Cellcom Israel Challenges Golan Lawsuit

Tells court that it doesn’t owe any payments to anyone

Cellcom Israel has finally released an official statement its ongoing lawsuits and refuted all the allegations filed in the Israel court. Following the Company’s previous reports regarding Golan Telecom Ltd., or Golan Telecom, Golan Telecom filed a lawsuit against the Company asking the Israeli district court to declare that it does not owe the Company the previously reported past national roaming payment differences (set in the Share Purchase Agreement to NIS 600 million plus VAT) or alternatively, set off certain payments.

Cellcom believes this lawsuit is unfounded, in contradiction to the binding National Roaming Agreement and Share Purchase Agreement between the parties and Golan Telecom’s numerous statements to both the Company and the regulators, attesting to the NIS 600 million sum (including approval of the monthly invoices which are the basis for the sum and a letter Golan Telecom wrote to the Prime Minister of Israel in his capacity as Minister of communications) and the Company intends to act vigorously in order to dismiss it.

Golan Telecom unilaterally and in breach of the Share Purchase Agreement and National Roaming Agreement between the parties, informed the Company that in light of certain unspecified claims it supposedly has in the matter, it will pay the Company a monthly amount of NIS 10.6 million (plus VAT) instead of the agreed NIS 21 million (plus VAT) for the national roaming services already provided by the Company and due now and until further notice. The Company strongly rejects Golan Telecom’s notice and intends to act vigorously and take legal actions in order to receive the agreed consideration for such services. In case the Company is unsuccessful in collecting the agreed consideration this will have a material adverse effect on the Company’s EBITDA and Net Income for the third quarter of 2016, and onwards.

Prior to the foregoing, Cellcom agreed to allow Golan Telecom, as an exception to its “no shop” obligation, to conduct negotiations with certain additional third parties which showed interest in the possible purchase of Golan Telecom’s share capital or operations or a part thereof, subject to certain conditions.

In addition, Cellcom has entered a tax assessment agreement with the Israeli tax authorities regarding the Company’s income tax for the years 2012-2013, which will have a material positive effect over the Company’s third quarter 2016 net income.

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