Increased competition dents Cellcom’s revenues in FY2012

5 Mar 2013

Noting that its financial performance ‘reflect the continued impact of the heightened competition in the cellular market’, Israel’s largest mobile network operator by subscribers, Cellcom, has published its results for the twelve-month period ended 31 December 2012.

Total revenues for the cellco’s 2012 fiscal year fell by 8.7% year-on-year to ILS5.938 billion (USD1.591 billion), down from ILS6.506 billion in FY2011, with Cellcom reporting a 22.4% decrease in equipment revenues over the year. Service revenues by comparison were 3.7% lower in FY2012 at ILS4.759 billion, with the decline attributed predominantly to ‘the ongoing erosion in the price of cellular services, resulting from the intensified competition in the cellular market’. However, having completed the merger with Netvision, Cellcom noted that service revenue declines in the wireless sector had been offset by the fixed line provider’s contribution to service turnover due to the difference in the period of consolidation of Netvision’s results. With the fixed line and broadband provider generating ILS965 million (excluding inter-company revenues) in FY12, after elimination of Netvision’s contribution, Cellcom said that service revenues for 2012 actually fell by 18.2% compared with 2011.

EBITDA for 2012 meanwhile declined by 19.1% to ILS1.753 billion, while operating income in the financial year tumbled 30.7% to ILS985 million. On the back of the lower turnover and EBITDA, Cellcom posted a net income of ILS531 million in 2012, down from ILS825 million in the previous twelve-month period. However, the operator did note that in the last quarter of the year it had recorded a 48.7% increase in net profit to ILS113 million, though this was a result of one-time adverse effects on the results of the fourth quarter of 2011.

At 31 December 2012 Cellcom’s mobile subscriber base stood at 3.199 million, down 4.5% y-o-y, arguably as the operator felt the impact of the launch of two new mobile network operators in the first half of 2012. Average monthly cellular minutes of use (MOU) per subscriber totalled 390 minutes in 2012, compared to 346 minutes in 2011, with the increase primarily the result of subscribers’ transitioning to new tariffs which included unlimited call allowances. By comparison, monthly cellular average revenue per user (ARPU) in 2012 was ILS87.5, down from ILS106 in FY11. Netvision’s fixed line voice accesses were said to stand at ‘over 112,000’ at end-2012, an increase of around 32,000 customers against end-2011, and while it said it had recorded ‘an increase in the number of internet (ISP) customers’ over the year, it did not break out exact customer numbers.

Commenting on the annual performance, Yaacov Heen, Cellcom’s chief financial officer, noted: ‘2012 was a challenging year for the communications market and for the Company. While we continue implementing our efficiency plan in order to adjust the Company’s expense structure to the revenue level, we expect further erosion in revenues in the first quarter of 2013, which will lead to further erosion of profitability.’

Israel, Cellcom, NetVision