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Israel Approves First DTH License

Tel Aviv, Israel -- The Israeli government has approved its
first direct-to-home satellite-TV license, effectively opening the country's pay TV
market -- currently dominated by cable -- to competition.

The license was approved for a consortium that was the
product of a merger between two formerly rival bidders -- the Ishpar Group and a
consortium led by Bezeq, Israel's national telephone company. The new partnership has
not been named.

Bezeq is the partnership's largest shareholder, with
33 percent. Ishpar, Sony Pictures' Israeli representative, holds 24 percent.
Investment company Lidan Investments and telecommunications firms Eurocom and Gilat
Satellite Communications each hold 11 percent. Clal Investments, another investment
company, owns 10 percent.

The merger of the two investor groups put the new
consortium in a stronger financial position. It came on the eve of receiving approval of
its license bid. In order to receive the DTH license, the consortium must pay the
government a fee of $7.5 million and prove that it has further assets of $7.5 million.

"These two groups want to succeed, and to succeed, we
knew that we had to be together," said Gilad Hayman, a Bezeq spokesman. "A lot
of money is needed. Together, we have a chance."

That said, some internal disagreements are already emerging
from within the group. A board meeting called last Monday to choose a new leader and
bestow a name on the new company ended inconclusively when Bezeq's candidate, Eitan
Rabv, failed to gain sufficient backing.

The group said Poalim Investments is also expected to join
the consortium if it receives approval from the Ministry of Communications. The ministry
last week was investigating whether Poalim's cable assets -- which include indirect
stakes in a number of operators -- create a conflict of interest and prevent it from
investing in DTH.

The ministry has withheld license approval for a second DTH
bidding group, headed by Prosper Abitbul and Arik Ben Hamu. However, that license could be
awarded as early as this week.