Bezeq Telecom eyes merger of TV, internet units to cut costs

JERUSALEM: Bezeq Israel Telecom said on Thursday it would look to further reduce costs by combining two of its units after it swung to a profit in the fourth quarter on lower impairment losses.

The country's largest telecoms group said it was examining a merger between its satellite TV business YES and ISP subsidiary Bezeq International due to increased competition and the need to enhance synergies and unlock value.

It also was looking to spin off its IT solutions for business division into a new company.

"The process, if completed, will contribute to the subsidiary companies' financial results, through an improvement in sales capability and in retention of subscribers as well through streamlining and reduction of costs estimated at tens of millions of shekels per year," said Chairman Gil Sharon.

Barclays analyst Tavy Rosner called the potential moves "logical" in that Bezeq can "deliver further savings through further redundancies and streamlining."

Its shares were down 0.1% to outperform losses of 1.5% on the broader Tel Aviv bourse.

Bezeq's main business is fixed-line but it has separate units for TV, internet and mobile phone. It has long sought to merge its units into one firm to reduce costs but efforts have been denied by the telecoms regulator, which fears easing up would allow the firm to use its market power to crush smaller rivals.

However, the regulator -- Israel's Communications Ministry -- has of late been willing to relax its regulations for Bezeq, including a deal that would allow Bezeq to begin deploying a nationwide fibre optics network.

Bezeq, which expects to cover 40% of households with fibre in 2021, said it earned 174 million shekels ($53 million) in the October-December period, compared with an 87 million shekel loss a year earlier. It reported a loss from impairment of assets of 25 million shekels in the quarter, versus 196 million shekels a year earlier.

Revenue was unchanged at 2.2 billion shekels.

The company also projected adjusted net profit of 1.0 billion shekels in 2021 after reporting a profit of 796 million in 2020, with adjusted EBITDA of 3.5 billion shekels.

Bezeq's Pelephone business, Israel's third-largest mobile operator, recorded a quarterly loss of 12 million shekels, versus a 69 million shekel loss a year earlier. Revenue slipped 11.5% to 533 million shekels while its subscriber base rose to 2.442 million from 2.327 million.