Q1 2025 Bezeq The Israel Telecommunication Corp Ltd Earnings Call
To date.
We have Mr. Oh, My love it.
Bezeq chairman.
Speaker Change: So Neil the V Bezeq fixed line C O, stating once he got to see all kind of funny.
Speaker Change: Before we start the call I would like to direct your attention to the Safe Harbor statement on slide two of our presentation, which also applies meeting is being recorded today.
Speaker Change: Who would like to inform you that this event is being recorded.
Speaker Change: Following the presentation of our results, we will move to Q&A session.
Thomas: With that let me now turn the call over to Thomas for his opening remarks after everything is introduction.
Thomas: Continue the presentation of group's financial highlights followed by Neil will discuss Bezeq fixed line results and Ilan, who will cover the results from California needs I will conclude the presentation with international results.
Thomas: Thank you Hi, and welcome it's great to have you on board.
Speaker Change: Let's start on slide three and thank you everyone for joining it was another quarter of strong execution, bringing us meaningfully closer to achieving our strategic goals as we enter our next phase we are well positioned to accelerate growth further enhanced profitability and lead through innovation, both as an enabler and a doctor.
Speaker Change: AI and advanced metering infrastructure.
Speaker Change: The group's core revenues grew 2%.
Speaker Change: This quarter.
Speaker Change: Fixed line and telephone and adjusted net income.
Speaker Change: Grew six 7%.
We continue to grow our strategic drivers recording a 36% increase in fiber take up an 18% growth in <unk> subscriber packs. The group's retail broadband subscribers, which includes fixed line and yes grew two 2% and fiber take up reached 33%. We are very proud of these tasks.
Speaker Change: Further demonstrate the leadership of that fiber infrastructure.
Speaker Change: Long side, yes ability to accelerate weekend fiber choice premium TV bundle.
Speaker Change: Last week, we also upgraded our 2025 guidance for adjusted net profit and adjusted EBITDA due to positive impact of the <unk> partner TBD. There has been significant progress on the regulatory front include.
Speaker Change: Including the completion of the copper networks, which offer form and progress regarding the structure of the operation with the MLC officially declaring it will issue its resolution during 2025.
Speaker Change: Moving to the next slide our technology technological and business roadmap is on track to reach our midterm kpis, including the completion of the fiber deployment. This year the migration from satellite TV to IP in 2026.
Speaker Change: And the transition to <unk> I.
Speaker Change: I would like to emphasize this page as we approach the end of the current roadmaps, putting legacy revenue and infrastructure behind with primary focus on top line and free cash flow growth leveraging our core advanced network and innovative AI solutions.
Speaker Change: We started three raws in the AI era.
Speaker Change: Enabler as we empower the AI ecosystem with scalable connectivity and data infrastructure to the provider as we deliver AI solutions to enterprises and consumers and three and then a doctor as we harness AI to optimize networks and drive operational efficiency and save costs in the <unk>.
Speaker Change: Coming months, we will be able to provide clear kpis borrowing investors corresponding to these capabilities now.
Speaker Change: Now turning to slide five let me point out that free cash flow was actually down this quarter due to tax assessments paid in this current quarter and the receipt of tax refunds in the corresponding quarter. After adjusting for these tax payments free cash flow was actually down by only 4%.
Speaker Change: Turning to the next slide you can really see how it even in a year with volatile geopolitical situation, our core business continued to perform and outperform.
Speaker Change: Total fiber subs as of today reached almost half of our 890000 with over $2 7 million home passed <unk> subscriber plants reached $1 3 million and ARPA grew approximately 5%, yes outperformed subscribers, which includes the PV and the fiber activity was up 4% and reach.
Speaker Change: 189, Checkers I will now turn the call over to your higher will elaborate further on the group results.
Checkers: Thank you Thomas.
Speaker Change: Moving to slide seven we show a two 4% increase in core revenues due to growth in bezeq fixed line inside of them.
Speaker Change: Adjusted net profit grew six 7% due to a decrease in the impairment of assets and use side.
Speaker Change: Turning to the next slide we show our operating expenses.
Speaker Change: <unk> expenses increased due to salary increase and a decrease in reimbursements received from national insurance for employees military reserve duty in Bezeq fixed line other expenses increased mainly due to a provision for a conditional grant to yes, England.
Speaker Change: The next slide shows our quarterly operational metrics broadband retail off will continue to grow with an increase in ESR pool from subscribers due to fiber works slide 10 highlights our balanced capital structure with net debt at $4 7 billion shekels and a coverage ratio of one four times the Israelis.
