The Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ) board of directors yesterday approved another transaction with a party at interest between DBS Satellite Services (1998) Ltd. (YES) and Spacecom Satellite Communications Ltd. (TASE:SCC). The new deal in effect replaces the original one between Bezeq and Spacecom. Solutions for Yes's very delicate situation were needed, following the explosion of the Amos 6 satellite, which left Yes without any backup.
Sources inform "Globes" that as part of the deal, Spacecom will make an Asian satellite it is slated to rent available to Yes for 4-5 years. During this time, Spacecom will build the Amos 8 satellite, which will eventually replace the Asian satellite. The agreement is until 2028.
The alternative to using the Asian satellite was using Bezeq's Internet network for Yes's broadcasts. This option was ruled out, because significant price gaps between the alternatives were found, and Yes absolutely refused the option of using Bezeq's network. The Bezeq board eventually accepted this stance.
The gap between the offers was $90 million: the cost of the alternative chosen is $190 million (NIS 750 million), compared with $280 million for broadcasting on Bezeq's network.
A special board of directors committee made a study of the matter that took Bezeq's attitude into account. On the one hand, some assert that Bezeq is incapable of meeting the challenge of transmitting all of Yes's broadcasts online on such short notice with the requisite availability and high transmission speeds. Yes argues that it needs a network that supports at least five televisions with K4 broadcasting quality in a home, and that Bezeq's Internet network is incapable of ensuring such broadcasting quality.
Home converters alternatives and the cost of deploying cables in homes were also presented to the board of directors. Not all homes have suitable wiring, and broadcasting only on WiFi networks is impossible.
On the other hand, criticism was made of the fact that the deal was with a party at interest, and would be of great assistance to Spacecom in obtaining a buyer for that company, which was prevented by the explosion of the Amos 6 satellite. This very substantial and expensive party at interest deal follows another parties at interest deal recently approved, in which Bezeq acquired Eurocom Group's holdings in Yes. That deal also did not pass Bezeq's board easily, and quite a few people believe that the prices paid by Bezeq were quadruple what it should really have paid.
The deal will not pass easily
Yes made every effort to push this deal through, asserting that for a company of its size, with 600,000 subscribers, there was no real option of broadcasting on Bezeq's Internet network.
Bezeq expects difficulty in obtaining approval of this deal at the company's shareholders' meeting, with investment institutions again objecting to it. Bezeq is aware that another parties at interest deal is a problem, due to the fact that it will again help Bezeq controlling shareholder Shaul Elovitz, who also controls Eurocom. Bezeq is preparing for an even more difficult struggle than in past deals. This time, however, parties close to the deal say that there is no real alternative, since no television company in the world makes its broadcasts completely on the Internet, and all the satellite companies plan to continue using satellites for many years as the most effective means of disseminating television broadcasts, while integrating Internet services in them.
Furthermore, Yes has a difficult problem: it has no satellite backup. This means that any minor malfunction is liable to cause a catastrophe, and Yes is in dire need of another satellite. Even if a parties at interest deal is involved, with all the problems that entails, approving it cannot be avoided, because Yes cannot be left without a backup, and it will take many years before Bezeq finishes deploying its home fiber-optic network enabling it to support complete broadcasts.
For their part, opponents of the deal argue that even if this is true, Bezeq has already paid hundreds of millions of shekels for Eurocom's stake in Yes merely because of the supposed synergy between the companies. If Yes does not broadcast on the Bezeq network, they ask, why did Bezeq agree to pay so much money?
Published by Globes [online], Israel Business News - www.globes-online.com - on February 15, 2017
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