Despite rising sales costs on intensifying competition, Partner Communications (Nasdaq, TASE:PTNR, LSE:PCCD) ( PTNR) should end 2002 on a net profit of NIS 100 million, predicts Menorah Gaon Investment House.

Menorah Gaon analyst Chen Lindman rates Partner a Buy and set a price target of NIS 27.8, 29% above its Sunday price on the Tel Aviv Stock Exchange.

Intensifying competition with arch-rival Cellcom will force the Israeli mobile operator to spend more on marketing, but Lindman sees Partner finishing 2002 on an operating profit of NIS 635 million, five times its result of 2001.

In the second quarter Partner boosted its operating profit to NIS 138 million.

Lindman predicts that by year-end Partner will have 1.85 million subscribers, versus 1.7 million at the end of the second quarter.

He sees the company's revenue rising to NIS 4.05 billion in 2002, from NIS 3.2 billion in 2001. But average revenue per user ARPU will continue to erode, Chen predicts, as a rising proportion of new subscribers employ prepaid mechanisms. He expects the ratio of joiners opting for prepaid service to pass 50% in 2002.

After investing NIS 2.5 billion in its infrastructure, Lindman continues, Partner's costs per subscriber will decline significantly in 2002 and in the years to come. Based on that estimate, he sees Partner's gross profit reaching a billion shekel in 2002, or 25%.

Sales costs will continue to rise in 2002, but at a slower pace, again due to the increasing proportion of prepaid users.

Menorah Gaon sees Partner ending 2002 on a net profit of NIS 100 million, thanks to its growing customer base, 5% average rate increase from the start of the third quarter, and value-added services.

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