Cellcom signs MoU for majority stake in IBC

10 August 2018 | Natalie Bannerman

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Cellcom, Israel’s largest mobile-network operator, has entered into a memorandum of understanding (MoU) with the Israel Broadband Company (IBC) to buy a majority stake in the company.

Under the terms of the agreement with IBC’s main shareholders and main creditors, the Israeli Electric Company, Cellcom is offering $27.2 million for a 70% stake in IBC. The remaining 30% of issued and outstanding share capital to be owned by IEC.

“Cellcom Israel’s investment in IBC will allow its continued operation and the ability to initially offer fibre-optic internet services to approximately 150,000 households in IBC’s current deployment areas. Our objective for Cellcom Israel and IBC’s fibre-optic deployment is reaching over 500,000 households in three years, reaching approximately 900,000 and 1,200,000 households after five and ten years, respectively,” said Nir Sztern, CEO of Cellcom.

The is also subject to an updated agreement between IBC with IEC and an indefeasible right of use (IRU) broadband service agreement between Cellcom and IBC for a certain period of time from the MoU execution.

“Our investment in fibre-optics in various paths provides us the means to make significant savings in the amounts paid for internet infrastructure usage to Bezeq and offer additional products and services,” added Sztern. “IBC has several advantages in that regard, including a very attractive fibre-optic deployment cost in areas of upper electricity infrastructure (approximately 60% of the buildings in Israel) and in new neighbourhoods. Fibre-optic infrastructure deployment through IEC's high quality professional personnel, alongside IBC's high quality and professional employees, will enable it to supply internet infrastructure services of up to 1 gigabyte per second to operators, by way of wholesale service and/or long term usage rights (IRU). "

In addition, the MoU also contains certain conditions that have to be met prior to the closing of the transaction, including regulatory approvals (including the change of IBC’s deployment obligations) as well as tax arrangements.