6-K 1 zk1720820.htm 6-K

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 6-K
 
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15a-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
 
Report on Form 6-K dated
 
November 21, 2017
 
Partner Communications Company Ltd.
(Translation of Registrant’s Name Into English)
 
8 Amal Street
Afeq Industrial Park
Rosh Ha’ayin 48103
Israel
                       
(Address of Principal Executive Offices)
 
(Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F.)
 
Form 20-F ☒   Form 40-F  ☐
 
(Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information to the
 Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.)
 
Yes ☐  No ☒
 
(If “Yes” is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82- _______)
 
This Form 6-K is incorporated by reference into the Company’s Registration Statements on Form S-8 filed with the Securities and Exchange Commission on December 4, 2002 (Registration No. 333-101652), September 5, 2006 (Registration No. 333-137102), September 11, 2008 (Registration No. 333-153419), August 17, 2015 (Registration No. 333-206420), November 12, 2015 (Registration No. 333-207946) and on March 14, 2016 (Registration No. 333-210151)
 
Enclosure: Partner Communications reports third quarter 2017 results
 

 
PARTNER COMMUNICATIONS REPORTS
THIRD QUARTER 2017 RESULTS1
 
ADJUSTED EBITDA2 TOTALED NIS 239 MILLION
 
ADJUSTED FREE CASH FLOW2 TOTALED NIS 202 MILLION
 
NET DEBT2 DECLINED BELOW NIS 1 BILLION TO NIS 887 MILLION
 
30 THOUSAND HOUSEHOLDS ARE CONNECTED TO PARTNER TV AS OF TODAY
 
CELLULAR SUBSCRIBERS INCREASE FOR THE SECOND CONSECUTIVE QUARTER
 
Third quarter 2017 highlights (compared with third quarter 2016)
 
·
Total Revenues: NIS 826 million (US$ 234 million), a decrease of 3%
·
Service Revenues: NIS 666 million (US$ 189 million), a decrease of 5%
·
Equipment Revenues: NIS 160 million (US$ 45 million), an increase of 6%
·
Total Operating Expenses (OPEX2): NIS 477 million (US$ 135 million), a decrease of 16%
·
Adjusted EBITDA: NIS 239 million (US$ 68 million), an increase of 9%
·
Adjusted EBITDA Margin2: 29% of total revenues compared with 26%
·
Profit for the Period: NIS 54 million (US$ 15 million), an increase of 184%
·
Net Debt: NIS 887 million (US$ 251 million), a decrease of NIS 881 million
·
Adjusted Free Cash Flow (before interest): NIS 202 million (US$ 57 million), a decrease of NIS 13 million
·
Cellular ARPU: NIS 64 (US$ 18), a decrease of 3%
·
Cellular Subscriber Base: approximately 2.68 million at quarter-end, a decrease of 1%
 
Rosh Ha’ayin, Israel, November 21, 2017 – Partner Communications Company Ltd. (“Partner” or the “Company”) (NASDAQ and TASE: PTNR), a leading Israeli communications provider, announced today its results for the quarter ended September 30, 2017.

1 The quarterly financial results are unaudited.
2  For the definition of this and other Non-GAAP financial measures, see “Use of Non-GAAP Financial Measures” in this press release.
 
2
Commenting on the third quarter 2017 results, Mr. Isaac Benbenisti, CEO of Partner noted:
 
"Our strong entrance to the TV market, together with our significant presence in the internet and cellular markets, establishes Partner as a comprehensive communications group. The customer recruitment figures for Partner TV are high compared to our preliminary forecasts. In the last month, the sales rate has increased even more and the number of daily installations has accelerated compared to the period from August through October. In less than a month, we have completed installations in 10,000 additional households and currently the number of households that are already connected to the Partner TV service is approximately 30,000. In addition, thousands of additional households have scheduled installations by the end of the month after they have already completed joining the service. Most of the customers that have joined the TV service have chosen the service as part of our bundle and triple offerings which also includes ISP and internet infrastructure.
 
As part of our strategic plan as a comprehensive communications group, in August we also announced the commencement of the commercial phase of our independent fiber optic infrastructure project - Partner Fiber - which provides, for the first time, a more advanced and cost-effective alternative to the existing fixed infrastructure in Israel.
 
Partner's optic fibers have already reached tens of thousands of households throughout the country, and we are working to deploy further at an accelerated rate in several cities simultaneously. In complete alignment with the Ministry of Communications and other regulatory bodies, we will continue to offer the most advanced technology with an attractive value offering to more and more customers.
 
In the cellular segment we added approximately 33 thousand net Post-Paid subscribers in the last quarter and recorded a net increase in our cellular subscriber base for the second consecutive quarter, despite a decline of approximately 18 thousand Pre-Paid subscribers.”
 
Mr. Dudu Mizrahi, Partner's Chief Financial Officer, commented on the third quarter 2017 results:
 
“In the third quarter, many of the activities that the Company has been engaged in during the last year were reflected, among others, in the growth of 33 thousand Post-Paid cellular subscribers, a continued single digit cellular churn rate, a significant improvement in the equipment sales gross profit margin which stood at 27%, an improvement in the EBITDA margin compared with Q3 2016, and an additional quarter with a strong free cash flow before interest which totaled NIS 202 million.
 
The increase in CAPEX in the quarter mainly reflected the acceleration of the Company's fiber project, which enables the Company to offer advanced services based on an independent fixed-line infrastructure both to the residential market and the business market, as well as the entrance to the TV market.
 
3
In the third quarter the Company early adopted the new International Financial Reporting Standard 15 ("IFRS 15"), retroactively as from January 1, 2017 (the standard is effective from January 1, 2018, earlier application is permitted). The total increase in operating profit and profit for the first three quarters of 2017 amounted to NIS 51 million and NIS 39 million, respectively. The increase in the operating profit and profit for the third quarter 2017 alone amounted to NIS 19 million and NIS 15 million, respectively. The increase is mainly a result of costs capitalization of obtaining contracts with customers (part of payroll expenses and selling commissions).
 
The financial steps which we executed in the past months, including among others, the early repayments of loans in an amount of approximately NIS 0.9 billion and the raising of a new traded bond series, are reflected in the significant decline in finance expenses compared to Q3 2016. The financial steps, together with the strong free cash flow presented by the Company in the current quarter, resulted in a decline in net debt to below NIS 1 billion – to NIS 887 million.”

NIS Million
Q3’17
Q2’17
Comments
Service Revenues
666
646
The increase results mainly from higher cellular seasonal roaming revenues
Equipment Revenues
160
159
  
Total Revenues
826
805
  
Gross profit from equipment sales
43
33
  
OPEX
477
*472
Q3 2017 include expenses related to the launch of the Company's TV services
Adjusted EBITDA
239
*269
Q2 2017 was the last quarter for which the Company recorded NIS 54 million income with respect to the settlement agreement with Orange. This was partially offset by an increase in service revenues and an increase in gross profit from equipment
Profit for the Period
54
*46
  
Capital Expenditures (additions)
107
*78
  
Adjusted free cash flow (before interest payments)
202
208
  
Net Debt
887
1,081
  

* Figures include the impact of IFRS15 retroactive implementation as from beginning of 2017.
 
