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Hot Mobile confirms network deal with Golan Telecom, Cellcom asks for compensation and threatens legal action.
Cellcom on Monday demanded a hefty sum from Golan Telecom to compensate for its smaller rival’s decision to break a takeover and network roaming deal and opt for a partnership with a rival player instead.
The Israeli mobile operator had hoped to acquire Golan Telecom, but, after coming up against regulatory opposition to the deal, was working on a network hosting deal with the telco instead.
However, on Friday rival operator Hot Mobile swept in, announcing a 10-year deal that will enable Golan Telecom to offer services using its network. The cost to Golan Telecom will depend on the number of end users and volume of traffic supported, Hot Mobile said, in an announcement to the Tel Aviv Stock Exchange.
Cellcom’s response was to issue a statement of its own demanding payments totalling 900 million shekels (€206 million) from Golan Telecom.
"The company has notified Golan Telecom and its shareholders that the Hot agreement constitutes material breaches of the Share Purchase Agreement (SPA) and National Roaming Agreement (NRA) between the company and Golan Telecom, including a service exclusivity obligation and obligations not to materially change the business to be purchased," Cellcom said.
That breach allows Cellcom to terminate the SPA and call in an immediate payment of ILS600 million plus VAT, and an additional ILS300 million under the NRA.
The operator has informed Golan Telecom and its shareholders that should they fail to remedy the breach based on a previously agreed timeframe, it will take all action available to it, including using legal channels.
Golan Telecom is having a turbulent time.
In November it agreed to be bought out by Cellcom for 1.17 billion shekels (€277 million), but Israel’s antitrust authority objected to the deal and in May the Ministry of Communications effectively blocked it.
Cellcom and Golan Telecom set about working out a roaming deal that would see the latter use the former’s network to offer services, but there were questions over whether such an agreement would meet with regulatory approval.
In the meantime, other suitors have been circling. Russian businessman Roman Abramovich and fellow entrepreneur Oded Kobo have reportedly been in touch with the Israeli government with regard to an acquisition of Golan Telecom, information that the Ministry of Communications has passed on to the telco.
However, according to local press reports, the deal with Hot Telecom could help Golan Telecom buy some time and avoid being taken over at a rock bottom price.
It remains to be seen whether regulators will green light the Hot Mobile deal though.
