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Cellcom Israel Announces Fourth Quarter and Full Year 2017 Results

Cellcom Israel concludes 2017 with net income of NIS 113 million and EBITDA[1] of NIS 853 million.

Nir Sztern, Cellcom CEO said: "Since it launched, Cellcom tv has spearheaded the OTT TV market in Israel and reports that as of today, 183,000 households have chosen the best TV experience in Israel. At the same time, we are in the midst of momentum in the internet infrastructure market, with our introduction to our customers of the "Super Fiber" optical fiber service, and establishment of our position as a dominant player in this market as well."

NETANYA, Israel, March 26, 2018 /PRNewswire/ --

2017 Full Year Highlights (compared to 2016):

  • Total Revenues totaled NIS 3,871 million ($1,117 million) compared to NIS 4,027 million ($1,161 million) last year, a decrease of 3.9%
  • Service revenues totaled NIS 2,919 million ($842 million) compared to NIS 3,033 million ($875 million) last year, a decrease of 3.8%
  • Operating income totaled NIS 297 million ($86 million) compared to NIS 310 million ($89 million) last year, a decrease of 4.2%
  • Net income totaled NIS 113 million ($33 million) compared to NIS 150 million ($43 million) last year, a decrease of 24.7%
  • Net income margin 2.9%, a decrease from 3.7% last year
  • EBITDA1 totaled NIS 853 million ($246 million) compared to NIS 858 million ($247 million) last year, a decrease of 0.6%
  • EBITDA margin 22.0%, an increase from 21.3% last year
  • Net cash from operating activities totaled NIS 774 million ($223 million) compared to NIS 781 million ($225 million) last year, a decrease of 0.9%
  • Free cash flow1 totaled NIS 325 million ($94 million) compared to NIS 416 million ($120 million) last year, a decrease of 21.9%
  • Cellular subscriber base totaled approximately 2.817 million subscribers (at the end of December 2017)

Fourth Quarter 2017 Highlights (compared to fourth quarter of 2016):

  • Total Revenues totaled NIS 975 million ($281 million) compared to NIS 984 million ($284 million) in the fourth quarter last year, a decrease of 0.9%
  • Service revenues totaled NIS 712 million ($205 million) compared to NIS 719 million ($207 million) in the fourth quarter last year, a decrease of 1.0%
  • Operating income totaled NIS 45 million ($13 million) compared to NIS 32 million ($9 million) in the fourth quarter last year, an increase of 40.6%
  • Net income totaled NIS 10 million ($3 million) compared to NIS 14 million ($4 million) in the fourth quarter last year, a decrease of 28.6%
  • Net income margin 1.0%, a decrease from 1.4% in the fourth quarter last year
  • EBITDA1 totaled NIS 189 million ($55 million) compared to NIS 173 million ($50 million) in the fourth quarter last year, an increase of 9.2%
  • EBITDA margin 19.4%, an increase from 17.6% in the fourth quarter last year
  • Net cash from operating activities totaled NIS 214 million ($62 million) compared to NIS 178 million ($51 million) last year, an increase of 20.2%
  • Free cash flow1 totaled NIS 77 million ($22 million) compared to NIS 83 million ($24 million) in the fourth quarter last year, a decrease of 7.2%



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 full year 2017 and fourth quarter of 2017:

"The high level of competition in the cellular market in 2017 continued to impact the results of the cellular segment. Alongside the competition, we accelerated our activities as a communications group, offering our customers a broad and full range of solutions, geared towards current communications era. Despite the continued competition, we ended 2017 with a growth of approximately 29,400 post-paid customers in the cellular segment.

In 2017, we again proved that Cellcom tv is the most successful and worthy alternative in the Israeli television broadcasting market.

We added to the rich world of content: the most talked about and sought after content from the prestigious content provider HBO, ten new channels including children channels in high demand, a high-quality documentary library and channel, blockbuster series and movies, all with no change in the price.

Today, it is clear to everyone that we offer a broad content offering, along with cost-effective price and a very advanced technological experience,  viewing capabilities of the entire content on all devices and platforms : Smart TVs with no converter, IOS and Android, as well as a built-in recording service for all channels going back a week.

Israeli consumer knows what he wants and especially what he needs and this winning combination of rich and high quality content, together with a most advanced technology and user experience, all packaged in a cost-effective and attractive price, has led us to a rapid growth trend throughout the year to 183,000 households, as of today.

The fourth quarter of 2017 is a record quarter for customers joining our quattro service, a service that combines the Cellcom tv service with internet, home telephony and cellular services. Within a short period of time, the quattro package has become a highly desired product among our customers, giving the customer a worthwhile value proposition that strengthens loyalty to the Group's services.

We are vigorously working in the internet infrastructure market to accelerate the deployment of optic fiber cables to the customer's home in order to provide our customers with high quality and high speed internet service. We launched the "Super Fiber" service, which enables customers with up to a 1 gigabyte surfing speed as a component in our quattro packages. We are preparing to continue the deployment of fixed line infrastructure using several alternatives simultaneously - independent deployment of fibers in residential neighborhoods, negotiation of a cooperation in deployment with Partner and examination of an investment in IBC. This, in order to cement ourselves as a dominant player in the fixed-line infrastructure market and to reduce expenses.

Alongside these growth engines, we are also continuing the momentum in the field of IoT and Smart Cities, a field in which we have recently won a number of significant tenders.

In 2017 also, we continued our streamlining measures, under the framework of which we took many varied steps to reduce our expenses and improve our operating excellence in both the mobile and fixed-line worlds, while improving processes of managing these worlds alongside improvement in the service and sales worlds.

I would like to thank the employees and the managers for working tirelessly for the Company's success and to the shareholders for their trust in the Company."

Shlomi Fruhling, Chief Financial Officer, said:

"2017 was characterized by accelerated growth in the fixed line segment and continued competition in the cellular segment, as expressed in the erosion of revenue from services as compared with last year.

