Partner Communications Ltd. (Nasdaq: PTNR; TASE: PTNR) reports a 3% rise in revenue for the first quarter of 2018 in comparison with the first quarter last year, from NIS 803 million to NIS 826 million.
Service revenues for the cellular segment fell by 5%, from NIS 489 million the first quarter of 2017 to NIS 466 million in the first quarter of 2018. Partner said that the decrease was mainly the result of the continued price erosion of cellular services (both Post-Paid and Pre-Paid) due to the continued competitive market conditions.
Service revenues in the first quarter of 2018 totaled NIS 625 million, representing a decrease of 2% from NIS 640 million in the corresponding quarter of 2017.
Service revenues for the fixed-line segment in the first quarter of 2018 totaled NIS 202 million, representing an increase of 4% from NIS 194 million in the corresponding quarter. Partner says that the increase reflects revenue from TV services as well as increase in revenue from internet services, which were partially offset principally by the decline in revenues from international calling services.
Equipment revenue in the first quarter of 2018 totaled NIS 201 million, up 23% from NIS 163 million in the corresponding quarter, which Partner says largely reflects higher volumes of equipment sales as well as a change in the product mix.
Gross profit on equipment sales was NIS 43 million, which compares with NIS 26 million in the corresponding quarter, representing an increase of 65%, mainly reflecting the higher sales volumes and higher profit margins from sales due to a change in the product mix.
Operating profit for was NIS 32 million, down 70% compared with NIS 105 million in the corresponding quarter.
Adjusted EBITDA in the first quarter of 2018 totaled NIS 177 million, representing a decrease of 29% from NIS 251 million in the corresponding quarter. As a percentage of total revenue, adjusted EBITDA in the first quarter of 2018 was 21%, compared with 31% in the corresponding quarter.
Net profit in the first quarter of 2018 was NIS 9 million, which compares with a profit of NIS 64 million in the corresponding quarter, a decrease of 86%. Partner posted a loss of NIS 50 million in the previous quarter. Basic earnings per share or ADS was NIS 0.05 ($ 0.02), compared with basic earnings per share of NIS 0.41 in the corresponding quarter.
One of Partner's problematic areas is free cash flow. In the first quarter of 2018, adjusted free cash flow totaled NIS 21 million, down 83% from NIS 126 million in the corresponding quarter.
A year ago, Partner held a NIS 200 million equity offering to strengthen its capital structure. Today, the company reports an opposite move: a share buyback program that will reduce its capital. Market analysts say they cannot recall another such contradictory action by a company within such a short time. The first tranche of the plan will amount to NIS 50 million of the company's ordinary shares
In addition, for the first time all Partner group employees will benefit from a profit participation mechanism provided for in the collective agreement between the company, the workers committee and the Histadrut. Each Partner employee will receive a bonus of NIS 450, beyond the salary rise and personal bonuses received for 2017.
At the end of the first quarter of 2018, Partner's cellular subscriber base (including mobile data and 012 Mobile subscribers) was approximately 2.67 million - approximately 2.34 million Post-Paid subscribers or 88% of the base, and approximately 331 thousand Pre-Paid subscribers, or 12% of the subscriber base. During the first quarter of 2018, the cellular subscriber base decreased by approximately 7,000 thousand subscribers. The Post-Paid subscriber base increased by approximately 16 thousand subscribers, while the Pre-Paid subscriber base decreased by approximately 23 thousand subscribers. The quarterly churn rate for cellular subscribers in the first quarter of 2018 was 8.8%, compared with 9.8% in the corresponding quarter. Total cellular market share (based on the number of subscribers) at the end of the first quarter of 2018 was estimated to be approximately 25%, compared with 26% in the corresponding quarter. Monthly average revenue per user (ARPU) for cellular subscribers in the first quarter of 2018 was NIS 58, down 5% from NIS 61 in the corresponding quarter. The decrease mainly reflected the continued price erosion in key cellular services due to the competition in the cellular market.
Partner CEO Isaac Benbenisti said, "Partner started 2018 with significant momentum - in the first quarter the Post-Paid cellular subscriber base continued to grow and Partner TV's subscriber base has reached over 77 thousand households as of today. In addition, the deployment of the fiber optic infrastructure was accelerated significantly, and by year end, we intend to be present in over half of the cities in Israel.
"A year ago we revealed our strategic partnership with Netflix which includes a user experience and unique value offers for Partner TV customers. Last month we reported an additional significant milestone with the announcement that Partner TV was chosen by Amazon Prime Video as its first partner in Israel. Partner TV's technological advantage is also highlighted through the upcoming FIFA World Cup games, since all of Partner set top boxes support 4K viewing as part of the basic service and with no need to change equipment.
"The fiber optic project, Partner Fiber, continues to expand, and in the first quarter of 2018 we doubled the deployment pace. We are reaching 27 cities with Partner Fiber as of today, with an independent fiber optic infrastructure that allow speeds of up to 1,000 megabits. Through the combined offers of Partner Fiber and Partner TV, more and more households in Israel are enjoying a more advanced technology and attractive prices compared to that were offered to them up until now."
Published by Globes [online], Israel business news - www.globes-online.com - on May 31, 2018
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