UPDATE 1-Bezeq Tel profit slides as mobile price war persists

Wed Nov 7, 2012 11:05am EST

* Q3 net profit 342 mln shekels vs 403 mln forecast

* Revenue down 15 percent to 2.49 billion shekels

* Sees 2012 revs 10.2-10.5 bln shekels, profit 1.75-1.85 bln (Adds details, CFO comment)

By Steven Scheer

JERUSALEM, Nov 7 (Reuters) - Bezeq Israel Telecom, Israel's largest telecoms group, reported a 38 percent drop in quarterly profit that missed estimates, as its mobile phone unit continues to suffer from intense competition.

Israel's mobile phone industry was turned upside down this year with the entry of six new operators, sparking a price war - with unlimited calling plans for around $25 a month - and leading to many customers switching companies.

"Our group performance was significantly influenced by comprehensive regulatory changes and intensifying competition... particularly in the cellular segment," Chief Financial Officer Alan Gelman said.

Three operators, including Bezeq unit Pelephone, had dominated the sector for more than 12 years until regulatory changes at the start of 2011 forced providers to slash the fees operators charge each other to connect calls and to scrap exit fines for customers, hurting revenue and earnings.

Bezeq said on Wednesday it earned 342 million shekels ($88 million) in the third quarter, down from 550 million a year ago. Revenue slipped 15 percent to 2.49 million shekels and earnings before interest, taxes, depreciation and amortisation dropped 21 percent to 1.03 billion shekels.

The company was forecast in a Reuters poll to make profit of 403 million shekels, with EBITDA of 1.05 billion and revenue of 2.49 billion shekels.

Pelephone, Israel's third-largest mobile operator, saw its quarterly profit slide 41 percent to 154 million shekels, with its revenue down 26 percent. Its subscriber base edged down 0.1 percent to 2.839 million.

Rivals Cellcom and Partner Communications will issue their results later this month and are expected to have suffered the same fate due to the spike in competition.

Bezeq affirmed its 2012 outlook of revenues of 10.2-10.5 billion shekels, EBITDA of 4.4-4.5 billion and net profit of 1.75-1.85 billion shekels. It said free cash flow would improve materially this year and exceed 2.5 billion shekels. ($1=3.89 shekels) (Additional reporting by Tova Cohen; Editing by Mike Nesbit)

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