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Despite the state's agreement in principle to allow the Shamrock-Saban group to bid for a controlling stake in the state-run phone company

Bezeq (TASE:


), obstacles have arisen, announced the Finance Ministry's accountant general, Nir Gilad, yesterday.

He confirmed meeting several times in recent weeks with Shamrock's representative - attorney Michael Zellermayer, in an attempt to work out a compromise that would allow the group to file a bid.

Two years ago, when buying 50% of Bezeq subsidiary Pele-Phone Communications, Shamrock - the investment arm of the Disney family - committed in writing not to bid for Bezeq. But the state failed to find enough contenders for the phone company, which it hopes to privatize during 2003.

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After discussions between the Prime Minister's Office, the Finance Ministry, the Justice Ministry and the Communications Ministry, the officials decided to allow Shamrock to bid together with media mogul Haim Saban, subject to certain limitations.

Among other things, Shamrock was told to pull out its representative on Pele-Phone's board of directors, to transfer its Pele-Phone shares to the accountant-general acting as trustee, and to undertake to sell its Pele-Phone shares to whoever wins the Bezeq auction, at a price to be set by a third-party assessor.

But Shamrock objected to most of those terms, Gilad says. The company fears it will be forced to sell the Pele-Phone shares, for which it paid about $930 million, at a loss, and at timing not of its choosing. Shamrock also objects to withdrawing its representative from the Pele-Phone board.

Government officials are worried that if Shamrock pulls out of the race, Saban will too, which might ultimately delay the whole privatization procedure.

The contenders are expected to receive security clearance in October, which will grant them access to confidential information in Bezeq's possession, ahead of determining their final bid.

Meanwhile, the government is considering allowing the buyer to acquire a 40% interest in the phone company, plus an option to buy another 10.1%, instead of buying the whole the controlling 50.1% interest at once.