Ladies and gentlemen, thank you for standing by. Welcome to the Ituran Second Quarter 2008 Results Conference Call. All participants are present in a listen-only mode. Following the management’s formal presentation, instructions will be given for the question and answer session. (Operator instructions) As a reminder, this conference is being recorded August 12, 2008. I would like to remind everyone that forward-looking statements for the respective company's business, financial condition, and results of its operations are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated. Such forward-looking statements include, but are not limited to – product demand, pricing, market acceptance, changing economic conditions, risks in product and technology development, and the effect of the company's accounting policies, as well as certain other risk factors which are detailed from time to time in the company's filings with the various securities authorities. You should have all received by now the company's press release. If you have not received it, please call GK Investor Relations at 1-866-704-6710 or 9723-607-4717. I would now like to hand over the call to Mr. Gabriel Frowein [ph] of GK Investor Relations. Mr. Frowien, would you like to begin?

Thank you, operator. Good day to all of you, and welcome to Ituran's conference call to discuss the second quarter 2008 results. I would like to thank Ituran's management for hosting this conference call. With me today on the call are Mr. Eyal Sheratzky, co-CEO, and Mr. Eli Kamer, CFO. Eyal will begin with a summary of the quarter's results, followed by Eli with a summary of the financials. We will then open the call for a question and answer session. I'd like to remind everyone that the Safe Harbor and the press release also cover the contents of this conference call. And, now, Eyal, would you like to begin, please?

Thank you, Gabriel. Welcome, everyone. Thank you for joining us today, and thank you for your interest in our company. Our second quarter was a solid continuation of the improvement we already showed last quarter. We achieved record revenue and strong top line growth, as well as strong improvement in profitability. We are very much seeing the fruits of our investment through last year. Note that, given that we sold Telematics at the end of December last year, myself and Eli will be analyzing the results on a pro forma basis, which focuses on the core business, excluding Telematics and removes Telematics' contribution to last year's results. We believe that this enables investors to better compare Ituran's historical results with current results on a similar basis. We saw strong growth, recording revenue of $35.2 million in the quarter. This represents a year-over-year growth of 45%, which was primarily driven by the continued and strong growth in the subscriber base. We grew by a net 15,000 subscribers during the quarter, which is our quarterly expectation. In Brazil, our services are gaining traction around the country, now that we provide nationwide coverage. In recent months, we have spent significant time and effort building strong relationships with the insurance companies, and we are beginning to see the rewards of this effort now, signing up three new insurance companies since the beginning of this year. Brazil remains a strong growth engine for us. Recent regulation requiring all new cars from July 2009 to include location technology is becoming a growth engine. And, as one of the leading suppliers of this technology in the country, combined with the relationships we have and are continuing to cultivate, we see ourselves in a prime position to capitalize on this. In Israel, new car sales have been robust…

Thank you, Eyal. As Eyal said, I will be using pro forma numbers which exclude the contribution of Telematics to Ituran in 2007. Revenue for the second quarter of 2008 reached $35.2 million. This represents a 45% increase compared with the pro forma revenues of $24.2 million in the second quarter last year. Revenue breakdown for the quarter was $21.8 million coming from subscription fees from our location-based services, which shows a year-over-year growth of 42%, and $13.3 million coming from product sales, which showed a year-over-year growth of 51%. The geographic breakdown of revenues in the quarter was as follows – Israel 55%, Brazil 34%, United States 3%, Argentina 8%. In terms of subscriber numbers, we reached 479,000 as of the end of June, a net increase of 15,000 in the last quarter. Gross margin in the quarter was 47%, compared with pro forma gross margin of 43% in the second quarter of 2007. Operating profit for the second quarter of 2008 was $6.8 million, or 19.3% of revenues, compared with pro forma operating profit of $4 million, or 16.5% of revenues in the second quarter of 2007. EBITDA for the quarter was $9.3 million, 26.4% of revenues, compared to a pro forma EBITDA of $5.5 million or 22.6% of revenues in the second quarter of last year. As Eyal explained, we had a financial expense in the quarter of $2.3 million as compared with a pro forma financial income of $691,000 in the second quarter of last year. The decrease was a result of the strong devaluation of the U.S. dollar against the company's functional currency in Israel, the Israeli shekel. GAAP net profit was $2.5 million in the second quarter of 2008, or 7.1% of revenues, compared with a pro forma net profit of $3.1 million, 12.9% of revenues, in the second quarter of 2007. Fully diluted GAAP EPS in the second quarter of 2008 were $0.12, compared with $0.13 in the second quarter of 2007. Excluding the above-mentioned financial charge, net profit in the quarter was $4.3 million, or 12.2% of revenue, and fully diluted EPS was $0.20. At the end of the quarter, we had 21.2 million in fully diluted shares, but our average fully diluted number of shares for the quarter was 21.6 million. The difference is due to the shares that we bought during the quarter. During the quarter, we repurchased 700,000 shares for a total of $8.9 million. Cash flow from operations during the quarter was $5.3 million. Including the above-mentioned financial charge, cash flow from operations was $7.8 million. And, with that, I would like to hand you back over to Eyal. Eyal?

