HOT Telecommunication Systems Ltd. (TASE: HOT) has asked Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ) to open negotiations on transferring control of its infrastructures currently held by Bezeq. An agreement is very important for HOT, which wants to ensure full ownership of its infrastructures, but it is not clear if HOT has the wherewithal now to buy the telephony lines, or if it merely seeking a new agreement to anchor its control of the infrastructures and to gradually assume full ownership.
Purchase of the infrastructures could cost tens or even hundreds of millions of shekels, which could be problematic for HOT, especially given its current conditions. The approach to Bezeq nevertheless indicates the importance that Patrick Drahi, who controls HOT, attaches to full ownership of HOT's infrastructures.
The current contract is draconian in Bezeq's favor. HOT is forbidden to touch the infrastructures that Bezeq operates for it; in effect HOT rents them, and it requires Bezeq's permission to make any use of them. Moreover, Bezeq charges HOT high sums for maintenance and repairs. In other words, HOT cannot access its communications boxes without a Bezeq technician present - a privilege that HOT has to coordinate in advance and pay for.
The source of this arrangement is back in the era of the original cable companies. When they were founded, some franchisees preferred to use Bezeq infrastructures in order to shorten procedures and meet timetables for deploying their networks. Other franchisees preferred to go independently all the way. At the time, Golden Lines opted to use Bezeq's network, as did Tevel in certain locations. Matav, in contrast, preferred to lay an independent network. When HOT amalgamated all three cable companies, it inherited their agreements with Bezeq.
Published by Globes [online], Israel business news - www.globes-online.com - on August 23, 2010
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