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TheStreet Open House

Internet Gold Reports Fourth Quarter 2010 Financial Results

In the second quarter, Bezeq began consolidating the results of Walla!, the leading Israeli Internet portal serving a community of more than 5 million monthly users in Israel and abroad.

Bezeq’s operating profit increased 26.0% to NIS 3.7 billion in 2010 as compared to the full year 2009. The improvement in operating profit delivered a 31.2% operating margin and was driven primarily by higher total revenues and the positive impact of ongoing cost reduction initiatives, as well as by the incremental capital gains from the ongoing disposal of real estate and copper during the year.

Net profit attributable to Bezeq shareholders from continuing operations in 2010 amounted to NIS 2.4 billion, up 13.3% as compared to the full year 2009, when excluding a one-time gain of NIS 1.5 billion related to the deconsolidation of yes in the third quarter of 2009.

Bezeq’s EBITDA for 2010 increased 15.6% to NIS 5.2 billion (EBITDA margin 43.0%) compared to 2009 (EBITDA margin 38.7%). EBITDA in the fourth quarter of 2010 increased 48.2% to NIS 1.3 billion (41.5% EBITDA margin) versus the year ago quarter (29.2% EBITDA margin).

Fourth quarter and full year 2009 operating profit, net profit, and EBITDA for the Fixed-Line segment were impacted by a NIS 267 million provision for employee retirement recorded in Q4 2009 versus an NIS 36 million provision recorded in 2010, of which only NIS 5 million was recorded in the fourth quarter. Subsequent to year end, Bezeq announced a plan to early retire up to 260 employees at an estimated cost of NIS 281.5 million. The provision for these expenses will be recorded in the first quarter of 2011.

Cash flow from operating activities in 2010 rose 1.1% year-over-year to NIS 3.7 billion versus the full year 2009.

Gross capital expenditures in 2010 amounted to NIS 1.6 billion, an increase of 9.3% as compared to the full year 2009. This rise was primarily related to the ongoing rollout of the Bezeq’s Fixed-Line segment’s NGN (next generation network) infrastructure. The 2010 consolidated capex-to-sales ratio was 13.7%, as compared with 13.1% for the full year 2009.

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