Israel's Cellcom Q2 profit rises 48 pct

(Adds details, background, changes dateline from NEW YORK)

JERUSALEM, Aug 14 (Reuters) - Cellcom Israel Ltd. (CEL.N), the largest mobile phone operator in Israel, said on Tuesday its second quarter earnings jumped 48 percent, helped by an increase in subscribers while reducing costs.

The company, which went public in February, posted second-quarter net profit of $50 million, or 51 cents a share, compared with profit of $30 million, or 34 cents a share, a year earlier.

Revenue for the quarter rose to $343 million from $326 million a year ago.

Cellcom was expected to post earnings per share of 40 cents, before special items, on revenues of $353.7 million, according to an average of analysts' forecasts compiled by Reuters Estimates.

Cellcom said the number of subscribers grew 10.5 percent to 2.96 million at the end of the second quarter, of which 3G subscribers made up 212,000. The company said it added a net 32,000 new subscribers in the quarter to give it a 34 percent market share although the number of 3G subscribers still lags its main rivals, Partner Communications (PTNR.O) and Pelephone.

Partner (PTNR.TA), Israel's second largest mobile operator, said its subscriber base had grown to 2.733 million at the end of the second quarter for a 32 percent market share. It has some 400,000 3G customers, while Pelephone, a unit of Bezeq Israel Telecom (BEZQ.TA), has about 525,000 out of a total of 2.513 million.

Partner, which operates under the Orange brand and is 52.2 percent owned by Hong Kong's Hutchison Telecommunications International Ltd. (2332.HK) (HTX.N), last month reported a 31 percent rise in second quarter net profit to 228.1 million shekels.

Pelephone posted a 39 percent rise in quarterly profit to 173.1 million shekels with revenues rising 5 percent to 1.15 million.

Amos Shapira, Cellcom's chief executive officer, said in a statement that increased competition, airtime price erosion due to a government mandated decline in interconnect tariffs, and new regualtions in which callers who reach voicemail do not have to pay if they immediately hang up posed a challenge to growth.

Shapira said the company focused on the introduction of new products while reducing expenses to stimulate growth. He noted that Cellcom would implement number portability in the second half of 2007.

Cellcom said it would distribute a dividend of 201 million shekels, or 2.06 shekel per share, to be paid on September 6.

(Additional Reporting by Lilla Zuill in New York)

((Reporting by Sergio Tjong-Alvares; Editing by Steven Scheer; Jerusalem newsroom, +972 2 632 2221, sergio.tjong-alvares@reuters.com)) Keywords: CELLCOM RESULTS/

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