Speaker Change: Rating agencies recently reiterated the double a rating.
Speaker Change: We remain committed to maintaining our high credit rating moves.
Speaker Change: Moving to the next slide in accordance with our 80% dividend payout policy last week, we distributed 392 million chickens or 14 on growth per share.
Speaker Change: Moving to the next slide we show the group's updated guidance for 2025.
Speaker Change: Further to the updates this months, we are now focusing for 2025 adjusted EBITDA of $3 75 billion shekels adjusted net profit of $1 32 billion share count Capex of $1 75 billion shekels and fiber deployment to $2 9 million households, I will now turn the call over to.
Neil: Neil will show more data and results from our fixed line operations.
Neil: Thank you for your clients welcome and good luck. Thank you.
Neil: Turning to slide 13 fixed line core revenue increased two 6% to $973 million <unk>, mainly due to higher revenues from infrastructure projects broadband service and transmission and data communication. Both on recent fiber customers reach 560 <unk>.
Neil: <unk> thousand today, and also rose five 5% year over year to 134 chickens on.
Neil: On the following slides, we show Q1 financial highlights adjusted net proceeds.
Neil: And one 2% to $261 million chicken, mainly due to lower financial expenses free cash flow was impacted by.
Neil: Tax assessments stays in the <unk>.
Neil: So on the quarter and tax refunds received in the corresponding quarter turning to the next slide we show continued fiber deployment reaches over two 7 million home passed today with approximately 900000 active subscribers.
Neil: Our fiber network today.
Neil: Resulting day count of 33%.
Neil: Moving to the next slide we show the Jacobs trends Q1, So 33000 returns fibre.
Neil: Net.
Neil: 20000 subscribers.
Neil: Five of them.
Neil: Turning to the next slide broadband revenues were up.
Neil: 0.8%.
Neil: Despite the decrease in also in salaries from using our buses network.
Neil: Other revenues growth, 27% due to a higher revenues from infrastructure projects.
Neil: I will now turn the call over to Ilan to discuss telephone and yes. Thank you.
Neil: And good luck with.
Neil: Moving to slide 18.
Neil: Posted its highest quarterly revenues in seven years, reaching 525.
Neil: <unk> million shekels due to continued growth in <unk> subscriber plans and roaming services.
Neil: On the next slide we show stable adjusted EBITDA, Despite increased frequency fees, resulting from the termination of the MLC is configured.
Adjusted net profit was down 3% due to higher depreciation and financial expenses.
Neil: Moving to the next slide RG subscriber grants reached approximately one 3 million subscribers as of today amounting to 60% of cost disciplines.
Neil: Next slide shows the Q1 key operational metrics, assuming we recorded an additional increase in postpaid subscribers are pool, those 474, 7% or two circles year over year due to higher ARPA from solar plants and roaming revenues.
Neil: Turning to yes on slide 22.
Neil: Revenues increased one 3% to 319 million shekels due to higher revenues from the TV.
Neil: And fiber bundles, we continued immigration from satellite to IP with 478000 IP customers today.
Neil: Also a record quarterly growth with 12000 net fiber subscribers ads, reaching 90000 as of today.
Neil: Moving to the next slide we recorded higher adjusted EBITDA and adjusted net profit due to higher revenues and streamline of expenses.
Neil: On the next slide I would like to hire the seven shekel year over year growth in our pool of subscribers due to the higher revenues from fiber plans.
Speaker Change: With that let me now turn the call back to require thanks.
Require: Thanks Dana.
Speaker Change: Moving on to Bezeq International on Slide 25, and 26, we recorded stable core revenues from business has got some due to higher ICT revenues offset by lower revenues from business design and integration services adjusted EBITDA and adjusted net profit went.
Speaker Change: Down mainly due to lower revenues from consumers.
Speaker Change: We are continuing with the implementation of the employees retirement agreement for these 25 2027 and with that I will open the Q&A session I would like.
Speaker Change: If you would like to ask a question. Please raise your hand virtually.
Speaker Change: You hear your name please be sure to unusual microphone.
Speaker Change: Ask your question for the benefit of the people in the room, please introduce yourself and share the name of the company represents.
Speaker Change: Ill address questions as we see the hands raised I will now pass to poll for questions.
Speaker Change: Hi, Tommy.
Tommy: Yes, sorry.
Speaker Change: For Internet connections.
Speaker Change: Thanks for the.
Speaker Change: Thanks for the presentation.
Speaker Change: A couple of short questions.
Speaker Change: Debt to EBITDA that you posted missed.
