Mobile carrier Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL) reported 0.4% revenue growth to NIS 1.58 billion ($456 million) for the first quarter of 2011 compared with the corresponding quarter of 2010. Equipment sales rose 130%, driven by increased sales of smartphones and other 3G devices.
Net profit fell 2.5% to NIS 306 million ($88 million) (NIS 3.09 or $0.89 per share) for the first quarter from NIS 314 million for the corresponding quarter.
Cellcom announced the distribution of a NIS 291 million dividend (NIS 2.93 per share).
Revenue from services fell 14.8% to NIS 1.2 billion, which the company attributed to regulatory changes. Revenue from content, including SMS, rose 13.5% to reach 23.7% of services revenue.
Operating profit rose 3.1% to NIS 471 million for the first quarter, and free cash flow rose 3.6% to NIS 401 million. Sales, marketing, administrative and general expenses rose to NIS 366 million for the first quarter from NIS 322 million for the corresponding quarter. The company attributed the increase to regulatory changes, which caused increased customers' queries to sales and service centers, requiring the hiring of sales staff.
Cellcom CEO Amos Shapira said, "During the quarter we witnessed the initial impact of the regulatory changes, some of which came into effect at the beginning of the quarter and some during the quarter. Service revenues decreased by approximately 15%, due to the reduction of interconnect fees." He added, "The regulatory changes affected our revenues, but also increased our operating expenses, mainly customer service and retention expenses."
Cellcom added 1,000 net new subscribers during the first quarter, bringing the number of subscribers to 3.39 million. The company added 48,000 net new 3G subscribers during the quarter, to 1.19 million, 35% of total subscribers.
Shapira said, "The reduction of early termination fees in calling plans with commitment for a certain period, led to a decrease of double counted and inactive subscribers in the market, which offset a considerable part of our gross recruitment of new subscribers and caused our net additions to be lower than in previous quarters."
Cellcom is a subsidiary of Nochi Dankner-controlled IDB Holding Corp. Ltd. (TASE:IDBH). Cellcom's share price fell 0.9% in New York yesterday to $31.58, giving a market cap of $3.14 billion, and fell 0.6 % in early trading on the TASE today to NIS 108.60.
Published by Globes [online], Israel business news - www.globes-online.com - on May 16, 2011
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