The Salkind brothers, the controlling shareholders in Discount Investment, which controls telecommunications company Cellcom (OTC: CELJF; TASE: CEL), are looking to sell Cellcom to rival telecommunications company Hot. Accounting firm EY is attempting to put together a deal whereby Hot will buy Cellcom and will commit to selling Hot Mobile, while Cellcom commits to selling its television activity.
The move is being led by a senior partner at EY at the behest of the Salkind brothers. Discount Investment does not appear to be a party to it. Sources inform Globes that the idea was raised with Hot, and attempts are being made to interest entities in the telecommunications market in buying Hot Mobile or Cellcom TV.
On buying control of the company, the shareholders in Discount Investment declared that they did not intend to continue to hold Cellcom, and that they would focus on Discount Investment's real estate business. It is believed that Discount Investment's management agrees that Cellcom should be sold, but not at this stage, and takes the view that a much higher price will be obtainable for it after it has undergone a process of enhancement.
The structure of the deal under consideration is intended to save the Competition Authority and the Ministry of Communications from a dilemma. The aim is that Hot Mobile should be sold to an external party that is not currently active in the telecommunications market, so that the number of players in the mobile telephony market will not be reduced.
As for Cellcom's television activity, the company has in any case been trying to sell it or find a merger for it in order to put an end to its losses in the television market by the end of the year. A few months ago, Cellcom offered its television business to Partner (Nasdaq: PTNR; TASE: PTNR), but the latter refused because of difficulties it foresaw in transferring Cellcom's subscribers to itself.
Cellcom and Hot have held talks in the past, but Hot's partnership with Partner in their joint cellular network made it difficult to structure a deal. The situation has now changed, in view of the fact that WE4G has returned to the market as an active player in mobile telephony, while the market is about to undergo major changes with the advent of Disney Plus and HBO next year, and that of FreeTV, owned by Keshet and RGE, with a varied and low-cost streaming package.
A no less important point is Hot's desire to deepen its hold on fiber-optic venture IBC (marketed as "Unlimited"), in which it is a partner together with Cellcom, Israel Electric Corporation, and the Israel Infrastructure Fund. Hot sees the company as its operative arm in rolling out an extensive fiber-optic network, and it currently only holds 23.3% of the shares in it. Cellcom is in no hurry to sell its own 23.3% stake in IBC, as it knows that in the coming years IBC's value will rise as its rollout proceeds. For Hot, buying Cellcom would also mean taking over its stake in IBC.
Published by Globes, Israel business news - en.globes.co.il - on March 13, 2022.
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