Cellcom switches to annual loss

Nir Sztern Photo: Sivan Faraj

Cellcom CEO Nir Sztern: The Israeli telecommunications market is in a difficult state, and without urgent regulatory intervention to resolve the crisis, genuine damage to investments is expected.

Telecommunications company Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL) is the first in the sector to release its 2018 fourth quarter and full year financials. The report indicates decline in all financial measures.

Revenue fell 4.7% in 2018 to NIS 3.7 billion, operating profit plunged 75.1% to NIS 74 million' and the company switched to an annual net loss, of NIS 64 million (NIS 0.58 per share), which compares with a net profit of NIS 113 million in 2017. EBITDA was NIS 660 million in 2018, 22.6% down on 2017. Cash flow was almost unchanged, at NIS 770 million.

Fourth quarter revenue fell 5.8% in comparison with the corresponding quarter of 2017, to NIS 918 million, and the company posted a net loss for the quarter of NIS 35 million, which compares with a net profit of NIS 10 million in the corresponding quarter.

In the breakdown by segment, the mobile segment produced annual revenue of NIS 2.4 billion in 2018, down 11.6% in comparison with 2017. Revenue from cellular services fell 10.3%, to NIS 1.7 billion. Adjusted EBITDA in the cellular segment totaled NIS 391 million, down 34.3% from 2017. At the end of 2018, Cellcom had 2.6 million cellular subscribers, up slightly, by 1.2%, from the end of 2017. Monthly ARPU (average revenue per user) fell 10.2% in 2018 to NIS 51.3. For the fourth quarter, the figure was NIS 49.

In the fixed-line segment (telephony, television and Internet), revenue grew 8.6% to almost NIS 1.5 billion, of which revenue from services was NIS 1.2 billion, up 4.2%. EBITDA in this segment rose 4.3% to NIS 269 million. At the end of 2018, Cellcom had 269 thousand households connected to its Internet infrastructure, up 21.2% in comparison with the end of 2017, and 219 thousand television subscribers, up 28.8%.

Cellcom CEO Nir Sztern said, "Despite the high level of competition in 2018, the fixed-line segment's revenues increased by 9%, compared to 2017. The signing of the investment transaction in IBC through a partnership of Cellcom and IIF is a breakthrough event for the coming years. However, the Israeli telecommunications market is in a difficult state, and without an urgent regulatory intervention to resolve the crisis, genuine damage to investments is expected.

"In view of the competition challenges in the cellular sector, we continued to act in order to reduce the Company's expenses and have taken many steps to improve and streamline the processes of sales, support and service. We intend to continue acting to reduce the company's expenses in 2019.

"IBC, under its new ownership of Cellcom, IIF and IEC, will bring the fiber-optic message of a up to 1 gigabyte per second, to over 1 million Israeli households in 5 years, and will allow Cellcom to offer fast internet service which shall improve the Israeli customer's internet and TV experience. The transaction is also expected to result in substantial savings over time in Cellcom's expenses and consequently have a positive effect on the Company's results of operations and free cash flow."

Cellcom has a market cap of NIS 1.9 billion after a 26.6% decline in its share price so far this year.

Published by Globes, Israel business news - en.globes.co.il - on March 18, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

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Nir Sztern Photo: Sivan Faraj
Nir Sztern Photo: Sivan Faraj
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