Cellular segment revenues declined by 10.0% compared with last year and were mainly effected from reclassification of the consideration from the sharing agreement with Golan, that came into effect in April 2017, between cellular segment revenues, fixed line segment revenues and reduction of expenses, compared to the classification to cellular segment revenues in 2016, and from the heightened competition in the cellular market. However, excluding said reclassification effects, we saw a decrease in the level of revenues erosion compared to previous years.

In the fixed line segment, we recorded an 8.9% growth in service revenues compared to last year, mainly due to the continued customer recruitment to Cellcom tv and internet services, mainly through our triple and quadruple-play offerings and due to the said reclassification of part of the revenues from the sharing agreement to the fixed line segment. We ended 2017 with a 53% growth in the TV subscriber base, and we reached profitability in the TV operation with a positive contribution to the EBITDA.

Our free cash flow in 2017 was NIS 325 million, a 21.9% decrease from 2016. The decrease was mainly due to an increase in investments in the fixed line segment due to the increase in activity in the TV field and growth in number of customers, as well as an increase in capital expenditures in fixed line infrastructure.

The Company's Board of Directors decided not to distribute a dividend for the fourth quarter of 2017, given the continued high level of competition in the market and its adverse 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") announced today its financial results for the fourth quarter and full year ended December 31, 2017.

The Company reported that revenues for the fourth quarter and full year 2017 totaled NIS 975 million ($281 million) and NIS 3,871 million ($1,117 million), respectively; EBITDA for the fourth quarter 2017 totaled NIS 189 million ($55 million), or 19.4% of total revenues, and for the full year 2017 totaled NIS 853 million ($246 million), or 22.0% of total revenues; net income for the fourth quarter and full year 2017 totaled NIS 10 million ($3 million) and NIS 113 million ($33 million), respectively. Basic earnings per share for the fourth quarter and full year 2017 totaled NIS 0.08 ($0.02) and NIS 1.11 ($0.32), respectively.

Main Consolidated Financial Results:


NIS millions

% of Revenues

% Change

US$ millions  
(convenience
translation)


2017

2016

2017

2016

2017

2016

Revenues - services

2,919

3,033

75.4%

75.3%

(3.8)%

842

875

Revenues - equipment

952

994

24.6%

24.7%

(4.2)%

275

286

Total revenues

3,871

4,027

100.0%

100.0%

(3.9)%

1,117

1,161

Cost of revenues - services

(2,035)

(2,028)

(52.5)%

(50.4)%

0.3%

(587)

(585)

Cost of revenues - equipment

(645)

(674)

(16.7)%

(16.7)%

(4.3)%

(186)

(194)

Total cost of revenues

(2,680)

(2,702)

(69.2)%

(67.1)%

(0.8)%

(773)

(779)

Gross profit

1,191

1,325

30.8%

32.9%

(10.1)%

344

382

Selling and marketing expenses

(479)

(574)

(12.4)%

(14.3)%

(16.6)%

(138)

(166)

General and administrative expenses

(426)

(420)

(11.0)%

(10.4)%

1.4%

(123)

(121)

Other income (expenses), net

11

(21)

0.2%

(0.5)%

(152.4)%

3

(6)

Operating income

297

310

7.6%

7.7%

(4.2)%

86

89

Financing expenses, net

(144)

(150)

(3.7)%

(3.7)%

(4.0)%

(42)

(43)

Profit before taxes on income 

153

160

3.9%

4.0%

(4.4)%

44

46

Taxes on income

(40)

(10)

(1.0)%

(0.3)%

300.0%

(11)

(3)

Net income

113

150

2.9%

3.7%

(24.7)%

33

43

Free cash flow

325

416

8.4%

10.3%

(21.9)%

94

120

EBITDA

853

858

22.0%

21.3%

(0.6)%

246

247

 


Q4/2017

Q4/2016

Change%

Q4/2017

Q4/2016


NIS million

US$ million

 (convenience translation)



Total revenues

975

984

(0.9)%

281

284

Operating Income

45

32

(40.6)%

13

9

Net Income

10

14

(28.6)%

3

4

Free cash flow

77

83

(7.2)%

22

24

EBITDA

189

173

9.2%

55

50

EBITDA, as percent of total revenues

19.4%

17.6%

10.2%



 

Main Financial Data by Operating Segments:


Cellular (*)

Fixed-line (**)

Inter-segment
adjustments

(***)

Consolidated results

NIS million

2017

2016

Change

%

2017

2016

Change

%

2017

2016

2017

2016

Change

%

Total revenues

2,699

2,998

(10.0)%

1,348

1,229

9.7%

(176)

(200)

3,871

4,027

(3.9)%

Service revenues

1,929

2,162

(10.8)%

1,166

1,071

8.9%

(176)

(200)

2,919

3,033

(3.8)%

Equipment revenues

770

836

(7.9)%

182

158

15.2%

-

-

952

994

(4.2)%

EBITDA

595

625

(4.8)%

258

233

10.7%

-

-

853

858

(0.6)%

EBITDA, as percent of total revenues

22.0%

20.8%

5.8%

19.1%

19.0%

0.5%



22.0%

21.3%

3.3%



 


Cellular (*)

Fixed-line (**)

Inter-segment adjustments

(***)

Consolidated results

NIS million

Q4'17

Q4'16

Change

%

Q4'17

Q4'16

Change

%

Q4'17

Q4'16

Q4'17

Q4'16

Change

%

Total revenues

655

707

(7.4)%

362

327

10.7%

(42)

(50)

975

984

(0.9)%

Service revenues

451

502

(10.2)%

303

267

13.5%

(42)

(50)

712

719

(1.0)%

Equipment revenues

204

205

(0.5)%

59

60

(1.7)%

-

-

263

265

(0.8)%

EBITDA

118

117

0.9%

71

56

26.8%

-

-

189

173

9.2%

EBITDA, as percent of total revenues

18.0%

16.5%

9.1%

19.6%

17.1%

14.6%



19.4%

17.6%

10.2%


(*)   The segment includes the cellular communications services, end user cellular equipment and supplemental services.


(**)  The segment includes landline telephony services, internet services, television services, transmission services, end user fixed-line equipment and supplemental services.


(***) Include cancellation of inter-segment revenues between "Cellular" and "Fixed-line" segments.

