Bezeq’s first quarter revenues fall on impact of fixed termination rate cuts

30 May 2014

Israel’s fixed line incumbent Bezeq has published its financial results for the first three months of 2014, revealing a 3.9% year-on-year decline in revenues. In the quarter ended 31 March 2014 Bezeq generated a total turnover of ILS2.311 billion (USD661 million), down from ILS2.405 billion in the year-ago period. This reduction, the company claimed, was primarily related to lower revenues from fixed line services, which had been impacted by a cut in fixed termination rates (FTRs), though this was partially offset by increased internet turnover. To that end, total fixed line turnover in 1Q14 stood at ILS1.08 billion, down from ILS1.13 billion a year earlier, with fixed voice revenues totalling ILS426 million against ILS510 million in 1Q13. By comparison, broadband internet revenues in the first quarter of 2014 totalled ILS332 million, up 7.1% year-on-year. In the wireless arena, meanwhile, Bezeq’s mobile unit Pelephone recorded turnover ILS917 million in 1Q14, representing a drop of 6.7% from the ILS983 million it reported a year earlier. Mobile service revenues were down 7.4% at ILS637 million primarily, the company said, due to tariff erosion as a result of increased competition in the sector and the transition of existing customers to lower priced plans as part of its customer retention policy.

Bezeq’s operating expenses in 1Q14 were ILS869 million compared with ILS889 million in the corresponding quarter of 2013, with the drop linked to the FTR reduction, though partly offset by a moderate increase in equipment expenses due to increased sales of cellular handsets and tablets. Operating profit for the period under review totalled ILS688 million (down 9.6% y-o-y), with EBITDA amounting to ILS1.00 billion, down from ILS1.09 billion in 1Q13. Net profit attributable to Bezeq shareholders in the first quarter of 2014 amounted to ILS457 million, meanwhile, down against ILS497 million in 1Q13.

Commenting on the company’s performance, David Mizrahi, Bezeq’s CFO and deputy CEO, was cited as saying: ‘We are continuing to streamline operations and reduce expenses in light of growing competition in all segments. In addition, the full quarter impact of lower fixed call termination rates was felt in the first quarter of 2014. Despite the erosion of revenues, we successfully achieved profitability levels, adjusted for one-time items, similar to the corresponding quarter.’

In operational terms meanwhile, Pelephone reported further customer losses, ending the first quarter of 2014 with 2.631 million subscribers on its books, down from 2.741 million a year earlier, and from 2.642 million at the end of 2013. Although fixed lines in service also maintained a downward trend, falling to 2.214 million at end-March 2014 from 2.242 million a year earlier, the company performed better in the broadband sector, where accesses increased by 8.8% year-on-year to 1.289 million.

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