Cellcom Israel Ltd.

Cellcom Israel Announces First Quarter 2017 Results
Cellcom Israel concludes the first quarter of 2017 with net income of NIS 26 million and EBITDA1 of NIS 201 million.
Nir Sztern, Cellcom CEO said: "We continue the quarterly growth trend of Cellcom tv subscribers, and in the first quarter, approximately 13,000 households who chose the best television in Israel joined the service. In the field of Internet infrastructure we also maintained our position as significant recruiters in the market with the addition of 17,000 new households".
"Revenues for the first quarter of 2017 were affected by the continued competition and price erosion in service revenues in the cellular segment and a decrease in revenues from national roaming compared to the first quarter of last year. The decrease in service revenues in the cellular segment was partially offset by growth in service revenues from the fixed-line segment in respect of television and wholesale market services".

NETANYA, Israel, May 24, 2017 /PRNewswire/ --

First Quarter 2017 Highlights (compared to first quarter of 2016):

  • Total Revenues totaled NIS 959 million ($264 million) compared to NIS 1,022 million ($281 million) in the first quarter last year, a decrease of 6.2%
  • Service revenues totaled NIS 739 million ($203 million) compared to NIS 774 million ($213 million) in the first quarter last year, a decrease of 4.5%
  • EBITDA1 totaled NIS 201 million ($55 million) compared to NIS 238 million ($66 million) in the first quarter last year, a decrease of 15.5%
  • EBITDA margin 21.0%, a decrease from 23.3% in the first quarter last year
  • Operating income totaled NIS 67 million ($19 million) compared to NIS 101 million ($28 million) in the first quarter last year, a decrease of 33.7%
  • Net income totaled NIS 26 million ($7 million) compared to NIS 59 million ($16 million) in the first quarter last year, a decrease of 55.9%
  • Free cash flow1 totaled NIS 66 million ($18 million) compared to NIS 149 million ($41 million) in the first quarter last year, a decrease of 55.7%
  • Cellular subscriber base totaled approximately 2.792 million subscribers (at the end of March 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 first quarter of 2017:

"Revenues for the first quarter of 2017 were affected by the continued competition and price erosion in service revenues in the cellular segment and a decrease in revenues from national roaming compared to the first quarter of last year. The decrease in service revenues in the cellular segment was partially offset by growth in service revenues from the fixed-line segment in respect of television and wholesale market services. In the first quarter of the year, the equipment revenues also decreased due to postponement of new handsets launches. In the second quarter of the year, we see an increase in activity of the end-user equipment in the cellular segment, with the cancellation of the purchase tax on this equipment and the successful launch of the Galaxy S8.

In the first quarter of 2017 again the intensified competition is reflected in the Company's results. In this quarter, we received all the required approvals for the network sharing agreements including the network sharing agreement with Golan which entered into force and guarantees us aggregate consideration of approximately NIS 2 billion over the coming decade. This is a significant achievement for the Company in the competitive market in which it operates. The effect of the network sharing agreement with Golan will be reflected gradually from the second quarter over the term of the agreement.

We continue the quarterly growth trend of Cellcom tv subscribers, and in the first quarter, approximately 13,000 households who chose the best television in Israel joined the service. In the field of Internet infrastructure we also maintained our position as significant recruiters in the market with the addition of 17,000 new households.

I am proud of our position in the television market as an innovative and quality company which provides value to the customer. In the recent weeks we announced that HBO content will be added to Cellcom tv at no additional cost. In addition we announced the possibility of viewing and recording from all smart TV screens and Android TV and launched the first Quattro package in Israel - all communications services in one package which includes television, three cellular lines, internet (connectivity and infrastructure) and a landline telephone service at a worthwhile and attractive price to the customer. This move is another step in our long-term strategy as a communications group that provides comprehensive service to its customers.

We continue to develop new growth engines and recently launched Cyber 360, an advanced comprehensive security solution for the business, that enables end-to-end protection of the enterprise through an innovative digital interface under control and monitoring of the business owner. The cyber-attack that took place two weeks ago illustrates the need for comprehensive cyber solutions for businesses."

