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JERUSALEM, March 15 (Reuters) - Cellcom, Israel's largest mobile operator, reported a steeper than expected 26 percent drop in quarterly profit due to intense competition in the sector, but said rising revenues from its new TV service cushioned the fall.
Cellcom said on Wednesday it earned 14 million shekels ($3.8 million) in the fourth quarter, down from 19 million a year earlier. Revenue slipped 5.9 percent to 984 million shekels.
The company, the first of Israel's telecoms firms to issue quarterly results, was forecast to earn 17 million shekels on revenue of 984 million, according to a Reuters poll of analysts.
Israel's mobile phone industry was shaken up in 2012 with the entry of a host of new operators, sparking a price war that led to steep drops in subscribers, revenue and profit for Cellcom and two incumbent rivals.
Cellcom in 2015 launched a lower-cost Internet-based TV service that it said has garnered 122,000 subscribers to date. It also has 180,000 customers for its internet services.
"The increase in revenues from the Internet and TV fields was partially offset by a decrease in revenues from long distance calling services," said CFO Shlomi Fruhling.
Cellcom's mobile subscriber base dipped 1.2 percent in 2016 to 2.801 million.
Last week, Israel's anti-monopoly regulator approved the $91 million purchase of smaller rival Golan Telecom to Electra Consumer Products. As part of the deal, Golan will pay Cellcom at least 210 million shekels a year plus value added taxes to use its network.
Cellcom had previously signed a network sharing and hosting agreement with Marathon 018 Xfone, a telecoms firm which was awarded fourth generation frequencies in a 2015 tender but which has yet to enter the cellular market.
"Signing the network sharing agreements with Electra Consumer Products (Golan) and Xfone 018, will ensure revenues while reducing investment to the group over the coming decade," said CEO Nir Sztern.
Cellcom's main rivals, Partner Communications and Pelephone, a unit of Bezeq Israel Telecom, will publish fourth-quarter results later in March.
$1 = 3.6596 shekels Reporting by Steven Scheer, editing by Louise Heavens