Israeli DTH Firm Ups Investment

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Tel Aviv, Israel -- Direct-to-home platform YES -- formerly
known as DBS Satellite Services -- is increasing its investment in the country's first DTH
offering by more than 50 percent, due to an unexpectedly aggressive reaction to the threat
of competition from Israel's three cable companies.

YES's original business plan called for an investment of
$250 million in startup costs. The company will boost that by $140 million, or 56 percent,
to $390 million, according to sources.

The spending increase is driven by the fact that Israel's
three cable operators, Golden Lines, Matav-Cable Systems Ltd. and Tevel Israel
International Communications, have been on a massive spending spree, paying high prices to
buy international syndicated programming for their own channels. YES, therefore, feels
obliged to increase its own programming investment and also recognizes that it will have
to spend more on marketing than planned, sources said.

In addition to acquiring programming from abroad, one
controversial local deal saw the cable operators pay $120 million for rights to Israel
Football League games over the next six years.

The DTH provider will receive $90 million in new funding in
the form of long-term bank loans from Israel Discount Bank. That's in addition to the
5-year, $200 million loan YES has with the bank.

The other $50 million will be put up by some or all of the
companies that form the YES consortium. YES is the product of the merger of two of the
four investor groups aiming to build DTH businesses here.

It is unclear which companies will contribute additional
funds to YES.

Three members of YES' original investor group -- Clal
Investments, Ishpar Group and Ronald Lauder's Jerusalem Capital Studios -- this month
reportedly agreed to sell their combined 30 percent share in YES to local businessman Gad
Ze'evi for $6 million. But Israeli Antitrust Commissioner David Tadmor may intervene if he
feels Ze'evi's stake in Keshet, one of the three owners of broadcaster Channel 2, bars him
from owning a share of another media company.

National telco Bezeq Israel Telephone is also a partner in
YES.

YES could not be reached for comment by press time.

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