Shlomi Fruhling, Chief Financial Officer, said:

"In the first quarter of 2017 we continued to recruit customers for Cellcom tv, the wholesale market service and the triple play service. Revenues from services in the fixed-line segment continue to grow following vast recruitment of subscribers. In the cellular segment, we experienced continued high level of competition which reflected in a continued erosion of service revenues from customers. In addition, we recorded a decrease in revenues from national roaming services compared to the first quarter of 2016.

As of the first quarter of 2017 the Company applies International Financial Reporting Standard (IFRS 15) and capitalizes part of the salaries expenses and commissions related to customer acquisition costs. The application of this standard is expected to have a material positive effect on the Company's financial results for the year.

Compared to the previous quarter, we recorded an increase of 2.8% in service revenues and a 16.2% improvement in EBITDA, as a result of the continued implementation of the growth strategy in the fixed-line segment, revenues' enhancement activity, an increase in revenues from national roaming services in the cellular segment and the application of International Financial Reporting Standard (IFRS 15).

Free cash flow for the first quarter of 2017 totaled NIS 66 million, a 55.7% decrease compared to the first quarter of 2016. The decrease in free cash flow resulted mainly from a one-time tax refund received in the first quarter of 2016 and from higher cash capital expenditures in fixed assets and intangible assets in the first quarter of 2017 compared to the first quarter of 2016. 

The Company's Board of Directors decided not to distribute a dividend for the first 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 first quarter of 2017.

The Company reported that revenues for the first quarter of 2017 totaled NIS 959 million ($264 million); EBITDA for the first quarter of 2017 totaled NIS 201 million ($55 million), or 21.0% of total revenues; net income for the first quarter of 2017 totaled NIS 26 million ($7 million). Basic earnings per share for the first quarter of 2017 totaled NIS 0.25 ($0.07).

MAIN CONSOLIDATED FINANCIAL RESULTS:


Q1/2017

Q1/2016

Change%

Q1/2017

Q1/2016





US$ million


NIS million

(convenience translation)

Total revenues

959

1,022

(6.2%)

264

281

Operating Income

67

101

(33.7%)

19

28

Net Income

26

59

(55.9%)

7

16

Free cash flow

66

149

(55.7%)

18

41

EBITDA

201

238

(15.5%)

55

66

EBITDA, as percent of total revenues

21.0%

23.3%

(9.9%)



MAIN FINANCIAL DATA BY OPERATING SEGMENTS:


Cellular (*)

Fixed-line (**)

Consolidation
adjustments

(***)

Consolidated results

NIS million

Q1'17

Q1'16

Change

%

Q1'17

Q1'16

Change

%

Q1'17

Q1'16

Q1'17

Q1'16

Change

%

Total revenues

692

778

(11.1%)

316

293

7.8%

(49)

(49)

959

1,022

(6.2%)

Service revenues

509

559

(8.9%)

279

264

5.7%

(49)

(49)

739

774

(4.5%)

Equipment revenues

183

219

(16.4%)

37

29

27.6%

-

-

220

248

(11.3%)

EBITDA

159

178

(10.7%)

42

60

(30.0%)

-

-

201

238

(15.5%)

EBITDA, as percent of total revenues

23.0%

22.9%

0.4%

13.3%

20.5%

(35.1%)



21.0%

23.3%

(9.9%)

 

(*)

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 (FIRST QUARTER OF 2017 COMPARED TO FIRST QUARTER OF 2016):

Revenues for the first quarter of 2017 decreased 6.2% totaling NIS 959 million ($264 million), compared to NIS 1,022 million ($281 million) in the first quarter last year. The decrease in revenues is attributed to a 4.5% decrease in service revenues and an 11.3% decrease in equipment revenues.

