Golan Telecom Ltd. proposed canceling the clause in its agreement with Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL) barring Golan Telecom from negotiating its sale until November. In the end, however, after Cellcom agreed to discuss the matter, Golan Telecom did not pursue it.
According to various sources, the Golan Telecom shareholders realize that they will have no choice other than to sell the company; otherwise, they will have to pay Cellcom NIS 600 million at the end of November for the use of its network. This obligation is moving the shareholders to sell the company. The possibilities are a sale to Hot Telecommunication Systems Ltd. (TASE: HOT.B1); a group of investors led by Gil Sharon that includes 018 owner Hezi Bezalel, who wants to enter the cellular market, and has signed a network consolidation agreement with Cellcom; and a group in the background led by businessman Oded Kobo.
HOT Mobile is willing to acquire Golan Telecom, and would do so, were it not for the no-shop agreement between the latter and Cellcom. This is the reason why HOT Mobile signed a roaming agreement with Golan Telecom, instead of a sale agreement.
Had the Ministry of Communications allowed the roaming agreement, it would have meant that after November, the company would have been sold to HOT Mobile, and the roaming agreement would have been only an introduction to an acquisition agreement. The Antitrust Authority did not approve either the Golan Telecom-Cellcom acquisition agreement or the Golan-Telecom-HOT mobile roaming agreement.
Following the Ministry of Communications' opposition and the court injunction issued at Cellcom's request against an agreement between Golan Telecom and HOT Mobile, Golan Telecom was forced to return to its sole possibility for selling the company. Theoretically, Golan Telecom could also return to a network consolidation agreement with Cellcom, but this does not appear likely, given the grudge and conflict between the two sides, and, of course, the desire of the Golan Telecom shareholders to get out of the market.
Golan Telecom's request to Cellcom was made before last week's court hearing on the injunction. Cellcom feared that Golan Telecom was trying to gain time, and therefore said it was willing to consider the request. Up until now, however, Golan has made no formal offer to begin negotiations on cancellation of the no-shop agreement.
Decision looming
At the same time, the Attorney General has authorized the government to foreclose NIS 30 million of Golan Telecom's guarantee. The Ministry of Communications is currently completing the writing of this decision, and according to Ministry of Communications sources, a decision to foreclose the guarantee is expected next week. Golan Telecom has the right to appeal the decision to the Minister of Communications, which it will almost certainly do, and the Ministry of Communications therefore decided to consult the Attorney General before deciding on the foreclosure.
The foreclosure is essentially a fine, because according to the license, the foreclosure is subtracted from the guarantee deposited by Golan Telecom as a condition for its license, and the company will have to repay any amount taken from the foreclosure; otherwise, it will be committing another serious violation of its license. The foreclosure now follows a hearing for Golan Telecom, because it dismantled its network without receiving approval for doing so. According to the emerging decision, it appears that the company's arguments have been dismissed.
The High Court of Justice yesterday heard a petition by Partner Communications Ltd. (Nasdaq: PTNR; TASE: PTNR) against the Ministry of Communications for not enforcing the terms of Golan Telecom's license. The state responded that it was holding a hearing for the company, and a representative of the State Attorney's Office undertook that the decision in this matter would be taken within a month. The Ministry of Communications has now made its decision, which is slated for official publication next week. Golan Telecom made no response to the report.
Published by Globes [online], Israel business news - www.globes-online.com - on July 26, 2016
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