Rejection of Cellcom-Golan Merger Benefits the Israeli Public

An approval of the Cellcom-Golan merger would have diminished the level of competition in the Israeli cellular market.

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Michael Golan at the Golan Telecom headquarters in Tel Aviv, June 9, 2013.
Michael Golan at the Golan Telecom headquarters in Tel Aviv, June 9, 2013.Credit: Eyal Toueg

The Antitrust Authority did well in its refusal on Monday to approve the merger between Cellcom and Golan Telecom. Such an approval would have diminished the level of competition in the telecommunications market, returning it to its pre-reform situation, in which mobile phone companies charged exorbitant fees for their services.

Had the merger been approved, Cellcom would have become the largest company in this business, holding 37 percent of the market. In such a situation, its sheer size and the exorbitant price it paid (1.5 billion shekels) in order to transfer Golan’s 850,000 customers would have led it to raise prices, with other companies quickly following suit.

It should be noted that all the relevant players opposed the merger. Prime Minister and Communications Minister Benjamin Netanyahu expressed his opposition in the past. Finance Minister Moshe Kahlon said he’d do everything he could to block the deal. The treasury’s budget supervisor Amir Levi also said that reducing the number of players in the market would reduce competition.

Golan Telecom responded to the decision harshly, calling it a “black day of mourning” for the Israeli economy, where competition would actually be reduced. This is illogical – a merger would have reduced the number of companies in this area, necessarily diminishing competition.

Golan arrived in Israel four years ago, revolutionizing the cellular phone world. It introduced competition and brought about a sharp reduction in prices. However, there is no point in collecting low fees without abiding by the tender’s conditions. Indeed, Golan did not establish a network of its own, did not erect an array of antennas, did not invest in technological renovations and did not expand services, choosing instead to piggyback on Cellcom while becoming a virtual operator, all of this in striking contrast to the terms of the license it obtained.

The preferred solution to the situation that has arisen is to find a new international investor that will buy Golan Telecom. It won’t be for 1.7 billion shekels but for considerably less. If this is not possible, a local investor will have to be found to buy Golan businesses, on condition that it’s someone new in this market, so that competition is not impaired. A further solution could be the forging of a true partnership between Golan and Cellcom, one that meets the conditions set by the Communications Ministry, such as the partnership between Partner and Hot.

Even though Golan is claiming that the merger was not approved due to “personal and trivial considerations” and that politicians have turned him into a scapegoat and victim, it seems that in this case the politicians did the right thing, not to mention the Antitrust Commissioner Michal Halperin.

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