Bezeq deal faces four serious regulatory hurdles

Shaul Elovitch's acquisition of Ap-Sab-Ar Holdings Ltd. (the Apax Partners-Saban Capital Group Inc.-Arkin consortium) 30.6% stake in Bezeq The Israeli Telecommunication Co. Ltd. (TASE: BEZQ) for NIS 6.5 billion through Eurocom Group unit 012 Smile.Communications Ltd. (Nasdaq:SMLC; TASE: SMLC) raises four major regulatory problems.

Elovitch, who closed the deal for NIS 8 per share will have six month to solve four major regulatory problems.

He will be required to sell his 32.6% stake in satellite broadcaster Yes because the Supreme Court has ruled that Bezeq, which holds 49.8% of Yes cannot merge the company. However, selling Yes, which has huge debts will be no easy matter.

Elovitch will also have to sell the activities of 012 Smile although he has already said that he will retail the company as a stock market shell for holding Bezeq. Elovitch cannot hold both 012 Smile and Bezeq International because he will then be deemed a monopoly in the Internet Service provider (ISP) market.

Elovitch will also find it difficult to get regulators approval because Eurocom holds a 40% market share in the organizational telephone centers market, while Bezeq International also has a 40% market share.

Another problem is that Eurocom imports Nokia mobile phone handsets, which are acquired in large numbers by Bezeq's mobile carrier subsidiary Pelephone Communications. Ilan Ben-Dov who imports Samsung mobile phone handsets has been able to continue doing so despite his acquisition of Partner Communications Co. Ltd. (Nasdaq: PTNR; TASE:PTNR; LSE:PCCD). But the ruling on Ben-Dov may not apply to Elovitch because Nokia's market share is 10% higher than that of Samsung.

Published by Globes [online], Israel business news - www.globes-online.com - on October 25, 2009

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