MATV Matav-Cable Systems Media Ltd. ADS (MM)

There is a correction to the news release, "Matav Reports Financial Results for the First Quarter of 2006" issued on 25 May 2006, by Matav - Cable Systems Media Ltd (NASDAQ:MATV) over PR Newswire. We are advised by the Company that it has performed a reclassification between "investments in affiliates" and "investment in other companies" for the comparable period ended December 31, 2005. Complete, corrected release follows: Matav Reports Financial Results for the First Quarter of 2006 NETANYA, Israel Matav-Cable Systems Media Ltd. (NASDAQ:MATV), a leading Israeli provider of digital cable television services, today reported financial results for the first quarter of 2006. Revenues for the first-quarter reached NIS 139.1 million (US$29.8 million) compared with NIS 135.3 million (US$29 million) for the previous quarter and NIS 137.5 million (US$29.5 million) for the first quarter of 2005. During first-quarter 2006, the company's ARPU (Average Revenue Per User) reached NIS 176.4 (monthly, not including value-added tax) compared to NIS 172.6 in the fourth quarter of 2005 and NIS 172.3 in the first quarter of 2005. The continued increase in ARPU in the multi-channel TV segment in the first quarter is attributed to tariff increase to part of the customers and to increased demand for pay -per-view and "on-demand" content. As of March 31, 2006, Matav had approximately 250.2 thousand subscribers, compared to 251.5 thousand subscribers as of December 31, 2005 and approximately 254.2 thousand as of March 31, 2005. Matav reported an increase in its Internet customer base along with a decrease in ARPU due to the intense competition in this market segment. As of March 31, 2006, the Company has approximately 116.8 thousand Internet subscribers. Matav is not consolidating Hot Telecom (26.6%) in its financial results. Hot Telecom was established as a limited partnership between the three cable companies in order to offer communication services over the cable infrastructure in Israel. Hot Telecom's revenues for the first quarter of 2006 reached NIS 33.1 million (US$7.1 million) compared with NIS 27.9 million (US$6 million) in the previous quarter and NIS 6.5 million (US$1.4 million) in the first quarter of 2005. First-quarter operating expenses increased to NIS 126.3 million (US$27.1 million) from NIS 124.4 million (US$26.7 million) in the previous quarter and NIS 118.1 million (US$25.3 million) in the first quarter of 2005. The increase in operating expenses compared to the previous quarter is due mainly to higher content expenses related to seasonality and higher expenses due to enhanced customer service platform. The increase in operating expenses compared to the first quarter of 2005 is due mostly to an enhanced customer service platform and to operating expenses related to the launch of new services (such as VoD). First-quarter gross profit totaled NIS 12.8 million (9.2%) (US$2.7 million) compared with NIS 10.9 million (8.1%) (US$2.3 million) for the fourth quarter of 2005 and NIS 19.3 million (14.1%) (US$4.1 million) for the first quarter of 2005. First-quarter selling and marketing expenses totaled NIS 11.7 million (US$2.5 million), compared with NIS 12.6 million (US$2.7 million) for the fourth quarter of 2005 and compared to NIS 14.6 million (US$ 3.1 million) for the first quarter of 2005. The decrease in selling and marketing expenses compared to the year-ago quarter is due to a decrease in advertising expenses. First-quarter G&A expenses reached NIS 10.2 million (US$2.2 million) compared with NIS 11.6 million (US$2.5 million) in the fourth quarter of 2005 and NIS 9.6 million (US$ 2.1 million) for the first quarter of 2005. First-quarter operating loss totaled NIS 9.1 million (US$2 million), compared with an operating loss of NIS 13.3 million (US$2.9 million) for the fourth quarter of 2005, and an operating loss of NIS 4.8 million (US$1 million) for the first quarter of 2005. First-quarter EBITDA reached NIS 23.7 million (17.3%) (US$5.1 million) compared with NIS 20.7 million (15.5%) (US$4.4 million) in the fourth quarter of 2005 and NIS 27.9 million (20.6%) (US$6 million) in the first quarter of 2005. First-quarter financing expenses totaled NIS 12.1 million (US$2.6 million) compared with NIS 12.5 million (US$2.7 million) in the fourth quarter of 2005 and NIS 11.8 million (US$2.6 million) in the first quarter of 2005. The Company's financing expenses are influenced by the exchange rate between US dollar and Israeli shekel, the Israeli CPI ,and Prime interest rate. Matav's share in affiliated companies' losses for the first quarter was NIS 3.1 million (US$0.7 million). These losses are the result of Matav's investment in Hot Telecom. In the fourth quarter of 2005, Matav reported equity losses of NIS 4.3 million (US$ 0.9 million), which were mainly due to Matav's share in Hot Telecom losses. In the first quarter of 2005, Matav reported