Matav-Cable Systems Media Ltd. Announces Second Quarter and First Six Months 1998 Results

Business Wire, August 12, 1998

NETANYA, Israel--(BUSINESS WIRE)--Aug. 12, 1998--

--Net Margins at Record 23.4% --

Matav-Cable Systems Media Ltd. (NASDAQ: MATVY) today announced unaudited results for the second quarter and six months ended June 30, 1998.

Revenues for the second quarter were adjusted New Israeli Shekels (NIS) 95.2 million (U.S. $26.0 million) (a), an increase of 7% from the same period a year ago. Operating income was NIS 36.1 million (U.S. $9.8 million), up 12% from the second quarter of last year. Net income reached NIS 22.3 million (U.S.$6.1 million), an increase of 15% over last year. Net income per ADS for the second quarter was NIS 1.64 (U.S. $0.44) (basic)(NIS 1.46, or $0.40, diluted) versus NIS 1.44, last year. Earnings before interest, taxes, depreciation and amortization (EBITDA) was NIS 55.6 million (U.S. $15.2 million), an increase of 11% from the same period a year ago.

Revenues for the six months ended June 30, 1998 reached NIS 190.9 million (U.S. $52.1 million), an increase of 7% over the same period a year ago. Operating income was NIS 72.7 million (U.S. $19.8 million), up 16% from last year. Net income was NIS 44.6 million (U.S. $12.2 million), up 19% from the same period last year. Net income per ADS was NIS 3.28 (U.S. $0.90)(basic)(NIS 2.84, or $0.77, diluted) versus NIS 2.78, last year. EBITDA for the six months was NIS 111.2 million (U.S.$30.3 million), up 11.8% from last year.

As of June 30, 1998, the Company had increased the number of homes passed to 376 thousand and subscribers to 265 thousand. This represents a penetration rate of 70.5% compared to 69.9% at the end of the first quarter of 1998.

As previously reported, the Company is today holding an extraordinary shareholder's meeting to approve the entry of the Company and its subsidiaries into certain agreements concerning the financing of Partner Communications Company Ltd. ("Partner"), the third Israeli mobile cellular telecommunication services licensee. Matav, through its subsidiaries, holds approximately 25% of the outstanding shares of Partner, subject to the joining of the Tapuz group as a shareholder in partner when the Company's holdings in Partner will be diluted to 20.3%. The agreements, to be made between Partner and its shareholders and a consortium of leading international and Israeli banks, provide for non-recourse loans to Partner of up to $650 million at a gearing debt-to-equity ratio of 60:40.

According to the agreements, the shareholders of Partner are required to invest in Partner up to an aggregate of $433.3 million. Matav will guarantee the undertaking of its subsidiaries to invest their portion of this sum in accordance with their proportional holdings in Partner. The shareholders of Partner will pledge their shares in Partner and their rights relating to shareholders' loans to Partner in favor of the banks and will subordinate certain rights to the bank's rights until the loan is repaid.

Partner expects to begin providing service during the fourth quarter of this year.

After the close of the quarter, Robert Avi-Tal, President and CEO of MATAV notified the Company of his intention to resign. After his departure, whose timing has yet to be determined, Mr. Amit Levin, the Company's Vice President of Israeli Operations, will be appointed temporary, acting CEO.

Last month, Dankner Investments Ltd. ("Dankner"), a controlling shareholder in the Company, reached an agreement with Most Invest Telecommunications Ltd.("Most"), Hanania Gibstein, Shimon Cheifetz, and Eli Cheifetz, according to which Most, Gibstein and Cheifetz agreed not to sell their shares in the Company without the consent of Dankner, and Dankner will not sell its shares in the Company without allowing the other parties to take part in such a sale. Most, Gibstein and Cheifetz will join in the sale of all or most of Dankner's shares of the Company. This agreement is subject to, among other things, existing agreements concerning the shares of the Company.

Commenting on the results, Robert Avi-Tal, President and Chief Executive Officer of MATAV said, "MATAV continues to grow and improve its profitability. Net income growth for the second quarter was 15% over last year on revenue growth of 7%. As a result, our net margins are at a record 23.4%. We also achieved a record subscriber penetration rate of 70.5%

"After the quarter, the Israel Supreme Court instructed the cable industry and the Ministry of Communication to hold discussions regarding Direct Broadcast Satellite (DBS) in order to arrive at a mutually acceptable arrangement. The parties have not yet been able to come to such an agreement and a court hearing has been set for August 19, 1998.

"Overall, we are pleased with the results for the first half of 1998 and MATAV remains well positioned for a productive second half."

Matav is a leading operator and provider of broadband Cable TV services in Israel. As one of five CATV operators in Israel, the Company operates in exclusive franchise areas which cover approximately 25% of Israel's households. The Company provides CATV services to about 25% of all CATV subscribers in Israel.