Mobile carrier Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL) posted net profit of NIS 326 million ($84 million, or $0.85 per share) for the second quarter of 2010, 17.7% more than the NIS 277 million for the corresponding quarter of 2009.
Cellcom partly attributes the increase in net profit to 28.7% growth in content and added value services revenue, including SMS and video services, to NIS 269 million in the second quarter, from NIS 209 million for the corresponding quarter. Content and added value services revenue accounted for 18% of total services revenue in the second quarter.
Total services revenue rose 5.2% to NIS 1.5 billion ($387 million) for the second quarter from NIS 1.42 billion for the corresponding quarter. Total revenue (including equipment sales) rose 5.5% to NIS 1.7 billion ($436 million) from NIS 1.61 billion.
The increase in content services did not affect Cellcom's core business of airtime minutes, which grew 5.6% compared with the corresponding quarter, and compared with 3.4% growth in the second quarter of 2009.
Cellcom added a net 28,000 subscribers during the second quarter, to a total of 3.34 million at the end of June. The company added a net 39,000 3G subscribers during the quarter to 1.08 million.
Commenting on the Ministry of Communications' planned rate cuts, Cellcom said, "If the changes as currently proposed are adopted, they are expected to have a material adverse effect on the company's results. Such adverse effects include both the direct effect of the proposed reduction (the estimated scope of which was previously reported by the company) and anticipated loss of outgoing cellular calls (which may occur due to an arbitrage gap created under the proposed tariff in favor of landline alternatives, including through the usage of landline based "callback" services), as well as other effects of the proposed reduction in interconnect tariffs, such as facilitating the entry of MVNOs and new operators to the market."
Cellcom CEO Amos Shapira said, "We are continuing to develop measures to mitigate, as much as possible, the expected adverse impact of these proposed changes."
Cellcom also announced that it will distribute a dividend of NIS 310 million.
Cellcom's share closed at $28.23 in New York yesterday, giving a market cap of $2.79 billion. The share price rose 0.3% by mid-afternoon to NIS 107.20.
Published by Globes [online], Israel business news - www.globes-online.com - on August 26, 2010
© Copyright of Globes Publisher Itonut (1983) Ltd. 2010