Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL) and Israel Infrastructure Fund (IIF) today completed their acquisition of control in Israel Broadband Company (IBC). Cellcom reported the completion of the deal to some of the employees, after the Ministry of Communications approved it.
Cellcom has not yet announced the deal officially, but will do so very soon. Cellcom CEO Nir Sztern met today with Ministry of Communications director general Netanel (Nati) Cohen and received the final license for the venture from him.
Under the deal, Cellcom and IIF undertook to invest up to NIS 200 million in equal shares in the next three years. According to the indefeasible rights of use (IRU) agreement for IBC's fiber-optic infrastructure, Cellcom undertakes to buy usage rights from IBC for 10-15% of the households to be hooked up to IBC's fiber-optic infrastructure in the next 15 years, and a certain number immediately. Cellcom and IIF will each hold 35% of IBC's shares, while Israel Electric Corporation will hold 30%.
Payment for the proceeds for the usage rights for households will be spread over 10 years. The rights, which will be valid for 15 years, will include extension options with no additional payment other than annual maintenance fees. This means that Cellcom is substantially reducing its financing costs. In effect, Cellcom will pay for 10 years for every fiber deployed by IBC.
The parties are today discussing the final version of the contracts and the transfer of the money between the new and old shareholders.
The new shareholders in the venture will raise money for the project, and are negotiating with investment institutions to obtain financing. The shareholders also expect that some of the operators in the communications market will join the venture as customers and buy services from it, which will help the shareholders expand deployment of their fiber-optic infrastructure.
The new license for the venture contains concessions in the first stage of deployment, so that it can be consolidated.
Published by Globes, Israel business news - en.globes.co.il - on July 31, 2019
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