Cellcom acquires Golan Telecom for NIS 720 million with 920,000 subscriptions

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by Ifi Reporter Category:Communication Feb 18, 2020

Just less than a month ago, Avi Gabay signed a collective bargaining agreement with the workers' committee, which his predecessor, Nir Stern, failed to advance in a few months. Gabay realized he had no choice - if he didn't rush to sign a deal, his competitors could be ahead of him and sign a merger deal and weaken Cellcom. The company offered Golan NIS 720 million (including a NIS 130 million debt waiver) and, according to market officials, is expected to return the investment in three years.
Cellcom is actually streamlining. Today it spends tens of millions on customer recruitment and abandonment. It now raises its mobile client base by about 920,000 subscriptions and stays with its current workforce. Golan's acquisition is actually an insurance certificate for Cellcom, as there was a possibility that Golan would leave Cellcom upon termination of their network sharing agreement, which ends in 2027.
Cellcom acquires a lean and efficient company, which averages about NIS 130 million in the quarter. Golan also has advanced and inexpensive IT systems that it has acquired and developed over the years. Cellcom will act smart if you can learn how Golan is behaving and copying the model for its operations. A likely possibility that Cellcom will leave Golan as an independent and profitable subsidiary.
It is uncertain that regulators will approve the deal, but it is expected to approach it positively in light of the shaky membership situation. In 2016, the regulator thwarted a similar deal between Cellcom and the Golan, but it did not anticipate the introduction of wexon-owned We4, which led to a dramatic fall in prices. Another regulator, mistakenly, believed that virtual operators such as Rami Levy and the 2009 Mobil, are limited competitors. Over the years, the government has believed that five mobile players are the right number on the market, and therefore the prospect of approving the deal is high. However, fierce objections are expected from competitors in the market, as well as their employee committees, similar to what happened in the 2016 deal.
The consumer gospel can come from the profits that Cellcom will make over the years from the deal, which will enable it to invest in deploying a 5-generation cellular infrastructure, supporting IBC, which it controls and deploying fiber-optic, and enhancing television competition.
In terms of cellular prices, the merger between Cellcom and the Golan does not constitute a line or a consumer injustice. Golan is the only mobile company that does not engage in television and internet activities. The merger will leave Cellcom as the largest mobile company in the market, increasing its share from 27% to 36%. Although six players in the market will now only have five, the market is still left with competition generators that will pull prices down and prevent a rise. Even if it were - it would be very moderate.
Anyone who could lose the move is Expono. If the merger is implemented, it will be required to increase its share of the joint network, which it currently owns together with Cellcom and Golan. There is a scenario that the exodus on Exponon will actually lead to price increases, but not in the near term. It is also likely that the regulator will approve Exxon's merger with another cellular company in the future, and therefore the company will have to seek external investors. The company maintains contacts with Rainbow, which offered to acquire 50% of Exponon and enter the TV sector.
Another loser is HOT, which sought to acquire Partner, and if the Cellcom-Golan deal is approved, the chances are slim. HOT hopes that by merging with Partner she will be able to accelerate her investments in the stationary sector. However, that does not mean that whoever submits the first proposal - will win. The regulator will examine all proposals submitted to the table equally. Partner, on the other hand, does not lose or earn. The company did not show excessive enthusiasm for the acquisition of HOT, and one less player in the market can only benefit from the fierce competition it faces.
The big beneficiaries of the deal are Electra Consumer Products, the Zalkind family, which owns the Golan. Zalkind bought Golan in 2017 for NIS 350 million, but in fact invested only NIS 80 million. They received NIS 130 million as a loan from Cellcom, which Cellcom will give up. She received an additional NIS 140 million from the banks, which Golan recouped from her earnings. Electra's goal from the outset was to stabilize Golan and sell it, and now market conditions have matured.

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