Government officials are hardening their anti-consolidation stance, incensed that Golan Telecom ignored their warnings. It remains unclear what convinced Cellcom and Bezeq to go ahead with offers on the number five player.
Israeli mobile operator Cellcom’s (TASE:CEL) NIS1.17bn (US$301.4m) acquisition of Golan Telecom, agreed yesterday, will not be approved, a government official has said.
Speaking to local newspaper Globes, Amir Levy, budget director at the Ministry of Finance (MOF), said Israel was “not a third world country” and “would not allow [Golan founder] Michael Golan to pull a fast one.”
He added that having worked so hard to introduce more competition into the market, the MOF could not now allow a transfer of the maverick’s spectrum to market leader Cellcom – something he described as “practically immoral”.
The companies would have a combined market share of 40%. Golan has 900,000 customers, while Cellcom has 2.85 million.
Levy went on to say that the ministry had in fact relaxed certain rules – in allowing Cellcom to set up a joint venture with Golan, on the proviso that the smaller player remain in the market for the long-term.
At present five network operators and a clutch of MVNOs compete for a population of 8 million.
Cellcom, which acknowledged the significant regulatory risk in its announcement yesterday, declined further comment, while Golan could not be reached.
Last week, Haaretz reported that sector regulator the Ministry of Communications (MOC) and the MOF had decided not to approve an in-market sale of Golan, and that it had communicated this to the operator. Partner Communications and Altice-owned Hot Mobile both indicated that they would not participate, while Bezeq (TASE:BZQ) made an offer to merge Golan into its mobile business, Pelephone, days before Cellcom. Another previous suitor had been MVNO Xfone.
There was an indication that it would allow a sale to an overseas player, although telecom operators have generally become more cautious about entering new markets, preferring only to target companies with a number one or number two position.
In September, TelecomFinance reported that the MOC and Antitrust Authority, which had been fairly aligned in their thinking, were understood to believe that the ultra-competitive market’s current ARPU (an average NIS60, or US$15.33, per month, with some operators acquiring new subscribers at NIS30-35, or US$7.67-US$8.94, per month) does not support investment.
While acknowledging that five mobile network operators was “a lot”, officials were at the time thought to like having a maverick in the market and did not necessarily see consolidation as the solution.
It was thought that the government would be willing to approve a network sharing deal between Cellcom and Golan, if the two held equal equity stakes.
The MOC and Antitrust Authority did not return calls and emails for comment, over what is now the weekend in Israel.