What precisely is Eurocom underwriting?

Telecom firm Eurocom has a financial arm as well. But why?

The list of Israel's underwriters usually includes firms affiliated with financial companies. Yet, the name of one firm that has no connection to the financial industry has stood out in recent years - Eurocom Capital Finance Ltd.

Eurocom Group, owned by Shaul Alovitz, is a company that sells telecommunications equipment and home electronics, media, and services. Eurocom Communications Ltd. is Israel's largest privately owned telecommunications company whose subsidiaries include Internet Gold Golden Lines Ltd. (Nasdaq: IGLD; TASE:IGLD) and its unit 012 Smile.Communications Ltd. (Nasdaq:SMLC; TASE: SMLC), and stakes in YES satellite broadcaster and other companies.

Eurocom Capital's services include an underwriting arm, Eurocom Capital Underwriting Ltd., which has participated in a number of offering recently. The most prominent of these was the bond offering by Delek Petroleum Ltd. (TASE: DLKP.B7; DLKP.B8), for which it was paid a fee, like any underwriter. Investors in this offering included both Smile and Internet Gold, which bought NIS 10 million worth of bonds.

This raises some questions. Is there a link between the fact that Eurocom Capital Underwriting, a sister company of both Smile and Internet Gold, was the lead underwriter in the Delek Petroleum offering, and the two companies' purchases of bonds for their nostro portfolios?

More generally, why did Eurocom subsidiaries buy Delek Petroleum bonds in the first place? Did the investors of Smile and Internet Gold, which are classified by the stock exchanges as "telephony and Internet service providers", intend for the companies to invest in other industries besides telecommunications? After all, an investor wanting to invest in the fuel and energy industry does not need a telecommunications company for this purpose.

There are currently no answers to these many questions. Eurocom Capital, Smile, and Internet Gold all declined to comment on the report.

Published by Globes [online], Israel business news - www.globes-online.com - on August 19, 2008

© Copyright of Globes Publisher Itonut (1983) Ltd. 2008

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