 
Q3’17
Q2’17
Comments
Cellular Post-Paid Subscribers (end of period, thousands)
2,306
2,273
Increase of 33 thousand subscribers
Cellular Pre-Paid Subscribers
(end of period, thousands)
371
389
Decrease of 18 thousand subscribers
Monthly Average Revenue per Cellular User (ARPU) (NIS)
64
62
Mainly the result of higher seasonal roaming revenues
Quarterly Cellular Churn Rate (%)
9.3%
9.0%
  
 
4
Key Financial Results

NIS MILLION (except EPS)
Q3'17
Q3'16
% Change
Revenues
826
849
-3%
Cost of revenues
625
691
-10%
Gross profit
201
158
+27%
Operating profit
92
64
+44%
Profit for the period
54
19
+184%
Earnings per share (basic, NIS)
0.32
0.12
+167%
Adjusted free cash flow (before interest)
202
215
-6%
 
Key Operating Indicators
 
 
Q3'17
Q3'16
Change
Adjusted EBITDA (NIS million)
239
220
+9%
Adjusted EBITDA (as a % of total revenues)
29%
26%
+3
Cellular Subscribers (end of period, thousands)
2,677
2,693
-16
Quarterly Cellular Churn Rate (%)
9.3%
9.7%
-0.4
Monthly Average Revenue per Cellular User (ARPU) (NIS)
64
66
-2
 
Partner Consolidated Results
 
 
Cellular Segment
Fixed-Line Segment
Elimination
Consolidated
NIS Million
Q3'17
Q3'16
Change %
Q3'17
Q3'16
Change %
Q3'17
Q3'16
Q3'17
Q3'16
Change %
Total Revenues
652
670
-3%
216
232
-7%
 (42)
 (53)
826
849
-3%
Service Revenues
514
531
-3%
194
220
-12%
 (42)
 (53)
666
698
-5%
Equipment Revenues
138
139
-1%
22
12
+83%
    
160
151
+6%
Operating Profit
74
36
+106%
18
28
-36%
    
92
64
+44%
Adjusted EBITDA
189
156
+21%
50
64
-22%
    
239
220
+9%
 
Financial Review
 
In Q3 2017, total revenues were NIS 826 million (US$ 234 million), a decrease of 3% from NIS 849 million in Q3 2016.
 
Service revenues in Q3 2017 totaled NIS 666 million (US$ 189 million), a decrease of 5% from NIS 698 million in Q3 2016.
 
Service revenues for the cellular segment in Q3 2017 totaled NIS 514 million (US$ 146 million), a decrease of 3% from NIS 531 million in Q3 2016. The decrease was mainly the result of the continued price erosion of cellular services (both Post-Paid and Pre-Paid) due to the continued competitive market conditions.
 
5
Service revenues for the fixed-line segment in Q3 2017 totaled NIS 194 million (US$ 55 million), a decrease of 12% from NIS 220 million in Q3 2016. The decrease reflected the continuing decrease in revenues from international calls as well as other fixed line services.
 
Equipment revenues in Q3 2017 totaled NIS 160 million (US$ 45 million), an increase of 6% from NIS 151 million in Q3 2016, largely reflecting a change in product mix.
 
Gross profit from equipment sales in Q3 2017 was NIS 43 million (US$ 12 million), compared with NIS 28 million in Q3 2016, an increase of 54%, mainly reflecting higher profit margins from sales due to a change in the product mix.
 
Total operating expenses (‘OPEX’) totaled NIS 477 million (US$ 135 million) in Q3 2017, a decrease of 16% or NIS 93 million from Q3 2016. The decrease mainly reflected a decline in expenses related to the cellular network, the implementation of the International Financial Reporting Standard 15 ("IFRS 15"), a nonrecurring decrease in site-rental expenses as well as a decrease in other expenses reflecting the impact of various efficiency measures undertaken as part of a long-term plan to reduce the Company’s cost base, partially offset by additional expenses relating to the Company's TV services which were launched in June 2017. Including depreciation and amortization expenses and other expenses (mainly amortization of employee share based compensation), OPEX in Q3 2017 decreased by 14% compared with Q3 2016.
 
Operating profit for Q3 2017 was NIS 92 million (US$ 26 million), an increase of 44% compared with NIS 64 million in Q3 2016.
 
Adjusted EBITDA in Q3 2017 totaled NIS 239 million (US$ 68 million), an increase of 9% from NIS 220 million in Q3 2016. As a percentage of total revenues, Adjusted EBITDA in Q3 2017 was 29% compared with 26% in Q3 2016.
 
Adjusted EBITDA for the cellular segment was NIS 189 million (US$ 54 million), in Q3 2017, an increase of 21% from NIS 156 million in Q3 2016, reflecting the decrease in OPEX (as explained above) and the increase in gross profit from equipment sales partially offset by the decrease in service revenues and despite the fact that Q3 2017 was the first quarter (since Q2 2015) in which the Company did not record any income with respect to the settlement agreement regarding the Orange brand. As a percentage of total cellular segment revenues, Adjusted EBITDA for the cellular segment in Q3 2017 was 29% compared with 23% in Q3 2016.
 
Adjusted EBITDA for the fixed-line segment was NIS 50 million (US$ 14 million) in Q3 2017, a decrease of 22% from NIS 64 million in Q3 2016, reflecting the decrease in service revenues, partially offset by the decrease in OPEX and the increase in gross profit from equipment sales. As a percentage of total fixed-line segment revenues, Adjusted EBITDA for the fixed-line segment in Q3 2017 was 23%, compared with 28% in Q3 2016.
 
Finance costs, net in Q3 2017 were NIS 15 million (US$ 4 million), a decrease of 50% compared with NIS 30 million in Q3 2016. The decrease largely reflects lower interest expenses due to the lower level of debt as a result of early repayments made in June and July 2017 as well as regular maturities, in addition to lower linkage expenses due to a lower CPI level.
 
6
Income taxes for Q3 2017 were NIS 23 million (US$ 7 million), compared with NIS 15 million in Q3 2016.
 
Profit in Q3 2017 was NIS 54 million (US$ 15 million), compared with a profit of NIS 19 million in Q3 2016, an increase of 184%.
 
Based on the weighted average number of shares outstanding during Q3 2017, basic earnings per share or ADS, was NIS 0.32 (US$ 0.09), compared to basic earnings per share of NIS 0.12 in Q3 2016.
 
Cellular Segment Operational Review
 
At the end of Q3 2017, the Company's cellular subscriber base (including mobile data and 012 Mobile subscribers) was approximately 2.68 million including approximately 2.31 million Post-Paid subscribers or 86% of the base, and approximately 371 thousand Pre-Paid subscribers, or 14% of the subscriber base.
 
During the third quarter of 2017, the cellular subscriber base increased by approximately 15 thousand subscribers. The Post-Paid subscriber base increased by approximately 33 thousand subscribers, while the Pre-Paid subscriber base declined by approximately 18 thousand subscribers.
 
The quarterly churn rate for cellular subscribers in Q3 2017 was 9.3%, compared with 9.7% in Q3 2016.
 
Total cellular market share (based on the number of subscribers) at the end of Q3 2017 was estimated to be approximately 26%, unchanged from Q3 2016.
 
The monthly Average Revenue per User (“ARPU”) for cellular subscribers in Q3 2017 was NIS 64 (US$ 18), a decrease of 3% from NIS 66 in Q3 2016. The decrease mainly reflected the continued price erosion in key cellular services due to the persistent competition in the cellular market.
 
Funding and Investing Review
 
In Q3 2017, Adjusted Free Cash Flow totaled NIS 202 million (US$ 57 million), a decrease of 6% from NIS 215 million in Q3 2016. Excluding the impact of the NIS 35 million payment received from Hot Mobile in Q3 2016, Adjusted Free Cash Flow increased by 12%.
 
Cash generated from operations increased by 21% to NIS 306 million (US$ 87 million) in Q3 2017 from NIS 253 million in Q3 2016. The increase mainly reflected the increase in Adjusted EBITDA and the smaller decrease in operating assets and liabilities.
 
Cash capital expenditures (‘CAPEX payments’), as represented by cash flows used for the acquisition of property and equipment and intangible assets, were NIS 105 million (US$ 30 million) in Q3 2017, an increase of 139% from NIS 44 million in Q3 2016. The increase mainly reflected the impact of the implementation of IFRS 15 (capitalization of part of payroll and selling commission expenses) and the increase in investments related to fiber deployment and TV services.
 
