Bloomberg News

Looming French Competitor Spurs Telecoms Drop: Israel Overnight

April 17, 2012

Internet Gold-Golden Lines Ltd. (IGLD:US) and Partner Communications Co. slipped in U.S. trading yesterday on concern the entrance of a French competitor will erode the mobile-phone providers’ earnings.

Internet Gold, a Petach Tikva, Israel-based company that controls Bezeq Israeli Telecommunications Corp. (BEZQ), and Partner, Israel’s second largest mobile-phone company, both dropped the most in a week yesterday, while the Bloomberg U.S-Israel Equity Index (ISRA25BN) of the largest Israeli companies listed in New York added 0.2 percent to 87.69. Internet Gold jumped 15 percent, while Partner rose 3 percent in Tel Aviv today.

Israel is forcing telecommunications providers, the worst performers on Tel Aviv’s TA-25 Index (TA-25) this year, to cut fees and is encouraging new players into a market where Bezeq, Partner and Cellcom Israel Ltd. (CEL:US) control 95 percent of sales. Those stocks will extend declines on concern Golan Telecom Ltd., partly owned by French entrepreneur Xavier Niel, will wage a “price war” similar to one that saw the company take 2 million customers from rivals in France, according to Bank Leumi Le- Israel Ltd.

“The genie is out of the bottle and it’s changing the whole industry,” Gil Dattner, an analyst at Tel Aviv-based Bank Leumi, said yesterday by phone after downgrading telecommunications industry shares. “There’s concern that we’ll see in Israel the same aggressive price cut that we saw in France.”

Bank Leumi, Israel’s largest lender by assets, lowered its price estimate on Bezeq’s Tel Aviv shares by 15 percent to 7.3 shekels ($1.94) and cut its recommendations on Partner and Cellcom to market perform from outperform, according to an e- mailed report yesterday, meaning they will probably provide returns in line with the market.

2-Euro Contracts

With mobile subscriptions starting at 2 euros ($2.63) a month, Niel’s Iliad SA (ILD) won customers from France Telecom SA, Vivendi SA’s SFR unit and Bouygues SA in less than two months, Jean-Ludovic Silicani, head of French regulator Arcep, said last month. The reduction in prices caused by the introduction of Iliad will weigh on profit for the next two years, Paris-based Vivendi said on March 1.

Niel is a partner in Golan Telecom, which received a license from Israel’s Communications Ministry in July to build a new wireless network. The company will probably enter the market by the end of the year, Bank Leumi’s Dattner said.

“What everyone wants to know and is unclear on, is at how low of a price the new competition will come in,” he said.

Bezeq Plunge

Tel Aviv-based Bezeq, which operates in the mobile phone industry through its unit Pelephone, before today had retreated 16.5 percent in Israeli trading this year after plunging 35 percent in 2011, the worst annual performance on record. The shares rose 7.5 percent to 6.27 shekels, or the equivalent of $1.67, at the 4:30 p.m. close in Tel Aviv today.

Revenue will decline this year to the lowest level since 2005, according to the median of four analysts’ estimates compiled by Bloomberg.

Internet Gold, the holding company whose unit B Communications Ltd. owns 31 percent of Bezeq, fell 2.3 percent to $5.24 in New York yesterday, the biggest one-day decline since April 9. The company’s stock rose 15 percent to 22.63 shekels in Tel Aviv today, or the equivalent of $6.02.

Reforms by Prime Minister Benjamin Netanyahu’s government have helped discount wireless operators Rami Levi Chain Stores Hashikma Marketing 2006 Ltd. and Alon Holdings Blue Square Israel Ltd. to get licenses to offer mobile-phone services.

Partner, based in Rosh Hayin, Israel, extended its 23 percent decline in New York this year, losing 1.7 percent to $6.81, the most since April 10. The company’s Tel Aviv shares rose 3 percent to 26.87 shekels today, or the equivalent of $7.15. The company will probably report a 16 percent drop in adjusted earnings per share in 2012, according to the median estimate of six analysts surveyed by Bloomberg.

Cellcom Gains

Netanya, Israel-based Cellcom, the country’s biggest mobile-phone services provider, climbed 0.7 percent to $11.43 in New York, paring this year’s drop to 32 percent. Its shares in Tel Aviv rose 1.1 percent to 43.46 shekels, or the equivalent of $11.56.

Israel, whose population of 7.8 million is similar in size to Switzerland’s, has about 60 companies traded on the Nasdaq Stock Market, the most of any country outside the U.S. after China. The nation is also home to more startup companies per capita than the U.S.

Mellanox Technologies Ltd. (MLNX:US) rose in New York after Clal Finance Brokerage Ltd. boosted its price target. Mellanox, a developer of technology used to transfer and store data quickly, climbed 1.2 percent to $41.63 in the U.S. The shares in Tel Aviv advanced 1 percent to 159.5 shekels, or the equivalent of $42.43, today.

Cephalon Victory

Clal Finance Brokerage raised its price estimate on the shares of Yokneam Elit, Israel-based Mellanox to $47 from $44. The company will probably report (MLNX:US) a 48 percent rise in revenue when announcing first quarter earnings tomorrow, according to the median of eight analysts’ estimates compiled by Bloomberg.

Teva Pharmaceutical Industries Ltd. (TEVA), the world’s largest maker of generic drugs, climbed 1.9 percent to $45.05 in New York yesterday. The shares in Tel Aviv rose 1.7 percent to 169.50 shekels, or the equivalent of $45.09.

Cephalon Inc., which was bought by Petach Tikva, Israel- based Teva, said yesterday that it won an appeals court ruling that may help it block sales of generic versions of the muscle- relaxant Amrix.

Prolor Biotech Ltd. (PBTH:US), the Nes Ziona, Israel-based developer of hormone treatments, jumped 7.9 percent to $5.47 yesterday after dropping 15 percent last week, the worst performance in almost two years.

MagicJack VocalTec Ltd. (CALL:US), the Netanya, Israel-based technology company, jumped 4.9 percent to $24.05. MagicJack raised its initial first-quarter earnings-per-share forecast to 28 cents from 26 cents, according to a statement distributed by Globe Newswire yesterday.

To contact the reporter on this story: Tal Barak Harif in New York at tbarak@bloomberg.net

To contact the editor responsible for this story: Emma O’Brien at eobrien6@bloomberg.net


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Companies Mentioned

  • IGLD
    (Internet Gold-Golden Lines Ltd)
    • $9.24 USD
    • -0.04
    • -0.43%
  • CEL
    (Cellcom Israel Ltd)
    • $11.46 USD
    • -0.13
    • -1.13%
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