Partner Communications Company Ltd.
Q4 2017 Earnings Call Transcript

Published: 29 Mar 2018

[Operator:]

Ladies and gentlemen. Thank you for standing by. Welcome to the Partner Communications Fourth Quarter and Full Year 2017 Results Conference Call. All participants are present in a listen-only mode. [Operator Instructions]. Following managements' formal presentations, 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 go ahead.

[Gideon Koch:]

Thank you. And thank you to all our listeners for joining us on this conference call to discuss Partner Communications' annual and fourth quarter results for 2017. With me on the call today is Isaac Benbenisti, Partner's CEO; and Tamir Amar, our CFO. Isaac Benbenisti will present a number of operational highlights for the year, focusing in particular on progress on our two strategic projects in 2017. He will then hand over to Tamir, who will provide an overview of the financial and operational results. And finally, we'll move over to 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 and 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 March 29, 2018, 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. I would also draw your attention to fact that Partner filed its annual report for 2017 on Form 20-F, with the SEC earlier today. Please note that the information in this conference call related to projections or other forward-looking statements is subject to the previous Safe Harbor statements 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. 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:]

Good day everyone. And welcome to our earnings conference call. We viewed significant accomplishments in our financial results for 2017. Growth in the company's EBITDA compared to 2016 while doubling profit, adding 79,000 cellular Post-Paid subscribers, a record addition of TV households to Partner TV, massive deployment of fiber optic infrastructure, all this while solidifying the financial strength to leverage the company's growth. Partner TV is leading the Israeli TV market in terms of household additions, and with a significant gap compared with its competitors. In the fourth quarter of 2017, an additional 29,000 households joined Partner TV. And as of today, over 64,000 households are connected to Partner TV, most of them customers who left HOT and Yes. Our cooperation with Netflix continues to prove successful and we are proud of this cooperation and recognize the great value that it brings to our customers. Our fiber optic project, which was commercially launched in August 2017, experienced a significant increase in the pace of deployment in the fourth quarter. And as of March 2018, tens of households -- tens of thousands of households across many cities throughout the country are already able to connect to Partner’s fiber services. In the cellular segment, Partner continued to increase its cellular Post-Paid subscriber base in the fourth quarter of 2017, with a net growth of 14,000 Post-Paid subscribers, which completes an addition of 79,000 Post-Paid subscribers in 2017. In addition, as part of our strategy to offer unique value offerings to our customers, and again demonstrating our ability to partner with leading international companies, we announced at the end of December 2017 an exclusive collaboration with Apple Music, under which we offer all our Post-Paid cellular subscribers a free six-month subscription to its music services. I will now 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. 2017 was characterized by the strengthening of Partner's position in the communications market and its transformation into a comprehensive communications group with entry into new activities, including the entry into the TV, which was officially launched in June 2017, and the expansion of the deployment of an independent fiber optic infrastructure for residential customers. At the same time, the company continued to strengthen its cellular subscriber base with growth of 79,000 Post-Paid cellular subscribers in 2017, similar to the growth seen in 2016, as well as a decline in the churn rate as a result of lower churn among Post-Paid cellular subscribers. In addition, during 2017, the company took a number of steps to improve the profitability of equipment sales. And accordingly, equipment sales profitability improved from 18% in 2016 to 21% in 2017, together with a significant improvement in the quality of sales as reflected by, among others, the decrease in doubtful debts expenses. In spite of the company's entry into television services, which was accompanied by an increase in expenses, content and internet expenses, the company recorded a decrease of 16% in OpEx in 2017 compared to 2016. Without the impact of the early adoption of IFRS 15, OpEx decreased by 13%. The decrease resulted from close management of the company's cost structure and its assets, including the cost savings from the network sharing agreement with Hot Mobile. In addition, the company strengthened its balance sheet structure with a continued decrease in net debt of NIS0.9 billion. Net debt decreased by NIS620 million during 2017 which together with the early repayments and the debt recycle led to a reduction in the average interest rate of the company's debt and to a net debt of EBITDA ratio of 1 at year-end. The change in the company's debt structure and its reduction will result in a significant reduction of financing expenses excluding the onetime debt repayment expenses and provide a strong foundation to support the company's continued development in the coming years. The increase in CapEx in 2017 result the impact of IFRS-15 totaled NIS104 million compared to 2017, mainly resulting from the increased deployment of the fiber optic infrastructure and from the company's entry into TV operations which constitute growth potential in the company's revenue in the coming years. And now I will be happy to open the call for question. Moderator, please begin the Q&A.

[Operator:]

There are no questions at this time. Before I ask Mr. Benbenisti to ahead with his closing statements, I would like to remind participants that the replay of this call is scheduled to begin in two hours. In the U.S. please call 1-888-782-4291. In Israel please call 03-925-5925 and internationally please call 972-3925-5925. The recording is also available on the company's website, www.partner.co.il. Mr. Benbenisti, would you like to make your concluding statements.

[Isaac Benbenisti:]

Yeah. I'd like to thank you for joining our earnings conference call. We think it's a demonstration this results in a clear demonstration of our strategy or strengthening the core businesses, while investing in our growing engines of the company like the TV and the Fiber projects. I'd like to thank you again and wish you happy holidays. Thank you and bye bye.

[Operator:]

Thank you. This concludes the Partner Communications' fourth quarter 2017 results conference call. Thank you for your participation. You may go ahead and disconnect.