Mobile carrier Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL) posted a net profit of $364 million (NIS 1.29 billion) (NIS 13.04 or $3.68 per share) on $1.88 billion (NIS 6.66 billion revenue) in 2010, and will distribute a dividend of NIS 303 million. The number of subscribers rose by 3% to 3.39 million at the end of the year, of whom 34%, or 1.14 million, were 3G subscribers.
2010 revenue rose 2.8% from NIS 6.48 billion in 2009, and net profit rose 9.2% from NIS 1.18 billion. Cellcom attributed the revenue increase to subscriber growth during the year and a 26% increase in content and value added services revenue to NIS 1.11 billion. Content and value added services revenue accounted for 19% of total service revenue in 2010, up from 15.4% in 2009.
Cellcom's fourth quarter results suffered from the nationwide crash of its network, which cut off service for half a day in December. The company made a NIS 66 million provision to cover compensation. Fourth quarter revenue rose 1.4% $468 million (NIS 1.66 billion) from NIS 1.64 billion for the corresponding quarter. Net profit rose 17.7% to $90 million (NIS 319 million) (NIS 3.28 or $0.92 per share) from NIS 271 million for the corresponding quarter. If the provision for compensation is excluded, fourth quarter net profit rose 28.4% to $98 million (NIS 348 million.
Cellcom CEO Amos Shapiro said, "Cellcom Israel received and still receives favorable responses from its customers as to our handling of the network malfunction, the transparency with our customers and the bonus we chose to give them. I want to take this opportunity to thank our customers again for their loyalty to Cellcom Israel."
Cellcom's churn rate rose to 20.5% in 2010 from 19.6% in 2009. The December crash caused the fourth quarter churn rate to rise to 5.3% from 4.8% during the corresponding quarter. The company said, "Both annual and quarterly churn rates were primarily impacted by the churn of pre-paid subscribers characterized by lower contribution and subscribers with collection problems."
Average monthly minutes of use (MOU) per subscriber rose 1.2% to 335 minutes in 2010 from 331 minutes in 2009. Average revenue per user (ARPU) was unchanged at NIS 144 per month in 2010.
Free cash flow rose 8.4% to NIS 1.65 billion in 2010 from NIS 1.52 billion in 2010. Fourth quarter free cash flow rose 55.7% to NIS 422 million from NIS 271 million for the corresponding quarter.
DS Brokerage analyst Eran Jacobi said, "The financial report is excellent, even including the breakdown, at both the quarterly and annual level. Regrettably, there is no guidance for 2011, except for the comment that the company is preparing in advance for the reduction in inter-network connectivity fees and new regulations, so far, the direct effects are in line with expectations."
IBI Investment House analyst Ori Licht says that, despite eroding ARPU over several quarters, Cellcom can still generate strong profit margins. He does not expect the company's fourth quarter "very strong" cash flow of NIS 422 to be repeated because of 16 new regulations which came into effect in January 2011 and a drop in revenue.
Cellcom is a unit of Nochi Dankner-controlled IDB Holding Corp. Ltd. (TASE:IDBH). Yesterday, the company made an offer to purchase its sister company NetVision Ltd. (TASE: NTSN), a provider of international calls, telephony, and Internet services.
Cellcom's share price closed at $31.29 in New York yesterday, giving a market cap of $3.1 billion. The share price fell 1.3% in morning trading on the TASE today to NIS 110.30.
Published by Globes [online], Israel business news - www.globes-online.com - on March 15, 2011
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