As potential suitors line up to assess an acquisition of Israeli operator Golan Telecom, a meeting of the ministries of finance and communications has poured cold water on the prospect of a sale to a competitor.
As potential suitors line up to assess an acquisition of Israeli operator Golan Telecom, a meeting of the ministries of finance and communications has poured cold water on the prospect of a sale to a competitor.
According to local reports, government officials concluded on 26 October that they should oppose a merger of Golan with a rival. Cellcom(TASE:CEL), Beze
The most likely outcome from the sale process would be a takeover by Cellcom, which would create an operator with 40% market share, potentially diminishing competition, a senior government staffer told news website Haaretz.
Golan enlisted Rothschild to explore its strategic options earlier this year and, at the end of August, Cellcom said the bank had invited it to bid.
The government would reportedly prefer Golan to be sold to a buyer outside Israel’s telecoms sector and/or agree a network sharing agreement with another operator, likely Cellcom.
Shlomo Filber, head of the Ministry of Communications (MOC), has reportedly informed Golan of the government’s decision. The ministry has not confirmed the report, which – if accurate – would represent a shift from comments Filber made to Bloomberg before the meeting with the Ministry of Finance (MOF).
Filber reportedly told the newswire that he did not have a problem with Golan being bought by another Israeli operator and that the market would “continue to be competitive even with four main players and other niche players, with rational prices that will enable reasonable profitability and infrastructure investment”.
The MOC and local antitrust authority were previously understood to be fairly aligned in their thinking, believing that the ultra-competitive market’s current low ARPU does not support investment.
However, while acknowledging that five mobile network operators is “a lot”, officials were previously thought to like having a maverick in the market and did not necessarily see consolidation as the solution.
In addition to its five mobile network operators, Israel also has a clutch of MVNOs – a relatively high number of players for a market serving 8 million people.
In mid-August, Cellcom’s CEO Nir Sztern blamed his company’s disappointing Q2 results on “the influence of the fierce competition” which he said had caused “an erosion in revenues and profitability”. Cellcom and rival Bezeq both agreed deferred loans in the summer to cut their financing costs.