November 18, 2019 / 9:23 AM / a month ago

UPDATE 2-Israel's Bezeq Telecom hopes to start fibre rollout soon as profits fall

* Larger-than-expected fall in third-quarter profit

* Hoping for new regulations in weeks or months

* Reiterates on track for a 1.1 bln shekel loss in 2019 (Adds CEO comment)

By Steven Scheer and Tova Cohen

TEL AVIV, Nov 18 (Reuters) - Bezeq Israel Telecom said on Monday it hoped it could soon start deploying its fibre optic network after the telecoms regulator opened the door to a less comprehensive service than it had previously demanded.

Bezeq, the dominant telecoms group in Israel, has been locked in a battle with the regulator over rolling out its fibre network, with Bezeq unwilling to meet demands it provide it for 100% of the country, saying that was not economically viable.

This month the ministry said it was willing to allow Bezeq to choose where to roll out its network - up to 10 times faster than current speeds to allow for more streaming of entertainment and more connected appliances - which would eventually give the company a boost in revenue and profit.

Chief Executive David Mizrahi said Bezeq’s network already covered 60% of the country with fibre to buildings and it would take a few years to connect those households.

“Hopefully in the next few weeks or months the ministry will form new regulations that will maybe allow us to start deploying the service but only on an economic basis,” he told Reuters after issuing the company’s third-quarter earnings.

Rivals Cellcom and Partner Communications have started to deploy their own fibre networks although as the largest telecoms group, Bezeq will likely have a very high market share.

Given the cost of connecting isolated homes to the new networks, companies have long found more densely populated cities more cost effective to tackle.

Barclays analyst Tavy Rosner said that although Bezeq was losing market share in fixed line, that will likely change once Bezeq and the regulator reach a final agreement on fibre.

Bezeq, which is in the midst of a change in ownership, reported a quarterly profit of 191 million shekels ($55 million), down from 234 million a year earlier and slightly short of the 198 million forecast by analysts. Bezeq attributed the decline mainly to higher financing expenses.

Revenue fell 2.3% to 2.25 billion shekels, slightly above the 2.23 billion expected by analysts.

Bezeq owns mobile phone operator Pelephone, satellite TV firm YES and internet service provider Bezeq International.

“Bezeq is in the midst of a major restructuring with several parallel early retirement plans and cost-cutting measures,” said Rosner said. “These are starting to pay off, as demonstrated by the 4% decrease in salaries.”

Last week the Communications Ministry approved the sale of a controlling share in Bezeq to the foreign private investor group Searchlight Capital Partners.

The company reiterated it was on track for a 1.1 billion shekel loss in 2019 after two major write-downs in its business units this year.

Bezeq’s shares were down 0.4% in afternoon trade in Tel Aviv. They are down 23% this year. ($1 = 3.4904 shekels) (Editing by Alison Williams)

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