Service revenues totaled NIS 739 million ($203 million) in the first quarter of 2017, a 4.5% decrease from NIS 774 million ($213 million) in the first quarter last year.

Service revenues in the cellular segment totaled NIS 509 million ($140 million) in the first quarter of 2017, an 8.9% decrease from NIS 559 million ($154 million) in the first quarter last year. This decrease resulted mainly from a decrease in cellular services revenues and from a decrease in revenues from national roaming services. 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 aggressive competition in the cellular market.

Service revenues in the fixed-line segment totaled NIS 279 million ($77 million) in the first quarter of 2017, a 5.7% increase from NIS 264 million ($73 million) in the first quarter last year. This increase resulted mainly from an increase in revenues from Internet and TV services.

Equipment revenues totaled NIS 220 million ($61 million) in the first quarter of 2017, an 11.3% decrease compared to NIS 248 million ($68 million) in the first 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 first quarter of 2017 totaled NIS 665 million ($183 million), compared to NIS 670 million ($184 million) in the first quarter of 2016, a 0.7% decrease. This decrease resulted mainly from a decrease in the quantity of end user equipment sold in the cellular segment. 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 first quarter of 2017 decreased 16.5% to NIS 294 million ($81 million), compared to NIS 352 million ($97 million) in the first quarter of 2016. Gross profit margin for the first quarter of 2017 amounted to 30.7%, down from 34.4% in the first quarter of 2016.

Selling, Marketing, General and Administrative Expenses ("SG&A Expenses") for the first quarter of 2017 decreased 9.6% to NIS 227 million ($62 million), compared to NIS 251 million ($69 million) in the first 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) as of the first quarter of 2017.

Operating income for the first quarter of 2017 decreased by 33.7% to NIS 67 million ($19 million) from NIS 101 million ($28 million) in the first quarter of 2016. The decrease in the operating income resulted mainly from a decrease in revenues from cellular services. The decrease was partially offset by a decrease in selling and marketing expenses in the amount of NIS 28 million ($8 million) 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) as of the first quarter of 2017.

EBITDA for the first quarter of 2017 decreased by 15.5% totaling NIS 201 million ($55 million) compared to NIS 238 million ($66 million) in the first quarter of 2016. EBITDA as a percent of revenues for the first quarter of 2017 totaled 21.0%, down from 23.3% in the first quarter of 2016. The decrease in EBITDA resulted mainly from the ongoing erosion in service revenues. The decrease was partially offset by a decrease in selling and marketing 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) as of the first quarter of 2017.

Cellular segment EBITDA for the first quarter of 2017 totaled NIS 159 million ($44 million), compared to NIS 178 million ($49 million) in the first quarter last year, a decrease of 10.7%, which resulted mainly from a decrease in service revenues as mentioned above. Fixed-line segment EBITDA for the first quarter of 2017 totaled NIS 42 million ($12 million), compared to NIS 60 million ($17 million) in the first quarter last year, a 30.0% decrease, mainly as a result of an erosion in the internet field profitability.

Financing expenses, net for the first quarter of 2017 increased 29.2% and totaled NIS 31 million ($9 million), compared to NIS 24 million ($7 million) in the first quarter of 2016. The increase resulted mainly from lower deflation of the Israeli Consumer Price Index in the first quarter of 2017 compared to the first quarter of 2016.

Net Income for the first quarter of 2017 totaled NIS 26 million ($7 million), compared to NIS 59 million ($16 million) in the first quarter of 2016, a 55.9% decrease.

Basic earnings per share for the first quarter of 2017 totaled NIS 0.25 ($0.07), compared to NIS 0.59 ($0.16) in the first quarter last year.

OPERATING REVIEW

MAIN PERFORMANCE INDICATORS - CELLULAR SEGMENT:


Q1/2017

Q1/2016

Change (%)

Cellular subscribers at the end of period (in thousands)

2,792

2,813

(0.7%)

Churn Rate for cellular subscribers (in %)

12.0%

11.1%

8.1%

Monthly cellular ARPU (in NIS)

60.2

65.2

(7.7%)

Cellular subscriber base - at the end of the first quarter of 2017 the Company had approximately 2.792 million cellular subscribers. During the first quarter of 2017 the Company's cellular subscriber base decreased by approximately 9,000 net cellular subscribers.

