Electra buys cellphone operator Golan for $91 million
Israel’s Electra Consumer Products has agreed to buy upstart cellphone operator Golan Telecom for NIS 350 million ($91m.), 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 NIS 130m. to help finance the purchase of Golan.
Electra shares jumped 10% on news of the deal, which will see it pay at least NIS 210m. 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.
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 NIS 600m. for using its network.
Golan was launched in 2012 after the government issued new licenses to boost competition in a sector that had been dominated by three players. Golan has taken about 10% 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 $300m. but was blocked by regulators.
Cellcom CEO Nir Sztern on Tuesday said the network-sharing deal with Electra allowed for “continued investment in future technologies.”
Electra, which makes air conditioners and electrical appliances and is a unit of Elco Holdings, said it would also borrow NIS 140m. from Israeli banks and use NIS 80m. 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 said Golan would need to charge NIS 50 a month just to break even, which is higher than the NIS 29 a month for its present package of unlimited calls and texts and 6 GB of Internet surfing, or NIS 39 for a package that includes unlimited calls to 56 countries. (Reuters)