Fierce Competition May Hurt Israel's Partner Communications in 2013

Israel's second-largest cell phone operator is suffering from fierce competition that has slashed calling rates; after Q4 performance falls materially short of forecasts, CFO says Q1, 2013 may also be harmed.

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Partner Communications , Israel's second-largest cell phone operator, reported weaker than expected quarterly profit and said it could have weak earnings throughout 2013 due to fierce competition that has slashed calling rates.

Partner on Wednesday posted fourth-quarter net profit of 102 million shekels ($27 million) compared with income of 123 million a year earlier, which excluded a 322 million shekel impairment charge related to the acquisition of Internet and long distance calling firm 012 Smile.

Revenue fell 21 percent to 1.26 billion shekels.

The company, the first of Israel's main telecoms groups to report quarterly results, was forecast to earn 111 million shekels on revenue of 1.3 billion shekels, according to Thomson Reuters I/B/E/S.

Israel's cell phone industry was turned upside down last year with the entry of six new operators, sparking a price war - with unlimited calling plans for around $25 a month.

Partner said its subscriber base fell to 2.98 million at the end of 2012 from 3.18 million in December 2011.

"The competition and material price erosion that adversely affected our financial results for the fourth quarter of 2012 are continuing in the first quarter of 2013 and may continue further into the year, which could have a material adverse effect on our financial results in the first quarter of 2013 and going forward," said Chief Financial Officer Ziv Leitman.

As part of an efficiency programme, Partner reduced its workforce by 700 people in the fourth quarter and by 2,495, or 32 percent, in 2012. Overall, operating expenses fell 16 percent in the October-December period.

Partner invested some 500 million shekels last year in upgrading its network in preparation for fourth-generation (4G) technology. It said it intends to participate in an expected tender for the allocation of new frequencies to be used by 4G.

Ilan Ben Dov, controlling shareholder of Partner, which operates using the orange logo.Credit: Ofer Vaknin
One of Partner Communications' Orange customer service centers.Credit: Tomer Appelbaum

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