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U.S. investment bank

Lehman Brothers


is setting up a consortium in an effort to acquire control of


, Israel's national phone company. The group is thought to include the investment house

Shrem Fudim Kelner


Lehman has been active in Israel's privatization efforts. Its intention to bid for Bezeq is indicated by the fact that the

Government Companies Authority

did not consult with it on the deal.

Lehman Brothers Israel

, managed by Ron Lubash, would not comment.

The state's majority holding in Bezeq is due to be sold off next May. The government has stipulated that any group contending for Bezeq must have at least a 20% Israeli component and must include an experienced telco. But none of Israel's telecommunications companies is eligible to bid, on antimonopoly grounds, and so the experienced company must be foreign.

Koor Industries


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and the group controlled by tycoon Yitzhak Tshuva have expressed interest in Bezeq. But so far,

Zeevi Holdings

, controlled by Gad Zeevi, is the only organization that has announced its intention to bid for the phone company. Zeevi has already acquired 20% of Bezeq and is trying to build a consortium with Spain's


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Telefonica is meanwhile negotiating to buy out the 50% stake in the cellular operator

Pele-Phone Communications

held by



. Bezeq owns the other 50% of Pele-Phone.

Sources involved in the privatization process tell


that Pele-Phone is one of Bezeq's stronger attractions for foreign investors. Unless Bezeq exercises its right of first refusal and buys out Motorola, the privatization process is liable to fall apart, the sources say. Further escalation of the Israeli-Palestinian conflict, discouraging foreign investment, could also hamper privatization efforts.

Meanwhile, speaking at an Israeli government-sponsored conference in New York, Lehman Vice Chairman Harvey Kruger said he had not seen any less interest in Israeli startups among American venture capitalists, although there is some concern.

Kruger was on of the keynote speakers at the conference, at which 37 Israeli startups are presenting themselves to potential investors. It is sponsored by the

Israel Export Institute


Participants include





PassCall Advanced Technologies








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