Bezeq The Israel Telecommunication Corp. Ltd (BEZQ) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. Welcome to Bezeq's Fourth Quarter and 2021 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded and broadcasted over the web. At this time, I would like to turn the call over to Mr. Naftali Sternlicht, Investor Relations Manager for Bezeq. Mr. Sternlicht. Please go ahead.

Thank you, operator. Welcome, everyone, and thank you for joining us on the call today. With us from Bezeq Group's senior management team, we have Mr. Gil Sharon, Bezeq's Chairman; Mr. Dudu Mizrahi, Bezeq Fixed-Line CEO; Mr. Ran Guron, CEO of Pelephone, yes and Bezeq International; and Mr. Tobi Fischbein, Bezeq Group's CFO. Before we start, I would like to draw your attention to the safe harbor statement on Slide 2, which also applies to any statement made during today's call. The speaker's comments will generally follow the slide presentation, which is available under the Slides tab on the webcast link and may also be downloaded from Bezeq's IR website. You can go through the presentation by clicking the arrows on the left or right-hand side. Let me now turn the call over to our Chairman, Mr. Gil Sharon, for prepared remarks. Tobi will then continue the presentation on Group Financial highlights, followed by Dudu who will be discussing Bezeq Fixed-Line results. Ran will pick up with the results of our subsidiaries, after which management will be available to answer questions. Gil?

Thank you, Naftali. Let's begin with Slide #3. We are reporting strong results for 2021, even above our revised guidance for adjusted EBITDA and adjusted net profit. As we announced in our last meeting when we presented our strategy, our headline was From Defense to Growth, and we're happy to report growth in all parameters, especially revenue growth for the first time in many years. During 2021, we set the basis for growth with a vast deployment of fiber and 5G. As you can see, the full year 2021 results include revenue growth of 1.1% to ILS 8.8 billion. Adjusted EBITDA growth of 1.4% to ILS 3.71 billion and adjusted EBITDA margin of slightly above 42%. Adjusted net profit growth of almost 1% to ILS 1.15 billion, 50% -- ILS 50 million above our revised guidance. Free cash flow decreased at about 30% to about ILS 1 billion due to an increase in CapEx in fiber, as you know, but also timing difference in working capital. Net debt decreased by ILS 1.8 billion compared to 2019 as we continue to improve our liquidity ratios. We are proud to announce that Bezeq Fixed-Line fiber deployment reached 1.17 million households in terms of Home Passed, which -- with 120,000 households connected. The retail broadband Internet ARPU reached ILS 106 on average for 2021, a year-over-year increase of slightly above 7%. In terms of the operating metrics. We closed the year with 2.576 million subscriber in the cellular business, Pelephone, a year-over-year increase of 5.5%, including 590,000 5G subscribers of today. The number of TV subscribers was also up by slightly more than 1% with approximately net adds of 6,000, reaching 563,000 subscribers of which 250,000 or 44% of already IP subscribers. Now let me turn the call to Tobi for a detailed financial results.

