Bezeq's Quiet Transformation: Cost Discipline and Subsea Optionality
Profit growth accelerates as fiber economics improve, but the real story is the pending regulatory decision and infrastructure bets.
BEZQ.TA · Earnings Call · 2026-08-05
A Beat Built on Efficiency
Bezeq's second-quarter results delivered a headline that any investor would welcome: comp net profit up 38% year-over-year, comp EBITDA up 6.2% to ILS 978 million, and a dividend hike to 80% of half-year profits. The growth was not driven by pricing or volume alone – it came from a marked improvement in the cost base. Operating expenses have become the company's highest-momentum keyword, and for good reason. Fixed-Line operating expenses fell 18% year-over-year, a step-change that CFO Yochai Benita attributed to the maturation of fiber deployment: “Operating expenses decreased approximately ILS 35 million and depreciation expenses increased approximately ILS 15 million.” — Yochai Benita, Chief Financial Officer (CFO) · 2026-08-05 As fiber penetration rises, the cost of connecting each new home drops, creating a structural margin tailwind that is only beginning to be reflected in the financials.The Fiber Flywheel
The fiber story continues to compound: home passed reached 3.04 million, retail fiber take-up grew to 655,000, and ARPU rose 4.4% to ILS 142. But the real insight is in the unit economics. The cost to serve incremental subscribers is falling faster than the investment is scaling, allowing the company to reinvest in higher-value services. This dynamic is why the structural separation – the regulatory removal that would fully merge the TV business into the broadband infrastructure division – is so foundational. CEO Nir David confirmed progress: “The process is close to completion, and we hope they will announce in the coming weeks.” — Nir David, CEO of Bezeq Fixed-Line · 2026-08-05 The company has consistently said this regulatory change is not included in guidance, which means the potential synergies and tax asset monetization remain an uncounted upside. As one analyst noted in the prior call, the removal could be a "massive boon" – and management agrees, with Tomer Raved stating that it "makes a lot of sense and also brings value to the company."Beyond the Core: Subsea and the AI Infrastructure Demand
While the fiber business is the steady engine, Bezeq is quietly becoming a player in the global digital infrastructure race. The company is advancing three submarine cable systems, with the first being built in partnership and the second already out for RFQ. Chairman Tomer Raved elaborated: “We provide details on one, and we are progressing very rapidly also on the second one, which we published RFQ for.” — Tomer Raved, Executive Chairman · 2026-08-05 This is a meaningful step-up from the prior quarter's more tentative language, where the strategy was framed as a long-term optionality. Now it is a concrete project with a clear ROI case. The company explicitly stated that subsea cables are not in the 2029 forecast, meaning the market has not yet priced in the returns. This aligns with a broader global theme: data centers and connectivity are among the most crowded keywords across the market, and Bezeq is positioning itself at the intersection of fiber, submarine, and cloud services. In the prior call, Tomer had already set the stage: “When we talk about connecting Europe to Israel to the Mediterranean, the core strategy is connecting Europe to Asia.” — Tomer Raved, Chief Executive Officer (CEO) · 2026-05-13 That vision is now moving from PowerPoint to the ocean floor.This statement is the key to the optionality in the stock. The company is executing on multiple fronts that are entirely uncorrelated with its base-case guidance.Nothing related to subsea cable forecast or nor structural separation nor M&As are included in the 2029 forecast as of today.