The Ministry of Communications is pulling out all the stops in its efforts to combat infringements by Golan Telecom Ltd. - it has notified the company that it intends to foreclose tens of millions of shekels of that company's guarantees for breaching its deployment obligation. Estimates are that the initial foreclosure will amount to NIS 30-40 million.
Predictions that the Ministry of Communications would foreclose Golan Telecom's guarantees began when the deal for sale of its business to Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL) became known. The Ministry of Communications holds NIS 80 million in guarantees from Golan Telecom. In addition, Golan Telecom received a NIS 270 million reimbursement of guarantees that it deposited when it won the cellular tender, and the Ministry of Communications is also considering demanding that amount from the company for its transgressions.
The decision to foreclose the guarantees was delayed for many months while the Ministry of Communications waited for a January 2016 inquiry to decide whether Golan Telecom was meeting its deployment obligation. Golan Telecom was to have completed deployment in 40% of Israel by that time. The letter is being sent now because it is obvious that Golan Telecom will not fulfill this obligation, since it has already dismantled the vast majority of its cellular sites throughout Israel.
The decision to foreclose a relatively small proportion of the guarantee now is not the end of the matter; the Ministry of Communications can decide later to foreclose additional guarantees. It is believed that the Ministry of Communications will act cautiously and not use all the measures at its disposal, given the uncertainty concerning Golan Telecom's planned merger with Cellcom.
Golan Telecom and Cellcom have applied for approval of their merger, and are waiting to begin negotiations with the Ministry of Communications and the Antitrust Authority director general. The Ministry of Finance has already notified Golan Telecom that it plans to deprive the company of its frequencies if the merger goes through, because the Ministry of Finance strongly opposes the merger.
The Ministry of Communications declined to respond to the report.
Published by Globes [online], Israel business news - www.globes-online.com - on December 15, 2015
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