Too HOT? Mobile network rollout sees net profit slump for Israeli cableco in 2Q12

14 Aug 2012

Israel’s HOT Telecommunications has cited the launch of wireless services as the driving factor behind a 95% slump in net profit in the second quarter of 2012, despite the company registering a 25% increase in turnover in the period. According to Globes Online, for the three months ended 30 June 2012 HOT generated turnover of ILS1.03 billion (USD269 million), up from ILS824 million in the same period of 2011. However, net income for the quarter stood at just ILS7 million, down from ILS78 million a year earlier as the company invested heavily in rolling out its own mobile network. HOT’s operating costs increased 34% year-on-year to ILS1.05 billion in 2Q12, while sales and marketing expenses surged by 58% to ILS84 million, and general and administrative expenses rose to ILS44 million (up 42%). Looking ahead, the telco has suggested that it expects similar results as the rollout continues, with the company reportedly saying in its financial filing: ‘The drop in profit is mainly due to entry into the mobile sector, and is expected to continue through the coming quarters.’

HOT Mobile, which as previously reported by CommsUpdate launched a 3G network in May 2012, reportedly signed up 142,000 subscribers within its first six weeks in operation, a figure that had risen to 250,000 within ten weeks. HOT has now revealed that its total mobile subscriber base, which also includes customers previously signed up with MIRS Communications, has reached 563,000. The mobile unit meanwhile reportedly posted a loss of ILS39 million in 2Q12.

By comparison, HOT’s cable television business posted a profit of ILS10 million for the second quarter, adding 4,000 net new pay-TV subscribers during the preceding twelve months to bring its total to 894,000. The operator’s fixed voice operations meanwhile generated profit of ILS121 million, with customers increasing by 46,000 over the year to reach 672,000, and broadband subscriptions climbing 15,000 y-o-y to 774,000.

HOT chairwoman Stella Handler said of the company’s outlook: ‘HOT is ready for the long term in all its areas of business, and is pursuing its extensive investment plan accordingly. In the first half of the year, the company invested more than ILS850 million, including ILS250 million in the setting up of a state-of-the-art mobile network, upgrading its cable television network, and in the latest end-user equipment at customers’ homes. At the same time, the company is preparing for the expected regulatory changes in the telecommunications market in general and in television in particular.’

Israel, HOT Mobile, HOT Telecommunication Systems