CELLCOM ISRAEL LTD. NETANYA, Israel, August 4, 2017 Second Quarter 2017 Highlights (compared to second quarter of 2016):
-- Total Revenues totaled NIS 962 million ($275 million) compared to NIS
1,029 million ($294 million) in the second quarter last year, a decrease
of 6.5%
-- Service revenues totaled NIS 731 million ($209 million) compared to NIS
782 million ($224 million) in the second quarter last year, a decrease
of 6.5%
-- Operating income totaled NIS 102 million ($29 million) compared to NIS
104 million ($30 million) in the second quarter last year, a decrease of
1.9%
-- Net income totaled NIS 45 million ($13 million) compared to NIS 44
million ($13 million) in the second quarter last year, an increase of
2.3%
-- Net income margin 4.7%, an increase from 4.3% in the second quarter last
year
-- EBITDA(1) totaled NIS 237 million ($68 million) compared to NIS 238
million ($68 million) in the second quarter last year, a decrease of
0.4%
-- EBITDA margin 24.6%, an increase from 23.1% in the second quarter last
year
-- Net cash from operating activities totaled NIS 278 million ($80 million)
compared to NIS 204 million ($58 million) in the second quarter last
year, an increase of 36.3%
-- Free cash flow(1) totaled NIS 77 million ($22 million) compared to NIS
103 million ($29 million) in the second quarter last year, a decrease of
25.2%
-- Cellular subscriber base totaled approximately 2.779 million subscribers
(at the end of June 2017)
([1]) Please see "Use of Non-IFRS financial measures" section in this press release.
Nir Sztern, the Company's Chief Executive Officer, referred to the results of the second quarter of 2017:
"The results of the second quarter of 2017 reflect an improvement in the financial parameters compared to the previous quarter, in a period of intense competition. In the current quarter, net income increased to NIS 45 million, compared with NIS 26 million in the previous quarter, and revenues were stable and amounting to NIS 962 million, compared to NIS 959 million in the previous quarter. In addition, in the current quarter, EBITDA amounted to NIS 237 million, compared to NIS 201 million in the previous quarter.
Again in this quarter we continued to present rapid growth in the fixed-line worlds that solidify our position as a communications group. The net increase in television households was approximately 13,000 and the net increase in wholesale market households was approximately 16,000. The addition of content from the prestigious HBO content provider to the Cellcom tv service and the launching of the Quattro package in the previous quarter, were received by our customers as significant value proposals, solidifying their choice of us and reinforcing our strategy."
Shlomi Fruhling, Chief Financial Officer, said:
The second quarter of 2017 was characterized by continued growth in the fixed-line segment and continued competition in the cellular field. The network sharing agreement with Golan came into force as of the beginning of the second quarter of 2017. According to the terms of the agreement, part of the consideration is recognized as revenues and part is recognized as a reduction of operation costs. In addition, revenues from the agreement are now divided between the cellular and fixed-line segments.
Service revenues from the cellular segment decreased by 5.5% compared to the previous quarter. The decrease resulted from the implementation of the network sharing agreement with Golan and was partly offset by an increase in revenues from customers mainly as a result of seasonality. Excluding the effect of the classification of the consideration according to the network sharing agreement with Golan on the cellular segment revenues, the cellular ARPU increased by NIS 0.8 compared to the previous quarter. The service revenues in the fixed-line segment increased by 4.7% compared to the previous quarter. This increase resulted mainly from revenues from fixed-line communications services provided under the network sharing agreement with Golan, as well as increase in revenues from internet and TV services. The EBITDA of the fixed-line segment increased by 88.1% compared to the previous quarter. The increase resulted from increase in the segment revenues, the recognition of a gain of approximately NIS 10 million from the sale of the Group's holdings in Internet Rimon Israel 2009 Ltd and from decrease in the operating expenses of the segment.
Free cash flow for the second quarter of 2017 totaled NIS 77 million, a 16.7% increase compared to the previous quarter. The increase in free cash flow resulted from higher receipts from customers which was partly offset by higher capital expenditures in fixed assets and intangible assets in the current quarter.
The Company's Board of Directors decided not to distribute a dividend for the second quarter of 2017, given the continued intensified competition in the market and its effect on the Company's operating results and in order to further strengthen the Company's balance sheet. The Board of Directors will re-evaluate its decision as market conditions develop, and taking into consideration the Company's needs."
Cellcom Israel Ltd. (NYSE: CEL; TASE: CEL) ("Cellcom Israel" or the "Company" or the "Group") announced today its financial results for the second quarter of 2017.
The Company reported that revenues for the second quarter of 2017 totaled NIS 962 million ($275 million); EBITDA for the second quarter of 2017 totaled NIS 237 million ($68 million), or 24.6% of total revenues; net income for the second quarter of 2017 totaled NIS 45 million ($13 million). Basic earnings per share for the second quarter of 2017 totaled NIS 0.45 ($0.13).
Main Consolidated Financial Results:
Q2/2017 Q2/2016 Change% Q2/2017 Q2/2016
------- ------- ------ ------- -------
NIS million US$ million
(convenience
translation)
----------- ------------
Total
revenues 962 1,029 (6.5%) 275 294
-------- --- ----- ----- --- ---
Operating
Income 102 104 (1.9%) 29 30
--------- --- --- ----- --- ---
Net
Income 45 44 2.3% 13 13
------ --- --- --- --- ---
Free
cash
flow 77 103 (25.2%) 22 29
---- --- --- ------ --- ---
EBITDA 237 238 (0.4%) 68 68
------ --- --- ----- --- ---
EBITDA,
as
percent
of
total
revenues 24.6% 23.1% 6.5%
======== ==== ==== ===
Main Financial Data by Operating Segments:
Cellular (*) Fixed-line (**) Consolidation Consolidated results
adjustments
(***)
====
NIS million Q2'17 Q2'16 Change Q2'17 Q2'16 Change Q2'17 Q2'16 Q2'17 Q2'16 Change
% % %
--- ---
Total
revenues 673 784 (14.2%) 331 294 12.6% (42) (49) 962 1,029 (6.5%)
--------- --- --- ------ --- --- ---- --- --- --- ----- -----
Service
revenues 481 567 (15.2%) 292 264 10.6% (42) (49) 731 782 (6.5%)
--------- --- --- ------ --- --- ---- --- --- --- --- -----
Equipment
revenues 192 217 (11.5%) 39 30 30.0% - - 231 247 (6.5%)
--------- --- --- ------ --- --- ---- --- --- --- --- -----
EBITDA 158 181 (12.7%) 79 57 38.6% - - 237 238 (0.4%)
------ --- --- ------ --- --- ---- --- --- --- --- -----
EBITDA, as 23.5% 23.1% 1.7% 23.9% 19.4% 23.2% 24.6% 23.1% 6.5%
percent of
total
revenues
========
(*) The segment includes the cellular communications services, end user cellular equipment and supplemental services.
(**) The segment includes landline telephony services, internet infrastructure and connectivity services, television services, end user fixed-line equipment and supplemental services.
(***) Include cancellation of inter-segment revenues between "Cellular" and "Fixed-line" segments.