The level of Net Debt at the end of Q3 2017 amounted to NIS 887 million (US$ 251 million), compared with NIS 1,768 million at the end of Q3 2016.
 
7
Business Developments
 
The Company's Board of Directors approved on November 20, 2017 the appointment of Mr. Tomer Bar Zeev as a member to the Company's Board of Directors. Mr. Tomer Bar Zeev was nominated by S.B. Israel Telecom Ltd., the Company's principal shareholder. In accordance with the Company's Articles of Association and applicable law, Mr. Bar Zeev shall serve in office until the coming Annual General Meeting of shareholders.
 
Mr. Bar Zeev is the founder and CEO of ironSource since 2010, a leading digital content company that offers monetization and distribution solutions for app developers, software developers, mobile carriers, and device manufacturers. Mr. Bar Zeev holds a BA in computer science from IDC Herziliya.
 
An active investor in other technology startups, Mr. Bar Zeev has a deep understanding of companies in the telecommunication and technology fields.
 
Regulatory Developments
 
In August 2015, the Ministry of Communications' regulation regarding access to Bezeq's passive infrastructure came into force. The purpose of this regulation is to allow other licensees to use Bezeq's passive infrastructure (such as ducts, manholes, poles, boxes etc.) in order to deploy their own high speed fiber optical cables. According to the Ministry's temporary instructions at the time (which was in force until November 1, 2015), any work inside Bezeq's passive infrastructure was to be performed by Bezeq's employees. Although the interim period has since passed, the Ministry of Communications did not effectively enforce its abovementioned decision on Bezeq.
 
Following the enactment of the Economic Program Law for the years 2017-2018 (which set Bezeq's obligation to allow access to its passive infrastructure into law), Bezeq has begun to partially observe its duty to provide access to its passive infrastructures. Bezeq has deployed several fiber optic cables for licensees using its own personnel.
 
On October 19, 2017, the Ministry of Communications instructed Bezeq to allow other domestic operators (including Partner) to deploy fiber optic cables with their own contractors (without the need for the use of Bezeq personnel). This change has the potential to substantially increase the speed of deployment of Partner's fiber infrastructure.
 
8
IFRS 15
 
In the third quarter of 2017 the Company early adopted (the standard is effective from January 1, 2018, earlier application is permitted), as from January 1, 2017 (the transition date), IFRS 15, Revenue from Contracts with Customers, which outlines a single comprehensive model of accounting for revenue arising from contracts with customers and supersedes IAS 18, Revenue, and IAS 11, Construction contracts (the "previous standards"). The model includes five steps for analyzing transactions so as to determine when to recognize revenue and at what amount:
 
1)
Identifying the contract with the customer.
 
2)
Identifying separate performance obligations in the contract.
 
3)
Determining the transaction price.
 
4)
Allocating the transaction price to separate performance obligations.
 
5)
Recognizing revenue when the performance obligations are satisfied.
 
In accordance with the model, the Company recognizes revenue when the customer obtains control over the goods or services. Revenue is based on the consideration that the Company expects to receive for the transfer of the goods or services promised to the customer, excluding amounts collected on behalf of third parties, and where collection is probable.
 
The Company applied IFRS 15 using the cumulative effect approach as from the transition date, without a restatement of comparative figures. As part of the initial implementation of IFRS 15, the Company has chosen to apply the expedients in the transitional provisions, according to which the cumulative effect approach is applied only for contracts not yet complete at the transition date, and therefore there is no change in the accounting treatment for contracts completed at the transition date. The Company also applied the practical expedient of examining the aggregate effect of contracts changes that occurred before the transition date, instead of examining each change separately. Contracts that are renewed on a monthly basis and may be cancelled by the customer at any time, without penalty, were considered completed contracts at the transition date. The cumulative effect as of the transition date was immaterial and did not affect the financial statements.
 
The application of IFRS 15 did not have a material effect on the measurement and timing of the Company’s revenue in the reporting period, compared to the provisions of the previous standards.
 
The main effect of the Company’s application of IFRS 15 is the accounting treatment for the incremental costs of obtaining contracts with customers, which in accordance with IFRS 15, are recognized as assets when the costs are incremental to obtaining the contracts, and it is probable that the Company will recover these costs, instead of recognizing these costs in the statement of income as incurred. IFRS 15 also determines that direct costs of fulfilling a contract which the Company can specifically identify and which produce or improve the Company’s resources that are used for its future performance obligation (and it is probable that the Company will recover these costs) are recognized as assets (the incremental and direct costs together: "contract costs"). Contract costs that were recognized as assets are presented in the statements of cash flows as part of cash flows used in investing activities.
 
Direct commissions paid to resellers and sales employees for sales and upgrades, are recognized as an asset for obtaining a contract instead of an expense in the statement of income. The assets are amortized in accordance with the expected service period (mainly over 2 to 3 years), using the portfolio approach.
 
For the effect of IFRS 15 on the financial reports, see also the section, 'Effect of IFRS15 implementation' in this press release.

 
9
Conference Call Details
 
Partner will hold a conference call on Tuesday, November 21, 2017 at 10.00AM Eastern Time / 5.00PM Israel Time.
 
To join the call, please dial the following numbers (at least 10 minutes before the scheduled time):
 
International: +972.3.918.0687
North America toll-free: +1.866.860.9642
 
A live webcast of the call will also be available on Partner's Investors Relations website at: www.partner.co.il/en/Investors-Relations/lobby/
 
If you are unavailable to join live, the replay of the call will be available from November 21, 2017 until December 12, 2017, at the following numbers:
 
International: +972.3.925.5940
North America toll-free: +1.877.456.0009
 
In addition, the archived webcast of the call will be available on Partner's Investor Relations website at the above address for approximately three months.

Forward-Looking Statements
 
This press release includes forward-looking statements within the meaning of Section 27A of the US Securities Act of 1933, as amended, Section 21E of the US Securities Exchange Act of 1934, as amended, and the safe harbor provisions of the US Private Securities Litigation Reform Act of 1995. Words such as "estimate", “believe”, “anticipate”, “expect”, “intend”, “seek”, “will”, “plan”, “could”, “may”, “project”, “goal”, “target” and similar expressions often identify forward-looking statements but are not the only way we identify these statements. Specific statements have been made regarding the Company's anticipated acceleration of the deployment of its fiber optic infrastructure.  In addition, all statements other than statements of historical fact included in this press release regarding our future performance are forward-looking statements. We have based these forward-looking statements on our current knowledge and our present beliefs and expectations regarding possible future events. These forward-looking statements are subject to risks, uncertainties and assumptions, including, as regards the anticipated acceleration of fiber cable deployment, whether the Ministry of Communications’ instruction to Bezeq to allow other domestic operators (including Partner) to deploy fiber optic cables with their own contractors (without the need for the use of Bezeq personnel) will be respected or enforced and whether the Company will have the financial resources needed to continue to increase the number of customers served by its fiber optic infrastructure. The future results may differ materially from those anticipated herein. For further information regarding risks, uncertainties and assumptions about Partner, trends in the Israeli telecommunications industry in general, the impact of current global economic conditions and possible regulatory and legal developments, and other risks we face, see “Item 3. Key Information - 3D. Risk Factors”, “Item 4. Information on the Company”, “Item 5. Operating and Financial Review and Prospects”, “Item 8. Financial Information - 8A. Consolidated Financial Statements and Other Financial Information - 8A.1 Legal and Administrative Proceedings” and “Item 11. Quantitative and Qualitative Disclosures about Market Risk” in the Company’s Annual Reports on Form 20-F filed with the SEC, as well as its immediate reports on Form 6-K furnished to the SEC. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
 
10
The quarterly financial results presented in this press release are unaudited financial results.
 
The results were prepared in accordance with IFRS, other than the non-GAAP financial measures presented in the section, “Use of Non-GAAP Financial Measures”.

