Cellcom today stepped up its pressure on the Communications Ministry by announcing it will not proceed with establishing a joint venture with Israeli telecoms company Eurocom.
Cellcom has already initialed an agreement establish a joint venture with Eurocom that would compete with the state-run monopolistic phone company Bezeq. The ministry wants to encourage competition against elephantine Bezeq, and Cellcom is just about the only serious contender at this point.
Today Cellcom said it awaits clarifications from the ministry regarding the terms of a license to compete with Bezeq in the domestic arena. After receiving clarifications, it said, it will decide how to proceed.
The purpose of its notice today could theoretically be to pressure the ministry into improving the terms in Cellcom's favor.
Meanwhile, shareholders of the Israeli mobile phone company Cellcom are spatting over the scope of the putative joint venture with Eurocom.
BellSouth Corporation (NYSE:BLS) wants to restrict the operations of the joint venture in order to reduce the venture's investment needs. Preferring to focus its investments on South America and the United States, BellSouth demands that Cellcom limit the operations of the joint venture strictly to the areas stipulated in its request for a domestic-communications license.
But BellSouth is a minority shareholder compared with the combined might of the Safra family and Discount Investments Corporation, which do not want to limit the JV.
Examples of areas into which the JV might someday wish to expand include hosting services for businesses, Internet infrastructure, data server services, and content for households.
For the time being, while its shareholders argue, Cellcom has halted due diligence proceedings on Eurocom subsidiary Ofek The New World, through which the JV is supposed to be effected.
A top source at the Elovitch group, which controls Eurocom, told TheMarker.com that Cellcom "knows what it's doing" in its moves against the Communications Ministry.
Asked what would happen to Ofek if Cellcom pulls out of the JV, he said that Elovitch was unlikely to allow the massive investments already made to go down the drain. Ofek had other options, he said.
A source near the talks between Cellcom and Ofek told TheMarker.com today that the two companies can't agree on the scope of their joint venture's business. Ofek wants it to engage in anything touching on wireline communications, while Cellcom prefers a narrower definition of LMDS technology-based communications.
Simply, Cellcom prefers not to allow Ofek and Eurocom access to its fiber network.