorola,” he added. Israelis handled territory from central Africa to Iran for the firm.
“We have been through everything you can imagine: wars, scud attacks, the Yom Kippur and the 1967 wars, and we have seen changes in governments coming in and out,” he asserted. “We have been through the `intifada’ (Palestinian uprising against Israeli occupation). Nothing can frighten us or put us in a pessimistic mood.”
Achsaf, 58, a Tel Aviv native, emphasized that there were unique factors in Israel that helped fuel the explosion in cell-phone usage, including the experience of most business people with army service, communications systems and a volatile region.
“The minute you go out into business, you want to control your troops. You want to be in communication. You want to know what is happening in real time everywhere. The need to know is very high,” he said. Sadly, in a land where buses can explode and helicopters collide, relatives need to be in contact to know if family and friends are safe.
After cell phones were first introduced in Israel in the mid-1980s, Motorola, working with the state-owned telephone company, Bezek, and Motorola subsidiaries like Pele-Phone, had a monopoly over the market for a decade. Then in December 1994, a company called Cellcom won the right to compete and drove prices down seeking to break into the market.
For a basic Pele-phone, the one-time signup fee is $95. The monthly charge for a basic Pele-phone is $22, plus per-minute usage charges. Cellcom does not charge a fee for connection. Its monthly fee is $6.50, plus per-minute charges for use.
But the market just keeps expanding. Cellcom, which says it and Motorola each have about 700,000 customers, said it is signing up 1,000 new subscribers a day. Some industry estimates are that growth will continue until there are 2 million cell phones or more in the Israeli market, come war or peace.
“What is a problem for one person is an opportunity for another. If you take our business, it is very immune to these things,” observed Achsaf. “If there is peace, we can move around and there will be a lot of economic activity. If there is war, that may be a different opportunity. No matter what you do, people need communications, in war or peace.”