The financial information is presented in NIS millions (unless otherwise stated) and the figures presented are rounded accordingly.

The convenience translations of the New Israeli Shekel (NIS) figures into US Dollars were made at the rate of exchange prevailing at September 30, 2017: US $1.00 equals NIS 3.529. The translations were made purely for the convenience of the reader.

11
Use of Non-GAAP Financial Measures
 
The following non-GAAP measures are used in this report. These measures are not financial measures under IFRS and may not be comparable to other similarly titled measures for other companies. Further, the measures may not be indicative of the Company’s historic operating results nor are meant to be predictive of potential future results.
 
Non-GAAP Measure
Calculation
Most Comparable IFRS Financial Measure
Adjusted EBITDA*
 
 
 
 
 
 
 
Adjusted EBITDA:
Profit (Loss)
add
Income tax expenses,
Finance costs, net,
Depreciation and amortization expenses (including amortization of intangible assets, deferred expenses-right of use and impairment charges), Other expenses (mainly amortization of share based compensation)
 
Profit (Loss)
 Adjusted EBITDA margin (%)
Adjusted EBITDA margin (%):
Adjusted EBITDA
divided by
Total revenues
  
Adjusted Free Cash Flow**
Adjusted Free Cash Flow:
Cash flows from operating activities
deduct
Cash flows from investing activities
add
Short-term investment in (proceeds from) deposits
Cash flows from operating activities
deduct
Cash flows from investing activities
Total Operating Expenses (OPEX)
Total Operating Expenses:
Cost of service revenues
add
Selling and marketing expenses
add
General and administrative expenses
deduct
Depreciation and amortization expenses,
Other expenses (mainly amortization of employee share based compensation)
Sum of:
Cost of service revenues,
Selling and marketing expenses,
General and administrative expenses
Net Debt
Net Debt:
Current maturities of notes payable and borrowings
add
Notes payable
add
Borrowings from banks and others
deduct
Cash and cash equivalents
deduct
Short-term deposits
Sum of:
Current maturities of notes payable and borrowings,
Notes payable,
Borrowings from banks and others
 
* Adjusted EBITDA is fully comparable with EBITDA measure which was provided in reports for prior periods.
**Adjusted Free Cash Flow measure is fully comparable to Free Cash Flow measure which was provided in reports for prior periods.

12
About Partner Communications
 
Partner Communications Company Ltd. is a leading Israeli provider of telecommunications services (cellular, fixed-line telephony, internet services and television services). Partner’s ADSs are quoted on the NASDAQ Global Select Market™ and its shares are traded on the Tel Aviv Stock Exchange (NASDAQ and TASE: PTNR).
 
For more information about Partner, see: http://www.partner.co.il/en/Investors-Relations/lobby
 
Contacts:
   Dudu Mizrahi
   Chief Financial Officer
   Tel: +972-54-781-4951
 
Liat Glazer Shaft
Head of Investor Relations and Corporate Projects
Tel: +972-54-781-5051
E-mail: investors@partner.co.il
 
13
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
 
   



New Israeli Shekels
    
Convenience
translation
into
U.S. Dollars
  
   
September 30,
    
December 31,
    
September 30,
  
   
2017
    
2016
    
2017
  
   
(Unaudited)
    
(Audited)
    
(Unaudited)
  
   
In millions
  
CURRENT ASSETS
                  
Cash and cash equivalents
    
1,010
      
716
      
286
  
Short-term deposits
    
150
      
452
      
43
  
Trade receivables
    
819
      
990
      
232
  
Other receivables and prepaid expenses
    
62
      
57
      
18
  
Deferred expenses – right of use
    
40
      
28
      
11
  
Inventories
    
90
      
96
      
25
  
     
2,171
      
2,339
      
615
  
                         
NON CURRENT ASSETS
                        
Trade receivables
    
228
      
333
      
65
  
Prepaid expenses and other
    
2
      
2
      
1
  
Deferred expenses – right of use
    
121
      
75
      
34
  
Property and equipment
    
1,128
      
1,207
      
320
  
Intangible and other assets
    
716
      
793
      
203
  
Goodwill
    
407
      
407
      
115
  
Deferred income tax asset
    
27
      
41
      
8
  
     
2,629
      
2,858
      
746
  
                         
TOTAL ASSETS
    
4,800
      
5,197
      
1,361
  


14
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
 
   


 
New Israeli Shekels
    
Convenience
translation
 into
U.S. Dollars
  
   
September 30,
    
December 31,
    
September 30,
  
   
2017
    
2016
    
2017
  
   
(Unaudited)
    
(Audited)
    
(Unaudited)
  
   
In millions
  
CURRENT LIABILITIES
                  
Current maturities of notes payable and borrowings
    
557
      
498
      
158
  
Trade payables
    
702
      
681
      
199
  
Payables in respect of employees
    
51
      
101
      
14
  
Other payables (mainly institutions)
    
28
      
28
      
8
  
Income tax payable
    
83
      
45
      
23
  
Deferred income with respect to settlement
                        
   agreement with Orange
            
108
          
Deferred revenues from HOT mobile
    
31
      
31
      
9
  
Other deferred revenues
    
42
      
38
      
12
  
Provisions
    
78
      
77
      
22
  
     
1,572
      
1,607
      
445
  
NON CURRENT LIABILITIES
                        
Notes payable
    
899
      
646
      
255
  
Borrowings from banks and others
    
591
      
1,550
      
167
  
Liability for employee rights upon retirement, net
    
36
      
39
      
11
  
 Dismantling and restoring sites obligation
    
28
      
35
      
8
  
        Deferred revenues from HOT mobile
    
172
      
195
      
49
  
 Other non-current liabilities
    
21
      
14
      
6
  
     
1,747
      
2,479
      
496
  
                         
TOTAL LIABILITIES
    
3,319
      
4,086
      
941
  
                         
EQUITY
                        
Share capital - ordinary shares of NIS 0.01
   par value: authorized - December 31, 2016
   and September 30, 2017 - 235,000,000 shares;
   issued and outstanding -
    
2
      
2
      
1
  
December 31, 2016 – *156,993,337 shares
                        
September 30, 2017 – *167,527,166 shares
                        
Capital surplus
    
1,199
      
1,034
      
340
  
Accumulated retained earnings
    
538
      
358
      
152
  
Treasury shares, at cost
   December 31, 2016 – **3,603,578 shares
         September 30, 2017 – **3,296,619 shares
    
(258
)
    
(283
)
    
(73
)
TOTAL EQUITY
    
1,481
      
1,111
      
420
  
TOTAL LIABILITIES AND EQUITY
    
4,800
      
5,197
      
1,361
  
 
*   Net of treasury shares.
** Including, restricted shares in amount of 2,008,584 and 2,061,201 as of September 30, 2017 and December 31, 2016 respectively held by trustee under the Company's Equity Incentive Plan, such shares will become outstanding upon completion of vesting conditions.
 
