JERUSALEM, Nov 17 (Reuters) - Israeli mobile phone

company Pelephone has reached a preliminary agreement to buy

rival HOT Mobile for 2.1 billion shekels ($652 million) in cash

from Patrick Drahi's Altice International, Pelephone's parent

company said on Monday.

Pelephone raised its offer for HOT Mobile last week after

Altice rejected its initial bid in July of up to 2 billion

shekels.

Bezeq Israel Telecom, Israel's largest telecoms

group, said in a regulatory filing to the Tel Aviv Stock

Exchange that signing the non-binding memorandum of

understanding gives Pelephone 45 days to conduct due diligence

and work towards a purchase agreement.

Pelephone does not have exclusivity during the negotiating

period.

A final deal would require a host of approvals, including

from both companies' boards and Israel's Communications Ministry

and Competition Authority.

French-Israeli businessman Drahi has been trying to divest

assets to pay down Altice's massive debt load.

Israeli media reported that two other parties were also

interested in HOT Mobile but their offers had so far been far

lower than Pelephone's.

A source close to the deal said Pelephone has been in talks

with Israel's Communications Ministry, the country's telecoms

regulator, and antitrust officials.

A similar deal between market leader Cellcom and

Golan Telecom was cleared in 2020 after being rejected in 2016.

Pelephone, which owns its own network, has nearly 2.6

million subscribers while HOT Mobile, which shares a network

with Partner Communications, has slightly less than 2

million.

In addition to the four main players in Israel, there

are some 20 virtual mobile operators that use networks from

Pelephone, Cellcom and Partner-HOT Mobile, which has led to

monthly calling plans starting as low as $6 a month - keeping

profits down and preventing investment in mobile infrastructure.

The Competition Authority said it had not yet begun to

review the potential deal. Similarly, the Communications

Ministry said "the request will be deliberated over once

received."

Industry sources said that should the deal go through, it

would create synergies of hundreds of millions of shekels for

Pelephone. This would allow for heavy investment in 5G.

While Israel is in the top 10 globally in broadband speeds,

it is 70th for 5G network speeds and investment in more towers

is needed to access faster 5G speeds.

($1 = 3.2220 shekels)