Financial Review (2017 full year compared to 2016):

Revenues for 2017 decreased 3.9% totaling NIS 3,871 million ($1,117 million), compared to NIS 4,027 million ($1,161 million) last year. The decrease in revenues is attributed to a 3.8% decrease in service revenues and a 4.2% decrease in equipment revenues.

Service revenues for 2017 totaled NIS 2,919 million ($842 million), a 3.8% decrease from NIS 3,033 million ($875 million) last year.

Service revenues in the cellular segment totaled NIS 1,929 million ($556 million) in 2017, a 10.8% decrease from NIS 2,162 million ($624 million) last year. This decrease resulted mainly from the ongoing erosion in the price of these services as a result of the competition in the cellular market and from the difference between the national roaming services revenues in 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 (the "Network Sharing Agreement with Golan")[2].

Service revenues in the fixed-line segment totaled NIS 1,166 million ($336 million) in 2017, an 8.9% increase from NIS 1,071 million ($309 million) last year. This increase resulted mainly from an increase in revenues from TV and internet services, as well as from fixed-line communications services provided according to the Network Sharing Agreement with Golan, which were partially offset as a result of the discontinuance of consolidation of Internet Rimon Israel 2009 Ltd. ("Internet Rimon"), following the sale of the Group's holdings in Internet Rimon in the second quarter of 2017 (the "Sale of Internet Rimon").

Equipment revenues totaled NIS 952 million ($275 million) in 2017, a 4.2% decrease compared to NIS 994 million ($286 million) last year. This decrease resulted mainly from a decrease in the quantity of end user equipment sold during 2017 in the cellular segment as compared to 2016. This decrease was partially offset by an increase in equipment sales in the fixed-line segment.

Cost of revenues totaled NIS 2,680 million ($773 million) in 2017, compared to NIS 2,702 million ($779 million) in 2016, a 0.8% decrease. This decrease resulted mainly from Golan's participation in operating costs according to the Network Sharing Agreement with Golan, as well as from a decrease in costs of end user equipment sold, primarily as a result of a decrease in the quantity of end user equipment sold in the cellular segment during 2017 as compared to 2016. This decrease was partially offset by an increase in content costs related to the TV field and in costs related to internet services in the fixed-line segment.

Gross profit for 2017 decreased 10.1% to NIS 1,191 million ($344 million), compared to NIS 1,325 million ($382 million) in 2016. Gross profit margin for 2017 amounted to 30.8%, down from 32.9% in 2016.

Selling, Marketing, General and Administrative Expenses ("SG&A Expenses") for 2017 decreased 9.0% to NIS 905 million ($261 million), compared to NIS 994 million ($287 million) in 2016. This decrease is primarily a result of a decrease in salaries and commissions expenses due to the capitalization of part of the customer acquisition costs as a result of the early adoption of a new International Financial Reporting Standard (IFRS 15) since the first quarter of 2017 (the "Adoption of IFRS15"). The effect of the adoption of the standard on 2017 expenses totaled NIS 93 million ($27 million).

Other income for 2017 totaled NIS 11 million ($3 million), compared to other expenses of NIS 21 million ($6 million) in 2016. Other income for 2017 mainly include a gain from the Sale of Internet Rimon, in the amount of approximately NIS 10 million ($3 million). Other expenses for 2016, mainly include an expense for employee voluntary retirement plan in the amount of approximately NIS 13 million ($4 million).

Operating income for 2017 decreased 4.2% to NIS 297 million ($86 million) from NIS 310 million ($89 million) in 2016.

EBITDA for 2017 decreased by 0.6% totaling NIS 853 million ($246 million) compared to NIS 858 million ($247 million) in 2016. EBITDA for 2017, as a percent of revenues, totaled 22.0% up from 21.3% in 2016.

Cellular segment EBITDA for 2017 totaled NIS 595 million ($172 million), compared to NIS 625 million ($180 million) last year, a decrease of 4.8%, which resulted mainly from the difference between national roaming services revenues in 2016 and the revenues for rights of use in cellular networks according to the Network Sharing Agreement with Golan in 2017, and from the ongoing erosion in cellular service revenues. This 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 the Adoption of IFRS15.

Fixed-line segment EBITDA for 2017 totaled NIS 258 million ($74 million), compared to NIS 233 million ($67 million) last year, a 10.7% increase, mainly as a result of an increase in revenues from fixed-line communications services provided according to the Network Sharing Agreement with Golan, from an increase in revenues from TV services and from a decrease in operating expenses, which resulted mainly from the capitalization of part of the customer acquisition costs as a result of the Adoption of IFRS15. This increase was partially offset as a result of an erosion in the internet field profitability.

Financing expenses, net for 2017 decreased 4.0% and totaled NIS 144 million ($42 million), compared to NIS 150 million ($43 million) in 2016. The decrease resulted mainly from higher gains in the Company's investment portfolio in 2017 compared to 2016. This decrease was partially offset by a decrease in interest income from installment sales of handsets, due to a decrease in the quantity of end user equipment sold during 2017 in the cellular segment as compared to 2016.

Taxes on income for 2017 totaled NIS 40 million ($11 million) of tax expenses, compared to NIS 10 million ($3 million) tax expenses in 2016. The increase resulted mainly from a tax income recorded in 2016, as a result of a tax assessment agreement for the years 2012-2013 and from a reduction in corporate tax rate for the years 2017 and on, which came into effect in 2016, following which the Company recorded a deferred tax income in 2016.

Net Income for 2017 totaled NIS 113 million ($33 million), compared to NIS 150 million ($43 million) in 2016, a 24.7% decrease.

Basic earnings per share for 2017 totaled NIS 1.11 ($0.32), compared to NIS 1.47 ($0.42) last year.

 




2 According to the terms of the Network Sharing Agreement with Golan, part of the consideration is recognized as revenues and part is recognized as a reduction of operation costs. In addition, revenues from the Network Sharing Agreement are divided between the cellular and fixed-line segments.

