Partner Jumps on Bets It Will Diversify Revenue: Tel Aviv Mover

Partner Communications Co. surged to the highest in almost four months on speculation Israel’s second-biggest mobile phone company is close to finding ways to diversify its revenue, potentially boosting profit.

Partner advanced 5.9 percent to 19.45 shekels, or the equivalent of $4.98, at the Tel Aviv close, the highest since May 21. The New York shares of the company based in the Israeli city of Rosh Ha’Ayin, fell 0.5 percent to $5.085 yesterday, snapping a five-day rally. Israel’s benchmark gauge, the TA-25 Index, gained 0.5 percent as trading resumed after a three-day holiday. Bezeq Israeli Telecommunication Corp., the country’s largest fixed-line phone provider, rose 1.1 percent.

“Investors believe Partner is close to signing a wholesale agreement which will allow it to lease infrastructure from Bezeq and provide fixed-line and other services, diversifying revenues,” said Richard Gussow, a senior analyst at DS Securities & Investments Ltd. in Tel Aviv.

Partner’s shares have slumped 47 percent in the past year as the government introduced regulations to boost competition and reduce prices. Israel’s main telecommunications companies, Cellcom Israel Ltd., Partner and Bezeq, have been the worst performers on the TA-25 index, respectively, in that period. Partner is cutting jobs and seeking to enter other segments to boost revenue, Chief Executive Officer Haim Romano said Aug. 14.

“Partner is in negotiations with Bezeq about a wholesale service,” the company said in a statement read out over the phone after markets closed.

Worst Over

The government wants to introduce a wholesale fixed-line market and a fiber-to-the-home network to boost competition with existing fixed-line operators such as Bezeq and Hot Telecommunication System Ltd. Cellcom said last month that efficiency measures have led to savings of 300 million shekels ($77 million) this year.

“Third-quarter results will still be tough, but investors feel the worst may be behind for the telecommunications sector,” Gussow said. “Once a wholesale market is in place, then the regulator will allow Bezeq subsidiaries to work together and allow them to cross market products and cut costs.”

Partner’s revenue is likely to drop 14 percent in the three months ending Sept. 30, according to a forecast from Bank Leumi Le-Israel on Bloomberg. The company trades at 6.9 times estimated earnings, compared with 10.9 times for the Israeli benchmark. Shares of Cellcom are trading at an estimated price-to-earnings ratio of 6.7 times, while Bezeq’s are at 6.6 times.

Cellcom advanced 2.8 percent to 31.75 shekels while Hot gained 3.5 percent to 35.87 shekels.

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