Sweden's ViaEuropa AB, whose Israeli representatives have said that it intends to participate in the Israel Electric Corporation's (IEC) (TASE: ELEC.B22) fiber optic venture, may bring in Cisco Systems Inc. (NYSE: CSCO) unit Cisco Capital as a partner with a small stake in the venture, or to finance the procurement of equipment for the venture.
As "Globes" has reported, Cisco and ViaEurope have business ties, and Cisco brought ViaEuropa to the IEC venture and has been an adviser to the company, in the hope of winning equipment sales if ViaEurope win the tender to deploy a fiber optics network.
ViaEuropa is currently the only company interested in the IEC venture. After meetings between investors and the tenders committee last week, it was the only company to express optimism about the venture, and it made no claims or demands to change the terms. The other potential investors - a consortium led by Ram Belinkov and BATM Advanced Communications Ltd. (LSE: BVC), run by CEO Zvi Marom - said that they will not participate in the tender under its current conditions.
ViaEuropa's message is actually ambivalent. On one hand, it is asking for a postponement of the tender on the grounds that the government has not yet kept its promises to arrange for the transfer of ownership of the venture, while its optimistic remarks about it are hard for outsiders to understand.
Sources in contact with ViaEuropa strongly doubt that it will bid, not only because of the tender's terms, but because there is an impression that it is being pushed to bid by Cisco and its Israeli representatives, and that ViaEuropa is not really interested. A hint to this effect can be seen in the inability to speak with the company's representatives for months, and its owners have not mentioned the venture and have shown no involvement in it, in contrast to what is expected from executives of a company that plans to invest hundreds of millions of shekels in one of Israel's most important infrastructure projects.
Only if ViaEuropa bids in the tender and deposits the necessary guarantees will we know if its intentions are serious. So long as this has not happened, there is no point in placing a bet. Meanwhile, an alternative date for the postponed tender has not been set, and the uncertainty around is growing, exacerbated by the economic situation.
As for Cisco's involvement in the IEC fiber optic venture, so long as it just advises and assists its customers - that is fine; but there is a very big difference if it becomes one of the venture's owners. As an equipment vendor to all of Israel's telecommunications companies, presumably Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ) and HOT Telecommunication Systems Ltd. (TASE: HOT) will be pleased if Cisco invests in the competing IEC venture. It is also unreasonable for Cisco to jeopardize its relationships with the Israeli carriers by competing directly against them.
Cisco Systems Israel general manager will have to provide explanations to some carriers which will want to clarify whether it is going to compete against them.
Published by Globes [online], Israel business news - www.globes-online.com - on July 30, 2012
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