Bezeq, controlled by chairman Shaul Elovitz and managed by CEO Stella Handler, today reported its results for the fourth quarter of 2016 and the entire year. The company's net profit fell from NIS 1.721 billion in 2015 to NIS 1.244 billion in 2016, a 28% decrease.
Bezeq explained that its results had been materially affected by lower tax rates and the effect of those rates on its deferred tax assets, plus a rise in net financing expenses. The 2016 results were also affected by lower operating profits in the group's main business categories and the merger with DBS Satellite Services (1998) Ltd. (YES) at the end of the first quarter of 2015. The group's revenue totaled NIS 10 billion in 2016, compared with NIS 9.985 billion in 2015.
Bezeq's fourth quarter net profit was halved to NIS 185 million, compared with NIS 369 million in the fourth quarter of 2015, and its revenue dipped from NIS 2.6 billion in the fourth quarter of 2015 to NIS 2.5 billion in the fourth quarter of 2016, a 4% drop.
The company explained that the one-time effects of over NIS 200 million affected its fourth quarter results: NIS 79 million from the corporate tax cut, wich reduced the gax asset in the consolidated financial statements, a NIS 78 million provision in the quarter for early retirement of employees, and a NIS 55 million expense for an increase in debt owed to Eurocom Group resulting from the acquisition of Yes.
Bezeq will distribute a NIS 578 million dividend for the second half of 2016.
Bezeq's revenue from landline business fell slightly to NIS 4.38 billion, as did its revenue in this category in the fourth quarter, when it totaled NIS 1.08 billion. Net profit from landline business was down 7% to NIS 1.23 billion in 2016, and down 31% to NIS 235 million in the fourth quarter. Revenue from telephony services sank 6% to NIS 1.5 billion in 2016 and 9% to NIS 357 million in the fourth quarter.
The net profit of subsidiary Pelephone Communications Ltd. plunged 72% to NIS 3 million in the fourth quarter of 2016, compared with the corresponding quarter in the preceding year, and its 2016 net profit plummeted 60% to NIS 61 million. Pelephone's fourth quarter revenue slipped 9% to NIS 652 million, compared with the fourth quarter of 2015, and its 2016 revenue was down 9% to NIS 2.63 billion.
Bezeq International Ltd.'s revenue dipped 2% to NIS 1.54 billion in 2016 and 3% to NIS 392 million in the fourth quarter of that year. Net profit fell 27% to NIS 125 million in 2016 and 21% to NIS 33 million in the fourth quarter of 2016.
Yes's revenue was down 2% to NIS 1.75 billion in 2016 and 2.4% to NIS 438 million in the fourth quarter of that year. Yes posted a NIS 68 million profit in 2016, compared with a NIS 354 million loss in 2015, and its fourth quarter net profit was NIS 385 million, compared with a NIS 110 million net loss in the corresponding quarter in 2015.
Elovitz said, "Our operating results for 2016 highlight the Group’s success in maintaining its leading position in reliability, service level, innovation, and product quality amid a highly competitive market. The Israeli telecom market continues to evolve in very significant ways, which present us with strategic challenges. To meet these challenges head-on, our companies work constantly to adapt to the changing landscape. However, regulations must adapt accordingly to enable effective competition - the kind that will create real value for consumers along with operational efficiency. It is extremely important that Bezeq, the largest investor in the Israeli telecom market, be accorded the regulatory support to continue providing Israeli citizens with outstanding service, while streamlining our operations and integrating commercial innovation. We believe the time has come to cancel the structural separation."
Handler commented, “In 2016, competition in the fixed-line market became stronger than ever and presented us with extreme challenges. The wholesale market reform deepened its impact on the Internet market, and competition in the business segment is growing. We have successfully navigated the changing industry landscape, kick-starting new growth drivers while continuing our streamlining efforts. This year, we continued to develop in the digital field and launched a platform for smart cities as well as a smart business service. We have set long-term goals in shaping the digital future of Israel, and will continue to lead breakthrough initiatives in this area. At the same time, our investments in infrastructure are extremely significant, totaling NIS 834 million or 19% of the Company’s overall revenue in 2016. Our investments in infrastructure serve not only our business but other telecom companies as well and allow for increased competition in the market. In today’s new competitive era the time has come to cancel the structural separation. This will allow consumers to benefit from a fully competitive market as well as improved service and pricing, while enabling Bezeq to become more efficient and save unnecessary costs.”
Published by Globes [online], Israel Business News - www.globes-online.com - on March 30, 2017
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