6-K 1 zk2024184.htm 6-K


FORM 6-K

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934

For March 23, 2020

Commission File Number:  001-33271

CELLCOM ISRAEL LTD.
10 Hagavish Street
Netanya, Israel 42140
________________________________________________
(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 if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):            

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):            

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): Not Applicable

This Report on Form 6-K is incorporated by reference into the registrant's Israeli prospectus, dated August 10, 2017.



 
CELLCOM ISRAEL ANNOUNCES
FOURTH QUARTER AND FULL YEAR 2019 RESULTS
------------------------
 
Cellcom Israel concludes 2019 with a 0.5% increase in revenues, loss of NIS
107 2 million and Adjusted EBITDA1 of NIS 9402 million.
 
The Company recorded a total expense of NIS 45 million in relation to the
employee voluntary retirement plan
 
Avi Gabay, the Company's Chief Executive Officer:

"We are acting to adapt Cellcom Israel to the Corona virus crisis and are
therefore focused on providing excellent service to our existing customers and
adjusting our cost structure to the crisis period and the period thereafter."
 
----
 
2019 Full Year Highlights (compared to 2018):

Total Revenues totaled NIS 3,708 million ($1,073 million) compared to NIS 3,688 million ($1,067 million) last year, an increase of 0.5%
 
Service revenues totaled NIS 2,776 million ($803 million) compared to NIS 2,784 million ($806 million) last year, a decrease of 0.3%
 
Operating income totaled NIS 24 million ($7 million) compared to NIS 101 million ($29 million) last year, a decrease of 76.2%
 
Loss totaled NIS 107 million ($31 million) compared to a loss of NIS 64 million ($18 million) an increase of 67.2%
 
Adjusted EBITDA1 totaled NIS 940 million ($272 million) compared to NIS 687 million ($199 million) last year, an increase of 36.8%
 
Net cash from operating activities totaled NIS 1,036 million ($299 million) compared to NIS 770 million ($223 million) last year, an increase of 34.5%
 
Free cash flow1 totaled NIS 391 million ($113 million) compared to NIS 181 million ($52 million) last year, an increase of 116.0%
 
 

1 Please see "Use of Non-IFRS financial measures" section in this press release.
2 As of January 1, 2019, the Company is applying International Financial Reporting Standard, IFRS 16, Leases. The effects of applying the standard in the annual and fourth quarter of 2019 amounted to an increase of NIS 275 million and NIS 72 million in Adjusted EBITDA respectively, an increase of NIS 280 million and NIS 76 million in Cash flows from operating activities respectively and an increase of NIS 6 million in the loss.


Fourth Quarter 2019 Highlights (compared to fourth quarter of 2018):

Total Revenues totaled NIS 932 million ($270 million) compared to NIS 918 million ($266 million) in the fourth quarter last year, an increase of 1.5%
 
Service revenues totaled NIS 694 million ($201 million) compared to NIS 677 million ($196 million) in the fourth quarter last year, an increase of 2.5%
 
Operating loss totaled NIS 27 million ($8 million) compared to Operating profit NIS 14 million ($4 million) in the fourth quarter last year.
 
Loss totaled NIS 54 million ($16 million) compared to of NIS 35 million ($10 million) in the fourth quarter last year, an increase of 54.3%
 
Adjusted EBITDA1 totaled NIS 212 million ($61 million) compared to NIS 169 million ($47 million) in the fourth quarter last year, an increase of 25.4%
 
Net cash from operating activities totaled NIS 241 million ($70 million) compared to NIS 167 million ($48 million) in the fourth quarter last year, an increase of 44.3%
 
Free cash flow1 totaled NIS 56 million ($16 million) compared to NIS 7 million ($2 million) in the fourth quarter last year, an increase of 700%
 
Shlomi Fruhling, Chief Financial Officer, said:
 
" 2019 was characterized by continued increased competition in the cellular segment, while we saw growth in the fixed line segment. During the year and thereafter, we made significant strategic moves such as completing the IBC acquisition and selling of the fiber-optic network in residential neighborhoods, signing a Memorandum of Understanding to acquire Golan Telecom shares (in February 2020), ongoing execution of a comprehensive restructuring plan that included a voluntary 450-employee retirement agreement, a move for reducing vendor payments and raising equity of over NIS 300 million which is intended to strengthen the Company's financial stability.
 
Mobile services revenue decreased 2.9% year-over-year. The erosion of revenues as a result of aggressive competition in the market was partially offset by an increase in revenue from the network sharing agreements.
 
Fixed-line service revenues grew 3.5% year-over-year. The increase was mainly due to continued customer recruitment to Cellcom tv and Internet services.
 
Continued growth in the fixed-line segment and the reduction in the erosion of the mobile segment, resulted in the Company's total service revenue has remained stable compared to the previous year.

- 2 -

Equipment revenue in 2019, grew by 3.1% year-over-year. Despite the increase in revenues, profitability and gross margins from equipment sales eroded compared to last year as a result of increased competition and lower equipment prices. We expect continued erosion of gross profit from this activity during 2020 as well.
 
The Company's Adjusted EBITDA amounted to NIS 940 in 2019 and was favorably affected by the adoption of IFRS16 compared with that of the previous year. In addition, this year, an expense of NIS 45 million was recorded for a voluntary employee retirement plan. Excluding these two effects, Adjusted EBITDA amounted to NIS 710, similar to that of the previous year.
 
The free cash-flow for 2019 amounted to NIS 391 million, and included the NIS 181 million cash received from the sale of the fiber-optic infrastructure. Even when excluding this sale, the free cash-flow increased by 16% compared to last year. The increase in free cash-flow was mainly due to a decrease in cash investments and payroll and tax payments.
 
The Company has successfully implemented the main components of the restructuring plan previously announced. As part of the actions taken, an agreement was signed with the employee representatives for the voluntary retirement of 450 employees. We expect to see the cost savings gradually start from the second quarter of 2020. The Company issued ordinary shares and options for a net immediate consideration of NIS 309 million. The proceeds from the issuance will serve us for general purposes and to strengthen the Company's balance sheet. We have taken the necessary steps to meet an annual investment target of NIS 450-500 million, and we continue to implement the overall efficiency plan for all the expense components of the Company.
 
We are in the midst of a global economic crisis as a result of the Corona virus pandemic. As this crisis continues, it is expected to adversely affect the Company's results of operations, particularly the revenues of the Company's roaming services abroad and the roaming services of tourists in Israel, revenues from end-user equipment and sales to new customers resulting from the closure of service centers and frontal sales points and substantial reduction of call centers operation, in accordance with regulatory instructions. In addition, in the first quarter of 2020, the Company is expected to record losses on its managed investment portfolio due to a sharp decline in capital markets in Israel and worldwide. On the other hand, the Company is acting to mitigate the expected adverse effect by reducing expenses and investments during the crisis. At this stage it is difficult to anticipate the duration of the crisis and therefore, the scope of the adverse effect to the Company's results of operations.
 
