Cellcom moves to scupper Partner-Hot merger

Gad Perez

The regulators will not allow more than one merger in Israel's telecommunications market, and so Cellcom's talks with Golan Telecom have a double aim.

As revealed by "Globes". Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL) is in advanced talks on a merger with Golan Telecom, in order to head off a possible merger between Partner Communications Ltd. (Nasdaq: PTNR; TASE: PTNR) and HOT Telecommunication Systems Ltd. (TASE: HOT). As soon as it became clear to Cellcom that Hot, with which it had sought to merge, was looking to merge with Partner, it started to attempt to anticipate it. The assumption is that the Competition Authority and the Ministry of Communications will not allow more than one merger in the telecommunications market, in order not to return to an oligopoly.

A merger between Cellcom and Golan Telecom stands a greater chance of obtaining regulatory approval, since it is less of a threat to competition in the market in various ways than a merger between Partner and Hot. The regulators' main worry is a merger of Partner and Hot's Internet infrastructures, which would create a duopoly with Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ), which dominates the infrastructures market.

If merger negotiations between Cellcom and Golan Telecom are completed before a merger between Partner and Hot, the chances of the latter merger going ahead are zero, and to a large extent that will be the crowning success of Cellcom's move.

A merger between Cellcom and Golan Telecom may take place under pressure, but it is easy for both sides, since Golan Telecom shares a network with Cellcom, and it will make life difficult for the third user of Cellcom's network, Xfone 018.

Xfone tried to go for a merger with Cellcom, but without success, because Cellcom realized that it was preferable for it to merge with Golan Telecom, which is substantially larger than Xfone. That merger has the additional advantage that it will force Xfone to pay half the maintenance cost of the network, instead of one third as it does today.

Published by Globes, Israel business news - en.globes.co.il - on February 11, 2020

© Copyright of Globes Publisher Itonut (1983) Ltd. 2020

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