Immediate Report – IRU agreement between the Company and Partner
Bezeq - The Israel Telecommunications Corp. Ltd.
(the “Company”)
December 22, 2022
Attn.
Israel Securities Authority
The Tel Aviv Stock Exchange Ltd.
Dear Madam/Sir,
Re: Immediate Report – IRU agreement between the Company and Partner
The Company hereby reports that on December 21, 2022, the Company and Partner Communications Ltd. (“Partner”) signed a long-term agreement for Bezeq to provide Partner with indefeasible right of use (IRU) for BSA fiber (wholesale market).
Under the agreement, Partner was granted the non-transferable and irrevocable independent right of use to provide service to its customers on 120 thousand fiber cables of the Company at a download speed of 1 Gbps per cable, for 15 years starting on January 1, 2023 (the right of use of the cables will start in gradual batches over a period of up to five years).
The consideration for the service, which includes one-time payments and annual payments, is expected to reach a total amount of NIS 1 billion (NIS 574 million for one-time payments, annual maintenance fees of 4% of the one-time payments for the cables for which the right of use will be granted up to that year, plus interest and/or linkage differences under the terms of the agreement); most of the consideration is expected to be paid in the first nine years of the agreement.
The agreement includes an option to increase the number of cables by another 48 thousand cables under the same terms, to upgrade speeds, and to extend the agreement period for two option periods of five years each, at a lower cable cost than in the first agreement period. Increasing the terms of the agreement will result in a corresponding increase in the total financial scope of the agreement. The agreement also includes a price protection mechanism for Partner that weights the regulatory price of the cable, starting from the sixth year of the agreement.
It is expected that the agreement will increase the usability and utilization of the Company's fiber network, its revenues and profits, and its free cash flow (mainly in the first nine years of the agreement) with a high level of certainty for future revenues from the cables in the wholesale market. At the same time, the agreement includes a discount on wholesale market rates for commitment to quantity and period of time.
The agreement was approved by the certified bodies of both companies. If the regulatory authorities request information or adjustments, the Company will act accordingly.
Some of the information in this immediate report is forward-looking information as defined in the Israel Securities Law, 1968, based on the Company's assessments, among other things, for the structure of competition and regulation in the communications market, the behavior of communications operators and consumers, as well as how Partner chooses to take advantage of the right to use the cables in the different areas (differentiating between areas where only the Company's fiber network is deployed and areas where other fiber infrastructure is deployed as well as that of the Company). Actual estimates and results may be different depending on the changing variables set out above.
Yours sincerely,
“Bezeq” The Israel Telecommunication Corp Limited
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.