Bezeq Profit Dropped in Quarter, Weighed Down by Pelephone Unit

Despite broadband reform, company boosted revenues in its Internet business.

Ahikam Seri/Bloomberg

Bezeq, Israel’s biggest telecommunications company, reported Thuesday a 5% decline in quarterly profit, as gains in landline telephony and satellite television were weighed down by a steep drop in profit at mobile phone unit Pelephone.

Bezeq earned 407 million shekels ($105 million) in the third quarter, down from 428 million a year earlier and below a forecast of 418 million shekels in a Reuters poll of analysts. Revenues climbed 16.6% from a year ago to 2.6 billion shekels, despite the broadband Internet reform aimed at breaking Bezeq’s lock-hold on the market. Revenues were in line with analysts’ expectations.

Bezeq said earnings before interest, taxes, depreciation and amortization also rose, by 11% to 1.11 billion shekels.

In spite of the third-quarter decline in profit, earlier in the week Bezeq raised its 2015 net profit estimate to about 1.7 billion shekels ($437.5 million) from 1.5 billion shekels.

“We continue to post strong results despite increasing competition, thanks to our ongoing focus on streamlining efforts and the reduction in operating costs,” Chief Financial Officer David Mizrahi said.

Bezeq shares ended down 0.46% to 8.60 shekels in heavy trading on the Tel Aviv Stock Exchange.

Boosted by the consolidation of its satellite TV unit Yes, revenue rose 16.6% to 2.6 billion shekels, in line with expectations. Bezeq’s core landline telephony operations, which include broadband Internet, also saw improved revenues, up 2% to 1.1 billion shekels.

Broadband revenues increased 9.1% to 385 million shekels. Average monthly revenue per Internet user remained unchanged at 88 shekels, the company said.

Although 177,000 subscribers now get their Internet through competing companies piggybacking their service on Bezeq’s network, Bezeq CEO Stella Handler said the company spent 230 million shekels in the third quarter alone — 21% of total revenues — on upgrading the network and extending fiber-optic capacity.

“Our investments in technology, operational streamlining, and entry into new markets enable us to successfully meet the increasing competition,” she said.

The otherwise good news was clouded by Pelephone, the No. 3 mobile phone operator, which saw quarterly profit plunge 45% to 55 million shekels, while revenue fell 11.5% to 729 million. The number of subscribers slipped to 2.569 million from 2.6 million a year ago.

Pelephone’s results were relatively good, compared to its rivals, all of whom have been coping with the onslaught of upstart competition in the market. Cellcom Israel this week reported a 62% dive in profit, while rival Partner Communications last week said it moved to a loss.