Release Date: November 19, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Bezeq The Israeli Telecommunication Corp Ltd (BZQIF, Financial) recorded a 2% increase in core revenues, driven by a 4% growth in Bezeq Fixed-Line.
- The company achieved a 50% year-over-year increase in fiber subscribers and a 25% growth in 5G subscriber plans.
- Bezeq has reached 2.5 million home passes with a 31% take-up rate, surpassing expectations.
- The strategic sale of Bezeq Online for ILS50 million contributed to financial efficiency.
- Net debt decreased by ILS290 million or 6% year-over-year, improving the coverage ratio from 1.6 times to 1.5 times.
Negative Points
- Adjusted EBITDA was negatively impacted by the reversal of the Universal Fiber Fund and the war's impact on roaming revenues.
- Free cash flow declined this quarter due to an increase in CapEx.
- The TV sector remains highly competitive, with a 1% decline in TV subscribers.
- Adjusted net profit decreased by 2.6% after adjustments for the universal fund and roaming revenue impacts.
- Bezeq International faced declines in revenues and profitability due to regulatory reforms and lower international long-distance revenues.
Q & A Highlights
Q: How should we think about CapEx for this year and next year, and what are the main reasons for falling behind on EBITDA guidance?
A: The impact from the war is not material but has affected roaming revenues. EBITDA will likely be slightly below guidance, around 2% lower, but CapEx will also be below expectations, resulting in better free cash flow. We are nearing the end of the CapEx cycle with the completion of the fiber project and migration from satellite to IP, which will lead to a significant drop in CapEx in the second half of next year and into 2026.
Q: Considering the increase in cash flow and low net debt, are there any thoughts about increasing the dividend payout?
A: We increased our payout from 60% to 70% this past March. We will evaluate the dividend policy at the management and Board level in the coming March and communicate any changes to the market. The metrics support this ongoing trend.
Q: How should we think of the Universal Fiber Fund's operating assumption in the coming quarters?
A: The Ministry of Communications (MOC) has proposed reducing the requirement from 0.5% to 0.2%. We expect this to be resolved before the end of the year. Since the country is almost fully rolled out, we do not expect significant universal fund provisions going forward, but we await formal communication from the regulator.
Q: Is the plan to retire 300 employees next year correct, and what are the potential cost savings?
A: We have the option to retire 50 people annually and an additional 300 by the end of 2025-2026. We will likely use a significant part of this option as we near the completion of the fiber rollout. We will communicate specific numbers and plans next year.
Q: Do you expect any developments regarding wholesale tariffs, and could there be agreements with other companies like the one with Partner?
A: The MOC set tariffs to be valid by June 2025, and we expect some announcement in the next six months. We are open to discussions with all market players regarding wholesale rate agreements. Partner signed an IRU, and we may see more such agreements in the future.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
