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Cellcom Israel Announces Second Quarter 2014 Results

Net income for the second quarter of 2014 totaled NIS 79 million, a 17.9% increase compared with the second quarter of 2013

NETANYA, Israel, Aug. 11, 2014 /PRNewswire/ --

SECOND QUARTER 2014 HIGHLIGHTS (compared to second quarter of 2013): 

  • Free cash flow increased by 4.6% to NIS 361 million ($105 million
  • Total Revenues decreased 6.3% to NIS 1,158 million ($337 million)
  • Service revenues decreased 8.6% to NIS 923 million ($268 million)
  • Equipment revenues increased by 4% to NIS 235 million ($68 million)
  • EBITDA decreased 7.4% to NIS 314 million ($91 million)
  • EBITDA excluding one-time effects decreased 2.4% to NIS 331 million ($96 million)
  • EBITDA margin 27.1%, down from 27.4%
  • EBITDA margin excluding one-time effects 28.6%, up from 27.4%
  • Operating income decreased 7.7% to NIS 156 million ($45 million)
  • Operating income excluding one-time effects increased 2.4% to NIS 173 million ($50 million
  • Net income increased by 17.9% to NIS 79 million ($23 million)
  • Cellular subscriber base totaled approx. 3.029 million subscribers (at the end of June 2014)

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 2014. Revenues for the second quarter of 2014 totaled NIS 1,158 million ($337 million); EBITDA for the second quarter of 2014 totaled NIS 314 million[2] ($91 million), or 27.1%[2] of total revenues; and net income for the second quarter of 2014 totaled NIS 79 million ($23 million). Basic earnings per share for the second quarter of 2014 totaled NIS 0.79 ($0.23).

Commenting on the results, Nir Sztern, the Company's Chief Executive Officer, said: "The Company continues to present good results, reflected in maintaining an EBITDA similar to the previous quarter after eliminating one-time effects. This quarter was also characterized by focusing on increasing equipment sales, including tablets, and the Company presents a 15.8% increase in equipment revenues compared with the previous quarter.

As compared with the second quarter of last year, the Company continues to present an improvement in net income and in profitability as a percent of revenues resulting from a successful implementation of its strategy to strengthen its position as a communications group while focusing on efficiency measures.

As part of the efficiency measures this quarter, we launched, together with the employees representing labor union, a voluntary retirement plan for employees, in which approximately 380 employees have retired. The Group recorded a one-time expense in the amount of NIS 39 million for the cost of this plan. The savings in payroll expenses will be seen as early as the third quarter this year."

Additionally, Nir Sztern said: "I'm proud that Cellcom Israel was chosen as the leading cellular brand in Israel, for the fourth consecutive year. This testifies again of our brand's strength in challenging market conditions and fortifies us in continuing our successful marketing activity, carried out in the past year.

We are very pleased with the launch of the 4G network. Our LTE network is already operating in wide areas with hundreds of operational sites as part of the current operation approval provided by the Ministry of Communications and allows our customers a taste of the next generation surfing experience. Additionally, we continue with a fast deployment of our 4.5G network supporting LTE Advanced technology, which will provide Cellcom Israel's customers internet surfing with a very high speed, subject to receiving additional frequencies and regulatory approvals.

Along with the current operations, we are in the middle of extensive preparations towards the launch of television services over the internet, an alternative for the traditional television services through cable or satellite. The Company has entered agreements for the procurement of equipment, content and ancillary services and is making preparations in the areas of customer service, sales and operating towards this launch". 

Shlomi Fruhling, Chief Financial Officer, commented: "This quarter, the Group presents a level of operating profitability similar to the second quarter of last year as a result of an increase in equipment sales, efficiency measures and cost cutting, as EBITDA after elimination of one-time effects totaled NIS 331 million this quarter, compared with EBITDA of NIS 339 million in the second quarter of last year. This result was achieved despite the continued price erosion in the communications market and the decrease in the Group's service revenues. The Company expects the price erosion and decrease in service revenues to continue in the coming quarters and to adversely affect its results.

In the second quarter this year, we continued generating high free cash flow totaling NIS 361 million, a 4.6% increase as compared with the second quarter of 2013. The increase in free cash flow resulted mainly from a decrease in payments for payroll and other operating expenses as a result of efficiency measures implemented by the Group and a decrease in payments for capital expenditures, which were partially offset by a decrease in proceeds from customers following the decrease in revenues. We continue to significantly strengthen the Company's balance sheet, as during the first half of 2014 we reduced our net debt by approximately NIS 575 million, to a level of NIS 3.27 billion.

Starting the third quarter this year, we expect a temporary but substantial decrease in our revenues from national roaming services, until the approval of our network sharing agreements with Golan , if and when such agreements will be approved by the regulators. If such sharing agreements are approved, the Company's revenues from national roaming services are expected to be at annual levels similar to those in 2013 and 2014 for the duration of the agreements term. At the same time, we continue our efforts to advance sharing of passive network elements, in order to achieve additional savings in the network operating costs.

After the end of the reporting period, the Company completed a successful issuance of two new series of debentures in Israel in an aggregate amount of approximately NIS 329 million with an average duration of approximately 6.7 years. One series is linked to the Israeli CPI with an annual interest rate of 1.98%, and the second series is not linked with a fixed annual rate of 4.14%. This successful issuance constitutes a vote of confidence of the Israeli institutional investors and the debt holders from among the public, in the Company.

The Company's Board of Directors decided not to distribute a dividend for the second quarter of 2014, given the continued intensified competition in the market and its adverse effect on the Company's revenues 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".