15
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 
   
New Israeli shekels
    
Convenience translation into U.S. dollars
  
   
9 month
period ended
 September 30
    
3 month
period ended
 September 30
    
9 month
period ended
 September 30,
    
3 month
period ended
 September 30,
  
   
2017
    
2016
    
2017
    
2016
    
2017
    
2017
  
   
(Unaudited)
    
(Unaudited)
    
(Unaudited)
    
(Unaudited)
    
(Unaudited)
    
(Unaudited)
  
   
In millions (except per share data)
  
Revenues, net
    
2,434
      
2,723
      
826
      
849
      
690
      
234
  
Cost of revenues
    
1,916
      
2,218
      
625
      
691
      
543
      
177
  
Gross profit
    
518
      
505
      
201
      
158
      
147
      
57
  
                                                 
Selling and marketing expenses
    
189
      
330
      
70
      
98
      
54
      
20
  
General and administrative expenses
    
146
      
188
      
46
      
60
      
41
      
13
  
Income with respect to settlement agreement with Orange
    
108
      
163
              
55
      
30
          
Other income, net
    
24
      
35
      
7
      
9
      
7
      
2
  
Operating profit
    
315
      
185
      
92
      
64
      
89
      
26
  
Finance income
    
4
      
10
      
5
      
*
      
1
      
1
  
Finance expenses
    
96
      
92
      
20
      
30
      
27
      
5
  
Finance costs, net
    
92
      
82
      
15
      
30
      
26
      
4
  
Profit before income tax
    
223
      
103
      
77
      
34
      
63
      
22
  
Income tax expenses
    
59
      
44
      
23
      
15
      
17
      
7
  
Profit for the period
    
164
      
59
      
54
      
19
      
46
      
15
  
                                                 
Earnings per share
                                                
         Basic
    
1.02
      
0.38
      
0.32
      
0.12
      
0.29
      
0.09
  
         Diluted
    
1.01
      
0.37
      
0.32
      
0.12
      
0.28
      
0.09
  
Weighted average number of shares outstanding (in thousands)
                                                
          Basic
    
161,002
      
156,120
      
167,371
      
156,178
      
161,002
      
167,371
  
         Diluted
    
162,745
      
157,925
      
168,815
      
157,953
      
162,745
      
168,815
  
 
* Representing an amount of less than 1 million.
 
16
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
   
New Israeli shekels
    
Convenience translation into U.S. dollars
  
   
9 month
period ended
 September 30,
    
3 month
period ended
 September 30,
    
9 month
period ended
 September 30,
    
3 month
period ended
 September 30,
  
   
2017
    
2016
    
2017
    
2016
    
2017
    
2017
  
   
(Unaudited)
    
(Unaudited)
    
(Unaudited)
    
(Unaudited)
    
(Unaudited)
    
(Unaudited)
  
   
In millions
  
Profit for the period
    
164
      
59
      
54
      
19
      
46
      
15
  
Other comprehensive income
     for the period, net of income tax
    
-
      
-
      
-
      
-
      
-
      
-
  
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD
    
164
      
59
      
54
      
19
      
46
      
15
  
 

17
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
INTERIM SEGMENT INFORMATION & ADJUSTED EBITDA RECONCILIATION
 
   
New Israeli Shekels
    
New Israeli Shekels
  
   
Nine months ended September 30, 2017
    
Nine months ended September 30, 2016
  
   
In millions (Unaudited)
    
In millions (Unaudited)
  
 
  
Cellular segment
    
Fixed line segment
    
Reconciliation
for
consolidation
    
Consolidated
    
Cellular
segment
    
Fixed line
segment
    
Reconciliation
for
consolidation
    
Consolidated
  
Segment revenue - Services
    
1,487
      
465
            
1,952
      
1,586
      
514
            
2,100
  
Inter-segment revenue - Services
    
13
      
115
      
(128
)
            
15
      
147
      
(162
)
        
Segment revenue - Equipment
    
428
      
54
              
482
      
571
      
52
              
623
  
Total revenues
    
1,928
      
634
      
(128
)
    
2,434
      
2,172
      
713
      
(162
)
    
2,723
  
Segment cost of revenues – Services
    
1,093
      
443
              
1,536
      
1,261
      
460
              
1,721
  
Inter-segment cost of  revenues- Services
    
114
      
14
      
(128
)
            
146
      
16
      
(162
)
        
Segment cost of revenues - Equipment
    
342
      
38
              
380
      
454
      
43
              
497
  
Cost of revenues
    
1,549
      
495
      
(128
)
    
1,916
      
1,861
      
519
      
(162
)
    
2,218
  
Gross profit
    
379
      
139
              
518
      
311
      
194
              
505
  
Operating expenses (3)
    
268
      
67
              
335
      
428
      
90
              
518
  
Income with respect to settlement 
    agreement with Orange
    
108
                      
108
      
163
                      
163
  
Other income, net
    
23
      
1
              
24
      
32
      
3
              
35
  
Operating profit
    
242
      
73
              
315
      
78
      
107
              
185
  
Adjustments to presentation of  segment Adjusted  EBITDA
                                                                
    –Depreciation and amortization
    
327
      
100
                      
338
      
110
                  
    –Other (1)
    
17
                              
37
                          
Segment Adjusted EBITDA (2)
    
586
      
173
                      
453
      
217
                  
Reconciliation of  segment subtotal
    Adjusted EBITDA to
     profit for the period
                                                                
Segments subtotal Adjusted EBITDA (2)
                            
759
                              
670
  
    -  Depreciation and amortization
                            
(427
)
                            
(448
)
    -  Finance costs, net
                            
(92
)
                            
(82
)
    -  Income tax expenses
                            
(59
)
                            
(44
)
    -  Other (1)
                            
(17
)
                            
(37
)
Profit for the period
                            
164
                              
59
  
 
18
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
INTERIM SEGMENT INFORMATION & ADJUSTED EBITDA RECONCILIATION
 
   
New Israeli Shekels
    
New Israeli Shekels
  
   
Three months ended September 30, 2017
    
Three months ended September 30, 2016
  
   
In millions (Unaudited)
    
In millions (Unaudited)
  
 
  
Cellular segment
    
Fixed line segment
    
Reconciliation
for
consolidation
    
Consolidated
    
Cellular
segment
    
Fixed line
segment
    
Reconciliation
for
consolidation
    
Consolidated
  
Segment revenue - Services
    
510
      
156
            
666
      
526
      
172
            
698
  
Inter-segment revenue - Services
    
4
      
38
      
(42
)
            
5
      
48
      
(53
)
        
Segment revenue - Equipment
    
138
      
22
              
160
      
139
      
12
              
151
  
Total revenues
    
652
      
216
      
(42
)
    
826
      
670
      
232
      
(53
)
    
849
  
Segment cost of revenues – Services
    
358
      
150
              
508
      
410
      
158
              
568
  
Inter-segment cost of  revenues- Services
    
38
      
4
      
(42
)
            
48
      
5
      
(53
)
        
Segment cost of revenues - Equipment
    
102
      
15
              
117
      
112
      
11
              
123
  
Cost of revenues
    
498
      
169
      
(42
)
    
625
      
570
      
174
      
(53
)
    
691
  
Gross profit
    
154
      
47
              
201
      
100
      
58
              
158
  
Operating expenses (3)
    
87
      
29
              
116
      
127
      
31
              
158
  
Income with respect to settlement
   agreement with Orange
                                    
55
                      
55
  
Other income, net
    
7
      
*
              
7
      
8
      
1
              
9
  
Operating profit
    
74
      
18
              
92
      
36
      
28
              
64
  
Adjustments to presentation of  segment Adjusted  EBITDA
                                                                
    –Depreciation and amortization
    
109
      
32
                      
108
      
35
                  
    –Other (1)
    
6
                              
12
      
1
                  
Segment Adjusted EBITDA (2)
    
189
      
50
                      
156
      
64
                  
Reconciliation of  segment
   subtotal Adjusted EBITDA
    to profit for the period
                                                                
Segments subtotal Adjusted EBITDA (2)
                            
239
                              
220
  
    -  Depreciation and amortization
                            
(141
)
                            
(143
)
    -  Finance costs, net
                            
(15
)
                            
(30
)
    -  Income tax expenses
                            
(23
)
                            
(15
)
    -  Other (1)
                            
(6
)
                            
(13
)
Profit for the period
                            
54
                              
19
  
 
*   Representing an amount of less than 1 million.
 
