Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ) is close to writing off NIS 1.2 billion of its tax asset. The reason is a notice from the Israel Securities Authority that conditions do not currently exist for Bezeq to take advantage of the tax asset, as it had hoped and planned when it planned the Bezeq-Yes deal.
The significance of the notice is mainly in accounting, and Bezeq will indeed report the write-off. The conditions set for recognition of the tax asset include structural separation in the company, which currently appears to be a distant prospect. The Securities Authority therefore notified Bezeq that the company would probably have to deal with the asset in its reports.
Following this event, publication of Bezeq's reports will probably be postponed to August 29, instead of tomorrow.
The tax asset was designed to enable Bezeq to benefit from NIS 10-15 million in regular quarterly revenue over a number of years.
Bezeq also last Friday issued an immediate report to the Tel Aviv Stock Exchange stating that the board of directors of Pelephone, Bezeq's subsidiary, had approved the company's second quarter reports. These reports include a NIS 1.2 billion downward revision in the value of Pelephone's activity, which is likely to cause a NIS 951 million decrease in the book value of Pelephone in Bezeq's accounts and reduce Bezeq's net profit and equity by that amount.
On July 29, less than a month ago, Bezeq announced that Pelephone's board of directors had discussed signs of a decline in Pelephone's value and its multi-year guidance. As indicated by the discussions, taking into account Pelephone's projected cash flow, Pelephone is liable to post a decrease in its value of NIS 800 million-1.3 billion.
Bezeq's announcement constitutes recognition that in contrast to the market's expectations, Pelephone believes that the mobile telephony market is far from recovery, which is very bad news for the entire communications market and its investors. The assessment is an initial internal one, with a valuation by an external party scheduled for later. "As a result of it, and according to its results, it is possible that the decrease in value in the company's books will be different, even materially different, than stated above," the announcement to investors state.
Published by Globes, Israel business news - en.globes.co.il - on August 25, 2019
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