IDB Holding Corp. Ltd. (TASE:IDBH) mobile carrier unit Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL) posted sharply lower profit and reduced revenue for the second quarter of 2011. Revenue fell 6% to NIS 1.59 billion ($465 million) from NIS 1.69 billion for the corresponding quarter of 2010, and net profit fell 25.2% to NIS 244 million ($71 million) or (NIS 2.45 or $0.72 per share), from NIS 326 million.
The company attributed the drop in revenue to a 24.5% reduction in service revenue, due to regulatory changes, from NIS 1.13 billion in the second quarter from NIS 1.5 billion in the corresponding quarter, which was partly offset by a 137% increase in equipment revenue to NIS 458 million from NIS 193 million, thanks to increased sales of smartphones and 3G mobile phones. Content and value added services revenue rose 5.2% to NIS 283 million, a quarter of all service revenue in the second quarter.
Free cash flow fell to NIS 174 million ($51 million) for the second quarter from NIS 323 million for the corresponding quarter.
Cellcom added 32,000 net new 3G subscribers in the second quarter to 1.22 million, 36.2% of all 3/37 million subscribers at the end of June. The proportion of 3G subscribers rose from 32.2% of all subscribers a year earlier.
Cellcom's average revenue per user (ARPU) fell 26% to NIS 108.20 per month in the second quarter from NIS 146.60 in the corresponding quarter, due to lower interconnect fees and other regulatory changes. However, minutes of use (MOU) rose 1.2% to 342 minutes per month per user in second quarter from 338 minutes in the corresponding quarter.
Cellcom CEO Amos Shapira said that the company was strongly affected by he regulatory changes that came into effect at the beginning of the year.
"In the '2011 Brands Index', which ranks the top 100 brands in Israel, Cellcom was ranked as the leading brand among all the Israeli brands, and specifically among all communications and cellular brands in Israel. Overall, Cellcom Israel was ranked number four in Israel, after three prestigious global brands. The Brands Index of Globes, the important Israeli financial newspaper, is considered the most prestigious index in Israel, and is based on professional analysis by leading research companies, combining market surveys and financial data," said Shapira, adding that the Public Trust report for the first half of the year and the Israeli Consumer Council both noted that although Cellcom has the largest subscriber base among the cellular companies in Israel, it receives the lowest number of customer complaints
Shapira concluded by noting Cellcom's merger with sister company, ISP, international calls and telephony provider NetVision Ltd. (TASE: NTSN) for NIS 1.6 billion to create "potential synergies and to create better capabilities to cope with the changing communications market."
Cellcom will distribute a dividend of NIS 232 million, 95% of its second quarter net profit.
Cellcom's share price closed at $23.90 in New York on Friday, giving a market cap of NIS 2.37 billion, and rose 0.5% in morning trading to NIS 81.87, after falling 6% drop in yesterday's market panic
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