Partner Communications sees profit slump in 2Q13 as competition increases

29 Aug 2013

Israeli mobile network operator Partner Communications has reported that net profit in the second quarter of 2013 slumped by 83% against the corresponding period a year earlier as competition in the wireless sector continued to impact it. In the quarter ended 30 June 2013 Partner posted a net income of ILS20 million (USD6 million), down from the ILS120 million it recorded in 2Q12, on turnover that was down by 21% year-on-year, with total revenues for the period coming in at ILS1.30 billion (ILS1.428 billion in 2Q12). Service revenues in the second quarter of 2013 totaled ILS950 million, representing a 22% decline year-on-year, while service revenues in the mobile sector were ILS726 million, down from ILS949 million a year earlier, with the latter decline predominantly attributed to ‘the price erosion of cellular services including voice and data services, following the increased competition due to the entry of new competitors (new operators and MVNOs)’. In the fixed sector, meanwhile, service revenue stood at ILS277 million in 2Q13, down 8% from ILS300 million in the same period of 2012, with the drop said to reflect price erosion as well as a decrease of approximately 6% in the average number of internet service subscribers over the period. Adjusted EBITDA in the quarter under review totaled ILS280 million, some 34% lower than the ILS423 million reported for 2Q12, while adjusted EBITDA for the cellular segment was ILS198 million (down 46% y-o-y), reflecting the impact of the decrease in service revenues and in gross profit from equipment sales, partially offset by a reduction in operating expenses.

In operational terms, at the end of June 2013 Partner’s wireless subscriber base (including mobile data and 012 Mobile customer) stood at 2.92 million, of which around 2.10 million, or 72%, were signed up to a post-paid service. In the second quarter of 2013 the customer base contracted by around 11,000, though the cellco noted that post-paid subscriber numbers had actually increased by 1,000, compared with a decline of 55,000 in the same quarter of 2012. Quarterly churn rate was 9.4% in 2Q13, up from 8.9% a year earlier, but down from the 10.4% recorded for the first three months of this year. Monthly average revenue per user (ARPU) meanwhile was ILS83, a decrease of approximately 18% from ILS101 in 2Q 2012, though up 1% from ILS82 in 1Q13; Partner said the minor boost from the first quarter was ‘primarily due to a decrease in price erosion together with seasonality effects’. With regards to fixed line services, at 30 June 2013 Partner subsidiary 012 Smile had 294,000 fixed voice subscribers, up 5% y-o-y, while broadband customer numbers fell from 609,000 at end-June 2012 to 572,000 a year later.

Commenting on the results, Haim Romano, Partner’s CEO, noted: ‘The results of the second quarter of 2013 continue to reflect, on the one hand, the ongoing impact of the competition in the market and, on the other hand, our investment in the Company’s key assets: high quality customer service, technological advancement and the most advanced network. At the same time, we are adjusting our business operations, our marketing approach and the cost structure of the Company, measures which resulted in a decline of ILS153 million in the Company’s operating expenses compared to the second quarter of 2012.’

Israel, 012 Smile Telecom, Partner Communications Company