Financial Review (second quarter of 2017 compared to second quarter of 2016):
Revenues for the second quarter of 2017 decreased 6.5% totaling NIS 962 million ($275 million), compared to NIS 1,029 million ($294 million) in the second quarter last year. The decrease in revenues is attributed to a 6.5% decrease in service revenues and a 6.5% decrease in equipment revenues.
Service revenues totaled NIS 731 million ($209 million) in the second quarter of 2017, a 6.5% decrease from NIS 782 million ($224 million) in the second quarter last year.
Service revenues in the cellular segment totaled NIS 481 million ($138 million) in the second quarter of 2017, a 15.2% decrease from NIS 567 million ($162 million) in the second quarter last year. This decrease resulted from the gap between the national roaming services revenues in the second quarter of 2016 and the revenues for rights of use in cellular networks according to the network sharing agreement with Golan which came into force as the beginning of the second quarter of 2017 and from a decrease in cellular service revenues. The decrease in cellular services revenues resulted from the ongoing erosion in the prices of these services and churn of customers as a result of the competition in the cellular market.
Service revenues in the fixed-line segment totaled NIS 292 million ($84 million) in the second quarter of 2017, a 10.6% increase from NIS 264 million ($76 million) in the second quarter last year. This increase resulted mainly from fixed-line communications services provided according to the network sharing agreement with Golan which came into force as the beginning of the second quarter of 2017 as well as increase in revenues from internet and TV services.
Equipment revenues totaled NIS 231 million ($66 million) in the second quarter of 2017, a 6.5% decrease compared to NIS 247 million ($71 million) in the second quarter last year. This decrease resulted mainly from a decrease in the amount of end user equipment sold in the cellular segment. This decrease was partially offset by an increase in equipment sales in the fixed-line segment.
Cost of revenues for the second quarter of 2017 totaled NIS 665 million ($190 million), compared to NIS 666 million ($191 million) in the second quarter of 2016, a 0.2% decrease. This decrease resulted mainly from Golan's participation in operating costs according to the network sharing agreement which came into force as of the beginning of the second quarter of 2017. The decrease was partially offset by an increase in costs of TV services content and in costs related to internet services in the fixed-line segment.
Gross profit for the second quarter of 2017 decreased 18.2% to NIS 297 million ($85 million), compared to NIS 363 million ($104 million) in the second quarter of 2016. Gross profit margin for the second quarter of 2017 amounted to 30.9%, down from 35.3% in the second quarter of 2016.
Selling, Marketing, General and Administrative Expenses ("SG&A Expenses") for the second quarter of 2017 decreased 15.5% to NIS 207 million ($59 million), compared to NIS 245 million ($70 million) in the second quarter of 2016. This decrease is primarily a result of a decrease in salaries and commissions expenses due to capitalization of part of the customer acquisition costs as a result of early adoption of a new International Financial Reporting Standard (IFRS 15) since the first quarter of 2017. The effect of the adoption of the standard on the second quarter of 2017 expenses is in a total amount of NIS 20 million ($6 million). In addition, the decrease in expenses resulted from the Company's continuous efforts to reduce ongoing operating expenses.
Other income for the second quarter of 2017 totaled NIS 12 million ($3 million), compared with other expenses of NIS 14 million ($4 million) in the second quarter of 2016. Other income for the second quarter of 2017 mainly include a gain from the sale of Internet Rimon Israel 2009 Ltd., an indirect subsidiary of the Company, in the amount of approximately NIS 10 million ($3 million), compared to an expense for employee voluntary retirement plan in the amount of approximately NIS 13 million ($4 million) in the second quarter of 2016.
Operating income for the second quarter of 2017 decreased by 1.9% to NIS 102 million ($29 million) from NIS 104 million ($30 million) in the second quarter of 2016.
EBITDA for the second quarter of 2017 decreased by 0.4% totaling NIS 237 million ($68 million) compared to NIS 238 million ($68 million) in the second quarter of 2016. EBITDA as a percent of revenues for the second quarter of 2017 totaled 24.6%, up from 23.1% in the second quarter of 2016.
Cellular segment EBITDA for the second quarter of 2017 totaled NIS 158 million ($45 million), compared to NIS 181 million ($52 million) in the second quarter last year, a decrease of 12.7%, which resulted mainly from the gap between national roaming services revenues in the second quarter of 2016 and the revenues for rights of use in cellular networks according to the network sharing agreement with Golan which came into force as the beginning of the second quarter of 2017and from the ongoing erosion in the service revenues. The decrease was partially offset by a decrease in selling and marketing expenses due to the capitalization of part of the customer acquisition costs as a result of early adoption of a new International Financial Reporting Standard (IFRS15) since the first quarter of 2017. Fixed-line segment EBITDA for the second quarter of 2017 totaled NIS 79 million ($23 million), compared to NIS 57 million ($16 million) in the second quarter last year, a 38.6% increase, mainly as a result of a decrease in operating expenses and an increase in revenues from fixed-line communications services provided according to the network sharing agreement with Golan as well as a gain from the sale of Internet Rimon Israel 2009 Ltd., an indirect subsidiary of the Company.
Financing expenses, net for the second quarter of 2017 were similar to the second quarter of 2016 and totaled NIS 44 million ($12 million).
Net Income for the second quarter of 2017 totaled NIS 45 million ($13 million), compared to NIS 44 million ($13 million) in the second quarter of 2016, an increase of 2.3%.
Basic earnings per share for the second quarter of 2017 totaled NIS 0.45 ($0.13), compared to NIS 0.43 ($0.12) in the second quarter last year.
OPERATING REVIEW
MAIN PERFORMANCE INDICATORS - Cellular segment:
Q2/2017 Q2/2016 Change (%)
------- ------- ---------
Cellular subscribers at the end 2,779 2,812 (1.2%)
of period (in thousands)
-----------------------
Churn Rate for cellular 10.8% 10.6% 1.9%
subscribers (in %)
-----------------
Monthly cellular ARPU (in NIS) 57.0 66.0 (13.6%)
----------------------------- ---- ---- ------
Cellular subscriber base - at the end of the second quarter of 2017 the Company had approximately 2.779 million cellular subscribers. During the second quarter of 2017 the Company's cellular subscriber base decreased by approximately 13,000 net cellular subscribers.
Cellular Churn Rate for the second quarter of 2017 totaled to 10.8%, compared to 10.6% in the second quarter last year.
The monthly cellular Average Revenue per User ("ARPU") for the second quarter of 2017 totaled NIS 57.0 ($16.3), compared to NIS 66.0 ($18.9) in the second quarter last year. The decrease in ARPU resulted from the gap between national roaming services revenues in the second quarter of 2016 and the revenues for rights of use in cellular networks according to the network sharing agreement with Golan which came into force as of the beginning of the second quarter of 2017 and from the ongoing erosion in the prices of cellular services, resulting from the intense competition in the cellular market.
MAIN PERFORMANCE INDICATORS - FIXED-LINE SEGMENT:
Q2/2017 Q2/2016 Change (%)
------- ------- ---------
Internet infrastructure field- 189 136 39.0%
households at the end of period
(in thousands)
-------------
TV field- households at the 137 87 57.5%
end of period (in thousands)
============================
In the second quarter of 2017, the Company's households base in respect of the internet infrastructure field increased by approximately 16,000 net households, and the Company's households base in the TV field increased by 13,000 net households.