(1) Mainly amortization of employee share based compensation.
(2) Adjusted EBITDA as reviewed by the CODM represents Earnings Before Interest (finance costs, net), Taxes, Depreciation and Amortization (including amortization of intangible assets, deferred expenses-right of use and impairment charges) and Other expenses (mainly amortization of share based compensation). Adjusted EBITDA is not a financial measure under IFRS and may not be comparable to other similarly titled measures for other companies. Adjusted EBITDA may not be indicative of the Group's historic operating results nor is it meant to be predictive of potential future results. The usage of the term "Adjusted EBITDA" is to highlight the fact that the Amortization includes amortization of deferred expenses – right of use and amortization of employee share based compensation and impairment charges; it is fully comparable to EBITDA information which has been previously provided for prior periods.
(3) Operating expenses include selling and marketing expenses and general and administrative expenses.

19
 
  PARTNER COMMUNICATIONS COMPANY LTD.
   (An Israeli Corporation)
   INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
   



New Israeli Shekels
    
Convenience
translation
 into
 U.S. Dollars
  
   
9 months ended
 September 30,
  
   
2017
    
2016
    
2017
  
   
(Unaudited)
    
(Unaudited)
    
(Unaudited)
  
   
In millions
  
CASH FLOWS FROM OPERATING ACTIVITIES:
                  
Cash generated from operations (Appendix)
    
804
      
652
      
227
  
Income tax paid
    
(7
)
    
(20
)
    
(2
)
Net cash provided by operating activities
    
797
      
632
      
225
  
                         
CASH FLOWS FROM INVESTING ACTIVITIES:
                        
Acquisition of property and equipment
    
(146
)
    
(97
)
    
(41
)
Acquisition of intangible and other assets
    
(117
)
    
(52
)
    
(33
)
Proceeds from (investment in) short-term deposits, net
    
302
              
85
  
Interest received
    
2
      
2
      
1
  
    Consideration received from sales of property and equipment
    
*
      
4
      
*
  
Net cash provided by (used in) investing activities
    
41
      
(143
)
    
12
  
                         
CASH FLOWS FROM FINANCING ACTIVITIES:
                        
Share issuance
    
190
              
54
  
Interest paid
    
(85
)
    
(80
)
    
(24
)
Current borrowings received
            
52
          
Repayment of non-current borrowings
    
(901
)
    
(11
)
    
(255
)
Proceeds from issuance of notes payable, net of issuance costs
    
252
              
71
  
Repayment of notes payable
            
(235
)
        
Net cash used in financing activities
    
(544
)
    
(274
)
    
(154
)
                         
 INCREASE IN CASH AND CASH EQUIVALENTS
    
294
      
215
      
83
  
                         
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
716
      
926
      
203
  
                         
CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
1,010
      
1,141
      
286
  
 
* Representing an amount of less than 1 million.
 

20
  PARTNER COMMUNICATIONS COMPANY LTD.
   (An Israeli Corporation)
   INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Appendix - Cash generated from operations and supplemental information
 
   



New Israeli Shekels
    
Convenience
translation
 into
 U.S. Dollars
  
   
9 months ended
 September 30,
  
   
2017
    
2016
    
2017
  
   
(Unaudited)
    
(Unaudited)
    
(Unaudited)
  
   
In millions
  
                   
Cash generated from operations:
                  
     Profit for the period
    
164
      
59
      
46
  
    Adjustments for:
                        
Depreciation and amortization
    
399
      
427
      
113
  
           Amortization of deferred expenses - Right of use
    
28
      
21
      
8
  
Employee share based compensation expenses
    
16
      
36
      
5
  
            Liability for employee rights upon retirement, net
    
(3
)
    
(3
)
    
(1
)
Finance costs, net
    
(3
)
    
2
      
(1
)
Change in fair value of derivative financial instruments
    
(1
)
    
*
      
*
  
Capital loss from property and equipment
    
*
      
1
      
*
  
Interest paid
    
85
      
80
      
24
  
           Interest received
    
(2
)
    
(2
)
    
(1
)
Deferred income taxes
    
14
      
12
      
4
  
Income tax paid
    
7
      
20
      
2
  
Changes in operating assets and liabilities:
                        
Decrease (increase)in accounts receivable:
                        
Trade
    
276
      
122
      
78
  
Other
    
(5
)
    
8
      
(1
)
Increase (decrease) in accounts payable and accruals:
                        
Trade
    
45
      
(3
)
    
13
  
Other payables
    
(49
)
    
(38
)
    
(14
)
       Provisions
    
1
      
(6
)
    
*
  
                  Deferred income with respect to settlement agreement with Orange
    
(108
)
    
(163
)
    
(31
)
                  Deferred revenues from HOT mobile
    
(23
)
    
54
      
(7
)
      Other deferred revenues
    
5
      
6
      
1
  
  Increase in deferred expenses - Right of use
    
(86
)
    
(52
)
    
(24
)
  Current income tax liability
    
38
      
11
      
11
  
Decrease in inventories
    
6
      
60
      
2
  
Cash generated from operations
    
804
      
652
      
227
  
 
             * Representing an amount of less than 1 million.
 
At September 30, 2017 and 2016, trade and other payables include NIS 102 million ($29 million) and NIS 96 million, respectively, in respect of acquisition of intangible assets and property and equipment; payments in respect thereof are presented in cash flows from investing activities.
 
These balances are recognized in the cash flow statements upon payment.
 
21
 
Effect of IFRS15 implementation:
 
The tables below summarize the effects on the interim condensed consolidated statement of financial position as at September 30, 2017 and on the interim condensed consolidated statements of income and cash flows for the nine and three months periods ended as of the same date.

Effect of change on interim condensed consolidated statement of financial position:

   
New Israeli Shekels in millions
  
   
As of September 30, 2017
  
   
Previous
accounting policy
    
Effect of
change
    
According
to IFRS15
  
   
(Unaudited)
  
Costs to obtain contracts recognized in intangible assets, net – non-current assets
    
-
      
51
      
51
  
Deferred income tax asset
    
39
      
(12
)
    
27
  
Equity
    
1,442
      
39
      
1,481
  

Effect of change on interim condensed consolidated statement of income:

   
New Israeli Shekels in millions
  
   
Nine months ended September 30, 2017
    
Three months ended September 30, 2017
  
   
Previous
accounting
 policy
    

Effect of
change
    

According
to IFRS15
    
Previous
accounting
policy
    

Effect of
change
    

According
 to IFRS15
  
   
(Unaudited)
  
 Selling and marketing expenses
    
240
      
(51
)
    
189
      
89
      
(19
)
    
70
  
Operating profit
    
264
      
51
      
315
      
73
      
19
      
92
  
Profit before income tax
    
172
      
51
      
223
      
58
      
19
      
77
  
Income tax expenses
    
47
      
12
      
59
      
19
      
4
      
23
  
Profit for the period
    
125
      
39
      
164
      
39
      
15
      
54
  
                                                 
Depreciation and amortization expense
    
422
      
5
      
427
      
138
      
3
      
141
  

Effect of change on interim condensed consolidated statement cash flows:

   
New Israeli Shekels in millions
  
   
Nine months ended September 30, 2017
    
Three months ended September 30, 2017
  
   
Previous
accounting
policy
    

Effect of
change
    

According to
IFRS15
    
Previous
accounting
policy
    

Effect of
 change
    

According
to IFRS15
  
   
(Unaudited)
  
                                     
Net cash provided by operating activities
    
746
      
51
      
797
      
286
      
20
      
306
  
Net cash provided by (used in) investing activities
    
92
      
(51
)
    
41
      
(234
)
    
(20
)
    
(254
)

22
Reconciliation of Non-GAAP Measures:
 
Adjusted Free Cash Flow
 
 
 