 

MAIN CONSOLIDATED FINANCIAL RESULTS:

 


Q2/2014

Q2/2013

% Change

Q2/2014

Q2/2013


NIS million

 

US$ million

 (convenience translation)

Total revenues

1,158

1,236

(6.3%)

336.8

359.5

Operating Income[3]

156

169

(7.7%)

45.4

49.2

Net Income

79

67

17.9%

23.0

19.5

Free cash flow

361

345

4.6%

105.0

100.3

EBITDA[3] 

314

339

(7.4%)

91.3

98.6

EBITDA, as percent of total revenues[3]

27.1%

27.4%

(1.1%)










 

MAIN FINANCIAL DATA BY OPERATING SEGMENTS:


Cellcom Israel (*)

 

Netvision (**)

 

Consolidation
adjustments

(***)

Consolidated
results

 

Q2/2014

NIS million

Total revenues

949

234

(25)

1,158

Service revenues

728

220

(25)

923

Equipment revenues

221

14

-

235

Operating Income[3]

100

69

(13)

156

EBITDA[3]

224

90

-

314

EBITDA, as percent
  of total revenues[3]

23.6%

38.5%

-

27.1%

 

(*)      Cellcom Israel Ltd. and its subsidiaries, excluding Netvision Ltd. and its subsidiaries.

(**)     Netvision Ltd. and its subsidiaries.

(***)    Include elimination of inter-company revenues between Cellcom Israel and Netvision, and amortization expenses attributable to the merger.

 

 

MAIN PERFORMANCE INDICATORS (data refers to cellular subscribers only):


Q2/2014

Q2/2013

Change (%)

Cellular subscribers at the end
of period (in thousands)

3,029

3,151

(3.9%)

Churn Rate for cellular
subscribers (in %)

11.1%

9.0%

23.3%

Monthly cellular ARPU (in NIS)

75.4

79.7

(5.4%)


Financial Review

Revenues for the second quarter of 2014 decreased 6.3% totaling NIS 1,158 million ($337 million), compared to NIS 1,236 million ($360 million) in the second quarter last year. The decrease in revenues is attributed to an 8.6% decrease in service revenues, which totaled NIS 923 million ($268 million) in the second quarter of 2014 as compared to NIS 1,010 million ($294 million) in the second quarter last year. This decrease was partially offset by a 4% increase in equipment revenues, which totaled NIS 235 million ($68 million) in the second quarter of 2014 as compared to NIS 226 million ($66 million) in the second quarter of 2013. Netvision's contribution to revenues for the second quarter of 2014 totaled NIS 209 million ($61 million) (excluding inter-company revenues) compared to NIS 233 million ($68 million) in the second quarter of 2013.

The decrease in second quarter 2014 service revenues resulted mainly from a decrease in cellular services revenues, due to the ongoing erosion in the price of these services as a result of the intensified competition in the cellular market. The decrease in service revenues also resulted from a decrease in revenues from internet services, long distance calls and extended warranty services due to intensified competition, which was partially offset by an increase in revenues from hosting operators on the Company's communications network. Netvision's contribution to service revenues for the second quarter of 2014 totaled NIS 195 million ($57 million) (excluding inter-company revenues) compared to NIS 220 million ($64 million) in the second quarter of 2013.

The increase in second quarter 2014 equipment revenues resulted mainly from an approximately 11% increase in the number of smartphones sold during the second quarter of 2014 as compared with the second quarter of 2013. Netvision's contribution to equipment revenues for the second quarter of 2014 totaled NIS 14 million ($4 million), compared to NIS 13 million ($4 million) in the second quarter of 2013.

Cost of revenues for the second quarter of 2014 totaled NIS 671 million ($195 million), compared to NIS 749 million ($218 million) in the second quarter of 2013, a 10.4% decrease. This decrease resulted from a decrease in interconnect expenses, mainly due to a reduction in the interconnect tariffs and decreased usage, a decrease in payroll expenses and other expenses due to the efficiency measures implemented by the Company, as well as a one-time cancelation of a provision for communication cables expenses in the amount of NIS 22 million ($6 million) in the second quarter of 2014.

Gross profit for the second quarter of 2014 totaled NIS 487 million ($142 million) similar to the second quarter of 2013. Gross profit margin for the second quarter of 2014 amounted to 42.1%, up from 39.4% in the second quarter of 2013.

Selling, Marketing, General and Administrative Expenses ("SG&A Expenses") for the second quarter of 2014 decreased 9.9% to NIS 290 million ($85 million), compared to NIS 322 million ($94 million) in the second quarter of 2013. This decrease is primarily the result of the efficiency measures implemented by the Company, which led to a decrease in payroll expenses, rent and other expenses. The decrease in SG&A expenses also resulted from a decrease in depreciation and amortization expenses, advertising expenses and doubtful accounts expenses.

Other expenses for the second quarter of 2014 totaled NIS 41 million ($12 million), compared with other income of NIS 4 million ($1 million) in the second quarter of 2013. Other expenses for the second quarter of 2014 primarily include a one-time expense for an employee retirement plan in the amount of approximately NIS 39 million ($11 million).

Operating income for the second quarter of 2014 decreased 7.7% to NIS 156 million ($45 million) from NIS 169 million ($49 million) in the second quarter of 2013. Operating income for the second quarter of 2014 was affected by a one-time expense for employee retirement plan in the amount of approximately NIS 39 million ($11 million), and on the other hand by a one-time cancelation of a provision for communication cables expenses in the amount of NIS 22 million ($6 million). Excluding these one-time effects, operating income for the second quarter of 2014 totaled NIS 173 million ($50 million), a 2.4% increase compared with the second quarter of 2013.

