Impairment charges lead to slump in net profit for Partner in 2011

23 Mar 2012

On the back of impairment charges totalling ILS311 million (USD83 million) Israeli operator Partner Communications has reported a more than 64% drop in net profit for its 2011 financial year. Partner noted that the impairment charges in part related to the acquisition of fixed line operator 012 Smile, which it completed in March 2011, and followed a ‘deterioration in market conditions and the annual impairment review of goodwill’. Further, the company noted in particular that additional capacity significantly increased the level of competition in the market for international connectivity, with that increased competition prompting a sharp decline in prices. As a result of this, Partner said its ‘expectations for increased competition in the retail internet service provider (ISP) market that would lead to a decrease in prices and market share, indicated the need to perform an impairment test to certain assets of the fixed line segment.’ For the twelve months ended 31 December 2011 Partner recorded a net income of ILS443 million, down from ILS1.24 billion in the previous year; the operator did note that net profits were ILS754 million, a year-on-year decline of 39% before the impact of the impairment.

In terms of revenues, in FY2011 Partner generated a consolidated turnover of ILS6.99 billion, up 5% against the ILS6.67 billion it saw in 2010, although the 2011 figure included revenues generated by 012 Smile. Excluding the results of the fixed line unit however, total revenues for Partner fell by 8% in FY11 compared with the previous financial year. Annual service revenues, meanwhile, stood at ILS5.22 billion in 2011, an 8% y-o-y decline, with service revenues in the mobile sector tumbling by 24% against the previous year, with Partner attributing the decline to the 71% reduction in the interconnect voice tariff and a 94% reduction in the interconnect SMS tariff from 1 January 2011.

In operational terms, at the end of December 2011 Partner’s mobile voice subscriber base stood at 3.176 million, up by less than one percentage point against its end-2010 total, with approximately 16,000 net active new customers signing up in 2011 compared to 118,000 in 2010. Partner said that the decrease in net additions ‘reflected the intensification of competition in the market which led to an increase in churn.’ The operator’s number of local fixed lines reached approximately 292,000 at end-2011 meanwhile, while it recorded around 632,000 internet subscribers.

Israel, 012 Smile Telecom, Partner Communications Company