Palephone Nears 265 Million NIS Acquisition of WeCom Amid Regulatory Hurdles
Palephone's acquisition of WeCom for 265 million NIS is nearing completion, boosting its market share to 26.5%. Regulatory hurdles involving WeCom's network sharing agreement with Cellcom remain a key challenge.
The acquisition of WeCom by Pelephone is expected to be signed in the coming days, with the deal valued at 265 million NIS. A non-binding memorandum of understanding was signed in mid-July, and the companies have now reached near-final agreements. The deal will increase Pelephone's subscriber base to approximately 3 million, bringing its market share to 26.5%.
Regulatory Challenges and Network Issues
A major question mark revolves around WeCom's agreement with Cellcom, upon whose network WeCom currently operates. The Ministry of Communications and the Competition Authority are expected to oppose a major competitor utilizing another rival's network. Pelephone, a subsidiary of Bezeq, will need to find a solution, potentially compensating Cellcom to exit the agreement, which spans from 2022 to 2032 with a total estimated volume of 300-350 million NIS.
Pelephone believes the regulatory and commercial complexities can be resolved, as the acquisition is a key pillar of Bezeq's growth strategy.
Financial Projections and Market Impact
Bezeq estimates that realizing potential synergies from the merger will contribute about 50 million NIS annually in the short term and 100 million NIS in the long term. In the second quarter, Pelephone reported a net profit of 34 million NIS, with an average revenue per user (ARPU) standing at 45 NIS.
