Kahlon: Cellcom purchase of Golan harms competition
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Kahlon: Cellcom purchase of Golan harms competition

Finance minister joins range of MKs opposed to NIS 1.17b merger of Israeli cellular companies, warns of price hike

Finance Minister Moshe Kahlon seen as he presents the proposal for the state budget for 2015 at the Ministry of Finance in Jerusalem, August 2, 2015. (Yonatan Sindel/Flash90)
Finance Minister Moshe Kahlon seen as he presents the proposal for the state budget for 2015 at the Ministry of Finance in Jerusalem, August 2, 2015. (Yonatan Sindel/Flash90)

Finance Minister Moshe Kahlon on Thursday criticized the planned NIS 1.17 billion ($300 million) merger of Israeli mobile giants Cellcom and Golan Telecom announced earlier in the day.

“The Finance Ministry opposes the approval of the deal, and warns that approving it will severely damage competition in the cellular market and [bring] with it a price increase,” a statement from the Finance Ministry said.

The Ministry said Golan was granted a tender to enter the market with the intention of encouraging new operators and increased market competition.

“The merger of Golan and Cellcom is a dire mistake. The cost of calls will rise to hundreds of shekels per month instead of the few dozen shekels the public now pays. Approving the merger will bring us back to the days of no competition, and consumers will become victims,” the statement said.

Kahlon served in a previous Netanyahu government as communications minister. The reform in the cellular service market was one of his major achievements.

The deal, which would make Cellcom Israel’s largest cellular service provider, still requires the approval of the Communications Ministry and the Antitrust Authority. After acquiring Golan, Cellcom would hold 37 percent of the market, the largest market share in Israel by a wide margin. Prime Minister Benjamin Netanyahu currently holds the post of communications minister.

The Finance Ministry’s budget director, Amir Levy, also harshly criticized the planned merger Thursday, telling the Hebrew-language business newspaper Globes that it was “borderline immoral.”

Public Security Minister Gilad Erdan, who succeeded Kahlon at the Communications Ministry, called on the Antitrust Authority and the Communications Ministry not to approve the deal. Erdan said it would be better to penalize Golan with a fine than allow the merger to proceed.

Meretz leader Zehava Gal-on also urged the Antitrust Authority not to approve the merger. “It is your job to ensure that the market moves in the direction of increasing competition for the good of customers, and not the other way around,” Gal-on wrote.

The Communications Ministry said it had not yet received any documents pertaining to the deal.

Cellcom announced its plan to buy Golan Telecom for NIS 1.17 billion ($300 million) in a notice sent to the Tel Aviv Stock Exchange on Thursday morning.

Golan Telecom, established in 2012, took the Israeli market by storm, offering fixed-price packages that were far cheaper than the competition. The company is a virtual provider, piggybacking onto the antenna network and physical relay station infrastructure owned by Cellcom.

Golan had begun to install its own statewide network of antennas, but started dismantling them at the beginning of the year. The eventual installation of its own infrastructure was one of the conditions of Golan’s operating license. Maintaining its own physical network would cost Golan some NIS 90 million ($23 million) per year, which the company had said is beyond its reach.

The company owes Cellcom NIS 400 million ($103 million) in roaming charges for using its network, and the bigger company agreed to forgive the debt as part of the merger. Its purchase of Golan is thus nominally valued at NIS 1.6 billion ($411 million).

As the company officially announced its intention to purchase Golan in a notice sent to the Tel Aviv Stock Exchange on Thursday morning, Cellcom CEO Nir Stern said it would “preserve Golan Telecom as an independent company and welcome all Golan employees with open arms.”

“Cellcom has proven its ability to expand the range of services in transitioning from a cellular company to a company marketing landlines, internet and television, despite the strong competition. Acquiring Golan Telecom will enable us to have a cheaper brand in our portfolio, and I am convinced of this merger’s ability to succeed,” Stern said.

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