 
New Israeli Shekels
    
Convenience
translation into
 U.S. Dollars
    
Convenience
translation into
 U.S. Dollars
  
   
9 months
period ended
September 30,
    
9 months
period ended
September 30,
    
3 months
period ended
September 30,
    
3 months
period ended
September 30,
    
9 months
period ended
September 30,
    
3 months
period ended
September 30,
  
   
2017
    
2016
    
2017
    
2016
    
2017
    
2017
  
   
(Unaudited)
    
(Unaudited)
    
(Unaudited)
    
(Unaudited)
    
(Unaudited)
    
(Unaudited)
  
   
In millions
  
Net cash provided by operating activities
    
797
      
632
      
306
      
253
      
225
      
87
  
Net cash used in investing activities
    
41
      
(143
)
    
(254
)
    
(38
)
    
12
      
(72
)
Proceeds from (investment in) short-term deposits
    
(302
)
            
150
              
(85
)
    
43
  
Adjusted Free Cash Flow
    
536
      
489
      
202
      
215
      
152
      
58
  
                                                 
Interest paid
    
(85
)
    
(80
)
    
(10
)
    
(14
)
    
(24
)
    
(3
)
Adjusted Free Cash Flow After Interest
    
451
      
409
      
192
      
201
      
128
      
55
  
 
Total Operating Expenses (OPEX)
 
 

 
New Israeli Shekels
    
Convenience
translation into
 U.S. Dollars
    
Convenience
 translation into
 U.S. Dollars
  
   
9 months
period ended
September 30,
    
9 months
period ended
 September 30,
    
3 months
period ended
September 30,
    
3 months
period ended
 September 30,
    
9 months
period ended
September 30,
    
3 months
period ended
September 30,
  
   
2017
    
2016
    
2017
    
2016
    
2017
    
2017
  
   
(Unaudited)
    
(Unaudited)
    
(Unaudited)
    
(Unaudited)
    
(Unaudited)
    
(Unaudited)
  
   
In millions
  
Cost of revenues – Services
    
1,536
      
1,721
      
508
      
568
      
435
      
144
  
Selling and marketing expenses
    
189
      
330
      
70
      
98
      
54
      
20
  
General and administrative expenses
    
146
      
188
      
46
      
60
      
41
      
13
  
Depreciation and amortization
    
(427
)
    
(448
)
    
(141
)
    
(143
)
    
(121
)
    
(40
)
Other (1)
    
(17
)
    
(37
)
    
(6
)
    
(13
)
    
(5
)
    
(2
)
OPEX
    
1,427
      
1,754
      
477
      
570
      
404
      
135
  
 
(1)   Mainly amortization of employee share based compensation
 
23
Key Financial and Operating Indicators (unaudited)*

NIS M unless otherwise stated
  
Q3' 15
    
Q4' 15
    
Q1' 16
    
Q2' 16
    
Q3' 16
    
Q4' 16
    
Q1' 17
    
Q2' 17
    
Q3' 17
    
2015
    
2016
  
Cellular Segment Service Revenues
    
587
      
550
      
543
      
527
      
531
      
498
      
489
      
497
      
514
      
2,297
      
2,099
  
Cellular Segment Equipment Revenues
    
234
      
269
      
244
      
188
      
139
      
158
      
145
      
145
      
138
      
1,051
      
729
  
Fixed-Line Segment Service Revenues
    
225
      
223
      
222
      
219
      
220
      
205
      
194
      
192
      
194
      
906
      
866
  
Fixed-Line Segment Equipment Revenues
    
12
      
22
      
23
      
17
      
12
      
11
      
18
      
14
      
22
      
68
      
63
  
Reconciliation for consolidation
    
(52
)
    
(57
)
    
(55
)
    
(54
)
    
(53
)
    
(51
)
    
(43
)
    
(43
)
    
(42
)
    
(211
)
    
(213
)
Total Revenues
    
1,006
      
1,007
      
977
      
897
      
849
      
821
      
803
      
805
      
826
      
4,111
      
3,544
  
Gross Profit from Equipment Sales
    
52
      
61
      
56
      
42
      
28
      
18
      
26
      
33
      
43
      
239
      
144
  
Operating Profit (Loss)
    
32
      
(48
)
    
54
      
67
      
64
      
8
      
**105
    
**118
    
92
      
107
      
193
  
Cellular Segment Adjusted EBITDA
    
137
      
152
      
142
      
155
      
156
      
109
      
**187
    
**210
    
189
      
597
      
562
  
Fixed-Line Segment Adjusted EBITDA
    
59
      
65
      
80
      
73
      
64
      
55
      
**64
    
**59
    
50
      
279
      
272
  
Total Adjusted EBITDA
    
196
      
217
      
222
      
228
      
220
      
164
      
**251
    
**269
    
239
      
876
      
834
  
Adjusted EBITDA Margin (%)
    
19
%
    
22
%
    
23
%
    
25
%
    
26
%
    
20
%
    
**31
 %    
**33
 %    
29
%
    
21
%
    
24
%
OPEX
    
650
      
608
      
612
      
572
      
570
      
570
      
**478
    
**472
    
477
      
2,463
      
2,324
  
Impairment charges on operating profit
            
98
                                                              
98
          
Income with respect to settlement agreement
                                                                                        
      with Orange
    
23
      
38
      
54
      
54
      
55
      
54
      
54
      
54
              
61
      
217
  
Finance costs, net
    
40
      
39
      
24
      
28
      
30
      
23
      
23
      
54
      
15
      
143
      
105
  
Profit (loss)
    
(9
)
    
(65
)
    
14
      
26
      
19
      
(7
)
    
**64
    
**46
    
54
      
(40
)
    
52
  
Capital Expenditures (cash)
    
64
      
56
      
48
      
57
      
44
      
47
      
**82
    
**76
    
105
      
359
      
196
  
Capital Expenditures (additions)
    
51
      
86
      
34
      
40
      
44
      
84
      
**58
    
**78
    
107
      
271
      
202
  
Adjusted Free Cash Flow
    
291
      
230
      
114
      
160
      
215
      
269
      
126
      
208
      
202
      
566
      
758
  
Adjusted Free Cash Flow (After Interest)
    
277
      
172
      
89
      
119
      
201
      
241
      
109
      
150
      
192
      
429
      
650
  
Net Debt
    
2,355
      
2,175
      
2,079
      
1,964
      
1,768
      
1,526
      
1,415
      
1,081
      
887
      
2,175
      
1,526
  
Cellular Subscriber Base (Thousands)
    
2,739
      
2,718
      
2,692
      
2,700
      
2,693
      
2,686
      
2,658
      
2,662
      
2,677
      
2,718
      
2,686
  
Post-Paid Subscriber Base (Thousands)
    
2,136
      
2,156
      
2,174
      
2,191
      
2,215
      
2,241
      
2,259
      
2,273
      
2,306
      
2,156
      
2,241
  
Pre-Paid Subscriber Base (Thousands)
    
603
      
562
      
518
      
509
      
478
      
445
      
399
      
389
      
371
      
562
      
445
  
Cellular ARPU (NIS)
    
71
      
67
      
67
      
65
      
66
      
62
      
61
      
62
      
64
      
69
      
65
  
Cellular Churn Rate (%)
    
10.8
%
    
11.1
%
    
11.2
%
    
9.8
%
    
9.7
%
    
9.4
%
    
9.8
%
    
9.0
%
    
9.3
%
    
46
%
    
40
%
Number of Employees (FTE)
    
3,017
      
2,882
      
2,827
      
2,740
      
2,742
      
2,686
      
2,580
      
2,582
      
2,696
      
2,882
      
2,686
  
 
*
See footnote 2 regarding use of non-GAAP measures.
**     Figures include impact of IFRS15 retroactive implementation as from beginning of 2017.
 