Thank you, Eli. In summary, the second quarter of 2008 was another great quarter with strong growth and profitability, demonstrating the reward of our efforts and investments of last year. Given our business model, based on recurring revenues and operating leverage, I expect that we will continue to show continued growth in revenues and profit for the coming future. As we've shown by leveraging our cash position to buy back our own shares, we are very much focused on sharing the reward of our success with our shareholders, and we hope to continue to share our success with our shareholders through the coming years. And, with that, I would now be happy to take your questions. Operator?

Thank you. (Operator instructions) The first question is from Maynard Um of UBS. Please go ahead. Maynard Um – UBS: Hi, thanks. Just a few questions, if I could. The 15,000 net adds was a little bit lower than last quarter. Can you just talk about the different trends that impact this quarter to quarter? And is 15,000 to 20,000 still a good quarterly range there – seasonality and the issues? Thanks. And then I have a couple more.

Actually, I would like to remind the audience that, last conference call after Q1; we said that we are expecting a range of 15,000 to 20,000. And the first quarter was closer to the high end of the range, and this quarter, we are closer to the low end. I think that the rhythm is between these two. And I still believe that this range is conservative, and this range describes right what should we average annual net new additions. Maynard Um – UBS: Okay. Thanks. And, then, from a G&A perspective, we saw a pretty big increase there. Any cause to that? Should we expect that to stay at those elevated levels?

The G&A in Q2 2008 was $7.2 million compared with $6.1 million in the first quarter of 2008. The increase in the expense was mainly due to the devaluation of the U.S. dollar against the Israeli shekel. And to remind the audience, the exchange rate of the U.S. dollar decreased 6% in the second quarter of 2008. And, in the quarter, we increased our expenses of labor costs worldwide. Maynard Um – UBS: Okay. And then, just looking at CapEx, was there the same issue there? CapEx was much higher than the normal run rate. I guess, what's the CapEx being spent on? Should we expect that to continue in the coming quarters?

I would like to give more details regarding this CapEx because I am expecting that this high number will continue to be the numbers of the coming quarters, and this is because of the change of the method – of the structure – of selling units to the insurance companies in Brazil. The industry in Brazil, as well as the needs of the insurance companies, is not to buy the hardware to their balance sheet but to lease it from the service providers, quite similar to the solo operators' way of selling the hardware. In that case, the way that it's integrated to the financial report – to the accounting policy is that, instead of sell the hardware and then charge the subscribers fees as a revenue, we now hold the hardware as an asset in our balance sheet, and we lease it to the insurance companies under contracts of between two to three years. So, actually, the way that it shows on accounting under the U.S. GAAP accounting policy is that it's like any other asset. So it's only a shift from selling the unit to lease it. So the definition is that we are actually increasing the assets. So, when we do it, our CapEx has jumped since we are growing very, I would say even the term, dramatically in net new subscribers in Brazil compared to last year and to last year's – this is the way that it appears. As I said, we signed new three contracts as well as a shift from two major insurance companies. We shift the model from selling the hardware to leasing the hardware. All of this happened from beginning of this year, and it is the first time that it's become more dramatic in the CapEx issue is in Q2. But, actually, it's the timing. If I would like to illustrate how the future should look like, it's like, in two years from now, the CapEx probably will stay the same or will decrease, but the cash flow will increase. It's only timing. By the way, when we charge the leasing as part or as additional fees for the monthly fees, of course, we are calculating all the interest and all the financial means to receipt, so, in the end of the day, it's only a timing issue between higher CapEx and high cash flow in the future. Maynard Um – UBS: So you're recognizing the revenue –? Are you amortizing the recognition of the revenue over this two- to three-year contract?

