Matav Reports Financial Results for the First Quarter of 2005

Matav Reports Financial Results for the First Quarter of 2005

NETANYA, Israel, May 25/PRNewswire-FirstCall/ -- Matav-Cable Systems Media Ltd. (Nasdaq: MATV), a leading Israeli provider
of digital cable television services, today reported first-quarter 2005
financial results. Revenues for the first-quarter reached NIS 137.5 million
(US$31.5 million) compared with NIS 147.6 million (US$33.9 million) for the
first quarter of 2004 and NIS 140.4 million (US$32.2 million) for the fourth
quarter of 2004. The decrease in revenues is a result of increased
competition in the Israeli multi-channel television market as evident in
Matav's certain subscriber loss in the period. However, Matav reported an
increase in Internet subscribers reaching over 95,000 subscribers to date.

Matav's financial results are not consolidated with Hot Telecom (Matav's
telephony & corporate data joint partnership with the two other Israeli cable
companies). Hot Telecom's revenues in the first quarter reached NIS 6.5
million (US$1.5 million), as compared to NIS 9 million (US$2 million) for the
entire year 2004. Matav's part in Hot Telecom's revenues for the first
quarter was NIS 1.7 (US$0.4 million). As of now, over 13,000 subscribers
joined this brand new telephony service.

First-quarter operating expenses decreased to NIS 118.1 million (US$27.1
million) from NIS 120.3 million (US$27.6 million) in first-quarter 2004. The
decrease in operating expenses is mainly due to lower depreciation costs and
content expenses. This decrease was partially off-set by an increase in other
operating expenses related to the broadening of the Company's activities.

First-quarter gross profit totaled NIS 19.3 million (US$4.4 million)
compared with NIS 27.4 million (US$6.3 million) in first-quarter 2004 and
NIS 21.3 million (US$4.9 million) for the fourth-quarter of 2004.

First-quarter selling and marketing expenses totaled NIS 14.6 million
(US$3.4 million), compared with NIS 14.9 million (US$3.4 million) for
first-quarter 2004. The high level of selling and marketing expenses is
related to the continued competition in the multi-channel television market.

First-quarter G&A expenses decreased by 5.4% to NIS 9.6 million (US$2.2
million) from NIS 10.1 million (US$2.3 million) in first-quarter 2004.

First-quarter EBITDA reached NIS 27.9 million (US$6.4 million) compared
with NIS 36.3 million (US$8.3 million) in first-quarter 2004.

As of March 31, 2005, Matav had 254,157 subscribers, compared with
257,344 at December 31, 2004. During first-quarter 2005, the company's ARPU
reached NIS 201.6 (monthly, including 17% value-added tax) compared to NIS
207.4 in the first quarter of 2004 and NIS 202.7 in the fourth quarter of
2004. The decrease in the Company's ARPU is mainly due to the market share
strategy undertaken by the company since June 2004 until March 2005.

First-quarter financing expenses declined to NIS 11.8 million (US$2.7
million) from NIS 12.3 million (US$2.8 million) in the comparable quarter of
2004. The decrease is attributed to two factors: a reduction in the Company's
net debt and a decrease in interest rates.

Matav's share in affiliated companies' profits for the first quarter of
2005 totaled NIS 3.3 million (US$0.8 million). This includes a profit of NIS
5 million (US$1.2 million) related to Partner Communications and a loss of
NIS 1.7 million (US$0.4 million) related to Hot Telecom. Matav's share in
affiliated companies' profits for the first quarter of 2004 totaled NIS3.6
million (US$0.8 million). In April 2005, Matav exercised its option to
participate in the share buyback of Partner Communications Company Ltd. Matav
sold to Partner 7,783,444 ordinary shares of Partner for a total
consideration of approximately NIS 250 million (US$57.3 million). Matav
expects to recognize on this sale a capital gain (net of tax impact) of
approximately NIS 115 million (US$26.4 million) in the second quarter of
2005. Matav still holds approximately 1.9 million ordinary shares of Partner,
almost all of which are subject to transfer restrictions under Partner's
communications license.

Matav reported first-quarter net loss of NIS 13.3 million (US$3 million),
or NIS 0.44 (US$0.1) per ordinary share, compared with a net loss of NIS 7.0
million (US$1.6 million), or NIS 0.23 (US$0.05) per ordinary share, for the
year-ago quarter.

Matav's Chairman of the Board, Meir Srebernik commented "The first
quarter of 2005 was characterized by continued intense competition in the
Israeli multi-channel television market. During this quarter, as part of our
triple-play strategy, we began to market our integrated offering that
combines: telecommunications, Internet, and television services, under one
platform. In this way, we offer a one-stop shop for all these communication
services. We believe that this is the beginning of a new era in the Israeli
communication market".

"In addition, during the quarter we allocated substantial company
resources in launching three new television services: VoD (video on demand),
high-definition broadcasting, and PVR (personal video recorder). I am happy
to note that we are receiving very enthusiastic responses to these new
services. In particular, we have received a record-high demand for our VoD
service. Looking forward to 2005, I believe that our triple-play strategy
will stimulate continued growth of our revenues, increase customer
satisfaction and loyalty, and therefore our subscriber loss rate will
continue to diminish ".

Management will conduct a teleconference today at 10:00 a.m. U.S. Eastern
Time. To participate, please dial +1-866-860-9642 in the United States and
+972-3-9180610 internationally, several minutes prior to the start of the
conference.

