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zu matav usw : .Sunday , Sep 17, 2000 Sun-Thu at 18:00 (GMT+3) Communications Features Who Will Buy Bezeq? By Efi Landau At a press conference two weeks ago on the occasion of the signing of the regulations opening the communications market to competition, Minister of Communications Binyamin Ben-Eliezer in effect set in motion the auction for the sale of the immensely powerful inland communications monopoly Bezeq. When the Minister`s signature is combined with the Knesset Finance Committee`s decision approving the Ministerial Committee for Privatization`s proposal to sell a 51% controlling interest in Bezeq and the understanding reached with the company employees concerning privatization, it is easy to see that Bezeq`s privatization process has reached its most advanced stage to date. If this were not Israel, with its unstable politics, its fragile coalition, and the constant threat of new elections, it could be unequivocally stated that the process is already irreversible, that we have reached the point of no return. Too many points of no return, however, have led to subsequent hasty about-faces, leading anyone concerned with Bezeq`s privatization to be extremely cautious. A telecommunications company is no longer a great bargain The general consensus is that the State and Bezeq have missed the most convenient time for privatizing Bezeq. Everything happening now could have already taken place a year or two ago, if so much time had not been wasted "flirting" with the process. Bezeq general manager Ilan Biran`s determination - some claim the aggressive pressure he brought to bear - is responsible for pushing things forward over the past six months. Biran did not stop there, and during the heat of the privatization struggle brought Bezeq its greatest achievement during his less than one-year term - the State`s agreement to grant Bezeq "privatization relief" on issues, such as the tender requirement, salaries, and investments, before the company is sold. Despite the advantage gained from the government decision, however, the Bezeq of today appears much less attractive to an investor. It appears that the great days of the old telecommunications companies are practically a thing of the past. It seems that the big investors are looking for new communications companies to compete with the old ones. The entry requirements leave almost everyone out Which companies and concerns, local and foreign, are interested in acquiring a controlling interest in Bezeq? It appears that a process of elimination will help us here, since the limitations contained in the privatization decision, approved by the Knesset Finance Committee, disqualify many potential competitors. We will begin with foreign companies. The privatization decision stipulates that any company competing to acquire Bezeq must be incorporated and registered in Israel, with a minimum of 20% Israeli ownership. Control of the company must not be in the hands of any nation, nor can a foreign government corporation be a party at interest in the company in control of Bezeq. This condition already disqualifies all the large telecommunications companies, mostly European, still controlled by foreign governments. Other limitations were dictated by the defense establishment, owing to Bezeq`s status as the chief communications provider for defense and its consequent significant role in emergencies or war. Residents of or corporations registered in countries hostile to Israel cannot be parties at interest in Bezeq. In addition, parties at interest in Bezeq are not allowed to hold a controlling interest, either directly or indirectly, in a corporation registered in a hostile country, and cannot hold more than an as yet undetermined rate of holdings in a corporation controlled by a hostile country. What is a hostile country? According to the definition in the decision, any country without diplomatic relations with Israel, or any country classified as such by the Minister of Defense. Will the Minister of Defense be willing to entrust control of Bezeq to an Egyptian or Jordanian company, or to a company with significant holdings and interests in these countries, even though both of them have diplomatic relations with Israel and are ostensibly not hostile countries? They saw what happened to those who invested in the cable companies In addition to those foreign countries disqualified from acquiring control of Bezeq, there are those uninterested in it, and they are more numerous than in the past. Market opinions claim that the lengthy pre-privatization process has led concerns seriously considering Bezeq in the past to lose patience, and it is unclear whether these concerns still retain their enthusiasm. Deutsche Telekom, for example, which conducted serious examinations in the past, today sounds less and less eager, not to mention the fact that it is a government corporation. Gossip is that British Telecom, which has a traumatic time here in the international calls tender, has decided it has no interest in the Israeli market. Other names mentioned include Telefonica of Spain, Hutchison of Hong Kong, which controls Partner, and