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Partner Communications Reports First Quarter 2018 Results1Partner Communications Company Ltd. ("Partner" or the "Company") (NASDAQ and TASE: PTNR), a leading Israeli communications provider, announced today its results for the quarter ended March 31, 2018.
1 The quarterly financial results are unaudited. Commenting on the first quarter 2018 results, Mr. Isaac Benbenisti, CEO of Partner noted: "Partner started 2018 with significant momentum - in the first quarter the Post-Paid cellular subscriber base continued to grow and Partner TV's subscriber base has reached over 77 thousand households as of today. In addition, the deployment of the fiber optic infrastructure was accelerated significantly, and by year end, we intend to be present in over half of the cities in Israel. In the cellular segment, in the first quarter the Post-Paid subscriber base increased by 16 thousand, thanks to subscribers that choose Partner over the competitors. The consistent growth in Post-Paid subscribers, for 11 consecutive quarters, results from, among other things, value offers which include unique benefits such as wifi calling, co-operation with Apple Music, and the fact that Partner's service continues to be a competitive advantage as reflected in the Consumer Protection Authority's report published last month. A year ago we revealed our strategic partnership with Netflix which includes a user experience and unique value offers for Partner TV customers. Last month we reported an additional significant milestone with the announcement that Partner TV was chosen by Amazon Prime Video as its first partner in Israel. Partner TV's technological advantage is also highlighted through the upcoming FIFA World Cup games, since all of Partner set top boxes support 4K viewing as part of the basic service and with no need to change equipment. The fiber optic project, Partner Fiber, continues to expand, and in the first quarter of 2018 we doubled the deployment pace. We are reaching 27 cities with Partner Fiber as of today, with an independent fiber optic infrastructure that allow speeds of up to 1,000 megabits. Through the combined offers of Partner Fiber and Partner TV, more and more households in Israel are enjoying a more advanced technology and attractive prices compared to that were offered to them up until now." Mr. Tamir Amar, Partner's Chief Financial Officer, commented on the first quarter 2018 results: "The first quarter results of 2018 reflected the Company's strategy in the fixed-line segment and equipment sales. Our rapid growth in the number of TV subscribers and in wholesale internet customers combined with our business model for these activities resulted in improved operational results in these activities compared to the fourth quarter of 2017. This improvement was reflected, among other things, in growth in service revenues and in EBITDA from the fixed-line segment compared to the fourth quarter. In addition, in equipment sales, the actions that we carried out last year continue to be reflected in our results, and in the first quarter of 2018, we reported equipment sales revenues of NIS 201 million and gross profit of NIS 43 million, compared with revenues of NIS 163 million and gross profit of NIS 26 million in the first quarter of 2017. In the cellular segment, we continue to see that the management of our Post-Paid subscriber base is also reflected in the first quarter of 2018, with growth in the Post-Paid subscriber base of 16 thousand subscribers, lower price erosion from these subscribers compared to both the first and fourth quarters of 2017, and continued decline in the churn rate of these subscribers as well as in the overall cellular churn rate of the Company. The Company's cellular churn rate declined by one basis point, compared to the first quarter of 2017, to 8.8% in the quarter, continuing the trend of the declining cellular churn rate for Partner over the past three years. We put emphasis on increasing the value we provide our Post-Paid subscribers both through value-added cellular services and through additional services that the Company provides. The Company's CAPEX in the quarter totaled NIS 138 million, with the growth mainly reflecting investments in the Company's growth engines - the fiber optic cable infrastructure and TV services. We are in advanced stages of negotiations with Cellcom regarding possible collaboration in the fiber optic infrastructure that both companies are deploying, in order to enable a faster deployment rate at a lower cost which will improve the economic returns from the project. This is in addition to the Ministry of Communications decision regarding the ability to use the last manhole before the building, which entails potentially significant cost savings in our fiber optic infrastructure deployment. In addition to our core activities and organic growth engines, Partner is in the process of examining nonorganic growth opportunities including, among others, conducting an initial assessment of entry into the credit and debit card market, through either acquisitions or internal development. The impact of the reduction in our debt level, the early repayments and the refinancing of debt that we undertook is also reflected in the quarter's results, with finance costs totaling NIS 18 million, including early loan repayment expenses of NIS 9 million (the first quarter being the final quarter to include significant early repayment expenses as part of the Company's debt restructuring which took place in the fourth quarter of 2017). As of the end of the first quarter, our net debt totaled NIS 0.9 billion and gross debt decreased to NIS 1.6 billion from NIS 1.9 billion in the previous quarter."
