Profits Plummet at Israel's Cellcom

Cellcom, which recently made a bid for rival Golan Telecom, reports a 62% drop in their third quarter net profit.

A woman walks past a branch of Cellcom, Israel's No. 1 mobile phone operator, in Tel Aviv, Israel, in this file picture taken January 28, 2014.
Reuters

REUTERS - Israel's Cellcom, which has made a bid for smaller rival Golan Telecom, reported a 62 percent drop in third-quarter net profit on Tuesday, hurt by intense competition in the industry.

Cellcom, the country's largest mobile phone company, said it earned 40 million shekels ($10 million) in the quarter, down from 106 million a year earlier, but above an average forecast of 29.75 million shekels in a Reuters poll of analysts.

Cellcom said this month it would buy smaller, low-cost rival Golan Telecom for 1.17 billion shekels but there is political opposition to the deal over competition concerns.

Israel's mobile phone industry was shaken up in 2012 with the entry of six new operators, including Golan, sparking a price war that led to steep drops in subscriber numbers, revenue and profit at Cellcom and two incumbent rivals.

Cellcom is hoping to take advantage of telecoms reforms, in which Bezeq Israel Telecom, the owner of a nationwide DSL network, must lease its infrastructure to smaller rivals.

Cellcom has already launched an Internet-based television service that has 50,000 customers and it now offers a low-price package of TV, home phone and high-speed Internet.

In the third quarter, revenue fell 9.6 percent to 1.03 billion shekels, led by a 10.3 percent fall in service revenue. Cellcom lost 16,000 customers in the quarter, trimming its subscriber base down to 2.832 million at the end of September.

"We expect that the competition level will remain high in the coming quarters," Chief Financial Officer Shlomi Fruhling said. "As such, the group is committed and continues to adjust its cost structure and investments to the market conditions."

Rival Partner Communications last week reported a 9 million shekel loss in the third-quarter.

Cellcom opted not to distribute a dividend for the third quarter. ($1 = 3.9049 shekels)