 

Financial Review (fourth quarter of 2017 compared to fourth quarter of 2016):

Revenues for the fourth quarter of 2017 decreased 0.9% totaling NIS 975 million ($281 million), compared to NIS 984 million ($284 million) in the fourth quarter last year. The decrease in revenues is attributed to a 1.0% decrease in service revenues and a 0.8% decrease in equipment revenues.

Service revenues totaled NIS 712 million ($205 million) in the fourth quarter of 2017, a 1.0% decrease from NIS 719 million ($207 million) in the fourth quarter last year.

Service revenues in the cellular segment totaled NIS 451 million ($130 million) in the fourth quarter of 2017, a 10.2% decrease from NIS 502 million ($145 million) in the fourth quarter last year. This decrease resulted mainly from the ongoing erosion in the prices of these services as a result of the competition in the cellular market and from the difference between the national roaming services revenues in the fourth quarter of 2016 and the revenues for rights of use in cellular networks according to the Network Sharing Agreement with Golan in the fourth quarter of 2017.

Service revenues in the fixed-line segment totaled NIS 303 million ($87 million) in the fourth quarter of 2017, a 13.5% increase from NIS 267 million ($77 million) in the fourth quarter last year. This increase resulted mainly from fixed-line communications services provided according to the Network Sharing Agreement with Golan, as well as from an increase in revenues from TV and internet services. This increase was partially offset as a result of the discontinuance of consolidation of Internet Rimon following the Sale of Internet Rimon.

Equipment revenues in the fourth quarter of 2017 totaled NIS 263 million ($76 million), a 0.8% decrease compared to NIS 265 million ($76 million) in the fourth quarter last year.

Cost of revenues for the fourth quarter of 2017 totaled NIS 680 million ($196 million), compared to NIS 697 million ($201 million) in the fourth quarter of 2016, a 2.4% decrease. This decrease resulted mainly from Golan's participation in operating costs according to the Network Sharing Agreement with Golan, as well as from an increase of a provision for claims recorded in the fourth quarter of 2016. This decrease was partially offset by an increase in content costs related to the TV field and in costs related to internet services in the fixed-line segment.

Gross profit for the fourth quarter of 2017 increased 2.8% to NIS 295 million ($85 million), compared to NIS 287 million ($83 million) in the fourth quarter of 2016. Gross profit margin for the fourth quarter of 2017 amounted to 30.3%, up from 29.2% in the fourth quarter of 2016.

Selling, Marketing, General and Administrative Expenses ("SG&A Expenses") for the fourth quarter of 2017 decreased 0.8% to NIS 249 million ($72 million), compared to NIS 251 million ($72 million) in the fourth quarter of 2016. This decrease is primarily a result of a decrease in salaries and resellers commissions expenses due to the capitalization of part of the customer acquisition costs as a result of the Adoption of IFRS15 (the effect of the adoption of the standard on the expenses in the fourth quarter of 2017 totaled NIS 21 million ($6 million)), as well as a decrease in advertising expenses. This decrease was partially offset by an increase in doubtful accounts expenses.

Operating income for the fourth quarter of 2017 increased by 40.6% to NIS 45 million ($13 million) from NIS 32 million ($9 million) in the fourth quarter of 2016.

EBITDA for the fourth quarter of 2017 increased by 9.2% totaling NIS 189 million ($55 million) compared to NIS 173 million ($50 million) in the fourth quarter of 2016. EBITDA as a percent of revenues for the fourth quarter of 2017 totaled 19.4%, up from 17.6% in the fourth quarter of 2016.

Cellular segment EBITDA for the fourth quarter of 2017 increased by 0.9% totaling NIS 118 million ($34 million) compared to NIS 117 million ($34 million) in the fourth quarter last year. This increase resulted mainly from a decrease in cost of revenues and Selling, Marketing, General and Administrative Expenses in this segment, which resulted mainly from a decrease in selling and marketing expenses due to the capitalization of part of the customer acquisition costs as a result of the Adoption of IFRS15. This increase was partially offset by a decrease in service revenues in the cellular segment, which resulted mainly from the ongoing erosion in the prices of these services, and from the difference between the national roaming services revenues in the fourth quarter of 2016 and the revenues for rights of use in cellular networks according to the Network Sharing Agreement with Golan in the fourth quarter of 2017.

Fixed-line segment EBITDA for the fourth quarter of 2017 totaled NIS 71 million ($20 million), compared to NIS 56 million ($16 million) in the fourth quarter last year, a 26.8% increase, mainly as a result of an increase in revenues from fixed-line communications services provided according to the Network Sharing Agreement with Golan and from an increase in activity in the internet and TV fields. This increase was partially offset from the discontinuance of consolidation of Internet Rimon following the Sale of Internet Rimon.

Financing expenses, net for the fourth quarter of 2017 decreased 25.0% and totaled NIS 30 million ($9 million), compared to NIS 40 million ($12 million) in the fourth quarter of 2016. The decrease resulted mainly from gains in the Company's investment portfolio in the fourth quarter of 2017 as opposed to losses in the corresponding quarter of 2016.

Taxes on income for the fourth quarter of 2017 totaled NIS 5 million ($1 million) of tax expenses, compared to NIS 22 million ($6 million) of tax income in the fourth quarter of 2016. The increase resulted mainly from deferred tax income which was recorded in the fourth quarter last year, as a result of a decrease in corporate tax rate for the years 2017 and on.

Net Income for the fourth quarter of 2017 totaled NIS 10 million ($3 million), compared to NIS 14 million ($4 million) in the fourth quarter of 2016, a 28.6% decrease.

Basic earnings per share for the fourth quarter of 2017 totaled NIS 0.08 ($0.02), compared to NIS 0.12 ($0.03) in the fourth quarter last year.

OPERATING REVIEW

Main Performance Indicators - Cellular segment:


2017

2016

Change (%)

Cellular subscribers at the end
of period (in thousands)

2,817

2,801

0.6%

Churn Rate for cellular
subscribers (in %)

45.8%

42.4%

8.0%

Monthly cellular ARPU (in NIS)

57.1

63.3

(9.8)%


Q4/2017

Q4/2016

Change (%)

Churn Rate for cellular
subscribers (in %)

11.5%

10.4%

10.6%

Monthly cellular ARPU (in NIS)

53.6

59.3

(9.6)%

 

Cellular subscriber base - at the end of 2017 the Company had approximately 2.817 million cellular subscribers, an increase of approximately 16,000 subscribers net, or approximately 0.6%, compared to the cellular subscriber base at the end of 2016[3]. In the fourth quarter of 2017, the Company's cellular subscriber base increased by approximately 12,000 net cellular subscribers.