Key Financial Results
Key Operating Indicators
Partner Consolidated Results
Financial Review In Q1 2018, total revenues were NIS 826 million (US$ 235 million), an increase of 3% from NIS 803 million in Q1 2017. Service revenues in Q1 2018 totaled NIS 625 million (US$ 178 million), a decrease of 2% from NIS 640 million in Q1 2017. Service revenues for the cellular segment in Q1 2018 totaled NIS 466 million (US$ 133 million), a decrease of 5% from NIS 489 million in Q1 2017. The decrease was mainly the result of the continued price erosion of cellular services (both Post-Paid and Pre-Paid) due to the continued competitive market conditions. Service revenues for the fixed-line segment in Q1 2018 totaled NIS 202 million (US$ 57 million), an increase of 4% from NIS 194 million in Q1 2017. The increase reflected the revenues from TV services as well as increase in revenues from internet services, which were partially offset principally by the decline in revenues from international calling services. Equipment revenues in Q1 2018 totaled NIS 201 million (US$ 57 million), an increase of 23% from NIS 163 million in Q1 2017, largely reflecting higher volumes of equipment sales as well as a change in the product mix. Gross profit from equipment sales in Q1 2018 was NIS 43 million (US$ 12 million), compared with NIS 26 million in Q1 2017, an increase of 65%, mainly reflecting the higher sales volumes and higher profit margins from sales due to a change in the product mix. Total operating expenses ('OPEX') totaled NIS 498 million (US$ 142 million) in Q1 2018, an increase of 4% or NIS 20 million from Q1 2017. The increase mainly reflected the additional expenses relating to the Company's TV service and the growth in internet services, partially offset principally by a decline in doubtful debt expenses and a decline in international calling services expenses. Including depreciation and amortization expenses and other expenses (mainly amortization of employee share based compensation), OPEX in Q1 2018 increased by 3% compared with Q1 2017. Operating profit for Q1 2018 was NIS 32 million (US$ 9 million), a decrease of 70% compared with NIS 105 million in Q1 2017. See Adjusted EBITDA analysis for each segment below. Adjusted EBITDA in Q1 2018 totaled NIS 177 million (US$ 50 million), a decrease of 29% from NIS 251 million in Q1 2017. As a percentage of total revenues, Adjusted EBITDA in Q1 2018 was 21% compared with 31% in Q1 2017. Adjusted EBITDA for the cellular segment was NIS 134 million (US$ 38 million) in Q1 2018, a decrease of 28% from NIS 187 million in Q1 2017, reflecting the decrease in cellular service revenues and the fact that since Q3 2017 the Company does not record any income with respect to the settlement agreement with Orange, partially offset by an increase in gross profit from equipment sales and a decline in OPEX. As a percentage of total cellular segment revenues, Adjusted EBITDA for the cellular segment in Q1 2018 was 21% compared with 29% in Q1 2017. Adjusted EBITDA for the fixed-line segment was NIS 43 million (US$ 12 million) in Q1 2018, a decrease of 33% from NIS 64 million in Q1 2017, reflecting the increase in OPEX, partially offset by the increase in service revenues. As a percentage of total fixed-line segment revenues, Adjusted EBITDA for the fixed-line segment in Q1 2018 was 19%, compared with 30% in Q1 2017. Finance costs, net in Q1 2018 were NIS 18 million (US$ 5 million), a decrease of 22% compared with NIS 23 million in Q1 2017. The decrease largely reflected lower interest expenses in view of the level of debt which was lower by more than NIS 1 billion compared with Q1 2017, and a decrease in foreign exchange rate expenses, partially offset by early loan repayment expenses of NIS 9 million recorded in Q1 2018. Income taxes for Q1 2018 were NIS 5 million (US$ 1 million), compared with NIS 18 million in Q1 2017. Profit in Q1 2018 was NIS 9 million (US$ 3 million), compared with profit of NIS 64 million in Q1 2017, a decrease of 86%. Based on the weighted average number of shares outstanding during Q1 2018, basic earnings per share or ADS, was NIS 0.05 (US$ 0.02), compared to basic earnings per share of NIS 0.41 in Q1 2017. Cellular Segment Operational Review At the end of Q1 2018, the Company's cellular subscriber base (including mobile data and 012 Mobile subscribers) was approximately 2.67 million including approximately 2.34 million Post-Paid subscribers or 88% of the base, and approximately 331 thousand Pre-Paid subscribers, or 12% of the subscriber base. During the first quarter of 2018, the cellular subscriber base decreased by approximately 7 thousand subscribers. The Post-Paid subscriber base increased by approximately 