Cellcom accuses Wecom of violating the frequency agreement between them

The relationship between Cellcom and Wecom is on the rocks. The two companies have barely started working together under the joint cellular network agreement, and already a business dispute has emerged between them that is about to go to court.

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As things stand now, what was supposed to be a successful arrangement for the two companies, who signed a network sharing agreement as part of wecom’s debt settlement, is now about to turn into a course of legal wrangling that obscures their entire relationship.

As if it were not enough for wecom with the troubles it has with Apple, which is delaying the release of its devices for use in the fifth generation in the network of the new-old operator in the market, now a dispute between Cellcom and it is added. This after it became clear that wecom wants to return a frequency band in the 1,800 MHz range.

Wecom claims that the shared network does not need this frequency range, but they are required to pay frequency fees amounting to approximately NIS 6 million per year for it. The company tried to reach an understanding with Cellcom, so that it would be responsible for paying these fees in case it believes that the frequencies are essential for the shared network, but the negotiations broke down. Cellcom, which claimed that it was a violation of an agreement, transferred the dispute to the handling of its lawyers.

The dispute between the companies does not bode well for either party, but it mainly casts doubt on wecom, which as a new player finds itself in a complex situation of fighting against its main network partner, and on the other hand has to face a giant like Apple. This is not how the company’s new owners hoped to start the year.

Frequency return timing

Let’s recall that wecom was established on the basis of the Marathon company, which was under the control of Hazi Bezalel and operated the WE4G brand. The latter got into a debt settlement after having a dispute with Cellcom, also over the network sharing agreement. As part of the debt settlement, Clearmark Fund and businessman Yariv Lerner acquired control of the company, and changed its name to Wecom after reaching a new network sharing agreement with Cellcom.

Along the way, they also received discounts from the Ministry of Communications, which insisted that the company continue to operate as an independent cellular player with frequencies as part of the cooperation with Cellcom. It is important to mention this, because the ministry was not ready to see the company become a virtual operator.

The difference between a virtual operator and a normal operator is the ownership of the frequencies: being the owner of a frequency changes the essence of the operator’s activity from the point of view of the Ministry of Communications, and this is what makes it a long-term cellular operator, which makes investments in the network (even if it is shared).

It is true that the return of a frequency band by a cellular operator is not an unusual event, and there have been similar cases in the past, but in the case of wecom it does seem unusual. After all, the company knew where it was getting into, and knew about the inventory of frequencies it had and how many fees it would have to pay, so why is it already at such an early stage talking about returning frequencies?

The incident with Apple is also seen as an exception, but here at least we can say to the credit of the heads of wecom, Lerner who serves as chairman and Asaf Ofer who serves as CEO, that they warned ahead of time and contacted the Ministry of Communications to intervene in the matter even before the company went live.

Cellcom’s experience

It’s not a common sight to see a cell phone companyYet enters the market, and after a month of activity and at the height of a campaign, brakes itself with screeching brakes because of an argument with Apple worldwide about recognizing it as a fifth generation operator.

It is difficult to make complaints to wecom, which claims that it cannot recruit customers without being able to operate a 5G network on Apple iPhones. On the other hand, customers much larger than her are standing and lined up to receive Apple’s seal of approval for the network, so how come wecom doesn’t know about it ahead of time and prepare in time?

A short reminder: about a month after the launch, the company was required to pay license fees for the fifth generation in the amount of NIS 45 million. Wecom refused, claiming that the Ministry of Communications is responsible for regulating the opening of their network for fifth generation iPhones. As long as the network is blocked for the fifth generation, Iponists cannot surf the fifth generation, and therefore do not join it.

The company’s claim to the Ministry of Communications is that its license is “disabled” as long as Apple does not approve it, and without Apple, there is no justification for the company’s activities – therefore there is no reason for it to pay 45 million shekels that will go down the drain. Recall that at the time of the company’s acquisition, it had 300,000 subscribers, and since then the number has not changed substantially.

Some claim that these are arguments that reflect a rethinking of the viability of the transaction in which the company was acquired, but the controlling owners reject the claims outright and claim that they will be willing to be satisfied with the state’s commitment that the issue will be settled.

Senior officials in the cellular market mention that other large companies in Israel were also delayed by Apple in launching the fifth generation. This, for example, happened last year with Cellcom, which was delayed 3.5 months in the launch of the fifth generation in its network, after Partner and Pelephone. It was not published or disclosed, but the largest cellular company in Israel was delayed, and this despite the fact that it sells the most iPhones through Dynamika, which it owns.

Apple doesn’t give too many explanations. She has her own way of working, and she “doesn’t count” any operator, big or small. As the CEO of one of the cell phone companies defined it, “You get the contract from them and sign it, you can’t change anything in it.”

Appeal to the Competition Authority

It is likely that wecom will also receive the recognition, and that it is only a matter of time until it happens, simply because there is a queue. But her claim is a little more complex, because she claims that the reason for the delay is that she does not sell Apple devices. And if Apple discriminates against her and uses her power against a small player like her, she will not be able to handle the situation on her own.

From here the ball rolls to the Ministry of Communications, which contacted the Competition Authority and requested its intervention in the matter. That is, the office also understands that if the claim that a company is discriminated against because it does not sell Apple devices is true, there is a problematic competitive practice here. The Competition Authority confirms that the issue is under review.

But even if the competition authority enters the thick of the beam, it is doubtful whether it has the power to influence the events. At the end of the day, the problem is much bigger than a small local market like Israel. These are Apple’s practices that work this way all over the world, and it is likely that Israel will not be the first to bend it to give permission to a small company like Wecom to operate 5G.

The good news is that the Communications Ministry’s inquiries to Apple led the latter to respond and imply that the issue is close to being resolved. At least in this respect, wecom will take a big bag off her shoulders. The question of how the conflict with Cellcom will end remains open.


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