Increased competition dents Partner’s revenues, net profit in 1Q12

23 May 2012

Israel’s second largest cellco by subscribers, Partner Communications, has posted a 43% year-on-year drop in net profit for the first quarter of 2012 on revenues that fell by 22% when excluding the impact of 012 Smile Telecom. For the three months ended 31 March 2012 Partner generated a total turnover of ILS1.571 billion (USD423 million), down 11% from ILS1.771 billion in the corresponding period a year earlier. However, with the 012 Smile Telecom purchase having only been completed in March 2011, Partner noted that the consolidated results for 1Q11 included financial results from 012 Smile for March 2011 only. As such, it revealed that 012 Smile contributed ILS257 million of total sales in 1Q12, compared to ILS86 million in the year-ago period. Service revenues for the three-month period, meanwhile, stood at ILS1.241 billion, up 2% year-on-year, although it was noted that this increase ultimately reflected the full quarter contribution of 012 Smile in 1Q12. Indeed, service revenues in the wireless sector slumped by 12% y-o-y to ILS963 million, a drop which Partner said ‘largely reflected price erosion due to an increase in the intensity of competition in the cellular market, as well as a decrease in revenues from roaming services’. By comparison, service revenues for the fixed line segment totalled ILS320 million, up from ILS137 million.

Earnings before interest, tax, depreciation and amortisation (EBITDA) for the first quarter of 2012 stood at ILS438 million, representing a drop of 25% when compared to the first three months of 2011. Net profit, meanwhile, was ILS146 million in 1Q12, having fallen 43% y-o-y from ILS254 million.

In operational terms, at the end of March 2012 Partner’s cellular subscriber base totalled 3.147 million, down marginally against the 3.149 million customers it had on its books a year earlier. The quarterly churn rate, the operator noted, was 8.0% compared with 7.3% in 1Q11, which it said in part reflected ‘the intensification of competition in the market following the imposition of restrictions on subscriber exit fines from February 2011, which led to a significant increase in the voluntary churn of post-paid subscribers’. Average revenue per user (ARPU) for the first three months of 2012 was ILS101, a 12% drop against the ILS115 recorded in the same period in 2011. The total number of active fixed lines (including 012 Smile), meanwhile, was approximately 285,000 at the end of March 2012, down from 288,000 a year earlier, while fixed broadband accesses numbered around 618,000, down from 632,000.

Israel, Partner Communications Company