Cellcom, Israel’s largest mobile operator, wants smaller rival Golan Telecom to pay ILS900 million ($233 million) in compensation for dropping a deal the two were negotiating, and working with cable TV provider (and the country’s number four mobile operator) Hot instead.
Cellcom wanted to acquire Golan last year but prime minister Benjamin Netanyahu, as well as regulators, opposed the move, saying the deal was contrary to efforts to introduce more competition.
Following that, Cellcom was working on an agreement that would allow Golan to continue to use its networks.
However last week, Hot, owned by French cable group Altice, said it was negotiating its own ten-year deal with Golan.
Cellcom said it “has taken note” of the agreement “for the provision of hosting services to Golan Telecom on the network used by Hot, and financing arrangements to be provided by Hot” and claimed it constitutes breaches of the share purchase agreement (SPA) and national roaming agreement (NRA) between Cellcom and Golan.
Cellcom added that a breach “resulting with the transfer of any of Golan’s customers traffic on Hot’s network, if not cured” would allow it to terminate the SPA and demand payment.
When Cellcom agreed to purchase Golan for ILS1.17 billion, it was also decided that if the acquisition did not go through, Golan would have to pay a ILS150 million termination fee to Cellcom plus ILS450 million for use of the latter’s network.
This, coupled with ILS300 million of discounts Cellcom provided Golan under the NRA, brings the total to ILS900 million.
“Should Golan fail to remedy all such breaches within the time frame set in the agreement, the company will take all actions available to it under the SPA, NRA and applicable law, against them,” Cellcom said.
“A substantial reduction of the future revenues from Golan Telecom will have a material adverse effect on the company’s revenues and results of operations,” it added.
Reuters quoted Sabina Levy, an analyst at Leader Capital Markets, as saying that “the agreement with Hot is just part of the negotiation process with Cellcom that is meant to strengthen Golan’s bargaining position” and that Golan still intends to leave the market.
Golan launched in 2012, offering very low prices and has around 10 per cent market share.
It is backed by Michael Golan and Xavier Niel, the founder of French low-cost operator Iliad/Free.
According to GSMA Intelligence, Cellcom is the country’s top operator, with around 27 per cent market share, while Golan comes in last place, behind Orange (Partner), Pelephone (Bezeq) and Hot Mobile.