Cellular Churn Rate for the first quarter of 2017 totaled to 12.0%, compared to 11.1% in the first quarter last year.

The monthly cellular Average Revenue per User ("ARPU") for the first quarter of 2017 totaled NIS 60.2 ($16.6), compared to NIS 65.2 ($18.0) in the first quarter last year. The decrease in ARPU resulted, among others, 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:


Q1/2017

Q1/2016

Change (%)

Internet infrastructure field-  households at the end of period  (in thousands)

173

121

43.0%

TV  field-  households at the end of period  (in thousands)

124

75

65.3%

In the first quarter of 2017, the Company's households base in respect of the internet infrastructure field increased by approximately 17,000 net households (in the fourth quarter of 2016 the Company's internet infrastructure households base was 156,000 and not 163,000, as previously reported), 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 first quarter of 2017, after elimination of a loan provided to Golan Telecom in the amount of NIS 130 million, as previously reported, totaled NIS 66 million ($18 million), compared to NIS 149 million ($41 million) in the first quarter of 2016, a 55.7% decrease. The decrease in free cash flow, resulted mainly from a one-time tax refund received in the first quarter of 2016 and from higher cash capital expenditures in fixed assets and intangible assets in the first quarter of 2017 compared to the first quarter of 2016.

Total Equity

Total Equity as of March 31, 2017 amounted to NIS 1,367 million ($376 million) primarily consisting of undistributed accumulated retained earnings of the Company.

Cash Capital Expenditures in Fixed Assets and Intangible Assets

During the first quarter of 2017, the Company invested NIS 140 million ($39 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)), compared to NIS 90 million ($25 million) in the first quarter 2016.

Dividend

On May 23, 2017, the Company's Board of Directors decided not to declare a cash dividend for the first 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 March 31, 2017, see "Disclosure for Debenture Holders" section in this press release.

Loans from Financial Institutions

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 FIRST QUARTER OF 2017 AND SUBSEQUENT TO THE END OF THE REPORTING PERIOD

Network Sharing Agreements

Following previous reports regarding the Company's network sharing and hosting services agreements with Marathon 018 Xfone Ltd., or Xfone, and with Electra Consumer Products Ltd., or Electra, in March and April 2017, respectively, both agreements came into effect after their respective preliminary conditions were met and the Company's agreement with Electra was adopted by Golan Telecom Ltd., or Golan Telecom, upon completion of its share capital being purchased by Electra. In April 2017, Xfone notified the Company that the Ministry of Communications granted Xfone a non-exclusive general license for the provision of cellular services.

For additional details see the Company's 2016 Annual Report 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 - Networks and Infrastructure - Cellular Segment- Network Sharing Agreements", "- Competition – Cellular" and "- Government Regulation – Cellular Segment - Additional MNOs" and the Company's current reports on Form 6-K dated March 20 2017 and April 5, 2017.

Sale of Indirect Subsidiary

In May 2017, a wholly owned indirect subsidiary of the Company, 013 Netvision Ltd., or Netvision, has entered an agreement for the sale of its holdings in Internet Rimon Israel 2009 Ltd., or Rimon, a subsidiary of Netvision, to the other shareholders of Rimon. The agreement is subject to regulatory approvals and contains customary terms and conditions. The consideration shall be paid to Netvision in several installments over a period of two years from the closing of the transaction. The Company expects to record a capital gain of approximately NIS 10-15 million following the consummation of the agreement.