FINANCING AND INVESTMENT REVIEW
Cash Flow
Free cash flow for the second quarter of 2017 totaled NIS 77 million ($22 million), compared to NIS 103 million ($29 million) in the second quarter of 2016, a 25.2% decrease. The decrease in free cash flow, resulted mainly from higher cash capital expenditures in fixed assets and intangible assets in the second quarter of 2017 compared to the second quarter of 2016, which was partly offset by decrease in payments to end user equipment suppliers in the cellular segment.
Total Equity
Total Equity as of June 30, 2017 amounted to NIS 1,398 million ($400 million) primarily consisting of undistributed accumulated retained earnings of the Company.
Cash Capital Expenditures in Fixed Assets and Intangible Assets
During the second quarter of 2017, the Company invested NIS 191 million ($55 million) in fixed assets and intangible assets (including, among others, investments in the Company's communications networks, information systems, software and TV set-top boxes and capitalization of part of the customer acquisition costs as a result of early adoption of a new International Financial Reporting Standard (IFRS 15) since the first quarter of 2017), compared to NIS 102 million ($29 million) in the second quarter 2016.
Dividend
On August 4, 2017, the Company's Board of Directors decided not to declare a cash dividend for the second quarter of 2017. In making its decision, the board of directors considered the Company's dividend policy and business status and decided not to distribute a dividend at this time, given the intensified competition and its adverse effect on the Company's results of operations, and in order to strengthen the Company's balance sheet. The board of directors will re-evaluate its decision in future quarters. No future dividend declaration is guaranteed and is subject to the Company's board of directors' sole discretion, as detailed in the Company's annual report for the year ended December 31, 2016 on Form 20-F dated March 20, 2017, or the 2016 Annual Report, under "Item 8 - Financial Information - A. Consolidated Statements and Other Financial Information - Dividend Policy".
Debentures
For information regarding a summary of the Company's financial liabilities and details regarding the Company's outstanding debentures as of June 30, 2017, see "Disclosure for Debenture Holders" as well as section "other developments during the second quarter of 2017 and subsequent to the end of the reporting period- Debt Raising- Private Debentures Placement" in this press release.
Loans from Financial Institutions
According to a loan agreement entered by the Company and two financial institutions in May 2015, in June 2017 the second loan under the agreement in a principal amount of NIS 200 million was provided to the Company. The loan is without linkage and the principal amount bears an annual fixed interest of 5.1%, and will be paid in four equal annual payments on June 30 of each calendar year commencing June 30, 2019 through and including June 30, 2022. The interest will be paid in ten semi-annual installments on June 30 and December 31, of each calendar year commencing December 31, 2017 through and including June 30, 2022.
For details regarding the fulfillment of financial covenants included in the loan agreements, which are identical to those included in the Company's Debentures Series F through K, see comment no.1 to the table of "Aggregation of the information regarding the debenture series issued by the Company" under "Disclosure for Debenture Holders" section in this press release. For additional details regarding the loans see the Company's 2016 Annual Report, under "Item 5B. Liquidity and Capital Resources - Other Credit Facilities".
OTHER DEVELOPMENTS DURING THE SECOND QUARTER OF 2017 AND SUBSEQUENT TO THE END OF THE REPORTING PERIOD
Regulation
Wholesale Market
In June 2017, the Ministry of Communications published the maximum tariffs for Hot Telecom L.P., or Hot, wholesale internet infrastructure services (after a petition filed by Hot against the Ministry of Communications in February 2017, claiming the Ministry of Communications was required to hold another hearing prior to setting maximum tariffs, was dismissed). Due to disagreements with Hot as to the implementation of the service (which await resolution by the Ministry of Communications), it is unclear when the service - which was to be offered by Hot as of February 2015 - will be offered. The maximum tariffs set are higher than those set for Bezeq the Israeli Telecommunications Company Ltd., or Bezeq, the other wholesale internet service provider.
In addition, in June 2017, the Ministry of Communications published regulations setting Bezeq's resale telephony service to be provided by Bezeq as of July 2017, as a temporary 14 month alternative for wholesale landline telephony service. In addition, the Ministry of Communications resolved that Bezeq's obligation to offer wholesale telephony service, which was to be offered by Bezeq as of May 2015, will be postponed until the lapse of said resale telephony service period. The resolution further notes that the Ministry of Communications will consider the resale telephony service as a permanent replacement of the telephony wholesale service. The tariffs set for the resale telephony service are substantially higher than those set for Bezeq's telephony wholesale service. The Ministry of Communications is holding a public hearing in relation to the aforementioned tariffs, to be applied retroactively after its conclusion.
For additional details see the Company's annual report for 2016 under "Item 3. Key Information - D. Risk Factors - Risks Related to our Business - We face intense competition in all aspects of our business" and "Item 4. Information on the Company - B. Business Overview -Competition - Fixed-line Segment - Internet infrastructure and ISP business", "- Landline telephony" and "- Government Regulation - Fixed-line Segment - Wholesale landline market".
Cellular License Amendment
In July 2017, following the previously reported amendment to the Company's cellular license in relation to the requirement that Israeli citizens and residents from among the Company's founding shareholders hold at least 5% of the Company's outstanding shares and other means of control, as of July 2017, the Israeli Ministry of Communications amended the Company's cellular license so as to postpone the application of such requirement until October 31, 2017.
For additional details see the Company's Annual Report for 2016 under "Item 3. Key Information - D. Risk Factors - Risks Related to our Business - There are certain restrictions in our licenses relating to the ownership of our shares" and "Item 4. Information on the Company - B. Business Overview - Government Regulations - Cellular Segment - Our Cellular License".
Change in Independent Auditors
In July 2017, Kesselman & Kesselman, or PwC Israel, one of the Company's joint independent registered public accounting firms, concluded serving as the Company's joint independent registered public accounting firm. Somekh Chaikin, a member of KPMG International, the Company's other joint independent registered public accounting firm, will continue to serve as the Company's sole independent registered public accounting firm.
PwC Israel's audit reports on the consolidated financial statements for the fiscal year ended December 31, 2016 of Cellcom Israel Ltd. did not contain an adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principle. During the Company's fiscal year ended December 31, 2016 and the subsequent interim period through March 31, 2017, there were no disagreements between the Company and PwC Israel on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to PwC Israel's satisfaction, would have caused PwC Israel to make reference to the matters in their reports on the Company's consolidated financial statements for such year.During the Company's fiscal year ended December 31, 2016 and the subsequent interim period through March 31, 2017, there have been no reportable events (as defined in S-K 304(a)(1)(v)).
Debt Raising
Private Debentures Placement
In June 2017, the Company entered into an agreement with certain Israeli institutional investors, according to which the Company irrevocably undertook to issue to the institutional investors, and the institutional investors irrevocably undertook to purchase from the Company, NIS 220 million aggregate principal amount of additional debentures of the existing series K debentures (which are listed on the Tel Aviv Stock Exchange, or TASE), on July 1, 2018, or the Agreed Date.