Exactly. Maynard Um – UBS: Okay. So your revenues actually –

Not the total revenue, only the revenues that allocate to the hardware – only the revenue – it's not the revenue – only what is related to the unit – to the hardware – that is still in our balance sheet. It's part of the revenues. Maynard Um – UBS: Right. But, I guess the point is that when – the prior model was that, when you sold it, you recognized all of the revenue in the quarter. Now that you're leasing it, I guess it's now, instead of you recognizing hardware revenue, you're including this in your – as a part of the monthly fee? Is that the right way to think about it?

This is the right way. Maynard Um – UBS: Okay. So the net impact is to the overall revenues is that revenues actually could end up being a little bit lower because of that amortization.

Exactly. But, on the other hand, if you consider the payments that attach to the monthly fees, so the ARPU is a little bit increased, again because of this situation. Maynard Um – UBS: Right. Okay. And in terms of depreciation, is there any depreciation on the P&L, since you're not actually selling this and ownership is yours, related to it?

Yes, of course.

Of course. Maynard Um – UBS: Okay. And how much of that is embedded into the second quarter? And, I guess, where is that showing up in your OpEx line?

I don't have a specific number in front of me, but, by definition, the amortization will increase quarter over quarter in the future, as long as this policy in the Brazilian market will continue. If you want, in two minutes, I can give you the answer. Maynard Um – UBS: And then just a last one for me, I guess, while you – if you can look that up, is just on the three agreements you have with the insurance companies in Brazil. Can you just talk a little bit more about those? Aside from the leasing, are they exclusive? Any details you can give related to that would be helpful. Thanks.

First of all, there is no exclusivity to anyone in the market because; otherwise, we are limiting our markets. We are working with insurance companies. Everybody knows in the market that we work with insurance companies. So there is not any exclusivity from our part. From the other part – so, actually – practically, I can say that in some of them we have exclusivity, but with most of the contracts, we don't have it legally. We are not giving the name because of commercial reasons. But we succeed to increase our penetration in the market. And, since we are offering our services on a nationwide basis in Brazil, it allows us to penetrate to new insurance companies that are not working only in Sao Paulo or in Rio. Of course, we see it in the growing net subscribers in Brazil. Maynard Um – UBS: Okay. Thank you.

The next question is from Paul Coster of JPMorgan. Please go ahead. Paul Coster – JPMorgan: Thanks. First of all, on the churn rate that you're experiencing as we head into this slowdown globally – is the churn rate changing materially; and, if so, in which countries?

The answer is that it's not material. But, when we decide to pay attention to this part of the business, one of the goals was that it will not increase in the future, and this goal, we achieved. Second, we even succeeded to decrease the churn, but it's not material. Paul Coster – JPMorgan: As we sort of head into this slowdown, if people start to buy second-hand cars in preference to new cars on a greater percentage basis, what actually happens for you in that second-hand market? Is it just simply not addressable, or is that an opportunity? So, can you just describe how it works?

