UPDATE 1-Cellcom says network outage to impact Q4 results

Thu Dec 2, 2010 11:08am EST

Related Topics

* Will refund customers 1-week's worth of calls, messages

* Shares up 1 pct in New York

(Recasts with compensation, impact on Q4 results)

By Maayan Lubell

JERUSALEM, Dec 2 (Reuters) - Cellcom (CEL.TA), Israel's largest mobile operator, said on Thursday a 12-hour outage in its network that prevented millions of customers from receiving or making calls would hurt fourth-quarter earnings. Cellcom (CEL.N) had 3.38 million customers at the end of September, and, as a result of its worst ever malfunction in the "core of its network", most of them were unable to make or receive calls from 0800 GMT on Wednesday.

"The company has since resumed full service," Cellcom said in a statement, adding it would refund subscribers for all calls and SMS text messages in Israel during the last week.

"This will impact the company's reported results for this quarter," it said.

Cellcom did not quantify its damage but Israeli media estimated compensation at about 40 shekels per customer for a total of about 135 million shekels ($37 million) plus the loss of 12 hours' worth of calls.

"The system fully works, but we are still in an emergency situation," Cellcom chief executive Amos Shapira told reporters, adding the cause was not due to overload.

Cellcom posted third-quarter net profit of 332 million shekels on revenue of 1.729 billion shekels. [ID:nLDE6A826Z]

Although service was restored, technicians from Nokia Siemens Networks (NSN) [NSN.UL] headed to Israel on Thursday.

"I spoke to Nokia (Siemens) global CEO last night, and we will continue to work with the technicians to understand what had happened," Shapira told Israel Radio earlier on Thursday.

Shapira said service to the majority of the company's clients had been restored overnight but that Cellcom technicians would remain on standby to ensure the fault would not recur.

NSN, owned 50-50 by global mobile phone maker Nokia (NOK1V.HE) and German industrial group Siemens (SIEGn.DE), in 2007 won a deal to set up Cellcom's next generation network.

Shapira refused to blame NSN for the fault.

"I am not in a position to place responsibility on anyone else; ultimately we are the ones providing the service," Shapira said.

Shares in Cellcom, which competes with Partner Communications (PTNR.TA) and Bezeq (BEZQ.TA) unit Pelephone in the highly saturated Israeli mobile phone sector, were up 1 percent at $33.99 in early trade in New York.

Cellcom also said separately it was hit with two-class action lawsuits of 25 million and 61 million shekels. [ID:nPnUKTH815]. Israeli media said there were more lawsuits of some 2 billion shekels.

"At this preliminary stage the company cannot estimate the lawsuits' chances of success," it said. (Additional reporting by Steven Scheer; Editing by Will Waterman)

FILED UNDER: