Cellcom Israel Ltd.

Cellcom Israel Announces Second Quarter 2017 Results
Cellcom Israel concludes the second quarter of 2017 with net income of NIS 45 million and EBITDA1 of NIS 237 million.
Nir Sztern, Cellcom CEO said: "Again in this quarter we maintained the high subscription rates: Cellcom tv with an addition of approximately 13,000 households that chose the best television in Israel and the internet infrastructure field with an addition of 16,000 households. We continue to strengthen our position as the significant recruiters in these markets."
"The results of the second quarter of 2017 reflect an improvement in financial parameters compared with the previous quarter, in a period of intense competition."

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
  • EBITDA1 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 flow1 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
adjustments

(***)

Consolidated results

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
percent of total
revenues

23.5%

23.1%

1.7%

23.9%

19.4%

23.2%



24.6%

23.1%

6.5%

(*)       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
of period (in thousands)

2,779

2,812

(1.2%)

Churn Rate for cellular
subscribers (in %)

10.8%

10.6%

1.9%

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-  
households at the end of period 
(in thousands)

189

136

39.0%

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

137

87

57.5%

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

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





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

   from financial institutions


861


792


227


863

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

  June 30,


For the six

months ended

  June 30,


For the three

months ended

  June 30,


For the three

months ended

  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















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 
    expenses

(291)


(226)


(65)


(143)


(112)


(32)


(574)

General and administrative 
    expenses

(205)


(208)


(59)


(102)


(95)


(27)


(420)

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
income

137


94


27


60


58


17


160















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
    (in NIS)

1.01


0.70


0.20


0.43


0.45


0.13


1.47















Diluted earnings per share
    (in NIS)

1.01


0.69


0.20


0.43


0.45


0.13


1.47















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

 months ended

June 30,


For the
six
months ended

  June 30,


For the three

 months ended

June 30,


For the three

months ended

  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 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,

   plant and equipment

3


(2)


(1)


2


(2)


(1)


10

Gain on sale of shares in a           

   consolidated company

-


(10)


(3)


-


(10)


(3)


-

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

   (including long-term amounts)

(75)


104


30


(17)


44


13


(28)

Change in other receivables

   (including long-term amounts)

15


(166)


(47)


(17)


(14)


(3)


(5)

Changes in trade payables,

   accrued expenses and provisions

30


25


7


28


36


10


-

Change in other liabilities

   (including long-term amounts)

23


(13)


(4)


(15)


(7)


(2)


20

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

   and equipment

(151)


(237)


(67)


(83)


(144)


(42)


(295)

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

   derivative contracts, net

-


(3)


(1)


-


(2)


(1)


-

Proceeds from sale of property,

   plant and equipment

1


-


-


1


-


-


2

Interest received 

7


8


2


1


4


1


11

Proceeds from sale of shares in 
    consolidated company, net of
    cash disposed

-


(8)


(2)


-


(8)


(2)


-

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

 months ended

June 30,


For the six

months ended

  June 30,


For the three

 months ended

June 30,


For the three

months ended

  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
       of issuance costs

250


-


-


-


-


-


653

Dividend paid

(1)


-


-


-


-


-


(1)

Interest paid

(92)


(86)


(25)


-


(8)


(2)


(185)















Net cash from (used in) financing
activities

(34)


(400)


(115)


200


192


55


62















Changes in cash and cash equivalents

221


(455)


(130)


301


196


56


479















Cash and cash equivalents as at the
beginning of the period

761


1,240


355


681


589


169


761















Cash and cash equivalents as at the end
of the period

982


785


225


982


785


225


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

June 30,

Year ended

December 31,


2016

2017

Convenience

translation

into US dollar

2017

2016


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

June 30,

Year ended

December 31,


2016

2017

Convenience

translation

into US dollar

2017

2016


NIS millions

US$ millions

NIS millions

Cash flows from operating
    activities(*).................................

204

278

80

781

Cash flows from investing
    activities.....................................

(103)

(274)

(79)

(364)

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

2

73

21

(1)

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
otherwise stated

Q1-2016

Q2-2016

Q3-2016

Q4-2016

Q1-2017

Q2-2017

FY-2016









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
of period (in 000's)

2,813

2,812

2,822

2,801

2,792

2,779

2,801

Monthly cellular ARPU (in NIS)

65.2

66.0

62.8

59.3

60.2

57.0

63.3

Churn rate for cellular
subscribers (%)

11.1%

10.6%

10.5%

10.4%

12.0%

10.8%

42.4%

 

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 Issuance

As of 30.06.2017

As of 04.08.2017

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)(8)**

07/10/07

03/02/08*

06/04/09*

30/03/11*

18/08/11*

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. Meirav Ofer Oren. 113 Hayarkon St., Tel Aviv. Tel: 03-5274867.

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

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

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

228.297

7.690

235.987

240.342

228.158

228.271

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

836.073

9.066

845.139

970.136

949.624

838.132

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

757.083

16.050

773.133

871.306

804.010

757.783

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

102.697

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. Rami Sebty. 48 Menachem Begin Rd. Tel Aviv. Tel: 03-6374355.

K (4)(5)**

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. 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* 

Series

Rating Company

Rating as of 30.06.2017 (1)

Rating as of 04.08.2017

Rating assigned upon issuance of the Series

Recent date of rating as of 04.08.2017

Additional ratings between original issuance and the recent date of rating as of 04.08.2017 (2)


Rating

D

S&P Maalot

A+

A+

AA-

06/2017

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, 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
to CPI

ILS not

linked to

CPI

Euro

Dollar

Other

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
to CPI

ILS not
linked to
CPI

Euro

Dollar

Other

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
to CPI

ILS not
linked to
CPI

Euro

Dollar

Other

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
to CPI

ILS not
linked to
CPI

Euro

Dollar

Other

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.

 

 

 

SOURCE Cellcom Israel Ltd.


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