Welcome everyone, and thank you for joining us on Bezeq's 2022 third quarter earnings call. I am Tobi Fischbein, Bezeq Group CFO. With us from the Bezeq Group senior management team are Mr. Gil Sharon, Bezeq's Chairman, Mr. Ran Guron, Bezeq's CEO, and Mr. Ilan Sigal, CEO of Pelephone, Yes, and Bezeq International. Before we start, I would like to draw your attention to the safe harbor statement on slide two of our Q3 investor presentation, which also applies to any statement made during today's call. We would like to inform you that this event is being recorded. After presenting our quarterly results, you can ask questions by raising your hand virtually. Let me now turn the call over to our Chairman, Mr. Gil Sharon, for his opening remarks. After his introduction, I will continue the presentation.
Followed by Ran, who will discuss Bezeq fixed line results, and Ilan, who will conclude with the results of our subsidiaries. Gil?
Thank you, Tobi. Let's start on slide three. We posted strong financial results in the third quarter of the year, which stand out positively versus the background of the economic turmoil that the world is experiencing and due to the successful implementation of our growth strategy. We continue to emphasize investment in growth-related infrastructure, which are well reflected in our third quarter results. In fixed line, we had record takeup of 51,000 fiber customers and continued growth in retail broadband ARPU, leading to revenue growth of 5% year-over-year. In Pelephone, roaming recovery and continued growth in 5G subscribers contributed to higher ARPU and significant improvement in Pelephone's financial results with a 12% year-over-year increase in revenues. Yes launched its TV and Bezeq fiber bundle, and we continue to pay down debt and distribute dividends. Moving to the next slide.
In the third quarter, we saw solid top-line growth coupled by increases in adjusted EBITDA and adjusted net profit. On the balance sheet, we reduced our net debt by ILS 600 million, or 10% from a year ago, further improving our net debt to EBITDA ratio to 1.7 from 1.9 in the same quarter last year. We have 233,500 fiber customers as of today. Retail broadband internet ARPU rose 8.4% year-over-year to reach ILS 116. Another increase of ILS 3 versus the previous quarter. Pelephone continued to show significant improvement, marking the sixth consecutive quarter with a year-over-year increase in service revenues. At the end of Q3 2022, we reached a total of 2.68 million subscribers, of which 753,000 are on 5G plans.
For Yes, net subscribers grew by 7,500, the best quarterly results since 2014, bringing the total new subscribers since the beginning of the year to over 12,000. In the third quarter, Yes also launched a triple bundle to combine TV and Bezeq fiber, allowing it to address new customers, reduce churn, and leverage Bezeq's advanced infrastructure to improve customers' experience. We're confident in our ability to maintain good results and stability while still keeping ESG as a focus throughout our decision-making process. In times of uncertainty in the global economy and capital markets, Bezeq offers investors strong and solid financial performance, spanning wide consumer and business customer bases with a sustainable demand for advanced telecom services, allowing us to generate strong cash flows and shareholders' returns supported by our dividend policy.
Now, let me turn the call back to Tobi to discuss our dividends, our detailed financial results.
Thank you, Gil. In the next slide, we present the group's financial highlights for the third quarter of the year. Revenues in the third quarter of 2022 amounted to ILS 2.26 billion, up 5.6% year-over-year. Adjusted EBITDA increased by 1% year-over-year to ILS 947 million. Adjusted net profit rose 6.4% year-over-year to ILS 314 million in Q3, mainly due to lower financing expenses. Free cash flow for the quarter was lower due to the impact of timing differences in working capital in all group companies, mainly payment for frequencies at Pelephone, payment of salaries in advance, and timing of payments to the Universal Fund and early retirement. We expect free cash flow to normalize in the coming periods.
Turning to the next slide, we experienced stable growth across the board for the nine-month period, with revenues increasing by 2.7% year-over-year to ILS 6.74 billion, driven by improvements in fixed line and Pelephone. Adjusted EBITDA rose by 1% year-over-year to ILS 2.83 billion, and adjusted net profit increased 5.3% year-over-year to ILS 946 million, both driven by improvements in Pelephone. Free cash flow at the end of September 2022 was up 22.2% year-over-year to ILS 959 million. The next slide shows the group's key operational metrics for the past five quarters. On the subscriber side, we saw increases in TV, cellular, and retail broadband subscribers as fiber take up offset churn from our copper network.
