Despite having reported a 20% year-on-year increase in profit for the year ended 31 December 2014, Israel’s Partner Communications has said ‘the trends of eroding profitability and an increasing level of working capital’ had continued in the first half of the first quarter of 2015. As such, it has warned that should such trends continue, it expects them to have an adverse impact on both profitability and cash flow in 2015.
In the operator’s most recent fiscal year, Partner reported a total turnover of ILS4.400 billion (USD1.131 billion), representing a drop of 3% against the previous year, while annual service revenues stood at ILS3.408 billion, having declined by 10% against FY13. Notably, service revenues in the cellular segment fell 10% y-o-y to ILS2.618 billion, with Partner saying this decline was mainly the result of the price erosion for both pre- and post-paid services prompted by increased competition linked to the activities of newer network operators and mobile virtual network operators (MVNOs), which had reduced the price for mobile tariffs offering unlimited voice minutes and text messages to ‘extremely low levels’. Service revenues in the fixed line sector meanwhile declined by 7% year-on-year to ILS1.004 billion, with this again attributed to price erosion linked to increased competition.
Adjusted EBITDA in 2014 totalled ILS1.096 billion, representing a 2% drop against the previous year, with adjusted EBITDA for the cellular segment standing at ILS762 million (down 3% y-o-y). Operating profit in the year under review was ILS400 million, down from ILS409 million in 2013, while profit for the year was ILS162 million, an increase of 20% compared with the ILS135 million reported for 2013.
In operational terms, at the end of 2014 Partner’s mobile subscriber base totalled 2.837 million, down from 2.956 million a year earlier, a figure which it estimated gave it a market share of 28%, down from 29% a year earlier. Notably, as competition in the sector has increased, so has churn with the operator reporting an annual churn rate of 47% in 2014, up from 39% in the previous twelve-month period. Average revenue per user (ARPU) continued to decline, falling to ILS71 per month in 2014, down from ILS81 million in the previous year.
Commenting on the results, Haim Romano, Partner Communications’ chief executive, said: ‘2014 was characterised by further escalation in the level of competition in the telecommunications market in Israel resulting in erosion of revenues and profitability of the company. At the same time, we remained loyal to implementing the company’s strategy and continued to advance its core elements: investment in technology and innovation and a focus on customer experience.’