Cellular Churn Rate for 2017 totaled 45.8%, compared to 42.4% in 2016. The cellular churn rate for the fourth quarter 2017 totaled to 11.5%, compared to 10.4% in the fourth quarter last year.

The monthly cellular Average Revenue per User ("ARPU") for 2017 totaled NIS 57.1 ($16.5) compared to NIS 63.3 ($18.3) in 2016. ARPU for the fourth quarter of 2017 totaled NIS 53.6 ($15.5), compared to NIS 59.3 ($17.1) in the fourth quarter last year. The decrease in ARPU, both annual and quarterly, resulted, among others, from the ongoing erosion in the prices of cellular services, resulting from the intense competition in the cellular market and from the difference between national roaming services revenues in 2016 and the revenues for rights of use in cellular networks according to the Network Sharing Agreement with Golan in 2017.

 

MAIN PERFORMANCE INDICATORS - FIXED-LINE SEGMENT:


2017

2016

Change (%)

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

222

156

42.3%

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

170

111

53.2%

 

In the fourth quarter of 2017, the Company's subscriber base in the internet infrastructure field increased by approximately 16,000 net households, and the Company's subscriber base in the TV field increased by 16,000 net households.




3 The increase resulted, among others, from subscribers that were added to the Company's cellular subscriber base as part of the Company's purchase of an Israeli MVNO's operations during the third quarter of 2017.

 

FINANCING AND INVESTMENT REVIEW

Cash Flow

Free cash flow for 2017 totaled NIS 325 million ($94 million), compared to NIS 416 million ($120 million) in 2016, a 21.9% decrease. The decrease in annual free cash flow resulted mainly from higher cash capital expenditures in fixed assets and intangible assets and others in the 2017 as compared to 2016, as well as from the difference between the receipts from rights of use in cellular networks according to the Network Sharing Agreement with Golan in 2017, and the receipts from national roaming services revenues in 2016. This decrease was partially offset by a decrease in tax payments, net, in 2017 as compared to 2016, which resulted, among others, from a receipt of a refund from the Israeli tax authorities in 2017.

Free cash flow for the fourth quarter of 2017 totaled NIS 77 million ($22 million), compared to NIS 83 million ($24 million) in the fourth quarter of 2016, a 7.2% decrease. The decrease in quarterly free cash flow resulted mainly from an increase in payments to payroll and other payables due to timing differences between the quarters. This decrease was partially offset by an increase in receipts from mobile operators in connection with the Company's roaming activity and a decrease in tax payments, net.

Total Equity

Total Equity as of December 31, 2017 amounted to NIS 1,441 million ($415 million) primarily consisting of undistributed accumulated retained earnings of the Company.

Cash Capital Expenditures in Fixed Assets and Intangible Assets and others

During 2017 and the fourth quarter of 2017 the Company invested NIS 583 million ($168 million) and NIS 138 million ($40 million), respectively, in fixed assets and intangible assets and others (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 the Adoption of IFRS15), compared to NIS 368 million ($106 million) and NIS 96 million ($28 million) in 2016 and the fourth quarter of 2016, respectively.

Dividend

On March 25, 2018, the Company's Board of Directors decided not to declare a cash dividend for the fourth 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, 2017 on Form 20-F dated March 26, 2018, or the Company's 2017 Annual Report, under "Item 8 - Financial Information – A. Consolidated Statements and Other Financial Information - Dividend Policy".

Debentures, Material Loans and Financial Liabilities

For information regarding the Company's outstanding debentures as of December 31, 2017, see "Disclosure for Debenture Holders" section in this press release.

For information regarding the Company's material loans as of December 31, 2017, see "Aggregation of the information regarding the Company's Material Loans" section in this press release.

For a summary of the Company's financial liabilities as of December 31, 2017, see "Disclosure for Debenture Holders" section in this press release.

CONFERENCE CALL DETAILS

The Company will be hosting a conference call regarding its results for the year 2017 and for the fourth quarter of 2017 on Monday, March 26, 2018 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: 1 888 407 2553              UK Dial-in Number: 0 800 917 9141
Israel Dial-in Number: 03 918 0610               International Dial-in Number: +972 3 918 0610
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.

ANNUAL REPORT FOR 2017

Cellcom Israel will be filing its annual report for the year ended December 31, 2017 (on Form 20-F) with the US Securities and Exchange Commission on March 26, 2018. The annual report will be available for download from the investor relations section of Cellcom Israel's website: www.cellcom.co.il. Cellcom Israel will furnish a hard copy to any shareholder who so requests, without charge. Such requests may be sent through the Company's website or by sending a postal mail request to Cellcom Israel Ltd., 10 Hagavish Street, Netanya, Israel (attention:Chief Financial Officer).

About Cellcom Israel

Cellcom Israel Ltd., established in 1994, is a leading Israeli communications group, providing a wide range of communications services. Cellcom Israel is the largest Israeli cellular provider, providing its approximately 2.817 million cellular subscribers (as at December 31, 2017) with a broad range of services including cellular telephony, roaming services for tourists in Israel and for its subscribers abroad, text and multimedia messaging, advanced cellular content and data services and other value-added 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. 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 services in Israel. 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, 2017. 

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 3.467 = US$ 1 as published by the Bank of Israel for December 31, 2017.