16 thousand subscribers, while the Pre-Paid subscriber base decreased by approximately 23 thousand subscribers. The quarterly churn rate for cellular subscribers in Q1 2018 was 8.8%, compared with 9.8% in Q1 2017. Total cellular market share (based on the number of subscribers) at the end of Q1 2018 was estimated to be approximately 25%, compared to 26% in Q1 2017. The monthly Average Revenue per User ("ARPU") for cellular subscribers in Q1 2018 was NIS 58 (US$ 17), a decrease of 5% from NIS 61 in Q1 2017. The decrease mainly reflected the continued price erosion in key cellular services due to the competition in the cellular market. Funding and Investing Review In Q1 2018, Adjusted Free Cash Flow totaled NIS 21 million (US$ 6 million), a decrease of 83% from NIS 126 million in Q1 2017. Cash generated from operations decreased by 24% to NIS 157 million (US$ 45 million) in Q1 2018 from NIS 207 million in Q1 2017. The decrease mainly reflected the decrease in Adjusted EBITDA. Cash capital expenditures ('CAPEX payments'), as represented by cash flows used for the acquisition of property and equipment and intangible assets, were NIS 138 million (US$ 39 million) in Q1 2018, an increase of 68% from NIS 82 million in Q1 2017. The increase mainly reflected the increase in investments related to the fiber optic infrastructure deployment and TV service. The level of Net Debt at the end of Q1 2018 amounted to NIS 919 million (US$ 262 million), compared with NIS 1,415 million at the end of Q1 2017. Regulatory Developments The Ministry of Communications' service portfolio on physical infrastructure (the "Service Portfolio") enables service providers (such as Partner) to use Bezeq's physical infrastructure components (such as manholes, ducts, poles, boxes, dark fibers, optical wavelengths etc.). On April 16, 2018, the Ministry of Communications issued its ruling on various disputes that arose between Partner and Bezeq regarding the implementation of the Service Portfolio. The main disagreement between the parties stemmed from the fact that Bezeq refused to allow Partner to deploy fibers to buildings from the physical infrastructure components of Bezeq that are located at the entrance to the ducts that belong to the buildings and that lead into the buildings. The Ministry of Communications determined that Bezeq's refusal was contrary to the purpose of the regulation, creating a significant barrier to the deployment of optical fibers and service provision to customers, and determined that Bezeq will enable Partner to deploy communications cables using the infrastructure components leading to the buildings and to perform any necessary works. The Ministry's ruling will reduce the cost, and accelerate the pace of deployment of Partner's fiber optic project. Other Developments On May 30, 2018, the Company's Board of Directors resolved to adopt a buyback plan of the Company's ordinary shares which are traded on the Tel Aviv Stock Exchange, up to an aggregate amount of NIS 200 million ("the Plan"). The Plan will be implemented in multiple tranches, the first tranche being in the amount of NIS 50 million of the Company's ordinary shares. The implementation of subsequent tranches will be subject to approval of the Company's Board of Directors. The Plan will be executed in accordance with the Israel Securities Authority Safe Harbor opinion regarding buyback securities by a corporation. For further details regarding the Plan, please see the Company's immediate report of May 31, 2018. Conference Call Details Partner will hold a conference call on Thursday, May 31, 2018 at 10.00AM Eastern Time / 5.00PM Israel Time. To join the call, please dial the following numbers (at least 10 minutes before the scheduled time): International: +972.3.918.0685 North America toll-free: +1.888.281.1167 A live webcast of the call will also be available on Partner's Investors Relations website at: www.partner.co.il/en/Investors-Relations/lobby/ If you are unavailable to join live, the replay of the call will be available from May 31, 2018 until June 30, 2018, at the following numbers: International: +972.3.925.5945 North America toll-free: +1.866.276.1485 In addition, the archived webcast of the call will be available on Partner's Investor Relations website at the above address for approximately three months. Forward-Looking Statements This press release includes forward-looking statements within the meaning of Section 27A of the US Securities Act of 1933, as amended, Section 21E of the US Securities Exchange Act of 1934, as amended, and the safe harbor provisions of the US Private Securities Litigation Reform Act of 1995. Words such as "estimate", "believe", "anticipate", "expect", "intend", "seek", "will", "plan", "could", "may", "project", "goal", "target" and similar expressions often identify forward-looking statements but are not the only way we identify these statements. Specific statements have been made regarding the Company's intention with respect to the scope of deployment of the fiber optic infrastructure in Israel, possible collaboration with Cellcom in the fiber optic infrastructure and the potential savings as a result both from the collaboration as well as the MoC's decision allowing the Company to use the last manhole, the Company's possible entry into the credit and debit card market including through acquisition of a company or activity in this area and the Company's plan to repurchase its shares. In addition, all statements other than statements of historical fact included in this press release regarding our future performance are forward-looking statements. We have based these forward-looking statements on our current knowledge and our present beliefs and expectations regarding possible future events. These forward-looking statements are subject to risks, uncertainties and assumptions, including, the anticipated pace and volume of the Company's fiber optic infrastructure deployment, the chances of success of the negotiations with Cellcom regarding a possible collaboration in the fiber optic infrastructure, the potential savings and its realization further to the negotiations with Cellcom the use of the last manhole, whether the Ministry of Communications' instruction to Bezeq to allow other domestic operators (including Partner) to deploy fiber optic cables with their own contractors (without the need for the use of Bezeq personnel) will be respected or enforced and whether the Company will have the financial resources needed to continue to increase the number of customers served by its fiber optic infrastructure. The future results may differ materially from those anticipated herein. For further information regarding risks, uncertainties and assumptions about Partner, trends in the Israeli telecommunications industry in general, the impact of current global economic conditions and possible regulatory and legal developments, and other risks we face, see "Item 3. Key Information - 3D. Risk Factors", "Item 4. Information on the Company", "Item 5. Operating and Financial Review and Prospects", "Item 8. Financial Information - 8A. Consolidated Financial Statements and Other Financial Information - 8A.1 Legal and Administrative Proceedings" and "Item 11. Quantitative and Qualitative Disclosures about Market Risk" in the Company's Annual Reports on Form 20-F filed with the SEC, as well as its immediate reports on Form 6-K furnished to the SEC. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The quarterly financial results presented in this press release are unaudited financial results. The results were prepared in accordance with IFRS, other than the non-GAAP financial measures presented in the section, "Use of Non-GAAP Financial Measures". The financial information is presented in NIS millions (unless otherwise stated) and the figures presented are rounded accordingly. The convenience translations of the New Israeli Shekel (NIS) figures into US Dollars were made at the rate of exchange prevailing at March 31, 2018: US $1.00 equals NIS 3.514. The translations were made purely for the convenience of the reader. Use of Non-GAAP Financial Measures The following non-GAAP measures are used in this report. These measures are not financial measures under IFRS and may not be comparable to other similarly titled measures for other companies. Further, the measures may not be indicative of the Company's historic operating results nor are meant to be predictive of potential future results.
* Adjusted EBITDA is fully comparable with EBITDA measure which was
provided in reports for prior periods. About Partner Communications Partner Communications Company Ltd. is a leading Israeli provider of telecommunications services (cellular, fixed-line telephony, internet services and television services). Partner's ADSs are quoted on the NASDAQ Global Select Market™ and its shares are traded on the Tel Aviv Stock Exchange (NASDAQ and TASE: PTNR). For more information about Partner, see: http://www.partner.co.il/en/Investors-Relations/lobby
PARTNER COMMUNICATIONS COMPANY LTD.
PARTNER COMMUNICATIONS COMPANY LTD.
* Net of treasury shares.
PARTNER COMMUNICATIONS COMPANY LTD.
PARTNER COMMUNICATIONS COMPANY LTD.
PARTNER COMMUNICATIONS COMPANY LTD.
PARTNER COMMUNICATIONS COMPANY LTD.
(1) Mainly amortization of employee share based compensation.
PARTNER COMMUNICATIONS COMPANY LTD.
* Representing an amount of less than 1 million.
