Israeli multi-service operator (MSO) Cellcom has entered into a series of definitive agreements related to a co-investment in wholesale broadband provider Israel Broadband Company (IBC). In a press release regarding the development, Cellcom confirmed that it had entered into partnership agreements for the purchase of 70% of IBC’s share capital through an equal joint investment with the Israel Infrastructure Fund (IIF). Alongside this, through the joint venture (JV) that Cellcom will form with the IIF, two other agreements have been reached, specifically: a share purchase agreement with IBC and the Israel Electric Company (IEC) for the 70% stake in IBC; and a shareholder agreement with IEC, under which the latter will hold 30% in IBC, with the remaining 70% to be held by the Cellcom/IIF JV. Rounding out the deals, meanwhile, are separate agreements: one granting Cellcom certain indefeasible right of use in IBC’s fibre-optic infrastructure; and the other, between IBC and IEC, updating the former’s right of use and services agreement for ‘its fibre-optic network when deployed over IEC’s infrastructure’.
Concurrently, in a related deal Cellcom has also confirmed it will sell its independent fibre-optic network in residential areas to IBC for between ILS180 million and ILS200 million (USD50 million-USD55 million), with the final price ‘subject to the rate of the fibre-optic deployment and the number of actual ‘home pass’ connected at the end of 2019 and certain adjustments’.
Commenting on the latest raft of contract arrangements, Cellcom CEO Nir Sztern was cited as saying: ‘Signing the definitive agreements for Cellcom and IIF’s investment in IBC is a giant step toward a new age in Israel’s internet infrastructure. Once the necessary approvals are received and the transaction is completed, IBC, under its new ownership of Cellcom, IIF and IEC, would have the ability to bring the fibre-optic message of a up to 1Gbps, to over one million Israeli households in five years, allow the company to offer fast internet service which shall improve the Israeli customer’s internet and TV experience and is also expected to result in substantial savings over time in the Company’s expenses and consequently have a positive effect on the Company’s results of operations and free cash flow.’