The company signed a Memorandum of Understanding to acquire Golan Telecom shares for NIS 590 and additional payments. We consider this acquisition an opportunity to strengthen our position as a leading telecommunications Company. Upon completion of the transaction, which is subject to certain conditions including regulatory approvals, and the extraction of operating synergies, Golan is expected to contribute to the Adjusted EBITDA and free cash flow of Cellcom, significant amounts on top of what has being paid by Golan to Cellcom Israel today.
 
The Company's Board of Directors decided not to distribute a dividend for the fourth quarter of 2019, in view of continued increased market competition and its negative impact on the Company's operating results, in order to continue to strengthen the Company's balance sheet. The Board of Directors will review its decision in accordance with the development of market conditions, while taking into account the needs of the Company.”
 
- 3 -


Netanya, Israel – March 23, 2020 – 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, 2019.
 
The Company reported that revenues for the fourth quarter and full year 2019 totaled NIS 932 million ($270 million) and NIS 3,708 million ($1,073 million), respectively; Adjusted EBITDA for the fourth quarter 2019 totaled NIS 212 million ($61 million), or 22.7% of total revenues, and for the full year 2019 totaled NIS 940 million ($272 million), or 25.4% of total revenues; loss for the fourth quarter and full year 2019 totaled NIS 54 million ($16 million) and NIS 107 million ($31 million), respectively. Basic loss per share for the fourth quarter and full year 2019 totaled NIS 0.43 ($0.12) and NIS 0.90 ($0.26), respectively.
 
Main Consolidated Financial Results:
 
 
NIS millions
% of Revenues
% Change
US$ millions  (convenience translation)
 
2019
2018
2019
2018
2019
2018
Revenues - services
2,776
2,784
74.9%
75.5%
(0.3)%
803
806
Revenues - equipment
932
904
25.1%
24.5%
3.1%
270
261
Total revenues
3,708
3,688
100.0%
100.0%
0.5%
1,073
1,067
Cost of revenues - services
(2,030)
(2,016)
(54.9)%
(54.7)%
1.0%
(587)
(583)
Cost of revenues - equipment
(695)
(645)
(18.6)%
(17.5)%
6.7%
(201)
(187)
Total cost of revenues
(2,725)
(2,661)
(73.5)%
(72.2)%
2.4%
(788)
(770)
Gross profit
983
1,027
26.5%
27.8%
(4.3)%
285
297
Selling and marketing expenses
(610)
(567)
(16.5)%
(15.4)%
7.6%
(177)
(164)
General and administrative expenses
(329)
(360)
(8.9)%
(9.8)%
(8.6)%
(95)
(104)
Other income (expenses), net
(20)
1
(0.5)%
-
N/A
(6)
-
Operating income
24
101
0.6%
2.7%
(76.2)%
7
29
Financing expenses, net
(144)
(171)
(3.9)%
(4.6)%
(15.8)%
(42)
(49)
Share of losses of equity accounted investees
(10)
-
(0.3)%
N/A
N/A
(3)
-
Loss before taxes on income
(130)
(70)
(3.5)%
(1.9)%
85.7%
(38)
(20)
Tax benefit
23
6
0.6 %
0.2 %
283%
7
2
Loss
(107)
(64)
(2.9)%
(1.7)%
67.2%
(31)
(18)
Free cash flow
391
181
10.5%
4.9%
116.0%
113
52
Adjusted EBITDA
940
687
25.4%
18.6%
36.8%
272
199
 
- 4 -


 
Q4/2019
Q4/2018
Change%
Q4/2019
Q4/2018
 
NIS million
US$ million
 (convenience translation)
Total revenues
932
918
1.5%
270
266
Operating Income (loss)
(27)
14
N/A
(7)
4
Loss
(54)
(35)
54.3%
(16)
(10)
Free cash flow
56
7
700%
16
2
Adjusted EBITDA
212
169
25.4%
61
49
Adjusted EBITDA, as percent of total revenues
22.7%
18.4%
23.4%
   
 
Main Financial Data by Operating Segments:
 
 
Cellular (*)
Fixed-line (**)
Inter-segment adjustments
(***)
Consolidated results
NIS million
2019
2018
Change
%
2019
2018
Change
%
2019
2018
2019
2018
Change
%
Total revenues
2,340
2,385
(1.9)%
1,529
1,464
4.4%
(161)
(161)
3,708
3,688
0.5%
Service revenues
1,679
1,730
(2.9)%
1,258
1,215
3.5%
(161)
(161)
2,776
2,784
(0.3)%
Equipment revenues
661
655
0.9%
271
249
8.8%
-
-
932
904
3.1%
Adjusted EBITDA
627
418
50.0%
313
269
16.4%
-
-
940
687
36.8%
Adjusted EBITDA, as percent of total revenues
26.8%
17.5%
53.1%
20.5%
18.4%
11.4%
   
25.4%
18.6%
36.6%
 
 
Cellular (*)
Fixed-line (**)
Inter-segment adjustments
(***)
Consolidated results
NIS million
Q4'19
Q4'18
Change
%
Q4'19
Q4'18
Change
%
Q4'19
Q4'18
Q4'19
Q4'18
Change
%
Total revenues
585
575
1.7%
387
383
1.0%
(40)
(40)
932
918
1.5%
Service revenues
416
416
-
318
301
5.6%
(40)
(40)
694
677
2.5%
Equipment revenues
169
159
6.3%
69
82
(15.9)%
-
-
238
241
(1.2)%
Adjusted EBITDA
133
103
29.1%
79
66
19.7%
-
-
212
169
25.4%
Adjusted EBITDA, as percent of total revenues
22.7%
17.9%
26.8%
20.4%
17.2%
18.6%
   
22.7%
18.4%
23.4%
 
(*)
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.
 
- 5 -

 
Financial Review (2019 full year compared to 2018):
 
Revenues for 2019 Increased 0.5% totaling NIS 3,708 million ($1,073 million), compared to NIS 3,688 million ($1,067 million) last year. The increase in revenues is attributed to a 3.1% increase in equipment revenues which was partially offset by a 0.3% decrease in service revenues.
 
Service revenues for 2019 totaled NIS 2,776 million ($803 million), a 0.3% decrease from NIS 2,784 million ($806 million) last year.

Service revenues in the cellular segment totaled NIS 1,679 million ($486 million) in 2019, a 2.9% decreased from NIS 1,730 million ($501 million) last year. This decrease resulted mainly from the ongoing erosion intense in the price of these services as a result of the competition in the cellular market.
 
Service revenues in the fixed-line segment totaled NIS 1,258 million ($364 million) in 2019, a 3.5% increase from NIS 1,215 million ($352 million) last year. This increase resulted mainly from an increase in revenues from TV and internet services, which was partially offset by a decrease in revenues from international calling services and minutes sales among international operators (hubbing services).
 
Equipment revenues totaled NIS 932 million ($270 million) in 2019, a 3.1% increase compared to NIS 904 million ($261 million) last year. This increase resulted mainly from an increase in the quantity of end user equipment sold in the fixed-line segment during 2019 compared to 2018.
 