Thank you, Gil. Turning to Slide 4. Revenues in the year increased for the first time since 2016 and amounted to ILS 8.82 billion, an increase of 1.1% mainly due to the growth in Pelephone and Bezeq Fixed-Line. Adjusted EBITDA and adjusted net profit rose moderately due to improvements in Pelephone and yes. CapEx For the year amounted to ILS 1.69 billion, up 12.8%, mainly due to the investment in fiber. The increase in CapEx is reflected and a 30% decline in free cash flow, along with timing differences in working capital. Slide 5 shows key operational metrics for the past 3 years. ARPU for our TV and cellular businesses have stabilized with moderate fluctuations in the past year. Retail broadband Internet infrastructure ARPU continued to see significant improvement, increasing from ILS 97 in 2019 to ILS 106 for the whole of 2021 and ILS 109 for Q4 2021. Cellular and TV subscribers as well as retail internet infrastructure lines have all increased over the last 2 years. On Slide 6, we present a snapshot of Bezeq's financial debt for the full year period. By the end of 2021, our gross debt decreased from 2019 by ILS 1.8 billion or 24% to ILS 8.1 billion. Total net debt amounted to ILS 6.1 billion. The results achieved follow our efforts to further strengthen the company's balance sheet. Our net debt-to-EBITDA ratio is now 1.8 compared to the 2.4 ratio recorded in 2019. Moving on to Slide 7. This slide presents Bezeq's 2022 outlook and midterm ambitions. We are targeting adjusted EBITDA of ILS 3.6 billion to ILS 3.7 billion, adjusted net profit between ILS 1 billion to ILS 1.1 billion and CapEx between ILS 1.7 billion to ILS 1.8 billion for 2022. And for the first time, we are publishing midterm ambitions expecting stable EBITDA with margins between 41% to 43%. This is adjusted EBITDA and mid-single-digit growth for free cash flow. CapEx and CapEx to sales are expected to remain relatively stable through 2024. And from 2024 on will decrease gradually. In terms of fiber deployment, after exceeding the 1 million household mark in 2021 we aim to reach 1.4 million households by the end of 2022 and 2.1 million households in the midterm, representing 80% of households in Israel. Regarding financial stability, we aim to maintain our high credit rating within the AA group, AA group. Turning to Slide 8. We are happy to announce that our Board of Directors has decided to approve a new dividend distribution policy, according to which the company will distribute to shareholders on a semiannual basis, a cash dividend of 50% of the semiannual net profit according to the consolidated financial statements. As such, the Board of Directors decided to recommend to the General Meeting of Shareholders a dividend distribution in the total amount of ILS 240 million which as of the date of passing this resolution, constitute ILS 0.09 per share and reflects an annualized dividend yield of 3.3%. Lastly, on Slide 9. In 2020, Bezeq published its first ESG report since 2010. The feedback we received was very positive. In 2021, we continue to update the ESG report while working tirelessly to improve our company's ESG ratings. Looking ahead, we have set various ESG targets, which include equal representation of women in Bezeq management and at least 40% on the board by 2030. An increase in the rate of diverse population to 20% by 2030 and reduction of greenhouse gas emissions to Net Zero by 2050, helping to shape our world into a better and greener place. Now Dudu will share with you updates on Bezeq Fixed-Line operations. Dudu?

Thanks, Tobi. We wrapped up another strong year with 0.6 increase -- 0.6% increase in overall revenues despite the 9.4% in the -- 9.4% drop in Pelephone revenues. The business sector performed extremely well and massive deployment of fiber continued throughout the year. The equipment sale was strong and this has led to a noticeable increase in retail growth and ARPU, which has helped to balance out, lower, wholesale tariffs and keep broadband revenues stable. As we move to Slide 12, we can see that Bezeq Fixed-Line revenue was up again for the second consecutive year. There was a decrease in net profit due to an increase in depreciation and higher tax expenses and free cash flow decreased for the year as we increased CapEx for the fiber deployment. Turning to Slide 13 and 14. Retail broadband lines grew 2.4% year-over-year despite a significant decrease in 2021 wholesale tariffs. Our revenues from broadband Internet remained stable as our retail broadband ARPU increased by 6.9%. Our average broadband speed also experienced a considerable boost now with 130 megabits per second, an increase of 75% year-over-year. Our broadband speed will further strengthen our competitive advantage and benefit our customer grade. In fiber, we move full speed ahead throughout the year, sweeping the nation with fiber optics. Our fiber network has already reached nearly 1.2 million Israeli homes with 120,000 homes connected together representing a penetration rate of 10%. It is truly a fantastic progress at an incredible speed. We estimate that we will have 2.1 million homes passed by 2025, meaning Bezeq fiber optics will be deployed for approximately 80% of all households in Israel. On the next slide, briefly describes -- the next slide briefly describes the full Wi-Fi differentiation we offer. The BE router is now -- is how we set ourselves apart from competitors and bring the best user experience to our customers. Since 2019 customers of BE router have more than doubled in size from -- we had 321,000 to 666,000 and they now account for 65% of our retail customers. As you can see on our following slide, we have achieved continuous growth in revenues from our business sector, which include Transmission & Data Cloud & Digital services. Slide 17, we detail our Fixed-Line expenses. Salaries in 2021 were up 1.6% due to the fiber project. Depreciation rose 7% for the year, mainly driven by the increase in CapEx. Operating expenses increased 13.1% year-over-year. The increase can be attributed mainly to the recognition of expense for the Universal fund for fiber deployments as well as a rising in subcontractor expenses. Other income was ILS 105 million for the year, primarily due to the increase in capital gains from the sale of real estate. With that, I'll now turn the call to Ran to talk about Bezeq subsidiaries.