On ARPU, retail broadband Internet grew 8.4% year-over-year, and cellular ARPU increased 5.5% year-over-year. Telephony ARPU was down due to the Ministry of Communications tariff reduction implemented in Q2 of this year. Moving to the next slide, let me again emphasize Bezeq's financial strength and success in our net debt reduction. As Gil previously said, by the end of Q3 2022, our net debt decreased by ILS 600 million, or 10% year-over-year. Moving on to the next slide, we would like to reaffirm the guidance updates made in Q2 2022. Adjusted EBITDA is expected to be in the range of ILS 3.65 billion-ILS 3.75 billion. Adjusted net profit between ILS 1.1 billion-ILS 1.2 billion, and CapEx is expected to be between ILS 1.7 billion-ILS 1.8 billion.
We expect to reach 1.5 million homes passed with our fiber network by the end of the year. Now, Ran will share with you updates on our fixed line operations.
Thank you, Tobi. We finished another strong quarter with record fiber connection of 51,000 for a quarter-over-quarter increase of 32%. The number of homes passed reached 1.48 million, with 233,000 fiber-connected customers as of today. Total revenues increased 5% year-over-year, mainly driven by broadband internet and business sector revenues. We achieved this strong performance despite the impact of the MOC telephony tariff reduction in April 2022. Moving on to the next slide, adjusted EBITDA was up moderately. Adjusted net profit rose by 3.8% year-over-year, mainly due to reduced financing expenses. Free cash flow was down due to timing differences in working capital. We expect free cash flow to normalize in the coming periods.
Moving to the next slide, for the first nine months of the year, free cash flow was up 7.4% year-over-year, driven by timing differences and improved working capital. The following slide shows our achievements in the broadband internet that reached revenues of ILS 452 million for the quarter, representing an 11.1% year-over-year increase. Fiber subscriber ARPU increased significantly by 8.4% year-over-year, reached ILS 160. Average broadband speed grew by nearly 85% year-over-year, reaching 192 Mbps, which is another record for us. Moving on to fiber optics on the next slide. We continue to deploy fiber nationwide and have increased our focus on customers take-up for a record 51,000 net adds in Q3.
Customers with Be router record 733,000 by the end of this quarter, approximately 72% of our retail customers. As shown in the next slide, the business sector continued to gain momentum with a 4.8% year-over-year revenue increase in transmission and data, as well as 3.8% year-over-year growth in cloud and digital services. Other revenues grew 33.3% year-over-year to ILS 80 million due to the Blue-Raman submarine cable project with Google, as well as other infrastructure development projects. Moving forward to the next slide, we detailed our expenses and showed a slight salary increase due to the employee recruitment related to the fiber project. Operating expenses were up in the quarter due to higher subcontractor and equipment expenses also related to the fiber project.
Moving to the next slide. In summary, our growth in broadband in the business sector have offset the negative impact caused by the MOC telephony tariff and the accelerated fiber deployment combined with the increase in fiber customers, has further solidified our strong position in Israel. Our robust results prove our strategy, and we continue to be very confident in our growth potential moving forward. With that, I will now turn the call to Ilan to talk about Bezeq subsidiaries, and wish him best of luck in his new position.
Thank you, Ran. Thanks, Ran. I am happy to be back with the Bezeq Group during these very exciting times and looking forward to leading our subsidiaries toward future growth. Moving to the next slide. Pelephone posted strong results with its sixth consecutive quarterly increase in service revenues, driven by a recovery in roaming revenues, as well as an increase in subscribers and 5G plans. As of today, Pelephone had 753,000 subscribers with 5G plans. In the next slide, we can see that total Pelephone revenue grew 12.4% year-over-year and reached ILS 608 million, the highest quarterly result in three years. Adjusted EBITDA increased 22.8% year-over-year to ILS 205 million, and adjusted net profit grew 129% year-over-year to ILS 55 million.
Free cash flow is lower for this quarter, with CapEx increasing 130.9% year-over-year to ILS 157 million, of which approximately ILS 88 million was due to a payment made to the MOC for frequencies. Most of the amount paid will be credited to us in the fourth quarter of this year. Moving to the next slide, free cash flow in the first nine months of 2022 was up nearly 530% year-over-year to ILS 264 million, compared to ILS 42 million in the corresponding period last year. This increase is mainly attributed to timing differences related to customer debt collection, as well as improved profitability and working capital. The graph displayed on the next slide shows the continued turnaround in service revenues over the last six quarters, showcasing the strong execution of our strategy.
