Telecom Merger Blocked; Golan Calls It “Black Day” for Israeli Economy

YERUSHALAYIM -

The Cellcom-Golan merger will not be.

Prime Minister Binyamin Netanyahu and the Israel Antitrust Authority (IAA) have decided to formally oppose the merger of Cellcom Israel and Golan Telecom, on the grounds that if allowed to go through it would lead to less competition and higher prices to the consumer, Globes said on Tuesday.

IAA experts further noted that taking Golan out of the market would take pressure off HOT Mobile, another major player, to offer competitive prices. Their analysis is based on figures from the companies themselves and talks with the relevant parties.

The decision to block the merger came despite claims from Golan that if not approved, it would withdraw from the market.

However, officials at the Antitrust Authority believe that Golan has several options that do not require leaving the market. These options include joining the already existing network sharing agreement between Partner Communications and HOT Mobile, revising the network sharing agreement with Cellcom to meet the Ministry of Communications’ requirements, and the sale of Golan Telecom’s business to a party that will not detract from competition.

On Tuesday, Golan Telecom issued a statement denouncing the government’s decision in the direst terms, counting it a failure of the telecom reforms and accusing senior elected officials of politicking at the public’s expense.

“This is a black day in the history of Israel’s economy,” Golan declared. “We regret the decision, which is completely opposed to continued competition. The decision in this matter is entirely political, with no economic context. Then-Minister of Communications Moshe Kahlon’s reform was never completed, then-Minister of Communications Gilad Erdan never approved the networks consolidation agreement, and by failing to approve the agreement, Prime Minister Binyamin Netanyahu is sealing the company’s fate.

“Due to petty and personal considerations, the politicians are not acting in the public interest and on behalf of the consumers. The politicians have chosen Golan Telecom as a scapegoat and victim, even though it is the only example in Israel’s history of real competition that has saved NIS 5 billion and NIS 10,000 per household a year since it was founded. In addition to the harm done to every household and consumer in Israel, the broader and more dramatic effect will be a halt in foreign investments in the Israeli economy, due to Israel’s unsuccessful management and absolute violation of OECD rules.”

The Ministry of Communications said, “We respect the decision by the Antitrust Authority director general to disallow the merger agreement between Cellcom and Golan Telecom. Acting as Minister of Communications, the Prime Minister also decided to reject the request, in line with the position taken by the Minister of Finance when the merger request was submitted. The Ministry of Communications is prepared to continue its safeguarding of service and competition in the cellular market. A detailed and reasoned decision will be published in the coming days.”

The Israeli government introduced reform in the cellular market in 2011–2012, featuring the entry of Golan Telecom and HOT Mobile into the market. This reform resulted in a substantial fall in the prices paid by cellular subscribers.

The fall in prices following the entry of Golan Telecom and HOT Mobile into the market is reflected in a 38 percent drop in cellular market revenue from NIS 17 billion in 2010 to NIS 10.5 billion in 2014. The average revenue per subscriber for the veteran operators dropped by NIS 73 a month in January 2011–May 2015, a 60 percent decrease; in other words, cellular company subscribers pay NIS 73 less per month on the average than they did before the reform.