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     6-K

CARTER LEDYARD & MILBURN LLP
Counselors at Law

570 Lexington Avenue

New York, NY 10022

(212) 371-2720

     2 Wall Street

New York, NY 10005-2072

—

Tel (212) 732-3200

Fax (212) 732-3232

1401 Eye Street, N.W.

Washington, DC 20005

(202) 898-1515

July
20, 2005

VIA EDGAR

Mr. Larry Spirgel

Assistant Director

Division of Corporation Finance

Securities and Exchange Commission

100 F Street N.E.

Washington D.C. 20549

                      Re:
Gilat
Satellite Networks Ltd.
                        Form 20-F for the Fiscal Year
Ended December 31, 2004
File No. 0-21218

Dear Mr. Spirgel:

        On
behalf of our client, Gilat Satellite Networks Ltd. (the “Company”), we are
submitting this letter in response to the written comments of the Staff of the Securities
and Exchange Commission (the “Commission”), in a letter to Ms. Tal Payne, Chief
Financial Officer of the Company, dated June 23, 2005 (the “Comment Letter”),
with respect to the Company’s Annual Report on Form 20-F for the fiscal year ended
December 31, 2004. We have repeated the numbered comments below and have provided a
response to each comment.

Capital Expenditures and
Divestitures, page 20

Question

1.
We
note that certain inventory was classified into property and equipment during
                    2002, 2003, and 2004. Please tell us the nature of the
reclassification.

Response

The Staff is hereby advised that
Gilat’s equipment inventory is generally used for sales to our GNS customers.
Additionally, we use some of our equipment inventory for the operation of networks owned
by Spacenet segment entities and some for our research and development laboratories. When
the designation of equipment changes and the equipment is installed in our networks or in
our laboratories, it is reclassified as property.

Critical Accounting
Policies and Estimates, page 45

Question

2.
Please
disclose how you estimate the general allowance for doubtful accounts.

Response

The general allowance for doubtful
accounts relates to past due debts of consumer-type customers and is estimated based on
past industry experience. The Staff is hereby advised that less than 10% of our allowance
for doubtful accounts is made with respect to a general allowance and the remainder is
specific amounts that we consider being doubtful of collection.

Revenues, page 52

Question

3.
Please
tell us and disclose your basis for revenue recognition on the Compartel
                    projects in Columbia and similar projects. In your response, please
address the                     effect of operational milestones as mentioned on page 61.
Refer to paragraph 46                     of SOP 81-1.

Response

        During
the reported period, we were awarded the following major government projects: Compartel
Rural Telephony and Compartel Telecentros which together are comprised of seven contracts,
and GESAC in Brazil. In all of these contracts, we are the owner and operator of the
network and we generated revenues from the “government subsidy” and, in the case
of the aforementioned Compartel projects, from “traffic”, i.e. consumer payment
for use of the network. The vast majority of the revenues from these contracts is
generated from the government subsidy and is recognized ratably throughout the contract
period only; once sites are operational, traffic revenues are recognized based on the
usage of the network.

        The
“operational milestones” referred to on page 61 of the Form 20-F do not affect
our revenue recognition of these projects. The milestones relate to the pace at which the
government subsidy is released to us, such as the completion of site surveys, and
submission of invoices from third party contractors, etc. The Staff is advised that the
rate at which the Company recognizes its revenues for these projects is far slower than
the rate at which the operational milestones are achieved. For example, for the Compartel
II projects, approximately 60% of the subsidy is released to us based upon milestones that
are met prior to the installations of sites and approximately 40% of the subsidy is
released to us during the period in which service is provided. For purposes of further
illustration, as of December 31, 2004, the Company had recognized revenues with respect to
approximately $9 million of the Compartel II projects and had collected more than $36
million in government subsidies.

- 2 -

Gross profit, page 57

Question

4.
We
note your statements that the “consolidation amounts presented above
                    represent effect of unrealized profits derived from the transactions
between GNS                     and Spacenet. Given that Spacenet revenues were lower in
2003 compared to 2002,                     purchases of equipment by Spacenet from GNS
were also reduced significantly. As                     such, the unrealized profits also
decreased.” Please tell us in detail how                     “intercompany” unrealized
profits affected the reported gross profit.

Response

The Staff is hereby advised that on a
consolidated level, “intercompany” unrealized profits have been eliminated. When
reported by segment, Spacenet’s results are presented based upon transfer prices. The
“consolidation” line reflects the intercompany profits that have been realized
in order to adjust the transfer price to Gilat’s cost. The purpose of the disclosure
was to explain the technical process and the related significant decrease in the amounts
from 2002 to 2003. The Company notes the need to clarify this in future filings.

