Inactive Ofek costing Eurocom NIS 300k a month, $30m Q4 write-off

Attempts by Eurocom subsidiary Ofek New World to get a strategic investor involved in the activity of its Greek sister company Europrom Telecommunications have failed, and its activity there is now frozen. Ofek had planned to operate in smaller sections of the Greek market, and launch in the Athens business community.

Eurocom was in fact planning to use know how gained in its Israeli joint LMDS project with Cellcom in the Greek project. The failure of the Israeli project torpedoed those plans.

The Rosh Ha'ayin-based Ofek today numbers only 20 employees and is mostly busy preserving the know how it accumulated in its year of efforts to enter the local telephony market, say sources close to the company.

Ofek CEO Reuven Sgan-Cohen told TheMarker this morning that the company "is working and I won't say where and why. We have 20 workers, and if you call this a company void of content then so be it. I hope we are doing our best."

Sgan-Cohen dismissed reports of negotiations to sell Ofek's know how to Bezeq. "There never has been nor will there ever be such negotiations."

On November 8, Cellcom and Ofek announced the failure of negotiations to start a joint LMDS venture that would compete with Bezeq in the local telephony market.

Following that announcement, Ofek and controlling shareholder Eurocom decided Ofek would preserve its know how and run a smaller version of the company. The company today is waiting for the local telephony market to open to competition, a move not anticipated in the next two years.

In the meantime, the company is costing Eurocom NIS 300,000 a month in salaries, excluding overhead. Cellcom, unlike Eurocom, decided to shut down its New Game division and leave fewer than ten people in charge of preserving acquired know how.

After the talks with Cellcom failed, 200-employee Ofek, which operated for about a year, returned the LMDS license it received to the Communications Ministry.

Closing the Ofek venture resulted in little profitability for Eurocom in 2001. Eurocom will likely write off its $30 million investment in Ofek in the year's fourth quarter. The $30 million is very similar to its profits this year, which means Eurocom will end 2001 either breaking even or with a very low profit.