According to police, the 40-year-old suspect, who is suspected of operating as part of a bigger network, intended to use a drone to bring the devices into Nafha Prison, which is located in the Negev.
The suspect, whose name is under a gag order, was arrested during a joint probe by Shin Bet, Israel Police and the Israel Prison Service's Dror narcotics intelligence unit, along with seven other suspects.
Other suspects include a couple from Lod, two residents of the West Bank town of Budrus near Ramallah and a man from Isfiya, a Druze village in northern Israel.
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They are suspected of committing several security offenses, among which are the attempt to provide assistance to a terror organization and an attempt to smuggle equipment with the aim of harming state security.
The network was operated by Hamas prisoner serving a life sentence for his involvement in a 1995 suicide bombing which killed six Israelis, as well as an Islamic Jihad activist convicted of laying explosive devices, police said.
Police suspect that the network has been sumggling the cellphones into the prison, where several senior security prisoners are held, since 2014. Police believe the network's members were paid for every successful transfer of phones.
On one occasion, they were able to smuggle 30 cellphones by throwing them over the prison wall. In a different case, the network is suspected of having smuggled dozens of devices into the Eshel Prison in Be'er Sheva; they received thousands of shekels in return.
Shin Bet and the Israel Prison Service believe the network intended to smuggle cellphones into the security wings of Nafha last month by using a drone. According to the indictment, it was for this operation that the Israeli citizen joined the network.
According to police, members of the network drove to the area of the prison to perform test runs for the operation, with the aim of smuggling in 60 cellphone devices.
The test run included the couple from Lod and the Israeli citizen, and saw them attaching potatoes to the drone in order to simulate the operation. The drone crashed during this attempt due to a technical malfunction, which exposed the three and led to the couple being arrested by security forces after a short pursuit.
The Israeli and another suspect managed to flee the scene, according to the indictment. He later deleted his correspondence with the other members of the network.