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The Menorah Gaon investment house has downgraded the state-run phone company

Bezeq (TASE:


) to Hold from Buy, and set its target price at 2% below its current market level.

The investment house set Bezeq an Ebitda (earnings before interest, taxes, depreciation and amortization) multiple of 4.8, which is 10% below the global average for peer companies. The Israeli phone company deserves the discount because of Israel's security situation, and the delay in the company's privatization, Menorah Gaon writes.

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Telecommunications analyst Chen Lindman calculates Bezeq's value at NIS 12.1 billion, whence derives a share price of NIS 5.02 which is 2% below its current rate of NIS 5.1.

Lindman estimates that the Yes satellite TV company will lose NIS 650 million in 2002, compared with NIS 860 million in the previous year. Bezeq's share in the loss will be NIS 250 million, compared with NIS 230 million in 2001 because Bezeq increased its stake in Yes to 45%.

The analyst estimates that Bezeq subsidiary Pele-Phone Communications will approach black ink in the fourth quarter of 2002.

Opening the fast-Internet market to competition should increase Bezeq's income in that sphere, Lindman estimates, even though profit margins will narrow slightly. By the end of 2002, he says, Bezeq will have more than 120,000 ADSL subscribers.

Menorah Gaon estimates Bezeq's 2002 revenue sat NIS 8.2 billion, and its operating profit at NIS 1.1 billion.