Taking Stock / Hot Orange
After crowning Partner Communications CEO Amikam Cohen the king of Israel's communications world; after telling and retelling the Orange in Wonderland adventures of the nation's youngest cellular carrier, which started from scratch and is now assuming the lead; after all that, comes the moment to ask a simple question.
After crowning Partner Communications CEO Amikam Cohen the king of Israel's communications world; after telling and retelling the Orange in Wonderland adventures of the nation's youngest cellular carrier, which started from scratch and is now assuming the lead; after reviewing the list of tycoons who'd been earmarked as the future leaders of telecom and cable, only to see Amikam Cohen snatch the power and glory from under their noses; after reading the endless list of contingencies on which Partner's investment in Matav Cable Systems hinges, and recalling that it will take months for all the terms to reach fruition; after remapping Israel's communications arena, the new cross-ownerships created by Partner's acquisition of a 40 percent stake in Matav, and after counting the winners and losers of the transaction, in which the cable company is getting $137 million from the cellular upstart; after all that, comes the moment to ask a simple question.
What came first, Amikam Cohen's desire to take over the future merged cable company, or the economic logic of marrying cellular to cable? Did this whole thing begin with Cohen's unbridled ambition to lead a communications empire, or with a cold-eyed analysis of the future communications world, indicating that such a union was necessary?
Or, in plain English: was the deal driven by ego, or profits? If both, which was the dominant consideration?
The proof of the pudding
One might argue that at Hutchison Whampoa, Partner's parent company, ego plays no role. For the Chinese, Partner is just another of many companies in Hutchison's portfolio, and all they care about is its share price. By that logic, if Hutchison supported the deal, it must be because it sensed great potential in uniting cellular and cable.
But do not forget that after five years of Cohen making practically no mistakes at Partner, after creating about half a billion dollars in asset value for Hutchison, after the Hong Kong company returned its entire investment - Cohen's word carries a lot of weight over there.
Cohen apparently answered all Hutchison's questions and allayed their fears about the giant, and decidedly bizarre, deal. But now he has his work cut out for him to prove a few more things.
Most consolidation in telecoms today is between cable and satellite infrastructure with content, such as Comcast and Disney. Nobody's merged cable TV and cellular.
One of the reasons behind Partner's success was its unwavering focus. From today, the company enters a new world. It will face challenges that it may not be ready to take on.
Just two years ago, Partner was groaning under the weight of tremendous debt, and the market signaled the company to lighten the load. And now that it's come to the point of generating strong cash flows not earmarked for investment in infrastructure, it goes and buys a cable company.