Thank you, Dudu. Slide 19 shows the key highlights and continued success among our subsidiary companies. Displaying subscriber growth as well as improved profitability metrics in Pelephone and yes. Pelephone posted revenue growth and yes, had positive free cash flow for the first time in years. 250,000 yes subscribers or 44% of total subscribers are watching TV through IP broadcasting and 88,000 are STING TV customers. Pelephone subscriber with 5G plan reached 590,000 as of now. Moving on to Slide 20 to 21. We have taken the necessarily steps to become more focused and efficient in the past 3 years. From December 2018 to December 2021, we reduced our headcount by 1,500 employees, including 45% reduction in our senior management position and those reporting to senior management, leading to savings of ILS 390 million in 2021 compared to 2018, excluding salary. Among the steps had transition to 1 new CRM system, which will allow sales and service customers using a broader approach, including triple play. This will permit the company to save future investments and cost of support while streamlining employee headcount and offering an operating expenses. As you can see, by streamlining measures, we have already achieved a 20% decrease in salary expenses through headcount reduction in all 3 companies, decreasing from ILS 912 million in 2018 to ILS 734 million in 2021. Turning to Slide 22. We are investing in new generation of technologies in Pelephone with 5G and in yes with IP broadcasting over fiber. We intend to continue to lead the market in those areas. As you can see on our following slides, we have achieved continued growth in revenues from our business sector, which includes transmission and data and cloud and digital services. Sorry? Let's turn the page. And in revenue and profitability was due to partial recovery from COVID-19 with increase in roaming revenues as well as an increase in postpaid subscribers. Employee sanctions impacted our cash flow, which resulted in delay in debt collection from customers for some months. On our next slide, we expect -- we expand on some key operational metrics for Pelephone. As the bar chart show ARPU for Q4 2021 was ILS 55, which is in line with the previous and corresponding quarters. Postpaid subscribers numbers continue to grow for the sixth consecutive year, reaching 2.1 million from 1.9 million subscribers just 2 years ago. The churn rate in 2021 also dropped to 22.9%, down from 26.9% reported in 2020. This was the lowest churn rate in the Israeli cellular market over the last few years. Moving on to Slide 27 to 29. I'm now going to focus on yes subscriber growth and IP migration. We are on the track to soon to be the largest IPTV operator in Israel. Yes has continued to lead in professional and high-quality content creation. Through the current IP migration process, we are already seeing savings in satellite costs and transition from expensive set-top boxes to cheaper streamers. We are looking at the key financial metrics. When looking at the key financial metrics, you can see a 4.7% increase in adjusted EBITDA for 2021. Free cash flow for 2021 became positive at ILS 29 million improvement for the second consecutive year. Yes has shown continued growth in subscribers for the second consecutive year, which total subscribers reaching 563,000 by the end of 2021. Our ARPU has been stable with a ILS 2 increase in Q4 2021. Moving on to Slide 30 to 31. Bezeq International is a leader in providing a wide range of business solutions such as integration, data and connectivity, both through data centers and on cloud. Currently, we have 5 activated data centers, and we are in joint agreement to operate the sixth one. We have also shown growth in cloud solutions and service contract with both domestic customers and a wide variety of international business customers. In late December 2021, we acquired a majority stake in CloudEdge. They specialize in public cloud fields and their assets and expertise. We are in a historical position than ever to deliver cloud-based solutions. Bezeq International has experienced some challenges this year with revenue and profitability down for the year. Free cash flow was breakeven for 2021 due to the employee sanctions mentioned earlier. I will now turn the call to Tobi for closing remarks.

