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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