Cost of revenues totaled NIS 2,725 million ($788 million) in 2019, compared to NIS 2,661 million ($770 million) in 2018, a 2.4% increase. This increase resulted mainly from an increase in of end user equipment sold in the fixed-line segment as well of an increase in content costs related to the TV field and in costs related to internet services as a result of increased of usage. This increase was partially offset by a decrease in costs of international calling services and hubbing services.
 
Gross profit for 2019 decreased 4.3% to NIS 983 million ($285 million), compared to NIS 1,027 million ($297 million) in 2018. Gross profit margin for 2019 amounted to 26.5%, down from 27.8% in 2018.
 
Selling, Marketing, General and Administrative Expenses ("SG&A Expenses") for 2019 increased 1.3% to NIS 939 million ($272 million), compared to NIS 927 million ($268 million) in 2018. This increase is primarily a result of an increase in depreciation expenses due to the capitalization of part of the customer acquisition costs, as a result of early adoption of an International Financial Reporting Standard (IFRS 15) as of the first quarter of 2017. This increase was partially offset by a decrease of salaries expenses and doubtful accounts expenses.
 
Other expenses for 2019 totaled NIS 20 million ($6 million), compared to other income of NIS 1 million ($0.3 million) in 2018. Other expenses for 2019, include mainly an expense totaling NIS 45 million in 2019 as part of a voluntary retirement plan (compared with NIS 26 million in 2018), which was partially offset by profit from the sale of fiber infrastructure in residential neighborhoods
 
Operating income for 2019 totaled NIS 24 million ($7 million) compared to NIS 101 million ($29 million) in 2018.
 
- 6 -



Adjusted EBITDA for 2019 increased by 36.8% totaling NIS 940 million ($272 million) compared to NIS 687 million ($199 million) in 2018. Adjusted EBITDA for 2019, as a percent of revenues, totaled 25.3% increase from 18.6% in 2018. The increase of Adjusted EBITDA resulted mainly from a decrease in rent expenses in a total amount of NIS 275 million which were recognized as a right-of-use asset as a result of the initial implementation of IFRS 16 as of 1 January, 2019, which was partially offset by an expense for employee voluntary retirement plan in the fourth quarter of 2019 which totaled NIS 45 million (compared with NIS 26 million in 2018).
 
Cellular segment Adjusted EBITDA for 2019 totaled NIS 627 million ($181 million), compared to NIS 418 million ($121 million) last year, an increase of 50% ,which resulted mainly from a decrease in rent expenses in a total amount of NIS 247 million which were recognized as a right-of-use asset as a result of the initial implementation of IFRS 16 as of 1 January, 2019, which was partially offset by an expense for employee voluntary retirement plan in the fourth quarter of 2019 which totaled NIS 30 million.
 
Fixed-line segment Adjusted EBITDA for 2019 totaled NIS 313 million ($91 million), compared to NIS 269 million ($78 million) last year, a 16.4% increase, which resulted mainly from a decrease in rent expenses in a total amount of NIS 28 million which were recognized as a right-of-use asset as a result of the initial implementation of IFRS 16 as of 1 January, 2019 and a profit from the sale of fiber infrastructure in residential neighborhoods which was partially offset by an expense for employee voluntary retirement plan in the fourth quarter of 2019 which totaled NIS 15 million.
 
Financing expenses, net for 2019 decreased to NIS 144 million ($42 million), compared to NIS 171 million ($49 million) in 2018. The finance expenses net, decreased as a result of finance income from gain in the Company's tradable investment portfolio and decrease in interest expenses which was partially offset, inter alia, by an increase of financing expenses as a result of the initial implementation of IFRS 16 as of 1 January 2019.
 
Tax benefit for 2019 totaled NIS 23 million ($7 million), compared to NIS 6 million ($2 million) of in 2018. This results mainly from the Company's loss before tax for which the Company recorded a tax income, which was partially offset by non-deductible expenses for tax purposes.
 
Loss for 2019 totaled NIS 107 million ($31 million), compared to a loss of NIS 64 million ($18 million) in 2018.
 
Basic loss per share for 2019 totaled NIS 0.90 ($0.26), compared to basic earnings per share of NIS 0.58 ($0.17) last year.

- 7 -


Financial Review (fourth quarter of 2019 compared to fourth quarter of 2018):
 
Revenues for the fourth quarter of 2019 increased 1.5% totaling NIS 932 million ($270 million), compared to NIS 918 million ($266 million) in the fourth quarter last year. The increase in revenues is attributed to a 2.5% increase in service revenues which was partially offset by a 1.2% decrease in equipment revenues.
 
Service revenues totaled NIS 694 million ($201 million) in the fourth quarter of 2019, a 2.5% increase from NIS 677 million ($196 million) in the fourth quarter last year. This increase resulted mainly from an increase in revenues from TV and internet services.
 
Service revenues in the cellular segment totaled NIS 416 million ($120 million) in the fourth quarter of 2019, similar to the fourth quarter of 2018.
 
Service revenues in the fixed-line segment totaled NIS 318 million ($92 million) in the fourth quarter of 2019, a 5.6% increase from NIS 301 million ($87 million) in the fourth quarter last year. This increase resulted mainly from an increase in revenues from TV and internet services
 
Equipment revenues in the fourth quarter of 2019 totaled NIS 238 million ($69 million), a 1.2% decrease compared to NIS 241 million ($70 million) in the fourth quarter last year. This decrease resulted mainly from a decrease in the quantity of end user equipment sold in the fixed-line segment which was partially offset by an increase in end user equipment sold in the cellular segment.
 
Cost of revenues for the fourth quarter of 2019 totaled NIS 692 million ($200 million), compared to NIS 676 million ($196 million) in the fourth quarter of 2018, a 2.4% increase. This increase resulted mainly from an increase in content costs related to the TV field and in costs related to internet services in the fixed-line segment and an increase in the cost of end user equipment resulting from an increase in equipment sales in cellular segment.
 
Gross profit for the fourth quarter of 2019 decreased 0.8% to NIS 240 million ($69 million), compared to NIS 242 million ($70 million) in the fourth quarter of 2019. Gross profit margin for the fourth quarter of 2019 amounted to 25.8%, down from 26.4% in the fourth quarter of 2018.
 
Selling, Marketing, General and Administrative Expenses ("SG&A Expenses") for the fourth quarter of 2019 decreased 3.4% to NIS 226 million ($65 million), compared to NIS 234 million ($68 million) in the fourth quarter of 2018. This decrease is primarily a result of a decrease in salaries expenses, and doubtful accounts expenses, which was partially offset by an increase in amortization expenses due to the capitalization of part of the customer acquisition costs.
 
Operating loss for the fourth quarter 2019 totaled NIS 27 million ($8 million), compared to operating profit of NIS 14 million ($4 million) in the fourth quarter of 2018. The operating loss for the fourth quarter 2019 include an expense for employee voluntary retirement plan, which totaled NIS 45 million. Excluding this effect, there is an improvement in the company's operating profit compared to the same quarter last year.
 