Thank you, Ran. Slide 32 summarizes the Bezeq Group's ongoing operation strategies. 2021 was a strong year. We recorded revenue growth for the first time in years. Our fiber optic deployment base will continue as we target 2.1 million households in 2025. We aim to continue the transition to 5G plans to positively impact ARPU. Yes migration to full IP will continue with bundled sales of market TV and broadband Internet. Lastly, we intend to continue our ESG efforts, reporting and setting targets to reach our objectives. Overall, we are progressing in the implementation of our strategy while continuing to focus on growth. We are excited about our future potential and look forward to delivering shareholder value. I would like to mention that we will be attending virtually 2 investor conferences over the next week. The Citi TMT Conference tomorrow, March 24, and the Jefferies Pan-European MidCap Conference on March 31. We look forward to catching up with investors and analysts. This concludes our prepared remarks. Operator, let's begin the Q&A session.

[Operator Instructions] The first question is from Tavy Rosner of Barclays.

This is Chris Reimer on for Tavy. First, I wanted to talk about the guidance. The 2022 adjusted EBITDA implies a decline versus 2021. Can you just walk us through the driving forces leading to this decline? And when do you estimate that you'll return to EBITDA growth?

Thank you for your question. As you know, 2022 is a year with some significant changes in the market. Starting in about 10 days with the removal of the separation between the Internet infrastructure and ISP. We have prepared duly for this change, but there is still uncertainty on how this will be executed in terms of the market dynamics. And this is one of the reasons that result in that kind of EBITDA -- adjusted EBITDA range that we have given. And on April 1, we will see also the change in telephony tariffs, the decline in the telephony tariffs, which was decided by the regulator, which is another reason why in this year in 2022 we are guiding actually for a moderate adjusted EBITDA versus 2021. I hope that answers your question.

Yes, that's great color. And then just regarding fiber, you talked about the 120,000 connected customers, both retail and wholesale. How should we think about the pace of adoption going forward, especially factoring in the fact that partners rolling out fast, competitors are out there also acquiring customers.

This is Dudu. I think this is the first time we're publishing numbers regarding the take-up on fiber. So I think that on the next quarter in the coming quarters, we'll see the quarterly change in fiber penetration and you could then extract the pace of customer connecting. I can say that we are quite satisfied with the current pace. It's where we are seeing the numbers that the pace that the competitors are growing, and I think we can be very satisfied with the current pace. And as I mentioned on Q1 results, you will be able to see for the first time, the growth in fiber connected customers.

The next question is from Ondrej Cabejšek of UBS.

I wanted to maybe follow up on some of the regulatory impacts. So you mentioned 2 of them, you mentioned the separation in broadband and you mentioned the fixed voice rate adjustment. So in terms of the latter, can you please talk us through what exactly do you expect the impact to be and over what time? And then I believe there's a third one in terms of DSL wholesale rates that were kind of reset in 2021 to the tune of something like minus 15% because of the increase in traffic. So presumably, you are expecting a positive impact from the kind of reset again going into 2022. So how should we think about wholesale DSL ARPUs and that's presumably more normalized environment in 2022, please?

This is Dudu. For your first question regarding Pelephone reform. So actually, the reform is going to start in the coming days on the beginning of April. And we already gave the effect on our numbers. So it will be in 2 steps when -- to be a full year of -- will be affected only on 2024. But the first step is going to be now. The second phase will be on August next year. And the full -- the first time that will be a full year effect will be in 2024 with an annual effect of roughly ILS 170 million on our revenue. So that's for the Pelephone. Regarding the ISP, so -- at the same time, beginning of April, the reform in broadband Internet is taking effect. And basically, starting there, we will start selling only full service -- full Internet service, meaning both the infrastructure and the ISP part for the first time ever in Israel. So due to the fact that we have very, very big numbers of customers changing their price plan, upgrading bandwidth moving to fiber, et cetera. We expect the take-up to be very, very high. So beginning -- starting on April, we're going to see tens of thousands of customers monthly joining the combined new service. So that will have -- of course, a considerable effect on our ARPU, there will be a negative effect, of course, on Bezeq International, but we will gain ISP customers both from Bezeq International and from the other ISPs that are currently operating in the market. So we expect the overall effect of that to be positive on a group-wide basis. Regarding wholesale tariffs, so actually the decrease, there was a sharp decrease in wholesale tariffs last year in January last year, and that has a negative effect on our revenue. And actually, on January 2022, there was a rebound on those tariffs, and they slightly increased. So wholesale ARPU will now rise during current year comparing to 2021. But we are seeing the number of customers on our network wholesale customer network declining mainly due to customer decline in Bezeq International. And we are seeing a positive effect of customers moving to -- wholesale customers on fiber. The overall effect is slightly down. So ARPU -- wholesale ARPU will increase and number of customers on our wholesale will be slightly decreased.