The following slide shows key operational metrics. Pelephone's ARPU rose 5.5% year-over-year in Q3 2022, while total subscribers increased by 5% year-over-year to reach over 2.67 million, of which 39,000 were added during the quarter. Moving to the next slide, Yes posted the highest quarterly subscriber growth since 2014 with 7,500 net adds in Q3 and over 12,000 since the beginning of the year. Yes is the largest IPTV operator in Israel today, with 317,000 customers watching TV through IP broadcasting, of which 103,000 are STINGTV customers. During the quarter, Yes continued to market agreements with Disney+ and discovery+.
Looking at the key financial metrics for Yes in the next slide, revenues were down slightly due to lower ARPU caused by the change in subscriber mix with growth in STINGTV. Profitability metrics were down due to an increase in content expenses as well as salary expenses impacted by the collective labor agreement. Moving on to the following slide, we see stable revenues and adjusted net loss. Free cash flow was impacted by timing differences and payment for content. The next slide shows Yes key operational metrics. Net subscribers grew by 2.7% year-over-year to 575,000. Fifty-five percent of Yes subscribers are now watching IPTV as we move forward our goal of 100% IP by 2026. Turning to the next slide, Bezeq International in Q3 2022 achieved good results with revenue and profitability growth.
Growth in cloud solutions and business services, including the CloudEdge acquisition, helped offset the reduction in ISP revenues. During the quarter, we reached an understanding with the labor union for voluntary retirement of permanent employees that will result in significant cost savings. On the next slide for Q3 2022, Bezeq International saw an 8.4% year-over-year increase in revenue due to growth in business services, driven by increased cloud and integration services activities. Adjusted net profit increased by 111.1% year-over-year to ILS 90 million due to lower depreciation and amortization expenses. Moving to the next slide, revenue in the first nine months increased 1.2% year-over-year to ILS 920 million.
Adjusted net profit was ILS 30 million, an increase of 130.8% year-over-year, and free cash flow decreased to ILS 51 million due to timing differences in working capital. With that, let me turn the call back to Toby for concluding remarks.
Thank you, Ilan. Turning to our last slide, Bezeq's Q3 results show strong results and growth in numerous metrics, once again testifying that we are on the right track with our strategy. Moving forward, we are devoted to continuing our momentum in implementing the growth strategy by advancing our fiber optics deployment, focusing on fiber take-up, promoting additional subscriber growth in Pelephone and Yes, and generating cost efficiencies across the group. I would also like to mention that we will attend two conferences over the next few weeks to further engage with investors and analysts. The Morgan Stanley European Technology, Media, and Telecom Conference in Barcelona tomorrow, November seventeenth, and the UBS TMT Conference in New York on December fifth and sixth. We look forward to meeting you there. With that, I will open the Q&A session.
If you would like to ask a question, please raise your hand virtually using the Raise Hand button in the Participants tab. In the mobile app, you can raise your hand by tapping the Raise Hand option in the More tab. As you hear your name, please be sure to unmute your microphone and ask your question. For benefit of the people in the room, please introduce yourself and share the name of the company you represent. We will address questions as we see the hands raised. If you later change your mind about raising your hand, you can lower it by clicking Lower Hand. I will now pause to poll for questions. First question from Tavy Rosner. Good afternoon, Tavy. Tavy, we cannot hear you.
Hi. Can you hear me?
Yes, we can now hear you. Hi, Tavy.
Hi. Sorry, I couldn't unmute myself. I wanted to ask about regulations. Are there any topics that we should be aware, something that's in the pipeline with the MOC, something that might weigh positively or negatively on Bezeq in the coming quarters? I'm asking in the context of the new government being formed. Are you hearing any Anything against Bezeq like we've seen in the past when we had some, you know, populist minister taking charge of a specific portfolio. I guess my question is anything we should be worried about?