Consolidated Statements
of Operations, page F-5

Question

5.
Please
tell us and disclose in your MD&A how you were able to reduce service
                    cost of revenues. We note that in prior years, service cost of
revenues exceeded                     the related service revenues.

Response

The Staff is hereby advised that we
were able to reduce service cost of revenues by increasing the business efficiency within
the Company. Specifically, our cost of service revenues increased on an absolute US Dollar
basis and decreased as a percentage of service revenues in 2004, due to the following
factors: (i) certain significant expenses were reduced as part of certain restructurings
in 2003, such as transponder capacity costs which were reduced due to the renegotiation of
such agreement with our major provider; (ii) depreciation expenses were reduced due to an
impairment of long-lived assets in 2003 in accordance with FASB 144 (iii) wages and
overhead costs decreased due to a reduction in headcount; and (iv) as described on page 53
of our 20-F, we had higher profit margins and more revenues streams in 2004. In future
filings we will include the above detailed explanation in MD&A.

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Question

6.
We
note that transactions with related parties accounted for approximately 10%
                    of cost of service revenues during each of the last three years. Tell
us and                     disclose the nature of these services.

Response

The Staff is hereby advised that as
is set forth in Note 8(c)5 of our Financials Statements, in all three reporting years, the
nature of the vast majority of the services is transponder capacity (space segment)
purchased from the SES Group. We note further that SES is deemed a related party due to
the membership of one of their executives, Mr. Robert Bednarek, on our board of directors.
As of July 18, 2005, Mr. Bednarek is no longer a board member.

Note 4. Investments in
Affiliated Companies and Excess of Losses over Investments, page F-29

Question

7.
We
note your conclusion that the Company is not the primary beneficiary of Satlynx and
therefore Satlynx should not be considered into the Company’s consolidated financial
statements. Considering that SES Global S.A. is a related party and holds a variable
interest in Satlynx, tell us your consideration of paragraph 17 of FIN 46(R).

Response

We have considered the indicators
(facts and circumstances) stipulated in Paragraph 17 of FIN 46(R) and concluded that SES
Global S.A. (“SES”) and the Company hold an aggregate variable interest that
makes the two together the primary beneficiary of Satlynx, and that within the two, SES is
most closely associated with the variable interest entity, Satlynx. We have based our
conclusion on the following indicators:

a.
Satlynx
has significant commercial obligations to SES, which outweigh any
                    commercial commitments and obligations Satlynx has to Gilat.

Gilat
has an equipment supply frame agreement, with no minimum purchase requirements by
Satlynx. Gilat also has a lease and an option agreement, pursuant to which, Satlynx pays
Gilat a quarterly rent payment in the amount of approximately Euro 0.2 million.

SES
and Satlynx entered into several transponder capacity agreements whereby Satlynx
undertook to lease certain transponder capacity from SES for lengthy periods. The overall
minimum commitment of Satlynx amounts to approximately Euro 74 million.

- 4 -

b.
Based
on an analysis, we found that SES absorbs the majority of the expected           losses
of Satlynx.

The
analysis was based on Satlynx’s business plan and projections. Management applied
probability percentages to the various future projected outcomes and each NPV for a
projected outcome was calculated taking into account the terminal value.

Note 2(k). Long-term
trade receivables, page F-18

Question

8.
Please
provide the disclosures required for receivables that include amounts under long-term
contracts. We note on page 8 that you current backlog of orders consists of long-term
contracts for three to five years. In addition, you indicated in Note 8(j) that you
provide guarantees on installation and operational period of long-term rural telephony
projects … and other projects until operational milestones are met. Refer to Rule
5-02.3(c) of Regulation S-X.

Response

The Staff is hereby advised that that
the following requested disclosure will be added to our future filings:

The following amounts represent the
unbilled amounts of the long–term receivables:

     Year ending December 31,
     In thousands

     2006

     $   12,609

     2007
        8,103

     2008
        4,244

     2009
        820

        25,776

     Unearned interest income
        (2,408
        )

     $   23,368

Generally, we issue invoices solely
based upon predetermined payment dates set forth in our agreements. This relates to
approximately $15 million of the above amounts.  For the remainder of the unbilled
amount, payment is made following routine verification of parameters relating to the
network connectivity.

Note 8.Commitments and Contingencies, page F-36

Question

 9.
We
note that you did not recognize any liability for the guarantees since you expect its
         performance will be acceptable.  Please tell us what is meant by this
disclosure.  It is unclear          to us if you have concluded that these guarantees are
not under the scope of FIN 45.

