This morning, Bezeq published its results for the third quarter of 2021, when in parallel with the report, the company’s management also published a strategic plan for the coming years. The quarterly report was very good, and continued to present positive trends in the landline market while continuing to save costs in subsidiaries as part of the streamlining measures that the company is implementing.
- Total revenues of the landline sector amounted to NIS 1.037 billion
- EBITDA (adjusted) was 640 at a rate of 61.7% for the quarter.
- The number of telephone lines continues as expected in the negative trend and decreased by 13,000 lines in the quarter, when the ARPU also returned to pre-Corona levels and stood at NIS 46 (47 in the previous quarter).
- The company reports a decrease of 5,000 Internet lines, of which as of the end of the quarter 500,000 wholesale lines (a significant decrease of 20,000 lines from the previous quarter). On the other hand, the company shows impressive growth in the retail lines, which rose by 15,000 in the quarter. The company has not yet released the scope of the fiber connection.
- The most impressive figure in the landline sector continues to be the retail ARPU, which stood at NIS 107 in the quarter and completely compensated for the loss of wholesale customers. We attribute the increase in ARPU to the installation costs charged by the company in fiber, to upgrading speeds in copper and especially to the continued increase in the number of BE routers currently installed in 62% of the company’s customers.
- Revenue from transmission and data communications was NIS 270 million in the quarter, compared with NIS 250 in the corresponding quarter – here too, the increase is explained by the number of business projects, the expansion of business lines and the trend of work from home that is expected to continue.
- Investments in the quarter were, as expected, very high and stood at NIS 314 million
- Pelephone continues to recruit subscribers in the second quarter as well, introducing an additional 26,000,000 subscribers, of which 24,000 are post-pay subscribers. The average revenue in the quarter rose slightly, as expected, to NIS 55 (NIS more than in the previous quarter), mainly as a result of a (slow) return of flights abroad and greater penetration into the market of 5th generation packages.
- The company presented revenues from services in the amount of NIS 417 million and revenues from the sale of end equipment of only NIS 124 million, which are explained by problems in the supply chain of the devices and the lack of launches. Total revenues were NIS 541 million.
- Pelephone recorded EBITDA for the quarter of NIS 166 million and a net profit of NIS 23 million
- In the expenses section, it continues to register a decrease, as part of the streamlining measures in the company and the trend of retiring employees, due to which Pelephone is able to improve its profitability rates.
- Bezeq International is recording a significant decline in the sales line, but the company is still able to record EBITDA of NIS 51 million.
- During the coming year, with the entry of the ISP reform, Bezeq International will lose its assets in favor of Bezeq Mapa, which will sell a unified Internet product.
- Bezeq International’s IT activities will be developed as a separate activity and will be expanded within the framework of the Group’s strategic plan.
- In the second quarter, YES recorded stability in the subscriber base when the average revenue per user rose by two shekels in the quarter (effect of sports channels) to 188 NIS.
- YES ‘revenue for the quarter was NIS 318 million
- EBITDA was NIS 75 million, compared with NIS 68 million in the corresponding quarter
- Yes’s volume of investments in the quarter illustrates the significance of the transition from high-cost satellite converters to Android TV converters, which cost about 20% of those satellite and amounted to NIS 38 million.
To summarize the results for the quarter, Bezeq records a profit of NIS 284 million and EBITDA for the quarter of NIS 925 million and is confidently moving towards meeting the newly updated forecast (with due caution I also assume that it will present a slightly better result than the forecast). The excellent results come in the background of the development of new growth engines and a moment before the impact of the fiber network and the triple proposals coming from YES that leave a lot of room for optimism over the next three years.
Regarding the strategic plan published today, in our opinion, these are Bezeq’s correct focus moves that take into account consumer changes, regulation and business opportunities that are expected to develop and are already developing in the market. The company’s goals in the various activities seem achievable in the next 3-5 years and the new growth engines will indeed drain resources in the beginning but will diversify the group’s future sources of income.
Dividend – The company noted that as part of the program and while maintaining financial strength and debt rating it strives to return to dividend distribution. In our estimation already next year.
Pricing: Bezeq trades in the EV / EBITDA X5.1 multiplier, which is cheap for our taste, and after making adjustments in our model, we increase the target price for the company to 5.1 NIS and maintain an overweight recommendation per share.