Partner Communications' CEO Discussees Q2 2012 Results - Earnings Call Transcript

Partner Communication Company, Ltd. (PTNR)

Q2 2012 Earnings Call

August 14, 2012, 11:00 a.m. ET

Executives

Gideon Koch – Manager, Revenues Finance Department

Haim Romano – CEO

Ziv Leitman - CFO

Analysts

David Kaplan – Barclays Capital

Simon Morris – Citibank

Gilad Alper – Excellence Nessuah Investment House

Presentation

Operator

Gideon Koch

Thank you. And thank you to all our listeners for joining us on this conference call to discuss Partner Communications’ results for the second quarter 2012. With me on the call today is Haim Romano, Partner’s CEO, and Ziv Leitman, our CFO. Haim Romano will be opening the call by sharing some thoughts on recent developments in the market and Partner’s strategic direction. Ziv will then discuss our financial and operational results for the quarter, and finally we’ll move on to the Q&As.

Before we begin, I would like to draw your attention to the fact that all statements in this conference call may be forward-looking statements within the meaning of section 27-A of the U.S. Securities Act of 1933, as amended, section 21-E of the U.S. Securities Exchange Act of 1934, as amended, and the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Regarding such oral forward-looking statements, you should be aware that Partner’s actual results might vary materially from those projected in the forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements are contained in Partner’s press release dated August 14 th, 2012, as well as Partner’s prior filings with the U.S. Securities and Exchange Commission on forms 20-F1 and 6-K, as well as the S-3 shelf registration statements, all of which are readily available. Please note that the information in this conference call related to projections or other forward-looking statements is subject to the previous Safe Harbor statement as of the date of this call. For your information, this call is being broadcast simultaneously over the internet, and can be accessed through our website at www.orange-co.il. If you have any further questions following the call, please feel free to contact our head of investor relations in Israel, [inaudible] at 972-54-909-9039. I will now turn the call over to Partner’s CEO, Haim Romano. Haim?

Haim Romano

Thank you, Gideon. Good morning, good afternoon, ladies and gentlemen, please allow me to welcome you to our second quarterly 2012 conference call. I will start my short briefing with a review of the recent events in the telecommunication market in Israel.

Firstly, I will describe the competition in the cellular market, and say that during May, last May, two new cellular operations launched, Hot Mobile and Golan Telecom. The new operators offer to the customer an unlimited plan at an aggressive price of NIS 98 and NIS 99. The launch was heavily promoted by PR campaigns, supported by the Israeli media and the Ministry of Communication. Existing cellular companies responded also by launching an unlimited package. The statistical approach of telephone was trying to maintain the market share almost at any price, offering an unlimited plan at the price of NIS 99. Cell com offering bundles of services [inaudible] aggressive offers to the business customers determined to maintain their customers almost at any price.

Our strategy was maintaining ARPU even at the price of [inaudible], offering unlimited plans at the price of 125 and NIS 135, the highest plan in the market, and launching 012 mobile sub-frames for customers who are only sensitive to the price but not to service and they are willing to stay with the service that is best on the internet. The outcome of our strategy, we managed to maintain the [inaudible] at NIS 101, the same as at Q1. As for the MVNOs, there is no doubt that the MVNOs are the main losers for the entry of the new operators. Currently, they’re also offering unlimited plans.

Moving to the fixed line markets, we face increasing competition in the ISP markets. The competition in the [inaudible] launch caused a decline of our market share from 33 to 32. The rate of the market share’s decline slowed down towards the end of the quarter. In the last quarter, we accelerated full operation merger with 012, and we started offering to our customers a telecommunication bundle service, fixed line and mobile. In spite of the operational efficiency in Q2 2012, op ex increased by NIS 100 million compared with Q3 2011. We managed to reduce 2,100 positions from October, 2011 until July, 2012, and it is not the end of our efficiency plan. On an annual base, we managed to save something like NIS 250 million annually.

For the technology progress, we are continuing the network operating, optimizing and enhancing the network towards the (LG). Currently, 70% of our network was upgraded to LG-ready. In addition to that, and to respect with the IT systems, the board of directors approved investment of NIS 60 million for our next generation of the CRM version of [inaudible].

In respect with the TV, we continue with our operation to launch a television service Over the Top, OTT. Once the condition will be matured, in the end of the day, to the end of the Minister of Communication, to solve the problem of our relationship with Bezeq and Hot, and it’s in, as I said before, it’s in the hands of the Minister of Communication. After that, we’ll be able to introduce to the market innovative and attractive solutions.

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