The second-hand market – if I will divide it to two main geographies for our business today, which is Brazil and Israel, it's a little bit different characteristic of the market. In Israel, even if, for example, you are buying – or, you are selling your car and the next buyer, which has now bought the second-hand car, you still get discount or still have some mandatory influence by the insurance company. So you will continue to be like a customer. But, after an average of seven or eight years, it doesn't matter whether the car is sold again or you as the long-term owner of the car do not get additional discounts because the car becomes much cheaper – a lower price – and the insurance company no longer has a risk with this car. So, usually, you are not motivated to stay a customer. But, based on our offers for additional added-value services, bundling some navigation systems – we succeed in adding operators to our customer support center; we succeed to reduce it a little bit. But this is the cycle. In Brazil, it's a little bit different because we are depend mainly, at least in 70% of the total customer base that we own in Brazil – we depend on the insurance companies because they have the communication and the contact with the end user. We are considering insurance companies as our direct customers. And, since they changed their discounts and policy and actuarial needs, it might be a situation that, after a year, you as the car owner will decide to leave this insurance company and to go to another one. So then we have to see if we can keep you as a client. Or maybe there is no relationship with the new insurance company that you decide to go. So the churn in Brazil is a little bit more volatile than compared to Israel. But this is the two cycles of customer churn in these two markets. Paul Coster – JPMorgan: I have a couple more quick questions. The mandate in Brazil – What's happening with the OEM market? And is that a threat? Can you explain how you're going to get through that?

First of all, I give you Ituran management policy. This is only an advantage. And now I will extend why. Ituran, and specifically by selling Telematics, was done based on our strategy to focus on being a service provider. The new regulation in Brazil says that every car that will come to the road from July 2009 will have to be equipped with a location solution. And add to this that the supplier of the hardware is forbidden from providing the service. And you can see this in the results; you can see it in our trend. Since we're less interesting in being a provider of hardware or selling hardware – the gross profit is lower, the competition is higher, our operating leverage model is much more excellent for us than selling hardware – it puts us in a position that we can offer now the car manufacturers to convert the problem through a solution, because, for them, the government came and say now that they have to attach – in the manufacture to attach additional costs because of the hardware. Now we offer them to enjoy selling the service itself. They cannot do it with Siemens or a Motorola or a Delphi, and they will do it probably – the end users will do it probably with service providers. And, in this niche or segment of being a service provider, we are one of the leaders of the Brazilian market. So I'm not saying that this is going to happen on July 1, 2009, because it will be a process. But, once the majority of the cars on the Brazilian market will have already the hardware, so then we, as well as other competitors, can offer the service. So the total cost for the end user will not include the hardware. So it will expand the market for us. So this is the end of this picture. Of course, today, it's not yet started. But it's become – it's influenced the market reaction. We see it in the market, and we show it by results. The market is more mature and more interesting in finding solution and is looking for providers. And we, I think, only can enjoy from it. Paul Coster – JPMorgan: My last question, Eyal. Everyone's getting comfortable now with this linear growth story, the visibility, and the margin expansion; and it's all good. But if there's more growth to be had, where's it going to come from? Is it acquisitions? New geographies? What's your latest thinking there?

Paul, I think, as you said, we have, I think, a very impressive growth if we are comparing oranges to oranges without Telematics that we already saw. So it's not only double-digit growth; it's even stronger than this. It's almost the high end of the double digits. And I think that organically we can continue. I don't want to provide any guidance, but I think that we are in the right markets at the right time with the right solution. Of course, based on, I think, a strong balance sheet and based on our, at least, wish strategy, of course, that we will add to the organic growth acquisitions, as long as we can make the right acquisition with the right price with the right geography. I know that up until now, besides two acquisitions here in Israel of Mapa and E.R.M., we didn't prove yet any big and strategic acquisition. But to do more than what we tried to do, I can't promise. Paul Coster – JPMorgan: Okay. Thank you.

The next question is from Jonathan Ho of William Blair. Please go ahead. Jonathan Ho – William Blair: Good morning, guys. Great quarter. Can you give us a little bit of color on the ARPU jump this quarter and maybe your expectations for the ARPU for the balance of the year?

First of all, linearly, we are offering additional services, like the Mr. Big in Israel and other navigations in Brazil. But I must admit that this is not the only case. There are two things that influence growing of the ARPU. First is the (inaudible). First, as I said before, from January 2008, we increased the price to our customers in Israel – $1.5 per customer. Add to this that the Brazilian real, which is the currency that we are working in Brazil, is also become stronger compared to the dollar, and our reports are in dollars, so we enjoy it. So these three main items are increasing our ARPU. And there is another aspect. Since we are selling in Brazil, we are changing from selling hardware to a lease policy. We add – we are not selling the hardware; we are charging additional payment to the monthly fee. But the way that this appears in the financial reports, it's part of the subscriber fees. So this is also influence the ARPU. So we have to take into consider that this is three or four different reasons that allow us to show higher ARPU. Jonathan Ho – William Blair: Where do you potentially see this heading once all these factors are played into – maybe this year?

