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UPDATE 1-Bezeq Israel Telecom eyes growth from fibre optics network
August 5, 2013 / 12:17 PM / 4 years ago

UPDATE 1-Bezeq Israel Telecom eyes growth from fibre optics network

* Q2 net profit 473 mln shekels vs 429 mln forecast

* Q2 revenue down 9.4 pct to 2.35 bln shekels

* Reaffirms 2013 outlook

* To pay total Q2 dividend of 1.49 bln shekels

* Shares rise 1.3 pct in Tel Aviv (Adds analyst, detail, shares)

By Steven Scheer

JERUSALEM, Aug 5 (Reuters) - Bezeq Israel Telecom is betting its future on a fibre optics network capable of super-fast internet speeds as it seeks to stay as Israel’s No. 1 telecoms group amid intensifying competition in the landline and mobile phone sectors.

Growth in internet customers fuelled Bezeq’s 14 percent rise in second-quarter profit and the company said on Monday it was rapidly deploying a fibre optics network. So far, 200,000 households and businesses have been connected to the network and that is expected to reach over 400,000 by the end of the year.

Bezeq’s push into fibre optics to the home comes as a group led by Sweden’s Viaeuropa and state-utility Israel Electric Corp (IEC) was chosen by Israel’s government to build a nationwide super-fast fibre optics network aimed at competing with Bezeq and cable company HOT. Fibre can provide internet speeds of 1 gigabit per second - or as much as 100 times faster than currently available speeds.

Bezeq used to be a government-owned monopoly but now is a private company facing stiff competition in all areas in which it operates, especially in phone calling where profits have been dropping in recent years.

The number of Bezeq’s active fixed-line subscriber lines fell by nearly 5 percent in the April-June period, but it continued to gain customers for its high-speed internet services amid a promotion of free upgrades to higher speeds. That led to a 5.8 percent rise in the number of internet subscribers and a 33.5 percent jump in profit in the fixed-line segment.

Helped by cost cutting, Bezeq earned 473 million shekels ($133 million) in the second quarter, above expectations in a Reuters poll of 429 million. Revenue slipped 9.4 percent to 2.35 billion shekels to fall short of expectations of 2.38 billion.

Its shares rose 1.3 percent in Tel Aviv.

Analysts believe Bezeq will struggle in the near-term as the market awaits news from the telecoms regulator over the creation of a wholesale market that could force Bezeq and HOT to lease their infrastructure to competitors.

“Due to expected changes in the sector and regulatory threats, the stock price is not low,” said Sabina Podval, an analyst at Leader Capital markets.

Mobile unit Pelephone posted a 17 percent fall in profit to 161 million shekels on a 20.3 percent drop in revenue. But Pelephone, Israel’s No. 3 mobile operator, said the erosion of revenue in the mobile sector had moderated.

Pelephone and its two main competitors are grappling with a price war following a shake-up of Israel’s mobile phone industry last year that ushered in six new operators.

Bezeq reaffirmed a 2013 forecast of 1.7-1.8 billion shekels in net profit and earnings before interest, tax, depreciation and amortisation of 4.25-4.35 billion. It will pay a quarterly dividend of 969 million shekels, or 0.3555 per share, plus a special dividend of 500 million, the last of six equal payments.

$1 = 3.56 shekels Reporting by Steven Scheer; Editing by Mark Potter

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