In its forthcoming financial statements, Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ) will publish a NIS 1.4-1.5 billion profit forecast for 2016, according to analysts and other capital market sources. Several months ago, Bezeq raised its 2015 profit forecast from NIS 1.5 billion to 1.7 billion.
Bezeq's projection stands in stark contrast to the poor results of all the other Israeli communications companies, whose aggregate 2015 profit totaled only NIS 64 million: Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL) - NIS 97 million, Partner Communications Ltd. (Nasdaq: PTNR; TASE: PTNR) - minus NIS 40 million, and Hot Telecommunication Systems Ltd. (TASE: HOT.B1) - NIS 7 million.
The publication of all the communications companies' results at almost the same time highlights Bezeq's enormous profits and the failure of the other companies in the market. This is an important watershed requiring serious thought by the Ministry of Communications about whether it can allow this state of affairs, in which the entire communications market other than Bezeq is losing money, to continue, and whether it intends to take responsibility for the results of its policy.
For the sake of fairness, it should be noted that Bezeq's enormous profits are a result of its monopoly in the landline communications market. On the other hand, it should also be realized that up until the recent elections, the Ministry of Communications' policy was aimed at creating four more or less balanced competing communications groups.
Since Prime Minister Benjamin Netanyahu became Minister of Communications, however, it appears that the exact opposite has been taking place in the communications market. Bezeq is becoming stronger, while all its competitors are collapsing, even before the regulatory concessions for Bezeq declared by the Ministry of Communications take effect.
It is clear that had we compared the results of Cellcom and Partner with those of Pelephone Communications Ltd., there would be little difference; in other words, Pelephone is also expected to report poor results. Pelephone will not lose money, however, because it has no financing expenses. When elimination of the structural separation between Bezeq and Pelephone and the other Bezeq subsidiaries is considered, however, there is no escaping the question of whether it is well-timed, and whether it will destabilize the communications market.
Published by Globes [online], Israel business news - www.globes-online.com - on March 15, 2016
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