Cellcom Reports Highest Quarterly Profit in 11 Years with 44% Net Income Surge

Cellcom, Israel's cellular company led by CEO Eli Addadi and owned by Fortissimo Capital Partners under Yuval Cohen, posted a 44% increase in net profit for Q2 2024, reaching 92 million shekels. This marks the company's most profitable quarter in over a decade. For the first half of the year, net profit totaled 164 million shekels, a 32% rise from 124 million shekels in the same period last year. Following the earnings release, Cellcom's stock jumped 5% at the Tel Aviv Stock Exchange opening.

Reported revenues for the quarter were 1.1 billion shekels, a modest 1.7% increase. However, excluding interconnection fees, which declined due to tariff reductions, the company highlighted a 5.5% growth. Service revenues fell slightly to 726 million shekels from 758 million shekels the previous year. The profit boost primarily came from two sources: a 17% rise in terminal equipment sales to 339 million shekels, with gross profit from equipment surging 40% to 63 million shekels, the highest in seven years, and a reduction in net financing expenses to 17 million shekels from 27 million shekels, reflecting debt reduction efforts.

Cellcom has reduced its gross financial debt by about one billion shekels over the past two years, paid approximately 400 million shekels in dividends, and cut net financing costs by roughly 50%. Operating profit increased 26% to 148 million shekels. Free cash flow for the quarter was 136 million shekels, up from 103 million shekels last year, and reached a decade-high 251 million shekels in the first half.

Core cellular service revenues grew moderately by about 3% to 425 million shekels, with increased recurring revenue from cellular packages partially offset by a decline in roaming income due to the "Roar of the Lion" military operation and its impact on Israeli air travel. Average revenue per user (ARPU) in the mobile segment rose to 38.6 shekels. Over the past year, Cellcom added approximately 70,000 cellular subscribers and 22,000 fiber subscribers.

CEO Eli Addadi described the results as "particularly strong, even in a quarter affected by security conditions." He also highlighted recent deals, including the Nabius contract to supply communication infrastructure for Mega DC's data centers and a partnership with Nofar Energy for energy storage solutions through Cellcom Energy.

These financial results come amid Fortissimo's potential plans to divest its holdings. Fortissimo, led by Yuval Cohen who also serves as Cellcom's chairman, acquired control of Cellcom in May 2024 for 936 million shekels at a valuation of 2.6 billion shekels and currently holds about 33% of the shares. The fund has engaged Citi Investment Bank to seek foreign investors. Cellcom's stock has risen 15% over the past year and is currently valued at 5.7 billion shekels on the market.