Cellcom Israel Ltd. (CEL:US) surged the most on record, narrowing the gap with U.S. shares on speculation that an investor is preparing to buy a stake and after announcing a plan that may boost fixed-line revenue.
The shares advanced 8.4 percent to 26.55 shekels, or the equivalent of $6.73, at the 4:30 p.m. close in Tel Aviv. Cellcom, Israel’s largest wireless provider, closed at $6.94 in New York trading on July 6.
“There are rumors in the market about potential buyers for a holding in Cellcom,” Liat Glazer, an analyst at Excellence Nessuah Investment House Ltd., said today by phone.
Cellcom, the worst performer in the TA-25 benchmark index this year, is selling all-inclusive voice, data and messaging packages for families, after mounting competition in the telecommunications industry slashed revenue. Israeli providers from Hot Telecommunication System Ltd. (HOT) to Golan Telecom Ltd. are offering customers unlimited packages at reduced costs.
Gilad Alper, a senior analyst at Excellence Nessuah, said that while he couldn’t comment on who may be interested in a Cellcom stake, “a new controlling shareholder can fix the business model to make the company leaner, increasing the net income significantly.”
Discount Investment Co. (DISI) currently owns a controlling 47 percent stake in Cellcom. The holding company is owned by IDB Holding Corp. (IDBH) and is part of Israeli businessman Nochi Dankner’s corporate investments. Dankner said in a Channel 2 interview in May that he would be willing to sell some companies under his control to pay back debts to investors.
On May 14, Standard & Poor’s Maalot downgraded IDB’s credit rating three levels to ilBBB-, the lowest investment grade, from ilA-, citing “weak” liquidity.
Cellcom’s package for families will include unlimited local and international fixed-line services and Internet, the company said on July 5.
“Investors like the new package because they expect this may increase Cellcom’s growth in the fixed-line sector, where it is weak, and may help curb its loss of share in the wireless market,” Gil Dattner, an equity analyst at Bank Leumi Le-Israel (LUMI) Ltd., said by phone.
Rami Levi Chain Stores Hashikma Marketing 2006 Ltd. (RMLI), a supermarket operator that started mobile-phone services in December, said last week it will offer unlimited wireless packages at lower prices. Partner Communications Co. (PTNR), Israel’s second-largest wireless provider, said on June 20 it plans to set up a new low-cost wireless brand.
The operators join competitors Hot and Golan, which started offering unlimited plans for less than 100 shekels a month, or about $25, in May.
Cellcom will probably post sales of 1.6 billion shekels in the third quarter, the first three-month period in which revenue from the family package will be reflected, according to the mean estimate (CEL:US) of four analysts surveyed by Bloomberg. That compares with sales of 1.7 billion shekels in the year-earlier period.
Partner shares added 2.3 percent, their biggest increase since July 1, to 15.29 shekels. Hot added 2.9 percent to 31.06 shekels. Bezeq Israeli Telecommunication Corp. (BEZQ) fell 0.2 percent to 4.10 shekels.
Partner has declined 55 percent and Cellcom has fallen 58 percent since the beginning of the year. That compares with a 2.3 percent decline in the Bloomberg Industries Index of 16 wireless providers in the Middle East and Africa.
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