Cellcom on Thursday announced that it has agreed to acquire smaller rival Golan Telecom, enabling it to consolidate its position as Israel’s largest mobile operator, provided the deal wins regulatory approval.
The operator will pay 1.17 billion shekels (€277 million) for 100% of Golan Telecom. It will finance the deal through a combination of equity and debt, which could include a rights issue.
Golan Telecom is a relative newcomer to the market, having launched services in 2012 as a disruptive, value player. It is owned by French businessman Michael Golan and counts Xavier Neil among its shareholders.
"The acquisition of Golan Telecom will allow us to add a low-cost brand to our portfolio, and I’m confident that Cellcom’s management will be able to successfully combine Golan’s operations as the company’s low cost brand," said Ami Erel, chairman of the Cellcom board.
"We intend to maintain Golan Telecom as an independent company and can assure all Golan Telecom’s customers that we will honour all of their present agreements," added Cellcom CEO Nir Sztern.
Golan Telecom has a national roaming deal with Cellcom, but has been underpaying, the telco explained. The acquisition makes provision for the continuation of that agreement and resolves the payment issue.
Should the deal go ahead, Cellcom will gain Golan Telecom’s 900,000 subscribers.
Cellcom leads the market , with 2.85 million mobile customers as of the end of June, but its major rivals are snapping at its heels. At the same date Partner Communications had 2.75 million customers and Bezeq’s Pelephone 2.57 million. Fourth player Hot, owned by Altice, had 1.1 million.
Both Hot and Pelephone have been linked with Golan Telecom in recent weeks.
And Cellcom knows that, as the biggest operator in the market, regulatory approvals could be tricky to obtain.
"There is no assurance that the agreement shall be approved by the Israeli regulators, which the company estimates to be challenging," it said.
"The company can provide no assurances as to the impact of this sale of holdings in Golan on the competitive environment in the market," it added.
