Cellcom Israel Ltd. tumbled the most on record after Israel’s largest mobile-phone company posted a 43 percent decline in first-quarter profit and on concern competition will force the company to cut prices.
The shares plunged 9.6 percent, the most since July 2007 when the stock was listed in Tel Aviv, to 37.50 shekels at the close in Israel. The stock was cut to underperform at Excellence Nessuah Investment House Ltd. with a share-price estimate of 30 shekels.
Net income in the quarter declined to 173 million shekels ($45 million) from 306 million shekels a year-earlier on lower revenue. Golan Telecom Ltd. and Hot Telecommunication System Ltd. said yesterday they will start offering unlimited mobile-phone services, competing with packages of Cellcom, Partner Communications Co. and Bezeq Israeli Telecommunication Corp., which control 95 percent of the market in Israel, according to data from the Ministry of Communications.
“Cellcom revenue will continue to be adversely affected by the increased competition in the sector,” Sabina Podval, an analyst at Leader & Co Investment House Ltd. in Tel Aviv, said in an e-mailed statement today. “The report underlines the limited ability of the company to control revenues and shows that the company must fall in line with the new level of prices in the sector.”
Prime Minister Benjamin Netanyahu’s government is forcing telecommunication providers to cut fees and is encouraging new players to the market. Partner, Cellcom and Bezeq’s Pelephone Communications Ltd. wireless unit have lowered prices and subsidized handsets to compete with new providers. Cellcom said the monthly average revenue per user declined 21 percent to 90.5 shekels in the quarter.
Golan Telecom, partly owned by French entrepreneur Xavier Niel, started services yesterday offering unlimited voice and messaging at 99 shekels ($25.84) a month and selling SIM cards without handsets. Hot Telecommunications’ unit will also start mobile-phone services at 89 shekels a month for unlimited use, according to an e-mailed statement.
Hot shares slid 8.7 percent to 34.50 shekels. “The feeling is that Golan Telecom caught Hot off guard and Hot reacted under pressure, offering prices that are much lower than what it planned originally,” said Ori Licht, head of equity research at I.B.I.-Israel Brokerage & Investments Ltd.
Partner, the country’s second-largest cellular company, tumbled 8.2 percent to 23.59 shekels, the lowest since September 2003. Bezeq declined 4.3 percent to 4.90 shekels, the lowest since December 2004. The TA-25 benchmark index retreated 1.9 percent.
Harel Finance Ltd. also lowered Cellcom to underperform from market perform. “We estimate the average revenue per user will continue to deteriorate even at a faster rate than we have seen to date,” analyst Rami Rosen, at Ramat Gan, Israel-based Harel wrote in an e-mailed note today.