Cellcom net profit halves on reduced revenue in 2Q12

14 Aug 2012

Israel’s largest mobile network operator by subscribers, Cellcom, has revealed that net profit for the three months ended 30 June 2012 more than halved on the back of a drop in revenue. For the operator’s second quarter of 2012 it posted a net income of ILS121 million (USD31 million), down from ILS244 million in the corresponding period of 2011, noting that alongside the revenue decline, financing expenses had risen from ILS75 million to ILS117 million; this rise was primarily the result of an increase in Consumer Price Index (CPI) linkage expenses and interest expense, Cellcom said.

In terms of consolidated revenues, in Q2 2012 Cellcom generated total turnover of ILS1.49 billion, down 5.7% against sales in the same quarter a year earlier, with a 31% drop in revenue from equipment cited as one of the main contributory factors. While equipment revenues fell to ILS316 million in 2Q12, Cellcom did note that this decline had been partially offset by a 4.5% increase in service revenues, which totalled ILS1.18 billion, up from ILS1.13 billion, with the contribution from newly merged fixed line operator Netvision boosting that figure.

Earnings before interest, tax, depreciation and amortisation (EBITDA) meanwhile stood at ILS474 million in the three months to end-June 2012, down 16.3% year-on-year, with operating profit totalling ILS282 million, compared to ILS397 million in 2Q11.

In operational terms, for the end of June 2012 Cellcom reported a total wireless subscriber base of 3.333 million, down by around 29,000 against the previous quarter, while in 2Q12 the cellco said it added approximately 42,000 net new 3G subscribers to bring its third-generation customer base up to 1.430 million, representing 42.9% of its total wireless accesses. Churn in the second quarter of 2012 stood at 8.1%, up from 6.4% in the corresponding period of 2011, with this increase attributed to increased competition in the wake of new mobile virtual network operator (MVNO) launches in the period under review. Average monthly minutes of use (MOU) per subscriber in 2Q12 was 375 minutes, up from 342 in the same quarter of 2011, while average revenue per user for the three-month period fell 16.5% to ILS90.3.

Commenting on the results, Ami Arel, Cellcom’s chairman, said: ‘In the first half of 2012 a new management was formed, and the results demonstrate that this management, led by Nir Sztern, is working to achieve the required efficiency measures. I am pleased with the new management’s function which is planning and executing the changes needed in order to adjust the company to market conditions.’

Israel, Cellcom, NetVision