CONFERENCE CALL DETAILS

The Company will be hosting a conference call regarding its results for the first quarter of 2017 on Wednesday, May 24, 2017 at 09:30 am ET, 06:30 am PT, 14:30 UK time, 16:30 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: 09:30 am Eastern Time; 06:30 am Pacific Time; 14:30 UK Time; 16:30 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 2.792 million cellular subscribers (as at March 31, 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 3.632 = US$ 1 as published by the Bank of Israel for March 31, 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); 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

Shlomi Fruhling

Chief Financial Officer

investors@cellcom.co.il

Tel: +972 52 998 9735

Investor Relations Contact

Ehud Helft

GK Investor & Public Relations

cellcom@GKIR.com

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





March 31,


March 31,


March 31,


December 31,



2016


2017


2017


2016



NIS millions


US$ millions


NIS millions










Assets









Cash and cash equivalents


681


589


162


1,240

Current investments, including derivatives


282


283


78


284

Trade receivables


1,299


1,293


356


1,325

Current tax assets


-


47


13


25

Other receivables


61


71


20


61

Inventory


78


67


18


64










Total current assets


2,401


2,350


647


2,999










Trade and other receivables


808


914


252


796

Property, plant and equipment, net


1,696


1,628


448


1,659

Intangible assets and others, net


1,221


1,230


339


1,207

Deferred tax assets


8


1


-


1










Total non- current assets


3,733


3,773


1,039


3,663










Total assets


6,134


6,123


1,686


6,662










Liabilities









Current maturities of debentures


858


709


195


863

Trade payables and accrued expenses


636


639


176


675

Current tax liabilities


57


1


-


-

Provisions


107


101


28


108

Other payables, including derivatives


272


243


67


279










Total current liabilities


1,930


1,693


466


1,925



















Long-term loans from financial institutions


-


340


94


340

Debentures


2,784


2,511


692


2,866

Provisions


20


30


8


30

Other long-term liabilities


28


33


9


31

Liability for employee rights upon retirement, net


12


12


3


12

Deferred tax liabilities


115


137


38


118










Total non- current liabilities


2,959


3,063


844


3,397










Total liabilities


4,889


4,756


1,310


5,322










Equity attributable to owners of the Company









Share capital


1


1


-


1

Cash flow hedge reserve


(2)


(1)


-


(1)

Retained earnings


1,230


1,348


371


1,322










Non-controlling interest


16


19


5


18










Total equity


1,245


1,367


376


1,340










Total liabilities and equity


6,134


6,123


1,686


6,662

 

 

 

Cellcom Israel Ltd.

(An Israeli Corporation)


Condensed Consolidated Interim Statements of Income
















Convenience









translation







into US dollar





Three-month


Three- month





period ended


period ended


Year ended



March 31,


  March 31,


 December 31,



2016


2017


2017


2016



NIS millions


US$ millions


NIS millions










Revenues


1,022


959


264


4,027

Cost of revenues


(670)


(665)


(183)


(2,702)










Gross profit


352


294


81


1,325










Selling and marketing expenses


(148)


(114)


(31)


(574)

General and administrative expenses


(103)


(113)


(31)


(420)

Other expenses, net


-


-


-


(21)










Operating profit


101


67


19


310










Financing income


14


16


4


46

Financing expenses


(38)


(47)


(13)


(196)

Financing expenses, net


(24)


(31)


(9)


(150)










Profit before taxes on income


77


36


10


160










Taxes on income


(18)


(10)


(3)


(10)

Profit for the period


59


26


7


150

Attributable to:









Owners of the Company


58


25


7


148

Non-controlling interests


1


1


-


2

Profit for the period


59


26


7


150










Earnings per share









Basic earnings per share (in NIS)


0.59


0.25


0.07


1.47










Diluted earnings per share (in NIS)


0.59


0.25


0.07


1.47










Weighted-average number of shares used
in the calculation of basic earnings per
share (in shares)


100,604,578


100,604,795


100,604,795


100,604,578










Weighted-average number of shares used
in the calculation of diluted earnings per
share (in shares)


100,604,578


101,390,301


101,390,301


100,698,306

 

 

 

Cellcom Israel Ltd.

