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Cellcom Israel Announces First Quarter 2018 Results

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Cellcom Israel Announces First Quarter 2018 Results

Cellcom Israel concludes the first quarter of 2018 with net income of NIS 7 million and EBITDA[1] of NIS 180 million.

PR Newswire

NETANYA, Israel, May 30, 2018 /PRNewswire/ -- Nir Sztern, Cellcom Israel CEO said:

"The strong growth trend of the fixed line segment also continued in this quarter. Fixed line revenues were up approximately 9% compared to the first quarter of 2017 and EBITDA of this segment reached NIS 68 million.

Cellcom Israel is the only Company in Israel that offers the quatro package. This advantage allows us to face the competition in the cellular segment, such that even as cellular prices decrease, we are successful in selling a complete communications package, and through this we increase total income per household."

First Quarter 2018 Highlights (compared to first quarter of 2017):

  • Total Revenues totaled NIS 933 million ($265 million) compared to NIS 959 million ($273 million) in the first quarter last year, a decrease of 2.7%
  • Service revenues totaled NIS 701 million ($199 million) compared to NIS 739 million ($210 million) in the first quarter last year, a decrease of 5.1%
  • Operating income totaled NIS 45 million ($13 million) compared to NIS 67 million ($19 million) in the first quarter last year, a decrease of 32.8%
  • Net income totaled NIS 7 million ($2 million) compared to NIS 26 million ($7 million) in the first quarter last year, a decrease of 73.1%
  • EBITDA1 totaled NIS 180 million ($51 million) compared to NIS 201 million ($57 million) in the first quarter last year, a decrease of 10.4%
  • Net cash flow from operating activities totaled NIS 230 million ($65 million) compared to NIS 77 million ($22 million) in the first quarter last year2, an increase of 198.7%
  • Free cash flow1 totaled NIS 84 million ($24 million) compared to NIS 66 million ($19 million) in the first quarter last year, an increase of 27.3%

[1]

Please see "Use of Non-IFRS financial measures" section in this press release.

[2]

Net cash flow from operating activities for the first quarter of 2017, included a loan in an amount of NIS 130 million, which was provided to Golan Telecom according to the terms of the Network Sharing Agreement with Golan.

Nir Sztern, the Company's Chief Executive Officer, referred to the results of the first quarter of 2018:

"The strong growth trend of the fixed line segment also continued in this quarter. Fixed line segment revenues grew by approximately 9% compared to the first quarter of 2017 and the EBITDA from this segment reached NIS 68 million (61.9% growth from the same quarter last year).

We continued to broaden our TV services, adding 14,000 new subscribers to our service in the first quarter of 2018.

Alongside the continued competition in the cellular segment, we continued to recruit new customers, among others, through a quatro package that offers cellular, television, internet and fixed line home telephony.

Cellcom Israel is the only Company in Israel that offers a quatro package. This advantage allows us to face the competition in the cellular segment, such that even as cellular prices decrease, we are successful in selling a complete communications package, and through this we increase total income per household. In the cellular segment, we finished the first quarter with an addition of 5,000 subscribers, all post-paid subscribers.

In this quarter also, we continued to lay down our fiber-optic infrastructure to the home, in order to make "Super Fiber", our fast and quality internet service, accessible to households, as part of our quatro, triple and bundle offerings.

Further, we continued to advance a possible investment in Israel Broadband Company (IBC) and after we issued a non-binding letter of intent and reached understanding with the Israeli Electric Company (IEC) regarding an update of IEC's services prices to IBC, if we invest in IBC, we conduct negotiations with IBC and its shareholders for investing in IBC. In the last few days, the Ministry of Communications published a hearing as to the reduction of the universal deployment to which IBC is bound by its license, the approval of which shall assist in advancing the negotiations among the parties.  

We recently have been informed that, once again, the IDF (the Israeli Defense Forces) selected Cellcom Israel Group to be the cellular operator for the IDF soldiers for the coming three years. This win reflects, once again, the significant trust in Cellcom Israel's network as well as our high level of service, and we are very proud of it.

We continue to act in order to reduce the Company's expenses and examine various ways to become more efficient, in order to cope with the price erosion in the cellular segment. A few days ago we announced the launch of a voluntary retirement plan that will be another layer of streamlining the Company's expenses."

Shlomi Fruhling, Chief Financial Officer, said:

"During the first quarter of 2018 the erosion in revenues from cellular services continued as a result of the intensified competition in the market, as well as due to the change in the classification of the consideration from Golan as of the coming into force of the sharing agreement with Golan in the second quarter of 2017, compared to national roaming revenues in the same quarter last year. Despite the continued competition, we experienced a decrease in the churn rate of cellular subscribers as compared with the previous quarter and the same quarter last year. After the end of the quarter, Xfone launched its services as the 6th Mobile Network operator (MNO) in Israel, and since its entrance, we are experiencing an additional increase in the competition level in the market, reflected in an increased amount of transfers among the operators and a decrease in the pricing level in the market. The continuation of this trend is expected to negatively impact the Company's cellular segment results. 

Our subscriber base in the TV and internet services continued to grow during the quarter, with most of the subscribers joining these services as part of our triple and quatro offering. Fixed line segment revenues grew by approximately 9% compared with the same quarter last year due to the continued growth in subscriber base and the classification of part of the consideration from the sharing agreement with Golan to the fixed line segment.

The free cash flow in the first quarter of 2018 reached NIS 84 million, a 27.3% increase compared to the same period last year. The increase in the free cash flow was mainly due to a reduction in payments to suppliers and was partially offset by a decrease in receipts from customers for services and end user equipment.

The Board of Directors decided not to distribute a dividend for the first quarter of 2018, in light of the intense competition in the market and its negative impact on the Company's results of operations and in order to continue to strengthen the Company's balance sheet. The board will review its decision in the future, taking into consideration developments in market conditions and the Company's needs."

Cellcom Israel Ltd. (NYSE:CEL) (TASE: CEL) ("Cellcom Israel" or the "Company" or the "Group") announced today its financial results for the first quarter of 2018.
The Company reported that revenues for the first quarter of 2018 totaled NIS 933 million ($265 million); EBITDA for the first quarter of 2018 totaled NIS 180 million ($51 million), or 19.3% of total revenues; net income for the first quarter of 2018 totaled NIS 7 million ($2 million). Basic earnings per share for the first quarter of 2018 totaled NIS 0.08 ($0.02).

Main Consolidated Financial Results:


Q1/2018

Q1/2017

Change %

Q1/2018

Q1/2017


NIS million

US$ million
 (convenience translation)

Total revenues

933

959

(2.7)%

265

273

Operating Income

45

67

(32.8)%

13

19

Net Income

7

26

(73.1)%

2

7

Free cash flow

84

66

27.3%

24

19

EBITDA

180

201

(10.4)%

51

57

EBITDA, as percent of total revenues

19.3%

21.0%

(8.1)%



 

Main Financial Data by Operating Segments:



Cellular (*)

Fixed-line (**)

Consolidation adjustments

(***)

Consolidated results

NIS million

Q1'18

Q1'17

Change

%

Q1'18

Q1'17

Change

%

Q1'18

Q1'17

Q1'18

Q1'17

Change

%

Total revenues

630

692

(9.0)%

343

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