Israeli mobile operator Cellcom profit falls less than forecast

TEL AVIV, March 6 Thu Mar 6, 2014 3:11am EST

TEL AVIV, March 6 (Reuters) - Cellcom, Israel's largest mobile phone operator, reported a 9.7 percent drop in quarterly profit due to lower revenue stemming from stiff competition that has eroded calling prices.

Cellcom said on Thursday it would not pay a dividend for the fourth 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".

Net profit slipped to 102 million shekels ($29.25 million)in the fourth quarter from 113 million a year earlier. Revenue dipped 14.1 percent to 1.21 billion shekels.

Cellcom was forecast to earn 89 million shekels on revenue of 1.2 billion, according to a Reuters poll.

Israel's mobile phone industry was shaken up in 2012 with the entry of six new operators, sparking a price war. That led to steep drops in subscribers, revenue and profit at Cellcom and two incumbent rivals.

In the third quarter Cellcom paid a quarterly dividend of 85 million shekels but it had not paid a dividend for the prior five quarters.

Cellcom Chief Executive Nir Sztern said efficiency measures led to savings of over 200 million shekels in expenses in 2013.

"I expect that the competition and consequently price erosion in the cellular market will continue in the coming year," he said. "However, we will continue to focus on efficiency measures, and we expect that in the long run, a shared passive infrastructure for our network will allow significant savings in operating expenses, and a shared fourth generation LTE network will assist in reducing investments in that area, if such sharing agreements are approved."

He said Cellcom was preparing for a quick launch of a 4G network and was making investments towards the opening of the landline communications market to competition, which would enable it to launch products such as TV over Internet.

Cellcom had 3.092 million subscribers at the end of 2013, down 3.3 percent from a year ago.

($1 = 3.4870 shekels) (Reporting by Tova Cohen)