Pelephone to Acquire Wicom for $70 Million Amid Regulatory Hurdles
Translated & summarized from Calcalist by baba
Pelephone is set to acquire Wicom for NIS 265 million, increasing its market share to 26.5%. The deal faces significant regulatory hurdles due to Wicom's existing network agreement with competitor Cellcom, which Pelephone would have to assume. Pelephone may need to pay Cellcom hundreds of millions of shekels to exit the agreement, and the deal requires approval from regulators. If the acquisition fails, Cellcom could potentially acquire Wicom.
The story in 5 lines · by baba
- Pelephone is acquiring Wicom for NIS 265 million, pending regulatory approval.
- The deal is complicated by Wicom's existing network usage agreement with competitor Cellcom.
- Pelephone may have to pay Cellcom hundreds of millions of shekels to terminate Wicom's contract.
- The acquisition would increase Pelephone's market share to 26.5%, narrowing the gap with Cellcom.
- Regulators are expected to scrutinize the deal due to concerns about market concentration.
Pelephone is nearing the final stages of acquiring Wicom for NIS 265 million (approximately $70 million), with a non-binding memorandum of understanding signed in mid-July. The deal's completion hinges on Pelephone resolving a complex agreement Wicom has with its current network operator, Cellcom.
Pelephone, owned by Bezeq, currently holds a 23.5% market share with 2.71 million subscribers, placing it second alongside Partner. Wicom, owned by Yair Lerner and Clarimarck Fund, is a smaller player with about 300,000 subscribers and a 2.6% market share. If the acquisition proceeds, Pelephone's subscriber base would increase to approximately 3 million, boosting its market share to 26.5% and narrowing the gap with market leader Cellcom, which has 3.694 million subscribers and a 32% share.
The primary challenge is Wicom's existing network usage agreement with Cellcom, which extends until 2032 and is valued between NIS 300-350 million. Pelephone would inherit this obligation, requiring it to continue paying Cellcom for network access despite operating its own nationwide infrastructure. This situation is expected to face scrutiny from the Ministry of Communications and the Competition Authority, which are generally opposed to increased market concentration and may prohibit such inter-operator network usage.
Pelephone may need to negotiate a costly exit from Wicom's agreement with Cellcom, potentially involving a one-time payment of hundreds of millions of shekels. Alternatively, the deal could face regulatory rejection. Bezeq anticipates potential synergies from the acquisition, estimating short-term operational cost savings of NIS 50 million annually, growing to NIS 100 million in the long term.
Cellcom's CEO, Eli Adadi, is involved in the negotiations. While Pelephone is pushing forward with the acquisition, Cellcom could potentially disrupt the deal if no agreement is reached. Should the acquisition fall through, Cellcom might consider acquiring Wicom itself, though previous offers from Cellcom and Partner were significantly lower than Pelephone's bid.
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