(An Israeli Corporation)


Condensed Consolidated Interim Statements of Cash Flows
















Convenience









translation









into US dollar





Three-month


Three- month





period ended


 period ended


Year ended



March 31,


 March 31,


December 31,



2016


2017


2017


2016



NIS millions


US$ millions


NIS millions










Cash flows from operating activities









Profit for the period


59


26


7


150

Adjustments for: 









Depreciation and amortization


135


133


37


534

Share based payments


2


1


-


6

Gain on sale of property, plant and equipment


1


-


-


10

Income tax expense


18


10


3


10

Financing expenses, net


24


31


9


150










Changes in operating assets and liabilities:









Change in inventory


7


(3)


(1)


21

Change in trade receivables (including long-term amounts)


(58)


60


16


(28)

Change in other receivables (including long-term amounts)


32


(152)


(42)


(5)

Change in trade payables, accrued expenses and provisions


2


(11)


(3)


-

Change in other liabilities (including long-term amounts)


38


(6)


(2)


20

Income tax paid


(21)


(12)


(3)


(88)

Income tax received


-


-


-


1

Net cash from operating activities


239


77


21


781










Cash flows from investing activities









Acquisition of property, plant, and equipment


(68)


(93)


(25)


(295)

Additions to intangible assets and others


(22)


(47)


(13)


(73)

Change in current investments, net


(1)


1


-


(9)

Payments for other derivative contracts, net


-


(1)


-


-

Proceeds from sale of property, plant and equipment


-


-


-


2

Interest received 


6


4


1


11

Net cash used in investing activities


(85)


(136)


(37)


(364)

 

 

 

Cellcom Israel Ltd.

(An Israeli Corporation)


Condensed Consolidated Interim Statements of Cash Flows (cont'd)
















Convenience









translation









into US dollar





Three-month


Three- month





period ended


 period ended


Year ended



March 31,


March 31,


December 31,



2016


2017


2017


2016



NIS millions


US$ millions


NIS millions










Cash flows from financing activities









Payments for derivative contracts, net


(6)


-


-


(13)

Receipt of long-term loans from financial institutions


-


-


-


340

Repayment of debentures


(385)


(514)


(142)


(732)

Proceeds from issuance of debentures, net of issuance costs


250


-


-


653

Dividend paid


(1)


-


-


(1)

Interest paid


(92)


(78)


(21)


(185)










Net cash from (used in) financing activities


(234)


(592)


(163)


62










Changes in cash and cash equivalents


(80)


(651)


(179)


479










Cash and cash equivalents as at the beginning of the period


761


1,240


341


761










Cash and cash equivalents as at the end of the period


681


589


162


1,240

 

 

 

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

March 31,

Year ended

December 31,


2016

2017

Convenience

translation

into US dollar

2017

2016


NIS millions

US$ millions

NIS millions

Profit for the period

59

26

7

150

Taxes on income

18

10

3

10

Financing income

(14)

(16)

(4)

(46)

Financing expenses

38

47

13

196

Other expenses

-

-

-

8

Depreciation and amortization

135

133

36

534

Share based payments

2

1

-

6

EBITDA

238

201

55

858
















Free cash flow




The following table shows the calculation of free cash flow:





Three-month period ended

March 31,

Year ended

December 31,


2016

2017

Convenience

translation

into US dollar

2017

2016


NIS millions

US$ millions

NIS millions

Cash flows from operating
   activities(*)

239

77

21

781

Loan to Golan Telecom

-

130

36

-

Cash flows from investing
  activities

(90)

(136)

(37)

(364)

Sale of short-term tradable
  debentures and deposits (**)

-

(5)

(2)

(1)

Free cash flow

149

66

18

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
otherwise stated

Q1-2016

Q2-2016

Q3-2016

Q4-2016

Q1-2017

FY-2016








Cellular service revenues

559

567

534

502

509

2,162

Fixed-line service revenues

264

264

276

267

279

1,071








Cellular equipment revenues

219

217

195

205

183

836

Fixed-line equipment revenues

29

30

39

60

37

158








Consolidation adjustments

(49)

