Bezeq Earnings Call Highlights Fiber and 5G Push

Bezeq The Israel Telecommunication Corp ((IL:BEZQ)) has held its Q1 earnings call. Read on for the main highlights of the call.

Bezeq The Israel Telecommunication Corp delivered a generally upbeat earnings call, highlighting modest but broad-based growth in revenue, EBITDA and net profit alongside strong momentum in fiber and 5G adoption. Management also underscored successful turnarounds at yes and Bezeq International and reaffirmed capital return plans, while cautioning about war-related roaming headwinds, one-off cash flow drivers and regulatory uncertainty.

Group revenue and profitability growth

Core group revenue rose 2.6% year over year to more than ILS 2.0 billion, signaling steady demand across Bezeq’s main business lines despite a challenging macro backdrop. Comparable EBITDA climbed 1.2%, while comparable net profit increased by over 4%, reflecting operating leverage from higher top-line contributions across fixed, mobile, TV and enterprise services.

Strong free cash flow expansion (with caveat)

Free cash flow was a standout metric, jumping 74% at the group level, while Fixed Line free cash flow surged 84% to ILS 404 million, bolstering Bezeq’s balance sheet and funding capacity. Management stressed, however, that a significant portion of the uplift came from a tax refund and working-capital timing effects, suggesting the current cash run-rate is not fully structural.

Fiber deployment and broadband momentum

Bezeq reached 3.0 million homes passed with fiber and achieved a 35% take-up rate, cementing its position as a leading broadband infrastructure provider in Israel. Fiber subscribers increased about 19% to more than 1.0 million, now 65% of the broadband base, while retail broadband ARPU climbed 3.7% year over year to ILS 139, driving an 8% rise in broadband revenue.

Mobile: strong 5G adoption and subscriber growth

Pelephone delivered its strongest quarterly postpaid additions since 2018, adding 34,000 postpaid customers and showcasing the appeal of its network and plans. 5G adoption remains a critical growth engine, with 5G postpaid subscribers increasing by 50,000 to roughly 1.45 million, or 61% of the postpaid base, and 5G Max plans rising to 184,000 as the firm targets more than 300,000 by year-end.

yes turnaround and record metrics

The TV unit yes posted a notable turnaround, with revenues rising 7.5% to ILS 343 million, the highest quarterly figure since early 2019, underscoring renewed momentum in content and service packages. Comparable EBITDA grew 14%, and the segment swung back to comparable net profit after several quarters of losses, supported by 137,000 fiber subscribers and an 89% customer migration to IP-based services.

Bezeq International growth

Bezeq International showed robust expansion in its business customer segment, where revenues climbed 10% to ILS 263 million on the back of heightened demand for cloud and equipment solutions. Comparable EBITDA advanced 18%, and the unit moved from a ILS 2 million comparable net loss a year ago to an ILS 8 million profit, marking a clear inflection in profitability.

Capital structure, shareholder returns and rating

Net debt declined by ILS 122 million to ILS 4.6 billion, bringing the net debt-to-comparable EBITDA ratio down to a conservative 1.4x and reinforcing financial resilience. The company highlighted the reaffirmation of its AA credit rating with a stable outlook and detailed capital return plans, including a declared ILS 549 million dividend and a ILS 150 million share buyback that is roughly half completed.

Strategic infrastructure initiatives

Bezeq is pushing ahead with strategic infrastructure plays, signing a memorandum of understanding for an international subsea cable system that aims to elevate Israel as a digital transit hub. Management discussed plans to invest in multiple subsea cables, with an example investment of about ILS 250 million for a 50% stake in a first cable, targeting meaningful revenue contributions and attractive internal rates of return.

Roaming impact from regional conflict hitting Pelephone

Despite subscriber and 5G gains, Pelephone’s results were pressured by reduced roaming revenues linked to the regional conflict, which weighed on its revenue, comparable EBITDA and comparable net profit. Mobile ARPU fell about 2.2% year over year to ILS 44, and management noted that excluding the roaming drag, service revenues would have grown by approximately 2%, highlighting the temporary nature of the hit.

Quality of free cash flow improvement partly non-recurring

Investors were reminded that the leap in free cash flow, both at the group level and in Fixed Line, is not entirely attributable to underlying business strength, as non-recurring items played a significant role. The sizable tax refund and working-capital tailwinds raised near-term cash generation, but management cautioned that future free cash flow growth should be assessed on an adjusted, more normalized basis.

Pressures in legacy telephony and some subscriber churn

The call acknowledged ongoing erosion in legacy fixed-line telephony revenue, reflecting structural shifts away from traditional voice services, which continue to weigh on that segment’s top line. Fixed-line retail broadband subscribers declined in the quarter even as total group retail broadband subs edged up 1%, underscoring competitive dynamics and the need to defend market share while migrating customers to fiber.

Expense volatility from workforce and one-off items

Operating expenses showed volatility due to workforce-related items, including provisions for employee retirement and one-time charges linked to collective agreements at Bezeq and Pelephone, which distorted cost trends. Management also pointed out that historical headcount reductions did not fully translate into proportional salary expense declines, implying further work is needed to align cost structures with digital-era operations.

Regulatory uncertainty around structural separation

A key strategic overhang remains the pending decision by the Ministry of Communications on removing structural separation within the group, which could unlock synergies but currently clouds long-term planning. Management said the timing and final terms of any regulatory change are still uncertain, and different outcomes could materially affect Bezeq’s operating model, investment strategies and competitive positioning.

Competitive intensity in fixed and TV markets

The company flagged persistent competitive intensity in both fixed broadband and TV, with rivals pursuing aggressive advertising and pricing strategies that could pressure future ARPU and subscriber trends. While management noted that these dynamics did not materially impact this quarter’s results, they remain alert to potential margin compression and are leaning on differentiated services, fiber and content to maintain their edge.

Forward-looking guidance and growth ambitions

Looking ahead, management reaffirmed its 2026 outlook and 2029 targets, projecting continued double-digit annual free cash flow growth while aiming to preserve the AA rating and enhance shareholder returns. Key operational goals include pushing retail broadband ARPU toward ILS 150 from the current ILS 139, expanding 5G Max subscribers beyond 300,000 by year-end, and further scaling fiber penetration, building on Q1 gains in revenue, profitability, free cash flow and deleveraging.

Bezeq’s earnings call painted a picture of a telecom group executing steadily on fiber, 5G and content-driven growth, even as it navigates war-related roaming shocks, legacy decline and regulatory ambiguity. For investors, the combination of improving segment profitability, disciplined leverage, and robust capital returns, tempered by clear disclosures on one-off cash boosts and competitive risk, frames a cautiously optimistic outlook for the coming years.