Cellcom in Network Sharing Agreements With Pelephone, Golan

Cellcom Israel Ltd., the country’s largest mobile communications provider, agreed to share networks with competitors as it moves to cut costs.

Cellcom will join Pelephone Communications Ltd., the cellular phone unit of Tel Aviv-based Bezeq Israeli Telecommunication Corp., and Golan Telecom Ltd. to build and operate a fourth-generation wireless network. Cellcom and Pelephone will also share antennas and other components in existing networks, according to a filing to the Tel Aviv bourse today. The accords require regulatory approvals.

The government has forced telecommunication providers to cut fees and encouraged new competitors in an effort to lower costs for consumers, eroding profit at Cellcom and Partner Communications Co., the country’s second-largest wireless operator. Partner announced a network sharing agreement with a unit of Hot Telecommunication System Ltd. last month.

The sharing arrangement may save Cellcom and Partner as much as $57 million a year, according to Gilad Alper, a senior analyst at the brokerage unit of Ramat-Gan, Israel-based Excellence Nessuah Investment House Ltd., the nation’s third-largest money manager. “We still need to see the response of the antitrust regulator who is generally very hawkish,” Alper said today by phone.

Share Surge

Rosh Ha’Ayin-based Partner’s shares jumped the most in more than a decade after the Hot announcement on Nov. 8. Cellcom rose to the highest in more than a year on expectations it would enter a similar deal. The shares are up 42 percent and 55 percent respectively this year after being two of the three worst performers on Israel’s benchmark index last year. Cellcom was trading 0.9 percent higher to 48.0 shekels at 11:59 a.m. in Tel Aviv today.

Gilad Erdan, Israel’s Minister of Communications, said he welcomed the Cellcom accords as they’ll ensure continued competition, lower cost of services for consumers and reduce the numbers of antennas in the country, according to an e-mailed statement today. Mark Schon, a spokesman for the antitrust authority, declined to comment on the deals in a text message to Bloomberg News today.

Mobile network operators Hot and Golan moved into Israel’s wireless market in May 2012 and together with virtual network operators control more than 10 percent of the cellular market, according to the Ministry of Communications. Their packages compete with those of Cellcom, Partner and Pelephone.

“The agreements perpetuate the competitive constellation of five mobile operators in the market and guarantee stiff competition for years to come,” Alper said.

The pacts should result in substantial operating and capital expenditure savings as Cellcom eliminates some cell sites, CEO Nir Sztern said in the filing.

Profits may rebound next year for the Israel’s two leading cellular operators, according to analyst estimates compiled by Bloomberg.