UBS sees telephony prices falling further
UBS analyst Roni Biron has cut his target prices for Bezeq, Cellcom, and Partner.
23 July 12 13:52, Nadav Neuman

UBS analyst Roni Biron today cut his target prices for Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ), Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL), and Orange franchisee Partner Communications Ltd. (Nasdaq: PTNR; TASE: PTNR), but he reiterated his “Buy” recommendation for all three carriers.

Biron cites the rising competition in the mobile sector. “In recent weeks we saw all three mobile incumbents introducing cheaper versions of their unlimited packages.” He estimates that the price war will reduce the mobile carriers’ monthly average revenue per user (ARPU) by a further NIS 5-7. He now estimates that ARPU will fall by NIS 15-17 from the levels in the first quarter of 2012 to NIS76-86 by the fourth quarter. “We estimate current levels to imply a sustainable ARPU below NIS 60,” he says.

“We cautiously do not assume a meaningful ARPU recovery in the outer years although we see this as a likely scenario,” says Biron.
Biron notes Cellcom’s family plan of NIS350 per month for three mobile lines including landline telephony, Partner’s family plan of NIS270 per month for three mobile lines, and Bezeq’s NIS 99 per month plan for all private subscribers. “Despite the low-priced packages we believe further price cuts are still possible although to a limited extent, and expect the negative sentiment to persist until sector dynamics stabilize. That said, we believe the aggressive response by the incumbents will likely force the sector into consolidation and a more rationalized environment in the mid-long term. We therefore continue to see long-term value at current levels,” Biron concludes.

Biron cut his target price for Bezeq from NIS 6.70 to NIS 5.80, he cut his target price for Cellcom from $10.50 to $8, and his target price for Partner from NIS 30 to NIS 23.

Biron also cut his earnings per share estimates for the carriers, as follows: Bezeq – NIS 0.70 in 2012; NIS 0.61 in 2013, and NIS 0.62 in 2014; Cellcom – $3.21 in 2012, $2.60 in 2013, and $2.73 in 2014; Partner NIS 2.03 in 2012; NIS 1.74 in 2013; and NIS 1.97 in 2014.
Bezeq’s share price fell a further 1.7% by mid-afternoon today to NIS 4.10, giving a market cap of NIS 11 billion; Cellcom fell a further 5.8% to NIS 20.06, after falling 3.4% on the New York Stock Exchange to $5.35, giving a market cap of $532 million; and Partner fell a further 1.9% to NIS 12.56, despite rising 0.9% on the Nasdaq yesterday to $3.34, giving a market cap of $527 million.

Published by Globes [online], Israel business news – www.globes-online.com – on July 23, 2012