Prime Minister Benjamin Netanyahu has indicated he will not approve the purchase by Cellcom Israel of its much smaller rival in the mobile telephony market, upstart Golan Telecom, Israel’s Channel 2 television news reported last night.
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As minister of communications, his approval is necessary for the acquisition to go forward, but sources in the industry said Netanyahu is dissatisfied with the deal. In closed conversations he has come out against the sale, saying “Golan did a number on the public and the government.”
Netanyahu’s statements were made before the Communications Ministry has formally carried out its examination of the matter, but the remarks still carry weight. Netanyahu would also have say in the antitrust aspect of the merger after taking over earlier this month the Economy Ministry, making him responsible for choosing the next antitrust commissioner.
Cellcom earlier this month agreed to purchase Golan for 1.17 billion shekels ($301 million) in a move that aroused considerable opposition both in the media and, informally, among government officials, including Finance Minister Moshe Kahlon. Buying Golan would add 900,000 subscribers to the more than three million Cell has today. Already Israel’s biggest mobile operator, the takeover would make Cellcom by far the dominant player in the market, with a market share of around 40%, harming competition and leading to higher cellphone bills.
On the other hand, if the acquisition does not go through, Golan will have to pay a huge termination fee of 150 million shekels to Cellcom as well as make good on the 450 million shekels it owes for use of Cellcom’s network.