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CORRESP
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     CORRESP

Carter Ledyard & Milburn LLP

Counselors at Law

October
17, 2005

VIA EDGAR AND HAND
DELIVERY

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 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 August 19, 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.

Form 20-F for Fiscal
Year Ended December 31, 2004
Revenues, page 52

Comment:

     1.
           Please refer to prior comment 3. Please cite your basis in the
          accounting literature for your revenue recognition policy on the Compartel
          projects. Please tell us the nature of the government subsidy and tell us how
          you are accounting for the related costs.

Response:

As detailed in our previous response
letter from July 20, 2005, revenues generated from the Compartel II projects are comprised
of (a) revenues from the government subsidy; and (b) revenues from use of the network that
the Company operates (also referred to as “traffic”). The government subsidy is
paid to the Company by the Colombian government in order to compensate it for the low
tariffs set by the government relating to rates at which the Company can charge for use of
its network.

The payment terms for these projects
are as follows: 60% of the subsidy is released to the Company upon the achievement of
certain operational milestones, such as, site surveys, network planning and design of the
network and installations of the sites. With respect to this 60% of the subsidy, all of
the milestones were achieved and payments made at the implementation stages of the
projects. The remaining 40% of the subsidy is released to the Company during the period in
which service is provided. Such services include operation and maintenance of the network
by the Company during the life of the project

Subsidy revenues for this project
were recognized over the life of each operational site, based on SAB 104, which gives a
reference to Concept Statement 5 paragraph 84(d), that states “if services are
rendered or rights to use assets extend continuously over time (for example, interest or
rent), reliable measures based on contractual prices established in advance are
commonly available, revenues may be recognized as earned as time passes.”

Revenues generated from traffic,
whether by consumers or by other network operators, is accounted for based on usage, in
accordance with the SEC view on variable fee arrangements.

All costs related to the
establishment and set-up of the network are capitalized and depreciated at the same rate
as the subsidy revenues are recognized over the life of the project. Operational and
maintenance costs are charged as expenses as incurred.

Note 10. Restructuring
of Debts, page F-43

Comment:

     2.
           Please refer to prior comment 10. It is not clear from your response
          whether you analyzed the cash flows of the new debt instrument and the remaining
          cash flows of the old debt on a present value basis. The guidance in EITF 96-19
          requires the 10 percent test based on a present value analysis and does not
          allude to “qualitative” aspects (i.e., non-detachable warrant) in
          evaluating debt modifications. Please revise or advise.

2

Response:

Summary:

The Company’s evaluation of the
2004 debt modification was premised on the fact that a convertible debt instrument is
fundamentally different than a non-convertible one. That view was based on discussions
with the Company’s auditors and a consideration of their published guidance relating
to the modification or exchange of convertible debt which states: “that there is
also a qualitative aspect to evaluating debt modifications. For example, we believe the
elimination or addition of a conversion option to a debt instrument would be considered
substantial and should be accounted for as an extinguishment”.

Based on this
view, the Company reviewed the original accounting treatment for the extinguishment and
the omission of any gain or loss in the Company’s income statement. The Company has
concluded that extinguishment accounting should continue to be utilized, the fair value of
the new loan with Bank Hapoalim should be recorded and the book value of the old loan
should be removed from the Company’s financial statements. The “fair value”
of the new loan was determined by calculating the present value of the outgoing cash flows
related to the new loan (including the value of the new warrant /conversion feature as
discussed below). In determining its original extinguishment accounting, the Company
defined the book value of the old loan as the old loan’s remaining recorded principal
balance but inadvertently excluded from its analysis the debt’s accrued interest that
arose in connection with the accounting for the original loan as a troubled debt
restructuring in accordance with SFAS No. 15-Accounting by Debtors and Creditors for
Troubled Debt Restructurings (SFAS 15) in March 2003.