I'm sorry. I didn't understand that question. Can you repeat? Jonathan Ho – William Blair: Where do you see the ARPU heading in terms of on a dollar basis? Where do you think it can go towards?

I think that it should be, without, of course, any radical changes that we cannot expect – it should reach to between $15 to $16 per subscriber. Jonathan Ho – William Blair: Great. And, in terms of just the gross margin for the wireless services, we saw a decrease sequentially. Can you talk a little bit about what's happening there? And is currency playing a factor on that side?

The decrease in the gross margin was mainly due to the devaluation of the U.S. dollar against the Israeli shekel. This is the main reason for the decrease in the gross margin.

So, based on the new policy of not being exposed even in Israel, we believe that the change will be a positive change. And it should increase instead of decrease. Jonathan Ho – William Blair: Great. Thank you.

The next question comes from Ziv Tal of Oscar Gruss. Please go ahead. Ziv Tal – Oscar Gruss: My question is regarding the competitive landscape, especially in Brazil. There's been quite a significant merger there lately and – how do you see the competitive landscape over there?

I will answer specifically for the new merger because, beside this news, nothing changed. The main players are still, beside the new Zenix merger, it's Ituran and LoJack. Now we have another – I wouldn't call it another player. It's the same players that merged together. But the most important issue, just to give the audience some description, a private equity fund bought five companies, and now they are calling it one company. Each one of them used to be a very small company in very, very different segments from each other. The majority of those companies deal with fleet management, which, for Ituran, is not the primary services that we are offering. So, of course, fleet management is part of the business of Ituran. And, in that case, of course, this merge is a little bit expanding the competition in this segment. But in the segment of the SVR, which is more than 90% of our results of our operation and our focus, this is not really, at least not now, a threatening player, and we're welcoming it to the market. But all of them are already in the market. Maybe it will acquire synergy; maybe they will save some expenses. But it's not a different player or not a new player. So we are not seeing on a daily basis – and, just as an example, we just signed three new contracts after the Zenix merger. So we're saying that in the SVR business we do not feel and do not expect the competitive landscape to change. Ziv Tal – Oscar Gruss: Okay. And a few words about your operations in Argentina. What's happening over there? Have you got any plans for it?

We are in Argentina, as we show – three years, and I believe it's continued this year, we are growing almost on the same level year over year. We are working in Argentina as we did in Brazil a year ago. We are working on adopting also a GPS/GPRS solution and start promoting it out of the Buenos Aires area, where we are currently operating only in this city. I must add to this some information that it's – again, also, during the last three years – the car theft rate in Argentina decreased three or more than three years ago when the new President came and made some macro changes with the crime. So, on one hand, we are already four years with this situation, and we succeed to grow although this is the case. But, of course, the potential – as long as the car theft rate is in a lower range, the potential to grow dramatically more than we are achieving now is only based on becoming more nationwide. And then we have to wait and see how dramatic it will be. Ziv Tal – Oscar Gruss: Okay. Thank you.

The next question comes from Kevin Wilder of Minuteman Capital. Please go ahead. Kevin Wilder – Minuteman Capital: I had a couple of follow-up questions on the Brazilian market; first, I guess a housekeeping question about where exactly the lease revenue is getting booked. Is that being booked in the service revenue line or the product revenue line – for the fees related to the hardware lease to the insurance companies?

It's converted from selling the units that appear in the hardware revenues now when it becomes on a lease basis. So it appears in the service revenues. Kevin Wilder – Minuteman Capital: Okay. Following up on the Brazil market development, the law that requires the hardware to be installed in cars sold there starting next July – does that mandate that consumers all sell parts of a service contract or not – just have the hardware in the car?

