The aggregate net profit of the three veteran mobile companies, Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL), Partner Communications Ltd. (Nasdaq: PTNR; TASE: PTNR), and Pelephone Communications Ltd., totaled NIS 208 million in 2015, 76.6% less than in 2014. Partner lost NIS 40 million in 2015. In 2011, before intensive competition was introduced into the mobile market, the three companies' aggregate profit was NIS 2.3 billion, and in the peak year of 2010, each of the companies had a profit of over NIS 1 billion. Nearly four years after new competitors entered the market and changed the situation in favor of the consumers, the local mobile market has not yet reached equilibrium, and its low point may still be ahead.
Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ) subsidiary Pelephone today published its financial statements for 2015, during most of which former CEO Gil Sharon led the company (current CEO Ran Guron took up his position only in November). Pelephone's net profit tumbled 60% to NIS 151 million, and its revenue slid 15.5% to NIS 2.9 billion. Some of the decline was because in contrast to the preceding year, Pelephone received no revenue from HOT Mobile Ltd. In addition, the company acted with great caution and did not offer excessive bargains on the sale of end-user equipment, following criticism of the company on this point. The coming year will be critical for Pelephone, due to the tender by the Ministry of Finance Accountant General department, an important strategic customer for the company. The tender, which concerns over 100,000 customers in the government sector, will in any case detract from Pelephone's revenue; even if the company wins, the prices will be substantially lower than those it has charged up until now.
Pelephone had the largest net profit of the three veteran mobile companies, among other things because its financing expenses are lower than those of the other two. Had its financing expenses been similar to those of the other two, it probably would have lost money in 2015. Even so, its net profit was down 60%, and totaled only NIS 11 million the fourth quarter, 80% less than in the corresponding quarter in 2014. Furthermore, Pelephone's free cash flow in the fourth quarter was minus NIS 51 million. Cellcom had the highest revenue of the three - NIS 3.4 billion, 9.3% less than in 2014. Partner's revenue was down 5.8% to NIS 3.3 billion, and Pelephone's was down 15.5% to NIS 2.9 billion. All three companies experienced a drop in revenue from mobile services: 12.3% at Cellcom and Partner, and 18.5% at Pelephone. On the other hand, Partner increased its sales of end-user equipment by 12%, while Cellcom's sales were unchanged, and Pelephone's fell 7.8%. Partner is also the only one of the three companies to sell more than NIS 1 billion in end-user equipment in 2015.
On the other hand, Pelephone stood out as the only one of the three companies to increase its number of subscribers in 2015, up 2.5% to 2.7 million, as a result of the addition of YouPhone subscribers. Cellcom and Partner both lost a net 4% of their subscribers, leaving Cellcom with 2.8 million and Partner with 2.7 million. Pelephone's average monthly revenue per user, on the other hand, was lower than that of its two veteran competitors, plunging from NIS 75 in the fourth quarter of 2014 to only NIS 60 in the fourth quarter of the succeeding year, putting it behind Cellcom with NIS 63 and Partner with NIS 67.
Published by Globes [online], Israel business news - www.globes-online.com - on March 17, 2016
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