Partner Initiated Bearish At Barclays On 'No Clear Strategy In Wireline'

Partner Communications Company Ltd (ADR) PTNR is the second largest wireless company in Israel, with 26 percent market share and the widest 3G coverage.

Barclays’ Tavy Rosner initiated coverage of the company with an Underweight rating and price target of ILS 19.

Rosner mentioned that Partner Communications has been operating under the Orange SA (ADR) ORAN brand since 1997 and rebranded itself as Partner only in 2015.

Network Sharing Agreement

The company has a wireless network sharing agreement with HOT. Under the terms of the agreement, a joint venture has been created to operate and develop their cellular network.

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According to the Barclays report, “Under the terms of the agreement, from April 2016 capex is being split equally between the two companies while opex is based partly equally and partly on traffic.”

Rosner believes this would help savings in opex and capex, while also helping with better spectrum utilization.

Partner Communications has also taken up other streamlining measures, such as prepayment of debt notes and share buybacks.

Some Concerns

The company’s operating margins and cash generation, however, have been under pressure, with opex having recently been affected by one-time charges due to the rebranding, along with new employee contracts that are expected to affect the P&L through the first half of 2016.

Rosner also pointed out that the company did not have a clear wireline strategy and that it “has not launched a TV or a triple-play offering yet.”

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