The price was set at NIS 1.011 for each Series K debenture (which bear a stated interest rate of 3.55% per annum) of NIS 1 principal amount, or a total consideration of approximately NIS 222 million, reflecting an effective interest yield of 3.6% per annum. The Company is required to pay a certain commitment fee to the institutional investors. In case the debentures' rating on the Agreed Date shall be il/(A-) or below, the price shall be reduced to NIS 1.001 for each Series K debenture of NIS 1 principal amount.
The closing of the issuance will be subject to certain customary conditions, including: the receipt of the TASE's approval, the absence of any event of default under the series K debentures indenture, the Company having an Israeli shelf prospectus in force, and satisfaction of the conditions set out in the series K debentures indenture for the issuance of additional K debentures (meaning, aside from the no events of default condition detailed above, that the issuance of additional debentures itself will not cause a rating downgrade compared to the rating prior to such issuance, and that the Company meets the financial covenants applicable to the series K debentures on the date of such issuance and thereafter). In June 2017, the TASE granted the Company the said requisite approval.
In relation to the said offering, the Company's rating agency reaffirmed the current rating of ilA+/stable for the Company and its debentures.
The offering described in this press release was made only in Israel and only to residents of Israel. The said debentures will not be registered under the U.S. Securities Act of 1933 and will not be offered or sold in the United States. This press release shall not constitute an offer to sell or the solicitation of an offer to buy any securities.
Loan Agreement
In June 2017, the Company entered into a loan agreement with an Israeli bank that provided the Company a similar loan in August 2015 (the "Lender" and the "2015 Loan Agreement", respectively), according to which the Lender has agreed, subject to certain customary conditions, to provide the Company a deferred loan in a principal amount of NIS 150 million, unlinked, which will be provided to the Company in March 2019, and will bear an annual fixed interest of 4%. The loan's principal amount will be payable in four equal annual payments on March 31 of each of the years 2021 through and including 2024 and the interest will be payable in ten semi-annual installments on March 31 and September 30 of each calendar year commencing September 30,2019 through and including March 31, 2024. Until the provision of the loan, the Company is required to pay the Lender a commitment fee.
The agreement includes similar terms and obligations to those included in the Company's August 2015 loan agreement and applies the right to demand immediate repayment of either or both agreements due to certain events of default under either agreement.
For additional details regarding the Company's existing debentures and existing loan agreements, including the August 2015 loan agreement, see the Company's 2016 Annual Report under "Item 5B. Liquidity and Capital Resources - Debt Service - Public Debentures" and "-Other Credit Facilities" and the Company's current report on Form 6-K dated June 1, 2017.
Sale of Indirect Subsidiary of the company
In June 2017, the previously reported sale of 013 Netvision Ltd. (the Company's wholly owned indirect subsidiary) holdings in Internet Rimon Israel 2009 Ltd. was completed.
For additional details see the Company's current report on Form 6-K dated May 24, 2017 under "Other developments during the first quarter of 2017 and subsequent to the end of the reporting period - Sale of Indirect Subsidiary".
Changes in Management- Vice President of Business Customers
In July 2017, Ms. Keren Shtevy notified the Company of her resignation from her position as the Company's vice president of business customers, and will be leaving the Company on August 15, 2017, after 19 years of successful and extensive tenure in 013 Netvision Ltd. and the Company. The Company's board of directors has nominated Mr. Nadav Amsalem as the Company's vice president of business customers, effective July 20, 2017.
Nadav Amsalem has served as head of the strategic customers department in the Company's business customers division, in charge of the major corporate business customers from 2014. From 2011 to 2014, he served as the director of strategic landline customers and major business customers sector. Mr. Amsalem has been a member of the Company's business customer's division since 2006.
IDB
In May 2017, IDB Development Corporation Ltd., or IDB, the Company's indirect controlling shareholder, announced in connection to the Concentration Law (according to which IDB and Discount Investment Corporation Ltd., or DIC, may not retain control over the Company beyond December 2019 so long as the Company is a third layer company in their pyramidal structure), that after reviewing possible ways to deal with this restriction, IDB is proposing to sell its holdings in DIC to a private company controlled by IDB's controlling shareholder. There can be no assurance of how or when this would occur, if at all.
For information about the Concentration Law, see the Company's 2016 Annual Report, under "Item 3.D - legislation in Israel affecting corporate conglomerates could adversely affect us."
CONFERENCE CALL DETAILS
The Company will be hosting a conference call regarding its results for the second quarter of 2017 on Tuesday, August 8, 2017 at 09:00 am ET, 06:00 am PT, 14:00 UK time, 16:00 Israel time. On the call, management will review and discuss the results, and will be available to answer questions. To participate, please either access the live webcast on the Company's website, or call one of the following teleconferencing numbers below. Please begin placing your calls at least 10 minutes before the conference call commences. If you are unable to connect using the toll-free numbers, please try the international dial-in number.
US Dial-in Number: 1 866 652 8972 UK Dial-in Number: 0 808 101 2717
Israel Dial-in Number: 03 918 0608 International Dial-in Number: +972 3 918 0608
at: 09:00 am Eastern Time; 06:00 am Pacific Time; 14:00 UK Time; 16:00 Israel Time
To access the live webcast of the conference call, please access the investor relations section of Cellcom Israel's website: www.cellcom.co.il. After the call, a replay of the call will be available under the same investor relations section.
About Cellcom Israel
Cellcom Israel Ltd., established in 1994, is the largest Israeli cellular provider; Cellcom Israel provides its approximately 2.779 million cellular subscribers (as at June 30, 2017) with a broad range of value added services including cellular telephony, roaming services for tourists in Israel and for its subscribers abroad and additional services in the areas of music, video, mobile office etc., based on Cellcom Israel's technologically advanced infrastructure. The Company operates an LTE 4 generation network and an HSPA 3.5 Generation network enabling advanced high speed broadband multimedia services, in addition to GSM/GPRS/EDGE networks. Cellcom Israel offers Israel's broadest and largest customer service infrastructure including telephone customer service centers, retail stores, and service and sale centers, distributed nationwide. Through its broad customer service network Cellcom Israel offers technical support, account information, direct to the door parcel delivery services, internet and fax services, dedicated centers for hearing impaired, etc. Cellcom Israel further provides OTT TV services (as of December 2014), internet infrastructure (as of February 2015) and connectivity services and international calling services, as well as landline telephone communications services in Israel, in addition to data communications services. Cellcom Israel's shares are traded both on the New York Stock Exchange (CEL) and the Tel Aviv Stock Exchange (CEL). For additional information please visit the Company's website http://investors.cellcom.co.il.
Forward-Looking Statements
The following information contains, or may be deemed to contain forward-looking statements (as defined in the U.S. Private Securities Litigation Reform Act of 1995 and the Israeli Securities Law, 1968). In some cases, you can identify these statements by forward-looking words such as "may," "might," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential" or "continue," the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to risks, uncertainties and assumptions about the Company, may include projections of the Company's future financial results, its anticipated growth strategies and anticipated trends in its business. These statements are only predictions based on the Company's current expectations and projections about future events. There are important factors that could cause the Company's actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. Factors that could cause such differences include, but are not limited to: changes to the terms of the Company's license, new legislation or decisions by the regulator affecting the Company's operations, new competition and changes in the competitive environment, the outcome of legal proceedings to which the Company is a party, particularly class action lawsuits, the Company's ability to maintain or obtain permits to construct and operate cell sites, and other risks and uncertainties detailed from time to time in the Company's filings with the U.S. Securities and Exchange Commission, including under the caption "Risk Factors" in its Annual Report for the year ended December 31, 2016.
