Cellcom Nears U.S. Debut

Investors will be closely eyeing Partner's shares as Cellcom makes its debut. Partner closed Friday at $13.40.

"This IPO is getting a lot of attention," says Danny Farhi, head of the foreign investors desk at Excellence Nessuah, a Tel Aviv brokerage and investment house. "We have been getting a lot of calls from U.S. institutional investors inquiring about Cellcom, even those that haven't had any significant position in Israeli equities."

Farhi believes the price range of $16 to $18 a share is reasonable and reflects investor confidence in Israel's economy. "It shows that Israel's overall risk factor is becoming lower and that investors are optimistic about it."

For many analysts, the inherent problem in Israel is that cell phones are already very widely owned, making it difficult for operators to find growth engines other than new subscribers.

"The cellular market in Israel is saturated," Farhi says, "but these companies continue showing impressive revenue growth through new products and technologies offered to their existing customer base."

According to Farhi, Partner has the lead in providing 3G and 3.5G cellular services in Israel, a fact that has been forcing Cellcom to increase investments in its own next-generation products.

In its prospectus, Cellcom says it plans "to continue to invest in the deployment of our high-speed UMTS/HSDPA network, which covered 80% of the populated territory of Israel at the end of 2006. We also plan to expand our content and data services, products and capabilities through in-house expertise and strategic relationships with leading cellular content providers."

Cellcom is currently 78.5% owned by Discount Investment Corp., a subsidiary of IDB Development. Bank Leumi and Goldman Sachs each purchased a 5% stake in the company last year. After the IPO, Discount Investment will own 60.5%.