Partner latest to make buyout offer for Xfone

Israel’s Partner Communications has made an offer to acquire smaller rival Xfone, but is one of a number of telcos interested in taking over the firm.

And to make matters more complicated, there are serious questions over whether Israeli regulators will allow any takeover deal to go ahead anyway.

Partner on Thursday revealed that it has made a (very) limited time offer of 187 million shekels (US$58 million) to acquire Marathon (018) Xfone, to give the business its full title. The offer is on the table until 9 September, it said, and is subject to a five-day due diligence period.

That all seems a bit hurried, but there’s a lot going on behind the scenes here.

To simplify things as much as possible, Partner is one of three or more companies apparently looking to buy Xfone, whose business is in something of a precarious position following the breakdown of a network-sharing agreement with Cellcom earlier this year. The cause of conflict appears to have been Cellcom’s acquisition of Golan Telecom this time last year, which Xfone claimed violated the network-sharing arrangement.

Xfone has been seeking an alternative arrangement, including considering returning its operating licence and relaunching as an MVNO, but has yet to pin anything down. In the meantime, it filed for insolvency in June, according to a statement from Cellcom.

In the same month, Xfone announced it would sell its business to Reichman family-owned MVNO Free Telecom for ILS330 million, Israeli publication Globes reported. Then this month came an offer from Cellcom itself, which lodged a ILS65 million bid via Golan Telecom, and now Partner has entered the fray.

There have been reports in the Israeli press, from Globes and others, in recent weeks about the various offers and the fact that would-be buyers are having trouble accessing the information they need from Xfone to carry out due diligence. There is also talk of a fourth party making a bid.

Xfone creditors at the weekend met to discuss the offers on the table but postponed any decision-making, although it seems they hope to push a deal through as soon as possible, hence the short timeframe associated with Partner’s offer.

The whole situation is further exacerbated by the regulatory regime in Israel, which could well block any takeover.

When the Cellcom/Golan Telecom deal went ahead last year the authorities made it clear that they would allow one merger – a single nod to consolidation – and no more, hence all the new bids for Xfone could fail. That said, with Xfone operating under insolvency rules, there is a chance that the threat of a telco going under could outweigh the state’s determination to maintain competition.

One way or another, there should be a decision, at least on Xfone’s plans, in the coming days. The regulatory response could take longer.