Cellcom Israel Announces Third Quarter 2011 Results
Grupo Iusacell DE Cv (NYSE:CEL)
Today : Tuesday 15 November 2011
Cellcom Israel Announces Third Quarter 2011 Results This quarter continued to reflect the continued impact of the regulatory changes and the increased competition, as previously expected and reported
PR Newswire
NETANYA, Israel, November 15, 2011
NETANYA, Israel, November 15, 2011 /PRNewswire/ --
In this quarter we consolidated Netvision's results for September only
Cellcom Israel declares a third quarter dividend of NIS 1.90 per share (totals approx. NIS 189 million)
Third Quarter 2011 Highlights including Netvision's Results for September Only[1] (compared to the third quarter 2010):
¦Total Revenues totaled NIS 1,665 million ($449 million) compared to NIS 1,729 million ($466 million)
¦Total Revenues from services totaled NIS 1,193 million ($321 million) compared to NIS 1,509 million ($407 million) as a result of the regulatory changes and the increased competition
¦Revenues from content and value added services (including SMS) increased 2.4%, reaching 26.6% of services revenues[2]
¦EBITDA[3]totaled NIS 534 million ($144 million) compared to NIS 716 million ($193 million)
¦EBITDA margin 32.1% compared to 41.4%
¦Operating income totaled NIS 349 million ($94 million) compared to NIS 534 million ($144 million)
¦Net income totaled NIS 199 million ($54 million) compared to NIS 332 million ($89 million)
¦Free cash flow[3] totaled NIS 262[4] million ($71 million) compared to NIS 513 million ($138 million)
¦Cellular Subscriber base totaled approx. 3.391 million at the end of September 2011
¦3G cellular subscribers reached approx. 1.282 million at the end of September 2011, representing 37.8% of total cellular subscriber base
¦The Company declared third quarter dividend of NIS 1.90 per share
1. On June 15, 2011, the Company and Netvision Ltd. ("Netvision") entered into a merger agreement. Netvision is a leading company in the Israeli communications market, which provides international long distance services, internet services (ISP), telephony services and other communication services. The transaction was completed on August 31, 2011. The consolidated financial results for the third quarter 2011 therefore include the results of Netvision only for the month of September 2011.
2. Excluding Netvision's services revenues.
3. Please see "Use of Non-IFRS financial measures" section in this press release.
4. The free cash flow for the third quarter 2011 is after elimination of the net cash flows used for the acquisition of Netvision in the amount of NIS 1,457 million (net of cash acquired in the amount of NIS 122 million).
Cellcom Israel Ltd. (NYSE: CEL TASE: CEL) ("Cellcom Israel", the "Company"), announced today its financial results for the third quarter of 2011. Revenues for the third quarter 2011 totaled NIS 1,665 million ($449 million); EBITDA for the third quarter 2011 totaled NIS 534 million ($144 million), or 32.1% of total revenues; and net income for the third quarter 2011 totaled NIS 199 million ($54 million). Basic earnings per share for the third quarter 2011 totaled NIS 2.00 ($0.54).
Commenting on the results, Amos Shapira, Chief Executive Officer said, "In the third quarter of 2011, we continued to see the impact of the regulatory changes, which came into effect at the beginning of the year, on our Company's results, as previously expected and reported. Likewise, we also see the impacts of the merger with Netvision, which was completed at the end of August, with September being the first month in which we consolidated Netvision's results in our financial statements. While the consolidation of Netvision's results in our financial report is only for September, I can say with great satisfaction that Netvision has demonstrated impressive results for its third quarter financial earnings, demonstrating growth in most parameters compared with the third quarter last year, among them a 24% increase in operating income and an 8% increase in EBITDA.
The cellular market underwent changes this year that significantly affected the level of competition and acceleration of price erosion, causing a decrease in revenues and profits. Notwithstanding, Cellcom Israel has continued to maintain its leading position, and even strengthen its position among its competitors, both financially and public image wise. In the third quarter, we continued to improve our customer service following the challenges we faced at the beginning of the year, due to market changes. I believe that our focus throughout the years on every aspect concerning customer service is what created such a change in the cellular market and is what makes us today the leading cellular company in terms of financial and image parameters. The-Marker, an Israeli business newspaper, recently published an annual survey, regarding the cellular companies customers' recommendation index, which noted that although the Israeli cellular market's public image on the whole requires improvement, Cellcom Israel is the only company in the sector to improve compared with last year and moves to the leading position in the sector. This index joins other recent and similar publications over the past few months such as Globes' - another Israeli business newspaper- "2011 Brands Index" and complaints index from the "Israel Consumer Council" and the "Public Trust" organization. All of the above publications demonstrated that although Cellcom Israel is the largest cellular company in Israel, the number of Cellcom Israel's customer complaints is the lowest in the industry. While I am pleased with the improvements in our customer service, we will continue our efforts in order to maintain this improvement trend.