EBITDA for the second quarter of 2014 decreased 7.4% totaling NIS 314 million ($91 million), compared to NIS 339 million ($99 million) in the second quarter of 2013. EBITDA for the second quarter 2014, as a percent of second quarter revenues, totaled 27.1%, down from 27.4% in the second quarter of 2013. Excluding the one-time effects described above, EBITDA for the second quarter of 2014 totaled NIS 331 million ($96 million), a 2.4% decrease compared with the second quarter of 2013. EBITDA for the second quarter 2014, as a percent of second quarter revenues, excluding the one-time effects totaled 28.6%, up from 27.4% in the second quarter of 2013. Netvision's contribution to the EBITDA for the second quarter of 2014 totaled NIS 90 million ($26 million), compared to NIS 68 million ($20 million) in the second quarter of 2013, a 32.4% increase. Netvision's contribution to EBITDA for the second quarter of 2014 excluding the one-time effects described above totaled NIS 73 million ($21 million), a 7.4% increase compared with the second quarter of 2013.

Financing expenses, net for the second quarter of 2014 decreased 17.9% and totaled NIS 64 million ($18 million), compared to NIS 78 million ($23 million) in the second quarter of 2013. The decrease resulted mainly from a decrease in interest expenses, associated with the Company's debentures, due to a decrease of approximately NIS 1.1 billion ($0.3 billion) in the Company's debt level, and a decrease in Israeli Consumer Price Index (CPI) linkage expenses, associated with the Company's debentures, due to a lower inflation rate in the second quarter of 2014 compared with the second quarter of 2013, and due to a reduction in the Company's debt level.

Taxes on income for the second quarter of 2014 totaled NIS 13 million ($4 million), compared to NIS 24 million ($7 million) in the second quarter of 2013. The decrease is mainly attributed to a tax income in respect of previous years.

Net Income for the second quarter of 2014 totaled NIS 79 million ($23 million), compared to NIS 67 million ($19 million) in the second quarter of 2013, a 17.9% increase. This increase is the result of a reduction in operating expenses, mainly due to the efficiency measures implemented by the Company, the one-time cancelation of the provision for communication cables expenses, a decrease in financing expenses, net, as well as the decrease in taxes on income. The increase in net income was offset in part by the erosion in service revenues resulting from the continued intensified competition in the cellular and landline communications market, as well as the one-time expense for the employee retirement plan.

Basic earnings per share for the second quarter of 2014 totaled NIS 0.79 ($0.23), compared to NIS 0.67 ($0.19) in the second quarter of last year.

OPERATING REVIEW (data refers to cellular subscribers only)

Cellular subscriber base – at the end of June 2014 the Company had approximately 3.029 million cellular subscribers. During the second quarter of 2014 the Company's cellular subscriber base decreased by approximately 20,000 net cellular subscribers, all of them pre-paid subscribers.

Cellular Churn Rate for the second quarter of 2014 totaled 11.1%, compared to 9.0% in the second quarter of 2013. The cellular churn rate was primarily affected by the intensified competition in the cellular market.

The monthly cellular Average Revenue per User ("ARPU") for the second quarter of 2014 totaled NIS 75.4 ($21.9), compared to NIS 79.7 ($23.2) in the second quarter of 2013. The decrease in ARPU resulted, among others, from the ongoing erosion in the price of cellular services, resulting from the intensified competition in the cellular market.

FINANCING AND INVESTMENT REVIEW

Cash Flow

Free cash flow for the second quarter of 2014, increased by 4.6% to NIS 361 million ($105 million), compared to NIS 345 million ($100 million) in the second quarter of 2013. The increase in free cash flow was mainly due to a decrease in payroll and other operating expenses mainly due to the efficiency measures implemented by the Company, and a decrease in payments for capital expenditure. These decreases were partially offset by a decrease in proceeds from customers due to the decrease in revenues in the second quarter of 2014 compared with the second quarter of 2013, resulting from the intensified competition in the cellular market.

Total Equity

Total Equity as of June 30, 2014 amounted to NIS 928 million ($270 million), primarily consisting of accumulated undistributed retained earnings of the Company.

Investment in Fixed Assets and Intangible Assets

During the second quarter of 2014, the Company invested NIS 104 million ($30 million) in fixed assets and intangible assets (including, among others, rights of use of communication lines and investments in information systems and software), compared to NIS 83 million ($24 million) in the second quarter of 2013. This increase is mainly attributed to investment in the 4G network (LTE) during the second quarter of 2014.

Dividend

On August 10, 2014, the Company's board of directors decided not to declare a cash dividend for the second quarter of 2014. 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 revenues, 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, 2013 on Form 20-F, under "Item 8 - Financial Information – A. Consolidated Statements and Other Financial Information - Dividend Policy."

Debentures

For information regarding the Company's summary of financial liabilities and details regarding the Company's outstanding debentures as of June 30, 2014, see "Disclosure for Debenture Holders" section in this press release.

OTHER DEVELOPMENTS DURING THE SECOND QUARTER OF 2014 AND SUBSEQUENT TO THE END OF THE REPORTING PERIOD

4 Generation Network and Network Sharing

Subsequent to the previously reported network sharing policy published by the Ministry of Communications ("MOC"), in May 2014 the Company entered a new 4G network sharing agreement with Golan Telecom Ltd. or Golan, after concluding that the previous 4G network sharing agreement with Pelephone Communications Ltd., or Pelephone, and Golan does not meet the policy principles and therefore would not be approved by the MOC.