Although the Company believes the expectations reflected in the forward-looking statements contained herein are reasonable, it cannot guarantee future results, level of activity, performance or achievements. Moreover, neither the Company nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. The Company assumes no duty to update any of these forward-looking statements after the date hereof to conform its prior statements to actual results or revised expectations, except as otherwise required by law.
The Company prepares its financial statements in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB). Unless noted specifically otherwise, the dollar denominated figures were converted to US$ using a convenience translation based on the New Israeli Shekel (NIS)/US$ exchange rate of NIS 3.496 = US$ 1 as published by the Bank of Israel for June 30, 2017.
Use of non-IFRS financial measures
EBITDA is a non-IFRS measure and is defined as income before financing income (expenses), net; other income (expenses), net (excluding expenses related to employee voluntary retirement plans and gain (loss) due to sale of subsidiaries); income tax; depreciation and amortization and share based payments. This is an accepted measure in the communications industry. The Company presents this measure as an additional performance measure as the Company believes that it enables us to compare operating performance between periods and companies, net of any potential differences which may result from differences in capital structure, taxes, age of fixed assets and related depreciation expenses. EBITDA should not be considered in isolation, or as a substitute for operating income, any other performance measures, or cash flow data, which were prepared in accordance with Generally Accepted Accounting Principles as measures of profitability or liquidity. EBITDA does not take into account debt service requirements, or other commitments, including capital expenditures, and therefore, does not necessarily indicate the amounts that may be available for the Company's use. In addition, EBITDA as presented by the Company may not be comparable to similarly titled measures reported by other companies, due to differences in the way these measures are calculated. See the reconciliation of net income to EBITDA under "Reconciliation of Non-IFRS Measures" in the press release.
Free cash flow is a non-IFRS measure and is defined as the net cash provided by operating activities (including the effect of exchange rate fluctuations on cash and cash equivalents) excluding a loan to Golan Telecom, minus the net cash used in investing activities excluding short-term investment in tradable debentures and deposits and proceeds from sales of such debentures (including interest received in relation to such debentures) and deposits. See "Reconciliation of Non-IFRS Measures" below.
Company Contact Investor Relations Contact
Shlomi Fruhling Ehud Helft
Chief Financial Officer GK Investor & Public Relations
investors@cellcom.co.il cellcom@GKIR.com
Tel: +972 52 998 9735 Tel: +1 617 418 3096
--------------------- --------------------
Financial Tables Follow
Cellcom Israel Ltd.
(An Israeli Corporation)
Condensed Consolidated Interim Statements of Financial Position
---------------------------------------------------------------
Convenience
translation
into US dollar
June 30, June 30, June 30, December 31,
2016 2017 2017 2016
---- ---- ---- ----
NIS millions US$ millions NIS millions
------------ ------------ ------------
Assets
Cash and cash equivalents 982 785 225 1,240
Current investments,
including derivatives 284 360 103 284
Trade receivables 1,327 1,263 361 1,325
Current tax assets - 52 15 25
Other receivables 68 88 25 61
Inventory 63 61 18 64
--- --- --- ---
Total current assets 2,724 2,609 747 2,999
----- ----- --- -----
Trade and other receivables 813 915 262 796
Property, plant and
equipment, net 1,682 1,619 463 1,659
Intangible assets and
others, net 1,206 1,228 351 1,207
Deferred tax assets 6 1 - 1
--- --- --- ---
Total non- current assets 3,707 3,763 1,076 3,663
----- ----- ----- -----
Total assets 6,431 6,372 1,823 6,662
===== ===== ===== =====
Liabilities
Current maturities of
debentures and of loans 861 792 227 863
from financial institutions
Trade payables and accrued
expenses 638 622 178 675
Current tax liabilities 49 2 1 -
Provisions 115 108 31 108
Other payables, including
derivatives 299 264 75 279
--- --- --- ---
Total current liabilities 1,962 1,788 512 1,925
----- ----- --- -----
Long-term loans from
financial institutions 200 462 132 340
Debentures 2,796 2,524 722 2,866
Provisions 30 19 5 30
Other long-term liabilities 29 32 9 31
Liability for employee
rights upon retirement,
net 12 12 4 12
Deferred tax liabilities 112 137 39 118
--- --- --- ---
Total non- current
liabilities 3,179 3,186 911 3,397
----- ----- --- -----
Total liabilities 5,141 4,974 1,423 5,322
----- ----- ----- -----
Equity attributable to
owners of the Company
Share capital 1 1 - 1
Cash flow hedge reserve (2) (1) - (1)
Retained earnings 1,275 1,394 399 1,322
Non-controlling interest 16 4 1 18
--- --- --- ---
Total equity 1,290 1,398 400 1,340
----- ----- --- -----
Total liabilities and
equity 6,431 6,372 1,823 6,662
===== ===== ===== =====
Cellcom Israel Ltd.
(An Israeli Corporation)
Condensed Consolidated Interim Statements of Income
---------------------------------------------------
Convenience Convenience
translation translation
into US dollar into US dollar
For the six
months ended For the six
months ended
June For the three
months ended For the three
months ended
June
June 30, 30, June 30, 30, For the year
ended
December 31,
2016 2017 2017 2016 2017 2017 2016
---- ---- ---- ---- ---- ---- ----
NIS millions US$millions NIS millions US$millions NIS millions
------------ ----------- ------------ ----------- ------------
Revenues 2,051 1,921 549 1,029 962 275 4,027
Cost of revenues (1,336) (1,330) (380) (666) (665) (190) (2,702)
------ ------ ---- ---- ---- ---- ------
Gross profit 715 591 169 363 297 85 1,325
Selling and
marketing (291) (226) (65) (143) (112) (32) (574)
expenses
General and
administrative (205) (208) (59) (102) (95) (27) (420)
expenses
Other income
(expenses), net (14) 12 3 (14) 12 3 (21)
--- --- --- --- --- --- ---
Operating profit 205 169 48 104 102 29 310
Financing income 28 26 8 16 14 4 46
Financing expenses (96) (101) (29) (60) (58) (16) (196)
--- ---- --- --- --- --- ----
Financing expenses,
net (68) (75) (21) (44) (44) (12) (150)
Profit before taxes
on 137 94 27 60 58 17 160
income
Taxes on income (34) (23) (7) (16) (13) (4) (10)
--- --- --- --- --- --- ---
Profit for the
period 103 71 20 44 45 13 150
=== === === === === === ===
Attributable to:
Owners of the
Company 102 70 20 44 45 13 148
Non-controlling
interests 1 1 - - - - 2
--- --- --- --- --- --- ---
Profit for the
period 103 71 20 44 45 13 150
=== === === === === === ===
Earnings per share
Basic earnings per
share 1.01 0.70 0.20 0.43 0.45 0.13 1.47
(in NIS)
===
Diluted earnings per
share 1.01 0.69 0.20 0.43 0.45 0.13 1.47
(in NIS)
===
Weighted-average
number of shares
used in the
calculation of
basic earnings per
share (in shares) 100,604,578 100,605,503 100,605,503 100,604,578 100,606,203 100,606,203 100,604,578
=========== =========== =========== =========== =========== =========== ===========
Weighted-average
number of shares
used in the
calculation of
diluted earnings
per share (in
shares) 100,604,578 101,340,873 101,340,873 100,705,952 101,265,547 101,265,547 100,698,306
=========== =========== =========== =========== =========== =========== ===========
Cellcom Israel Ltd.
