Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ) subsidiary Pelephone Communications Ltd. was the first mobile carrier to publish its second quarter results today, reporting double-digit drop in revenue and profits.
Revenue fell 20.2% to NIS 1.15 billion for the second quarter from NIS 1.44 billion for the corresponding quarter. Services revenue fell 7.4% to NIS 857 million from NIS 925 million, and equipment sales fell 43.3% to NIS 291 million from NIS 513 million, due to a drop in mobile phone sales. Value added services sales, however, rose 5% to NIS 312 million for the second quarter, from NIS 297 million for the corresponding quarter. Value added services totaled 39% of total revenue for the second quarter, up from 34.5% for the corresponding quarter.
Net profit fell 30.5% to NIS 194 million for the second quarter from NIS 279 million for the corresponding quarter.
Pelephone attributes the fall in revenue and profit to lower mobile rates caused by the entry of new carriers into the market during the second quarter, and to lower mobile phone sales.
Cash flow from operations, however, rose five-fold to NIS 556 million for the second quarter from NIS 101 million for the corresponding quarter, due to an improvement in working capital because of the lower mobile phone sales and the factoring of certain payments for mobile phones paid for in installments.
Pelephone lost a net 17,000 subscribers during the second quarter, to 2,86 million at the end of June, although the figure was 32,000 higher than the end of June 2011. Average revenue per user (ARPU) per month fell 9.2, to NIS 99 in the second quarter from NIS 109 in the corresponding quarter, but average minutes of use (MOU) per user per month rose 10.5% to 409 minutes from 370 minutes.
Pelephone CEO Gil Sharon said, "The decrease in our profitability in the quarter is the result of the ongoing erosion of tariffs during the past year. Efficiency measures that we have been implementing since the beginning of the year have moderated the impact. The new competitors who entered the market in the middle of the second quarter created an opportunity for Pelephone in the form of new sources of revenue through wholesale service agreements. Two of those competitors HOT Mobile Ltd. and Rami Levy Communications - are hosted on our high-speed network. Since the onset of increased competition, we have lost fewer subscribers to the new and incumbent operators and recruited more subscribers from the incumbent carriers, thanks to a combination of the advantages of our high-speed network and excellent customer service."
Published by Globes [online], Israel business news - www.globes-online.com - on August 2, 2012
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