Speaker Change: The consensus that you guys compiled so.
Speaker Change: Im wondering where did you think it came from I mean from what I can tell from my model at Tcs that came out of beta below so I'm wondering what's.
Speaker Change: What's going on there and what's the plan.
Speaker Change: For the rest of the year.
Speaker Change: I'll touch <unk>, the EBITDA level first from our perspective EBITDA was as expected and we also guided for a flattish year ahead of 2026 with few impact to this year EBITDA as we alluded to in the previous quarter. One we are still providing <unk> University.
Speaker Change: As you can see almost 10 million check in a quarter across the group slightly more than that but also we have the higher spectrum fees that are significantly higher than.
Speaker Change: Last year, that's almost 10 billion check in a quarter and or then that we see roaming gradually recovering and no other element and no surprises from our perspective, and we feel very confident about where we track are vis vis guidance and vis vis the revised guidance, which was actually slightly higher.
Speaker Change: And I expected given the right retina run rates, we're seeing so we feel very comfortable on that on the <unk> side. We also had a strong quarter at 5% up on adjusted EBITDA. We had you know.
Speaker Change: Nice to see a stability.
Speaker Change: Stability in subscribers overall and also the growing RFP thanks to fiber.
Speaker Change: Additionally, when you see the total company ARPA.
Speaker Change: But other than that we have not seen any surprises out there as well.
This quarter, yes resolved before the partner TV impact both on the accounting side and also on the financial side.
Speaker Change: Okay. Thanks for that and on the Internet and may be a good the number wrong.
Speaker Change: It should mean that our pool was.
Speaker Change: Over 5%, but that internet revenues were up.
Speaker Change: Up less than 1%, maybe I got it wrong, but if.
Speaker Change: If not what's the what's the gating factor over there.
Speaker Change: So you see our blew up we don't withdraw.
Speaker Change: Ongoing a conversion between copper and fiber and but we also saw a slight decline in total broadband subs on the fixed line business. However.
Speaker Change: Can we see more than making up for that on the top of our group wide. When you see the 2% growth in retail broadband taking into account.
Speaker Change: Yes, what you also have on broadband revenues as some of these reduced our hardest center passive rates that were not in the passive one if were not taken into effect in Q1 last year.
Speaker Change: Okay. Thanks for that and then lastly for me if I May you mentioned, the most see working on the resolution for the removal of structural separation.
Speaker Change: What kind of outcome can we expect is there any chance that they may say you know what.
Speaker Change: It can stay as is been going on for 20 years, No reason to change now or it's unlikely to happen.
Speaker Change: So for now we don't know what the outcome gonna be what do we do know and what change <unk> did announce each weird.
Speaker Change: And now as each resolution on that matter in 2025 is a key target.
Target for this year, we are in a formal process with them I'm sure you the market with you more in the coming weeks and months about the process, formerly from us and from the MLC.
Speaker Change: But we stand behind.
Speaker Change: With that he should be fully removed and then all of a full merger without any restrictions.
Speaker Change: So we are working on that on formal advanced work with the MLC.
Speaker Change: We'll communicate more information to the market hopefully havoc in the coming weeks.
Speaker Change: Okay. Thanks, guys I appreciate it.
Speaker Change: Thank you Kevin.
Speaker Change: Hi, Andre.
Speaker Change: Hi, everyone.
Speaker Change: How are you.
Speaker Change: When you say here from UBS. Thank you for the presentation I have a couple of questions first of all please maybe.
Speaker Change: Starting with the regulatory environment.
Speaker Change: Following up on the previous question. So basically the other topic that you guys highlighted the copper shutdown.
Speaker Change: So if you can maybe give more color on any specifics coming from the talks that you're having with the MLC.
Speaker Change: The timeline of that or the potential impacts that you already are I guess internally.
Speaker Change: Looking out because we've seen with other incumbents in the space that this can potentially be a material boost to.
Speaker Change: Profitability, both from an opex leasing as well as Capex perspective over the midterm. So that's one question.
Speaker Change: So I'll touch on the corporate one.
Speaker Change: First with within our guidance and also our midterm guidance, we did not really budget for the for a copper the copper switch off our fall because it was not find them before this quarter and now that it's fine and then we are very satisfied with the results we started implementing that youre right.
We would have even as soon as this year some level of Capex and Opex savings from FX, we do not need to rollout new copper two new houses, which is part of the dated universal coverage requirement around copper, which is not there anymore secondly in air.
Speaker Change: We are fully covered with fiber, we can start to gradually and they said the impact if you will see over the next three to five years.
