The launch of HOT Mobile Ltd. slashed the net profit for the second quarter of 2012 of HOT Telecommunication Systems Ltd. (TASE: HOT) 95%, despite a 25% increase in revenue.
Revenue rose 25% to NIS 1.03 billion for the second quarter from NIS 824 million for the corresponding quarter of 2011. However, net profit fell to NIS 7 million for the second quarter from NIS 78 million for the corresponding quarter. "The drop in profit is mainly due to entry into the mobile sector, and is expected to continue through the coming quarters," states HOT in its financial report.
HOT says that HOT Telecom recruited 142,000 new subscribers within six weeks and 250,000 subscribers within ten weeks, and has 563,000 subscribers altogether (including former subscribers of Mirs Communications). The company is investing heavily in building its mobile infrastructure, reducing its profits.
HOT's operating costs rose 34% to NIS 1.05 billion for the second quarter, it sales and marketing expenses rose 58% to NIS 84 million, and its general and administrative expenses rose 42% to NIS 44 million
HOT Mobile posted a loss of NIS 39 million for the second quarter and NIS 45 million in the first half. Meanwhile, HOT's cable television business posted a profit of NIS 10 million for the second quarter, and recruited 4,000 net new subscribers during the preceding 12 months to reach 894,000 subscribers at the end of June. HOT's landline telephony operations posted a profit of NIS 121 million for the second quarter, and recruited 46,000 net new subscribers over the preceding 12 months to reach 672,000 subscribers at the end of June, and it recruited 15,000 net new Internet subscribers to reach a 774,000 subscribers.
HOT chairwoman Stella Handler said, "HOT is ready for the long term in all its areas of business, and is pursuing its extensive investment plan accordingly. In the first half of the year, the company invested more than NIS 850 million, including NIS 250 million in the setting up of a state-of-the-art mobile network, upgrading its cable television network, and in the latest end-user equipment at customers' homes. At the same time, the company is preparing for the expected regulatory changes in the telecommunications market in general and in television in particular."
HOT's share price fell 1.6% in morning trading to NIS 31.61, giving a market cap of NIS 2.3 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on August 13, 2012
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