Cellcom Israel Ltd. Q1 2010 Earnings Call Transcript

Cellcom Israel Ltd. Q1 2010 Earnings Call Transcript
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Cellcom Israel Ltd. (CEL)

Q1 2010 Earnings Call

May 17, 2010 9:20 a.m. ET

Executives

Porat Saar - CCG, IR

Amos Shapira - CEO

Yaacov Heen - CFO

Analysts

Anupam Palit - Jefferies

David Kaplan - Barclays Capital

Presentation

Operator

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Ladies and gentlemen, thank you for standing by. Welcome to the Cellcom Israel Ltd. first quarter 2010 results conference call. All participants are present in listen-only mode. Following management's formal presentation, instructions will be given for the question and answer session. (Operator Instructions) As a reminder this conference is being recorded May 17, 2010.

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

Porat Saar

Thank you, operator. I would like to welcome you all 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 first 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 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 estimate as of today, May 17, 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 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 first quarter earnings. This has been a good quarter for Cellcom Israel, and we have demonstrated a strong EBITDA margin with sustained growth in service revenues' EBITDA, operating income, and our subscribers' base.

During this quarter, we have seen an improvement in the growth rate of airtime minutes, which totaled 4.8% in the first quarter this year, compared to 2.5% in the first quarter of last year. We have also seen growth in our service revenues, which totaled 3% this quarter, compared to 1.1% in the first quarter of last year.

Furthermore, we continue to expand our 3G subscriber's base reaching over 1 million subscribers at the end of March 2010. This now represents 31.3% of our total subscribers' base. We are pleased with our results, because as we all know, the Israeli cellular market is highly competitive and constantly evolving. Yet, we have continued to maintain our position as the cellular operator with an overall best financial performance, and as market leader in terms of subscribers' base, as well as in total revenues.

I believe this is a result of our strategy, which is to focus on cellular communications. At the same time, we are committed to delivering quality customer service. Also, we have been able to leverage our core business through synergetic growth opportunities, while prudently managing expenses. I think this further solidifies and supports our leading position and strong financial performance.

I am happy to announce that we recently finalized acquisition of the assets and operation of Dynamica, one of our major dealers. As part of the acquisition, Dynamica's communications chain store will continue its operations as a fully owned Cellcom Israel subsidiary.

I want to take this opportunity to welcome all Dynamica's managers and employees to Cellcom Israel's family. I look forward to working together in the future, so that we can continue to provide our subscribers with quality customer service and the most advanced products and assets.

Finally, I would like to briefly touch upon the recent developments that have taken place here in Israel regarding the Ministry of Communications' plan to reduce interconnect fees in the cellular market. We have until the beginning of June to prepare a response. We intend to object to the decrease of interconnect tariffs as suggested, especially to the way it is implemented, which may have an adverse effect on the Company's results.

The Company intends to take measures to mitigate as much as possible the expected adverse effects of such proposed changes through revenue enhancement, as well as cost reduction.

In closing, we will continue to track and respond to the dynamic changes in the local communications market, and will continue to focus on our core business. We remain committed to providing the best services to our customers and will work to achieve strong financial results for the benefit of our shareholders.

We had a very positive first quarter, and I look forward to the rest of the year.

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

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