Cellcom Israel CEO Discusses Q2 2010 Results - Earnings Call Transcript

Cellcom Israel CEO Discusses Q2 2010 Results - Earnings Call Transcript
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Cellcom Israel Ltd. (CEL)

Q2 2010 Earnings Call

August 26, 2010 9:30 pm ET

Executives

Porat Saar - CCG IR

Amos Shapira - CEO

Yaacov Heen - CFO

Analysts

David Kaplan - Barclays Capital

Daniel Meron - RBC Capital Markets

Darren Shaw - UBS

Presentation

Operator

Welcome to the Cellcom Israel Ltd. second quarter 2010 results conference call. (Operator Instructions)

I would now like to hand over the call to Ms. Porat Saar of CCG Investor Relations. Ms. Saar, would you like to begin?

Porat Saar

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Previous Statements by CEL
» Cellcom Israel Ltd. Q1 2010 Earnings Call Transcript
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I would like to welcome all of you to the conference call, and thank Cellcom Israel's management for hosting this call today. With us here are Mr. Amos Shapira, our CEO; and Mr. Yaacov Heen, CFO.

Mr. Shapira will open by providing a summary of the main highlights of the second quarter 2010, followed by Mr. Heen, who will review Cellcom Israel's financial performance in further detail.

Before I turn the call over to Mr. Shapira, I would like to remind our listeners that in this call, management's prepared remarks contain forward-looking statements which are subject to risks and uncertainties, and management may make additional forward-looking statements in response to your questions. Therefore, the company claims the protection of the Safe Harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995 and in the Israeli Securities Law, 1968.

Actual results may differ from those discussed today, and therefore we refer you to a more detailed discussion of the risks and uncertainties in the company's filings with the Securities and Exchange Commission, including under risk factors in the company's annual report for the year ended December 31, 2009 20-F filled with the SEC.

In addition, any projections as to the company's future performance represent management's estimates as of today, August 26, 2010. Cellcom Israel assumes no obligation to update these projections in the future as market conditions change. You should have, by now, received a copy of the company's press release. If you have not yet received so, please call CCG Investor Relations at 1-646-233-2161.

I would now like to hand the call over to Mr. Shapira. Amos?

Amos Shapira

Thank you, Porat. Good day everyone, and welcome to our 2010 second quarter earnings. This quarter, we presented strong performance with solid growth in revenues, EBITDA, EBITDA margin, operating income, net income and subscribers' base. Our airtime minutes grew 5.6% this quarter and our service revenues by 5.5% year-over-year. We also continue to expand our 3G subscriber base, reaching 1.07 million at the end of June 2010, representing 32.2% of our total subscriber base.

These are very positive results, and I believe they are a testament to the success of our strategy of focusing on cellular communications, while being committed to delivering quality customer service. As you all know, this is a competitive and constantly evolving industry, and we continue to maintain our position as market leader. So we will continue to work according to our strategy and aim to continue maximizing our performance.

Now turning to some of Cellcom Israel's developments. Again, I think we are showing how our strategy is guiding us to take on very interesting projects with very interesting potential. First, as we reported back in July, Cellcom Israel is entering the financial services market with the intent to launch innovative solutions for conducting everyday financial transactions, using the mobile phone.

We have leading partners in this initiative, Citigroup and Isracard Group to help us realize these plans. We believe that together we will be able to leverage the many untouched opportunities in the cellular business. Moreover, I would like to add the fact that we are the first cellular company to enter the financial services market in Israel.

In addition, we have succeeded to generate additional growth by extending our landline services in the business segment. The Israeli Government recently announced that Cellcom Israel was chosen to operate 20% of their landlines. This is a very exciting development in our landline services, which is one of our growth engines.

Finally, I would like to point out the acquisition of Dynamica has been completed and has already been successfully integrated. This acquisition is already contributing to Cellcom Israel's results, and Yaacov will tell you a bit more about this later.

Now in the area of MoC regulation, we are waiting on the results of the Ministry of Communications hearing regarding the proposed interconnect tariff reduction, payable to cellular operators for which we filed our formal objection. Depending on the outcome, we may continue our case against these proposed changes.

Concurrently, we are continuing to develop measures to mitigate as much as possible the expected adverse impact of these proposed changes. We will of course continue to keep you updated as this situation develops.

In summary, this has been a good quarter and we have seen some very positive developments. We will continue to focus on our core business by remaining committed to providing the best services to our customers and strong financial results for the benefit of our shareholders. I look forward to talking with you again next quarter.

With that I would like to turn the call over to our CFO, Mr. Yaacov Heen, for a detailed review of our financials.

Yaacov Heen

Thank you, Amos, and good day to all of you. As Amos noted, this has been a strong quarter for us with year-over-year growth in all key areas. Our revenues for the second quarter of 2010 increased by 5.2%, totaling NIS 1.7 billion. Within these, service revenues accounted for most of this increase, rising by 5.5%, reaching NIS 1.5 billion.

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