Ilan Ben-Dov's control of mobile carrier Partner Communications Ltd. (Nasdaq: PTNR; TASE: PTNR) was one of the reasons Merrill Lynch was negative on the share of the Orange franchisee. This attitude has changed with Haim Saban now taking control. Merrill Lynch analyst Haim Israel today raised his recommendation on Partner to "Buy" from "Underperform."
Israel lowered his recommendation back when Partner's share price was touching NIS 80, whereas today after a triple digit percentage plunge since the end of July, the share is traded at around NIS 24.65. Merrill Lynch's new target price has been raised from NIS 19 to NIS 28.50, a premium of 15.6% on its market price.
Merrill Lynch also gives a "Buy" recommendation for Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ) and "Neutral" for Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL).
Over the weekend it was announced that Saban will buy two thirds of Scailex Corporation (TASE: SCIX; Pink Sheets:SCIXF) (controlled by Ben-Dov) holdings in Partner for NIS 250 million and take on the $300 million debt to former Hong Kong based owner Hutchison.
Israel describes Saban's investment as a game changer and cites four reasons for buying the share. The first is that the deal should lower Partner's costs giving it access to cheaper funding without Scailex's debt haunting it. The second is the long awaited clarity on shareholder structure, and management can finally “unleash” the full potential of the company. The third reason is clarity on dividends, and Israel believes Partner will go back to paying regular high dividends.
Finally Merrill Lynch believes that competition has bottomed out and that Golan Telecom's latest NIS 49 per month unlimited package is "irrational." "The package is the last bullet in their arsenal of ammunition," Israel writes. He insists this is an encouraging sign for Israel's three veteran mobile players, and he sees stability in their churn rates.
Israel adds that the wholesale market agreement signed by Bezeq, and the successful implementation of Partner's reorganization, put the company in a better position to cope with the challenges of the more competitive environment.
Published by Globes [online], Israel business news - www.globes-online.com - on December 4, 2012
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