UPDATE 1-Partner Comms profit slides but less than forecast

Wed Nov 21, 2012 7:26am EST

* Q3 net profit 110 mln shekels vs 108 mln forecast

* Q3 revenue down 25 pct to 1.315 bln shekels

* Company sees average revenue per user falling further in Q4

JERUSALEM, Nov 21 (Reuters) - Partner Communications , Israel's second-largest mobile phone operator, said revenue could fall further in the fourth quarter after an ongoing price war led to a steep decline in revenue and profit in the third quarter.

Average revenue per user (ARPU) declined 13 percent in the July-September period to 97 million shekels.

"The company estimates that the level of ARPU for the fourth quarter will be lower than in the third quarter, as a result of seasonality effects and continued price erosion in the market," Chief Financial Officer Ziv Leitman said.

Total revenue fell 25 percent to 1.315 billion shekels, hurt by both services and a 57 percent drop in income from handset sales.

Net profit slid 36 percent to 110 million shekels, while earnings before interest, tax, depreciation and amortisation declined 24 percent to 401 million.

Partner, which operates under the Orange brand name, was forecast to earn 108 million shekels on revenue of 1.36 billion shekels with EBITDA of 386 million.

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.

Partner said its customer base fell 5 percent over the prior year to 3.04 million. The company started its own low-cost provider, 012 Mobile, which it said enrolled tens of thousands of subscribers.

Partner noted it would continue to implement efficiency measures, which cut operating expenses by 600 million shekels in annual terms, while it reduced its workforce by 850 to 5,863 people.

Its free cash flow rose 20 percent over the second quarter to 375 million shekels and the company said it will continue to increase investment in the fourth quarter on upgrading its network.

Partner said its board did not discuss a dividend distribution for the third quarter after it cancelled its 2012 dividend policy in September. The policy will be assessed prior to fourth-quarter results.

Earlier this month, market leader Cellcom posted a 38 percent fall in quarterly profit while Bezeq Israel Telecom unit Pelephone, Israel's third-largest mobile provider, reported a 41 percent drop in profit.