Cable TV unit Tevel Israel International Communications has been awarded a license by the Israeli Satellite and Cable Television Broadcasting Council, Discount Investment Corp (TASE:DISI) said on Sunday.
Discount, which has a 48.5% stake in financially troubled Tevel, said the license, which replaces Tevel's previous broadcast arrangement, was subject to a bank guarantee of nine million shekels ($1.8 million).
Tevel, 46.5% owned by Dutch cable TV operator United Pan-European Communications (Nasdaq:UPCOY, ASE:UPEC), must also pay NIS 15.6 million to local television program producers.
If necessary, the payments will be subject to the approval of a court dealing with the freezing of legal moves against Tevel. A Tel Aviv court last month approved a stay of bankruptcy proceedings to provide Tevel, which has debts of more than two billion shekels, with protection against creditors.
Meanwhile, banking sources suggest that the Tevel cable television company's best escape from its credit crisis is to replace UPC as a key shareholder with Israeli mobile-communications company Cellcom.
The banks and Tevel's shareholders agreed last week to a per-subscriber value of $940.
Tevel owes the banks NIS 2.4 billion. The value per subscriber values the company at $375 million, or just over NIS 1.8 billion. Therefore, the banks calculate, Tevel's shareholders need to stream in NIS 600 million.
For comparison, fellow TV provider Matav Cable Systems (Nasdaq:MATV) trades at a company value of NIS 740 million, pricing its subscribers at $520 each.
Moreover, while Tevel's debt per subscriber is $1,200, Matav's is only $400.
The banks have already stated that they are prepared to finance part of Tevel's operation while it reorganizes, contingent on the shareholders covering the company's deficit.
Although key shareholder Discount Investment Corporation is itself in a financial hole, with negative cash of NIS 600 million, it has agreed to provide Tevel with $60 million. It is not clear where Tevel can get the rest of the infusion it needs. Discount Investment is looking at bringing Cellcom in as an investor, an idea the banks support.
Cellcom's annual operating cash flow is some NIS 1.2 billion. That is also roughly the amount of its capital investments. But Cellcom, with its relatively low leverage, can easily obtain bank loans.
For Cellcom, the investment would give it a chunk of a company poised to compete in the domestic communications market. But Cellcom shareholder BellSouth is unlikely to give the move its blessing, given that it has already advised the Israeli company of its opposition to its expanding its horizons.