Behind the Scenes of the Merger Between Israel's Telecom Giant Bezeq and Satellite TV Company Yes, Now at Center of Police Probe

Members raised issues about deal that aren’t addressed, but nevertheless approved the merger in a meeting documented in a recording obtained by TheMarker

Ahikam Seri/Bloomberg

The 2015 merger between Bezeq and the satellite-television company Yes is at the center of Case 4000. Shaul Elovitch, who controlled both companies, stood to profit immensely from the deal, but in order to complete it he needed the approval of the Communications Ministry and the Cable and Satellite Council.

The details of how the deal got approved have yet to be revealed. Shlomo Filber, a confidant of Prime Minister Benjamin Netanyahu who was the ministry’s director general at the time, has recalled how he worked hard to meet the June 23, 2015 deadline sought by Bezeq for the 680 million shekel ($195.5 million at current exchange rates) deal.

Now, TheMarker has obtained the minutes of the Cable and Satellite Council meeting that approved the merger. They reveal that some members expressed reservations about the deal and the pressure to approve it, but in the end they gave in to the demands of chairwoman Yifat Ben-Hai Segev.

They show that the merger was approved unanimously in a specially called meeting just before Bezeq’s deadline and signed later that day by Netanyahu, who was then serving as communications minister and prime minster. Moreover, council members were given a copy of the research report commissioned by the ministry only on the day of the meeting and had no time to review it.

“My recommendation is to advise the minister that there is no impediment to approving the financial merger. I want to give you a draft of the decision that we made in advance,” Ben-Hai Segev says in an effort to wind up the meeting. The draft decision was also shown to council members only during the meeting.

The minutes of the meeting were obtained by TheMarker under a freedom-of-information request. The Communications Ministry has declined to release the research report.

Already at the start of the meeting, Ben-Hai Segev stresses the importance of voting and approving the merger quickly.

“Due to the bureaucratic problems involved in tender proceedings, and hiring economic advisers, we weren’t able to deal with the matter at the required and appropriate speed,” she says. “As such we found ourselves under enormous time pressure.”

She then makes the case for the merger based on previous meetings with Yes and Bezeq executives. Among the reasons cited: the threat of America’s Netflix entering the Israeli market (as it eventually did); the launch of Cellcom Israel’s rival television service; and the trend toward “convergence” between telecommunications companies like Bezeq and media companies like Yes.

In response, a council member whose name was removed the minutes given to TheMarker asks how consumers would benefit from the merger.

“Their main claims relate to business issues — that if they don’t complete the merger their financial situation won’t be good. But I don’t see anything here in the merger, at least what I was able to read of the material we were given, that shows any concern about the consumer. The good of the consumer isn’t part of the equation,” he complains.

Ben-Hai Segev doesn’t address the question and returns to the business case for the merger, this time noting that Yes’ big rival in the television market is Hot, a unit of the European media and telecommunications giant Altice. “I suggest because of the time pressure that we really try to keep to the agenda,” she adds.

At this point, Eran Horn, director of business development at Adalia speaks. Adalia was the consulting firm retained by Filber in order to write a report explaining the business case for approving the Bezeq-Yes merger.

Horn warns against attaching any conditions to the merger approval, saying it would cause Bezeq to back away from it. The Communications Ministry professional staff had proposed agreeing to the merger in exchange for Bezeq’s making concessions on other telecommunications reforms. But a month before the meeting of the Cable and Satellite Council, Netanyahu fired Avi Berger, the Communications Ministry director general, who had been advocating the trade-off.

Tal Eisenfeld, another council member, asks Horn whether there were conditions Horn thought would be desirable but opted not to consider because Bezeq would cancel the merger altogether. Horn responds, “The answer is no,” and doesn’t elaborate.