Israeli snub pushed Chinese firm to sell telecom shares

Israel intentionally did not respond to a Chinese firm’s application for a license to control its second-largest mobile communications company, Partner, out of security concerns and under US pressure, multiple sources confirmed.

The biggest drama in the Israeli business world this week came when Avi Gabbay, the former Labor Party leader and CEO of Cellcom, Israel’s largest mobile communications company, resigned and then led a group of investors that bought the controlling share in Partner.

Behind that domestic business story is one of Israel getting in line with American expectations when it comes to Chinese investments in Israeli infrastructure.

Gabbay, who is expected to become Partner’s chairman, led a group that also includes former Bezeq chairman Shlomo Rodev, Pheonix Holdings, Clal Insurance, Menorah Mivtachim and Arkin Holdings, to purchase 27.1% of Partner’s shares for $300 million from Hong Kong-based Hutchison Telecommunications.

Hutchison attained the controlling shares in Partner in 2019, after Israeli-American billionaire Haim Saban gave them to the firm rather than pay a $300 million loan.

The holding group then sought a control license for Partner, but the Communications Ministry never gave an official response. The lack of a response was intentional, to encourage Hutchison to sell, The Jerusalem Post learned on Saturday.

There was no overarching government policy on doing business with China, and then-prime minister Benjamin Netanyahu could not legally get involved in Communications Ministry matters because of his ongoing court case related to the ministry.

The Communications Ministry sought opinions from the Shin Bet and other security arms, which were opposed to the deal, a source with knowledge of the matter said.

Hutchison’s application also came at a time when the US, under then-president Donald Trump, was pressuring Israel to have a more robust oversight system for foreign investments in its vital infrastructure, with an emphasis on telecommunications and 5G infrastructure. The US urged its allies that China will use their involvement in building infrastructure for espionage or possibly sabotage of communications infrastructure.

Multiple sources with knowledge of communications between US and Israeli officials on the matter of Chinese investments said that the US raised the matter of Hutchison’s stake in Partner.

In July 2020, Communications Minister Yoaz Hendel, who is currently back in that position, made comments to The Jerusalem Post on the issue. One source said his remarks sent a message to Hutchison that it would not be able to control Partner. Two months later, Israeli media reported the Hong Kong-based company was looking to sell its shares.

“We see eye-to-eye with the Americans on our shared values and interests,” Hendel said last year. “We are in direct discussions with representatives of the American government about all of our shared interests, including communications infrastructure.

“We will do what is good for Israel, and it is good for Israel to be in full cooperation with our greatest ally in the world, the United States,” Hendel added.

One former Trump administration official reacted approvingly on Saturday night to the developments, but added: “I wish [the government of Israel] would be clear. It helps to state the policy from the get-go, not after the fact.”