Cellcom improves net profit in 2Q14 on lower operating expenses

11 Aug 2014

Israel’s Cellcom recorded an almost 18% year-on-year increase in net profit in the second quarter of 2014, despite seeing lower revenues in the period. In the three months ended 30 June 2014 Cellcom generated a total turnover of ILS1.158 billion (USD336.8 million), representing a decline of 6.3% when compared to the ILS1.236 million recorded in 2Q13. Service revenues, meanwhile, fell by 8.6% to ILS932 million for the period under review, though this decline was partially offset by a 4% increase in equipment revenues, which rose to ILS235 million on the back of higher smartphone sales. Lower service revenues, however, were attributed to ongoing price erosion in the cellular sector, which itself stemmed from ‘intensified competition’ in that sector. Netvision, the company’s fixed line unit, accounted for revenues of ILS209 million (excluding inter-company revenues) in 2Q14, down from ILS233 million a year earlier.

Operating income in the second quarter of 2014 fell by 7.7% against 2Q13, to ILS156 million, having been affected by a one-time expense for the company’s employee retirement plan, as well as a necessary provision for communication cables expenses. Excluding these one-time effects, Cellcom said operating income for the second quarter of 2014 was actually up 2.4% y-o-y, at ILS173 million. EBITDA in 2Q14 meanwhile fell by 7.4% y-o-y to ILS214 million, though when again excluding the aforementioned one-time effects that figure rose to ILS331 million, meaning a 2.4% increase against the corresponding period in 2013. Net profit for the latest reporting period meanwhile stood at ILS79 million, compared to ILS67 million in 2Q 2014, with the company saying this increase was the result of ‘a reduction in operating expenses, mainly due to the efficiency measures implemented by the company, the one-time cancellation of the provision for communication cables expenses, a decrease in financing expenses, net, as well as the decrease in taxes on income’.

In operational terms, at the end of June 2014 Cellcom had a mobile subscriber base of 3.029 million, which represented a drop of 3.9% from the same date a year earlier.

Commenting on the quarterly performance, Cellcom CEO Nir Sztern noted: ‘[Cellcom] continues to present good results, reflected in maintaining an EBITDA similar to the previous quarter after eliminating one-time effects … As compared with the second quarter of last year, the company continues to present an improvement in net income and in profitability as a percent of revenues resulting from a successful implementation of its strategy to strengthen its position as a communications group while focusing on efficiency measures.’

Israel, Cellcom, NetVision