In July 2014, the Israeli Ministry of Communications or MOC published a tender for 1800MHz frequencies, for 4G technologies (such as LTE, LTE Advanced). The tender documents include a draft license amendment which sets certain specific requirements for the approval of such network sharing. The Company is in the process of adjusting and amending network sharing agreements with Golan, in light of these requirements, including to the 4G network sharing agreement with Golan, among others, in order to increase Golan's economic stake in the shared network.

The draft of the license amendment further sets coverage and quality requirements for the 4G network. In addition, in July 2014, the Israeli Ministry of Communications published a hearing regarding 2G and 3G networks' coverage and quality requirements as well. The requirements proposed are more severe than the existing requirements. The Company is studying the requirements proposed and at this time cannot evaluate the extent of its effects on the Company, if adopted as proposed. The Company intends to object to the requirements proposed, which the Company believes to be unreasonable and unnecessary.

Participation in the tender is open for all current Mobile Network Operators and Mobile Virtual Network Operators as well as other entities meeting certain conditions. The bands will be awarded to the highest bids with a minimal bid of NIS 10 million for each of the 8 available 5MHZ frequency bands. New and small operators may receive up to 50% discount, 10% discount for each 1% addition to their market share, obtained over the next 5 years. The tender conditions limit the number of bands for each operator and for a 4G shared radio network and further limits the number of bands the Company and Partner Communications Ltd. (which are already in possession of 1800MHz frequencies) may purchase.

The Company continues its efforts at sharing of passive elements of cell sites for existing networks, and expects to generate future savings in both operating expenses and capital expenditures related to these passive elements, if and when such sharing is carried out.

In addition, in July 2014, the Company launched its LTE network, after having received the MOC's approval (granted to other cellular operators as well) to use a 5MHZ 1800MHz frequency band (already in the Company's possession) for its 4G network, under certain conditions, even before the completion of the above mentioned 4G frequencies tender. The Company continues the rapid deployment of the network in order to achieve a wide and high quality deployment by the end of the year.

For additional details see the Company's most recent annual report for the year ended December 31, 2013 on Form 20-F, filed on March 6, 2014, or the Company's 2013 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", " – We may not be able to obtain permits to construct and operate cell sites", "- We may be adversely affected by significant technological and other changes in the cellular communications industry; network sharing agreements, if approved, may have material adverse effects on our business" and "Item 4. Information on The Company – B. Business Overview – Network and Technology - Network and Technology" and "-Network and Cell Sites Sharing Agreements", and" – Permits for cell sites construction",  the Company's immediate report regarding the Company's results for the first quarter of 2014 on Form 6-K dated May 14, 2014 under "Other developments during the first quarter of 2014 and subsequent to the end of the reporting period - 4 Generation Network" and "- Network Sharing Agreements" and the company's immediate reports on form 6-K dated May 19, 2014, May 27, 2014 and July 2, 2014.


TV Over Internet Services

In June 2014, the Company's Board of Directors resolved that the Company shall enter the field of television over the internet services (known as Over the Top TV, or OTT TV). In preparation of the Company's launch of its OTT TV solution, the Company has entered agreements for the procurement of equipment and content and ancillary services. Entering a new and penetrated market will require substantial investment and additional operating expenses.

For additional details see the Company's 2013 annual report under "Item 3. Key Information – D. Risk Factors – Our investment in new businesses involves many risks".

Changes in Management

Vice President of TV and Content- In August 2014, the Company's board of directors has nominated Mr. Yaniv Gruenwald as the Company's Vice President of TV and content, effective August 10, 2014.

Mr. Gruenwald has served as Vice President of television and content of Netvision since 2012 and as chief technology officer of Netvision from 2010 to 2011. From 2008 to 2010 he served as a CTO of wire-line & broadband division of Partner Communications Ltd., and from 2005 to 2008 he served as Partner's director of product development. Mr. Gruenwald Holds a B.A in business administration from the Peres Academic Center and is currently studying in the Executive MBA program at the Tel-Aviv University.

Debt raising

In July 2014, the Company issued two new series of debentures. The first, H debentures in a principal amount of approximately NIS 106 million at an interest rate of 1.98% per annum, linked to the Israeli Consumer Price Index, and the second, I debentures in a principal amount of approximately NIS 223 million, at an interest rate of 4.14% per annum, without linkage. Both series was sold at par value (NIS 1,000 per unit).

The debentures (rated ilA+/Stable) were issued in a public offering in Israel based on the Company's Israeli shelf prospectus and indenture, published in June 2014 and were listed for trading on the Tel Aviv Stock Exchange. 

The total net consideration received by the Company was approximately NIS 326 million.

The indenture of the new series of debentures, or the New Indenture, provides for additional undertakings the Company undertook in regard to such new series, in addition to those previously undertaken by the Company in its Series F and G indenture, or the Existing Indenture, including: (1) in addition to being an event of default in its existing indenture, meeting the financial covenants previously undertaken by the Company (a maximum net leverage ratio (net debt to EBITDA ratio) in excess of 5.0:1, or in excess of 4.5:1 for four consecutive quarters) would be a condition for dividend distribution; and (2) meeting such financial covenants would also be a condition for the issuance of additional debentures of each of the two new series.

