Partner Communications Company Ltd (PTNR) 2020 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Partner Communications' Fourth Quarter and Full Year 2020 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.

Thank you, and thank you to all our listeners for joining us on this conference call to discuss Partner Communications' Fourth Quarter and Annual Results for the year 2020. With me on the call today is Isaac Benbenisti, Partner's CEO; and Tamir Amar, our CFO. Isaac will provide a general survey of business -- Partner's business and strategic developments over the year 2020. He will then hand over to Tamir, who will provide a more detailed discussion of our quarterly and annual results. And finally, we'll move on 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 March 25, 2021, 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 F3 self-registration statement, all of which are readily available.

I would also draw your attention to the fact that Partner filed its Annual Report for 2020 on Form 20-F with the SEC earlier today. 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 Internet and can be access 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 turn the call over to our CEO, Isaac Benbenisti. Isaac?

Thank you. Good day, everyone, and welcome to our Earnings Conference Call. In summary of the year of the COVID-19 and its operational complexity, Partner was able to maintain stability in revenues and to present a net profit. During the year 2020, hundreds of thousands of subscribers joined the company's services in cellular, Internet and television.

During the past year, Partner has expanded its growth engines. In cellular, with the launch of the 5G network, Partner 5G; in Internet, with the future -- further rollout of our independent fiber optic infrastructure, Partner Fiber; and in TV, the fastest-growing TV service in Israel, Partner TV, with the deepening of our cooperation with Netflix in a unique bundled offer.

In cellular, Partner subscriber base grew by 179,000 cellular subscribers net in 2020 to total approximately 2.84 million. Alongside the continued increase in customer loyalty with the lowest churn rates for over a decade. In May 2020, we made a big leap in the group's activity in the Internet sphere with a 23 increase -- 23% increase in the company's infrastructure-based internet subscriber base to total 329,000 subscribers at year-end. The growth resulting from the joining of tens of thousands of new subscribers to services offered Partner Fiber, the company's independent fiber-optic infrastructure.

Partner's independent fiber optic infrastructure already reaches more than 760,000 households as of today, of which over 500,000 reside in buildings already connected to the infrastructure, and over 150,000 of which are already subscribed to Internet services of our Partner Fiber optic infrastructure.

In 2020, Partner TV was, again, the fastest-growing of all television services in Israel, with 44,000 subscribers joining the net during the year. As of today, Partner TV is enjoined by more than 234,000 subscribers. Most of them are also customers of the company's Internet services.

At the outset of the year -- at the outset of the year 2021, Partner stands in an excellent position for growth in all areas of activity. Thanks to the long-term preparations we have made in recent years, which have included both a significant reduction in debt, and investment in independent communication infrastructure that enable us to increase profitability.

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

Thank you, Isaac. Good day, everyone, and welcome to our earnings conference call. The steps we've taken during the year, alongside the continued subscriber growth in the cellular and fixed-line segment lessened the impact of COVID-19 on our results. In the fourth quarter and during 2020 as a whole, the positive momentum in our growth engines continued while accelerating the rollout of our fiber optic infrastructure.

Our success this year in the 5G frequencies tender and our compliance with the milestone in the deployment of 5G sites led by the Ministry of Communications will enable us to advance the rollout and connect more and more customers to the 5G network. And gradually expand the range of advanced services offered to Partner's growing subscriber base.

In addition, the company managed to position itself in first place, together with another operator in bidding for a deployment grant in 5G, thus benefiting from additional financial support for the continued deployment of 5G sites, in addition to our eligibility for a significant discount on frequency fees subject to certain tender conditions.

Our cellular subscriber base increased this year by 179,000. The increase included 74,000 subscribers net who joined in the last quarter of the year, including 25,000 subscribers to 12-month data package for models provided to students by the Ministry of Education as part of their COVID-19 crisis program.

The churn rate in the fourth quarter amounted to 7.2%, similar to that in the corresponding quarter last year. ARPU in the fourth quarter totaled ILS 49 compared to ILS 55 in the fourth quarter last year, mainly reflecting the negative impact of the decline in roaming services revenue as a result of the sharp decline in international travel due to COVID-19.

In the fixed line segment, our fiber optic infrastructure already reached more than 760,000 households as of today. The number of Home Connected within buildings connected to our fiber optic infrastructure was 465,000 at year-end 2020, an increase of 141,000 in the year and 32,000 in the fourth quarter.

As of the end of 2020, Partner has 139,000 fiber optics subscribers, an increase of 63,000 in the year and 19,000 in the fourth quarter. The number of fiber optic subscribers from household within Home Connected building reflects a Home Connected penetration rate of approximately 30% as of the end of 2020, compared with approximately 23% at the end of to 2019.

Regarding television, the number of subscribers grew by 8,000 in the last quarter of 2020, bringing the total increase this year to 44,000. As of today, the number of TV subscribers is approximately 234,000. The rate of growth from the beginning of 2021 mainly reflects the temporary impact of the technical malfunction in the television broadcast during the second week of January 2021.

As we expected, we finished the fourth quarter of 2020 with only a small decrease of 6% in adjusted EBITDA compared to the corresponding quarter, in light of the continued cost-cutting measures along with growth in fixed line activity, which partially offset the impact of the almost complete cessation of international travel due to COVID-19.

Looking ahead, the company expects that in the first quarter of 2021, the negative impact will continue as a result of the almost complete cessation of air travel and closure of stores for part of the quarter. However, the overall impact is not expected to differ materially from its scope in the preceding quarter. The adjusted free cash flow for 2020 totaled ILS 72 million. CapEx totaled ILS 573 million. For the fourth quarter, the adjusted free cash flow was negative and totaled approximately minus ILS 3 million, with CapEx totaling ILS 156 million.

The investments in 2020 reflects the continued efforts of the company to expand the deployment of the fiber optical infrastructure for which we expect to complete the major rollouts in during the year 2023, and the continued penetration of the television market. These investments continue to be made possible as a result of Partner's financial stability and strong balance sheet, and they continue even during challenging period of the COVID-19 crisis.

Net debt was ILS 657 million at the end of the year 2020, compared with ILS 957 million at the end of last year, a decrease of ILS 300 million mainly reflecting the company's successful capital raising in January 2020 in the amount of ILS 276 million net.

The company's net debt to adjusted EBITDA ratio stood at 0.8 at year-end 2020, 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) 326-9310; in Israel, please call 03-9255-921. And internationally, please call 9 (723) 925-5921. The recording is also available on the company's website www.partner.co.il.

Mr. Benbenisti, would you like to make your concluding statement?

Yes. So thank you for joining our earnings conference call. We are very pleased of our results. We think compared to the big complexities that we faced in 2020, we achieved impressive results, and it puts us in a very good position to 2021. And I'd like to thank you and wish you all a happy Passover and looking forward to seeing you at our next conference call. Thank you.

Thank you. This concludes the Partner Communications Fourth Quarter and Full Year 2020 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.