Cellcom And IBC: What Really Remains After The Sale

What The Main Article Already Established, And What This Follow-Up Is Isolating

The main article already established that 2025 looked better at the core, but less clean than the headline profit suggested, because the IBC sale lifted both earnings and the balance sheet in one move. This follow-up isolates the question that the headline can flatten: did Cellcom truly exit IBC, or did it merely replace one layer of exposure with another.

The short answer: Cellcom did sell the ownership layer. It received about ILS 520 million in cash, recorded a pretax gain of about ILS 386 million, and net financial debt fell within a year from ILS 1.701 billion to ILS 1.119 billion, while net debt to adjusted EBITDA dropped from 1.25 to 0.8. That improvement is real.

But Cellcom did not exit the economic relationship with IBC. The IRU contract remained in place, principal and interest owed to IBC still stood at about ILS 694 million at the end of 2025 based on the company's own position, there is an active dispute over the scope of the obligation, and IBC already drew about ILS 16.5 million from guarantees posted by the company. So yes, the equity interest was sold. No, the relationship did not disappear.

That is why the sale needs to be read more sharply. Anyone looking only at the cash proceeds and the capital gain will read it as a successful monetization. Anyone reading the infrastructure-use agreements and the dispute disclosure will see something else: Cellcom sold a financial holding, but remained a major infrastructure buyer, a material debtor, and a party to a dispute that has already touched cash. That is not the same risk, but it is still part of the thesis.

This chart makes the first point clear. In balance-sheet terms, the sale worked. This was not cosmetic and not merely an accounting maneuver. But that is only the beginning of the analysis. The real question is what remained after ownership was sold.

What The Sale Actually Closed

The equity transaction itself is relatively straightforward. In July 2019 Cellcom and Israel Infrastructure Fund 3 formed the IBC partnership, which acquired 70% of IBC. In February 2021 HOT joined, so each partner held an indirect 23.3% stake in IBC. In May 2025 HOT and the fund received a binding offer from an entity in the Phoenix group to acquire all holdings in the partnership and in its general partner. In June 2025 Cellcom decided not to exercise its right of first refusal and instead joined the sale of all of its holdings.

In October 2025, after approvals from the Competition Authority, the Ministry of Communications, and IBC's lenders, the transaction closed. Cellcom received about ILS 520 million, and a pretax gain of about ILS 386 million was recognized in 2025. This is the point where precision matters: the sale closed the ownership layer, the volatility of the investment value, and the direct equity exposure around the partnership.

The balance-sheet improvement recorded later in the year shows that the cash was not theoretical. The company itself links the decline in net financial debt both to the proceeds from the IBC sale and to free cash flow. That distinction matters. The sale alone does not tell the whole story, because 2025 free cash flow also rose to ILS 350 million. But the sale clearly created a rapid expansion of financial room exactly as Cellcom returned to paying dividends.

This is also where management's capital-allocation framing matters. At year-end, management grouped together the sharp decline in debt, the lower leverage ratio, and a cumulative ILS 400 million dividend for 2025, of which ILS 200 million was paid in December 2025 and ILS 200 million was due in April 2026. That is not proof that the sale alone funded the dividend. The filings do not make that attribution. But it is proof that the sale opened a new layer of flexibility that Cellcom did not have as comfortably before the transaction.

So anyone reading the sale as a balance-sheet move is right. Anyone reading it as a full separation from IBC is only reading half the story.

What Remains Open

The IRU Contract Did Not Go Anywhere

The key to what remained is not actually in the sale note. It is in the IRU agreement. After HOT's investment transaction was completed in 2021, Cellcom committed to purchase an indefeasible right of use in IBC infrastructure lines at a rate of 10%, and later up to 15%, of households connected to the network. Payment is made over 36 quarterly installments, with fixed annual interest set in advance and annual maintenance charges added on top. To secure those payments, the company provided IBC with an autonomous bank guarantee under an agreed mechanism and up to ILS 50 million.

In March 2023 an additional agreement set the network rollout target at 2 million households and raised the minimum commitment rate to 12.5% starting in July 2023 and to 15% starting in July 2024 until the commitment cap. By the end of 2025 the actual rollout had already reached about 2.4 million households. That is the data point holding the whole argument together: ownership was sold, but the mechanism for purchasing infrastructure access kept running.

That is why the ILS 694 million principal-and-interest balance matters much more than it appears to on first read. It does not mean the transaction was a mistake. It also does not mean investors should naively net ILS 694 million against ILS 520 million as if the two figures belong to the same bucket of economics. That would be artificial. The ILS 520 million reflects the monetization of the ownership layer. The ILS 694 million reflects remaining principal and interest for ongoing use of the infrastructure, based on Cellcom's own view that the commitment applies up to 2 million households. But precisely because these are two different layers, the core thesis matters: the sale did not sever Cellcom from IBC economics. It merely replaced direct ownership with a long-dated contractual relationship.

The payment schedule reinforces the same point. What remained after the sale is not a footnote. It is a multi-year payment curve, with ILS 134 million due already in 2026, ILS 130 million in 2027, and another ILS 138 million from 2031 onward. In other words, the exit from the equity position was fast. The exit from the infrastructure commitment, if it is even right to call it an exit, is much slower.

