Bezeq’s revenue, net profit in 2012 down on increased competition

14 Mar 2013

Israeli fixed line incumbent Bezeq saw net profit fall by 10.1% in the year ended 31 December 2012, on revenues that fell by 9.6%. Bezeq posted a net profit of ILS1.858 billion (USD482 million), down from ILS2.066 billion in 2011. Consolidated revenue for the twelve-month period stood at ILS10.278 billion, down from ILS11.373 billion, with the telco noting that the reduction was primarily due to lower turnover in the cellular sector, specifically as a result of lower revenues from handset sales (down ILS704 million year-on-year), and cellular services revenue (down ILS376 million y-o-y). Indeed, in 2012 service revenue at Bezeq’s mobile subsidiary Pelephone totalled ILS3.261 billion, down from ILS3.637 billion in FY11, with the company attributing the decline to tariff erosions which had occurred as the result of increased competition in the sector. This decline, it noted, had been partially offset by wholesale revenues from new mobile virtual network operators (MVNOs) hosted on Pelephone’s network.

Operating profit in FY12 came in at ILS3.035 billion compared with ILSNIS 3.242 billion a year earlier (representing a 6.4% decline), while EBITDA in the fiscal year was ILS4.471 billion, down 3.6% y-o-y from ILS4.637 billion.

In operational terms, at the end of December 2012 Bezeq’s broadband subscriber base stood at 1.169 million, up 5.9% from the 1.111 million customers it had on its books a year earlier, although fixed line voice accesses continued to decline, falling by 4.2% y-o-y to 2.268 million. Mobile voice connections, meanwhile, declined by 1.7% to stand at 2.800 million at 31 December 2012.

David Mizrahi, Bezeq’s CFO and deputy CEO, noted: ‘Despite intensified competition, the moderate erosion in profitability was partially mitigated by our success in instituting streamlining processes across the Group … In 2012, free cash flow reached a record of ILS2.78 billion, an increase of more than ILS1.2 billion compared to 2011. The ongoing strength of our cash flows enable us to continue to invest in and develop our communications infrastructure.’