Israeli mobile operator Cellcom profit slides, misses estimates

November 12, 2013

JERUSALEM, Nov 12 (Reuters) - Cellcom, Israel's largest mobile phone operator, reported a 58 percent drop in quarterly profit due to higher financing expenses and lower revenue stemming from stiff competition that has eroded calling prices.

Net profit slipped to 52 million shekels ($14.7 million) in the third quarter from 124 million a year earlier. Revenue dipped 15.5 percent to 1.224 billion shekels.

Cellcom was forecast to earn 63 million shekels on revenue of 1.247 billion, according to a Reuters poll.

Israel's mobile phone industry was shaken up last year with the entry of six new operators, sparking a price war - with unlimited calling plans for $25 a month or lower. That led to steep drops in subscribers, revenue and profit at Cellcom and two incumbent rivals.

Cellcom said on Tuesday it showed improvement in free cash flow over the second quarter partly due to efficiency measures.

As a result, Cellcom declared a quarterly dividend of 85 million, or 0.85 shekel (24 cents) a share. Cellcom had not paid a dividend for the prior five quarters to strengthen its balance sheet.

"This decision does not indicate on dividend distribution in future quarters, and any such decision shall be examined according to the future market conditions and the company's needs," said Chief Financial Officer Shlomi Fruhling.

Cellcom said it expects growth to come from future competition in the landline market as Israel's telecoms regulator is pushing for more competition in the sector which could include TV over Internet.

Cellcom had 3.156 million subscribers at the end of September, down 5.5 percent a year earlier.

Last week, Bezeq's Pelephone unit, one of its rivals, reported a 9.1 percent fall in quarterly profit to 140 million shekels on a 9.7 percent drop in revenue.