Sharp Rise in Profits for Israeli Operator
Cellcom Israel has reported a sharp jump in first quarter profits after operating profit increased 50% to NIS 347 million ($84 million). Revenues for the quarter increased 7% to NIS 1,438 million ($346 million); Revenues from content and value added services (excluding SMS) increased 42%. EBITDA increased 20% to NIS 535 million ($129 million) and EBITDA margin increased from 33.4% to 37.2%
Tal Raz, Chief Financial Officer commented: "This quarter we delivered a substantial increase in profitability, despite the ongoing erosion in the price per minute, resulting from the decrease of interconnectivity rates and increased competition. During the first quarter of 2007, airtime rates were 9% lower than in the first quarter of last year. While average monthly Minutes of Use (MOU) increased by 8.4%, and revenues from content and value added services increased by 42%, ARPU declined by 0.6% (excluding the impact of the change in subscribers counting methodology). The higher profitability overall follows a 17% increase in total airtime, growth in revenues from content and the ongoing efficiency measures. As an outcome of the efficiency measures, sales, marketing, general and administrative expenses decreased, and their percentage out of revenues dropped by 8%."
The company says that the increase in revenues resulted mainly from an increase of approximately 17% in airtime usage (outgoing and incoming), as a result of the increase in the Company's subscriber base and in Minutes of Use (MOU) which rose from 323 minutes last year to 341 minutes in the first quarter 2007. Revenues also benefited from the 42% increase in revenues from content and value added services (excluding SMS), mainly from advanced content HSDPA 3.5 based services, as well as a substantial increase in SMS. This increase was partially offset by a decline in interconnection rates and the change in the pricing of calls reaching a voice mailbox, following the recent decisions by the Israeli Ministry of Communications.
New Subscribers - at the end of the first quarter of 2007 the Company had approximately 2.928 million subscribers. During the first quarter of 2007 the Company added 44,000 net new subscribers compared to a net increase of 38,000 in the same period last year.
In the third quarter 2006 the Company adopted a new method for counting its subscriber base. Under this new method the Company removes subscribers from its subscriber base after six months of no revenue generation or activity on its network. Previously, subscribers were removed from the subscriber base after three months. As a result of this change, Cellcom's subscriber base increased by 80,000 subscribers. The company believes that the new method is preferable as many subscribers who have not been active for three months, became active again before the end of six months. In addition, and to the best of the Company's knowledge, the new method is in line with general industry practice in Israel.
The monthly Average Revenue per User (ARPU) in the first quarter of 2007, excluding the effect of the change in subscriber counting method, totaled NIS 149 ($35.9), compared to NIS 150 ($36.1) in the first quarter last year, a 0.6% decrease. (Following the change in the subscriber counting method, ARPU totaled NIS 145 ($34.9), a 3.3% decrease). The increase in average MOU and additional increase in content and value added services contributed offset some of the ARPU erosion observed in the quarter."
Posted to the site on 14th May 2007
