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JERUSALEM (Reuters) - Israeli Prime Minister Benjamin Netanyahu appointed on Sunday Ayoob Kara, a minister in his Likud party, as communications minister, who will oversee Israel's telecom market as it undergoes significant reforms.

Netanyahu himself held the post until he relinquished it in February amid allegations he had negotiated a deal with a newspaper owner for good press coverage.

The communications ministry has oversight of the telecoms and broadcast media industries.

The cabinet has approved the appointment of Kara, who was previously a minister without portfolio, the prime minister's office said in a statement.

Netanyahu kept the communications portfolio for himself after re-election in 2015, but shortly after gave up much of the job's responsibility when he was barred from dealing with Israel's largest telecom provider, Bezeq, due to his personal friendship with the company's chairman.

Netanyahu stepped down from the role completely three months ago after being questioned by police over allegations he tried to secure a deal with the owner of Israel's best-selling newspaper for better coverage. He did not give an official reason for stepping down.

Likud lawmaker and Netanyahu confidant Tzachi Hanegbi filled the post in the interim.

One of the biggest decisions Kara will have to make is whether to allow Bezeq, one of the most profitable companies in Israel and a favourite among foreign investors, to combine its fixed-line, mobile, satellite TV and internet units, which currently are separate companies.

He also faces the challenge of enhancing competition in the fixed-line sector and enabling mobile phone operators like Cellcom and Partner to better compete with Bezeq.

(Reporting by Ari Rabinovitch; Editing by Susan Fenton)

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