Cellcom Israel CEO Discusses Q1 2012 Results - Earnings Call Transcript

Cellcom Israel (CEL)

Q1 2012 Earnings Call

May 15, 2012 10:00 AM ET

Executives

Porat Saar - CCG Investor Relations

Nir Sztern - CEO

Yaacov Heen - CFO

Analyst

David Kaplan - Barclays

James Breen - William Blair

Michael Clark - Citibank

Dan Harvard - Deutsche Bank

Maura Shaughnessy - MFS

Presentation

Operator

Welcome to the Cellcom Israel Ltd. First Quarter 2012 Results Conference Call. (Operator Instructions). I would now like to hand over the call to Ms. Porat Saar of CCG Investor Relations Israel. Ms. Saar, please go ahead.

Porat Saar

Thank you 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 today are Mr. Nir Sztern, CEO and Mr. Yaacov Heen, CFO. Mr. Sztern will open by providing a summary of the main highlights of the first quarter 2012 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 our listeners that in this call management’s prepared remarks contain forward-looking statement which are subject to risk 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 31st, 2011 20-F on March 7, 2012 with the SEC.

In addition, any projections as to the Company's future performance represent management's estimates as of today, May 15th, 2012. 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've 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. Nir Sztern? Nir?

Nir Sztern

Thank you Porat. Good day everyone and welcome to our first quarter 2012 earnings conference call. All as you know we have seen quite a few developments in the cellular market here in Israel in the past 48 hours and I will read this after I give an overview of our results. In this quarter we continue to see the impact of the regulatory changes and increased competition. However, we also saw positive results from our merger with Netvision which already created a decline in costs as well as the positive effect on revenues.

We can also attribute this positive outcome to some of the goals we outlined in the last quarter such as our efficiency measures and so we view our strategy of staying on track. Indeed comparing the results of the first quarter of 2012 with the first quarter of 2011 we see a decline in profitability as a result of the competitive environment.

However, if we compare the first quarter of 2012 with the fourth of 2011 we can see that we succeeded in reducing the company’s expenses by approximately NIS 80 million creating the significantly low expense level for us and these results from among others. The efficiencies measures we implemented. We are committed to continuing this cost cutting momentum.

We are also making headway with our other goals which is to create value for our customers. Few are continuing to deepen our focus on server, internet growth by introducing data devices such as the new iPad for which Cellcom Israel is the only cellular company in Israel to sell this product. As well as the sales of a wide clarity of tablets and smartphones. We see a positive trend in this area with revenues from content and value added services rising by 10.9% compared with the first quarter of last year.

With regards to our network upgrade we are currently in the midst of this process and soon our network when enables future serving speeds with up to 84 megabits per second. We recently launched a variety of unlimited calling plans that offer great volume for money to our customers. This together with our success in winning the Israeli Defense forces tender will contribute to our efforts in boasting our subscriber growth this year despite increased competitive environment.

Our third goal was growth and you will see opportunities in the landline business. Indeed the Ministry of Communications recently decided to open the landline market for competition and we see this an opportunity to grow an strengthen Cellcom’s Israel’s position that a communication group providing a wide variety of solution to business and private customer.

However, the success of opening this market to competition still depends on the active involvement and supervision or (inaudible). So we hope to see some positive developments here.

I want to now turn to the recent events in the Israeli cellular markets. For those of you who have been following us, you will know that the company has always anticipated the intensified competition which would accompany the entry of new player. For this reason we initiated efficiency measures already backing 2011 and for this reason we are in a better position to deal with a new development and competitive landscape. We will continue to pursue vigorous cost cutting measures while continuing our efforts, our focus on providing the best service we can combined with attractive prices.

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