The New Indenture contains substantially similar events of default to those found in the Existing Indenture, with the exception of certain new events of default that do not appear in the Existing Indenture as well as certain modifications to the events of default that are found in the Existing Indenture, including: (1) breach of the above limitation on dividend distributions; (2) the minimum amount required for triggering a cross default shall not apply to a cross default triggered by another series of debentures; (3) the existence of a real concern that the Company shall not meet its material undertakings towards the debenture holders; (4) the inclusion in the Company's financial statements during a period of two consecutive quarters of a note regarding the existence of significant doubt as to the Company's ability to continue as a going concern; and (5) breach of the Company's undertakings regarding the issuance of additional debentures.

The Company intends to use the net proceeds from the offering for general corporate purposes, which may include financing its operating and investment activity, refinancing of outstanding debt under its debentures, and dividend distributions, subject to certain restrictions that apply to dividend distributions made by the Company and to the decisions of the Company's board of directors from time to time.

The offering described in this press release, was made in Israel to residents of Israel only. 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 debentures.

For additional details of the Company's public debentures see the Company's 2013 annual report under "Item 5. Liquidity and Capital Resources – Debt Service"; for details of the Company's Israeli shelf prospectus and debt raising see the Company's immediate reports on Form 6-K dated June 23, 2014, July 7, 2014 and July 8, 2014; for details of the Company's dividend policy see the Company's 2013 annual report under "Item 8. Financial Information - A. Consolidated Statements and Other Financial Information - Dividend Policy" and the Company's immediate report on Form 6-K dated June 23, 2014.

The law for the promotion of competition and the mitigation of concentration

In August 2014, following the previously reported Israeli law for the promotion of competition and the mitigation of concentration, Discount Investment Corporation Ltd., or DIC, (the Company's  controlling shareholder) and IDB Development Corporation Ltd, or IDB Development, (DIC's controlling shareholder), announced they are reviewing ways to deal with the two layer limitation on the total number of reporting corporations (layers) in a pyramidal structure, as of December 2019, in order to allow DIC and IDB Development continued control in "third layer companies" and on. This, including by turning either DIC or IDB Development into a private non-reporting company (which is not considered a "layer" according to such law) or by a merger of IDB Development and DIC. The Company is presently a "third layer company" in the IDB group. DIC and IDB Development clarified in their reports that this issue is under review only, that no concrete decisions have been made, that there is no certainty that any of the structural changes will be affected and that the implementation of any such change may take several years.

For additional details see the Company's 2013 annual report under "Item 3. Key Information – D. Risk Factors - Risks Relating to Our Ordinary Shares - Legislation in Israel affecting corporate conglomerates, could adversely affect us."

CONFERENCE CALL DETAILS

The Company will be hosting a conference call on Monday, August 11, 2014 at 9:00 am EST, 06:00 am PST, 14:00 GMT, 16:00 Israel time. On the call, management will review and discuss the results for the second quarter of 2014, 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: 1 866 744 5399        

UK Dial-in Number: 0 800 051 8913

Israel Dial-in Number: 03 918 0664   

International Dial-in Number:  +972 3 918 0664

at: 9:00 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 3.029 million subscribers (as at June 30, 2014) with a broad range of value added services including cellular and landline 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 a 4 Generation LTE network (currently partially deployed) 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 through its wholly owned subsidiaries internet connectivity services and international calling services, as well as landline telephone communication services in Israel, in addition to data communication 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 www.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, 2013. 

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 3.438 = US$ 1 as published by the Bank of Israel for June 30, 2014.

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 one-time expense related to employee retirement plan); 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 for Non-IFRS Measures" below.

Free cash flow is a non-IFRS measure and is defined as the net cash provided by operating activities 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 for Non-IFRS Measures" below.

Company Contact

Shlomi Fruhling

Chief Financial Officer

[email protected]

Tel: +972 52 998 9755

Investor Relations Contact

Ehud Helft

GK Investor & Public Relations in partnership with LHA

[email protected]    

Tel: +1 617 418 3096


 

[1] Please see "Use of Non-IFRS financial measures" section in this press release.


[2] The results for the second quarter of 2014 include two one-time effects, the first is in Cost of revenues and the second is in Other expenses. For details regarding the one-time effects see "Cost of revenues" and "Other expenses" in this press release.


[3] The results for the second quarter of 2014 include two one-time effects, the first is in Cost of revenues and the second is in Other expenses. EBITDA for the second quarter of 2014 excluding these one-time effects totaled NIS 331 million, a 2.4% decrease compared with the second quarter of 2013 and EBITDA margin totaled 28.6%. Operating income for the second quarter of 2014 excluding these one-time effects totaled NIS 173 million, a 2.4% increase compared with the second quarter of 2013. For details regarding the one-time effects see "Cost of revenues" and "Other expenses" in this press release.

 

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,



2013


2014


2014


2013



NIS millions


US$ millions


NIS millions










Assets









Cash and cash equivalents


1,185


1,083


315


1,057

Current investments, including derivatives


500


520


151


513

Trade receivables


1,837


1,541


448


1,731

Other receivables


96


132


38


63

Inventory


100


88


26


84










Total current assets


3,718


3,364


978


3,448










Trade and other receivables


999


784


228


854

Property, plant and equipment, net


1,969


1,796


522


1,865

Intangible assets, net


1,452


1,339


390


1,390

Deferred tax assets


28


22


7


22










Total non- current assets


4,448


3,941


1,147


4,131










Total assets


8,166


7,305


2,125


7,579










Liabilities









Current maturities of debentures and long term
    loans and short term credit 


1,091


1,093


318


1,100

Trade payables and accrued expenses


657


630


183


582

Current tax liabilities


75


86


25


99

Provisions


177


170


50


187

Other payables, including derivatives


466


420


122


398










Total current liabilities


2,466


2,399


698


2,366










Long-term loans from banks


10


-


-


5

Debentures


4,865


3,791


1,103


4,332

Provisions


20


21


6


21

Other long-term liabilities


13


15


4


10

Liability for employee rights upon retirement, net


16


12


4


13

Deferred tax liabilities


140


139


40


122










Total non- current liabilities


5,064


3,978


1,157


4,503










Total liabilities


7,530


6,377


1,855


6,869










Equity attributable to owners of the Company









Share capital


1


1


-


1

Cash flow hedge reserve


(16)


