Partner cites increased competition as first quarter revenues fall by 4%

16 May 2014

Israel’s Partner Communications has cited intensified competition in the country’s mobile sector as it reported a 4% year-on-year decline in total turnover to ILS1.103 billion (USD316 million) in the quarter ended 31 March 2014. Service revenues for the three month period under review totalled ILS876 million, down by 9% against the same quarter a year earlier, with service revenues from the cellular segment declining by 6% y-o-y to ILS680 million, a drop which it said was mainly the result of ‘the continued price erosion of post-paid and pre-paid cellular services due to the intensified competitive environment’. Similarly, service revenues for the fixed line segment stood at ILS247 million in 1Q14, representing a 13% drop from the corresponding quarter of 2013, and reflecting price erosion in fixed line services including local calls, long distance calls and internet services. Equipment revenues, however, increased by 24% from ILS183 million in the first three months of 2013, to ILS227 million a year later, due to both higher unit sales and an increase in the average unit price.

Adjusted earnings before interest, tax, depreciation and amortisation (EBTIDA) totalled ILS274 million in 1Q 2014, up 2% year-on-year, with EBITDA for the cellular segment rising by 7% to ILS199 million, reflecting the impact of lower operating expenses and higher gross profit from equipment sales. By contrast, adjusted EBITDA for the fixed line segment fell by 9% to ILS75 million, reflecting the decline in service revenues partially offset by lower operating costs. Net profit in 1Q 2014 meanwhile was ILS52 million, up 68% y-o-y as a result of the improved adjusted EBITDA and lower finance costs.

In operational terms, at the end of March 2014 Partner’s mobile customer base stood at 2.936 million, up marginally from the 2.932 million it reported a year earlier, of which around 2.14 million were post-paid and the remainder pre-paid. During the first quarter of 2014, Partner noted that the cellular subscriber base had actually declined by approximately 20,000, noting though that while pre-paid customer numbers fell by 24,000, largely reflecting seasonal trends, post-paid accesses rose by around 4,000 in the three-month period. Quarterly churn was 11.6% in 1Q14, meanwhile, compared with 10.4% in Q1 2013 and 10.7% in Q4 2013, while monthly average revenue per user (ARPU) for cellular subscribers standing at ILS77 in the first three months of 2014, down from ILS82 a year earlier.

Commenting on the company’s performance, Partner CEO Haim Romano said: ‘The results of the first quarter of 2014 reflect the successful implementation of our strategic plan. Despite the intensified competition and price erosion which negatively affected our service revenues, we recorded this quarter an increase in adjusted EBITDA compared to the same quarter last year, for the first time since the fourth quarter of 2010. The improvement resulted from adapting our cost structure to our challenging business reality, as well as the activity of our Retail Division which contributed to the growth in equipment sales.’

Israel, Partner Communications Company (Orange),

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