Partner, Cellcom Decline as Price War Continues: Tel Aviv Mover

Cellcom Israel Ltd. (CEL) and Partner Communications Co. (PTNR) led declines on the benchmark TA-25 index on bets a recent surge in shares in Israel’s two largest mobile phone providers was overdone amid growing competition.

Cellcom’s shares dropped 2.1 percent to 34.43 shekels, the lowest intraday level since Oct. 14, at 2:50 p.m. in Tel Aviv, bringing its drop this year to 46 percent. Partner’s shares retreated 2.7 percent to 21.51 shekels. The TA-25 benchmark index advanced 0.6 percent. Cellcom, Partner and Bezeq Israeli Telecommunication Corp. (BEZQ) were the three biggest gainers on the TA-25 index last week.

Israeli mobile virtual network operator YouPhone started offering monthly wireless packages for 79 shekels ($20.50) today, the cheapest offered by operators in Israel, according to a price list compiled by Citigroup Inc. (C) in an Oct. 22 report. Calcalist reported yesterday that the mobile operator of Hot Telecommunication System Ltd. (HOT) has enrolled 350,000 customers since the start of services in May.

“Despite recent gains in telecommunication shares, the sector remains competitive and operators lack the ability to raise prices,” Zach Herzog, head of international sales at Psagot Investment House Ltd., said today by phone.

Cellcom and Partner shares have been the worst performing on the TA-25 index this year, as new players have entered the wireless industry amid government efforts to enhance competition. Hot, Golan Telecom Ltd., and YouPhone entered the wireless market in May, leading to greater price competition. Bezeq, which provides mobile-phone services via a unit, has been the third-worst performing share on the index this year.

“Our view is that the competitive intensity is here to stay,” Michael Klahr, an analyst at Citi Research wrote in the Oct. 22 report. “We remain sellers of mobile.”

To contact the reporter on this story: Shoshanna Solomon in Tel Aviv at ssolomon22@bloomberg.net

To contact the editor responsible for this story: Alaa Shahine at asalha@bloomberg.net

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