Bezeq reports net profit increase in 2Q13 despite revenue decline

6 Aug 2013

Despite registering a 9.4% year-on-year decline in turnover in the second quarter of 2013, Israeli fixed line incumbent Bezeq posted a net profit of ILS473 million (USD130.2 million), representing a 14% increase against the same period a year earlier. In releasing its financial results for the three months ended 30 June 2013, Bezeq attributed the improvement in its bottom line to its ‘focused policy of initiating streamlining and efficiency measures in all segments, both in salaries and in general operating expenses’. This strategy, it claimed, helped moderate the decline in EBITDA, while it also cited a decrease in depreciation expenses and a reduction in financing expenses as contributory factors in the stabilisation of operating profit and the increase in net profit.

In the period under review Bezeq generated a total turnover of ILS2.35 billion, down from ILS2.60 billion in 2Q12, with the operator noting that the reduction was primarily due to lower revenues from its mobile unit Pelephone. Indeed, total mobile revenues amounted to ILS915 million in the quarter, down from ILS964 million a year earlier, a decline of more than 20 percentage points. Meanwhile, mobile service revenues slumped from ILS857 million in 2Q12 to ILS714 million a year earlier, with Bezeq attributing the drop to tariff erosion resulting from increased competition in the wireless sector, coupled with the transition to unlimited plans which resulted in a decrease in average revenue per user (ARPU) and a reduction in the number of subscribers.

Operating profit in the second quarter of 2013 totalled ILS744 million, flat year-on-year when compared with the ILS746 million reported in the corresponding period of 2012, while EBITDA stood at ILS1/07 billion in 2Q13, down by 3.1% y-o-y.

In operational terms, at the end of June 2013 Pelephone’s total subscriber base stood at 2.702 million, down from 2.859 million a year earlier, and from 2.741 million at the end of the previous quarter. ARPU in 2Q13 was ILS85 (ILS99 in 2Q12), with average monthly minutes of use being 467, up from 409. In the fixed line broadband arena, Bezeq reported a total of 1.202 million high speed internet subscribers at end-June 2013, up from 1.136 million a year earlier, while fixed voice accesses totalled 2.224 million, down from 2.335 million.

Bezeq also issued an update on the progress of its fibre network rollout, confirming that to date it has passed approximately 200,000 premises with the infrastructure, and, in continuing the deployment at ‘an expedited pace’, it now expects to connect over 400,000 premises by the end of this year. Bezeq’s fibre-optic network is now available in ‘dozens’ of cities, including: Bear Sheva, Ashdod, Rishon-Letzion, Kiryat Bialik, Holon, Tel Aviv, Jerusalem, Modiin, Nahariyah and Eilat.

Commenting on the quarterly results, Stella Handler, Bezeq CEO: ‘This has been an excellent quarter for Bezeq Fixed-line, both financially and operationally as we continue to adapt to the shifting market. The telephony sector continues to contract, although at a slower pace, in terms of revenues and in the number of subscribers. On the other hand, in response to Bezeq’s acceleration of free surfing speed upgrades and advanced service offerings, the Internet sector stood out with impressive growth in subscribers, together with an increase in revenues.’