equity profits due to its investment in Partner Communications, in the amount of NIS 5 million (US$ 1.1 million), which was off-set by equity losses of NIS 1.7 million (US$0.4 million) due to Hot Telecom. Matav reported first-quarter net loss of NIS 24.4 million (US$5.2 million), or NIS 0.81 (US$0.2) per ordinary share, compared with a net loss of NIS 40.7 million (US$8.7 million), or 1.34 (US$0.3) per ordinary share, for the fourth quarter of 2005 and NIS 13.3 million (US$2.9 million) or NIS 0.44 (US$0.1) per ordinary share, for the first quarter of 2005. The fourth quarter results were influenced among other things by an allocation of approximately NIS 10 million related to a revaluation of certain real-estate assets. On May 8, 2006, Matav announced that it signed together with the other Israeli Cable Operators, namely the group led by Golden Channels G.P., and the group led by Tevel International Telecommunications Ltd. an agreement for the purchase by Matav, directly or indirectly, of all of the outstanding shares, partners' rights, or assets and liabilities of each of the entities constituting the groups. In consideration for the above acquisition, Matav will assume, directly or indirectly, the financial liabilities of the entities constituting the groups as of December 31, 2005 in an aggregate amount of approximately NIS 3 billion, and will issue approximately 45,600,000 shares to the groups' direct or indirect owners, constituting approximately 60% of Matav's outstanding shares following the completion of the transaction. Accordingly if the transaction is completed the holdings of Matav's existing shareholders will be diluted. If completed, the acquisition will be effected retroactively as of January 1, 2006, such that the business operating results of the merged activity commencing as of that date will be attributed to the company. The completion of the transaction is subject to various conditions precedent, including the completion of due diligence, the execution of a definitive agreement regarding the financing of Matav following the acquisition and the receipt of certain third party and regulatory approvals. The completion of the transaction is also subject to the approval of the Company's shareholders and their approval of certain amendments to the Company's Articles of Association, including with respect to the structure of the Company's board. The transaction is also subject to the completion of certain actions by the parties so that either the Fishman Group or Yedioth Communications Ltd. will be the Company's largest shareholder immediately following the closing of the transaction. There is no assurance that these conditions will be satisfied or that the proposed transaction, or a similar transaction, will be consummated on these or any other terms. Matav is one of Israel's three cable television providers, serving roughly 25 percent of the Israeli cable subscriber market. Matav's current investments include 1.2% of Partner Communications Ltd., a GSM mobile phone company and 18.5% of Barak I.T.C. (1995) Ltd., one of the three international telephony providers in Israel. (This press release contains forward-looking statements with respect to the Company's business, financial condition and results of operations. These forward-looking statements are based on the current expectations of the management of Matav Cable only, and are subject to risk and uncertainties, including but not limited to changes in technology and market requirements, decline in demand for the Company's products, inability to timely develop and introduce new technologies, products and applications, loss of market share and pressure on pricing resulting from competition, which could cause the actual results or performance of the Company to differ materially from those contemplated in such forward-looking statements. The Company undertakes no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. For a more detailed description of the risk and uncertainties affecting the Company, reference is made to the Company's reports filed from time to time with the Securities and Exchange Commission.) Contacts: Tal Peres, CFO Matav Cable Systems Telephone: +972-9-860-2221 Ayelet Shaked Shiloni Integrated IR Telephone US: +1-866-447-8633 / Israel: +972-3-635-6790 E-Mail: MATAV - CABLE SYSTEMS MEDIA LTD. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) Convenience translation December 31, March 31, March 31, 2005 2005 2006 2006 AUDITED UNAUDITED UNAUDITED U.S. Reported NIS In thousands (1) dollars ASSETS CURRENT ASSETS: Cash and cash equivalents 13,184 1,157 605 130 Short-term deposit 27,196 50 21,637 4,638 Trade receivables 74,699 78,807 83,222 17,840 Other accounts receivable 20,381 21,767 16,472 3,531 Total current assets 135,460 101,781 121,936 26,139 LONG-TERM INVESTMENTS AND RECEIVABLES: Investments in affiliates 51,384 117,992 57,673 12,363 Investment in other companies 46,934 - 46,934 10,060 Investment in limited partnerships 669 1,629 669 143 Rights to broadcast films and programs 23,918 34,887 22,576 4,839 Other receivables 317 597 318 68 123,222 155,105 128,170 27,473 FIXED ASSETS, NET Cost 2,265,503 2,153,126 2,292,024 491,323 Less - accumulated depreciation 1,451,095 1,328,036 1,480,060 317,269 814,408 825,090 811,964 174,054 OTHER ASSETS, NET 2,525 2,933 2,425 520 1,075,615 1,084,909 1,064,495 228,186 (1) Nominal financial reporting beginning January 1, 2004. MATAV - CABLE SYSTEMS MEDIA LTD. