Low-cost cell phone service operator Golan Telecom is likely to go out of business unless the government authorizes its merger with veteran cell-phone firm Cellcom, the head of the company, Michael Golan, wrote in a letter this week to Prime Minister Binyamin Netanyahu, who is also acting communications minister. If the merger is not approved and Golan goes broke, “a million customers will be left without cell-phone service,” Golan wrote.
In the letter, which was reprinted in Haaretz, Golan wrote that “the refusal to authorize the merger will bring about the dissolution of our company.” The letter includes quotes from a number of industry experts affirming Golan’s claims. “The collapse of our company will lead to serious consequences, both for our customers and the cell-phone industry in Israel overall,” the letter said.
Golan Telecom was the first low-cost cell-phone service provider in Israel, cutting the charges that veteran companies Pelephone, Cellcom, and Orange (Partner) by tens of percent. As a result of Golan Telecom’s approach to business, Israelis save hundreds of shekels on their cell-phone bills, forcing the veteran companies to cut costs – and to lay off workers and downsize, as the low-cost revolution ate into profits.
Apparently, though, Golan lowered rates too much, leading to the current situation. While it is not at all certain that the company will really go under, the Communications Ministry has contingency plans at the ready to move Golan’s customers to other companies.
The government has refused to authorize the merger of the companies, which was agreed to about five months ago by both firms. The government fears that the merger will create a too-large company that could pull in too much business, creating a monopolistic situation.