The net profit for the third quarter of 2011of mobile carrier Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL) fell by over a third on lower revenue, even through the results include the results of 013 NetVision Ltd. following their merger at the end of August. The company will nevertheless distribute 95% of its net profit - NIS 189 million.
Cellcom's revenue fell 3% to NIS 1.67 billion ($449 million) for the third quarter from NIS 1.73 billion for the corresponding quarter. Net profit fell 40% to NIS 199 million ($54 million) (NIS 2.00 or $0.54 per share) from NIS 332 million. The company missed the analysts' consensus of NIS 2.48 earnings per share, but beat the revenue consensus of NIS 1.62 billion.
Service revenue fell 20% to NIS 1.19 billion ($321 million) for the third quarter from NIS 1.51 billion for the corresponding quarter, although content and value added services (including SMS) rose 2.4% to account for 26.6% of total services revenue. The company attributed the drop to the mandated cut in inter-network connectivity fees and the erosion in airtime prices, due to the increased competition. Equipment sales, mostly smartphones and 3G phones, rose 114% to NIS 472 million in the third quarter from NIS 220 million in the corresponding quarter, continuing the trend of the first half of the year
Free cash flow fell to NIS 262 million ($71 million) for the third quarter from ($138 million) for the corresponding quarter, due to the NIS 1.46 billion paid for the acquisition of NetVision. Cellcom raised NIS 1.1 billion in debt during the third quarter, bringing the total amount of debt raised this year to NIS 2.16 billion.
Cellcom completed its merger with sister company, ISP and international calls carrier NetVision at the end of August, with the goal of creating a full-service telecommunications company. Both companies are units of Nochi Dankner-controlled IDB Holding Corp. Ltd. (TASE:IDBH) unit Discount Investment Corporation (TASE: DISI).
Cellcom added a net 25,000 new subscribers during the quarter to reach 3.39 million subscribers at the end of September, of whom 37.8%, or 1.28 million were 3G subscribers.
Cellcom CEO Amos Shapira said, "I believe that our entry into the land line market through the acquisition of Netvision will only further strengthen our position. The changes expected in the coming year are not the first challenges to our market and I believe that just as we emerged stronger from previous challenges (such as number portability in 2008 and the significant regulatory changes at the beginning of 2011)."
Cellcom's share price fell 2.3% in New York yesterday to $20.87, giving a market cap of $2.1 billion, and fell 0.6% in early trading on the TASE today to NIS 76.84.
Published by Globes [online], Israel business news - www.globes-online.com - on November 15, 2011
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