UPDATE 1-Israel's mobile price war hits Bezeq and Cellcom profits

Thu Mar 6, 2014 6:46am EST

* Bezeq Q4 profit 352 mln shekels vs 401 mln forecast

* Bezeq sees 2014 net profit 1.6-1.7 bln shekels vs 1.77 bln in 2013

* Cellcom Q4 net profit 102 mln shekels vs 89 mln forecast

* Cellcom says will not pay quarterly dividend (Adds Pelephone results, Cellcom details)

By Tova Cohen and Steven Scheer

TEL AVIV, March 6 (Reuters) - Fierce competition in Israel's mobile sector pushed down the fourth-quarter profits of two of the country's biggest telecoms companies, Bezeq Israel Telecom and Cellcom.

Cellcom, Bezeq's mobile unit and Partner Communications are grappling with a price war after a shake-up of Israel's mobile industry in 2012 that ushered in six new operators.

Rates for mobile services have more than halved since the entry of the new providers, who offered unlimited calling plans for as little as $25 a month. Competition has also been stiff for Internet services.

Bezeq, Israel's largest telecoms group by revenue, said on Thursday it earned 352 million shekels ($101 million) in the fourth quarter, down almost 33 percent from a year earlier. Revenue slipped 1.6 percent to 2.41 billion.

It had been expected to earn 401 million shekels on revenue of 2.35 billion, according to the average forecast in a Reuters poll of analysts.

For 2014, Bezeq forecast full-year net profit of 1.6-1.7 billion shekels - down from 1.77 billion in 2013 and below the average analyst forecast of 1.74 billion for 2014 according to Thomson Reuters I/B/E/S.

Cellcom, Israel's largest mobile phone operator by subscribers, reported a 9.7 percent drop in quarterly profit to 102 million shekels as revenue dipped 14.1 percent to 1.21 billion shekels.

It said it would not pay a dividend for the quarter due to the "intensified competition and its adverse effect on the company's results of operations and in order to strengthen the company's balance sheet".

Cellcom had been forecast to earn 89 million shekels on revenue of 1.2 billion, according to the Reuters poll.

The smaller-than-expected drop in Cellcom's profit was due to efficiency measures the company took following its acquisition of Internet service provider Netvision.

WHOLESALE

Bezeq's profit was also hit by a provision for employee retirement at its fixed-line unit, while its mobile phone subsidiary Pelephone recorded a one-time expense due to the implementation of an agreement with its labour union.

Pelephone, the country's No. 3 mobile operator, posted adjusted net profit of 109 million shekels, down 18.7 percent as revenue fell 4.3 percent and the number of subscribers slipped 5.6 percent to 2.642 million.

Partner will report its results next week.

Bezeq shares were down 1 percent at 5.774 shekels at 1055 GMT, while Cellcom shares were up 1.1 percent at 44.25 shekels, against a 0.4 percent rise in Tel Aviv's TA-25 blue-chip index.

Israel's government is in the process of creating a wholesale telecoms market which will allow other companies to use the infrastructure of Bezeq and cable firm HOT. In return, Bezeq is seeking the ability to merge its units to save costs.

"While (Bezeq's) fourth-quarter results and 2014 guidance anchor a strong 12-months dividend yield, we believe share performance will be dominated by development on the wholesale market and structural separation fronts," said UBS analyst Roni Biron.

Bezeq declared a dividend of 802 million shekels, or 0.29 shekel a share, for the second half of 2013, down from 969 million in the first half of the year.

($1 = 3.4870 Israeli shekels) (Editing by Pravin Char)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.