Investors should buy Israeli telecommunication shares as dividends will increase and a "unique market formation" following changes in ownership will limit competition, Bank of America-Merrill Lynch & Co. said Wednesday in a report.

Photo: Ariel Jerozolimksi

012 Smile.Communications Ltd., the Internet and long-distance provider, said Sunday it would buy a controlling stake in Bezeq Israeli Telecommunication Corp. for NIS 6.5 billion.

Scailex Corp. on Wednesday received approval from the Communication Ministry to buy Partner Communications Co. from Hutchison Telecommunications International Ltd. for $1.4b.

"'The acquisition of Bezeq and Partner will likely lead to a reshuffle in market dynamics, competition and structure," Haim Israel, an analyst at Bank of America-Merrill Lynch in Tel Aviv, said in the report. "A reduction in the number of players usually improves the sector's equilibrium for the benefit of the competing companies."

Part of the financing of the Bezeq deal will be from second-half dividends, meaning that its dividend payment might be above estimates, Israel said.

Bezeq, the country's largest telecommunications company, gained 0.5 percent to NIS 8.545. Cellcom Israel Ltd., the largest cellphone operator, fell 0.7% to NIS 114.10. Partner, Israel's second-largest cellphone company, added 0.4% to NIS 73.67.