Price-slashing Golan Telecom’s Future Remains Somewhat Murky

Golan seems to rely on the prospect of cooperative efforts with Cellcom on the sharing of transmission sites, but the Communications Ministry is refusing to approve the deal.

Eyal Toueg

As communications minister at the time, it was Moshe Kahlon, now the finance minister, who is credited with injecting competition into the cellular service sector, and in the process driving down prices substantially. The person who took up the gauntlet as much as anyone and built a company that competed with the three large mainstays in the market, however, was Michael Golan, the founder of Golan Telecom.

To this day, the shares of major mobile operators, Cellcom Israel and Partner Communications, which does business as Orange, rise and fall on his mood. (The third longtime player is Pelephone, a unit of Bezeq). The current price levels of Cellcom and Partner shares appear to reflect continued concern about competition in the marketplace as they are trading at rock bottom levels.

If Golan Telecom were a publicly-traded company, the industry would be able to take the company’s temperature on a quarterly basis, based on its financial reports, and gauge the extent to which it poses a threat to the veteran companies in the sector. Since it is not publicly traded, all that can be done is analyze Golan’s promotional activities and statements made by Michael Golan.

Since it ventured into the cellular market for businesses at the beginning of the year, Golan Telecom has not taken any major promotional steps. Golan continues to try to recruit new customers, but he does not currently seem to be willing to step up price competition. In fact the staff at Golan seems to be increasingly worried. Golan is still apparently not profitable and Michael Golan seems to be in no hurry to bring in additional investors. And he is not going head-to-head with Partner and Cellcom in offering the Internet and cable television services.

Golan has seemed to have relied on the prospect of cooperative efforts with Cellcom on the sharing of transmission facilities, which would save the upstart company a bundle, but the Communications Ministry is refusing to approve the original agreement that the two companies had ironed out for that purpose and is insisting that Golan build its own third generation cellular network before giving consent to a joint fourth generation network with Cellcom.

Any regulatory decision against Golan might spell major trouble and even closure. Some say that if things don’t change by the end of the year, Golan may stop being an aggressive player in the industry.