(49)

(52)

(50)

(49)

(200)

Total revenues

1,022

1,029

992

984

959

4,027








Cellular EBITDA

178

181

149

117

159

625

Fixed-line EBITDA

60

57

60

56

42

233

Total EBITDA

238

238

209

173

201

858








Operating profit

101

104

73

32

67

310

Financing expenses, net

24

44

42

40

31

150

Profit for the period

59

44

33

14

26

150








Free cash flow

149

103

81

83

66

416








Cellular subscribers at the end
of period (in 000's)

2,813

2,812

2,822

2,801

2,792

2,801

Monthly cellular ARPU (in NIS)

65.2

66.0

62.8

59.3

60.2

63.3

Churn rate for cellular
subscribers (%)

11.1%

10.6%

10.5%

10.4%

12.0%

42.4%

 

 

 

Cellcom Israel Ltd.


Disclosure for debenture holders as of March 31, 2017


Aggregation of the information regarding the debenture series issued by the Company (1), in million NIS


Series(8)

Original Issuance Date

Principal on the Date of Issuance

As of 31.03.2017

As of 23.05.2017

Interest Rate (fixed)

Principal Repayment Dates

Interest Repayment Dates (3)

Linkage

Trustee

Contact Details

Principal

Balance on Trade

Linked Principal Balance

Interest Accumulated in Books

Debenture Balance   Value in Books (2)

Market Value

Principal Balance on Trade

Linked Principal Balance

From

To

D (7)**

07/10/07

03/02/08*

06/04/09*

30/03/11*

18/08/11*

2,423.075

299.602

347.668

13.479

361.147

364.795

299.602

349.120

5.19%

01.07.13

01.07.17

July-1

Linked to CPI

Hermetic Trust (1975) Ltd. Meirav Ofer Oren. 113 Hayarkon St., Tel Aviv. Tel: 03-5274867.

F (4)(5)(6) **

20/03/12

714.802

643.322

656.197

7.018

663.215

703.279

643.322

659.398

4.60%

05.01.17

05.01.20

January-5

and July-5

Linked to CPI

Strauss Lazar Trust Company (1992) Ltd. Ori Lazar. 17 Yizhak Sadeh St., Tel Aviv. Tel: 03- 6237777.

G (4)(5)(6)

20/03/12

285.198

228.158

228.307

3.714

232.021

247.232

228.158

228.293

6.99%

05.01.17

05.01.19

January-5

and July-5

Not linked

Strauss Lazar Trust Company (1992) Ltd. Ori Lazar. 17 Yizhak Sadeh St., Tel Aviv. Tel: 03- 6237777.

H (4)(5)(7)**

08/07/14

03/02/15*

11/02/15*

949.624

949.624

830.022

4.379

834.401

968.711

949.624

834.062

1.98%

05.07.18

05.07.24

January-5

and July-5

Linked to CPI

Mishmeret Trust Company Ltd. Rami Sebty. 48 Menachem Begin Rd. Tel Aviv. Tel: 03-6374355.

I (4)(5)(7)**

08/07/14

03/02/15*

11/02/15*

30/03/16*

804.010

804.010

754.941

7.752

762.693

872.914

804.010

756.360

4.14%

05.07.18

05.07.25

January-5 

and July-5

Not linked

Mishmeret Trust Company Ltd. Rami Sebty. 48 Menachem Begin Rd. Tel Aviv. Tel: 03-6374355.

J (4)(5)

26/09/16

103.267

103.267

102.257

0.589

102.846

107.078

103.267

102.280

2.45%

05.07.21

05.07.26

January-5 and July-5

Linked to CPI

Mishmeret Trust Company Ltd. Rami Sebty. 48 Menachem Begin Rd. Tel Aviv. Tel: 03-6374355.

