Reuters: Regulatory News: UPDATE 2-Partner Communications braces for market share drop

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UPDATE 2-Partner Communications braces for market share drop May 23rd 2012, 12:38 Wed May 23, 2012 8:38am EDT * Q1 net profit 146 mln shekels vs 157 mln forecast * Q1 revenue down 11 pct to 1.57 bln shekels * Company reviewing business plan, to discuss dividend * Shares down 5.2 pct to new 52-week low By Steven Scheer JERUSALEM, May 23 (Reuters) - Partner Communications , Israel's second largest mobile phone operator, is reviewing its business plan and dividend after the outbreak of a price war in the country's mobile phone market that threatens to cut its market share. Partner, which reported a 43 percent fall in first quarter profit on Wednesday, said it was updating its business plans and that it had opted not to issue a dividend now "but rather to discuss it later on." It last paid a dividend in the third quarter of 2011, in line with a policy of paying a quarterly dividend of about 80 percent of its profit. The company posted a loss the fourth quarter. Partner and its main rivals have come under pressure since the start of 2011 because regulatory changes have forced them to slash fees mobile operators charge each other to connect calls and to scrap exit fines for customers. The government has also issued new licences to create more competition and push prices down in a market dominated for more than 12 years by three groups -- Partner and chief rivals Cellcom and Bezeq unit Pelephone. "In light of the current saturation of the cellular communications market the market share of existing mobile operators could diminish and pricing of services are expected to be reduced," said Partner, which has held a market share of around one-third for many years. The opening up of the market to five new competitors has already had a big impact on prices. Two new operators and three virtual ones that use infrastructure from the three incumbents have just launched with either very low per-minute rates or by offering packages bundling unlimited voice calls, text messages and Internet surfing for about $25 per month. Partner, which operates under the Orange brand name, has responded with its own unlimited plan for about $30 a month. Partner's shares fell 5.2 percent in Tel Aviv to a new 52-week low of 18.02 shekels. They have plunged nearly 50 percent so far in 2012 after a 53.3 percent drop in 2011. Analysts said the full impact on Partner of the new entrants is yet to come. "The first quarter results were influenced mainly by competition between the large companies and do not reflect the entry of (new players) Golan and HOT Mobile to the sector," said Sabina Podval, an analyst at Leader Capital Markets. "Consequently, we expect continued erosion of Partner's results, which will grow worse in the coming quarters." Podval lowered her price target for Partner to 20 shekels from 33 but maintained a "market perform" rating. Cellcom and Pelephone have also posted poor quarterly results. COST CUTS, INTERNET TV Partner's first-quarter net profit was 146 million shekels ($39 million), compared with 254 million a year earlier. Earnings before interest, depreciation, taxes and amortisation (EBITDA) slipped 25 percent to 438 million shekels, while revenue fell 11 percent to 1.57 million. The company was forecast to record profit of 157 million shekels, with EBITDA of 459 million and revenue of 1.57 billion shekels, according to a Reuters poll. Gil Dattner, an analyst at Leumi Capital Markets, said investors were looking at what Partner says about the change in the telecoms landscape. But, "we think at this point there is little the company can say that will improve sentiment." Partner, which is in the midst of fully merging with 012 Smile, a provider of fixed line and long distance calling and internet services that it bought last year, also plans to launch later this year services such as television and content services over the Internet while continuing to implement a 4G network. Cost cuts that began in the fourth quarter have reduced expenses by 80 million shekels the past six months but Partner said the full effect of the measures, which include steep layoffs, would be reflected in coming months when the merger is completed in the third quarter. Partner's subscriber base slipped 2 percent to 3.147 million. Link this Share this Digg this Email Reprints

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