November 20, 2018 / 8:01 AM / 25 days ago

UPDATE 1-Bezeq Israel Telecom Q3 profit falls, moving ahead with restructuring

(Adds details, comments from CFO/chairman/analyst)

By Steven Scheer

JERUSALEM, Nov 20 (Reuters) - Bezeq Israel Telecom missed forecasts with a 27 percent fall in third quarter profit hurt by declines in net profit at its mobile phone and Internet services units and said it would move ahead with a restructuring plan.

Profit fell to 234 million shekels ($63 million) from 322 million a year earlier, Israel’s largest telecom group said on Tuesday, coming in below the 255 million expected by analysts in a Reuters poll.

Revenue slipped 4.7 percent to 2.3 billion shekels, not far off the 2.34 billion expected by analysts.

“The results of the quarter reflect the impact of the growing competitive environment,” Chief Financial Officer Yali Rothenberg said.

The company reiterated its 2018 forecast for net income of 1.0 billion shekels.

Bezeq is being investigated for suspected securities offences and is the midst of a corporate shake-up.

In August, it said it planned to merge some of its businesses to cut costs. Under the proposal, which still needs regulatory approval, Bezeq would combine its mobile phone, satellite TV and Internet service provider businesses - Pelephone, YES and Bezeq International. Its fixed-line business, which controls much of Israel’s telephony and Internet infrastructure, would remain separate.

Bezeq said it has not received an answer from the Communications Ministry on its plan.

Chairman Shlomo Rodav said Bezeq has launched negotiations with labour unions on job reductions at Pelephone, Bezeq International and YES.

“We continue to believe that there is significant value to be unlocked at Bezeq and we trust that the launch of the upcoming strategic plan will help rebuild investors’ confidence and pave the way to the further rerating of the shares,” said Barclays analyst Tavy Rosner.

Bezeq’s shares have risen 16.5 percent since announcing its plan on Aug. 23.

Rodav said the company is ready to roll out its fibre optics network but was discussing with the regulator how best to proceed. Bezeq is seeking assurances on wholesale pricing and other issues to ensure the project’s profitability.

Net profit at Pelephone, Israel’s third-largest mobile phone operator, fell 75 percent to 6 million shekels, while its subscriber base slid to 2.185 million from 2.475 million a year earlier.

Bezeq, Israel’s former telecoms monopoly, began facing stronger competition in 2015 after the government opened the market to smaller rivals offering cheaper but more limited services.

$1 = 3.7032 shekels Reporting by Steven Scheer; editing by Tova Cohen and Jason Neely

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