K (4)(5)**

26/09/16

303.971

303.971

300.926

2.513

303.439

313.637

303.971

300.995

3.55%

05.07.21

05.07.26

January-5 and July-5

Not linked

Mishmeret Trust Company Ltd. Rami Sebty. 48 Menachem Begin Rd. Tel Aviv. Tel: 03-6374355.

Total


5,583.947

3,331.954

3,220.318

39.444

3,259.762

3,577.646

3,331.954

3,230.508







 

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 financial and loan agreements covenants - as of March 31, 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 3.30. 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". (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 (Series E debentures were fully repaid in January 2017), 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. (8) In January 2017, debentures Series B and E were fully repaid.

(*)

On these dates additional debentures of the series were issued, the information in the table refers to the full series.

(**)

As of March 31, 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 March 31, 2017 (cont.)


Debentures Rating Details* 


Series

Rating Company

Rating as of 31.03.2017 (1)

Rating as of 23.05.2017

Rating assigned upon issuance of the Series

Recent date of rating as of 23.05.2017

Additional ratings between original issuance and the recent date of rating as of 23.05.2017 (2)


Rating

D

S&P Maalot

A+

A+

AA-

08/2016

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

AA-, AA,AA-,

A+ (2)

F

S&P Maalot

A+

A+

AA

08/2016

5/2012, 11/2012, 6/2013, 6/2014, 8/2014, 1/2015, 9/2015, 3/2016, 08/2016

AA,AA-,A+ (2)

G

S&P Maalot

A+

A+

AA

08/2016

5/2012, 11/2012, 6/2013, 6/2014, 8/2014, 1/2015, 9/2015, 3/2016, 08/2016

AA,AA-,A+ (2)

H

S&P Maalot

A+

A+

A+

08/2016

6/2014, 8/2014, 1/2015, 9/2015, 3/2016, 08/2016

A+ (2)

I

S&P Maalot

A+

A+

A+

08/2016

6/2014, 8/2014, 1/2015, 9/2015, 3/2016, 08/2016

A+ (2)

J

S&P Maalot

A+

A+

A+

08/2016

08/2016

A+ (2)

K

S&P Maalot

A+

A+

A+

08/2016

08/2016

A+ (2)

(1)     In August 2016, 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 and August 2016, 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 August 23, 2016.

* 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 March 31, 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
to CPI

ILS not
linked to
CPI

Euro

Dollar

Other

First year

563,709

142,029

-

-

-

128,875

Second year

330,901

165,457

-

-

-

88,196

Third year

330,901

80,240

-

-

-

66,658

Fourth year

113,043

80,240

-

-

-

51,076

Fifth year and on

703,066

861,701

-

-

-

123,970

Total

2,041,620

1,329,667

-

-

-

458,775

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
to CPI

ILS not
linked to
CPI

Euro

Dollar

Other

First year

-

-

-

-

-

16,060

Second year

-

78,000

-

-

-

14,213

Third year

-

78,000

-

-

-

10,541

Fourth year

-

78,000

-

-

-

6,874

Fifth year and on

-

106,000

-

-

-

3,881

Total

-

340,000

-

-

-

51,569

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 March 31, 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
to CPI

ILS not
linked to
CPI

Euro

Dollar

Other

First year

563,709

142,029

-

-

-

144,935

Second year

330,901

243,457

-

-

-

102,409

Third year

330,901

158,240

-

-

-

77,199

Fourth year

113,043

158,240

-

-

-

57,950

Fifth year and on

703,066

967,701

-

-

-

127,851

Total

2,041,620

1,669,667

-

-

-

510,344

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
to CPI

ILS not
linked to
CPI

Euro

Dollar

Other

First year

1,913

570

-

-

-

641

Second year

1,436

503

-

-

-

493

Third year

1,436

161

-

-

-

420

Fourth year

912

161

-

-

-

371

Fifth year and on

7,960

5,077

-

-

-

975

Total

13,657

6,472

-

-

-

2,900

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.

 

SOURCE Cellcom Israel Ltd.


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