Elbit Systems Ltd. (Nasdaq: ESLT; TASE: ESLT) has notified the tenders committee that it is withdrawing from the Israel Electric Corporation (IEC) (TASE: ELEC.B22) fiber optics venture. The company has been deliberating about the telecommunications infrastructure venture for several weeks, before concluding that it was too risky, despite government easements.
Tenders committee chairman Zvi Harpak told "Globes" that the committee was studying the significance of Elbit Systems' withdrawal, but that he was still optimistic about the tender. He said that the tender would go forward, even if there were just two bidders, and claimed that Israeli and foreign partners were interested in it.
Given that the Ram Belinkov-led consortium has also withdrawn from the tender, although it has not yet officially notified the tenders committee to this effect, the IEC fiber optic venture is in deep trouble, which will force the government to reconsider how to carry it out. Only two bidders remain, Israel's BATM Advanced Communications Ltd. (LSE: BVC), and Sweden's ViaEuropa AB. Neither company will bid alone in the tender. ViaEuropa was due to team with Elbit Systems, and the latter's withdrawal is putting the entire tender into doubt.
The government's easements for the fiber optic venture including reducing IEC's share in it to 40%, lower initial investments and longer deployment deadlines. Nonetheless, the fundamental problem of IEC's relations with the partner in the venture remained unresolved. The potential bidders believe that IEC's terms are unreasonable, because it refuses to reduce the venture's planning and work costs, or to let the venture uses private contractors. As a result, the venture's costs are well above equivalent costs in the open market. IEC is also demanding veto rights on the venture's employees.
As things stand now, the fiber optic venture, which is supposed to increase competition in the telecommunications infrastructure market against Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ) and HOT Telecommunication Systems Ltd. (TASE: HOT), is liable to be cancelled.
Published by Globes [online], Israel business news - www.globes-online.com - on May 31, 2012
© Copyright of Globes Publisher Itonut (1983) Ltd. 2012