ynetnews 13-8-2013.

Bezeq eyes growth from fiber optics

Israel’s No. 1 telecoms group betting its future on network capable of super-fast Internet speeds amid intensifying competition in landline, mobile phone sectors

Bezeq Israel Telecom is betting its future on a fiber optics network capable of super-fast Internet speeds as it seeks to stay as Israel‘s No. 1 telecoms group amid intensifying competition in the landline and mobile phone sectors.

 Growth in internet customers fuelled Bezeq’s 14% rise in second-quarter profit and the company says it is rapidly deploying a fiber optics network. So far, 200,000 households and businesses have been connected to the network and that is expected to reach over 400,000 by the end of the year.

 ezeq’s push into fiber optics to the home comes as a group led by Sweden’s Viaeuropa and state-utility Israel Electric Corp (IEC) was chosen by Israel’s government to build a nationwide super-fast fiber optics network aimed at competing with Bezeq and cable company HOT.

 Fiber can provide internet speeds of 1 gigabit per second – or as much as 100 times faster than currently available speeds.

 Bezeq used to be a government-owned monopoly but now is a private company facing stiff competition in all areas in which it operates, especially in phone calling where profits have been dropping in recent years.

 The number of Bezeq’s active fixed-line subscriber lines fell by nearly 5% in the April-June period, but it continued to gain customers for its high-speed internet services amid a promotion of free upgrades to higher speeds. That led to a 5.8% rise in the number of internet subscribers and a 33.5% jump in profit in the fixed-line segment.

 Helped by cost cutting, Bezeq earned NIS 473 million ($133 million) in the second quarter, above expectations in a Reuters poll of NIS 429 million ($120 million). Revenue slipped 9.4% to NIS 2.35 billion ($660 million) to fall short of expectations of NIS 2.38 billion ($670 million).

 Analysts believe Bezeq will struggle in the near-term as the market awaits news from the telecoms regulator over the creation of a wholesale market that could force Bezeq and HOT to lease their infrastructure to competitors.

 ”Due to expected changes in the sector and regulatory threats, the stock price is not low,” said Sabina Podval, an analyst at Leader Capital markets.

Mobile unit Pelephone posted a 17% fall in profit to NIS 161 million ($45 million) on a 20.3% drop in revenue. But Pelephone, Israel’s No. 3 mobile operator, said the erosion of revenue in the mobile sector had moderated.

 Pelephone and its two main competitors are grappling with a price war following a shake-up of Israel’s mobile phone industry last year that ushered in six new operators.

Bezeq reaffirmed a 2013 forecast of NIS 1.7-1.8 billion ($480-500 million) in net profit and earnings before interest, tax, depreciation and amortization of NIS 4.25-4.35 billion ($1.19-1.22 billion). It will pay a quarterly dividend of NIS 969 million ($271 million), or 0.3555 per share, plus a special dividend of NIS 500 million ($140 million), the last of six equal payments