Bloomberg News

Cellcom Drops to Record as Golan Starts Services: Tel Aviv Mover

May 14, 2012

Cellcom Israel Ltd. (CEL), Israel’s biggest mobile-phone provider, declined to a record low after Golan Telecom Ltd. and Hot Telecommunication System Ltd. started their wireless services.

Shares of Netanya, Israel-based Cellcom retreated 3.7 percent to 41.50 shekels at the close in Tel Aviv, the lowest price since July 2007 when the shares were listed in Tel Aviv. Partner Communications Co. (PTNR), the country’s second-largest cellular company, dropped 3.4 percent to 25.70 shekels, the lowest since September 2003.

Golan Telecom, partly owned by French entrepreneur Xavier Niel, started services today offering unlimited voice and messaging at 99 shekels a month and selling SIM cards without handsets, and Hot Telecommunication said its unit will start mobile-phone services at 89 shekels a month for unlimited use, the companies said in e-mailed statements today.

“Golan and Hot offer by far the cheapest package available,” said Gilad Alper, a senior analyst at Excellence Nessuah Investment House Ltd. in Ramat Gan, Israel. “Both Hot and Golan will put further pressure on Cellcom, Partner and Pelephone.” Pelephone Communications Ltd. is the mobile-services unit of Bezeq Israeli Telecommunication Corp. (BEZQ)

Prime Minister Benjamin Netanyahu’s government is forcing telecommunication providers to cut fees and is encouraging new players to the market. Partner, Cellcom and Bezeq control 95 percent of the telecommunications market, according to data from the Ministry of Communications. They have lowered prices and subsidized handsets to compete with new wireless providers.

Big Competition Ahead

“We shouldn’t be blinded by the low share prices of the cellular companies,” Ori Licht, head of equity research at I.B.I.-Israel Brokerage & Investments Ltd. wrote in an e-mailed note today. “The big competition is still ahead.”

Cellcom and Partner have been the worst performing shares on the TA-25 index in the past 12 months, posting declines of 62 percent and 60 percent, respectively. Partner had its recommendation cut to underperform from market perform at Clal Finance Brokerage Ltd. today, which cited competition from Golan.

Golan received a license to build a new wireless network from the communications ministry in July. Hot Telecommunication acquired MIRS Communications Ltd. last year to compete in the cellular services market.

Hot shares dropped 4.2 percent to 37.77 shekels. Bezeq declined 3.8 percent to 5.12 shekels, the lowest since September 2006. The TA-25 benchmark index slipped 1.5 percent.

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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