Cellcom profit plummets
The mobile carrier’s second quarter net profit fell 45%, compared with the corresponding quarter, to NIS 67 million and revenue fell 18% to NIS 1.23 billion.
Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL), the mobile carrier unit of IDB Holding Corp. Ltd. (TASE:IDBH), controlled by Nochi Dankner, today reported a sharp drop in revenue and profit for the second quarter of 2013, compared with the corresponding quarter of 2012, but an improvement over the preceding quarter.
Revenue fell 17.5% to NIS 1.23 billion for the second quarter from NIS 1.5 billion for the corresponding quarter. The company attributed the drop to lower service revenue and equipment sales.
Net profit fell 44.6% to NIS 67 million (NIS 0.67 per share) for the second quarter from NIS 121 million for the corresponding quarter. The decrease was primarily the result of the erosion in the price of cellular services during the past year, as well as the significant decrease in equipment revenue.
Average revenue per user (ARPU) fell 11.7% to NIS 79.70 per month in the second quarter, mainly due to all-inclusive mobile plans instituted with the reform in the market and the entry of new carriers last year.
Cellcom lost a net 15,000 subscribers during the second quarter. It had a total of 3.15 million subscribers at the end of June. The churn rate was 9% during the second quarter.
In late July, Cellcom published preliminary results for the second quarter at the request of IDB, which is going through debt settlement proceedings. Cellcom predicted NIS 1.22-1.24 billion revenue and a net profit of NIS 55-65 million. It forecast ARPU of NIS 78-79 per month.
The preliminary results included a rise in services revenue, earnings before interest, taxes, depreciation and amortization (EBITDA), and ARPU for the second quarter over the preceding quarter. Cellcom warned that the improvement might not continue in the following quarters. The company posted a net profit of NIS 67 million on NIS 1.26 billion revenue for the first quarter, and ARPU of NIS 75.90 per month.
In the past few weeks, tensions between Cellcom’s management and the workers committee have been rising over the company’s alleged refusal to recognize the union. Among other things, employees are protesting against the company’s compensation policy, under which CEO Nir Sztern’s compensation will exceed NIS 3 million, subject to meeting agreed targets. His salary cost was NIS 3.4 million in 2012, including a gross monthly salary of NIS 120,000 and a bonus of NIS 1.35 million.
Published by Globes [online], Israel business news – www.globes-online.com – on August 19, 2013