Elliott Advisors has asked Bezeq, a telecom operator in Israel, to appoint a new CEO and plan new strategies to improve performance.
Bezeq chairman Shlomo Rodav, who joined the board recently, has already received a letter from Elliott that highlights the poor corporate governance, leading to an Israel Securities Authority investigation, and a number of board members and executives being placed under house arrest and barred from the company.
Elliott has also asked changes in the top management at Telecom Italia recently.
What Elliott wants
# Appoint a new CEO
# Rebuild a regulatory dialogue
# Develop a new strategy for the business balancing growth with efficiency gains
# Review shareholder distribution policy
# Buy back shares
Elliott said Bezeq has one of the highest equity free cash flow yields (~11 percent) of any incumbent telecom company in the EMEA region. This yield is based on the 2018 earnings and cash flow, reflecting the pricing initiative taken at Yes earlier this year, but none of the anticipated cost savings from combining Yes and Bezeq International.
It would be accretive for Bezeq to buy back its own shares. This could be funded by the ~ILS 500 million proceeds from the Sakia real estate disposal and by modest incremental borrowings, appropriately sized to avoid impacting Bezeq’s credit rating or significantly affecting borrowing costs.