Cellcom, Israel’s largest cellphone operator, to cut jobs amid stiff competition

Workers stage improvised strike as company says it hopes its ‘comprehensive restructuring plan’ will allow it to return to profitability by end of 2020

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

A Cellcom service station in Jerusalem on November 5, 2015 (Lior Mizrahi/Flash90)
A Cellcom service station in Jerusalem on November 5, 2015 (Lior Mizrahi/Flash90)

Cellcom Israel Ltd., the nation’s largest cellphone operator, is planning to lay off workers and cut payments to suppliers as part of a “comprehensive restructuring plan” it hopes will allow it to return to profitability by the end of 2020.

The plan comes as the firm faces “intense competition and low prices” in the local telecom sector, the company said in a filing to the Tel Aviv Stock Exchange Monday night. Following the announcement, workers at the firm staged an improvised strike, saying they would oppose the cuts.

In a filing, the firm said it hopes the plan will help it return to a positive net income by end 2020, reduce debt and cope better with “market conditions, the intense competition and future investments.”

Israel’s cellphone industry has witnessed intense competition and cutthroat prices since a reform allowed the entry of a host of new operators in 2012. The price war led to steep drops in subscribers, revenue and profit for Cellcom and its rivals Partner Communications and Pelephone, a unit of Bezeq Israel Telecom.

A man speaks on the cellphone in Jerusalem on November 05, 2015 (Lior Mizrahi/Flash90)

Cellcom said in the filing that it hopes to cut some NIS 150 million ($43 million) in annual operational expenditures by reducing expenses and payments to suppliers and by a “substantial reduction in manpower.” The firm did not say how many workers it planned to lay off, but the Calcalist financial website reported that the firm is planning to chop some 500-600 jobs, or 20 percent of its workforce, with a potential of as many as 700-800

Cellcom also said in the filing that it plans to reduce capital expenditure levels by some NIS 400 million-500 million per year, to be fully executed by 2020.

The firm also plans to raise some NIS 400 million before the end of 2019, and buy back bonds for up to NIS 150 million.

“The company intends to substantially reduce costs and decrease the company’s debt, as market conditions continue to be challenging,” said CEO Nir Sztern in the filing. “I am determined to execute the plan and hope the employees’ representatives will demonstrate responsibility towards the company and the need to lead it to safe grounds, for the benefit of its employees and shareholders. I intend to carry out the plan as soon as possible.”

In August, the firm reported a larger-than-expected quarterly loss amid higher financing costs and fierce competition.

The restructuring will enable Cellcom “to participate in mergers, acquisitions and other opportunities that may present themselves in the telecommunications arena in the next few years,” Ami Erel, the chairman of the board of directors, said in the filing.

The firm’s shares were trading 2.2 percent higher at 9:58 a.m. in Tel Aviv, capping a decline of 69% in the past 12 months.

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