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Electra Acquires Golan Telecom For $91 Million

Reuters

Updated: January 3, 2017, 4:24 PM IST
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Electra Acquires Golan Telecom For $91 Million
Representative Image. (Image: REUTERS/Neil Hall)

Israel's Electra Consumer Products has agreed to buy upstart mobile phone operator Golan Telecom for 350 million shekels ($91 million), ending months of speculation over Golan's future.

Electra also said it had signed a 10-year network sharing agreement with Cellcom, Israel's largest mobile operator, and that Cellcom will lend it 130 million shekels to help finance the purchase of Golan.

Electra shares jumped 10 percent on news of the deal, which will see it pay at least 210 million shekels a year plus value-added taxes for the network-sharing agreement. The final sum will depend on the number of Golan subscribers and their usage, Cellcom said in a separate statement.

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The deal puts Golan on a stable footing after Cellcom in November filed a request in a Tel Aviv court for the liquidation of Golan, alleging that Golan owes it 600 million shekels for using its network.

Golan was launched in 2012 after the Israeli government issued new licences to boost competition in a sector that had been dominated by three players. Golan has taken about 10 percent of Israel's mobile market by offering rock-bottom prices, hurting Cellcom and main rivals Partner Communications and Pelephone, a unit of Bezeq Israel Telecom, which are now barely profitable.

Cellcom tried to buy Golan in 2015 for about $300 million but was blocked by regulators.

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Nir Sztern, Cellcom's chief executive, said on Tuesday that the network-sharing deal with Electra allowed for "continued investment in future technologies."

Cellcom's shares jumped 8.6 percent on Monday in anticipation of the deal with Electra and were up another 2.5 percent on Tuesday in Tel Aviv.

Electra - which makes air conditioners and electrical appliances and is a unit of Elco Holdings - said it will also borrow 140 million shekels from Israeli banks and use 80 million shekels of its own capital to finance the takeover of Golan.

Barclays analyst Tavy Rosner said the takeover of Golan was very positive for the mobile sector since "it would allow price rationality to be restored in the market."

He noted that Golan would need to charge 50 shekels a month just to break even. That's higher than the 29 shekels a month, or less than $8, for its present package of unlimited calls and texts and 6 GB of Internet surfing, or 39 shekels for a package that includes unlimited calling to 56 countries.

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First Published: January 3, 2017, 4:24 PM IST
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