- 8 -

 
Adjusted EBITDA for the fourth quarter of 2019 increased by 25.4% totaling NIS 212 million ($61 million) compared to NIS 169 million ($49 million) in the fourth quarter of 2018. Adjusted EBITDA as a percent of revenues for the fourth quarter of 2019 totaled 22.7%, up from 18.4% in the fourth quarter of 2018.
 
Cellular segment adjusted EBITDA for the fourth quarter of 2019 increased by 29.1% totaling NIS 133 million ($38 million) compared to NIS 103 million ($30 million) in the fourth quarter last year. This resulted mainly from a decrease in rent expenses in a total amount of NIS 65 million which were recognized as a right-of-use asset as a result of the initial implementation of IFRS 16 as of 1 January, 2019, which was partially offset by an increase in an expense for employee voluntary retirement plan totaled NIS 30 million ($9 million).
 
Fixed-line segment adjusted EBITDA for the fourth quarter of 2019 totaled NIS 79 million ($23 million), compared to NIS 66 million ($19 million) in the fourth quarter last year, a 19.7% increase, which resulted mainly from a decrease in rent expenses in a total amount of NIS 7 million which were recognized as a right-of-use asset as a result of the initial implementation of IFRS 16 as of 1 January, 2019, which was partially offset by an increase in an expense for employee voluntary retirement plan which totaled NIS 15 million ($4 million).
 
Financing expenses, net for the fourth quarter of 2019 decreased 33.3% and totaled NIS 34 million ($10 million), compared to NIS 51 million ($15 million) in the fourth quarter of 2018. The decrease resulted mainly from losses in the Company's tradable investment portfolio due to a sharp decrease in the securities market in the fourth quarter of 2018 and a decrease in interest expenses.
 
Tax benefit for the fourth quarter of 2019 totaled NIS 13 million ($4 million), compared to NIS 2 million ($1 million) in the fourth quarter of 2018. Income tax resulted mainly from the Company's loss before tax for which the Company recorded a tax income, which was partially offset by non-deductible expenses for tax purposes.
 
Loss for the fourth quarter of 2019 totaled NIS 54 million ($16 million), compared to NIS 35 million ($10 million) in the fourth quarter of 2018. The loss in the fourth quarter of 2019 was affected by an expense for employee voluntary retirement plan, which totaled NIS 45 million. (NIS 35 million, net of tax)
 
Basic loss per share for the fourth quarter of 2019 totaled NIS 0.43 ($0.12), compared to basic loss per share NIS 0.3 ($0.08) in the fourth quarter last year.
 
- 9 -


Operating Review
 
Main Performance Indicators - Cellular segment:

 
2019
2018
Change (%)
Cellular subscribers at the end of the period (in thousands)
2,744
2,851
(3.8)%
Churn Rate for cellular subscribers (in %)
48.8%
43.2%
13.0%
Monthly cellular ARPU (in NIS)
 50.7
 51.3
(1.2)%
 
Q4/2019
Q4/2018
Change (%)
Churn Rate for cellular subscribers (in %)
11.3%
11.1%
    1.8%
Monthly cellular ARPU (in NIS)
50.5
49.0
   3.1%
 
Cellular subscriber base - at the end of 2019 the Company had approximately 2.744 million cellular subscribers, a decrease of approximately 107,000 subscribers net, compared to the cellular subscriber base at the end of 2018. The decrease resulted mainly because the company deleted 153,000 subscribers from its subscriber base count at the end of the first quarter of 2019 due to a change in the counting method of the company's cellular subscriber base. These subscribers generate negligible revenues to the Company. Excluding this effect the Company's subscribers base increased by approximately 46,000 subscribers net. In the fourth quarter of 2019, the Company's cellular subscriber base decreased by approximately 23,000 subscribers net.
 
Cellular Churn Rate for 2019 totaled 48.8%, compared to 43.2% in 2018. The cellular churn rate for the fourth quarter of 2019 totaled 11.3%, compared to 11.1% in the fourth quarter last year. Due to the significant influence of M2M subscribers on the reported churn rate of the company, which is mostly technical, the Company is examining a new counting method of M2M subscribers' churn, which is similar to other companies in Israel from the first quarter of 2020. This change, if and when applicable, is expected to significantly reduce the reported churn rate of the Company.
 
The monthly cellular Average Revenue per User ("ARPU") for 2019 totaled NIS 50.7 ($14.7) compared to NIS 51.3 ($14.8) in 2018. ARPU for the fourth quarter of 2019 totaled NIS 50.5 ($14.6), compared to NIS 49.0 ($14.2) in the fourth quarter last year. The decrease in ARPU, both annually and quarterly resulted, among others, from the ongoing erosion in the prices of cellular services, resulting from the intense competition in the cellular market.
 
- 10 -


Main Performance Indicators - Fixed-line segment:
 
 
2019
2018
Change (%)
Internet infrastructure field subscribers- (households) at the end of the period (in thousands)
278
269
3.3%
TV field subscribers- (households) at the end of the period (in thousands)
258
219
17.8%

In 2019, the Company's subscriber base in the internet infrastructure field increased by approximately 9,000 households net, and the Company's subscriber base in the TV field increased by 39,000 households net. In the fourth quarter of 2019, the Company's subscriber base in the internet infrastructure field increased by approximately 2,000 households net, and the Company's subscriber base in the TV field increased by 11,000 households net.
 
Financing and Investment Review
 
Cash Flow
 
Free cash flow for 2019 totaled NIS 391 million ($113 million), compared to NIS 181 million ($52 million) in 2018, a 116% increase. The increase in free cash flow resulted mainly from the sale of independent fiber optic infrastructure of the company in residential areas to IBC in the amount of approx. NIS 181 million, a decrease in salaries expenses as a result of employee voluntary retirement plan of 2018 and a decrease in tax payments, net in 2019 compared to 2018.
 
Free cash flow for the fourth quarter of 2019 totaled NIS 56 million ($16 million), compared to NIS 7 million ($2 million) in the fourth quarter of 2018, a 700% increase. The increase in quarterly free cash flow resulted mainly from an increase in receipts from customers, decrease in salaries payments and decrease in payments for end-user equipment suppliers.
 
Total Equity
 
Total Equity as of December 31, 2019 amounted to NIS 1,887 million ($546 million) primarily consisting of undistributed accumulated retained earnings of the Company.
 
Cash Capital Expenditures in Fixed Assets and Intangible Assets and others
 
During 2019 and the fourth quarter of 2019 the Company invested NIS 557 million ($161 million) and NIS 111 million ($32 million), respectively, in fixed assets and intangible assets and others (including, among others, investments in the Company's communications networks, investment in optic-fiber deployment, 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 593 million ($172 million) and NIS 156 million ($45 million) in 2018 and the fourth quarter of 2018, respectively.
 
- 11 -

 
Dividend
 
On March 22, 2020, the Company's Board of Directors decided not to declare a cash dividend for the fourth quarter of 2020. 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, 2019 on Form 20-F dated March 23, 2020, or the Company's 2019 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, 2019, see "Disclosure for Debenture Holders" section in this press release.
 