The Company's image as an attractive workplace was also substantially reinforced. According to a recent survey, Cellcom Israel was ranked number one among cellular companies in Israel for students entering the workforce and ranked number five for Israeli companies overall. Our advantage in competing for the best employees in Israel is a very important competitive tool for the Company in the market, both for now and in the future. Strong financial results as compared with our competitors, along with the strengthening in all our image parameters, better position us towards the additional challenges expected in the communications industry in the future.
At a time when future challenges in the market are great due to increased competition, I think we can see that our consistent strategy of focusing on mobile communications - along with our development of unique management processes and professional staff of employees and managers with the motivation to win - is the right strategy and one that positioned us as market leaders. I believe that our entry into the land line market through the acquisition of Netvision will only further strengthen our position. The changes expected in the coming year are not the first challenges to our market and I believe that just as we emerged stronger from previous challenges (such as number portability in 2008 and the significant regulatory changes at the beginning of 2011), the Company has the management team, employees and strength to continue doing so in the future.
We are in the midst of the merger process. The main strategic decisions related to the merged Group's future characteristics have been decided upon and we now have several teams in place led by an outstanding professional, Netvision's CEO and designated Cellcom Israel's CEO, Mr. Nir Sztern, along with the assistance of McKinsey, to plan the integration of the companies' units in more details. We are very pleased with the progress of the process and with the fertile involvement of tens of our managers in this process. I believe a merger between companies is first and foremost a merger of people, and we have the best people in both companies. We are executing this process transparently and professionally and making an effort to shorten it as much as possible, so that we can start harvesting the fruits of the merger as soon as possible. I believe that the main changes resulting from the merger may be completed by early 2012, and that we start to enjoy the fruits of the synergy during the first half of 2012.
Mr. Shapira added: "Recently, I announced my retirement after six years in office. I had both the privilege and an obligation to lead this wonderful organization through an exciting and incredibly challenging time. The cellular market today is completely different from what it was six years ago, both from the technological perspective as well as the customer usage perspective. Mobile devices are no longer just for, but rather also for, phone calls. The slogan "mobile is everything" is true now more than ever. Likewise, the level of competition is not like it used to be in the past. With all this, we have dealt successfully and improved our position, moving from second to the leading position in the industry. The smiles of Cellcom Israel employees and managers along with the Board of directors' trust, gave me the energy required for this position and I thank them for this as I know this is not something to take for granted.
Although I will continue in my post until the end of 2011, this will be the last quarter I report our results to you. Starting next quarter, Mr. Nir Sztern, current CEO of Netvision, and appointed by the Board of directors to be the next CEO of Cellcom Israel, will be reporting the results. Nir began his career in the communications market at Cellcom Israel seventeen years ago and he has since performed successfully several roles in the communications industry. He has extensive experience in both mobile and landline communications, and this will serve as an important asset to his ability to lead the merged group to manage future market challenges. In the last two months I have worked with Nir closely, in leading the teams of the merger and was introduced to his great abilities. I have no doubt that Nir, together with the management team and employees of Cellcom Israel and Netvision, will successfully continue to lead the industry in the future".
Yaacov Heen, Chief Financial Officer, commented: "As we previously expected and reported, the reduction of interconnect fees and the continued price erosion had an adverse effect on our service revenues and profitability and we estimate that they will continue to affect our results for the fourth quarter as well. In the third quarter we consolidated Netvision's results for the month of September, which contributed NIS 98 million to total revenues and NIS 20 million to EBITDA. Turning to our results excluding Netvision: our total revenues decreased by 9.4% and service revenues decreased by 27% as compared with the third quarter last year, mostly due to the reduction of interconnect fees, but also due to the intensified competition. Revenues from content and value added services increased by 2.4% and EBITDA decreased by approximately 28.2% compared with the third quarter last year. As in the first half of the year, regulatory changes and accelerated competition led to a material increase in the Company's gross recruitment of subscribers, as well as to a 112% increase in revenues from handsets and accessories compared with the third quarter last year, most of which resulted from an increased sale of smartphones and advanced 3G handsets. In addition, the increased sale of handsets continue to cause a decrease in our free cash flow compared with the third quarter last year, due to an increase in the immediate payment to vendors for handset purchases, as opposed to spreading the proceeds from those sales, which are paid in installments by our customers (generally in 36 installments), although we can see an improvement in our free cash flow this quarter compared with the previous quarter.
During the quarter, we successfully raised approximately NIS 1.1 billion debt, through the expansion of existing series of debentures in a public tender, and for which we received demands of approximately NIS 2 billion. Overall, we have raised debt of approximately NIS 2.16 billion this year. The success of our latest debt raising, in a time of market turmoil, expresses the confidence of the investor community in our company.
For the third quarter of 2011, the Company will distribute a dividend of approximately NIS 189 million, representing approximately 95% of the third quarter net income to our shareholders."
Main Consolidated Financial Indicators (including Netvision's Results for September only):
see celcom's site for full financial report
