A blow to Cellcom: Expon in advanced negotiations with Pelephone for a network sharing agreement

A dead end in mediation attempts: Cellcom announced this morning that this is the second month in a row that Expon has not sent payments to it; Expon’s withdrawal from the agreement will result in Cellcom losing approximately NIS 100 million per year in revenue

A company owned by Hezi Bezalel, is examining the possibility of abandoning Cellcom and is in advanced negotiations with Pelephone to sign an agreement between the companies to share cellular networks.

Such a move involves a breach of contract and is likely to be in trouble, but if implemented, Cellcom is expected to suffer a severe financial blow, to which Expon transfers about NIS 100 million annually. They told by a senior Cellcom official: “We were not excited. Serious companies are expected to meet their obligations. Those who do not pay Cellcom will not pay others either.”

Cellcom reported to the stock exchange this morning (Wednesday) that Expon had not paid its payments. This represents a cumulative delay of around 17 million NIS.

The business confrontation between the sides began with Cellcom’s acquisition of Golan Telecom. Even before Expon entered the cellular market in 2018, it signed a network-sharing agreement with Cellcom for a decade under the we4G brand, under which it shared maintenance and network investments equally. A similar agreement with Golan Telecom was then signed by Cellcom and the investments were split into three.

The acquisition of Golan led, at a sensitive time, to an increase in Expon’s share of the agreement – in preparation for huge investments in 5th generation infrastructure.

Now it turns out that Bezalel is not waiting between the parties to straighten things out and has started to consider leaving Cellcom in favor of another network.

Pelephone works alone on a network, and is therefore the most appropriate, while a network is shared together by Partner and HOT Mobile. It is expected that leaving the agreement with Cellcom will impose a heavy fine on Expon to continue with the funds until the end of the agreement, but senior communications market legal sources say Bezalel will play on the fact that when it left the merger with Cellcom, Golan did not pay a NIS 600 million fine. This is a problematic timing on the part of Cellcom, and not a simple blow, after the company has ended in a loss for several quarters and its financial situation is unstable.

Just about a month ago, Expon announced that Bezalel had chosen HOT Mobile’s former CEO, Assaf Ofer, to serve as the CEO of the company, with Yaakov Nadborni leaving after five and a half years in the position. Ofer has not yet formally entered the position, but with Cellcom, which has not yet taken shape, mediation attempts have already begun.

“for life”for life. At the current price level, however the company will have a hard time surviving over time and will have to find other engines for growth. One of them is the 5th generation, but because of the conflicts with Cellcom, Expon is the only company that has not yet received a license from the Ministry of Communications for the new generation. Expon is also active, with 220,000 subscribers, in the stationary Internet field.