Bezeq, Israel’s largest telecommunication firm, whose controlling shareholder and CEO are embroiled in a corruption probe, said Wednesday it would cut dividend payments to 70 percent of its net profit instead of the 100 percent it has paid shareholders until now.
The next semiannual dividend payment will be in accordance with the new policy, Bezeq said in a filing to the Tel Aviv Stock Exchange on Wednesday.
The dividend policy of distributing 100 percent of its profits had been a main attraction to investors. In an interview with The Times of Israel published earlier this month, Yali Rothenberg, Bezeq Group’s chief financial officer, said the board would study the matter closely in light of the increasingly competitive environment the company operates in.
Bezeq controlling shareholder Shaul Elovitch, along with members of his family, Bezeq CEO Stella Handler and another official at the firm were arrested last month as part of a probe by the Israel Securities Authority (ISA) and police into connections between Prime Minister Benjamin Netanyahu and Elovitch, who controls Bezeq via his Eurocom Ltd. unit. They all deny wrongdoing.
“The board sees importance in maintaining a balance between ensuring the company’s financial strength and stability, while maintaining its current ‘AA’a credit rating over time, and continuing to create value for its shareholders by distributing dividends,” Bezeq said in the filing.
“The change in policy does not come as a big surprise,” Roni Biron, co-head of research at Excellence Nessuah, a Petah-Tikva based brokerage, said in a note to investors. “We believe the change in policy should support Bezeq’s balance sheet and credit rating, but diminishes one of its main attractions to investors.”
Bezeq also said Wednesday that its board has approved the appointment of two interim directors, Shlomo Rodav and Doron Turgeman, as they would be “good for the firm.” The two were nominated last month by parent company, B Communications Ltd. The directors will serve until a general shareholders meeting is held later this year, Bezeq said.
In conjunction with the appointment of the two new directors, controlling shareholder Shaul Elovitch and his son, Or Elovitch, who are entangled in the probe, submitted their resignation letters and stepped down from the board.
The corruption case, known as Case 4000, involves suspicions that controlling shareholder Elovitch ordered the Walla news site, which he owns, to grant positive coverage to Netanyahu and his family in exchange for the prime minister advancing regulations benefiting Elovitch. The director of the Communications Ministry, Shlomo Filber, has become a state witness in the case.