News Column

Wholesale market raises concern for Hot parent's IPO

January 23, 2014

By Gad Perez, Globes, Tel Aviv, Israel

Jan. 23 --The problematic revenue projection for Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ) published by the Ministry of Communications is worrying the banks underwriting the IPO of Patrick Drahi's Altice SA , the parent company of Bezeq rival Hot Telecommunication Systems Ltd. (TASE: HOT.B1). Capital market sources say that the ministry's position paper and Israeli media reports worry their foreign colleagues, who are seeking information about the possible effect of implementation of the wholesale market on Hot. Altice plans to issue 20-25 percent of its shares at a company value of 1.5 billion on the Euronext Amsterdam exchange. Earlier this week, the Ministry of Communications published an extreme forecast that Bezeq could lose NIS 1.3 billion revenue from implementation of the wholesale market over the next four years. The report did not mention Hot, or the effect of the ministry's policy on it, but if Bezeq losses 600,000 telephony subscribers as the ministry predicts, Hot could lose 400,000 subscribers on the basis of its market share. Under this scenario, Hot would suffer a grievous blow that it might not survive. Hot has been forced to give explanations to investors and banks. It says that, firstly, the policy has not been finalized, that, for now, the process will only apply to Bezeq , and that any implementation is still far off. Hot is also trying to calm investors, explaining that this is a public hearing, and that changes are possible in the prices that the Ministry of Communications will set for the use of Bezeq and Hot's infrastructures by competitors. Hot is worried about the effect of the wholesale market, because any reduction in prices caused by competitors' entry into its core Internet service and cable television business could be very problematic for the carrier, because it is more sensitive than Bezeq in terms of financial standing and ability to survive such crises. Hot is very worried by the price that the Ministry of Communications has published for the use of Bezeq's infrastructures. In addition to Hot, Altice owns telecommunications operations in France , Belgium , Portugal , the French West Indies in the Caribbean , and in the Dominican Republic . The company plans to use proceeds from the IPO to repay debt in order to continue its acquisition of telecommunications carriers around the world. ___ (c)2014 the Globes (Tel Aviv, Israel) Visit the Globes (Tel Aviv, Israel) at Distributed by MCT Information Services

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Source: Globes (Tel Aviv)

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