Read Larry Connors' blog – Short Term Trading Strategies
It is not possible to know how and when he will pay for this deal, because it will be very difficult to pull off. Elovitch signed the deal with a big headache: an excellent company that he built up and fostered -- the businesses of 012 Smile.Communications Ltd. (Nasdaq:SMLC; TASE: SMLC | Quote | Chart | News | PowerRating) have overnight become a candidate for sale at any price, simply because its international calls carrier and Internet services provider rival, Bezeq International Ltd. has become the more desired firm.
Elovitch cannot own two companies in the same business, because no one will let him. The same is true for satellite broadcaster YES; his company Eurocom Group will have to sell its stake in the company (in which Bezeq owns 48 percent), unless the regulator changes its mind, and amends the law to allow Bezeq to wholly take over YES.
Elovitch's takeover of Bezeq has some elements of a dramatic saga: ego, honor, heroes, winners, and the vanquished. But is mainly the story of dream come true: the acquisition of Israel's largest telecommunications company.
Once, Elovitch dreamed of created Bezeq 2, through Ofek, a venture that failed. Later, he tried to consolidate his position through Hot Cable Systems Media Ltd. (TASE: HOT), and also made a play for Partner. When he decided to go for the real thing -- Bezeq -- instead of pseudo-Bezeq's the road was opened for him. The acquisition, should it go through, changes the Israeli telecommunications world. The regulator will have to redesign the market and the rules of the game because it simply has no choice. Telecommunications groups are being created, and the regulator is utterly unprepared for possible scenarios:
--What would be the structural separation if Smile is sold to Partner?
--What is the significance on banning cellular operators from becoming international calls carriers is such a case?
--What will happen to the restrictions on Bezeq and service packages?
--Above all, are the telecommunications groups now being created good for the Israeli economy and consumers, or bad for them?
Last year, the Antitrust Authority blocked Nochi Dankner-controlled international calls carrier and ISP NetVision Ltd. (TASE: NTSN) from acquiring Hot Cable Systems Media Ltd. (TASE: HOT), so what will happen if Partner, under Ilan Ben-Dov, seeks to acquire Smile and reduce the ISP market? What will happen to the ISP market and is it at all relevant for the new situation that Elovitch has created?
These issues require a rethinking of the structure of the telecommunications market. The problem is that it is hard to know if anyone at the Ministry of Communications will do it.
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