(6)


(2)


(13)

Retained earnings


648


920


268


719










Non-controlling interest


3


13


4


3










Total equity


636


928


270


710










Total liabilities and equity


8,166


7,305


2,125


7,579










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,



2013


2014


2014


2013


2014


2014


2013



NIS millions


US$ millions


NIS millions


US$ millions


NIS millions
















Revenues


2,494


2,288


665


1,236


1,158


337


4,927

Cost of revenues


(1,533)


(1,335)


(388)


(749)


(671)


(195)


(2,990)
















Gross profit


961


953


277


487


487


142


1,937
















Selling and marketing expenses


(356)


(334)


(97)


(175)


(170)


(50)


(717)

General and administrative expenses


(300)


(238)


(69)


(147)


(120)


(35)


(570)

Other income (expenses), net


3


(40)


(12)


4


(41)


(12)


1
















Operating profit


308


341


99


169


156


45


651
















Financing income


83


63


19


42


31


9


156

Financing expenses


(207)


(154)


(45)


(120)


(95)


(27)


(402)

Financing expenses, net


(124)


(91)


(26)


(78)


(64)


(18)


(246)
















Profit before taxes on income


184


250


73


91


92


27


405
















Taxes on income


(50)


(57)


(17)


(24)


(13)


(4)


(117)

Profit for the period


134


193


56


67


79


23


288

Attributable to:















Owners of the Company


133


193


56


66


79


23


287

Non-controlling interests


1


-


-


1


-


-


1

Profit for the period


134


193


56


67


79


23


288
















Earnings per share















Basic earnings per share (in NIS)


1.34


1.94


0.56


0.67


0.79


0.23


2.89
















Diluted earnings per share (in NIS)


1.33


1.91


0.56


0.66


0.78


0.23


2.86
















 

 

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,







2013


2014


2014


2013


2014


2014


2013


NIS millions


US$ millions


NIS millions


US$ millions


NIS millions















Cash flows from operating activities














Profit for the period

134


193


56


67


79


23


288

Adjustments for: 














Depreciation and amortization

342


310


90


171


155


45


676

Share based payment

6


2


-


3


1


-


9

Loss on sale of property, plant and        
    equipment

1


2


-


-


2


-


2

Income tax expense

50


57


17


24


13


4


117

Financing expenses, net

124


91


26


78


64


18


246

Other income

(3)


-


-


(3)


-


-


(3)















Changes in operating assets and liabilities:














Change in inventory

11


(4)


(1)


18


(5)


(1)


27

Change in trade receivables (including
      long-term amounts)

274


295


86


124


123


36


576

Change in other receivables (including
      long-term amounts)

(48)


(83)


(24)


(28)


(14)


(4)


(34)

Changes in trade payables, accrued
         expenses and provisions

(103)


26


8


9


(19)


(6)


(185)

Change in other liabilities (including
         long-term amounts)

(7)


66


19


4


68


20


(33)

Payments for derivative hedging
              contracts, net

(6)


(6)


(1)


(5)


(1)


-


(17)

Income tax paid

(61)


(55)


(16)


(26)


(25)


(7)


(119)

Income tax received

6


-


-


6


-


-


6

Net cash from operating activities

720


894


260


442


441


128


1,556















Cash flows from investing activities














Acquisition of property, plant, and         equipment

(171)


(127)


(37)


(83)


(63)


(18)


(275)

Acquisition of intangible assets

(48)


(44)


(13)


(22)


(19)


(6)


(90)

Change in current investments, net

(10)


(14)


(4)


(6)


88


26


(16)

Payments for other derivative
                  contracts, net

(5)


(2)


-


(2)


(1)


-


(10)

Proceeds from sale of property, plant     and equipment

10


3


1


5


-


-


17

Interest received 

19


17


5


8


5


1


29

Dividend received

1


-


-


1


-


-


1

Net cash from (used in) investing
         activities

(204)


(167)


(48)


(99)


10


3


(344)





























 


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,







2013


2014


2014


2013


2014


2014


2013


NIS millions


US$ millions


NIS millions


US $millions


NIS millions















Cash flows from financing activities














Payments for derivative contracts, net

(4)


(14)


(4)


(4)


(13)


(4)


(8)

Repayment of long term loans from banks

-


(11)


(3)


-


-


-


(6)

Repayment of debentures

(561)


(523)


(152)


-


-


-


(1,124)

Dividend paid

-


(4)


(1)


-


-


-


(81)

Interest paid

(180)


(149)


(44)


-


-


-


(350)















Net cash used in financing activities

(745)


(701)


(204)


(4)


(13)


(4)


(1,569)















Changes in cash and cash equivalents

(229)


26


8


339


438


127


(357)















Cash and cash equivalents as at the
   beginning of the period

1,414


1,057


307


846


645


188


1,414















Cash and cash equivalents as at the
  end of the period

1,185


1,083


315


1,185


1,083


315


1,057















 

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,


2013

NIS millions

 

2014

NIS millions

 

Convenience

translation

into US dollar

2014

US$ millions

 

2013

NIS millions

 

Profit for the period

67

79

23

288

Taxes on income

24

13

4

117

Financing income

(42)

(31)

(9)

(156)

Financing expenses

120

95

27

402

Other expenses (income)(*)

(4)

2

1

(1)

Depreciation and amortization

171

155

45

676

Share based payments

3

1

-

9

EBITDA

339

314

91

1,335


(*) Other expenses for the second quarter of 2014 exclude a one-time expense for an employee retirement plan in the amount of approximately NIS 39 million ($11 million).