Use of non-IFRS financial measures

EBITDA is a non-IFRS measure and is defined as income before financing income (expenses), net; other income (expenses), net (excluding expenses related to employee voluntary retirement plans 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)


Consolidated Statements of Financial Position














Convenience







 translation into 







US dollar



December 31,


December 31,


December 31,



2016


2017


2017



NIS millions


NIS millions


US$ millions








Assets







Cash and cash equivalents


1,240


527


152

Current investments, including derivatives


284


364


105

Trade receivables


1,325


1,280


369

Current tax assets


25


4


1

Other receivables


61


89


26

Inventory


64


70


20








Total current assets


2,999


2,334


673








Trade and other receivables


796


895


258

Property, plant and equipment, net


1,659


1,598


461

Intangible assets and others, net


1,207


1,260


364

Deferred tax assets


1


-


-








Total non- current assets


3,663


3,753


1,083








Total assets


6,662


6,087


1,756








Liabilities







Current maturities of debentures and of loans
from financial institutions


863


618


179

Trade payables and accrued expenses


675


652


188

Current tax liabilities


-


4


1

Provisions


108


91


26

Other payables, including derivatives


279


277


80








Total current liabilities


1,925


1,642


474








Long-term loans from financial institutions


340


462


134

Debentures


2,866


2,360


681

Provisions


30


21


6

Other long-term liabilities


31


15


4

Liability for employee rights upon retirement, net


12


15


4

Deferred tax liabilities


118


131


38








Total non- current liabilities


3,397


3,004


867








Total liabilities


5,322


4,646


1,341








Equity attributable to owners of the Company







Share capital


1


1


-

Cash flow hedge reserve


(1)


-


-

Retained earnings


1,322


1,436


414








Non-controlling interests


18


4


1








Total equity


1,340


1,441


415








Total liabilities and equity


6,662


6,087


1,756


 

 

Cellcom Israel Ltd.

(An Israeli Corporation)


Consolidated Statements of Income










Convenience









 translation into 









 US dollar



Year ended


Year ended


Year ended


Year ended



December 31,


December 31,


December 31,


 December 31,



2015


2016


2017


2017



NIS millions


NIS millions


NIS millions


US$ millions










Revenues


4,180


4,027


3,871


1,117

Cost of revenues


(2,763)


(2,702)


(2,680)


(773)










Gross profit


1,417


1,325


1,191


344










Selling and marketing expenses


(620)


(574)


(479)


(138)

General and administrative expenses


(465)


(420)


(426)


(123)

Other income (expenses), net


(22)


(21)


11


3










Operating profit


310


310


297


86










Financing income


55


46


52


15

Financing expenses


(232)


(196)


(196)


(57)

Financing expenses, net


(177)


(150)


(144)


(42)










Profit before taxes on income


133


160


153


44










Taxes on income


(36)


(10)


(40)


(11)

Profit for the year


97


150


113


33

Attributable to:









Owners of the Company


95


148


112


33

Non-controlling interests


2


2


1


-

Profit for the year


97


150


113


33










Earnings per share









Basic earnings per share (in NIS)


0.95


1.47


1.11


0.32










Diluted earnings per share (in NIS)


0.95


1.47


1.10


0.32










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


100,589,458


100,604,578


100,654,935


100,654,935










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


100,589,530


100,698,306


100,889,661


100,889,661


 

 

Cellcom Israel Ltd.

(An Israeli Corporation)


Consolidated Statements of Cash Flows









Convenience








 translation into








 US dollar


Year ended


Year ended


Year ended


Year ended


December 31,


December 31,


December 31,


 December 31,


2015


2016


2017


2017


NIS millions


NIS millions


NIS millions


US$ millions

Cash flows from operating activities








Profit for the year

97


150


113


33

Adjustments for: 








Depreciation and amortization

562


534


555


160

Share based payments

3


6


2


-

Loss (gain) on sale of property, plant and
equipment

(1)


10


(1)


-

Gain on sale of shares in a consolidated company 

-


-


(10)


(3)

Income tax expense

36


10


40


11

Financing expenses, net

177


150


144


42









Changes in operating assets and liabilities:








Change in inventory

4


21


(6)


(2)

Change in trade receivables (including long-term
amounts)

209


(28)


132


38

Change in other receivables (including long-term
amounts)

(34)


(5)


(191)


(55)

Change in trade payables, accrued expenses and
provisions

(54)


-


(27)


(8)

Change in other liabilities (including long-term
amounts)

(95)


20


28


8

Payments for derivative hedging contracts, net

-


-


(3)


(1)

Income tax paid

(68)


(88)


(44)


(12)

Income tax received

-


1


42


12

Net cash from operating activities

836


781


774


223









Cash flows used in investing activities








Acquisition of property, plant, and equipment

(305)


(295)


(346)


(100)

Additions to intangible assets and others

(91)


(73)


(237)


(68)

Dividend received

2


-


-


-

Change in current investments, net

231


(9)


(77)


(22)

Proceeds from sale of property, plant and
equipment

4


2


1


-

Interest received 

15


11


12


3

Repayment of a long-term deposit

48


-


-


-

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

-


-


3


1

Net cash used in investing activities

(96)


(364)


(644)


(186)


 

 

Cellcom Israel Ltd.

(An Israeli Corporation)


Consolidated Statements of Cash Flows (cont'd)









Convenience








 translation into








 US  dollar 


Year ended


Year ended


Year ended


Year ended


December 31,


December 31,


December 31,


 December 31,


2015


2016


2017


2017


NIS millions


NIS millions


NIS millions


US$ millions









Cash flows used in financing
activities








Payments for derivative contracts, net

(32)


(13)


(3)


(1)

Receipt of long-term loans from
financial institutions

-


340


200


58

Repayment of debentures

(873)


(732)


(864)


(249)

Proceeds from issuance of
debentures, net of issuance costs

(3)


653


-


-

Dividend paid

(1)


(1)


(1)


-

Interest paid

(227)


(185)


(175)


(51)









Net cash from (used in) financing
activities

(1,136)


62


(843)


(243)









Changes in cash and cash
equivalents

(396)


479


(713)


(206)









Cash and cash equivalents as at
the beginning of the year

1,158


761


1,240


358

Effect of exchange rate
fluctuations on cash and cash
equivalents

(1)


-


-


-









Cash and cash equivalents as at
the end of the year

761


1,240


527


152

 

 

 

Cellcom Israel Ltd.