No. The regulation does not determine or is not mandating to have to buy the service. But, by definition, if today a customer has to pay $400 or $500 at least for the unit, plus $15 per month, when he will have to judge whether he wants to pay only the $15 and he doesn't have the cost of the $500 or $1,000, of course, from the beginning, it will expand the market. We don't know to evaluate whether it will happen in the first months or after a year or two years when the market will get used to it. But, of course, it will be very positive to affect the market. And the customers, whether it's insurance companies that will no longer have the cost of the hardware. Second, the uninsured population that today they are calculating the cost of the hardware. We no longer need to calculate it. And, third, the car industry that will have to find some way for additional income, because they are increasing the cost in the manufacturer. All these three segments, I think, will be much more enthusiastic or much more interested in looking for the service itself. Otherwise, it's only a unit in the car that everybody paid for it but nobody enjoyed from it. Kevin Wilder – Minuteman Capital: Right. And a final question. How is Ituran going to serve the compatibility with the OEM devices? If they're in the cars, how are you going to ensure the devices in the cars are compatible with Ituran's technologies? There's a few different technologies in the marketplace.

There is a standard – under the law, there is technology standards for the units that includes compatibility that will not create limitation for providing the service. We already explore what it is. And, as long as our technician and engineers and IT people – it shouldn't be a problem, and compatibility is okay. Kevin Wilder – Minuteman Capital: So these devices will be compatible with all the different competing technologies down there or not? Will it be both GPS compatible as well as radio frequency compatible?

No. The hardware will be for sure – the hardware will have to be a GPS/GPRS because it has to be available for every region in the country. So it can't be based on RF because RF requires specific infrastructure. So it will be for sure a GPS/GPRS solution. But this GPS/GPRS – this hardware has to have compatibility with the control centers – with the service provider computers and network. That's what I mean. But, for sure, it will be a GPS/GPRS solution. Kevin Wilder – Minuteman Capital: Okay. Thank you for clarifying that. And, then, one final question on the contracts with the insurance companies that are two- or three-year contracts you mentioned. How does that work if a customer changes insurance companies? What happens to the hardware lease in place with the insurance company if the customer changes before the end of the lease term?

It's not only with these three companies; it's also with historical companies that worked with us and we decide together to change the model from buying the hardware to a lease model. So it includes more than these three customers. And, actually, there are different contracts. But to try to – again, to summarize this situation is that, once the customer leaves this insurance company, the insurance company has all [ph] to install it in a new customer car and continue to pay for us or pay us the – or bring us back the hardware or allow us to contact the customer to collect from him the hardware or the money for the hardware. So it's very diversified between each insurance company. But this is a summary of these three possibilities. Kevin Wilder – Minuteman Capital: Great. Well, thank you, and congratulations on a nice quarter.

The next question comes from Yair Reiner of Oppenheimer. Please go ahead. Yair Reiner – Oppenheimer: First, a question on the change in the charges in Israel – in the monthly charges from shekels to dollars. Near term, is that based –?

Dollars to shekels. Yair Reiner – Oppenheimer: Dollars to shekels. Near term, it sounds like, effectively, it's about a 10% or a 12% increase in monthly charges. Is that correct?

Yes. Yair Reiner – Oppenheimer: Okay. And that should start showing up, I guess, in the current third quarter?

Yes, but I must here give notice. From now on, in terms of accounting translation, we will be exposed only from the accounting translation to the dollar/shekel and vice versa that was until today. And that's why, because, if, for example, the shekel or the dollar now will become stronger and stronger – for example, it will be ILS 4, so we will not see any growth in the revenue. Okay? Yair Reiner – Oppenheimer: Yes, but in terms of operating margin, it should be neutral?

Exactly. Yair Reiner – Oppenheimer: Okay. In terms now of moving a lot of the hardware sales to the LBS charge, will that have a slightly negative impact on gross margins moving forward?

Moving forward, I don't think so, because, anyway, our gross margins on the hardware in the situation when we sell it is anyway quite low. It's between 15% to 20% compared to the ARPU and the gross margin. So I don't think that it will decrease. Yair Reiner – Oppenheimer: Actually, going back to the question of how you charge Israeli customers, what are your competitors doing now, if you can remind us? Do they charge in shekels or in dollars?

Mostly in shekels. Yair Reiner – Oppenheimer: Okay. So you're basically going to be providing –

Anyway, they are charging higher prices than we charge. Yair Reiner – Oppenheimer: So once you institute these changes, your prices are going to be more – look more like the standard prices in the market currently?

