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Cellcom hits Golan with legal action for dropping deal

Israeli market leader Cellcom has begun legal proceedings against Golan Telecom after the smaller firm abandoned discussion concerning a network-sharing agreement to partner with Hot Mobile.

Last month, Cellcom demanded  ILS900 million ($233 million) in compensation from Golan after it bailed out of the deal to work with Hot, which is Israel’s fourth largest operator. The market leader is now taking the matter to court, and has made “a request for an interim injunction against the consummation of the Golan Telecom – Hot Mobile agreement.”

Cellcom is arguing that Golan’s hosting agreement with Hot Mobile “constitutes material breaches of the share purchase agreement (SPA) and national roaming agreement (NRA) between the company and Golan Telecom”.

Golan and Cellcom were discussing a network-sharing arrangement after an attempt last year by Cellcom to acquire Golan was shot down by regulators – and Prime Minister Benjamin Netanyahu – as running counter to the need for more competition in the market.

The deal had been essentially agreed, with Cellcom paying ILS1.17 billion for Golan with the agreement that the smaller firm would pay it a termination fee of ILS150 million if the deal did not close, as well as ILS450 million for using Cellcom’s network. Cellcom also provided Golan with ILS300 million of discounts under the NRA, bringing the requested total to ILS900 million.

When Hot Mobile revealed last month that it was holding its own discussions with Golan, Cellcom stated: “should Golan fail to remedy all such breaches within the time frame set in the agreement, the company will take all actions available to it under the SPA, NRA and applicable law, against them. A substantial reduction of the future revenues from Golan Telecom will have a material adverse effect on the company’s revenues and results of operations.”

Cellcom leads the Israeli market with a 27% share, while Golan is the smallest operator, behind Orange (Partner), Pelephone (Bezeq) and Hot Mobile.

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