Can I just confirm, please, in terms of the DSL ARPU specifically, would you expect the rebound to kind of the previous levels of high 50s because we were closer to the low 50s in 2021 as a result of the...

No. No. Unfortunately not, it's not a full rebound, but decreased last year was a heavy decrease. So the increase that was done 2 months ago, will be -- will have -- will slightly rebound the tariff, but not fully.

Any kind of ballpark figure, please? Is this kind of low single-digit increase? Or any comments, please?

Well, actually, it's a public tariff. So I will -- I can say that roughly 25% decrease last year with like 10% to 15% increase this year.

The next question is from Alex Caldwell of Jefferies.

My first question would be, even with a 50% dividend being resumed, it looks like the company should still delever relatively quickly. It's quite a low ratio. I wondered if you have a level of leverage that you would say is optimal in say, 2023 or in the medium term? And then following on from that, if there is spare debt capacity, would you have acquisitions in mind or be thinking about additional cash return -- and then if there would be additional cash return, do you have a particular view on buybacks or on special dividends?

Alex, this is Tobi. Thanks for your question. I'll take the first part. The board has adopted a financial policy about 6 months ago, aiming to maintain our high credit ratings within the AA Group. So from that, we understand that we will have to maintain those liquidity ratios and, of course, other parameters that allow us to perform based on that objective. But as you have rightly said, the cash generation of the group is strong. And as we perform on our guidance, we will be able to create some additional spare cash. We have not made any decisions, the board has not made any decisions about what will happen if and when we achieve that spare cash. We don't have any buybacks in mind. And in terms of acquisitions investment, Gil, you want to mention?

As we said on our strategy deck last time we discussed, we think that there should be some opportunities for strategic acquisitions within the broad range of our capabilities and know-how. So without being too specific, I think areas like electricity, which is starting to open to competition in Israel and the adjacent areas in that area might be interesting because of our capabilities within the home and within the residential population in Israel. So -- but there's nothing specific yet. So we will continue to look and explore these possibilities.

Okay. And then my next question would just be on the guidance. So you're guiding to stable EBITDA over the medium term with margins pretty much flat. So are we correct to infer from this that group revenue is effectively you're looking to keep that stable as well rather than growing. And I just wondered why do you not think you can do a bit better than that. I think at the 3Q strategy presentation you talked about going from defense to growth. And I think at that time, you set out a midterm ambition to actually grow adjusted EBITDA. So I wonder what has changed.

Okay. So we, for the first time, are announcing today an ambition for the midterm, not just in terms of specific KPIs, but on more general broad financial parameters as the one you mentioned. And this is based on our updated 5-year plan, which, of course, includes several different plans that we feel very comfortable about. And at the same time, we are working and management is working within the group on several additional plans that are not yet mature enough. But once they progress, they will be able to deliver additional growth. We felt at this point in time that it would be a bit premature to include those in the midterm ambitions. And in addition, you need to remember that we are facing now a downward telephony tariffs that their impact will increase in the next -- over the next 3 years. So that sums up why we have given this kind of midterm ambitions.

Okay. So are those additional plans, those are new to current operations, right, is that what you're saying?

Well, are part of the current operations, but are things that, as we said, are not necessarily mature enough to be able to incorporate into the guidance. I can give you one example. Now we have recently -- the board has decided to change the means by which it will be achieving the strategic and business objectives related to the subsidiary companies mainly, yes, becoming a triple-play arm and also having an independent ICT operation that will be focused on growth. Now one of the things we learned is that as we are approaching April 3, Bezeq has -- Bezeq Fixed-Line has diligently prepared for that regulatory change. And we learned that there are opportunities maybe to do things in a quicker fashion than we previously thought. This, if and when can be executed, would be creating additional upside. But there are still a number of question marks out there. So we will need to be a bit more patient before we can become more optimistic.