The Dispute Has Already Moved From Interpretation To Cash

The most interesting risk is not only the size of the balance, but what exactly is included in it. Cellcom argues, based on the legal advice it received, that under the contractual framework its line-purchase obligation applies only up to about 2 million households, and therefore it has no obligation to buy lines from the new rollout beyond that level. IBC and some rights holders take a different position. This is not a narrow drafting dispute. It is a dispute over the scope of the commitment, the payment timing, and the amounts themselves.

In May 2025 Cellcom filed suit in the Tel Aviv District Court and asked the court to reject IBC's interpretation and to prevent IBC from using self-help remedies, including drawing the guarantees. In November 2025 Cellcom received a statement of defense and a counterclaim from IBC that included monetary relief of about ILS 16.5 million and declaratory remedies. At the same time, IBC already drew about ILS 16.5 million from guarantees posted by the company.

This is the point where the story changes. As long as the issue lived only inside a legal note, the market could dismiss it as noise. Once there is a counterclaim and an actual guarantee draw, the dispute is no longer theoretical. It has already touched cash, and that is exactly why it changes how the sale should be read.

There is also a subtler point here. The company explicitly says that at this stage it cannot assess the outcome and implications of the dispute. That does not automatically imply a bad outcome. It means readers cannot set the risk to zero, but they also should not load the entire new rollout into the liability as if the question has already been decided. Until there is a resolution, the responsible reading is that the ILS 694 million balance reflects the company's own position, not the end of the argument.

How To Read The Economic Exit

The right way to read the sale is through three layers.

First layer, accounting: Cellcom exited. The stake was sold, the gain was recognized, and the investment no longer sits on the balance sheet in the same form.

Second layer, balance sheet: Cellcom exited partially, but in a meaningful way. Net debt fell, leverage improved, and the company entered 2026 with more room and with the ability to return to dividends. That is a real achievement.

Third layer, economics and operations: Cellcom did not exit. It still buys access rights to infrastructure, still owes principal and interest to IBC, still operates under a guarantee mechanism, and still faces a dispute over the scope of the obligation. Put simply, Cellcom is no longer an IBC shareholder, but IBC still sits inside the economics of Cellcom's fiber strategy.

That is the key point of this continuation analysis. The market should not ask whether the sale was good. It clearly was. It should ask what exactly was sold and what exactly remained. What was sold is the ownership layer and the direct equity upside or downside of the investment. What remained is the infrastructure-use layer, a multi-year payment schedule, and a dispute that has already moved from words to money.

In one sentence: Cellcom replaced the risk of being a partner with the risk of being a customer and debtor. That is a risk that is easier to measure, but it is not a risk that vanished.

What Needs To Be Seen From Here

The first point is the pace of decline in the IBC balance. If future filings show a steady decline in the principal-and-interest balance without a new jump in the scope of the commitment, the market will be able to see the sale as a deeper economic separation. If the balance behaves differently, the read of "we exited IBC" will erode quickly.

The second point is the dispute itself. The important trigger is not the mere existence of the case, but whether it ends without an expansion of the obligation beyond Cellcom's position of up to 2 million households, and without additional draws or a sharp change in the payment path.

The third point is the connection between the sale and capital allocation. After the April 2026 dividend, the market will begin to measure not only whether Cellcom looks stronger, but how much of the balance-sheet improvement is truly free for shareholders and how much remains tied to the ongoing relationship with IBC.

The fourth point is disclosure quality. In the next filings it will matter that Cellcom keeps a sharp separation between the monetization that has already happened and the payment/dispute layer that remains. Without that separation, it becomes too easy to read a one-off capital gain as if it also solved the structural exposure. That would be a mistake.

Conclusions

The IBC sale was the right move for Cellcom's balance sheet. It turned an equity holding into cash, lowered leverage, and opened balance-sheet room that the company did not previously have as comfortably. But anyone reading the move as a full exit from IBC is missing the more important part of the disclosure.

IBC remains inside the thesis, just in a different form: not as an equity holding, but as an infrastructure contract, a payment balance of about ILS 694 million under the company's own position, and a dispute that has already produced both a counterclaim and a guarantee draw. So the key question is not whether Cellcom benefited from the sale. It did. The key question is whether that benefit also removed the deeper economic layer of IBC. As of the end of 2025, the answer is no.

Current thesis: Cellcom exited ownership in IBC, but not the economics of IBC, so the exit is balance-sheet strong but economically partial.

What changed versus the main read: In the main article, IBC was primarily a one-off gain that required normalization. Here it also turns out to be a payment layer, a contract layer, and a dispute layer that stayed inside 2026.

Counter-thesis: This caution may prove too conservative, because the proceeds are already in hand, the remaining balance is spread over years, and the dispute may end without a meaningful expansion of the obligation beyond the company's own position.

What could change the near-term market read: a constructive update in the dispute, an orderly decline in the IBC balance, and no further guarantee draws could strengthen the sense that the exit is cleaner than it looks today. On the other hand, any sign that the obligation expands beyond 2 million households would immediately change how the market reads the cash that Cellcom received.

Why this matters: anyone trying to understand how much value the sale really created for shareholders has to distinguish between value that has already been realized in cash and infrastructure economics that are still running forward.

What must happen over the next 2-4 quarters for the thesis to strengthen: the IBC balance needs to decline along the expected path, the dispute needs to remain contained without more cash damage, and after the April 2026 dividend Cellcom needs to show that the balance-sheet improvement remains real even without new asset sales. What would challenge the thesis is a growing obligation, additional draws, or disclosure suggesting that the dispute over the new rollout is broader than the market currently assumes.