Singapore Telecom, as well as US companies. The bottom line, however, is that the list is not as long as it could be, and ought to be. A senior source in one of the groups seeking to compete for the purchase of Bezeq`s controlling interest said, "What concerns foreign companies is a timetable, which the document approved by the Knesset Finance Committee lacks. They understand the Israeli economy and they are watching the Barak government, but they don`t know what will happen next." They are therefore being very careful before they jump at a bargain. Former Ministry of Communications director-general Shlomo Wachs, now responsible for communications in the Gad Zeevi group, puts the problem more sharply. "Israel has a bad reputation for regulation," he says. "What was done to the cable companies is affecting Israel`s good name." Israeli groups without a conflict of interest - are there any? The need to avoid a conflict of interest has left an extremely limited list of possible competitors, including Yitzhak Tshuva, Gad Zeevi, the Israel Corporation, and…that`s about it. There are also groups with a conflict of interest, but which are willing to commit themselves to selling their other holdings, in the event they win the tender. These include Dankner Investments, Discount Investments, and perhaps also Poalim Investments, to cite a few examples. It initially appears we can expect a tender with few competitors - no more than two or three. The Bezeq of today differs from that of five years ago. At that time, the share was traded at NIS 6, and its profits were high. Today profits are lower, and the share price is over NIS 24 and climbing. Players likely to compete for a controlling interest fear that the share will reach levels that will make the acquisition uneconomical. From this standpoint, Bezeq is an anomaly in today`s global communications market; its success is liable to stand in its way. Investors know that they will not be able to acquire the company for less than the market price, which is today already estimated at $4.8 billion. Another point against Bezeq is its relative lack of "content", compared with corresponding companies in the global communications market. It has no Internet access, and it holds 50% of a money-losing cellular company (Pele-Phone), which is only the second largest in Israel. Pele-Phone`s cellular Internet activity, which is forecast to provide the lion`s share of cellular revenues in the coming years, is concentrated in Go Next, in which Suny.com is an equal partner. Bezeq`s Internet company, Bezeq International, serves a total of only 160,000 narrow band customers, and has no large scale accompanying strategic activities. For the potential investor, the more attractive side of Bezeq`s coin is its status as an extremely powerful monopoly, whose competitors will find it difficult to take away chunks of its market share. The competition rules outlined by the regulation authorities are in Bezeq`s favor, and present new competitors with very high entry barriers. The most recent achievement - the State commitment to relax limitations on Bezeq`s activity before privatization - raises these barriers even further. In contrast to other monopoly operators around the world, Bezeq has not been saddled with an unbundling requirement allowing its competitors to use its infrastructures. This fact will dictate larger investments by competing companies in deployment of independent infrastructures, and extend the time required for penetration. Even if we assume the regulator eventually requires Bezeq to allow the competition use of its infrastructures, it will still be hard to stop Bezeq. The company has the most modern technology, currently provides good service to its customers, and benefits from a very positive image, which its competitors will find hard to undermine. The Zeevi group - only feelers for now One player with no need to prove the seriousness of its intentions regarding Bezeq is Gad Zeevi, who holds 20% of Bezeq, which he acquired in October 1999 from Cable and Wireless for $630 million in cash at NIS 17. 6 per share. The group`s communications activity is being handled by Shlomo Wachs, who does not hesitate when asked about the groups intentions regarding Bezeq. "Of course we will bid for control," says Wachs. "Globes": Alone? Wachs: "A foreign company is needed. We will hear the conditions and get organized." Are you negotiating? "We have begun negotiations with several concerns, but we are still exploring. Israel has a bad reputation for regulation." Are you saying this because of things you have heard in your negotiations? "That`s what I`m telling you." As part of his demand to appoint a director to represent him, several weeks ago Gad Zeevi prevented the selection of external directors for Bezeq, following which the company was paralyzed in several sectors. The board of directors` supervisory committee is not functioning. Compensation for directors and managers and the new chairman`s salary have not been approved, and the company controller`s reports are not being discussed. "If they play ball with us in selecting external directors, the problem will be solved," says