Pelephone revenue, profits down

Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ) mobile subsidiary Pelephone Communications Ltd. today published its financial report for the second quarter of 2013. Revenue totaled NIS 915 million for the second quarter, down from NIS 964 million for the preceding quarter, and down 20.3% from NIS 1.15 billion for the corresponding quarter of 2012.

Services revenue totaled NIS 696 million for the second quarter, down from NIS 714 million for the preceding quarter, and down 18.8% from NIS 857 million for the corresponding quarter. The drop in services revenue was due to the erosion in rates as a result of increased competition in the market and the switch to unlimited calls plans, which reduced average revenue per user (ARPU), and a fall in the number of subscribers. Pelephone said that the drop in revenue was partly offset by increased revenue from carriers which use its network.

Revenue from equipment sales totaled NIS 219 million for the second quarter, down from NIS 250 million for the preceding quarter, and down 24.7% from NIS 291 million for the corresponding quarter. The drop in revenue from equipment sales was due to fewer sales and lower handset prices, partly because of the opening of the market to parallel imports and the opening of many stores which sell end-user equipment.

Operating profit totaled NIS 186 million for the second quarter, up 7% from NIS 174 million for the preceding quarter, but down 28% from the corresponding quarter. The sequential increase in operating profit was due to streamlining, which reduced expenses, and a change in the estimate of liabilities for leasing sites in the amount of NIS 30 million.

Earnings before interest, taxes, depreciation and amortization (EBITDA) rose to NIS 299 million for the second quarter from NIS 295 million for the preceding quarter, but fell from NIS 396 million for the corresponding quarter.

Net profit rose 5% to NIS 161 million for the second quarter from NIS 153 million for the preceding quarter, but fell 17% from NIS 194 million for the corresponding quarter.

Pelephone lost a net 39,000 subscribers during the second quarter. It had 2.7 million subscribers at the end of June, compared with 2.74 million subscribers at the end of March. ARPU fell to NIS 85 per month in the second quarter from NIS 86 per month in the preceding quarter and NIS 99 in the corresponding quarter.

Pelephone CEO Gil Sharon said, “Competition in the industry continues to erode revenue, but at a lower rate than in preceding quarters.” He added, “The net churn rate has also slowed, and it seems that the aggressive campaigns by the new competitors are no longer as effective as they used to be, and most subscribers have no interest or desire to switch to another company.”

Published by Globes [online], Israel business news – www.globes-online.com – on August 5, 2013