For information regarding the Company's material loans as of December 31, 2019, 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, 2019, 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 2019 and for the fourth quarter of 2019 on Monday, March 23, 2020 at 10:00 am ET, 07:00 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: 1 888 668 9141         UK Dial-in Number: 0 800 917 5108
 
Israel Dial-in Number: 03 918 0609          International Dial-in Number: +972 3 918 0609
 
at: 10:00 am Eastern Time; 07:00 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.
 
- 12 -

 
ANNUAL REPORT FOR 2019
 
Cellcom Israel will be filing its annual report for the year ended December 31, 2019 (on Form 20-F) with the US Securities and Exchange Commission on March 23, 2020. 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 2.744 million cellular subscribers (as at December 31, 2019) 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, internet infrastructure 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, 2019.
 
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 3.456 = US$ 1 as published by the Bank of Israel for December 31, 2019.
 
- 13 -

Use of non-IFRS financial measures
 
Adjusted EBITDA is a non-IFRS measure and is defined as income before interest (financing expenses, net), taxes, other income (expenses) (except for expenses in respect of voluntary retirement plans for employees, and gain (loss) due to sale of subsidiaries), depreciation and amortization, profits (losses) of equity account investees 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. Adjusted 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. Adjusted 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, Adjusted 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 Adjusted 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
- 14 -


Cellcom Israel Ltd.
 (An Israeli Corporation)

 
Consolidated Statements of Financial Position


               
Convenience
 
               
translation into
 
               
US dollar
 
   
December 31,
   
December 31,
   
December 31,
 
   
2018
   
2019
   
2019
 
   
NIS millions
   
NIS millions
   
US$ millions
 
                   
Assets
                 
Cash and cash equivalents
   
1,202
     
1,006
     
291
 
Current investments, including derivatives
   
404
     
473
     
137
 
Trade receivables
   
1,152
     
1,142
     
330
 
Current tax assets
   
11
     
3
     
1
 
Other receivables
   
84
     
69
     
20
 
Inventory
   
94
     
66
     
19
 
                         
Total current assets
   
2,947
     
2,759
     
798
 
                         
Trade and other receivables
   
852
     
782
     
227
 
Property, plant and equipment, net
   
1,652
     
1,432
     
414
 
Intangible assets and others, net
   
1,298
     
1,294
     
374
 
Investments in equity accounted investees
   
-
     
150
     
43
 
Right-of-use assets, net
   
-
     
745
     
216
 
                         
Total non- current assets
   
3,802
     
4,403
     
1,274
 
                         
Total assets
   
6,749
     
7,162
     
2,072
 
                         
Liabilities
                       
Current maturities of debentures and of loans from financial institutions
   
620
     
509
     
147
 
Current taxation liabilities
   
-
     
6
     
2
 
Current maturities of lease liabilities
   
-
     
226
     
65
 
Trade payables and accrued expenses
   
696
     
687
     
199
 
Provisions
   
105
     
99
     
29
 
Other payables, including derivatives
   
257
     
299
     
86
 
                         
Total current liabilities
   
1,678
     
1,826
     
528
 
                         
Long-term loans from financial institutions
   
334
     
300
     
87
 
Debentures
   
2,911
     
2,511
     
727
 
Long-term lease liabilities
   
-
     
533
     
154
 
Provisions
   
20
     
22
     
6
 
Other long-term liabilities
   
16
     
4
     
1
 
Liability for employee rights upon retirement, net
   
14
     
19
     
5
 
Deferred tax liabilities
   
99
     
60
     
17
 
                         
Total non- current liabilities
   
3,394
     
3,449
     
997
 
                         
Total liabilities
   
5,072
     
5,275
     
1,525
 
                         
Equity attributable to owners of the Company
                       
Share capital
   
1
     
2
     
1
 
Share premium
   
325
     
623
     
180
 
Receipts on account of share options
   
10
     
24
     
7
 
Retained earnings
   
1,339
     
1,236
     
358
 
                         
Non-controlling interests
   
2
     
2
     
1
 
                         
Total equity
   
1,677
     
1,887
     
547
 
                         
Total liabilities and equity
   
6,749
     
7,162
     
2,072
 

- 15 -

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,
 
   
2017
   
2018
   
2019
   
2019
 
   
NIS millions
   
NIS millions
   
NIS millions
   
US$ millions
 
                         
Revenues
   
3,871
     
3,688
     
3,708
     
1,073
 
Cost of revenues
   
(2,680
)
   
(2,661
)
   
(2,725
)
   
(788
)
                                 
Gross profit
   
1,191
     
1,027
     
983
     
285
 
                                 
Selling and marketing expenses
   
(479
)
   
(567
)
   
(610
)
   
(177
)
General and administrative expenses
   
(426
)
   
(360
)
   
(329
)
   
(95
)
Other income (expenses), net
   
42
     
1
     
(20
)
   
(6
)
                                 
Operating profit
   
328
     
101
     
24
     
7
 
                                 
Financing income
   
21
     
19
     
49
     
14
 
Financing expenses
   
(196
)
   
(190
)
   
(193
)
   
(56
)
Financing expenses, net
   
(175
)
   
(171
)
   
(144
)
   
(42
)
                                 
Share in losses of equity accounted investees
   
-
     
-
     
(10
)
   
(3
)
                                 
Profit (loss) before taxes on income
   
153
     
(70
)
   
(130
)
   
(38
)
                                 
Tax benefit (Taxes on income)
   
(40
)
   
6
     
23
     
7
 
Profit (loss) for the year
   
113
     
(64
)
   
(107
)
   
(31
)
Attributable to:
                               
Owners of the Company
   
112
     
(62
)
   
(107
)
   
(31
)
Non-controlling interests
   
1
     
(2
)
   
-
     
-
 
Profit (loss) for the year
   
113
     
(64
)
   
(107
)
   
(31
)
                                 
Earnings (loss) per share
                               
Basic earnings (loss) per share (in NIS)
   
1.11
     
(0.58
)
   
(0.90
)
   
(0.26
)
                                 
Diluted earnings (loss) per share (in NIS)
   
1.10
     
(0.58
)
   
(0.90
)
   
(0.26
)
                                 
Weighted-average number of shares used in the calculation of basic earnings (loss) per share (in shares)
   
100,654,935
     
107,499,543
     
118,376,455
     
118,376,455
 
                                 
Weighted-average number of shares used in the calculation of diluted earnings (loss) per share (in shares)
   
100,889,661
     
107,499,543
     
118,376,455
     
118,376,455
 

- 16 -



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,
 
   
2017
   
2018
   
2019
   
2019
 
   
NIS millions
   
NIS millions
   
NIS millions
   
US$ millions
 
Cash flows from operating activities
                       
Profit (loss) for the year
   
113
     
(64
)
   
(107
)
   
(31
)
Adjustments for:
                               