Okay. That's great. I'll just ask can just ask -- if I can try and squeeze one more in. Just on the fiber target for 2022 at 1.4 million. So if you've already passed almost 1.2 million, that implies quite a strong slowdown to less than 100,000 per quarter. So I just wondered if you could talk around that and also around the fact that with such a slowdown taking place in 2022, we're guiding for an increase in CapEx at the same time?

This is Dudu, again. No, you need to understand that we started a deployment in the [ banned ] areas of Israel, big buildings, multi-apartment buildings, and that was our main focus during the launch of the project and during the first year of the deployment. So that's how we basically got to the 1 million households, representing roughly 45% Israeli population and basically, within a year, we managed to fully cover all those areas in Israel. So basically, all the buildings in Israel are now connected to our fiber network. Now we are moving to rural areas, single unit houses, small communities and by definition, deployment become much, much harder, and it takes more time. So you can -- with the same amount of CapEx, we're going to reach a much less household, but the difference will be in the take-up because we are now moving to areas when we are the sole provider of fiber. We can expect that the take-up in those areas will be higher. Currently, the areas we are now -- we've deployed and the customers we are targeting are also being targeted by several other operators, which deployed in the same areas, the tall buildings, big buildings in Israel. And the level of competition in those areas is much, much higher. Moving to rural areas, basically -- we are the sole provider and other players can wholesale our network and provide services through wholesale.

There is an additional question from Ondrej Cabejšek of UBS.

I've got 2 follow-up questions, if I may. One, just following up on the previous question in terms of the medium-term outlook. So you're guiding for flattish EBITDA, flattish CapEx but mid-single-digit free cash flow equity growth -- is it free cash flow growth. And you've mentioned previously that there was some kind of debt collection issues around the 4Q, especially. So if you could just talk us through whether this mid-single-digit growth is entirely or the assumption is that, it's entirely working capital driven? And what's the scale of the online of some of the receivables that you're expecting and the timing of that as well, please? And then a second one, if I may, in terms of mobile ARPU trends, specifically. So you're now -- or previously, you've said that in terms of 5G ARPU, you're seeing something like a 15% premium. And if I'm not mistaken, you now have between 20%, 25% of your subscriber base on 5G, yet your ARPU year-over-year in the fourth quarter was still kind of flattish. So can you -- and this is what's presumably annualized COVID impact. So can you just talk about the underlying trends in mobile in terms of pricing ARPUs? And what can we expect going forward? Because I believe you've made some pretty encouraging remarks previously, but I'm not sure I'm understanding where the zero year-over-year growth in ARPU is coming from with all of the 5G uplift that you're talking about?

Thank you, Ondrej. I'll take the first question and then sharing with Ran on the second one. On the midterm ambitions, we guided for mid-single-digit growth in free cash flow. We are looking into the midterm, which is 3- to 5-year term. It's partly a result of CapEx peaking in '23, '24 and starting in 2024 to gradually come down and that will allow for increased free cash flow. But also, we envisage some more volatility on free cash flow. We can see, as you rightly said, as a result of working capital changes, an increase in free cash flow even this year, we actually have already collected most of the billing cycle that was delayed due to the employee sanctions that were faced at the Pelephone and Bezeq International in the second half of 2021. So we are actually almost after that billing cycle completely and that will contribute what we were missing in 2021. So that's on the free cash flow. On mobile ARPU, what we are seeing in mobile ARPU is that both sequentially and also year-on-year, we have seen a stable result. But when you look into the ARPU breakdown, which is something that we don't publish, you see actually there is a slight increase in the bulk part, which is actually our plan. But on the other hand, there is a decline in interconnect. Now interconnect comes both in revenues and in expenses, but in the ARPU, you only see the revenue side. And because the comparative period had higher minutes and mostly related to COVID-19 effect, that's why that portion of the ARPU came down in the -- towards the last part of 2021. We definitely see an increase in roaming. To be more specific, for the full year 2021, roaming is still below 50% of what it was for the full year 2019, which is pre COVID-19, yet significantly higher, maybe twice as high as in 2020. But when you look into the second half of 2021 and even more so in the fourth quarter of 2021, you will see that the increase in that share versus 2019 is going higher even to over 60% in the fourth quarter. I don't know, Ran, if you want to add anything on the price plans. I hope that answers your question, Ondrej.