(An Israeli Corporation)




Reconciliation for Non-IFRS Measures


EBITDA




The following is a reconciliation of net income to EBITDA:


Year ended December 31

Convenience

translation

into US dollar

Year ended

December 31


2015

NIS millions

2016

NIS millions

2017

NIS millions

2017

US$ millions

Net income....................................

97

150

113

33

Income taxes..................................

36

10

40

11

Financing income...........................

(55)

(46)

(52)

(15)

Financing expenses........................

232

196

196

57

Other expenses (income)...............

(3)

8

(1)

-

Depreciation and amortization.......

562

534

555

160

Share based payments....................

3

6

2

-

EBITDA.........................................

872

858

853

246












Three-month period ended

December 31


2015

NIS millions

2016

NIS millions

2017

NIS millions

Convenience

translation

into US dollar

2017

US$ millions

Net income....................................

19

14

10

3

Income taxes..................................

12

(22)

5

1

Financing income...........................

(11)

(13)

(17)

(5)

Financing expenses........................

59

53

47

14

Other expenses..............................

1

3

1

-

Depreciation and amortization.......

143

136

143

42

Share based payments

2

2

-

-

EBITDA.........................................

225

173

189

55

 

 

Cellcom Israel Ltd.

(An Israeli Corporation)




Reconciliation for Non-IFRS Measures (cont'd)




Free cash flow




The following table shows the calculation of free cash flow:


Year ended December 31

Convenience

translation

into US dollar

Year ended

December 31


2015

NIS millions

2016

NIS millions

2017

NIS millions

2017

US$ millions

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

836

781

774

223

Loan to Golan Telecom..........................

-

-

130

38

Cash flows from investing activities......

(96)

(364)

(644)

(186)

Purchase (sale) of tradable
   debentures(**)....................................

(246)

(1)

65

19

Free cash flow......................................

494

416

325

94






Three-month period ended

December 31


2015

NIS millions

2016

NIS millions

2017

NIS millions

Convenience

translation

into US dollar

2017

US$ millions

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

210

178

214

62

Cash flows from investing activities......

8

(96)

(133)

(39)

Purchase (sale) of tradable
   debentures(**)....................................

(97)

1

(4)

(1)

Free cash flow......................................

121

83

77

22



(*) 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

Q3-2017

Q4-2017

FY-2016

FY-2017












Cellular service revenues

559

567

534

502

509

481

488

451

2,162

1,929

Fixed-line service revenues

264

264

276

267

279

292

292

303

1,071

1,166












Cellular equipment revenues

219

217

195

205

183

192

191

204

836

770

Fixed-line equipment revenues

29

30

39

60

37

39

47

59

158

182












Inter-segment adjustments

(49)

(49)

(52)

(50)

(49)

(42)

(43)

(42)

(200)

(176)

Total revenues

1,022

1,029

992

984

959

962

975

975

4,027

3,871












Cellular EBITDA

178

181

149

117

159

158

160

118

625

595

Fixed-line EBITDA

60

57

60

56

42

79

66

71

233

258

Total EBITDA

238

238

209

173

201

237

226

189

858

853












Operating profit

101

104

73

32

67

102

83

45

310

297

Financing expenses, net

24

44

42

40

31

44

39

30

150

144

Profit for the period

59

44

33

14

26

45

32

10

150

113












Free cash flow

149

103

81

83

66

77

105

77

416

325












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

2,813

2,812

2,822

2,801

2,792

2,779

2,805

2,801

2,801

2,817

Monthly cellular ARPU (in NIS)

65.2

66.0

62.8

59.3

60.2

57.0

57.8

53.6

63.3

57.1

Churn rate for cellular subscribers
(%)

11.1%

10.6%

10.5%

10.4%

12.0%

10.8%

11.5%

11.5%

42.4%

45.8%

 

 

Cellcom Israel Ltd.


Disclosure for debenture holders as of December 31, 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 31.12.2017

As of 25.03.2018

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

F (4)(5)(6)(9)**

20/03/12

714.802

643.322

659.060

14.853

673.913

463.921

428.881

438.142

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)(9)**

20/03/12

285.198

228.158

228.217

7.821

236.038

90.633

85.559

85.593

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

848.514

9.221

857.735

987.419

949.624

874.140

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

761.438

16.324

777.762

888.753

804.010

776.532

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

102.349

1.241

103.590

112.086

103.267

102.391

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)(8)**

26/09/16

303.971

303.971

301.186

5.292

306.478

327.985

303.971

301.318

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.

L ***

23/01/18

400.600






400.600

396.487

2.50%

05.01.23

05.01.28

January-5

Not linked

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

Total


3,561.472

3,032.352

2,900.764

54.752

2,955.516

2,870.797

3,075.912

2,974.603







 

Comments:

(1) For a summary of the terms of the Company's outstanding debentures see the Company's 2017 Annual Report under "Item 5. Operating and Financial Review and Prospects - B. Liquidity and Capital Resources - Debt Service - Public Debentures". In the reporting period, the Company fulfilled all terms of the debentures and Indentures. Debentures financial covenants - as of December 31, 2017 the net leverage (net debt to EBITDA excluding one time events ratio- see definition in the reference above to the Company's 2017 Annual Report) was 3.00. In the reporting period, no cause for early repayment occurred. (2) Including interest accumulated in the books. (3) Semi annual payments. (4) Regarding the debentures , 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 the debentures - the Company has the right for early redemption under certain terms. (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 2015, 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 and in January 2017, respectively. (8) In June 2017, the Company undertook to issue NIS 220 million principle amount of additional series K debentures in July 1, 2018, under certain terms. See the Company's annual report for the year ended December 31, 2017 on Form 20-F, under "Item 5. Operating and Financial Review and Prospects - B. Liquidity and Capital Resources - Debt Service - Public Debentures". (9) On January 5, 2018, after the end of the reporting period, the Company repaid principal payments of approximately NIS 362 million of Series F and G debentures (the ex-date of which was December 24, 2017).

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

(**) As of December 31, 2017, debentures Series F through I and K are material, which represent 5% or more of the total liabilities of the Company, as presented in the financial statements.

(***) Debenture Series L was issued after the end of the reporting period.

 

 

Cellcom Israel Ltd.


