Q4 2019 Partner Communications Company Ltd Earnings Call
Rosh Ha`ayin Apr 1, 2020 (Thomson StreetEvents) — Edited Transcript of Partner Communications Company Ltd earnings conference call or presentation Thursday, March 26, 2020 at 3:00:00pm GMT
TEXT version of Transcript
* Gideon Koch
Partner Communications Company Ltd. – IR Officer
* Isaac Benbenisti
Partner Communications Company Ltd. – CEO
* Tamir Amar
Partner Communications Company Ltd. – CFO
Ladies and gentlemen, thank you for standing by. Welcome to Partner Communications’ Fourth Quarter and Full Year 2019 Results Conference Call. (Operator Instructions) 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, Partner Communications Company Ltd. – IR Officer 
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 2019. With me on the call today is Isaac Benbenisti, Partner’s CEO; and Tamir Amar, our CFO. Isaac Benbenisti will provide an update on how the company is managing the global health crisis and an overview of our results for 2019. He will then hand over to Tamir, who will provide a more detailed discussion of our fourth quarter and annual results as well as the impact of the global health crisis on our business. 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 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 March 26, 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.
I would also draw your attention to the fact that Partner has filed its annual report for 2019 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 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.
I will now turn the call over to Partner’s CEO, Isaac Benbenisti. Isaac?
Isaac Benbenisti, Partner Communications Company Ltd. – CEO 
Thank you, Gideon. Good day, everyone, and welcome to our earnings conference call. The year 2020 started with an extraordinary global health crisis of unprecedented scope and impact on the global and domestic market. Partner’s entry point in this exceptional situation is relatively good compared to the market in light of our net debt, which totals ILS 957 million and our level of cash, which is significantly higher than our interest and principal payment for the coming 2 years.
We have also changed, where necessary, the nature of operations to support the continuation of business operations during this period and we have taken steps to adjust the company’s spending structure to the new reality. At the same time, we are looking ahead and preparing for the nature of the operations the day after.
Those days, we continue to provide millions of our customers with the infrastructure, which is so critical for all of us, a stable, reliable and fast communication. We are experiencing a significant increase in the use of our services, cellular, Internet and TV. We ended 2019 with growth of fixed-line segment revenues and independent fiber optic infrastructure that already reaches approximately 600,000 households and already 199,000 subscribers connected to the Partner TV, the fastest-growing TV service in Israel, also in 2019.
In the cellular segment, we ended 2019 with an increase of 11,000 subscribers, while we successfully implemented our subscriber value strategy, which resulted in an increase in subscriber loyalty and the lowest churn rate since 2011, totaling 7.2% in the fourth quarter and 31% for the entire year.
I will now like to turn the call over to Tamir Amar for a detailed review of our financial results. Tamir, please?
Tamir Amar, Partner Communications Company Ltd. – CFO 
Thank you, Isaac. Good day, everyone, and welcome to our earnings conference call.
During 2019, Partner continued to strengthen its position as a comprehensive telecommunication group, which was reflected, among other elements, by the significant continued growth in the company’s growth engine, which includes the TV services and the fiber optic infrastructure and the stabilizing trends in the cellular market.
Although profit for the quarter decreased by 63% compared to the same quarter in the preceding year, the fourth quarter results reflected the continued positive trend with services revenue growth, growth in the fixed-line segment adjusted EBITDA, the continued improvement in the cellular segment operating results and positive free cash flow.
In the cellular segment, we continue to reduce erosion in cellular service revenues alongside a decline in churn rates, which totaled 7.2% in the fourth quarter of 2019 and 31% for the year 2019 compared to 8.5% in the fourth quarter of 2018 and 35% for the year 2019.
In addition, we recorded growth in the subscriber base both in the fourth quarter and the year as well as relatively low erosion in ARPU, which totaled ILS 55 in the fourth quarter of 2019 and ILS 57 for the year 2019 compared to ILS 57 in the fourth quarter of 2018 and ILS 58 for the year 2019 (sic) . These results reflected the progress we are making in executing the company’s strategy to increase value for the customer, to focus on continued improvement in service and expand our product offering, despite the continued competition during 2019.
Adjusted EBITDA in 2019 totaled ILS 853 million or ILS 696 million, excluding the impact of IFRS 16, compared to ILS 722 million in 2018. This outcome reflects the company’s strict control over its OpEx while it expands into new areas of activity.
Adjusted EBITDA increased in the fourth quarter of 2019 and totaled ILS 217 million, or ILS 177 million excluding the impact of IFRS 16, compared to ILS 172 million in the fourth quarter of 2018. The improvement in the fourth quarter resulted mainly from the increase in adjusted EBITDA in the fixed-line segment alongside stability in the cellular segment.
The company’s balance sheet reflected net debt of less than ILS 1 billion and a low net debt-to-adjusted EBITDA ratio of 1.1 at the end of 2019. In the beginning of January 2020, the company successfully completed an equity raise of ILS 276 million, net, with the purpose of supporting the company’s growth engine and of preserving our competitive advantage and thus being prepared for the new growth opportunities.
Adjusted free cash flow before interest in 2019 totaled ILS 49 million. We continue to invest in fiber optic deployment and even accelerated deployment in 2019. This investment was possible due to our financial strength and strong balance sheet, and it positions us at the technological forefront in Israel, as reflected in the continued growth in our TV subscriber base, which stands at 199,000 subscribers as of today and in the sustained high deployment rates of our fiber optic infrastructure, which reached, today, 600,000 households across Israel.
Regarding the coronavirus crisis, from the beginning of March 2020, the crisis began to have a harmful effect on our business, revenues and results from operations. In particular, the significant fall in the volume of international travel by our customer has begun to cause a decrease in revenue from roaming services and the closure of shopping malls has begun to affect the volume of sales of equipment and service revenues.
To-date, the impact has been limited since the crisis only began at the beginning of March 2020. In addition, the impact has been mitigated by a number of measures we have taken, including cutting costs and sending a large quantity of employees on unpaid leaves. However, should these trends continue, the reduction in roaming revenues and in sales of equipment and services, together with an increasing bad debt that is likely to be caused by the high level of unemployment in Israel as a result of the coronavirus crisis, may have a material harmful effect on our results of operations and financial position for 2020.
I will now be happy to open the call for questions. Moderator, please begin the Q&A.
(Operator Instructions) There are no questions at this time. Before I ask Mr. Benbenisti to go ahead with his closing statement, I would like to remind participants that a replay of this call is scheduled to begin in 2 hours. In the U.S., please call 1 (877) 456-0009. In Israel, please call (03) 925-5901. And internationally, please call 927-3-925-5901 (sic) [972-3-925-5901]. The recording is also available on the company’s website, www.partner.co.il.
Mr. Benbenisti, would you like to make your concluding statement?
Isaac Benbenisti, Partner Communications Company Ltd. – CEO 
Yes. Thank you very much for joining our call. I wish all of us that in our upcoming meeting, the next quarter, we’ll meet in better times and promise to do most efforts that we’ll be at the best position. So thank you, everybody, and see you later.
Thank you. This concludes Partner Communications’ Fourth Quarter and Full Year 2019 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.