Matav is one of Israel's three cable television providers, serving
roughly 25 percent of the population. Matav's current investments include 1.2
percent of Partner Communications Ltd., a GSM mobile phone company and 10
percent 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:

Ori Gur-Arieh,
Counsel
Matav Cable Systems
Telephone: +972-9-860-2261

Ayelet Shaked Shiloni
Integrated IR
Telephone US: +1-866-447-8633/Israel: +972-3-635-6790
E-Mail: ayelet@integratedir.com

MATAV - CABLE SYSTEMS MEDIA LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

Convenience
translation
December 31, March 31, March 31
2004 2004 2005 2005
AUDITED UNAUDITED UNAUDITED UNAUDITED
Reported (1)
(NIS In thousands) U.S. dollars

ASSETS:

CURRENT ASSETS:
Cash and cash
equivalents 24,250 27,242 1,157 265
Short-term deposit 50 - 50 11
Trade receivables 75,458 83,008 78,807 18,071
Other accounts
receivables 20,010 21,361 21,767 4,991

Total current assets 119,768 131,611 101,781 23,338

INVESTMENTS AND
LONG-TERM RECEIVABLES:
Investments in
affiliates 101,736 72,100 117,992 27,056
Investment in limited
partnerships 1,656 1,597 1,629 374
Rights to broadcast
movies and programs 26,509 45,910 34,887 8,000
Other receivables 601 885 597 137
Investments in other
company - 16,241 - -

130,502 136,733 155,105 35,567

PROPERTY, PLANT AND
EQUIPMENT:
Cost 2,119,060 2,050,836 2,153,126 493,723
Less - accumulated
depreciation 1,293,549 1,188,156 1,328,036 304,526

825,511 862,680 825,090 189,197

INTANGIBLE ASSETS AND
DEFERRED CHARGES, NET 3,101 3,710 2,933 673

1,078,882 1,134,734 1,084,909 248,775

(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
2004 2004 2005 2005
AUDITED UNAUDITED UNAUDITED UNAUDITED
Reported (1) U.S. dollars
(NIS In thousands)

LIABILITIES AND
SHAREHOLDERS' EQUITY:

CURRENT LIABILITIES:
Bank credit 465,339 413,374 469,564 107,673
Current maturities of
debentures 34,005 33,634 33,904 7,774
Accounts payable and
accruals:
Trade 104,282 108,735 112,516 25,801
Jointly controlled
entity - current
account 18,112 18,374 18,265 4,188
Other 201,943 167,240 210,009 48,156

Total current
liabilities 823,681 741,357 844,258 193,592

LONG-TERM LIABILITIES:
Loans and debentures
(net of current
maturities):
Loans from bank and
others 101,457 126,056 100,940 23,146
Debentures 33,201 66,101 33,220 7,618
Customers' deposits
for converters, net of
accumulated
amortization 20,279 24,974 19,251 4,414
Accrued severance pay,
net 2,483 2,503 2,716 623

Total long-term
liabilities 157,420 219,634 156,127 35,801

SHAREHOLDERS' EQUITY:
Share capital 48,899 48,893 48,899 11,213
Additional paid-in
capital 375,538 375,527 375,538 86,113
Accumulated deficit (326,656) (250,677) (339,913) (77,944)

Total shareholders'
equity 97,781 173,743 84,524 19,382

1,078,882 1,134,734 1,084,909 248,775

(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
Year months
ended ended
December Three months ended
31 March 31, March 31
AUDITED UNAUDITED UNAUDITED UNAUDITED
2004 2004 2005 2005
Reported (1) U.S. dollars
(NIS In thousands)

Revenues 584,564 147,637 137,464 31,521

Operating expenses 472,488 120,265 118,120 27,086

Gross profit 112,076 27,372 19,344 4,435

Selling, marketing,
general and
administrative expenses:
Selling and marketing 63,676 14,886 14,618 3,352
General and
administrative 45,391 10,115 9,566 2,194

109,067 25,001 24,184 5,546

Operating income (loss) 3,009 2,371 (4,840) (1,111)
Financial expenses, net (50,333) (12,257) (11,796) (2,705)
Other income )expenses),
net (42,680) (758) 143 33

Loss before taxes on
income (90,004) (10,644) (16,493) (3,783)
Taxes on income 7,281 - 46 11

Loss from operations of
the Company and its
subsidiaries (97,285) (10,644) (16,539) (3,794)
Equity in earnings of
affiliates, net 14,301 3,639 3,282 753

Net loss (82,984) (7,005) (13,257) (3,041)

Loss per ordinary share (2.83) (0.23) (0.44) (0.10)

Loss per ADS (5.66) (0.46) (0.88) (0.20)

Weighted average number
of shares outstanding in
thousands 29,360 30,215 30,221 30,221
Weighted average number
of ADSs outstanding in
thousands 14,680 15,108 15,110 15,110

Operating income (loss) 3,009 2,371 (4,840) (1,111)
Net of the effect of
proportional
consolidation (2,280) (2,044) (1,029) (236)
Depreciation and
amortization (including
income
from amortization of
deposits for converters) 138,915 35,956 33,796 7,750
Memo EBITDA(*) - not
including proportional
consolidation 139,644 36,283 27,927 6,403

(1) Nominal financial reporting beginning January 1, 2004.

(*) 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 period or
as an indicator of the operating performance of the Company. Similarly,
EBITDA should not be considered as an alternative to cash flow from operating
activities or 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 it 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.

Source: Matav - Cable Systems Media Ltd.

Ori Gur-Arieh, Counsel, Matav Cable Systems, Tel: +972-9-860-2261, Ayelet Shaked Shiloni, Integrated IR, Tel US: +1-866-447-8633/Israel: +972-3-635-6790, E-Mail: ayelet@integratedir.com

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