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) Convenience translation December 31, March 31, March 31, 2005 2005 2006 2006 AUDITED UNAUDITED UNAUDITED U.S. Reported NIS In thousands (1) dollars LIABILITIES AND SHAREHOLDERS' EQUITY: CURRENT LIABILITIES: Credit from banks and others 551,742 469,564 561,256 120,312 Current maturities of debentures 34,596 33,904 34,751 7,449 Trade payables 105,187 112,516 93,943 20,138 Jointly controlled entity - current account 15,648 18,265 23,210 4,975 Other accounts payable 101,525 210,009 108,438 23,245 Total current liabilities 808,698 844,258 821,598 176,119 LONG-TERM LIABILITIES: Loans from banks and others 75,464 100,940 76,036 16,299 Debentures - 33,220 - - Customers' deposits for converters, net 16,074 19,251 15,436 3,309 Accrued severance pay, net 3,327 2,716 3,591 770 Deferred taxes 4,695 - 4,695 1,006 Total long-term liabilities 99,560 156,127 99,758 21,384 Total liabilities 908,258 1,000,385 921,356 197,503 SHAREHOLDERS' EQUITY: Share capital 48,901 48,899 48,901 10,483 Additional paid-in capital 375,538 375,538 375,538 80,501 Deferred compensation 354 - 506 108 Accumulated deficit (257,436) (339,913) (281,806) (60,409) Total shareholders' equity 167,357 84,524 143,139 30,683 1,075,615 1,084,909 1,064,495 228,186 (1) Nominal financial reporting beginning January 1, 2004. MATAV - CABLE SYSTEMS MEDIA LTD. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except per share and per ADS data) Convenience translation Three months Year ended ended December Three months ended 31 March 31, March 31 AUDITED UNAUDITED UNAUDITED UNAUDITED 2005 2005 2006 2006 Reported (1) U.S. (NIS In thousands) dollars Revenues 542,968 137,464 139,131 29,824 Operating expenses 481,560 118,120 126,281 27,070 Gross profit 61,408 19,344 12,850 2,754 Selling, marketing, general and administrative expenses: Selling and marketing expenses 53,318 14,618 11,717 2,512 General and administrative expenses *42,487 9,566 10,194 2,185 *95,805 24,184 21,911 4,697 Operating loss *(34,397) (4,840) (9,061) (1,943) Financial expenses, net (50,645) (11,796) (12,146) (2,604) Other income, net 153,526 143 17 4 Income (loss) before taxes on income *68,484 (16,493) (21,190) (4,543) Taxes on income (6,736) 46 36 8 Income (loss) after taxes on income *75,220 (16,539) (21,226) (4,551) Equity in earnings (losses) of investees, net (6,000) 3,282 (3,144) (674) Net income (loss) *69,220 (13,257) (24,370) (5,225) Income (loss) per ordinary share *2.29 *(0.44) (0.81) (0.17) Income (loss) per ADS *4.58 *(0.88) (1.62) (0.34) Weighted average number of shares outstanding in thousands 30,222 30,221 30,223 30,223 Weighted average number of ADSs outstanding in thousands 15,111 15,111 15,111 15,111 Operating income (loss) *(34,397) (4,840) (9,061) (1,943) Net of the effect of proportional consolidation (4,130) (1,029) (1,037) (222) Depreciation and amortization (including income from amortization of deposits for converters) 136,672 33,796 33,778 7,241 Memo EBITDA(**) - not including proportional consolidation *98,145 27,927 23,680 5,076 (1) Nominal financial reporting beginning January 1, 2004. (*) Restated. (**) EBITDA is presented because it is a measure commonly used in the telecommunications industry and is presented solely in order to improve the understanding of the Company's operating results and to provide further a perspective regarding these results. EBITDA, however, should not be considered as an alternative to operating income or income for the year as an indicator of the operating performance of the Company. Similarly, EBITDA should not be considered as an alternative to cash flows from operating activities as a measure of liquidity. EBITDA is not a measure of financial performance under generally accepted accounting principles and may not be comparable to other similarly titled measures for other companies. EBITDA may not be indicative of the historic operating results of the Company. Nor is meant to be predictive of potential future results. Reconciliation between the operating profit in the financial statements and EBIDTA is presented in the attached summary financial statements. DATASOURCE: Matav - Cable Systems Media Ltd. Contact: Tal Peres, CFO of Matav Cable Systems, +972-9-860-2221; or Ayelet Shaked Shiloni of Integrated IR, Telephone US, +1-866-447-8633, or Israel, +972-3-635-6790, , for Matav Cable Systems

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