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On Wednesday, Partner Communications Company, Ltd. ADR (NASDAQ:PTNR) reported its first quarter earnings and discussed the following topics in its earnings conference call. Here’s what executives shared.
Gilad Alper – Excellence: My question is on the business model of the Company. You’re mentioning maybe adjusting it, which is again the reason you haven’t paid dividend this quarter. So, my question is, what exactly are you talking about? Is it for example moving closer to the business model of Golan Telecom, maybe less customer service and more simplified Internet-based business model or are you talking about something completely different?
Ziv Leitman – CFO: First, I would like to know at last, what is the business model of Golan Telecom, because we didn’t explain – we try to explore it, but we didn’t find it yet, so I’m not sure that Golan Telecom knows its business model, no. The Idea is to – when we started already in the last six months to adjust our platform to the new situation in the market, reduce costs and taking care of the customer in a different way, most of service and less labor intensive companies and this is one issue. As I mentioned before, we managed to reduce 1,440 positions. We can do much better than that. You can look at the Company in the year 2006 and 2005, you can see that the Company was there and staffed by something like 3,900 employees and providing great service. This is our, this is our vision. Our vision is to be a leaner company with the great service, personal in one hand and self service on the other and very efficient and very precise company, and still a premium company. But you have to priorities your missions and your objectives and this is exactly what we are doing, we have to enhance some of our activities and adjust them, but the business model has been started already. The new business model started already six months ago and you see the results in the reduction of the office quota.
Gilad Alper – Excellence: If I can ask just a quick follow-up, are you considering for example as part of your adjustments maybe not selling handsets anymore especially because the gross margin on that part of the business is declining anyway, are there any – is there any specific element you’re considering simply giving rather than just becoming more efficient, any part of the business that you think we might want not to do anymore in the future?
Haim Romano – CEO: What we started in the last two quarters is not subsidizing the handset by reducing our ARPU, and if you see the difference between our ARPU and our competitors, for example Cellcom went down to NIS 90 ARPU because they subsidized the handsets with the reduction of the ARPU. We stopped it (to be clear). So, we intend to sell handsets and it’s quite profitable business when you don’t leak into the packages. So, we can – and now even today we just launched a new program for handsets, but we just cut the link with the linkage between handsets and the programs and we intend to do the same in the business markets.
Michael Klahr – Citigroup: I’ve got two questions. Firstly, on the new offer that you came out with on that, I think it was Thursday last week, the NIS 125 unlimited up to, I think, half a giga and NIS 135 for 1.5 giga. That was followed by your – by Cellcom and Pelephone, whose prices for similar packages are still closer to NIS 160, NIS 170. So I wanted to just check what was driving your cuts in prices and whether it is having the desired effects so far?
Haim Romano – CEO: First I have to correct you and sorry for that, but Pelephone is introduced in NIS 119 – we have the service in the market and we….
Michael Klahr – Citigroup: The NIS 119 is only with the 100 megabytes of data so to get to…
Haim Romano – CEO: They are selling even lower than that and Pelephone introduced with NIS 99 offer in the door-to-door and we see it.
Michael Klahr – Citigroup: But for similar data package of 1.5 gigabytes, it is a NIS 117…
Haim Romano – CEO: In the end of the day the question is what will be the price that the customer will be paying and not if he is different about the data it doesn’t matter he will pay NIS 99, or even (indiscernible) data will pay NIS 119. We started that as a retention plan, we said that this is a pilot. Half of our sales are in 135 to 1 giga and we follow the market and we see – we didn’t promise that this price will be forever, it’s kind of a retention plan. We look at the market and we see what’s going on. I am sure that at the end of the day, this won’t be the common price in (indiscernible) markets, but for today we think that this is just the right answer for what’s going on in the markets. If you look and – I don’t know where you getting your information, the market is there and we see the retention efforts by all the three companies and we are very, very similar to each other, because we understand that for the time being we have to do something to face this NIS 99 or NIS 89, not to match this, but to also reasonable offer for the time being to those sensitive price level customers.
Michael Klahr – Citigroup: My second question is on what’s happening in prepaid ARPU, if you could give us any color of the impact of the MVNOs on that? If you can tell us anything that’s different from what we see in the financial statement?
Haim Romano – CEO: Just to complete my answer for the first question that you asked, in parallel to that we decreased our stock. We’re working hard to decrease our customer acquisition cost. If you pay a commission of NIS 480, as it’s in the common – less than the common commission in the markets, it’s exactly NIS 20 a month to the customer, so we prefer to go into direct sales and to save those commissions and to get more customers and the return of more customers than to go on with this trend in the market. You lose 1,000 and you gain 1,000 everyday. So, we have to spot these vertical stuff. I will love to enhance about it later if you want to. About the prepaid, we don’t see the competition in the prepaid today, but we are sure that it will be there and we take any measures to we have to take to face this threat and we know that it’s there it’s on our door.
Ziv Leitman – CFO: Michael, if you recall according to our yearly financials, the ARPU of the prepared on a yearly average is around 50 seconds. We disclosed these numbers on a yearly basis.
Michael Klahr – Citigroup: Can you just tell me in the weeks since the launches, the two new operator launches, where are you seeing the most churn or the most moment? Is it on the prepared or the postpaid side?
Haim Romano – CEO: The (indiscernible) is now is in the postpaid and the offer of NIS 89, that you and I, we know exactly what is the meaning of this offer for Hot. We understand why they’re doing that. We understand that it’s not a sustainable offer, and what we are trying to do now is to minimize the effects of this campaigning, but you understand very well that when someone is offering NIS 89 because we don’t track that, this offer is good enough, when the available company that can tempt any customer to change to HOT or Golan unless is reducing price to a ridiculous one is 89, and it would come out in the papers. I don’t think that I have to add on that.
Michael Klahr – Citigroup: Just, if you breakdown the customer base between residential and business customers, part of the attraction I think of the Golan offer is long distance telephony where you get close to 29 countries and you also get far lower roaming prices and I wanted to understand is, have you seen any impact from the business side or is– I know business customers are tied in by longer contract?
Haim Romano – CEO: It was just a declaration. We don’t have the license for that. Actually they asked us to be their – they want us to be their operators, and we know how to deal with it. We can merge it and we don’t think that this is our threat. We don’t look at Golan as the big story in the market today. We will be surprised by it, but we don’t look at it as the big story that has many, many problems, service and operational problems. They are not prepared to the situation and you can read it in the papers and the sites. I think that MIRS, as I said to you when you met, MIRS is a different story. They have a company, they have customer base MIRS and HOT and we take them more seriously than we take Golan, but we have the answer, as you have seen, because you could read yesterday in (The Globe) exactly the numbers of the turnover of each of every company. The problem is the cost of goods is earning and losing of customers, this is what was the main problem today, not that we are losing customers because we don’t lose customers as in the papers but the retention cost and the acquisition cost is something that we look at very carefully.
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