Elco Holdings Ltd. (TASE: ELCO) unit Electra Consumer Products (TASE: ELEK), the controlling shareholder in Golan Telecom, is casting its eyes at Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL). Elco Group, the controlling shareholder in Electra Consumer Products, has decided to expand in the local mobile telephone market, and Cellcom is the preferred takeover candidate, if Cellcom controlling shareholder Eduardo Elsztain decides to sell the company.
Golan Telecom has already been a candidate to acquire Cellcom in the past. Last year, Elsztain considered selling the company in order to enable him to bid for the controlling interest in Bezeq. The parties held talks, and Elco Group waited for developments before beginning negotiations. Elsztain eventually decided to abandon the idea of bidding for Bezeq.
Golan Telecom has utilized Cellcom's infrastructure from its first day in Israel. Under former owner Michael Golan, Golan Telecom tried to take over Cellcom and concluded a NIS 1.7 billion merger deal, which included Golan Telecom's NIS 600 million debt to Cellcom, but the Israel Competition Authority vetoed the deal.
After Golan Telecom was sold to Electra Consumer Products for only NIS 350 million, Electra Consumer Products started negotiations with Cellcom for a shared network. Golan Telecom allocates frequencies and shares in the investment in the network to this day. This is the reason that merging with Cellcom is far more compatible for Golan Telecom, rather than Partner, because that would require moving subscribers between the networks and dissolving the Golan Telecom-Cellcom partnership, and there is little chance of that.
A takeover of Cellcom by Golan Telecom sounds much more logical and likely, just as a merger between Hot and Partner is far more relevant - the two companies have a shared network, and dismantling the network is almost impossible. Golan Telecom has another significant advantage in acquiring Cellcom - an absence of regulatory barriers.
Published by Globes, Israel business news - en.globes.co.il - on September 25, 2019
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