Bezeq Drops as Citi Cuts to Sell on New Rivals: Tel Aviv Mover
Bezeq Israeli Telecommunication Corp. (BEZQ) fell the most in more than a month after Citigroup Inc. cut its recommendation for this year’s best-performing stock on Israel’s benchmark index to sell, citing increasing competition.
The shares of the country’s biggest fixed-line provider, which also offers wireless services, dropped 5.7 percent, the most since since Sept. 3, to 6.295 shekels at 12:59 p.m. in Tel Aviv. That trimmed the gain for the year to 58 percent. The benchmark TA-25 Index (TA-25), up 9.3 percent in 2013, lost 1 percent.
“We have seen it before: a stock rallying ahead of a major change in the competitive environment,” Citi analyst Michael Klahr wrote in an e-mailed note to clients today. “We may be early to this call but think that this could be the last hurrah for Bezeq shares ahead of new fixed competition.” Klahr cut his recommendation from neutral, while raising the share-price estimate to 5.40 shekels from 4.26 shekels.
The fixed-line market is becoming more crowded as state-owned Israel Electric Corp. sets up a fiber network and the Ministry of Communications seeks to introduce a wholesale market. Bezeq’s group revenue could fall as much as 17 percent, Klahr wrote, as the market is expected to be opened to competition in the second half of 2014.
Internet Gold-Golden Lines Ltd. (IGLD), which has a stake in Bezeq via its B Communications (BRCD) Ltd. unit, plunged as much as 21 percent, the most on record. The shares have more than tripled this year. B Communications, owner of a 31 percent stake in Bezeq, dropped 14 percent, the most in more than a year. The shares have still more than quadrupled in 2013.
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