Partner Communications Company Ltd.
Q2 2020 Earnings Call Transcript

Published: 18 Aug 2020

[Operator:]

Ladies and gentlemen, thank you for standing by. Welcome to the Partner Communications Second Quarter 2020 Results Conference Call. All participants are present in a listen-only mode [Operator Instructions]. Following management's formal presentation, instructions will be given for the question-and-answer session. As a reminder this conference is being recorded. I would now like to turn the call over to Mr. Gideon Koch. Mr. Koch, please begin.

[Gideon Koch:]

Thank you, and thank you to all our listeners for joining us on the conference call to discuss Partner Communications second quarter results of 2020. With me on the call today is Isaac Benbenisti, Partner's CEO and Tamir Amar, our CFO. Isaac Benbenisti will provide an update on Partner's business developments and an overview of the results for the second quarter. He will then hand over to Tamir, who will provide a more detailed discussion of the quarterly financial and operational results. And finally, we'll move on to the Q&A. 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 27A of the U.S. Securities Act of 1933 as amended, Section 21E 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 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 18, 2020, as well as Partner's filings with the U.S. Securities and Exchange Commission on Forms 20-F, F-1 and 6-K, as well as the F-3 shelf registration statement, 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 Web site. If you have any further questions following the call, please feel free to contact our Head of Investor Relations and Corporate Projects, Liat Glazer Shaft, on 972-54-781-5051. I will now turn the call over to Partner's CEO, Isaac Benbenisti. Isaac?

[Isaac Benbenisti:]

Thank you, Gideon. Good day, everyone and welcome to our earning conference call. The rapid adjustments we have made at Partner to adopt the coronavirus period are reflected in the results that we published today. Partner finished the quarter with a net profit of NIS7 billion despite the harmful impact from the restrictions on international travel and the reduced activity in shopping malls. The strengthening of the fixed line segment and our status communication group contributed to our ability to remain stable during this period. In addition, Partner’s financial strength led to an improvement in the outlook of our A+ rating from negative to stable. This change when the impact of the coronavirus crisis is in its peak, demonstrates our ability to continue to operate in times of uncertainty. In the business sector, we are focusing our efforts or ensuring our customers’ business continuity as they have expanded the transition to working from home, but by implementation the information security systems and cloud services which Partner’s offers. Those changes in the business practices and the need for advanced communication services and infrastructure support the continuous growth of Partner’s business sector activities. In the cellular segment, our subscriber base increased by 32,000 and the churn rates remained stable at 7.5%. Last month, we unveiled Partner 5G, the cellular network, which Partner is building with the ability to reach data transfer speeds of one gigabyte. Last week the company recorded a strategic accomplishment in the frequency auction tender with the acquisition of 4G and 5G frequencies that will enable Partner to offer its retail and business subscribers advanced 5G services. Partner’s independent fiber infrastructure, Partner Fiber, reaches today over 657,000 households across Israel from Eilat in the south to Naharia in the north, as well as dozen of other cities through the country. This month we are marketing the three year anniversary of Partner TV whose subscriber base has grown more than any other TV service in Israel since its launch and as of today reaches over 220,000 subscribers. I would now like to turn the call over to Tamir Amar for a detailed review of our financial results. Tamir Please.

[Tamir Amar:]

Thank you, Isaac. Good day, everyone and welcome to our earnings conference call. The results for the second quarter of 2020 reflect, on the one hand, the negative impact of the global coronavirus crisis on the company's revenues and on the other hand, the company’s agility in quickly adjusting to the changes made, the impact of which largely offsets the harmful effects of the crisis. In the second quarter, we saw the effect of the near-complete cessation of international travel which caused a significant decrease in revenues from roaming services, and the effect of the closure of shopping malls, which negatively impacted equipment sales. Nevertheless, the overall impact of the coronavirus crisis on our results in the second quarter 2020 was not significant, owing, among other factors, to the fact that the Company mitigated the impact by cutting costs by temporarily reducing our headcount through putting a significant number of employees on unpaid leave, and by using alternative sales channels to support equipment sales. In addition, we recorded improvements in our fixed-line business performance as a result of the heightened need for fast and stable communications services, both in the residential and business sectors. Despite the restrictions in our operations during part of the quarter, in the cellular segment our subscriber base increased by 32,000 subscribers, including 24,000 postpaid subscribers, in conjunction with stability in the churn rate, which remained unchanged at 7.5%, reflecting a decline in the churn of postpaid subscribers and an increase in the churn of prepaid subscribers. ARPU this quarter totaled NIS51 compared with NIS53 in the previous quarter, which reflected the negative impact on roaming revenues of the coronavirus crisis, which significantly reduced international travel. In addition, the Company's TV subscriber base increased by 15,000 subscribers, the majority of whom are also Internet subscribers of the Company. Adjusted EBITDA this quarter totaled NIS200 million compared with NIS215 million in the previous quarter. The decline in adjusted EBITDA resulted from the refund during the previous quarter of approximately NIS20 million of surplus payments to Bezeq for access to the wholesale Internet infrastructure during the year 2017 to 2019. Excluding this refund, the Company recorded an increase in adjusted EBITDA despite the full quarter impact of the coronavirus crisis compared to only a partial impact in the first quarter. Adjusted free cash flow before interest totaled NIS44 million in the second quarter. CapEx totaled NIS119 million with investments continuing to reflect the Company's continued efforts to expand the deployment of its fiber optic network and to further penetrate the TV market. These investments continue to be possible as a result of Partner's financial stability and strong balance sheet, and have continued through the challenging period of the coronavirus crisis, as we see an increase in the amount of subscribers who are joining our fiber optic infrastructure service, reflecting, among other things, an understanding of the necessity of this product during this period. The level of net debt at the end of the second quarter stood at NIS658 million. In light of the near-complete cessation of international travel, which has caused a significant decrease in revenues from roaming services to date, the Company estimates that continuation in the international travel cessation will result in a material negative impact on the Company's results of operations for the second half of 2020. We estimate that we will be able to partially mitigate the aforementioned material effects through proactive measures the Company has taken, and continues to take, to cut costs and also by improvements in other business parameters, including positive improvements resulting from an increase in demand for the Company's services following the crisis. I will now be happy to open the call for questions. Moderator, please begin the Q&A.

[Isaac Benbenisti:]

Yeah. Thank you. I would like to say to thank everybody for joining this call. I think that the Company demonstrated in Q2 and at the first half of this year, demonstrates a very stable approach and the ability to overcome the coronavirus and the effects that we have on our results and to be able to mitigate and to demonstrate a very stable and good results and we look forward to the future. So thank you very much everybody.

[Operator:]

Thank you. This concludes the Partner Communications second quarter 2020 results conference call. Thank you for your participation. You may go ahead and disconnect.