Veteran mobile co profits shrink 90% in 4 years

cellular operators
cellular operators

Competition from the new companies has slashed prices.

The first quarter of 2015 is a quarter that the veteran cellular companies - Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL), Partner Communications Ltd. (Nasdaq: PTNR; TASE: PTNR), and Pelephone Communications Ltd. - will want to forget. Three years after the watershed in the cellular market - the entry of the new competitors and the price cuts that detracted from the veteran companies' results - it appears that the market has not yet bottomed out.

The net profit of all three veteran companies hit a low point in January-March 2015. Their aggregate net profit totaled NIS 87 million, down 68%, compared with the corresponding quarter last year.

For the same of comparison, both Cellcom and Pelephone had profits of over NIS 100 million in the first quarter of 2014. Three years previously, in the first quarter of 2011, the three companies jointly earned a total of NIS 870 million,10 times their aggregate profit in the quarter just completed.

Furthermore, in the second quarter, the three veteran cellular companies will each have to pay about NIS 30 million for 4G frequencies, meaning that it is very likely that they will report a loss for the quarter; a small change in the indices or interest rate would make a loss almost certain.

The previous blow to the cellular companies took place in late 2014, when Cellcom launched its Cellcom TV services, and its competitors responded by cutting their cellular package prices in an attempt to hang on to their customers.

The result is starting to leave its mark on the companies' financial statements with a drop in revenue from cellular services, profits, EBITDA (earnings before interest, tax, depreciation, and amortization), and of course average monthly revenue per user (ARPU).

Severe blow to Pelephone revenue

The three veteran companies had aggregate revenue from cellular sectors of NIS 2.4 billion in the first quarter, down 10.5%, compared with the corresponding quarter last year, and 7.7%, compared with the preceding quarter. EBITDA was down even more steeply, from NIS 700 million in the first quarter of 2014 to NIS 420 million in the first quarter of 2015.

Published by Globes [online], Israel business news - www.globes-online.com - on May 21, 2015

© Copyright of Globes Publisher Itonut (1983) Ltd. 2015

cellular operators
cellular operators
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