Discount Investments weighing Cellcom buying UPC stake in Tevel
Discount Investment Corporation is considering cellular provider Cellcom buying Dutch cable firm UPC's stake in cable TV firmTevel.
Discount Investments owns 48.5% in Tevel, and UPC owns 46.5%.
The move could create a partner willing to inject money into Tevel. The move is essentially similar to selling part of Discount Investments' holdings in Cellcom in favor of financing Tevel, which has NIS 3 billion debt. Therefore Discount Investments might favor such a move.
For Cellcom, the move could help enter the multi-channel television market, which is expected to improve yield for shareholders in the medium term. In addition, the move could help Discount Investments leverage future investments in the domestic calls market.
The move would require the approval of the Communications Ministry and Antitrust Commissioner Dror Strum. Phone company Bezeq is likely to strongly object to the move and demand the lifting of structural restrictions obliging it to operate through subsidiaries.
It is doubtful that Discount Investments will be able to convince the Safra family of the benefits of this move. The Safra family owns 34.5% in Cellcom, and according to foreign press reports might soon own 70% in Cellcom given its talks to swap shares with BellSouth Corporation (NYSE:BLS).
In addition to the expected change in Cellcom shareholders, the company is expected to appoint a new president in place of Jacob Perry, who is due to step down. The appointment of new management could delay strategic decisions in Cellcom.
Last week UPC asked Discount Investments to inject money into Tevel as part of their agreement on a new credit line for Tevel, without diluting UPC. TheMarker recently reported that Discount Investments and UPC have begun examining selling UPC's share in Tevel, and that the managements of the two companies met with assessors recently.
Due to Tevel's credit crunch it is putting off paying suppliers, and slowing development and marketing of digital set-top boxes. In addition, the company dismissed dozens of workers a few weeks ago, so far this year firing 200 workers.
