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Cellcom Israel Slips in IPO
Cellcom Israel Falls Modestly in First-Day Trading, After Pricing Above Predicted Range

NEW YORK (AP) -- Shares of Cellcom Israel Ltd. dropped slightly Tuesday, as the cell phone company debuted on New York Stock Exchange.

The stock fell 46 cents, or 2.3 percent, to close at $19.54 on the New York Stock Exchange. Cellcom Israel sold 20 million shares at an initial public offering price of $20 a share.

That price was well above the expected range of $16 a share to $18 a share set by underwriters Goldman Sachs Group Inc., Citigroup Inc. and Deutsche Bank AG. Originally, an offering consisting of almost 19 million shares had been targeted.

Cellcom's shares had opened at $20.30, for a 1.5 percent price gain.

The bulk of the IPO shares were sold by founding shareholder Discount Investment Corp., a subsidiary of Cellcom Israel's parent company IDB Holding Corp Ltd.

"When you see a pricing that aggressive, when it is not just a point but two points above the range and you see an increase in the number of shares, it just speaks to the demand for the deal," said Ben Holmes, publisher of MorningNotes.com, a research firm that tracks IPOs.

Cellcom is the leading provider of cellular communications in Israel, with 2.83 million subscribers as of Sept. 30, 2006, representing 34.4 percent of the market.

However the environment is competitive. Cellcom Israel's nearest rivals, Partner Communications and Pelephone Communications which is owned by the Israeli local-telecommunications provider Bezeq, have a 31.9 percent and 28.7 percent share of the market respectively.

Cellcom holds one of four general licenses to provide cellar telephone services in Israel.

Granted in 1994 by the Ministry of Communications, the license is valid until 2022 and can be extended for six-year periods.

Cellcom, which is highly profitable, booked a net profit of 390 million Israeli new shekels, or $91 million for the nine months to Sept. 30. However, the company is also debt heavy. As of September, its long term debt stood at 3.3 billion shekels, or $767 million.

"It has a high level of debt however in 2005; their parent company, IDB Holding Corp., brought in a whole new management team from the most prestigious Israeli telecommuncation companies to work on the future and reduce the debt level," said Scott Sweet, founder and mangaging director of IPOboutique.com.

Cellcom's new team includes chairman Ami Erel, a former chief executive of Bezeq, the largest telecommunications carrier in Israel.

Cellcom said in its prospectus that it has implemented a series of initiatives including reducing work force numbers and renegotiating contracts with key suppliers, to push revenue higher.

Following the sale of Cellcom's shares, Discount Investment Corp.'s interest in the mobile phone operator will fall to 59 percent from 78.5 percent.

Under Cellcom's dividend policy, it will distribute at least 75 percent of its annual net income.

Cellcom marks the first foreign company to list on a U.S. exchange so far this year, but it will soon be joined by another Israeli IPO, semiconductor company Mellanox Technologies Ltd. Mellanox is expected to be begin trading on Thursday.