Depreciation and amortization
   
555
     
584
     
898
     
260
 
Share based payments
   
2
     
2
     
8
     
2
 
Gain on sale of property, plant and equipment, intangible assets and others
   
(1
)
   
-
     
(8
)
   
(2
)
Gain on sale of shares in a consolidated company
   
(10
)
   
-
     
-
     
-
 
Net change in fair value of  investment property
   
-
     
-
     
6
     
2
 
Income tax expense (tax benefit)
   
40
     
(6
)
   
(23
)
   
(7
)
Financing expenses, net
   
175
     
171
     
144
     
42
 
Other expenses
   
-
     
-
     
3
     
1
 
Share in losses of equity accounted investees
   
-
     
-
     
10
     
3
 
                                 
Changes in operating assets and liabilities:
                         
Change in inventory
   
(6
)
   
(24
)
   
28
     
8
 
Change in trade receivables (including long-term amounts)
   
101
     
166
     
80
     
23
 
Change in other receivables (including long-term amounts)
   
(191
)
   
(21
)
   
13
     
4
 
Change in trade payables, accrued expenses and provisions
   
(27
)
   
(26
)
   
(27
)
   
(8
)
Change in other liabilities (including long-term amounts)
   
28
     
11
     
23
     
6
 
Payments for derivative hedging contracts, net
   
(3
)
   
-
     
(10
)
   
(3
)
Income tax paid
   
(44
)
   
(23
)
   
(12
)
   
(4
)
Income tax received
   
42
     
-
     
10
     
3
 
Net cash from operating activities
   
774
     
770
     
1,036
     
299
 
                                 
Cash flows used in investing activities
                               
Acquisition of property, plant, and equipment
   
(346
)
   
(356
)
   
(324
)
   
(94
)
Acquisition of intangible assets and others
   
(237
)
   
(237
)
   
(233
)
   
(67
)
Acquisition of equity accounted investee
   
-
     
-
     
(16
)
   
(5
)
Change in current investments, net
   
(77
)
   
(56
)
   
(49
)
   
(14
)
Receipts from other derivative contracts, net
   
-
     
3
     
9
     
3
 
Proceeds from sale of property, plant and equipment, intangible assets and others
   
1
     
1
     
181
     
52
 
Grant of long-term loans to equity accounted investees
   
-
     
-
     
(141
)
   
(41
)
Interest received
   
12
     
14
     
13
     
4
 
Proceeds from sale of shares in a consolidated company, net of cash disposed
   
3
     
-
     
-
     
-
 
Net cash used in investing activities
   
(644
)
   
(631
)
   
(560
)
   
(162
)


- 17 -


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,
 
   
2017
   
2018
   
2019
   
2019
 
   
NIS millions
   
NIS millions
   
NIS millions
   
US$ millions
 
                         
Cash flows used in financing activities
                   
Payments for derivative contracts, net
   
(3
)
   
(15
)
   
(2
)
   
(1
)
Receipt of long-term loans from financial institutions
   
200
     
-
     
150
     
43
 
Payments for long-term loans from financial institutions
   
-
     
(78
)
   
(212
)
   
(61
)
Repayment of debentures
   
(864
)
   
(556
)
   
(504
)
   
(145
)
Proceeds from issuance of debentures, net of issuance costs
   
-
     
997
     
-
     
-
 
Repurchase of own debentures
   
-
     
-
     
(10
)
   
(3
)
Dividend paid
   
(1
)
   
-
     
-
     
-
 
Interest paid
   
(175
)
   
(126
)
   
(151
)
   
(43
)
Acquisition of non-controlling interests
   
-
     
(19
)
   
-
     
-
 
Equity offering
   
-
     
275
     
309
     
89
 
Proceeds from exercise of share options
   
-
     
59
     
4
     
1
 
Payment of principal of lease liabilities
   
-
     
-
     
(256
)
   
(74
)
                                 
Net cash from (used in) financing activities
   
(843
)
   
537
     
(672
)
   
(194
)
                                 
Changes in cash and cash equivalents
   
(713
)
   
676
     
(196
)
   
(57
)
                                 
Cash and cash equivalents as at the beginning of the year
   
1,240
     
527
     
1,202
     
348
 
                                 
Effects of exchange rate changes on cash and cash equivalents
   
-
     
(1
)
   
-
     
-
 
                                 
Cash and cash equivalents as at the end of the year
   
527
     
1,202
     
1,006
     
291
 


- 18 -


Cellcom Israel Ltd.
 (An Israeli Corporation)

Reconciliation for Non-IFRS Measures


Adjusted EBITDA

The following is a reconciliation of net income to adjusted EBITDA:
 
   
Year ended December 31
   
Convenience
translation
into US dollar
Year ended
December 31
 
   
2017
NIS millions
   
2018
NIS millions
   
2019
NIS millions
   
2019
US$ millions
 
Net income (loss)          
   
113
     
(64
)
   
(107
)
   
(31
)
Taxes on income (tax benefit)          
   
40
     
(6
)
   
(23
)
   
(7
)
Financing income          
   
(21
)
   
(19
)
   
(49
)
   
(14
)
Financing expenses          
   
196
     
190
     
193
     
56
 
Other expenses (income)          
   
(1
)
   
(1
)
   
10
     
3
 
Depreciation and amortization          
   
555
     
584
     
898
     
260
 
Share of loss of equity accounted investees (net of income tax)
   
-
     
-
     
10
     
3
 
Share based payments          
   
2
     
3
     
8
     
2
 
Adjusted EBITDA          
   
884
     
687
     
940
     
272
 

   
Three-month period ended
December 31
 
   
2017
NIS millions
   
2018
NIS millions
   
2019
NIS millions
   
Convenience
translation
into US dollar
2019
US$ millions
 
Net income (loss)          
   
10
     
(35
)
   
(54
)
   
(16
)
Taxes on income (tax benefit)          
   
5
     
(2
)
   
(13
)
   
(4
)
Financing income          
   
(10
)
   
(7
)
   
(9
)
   
(3
)
Financing expenses          
   
47
     
58
     
43
     
13
 
Other expenses          
   
1
     
-
     
3
     
1
 
Depreciation and amortization          
   
143
     
155
     
233
     
67
 
Share of loss of equity accounted investees (net of income tax)
   
-
     
-
     
6
     
2
 
Share based payments          
   
-
     
-
     
3
     
1
 
Adjusted EBITDA          
   
196
     
169
     
212
     
61
 

- 19 -


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
 
   
2017
NIS millions
   
2018
NIS millions
   
2019
NIS millions
   
2019
US$ millions
 
Cash flows from operating activities(*)
   
774
     
769
     
756
     
219
 
Loan to Golan Telecom          
   
130
     
-
     
-
     
-
 
Cash flows from investing activities
   
(644
)
   
(631
)
   
(560
)
   
(162
)
Purchase (sale) of tradable debentures(**)
   
65
     
43
     
38
     
11
 
Investment in equity accounted investees
   
-
     
-
     
157
     
45
 
Free cash flow          
   
325
     
181
     
391
     
113
 

   
Three-month period ended
December 31
 
   
2017
NIS millions
   
2018
NIS millions
   
2019
NIS millions
   
Convenience
translation
into US dollar
2019
US$ millions
 
Cash flows from operating activities(*)
   
214
     
165
     
165
     
48
 
Cash flows from investing activities
   
(133
)
   
(148
)
   
(149
)
   
(43
)
Purchase (sale) of tradable debentures(**)
   
(4
)
   
(10
)
   
37
     
11
 
Investment in equity accounted investees
   
-
     
-
     
3
     
1
 
Free cash flow          
   
77
     
7
     
56
     
17
 

(*)  Including the effects of exchange rate fluctuations in cash and cash equivalents and lease payments.

