Bezeq shares decline as telecom firm sees lower profit for 2018

Israel’s largest telecommunications firm says profit for 2017 slid 0.7% to NIS 1.24 billion ($354 million), and forecasts 2018 net profit will be NIS 1.0 billion

By Shoshanna Solomon

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29 March 2018, 12:41 pm

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Shoshanna Solomon was The Times of Israel's Startups and Business reporter

The shares of Bezeq, Israel’s largest telecommunications company, declined on Thursday after the company reported lower than expected fourth quarter net profit and said it expects lower profit for 2018.

The results come with the company’s controlling shareholder and senior management officials embroiled in a probe by the Israel Securities Authority and police into connections between Prime Minister Benjamin Netanyahu and Shaul Elovitch, who controls Bezeq via his Eurocom Ltd. unit. They all deny wrongdoing.

Bezeq said net profit for the last quarter of the 2017 increased 11 percent to NIS 205 million ($58.5 million), compared with NIS 185 million a year earlier. The increase in net profit in the fourth quarter of 2017 was primarily due to a decline in tax and financing expenses, the company said. A Reuters poll of analysts had forecast Bezeq would earn NIS 240 million for the fourth quarter of 2017.

For the full year 2017, net profit declined 0.7 percent to NIS 1.24 billion. The company forecast 2018 net profit would be NIS 1.0 billion.

Shaul Elovitch arrives at the Tel aviv Magistrate’s Court for extension of his remand in Case 4000, February 22, 2018. (Flash90)

Revenue for the fourth quarter slid 1.8 percent to NIS 2.46 billion. Bezeq shares were trading 4.7 percent lower at 11:45 a.m. in Tel Aviv.

The company said its financial results for 2017 reflect the increasing competition the telecommunication provider is facing across all of its business activities, including cellular, satellite television and fixed line services.

“The present period is undoubtedly challenging for the Bezeq Group, not only from the commercial and competitive side, but also in terms of concerns about our corporate governance,” David Granot, Bezeq’s interim chairman, said in a statement.

“The effects of the ongoing investigations, including matters related to Bezeq as well as the Company’s officers and its ownership structure, are numerous and complex, and Bezeq’s Board of Directors views the matters with all due seriousness. In recent months, many actions have been taken to improve Bezeq’s corporate governance, and we will continue these efforts diligently, upholding the interests of all of Bezeq stakeholders.”

On March 6, the company’s board of directors updated the firm’s dividend distribution policy, whereby Bezeq will distribute, on a semi-annual basis, a dividend of 70% of the half-year profit. On Thursday, the company said it would pay a cash dividend of NIS 368 million shekels to shareholders, representing 70% of net profit for the second half of 2017.

In a separate statement on Thursday, Granot said that if he is elected as a director of the firm at the annual meeting scheduled for April 26, 2018, he does not intend to present his candidacy to serve as chairman of the board of directors of Bezeq.

Bezeq said last month it appointed an interim CEO to replace Stella Handler, as she remains under police investigation.