Cellcom boosts net profit as it reduces costs in 1Q14

14 May 2014

Israel’s largest cellco by subscribers Cellcom has revealed a 70% year-on-year increase in net profit for the three months ended 31 March 2014, despite lower revenues. In the quarter under review, Cellcom generated a total turnover of ILS1.13 billion (USD324 million), representing a 10.2% decline from the year earlier period. Service revenues for the first quarter of 2014 totalled ILS927 million, down from ILS985 million, while equipment revenues fell by 25.6% y-o-y to ILS203 million. Fixed line unit NetVision meanwhile contributed ILS214 million in turnover (excluding inter-company revenues) in 1Q14, down from ILS244 million in the corresponding period of 2013. Service revenue decline, Cellcom said, had resulted mainly from a decrease in cellular service turnover, impacted by the ‘ongoing erosion in the price of these services as a result of the intensified competition in the cellular market’.

In 1Q 2014 operating income increased by 33.1% to ILS185 million from ILS139 million a year earlier, while EBITDA rose by 8.3% year-on-year to ILS340 million. Net income for the first quarter of 2014 meanwhile stood at ILS114 million, up 70.1% from the ILS67 million reported in the year earlier period. This increase, the company said, was the result of a reduction in operating expenses, mainly due to efficiency measures and a decrease in financing expenses, offset in part by the decrease in service and equipment revenues.

In operational terms, at the end of March 2014 Cellcom’s mobile subscriber base totalled 3.049 million, down 3.7% year-on-year, while during the first quarter of 2014 the cellco noted that its customer base had fallen by approximately 43,000, all of which were pre-paid subscribers. Churn in the first quarter of 2014 stood at 11.1%, up from 9.4% in 1Q13, while monthly average revenue per user (ARPU) was ILS74.7 in the period under review, down from ILS75.9 in 1Q13.

Commenting on the results, Cellcom CEO Nir Sztern noted: ‘Cellcom Israel presents strong business results for the first quarter of 2014. These positive results are a direct result of our strategy of establishing our position as a leading communications group, while focusing on profitability and expansion of the products offering to the customer as well as maintaining our commitment to provide quality customer service. In the first quarter this year we present an improvement in EBITDA, operating profit, net income and free cash flow compared with the first quarter of 2013, all despite the ongoing revenue erosion due to the increased competition.’

Israel, Cellcom, NetVision