The inclusion of the debt’s
accrued interest creates an “excess” (of approximately $16 million) of book
value over fair value which, essentially by definition, is equal to the recorded book
value of the accrued interest. Based on this updated analysis, the accrued interest should
have been eliminated as of April 2004 and thus the original accounting will be restated.
Given that Bank Hapoalim is a related party, the extinguishment gain from the transaction
will need to be recorded as an equity contribution (rather than a gain recorded in the
income statement). Future interest accruals arising under the new loan agreement will need
to be expensed as incurred in future periods’ income statements. The fair value of
the new loan is unchanged in the original versus restatement accounting.

In light of the correspondence to
date on this point with the Staff, the Company has not submitted restated financial
statements pages or revised the Form 20-F at this time pending any further inquiries on
the Company’s proposed accounting treatment from the Staff. Upon the conclusion of
the matters discussed in this letter, the Company proposes to submit drafts of all changed
pages for the Staff’s consideration and review.

3

Analysis:

Immediately before the April 2004
modification of the terms of the old Bank Hapoalim loan, the carrying value of the old
loan was as follows:

     o

     Principal - $71,400,000

     o
     Accrued interest arising from the March 2003 troubled debt restructuring accounted for in accordance
with SFAS 15 - $16,100,000

The April 2004 modification of the
loan’s terms included: (i) the addition of Bank Hapoalim’s right to require the
Company to issue a non-detachable warrant to convert the outstanding loan balance into
varying amounts of common shares of the Company depending upon the timing of the
conversion (the “warrant/conversion option”); (ii) a reduction of the interest
rate; and (iii) deferral of a portion of two of the original loan’s principal
payments. The original loan and April 2004 modification of terms are both discussed in
Note 10 – Restructuring of Debts in the Company’s Form 20-F for the year ended
December 31, 2004. The new loan terms were incorporated into an “Amendment to the
Loan Agreement with Bank Hapoalim dated April 1, 2004” (the “new loan
agreement”) and that document was filed as Exhibit 4.3 to the Company’s Form
20-F. Appendix A of the new loan agreement delineates the terms of the non-detachable
warrant/conversion option. A copy of the new loan agreement is attached for your
convenience.

When determining the accounting for
the new loan, the Company analyzed the indicators of “financial difficulties” in
paragraphs 9 and 10 of EITF Issue No. 02-4 – Determining Whether a Debtor’s
Modification or Exchange of Debt Instruments is within the Scope of FASB Statement No. 15
and determined:

     o

     The Company was not in default on any of its debt.

     o
     The Company had not declared nor was it in the process of declaring bankruptcy.

     o

       There was no significant doubt as to whether the Company could continue as a going concern.

     o
     The Company did not have securities that had been delisted, were in the process of being delisted or under threat of being delisted from an exchange.

     o

     Based on estimates and projections that only encompass the current business capabilities, the
              Company did not  forecast that its entity-specific cash flows will be insufficient to service
              the debt (both interest and principal) in accordance with the contractual terms of the existing
              agreement through maturity.

     o
     The Company did not have any indication whether it would have been able to obtain funds from sources
              other than existing creditors since it made no such attempt.

Accordingly, the Company concluded it
had not experienced “financial difficulties” and SFAS 15 was not applicable.

In performing its analysis, the
Company concluded the following amounts were approximately equal: a) the recorded
principal balance of the old loan; b) the “fair value” of the old loan; and c)
and the “fair value” of the new loan. Thus, notwithstanding the chronological
proximity of the March 2003 loan restructuring to the April 2004 loan amendment, the
Company did not believe paragraph 12 of EITF 02-4 applied since according to paragraph 6
of EITF 02-4, such criterion are only relevant if one determines that a company is having
financial difficulties as per paragraph 9.

4

Having determined the modification of
the loan agreement was not a “troubled debt restructuring”, the Company
correlated its fact pattern with the scope of EITF Issue No. 96-19 – Debtor’s
Accounting for a Modification or Exchange of Debt Instruments. The Company understands
EITF 96-19 is an interpretation of paragraph 16 of SFAS 140 – Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities which
states:

16.

A debtor shall derecognize a liability if and only if it has been extinguished.
          A liability has been extinguished if either of the following conditions is met:

a.

