The end of cheap cellular? Golan seeks consolidation

"Shareholders have given and investment bank the mandate to evaluate and explore options that could lead to a sale, acquisition, merger, but could also leave Golan Telecom independent," says company.

August 26, 2015 17:04
1 minute read.
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Golan Telecom, one of the first new cellular companies that entered the market under then-communications minister Moshe Kahlon, announced on Wednesday that it is seeking to consolidate the market through a merger or acquisition.

In a letter, the company revealed that “Shareholders have given and investment bank the mandate to evaluate and explore options that could lead to a sale, acquisition, merger, but could also leave Golan Telecom independent.”

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Kahlon’s plan, which allowed new cellular companies to “rent” existing infrastructure from existing ones, introduced fierce competition into a market that until 2012 was controlled by just three players: Orange, Cellcom and Pelephone. After Golan, Hot Mobile and XPhone entered the market, prices fell dramatically, with some estimates putting consumer savings at 90 percent.

But analysts had warned that Israel’s tiny market might not have enough room for so many companies, and warned that one might go bankrupt or merge, thus reducing competition once again.

In a February interview with The Jerusalem Post ahead of March’s general election, candidate Kahlon, now finance minister, said he considered the prospects of such a merger unlikely.

“I don’t think it will happen, and if it will become concentrated again, we have to prevent it,” he said at the time. The question came in light of public comments by YouPhone CEO Ariel Schreiber arguing that he expected cellular mergers in the medium term, which would undo the gains of the reforms.

Kahlon would not comment on Wednesday’s Golan announcement.

But the announcement, with its explicit note that Golan could choose to remain independent, may have been a warning shot aimed the Communications Ministry, which continues to regulate not only the cellular market, but the markets for Internet, television and landlines, which Golan plans to offer in the future.

In July, Globes reported that Golan might have been behind rumors of its possible sale because it wanted to counter pressure from the Communications Ministry to increase its investment in Cellcom’s network, which it “rents” for its customers. The ministry rejected a plan for the two companies to consolidate their network in March, and has yet to approve new terms.

Whether the Antitrust Authority would approve a merger in the cellular market is also an open question.

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