Internet Gold Golden Lines: media spending, merger synergies will power growth
During a morning conference call, executives of Internet Gold Golden Lines Ltd. (Nasdaq: IGLD) said the Internet communications company will benefit from Internet media spending and synergies from its merger with Smile.Communications, and that the company will overcome legal problems.
“We continue to benefit from a significant ramp-up of Internet media budgets, a trend which we believe has the power to become a significant driver of our growth over the long-term,” CEO Eli Holtzman said during the call.
On July 8, Internet Gold was ordered by Israel’s Supreme Court to temporarily discontinue its ad campaign for its voice-over-broadband service, because of a claim by a competitor. Because of the lawsuit, Internet Gold is limiting its voice-over-broadband marketing to its existing customer base.
Holtzman said the company plans to benefit from the opening of Israeli telephony to competition, the continued increase of Internet usage and the shift of media budgets to the Internet.
“Looking forward, we believe these trends have the power to continue building our revenues strongly,” Holtzman said. “We are optimistic as we look to the future.”
Before the opening bell, Internet Gold reported that its second-quarter net income more than tripled compared with the year-ago period. The results were enhanced by Internet Gold’s merger with communications company 012 Smile.Communications that was completed in February. In a non-audited release, Internet Gold reported its net income rose to $5.1 million, or $0.24 a share, during the three months ended June 30, up from $1.5 million, or $0.08 a share, a year earlier. The company’s revenue soared to $66.7 million, up from $21.5 million during the same period of 2006.
The company’s merger plans are on track and Internet Gold expects to “realize the full effect of the merger’s synergies towards early 2008,” Holtzman said.
“The second quarter is always a period of relatively weak demand but the foundation of the business is strong,” he said. “Voice-over-broadband revenue is building gains. Our business integration sector continues to perform on track.”
Costs rose along with revenue. During the second quarter, the firm’s total costs and expenses increased to $59.8 million, from $19 million a year earlier. The company’s non-audited results do not include non-cash amortization expenses and non-recurring expenses related to the merger, Holtzman said.
“Any revision will reflect the goodwill as recorded on our balance sheet,” he said.
Holtzman said the company’s revenue was impacted by the temporary closure of one of its e-commerce sites, which resulted in lost revenue of about $0.6 million. Also, the weakened value of the dollar as compared to the Israeli shekel during April and May reduced Smile.Communications’ sales by about $0.8 million, Holtzman said.
In midday trading, shares are down 0.44%, or $0.05, at $11.19.
