Interconnect fees continue to hurt Cellcom revenues

Earnings before interest, tax, depreciation and amortization fell 14% to NIS 440m.

cellcom logo 88 (photo credit:)
cellcom logo 88
(photo credit: )
Third quarter earnings slowed substantially for Israel's largest cellular provider Cellcom as the company said it continues to feel the effects of the government-induced reduction in interconnect fees for calls made between different cellular networks. Net income dropped 19 percent from year ago levels to NIS 144 million, while revenue was NIS 1.32 billion, 7% lower than the 2004 parallel quarter's level. Earnings before interest, tax, depreciation and amortization fell 14% to NIS 440m. "The drop in income stems from the cut in interconnect fees which we were only able to offset on a gradual basis by increasing rates," the company said in a statement. From March 1, the charge that cellular companies could charge to complete the call of a rival was reduced from 45 agorot to 32 agorot. The decrease was the first in a three-stage program to cut the fees to 22 agorot per minute by 2008. Meanwhile, Cellcom, has been losing market share. In the third quarter, the company had the lowest new subscriber base of the three cellular companies in the market, recruiting 35,000 new customers (net) compared to Pelephone's 74,000 and Partner's 71,000. Cellcom is owned by Nochi Dankner's Discount Investment Corporation. Dankner said earlier this year that he plans to build a major telecommunications company, with Cellcom as its base, to be the main competitor to Bezeq. Following the announcement, Discount shares fell 2% to NIS 93.27 in Tel Aviv.