The Securities Authority, Jerusalem, Israel
The Tel Aviv Stock Exchange, Tel-Aviv, Israel
The Registrar of Companies, Jerusalem, Israel
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Re: Immediate Report-Cellular Connection Payments
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Immediate notice is hereby given as follows:
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1. Further to the applications of the Company, Cellcom Communications Ltd.
("Cellcom") and Partner Communications Ltd. ("Partner"), a letter was sent
on 28th November, 2001 by the Minister of Communications to the applying
companies, concerning reciprocal connection payments from the Company
to the cellular service operators.
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2. As described in Note 1(b)(3) to the financial statements of the Company
as at 30th September, 2001, the company cancelled, starting from 1st March, 2000,
the arrangement for billing and collection which had been in effect between it
and the cellular service operators (“the Operators”), and introduced a new
arrangement whereby the Company transfers to the Operators only the amounts
it actually collected for airtime, less a collection fee. This differs from
the previous situation, inwhich the transfer was made on the basis of the
customer charges without deduction of a collectionfee. The Operators objected
to the change in the arrangement, and one of them even filed a claim in the
District Court, which was rejected, and an appeal on the same mater is pending
in the Supreme Court. The Company, which has negotiated with all the Operators
in an attempt to reach an agreed arrangement, has reached agreement with
Pelephone Communications Ltd. (“Pelephone”, a proportionally consolidated
company) and with MIRS Communications Ltd., on the matter of billing and
collection.
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3. In his letter, the Minister of Communications ("the Minister") gives
notice that he determines and directs, in accordance with his authority
under the Communications Law (Telecommunications and broadcasts),
5742-1982, as follows:
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| | In accordance with the interpretation of the Ministry of Communications
of the Telecommunications Regulations (Payments for reciprocal connection),
5760-2000 ("the Regulations"), the Company is duty bound to pay the Operators
reciprocal connection payments according to the volume of minutes of traffic
which actually passed from the Company's network to the Operators' systems,
irrespective of the extent of collection. Accordingly, the Company must transfer
to Cellcom and to Partner connection payments based on traffic, for the period
from 2nd October 2000 (the date on which the Regulations took effect) onwards,
subject to the following determinations:
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| | a. The existence of an accompanying arrangement between the Company and
Cellcom and Partner, effective from 2nd October 2000 until 1st January 2003
(the date of the start of reduction of the reciprocal connection tariffs
according to the Regulations), whereby a certain percentage ("the Deduction Rate")
will be deducted from the reciprocal connection payments (which according to the
Minster will be determined in agreement by the parties, and in the absence of
agreement will be decided by the Minister), which will reflect a sharing of the
risk between the Company and Cellcom and Partner with regard to the traffic
for which the Company is obligated to pay, according to the position of the
Minister, even if it did not collect payment therefor from the subscriber.
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| | b. With reference to the period from 2nd October 2000 until the date of
determining the aforementioned Deduction Rate, the Company must transfer to
Cellcom and to Partner reciprocal connection payments on the basis of traffic
less 2.5% (as determined in the Company's arrangement with Pelephone). As a
result, the Minister, in his notice, directs that the Company will pay
immediately the difference between the said amounts and the amounts it
actually transferred to those Operators, plus linkage differentials and
interest according to the Adjudication of Interest and Linkage Law, 5721-1961.
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| | With regard to the period which will start on 1st January 2003, the Minister
believes that there will be room to replace said arrangement with another
arrangement relating to the question of the bad debts, by an increase in the
tariff paid to the Company in respect of reciprocal connection (interconnection rate)
or in another form of payment adjustment.
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4. As stated in the Minister's letter, his directive does not relate to
the period from 1st March 2000 until 1st October 2000, with regard to which
a decision was given by the District Court in the Company's favor and which
is currently being heard in an appeal in the Supreme Court.
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5. The Company is studying the Minister's notice and considering its
response to its contents, and is unable to estimate, at this stage,
its significance and implications for the Company. However, it is noted
that the Company included in its financial statements a provision of
approximately NIS 78 million to cover the retroactive accounting differentials
in connection with the dispute.
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Yours sincerely,
Shlomo Koppel
Company Secretary
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Disclaimer: The above information constitutes a translation of the Immediate Report published by the
Company. The Hebrew version was submitted by the Company to the relevant authorities pursuant to
Israeli law, and represents the binding version and the only one having legal effect. This
translation was prepared for convenience purposes only. |
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