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UPDATE 1-Israel's Bezeq Telecom seeks regulatory relief as Q4 profit halves
March 30, 2017 / 10:31 AM / 8 months ago

UPDATE 1-Israel's Bezeq Telecom seeks regulatory relief as Q4 profit halves

* Q4 profit 185 mln shekels vs 258 mln forecast

* Bezeq looking to merge its various business units

* Mobile unit Pelephone Q4 profit slides 73 pct (Adds CEO, analyst comments)

By Steven Scheer

JERUSALEM, March 30 (Reuters) - Bezeq Israel Telecom urged the government to allow it to merge its various units to improve efficiency, as it reported a 50 percent drop in quarterly net profit, weighed down by an early retirement provision and other one-time expenses.

Israel’s dominant telecoms operator has long argued for an end to its “structural separation”, which forces it to keep its mobile phone, fixed line, satellite TV and internet units as separate entities.

In late 2016, Israel’s telecoms regulator said it would likely allow Bezeq to merge its units but the prospect has angered politicians, competitors and the public who are wary of Bezeq becoming more powerful, and the issue is on hold.

“In today’s new competitive era the time has come to cancel the structural separation,” Bezeq CEO Stella Handler said on Thursday. “This will allow consumers to benefit from a fully competitive market as well as improved service and pricing, while enabling Bezeq to become more efficient and save unnecessary costs.”

Its shares were up 0.4 percent at 6.48 shekels but have lost 11.5 percent since the start of 2017.

Barclays analyst Tavy Rosner believes the sell-off is overdone and sees Bezeq’s shares reaching 8 shekels without the end to structural separation.

“While it is clear to us that merging Bezeq’s units would unlock significant value, we continue to argue that investors should value Bezeq in its current structure,” he said.

Bezeq earned 185 million shekels ($51 million) in the fourth quarter, down from 369 million a year earlier and below a forecast of 258 million shekels in a Reuters poll of analysts. It booked one-off items of more than 200 million shekels in the quarter.

Revenue dipped 4 percent to 2.5 billion shekels.

Bezeq estimated 2017 net profit at 1.4 billion shekels, compared with net profit in 2016 of 1.24 billion.

It declared a dividend of 578 million shekels for the second half of 2016, a distribution of 100 percent of net profit.

In Bezeq’s fixed-line segment, where it makes most of its revenue, fourth-quarter profit dropped 31 percent.

Its Pelephone unit, Israel’s third-largest mobile operator which faces stiff competition, saw a 73 percent fall in fourth-quarter profit to 3 million shekels, as its subscriber base slipped to 2.4 million in 2016 from 2.65 million in 2015.

Pelephone rival Partner Communications reported a narrower fourth-quarter loss.

$1 = 3.6206 shekels Reporting by Steven Scheer; Editing by Tova Cohen and Mark Potter

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