Cellcom Israel Ltd. Executive Insights: Dividend, Competition

On Tuesday, Cellcom Israel, Ltd. (NYSE:CEL) reported its first quarter earnings and discussed the following topics in its earnings conference call. Here’s what the C-suite revealed.


David Kaplan – Barclays Capital: The first question I have is on the dividend. I know you don’t have any stated dividend policy, but this quarter, you paid 75% of net income whereas currently to last eight quarters we have seen 95% or more. So, can you talk a little bit about why you paid out less this quarter and what you see going forward for rest of this year?

Nir Sztern – CEO: As you know, our dividend policy is 75% of the net income. This quarter, we decided to follow our former dividend policy. We believe that this is going to strengthen our balance sheet, and of course, you know that we can – the rest of the year, if we can see that the situation is changed, we can continue with our previous dividend policy, but right now, this is the message, that we believe that it’s right balance between our shareholders and debt-holder.

David Kaplan – Barclays Capital: So if I take into account the guidance that you gave in the press release where you said that the second quarter looks like it’s going to be difficult again, perhaps even – so, should I take that to understand that for at least the next couple of quarters, we should expect 75% of net income as the dividend?

Nir Sztern – CEO: Not necessarily. As you know, this is our Board of Directors decision and we analyze it every quarter. This time, as we analyzed the uncertainty in the market, that’s why we have this decision.

David Kaplan – Barclays Capital: As the last question, with all the new pricing in the market, I’m sure some companies has come up with, and is going to continue to come up with new pricing plans themselves. Do you see any other regulatory changes coming down the road like what the Minister talks about that today about opening or I should say I think you’re going to quote that you’re flooding the market with new cheap smartphones and how you’re going to be able to prepare to deal with that?

Yaacov Heen – CFO: Well, obviously we can’t tell if there is going to be any more regulatory decisions in the future. You have to ask the regulator I think we can also expect some regulatory leasing in terms of the landline business. In terms of the smartphone decision, we still haven’t seen the decision yet, I am sure we’ll be able to deal with it in a very good way.


James Breen – William Blair: Can you just give a little bit more color on how you feel the competitive environments been changed there given some of the news in the last days and then also can you remind us about some of step downs in the regulatory side and when you’ll see those sort of lapse from a reporting perspective in the second quarter of third quarter this year?

Yaacov Heen – CFO: I’ll answer the first question then if you can just clarify the second question because it wasn’t clear. In terms of what we see coming into the competitive environment as I’ve said we’ve seen a few new competitors entering the market and new operators are declaring unlimited pricing plans and such. Obviously, I mean we were preparing for the entrance of new competition. We have launched several bundles and packages in the last few months and we will see how things are unfolding in the next few days and weeks and react accordingly, maintaining our customers value for money, we’ll continue to do that. But we’ll make very cautious decisions there looking forward.

James Breen – William Blair: Then just the second question was around some of the regulatory rate changes that took place a little over a year ago. You’ve seen revenue decline because of the changes in those rates, when is that sort of get grandfathered so that you potentially can see revenue increase as we go forward?

Yaacov Heen – CFO: I think the question on this when we’re going to see revenues going up is not so much going to regulatory issues. It’s more going to the competitive arena right now. I think that’s what driving the prices down and we’ll have to see how the market unfolds into next few months and then we’ll be much more smarter to answer the question.