Partner reveals strong reports: but why are investors worried?
The telecommunications company managed by Avi Gabay closed a strong quarter with growth in all profit lines and the highest mobile subscriber recruitment in the industry - but at the same time is trying to distribute half a billion shekels to shareholders not from its profits, a move its bondholders have already voted against. What does this mean for the company's financial resilience, and how does it fit into the picture of Cellcom and Pelephone?
Partner, the company that completes the trio of the largest mobile companies in Israel alongside Pelephone and Cellcom, published the results of the second quarter of 2026, which shows a quarter of growth in profitability.
At Partner, net profit climbed by about 17% to 84 million shekels, operating profit also rose by about 17% to 121 million shekels, and adjusted EBITDA grew by about 4% to 314 million shekels, which is 40% of total revenue.
The main engine is the mobile sector. The subscriber base reached 2.725 million, an addition of 29 thousand subscribers within a quarter and 77 thousand within a year - the highest recruitment in the industry according to the company, which attributes it to its advanced 5G network. The number of paying 5G customers crossed the million mark for the first time and amounted to 1.012 million, about 37% of all mobile subscribers. The churn rate stood at 4.6%, relatively low for the industry.
The less glamorous side: the average revenue per user (ARPU), excluding interconnection fees, remained stable at 43 shekels. The reason it did not rise is a decrease in roaming revenues - the same phenomenon that repeated in all three companies. The "Lion's Roar" operation against Iran in March-April reduced flights abroad, and when Israelis do not travel, companies do not collect roaming fees.
The renewed Partner tv+ television service continued to gain momentum for the third consecutive quarter, with 212 thousand subscribers - an addition of 5 thousand in the quarter and 16 thousand since the launch. Fiber optic subscribers reached 480 thousand, and total internet subscribers (fiber and copper) touched 500 thousand.
Here the ARPU actually rose - to 96 shekels compared to 93 shekels last year - thanks to customers moving to faster surfing packages. The combination of high-speed internet and television is exactly the product that increases the average revenue and reduces churn.
On the top line, revenues excluding interconnection fees grew by about 3% to 790 million shekels. It is important to note: in "regular" reported terms, revenues actually fell by about 2% (from 802 million), but the decrease is almost entirely due to the reduction of regulatory connectivity tariffs that ended in 2025 - and therefore the comparison excluding interconnection fees better reflects the business trend.
And here comes the story that has occupied shareholders in recent months. In March, the company already distributed a dividend of 465 million shekels, and in July the board of directors approved approaching the court with a request to distribute up to another 500 million shekels - this time not from profits, i.e., by way of capital reduction. Partner even took out credit lines for financial flexibility, a move the market called "taking a loan to distribute a dividend".
The problem: bondholders do not like it when money leaves the company to shareholders (led by Ampisa Holdings, which holds about 21%), because it reduces the cushion from which the debt will be repaid.
In meetings held on August 6, holders of series Zayin and Het voted against - and did not pass the required two-thirds majority. The trustee notified the court that the holders oppose the distribution. At the same time, as a kind of goodwill gesture, Partner approved a full early redemption of series Het bonds for about 140 million shekels, which will be carried out on September 14.
It is important to emphasize: there is no sign of distress here. The net financial debt to EBITDA ratio stands at only 0.3 and the company meets all financial covenants. However, the net financial debt did climb to 369 million shekels (from 287 last year) following the distribution, and at the solo level a deficit was created in working capital - data that explain why bondholders are raising an eyebrow.
This quarter places the three companies side by side clearly. Cellcom, managed by Eli Adadi, recorded a record profit of 92 million shekels (the highest since 2015, a jump of 44%) and continued its policy of aggressive debt reduction.
Pelephone, from the Bezeq house, presented revenues of 511 million shekels and a comparative profit of 34 million, but recorded a negative free cash flow of about 49 million shekels. Partner, for its part, chose the most aggressive path of returning cash to shareholders.
And hovering above them all is the deal for the acquisition of Hot Mobile by a consortium of Delek Israel, Leumi and partners (which already received the approval of the Competition Authority on August 5) - a deal expected to reignite the mobile price war and test how much the improvement in profitability can continue.
Partner shares are traded on the Tel Aviv Stock Exchange and are included in the TA-90 and TA-125 indices, and therefore are found in many ETFs, provident funds and training funds. The company's value stands at about 6.8 billion shekels. It is interesting that this strong quarter comes after the stock stood almost in place since the beginning of 2026 (a return of about 1.5%), even though looking back a year it jumped by about 22%.
That is, the operational growth is clear - but the market has already priced in part of it, and is now following with interest the campaign around the distribution and what will happen when Hot Mobile changes hands.
Avi Gabay, CEO of Partner Group, said: "We are satisfied with the continuous improvement in results and the recruitment of subscribers in all activities, which are a direct result of excellent service and investment in quality infrastructure and products that create real value for customers. Our continuous investment in artificial intelligence contributes to strengthening service systems and increasing employee productivity".
Miri Tekutiel, CFO of Partner Group, said: "The results of the second quarter of 2026 reflect an increase in revenues excluding interconnection fees, alongside continued improvement in profitability indicators and their rate out of total revenues. The growth in revenues was supported, among other things, by continuous growth in the subscriber base in the company's core services - mobile, internet and data for businesses - and in the first half of the year also by the addition of television subscribers following the launch of the new television service.
The adjusted free cash flow amounted to about 106 million NIS, as it was influenced, among other things, by equipping with mobile devices as part of the Accountant General's tender - an impact expected to continue in the second half of 2026 as well. At the same time, the company submitted a request for approval of a cash dividend distribution of up to 500 million NIS not from profits, in accordance with section 303 of the Companies Law; the request is pending in court".
