Bezeq records lower revenues, EBITDA in 1Q15, but net profit rises on improved YES financials

22 May 2015

Israeli fixed line incumbent Bezeq has published its financial results for the three months ended 31 March 2015, and while it saw year-on-year decline in revenues, operating profit and EBITDA, net profit was up thanks to ‘an improvement in the financial results of [pay-TV provider] YES’.

In the quarter under review Bezeq recorded a total turnover of ILS2.17 billion (USD549 million), representing a drop of 5.9% against 1Q14; the development was primarily attributed to lower revenues at mobile subsidiary Pelephone, with the decline partially offset by increased turnover at the company’s fixed line and international units. Operating profit in the first three months of 2015 totalled ILS636 million, down from ILS688 million a year earlier, while EBITDA fell from ILS1 billion (EBIDTA margin of 43.4%) to ILS953 million (EBITDA margin of 43.8%). Declines in both operating profit and EBITDA were said to be due to the company’s lower revenues, though these were partially offset by lower expenses at both the Pelephone and ‘Bezeq Fixed-Line’ units. Net profit attributable to Bezeq shareholders in the first quarter of 2015 stood at ILS463 million, representing an increase of 1.3% y-o-y against the ILS457 million reported in 1Q14.

CAPEX in the first three months of 2015 totalled ILS368 million, up by almost 17% against the ILS315 million the company invested in the corresponding period a year earlier. Such an increase, the company said, was due to the continued nationwide rollout of its fibre-optic network, coupled with investments in ‘advanced technologies for the enhancement of the Next Generation Network (NGN)’.

In operational terms, in the three months to end-March 2015 Bezeq added 26,000 broadband subscribers to its books, bringing its total to 1.39 million; notably this number included 11,000 broadband accesses that were signed up to Bezeq’s newly-introduced wholesale service for rival telecoms providers. Meanwhile, fixed voice accesses ‘continued to stabilise’, the company said, and at end-March 2015 its total for such services stood at 2.208 million, up marginally from the 2.205 million reported three months earlier, though down from 2.205 million at end-March 2014. Mobile subscriber numbers continued to decline, however, and as at end-March 2015 the 2.565 million mobile customers signed up to a Pelephone service represented a 2.5% y-o-y decline from the 2.631 million reported a year earlier.

Commenting on the quarterly performance and the company’s future plans, Bezeq chairman Shaul Elovitch said: ‘We are witnessing material changes in the competitive structure of the Israeli telecom market. Competition is increasing in all our operating segments, and we are already preparing for these changes through major investments in state-of the-art infrastructure, development of cutting-edge services, and a focus on outstanding customer service. Competition is continuing to develop in the cellular market, as well as in the television market where new competitors are starting to appear. In the internet market, the wholesale telecom market reform has been implemented smoothly, aided by our significant efforts to facilitate this reform.’