March 29, 2018 / 10:54 AM / 4 months ago

UPDATE 1-Israel's Bezeq warns on 2018 after Q4 net disappoints

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By Steven Scheer

JERUSALEM, March 29 (Reuters) - Bezeq Israel Telecom warned of lower profit in 2018 after missing fourth-quarter net profit expectations on Thursday, sending shares in Israel’s largest telecoms group lower.

The company has been rocked by an investigation of its chief executive and top shareholder over suspected securities offences and is set to name a new board on April 26.

It reported a 0.7 percent fall in 2017 net profit to 1.24 billion shekels and warned it expected that to fall to 1.0 billion this year.

For the fourth quarter, Bezeq reported a rise in net profit to 205 million shekels ($58.5 million) from 185 million, but that fell short of the 240 million expected by analysts in a Reuters poll.

Revenue fell 1.8 percent to 2.46 billion shekels, but topped the 2.41 billion expected by analysts.

Bezeq’s shares were down 5.4 percent to 4.57 shekels at 1045 GMT. The stock is down 12 percent this year.

The company has called a shareholders meeting for April 26, when a new board of 13 to 15 members is to be named. Interim chairman David Granot said he does not plan to stand for chairman.

“Bezeq will only be able to regain investors’ confidence once it manages to establish a fully independent and professional board, which we hope will pave the way to the appointment of a new management and the launch of a new strategic plan for the company,” Barclays analyst Tavy Rosner said.

Chief Executive Stella Handler was arrested last month in connection with a wider investigation into alleged fraud, bribery and securities offences. She has denied any wrongdoing and plans to step down in July.

Controlling shareholder and former chairman Shaul Elovitch and a number of other officials connected to Bezeq were also arrested. They all deny any wrongdoing.

Elovitch controls Bezeq through the indebted Eurocom group, which is expected to be sold.

In the fourth quarter, Bezeq’s satellite TV business Yes saw its profit plunge 97 percent to 11 million shekels.

Mobile phone unit Pelephone gained 50,000 subscribers to 2.525 million, leading to a jump in net profit to 21 million shekels.

Bezeq declared a dividend of 368 million shekels for the second half of 2017. This month Bezeq said it would reduce its dividend payout to 70 percent from 100 percent of profit.

$1 = 3.5038 shekels Additional reporting by Tova Cohen; editing by Jason Neely

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