The decrease in value among companies in the Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ) Group has reached Bezeq International. Bezeq has notified the Tel Aviv Stock exchange (TASE) that Bezeq International's value has fallen below its book value, which will result in a write-down of its book value by NIS 80 million, after tax. This initial valuation is still being examined. Bezeq will recognize a decrease in Bezeq International's value in its 2019 financial statements.
Bezeq International's value, as estimated by Prometheus, was set at NIS 1.061 billion and attached to Bezeq's 2018 financial statements. Despite the fall in value, Bezeq is not changing the range of its guidance. Bezeq's most recent projections were a NIS 1.1 billion net loss for its shareholders in 2019, NIS 2.9 billion in EBITDA, and NIS 1.7 billion in CAPEX. The guidance was adjusted last summer due to a write-off of a tax asset in respect of Yes's losses, a loss from a decline in Pelephone's value, and recognition of NIS 403 million capital gain on the sale of the Sakiya site.
Bezeq International provides ISP, international telephone, and other services. The company's revenue totaled NIS 1 billion in the first three quarters of 2019, 2.9% less than in the corresponding period in 2018. EBITDA was down 26.6% to NIS 171 million, and net profit plummeted 67.9% to NIS 17 million. Free cash flow fell by the same rate, reaching NIS 37 million. Bezeq International CEO Ron Guron also manages Bezeq subsidiaries Pelephone and Yes.
The valuations of other Bezeq group subsidiaries have fallen in recent years: Yes, Pelephone, and Walla! In some cases, the fall in value has had a substantial negative impact on Bezeq's results. In Bezeq's 2018 financial statements, for example, Bezeq recognized a decline of over NIS 1.5 billion in the value of DBS-Yes, which became minus NIS 871 million, after writing off $87 million for a decline in Yes's value in the 2017 financial statements. At the same time, Bezeq recognized a loss for a NIS 37 million drop in value of Walla!, following intensifying competition in the online advertising sector. The write-offs in Bezeq's report for the second quarter of 2019 were for Pelephone, with Bezeq writing off NIS 951 million in its books for goodwill.
Bezeq's market cap is NIS 7.1 billion, following a 19.4% fall in its share price over the past year. After the company's report last week, the company's share price is down 2% in today's morning trading. The controlling shareholder in Bezeq is B Communications, control of which recently passed to US investment fund Searchlight and businessman David Fuhrer. B Communications' share price was also down 2% in today's morning trading.
Published by Globes, Israel business news - en.globes.co.il - on March 1, 2020
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