Pelephone Communications Ltd. is negotiating to acquire mobile virtual cellular operator (MVNO) YouPhone from Mega Group. As reported by "Globes," due to the Mega Group's difficulties and YouPhone's continued losses, it was decided to sell the cellular business, and all the operators were contacted.
The focus in recent weeks has been on Pelephone, whose network YouPhone uses, in addition to Partner Communications Ltd.'s network. (Nasdaq: PTNR; TASE: PTNR). YouPhone's use of Pelephone's network reduces the risk that customers will leave after the company is sold. Were YouPhone to be acquired by HOT Mobile Ltd., for example, or another operator, retaining its customers would be a more difficult task.
YouPhone has an estimated 80,000 cellular subscribers, some of whom are members of the You buyers club, and therefore receive discounts in buying gasoline at Alon Israel Oil Company Ltd. filling stations and discounts in shopping at the Mega chain. YouPhone's business model was based precisely on this attempt to link cellular services with other products.
YouPhone began operating following the cellular reform in 2012, shortly before Golan Telecom Ltd. and HOT Mobile Ltd. The latter two companies sent the market into a tailspin, and YouPhone had to deal with the ensuing market tempest, which in effect has continued until the present time.
YouPhone began very well, recruiting subscribers at a fine pace for a virtual operator. It business declined over the past year for various reasons, and its recruitment shrank to the extent that during many months, the company lost more subscribers than it gained.
Eventually, the state of Mega Group proved decisive, and it appears that the company did not manage to consolidate its standing, as it had hoped, and the effort to sell YouPhone therefore began. It is believed that the initial asking price mentioned by the company heads was NIS 15 million, but there is probably little chance of getting it.
Keep in mind that YouPhone's average revenue per cellular subscriber is very low, and the price will also reflect this fact.
Published by Globes [online], Israel business news - www.globes-online.com - on June 18, 2015
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