Partner Communications Company Ltd. (PTNR) CEO Isaac Benbenisti on Q1 2019 Results - Earnings Call Transcript

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Partner Communications Company Ltd. (NASDAQ:PTNR) Q1 2019 Results Earnings Conference Call May 30, 2019 10:00 AM ET

Company Participants

Gideon Koch - IR

Isaac Benbenisti - CEO

Tamir Amar - CFO

Conference Call Participants

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Partner Communications First Quarter 2019 Results Conference Call. All participants are present in a listen-only mode. [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 go ahead.

Gideon Koch

Thank you. And thank you to all our listeners for joining us on this conference call to discuss Partner Communications' first quarter results for 2019. With me on the call today is Isaac Benbenisti, Partner's CEO; and Tamir Amar, our CFO.

Isaac Benbenisti will present an update on progress made in the company's strategy over the last few months. He will then hand over to Tamir, who will provide an overview of the financial and operational results for the first quarter. 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 the Partner's press release dated May 30th, 2019, 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 F-3 shelf 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 statements as of the date of this call. For your information, this call is being rebroadcast simultaneously over the Internet and can be accessed through our website.

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

Isaac Benbenisti

Good day everyone and welcome to our earnings conference call. Partner succeeded in starting the year 2019 with the positive momentum. Partner's fiber optics network already reached more than 400,000 households in more than half of Israel's cities across the country. And Partner TV continues to be the fastest-growing TV service in Israel, with over 152,000 subscribers.

In the cellular segment, we continued to maintain a low rate of churn by focusing on existing customers. This strategy is also reflected in the moderate decrease in ARPU that we recorded.

In recent months, we have also focused on providing value to Partner's customers in all areas of their group's businesses: cellular, Internet, TV, and the business division. This strategy is expected to bring results both in the revenue side and by increasing customers loyalty.

As part of this strategy, we are currently in the process of setting up a private customer service division. This will increase Partner's differentiation and competitive advantage over the other players in the market.

Even with the continued growth in TV and accelerated deployment of the fiber optics network, we still succeeded to maintain a net debt level of under ILS1 billion. Partner's financial strength offers us the flexibility for making strategic investments and for expanding activity in new and existing business areas.

I will now turn the call over to Tamir Amar for more details -- more detailed review and our financial results. Tamir?

Tamir Amar

Thank you, Isaac. Good day everyone and welcome to our earnings conference call. Despite the significant competition that we continue to experience in the first quarter, we achieved relative stability in service revenue compared to the previous quarter, while continuing to grow our fixed-line segment activity, both in the number of subscribers and in revenues.

In the cellular segment, we continued to maintain relatively low churn rate, which was unchanged compared to the previous quarter and declined compared to the corresponding quarter last year. ARPU erosion was also relatively low made possible by, among other things, strategically focusing on customers that offer value for the company.

At the beginning of January 2019, an amendment to the network sharing agreement between the company and HOT Mobile was signed. As a result, from the beginning of this year, the accounting treatment for the jointly owned partnership with HOT Mobile, PHI, is as a joint operation instead of through the equity method.

Therefore, the company's relative share, 50% in PHI's assets and liabilities, was added to the company's balance sheet. The change did not materially affect the company's statement of income.

Starting with the first quarter of 2019, the company adopted the new accounting standard IFRS 16 leases, as required under IFRS. The impact of adopting IFRS 16 in the first quarter was an increase in adjusted EBITDA for the quarter by ILS39 million.

We concluded the quarter with adjusted free cash flow before interest payments of negative ILS11 million. Cash flow from operating activities totaled ILS213 million. Lease payments, presented in cash flows from financing activities, totaled ILS39 million.

CapEx payments totaled ILS185 million, reflecting the company's strategy to continue its relationship -- leadership in technologies with continued significant investment in our fiber optic infrastructures. This is only made possible by Partner's strong balance sheet.

In addition, in recent months, we have continued our Partner preparations for our future debt recycling with the private placement of untradeable option warrants exercisable for the company's Series G debentures. As a result, we already have arrangement in place for a significant portion of the company's expected funding requirements for the years through 2021.

And now I will be happy to open the call for question. Moderator, please begin the Q&A.

Question-and-Answer Session

Operator

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 two hours.

In the U.S., please call 1-888-254-7270. In Israel, please call 03-925-5929. And internationally, please call 9723-925-5929. The recording is also available on the company's website, www.partner.co.il.

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

Isaac Benbenisti

Yes. Thank you. So, summarizing Q1, I think it's maintaining our core businesses along with the investment we do in our growth engines such as the TV and very important fiber optic project. And I like to thank you very much for the call. Thank you, everybody.

Operator

Thank you. This concludes the Partner Communications first quarter 2019 results conference call. Thank you for your participation. You may go ahead and disconnect.

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