Disclosure for debenture holders as of December 31, 2017 (cont'd)


Debentures Rating Details*


Series

Rating Company

Rating as of 31.12.2017 (1)

Rating as of 25.03.2018

Rating assigned upon issuance of the Series

Recent date of rating as of 25.03.2018

Additional ratings between original issuance and the recent date of rating as of 25.03.2018 (2)


Rating

F

S&P Maalot

A+

A+

AA

01/2018

05/2012, 11/2012, 06/2013, 06/2014, 08/2014, 01/2015, 09/2015, 03/2016, 08/2016, 06/2017, 01/2018

AA,AA-,A+ (2)

G

S&P Maalot

A+

A+

AA

01/2018

05/2012, 11/2012, 06/2013, 06/2014, 08/2014, 01/2015, 09/2015, 03/2016, 08/2016, 06/2017, 01/2018

AA,AA-,A+ (2)

H

S&P Maalot

A+

A+

A+

01/2018

06/2014, 08/2014, 01/2015, 09/2015, 03/2016, 08/2016, 06/2017, 01/2018

A+ (2)

I

S&P Maalot

A+

A+

A+

01/2018

06/2014, 08/2014, 01/2015, 09/2015, 03/2016, 08/2016, 06/2017, 01/2018

A+ (2)

J

S&P Maalot

A+

A+

A+

01/2018

08/2016, 06/2017, 01/2018

A+ (2)

K

S&P Maalot

A+

A+

A+

01/2018

08/2016, 06/2017, 01/2018

A+ (2)

L (3)

S&P Maalot


A+

A+

01/2018



(1)       In January 2018, S&P Maalot affirmed the Company's rating of "ilA+/stable".

(2)       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, June 2017 and January 2018, S&P Maalot affirmed the Company's rating of "ilA+/stable". For details regarding the rating of the debentures see the S&P Maalot report dated August 22, 2017, included in the Company's Shelf offering Report filled in the Israeli Securities Authority website ('MAGNA") on January 22, 2018 .

(3)       Debenture Series L was 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.


Aggregation of the information regarding the Company's Material Loans (1), in million NIS


Loan

Provision Date

Principal
Amount as of
31.12.2017

Interest Rate
(nominal)

Principal Repayment
Dates (annual
payments)

Interest
Repayment
Dates (semi-
annual payments)

Linkage

From

To



Loan from financial
institution

06/2016

200

4.60%

30.06.18

30.06.21

June-30

and
December-31,
commencing
December 31,
2016  through
June 30, 2021

Not
linked

Loan from bank

12/2016

140

4.90%

30.06.18

30.06.22

June-30 and
December 30, 
commencing
June 30, 2017
through June
30, 2022

Not
linked

Loan from financial
institution

06/2017

200

5.10%

30.06.19

30.06.22

June-30

and
December-31,
commencing
December 31,
2017 through
June 30, 2022

Not
linked

Total


540






Comments:

(1) For a summary of the terms of the Company's loan agreements see the Company's 2017 Annual Report under "Item 5. Operating and Financial Review and Prospects - B. Liquidity and Capital Resources - Other Credit Facilities" and the reference therein to "- Debt Service - Public Debentures". (2) In the reporting period, the Company fulfilled all terms of the loan agreements. (3) Loan agreements financial covenants - as of December 31, 2017 the net leverage (net debt to EBITDA excluding one-time events ratio- see definition in the reference above to the Company's 2017 Annual Report) was 3.00. (4) In the reporting period, no cause for early repayment occurred. (5) In the loan agreements, the Company undertook not to create any pledge on its assets, as long as the loans are not fully repaid, subject to certain exclusions. (6) According to the loan agreements the Company may prepay the loans, subject to a prepayment fee. (7) In June 2017, the Company entered into an additional loan agreement with the lender of the Company's existing bank loan for the provision of a deferred loan in a principal amount of NIS 150 million. See more information in the reference above to the Company's 2017 Annual Report.

Cellcom Israel Ltd.

Summary of Financial Undertakings (according to repayment dates) as of December 31, 2017

a.       Debentures issued to the public by the Company and held by the public, excluding such debentures held by the Company's parent company, by a controlling shareholder, by companies controlled by them, or by companies controlled by the Company, based on the Company's "Solo" financial data (in thousand NIS).


Principal payments

Gross interest
payments
(without
deduction of
tax)

ILS linked to
CPI

ILS not
linked to CPI

Euro

Dollar

Other

First year

332,545

222,292

-

-

-

101,081

Second year

332,545

165,506

-

-

-

77,484

Third year

332,545

80,327

-

-

-

58,843

Fourth year

166,122

156,847

-

-

-

48,224

Fifth year and on

539,046

701,369

-

-

-

99,573

Total

1,702,804

1,326,340

-

-

-

385,204

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

-

50,000

-

-

-

18,241

Second year

-

100,000

-

-

-

14,655

Third year

-

100,000

-

-

-

9,812

Fourth year

-

100,000

-

-

-

4,955

Fifth year and on

-

50,000

-

-

-

1,265

Total

-

400,000

-

-

-

48,927

c.       Credit from banks in Israel 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

-

28,000

-

-

-

6,153

Second year

-

28,000

-

-

-

4,800

Third year

-

28,000

-

-

-

3,430

Fourth year

-

28,000

-

-

-

2,056

Fifth year and on

-

28,000

-

-

-

684

Total

-

140,000

-

-

-

17,124

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 December 31, 2017 (cont'd)

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

332,545

300,292

-

-

-

125,475

Second year

332,545

293,506

-

-

-

96,939

Third year

332,545

208,327

-

-

-

72,084

Fourth year

166,122

284,847

-

-

-

55,236

Fifth year and on

539,046

779,369

-

-

-

101,521

Total

1,702,804

1,866,340

-

-

-

451,255

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

885

708

-

-

-

545

Second year

885

455

-

-

-

487

Third year

885

74

-

-

-

451

Fourth year

1,308

1,310

-

-

-

430

Fifth year and on

4,550

7,252

-

-

-

1,045

Total

8,514

9,799

-

-

-

2,959

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.

 

 

 

Cision

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