Israel's Cellcom net profit rises on cost cuts

JERUSALEM Mon Aug 11, 2014 6:17am EDT

JERUSALEM Aug 11 (Reuters) - Cellcom, Israel's largest mobile phone operator, reported an 18 percent rise in second-quarter net profit, due to cost-cutting aimed at offsetting fierce competition.

Net profit rose to 79 million shekels ($22.8 million), just ahead of the 76 million forecast in a Reuters poll of analysts.

Revenue fell 6.3 percent to 1.158 billion shekels compared with 1.12 billion in the poll, although equipment revenue grew.

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.

Cellcom said it subscriber base fell by 20,000 in the second quarter to 3.03 million.

Last week, rival Pelephone - a unit of Bezeq Israel Telecom - posted a 34 percent drop in quarterly profit.

Cellcom last month launched its 4G LTE network and said it was also deploying a faster 4.5G network. At the same time, it is preparing for the launch of TV over the Internet as an alternative to cable or satellite TV.

Cellcom noted that it expects a temporary but substantial decrease in revenue from national roaming services until the approval of a network sharing agreement with smaller rival Golan Telecom.

The board decided not to distribute a quarterly dividend for the third straight quarter given the tough competition and its impact on revenue.

Cellcom recorded a one-time expense of 39 million shekels from a voluntary retirement plan that led to the retirement of 380 workers. The savings in payroll are expected to be seen as early as the third quarter, it said.

Partner Communications is slated to report results later this week.

(1 US dollar = 3.4678 Israeli shekel) (Reporting by Steven Scheer; Editing by Erica Billingham)