Hi, Tavy. It's Gil. It's too early to say, you know. We do not know yet who will be the next minister. On the professional teams table, we know that we have the issue that they started exploring in regards to the business sector at Bezeq fixed line. We talked about that in the past already. There's the examination of the wholesale prices. Again, it's work in progress. They took Axon, an international consulting firm, and work is being done. These are the things that we already know about and talked about in last calls. We do not see any new issues on the table. Of course, we cannot predict what the new minister would bring it's again, nothing new, but it's too early.
Okay. Thanks for that. I wanted to follow up on the dividends. How should we be thinking about the payout policy in the future? On the one hand, you generate, you know, significant free cash flow. You do invest a lot in the fiber infrastructure. Should we assume that unless the investment is done, you will not be raising the payout ratio for now?
I will take that question. As you know, we reintroduced dividends with a formal dividend policy as of Q1 of this year. It's a bit too early to change it. Looking forward, you know, as long as our business momentum continues and we continue to generate significant free cash flow, as you mentioned, we do see the potential, you know, for some increase in the payout ratio. This is something that will be discussed probably at the beginning of next year.
Okay, great. Thanks for taking my questions.
Thank you. Next question from Ondrej from UBS. Let me please ask that whoever is asking questions, if you can, open your cameras, it will be helpful for us. Hi, Ondrej . Ondrej , can you open your mic, please?
Hi. Apologies, yeah. I did that, and it reverted for some reason. Hello, everyone. Ondrej here from UBS. Thanks for the presentation. Congratulations on the results. I wanted to follow up on regulation, but more backward-looking. You entered this year with a cautious guidance, citing several impacts from the change in regulations. Just wondering if you can give us an update in terms of what impacts you're seeing, whether, for example, the rate cut on the fixed voice and the impact that it has on the business is progressing as expected. Same thing with the wholesale changes and the ISP changes. Second question on just the fiber homes passed.
It seems like you're very close to achieving the year end or you were at the end of 3Q, very close to achieving the 1.5 million target of homes passed. Is this something that you feel you will maybe exceed even the upgraded target? And whether you're kind of planning to maybe apply for investing in the additional areas that you were not initially kind of targeting. Third question, if I may, just a general comment around competition in fiber and mobile. In fiber, last time you commented on more competition on the ISP fees.
In mobile, obviously we've had some consolidation, some you know, upward pricing in terms of 5G and also, just general price increases. If you can just generally comment on the competitive landscape in both fiber and mobile. Thank you.
Let me just make sure we understood all your three questions. The first one was about the regulatory impact on mainly telephony, ISP, and wholesale. These are things that have happened already. We will discuss this in a moment. Second one is about fiber deployment and take-up. The third one, if you could just repeat it, because I didn't get it. Ondrej ?
Yeah. Yeah, sorry. Third question, just a general comment on competitive dynamics in terms of fiber and mobile in particular, please.
Great. Let me suggest that Ran start with the first, actually with the first two questions, and then we'll share with Ilan.
Yeah.
Okay. I'll take the first two questions and maybe part of the third question. Tariff, MOC tariff reduction works as expected. We are quite satisfied that we can offset some of that and compensate by broadband revenues, but it works as planned. For the ISP, we do not publish the figures, but we are very satisfied with the pace. It works better than we expected, but those figures are not out yet. As for homes passed, we publish a prediction of 1.5 million by the end of this year. We will continue in 2023, we'll not publish these plans yet, but we are ahead of plan and it help us in take up as well. I believe in the third question you asked about the competitive momentum or competitive arena in the fiber. It's a highly competitive market.
We are gaining momentum, gaining some market share back, but we still have a long way to lead this market in terms of retail customers. As you saw, our pace is picking up, so it looks better for us and we continue to accelerate take up for fiber.
About the mobile, I'll take the question. Pelephone was the first player that launched 5G, and we are deploying 5G. Till now we have 750,000 customers that already have 5G packages. As you know, we have more than 2.6 million customers, so probably there will be more and more Pelephone customers that will transfer from regular packages to 5G packages. We see a future of customers that will move to 5G plans.
Thank you very much.
Thank you, Ondrej . Next question from Jerry Dellis. Hi, Jerry.
Yes. Good afternoon, everybody. Thank you for taking my questions. I've got three questions, please. Firstly, in relation to your full year 2022 guidance. Looks to me as though you're sort of on track to beat at the high end on sort of net income and also EBITDA. I'd be grateful for your sort of thoughts as to whether that is the case, and how management will think about the appropriate guidance range over the next few weeks. Secondly, in relation to free cash flow, I think consensus is looking for about ILS 1.4 billion of free cash flow for the full year, which would imply about ILS 400 million in Q4.
