Partner Outperforming Cellcom on Saban: Israel Overnight

Partner Communications Co. is outperforming Cellcom Israel Ltd. in the stock market on prospects investment from a new shareholder will help the phone company revive sales growth amid rising competition.

Partner, Israel’s second-biggest mobile provider, has climbed 15 percent in New York since Oct. 14, when Scailex Corp. said it was in talks with Saban Capital Group Inc. to sell its Partner stake. Cellcom, the nation’s largest mobile company, has lost 5.4 percent in the same period. Both stocks rose in New York yesterday, as the Bloomberg Israel-US Equity Index of the biggest Israeli companies in the U.S. dropped for a third day.

Saban Capital, owned by billionaire Haim Saban, bought

30.73 percent of Partner from Scailex in January. Partner, which posted the steepest sales drop since its 1999 U.S. listing last year as new operators cut prices to lure customers, will see 2014 revenue increase 0.9 percent, according to analysts’ estimates collated by Bloomberg. Cellcom’s sales are projected to drop over the next two years.

“They’re in a challenging business environment,” Zach Herzog, head of international sales at Psagot Investment House Ltd. in Tel Aviv, said by phone yesterday. “You may have to weigh the company based on what its investor is willing to put into it and not what they’re able to generate on their own.”

This isn’t the first time Saban has ventured into Israeli telecommunications. Saban’s FSBR Group, together with Moshe Arkin and Apax Partners LLP, agreed to sell their stake in Bezeq Israeli Telecommunication Corp to 012 Smile Communications Ltd. in 2009.

‘Quite Well’

“With the experience of Saban, maybe he’d be able to leverage Partner activities to perform quite well,” Ori Licht, an analyst at Israel Brokerage and Investments Ltd. in Tel Aviv, said in a phone interview yesterday. He has the equivalent of hold on Partner and Cellcom shares.

Moshe Debby, a spokesman for Saban, declined to comment yesterday in an e-mail.

Discount Investment Corp., owned by Israeli tycoon Nochi Dankner’s IDB Holding Corp., has a 45 percent stake in Netanya, Israel-based Cellcom, according to a March 18 filing. IDB Holding, struggling to meet debt payments, offered to transfer 15 percent of the company’s shares to bondholders as well as inject 500 million shekels in cash, according to a March 12 filing to the Tel Aviv bourse.

“There’s a real difference between an owner who has money and, by choice, enters the sector at this time to take advantage or explore new sources of revenue,” Psagot’s Herzog said of Saban’s stake in Partner. “On the other hand you have Cellcom, which is owned by a holding company that has had to negotiate its debt.”

Pricing Pressure

Cellcom and Partner were two of the three worst performers in the Bloomberg Israel-US index last year. Both have grappled with competition as new entrants Hot Telecommunication System Ltd. and Golan Telecom Ltd. offer unlimited monthly wireless packages for less than 50 shekels ($13.57). Because of pricing pressure in the industry, Excellence Nessuah Investment House Ltd.’s Gilad Alper says Saban will face challenges in improving Partner’s revenues.

“I disagree that he can actually make a big difference,” Alper, a senior analyst at Excellence Nessuah in Ramat Gan, Israel, said in a telephone interview yesterday. He has a hold rating on Cellcom and the equivalent of sell on Partner. “The issues the company is facing are unsuitable for the market.”

Partner shares were unchanged at 22.6 shekels, or the equivalent of $6.15, at the close in Tel Aviv, after rising 0.2 percent to $6.13 yesterday in New York. Cellcom jumped 3.4 percent to 31.56 shekels, or $8.59, after advancing 3.5 percent to $8.36 in the U.S. yesterday.

Mellanox Slides

The Bloomberg Israel-US Index dropped 0.4 percent to 89.99 yesterday, decreasing a third day in the longest streak of declines in a month. Israel’s benchmark TA-25 Index was little changed at 1,249.37 today.

Mellanox Technologies Ltd. slumped 4.5 percent to $53.86, its fifth day of losses in the U.S. Law firm Faruqi & Faruqi LLP said it’s investigating potential securities fraud, according to a March 18 statement. The company’s Tel Aviv stock fell 0.2 percent to 204 shekels, or $55.51, today.

CaesarStone Sdot-Yam Ltd. surged 7 percent to $25.07 in New York, the biggest gain in the Bloomberg Israel-US gauge. Credit Suisse Group AG raised its share-price estimate by 23 percent to $27.

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