Xfone takeover buried as buyer's check bounces

Just days after Xfone 018 told investors that the company's controlling interest was being bought by businessman David Sela, the long-distance carrier admitted yesterday that the deal is on the rocks, because of a rubber check.

Israel Discount Bank announced yesterday in a statement that a NIS 11.4 million check from Sela, for what was supposed to be an initial deposit, had bounced.

The statement came after all the arrangements for the sale of the company had been finalized.

Xfone told shareholders that the obligations of Sela and those of his company regarding the purchase of Xfone are all backed up by a purchase agreement personally guaranteed by Sela. Xfone says it will seek legal recourse, including the seizure of Sela's personal assets and those of his company.

The phone company's international holding company Xfone Inc. finalized an agreement late last week with Sela on the sale of the firm's Israeli operations. Sela agreed to pay $6.9 million for 69% of the company's shares.

David Sela has been known in the communications industry for a number of years, marketing prepaid SIM cards and international calling cards, as well as products for local carriers 012 Smile and Partner, primarily to foreign workers in Israel.

He'd had competition over Xfone, too. A number of well-known figures had vied to buy the company, including businessman Shlomo Shmeltzer, who controls the Shlomo investments group, which among other things leases cars. Tadiran Telecom and Bezeq International were also interested in Xfone. Now all have the chance to try, try again: the bidding is expected to be renewed.

Xfone is the smallest international telephone carrier operating in Israel. The company was founded in 2004 as a low-cost call carrier, and currently commands 4% of the local international calling market.

It has launched a number of new products over the past year, including Internet and landline services, but only a few thousand subscribers have signed up.

Sela declined to comment on the announcement from Bank Discount.