Could you discuss with us whether that's a sort of a doable objective and perhaps go through some of the moving parts on free cash flow in Q3? I understand there were some sort of exceptional one-time payments, some of which might reverse into the fourth quarter. Finally, please, in relation to retail broadband customers. Your retail broadband base across the group has been extremely stable over the last few quarters, even as the retail fiber base has been sort of increasing. I understand it's a competitive market, but could you explain to us, please, you know, how the retail base has been kept that stable? Is that essentially a management decision to keep it stable? In terms of the retail fiber net adds, you know, where are those coming from in terms of internal upgrades versus new customers being sucked into the base? Thank you.
Thank you, Jerry. I'll take the first two questions and let Ran address the third one. On our full year guidance for 2022, we didn't change it this time. You know, at the end of the day, not every quarter is the same. As you remember, you know, part of the regulatory changes came in in April only. The second half of the year has two full quarters with lower tariff reductions versus the first half of the year. That's one part of the answer. The other part is that we are really looking to end very we would say around the higher end of the range that we gave.
You know, as long as we don't, you know, see that for sure, we will overcome it by more than 5%, which is the threshold that we set. We didn't feel that was right for us to update the guidance right now. On the second question, it's on the free cash flow. Perhaps, you know, it's a good opportunity to explain the timing differences that we had in Q3, some of which relate to Q2 and some others to Q4. There were about four or five timing differences across the group, which in total amount to about ILS 350 million.
If you would add up that to the Q3 free cash flow, you would see that it's more or less the same that it was in the same quarter last year. We had across the group, payments for the Universal Fund. This is about ILS 45 million worldwide, and this was paid this time in September. Last year was in October, in Q4. The subsidiaries would have made advance payment for salaries due to the timing of the high Jewish holidays at the beginning of October. We made these payments in September versus last year, where we paid normally. We paid for cumulative balance for employees at Bezeq fixed line, which is another ILS 35 million in July.
Historically, we're paying this in April, so this coming in Q3 versus Q2 of the previous year. We have made a significant payment in terms of early retirement at Bezeq fixed line on July 1 versus last year on June 30. Just one day of a difference, but it's a ILS 100 million difference. Then there was some VAT payments that were postponed last year from Q3 to Q4, and this year we paid normally in Q3. The last one, which is quite big, is at Pelephone. We paid ILS 88 million, Ilan mentioned this before, for frequencies, following the tender that was made two years ago. We will be getting credit for this payment in Q4, so it's just timing. We don't give specific guidance on free cash flow on a specific quarter, but we plan to end the year not far from where you mentioned before. Ran?
I'll address the retail internet customer base. First of all, we return to growth. We have returned this quarter, so this is good news for us and it's been a while. Our plan is to grow onwards, to go forward. Our ambition, the group ambition, is to grow in retail customers. We are satisfied to see a good beginning of that. Of course, the main effect is of fiber. As long as we recruit more and more fiber customers, it reflects on our ability to grow in the retail market as well. Even though we don't break out this number, we have around 1 million retail customers, of which still not a large enough portion is fiber.
We have a lot of work to do there, in upgrades and new customers. We don't release the number, but we have a good surprise, or we are surprised by the number of new customers that is recruited, both by Bezeq and by Yes, who have started to sell their triple or maybe we say bundle of internet and TV. We are quite satisfied with that, but there is a lot of work to do in the future. You're muted.
Oh, yeah. Just as a follow-up, please, if I may. You have some sense as to the proportion of fiber intake, which are new customers to the Bezeq platform?
Could you repeat that, or I didn't get the question.
Of your retail fiber intake, is it possible to get some idea as to the rough proportion which are new customers to the Bezeq platform?
We don't release these numbers, so but it's not slim. I mean, it's quite significant, but we don't release the number.
Thank you.
Thank you, Jerry. If there are any other questions, please raise your hand so that we can call your questions. There are no further questions at this time. I would like to thank you all for taking the time to join us today. Should you have any follow-up questions, please feel free to contact our investor relations department, and we look forward to speaking to you on the fourth quarter 2022 earnings call in March of next year. Thank you, and have a nice day.