Xfone, owned by Hezi Bezalel, today petitioned the court for a restraining order against Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL), alleging that Cellcom violated the network sharing agreement between the two companies when it recently signed a network-sharing agreement with Electra Consumer Products (TASE: ELEK), after the latter acquired control of Golan Telecom Ltd..
The Ministry of Communications has not yet approved the agreement between Xfone and Cellcom. Xfone was one of the serious bidders for Golan Telecom, before withdrawing from the deal at a certain stage, while Electra Consumer went through with it.
There is also nothing preventing Xfone from joining the network unification agreement between Golan Telecom and Cellcom as a third player.
According to Xfone, the sharing agreement between it and Cellcom was signed over six months ago. Under the agreement, Cellcom and Xfone undertook to jointly build a 4G network, to be managed by a company owned and controlled by Cellcom and Xfone in equal shares. The Antitrust Authority director general has approved this agreement, which has been waiting over six months for approval from the Ministry of Communications.
In its petition, Xfone states that it does not oppose the addition of another partner to the joint 4G network mentioned in the agreement between it and Cellcom; on the contrary. Xfone insists that this addition be on the basis of the arrangements stipulated in the Cellcom-Xfone sharing agreement, while safeguarding Xfone's rights under it. Xfone is also demanding a tripartite agreement based on equality and transparency in all the relevant aspects of ownership, control, financing, etc.
"In this state of affairs, the negotiations between the parties have reached a deadlock in the absence of the necessary information. Given the concrete fear that the Cellcom-Golan Telecom sharing agreement will be carried out, thereby rendering the Cellcom-Xphone agreement null and void, Xfone is therefore left with no choice other than to petition the honorable Court to order that the Cellcom-Golan Telecom agreement in its current form not be completed and implemented, that the provisions of the Cellcom-Xfone agreement in general, and the provisions concerning the principles and conditions for adding a third party to the joint Cellcom-Xfone 4G network in particular, be enforced, and that Cellcom deliver the Cellcom-Golan Telecom sharing agreement to Xfone for its perusal without delay."
Xfone also wrote, "The immediate reports issued by Cellcom and Electra Consumer to the Tel Aviv Stock Exchange (TASE) directly contravene the language of the Cellcom-Xfone sharing agreement, and establishes reliable evidential grounds for the existence of a clear and unequivocal violation of the Xfone-Cellcom sharing agreement.
"These evidential grounds show that the a lawsuit has high chances of success, and that the balance of convenience is significantly in Xfone's favor, since if the requested order is not issued, Xfone will suffer heavy and irreversible damage for which money cannot compensate. This damage includes a severe injury to Xfone's chances of entering the cellular market and taking advantage of what it won in the 4G tender. The Cellcom-Xfone sharing agreement is an essential condition for Xfone going on the air, while implementation of this agreement in the form that was signed will be impossible if the Cellcom-Golan Telecom sharing agreement is completed and implemented.
"Issuing the order is therefore essential to maintain the current situation, and in order to ensure that Xfone will be able to carry out a judgment ordering the enforcement of the Cellcom-Xfone sharing agreement. If it is issued, Cellcom will suffer no damage as a result."
Published by Globes [online], Israel Business News - www.globes-online.com - on January 29, 2017
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