* Q1 net profit 26 mln shekels vs 114 mln year earlier
* Q1 revenue down 6 pct to 1.062 bln shekels
* Cellcom launches TV, Internet and home phone package (Recasts, adds CEO comment, share price)
JERUSALEM, May 14 (Reuters) - Israel’s largest mobile phone operator Cellcom expects its entry into home internet and television services to boost profitability, it said on Thursday after posting a 77 percent slide in first-quarter profit, hit by cut-throat competition in the cellular sector.
Faced with competition from nine other companies for mobile phone customers and the government creation of a wholesale market for landline telecoms, Cellcom launched a TV service at the start of the year to go head to head with cable and satellite duo HOT and YES.
That enabled it to announce on Wednesday a new package for TV, home phone and high-speed internet at less than half the price of current offerings, which Chief Executive Nir Sztern expects to drive future profit growth.
“Alongside the adverse impact on the cellular operation, (Cellcom) is operating and investing in future growth engines in the landline sector, which we expect over time to lead to growth in revenues and improvement in profitability,” Sztern said on Thursday.
About 30,000 customers have already signed up for Cellcom’s TV service, the company said.
Cellcom, the first of Israel’s telecoms groups to report first-quarter results, earned 26 million shekels ($6.8 million) in the period, compared with 114 million shekels a year earlier. The figure included a 30 million shekel expense for a voluntary redundancy programme.
It noted that the programme will result in further costs in the second quarter, but said it remains unknown how many employees will participate.
Revenue dipped 6 percent to 1.062 billion shekels, largely because of a drop in service revenue that was partly offset by equipment sales.
Cellcom’s average revenue per user fell by 12.3 percent to 65.6 shekels while subscriber numbers fell by 82,000 to below 2.9 million.
The company’s board opted not to distribute a dividend for the first quarter.
Shares in Cellcom were down 0.6 percent in early afternoon trading in Tel Aviv.
UBS analyst Roni Biron said the incoming communications minister may have to consider consolidation as a response to the erosion in companies’ profits, but the move would be unpopular with consumers now benefiting from cheaper prices.
Cellcom’s main rivals Pelephone and Partner Communications , report earnings next week. Pelephone and YES are both owned by industry leader Bezeq Israel Telecom. ($1 = 3.8281 shekels) (Reporting by Steven Scheer; Editing by David Goodman)