 

Free cash flow


The following table shows the calculation of free cash flow:



Three-month period ended

June 30,

Year ended

December 31,


2013

NIS millions

 

2014

NIS millions

 

Convenience

translation

into US dollar

2014

US$ millions

 

2013

NIS millions

 

Cash flows from operating activities

442

441

128

1,556

Cash flows from investing activities

(99)

10

3

(344)

Short-term Investment in (sale of) tradable debentures and deposits(*)

2

(90)

(26)

(2)

Free cash flow

345

361

105

1,210


 (*) Net of interest received in relation to tradable debentures.

 


Cellcom Israel Ltd.

 (An Israeli Corporation)


Key financial and operating indicators (unaudited)


NIS millions unless otherwise stated

Q2-2012

Q3-2012

Q4-2012

Q1-2013

Q2-2013

Q3-2013

Q4-2013

Q1-2014

Q2-2014

FY-2012

FY-2013













Cellcom service revenues

942

902

828

758

790

789

774

728

728

3,617

3,112

Netvision service revenues

258

276

260

254

246

251

229

223

220

1,052

979













Cellcom equipment revenues

297

285

310

256

213

205

208

188

221

1,274

882

Netvision equipment revenues

19

15

31

17

13

6

24

15

14

82

60













Consolidation adjustments

(18)

(30)

(22)

(27)

(26)

(27)

(26)

(24)

(25)

(87)

(106)

Total revenues

1,498

1,448

1,407

1,258

1,236

1,224

1,209

1,130

1,158

5,938

4,927













Cellcom EBITDA

399

355

306

251

271

286

258

265

224

1,470

1,066

Netvision EBITDA

75

75

68

63

68

61

77

75

90

283

269

Total EBITDA

474

430

374

314

339

347

335

340

314

1,753

1,335













Operating profit

282

239

189

139

169

173

170

185

156

985

651

Financing expenses, net

117

64

42

46

78

92

30

27

64

259

246

Profit for the period

121

124

113

67

67

52

102

114

79

531

288













Free cash flow

284

414

288

168

345

389

308

366

361

1,130

1,210













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

3,333

3,338

*3,199

3,166

3,151

3,156

**3,092

3,049

3,029

3,199

3,092

Monthly cellular ARPU (in NIS)

90.3

86.7

82.4

75.9

79.7

79.6

78.7

74.7

75.4

87.5

78.5

Churn rate for cellular subscribers (%)

8.1%

8.6%

8.7%

9.4%

9.0%

8.9%

9.9%

11.1%

11.1%

31.5%

36.8%

* After a removal of approximately 138,000 data applications subscribers (M2M) from the Company's cellular subscriber base following a change to the subscribers counting mechanism.

** After a removal of approximately 64,000 pre-paid subscribers from the Company's cellular subscriber base following a change to the subscribers counting mechanism.

 

 


Cellcom Israel Ltd.


Disclosure for debenture holders as of June 30, 2014

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 30.06.2014

As of 10.08.2014

Interest

Rate (fixed)

 

 

Principal Repayment Dates (3)

Interest

Repayment

Dates

 

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

 

B(4) **

 

 

 

22/12/05

02/01/06*

05/01/06*

10/01/06*

31/05/06*

925.102

555.061

668.025

17.072

685.097

730.350

555.061

669.990

5.30%

05/01/13

05/01/17

  January 5

Linked to CPI

Hermetic Trust (1975) Ltd.

Meirav Ofer Oren.

113 Hayarkon St.,

Tel Aviv. Tel: 03-5274867.

D(7) **

 

 

 

07/10/07

03/02/08*

06/04/09*

30/03/11*

18/08/11*

2,423.075

1,938.460

2,276.233

117.813

2,394.046

1,863.684

1,453.845

1,712.196

5.19%

01/07/13

01/07/17

July 1

Linked to CPI

Hermetic Trust (1975) Ltd.

Meirav Ofer Oren. 1

13 Hayarkon St.,

Tel Aviv. Tel: 03-5274867.

E **

 

 

 

06/04/09

30/03/11*

18/08/11*

1,798.962

899.481

899.481

27.108

926.589

986.012

899.481

899.481

6.25%

05/01/12

05/01/17

January 5

Not linked

Hermetic Trust (1975) Ltd.

Meirav Ofer Oren.

113 Hayarkon St.,

Tel Aviv. Tel: 03-5274867.