Maybe just 2 short follow-ups on both questions, please. So can you be more specific in terms of the collection, how much was that in the second half of 2021 and therefore, how much working capital benefit we will see this year because you mentioned that you've already managed to collect that. And just in terms of the ARPU dynamics. So I understand there's a slight increase in terms of -- or benefit towards the end of '21 in terms of roaming. But then, is there -- I think you still have a significant or what I would expect rather is that, if you're now kind of year-over-year, adding maybe 20% of your subscriber base on significantly more expensive 5G tariffs, is there just more competition on 4G? Or how do I reconcile the fact that there is maybe a minor benefit from roaming, as you say, but then ARPU is still flat with maybe 20% year-over-year growth in 5G subscriber base. So is there a deterioration in the say, 4G competition? Or how do I understand that?

So I'll take the first part, and I'll be short. I say couple of hundreds of million shekels of additional collections that are shifting actually from 2021 to early 2022. And I'll let Ran address the...

I'll give a few insights about cellular ARPU. First of all, we are not giving any projections about market prices or cellular ARPU. But what we can see that less and less customers are switching to lower tariff plans, so this effect does exist in the market, but not, as it used to be 1 year or 2 years ago. Customers are joining 5G plans. So we have a lot of work to do there. And the big unknown is roaming. Roaming is really picking up in this country. January, February, we see a lot of people traveling abroad. What will happen in the summer is a big question. So our main ARPU driver, which is yet unknown is roaming, and we are really looking forward to see if that picks up because it can make a major change. So -- those are my insights.

There's a follow-up question from Alex Caldwell of Jefferies. .

I've just got a couple more, if that's okay. I just wondered on the combined Internet service, I think other players have been allowed to offer this already in advance of yourselves and Hot. I just wondered if you've seen any impact from that? And also then Bezeq fiber able to offer it as straight away as soon as the regulation opens up? Would be my first question. And then secondly, just -- in terms of the retail Internet ARPU target given at the 3Q strategy today of being just over ILS 130 per month in the medium term. So if you're already at ILS 109 currently without including the ISP, which I think is around ILS 20, do we not think that we could go considerably higher than the ILS 130 in the medium term, given how low fiber currently is in the mix? And then just lastly would be on the areas where you're not building fiber, are you open to wholesaling with the other fiber players now being starting to build following the government tenders.

Regarding your first question, the 2 incumbent players, meaning Bezeq and Hot were forbidden of providing full broadband service. Just the -- they were allowed only to sell, we were allowed only to sell the infrastructure part. Second, when partner was newcomers could -- from day 1, offer a full broadband service. So as I mentioned, we will -- on the beginning of April, we'll start selling a combined service. And Hot, I think we'll start a few weeks later or close to that date. They need to comply to some regulation, but the change will apply both to Bezeq and Hot, more or less on the same time. Regarding the effect on ARPU I'm not sure the number that you provided represent really the market ARPU in ISP. I think numbers are lower. So the projection that we gave also includes the effect of the ISP, but a continuous growth in the basic ARPU due to customers turning to fiber and upgrading bandwidth, et cetera. So -- both trends are taking into account. Regarding -- sorry -- for your last question regarding those -- the areas that are under the government subsidy. There is still -- it is still unclear whether Bezeq would will be able to offer wholesale services there. Regard -- looking at the formal regulation, Bezeq and Hot will be allowed to provide service there on a wholesale basis. But there is still something we need to recheck with the Ministry of Communications to fully be sure that, that would be the case.

Okay. And then I've just got -- I've got one more, if that's okay. I just wondered on the canceled merger of Bezeq International and yes, I just wondered, is this due to labor negotiations. And then I just wondered what would be different with the alternative strategy if essentially still winding down the ISP services within Bezeq International?

