Israel’s Ministry of Communications approves sale of controlling stake in 018 Xfone

23 Feb 2022

Israel’s Ministry of Communications (MoC) has announced its approval for the sale of a controlling stake in local mobile network operator (MNO) 018 Xfone. In a press release regarding its decision, the regulator noted the deal had been approved following deliberations which included consideration of its effect on competition in the local mobile market. According to the MoC, the deal will enable Xfone to continue operating, after it had been in the process of approving a debt settlement in the district court over recent months. The ministry’s approval follows on from the Israel Competition Authority giving the deal the green light last week.

In terms of specifics of the proposed transaction, as part of a deal reached as part of a creditor’s arrangement a company controlled by Yariv Lerner and the Clearmark Fund will acquire two-thirds of Xfone’s shares for ILS100 million (USD31 million), according to local news outlet Calcalist. Of that amount, ILS65 million will then be transferred to Xfone’s creditors, it said. Meanwhile, Xfone’s current controlling shareholders, Hezi Bezalel, will remain as a minority shareholder, retaining the other 33% of the MNO’s shares.

Alongside the above, meanwhile, the MoC has also approved changes to the network sharing agreement between Xfone and rival Cellcom, suggesting that this will enable the former to continue to function as an independent MNO, while preserving the current market structure. Only last week Cellcom confirmed it had ‘entered into an addendum to the agreement for the modification of its sharing and usage agreement with [Xfone]’, with Xfone’s proposed buyer.

Notably, the revision to the agreement is understood to include a put option under which Cellcom would be required to acquire Xfone for a consideration of ILS130 million between three and five and a half years after the date of completion of the transaction which will see Lerner/Clearmark take a controlling stake in it, subject to regulatory approval. For its part, Cellcom has noted that – should it be unable for any reason to exercise the put option – Xfone would be entitled to ‘certain discounts for additional payments it has to pay to [Cellcom]’, while it would also be entitled to shorten the sharing agreement between the companies – which is scheduled to last for ten years – by a period of between three and seven. However, should Xfone choose to shorten the network sharing agreement, then Cellcom does have a call option which would obligate Xfone’s shareholders to sell it to Cellcom for ILS130 million, again subject to regulatory approvals.

Israel, 018 Xfone (We4G), Cellcom, Ministry of Communications