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

 

 

 

20/03/12

714.802

714.802

737.511

16.359

753.870

839.749

714.802

739.680

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

285.198

285.198

9.612

294.810

327.037

285.198

285.198

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) ***

 

 

 

08/07/14

105,962






105.962

106.274

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) ***

 

 

08/07/14

222,667






222.667

222.667

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

Total


6,475.768

4,393.002

4,866.448

187.964

5,054.412

4,746.832

4,237.016

4,635.486







 


Comments:

(1) In the reporting period, the company fulfilled all terms of the debentures. The company also fulfilled all terms of the Indentures. Debentures F and G financial covenants (also included in the indentures of series H and I debentures issued in July 2014) - as of June 30, 2014  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, 2013 on Form 20-F, under "Item 5. Operating and Financial Review and Prospects – B. Liquidity and Capital Resources – Debt Service ") was 2.42 (the net leverage without excluding one-time events was 2.45). In the reporting period, no cause for early repayment occurred. (2) Including interest accumulated in the books and excluding net balance of premium on debentures and deferred issuance expenses. (3) Annual payments, excluding series F, G, H and I debentures in which the payments are semi-annual. (4) Regarding Debenture series B, F G, H and I - the company undertook not to create any pledge on its assets, as long as debentures are not fully repaid, subject to certain exclusions. (5) Regarding Debenture series F and G - the company has the right for early redemption under certain terms (see the Company's annual report for the year ended December 31, 2013 on Form 20-F, under "Item 5. Operating and Financial Review and Prospects– B. Liquidity and Capital Resources – Debt Service"). Such provision was also included in the indentures of series H and I debentures issued in July 2014. (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) On July 1, 2014, after the end of the reporting period, the Company repaid a principal payment of approximately NIS 569 million (the ex-date of which was June 19, 2014).


 (*) On these dates additional debentures of the series were issued. The information in the table refers to the full series.

(**) Series B, D, E and F are material, which represent 5% or more of the total liabilities of the Company, as presented in the financial statements.

(***) Series H and I were issued after the end of the reporting period.

Disclosure for debenture holders as of June 30, 2014 (cont.)









Debentures rating details*  



Series

Rating Company

Rating as of
30.06.2014  (1)

Rating as of
10.08.2014

Rating assigned
upon issuance of
the Series

Recent date of rating
as of 10.08.2014

Additional ratings between original issuance and the recent date
of rating as of 10.08.2014 (2)


Rating

B

S&P Maalot

A+

A+

AA-

06/2014

5/2006, 9/2007, 1/2008, 10/2008, 3/2009,
9/2010, 8/2011, 1/2012, 3/2012, 5/2012,
11/2012, 6/2013, 6/2014

AA-,AA,AA-,A+ (2)

D

S&P Maalot

A+

A+

AA-

06/2014

1/2008, 10/2008, 3/2009, 9/2010, 8/2011, 1/2012, 3/2012, 5/2012,11/2012, 6/2013,
6/2014

AA-, AA,AA-,A+ (2)

E

S&P Maalot

A+

A+

AA

06/2014

9/2010, 8/2011, 1/2012, 3/2012, 5/2012,
11/2012, 6/2013, 6/2014

AA,AA-,A+ (2)

F

S&P Maalot

A+

A+

AA

06/2014

5/2012,11/2012, 6/2013, 6/2014

AA,AA-,A+ (2)

G

S&P Maalot

A+

A+

AA

06/2014

5/2012,11/2012, 6/2013, 6/2014

AA,AA-,A+ (2)

H (3)

S&P Maalot


A+

A+

06/2014

6/2014


I (3)

S&P Maalot


A+

A+

06/2014

 6/2014










(1)     In June 2013, S&P Maalot updated the Company's rating from an "ilAA-/negative" to an "ilA+/stable".


(2)     In September 2007, S&P Maalot issued a notice that the AA- rating for debentures issued by the Company was in the process of recheck with positive implications (Credit Watch Positive). 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". For details regarding the rating of the debentures see the S&P Maalot report dated June 20, 2013. In June 2014, S&P Maalot Issued a notice of "ilA+" ranking for new series H and I debentures issued in July 2014.


(3)     Series H and I were issued after the end of the reporting period.


* 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, 2014

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

749,854

298,019

-

-

-

253,818

Second year

749,854

298,019

-

-

-

196,041

Third year

820,966

354,771

-

-

-

138,265

Fourth year

751,733

141,880

-

-

-

73,251

Fifth year and on

426,670

85,128

-

-

-

35,391

Total

3,499,077

1,177,817

-

-

-

696,766

 

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) – None

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

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

749,854

298,019

-

-

-

253,818

Second year

749,854

298,019

-

-

-

196,041

Third year

820,966

354,771

-

-

-

138,265

Fourth year

751,733

141,880

-

-

-

73,251

Fifth year and on

426,670

85,128

-

-

-

35,391

Total

3,499,077

1,177,817

-

-

-

696,766



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).


Cellcom Israel Ltd.

Summary of Financial Undertakings (according to repayment dates) as of June 30, 2014 (cont.)

 


Principal payments

Gross interest

payments

(without

deduction of tax)

ILS 

linked to

CPI

ILS not

linked to

CPI

Euro

Dollar

Other

First year

-

1,100

-

-

-

49

Second year

-

-

-

-

-

-

Third year

-

-

-

-

-

-

Fourth year

-

-

-

-

-

-

Fifth year and on

-

-

-

-

-

-

Total

-

1,100

-

-

-

49

 

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

41,879

1,808

-

-

-

9,803

Second year

41,879

1,808

-

-

-

7,504

Third year

44,518

2,096

-

-

-

5,205

Fourth year

38,578

719

-

-

-

2,764

Fifth year and on

15,837

432

-

-

-

1,123

Total

182,691

6,863

-

-

-

26,399

 

k.

Total balances of credit granted to the Company by consolidated companies and balances of debentures offered by the Company held by the consolidated companies (in thousand NIS) - None


 

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