Internet usage boosts Bezeq’s quarterly net

Company betting future on fiber optics network for super-fast speeds.

Bezeq is betting its future on a fiber optics network capable of super-fast Internet speeds as it seeks to stay as Israel’s No. 1 telecoms group amid intensifying competition.

Growth in Internet customers fueled Bezeq’s 14% rise in second-quarter profit and the company said Monday it was rapidly deploying a fiber optics network. So far, 200,000 households and businesses have been connected to the network and that is expected to reach over 400,000 by the end of the year.

Bezeq’s push into fiber optics to the home comes as a group led by Sweden’s Viaeuropa and state-owned utility Israel Electric Corporation was chosen by the government to build a nationwide super-fast fiber optics network aimed at competing with Bezeq and cable company HOT. Fiber can provide speeds of one gigabit per second – up to 100 times faster what bis available now.

The number of Bezeq’s active fixed-line subscriber lines fell by nearly 5% in the quarter, but it continued to gain customers for its high-speed Internet services by offering free upgrades to higher speeds. That led to a 5.8% rise in the number of Internet subscribers and a 33.5% jump in profit in the fixed-line segment.

Helped by cost cutting, Bezeq earned NIS 473 million in the second quarter, above expectations in a Reuters poll that had an average forecast of NIS 429 million. Revenue slipped 9.4% to NIS 2.35 billion to fall short of expectations of NIS 2.38 billion.

Bezeq shares rose 1.7% to NIS 5.96 in Tel Aviv Stock Exchange trading Monday. The company said it would pay a quarterly dividend of NIS 969 million, or just under 36 agorot a share, plus a special dividend of NIS 500 million, the last of six equal payments.

Analysts say Bezeq will struggle in the near term as the market awaits news from the telecoms regulator over the creation of a wholesale market that could force Bezeq and HOT to lease their infrastructure to competitors.

Bezeq’s mobile unit Pelephone posted a 17% fall in profit to NIS 161 million on a 20.3% drop in revenue. But Pelephone, the third-largest mobile operator, said the erosion of revenue in the mobile sector had moderated.

Bezeq reaffirmed a 2013 forecast of net profit of between NIS 1.7 billion and NIS 1.8 billion in net profit and earnings  before interest, tax, depreciation and amortization of up to NIS 4.35 billion.