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Cellcom Israel Ltd. (CEL)’s bond yield soared to the highest in more than three years on bets growing competition on prices would hurt profitability at the nation’s biggest mobile-phone company.
The yield on Cellcom’s 5.19 percent shekel-denominated notes due July 2017 rose eight basis points, or 0.08 percentage points, to 4.71 percent, the highest since January 2009, at the 4:30 p.m. close in Tel Aviv. The yield soared 184 basis points this week. Shares of the Netanya, Israel-based company slumped for a fifth day, falling 4.7 percent to 32.5 shekels, the lowest close since the shares were listed in Tel Aviv in July 2007. The yield on Partner Communications Co. (PTNR)’s 3.4 percent bonds maturing November 2016 jumped 36 basis points to 4.17 percent, the highest since August.
Partner, Israel’s second-largest mobile-phone provider, Cellcom and Bezeq Israeli Telecommunication Corp. (BEZQ) are facing new competition after Hot Telecommunication System Ltd. (HOT) and Golan Telecom Ltd. started offering wireless services on May 14.
“New entrants in the sector offering cheaper packages is likely to force Cellcom and other service providers to cut prices which will in turn hurt their profitability,” said Avihay Hermon, a bond trader at Psagot Investment House Ltd. in Tel Aviv. “There are also growing concerns in the market that these companies may have their debt ratings downgraded.”
Cellcom’s first-quarter net income plunged 43 percent to 173 million shekels ($45 million) as revenue declined, the company said this week. In addition, Cellcom and Partner will be moved from the MSCI’s Israel Index to a gauge for smaller stocks after the market closes on May 31. Their shares have plunged 70 percent and 67 percent, respectively, in the past year, outpacing the 16 percent drop in the benchmark TA-25 Index. (TA-25)
The Tel-Bond 40 Index, a measure of inflation-linked and fixed-rate corporate bonds, dropped 0.4 percent to 261.43, the lowest close since Jan. 4.
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