Cellcom Israel's CEO Discusses Q4 2011 Results - Earnings Call Transcript

Cellcom Israel Ltd. ( CEL)

Q4 2011 Earnings Call

March 07, 2012 09:00 AM ET

Executives

Porat Saar – CCG, Investor Relations

Nir Sztern – CEO

Yaacov Heen – CFO

Analysts

David Kaplan – Barclays Capital

Bill Rosenberg – RBC Capital Markets

Maura Shaughnessy – MFS Investment Management

Louie DiPalma – William Blair

Dan Howard – Deutsche Bank

Presentation

Operator

Welcome to the Cellcom Israel Ltd Fourth quarter and Year End 2011 Results Conference Call. (Operator Instructions). 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 Rachel. I would like to welcome all of you to the conference call and thanks Cellcom Israel’s Management for hosting this call today. With us here are Mr. Nir Sztern, CEO and Mr. Yaacov Heen, CFO.

Mr. Sztern will open by providing a summary of the main highlight for the fourth quarter and full year 2011 results followed by Mr. Heen who will review Cellcom Israel’s financial performance in further detail. Before I turn the call over to Mr. Sztern I would like to remind everyone within this call management’s prepared remarks contains forward-looking statements which are subject to risk and uncertainties and management may make additional forward-looking statements in response to your questions. Therefore the company claims protection of the Safe Harbor for forward-looking statements that is contained in the Private Securities Reform Act of 1995 and in this Israeli Securities Law of 1968.

Actual results may differ from those discussed today and therefore we refer you to a more detailed discusses today and therefore we refer you to a more detailed discussion as a risk and uncertainties in company’s filings with the Securities and Exchange Commission.

Including on the risk factors and the company’s annual reports for the year ended December 2011, 20-F files today with the FCC. In addition, any projections as to the company’s future performance represent management estimates as of today March 7, 2012.

Cellcom Israel seems to have obligation to update these projects in the future of market conditions change. You should by now received a copy of the company’s press release, if you have not yet received please call CCG Investor Relations at 1-646-233-2161.

I would now like to hand the call over to Mr. Nir Sztern.

Nir Sztern

Thank you Porat. Good day everyone and welcome to our fourth quarter and full year 2011 earnings conference call. This is my first conference call with Cellcom Israel as CEO. I am very happy to be here today and I want to thank you all for being on the call. As you know 2011 was a very challenging year for our company, our 2011 financial results reflected impact on the regulatory changes which caused a significant decrease in interconnections paid to us by local operators as well as the reduction in early termination fees.

This along with the resulting increase competitiveness in our market eroded our profitability and revenues. However, we are also seeing rise in our 3G subscriber base which is increased by almost 34% over the last year which is a positive indicator as we plan in the coming years to deepen our focus on cellular internet and data services as a key growth engine.

As a new CEO what is important to me at this stage is to look ahead in 2012 and see how we can not only weather all the new changes but also to come out evens stronger. Let start our overarching objective for the company is to move beyond just a cellular company and become a communications.

Based on this I have several key goals for 2012, first of which is to create deficiencies and such help us reduce calls. In recent weeks the company began to process a cost reduction in order to significantly lower its expenses. As an initial step we have taken efficiency measures following our merger with NetVision to integrate both companies’ headquarters and bring the NetVision headquarters employees over to our Cellcom offices in Netanya.

We are in a process of eliminating duplicate costs and positions and moving to an organizational structure which will maximize the mergers synergies.

We estimate that we will see the synergies of the merger both in terms of income and expenses during 2012 and the following year. Our second goal is to continue to create volume for our customers. On this front we are currently in the midst of upgrading our cellular network to support future data speeds of up to 84 megabits per second. Along with the development of our network we have shut down the old TDMA network and upgraded its active customers to our advanced network at no additional cost. As we mentioned before, our commitment to giving our customer the best customer experience in the cell market was recognized by our report previously published in 2011 from the Public Trust which is a non-profit organization which determined that Cellcom Israel is a company with the least number of customer complaints despite having the highest number of subscribers. Customer service is a key strength for the company as far (inaudible) and we will continue our efforts in giving our customers the best customer service we can including the vast devices and service packages.

Our third quarter 2012 is to continue focusing on key growth areas for the company. This means we will focus on improving our data services. As a result of this we will continue focusing on 3G customers while offering the best tablets and smartphones to our customers. This is a key growth area for our industry and we are focused on tapping into it and finding new opportunities. In order to achieve these goals we will need to leverage our talent and channel it into generating new ideas for growth and development.

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