Partner Communications Company Ltd (PTNR) 2021 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Partner Communications First Quarter 2021 Results Conference Call. (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. Please go ahead.

Thank you, and thank you to all our listeners for joining us on this conference call to discuss Partner Communications' first quarter results for the year 2021. With me on the call today is Isaac Benbenisti, Partner's CEO; and Tamir Amar, our CFO and VP Fiber-Optics. Isaac will provide an update on Partner's business developments and an overview of our results for the first quarter. He will then hand over to Tamir, who will provide a more detailed discussion of our quarterly financial and operational results. And finally, we'll move over 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 May 26, 2021, and as well as Partner's filings with the U.S. Sectors and Exchange Commission on Forms 20-F, F-1 and 6-K, as well as the F3 self-registration statement, all of which are readily available. Please note, 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 web 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, Amir Adar, on 972-54-781-5051.

I will now hand to turn the call over to our Partner's CEO, Isaac Benbenisti.

Thank you, Gideon. Good day, everyone, and welcome to our earnings conference call. Partner ended the first quarter of 2021 with subscriber growth in all our operational areas. The company's revenues returned to the levels of the period prior to COVID-19 despite the continued closed [skies] and full lockdown for a significant part of the quarter.

In the cellular segment, the focus on our customer loyalty and the investment in 5G supported the continued organic growth of the subscriber base, which totaled ILS 2.9 million at the end of the quarter with a churn rate of 6.8%, the lowest rate in the last decade. We are continuing with the rapid rollout of Partner's independent fiber optic infrastructure across the country and have reached big -- and have recently begun to deploy in municipalities characterized by low raised buildings and single-dwelling units.

The Partner Fiber infrastructure already reaches more than 840,000 households as of today, of which 545,000 raised in buildings already connected to the infrastructure. As of today, 165,000 households are subscribed to Internet services over Partner's fiber optic infrastructure, representing a 30% penetration rate from potential customers in connected buildings.

Partner TV has approximately 240,000 subscribers as of today. At the end of the first quarter, we unveiled an expansion of the cooperation with Amazon Prime Video and a unique value proposition in parallel with the process of localizing the Prime Video content in Israel.

I'm very proud and honored to have led such a magnificent company with wonderful employees. Over the last 6 years, we have succeeded in both developing new and significant growth engines and strengthening the company's financial robustness, all in a challenging period for the economy and in the entire world.

I will now like to turn the call over to Tamir Amar for a review of our financial results. Tamir, please?

Thank you, Isaac. In the first quarter of 2021, we returned to revenues growth compared also to the corresponding period last year, while maintaining the same level of OpEx, excluding the ILS 20 million government-mandated refund we received in the first quarter of 2020.

The fixed-line segment, despite the continuing decrease in international call activity, continued to flourish such that its revenue growth more than offset the revenue loss in the cellular segment due to the near complete absence of roaming services. At the same time, we were able to increase revenues from equipment sales despite the third lockdown period during the quarter, while also improving gross profit from equipment sales. We continued to expand our subscriber base in the cellular and fixed-line segments alongside the expansion of the rollout of the 5G cellular network and the fiber optic network that we believe will continue to provide us with substantial growth engines also in the coming years.

Our cellular subscriber base totaled 2.9 million at quarter end, the highest level for over 6 years. Over the quarter, the cellular subscriber base increased by 67,000, of which 13,000 were subscribers of data packages and 8,000 were subscribers of voice packages provided to students with a fixed 12-month package by the Ministry of Education as part of their COVID-19 program. Even excluding these subscribers, the increase in postpaid subscribers totaled 32,000 this quarter, a growth rate that illustrates Partner's strong position in the Israeli communications market.

The churn rate in the quarter amounted to 6.8% compared to 7.5% in the corresponding quarter last year. ARPU in the quarter totaled ILS 48 compared to ILS 53 in the corresponding quarter last year. The decrease mainly reflecting the decline in roaming services revenues as a result of the sharp decline in international travel due to COVID-19. The combination of these factors lead us to conclude that in an apples-to-apples comparison, which excludes roaming services revenues from cellular service revenue, a positive trend change and growth in revenue can be discerned.

In the fixed-line segment, the number of homes connected within buildings connected to our fiber optic infrastructure was 514,000 at the end of the quarter, an increase of 49,000 in the quarter, a record rate which reflects the growing demand for Partner's fiber services, along with our focus on connecting buildings to the company's fiber optic infrastructure. Partner Fiber Optic subscriber base totaled 155,000 at the end of the quarter, an increase of 16,000 from the previous quarter. The infrastructure-based Internet subscriber base increased by 10,000 in the quarter.

Regarding our television services, the number of subscribers grew by approximately 2,000 in the quarter, a rate of increase which was impacted by the technical malfunction in television broadcast during the second week of January 2021. However, the growth rate since then returned to its previous rate with a net increase of 8,000 subscribers since the beginning of the year. Despite COVID-19 and its ongoing implications, we finished the first quarter of 2021 with a decrease of only 3% in adjusted EBITDA compared to the corresponding quarter last year.

To recap, the corresponding quarter last year was positively impacted by the receipt of a governmental mandated refund from Bezeq of approximately ILS 20 million for payments in previous year. Excluding this refund, adjusted EBITDA increased by 7%, reflecting the continued cost-cutting measures and budgetary discipline along with growth in cellular and fixed-line activity, which more than compensated for the impact of the near-complete cessation of international travel on roaming services revenues and the lockdown in part of the quarter. We intend to maintain this budgetary discipline through the rest of the year.

Looking ahead, although a slight recovery in roaming services compared to the first quarter of 2021 can be seen, the company expects that the negative impact of the almost complete cessation of air travel will continue in the second quarter of 2021. However, it is not expected to differ materially from its scope in the preceding 2 quarters.

Adjusted free cash flow before interest including lease payments for the quarter totaled ILS 19 million. CapEx payments totaled ILS 149 million. As was shown in our annual report for 2020, approximately half of our investments serve our growth engines. The company continues to expect that the major rollout phase of the fiber optic infrastructure will be complete during the year 2023.

Net debt was ILS 639 million at the end of the quarter compared with ILS 673 million at the end of the corresponding quarter last year, a decrease of ILS 34 million. The company's net debt to adjusted EBITDA ratio stood at 0.8 at the end of the quarter, which demonstrates the company's financial strength.

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 1-888-254-7270. In Israel, please call 03-925-5921. And internationally, please call 972-3-925-5921. The recording will also be available on the company's website at www.partner.co.il. Mr. Benbenisti, would you like to make your concluding statements.

Yes. Thank you. Just a very short statement saying to all of you, thank you for a wonderful 6 years. Thank you for being with us. Thank you for believing on us. It was a unique time for me, and I anticipate to the company a very bright future. So thank you very much, everybody.

Thank you. This concludes the Partner Communications First Quarter 2021 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.