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December 29, 2009

Partner Communications Ratifies Agreement with Scailex to Purchase Samsung Mobile Products

By Jayashree Adkoli, TMCnet Contributor


Partner Communications Company Ltd., an Israeli mobile communications operator, has announced that its audit committee and board of directors have approved as well as ratified the existing agreement with Scailex Corporation Ltd. to purchase Samsung’s (News - Alert) cellular handsets, accessories and spare parts.


As a provider of mobile communications services in Israel, Partner Communications offers cellular, fixed-line telephony as well as internet services under the Orange brand. It is an approximately 45 percent-owned subsidiary of Scailex.

As a controlling shareholder of Partner Communications, Scailex Corp. imports, markets, and distributes Samsung mobile handset and accessories products to three major cellular operators in Israel. Apart from maintenance of Samsung mobile products, it also undertakes distribution and sale of various manufacturers' mobile handsets, accessories as well as provision of maintenance services, through a chain of retail stores and booths to end customers of Cellcom (News - Alert).

In a press release, officials with Partner said that additional commercial arrangements between Scailex and Partner were approved by the company’s audit committee and board of directors. This agreement, called as 'the Samsung Products Agreement,' is with regard to the annual volumes of purchases of the Samsung products, as well as to the annual gross profit margin of Scailex from transactions with Partner.

Under the terms of the agreement, the total and accumulative annual gross profit margin for each type of transactions with Partner should not exceed the Average Gross Profit Margin of the same type of transactions. In precise, the total and accumulative annual gross profit margin of Scailex -- from transactions with Partner -- regarding each type of transaction, such as purchase of handsets, accessories or spare parts, shall not exceed Scailex's average gross profit margin from similar transactions with all parties to which Scailex sells, during the same calendar year. The products prices of each order are determined by negotiations between both the parties.

However, in case the total and accumulative annual gross profit margin for each type of transactions with Partner exceeds the Average Gross Profit Margin of the same type of transactions, Scailex will credit Partner with the differences amount accordingly. However, the deviation should be less than 10 percent from the Average Gross Profit Margin, says the agreement.

In addition, the agreement also says that the total volume of the transactions between Scailex and Partner should not exceed USD $65.91 million every year. However, both the parties may increase the scope of annual purchases by an additional amount of up to USD $13.1 million once the both the companies’ audit committee and board of directors approves.

The agreement term is for a period of three years commencing on the date Scailex acquired control of Partner.

Jayashree Adkoli is a contributing editor for TMCnet. To read more of Jayashree's articles, please visit her columnist page.

Edited by Patrick Barnard


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