MTR reduction dents Bezeq’s second quarter revenues, income

2 Aug 2011

Israel fixed line incumbent Bezeq has announced its financial results for the three months ended 30 June 2011, revealing a larger-than-expected drop in net profit for the period. In the company’s second fiscal quarter of the year it reported net income of ILS585 million (USD170 million), down 8.3% from the ILS638 million it posted in the same period of 2010. The decline was attributed to lower revenues, which fell 3% year-on-year to ILS2.9 billion, with Bezeq noting that turnover had been negatively affected by the reduction in mobile termination rates (MTRs) that came into effect from 1 January 2011. Amid continued competition from alternative operators Bezeq also noted that revenues from fixed line voice services had fallen by 10.5% compared to 2Q10, although it noted that increased turnover from internet, transmission and data communications had helped offset this decline. Bezeq’s mobile unit Pelephone meanwhile reported total turnover of ILS1.44 billion in the three months to end-June 2011, up just 0.6% compared with the previous year. Mobile service revenues however plunged by 19% y-o-y in the second quarter of 2011, to ILS925 million, while the cellco said that excluding the reduction of the MTR decrease, turnover would have declined 1.1% in the year to date, predominantly as a result of ‘an erosion of tariffs resulting from stronger competition during the quarter.’ Earnings before interest, tax, depreciation and amortisation (EBTIDA) in 2Q11 amounted to ILS1.28 billion, representing a 4.1% decline against the figure a year earlier.

In operational terms, at the end of June 2011 Bezeq reported that fixed line voice subscribers had fallen to 2.336 million, down from 2.412 million a year earlier, while broadband accesses at that date totalled 1.088 million, up 3.5% y-o-y from 1.051 million. Mobile subscribers were up 3% year-on-year to 2.89 million, while Pelephone also noted that the number of customers active on its HSPA network had increased by more than 60% compared to a year ago, reaching 1.61 million, or 55.7% of its overall wireless subscriber base.