Bloomberg News

Cellcom Retreats Most in 6 Weeks as Quarterly Profit Tumbles 40%

November 16, 2011

Nov. 15 (Bloomberg) -- Cellcom Israel Ltd. slid the most in six weeks after the country’s biggest mobile-service provider, said third-quarter profit tumbled 40 percent as service revenue fell amid growing competition.

The shares declined 2.4 percent, the most since Oct. 4, to 75.55 shekels, at the 4:30 p.m. close in Tel Aviv.

“The reduction of interconnect fees and the continued price erosion had an adverse effect on our service revenues and profitability and we estimate they will continue to affect our results for the fourth quarter as well,” Chief Financial Officer Yaacov Heen said in a statement.

Regulatory changes have opened the country’s mobile-phone market to new entrants and led existing operators to cut fees. Golan Telecom Ltd., an Israeli phone company, agreed last month a national roaming deal with Cellcom to use its network. Rami Levi Chain Stores Hashikma Marketing 2006 Ltd., which operates a chain of discount supermarkets, plans to start a cellular company this month, TheMarker reported on Oct. 27.

Third-quarter net income dropped to 199 million shekels ($53 million), or 2 shekels a share, from 332 million shekels, or 3.34 shekels a year earlier, the company said today in a regulatory statement. The average estimate of three analysts on Bloomberg was for earnings per share of 2.182 shekels. Revenue fell 3.7 percent to 1.67 billion shekels.

Service revenue fell 21 percent to 1.2 billion shekels as interconnect fees paid to the company by other operators dropped following a reduction of tariffs in January and airtime prices declined as a result of increased competition, Cellcom said.

Earnings before interest, tax, depreciation and amortization fell 25 percent to 534 million shekels. The company raised 1.1 billion shekels in debt in the quarter, bringing total debt raised in the year to 2.16 billion shekels.

Partner Communications Co., Israel’s second-largest wireless operator, fell 3.1 percent to 39.36 shekels. Partner is scheduled to report its third-quarter results Nov. 23

--With assistance from Gwen Ackerman in Jerusalem. Editors: Tim Farrand, Susan Lerner, Peter Branton

To contact the reporter on this story: Shoshanna Solomon in Tel Aviv at ssolomon22@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net


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