Two bidders have pulled out of the auction for a controlling stake in Israel's state telephone company Bezeq Israel Telecom, throwing the country's largest privatisation into doubt.

Israel Corporation, a domestic holding company, and the British private equity fund Apax Partners have both dropped out of the running.

But Israel's communications ministry said both would be able to rejoin at a future date.

For the moment only three local companies remain interested in the 50.1% stake, which could raise up to $1.5bn (�1bn) for the government.

Resolving problems

Communications minister Reuven Rivlin told Reuters that Apax, the only foreign bidder, withdrew because of political and security concerns and not because of Israel's economy.

He added that he had no plans to delay the sale of Bezeq, which has a monopoly over local phone services.

But in a letter to the government, the head of Israel Corp Yossi Rosen said several issues needed to be resolved including future tariff levels and a property ownership dispute between Bezeq and the government.

Israeli companies Eurocom and Polar Investments are still bidding while a group led by former Bezeq chief executive Isaac Kaul and former communications ministry official Danny Rosenne are reportedly still looking for backers.

Telecoms slump

Eurocom is said to be prepared to pay a 15m shekel (�2m) deposit to get access to confidential company information starting next week.

Another potential bidder is still waiting on the sidelines.

Shamrock Holdings, the investment arm of Walt Disney heir Roy Disney, wants to join the bidding but must first sell its 50% holdings in Bezeq mobile phone subsidiary Pelephone.

The minister said he expected a decision from Shamrock by the end of the week.

Bezeq is one of Israel's largest companies but its sale has been repeatedly delayed by the slump in the global telecoms sector and by internal opposition.