IDB Buys Cellcom One Day, Mulls Part Sale the Next

Discount Investment announced that it was paying $720 million for the Safra brothers' 34.75 percent stake in Cellcom.

No sooner had Nochi Dankner pulled off a takeover of Cellcom when he's considering selling a 35 percent stake in the cell phone operator.

On Tuesday, Discount Investment announced that it was paying, via IDB group company Discount Investment Corporation, $720 million for the Safra brothers' 34.75 percent stake in Cellcom. Having already concluded a deal to buy BellSouth's 34.75 percent three months ago, Discount Investment will now own 94 percent of the company. Discount Investment is paying BellSouth $625 million for its stake and the deal is scheduled to be completed on Monday.

Then yesterday, IDB sources said that it had received several offers from potential Israeli and foreign investors for a stake in Cellcom.

One serious candidate partner is Markstone Capital, a private equity fund headed by Ron Lubash and Amir Kess, which had teamed up with Dankner to bid for the state's controlling interest in Bezeq. That move fizzled out when the antitrust commissioner stymied Dankner's ambitions by demanding Discount Investment first sell its 25 percent stake in Cellcom. Frustrated, Dankner bought the controlling interest in Cellcom instead.

Ami Erel, the brand-new Cellcom chairman, is expected to be a highly dominant manager, leading the mobile operator into a new era of competition with Bezeq. He knows Bezeq well, having served as its chief executive until five years ago, and knows Israel's telecommunications market inside out.

Erel also has excellent personal relations with HOT CEO Ram Belinkov.

The status of the current chief executive of Cellcom, Yitzhak Peterburg, is far from clear. In the past, as a shareholder with 25 percent of Cellcom, Dankner had slammed Peterburg and his performance as CEO, and their relations turned chilly. Today they define their relationship as "correct." But Peterburg may pay dearly for failing to stop Cellcom's eroding market share vis-a-vis Partner Communications and its slide to second place behind Partner in second-quarter 2005 revenues.

At least it's clear sailing for Dankner on the regulatory front, as he obtained Communications Ministry approval in advance to buy out the holdings of BellSouth and the Safra family in Cellcom. The antitrust commissioner is not expected to object either.

This week Cellcom and rival Partner released second quarter financials. Partner saw its revenues of NIS 1.25 billion trump those of Cellcom - NIS 1.23 billion - putting it at the top of the heap in the Israeli cellular market.

Cellcom's net earnings for the quarter totaled NIS 129 million.