FTTH Coming this Spring

JERUSALEM, Oct 9 (Reuters) - Israel announced on Sunday it was seeking an investor to help build a fiber optic network that would bring ultra high-speed internet to the entire country and increase competition in the telecommunications market.

The nationwide project will be one of the first of its kind in the world and will spur economic growth, Finance Minister Yuval Steinitz said at a news conference.

"The project we are launching today will allow growth potential to be realised across the country, while increasing competition in the field of communications and significantly improving consumer service," he said.

The new investor will partner with state-run Israel Electric Corp (IEC) to form a private company that will build and operate the network using the utility's infrastructure. It will have a 51 percent stake in the new company to be formed by April 2012.

IEC's Tzvi Harpak, who heads the tender committee, said the project will cost billions of shekels and will include some 25,000 km of optic fibers that will provide internet access at 100 megabits per second.

About 65 percent of the country will be covered in the first seven years and the rest by 2020, he said.

Israel's telecom sector has a relatively small amount of players and the government is under increasing pressure to add competition and lower prices.

Communication Minister Moshe Kahlon has already taken aim at the cellular phone market in the past year by awarding licences to two new operators and allowing the entry of mobile virtual network operators.

Kahlon said on Sunday the telecom infrastructure field "is in need of a new player".

Currently only two companies run internet infrastructures -- telephone operator Bezeq and cable company HOT .

Yiftah Ron-Tal, chairman of the board at IEC, said the fiber optic project will bring in new revenues at a time when his company is in "a very tough financial situation".

The IEC has run into financial difficulties due to extra costs for fuel stemming from a halt in natural gas from Egypt, forcing the company to turn to more expensive alternatives. (Editing by Hans-Juergen Peters)