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


- 20 -



Cellcom Israel Ltd.
 (An Israeli Corporation)

Key financial and operating indicators
 
NIS millions unless otherwise stated
   
Q1-2018
     
Q2-2018
     
Q3-2018
     
Q4-2018
     
Q1-2019
     
Q2-2019
     
Q3-2019
     
Q4-2019
   
FY-2018
   
FY-2019
 
 
                                                                           
Cellular service revenues
   
437
     
434
     
443
     
416
     
404
     
420
     
439
     
416
     
1,730
     
1,679
 
Fixed-line service revenues
   
304
     
300
     
310
     
301
     
317
     
312
     
311
     
318
     
1,215
     
1,258
 
 
                                                                               
Cellular equipment revenues
   
193
     
157
     
146
     
159
     
158
     
162
     
172
     
169
     
655
     
661
 
Fixed-line equipment revenues
   
39
     
76
     
52
     
82
     
92
     
63
     
47
     
69
     
249
     
271
 
                                                                                 
Consolidation adjustments
   
(40
)
   
(40
)
   
(41
)
   
(40
)
   
(43
)
   
(37
)
   
(41
)
   
(40
)
   
(161
)
   
(161
)
Total revenues
   
933
     
927
     
910
     
918
     
928
     
920
     
928
     
932
     
3,688
     
3,708
 
                                                                                 
Cellular adjusted EBITDA
   
119
     
78
     
118
     
103
     
146
     
163
     
185
     
133
     
418
     
627
 
Fixed-line adjusted EBITDA
   
68
     
62
     
73
     
66
     
78
     
70
     
86
     
79
     
269
     
313
 
Total adjusted EBITDA
   
187
     
140
     
191
     
169
     
224
     
233
     
271
     
212
     
687
     
940
 
 
                                                                               
Operating profit (loss)
   
52
     
(5
)
   
40
     
14
     
9
     
6
      36      
(27
)
   
101
     
24
 
Financing expenses, net
   
40
     
43
     
37
     
51
     
27
     
52
     
31
     
34
     
171
     
144
 
Profit (loss) for the period
   
7
     
(37
)
   
1
     
(35
)
   
(16
)
   
(35
)
   
(2
)
   
(54
)
   
(64
)
   
(107
)
 
                                                                               
Free cash flow
   
84
     
56
     
34
     
7
     
46
     
55
     
234
     
56
     
181
     
391
 
 
                                                                               
Cellular subscribers at the end of period (in 000's)
   
2,822
     
2,809
     
2,825
     
2,851
     
2,853
     
2,745
     
2,767
     
2,744
     
2,851
     
2,744
 
Monthly cellular ARPU (in NIS)
   
51.8
     
51.8
     
52.5
     
49
     
47.2
     
51.9
     
53.2
     
50.5
     
51.3
     
50.7
 
Churn rate for cellular subscribers (%)
   
9.5
%
   
12.6
%
   
10.0
%
   
11.1
%
   
11.0
%
   
11.3
%
   
11.4
%
   
11.3
%
   
43.2
%
   
48.8
%

- 21 -


Cellcom Israel Ltd.

Disclosure for debenture holders as of December 31, 2019

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 31.12.2019
As of 23.03.2020
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)(8)**
20/03/12
714.802
214.441
222.777
5.026
227.803
227.736
0.000
0.000
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.
(4)(5)(7)**
08/07/14
03/02/15*
11/02/15*
949.624
721.714
682.285
7.056
689.341
728.859
721.714
682.930
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*
28/03/16*
804.010
643.208
625.616
13.059
638.675
663.855
643.208
626.892
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)
 
 
 
25/09/16
103.267
103.267
104.167
1.259
105.426
101.811
103.267
103.695
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)**
 
25/09/16
01/07/18*
10/12/18*
    710.634
710.634
705.779
12.372
718.151
688.746
710.634
706.121
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 (4)(5)(9)** 
 
 
24/01/18
10/12/18*
    613.937
602.979
579.040
14.868
593.908
543.308
602.979
579.936
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
 
 3,896.274
2,996.243
2,919.664
53.640
2,973.304
2,954.315
2,781.802
2,699.574
 
 
 
 
 
 

- 22 -


Comments:

(1) For a summary of the terms of the Company's outstanding debentures see the Company's 2019 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, 2019 the net leverage *** was 2.03. In the reporting period, no cause for early repayment occurred. (2) Including interest accumulated in the books. (3) Semi annual payments other than regarding Series L. (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, 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%, 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) On January, 2020, after the end of the reporting period, the Company repaid principal payments of approximately NIS 214 million of Series F debentures that were fully repaid. 9) In December 2019, the Company repurchased Series L Debentures for approximately NIS 10 million.

(*) On these dates additional debentures of the series were issued, the information in the table refers to the full series. (**) As of December 31, 2019, debentures Series H, I, K and L are material, which represent 5% or more of the total liabilities of the Company, as presented in the financial statements. (***) Net Leverage - the ratio of Net Debt to Adjusted EBITDA, excluding one-time influences. Net Debt defined as credit and loans from banks and others, debentures and interest payable, net of cash and cash equivalents and current investments in tradable securities. The definition of net leverage refers to Adjusted EBITDA for a period of 12 consecutive months. Accordingly, the net leverage ratio above includes the effects of the new standard IFRS 16 (applied by the Company as of January 1, 2019) on the Adjusted EBITDA for the year ended in December 31, 2019. For details of the effects of IFRS 16 on the Company's results see footnote 2 on page 1 of this press release and note 2 F to the Company's financial statement for the period ended on December 31, 2019, included elsewhere in this report.

- 23 -

Cellcom Israel Ltd.

