Israel's Ministry of Communications blocked a network-sharing deal unveiled by Golan Telecom and Hot Mobile in June, telling Hot that its licence did not allow it to host other operators on its network, according to Reuters.
The decision by the ministry is apparently unconnected with Cellcom Israel's move to bring an ILS900 million (€210 million/$232 million) lawsuit against Golan over the Hot agreement.
When Golan and Hot first announced their agreement last month, Cellcom Israel demanded financial compensation of ILS900 million from Golan Telecom because it said the Golan-Hot agreement breached a share purchase agreement (SPA) and national roaming agreement (NRA) it had previously reached with Golan.
Cellcom has now decided to take the matter to court after Golan Telecom rejected its demands, and is also asking for an interim injunction against the consummation of the Golan Telecom-Hot Mobile agreement. It's not clear whether the company will now pursue the lawsuit following the government's ruling.
When Hot informed the Tel Aviv stock exchange in early June that it had signed a 10-year agreement with Golan, Haaretz noted at the time 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.
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.
Meanwhile in a separate development, Cellcom announced a 4G network sharing and 2G and 3G hosting services agreement with Xfone, which was awarded 4G frequencies in a 2015 tender, but has not yet entered the mobile market. Cellcom added that the agreement would have no impact on the company's current agreements with Golan Telecom.
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.
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