PARTNER COMMUNICATIONS COMPANY LTD. Appendix - Cash generated from operations and supplemental information
* Representing an amount of less than 1 million. At March 31, 2018 and 2017, trade and other payables include NIS 142 million ($40 million) and NIS 102 million, respectively, in respect of acquisition of intangible assets and property and equipment; payments in respect thereof are presented in cash flows from investing activities. These balances are recognized in the cash flow statements upon payment. Reconciliation of Non-GAAP Measures:
(1) Mainly amortization of employee share based compensation. Key Financial and Operating Indicators (unaudited)*
* See footnote 2 regarding use of non-GAAP measures. Figures from 2017 include impact of adoption of IFRS15. Disclosure for notes holders as of March 31, 2018 Information regarding the notes series issued by the Company, in million NIS
(1) In July 2017, the Company issued Series F Notes in a principal
amount of NIS 255 million. In December 11, 2017, the Company issued an
additional Series F Notes in a principal amount of NIS 389 million.
Regarding Series F Notes, the Company is required to comply with a
financial covenant that the ratio of Net Debt to Adjusted EBITDA shall
not exceed 5. Compliance will be examined and reported on a quarterly
basis. For the definitions of Net Debt and Adjusted EBITDA see 'Use of
non-GAAP measures' section above. For the purpose of the covenant,
Adjusted EBITDA is calculated as the sum total for the last 12 month
period, excluding adjustable one-time items. As of March 31, 2018, the
ratio of Net Debt to Adjusted EBITDA was 1.1. Additional stipulations
regarding Series F Notes mainly include: shareholders' equity shall not
decrease below NIS 400 million; the Company shall not create floating
liens subject to certain terms; the Company has the right for early
redemption under certain conditions; the Company shall pay additional
annual interest of 0.5% in the case of a two-notch downgrade in the
Notes rating and an additional annual interest of 0.25% for each further
single-notch downgrade, up to a maximum additional interest of 1%; the
Company shall pay additional annual interest of 0.25% during a period in
which there is a breach of the financial covenant. Disclosure for Notes holders as of March 31, 2018 (cont.) Notes Rating Details*
(1) In July 2017, S&P Maalot affirmed the Company's rating of "ilA+/Stable". (2) For details regarding the rating of the notes see the S&P Maalot report dated July 2, 2017 and July 27, 2017. * A securities rating is not a recommendation to buy, sell or hold securities. Ratings may be subject to suspension, revision or withdrawal at any time, and each rating should be evaluated independently of any other rating Summary of Financial Undertakings (according to repayment dates) as of March 31, 2018 a. Notes issued to the public by the Company and held by the public, excluding such notes held by the Company's parent company, by a controlling shareholder, by companies controlled by them, or by companies controlled by the Company, based on the Company's "Solo" financial data (in thousand NIS).
b. Private notes and other non-bank credit, excluding such notes held by the Company's parent company, by a controlling shareholder, by companies controlled by them, or by companies controlled by the Company, based on the Company's "Solo" financial data (in thousand NIS).
Summary of Financial Undertakings (according to repayment dates) as of March 31, 2018 (cont.) c. Credit from banks in Israel based on the Company's "Solo" financial data (in thousand NIS).
d. Credit from banks abroad based on the Company's "Solo" financial data - None. e. Total of sections a - d above, total credit from banks, non-bank credit and notes based on the Company's "Solo" financial data (in thousand NIS).
f. Off-balance sheet Credit exposure based on the Company's "Solo" financial data (in thousand NIS) - 50,000 (Guarantees on behalf of an associate, without expiration date). g. Off-balance sheet Credit exposure of all the Company's consolidated companies, excluding companies that are reporting corporations and excluding the Company's data presented in section f above - None. Summary of Financial Undertakings (according to repayment dates) as of March 31, 2018 (cont.) h. Total balances of the credit from banks, non-bank credit and notes of all the consolidated companies, excluding companies that are reporting corporations and excluding Company's data presented in sections a - d above - None. i. Total balances of credit granted to the Company by the parent company or a controlling shareholder and balances of notes offered by the Company held by the parent company or the controlling shareholder - None. j. Total balances of credit granted to the Company by companies held by the parent company or the controlling shareholder, which are not controlled by the Company, and balances of notes offered by the Company held by companies held by the parent company or the controlling shareholder, which are not controlled by the Company - None. k. Total balances of credit granted to the Company by consolidated companies and balances of notes offered by the Company held by the consolidated companies - None. View source version on businesswire.com: https://www.businesswire.com/news/home/20180530006616/en/ |
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