Golan Telecom Ltd. is recycling a series of arguments about the need to approve the network consolidation agreement it signed with Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL). In a letter sent to Ministry of Communications director general Shlomo Filber, with copies to the Ministry of Finance and the Prime Minister's Office, Golan Telecom repeats all its claims about the need to approve the agreement. At the same time, however, the letter contains no explicit request for approval.
What the letter does contain is an attack on HOT Mobile Ltd. for violating the terms of its license. Golan Telecom says that HOT Mobile has no right to argue against its networks consolidation agreement, and even if it does have such a right, there are strong enough counter-arguments on the legal level. The letter was sent through Adv. Lior Porat from the Gornitzky & Co. law firm.
Golan Telecom's letter states that the Communications Law establishes general rules that should guide the minister of communications in considering whether to approve a license or revision of a license for a cellular operator. These considerations include the public good, guaranteeing the level of competition in the sector, ensuring the level of service, and supporting new technologies. The letter asserts that the Ministry of Communications' policy document concerning consolidation of networks should be viewed in the light of these guiding principles.
In Golan Telecom's opinion, the networks sharing agreement with Cellcom, together with its revisions, conforms to the underlying purposes of the law and the policy document. The company says that its license entitles it (and HOT Mobile also) to exchange its commitment to deploy a 3G network for a plan for deploying 4G. In other words, the investment in 4G is equivalent to an investment in 3G, because the 3G network is outmoded. There is no point in investing in and deploying 3G, and the Ministry of Communications' policy is therefore that in a 3G network, the emphasis is on the ability to provide service, while focusing on investment in the new generation.
From this perspective, Golan Telecom believes that granting an irrevocable right to use Cellcom's 3G network meets the Ministry of Communications' requirements.
The Ministry of Communications is demanding that the joint network should also include 3G, which was the main bone of contention between the parties, and eventually prevented consolidation of the networks, and hence also the merger bid, which was rejected this week.
Following the opposition to the deal, the question now is whether Cellcom and Golan Telecom will go back to the negotiating table in order to reach a network consolidation agreement that will satisfy the Ministry of Communications. Although the impression is that Golan Telecom would like to renew negotiations for a network consolidation agreement that would leave it in the market, there is no real proof of this. It is not certain, and Michael Golan is not saying at present, that if a network consolidation agreement is reached on the terms sought he sought, he will carry it out and remain in the market.
The Ministry of Finance wrote several days ago that a network consolidation agreement could be signed, as stipulated in the policy document, with the exclusion of any regulatory concessions to Golan Telecom. According to the Ministry of Finance, with the addition of slight changes, the agreement could meet the requirements stipulated by the Ministry of Communications and in the policy documents, which the Ministry of Finance had a hand in formulating.
Meanwhile, Partner Communications Ltd. (Nasdaq: PTNR; TASE: PTNR)has written to the Attorney General with a demand that Golan Telecom should not be granted any concessions in the context of a network consolidation agreement with Cellcom.
Published by Globes [online], Israel business news - www.globes-online.com - on April 14, 2016
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