Cellcom records lower turnover in 2014, though lower costs boost bottom line

17 Mar 2015

Israel’s Cellcom has published its financial results for the year ended 31 December 2014, with turnover and EBITDA both down year-on-year, despite net income actually rising in the period, thanks to certain one-off effects.

In the year under review Cellcom recorded a total turnover of ILS4.570 billion (USD1.175 billion), down from ILS4.927 million in 2013, with service revenues falling by 10.5% to ILS3.565 billion, with this partially offset by an increase in equipment revenues, which were up by almost 12% y-o-y at ILS3.985 billion. Lower service revenues were, the company said, mainly due to declining turnover from cellular services as a result of the ongoing price erosion in the sector as competition intensified. The company’s fixed line unit Netvision contributed ILS853 million to the group’s total turnover, down from ILS933 million, with service revenues for the division standing at ILS781 million, down from ILS873 million; such declines were attributed mainly to lower revenues from internet and international calling services.

Cost of revenues for 2014 totaled ILS2.727 billion, however, representing an 8.8% annual decline, while the cost of service revenues fell by 12.7% y-o-y; these reductions were, Cellcom said, mainly the result of lower payroll expenses due to efficiency measures, a decrease in interconnect fees as a result of a reduced connectivity tariffs, a decrease in cost of revenues from internet and international calling services as a result of a decrease in sales of such services, a one-time reduction of a provision for cell-sites rent expenses in the amount of ILS44 million in 3Q14, and a one-time cancellation of a provision for communications cables expenses in the amount of ILS22 million in 2Q14.

EBITDA for 2014 meanwhile fell by 4.0% to ILS1.282 billion, while excluding one-time effects in the amount of approximately ILS27 million it stood at ILS1.255 billion. Net income for 2014 by comparison increased by 22.9% to ILS354 million, including the aforementioned one-time effects.

In operational terms, at the end of 2014 Cellcom had a total of 2.967 million mobile voice subscribers on its books, down from 3.092 million a year earlier, with the cellular churn rate for the year standing at 44.0%, compared to 36.8% in 2013. Monthly cellular average revenue per user (ARPU) meanwhile was ILS72.1 in 2014, down from ILS78.5 million a year earlier.

Commenting on the financial performance, Shlomi Fruhling, Cellcom’s chief financial officer, noted: ‘2014 was characterised by a continued high level of competition, which led to an erosion of the company’s service revenues which is expected to continue into 2015. In order to adjust the cost structure of the Company to the high level of competition in the market, we continued to implement efficiency measures which included a voluntary retirement plan.’

Israel, Cellcom