Cellcom’s net profit more than halved in 1Q13 as competition bites

14 May 2013

Israel’s Cellcom has reported a rough start to its 2013 financial year, reporting a slump in both net profit and revenues on increased competition in the wireless sector. In the three months ended 31 March 2013 Cellcom generated a total turnover of ILS1.258 billion (USD345 million), down more than 20% year-on-year from the ILS1.585 billion it recorded in 1Q12. Service revenues fell by 16.9% against the year-ago period to ILS985 million, a drop which Cellcom said was mainly the result of the ongoing erosion of prices in the mobile sector due to increased competition. Meanwhile, equipment sales tumbled by 31.6% y-o-y to ILS399 million, a decline which the company noted was prompted by both a decrease in the number of handsets sold in the quarter, in addition to a fall in the average price for those handsets that were sold in the period compared to 1Q12.

Operating income in the first three years of 2013 fell by 49.5% to ILS139 million, while EBITDA in the period totalled ILS314 million, representing an almost 34% drop against 1Q12. Net income for the period, meanwhile, was ILS67 million, down from ILS173 million.

In operational terms, at the end of March 2013 Cellcom’s mobile subscriber base stood at 3.166 million, down from 3.362 million a year earlier, while the mobile churn rate for the first quarter of the year was 9.4%, up from 6.3% in 1Q12. Average revenue per user (ARPU) in the period under review was ILS75.9 per month, down from ILS90.5 in the corresponding quarter of 2012, despite average minutes of use (MOU) rising from 365 minutes per month in 1Q12 to 432 minutes in 1Q13; the increase in the latter, Cellcom said, was primarily the result of subscribers switching to tariffs with unlimited monthly call allowances.

Commenting on the results, Cellcom CEO Nir Sztern said: ‘As we expected, the effects of the competition are also reflected in the results of the first quarter of 2013. The aggressive pricing competition during the past year has been fully reflected in the first quarter results … The Company continues to achieve impressive results in the area of operational excellence. In the first quarter of 2013 we also continued to streamline processes and extract the synergies from the merger with Netvision, and have reached savings at an annual rate of over ILS600 million, compared to the end of 2011.’

Israel, Cellcom, NetVision