- 5 -

Response

The Staff is hereby advised that as
described in Note 8j, the Company provides performance guarantees for its own and for its
subsidiaries' performance. As stated in Paragraph 4 of FIN 45 "...the scope of this
interpretation does not encompass indemnifications or guarantees of an entity's own
future performance (for example, a guarantee that the guarantor will not take any certain
future actions...)." As such, the guarantees granted by us are excluded from the scope of
FIN 45. We hereby advise the Staff that the related disclosure will be amended in future
filings to indicate that the Company's performance guarantees are out of the scope of FIN
45.

Note 10. Restructuring of Debts,
page F-43

Question

10.
Tell
us how accounted for the Bank Hapoalim warrant.

Response

The Staff is hereby advised that as
part of the agreement, Bank Hapoalim is entitled to provide the Company with written
instructions to issue a warrant or warrants for the purchase of its ordinary shares. Once
issued to a holder, the warrant is exercisable for a thirty-day period only. The proceeds
paid to the Company from the exercise of each warrant shall be applied to reduce all
future installments of the principal due to the bank, on a pro-rata basis. As such, the
warrant is a non-detachable instrument.

In our accounting for the Bank
Hapoalim transaction and the conversion feature granted, we followed the provisions of
EITF Issue No. 96-19, "Debtor's Accounting for a Modification or Exchange of Debt
Instruments" (EITF 96-19), EITF Issue 98-5 "Accounting for Convertible Securities with
Beneficial Conversion Features or Contingently Adjustable Conversion Ratios" and EITF
Issue No. 00-27 "Application of Issue No. 98-5 to Certain Convertible Instruments".

EITF  96-19   addresses   whether
 an  exchange  or   modification  of  a  debt  instrument  is  considered "substantial",
 and  therefore,  results in a debt  extinguishment.  Under the  consensus,  an  exchange
or modification  of a debt  instrument  with the same creditor is considered  substantial
if the present value of the cash flows under the terms of the new debt  instrument
 differs by more than 10 percent  compared to the present  value of the  remaining  cash
flows under the terms of the original  instrument.  In addition, there is also a
qualitative  aspect to evaluating  debt  modifications.   The  elimination or addition of
a conversion  feature to a debt  instrument is considered to be a substantial
 modification.  As the modified debt included a non-detachable  warrant, it was
considered a substantial  modification and accounted for as a debt extinguishment.

- 6 -

As the fair value of the convertible
debt instrument as of the analysis date approximated the fair value of the original debt
instrument on that date, no charges to the statement of operations was required. In order
to estimate the fair value of the two instruments, we had a valuation analysis performed
by an independent appraiser.

In accordance with EITF 98-5 and
EITF 00-27, we evaluated the existence of a beneficial conversion feature. As the
exercise price of the warrant was set to be $7.5 or higher, while the stock price at the
date of the agreement was approximately $4.5, no beneficial conversion feature was
identified.

The Staff is advised that effective
July 18, 2005, Bank Hapoalim sold its interest in the loan and corresponding rights to a
warrant to a third party, York Capital Management.

Question

11.
Please
tell us why the Hapoalim transaction was not accounted for under SFAS 15.

Response

We concluded  that the Bank Hapoalim
 transaction  should not be accounted for under SFAS 15 "Accounting by Debtors and
 Creditors  for Troubled  Debt  Restructurings."  In  accordance  with EITF 02-04
 "Determining Whether a Debtor's  Modification  or Exchange of Debt Instruments is within
the Scope of FASB Statement No. 15," the first step is to decide if the  company is
 experiencing  financial  difficulties.  As the Company was not experiencing financial
 difficulties,  based on the factors outlined in the EITF, we concluded that the
transactions in issue did not fall under the scope of SFAS 15.

Question

 12.
Considering
that Bank Hapoalim is a 14.8% shareholder, tell us how you considered SAB Topic 5(T)
         in accounting for this transaction.

Response

As further discussed in response to questions 10 and 11, the Staff is hereby advised that since the fair
value of the financial instruments before and after the transaction were approximately equal, no
concession was granted to the Company by Bank Hapoalim. Thus, we believe that SAB Topic 5(T) is not
applicable.

Note 12. Taxes on Income, page F-52

Question

13.
Please
disclose the significant components of your income tax expense.  Refer to paragraphs 45
         and 47 of SFAS 109.

- 7 -

Response

The Staff is hereby advised that the
disclosure referenced in paragraph 45 is provided he