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Hutchison selling out of Israel…again

A pair of well-known Israeli telecoms executives have made a US$300 million bid for control of Partner Communications, a move that should facilitate CK Hutchison’s exit from the market.

Partner announced that it has received the aforementioned offer from Avi Gabbay and Shlomo Rodav for a 27% stake. Both have links with incumbent operator Bezeq; Rodav stepped down as its chairman the best part of 18 months ago and Gabbay held a number positions at the telco, including a stint as its CEO that ended in 2013. As well as pursuing a political career, Gabbay become CEO of Israel’s Cellcom but, according to Reuters, tendered his resignation at the weekend.

The execs will have to apply to the Tel Aviv District Court for permission to carry out the deal, since the shares in question are being held by receivers.

Technically, the stake belongs to Hutchison, but it’s fair to say that Hutchison is a reluctant participant in the Israeli market these days.

To provide a quick potted history, Hutch founded Partner Communications in the late 1990s, but sold out in 2009. However, after various share transactions, it ended up with its current 27% stake two years ago when the then owner of the shares Haim Saban handed them over to Hutchison rather than pay a $300 million loan, according to a Globes press report at the time.

Hutchison explored the idea of participating in the market once again, but according to Reuters failed to secure an operating licence, despite having been a big player there some years earlier. There is a suggestion that it may have been caught in the crossfire from the US-China trade war.

Whatever the reason, Hutch decided enough was enough and it wants out. There have been multiple reports of late of talks between it and investment firm Apollo Global Management but, as Globes points out, such a deal would not have been guaranteed to receive regulatory approval.

The Gabbay/Rodav offer, on the other hand, is likely to find favour with regulators, given the would-be buyers’ history in the market. That could prove a big driver for Hutchison to accept the offer. Indeed, the local press expects the court-appointed trustee of the shares to be in favour of the deal too, which could see it finalised as soon as this week or next.

The Israeli market has been a difficult operating environment in recent years, with fierce competition and low mobile prices. But Partner delivered a solid set of Q2 results this year, growing revenues and earnings on the back of increasing customer numbers, albeit with a slight fall in ARPU. In addition, the firm is working on a diversification strategy that includes a move into energy supply, and 5G and fibre network rollouts are progressing. It’s clear to see why the likes of Apollo were interested in buying it, but this time it seems that Gabbay and Rodav will be the ones to pick up a growth opportunity business.


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