24
Disclosure for notes holders as of September 30, 2017
 
Information regarding the notes series issued by the Company, in million NIS
 
Series
Original issuance date
Principal on the date of issuance
As of 30.09.2017
Interest rate
Principal repayment dates
Interest repayment dates
Linkage
Trustee contact details
Principal book value
Linked principal book value
Interest accumulated in books
Market value
From
To
      
C
25.04.10
24.02.11*
200
444
393
425
4
435
3.35%
+
CPI
30.12.16
30.12.18
30.6, 30.12
Linked to CPI
Hermetic Trust (1975) Ltd.
Merav Offer. 113 Hayarkon St., Tel Aviv. Tel: 03-5544553.
D
25.04.10
04.05.11*
400
146
546
546
2
551
1.328%
 
(MAKAM+1.2%)
30.12.17
30.12.21
30.3, 30.6, 30.9, 30.12
Variable interest MAKAM (2)
Hermetic Trust (1975) Ltd. Merav Offer. 113 Hayarkon St., Tel Aviv. Tel: 03-5544553.
E
25.04.10
04.05.11*
400
535
121
121
2
124
5.5%
30.12.13
30.12.17
30.6, 30.12
Not Linked
Mishmeret Trust Company Ltd. Rami Sebty. 48 Menachem Begin Rd. Tel Aviv.Tel:03-6374355.
F (1)
20.07.17
255
255
255
1
260
2.16%
25.06.20
25.06.24
25.6, 25.12
Not Linked
Hermetic Trust (1975) Ltd.
Merav Offer. 113 Hayarkon St., Tel Aviv. Tel: 03-5544553.
 
(1) In July 2017, the Company issued Series F Notes in a principal amount of NIS 255 million. Regarding Series F Notes, the Company is required to comply with a financial covenant that the ratio of Net Debt to Adjusted EBITDA shall not exceed 5. Compliance will be examined and reported on a quarterly basis. For the definitions of Net Debt and Adjusted EBITDA see 'Use of non-GAAP measures' section above. For the purpose of the covenant, Adjusted EBITDA is calculated as the sum total for the last 12 month period, excluding adjustable one-time items. As of September 30, 2017, the ratio of Net Debt to Adjusted EBITDA was 1.0. Additional stipulations regarding Series F Notes are as follows: shareholders' equity shall not decrease below NIS 400 million; the Company shall not create floating liens subject to certain terms; the Company has the right for early redemption under certain conditions; the Company shall pay additional annual interest of 0.5% in the case of a two-notch downgrade in the Notes rating and an additional annual interest of 0.25% for each further single-notch downgrade, up to a maximum additional interest of 1%; the Company shall pay additional annual interest of 0.25% during a period in which there is a breach of the financial covenant.
 
The Company has additional financial covenants regarding its borrowings from financial institutions. See note 15 to the Company's 2016 annual financial statements.
 
In the reporting period, the Company was in compliance with all financial covenants and obligations and no cause for early repayment occurred.
 
In September 2017, the Company entered into an agreement with Israeli institutional investors to issue in December 2018, in the framework of a private placement, additional Series F notes, in an aggregate principal amount of NIS 150 million. S&P Maalot has rated the additional deferred issuance with an 'ilA+' rating. For additional details see the Company's press releases dated September 13 and 17, 2017.
 
(2) 'MAKAM' is a variable interest based on the yield of 12 month government bonds issued by the government of Israel. The interest rate is updated on a quarterly basis.
 
(*) On these dates additional Notes of the series were issued. The information in the table refers to the full series.
 
25
Disclosure for Notes holders as of September 30, 2017 (cont.)
 
Notes Rating Details*
 
Series
Rating Company
Rating as of 30.09.2017 and 22.11.2017 (1)
Rating assigned upon issuance of the Series
Recent date of rating as of 30.09.2017 and 22.11.2017
Additional ratings between the original issuance date and the recent date of rating (2)
Date
Rating
C
S&P Maalot
ilA+
ilAA-
07/2017
07/2010, 09/2010,
10/2010, 09/2012,
12/2012, 06/2013,
07/2014, 07/2015,
07/2016, 07/2017
ilAA-/Stable, ilAA-/Stable,
ilAA-/Negative, ilAA-/Watch Neg,
ilAA-/Negative, ilAA-/Stable,
ilAA-/Stable, ilA+/Stable,
ilA+/Stable, ilA+/Stable
D
S&P Maalot
ilA+
ilAA-
07/2017
E
S&P Maalot
ilA+
ilAA-
07/2017
F
S&P Maalot
ilA+
ilA+
07/2017
07/2017
ilA+/Stable
 
(1) In July 2017, S&P Maalot affirmed the Company's rating of “ilA+/Stable”.
 
(2) For details regarding the rating of the notes see the S&P Maalot report dated July 2, 2017 and July 27, 2017.
 
* A securities rating is not a recommendation to buy, sell or hold securities. Ratings may be subject to suspension, revision or withdrawal at any time, and each rating should be evaluated independently of any other rating
 
26
Summary of Financial Undertakings (according to repayment dates) as of September 30, 2017
 
a.
Notes issued to the public by the Company and held by the public, excluding such notes 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
 212,513
230,506
 -
 -
 -
 26,963
Second year
 212,513
109,228
 -
 -
 -
 13,651
Third year
 -
160,138
 -
 -
 -
 8,678
Fourth year
 -
160,138
 -
 -
 -
 6,165
Fifth year and on
 -
261,958
 -
 -
 -
 6,951
Total
425,026
921,968
 -
 -
-
 62,408
 
b.
Private notes and other non-bank credit, excluding such notes 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
 -
 115,000
 -
 -
 -
 35,036
Second year
 -
 152,917
 -
 -
 -
 23,548
Third year
 -
 163,333
 -
 -
 -
 16,592
Fourth year
 -
 133,333
 -
 -
 -
 9,845
Fifth year and on
 -
 141,667
 -
 -
 -
 6,003
Total
 -
 706,250
-
 -
 -
 91,024
 
c.
Credit from banks in Israel based on the Company's "Solo" financial data – None.
 
d.
Credit from banks abroad based on the Company's "Solo" financial data – None.

27
Summary of Financial Undertakings (according to repayment dates) as of September 30, 2017 (cont.)
 
e.
Total of sections a - d above, total credit from banks, non-bank credit and notes 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
 212,513
 345,506
 -
 -
 -
 61,999
Second year
 212,513
 262,145
 -
 -
 -
 37,199
Third year
 -
 323,471
 -
 -
 -
 25,270
Fourth year
 -
 293,471
 -
 -
 -
 16,010
Fifth year and on
 -
 403,625
 -
 -
 -
 12,954
Total
425,026
 1,628,218
-
-
-
 153,432

f.
Off-balance sheet Credit exposure based on the Company's "Solo" financial data (in thousand NIS) – 50,000 (Guarantees on behalf of an associate, without expiration date).
 
g.
Off-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 – None.
 
h.
Total balances of the credit from banks, non-bank credit and notes of all the consolidated companies, excluding companies that are reporting corporations and excluding Company's data presented in sections a - d above - None.
 
i.
Total balances of credit granted to the Company by the parent company or a controlling shareholder and balances of notes offered by the Company held by the parent company or the controlling shareholder - 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 notes offered by the Company held by companies held by the parent company or the controlling shareholder, which are not controlled by the Company – None.
 
k.
Total balances of credit granted to the Company by consolidated companies and balances of notes offered by the Company held by the consolidated companies - None.
 
28
 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Current Report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
  Partner Communications Company Ltd.  
       
By:
/s/ David (Dudu) Mizrahi  
    Name: David (Dudu) Mizrahi  
    Title: Chief Financial Officer  
 
Dated: November 21, 2017
 
 
29