(An Israeli Corporation)
Condensed Consolidated Interim Statements of Cash Flows
-------------------------------------------------------
Convenience Convenience
translation translation
into US dollar into US dollar
For the six For the For the three For the three
months ended
June
months ended months ended 30,
June 30,
June 30, For the
year ended
December 31,
six months ended
June 30,
2016 2017 2017 2016 2017 2017 2016
---- ---- ---- ---- ---- ---- ----
NIS millions US$ millions NIS millions US$millions NIS millions
------------ ------------ ------------ ----------- ------------
Cash flows from operating activities
Profit for the period 103 71 20 44 45 13 150
Adjustments for:
Depreciation and
amortization 267 269 77 132 136 39 534
Share based payments 3 2 1 1 1 - 6
Loss (gain) on sale
of property, 3 (2) (1) 2 (2) (1) 10
plant and equipment
Gain on sale of
shares in a - (10) (3) - (10) (3) -
consolidated company
Income tax expenses 34 23 7 16 13 4 10
Financing expenses,
net 68 75 21 44 44 12 150
Changes in operating assets and
liabilities:
Change in inventory 22 3 1 15 6 2 21
Change in trade
receivables (75) 104 30 (17) 44 13 (28)
(including long-term
amounts)
Change in other
receivables 15 (166) (47) (17) (14) (3) (5)
(including long-term
amounts)
Changes in trade
payables, 30 25 7 28 36 10 -
accrued expenses and
provisions
Change in other
liabilities 23 (13) (4) (15) (7) (2) 20
(including long-term
amounts)
Income tax paid (50) (26) (7) (29) (14) (4) (88)
Income tax received - - - - - - 1
Net cash from
operating activities 443 355 102 204 278 80 781
--- --- --- --- --- --- ---
Cash flows from investing activities
Acquisition of
property, plant (151) (237) (67) (83) (144) (42) (295)
and equipment
Acquisition of
intangible assets (41) (94) (27) (19) (47) (13) (73)
Change in current
investments, net (4) (76) (22) (3) (77) (22) (9)
Payments for other - (3) (1) - (2) (1) -
derivative contracts, net
Proceeds from sale of
property, 1 - - 1 - - 2
plant and equipment
Interest received 7 8 2 1 4 1 11
Proceeds from sale of
shares in - (8) (2) - (8) (2) -
consolidated company, net of
cash disposed
Net cash used in
investing activities (188) (410) (117) (103) (274) (79) (364)
---- ---- ---- ---- ---- --- ----
Cellcom Israel Ltd.
(An Israeli Corporation)
Condensed Consolidated Interim Statements of Cash Flows (cont'd)
---------------------------------------------------------------
Convenience Convenience
translation translation
into US dollar into US dollar
For the six For the six
months ended
June For the three For the three
months ended
June
months ended 30, months ended 30,
June 30,
June 30, For the year
ended
December 31,
2016 2017 2017 2016 2017 2017 2016
---- ---- ---- ---- ---- ---- ----
NIS millions US$ millions NIS millions US$millions NIS millions
------------ ------------ ------------ ----------- ------------
Cash flows from financing activities
Payments for
derivative
contracts, net (6) - - - - - (13)
Long term loans
from financial
institutions 200 200 57 200 200 57 340
Repayment of
debentures (385) (514) (147) - - - (732)
Proceeds from
issuance of
debentures, net 250 - - - - - 653
of issuance costs
Dividend paid (1) - - - - - (1)
Interest paid (92) (86) (25) - (8) (2) (185)
--- --- --- --- --- --- ----
Net cash from
(used in)
financing (34) (400) (115) 200 192 55 62
activities
---
Changes in cash
and cash
equivalents 221 (455) (130) 301 196 56 479
Cash and cash
equivalents as at
the 761 1,240 355 681 589 169 761
beginning of the period
---
Cash and cash
equivalents as at
the end 982 785 225 982 785 225 1,240
of the period
===
Cellcom Israel Ltd.
(An Israeli Corporation)
Reconciliation for Non-IFRS Measures
------------------------------------
EBITDA
The following is a reconciliation of net income to EBITDA:
Three-month period ended Year ended
June 30, December 31,
-------- ------------
2016 2017 Convenience 2016
translation
into US dollar
2017
--- ---
NIS millions US$ millions NIS millions
------------ ------------ ------------
Profit for the period....................... 44 45 13 150
Taxes on income.......................... 16 13 4 10
Financing income......................... (16) (14) (4) (46)
Financing expenses...................... 60 58 16 196
Other expenses (income)(*)......... 1 (2) - 8
Depreciation and amortization...... 132 136 39 534
Share based payments................ 1 1 - 6
--- --- --- ---
EBITDA......................................... 238 237 68 858
=== === === ===
(*) Excluding gain from the sale of Internet Rimon Israel 2009 Ltd, an indirect subsidiary
of the Company in the second quarter of 2017 and expenses related to employee voluntary
retirement plan in the second quarter of 2016.
Free cash flow
The following table shows the calculation of free cash flow:
Three-month period ended Year ended
June 30, December 31,
-------- ------------
2016 2017 Convenience 2016
translation
into US dollar
2017
--- ---
NIS millions US$ millions NIS millions
------------ ------------ ------------
Cash flows from operating 204 278 80 781
activities(*).................................
Cash flows from investing (103) (274) (79) (364)
activities.....................................
Sale of short-term tradable 2 73 21 (1)
debentures and deposits (**).....
---
Free cash flow.............................. 103 77 22 416
=== === === ===
(*) Including the effects of exchange rate fluctuations in cash and cash equivalents.
(**) Net of interest received in relation to tradable debentures.
Cellcom Israel Ltd.
(An Israeli Corporation)
Key financial and operating indicators
--------------------------------------
NIS millions unless Q1-2016 Q2-2016 Q3-2016 Q4-2016 Q1-2017 Q2-2017 FY-2016
otherwise stated
---------------- ---
Cellular service revenues 559 567 534 502 509 481 2,162
Fixed-line service revenues 264 264 276 267 279 292 1,071
Cellular equipment revenues 219 217 195 205 183 192 836
Fixed-line equipment revenues 29 30 39 60 37 39 158
Consolidation adjustments (49) (49) (52) (50) (49) (42) (200)
------------------------- --- --- --- --- --- --- ----
Total revenues 1,022 1,029 992 984 959 962 4,027
Cellular EBITDA 178 181 149 117 159 158 625
Fixed-line EBITDA 60 57 60 56 42 79 233
----------------- --- --- --- --- --- --- ---
Total EBITDA 238 238 209 173 201 237 858
Operating profit 101 104 73 32 67 102 310
Financing expenses, net 24 44 42 40 31 44 150
Profit for the period 59 44 33 14 26 45 150
Free cash flow 149 103 81 83 66 77 416
Cellular subscribers at the end 2,813 2,812 2,822 2,801 2,792 2,779 2,801
of period (in 000's)
Monthly cellular ARPU (in NIS) 65.2 66.0 62.8 59.3 60.2 57.0 63.3
Churn rate for cellular 11.1% 10.6% 10.5% 10.4% 12.0% 10.8% 42.4%
subscribers (%)
Cellcom Israel Ltd.
