Internet Gold’s net loss for the fourth quarter totaled NIS 171 million (US$ 48 million) compared with net income of NIS 31 million recorded in the fourth quarter of 2009. Internet Gold’s net loss for the year ended December 31, 2010 totaled NIS 241 million (US$ 68 million) compared with net income of NIS 62 million recorded in 2009. These net losses reflected the impact of two significant expenses:
- Amortization of tangible and identifiable intangible assets resulting from the Bezeq acquisition: According to the rules of business combination accounting, the total purchase price of Bezeq was allocated to Bezeq’s tangible and identifiable intangible assets based on their estimated fair values as determined by an analysis performed by an independent valuation firm. During the fourth quarter of 2010, Internet Gold recorded an additional NIS 267 million (US$ 75 million) in amortization expenses related to the aforementioned Bezeq purchase price allocation (“Bezeq PPA”), bringing the total of its Bezeq PPA amortization expense for 2010 to NIS 359 million (US$ 101 million). Internet Gold is amortizing certain of the acquired identifiable intangible assets in accordance with the economic benefit expected from such assets using an accelerated method of amortization under which approximately 40% of the acquired identifiable intangible assets will be amortized during 2010 and 2011. Bezeq PPA amortization expense is a non-cash expense which is subject to adjustment. If, for any reason, the Company finds it necessary or appropriate to make adjustments to amounts already expensed, it may result in significant changes to future financial statements. (see Note B below).
- Financial expenses: Internet Gold’s financial expenses for the fourth quarter totaled NIS 129 million (US$ 36 million). These expenses consisted primarily of interest on the long-term loans incurred to finance the Bezeq acquisition, which totaled NIS 73 million (US$ 20 million), and expenses related to the Company’s CPI-linked debentures, which totaled NIS 31 million (US$ 9 million). This was offset by NIS 8 million (US$ 2 million) of finance income generated by the Company’s conservative portfolio of marketable investments.
Internet Gold’s Unconsolidated Financial Results
|Internet Gold’s interest in subsidiaries net loss||(158)||(45)||(136)||(38)|
|Internet Gold’s net loss||(171)||(49)||(241)||(68)|
Comments of Management
Commenting on the results, Mr. Eli Holtzman, CEO of Internet Gold, said, “2010 was an outstanding year for the Internet Gold Group. From a strategic point of view, the Bezeq acquisition, which we closed in April, transformed us from a niche ISP/ILD player into a very broad communications group, giving us control over Israel’s largest Telco and clear leadership of the Israeli telecommunications market. From the financial point of view, we have already accelerated our loan repayment plan, and carried out a bond exchange transaction that improved the structure of our outstanding debt.
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