Cellcom revenues slump on competition, tariff erosion

20 Aug 2013

Israel’s largest cellco by subscribers Cellcom has announced its financial results for the three months ended 30 June 2013, revealing that net profit for the period slumped by more than 44% against the corresponding quarter of 2012 as turnover declined amid increased competition and falling prices.

In the cellco’s second quarter of 2013 it generated total revenues of ILS1.236 billion (USD342 million), representing a decline of 17.5% against the ILS1.498 billion reported for 2Q 2012, with the operator attributing the drop mainly to a 14.6% year-on-year reduction in service revenues to ILS1.010 billion. Citing the ‘ongoing erosion in the price of … services as a result of the intensified competition in the cellular market’, Cellcom also noted that the decrease in service revenues was affected by a fall in turnover from roaming services, internet services and extended warranty services, though this was partially offset by an increase in revenue from mobile virtual network operators (MVNOs) hosted on the cellco’s network. Further, turnover from equipment sales was also lower than in the same period of 2012, with Cellcom seeing a 28.5% y-o-y drop to ILS316 million. Meanwhile, revenue contribution from fixed line services provider Netvision totalled ILS233 million (excluding inter-company revenues), down from ILS259 million in 2Q12.

EBITDA in 2Q 2013 stood at ILS339 million, representing a decline of 28.5% from the ILS474 million recorded in the second quarter of 2013, with Netvision’s contribution standing at ILS68 million, down from ILS75 million. Net income for the quarter under review stood at ILS67 million, compared to ILS121 million a year earlier.

In operational terms, at the end of June 2013 Cellcom’s mobile subscriber base totaled 3.151 million, having fallen by approximately 15,000 in the quarter, all of them pre-paid accesses. The cellular churn rate for the second quarter of 2013 stood at 9.0%, up from 8.1% in 2Q12, with the rate said to have been primarily affected by the increased competition in the wireless sector. Average monthly cellular minutes of use (MOU) in 2Q13 was 468 minutes, compared to 375 minutes in the second quarter of 2012, with the increase attributed to more subscribers taking up tariffs which offered unlimited calls. Average revenue per user (ARPU), meanwhile, fell to ILS79.7, down from ILS90.3 million.

Commenting on the quarterly results, Cellcom CEO Nir Sztern said: ‘In this quarter, we see the results of the strategy we have taken since the merger, of offering a comprehensive communication solution which combines cellular, home landline telephony, international calls and internet into one product in one bill … The focus on streamlining and process improvement continues to bear fruit and following the merger and compared with Q4/2011 results, the company achieved savings at an annual rate of approximately ILS660 million, out of which savings at an annual rate of approximately ILS50 million were achieved in the second quarter of 2013.’

Israel, Cellcom, NetVision