If the board decides that a merger or sale of the company is a right step, it does not necessarily mean that they will choose a HOT offer. The board is supposed to exhaust the process and get the best price for its shareholders. Therefore, he may also decide to approach an investment bank to conduct an open auction sale process for him. The regulatory issue is also a consideration in the decisions of the Board of Directors, which would prefer a transaction with a high chance of obtaining approval even at the cost of a decline in value. The board also proved that it knew how to maintain its independence, having diluted Hutchison last month.

Board of Catch

HOT’s proposal captures Partner’s board of directors. The very offer, and its leakage, require the board of directors to decide whether the company is for sale. If so, then the board will inevitably have to conduct a partner tender. In such a situation, any decision that the board makes may endanger it. If it decides that the company is not for sale, shareholders may sue it. If it decides not to conduct a tender process, it may also be sued by shareholders on the grounds that it did not maximize shareholder profits.

In deciding whether a merger is good for the company, the board will need to consider some considerations. For example, a merger will save costs down, as HOT will fire most of Partner’s management. The merger will also inevitably cut back, which is expected to raise opposition among workers.

At the regulatory level, the merger will need to be approved by both the Competition Authority and the Communications Ministry. The prospect of approval is not bad, but it will probably include restrictive conditions, including the sale of Partner’s television activities. In that case, the natural candidate for the acquisition is Cellcom. Partner may be required to sell its fiber operations as well.

If the merger comes to fruition, it will be a close for the two companies, which tried to take a similar step at the end of 2000. The leader of the move was then-CEO Amikam Cohen, who then represented, and still represents, China Hutchison.

But even before the competition authority, there is a long way to go in Partner itself. The price that HOT offered is a starting price only. Partner’s board is expected to oppose it, as it is only about 5% higher than Partner’s after the stock exchange yesterday, which closed at NIS 2.8 billion.

Attorneys will also play a key role in conducting the deal. Partner is represented by the Zvi Agmon office while HOT is by Meitar.

Hutchison will be a major factor in the merger. She owns 27% of Partner and Darhi will have to consider it. When Saban gave up his controlling shares, Hutchison did not accept his shares voluntarily. The move was forced on her by Saban, who gave up shares that were mortgaged for a loan he received from Hutchison to acquire control of the company.

No choice

According to market estimates, 2020 is the year when a huge media deal will occur. In recent months, companies in the industry have held conversations between them and looked at merger options. At the same time, regulators have stated favorably on the issue. And still, companies are clear: Only one deal will be approved – and the first ones to reach the finish line will receive a significant advantage.

Partner-to-HOT merger seems natural, given the existing partnership between the two cellular network companies since 2015. The move led to reducing infrastructure investment costs for each company, but that wasn’t enough to cope with the tough competition in the cellular market. Package prices have fallen so low that the sector has become losses, or at a single-digit rate of profit.

Partner is the second largest company in terms of number of mobile subscribers, with 2.65 million customers. HOT Mobile is in fourth place, with 1.35 million customers. Merging the two will make them almost a company monopolyYeastish, with a 45% market share. However, even the merger between the two will not solve the crisis of the cellular market. Neither Partner nor HOT led the drop in prices in the market, but it was the smaller companies: Rami Levy, Golan Telecom and WE4g. As long as there is a small company that can continue to drag down prices, HOT and Partner’s maneuver space – whether together or separately – is very small.

Another reason for the close merger is the upcoming switch to cellular generation 5.
Both companies are obliged to apply as one group to the Communications Ministry’s 5th Generation Tender, because they have shared infrastructure, but are unable to bridge the gaps between them regarding the proposal. A merger between them will make the huge investment in establishing antennas more viable and faster.

HOT’s passion for finding a merger partner could be heard in the comments of CEO Tal Granot Goldstein in September: “In today’s market situation, with the revenues of telecommunications companies eroding, significant structural change in the market is needed. Mergers are the way to meet this national challenge, “she said.” The power of mergers can encourage innovation, produce change, increase employment and strengthen the Israeli economy. ”

The battle for fiber

While the situation is fairly pessimistic, the wired Internet sector offers a degree of optimism in case Partner-HOT merger does happen. Until a few years ago, Bezeq and HOT controlled the sector with a high level of control, with Bezeq being declared a monopoly in the field to this day.

This hegemony has been broken in recent years by Cellcom-controlled Partner and IBC, which are deploying competing fiber-optic infrastructure.
The fibers allow ultra-fast surfing at up to 1,000 megabytes. In comparison, Bezeq’s infrastructure can deliver up to 100 megabytes, and HOT up to 500 megabytes.

Bezeq is also preparing the area for optical fiber entry, and has already deployed fiber in about 60% of the country’s territory. She is currently waiting to reach understandings with the Ministry of Communications to begin operations. HOT, on the other hand, does not even signal direction. Optical fiber deployment requires very heavy investment and due to the multiplicity of competitors, no return on investment is guaranteed.

If there is good enough reason to appreciate why HOT has not yet entered the fiber field, it is her expectation of a battle merger. In that respect, Partner is the most promising option, having deployed infrastructure to more than half a million households within two years, and it is estimated that it already has at least 70,000 customers connected to this infrastructure. By comparison, IBC is now accessible to some 300,000 households. If the regulator has good reason to approve the merger, it is the fact that four companies that deploy fiber infrastructure is too high, and that this could lead to price collapse like cellular.

HOT also brings hundreds of thousands of Internet customers with its cable infrastructure – 711,000 as of mid-2018, so it stopped reporting to the stock exchange. Partner does not report the number of its Internet customers in the wholesale market, but the number is likely to be similar to that of Cellcom, which has some 250,000 customers. Partner and HOT’s motivation, along with existing customers, will lead the merged company to a fast control of the landline market.

Another sector that HOT has not yet exhausted is its multi-channel television. HOT is now declared a monopoly in the field. In mid-2018, it reported 777,000 subscribers, however, in line with the global trend in the field, it has lost many customers in recent years, in light of the shift to viewing cheaper streaming services like Netflix. In this area, too, those who have undermined the hegemony of the old companies – HOT and yes – are Partner and Cellcom, who have entered the field in recent years. Since Partner launched the service in June 2017, it has amassed some 183,000 TV customers. Cellcom, which launched its services in December 2014, gained 276,000 customers.

As Cellcom and Partner continue to sign customers, and the competitor yes announced a move from satellite to internet and launched a streaming service, HOT is still stuck in the older models. While it has launched a discounted streaming service called NEXT TV, it has failed to rise.

In July, the company launched an app for streamers and smart TVs,
Includes all channels and content available to regular customers, but this is only a pilot, which is provided as a supplementary service only, and only to the company’s customers who own at least one converter. In a third-quarter report, Altis reported HOT is expected to launch the pilot commercially by the end of 2019. That has not yet happened, and it is conceivable that the upcoming merger has delayed the process.

Partner has a streaming service that connects to the global trend, and serves as a device that allows downloading applications from various content providers and coordinates payments in one monthly account. However, the downside to the service is that Partner has no original local content. Combining Partner’s interface with the existing HOT content can provide an attractive service.