Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ) today published a profit warning for 2012, due to regulatory and competitive impact on its mobile subsidiary, Pelephone Communications Ltd. The company reported lower revenue and profit for the second quarter of 2012 as growth in landline and international calls services failed to offset the drop in income from the sale of mobile phones and services.
Bezeq's consolidated revenue fell 10.3% to NIS 2.6 billion for the second quarter from NIS 2.89 billion for the corresponding quarter of 2011. Net profit attributable to majority shareholders fell 29.1% to NIS 415 million (NIS 0.15 per share) for the second quarter from NIS 585 million for the corresponding quarter.
Bezeq cut its full-year guidance to NIS 1.75-1.85 billion revenue on NIS 10.2-10.5 billion revenue. CFO Alan Gelman attributed the revision to the increased level of competition in the cellular market. He added, however, that the company's free cash flow would materially improve, compared with 2011, to over NIS 2.5 billion, due to the improvement in working capital and the progress made in large infrastructure projects.
Bezeq's landline revenue edged down 0.8% to NIS 1.16 billion for the second quarter from NIS 1.17 billion for the corresponding quarter, due to a 5.8% drop in telephony revenue, which was offset by a 7% increase in in Internet and transmission revenue to NIS 532 million, which the company attributed to a 57% increase in average surfing speed, compared with the corresponding quarter to 8.3 Mbps. However, net profit fell 20% to NIS 263 million for the second quarter from NIS 330 million for the corresponding quarter.
Pelephone's revenue fell 20% to NIS 1.15 billion for the second quarter from NIS 1.44 billion for the corresponding quarter, and net profit fell 30.5% to NIS 194 million from NIS 279 million. The fall in revenue and profits were mainly due to the drop in rates caused by increased competition and a 43% drop in equipment sales.
Bezeq's satellite television subsidiary DBS Satellite Services (1998) Ltd. (YES) widened its losses on higher revenue. Revenue rose 1.2% to NIS 409 million for the second quarter from NIS 404 million for the corresponding quarter, and the net loss rose 20.7% to NIS 107 million from NIS 88 million.
Bezeq will distribute a dividend of NIS 997 million. The ex-date for the distribution is September 23 and the payment date is October 10.
Bezeq chairman Shaul Elovitch said, "In the second quarter we experienced comprehensive regulatory changes and intensifying competition in the various areas of our operations, all of which are reflected in our financial results. Our strategy of long-term investment in advanced infrastructure, innovative services and first class customer service, have made us the leading communications group in Israel, well capable of dealing with the competition. The current changes in the communications market also have a positive potential for Bezeq, in that they can be leveraged for greater operational efficiency while creating business opportunities for the group as a whole."
Bezeq's share price fell a further 1.6% in morning trading to NIS 4.01, giving a market cap of NIS 11 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on August 2, 2012
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