Israel's Orange second-quarter profit slides 80 percent

By Steven Scheer

JERUSALEM (Reuters) - Partner Communications Co Ltd (PTNR.TA), Israel's second-largest mobile phone operator which operates under the Orange brand name, has reported an 80 percent drop in quarterly profit, citing intense competition.

Israel's mobile phone industry was shaken up in 2012 with the entry of a host of new operators, sparking a price war that led to steep drops in subscribers, revenue and profit at Partner and two incumbent rivals.

It is hoping to stem a rough three years by taking advantage of a new wholesale reform in the telecoms sector, in which Bezeq Israel Telecom (BEZQ.TA) - the owner of a nationwide DSL network - must lease its infrastructure to smaller rivals.

Partner and a handful of other players have started offering a package of Internet and other services at far lower costs than Bezeq. Rival Cellcom (CEL.TA), which will report quarterly earnings on Thursday, has already launched a low-cost TV service using the Internet and Partner has said it may follow suit.

"We are intent on becoming a significant player, furthering competition in the fixed telecommunications market," said Isaac Benbenisti, Partner's chief executive.

It is also looking to capitalise on receiving long-awaited 4G frequencies when it starts operating 4G in a 20 MHz band in the coming days. Partner had been offering in 4G in a limited capacity.

Partner (PTNR.O) - the first of Israel's telecoms firms to report - said on Wednesday it earned 9 million shekels ($2.4 million) in the second quarter, compared with 46 million a year earlier. Revenue slipped 4 percent to 1.04 billion.

The company had been forecast to earn 5.5 million shekels on revenue of 1.03 billion, according to a Reuters poll of analysts.

Its subscriber base dipped 6 percent to 2.75 million customers.

Partner said it may make a loss in the third quarter due to a one-time 35 million shekel expense linked to a retirement plan that will trim its workforce by 350 in the next few months, as well as the negative effects of competition.

Ziv Leitman, Partner's chief financial officer, noted that the intense competitive environment "eased slightly" in the quarter as its churn rate declined to 10.9 percent from 12.7 percent in the prior three months.

Shares of Partner were 3.8 percent lower at midday in Tel Aviv.

Partner operates under the Orange brand name through a long-standing licensing deal with French telecoms group Orange (ORAN.PA). In June, the two companies agreed to end that deal following a public dispute in the wake of comments from Orange's chief executive.

Partner has already received an initial payment of 15 million euro from Orange and it said it was conducting a study regarding the use of the Orange brand.

(The story has been refiled to correct Reuters quarter two profit consensus)

(Reporting by Steven Scheer; Editing by David Holmes and William Hardy)