Disclosure for debenture holders as of June 30, 2017
----------------------------------------------------
Aggregation of the information regarding the debenture series issued by the Company (1), in million NIS
-------------------------------------------------------------------------------------------------------
Series Original Issuance Date Principal on the Date of As of 30.06.2017 As of 04.08.2017 Interest Rate (fixed) Principal
Issuance Repayment Dates Interest Repayment Dates (3) Linkage Trustee
Contact Details
--- --- ---------------
Principal Linked Principal Balance Interest Accumulated in Books Debenture Balance Value in
Books (2) Market Value Principal Balance on Trade Linked Principal Balance From To
Balance on Trade
---------------- ---
D 07/10/07 2,423.075 299.602 350.377 18.134 368.511 368.480 0.000 0.000 5.19% 01.07.13 01.07.17 July-1 Linked to CPI Hermetic Trust (1975) Ltd.
(7)(8)** Meirav Ofer Oren. 113
Hayarkon St., Tel Aviv.
Tel: 03-5274867.
03/02/08*
06/04/09*
30/03/11*
18/08/11*
--- ---------
F 20/03/12 714.802 643.322 661.999 14.663 676.662 695.238 643.322 657.329 4.60% 05.01.17 05.01.20 January-5 Linked to CPI Strauss Lazar Trust Company
(4)(5)(6) (1992) Ltd. Ori Lazar. 17
** Yizhak Sadeh St., Tel Aviv.
Tel: 03-6237777.
and July-5
--- --- ---
G 20/03/12 285.198 228.158 228.297 7.690 235.987 240.342 228.158 228.271 6.99% 05.01.17 05.01.19 January-5 Not linked Strauss Lazar Trust Company
(4)(5)(6) (1992) Ltd. Ori Lazar. 17
Yizhak Sadeh St., Tel Aviv.
Tel: 03-6237777.
and July-5
--- --- ---
H 08/07/14 949.624 949.624 836.073 9.066 845.139 970.136 949.624 838.132 1.98% 05.07.18 05.07.24 January-5 Linked to CPI Mishmeret Trust Company Ltd.
(4)(5)(7)** Rami Sebty. 48 Menachem
Begin Rd. Tel Aviv. Tel:
03-6374355.
03/02/15* and July-5
11/02/15*
--- ---------
I 08/07/14 804.010 804.010 757.083 16.050 773.133 871.306 804.010 757.783 4.14% 05.07.18 05.07.25 January-5 Not linked Mishmeret Trust Company Ltd.
(4)(5)(7)** Rami Sebty. 48 Menachem
Begin Rd. Tel Aviv. Tel:
03-6374355.
03/02/15* and July-5
11/02/15*
30/03/16*
--- ---------
J 26/09/16 103.267 103.267 102.697 1.225 103.922 107.367 103.267 102.292 2.45% 05.07.21 05.07.26 January-5 and July-5 Linked to CPI Mishmeret Trust Company Ltd.
(4)(5) Rami Sebty. 48 Menachem
Begin Rd. Tel Aviv. Tel:
03-6374355.
------- -------- ------- ------- ------- ----- ------- ------- ------- ------- ---- -------- -------- -------------------- ------------- ----------------------------
K 26/09/16 303.971 303.971 301.033 5.203 306.236 316.525 303.971 301.017 3.55% 05.07.21 05.07.26 January-5 and July-5 Not linked Mishmeret Trust Company Ltd.
(4)(5)** Rami Sebty. 48 Menachem
Begin Rd. Tel Aviv. Tel:
03-6374355.
--------- -------- ------- ------- ------- ----- ------- ------- ------- ------- ---- -------- -------- -------------------- ---------- ----------------------------
Total 5,583.947 3,331.954 3,237.559 72.031 3,309.590 3,569.394 3,032.352 2,884.824
----- --------- --------- --------- ------ --------- --------- --------- ---------
Comments:
(1) In the reporting period, the Company fulfilled all terms of the debentures. The Company also fulfilled all terms of the Indentures and loan agreements. Debentures Series F through K and loan agreements financial covenants - as of June 30, 2017 the net leverage (net debt to EBITDA excluding one time events ratio- see definition in the Company's annual report for the year ended December 31, 2016 on Form 20-F, under "Item 5. Operating and Financial Review and Prospects - B. Liquidity and Capital Resources - Debt Service- Public Debentures") was 3.24. In the reporting period, no cause for early repayment occurred. (2) Including interest accumulated in the books. (3) Semi annual payments, excluding Series D debentures in which the payments are annual. (4) Regarding debenture Series F through K and loan agreements, the Company undertook not to create any pledge on its assets, as long as debentures or loans are not fully repaid, subject to certain exclusions. (5) Regarding debenture Series F through K and loan agreements, the Company has the right for early redemption under certain terms (see the Company's annual report for the year ended December 31, 2016 on Form 20-F, under "Item 5. Operating and Financial Review and Prospects- B. Liquidity and Capital Resources - Debt Service- Public Debentures" and "-Other Credit Facilities" and this report under "- Other developments during the second quarter of 2017 and subsequent to the end of the reporting period - Debt raising". (6) Regarding debenture Series F and G - in June 2013, following a second decrease of the Company's debenture rating since their issuance, the annual interest rate has been increased by 0.25% to 4.60% and 6.99%, respectively, beginning July 5, 2013. (7) In February 2016, pursuant to an exchange offer of the Company's Series H and I debentures for a portion of the Company's outstanding Series D and E debentures, respectively, the Company exchanged approximately NIS 555 million principal amount of Series D debentures with approximately NIS 844 million principal amount of Series H debentures, and approximately NIS 272 million principal amount of Series E debentures with approximately NIS 335 million principal amount of Series I debentures. Series D and E debentures were fully repaid in July 2017 (after the end of the reporting period) and in January 2017, respectively. (8) On July 5, 2017, after the end of the reporting period, the Company repaid principal payments of approximately NIS 350 million of Series D debentures, and Series D debentures was fully repaid.
(*) On these dates additional debentures of the series were issued, the information in the table refers to the full series.
(**) As of June 30, 2017, debentures Series D, F, H, I and K are material, which represent 5% or more of the total liabilities of the Company, as presented in the financial statements.
Cellcom Israel Ltd.
Disclosure for debenture holders as of June 30, 2017 (cont.)