Speaker Change: Shutdown copper I'm, we're not quantifying the outcome of that but obviously there is some element of selling copper, which is not huge but nice but also energy savings significantly last model functions that happens once you have.
Speaker Change: Only a fiber network and we've seen great precedents within Telefonica in KPN and doing the same thing, especially with Telefonica, which is a great great case study.
Speaker Change: And also the fact that we don't need to meet to maintain basically maintenance capex and.
Speaker Change: Inexpensive copper network. So all of these will come live and will be quantified with the market, but it's premature.
Speaker Change: Thank you Tim the other question I had was on the partner deal on television that you signed so you've obviously quantified the impact on your guidance from our EBITDA and net income perspective, but I was also wondering how does that translate into free cash flow.
Speaker Change: Uplift would that be kind of the post tax at the.
Speaker Change: Equivalent or is there anything else attached to this that you have to invest in for example on the Capex side that would reduce that impact and then if you have any notion of does that change at all for example, the <unk>.
Speaker Change: Retail dynamics on the TV side whatsoever in the sense that for example partner now has a different cost base relating to TV. So the prices on their product could go up or down so and any color on that please. Thank you.
Speaker Change: Our first on the second part of the question.
Speaker Change: Nothing to comment about the retail dynamics, we think the competition will stay intense and rationale and the same because it's basically a passive platform from that perspective.
Speaker Change: So that doesn't change anything from the financial point of view, yes, we have the one time impact given the AR write up Etfs are on the Dci side, which we quantified in that through the impact on the guidance you will see this specifically in the yes the valuation.
Speaker Change: Be published in the next quarter in.
Speaker Change: In town and some of the accounting in terms of EBITDA and free cash flow in fact, I can say that and we did publish its going to be a minimum of high single digit but realistically.
Speaker Change: Realistically, it's probably going to be low to mid teens.
Speaker Change: It really depends on the fiber on the television subs that Arthur is painful which either on a per sub basis with a minimum guarantee.
Speaker Change: But that's really all we can share on that pattern, we will see it in the end of this year.
Speaker Change: Starting at the end of this year.
Speaker Change: Thank you and sorry, Tony you mentioned this was a one off so there are no recurring revenues attached to this alright.
Speaker Change: Recurring revenue on a cash flow.
Speaker Change: One off significant impact on the net income basis right because of <unk>.
Speaker Change: Reevaluation of the asset based on DCF.
Speaker Change: And one off impact on net income from that and then an ongoing recurring significant revenue and EBITDA impact as I said, we will start at the end of this year.
Speaker Change: Hi.
Speaker Change: And then the free cash flow.
Speaker Change: Thank you very much for answering my question. Thank you.
Speaker Change: Thank you.
Alex: Hi, Alex.
Alex: Alright, alright, good suits, Alex right from Jefferies.
Alex: So two questions from my side please.
Speaker Change: Clearly well on track to meet the $2 9 million homes passed.
Alex: Fiber by the end of this year.
Speaker Change: Yeah, It looks like you've added a bouncing it is sorry.
Speaker Change: So 50000.
Speaker Change: Already this quarter.
Speaker Change: As well so could you elaborate on.
Speaker Change: You are basically building the existing plan faster than I expected some season, let's say to watch out for through the rest of the year.
Speaker Change: Are you finding new geographies already that's you're kind of adding to the schedule.
Speaker Change: In terms of build outs.
Speaker Change: Just search and figure out kind of pathway relative to the.
Speaker Change: The guidance that you've given on that.
Speaker Change:
Speaker Change: And then the second question is on telephone in the service revenue growth.
Speaker Change: Can you specify how much of a tailwind from roaming youre seeing at the moment, what you see as sustainable underlying growth rates in mobile service revenue.
Speaker Change: Yes.
Speaker Change: I'll touch briefly on the fiber market and Iran can touch roaming, but youre right. We are on track to complete fiber deployment, two nine would be the Max basically reaching most of the country and the limit of what we can reach from our fiber coverage perspective.
Speaker Change: Obviously with the growth of the population and we always have always had the smallest hain, but the fiber project as we know with the elevated capex will be completed before end of this year and you will see you'll start seeing the capex reduction going from the 20% ish capex to stay to down to the 16 to 18.
Speaker Change: 8% level, we guided to.
Speaker Change: So that's on that we do not have a significant cutbacks project, obviously, we're investing in AI and investing a lot on data infrastructure around that but we already upgraded in network and deployed what we need for both the business and private sectors to allow for the next probably five to 10 years at least death.