Wachs. "In places where the minority shareholder in Bezeq can have an effect, the owners of the controlling interest should talk to them, and if they do so, an appropriate solution will probably be found. A party holding 20% of the company should have a say." What else bothers you about the opening of the market to competition? "Primarily two things. First, there is no guarantee that the benefits of competition will reach outlying areas. How will Shlomi, Ma`alot, Shderot, and Mitzpe Ramon be affected by the results of competition? Second of all, the policy on Bezeq`s rates is unclear. Will Bezeq need the approval of the Knesset Finance Committee for every change in rates after privatization and the beginning of competition?" Apparently it will, as long as it is a monopoly. "If Bezeq cannot react quickly, I don`t understand what kind of competition it will be." Do you want Bezeq to operate as a monopoly without limitations? "I didn`t say give it a free hand, but you have to define more clearly what is and isn`t allowed regarding rates. You have to allow a certain degree of freedom. I agree that it should not be allowed to reduce prices to nothing, but Bezeq should not be forced to keep its prices high. Bezeq`s prices today are among the lowest in the world, and any competitor with eyes to see will not be able to bring them much lower." The Israel Corporation - "We haven`t made our mind up" The Israel Corporation is one of the candidates for purchasing the controlling interest in Bezeq, and is in contact with a number of European operators, at least one of which, Telefonica of Spain, has already been mentioned in the press. Israel Corporation communications manager Gilad Shavit is unwilling to be interviewed. General manager Yossi Rosen, however, is willing to talk about the company`s plans. "We are not yet dealing with the acquisition of a controlling interest in Bezeq," he says. "Privatization has not yet been announced. We intend to study the matter and consider competing, but we haven`t made our mind up yet. We won`t do it at all costs." What about a foreign partner? Rosen: "We will of course come in only with a strategic partner, and we are in touch with international concerns. There are several interested candidates, but I know of no international company that has announced it will definitely join. If more than 50% is offered for sale, I assume several foreign companies will be encouraged to enter. If there are limitations, however, international companies will stay out." What is the reason for your decision in principle to enter communications operation? "As a strong company, we have examined various interesting fields that guarantee an appropriate return. The growth we see today in communications made us want to operate in the field, so we are going for it." Why did you sever your relations with Koor? "Koor decided to focus more on technology, rather than on communications. We have an understanding, however, that we will offer them the chance to join any new project we decide on. It is not a contractual right, but an understanding." Yitzhak Tshuva: "We also have not yet decided One of the names mentioned as a potential buyer is Yitzhak Tshuva, who controls extensive construction business and the Delek concern, as well as owning the Green Investments high tech holding company. The "Minister of Communications" in his group is Yitzhak Kaul, who is also a former Bezeq general manager, and to this day sounds like someone who greatly longs for the company. "I follow Bezeq constantly, with a lot of love and joy," Kaul said in an interview with "Globes" two weeks ago. Tshuva, however, even with Kaul, is careful to sound indecisive. "Globes": Why do you keep near you the man who knows Bezeq better than anyone else? Tshuva: "That doesn`t mean that I am going to invest so much money. We don`t know; we haven`t yet decided." Shmuel Dankner: "I want Bezeq" Compared with Tshuva, Shmuel Dankner sounds very serious about Bezeq. First of all, he is willing to discuss the matter for the record. "It is serious - definitely on our agenda," Dankner says. "My priority is to win Bezeq. If not, I will compete with Bezeq, but I want Bezeq. If I win the tender, I will have to deal with a conflict of interest." Dankner has at least two such conflicts of interest: his control of cable company Matav and his holding, through Matav, in Partner and Barak, which competes with Bezeq subsidiaries Pele-Phone and Bezeq International. Dankner is willing for the first time to confirm his link with Hutchison, controlling shareholder in Partner, in order to compete for Bezeq. "A little less than a year ago, when Bezeq`s privatization was spoken of, we decided that the group would consist of Hutchison, which would have control, ourselves, and another concern. I assume that it will also be like that this time," he says. Published by Israel`s Business Arena on September 13, 2000 |
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| aus der Diskussion: | Met@box - der Israeldeal |
| Autor (Datum des Eintrages): | junkstro (17.09.00 18:13:12) |
| Beitrag: | 24 von 315 (ID:1853468) |
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