Bezeq’s third quarter results prompt guidance reiteration

2 Nov 2010

Israeli incumbent Bezeq has released its financial results for the three months ended 30 September 2010, revealing that third quarter net profit remained flat when excluding the impact of a one-off ILS1.5 billion (USD413.6 million) gain in the same period a year earlier. In the three-month period Bezeq posted a net profit of ILS588 million, while group revenues for the period stood at ILS3.033 billion, representing a 3.7% year-on-year increase. Higher turnover from the company wireless subsidiary, Pelephone helped to offset an annual decline in fixed line revenues, although Bezeq registered its first growth in the latter in more than four quarters. In the third quarter Pelephone generated turnover of ILS1.442 billion, up 5.1% against 3Q 2009, while fixed line revenue was ILS1.323 billion, down 1.5% against the same period a year earlier, but up 1.2% quarter-on-quarter. Further, Bezeq claimed that excluding the impact of mobile interconnect fees, ‘the growth in broadband internet, data and transmission services almost completely offset the anticipated decline in revenues from traditional telephony’. Earnings before interest, tax, depreciation and amortisation (EBITDA) were ILS1.329 billion for the period. On the back of the results, Bezeq said it expects to meet its full-year guidance, with revenues, net profit from continuing operations and EBITDA all expected to be in line with, or slightly higher than, in 2009.

In operational terms, at end-September 2010 Bezeq’s fixed line subscriber numbers were continuing to fall, with it reporting a customer base of 2.395 million, down from 2.518 million a year earlier. Sign-ups to the telco’s high speed internet services continued to rise, albeit at a slower rate, with 1.056 million internet subscribers connected at the end of the quarter. While growth in the overall number of wireless subscriber has also waned – rising 3.8% y-o-y to 2.825 million – uptake of 3G services remains high, with Pelephone reporting that 62.8% of its customer base, or 1.775 million, were 3G subscribers, of which 1.16 million were active on the operator’s HSPA network.

Bezeq chairman Shlomo Rodav also noted that the rollout of the operator’s next generation network (NGN) is progressing on schedule, with more than 50% of Israeli households expected to be covered by the infrastructure by end-2010, with that figure rising to more than 80% by end-2012.