Telephone operator Cellcom Israel Ltd said it posted a forecast-beating rise in second-quarter net profit as an increase in content and value-added services offset a decline in roaming revenue from tourism.

Cellcom, Israel's biggest cell phone operator, posted a 15 percent rise in net profit from the previous year and continued to expand its market share, solidifying its position as Israel's biggest cell phone operator.

A 31 percent increase in revenue from content and value-added services, such as text messaging, helped Cellcom totally offset a decline in roaming revenue from inbound and outbound tourism, the company said on Monday.

The results were also helped by its new domestic landline services, which Israel's mobile phone companies are expanding in to due to mobile penetration rates of well above 100 percent, it said.

Cellcom competes with Partner Communications, the country's second largest mobile operator, and Pelephone, the third largest operator, which is owned by Bezeq Israel Telecom.

All three companies have made non-binding bids for MIRS, a smaller operator owned by U.S. company Motorola.

The results show that Cellcom continues to gain market share on Partner despite the latter's relatively good second quarter results, Deutsche Bank analyst Richard Gussow wrote in a client note.

Partner, which operates under the Orange brand name, last week posted a 2.1 percent rise in net profit and lower revenue. Pelephone recorded a 29 percent rise in profit.

Cellcom said its second-quarter net profit rose to 277 million shekels ($71 million), or 2.82 shekels per share, compared with a 272.1 million shekel mean estimate in a Reuters poll and 241 million shekels, or 2.35 shekels a share, a year earlier.

Cellcom shares were down 1.8 percent in afternoon trade, compared with a 2.3 percent drop on the broader Tel Aviv bourse.

Overall revenue for the quarter rose by 0.5 percent to 1.608 billion shekels, compared with a mean estimate of 1.59 billion in the Reuters poll.

Cellcom said the results were also boosted by efficiency measures that cut expenses and the addition of 20,000 new subscribers in the quarter. Its subscriber base reached 3.228 million by the end of June, ahead of Partner's 2.944 million and Pelephone's 2.694 million.

Israel's population is currently about 7.2 million.

Excluding interest, taxes, depreciation and amortisation (EBITDA) stood at 637 million, up 3 percent from a year earlier.

The company announced a dividend of 3.05 shekels per share, or a total of 300 million shekels, for the quarter to be paid on Sept. 14, compared with 2.76 shekels paid in the second quarter of 2008.

($1 = 3.81 shekels)

(Editing by Karen Foster)

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