Yes. We already did this change, although it will appear from – it started from July 1, but publishing it to the customers and to the market was before that. And the reaction wasn't bad; and this thanks to the situation in Israel that many industries that historically worked attached the revenues to dollars changed because of the weakness of the dollar. I think that we use the situation or the total experience in Israel that people understand the change is something which is okay – something that they can accept. Yair Reiner – Oppenheimer: Okay. Fair enough. A quick question about the U.S., which we generally don't talk about much; it seems like the business there has stagnated or worse. Can you give us a sense of what the U.S. business is doing for the bottom line and what and if are your long-term plans there and whether it may be time at some point to just kind of pull stakes and say there's better opportunities elsewhere?

First of all, at this time, I think that we are a little bit happy that this is not material geography for our operation. But we more seriously think looking forward. Of course, the U.S. market for the future is a very important and interesting market. And we are not giving up yet for this very important market. The way that we are now working is, first of all, we changed the management. And we plan to try to change our operation in the U.S. market. Of course, unfortunately, this is not the right timing to prove it. But we have now changed the management. We want to see whether we can compete more aggressively in the market. We are in the U.S. different than the other markets. We are not concentrating only in SVR. The opposite is right. We are concentrating in fleet management and some solutions that we may have some advantages. But, for the coming short- and even midterm, I wouldn't say that it's going to be material to our results. For the more longer terms, of course, don't forget that part of our – I don't want to use focus – but part of the geographies that we are looking for potential acquisitions, of course, we are not eliminating the U.S. market as one of them. Yair Reiner – Oppenheimer: Great. Thank you and congratulations on the nice results.

(Operator instructions) The next question is from Aribi Riza [ph] of Rothschild [ph]. Please go ahead. Aribi Riza – Rothschild: Great results. I have a few questions. First of all, can you give us more details about the progress of E.R.M. and Mapa?

We are not providing the specific details, but I can give you some very rough statements. Both of them are very, very, very good acquisitions. Both of them growth – of course, both of them are not material numbers by itself, but together and, specifically, after selling Telematics, it's very, very shining results. Both of them are much more than small double digits, both of them growing their profit. And I can explain why. E.R.M. – when we acquired E.R.M. is when we understand that we are converting from only RF technology also to GPS/GPRS and we saw what is going to be the situation, or at least we estimated that the Brazilian market is going to grow. So, from the moment that we acquired E.R.M., it happened. So E.R.M. through Ituran is selling much more than in the past, so we enjoy it. The nature of this transaction is that we enjoy it as the owners of E.R.M. and Mapa, as well. Mapa is a business that required them to invest a lot of money before they get to breakeven. And soon after they get to breakeven, after many years, we make this acquisition. And I think that we realized something that the other companies that compete with us on this acquisition didn't realize. Most of the cellular operators and the cellular handsets will include navigation systems will require GIS. And this is what actually happened in Israel today – more and more handsets integrating with a navigation application. And they need to pay some fees to Mapa. So the timing of the acquisitions was nice and good, and the prices that we paid, I think – between three to five times EBITDA – again, in any measure, it's right, and it's not a very expensive price. So it, of course, helps and influences in our records. Aribi Riza – Rothschild: Okay. Another question. If we put Israel aside, you're charging the other territories in dollars. Can you give us details about the average monthly fee for the subscriber?

First of all, I want to correct you. We are not charging in dollars. We are charging in every country with the local currency. It means that, in Brazil, it's the Brazilian real. In Argentina, it's the Argentinean peso. In Israel now, it's in shekels. So, of course, by doing this, we have to translate it to dollars when we provide the report in dollars. On the other hand, we have – I don't want to say that we have professional hedging by doing it, but, since we have three different currencies – and on the other hand, by the way, the hardware, being sometimes in dollars and sometimes in shekels and sometimes in reals, so we have a typical nature hedging in the business. So we are not very exposed to changes in currencies, but we have some exposure. Aribi Riza – Rothschild: But the average monthly fee is around $13?

