Internet Gold-Golden Lines Ltd. and B Communications Ltd., which both hold interests in Bezeq Israeli Telecommunication Corp, advanced in Tel Aviv on bets shares in the fixed-line operator are cheap.
Internet Gold, which owns a stake in Bezeq via B Communications, rose 5.7 percent to 9.382 shekels, the highest level since Aug. 8, at the close in Tel Aviv. B Communications advanced 8.8 percent, the most since Aug. 7, to 12.2 shekels. Bezeq declined 2 percent to 4.50 shekels, trimming the gain since releasing second-quarter earnings on Aug. 2 to 10 percent. The benchmark TA-25 index rose 0.5 percent.
French entrepreneur Patrick Drahi’s Cool Holding Ltd. on Aug. 26 offered to buy the remaining shares in competitor Hot Telecommunication System Ltd. at a premium and said it intends to make the company closely held. Bezeq’s shares are trading at 6.3 times estimated earnings compared with 10.6 times for the TA-25 index and 13.5 times for the MSCI World/Telecommunication Services Index.
“Investors think that if Drahi is taking Hot private it means the company is cheap, which may mean that Bezeq is also cheap,” Gilad Alper, a senior analyst at Excellence Nessuah Investment House Ltd., in Ramat Gan, Israel, said today by phone. “Bezeq’s second-quarter numbers were somewhat better than expected.”
Shares of Bezeq, whose second-quarter profit dropped 29 percent, have declined 34 percent this year after the government moved to increase competition in the wireless, fixed-line and television markets, where the company is active.
The government is seeking to introduce a “wholesale” fixed-line market and a fiber-to-the-home (FTTH) network, which would be set up by Israel Electric and a company to be selected, to compete with existing fixed-line operators. On July 15 a government panel postponed the deadline for submissions to choose an investor and controlling shareholder in the FTTH network.
“This is a make-or-break period for Bezeq,” said Alper. “If no investor is found for the FTTH network project, Bezeq will soar above 5 shekels. If an investor is found, it will be a whole new ballgame for Bezeq.”