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With an added NIS 1 billion in its war chest following the planned merger of the three cable companies that make up HOT, the new company was expected to step up pressure on competitor Yes Satellite Network, which has been stealing market share from the cable provider.
"This puts HOT in a position to more effectively compete with Bezeq and Yes," said a source within the company, who claims that NIS 1b. of HOT's current NIS 4b. debt would remain in the hands of the respective parent companies and not be transferred to the new concern.
"Not only in terms of financial capabilities, but as a more efficient unit, HOT should be able to capitalize on its new position," the source told The Jerusalem Post.
After four years of negotiations, Matav-Cable Systems Media Ltd. said Wednesday it reached an oral agreement with the owners of Golden Channels and Tevel Israeli International Communications on the main principles of the proposed merger, except for the terms of financing the merged company. The main issue surrounding the financing revolves around the terms of the company's debt.
Matav, Tevel and Golden Channels have been operating in partnership as a single marketing unit for some time, but have had separate financial resources.
While no contract has yet been signed, a deal was expected to be closed within the next three months. Upon completion, various banks which currently have a 41.3% stake in Tevel would own a 30% share in HOT, while Yitzhak Tshuva, who controls Matav through the Delek Group, would gain between 15% and 17%, as would each Noni Mozes and Eliezer Fishman, who own Yediot Telecommunications Group - the parent company of Golden Channels. The public would own the remaining 20% to 25%, through their holdings in Matav.
As part of the deal, Tevel was expected to sell to Matav approximately 125,000 cable TV subscribers at $1.35 each.
Following the announcement Wednesday, shares of Matav rose 4% to NIS 32.2 in Tel Aviv.
HOT was the first to break the Bezeq monopoly when it entered the fixed line telephony market in November 2004, but due to budgetary constraints was limited in its marketing activities for the service which has since attracted some 80,000 subscribers.
These limitations have also caused it to steadily lose market share to satellite company Yes over the past year.
Hot has dropped from having approximately 950,000 cable-TV subscribers a year ago, to around 920,000 presently. At the same time, Yes has grown from approximately 471,000 customers to 520,000 over the past year.
Richard Gussow, a telecommunications analyst at Excellence Nessuah, said he expects HOT to now have better resources to reduce, or even reverse, this erosion.
"The merger will reduce the financing expenses at the company and provide more funds to invest in marketing and infrastructure," Gussow said. "This will allow Hot to more effectively compete with Bezeq and Yes."
While Bezeq would not comment on the matter, Gussow said the deal would not effect any dramatic changes at Bezeq.
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