The Competition Authority has approved the merger of HOT and IBC’s fiber optic venture
20, January 2021
Asset: Unlimited

HOT will acquire approximately 23.3% of IBC’s shares for NIS 170 million ■ The merger is intended to encourage the expansion of high-speed Internet infrastructure to other areas in Israel ■ The transaction requires the approval of the Ministry of Communications

The Competition Authority has approved the merger between HOT and IBC (Unlimited) – the fiber-optic venture based on Israel Electric Company’s (IEC) infrastructure. The purpose of the merger is to provide an incentive for the IBC project to expand the expansion of the fiber infrastructure from 40% to about 70% of households in Israel.

According to the Competition Authority, its investigation revealed that the merger would not harm competition, and the move would encourage more players to deploy fiber infrastructure in areas where there is no infrastructure. As part of the transaction, HOT will purchase approximately 23.3% of IBC’s shares for NIS 170 million. Following the transaction, IEC will hold 30% of IBC and HOT, Cellcom and Israel Infrastructure Fund will each hold 23.3% of the venture. The transaction requires the approval of the Ministry of Communications.

The wholesale market reform, which was launched in 2015, allowed Partner and Cellcom to enter the field of fiber optics, but the companies deployed the infrastructure mainly in high-profit areas. The IBC venture, established as early as 2013, moved very slowly in its early years and in 2016 the company was close to insolvency. In 2019, Israel Infrastructure Fund and Cellcom acquired 70% of the company . The project also received regulatory discounts, including a rollout obligation in 40% of households in Israel.

IBC currently reaches 500,000 households and aims to reach more than one million households. The approval of the merger will allow entry into the market of an anchor client, HOT, which will inject additional financing into the venture and will allow IBC to expand its rollout capabilities to additional locations in Israel. The Competition Authority believes that the approval of the move will encourage Bezeq to expand the deployment of its fiber infrastructure.

The Competition Authority further believes that the merger will not significantly reduce HOT’s incentive to compete with its existing infrastructure. That is, HOT will continue to deploy its infrastructure that provides up to 500MB of Internet to customers who do not want faster Internet, and the venture with IBC will provide Gigabit Internet infrastructure for customers who do.

IBC commented: “The decision of the Competition Authority, in line with the opinion of the Ministry of Communications and the Budget Division of the Ministry of Finance, is ground-breaking and is good news for the Israeli economy. Hot’s entry into IBC will create a real wholesale platform that will create competition in the market. The structural change will lead to a broad and accelerated deployment of the fiber optic network, which will allow Israeli citizens to surf the ultra-fast Internet in a short period of time, and will lead to increased productivity in the economy and connection of the periphery to advanced communications infrastructure.

“It is precisely during this challenging period that it is of great economic importance to upgrade the communications infrastructure, through which it is possible to provide remote medical services, studies from home and maintain the proper functioning of the Israeli economy in times of crisis. ”