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Bezeq reported a slight drop in second-quarter profits to NIS 86 million, compared with NIS 90 million fgor the same quarter of last year.

Revenues for the state-controlled domestic telecoms monopoly fell 4.6%, to NIS 2.05 billion, while operating expenses dropped 8% to NIS 97 million.

The Bezeq group's first half revenues totaled NIS 4.11 billion, compared to NIS 4.35 billion in the first half of 2001. CEO Ilan Biran attributed the drop to the state of the economy, inflation and the cancellation of access fees that Bezeq had charged mobile phone operators.

The company's cash flow also fell due to falling revenues and higher expenditures on early-retirement packages.

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Another factor lowering cash flow was the change in the payment structure between Bezeq and its cellular phone subsidiary Pele-Phone Communications. The fall was tempered by growing cash flow from long-distance operator Bezeq International.