Paltel Group announces its preliminary results for year ending 31 December 2012

The country continues to be affected by changes in the taxation laws, fluctuation in currency exchange rates and the overall slowdown in economic activities in the region.

The consolidated net operating revenues reached $516m compared with $522.7m in 2011 reflecting a decrease of 1.3% from the previous year

The Earnings before Tax (EBT) reached $149m compared with US$ 142.5 reflecting a growth in EBT of 4.6% and this reflects a steady growth in operational indicators from last year.

Net income reached $15.8m compared with $128m reflecting a decrease of 9.5% from the previous year which is attributed to the government decision to postpone the investment encouragement 50% tax exemption for an additional two years. In addition, the tax has been raised from 7.5% in the previous year to 20% in 2012 as per a new tax law that was implemented the beginning of 2012 to raise the income tax from 15% to 20%.

Sabih Masri, Chairman of the Paltel Group Board of Directors, stated, "The consolidated net operating revenues and the net income do not solely reflect the performance indicators of the Group. On the contrary, the Group achieved significant growth in its customer base in both the fixed and mobile lines which also applies to ADSL subscribers."

Masri further added, "The economic crisis the government is currently facing, coupled with the current challenges in the economy in general and fluctuations of exchange rates, have affected the net income of the Group in the year 2012. In spite of continued external challenges, the Group maintains core investments in the telecom infrastructure in Palestine and foresees future opportunities in this promising sector."

Ammar Aker, CEO of Paltel Group, stated, "The Group's operating environment remains influenced by a string of challenges and they are manifested by a deepening economic crisis, increase in tax tariffs, fluctuating exchange rates, increase in infrastructure development costs; all contributing to placing a strain on the financial performance of the Group. These challenges are further exacerbated by additional Israeli obstacles towards the Group's efforts to obtain 3G and 4G frequencies which we perceive as an opportunity for future growth and more development in the telecom sector in Palestine. We are still hopeful to succeed in obtaining these frequencies in order to provide 3G and 4G services to our customers in the near future."

Aker added, "Paltel Group is slated to witness a new era after the upgrade of the Palestine status at the UN, to a non member state, thus in turn creating an urgency for more digital exposure and a knowledge economy as Palestine aggressively pursues its rights in frequencies as a member of the global community of nations. We are also endowed in Palestine with a younger generation that is much attuned to the latest in global technology development to which we respond by developing the IT infrastructure and by launching creative initiatives for Palestinian youth, such as the Mobile Applications Development Initiative (MADI) in 2012."

Aker concluded by saying, "The Group is proud of the year 2012's qualitative achievements; these results continue to motivate us to invest more efforts in the future. Paltel Group remains committed to working with all relevant parties to lead the IT and telecom sector in Palestine. That, in addition to the Group's commitment to its social responsibility based on its belief in the importance of community empowerment and sustainability to help an aspiring young generation of Palestinians to look ahead for a future filled with advanced technology in Palestine. We live in a country that is young but offers promising yields."

Operating Performance
Fixed Line
The number of fixed line subscribers witnessed 2.9% growth rate to stand at 396 K subscribers compared with 385 K as of the end of year 2011. This growth resulted from new acquisition campaigns. The average monthly revenue per fixed line subscriber reached US$ 19.2 at the end of 2012 compared with US$ 21.2 at the end of 2011.

Mobile
Mobile subscribers grew by 6.4% to stand at 2.58 M at the end of 2012 compared with 2.42 M at the end of 2011. The composition (split between) of the prepaid and postpaid subscribers remained 90% and 10% respectively.

This growth in the number of mobile subscribers was affected by several acquisition campaigns and new products and services that targeted existing and prospective customers.

The blended ARPU declined to US$ 13/subscriber/month during year 2012 compared with US$14.7 in the year 2011. This decrease in the ARPU is attributable to the larger customer base, low ARPU of new customers, offering larger discounts to the customers and the exchange rate differential.

Data
The data segment achieved an 18.9% growth rate in the number of ADSL lines to stand at 185 K lines by the end of 2012 compared with 156 K lines as of the end of 2011. This increase in customer base was accompanied by a decline of 26.4% in the monthly ARPU in 2012 compared by the monthly ARPU of 2011. In addition, penetration rate of the ADSL lines (per landline) increased from 40.5% at the end of 2011 to 46.8% at the end of 2012.

Future Outlook
The company is maintaining stability in its operating indicators, maintaining customer loyalty and investing in technology upgrades to prepare for a buoyant future where growth would come as a result of reliable and added value services and expansion into Area C and other under-serviced populated centers in Palestine. The company will continue to employ a long term strategy despite the negative effects of the continued short-term economic downturn in the country. With more than 82% market share and more than 78% penetration rate, we are still confident of capturing future growth in the telecom market in the Palestinian territories, especially once our rights in 3G frequencies are granted.