No. Today, it's more than this. Aribi Riza – Rothschild: Okay. It's more because of the dollar weakness?

This is part of the reason, yes, and not only in Israel. The dollar, by the way, becomes weakness compared to the Brazilian real much before it happened in the rest of the world, because the Brazilian economy and the Brazilian situation and the Brazilian interest changed. So it's not only to use any headline of recession, for example. Every country has own specific characteristics. Sometimes in one country the local currency is weakening, and in the other countries, it's inflating. So we feel that it's – of course, we cannot control it, but it creates, along with the last ten years of operation, a natural hedge for us. Aribi Riza – Rothschild: Okay. And my last question is about the deal with – the sale of Telematics. You have some line about royalty from future sales in Korea and China. Any progress there?

Up until now, our royalties are very, very, very low. And maybe we make this deal on the right timing and the right price. But, as I said, we are very respecting the buyer, ST from Singapore, for a potential future or a good future with Telematics. And if this will happen, we will enjoy royalties. Currently, it's very, very minor – close to zero. Aribi Riza – Rothschild: Okay. Thanks again.

The next question comes from Garet King [ph] of Triple Hong Capital [ph]. Garet King – Triple Hong Capital: Hi, given the regulation change in Brazil, clearly you see growth from an expansion of your market. But in what ways to do you see the change as an opportunity to increase your market share in the SVR services market in Brazil?

Actually, even if I will eliminate potential of increasing market share, even with having the same market share, still, if the number is that, in every year, instead of 300,000 new subscribers, there is a potential of 4 million. So, even with the same market share, we are growing our results dramatically. Of course, we want always to increase the market share, but this is not the only definition. The only definition is to increase subscriber base and increase ARPU and increase results. I'm not expecting that our competitive landscape will change not in favor of Ituran, but, if it will be in favor of Ituran, I will be happy. Garet King – Triple Hong Capital: Okay. Thank you.

The next question is a follow-up question from Paul Coster of JPMorgan. Please go ahead. Paul Coster – JPMorgan: Yes, thank you. Can you just remind us whether or not you're authorized to make more share repurchases?

We have under the last approval of the Board, we have a very minor – that we didn't use yet, which is about $1 million. And, after that, of course, it depends on the board and the strategy and the needs of the company. But among the $13 million, we still have only $1 million. Paul Coster – JPMorgan: Once I have you on the line, Eyal, what is your vision for the long-term business model here in terms of the operating margins?

I think that, based on the model, which we don't want to change because we believe that this is the right model, I'm expecting that the operating margin will increase. The operating leverage model will make it for us. And, if we look even of the last quarters, so we see that compared to last year, I think it will be even more dramatically in Q3 and Q4 in terms of margins. So it's showing. Paul Coster – JPMorgan: Do you think over a multiyear period you can get to 25% pro forma operating margin?

I don't want to give a specific number. But I really will be realistic. I will say that I'm expecting that, very closely, we will pass the 20%. To reach the 25%, it's very dramatic, and I don't want to take the risk and give this as a guidance now. Paul Coster – JPMorgan: Okay. Thank you.

The next question is a follow-up question from Ziv Tal of Oscar Gruss. Please go ahead. Ziv Tal – Oscar Gruss: Just another follow-up question on the regulation in Brazil. And that's in terms of sales and marketing expenses. Do you expect to increase those expenses as the regulation progresses and it actually starts in order to win additional market share?

If there will be a need to do this, we will do it. But again, I think that the competitive landscape is already under the assumption that there will be good changes based on the regulation, and on the operation, we don't find a situation that we have to be more aggressive or to increase the cost. Ziv Tal – Oscar Gruss: Okay.

There are no further questions at this time. Before I ask Mr. Sheratzky to go ahead with his closing statement, I would like to remind participants that a replay of this call will be available in three hours on Ituran's Website, www.ituran.co.il. Mr. Sheratzky, would you like to make your concluding statements?

Yes. Thank you for joining our call today. I'd like to thank all our employees for their hard work in the quarter, as always. To our investors, I look forward to speaking with you the next quarter. Each one have a good day or a good evening, wherever you are. Thank you very much.

Thank you. This concludes the Ituran Second Quarter 2008 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.