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Cable TV co Tevel valued at zero by most analysts

Discount Investments nonetheless expects it to become its highest-growth holding

According to a TheMarker investigation, most local investment and research firms value cable television company Tevel at zero in assessing the holdings of Discount Investment Corporation, which owns 48% in Tevel.

Most analysts believe that there is no need to update the models used, and investment banks that asigned Tevel a monetary value intend to lower their valuations.

The evaluation of the company is based on a comparison between Tevel and Matav Cable Systems (Nasdaq:MATV) in operating value per subscriber excluding debt, and subscriber volume. The Tevel subscriber volume factors its relative subscriber volume in Golden Channels, based on its 35% purchase, which is still awaiting regulatory approval.

One analyst said that when examining Tevel, company valuation calculations are not the essential thing, but its ability to exist.

The analysts referred to the Tevel effect on Discount Investments, taking into account that the second shareholder, United Pan-Europe Communications (UPC), has stopped injecting capital and that Tevel is vstly leveraged. They expect that Discount Investments stock and portfolio will be negatively impacted in the short term. The analysts believe that in the future Tevel will markedly increase the value of the Discount Investments portfolio.

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Tevel constitutes 2% of the total assets of Discount Investments, while cellular provider Cellcom accounts for 30%. Super-Sol (NYSE:SAE) constitutes 23%, Elron Electronic Industries (Nasdaq:ELRN) comprises 12.6%, and Housing and Construction accounts for 6%.

The analysts conclude that there is no chance per subscriber valuation of the merged cable company will come near the per subscriber valuations in the United States, $4,000, or in Europe, $2,400.

The analysts believe that Discount Investments will be affected by Tevel's huge debt, some NIS 2.3 billion, most of which will fall on Discount Investments, because the cable company shareholders plan to transfer a certain level of each of the companies' debt to the merged company.

Discount Investments has more than once said that Tevel is a strategic investment, and that it expects that in the future the cable company will post the highest growth from among its holdings.

The analysts estimate that should Discount Investments manage to significantly improve its investment in Tevel, the latter could in several years attain $1 billion valuation.

But until that happens, Discount Investments will probably have to operate much like Bezeq in satellite TV firm YES, namely go on injecting capital.