A serious dispute has emerged between the partners in the Israel Broadband Company (IBC) fiber-optic venture. Sources inform "Globes" that three of the Israeli partners - Rapac Communication and Infrastructure Ltd. (TASE: RPAC), BATM Advanced Communications Ltd. (LSE: BVC; TASE: BATM), and Yehuda Zisapel - are threatening a court petition against ViaEuropa and Cisco Systems, asserting that they are leading the venture with the clear intention of stealing the investors' and the state's money.
According to these Israeli partners, who hold 30% of the shares in the venture, Cisco and ViaEuropa are not cooperating with them, are denying them access to information and the venture's method of operation, and are making completely unnecessary future orders amounting to tens of millions of shekels. They are also asserting that the appointment of former Government Companies Authority director general Doron Cohen as chairman is designed to perpetuate the current situation and conceal the truth behind what is going on in the project. The shareholders contacted the company through their lawyers, and are preparing to file a claim against the venture.
A senior source close to the venture told "Globes" that the venture "is simply being robbed by ViaEuropa and Cisco," and that unnecessary equipment was being ordered on an unnecessary and huge scale.
In view of the severe dispute between the partners, the venture's CFO has been asked to refrain from signing checks, and to stop spending the company's money. As revealed by "Globes," the partners are also demanding the dismissal of the venture's CEO, Danny Lauber, claiming that the appointment was unprofessional. Note that another partner already at loggerheads with IBC is businessman Poju Zabludowicz, owner of Tamares Telecom, which operates an undersea cable. He is suing the enterprise for not paying him money due him under the partnership agreement between them.
Several months ago, "Globes" revealed that the venture had built a communications center (a backup site) in Malmo, Sweden - a completely unnecessary site of uncertain purpose. The decision to spend millions of shekels on building it there, where ViaEuropa operates, was approved by the company board of directors, but it is now being alleged that it was built simply to get money out of the venture, since a project based in Israel does not require a backup in Sweden. Senior executives in Israel Electric Corporation (IEC) (TASE: ELEC.B22), which owns 40% of the venture, also opposed the decision to build the site in Malmo and demanded that it be disassembled and returned to Israel.
Sources also inform "Globes" that an appeal to the Israel Security Agency is under consideration, given concern that the information on communications networks in Israel, including about IEC and Cisco, is being moved to Sweden with no supervision or control by the Ministry of Defense.
A second round of money is currently being injected into the project, with the Israeli partners having already paid their share. In theory, the state is due to inject NIS 75 million, after having already injected NIS 75 million when the venture was founded.
ViaEuropa said in response, "Up until this moment, the company has received no such message. IBC has been dealing for some time with repeated attempts by interested parties aimed at disrupting the company's business. The company board of directors is acting according to strict rules of corporate governance, with complete transparency, and according to the agreements signed by all the various parties at interest before the venture was founded. All the company's actions are taking place according to decisions by the board of directors. Beyond that, an observer on behalf of the Israeli shareholders was also present at the board's meetings. IBC will continue to lead the next fiber-optic revolution for residents of Israel."
Cisco said in response, "Cisco was selected as the technology provider for the fiber-optic venture, is meeting all the terms of the contract signed with Unlimited, and will continue to do so. Cisco is committed to the success of its customers, and will continue to be committed to the success of every one of its customers in Israel."
Published by Globes [online], Israel business news - www.globes-online.com - on April 15, 2015
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