The debtor pays the creditor and is relieved of its obligation for the liability. Paying the
creditor includes delivery of cash, other financial assets, good or services or
reacquisition by the debtor of its outstanding debt securities whether the securities are
canceled or held as so-called treasury bonds.

b.

The debtor is legally released from being the primary obligor under the liability, either
judicially or by the creditor. (footnotes omitted)

The Company also understands EITF
96-19 addresses potential (but not all) fact patterns where there could be an in-substance
defeasance of debt, with the resultant use of extinguishment accounting, even though the
debt did not meet the exact criteria defined in par. 16 of SFAS 140.

In response to the Staff’s
comment the Company notes that according to EITF 96-19 a debt instrument is
“substantially different” if:

…the
present value of the cash flows under the terms of the new debt instrument is at least
10% different from the present value of the remaining cash flows under the terms of the
original instrument.

EITF 96-19 also notes:

    -        Recourse
or nonrecourse features.

    -        Priority
of the obligation.

    -        Collateralized
(including changes in collateral) or noncollateralized
features.

    -        Debt
covenants and/or waivers.

    -        The
guarantor (or elimination of a guarantor).

    -        Option
features.

5

If
the terms of a debt instrument are changed or modified in any of the ways described above
and the cash flow effect on a present value basis is less than 10 percent, the debt
instruments are not considered to be substantially different. (italics in
original)

Following the Company’s
comparison of the present value of the remaining cash flows on the respective old and new
loans, it determined the new loan was not “substantially different” under
this quantitative test. That conclusion was based on the present value of the cash flows
of the original loan being approximately equal to the present value of the cash flows of
the new loan (with the cash flows of the new loan including the fair value of the
warrant/conversion option).

Although the modification was
not “substantially different” under this quantitative test, the Company adopted
a “qualitative evaluation” based on the interpretation cited above. According to
this interpretation, the difference in the present value of the cash flows of the
respective old and new loan as well as the value of the conversion option are irrelevant
due to the qualitative consideration of the substantive inherent difference between a loan
that is convertible and one that is not. Specifically, according to this qualitative
analysis, the fact that a conversion option has been added means that the transaction is
to be treated as extinguishment, even if, as in the case of our modified loan:

     o

     the value of the conversion option is not significant -- approximately $2 million -- which
         represents less than 3% of the loan; and

     o
     the fair value of the old loan and the fair value of the new instruments are essentially
equal. In the Company’s case, it granted an option valued at approximately $2 million
and received approximately $2 million in the reduction of the interest rate and deferral
of principal payments.

In making its assessment to consider
the addition of a convertible feature as indicia of a “substantially different”
loan, the Company considered the above analysis. However, the Company acknowledges there
are no “bright line” qualitative factors that could give rise to an
extinguishment as discussed EITF 96-19. Specifically, it is aware of the following recent
developments:

          a.

          A speech given by Mr. Robert J. Comerford, a Professional Accounting Fellow at
          the SEC, on December 6, 2004, regarding the applications of EITF Issue No. 96-19 to modified convertible bond
          transactions, where he stated “…we [the OCA
          Staff] believe that any EITF 96-19 analysis of a convertible bond modification
          that does not take into consideration changes in the fair value of the embedded
          conversion option would be incomplete.”; and

          b.

          At a very recent (September 15, 2005) EITF meeting, the Company understands the
          determination made in the analysis above (i.e. that the addition of a conversion
          feature to a debt instrument – regardless of its value – is to be
          treated as “substantially different” and thus subject to
          extinguishment accounting) is not definitive and indeed is not necessarily an
          acceptable accounting treatment.

6

Comment:

3.
Please
refer to prior comment 11. Considering that you had restructured                     the
Bank Hapoalim debt more than once as disclosed in this section, tell
                    us your consideration of paragraph 12 of EITF 02-4.

Response:

See response to comment 2 above where
the Company advised the Staff that it does not believe that paragraph 12 of EITF 02-4
applies since according to paragraph 6 of EITF 02-4, such criterion are only relevant if
one determines that a company is having financial dif