Bezeq chairman and CEO placed under house arrest

Bezeq chairman and CEO placed under house arrest

Bezeq, Israel’s largest telecom operator, is facing pressure following a series of investigations and accusations of internal fraud.

Investigators from the Israel Securities Authority (ISA) have raided Bezeq’s offices under possible securities law violations.

According to reports, the investigation has now been expanded to include possible illicit dealings between the telecommunications regulator and companies owned by Shaul Elovitch, who is the chairman and controlling shareholder of Bezeq.

“We don’t know how far this investigation reaches,” wrote Citi analyst Michael Klahr in a note on the company. “Key business managers may need to be replaced likely impacting operations for a short period.” The board of directors’ attention is also “likely to be elsewhere in the interim”.

In a filing to the Tel Aviv Stock Exchange, the company has confirmed that the Tel Aviv Magistrates Court had ruled that several people including Elovitch, his son Or Elovitch, a company director, and Stella Handler, Bezeq’s CEO will be placed under house arrest until 21 July.

According to the filing, during this time they are forbidden from contacting any Bezeq officers or employees, including those from Eurocom, a firm which is also controlled by Elovitch. The other unnamed officers at the company were also subject to certain limitations and David Granot was named as temporary acting chairman at the end of last month.

Linked to the controversy is Shlomo Filber, director general of the Communications Ministry. Filber was put under house arrest last week under the same investigation, which is looking at accusation of offences under security law, fraud and breach of trust. Maimon Shalima was appointed as acting managing director of the ministry by communications minister Ayoub Kara.

Speaking to the Times of Israel, Roni Biron, co-head of research at Excellence Nessuah Brokerage in Petah Tikah, said: “With restrictions on key personnel, the current situation is clearly sub-optimal from a management perspective and its ability to navigate the company. We expect Bezeq’s share price to trade below its fair value until the dust settles around the ISA investigation and as the regulatory roadmap crystallizes.”

The company is unable comment on the investigation but, according to a text message received by the Times of Israel from a company spokesperson, Bezeq is “awaiting completion to a get a clearer picture of events.” It added: “The company operates and has always operated according to law and regulations,” the text message said.

The temporary chairman, David Granot, “an esteemed and experienced figure in the Israeli economy”, is aiding Bezeq “to continue to give customers the highest levels of service”, said the message.

Despite all the drama and speculation, the company still maintains its optimistic outlook, reassuring customers by saying: “Alongside the investigation, the company continues its operations and its service to its hundreds of thousands of customers, invests in advanced infrastructure and provides quality products and services.”

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