Partner Communications Ltd. (Nasdaq: PTNR; TASE: PTNR) will begin recognizing revenue from its agreement with Orange starting in the third quarter of 2015. The revenue is compensation that Partner will receive for ceasing its use of the Orange brand name and in the first stage of the damage caused to the company by the public controversy caused by Orange International CEO's remarks.
Against all the market predictions that Partner would report better results, as a result of the revenue it stands to receive under the agreement, the situation is more complicated, and Partner will recognize only €5 million, starting in the third quarter of the year.
The agreement reported by the company at the end of the second quarter is divided into two parts. In the first part, the company is due to receive €40 million spread over eight quarters. The capital market, and especially the communications market, expected this revenue to begin already in the second quarter. It has now been learned that this is not the case, and the company will begin posting revenue only in the third quarter, apparently because the deal was actually signed in July.
The second part of the agreement, in which Orange is due to pay an additional €50 million, will apply only if the parties decide on a final separation. It, too, is due to be spread over eight quarters.
The agreement with Orange was reached after the French company's CEO, Stephane Richard, was quoted as saying that he preferred not to do business in Israel for political reasons. France Telecom owns the Orange brand name, which Partner uses in Israel. The damage caused by Richard's remarks led the two companies into negotiations that will probably eventually end in the severing of the connection between them, but this is not certain at this stage, and the decision remains in the hands of the parties in equal measures. The agreement says that the companies will decide finally whether to continue the agreement between them only after an economic assessment is carried out, and will base their decision on its results.
Published by Globes [online], Israel business news - www.globes-online.com - on July 12, 2015
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