This is, Ran. It's because negotiations took too long. This is first. And second, our estimate that pickup by infrastructure player, including Bezeq will be fast. So we are going to reach the same objectives put in the yes as a triple play arm and focus Bezeq International and ICT business integration sector, we're going to reach the same target in a different way. So the reasons are the time it took. And negotiation is a part of that.

The next question is from Roni Biron of Ion Asset Management.

Just another follow-up on your midterm ambitions and especially on mobile. In your strategic presentation in November, you mentioned -- you basically pointed to upside of ILS 8 to ILS 9 in ARPU by I think 2025, if I'm not mistaken, between the recovery of roaming and the 5G upgrading. To what extent is this being factored into your midterm ambitions, if at all?

We are actually taking as part of our midterm ambitions, as I said before, also Pelephone's midterm plans. Those plans call for a recovery in roaming -- a gradual recovering roaming that will not see the 2019 levels before 2025, 2026. So that 1 part of the answer. The other part is that, you need to remember that there is also an interconnect tariff or actually regime change over the next 3 years. Of course, that we have more or less a 0 effect on profitability, but we have an effect on ARPU. So you have to take that into account as well. And that is also part of our midterm ambitions.

If I may, this is Gil. There were a lot of questions here on our midterm ambitions. So just a few comments. I think as we said on our strategic presentation last time, in terms of cellular ARPU, we see 2 positive trends. One is roaming picking up, but no one knows how this pandemic will play out. Currently, we are seeing improvement in roaming. And it could -- as Tobi mentioned, we were thinking that it will pick up only until '25, but it can pick up much faster than that. Israelis love to fly abroad. So it's all about the pandemic. And the second lever is the 5G pickup. And now in cellular the way that ARPU -- basic ARPU without roaming, the basic ARPU changes is, it goes up or down by 2 streams, 1 stream is that customers changing their bill plan. So existing customers every year by hundreds of thousands, change their bill plan. So in previous years, we mainly saw a change to a lower bill plan. Once we introduced the 5G plan, which is a higher bill plan, but they get more gigabytes and higher speeds. So now more customers are switching to a higher actually bill plan. So that is the change, the shift that we're seeing from a downward trend when people were switching from an existing high plan to a lower plan. Now they're switching from a low plan to a bit higher plans. So this is a switch, but it's gradual. Every month, it's changing bit by bit because you're changing the whole mix. So it takes time, but we see this trend. So we have the 2 trends. One is the mix, hopefully improving, and we already see it starting to happen and also the roaming picking up maybe much faster, hopefully, then we could think about a few months ago. In regards, the other areas of the business, there are a lot of unknowns that could factor in both positively and negatively. For instance, as we said, maybe the migration of Bezeq International ISP residential customers to Bezeq could be faster. This could improve Bezeq Fixed-Line results, but also reduce very quickly OpEx and CapEx on Bezeq International. So again, if the pace is higher, this would create a quite nice upside, both in reduction of costs and higher revenues in Bezeq Fixed-Line. Another thing that we can think of in the midterm that, of course, we don't know if and when it can happen, but -- maybe at some point, Bezeq Fixed-Line will be allowed to bundle television into its triple play. We don't know. But again, it's a scenario that is possible that would create some additional benefits for Bezeq -- it's actually for Fixed-Line to be much more competitive and actually providing a product like its competitors. So again, who knows, but that can happen someday. On the other hand, we have the [ telephony ] that is a negative. Of course, it's factored in but it's going to be better or worse, we'll have to see. So we -- this is the first time we do midterm. So I think in the future, of course, we can do it with some more information and to it, maybe with some different insights. So thank you for that.

[Operator Instructions] There are no further questions at this time. I would like to remind participants that a replay is scheduled to begin in a period of 3 hours on the company website at www.bezeq.co.il. Mr. Fischbein, would you like to make your concluding statement?

Yes. Thank you. I would like to thank you all for taking the time to join us today. If you have any follow-up questions, please feel free to contact our Investor Relations department. Management looks forward to speaking to you on the first quarter 2022 earnings call. Thank you all.

Thank you. This concludes Bezeq's Fourth Quarter 2021 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.