Pelephone's Acquisition of Wecom Faces Last-Minute Delays Over Tax Dispute
Pelephone's 265 million shekel acquisition of Wecom faces last-minute delays over tax rulings and shareholder loans, threatening the major telecom merger.
Pelephone's acquisition of Wecom has hit a last-minute stumbling block, putting the 265 million shekel deal in jeopardy. According to reports, a dispute has emerged between the buyers and sellers regarding accumulated losses at Wecom and shareholder loans provided by controlling owners Yariv Lerner and the Clearmark fund.
Pelephone is insisting that these loans be converted into equity before the transaction is finalized. While Wecom's owners agree in principle, they are pushing to delay the signing by several weeks to secure a tax ruling from the Israel Tax Authority concerning value-added tax implications on the debt write-off. Pelephone has rejected this condition, pushing to sign immediately without conditions tied to tax rulings.
The deal, valued at 265 million shekels for 100% of Wecom, faces significant regulatory hurdles from both the Competition Authority and the Ministry of Communications. Pelephone currently holds about 2.71 million subscribers, representing a 23.5% market share, while Wecom brings around 300,000 subscribers, or a 2.6% market share.
Another major complication is that Wecom currently operates on Cellcom Israel's network under an agreement valid through 2032, worth an estimated 300 to 350 million shekels. Pelephone would either need to continue paying its rival Cellcom or negotiate a massive lump-sum compensation to exit the contract, adding further friction to an already complex market consolidation.
