Bezeq Gains on Fourth Quarter Net, Dividend: Tel Aviv Mover

Bezeq Israeli Telecommunication Corp., the country’s largest fixed-line provider, advanced the most in a week as the company reported fourth-quarter profit that beat estimates and announced a dividend payment.

Shares of the company, which also offers mobile phone services, advanced 2.5 percent, the most since Feb. 26, to 4.808 shekels at the close in Tel Aviv. The company’s 12-month dividend yield is 24 percent compared with a yield of 2.8 percent for the benchmark TA-25 Index which was little changed at 1,240.51.

Profit for the quarter dropped 1 percent to 519 million shekels, according to an e-mailed statement today, higher than two estimates of 410 million shekels and 432 million shekels, according to data compiled by Bloomberg. The company reiterated its guidance for 2013 of a profit of 1.7 billion shekels to 1.8 billion shekels for the year. Bezeq said it would pay a dividend and a special dividend totaling 1.36 billion shekels in May. Free cash flow for the year rose 79 percent to 2.78 billion shekels.

“The results were good, the numbers strong and the cash flow is high,” Ori Licht, an analyst at Israel Brokerage and Investments Ltd. in Tel Aviv, said in an e-mailed note today. “The coming years are going to be more and more challenging for the company.”

The share has been the second-best performer on the benchmark gauge this year, as investors were lured by expectations of high dividends and after the company issued strong 2013 guidance on Feb. 5. Bezeq shares were the second-worst performer on the TA-25 index in 2012 after Cellcom Israel Ltd., dropping 39 percent as competition in the telecommunications industry intensified.

Tough Year

This year “will mark another tough year in the mobile market but Bezeq should weather the storm,” Roni Biron, an analyst at UBS AG wrote in an e-mailed note today. “We maintain our positive stance on Bezeq due to its high free-cash flow and dividend yield.” Biron has a buy recommendation on the shares.

The company said today it posted a 7.6 percent drop in sales in the fourth quarter of 2012 to 2.45 billion shekels and a 9.6 percent drop in revenue for the year, reflecting lower sales in the cellular segment.

Hot Telecommunication System Ltd. and Golan Telecom entered the wireless market in May leading to greater price competition. Bezeq provides mobile phone services via its Pelephone Communications Ltd. unit. The company is also set to face additional competition in the fixed-line market as the Israel Electric Corp. sets up a fiber-to-the-home network and as government seeks to introduce a wholesale fixed-line market.

ARPU Falls

Bezeq said sales from internet services in 2012 rose 6.8 percent to 1.17 billion shekels, as the number of subscribers and average revenue per subscriber increased.

Its Pelephone unit reported a 17 percent drop in revenues to 1.03 billion shekels and said profit for the quarter dropped 34 percent to 134 million shekels. Pelephone lost a net 47,000 subscribers during the year, with 2.8 million cellular subscribers as of Dec. 31. Average monthly revenue per user in the fourth quarter dropped to 89 shekels compared with 100 shekels in the corresponding quarter a year earlier.

B Communications Ltd., which holds a 31 percent stake in Bezeq according to data compiled by Bloomberg, gained 2.7 percent. Internet Gold-Golden Lines Ltd., B Communications’ parent company, advanced 1.9 percent.

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