Bezeq records slump in net profit in Q2 2016

4 Aug 2016

Israeli fixed line incumbent Bezeq has reported a slump in net profit in the second quarter of 2016, while revenues, EBITDA and operating profit also declined year-on-year.

In the three months ended 30 June 2016 Bezeq recorded a total turnover of ILS2.511 billion (USD658 million), representing a drop of 3.5% against the corresponding period a year earlier. This decline, Bezeq said, was due to lower revenues in all of the group segments and primarily at its wireless unit, Pelephone. Indeed, cellular service revenues totalled ILS456 million in the quarter, having fallen by 9.2% y-o-y, while total revenues attributable to Pelephone were ILS658 million, down from ILS721 in Q2 2015. With regards to the drop in cellular service turnover, Bezeq attributed this to lower tariffs, which had been prompted by increased competition in the sector, along with the transition of existing customers to lower-priced plans with higher data volumes. By comparison, the group’s fixed line unit reported turnover of ILS1.10 billion in Q2 2016, down marginally from ILS1.11 billion a year earlier, with revenues from fixed line voice services standing at ILS374 million (2Q15: ILS396 million). Turnover from broadband internet services (retail and wholesale combined) was a bright spot, however, reaching ILS398 million, and representing y-o-y growth of 2.8%. This increase in revenues was said to be primarily due to continued growth in the number of broadband accesses on the company’s books.

Group EBTIDA for Q2 2016 was ILS1.06 billion, with an EBITDA margin of 42.1%, compared to ILS1.25 billion (EBITDA margin of 47.8%) in the year-ago quarter, with operating profit totalling ILS616 million, a 22.4% y-o-y decline. Net profit attributable to Bezeq shareholders was ILS377 million, 21.8% lower than the ILS482 million reported for 2Q15.

In operational terms, at the end of June 2016 Bezeq’s mobile subscriber base had fallen to 2.260 million, from 2.566 million a year earlier. However, the company noted that during this latest reporting period it had written off 499,000 CDMA subscribers (455,000 pre-paid and 44,00 post-paid) which it said had not made any outgoing calls or taken any internet action in the previous six months. Excluding these, Bezeq said it had actually increased wireless subscribers by 67,000 during the second quarter of 2016. Total broadband lines meanwhile numbered 1.521 million at end-June 2016, up from 1.418 million a year earlier, of which 323,000 were classified as wholesale. Fixed voice lines declined, however, falling to 2.151 million at mid-2016, down from 2.204 million a year earlier.

Commenting on the company’s performance, Bezeq chairman Shaul Elovitch said: ‘Despite increasing market competition in all of the group’s operating sectors, we continued to post strong results in the second quarter through leveraging our strengths in infrastructure, customer service, and product offerings.’