Debentures Rating Details*
Rating assigned upon Recent date of rating as of Additional ratings
issuance of the Series 04.08.2017 between original
issuance and the
recent date of
rating as of
Series Rating Company Rating as of 30.06.2017 (1) Rating as of 04.08.2017 04.08.2017 (2)
------ -------------- -------------------------- ----------------------- ---------------------- --------------------------- ------------------
Rating
------
1/2008, 10/2008, 3/2009,
9/2010, 8/2011, 1/2012,
3/2012, 5/2012,
11/2012, 6/2013,
6/2014, 8/2014,
01/2015, 9/2015,
3/2016, 08/2016,
D S&P Maalot A+ A+ AA- 06/2017 06/2017 AA-, AA,AA-,
A+ (2)
--- -----
F S&P Maalot A+ A+ AA 06/2017 5/2012, 11/2012, 6/2013,
6/2014, 8/2014, 1/2015,
9/2015, 3/2016,
08/2016, 06/2017 AA,AA-,A+ (2)
--- ---------- --- --- --- ------- ------------------------ ------------
G S&P Maalot A+ A+ AA 06/2017 5/2012, 11/2012, 6/2013,
6/2014, 8/2014, 1/2015,
9/2015, 3/2016,
08/2016, 06/2017 AA,AA-,A+ (2)
--- ---------- --- --- --- ------- ------------------------ ------------
H S&P Maalot A+ A+ A+ 06/2017 6/2014, 8/2014, 1/2015,
9/2015, 3/2016,
08/2016, 06/2017 A+ (2)
--- ---------- --- --- --- ------- ------------------------ -----
I S&P Maalot A+ A+ A+ 06/2017 6/2014, 8/2014, 1/2015,
9/2015, 3/2016,
08/2016, 06/2017 A+ (2)
--- ---------- --- --- --- ------- ---------------- -----
J S&P Maalot A+ A+ A+ 06/2017 08/2016, 06/2017 A+ (2)
--- ---------- --- --- --- ------- ---------------- -----
K S&P Maalot A+ A+ A+ 06/2017 08/2016, 06/2017 A+ (2)
--- ---------- --- --- --- ------- ---------------- -----
(1) In June 2017, S&P Maalot affirmed the Company's rating of "ilA+/stable".
(2) In October 2008, S&P Maalot issued a notice that the AA- rating for debentures issued by the Company is in the process of recheck with stable implications (Credit Watch Stable). This process was withdrawn upon assignment of AA rating in March 2009. In August 2011, S&P Maalot issued a notice that the AA rating for debentures issued by the Company is in the process of recheck with negative implications (Credit Watch Negative). In May 2012, S&P Maalot updated the Company's rating from an "ilAA/negative" to an "ilAA-/negative". In November 2012, S&P Maalot affirmed the Company's rating of "ilAA-/negative". In June 2013, S&P Maalot updated the Company's rating from an "ilAA-/negative" to an "ilA+/stable". In June 2014, August 2014, January 2015, September 2015, March 2016, August 2016 and June 2017, S&P Maalot affirmed the Company's rating of "ilA+/stable". For details regarding the rating of the debentures see the S&P Maalot report dated June 1, 2017.
* A securities rating is not a recommendation to buy, sell or hold securities. Ratings may be subject to suspension, revision or withdrawal at any time, and each rating should be evaluated independently of any other rating.
Cellcom Israel Ltd.
Summary of Financial Undertakings (according to repayment dates) as of June 30, 2017
a. Debentures issued to the public by the Company and held by the public, excluding such debentures held by the Company's parent company, by a controlling shareholder, by companies controlled by them, or by companies controlled by the Company, based on the Company's "Solo" financial data (in thousand NIS).
Principal payments Gross interest
payments (without
deduction of
tax)
---
ILS
linked ILS not Euro Dollar Other
to
CPI
linked to
CPI
--- ---
First
year 568,913 141,894 - - - 129,437
-----
Second
year 332,963 165,416 - - - 88,506
------
Third
year 332,963 80,279 - - - 66,877
-----
Fourth
year 113,151 80,279 - - - 51,199
------
Fifth
year
and
on 705,087 862,011 - - - 124,113
-----
Total 2,053,077 1,329,879 - - - 460,132
----- --------- --------- --- --- --- -------
b. Private debentures and other non-bank credit, excluding such debentures held by the Company's parent company, by a controlling shareholder, by companies controlled by them, or by companies controlled by the Company, based on the Company's "Solo" financial data (in thousand NIS).
Principal payments Gross interest
payments (without
deduction of
tax)
---
ILS
linked ILS not Euro Dollar Other
to CPI linked to
CPI
--- ---
First year - 78,000 - - - 26,260
----------
Second
year - 128,000 - - - 22,588
------
Third year - 128,000 - - - 16,389
----------
Fourth
year - 128,000 - - - 10,130
------
Fifth year
and on - 78,000 - - - 3,922
----------
Total - 540,000 - - - 79,289
----- --- ------- --- --- --- ------
c. Credit from banks in Israel based on the Company's "Solo" financial data (in thousand NIS) - None.
d. Credit from banks abroad based on the Company's "Solo" financial data (in thousand NIS) - None.
Cellcom Israel Ltd.
Summary of Financial Undertakings (according to repayment dates) as of June 30, 2017 (cont.)
e. Total of sections a - d above, total credit from banks, non-bank credit and debentures based on the Company's "Solo" financial data (in thousand NIS).
Principal payments Gross interest
payments
(without
deduction of
tax)
---
ILS
linked ILS not Euro Dollar Other
to
CPI linked to
CPI
--- ---
First
year 568,913 219,894 - - - 155,697
-----
Second
year 332,963 293,416 - - - 111,094
------
Third
year 332,963 208,279 - - - 83,266
-----
Fourth
year 113,151 208,279 - - - 61,329
------
Fifth
year
and
on 705,087 940,011 - - - 128,035
-----
Total 2,053,077 1,869,879 - - - 539,421
----- --------- --------- --- --- --- -------
f. Out of the balance sheet Credit exposure based on the Company's "Solo" financial data - None.
g. Out of the balance sheet Credit exposure of all the Company's consolidated companies, excluding companies that are reporting corporations and excluding the Company's data presented in section f above (in thousand NIS) - None.
h. Total balances of the credit from banks, non-bank credit and debentures of all the consolidated companies, excluding companies that are reporting corporations and excluding Company's data presented in sections a - d above (in thousand NIS) - None.
i. Total balances of credit granted to the Company by the parent company or a controlling shareholder and balances of debentures offered by the Company held by the parent company or the controlling shareholder (in thousand NIS) - None.
j. Total balances of credit granted to the Company by companies held by the parent company or the controlling shareholder, which are not controlled by the Company, and balances of debentures offered by the Company held by companies held by the parent company or the controlling shareholder, which are not controlled by the Company (in thousand NIS).
Principal payments Gross interest
payments
(without
deduction of
tax)
---
ILS linked ILS not Euro Dollar Other
to CPI linked to
CPI
--- ---
First
year 1,810 705 - - - 524
-----
Second
year 1,343 544 - - - 374
------
Third
year 1,343 122 - - - 301
-----
Fourth
year 803 122 - - - 258
------
Fifth
year
and
on 6,347 4,767 - - - 864
-----
Total 11,646 6,260 - - - 2,321
----- ------ ----- --- --- --- -----
k. Total balances of credit granted to the Company by consolidated companies and balances of debentures offered by the Company held by the consolidated companies (in thousand NIS) - None.
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SOURCE Cellcom Israel Ltd.
