In its official opinion, the Communications Ministry has vetoed the proposed merger of Cellcom and Golan Telecom. A report by the Ministry released last week said that the merger “will bring a significant increase in concentration of services in one organization in the market. The merger will bring about an opportunity for the setting of prices in an unfair manner and a rollback of the chief benefits of the cellular market reform of 2011.”
The Ministry based its opinion on a report by the Organization for Economic Cooperation and Development (OECD) that shows that the more companies with their own infrastructure operating in the cellular market, the lower the price for existing services, and the more innovative new services are offered.
Golan Telecom was the first low-cost cellphone 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 cellphone 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 solution, according to Golan, is for the government to approve a proposed merger with Cellcom, which the Antitrust Authority opposes. Golan claims that unless the deal is approved, his company will go out of business, leaving a million customers stranded.