Before Hot Telecommunication Systems Ltd. (TASE: HOT.B1) subsidiary Mirs Communications, now Hot Mobile Ltd. failed to qualify in IDF tender for a mobile services provider in 2012, the IDF was an important customer for the company. In 2010-11, the IDF accounted for 15% of Mirs' subscribers, but the proportion fell to just 5.3% at the end of 2012, partly because of the growth in the number of private subscribers.
In 2009-11, Mirs' aggregate revenue from the IDF was NIS 380 million, peaking at NIS 139.3 million in 2010. The figure slumped to NIS 83.7 million in 2012. In previous years, Hot said in its financial reports that the IDF was an important subscriber, the loss of which would have a material effect on the company's business. The IDF, which accounted for 13% of Mirs' revenue in previous years, accounted for 9.8% of revenue in 2012. 10% of the revenue from the IDF came from PTT (walkie-talkie) services, which Mirs provided outside the context of the IDF tender.
Hot, now wholly owned by Patrick Drahi, acquired Mirs in 2011 in a parties at interest deal for NIS 500 million (with an additional NIS 450 million in milestone payments). Mirs now operates through Hot Mobile, which was launched in 2012.
Mobile operations generated NIS 845 million revenue for Hot in 2012, and had a net loss of NIS 183 million. Revenue was higher and the losses greater compared with 2011.
Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL) won the 2012 IDF tender for mobile services, beating Partner Communications Ltd. (Nasdaq: PTNR; TASE: PTNR) and Pelephone Communications Ltd.. Mirs, which held the tender for the seven preceding years, did not even bid, after failing to meet the threshold conditions. The IDF tender was partly designed to replace Mirs because the IDF did not want the company's network. After some muscle-flexing Mirs gave up, possibly because of the tender's low profit margins.
Published by Globes [online], Israel business news - www.globes-online.com - on April 4, 2013
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