Antitrust Authority blocks Golan-Cellcom merger

Golan and Hot both entered the market following a major cellular reform led by then-communications minister Moshe Kahlon.

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April 12, 2016 20:19
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The Antitrust Authority on Tuesday blocked a proposed merger between Golan Telecom and Cellcom, arguing that joining the companies would reduce competition in the market and raise prices for consumers.

“An analysis carried out by the authority showed that the disappearance of Golan from the market is liable to also have an adverse effect on the behavior of Hot Mobile, another company that creates competition in the cellular market, since the pressure on it to compete will be reduced significantly,” the authority wrote in a statement.

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Cellcom, which had offered to buy Golan for NIS 1.17b in November, said in a statement to the Tel Aviv Stock Exchange that “The company will consider its options after receiving and reviewing the arguments for the decisions.” Golan called the decision “a black day” for Israel.

Golan and Hot both entered the market following a major cellular reform led by then-communications minister Moshe Kahlon. Their entry led to a significant drop in prices, which manifested itself in a 38 percent drop in cellular profits between 2010 and 2014.

The Antitrust Authority’s analysis raised the concern that, in Golan’s absence, the market would return to the non-competitive situation that prevailed before the reform.

New companies would find it difficult to enter the market, it said.

The fact that the existing cellular companies also deal in other segments, such as TV and Internet, helped bring down prices in all the related categories, meaning an exit for Golan could jeopardize other prices as well.



Golan CEO Michael Golan said last week that if the merger was not approved, the company would collapse, presumably because of problems with network sharing agreements (Golan and Hot are both virtual operators, in that they do not build their own cellular infrastructure but rent it from other companies, in accordance with the reforms.) He restated his position that the company would exit the market in meetings with the authority.

The authority noted that Golan had other options aside from quitting altogether: “Joining the network sharing agreement that already exists between Partner and Hot, amending the network sharing agreement with Cellcom in a way that will meet the requirements of the Ministry of Communication, and selling Golan’s business to a party that will not reduce the level of competition.”

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