M&A

1 November, 2009

UPDATE 1-Partner may be interested in buying 012 Smile assets

* Not worried by change in ownership at competitor Bezeq

(Adds quotes, background)

By Tova Cohen

ROSH HA'AYIN, Israel, Nov 1 (Reuters) - Partner Communications (PTNR.O), Israel's second largest mobile phone operator, said on Sunday it might be interested in buying 012 Smile's (SMLC.O) operations following the Internet service provider's acquisition of Bezeq Israel Telecom (BEZQ.TA).

012 Smile (SMLC.TA), a fast-growing telecom company controlled by businessman Shaul Elovitch's Eurocom Communications, last week agreed to buy a controlling 30.6 percent stake in Bezeq, Israel's largest telecoms firm, for 6.5 billion shekels ($1.73 billion). [ID:nLP676587]

As part of the deal, 012 Smile, which offers local and long distance calling and Internet services, likely will have to sell its ISP and other assets to receive regulatory approval. [ID:nLR173632]

"It (buying 012 Smile) was on the table when we looked in the past to buy it," David Avner, Partner's chief executive, told a news conference to introduce the company's new controlling shareholders.

"Talks were in early stages. There is certainly a possibility we will look at it again when there will be the opportunity and it could be an opportunity will arise in the near future."

Analysts consider Partner and cable company HOT (HOT.TA), which is also trying to break into the Internet market, to be the top contenders to buy 012 Smile's operations.

Last week, Scailex Corp (SCIX.TA) -- controlled by Ilan Ben Dov -- bought a 51.2 percent stake in Partner (PTNR.TA) for 5.3 billion shekels from Hutchison Telecommunications (2332.HK). Scailex now holds about 45 percent after selling off small stakes.

Ben Dov was named chairman of Partner, which has a one-third share of Israel's mobile phone market and has recently started offering landline phone and Internet services.

Ben Dov, like Elovitch, made his fortune by importing cell phones -- Ben Dov imports Samsung phones and Elovitch imports phones from Nokia.

"In 10 years I ... am convinced that Partner will lead the entire communications industry in Israel," Ben Dov said. "Orange (Partner's brand name) will provide all the communications needs of the Israeli consumer."

Avner told Reuters on the sidelines of the news conference that he was not concerned that the change in ownership at Bezeq could have a negative impact on Partner and Cellcom (CEL.N) (CEL.TA), Israel's largest mobile phone operator.

Bezeq owns Pelephone, the third largest.

Analysts have said 012 Smile will now have to drop out of the tender to buy Mirs, Israel's fourth and smallest mobile phone operator, from Motorola (MOT.N). That would leave HOT as the most likely buyer of MIRS.

HOT would seek to stir up competition and could transform Mirs from a marginal player with a market share of about 5 percent in the mobile market to a serious competitor, analysts say.

"I don't see any big changes," Avner said. "Mirs was a competitor in the past and will remain a competitor."

(Editing by Steven Scheer and David Cowell)

Source: http://www.reuters.com