Cellcom Israel demanded financial compensation from Golan Telecom after it emerged the latter has struck a separate hosting services deal with rival Hot Mobile.
The company said it is seeking a total of ILS900 million (€206 million/$233 million) from Golan Telecom because the Golan-Hot agreement breached a share purchase agreement (SPA) and national roaming agreement (NRA) it had previously reached with Golan.
"A substantial reduction of the future revenues from Golan Telecom will have a material adverse effect on the company's revenues and results of operations," Cellcom added.
Cellcom had previously offered to buy Golan, which is owned by Michael Golan and French billionaire Xavier Niel, but Israel's regulators blocked that deal earlier this year over competition concerns. Since then the two parties have been negotiating an agreement that would allow Golan to continue to use Cellcom's networks, subject to regulatory approval.
The Hot deal therefore came as something of a surprise to Cellcom, which said if the deal is not changed it would terminate the SPA and demand ILS600 million as defined in that agreement. It would also demand the recovery of ILS300 million of discounts it provided Golan under the NRA.
Hot informed the Tel Aviv stock exchange on Friday that it had signed a 10-year agreement with Golan. Haaretz noted that a move to Hot from Cellcom would require a change in the terms of Golan's licence. Sources told the paper that Golan would in effect become a mobile virtual network operator (MVNO), which is contrary to the conditions of its licence.
In January 2015, Israel awarded LTE spectrum in the 1800 MHz band to six companies including the three largest mobile network operators Cellcom, Partner Communications and Bezeq-owned Pelephone as well as Golan Telecom and Hot Mobile.
At the time it was reported that Cellcom had agreed an LTE network-sharing deal with Golan Telecom that would enable the latter to use Cellcom's LTE network and its existing 2G and 3G networks. Hot Mobile and Partner also formed a network-sharing deal for LTE services.
Golan and Hot Mobile launched services in 2012 after each being granted one of several new network licences designed to boost competition on the market. The two companies also discussed a merger in 2015.
For more:
- see the Cellcom Israel statement
- see this Haaretz article
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