Disclosure for debenture holders as of December 31, 2019 (cont'd)

Debentures Rating Details*

Series
Rating Company
Rating as of 31.12.2019 (1)
Rating as of 23.03.2020
Rating assigned upon issuance of the Series
Recent date of rating as of 23.03.2020
Additional ratings between original issuance and the recent date of rating as of 23.03.2020 (2)
 
Rating
F
S&P Maalot
A
A
AA
08/2019
05/2012, 11/2012, 06/2013, 06/2014, 08/2014, 01/2015, 09/2015, 03/2016, 08/2016, 06/2017, 01/2018, 06/2018, 08/2018, 12/2018, 03/2019, 08/2019
AA,AA-,A+,A(2)
H
S&P Maalot
A
A
A+
08/2019
06/2014, 08/2014, 01/2015, 09/2015, 03/2016, 08/2016, 06/2017, 01/2018, 06/2018, 08/2018, 12/2018, 03/2019, 08/2019
A+,A(2)
I
S&P Maalot
A
A
A+
08/2019
06/2014, 08/2014, 01/2015, 09/2015, 03/2016, 08/2016, 06/2017, 01/2018, 06/2018, 08/2018, 12/2018, 03/2019, 08/2019
A+,A(2)
J
S&P Maalot
A
A
A+
08/2019
08/2016, 06/2017, 01/2018, 06/2018, 08/2018, 12/2018, 03/2019, 08/2019
A+,A(2)
K
S&P Maalot
A
A
A+
08/2019
08/2016, 06/2017, 01/2018, 06/2018, 08/2018, 12/2018, 03/2019, 08/2019
A+,A(2)
L
S&P Maalot
A
A
A+
08/2019
 01/2018, 06/2018, 08/2018, 12/2018, 03/2019, 08/2019
A+,A(2)

(1)
In August 2019, S&P Maalot updated the Company's rating outlook from an "“ilA+/negative” to an “ilA-/negative”.
(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, January 2018, June 2018, August 2018 and December 2018 S&P Maalot affirmed the Company's rating of “ilA+/stable”. In March 2019, S&P Maalot updated the Company's rating outlook from an "ilA+/stable" to an “ilA+/negative”. In August 2019, S&P Maalot updated the Company's rating outlook from an "ilA+/negative" to an “ilA/negative”. For details regarding the rating of the debentures see the S&P Maalot report dated August 5, 2019, included in the Company's current report filled in the Israeli Securities Authority website ("MAGNA") on August 5, 2019

* 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.
 
- 24 -



Cellcom Israel Ltd.

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

Loan
Provision Date
Principal Amount as of 31.12.2019
 
Interest Rate (nominal)
Principal Repayment Dates (annual payments)
Interest Repayment Dates (semi-annual payments)
Linkage
From
To
   
Loan from financial institution (2)(3)(4)(5)(6)
06/2016
100
4.60%
30.06.18
30.06.21
Jun-30 and December-31, commencing December 31, 2016 through June 30, 2021
Not linked
Loan from financial institution(2)(3)(4)(5)(6)
06/2017
150
5.10%
30.06.19
30.06.22
June-30
and December-31, commencing December 31, 2017 through June 30, 2022
Not linked
Loan from bank(2)(3)(4)(5)(6)
03/2019
150
4.00%
31.03.21
31.03.24
March-31 and September 30, commencing September 30, 2019 through March 31, 2024
Not linked
Total
 
400
 
 
 
 
 

Comments:

(1) For a summary of the terms of the Company's loan agreements see the Company's 2019 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, 2019 the net leverage* (net debt to Adjusted EBITDA excluding one-time events ratio- see definition in the reference above to the Company's 2019 Annual Report (The definition of Adjusted EBITDA is identical to the definition of EBITDA (which the Company used in previous periods)) was 2.03. (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.

(*) Net Leverage - the ratio of Net Debt to Adjusted EBITDA, excluding one-time influences. Net Debt defined as credit and loans from banks and others, debentures and interest payable, net of cash and cash equivalents and current investments in tradable securities. The definition of net leverage refers to Adjusted EBITDA for a period of 12 consecutive months. Accordingly, the net leverage ratio above includes the effects of the new standard IFRS 16 (applied by the Company as of January 1, 2019) on the Adjusted EBITDA for the year ended in December 31, 2019. For details of the effects of IFRS 16 on the Company's results see footnote 2 on page 1 of this press release and note 2 F to the Company's financial statement for the period ended on December 31, 2019 included elsewhere in this report.

 
- 25 -

Cellcom Israel Ltd.
 
Summary of Financial Undertakings (according to repayment dates) as of December 31, 2019


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
   
336,705
     
80,401
     
-
     
-
     
-
     
88,719
 
Second year
   
168,288
     
218,668
     
-
     
-
     
-
     
78,013
 
Third year
   
168,288
     
218,668
     
-
     
-
     
-
     
66,182
 
Fourth year
   
168,288
     
308,564
     
-
     
-
     
-
     
54,351
 
Fifth year and on
   
209,176
     
1,123,590
     
-
     
-
     
-
     
89,220
 
Total
   
1,050,745
     
1,949,891
     
-
     
-
     
-
     
376,485
 


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
   
-
     
100,000
     
-
     
-
     
-
     
9,812
 
Second year
   
-
     
100,000
     
-
     
-
     
-
     
4,955
 
Third year
   
-
     
50,000
     
-
     
-
     
-
     
1,264
 
Fourth year
   
-
     
-
     
-
     
-
     
-
     
-
 
Fifth year and on
   
-
     
-
     
-
     
-
     
-
     
-
 
Total
   
-
     
250,000
     
-
     
-
     
-
     
16,031
 


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
   
-
     
-
     
-
     
-
     
-
     
5,984
 
Second year
   
-
     
37,500
     
-
     
-
     
-
     
5,248
 
Third year
   
-
     
37,500
     
-
     
-
     
-
     
3,748
 
Fourth year
   
-
     
37,500
     
-
     
-
     
-
     
2,248
 
Fifth year and on
   
-
     
37,500
     
-
     
-
     
-
     
750
 
Total
   
-
     
150,000
     
-
     
-
     
-
     
17,978
 


d.
Credit from banks abroad based on the Company's "Solo" financial data (in thousand NIS) - None.

 
- 26 -

Cellcom Israel Ltd.
 
Summary of Financial Undertakings (according to repayment dates) as of December 31, 2019 (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
   
336,705
     
180,401
     
-
     
-
     
-
     
104,514
 
Second year
   
168,288
     
356,168
     
-
     
-
     
-
     
88,216
 
Third year
   
168,288
     
306,168
     
-
     
-
     
-
     
71,195
 
Fourth year
   
168,288
     
346,064
     
-
     
-
     
-
     
56,599
 
Fifth year and on
   
209,176
     
1,161,090
     
-
     
-
     
-
     
89,970
 
Total
   
1,050,745
     
2,349,891
     
-
     
-
     
-
     
410,494
 



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
   
809
     
-
     
-
     
-
     
-
     
292
 
Second year
   
419
     
488
     
-
     
-
     
-
     
273
 
Third year
   
419
     
488
     
-
     
-
     
-
     
246
 
Fourth year
   
419
     
1,039
     
-
     
-
     
-
     
218
 
Fifth year and on
   
1,458
     
4,914
     
-
     
-
     
-
     
455
 
Total
   
3,524
     
6,929
     
-
     
-
     
-
     
1,484
 


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.

- 27 -


Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 
CELLCOM ISRAEL LTD.
 
       
Date:    March 23, 2020
By:
/s/ Liat Menahemi Stadler  
    Name: Liat Menahemi Stadler  
    Title:   VP Legal and Corporate Secretary