Antitrust Office Expected to Approve Shared Telecom Network by Hot, Partner

The commissioner is believed to oppose a similar deal for two other major firms, Cellcom and Pelephone.

AP

Antitrust Commissioner David Gilo is expected to soon approve a proposal by Hot Telecommunications and Partner Communications to merge their networks and build a grid based on more-advanced fourth-generation technology, sources told TheMarker.

In addition, Golan Telecom is expected to win approval to continue piggybacking on Cellcom Israel’s network for another five years. Gilo is expected to impose conditions on both joint ventures, but the terms are not expected to stand in the way.

Amid fierce competition in the cellular industry and declining prices in the two years since a cellphone reform went into effect, antitrust officials are concerned that one of the companies that maintains its own network might call it quits. By allowing some tie-ups, the commission aims to ensure that the country has at least three independent networks.

Nevertheless, Gilo is expected to block the proposal by Cellcom and Pelephone, longtime rivals, to merge their networks. Gilo’s office did not respond when asked for comment.

Since the end of Passover last week, the commission has been holding marathon talks with the companies in an effort to settle the matter as soon as possible. The commission is expected to make a decision on the Hot-Partner deal first. That will probably include a requirement that if one of the firms’ competitors leaves the market, the commission will reserve the right to demand that the joint network be split in two.

Partner’s discussions with antitrust officials revolve around the company’s request that the terms not be linked to the number of competitors, on the grounds that it cannot accept a condition over which it has no control.

The continued shared use of a third-generation network by Golan Telecom and Cellcom would spare Golan the expense of building its own network. Over the past two years, Golan has been building its own transmission facilities, but slowly, in light of the savings it would enjoy if it continued using a competitor’s network.

The commission’s approval is expected to be limited to Golan Telecom’s use of third-generation facilities, meaning it would have to seek additional approval to share a fourth-generation network or build its own.

Whatever the decision, Golan Telecom would have to invest at least several hundred million shekels in a fourth-generation network and own a stake in it. The general thinking is that in the long term the commission would not let Golan simply lease space on a competitor’s network.

Meanwhile, Partner and Hot’s proposed joint-fourth generation network, which they announced in November, would be a 50-50 venture. They would use Partner’s current transmission network, for the most part.

A few weeks after Partner and Hot’s announcement, Cellcom, Pelephone and Golan Telecom said they had signed a similar agreement to build a fourth-generation network to be owned in equal shares by the three companies. At the same time, Golan and Cellcom unveiled an agreement to extend Golan’s use of Cellcom’s facilities.

The Communications Ministry supports the cellular operators’ plan to share fourth-generation networks, which would minimize the problem of available transmission frequencies. The ministry is concerned that absent collaboration, there would be a shortage of quality frequencies for five independent fourth-generation networks, because some frequencies are used by the army, which the ministry prefers not to confront.

One party in the network-sharing contacts criticized the Antitrust Authority for not reaching a decision nearly six months after the requests were filed. Another source noted that the commission had thoroughly investigated the subject but said delays in planning shared networks was a problem costing the companies a lot of money and postponing technology upgrades.