Speaker Change: On the fixed line side Opex, we've stayed elevated on the <unk> side in the coming years as we rollout the rest of the country with the different <unk> spectrum, both mid band and high band and I will let I'm, sorry, Elan patrolman for a second.
Speaker Change: The growth of the revenues in this quarter.
Speaker Change: Those are the two vectors one is the growth in pharmacy plants.
Speaker Change: More and more customers.
Speaker Change: Sure.
Speaker Change: RG plans the regular five G. Five G. Max this is a standalone.
Speaker Change: <unk> expense that we have with <unk>.
Speaker Change: Second is the coming back of Israelis that are going back and flying abroad.
Speaker Change: It's Uh huh.
Speaker Change: It's a great trend for this quarter and we hope that this trend will.
Speaker Change: Also in the next quarters, because as you've seen in two weeks ago. Two weeks ago. There was a stopping the slices to Israel. So we hope it will come will come back and the trend that started in this quarter. We will continue to grow in the next few quarters.
Speaker Change: Okay. Thank you are you able to quantify the impact of the roaming because other than previous quarters.
Speaker Change: We're not sharing this this.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Thanks, very much sure.
Speaker Change: Next question is from <unk> from Citibank.
Speaker Change: Hello, Hi, Thank you for taking my questions.
Speaker Change: I have two two place hopefully them quick the first one is a radio all the tax assessment that led to the free cash flow.
Speaker Change: On may 5th coach Huh.
Speaker Change: I was just wondering if there will be a racer to offset that and whether you will still happy with the current concern is just free cash flow for the year, which is a similar level to 2024 and my second question is just a follow up on the.
Speaker Change: Uh-huh decommission I understand that she might be too early to quantify the benefits and I was wondering when you think about the current.
Speaker Change: Current customers industrial retail or wholesale on your corporate network and is there a plan to accelerate the.
Speaker Change: Migration to them off to fiber or to other network. This is my understanding is that still extract.
Speaker Change: You just benefit from copper.
Speaker Change: After those customers.
Speaker Change: <unk> be migrated off thank you.
Speaker Change: So I want to touch the first question on free cash flow and Texan and Soma will relate to the proper.
Speaker Change: So the tax assessment is something that we anticipated.
Speaker Change: Free cash flow forecast as we provided and we still stand behind the forecast that we gave so theres no change from our phones.
Speaker Change: And from a comparison perspective, it's probably not going to change what you would see on an ongoing regular year basically not anything unique on your copper question their reform without going too much into detail actually allow us to start force customers wholesaler and retailer.
Speaker Change: Switch from copper to fiber one when you reach an 85% penetration of interest or the neighborhood, which is not that complicated.
Speaker Change: We already have obviously, 33% take up on the network, but that's not the way you should view it in a certain area or a city or a village. Once you have 85% network penetration on your fiber you can switch off basically the copper network and start migrating customers. That's in the first and the next.
Speaker Change: Five years after year five you can do it to everyone you don't youre not abide by the 85% anymore.
Speaker Change: So there is basically a flexibility and a path to do that without incur any significant costs in the initial draft form we did have some concern around some potential spending unnecessary one around that deal.
Speaker Change: Concerns were addressed and remove a when they find them in the form of published and we feel very satisfied with.
Speaker Change: With what's out there thank.
Speaker Change: Thank you very much.
Speaker Change: If there are no further questions at this time I would like to see.
Speaker Change: Sorry, we do have a question.
Speaker Change: Yeah.
Speaker Change: Hi, Sabina from Linda sorry.
Hi, guys.
I have one question actually and can you. Please provide us some color regarding the competitive environment in the mobile sector because we.
Speaker Change: We saw partner reported its results and and just trying to assess how asps and pass on resource ascribed a sense shall we say stable are cool and we see a stable customer base just just to understand.
Speaker Change: What is the environment, there and how should we evaluate the path going forward should we see any additional improvement in not only seasonality, but maybe some pricing dynamics.
Speaker Change: Thank you.
Speaker Change: Hi, Sabina, yeah, the only thing that I can say to that.
Speaker Change: The competition is stable who's here change.
Speaker Change: So there's no other things that I can add on this matter.
Speaker Change: So nothing nothing happened.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you.
Speaker Change: Okay. So if there are no further questions at this time I would like to thank you all for taking the time to join US today should you have any follow up questions. Please feel free to contact our Investor Relations Department. We look forward to speaking to you on the second quarter 2000 25000.
Speaker Change: Thank you.
Speaker Change: [music] [noise].
Speaker Change: Okay.
Speaker Change: [noise].