Cellcom Israel Announces First Quarter 2018 Results

Cellcom Israel Announces First Quarter 2018 Results

Cellcom Israel concludes the first quarter of 2018 with net income of NIS 7 million and EBITDA[1] of NIS 180 million.

NETANYA, Israel, May 30, 2018 /PRNewswire/ -- Nir Sztern, Cellcom Israel CEO said:

"The strong growth trend of the fixed line segment also continued in this quarter. Fixed line revenues were up approximately 9% compared to the first quarter of 2017 and EBITDA of this segment reached NIS 68 million.

Cellcom Israel is the only Company in Israel that offers the quatro package. This advantage allows us to face the competition in the cellular segment, such that even as cellular prices decrease, we are successful in selling a complete communications package, and through this we increase total income per household."

First Quarter 2018 Highlights (compared to first quarter of 2017):

    --  Total Revenues totaled NIS 933 million ($265 million) compared to NIS
        959 million ($273 million) in the first quarter last year, a decrease of
        2.7%
    --  Service revenues totaled NIS 701 million ($199 million) compared to NIS
        739 million ($210 million) in the first quarter last year, a decrease of
        5.1%
    --  Operating income totaled NIS 45 million ($13 million) compared to NIS 67
        million ($19 million) in the first quarter last year, a decrease of
        32.8%
    --  Net income totaled NIS 7 million ($2 million) compared to NIS 26 million
        ($7 million) in the first quarter last year, a decrease of 73.1%
    --  EBITDA(1) totaled NIS 180 million ($51 million) compared to NIS 201
        million ($57 million) in the first quarter last year, a decrease of
        10.4%
    --  Net cash flow from operating activities totaled NIS 230 million ($65
        million) compared to NIS 77 million ($22 million) in the first quarter
        last year(2), an increase of 198.7%
    --  Free cash flow(1) totaled NIS 84 million ($24 million) compared to NIS
        66 million ($19 million) in the first quarter last year, an increase of
        27.3%

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

    [2]             Net cash flow from operating
                    activities for the first
                    quarter of 2017, included a
                    loan in an amount of NIS
                    130 million, which was
                    provided to Golan Telecom
                    according to the terms of
                    the Network Sharing
                    Agreement with Golan.

Nir Sztern, the Company's Chief Executive Officer, referred to the results of the first quarter of 2018:

"The strong growth trend of the fixed line segment also continued in this quarter. Fixed line segment revenues grew by approximately 9% compared to the first quarter of 2017 and the EBITDA from this segment reached NIS 68 million (61.9% growth from the same quarter last year).

We continued to broaden our TV services, adding 14,000 new subscribers to our service in the first quarter of 2018.

Alongside the continued competition in the cellular segment, we continued to recruit new customers, among others, through a quatro package that offers cellular, television, internet and fixed line home telephony.

Cellcom Israel is the only Company in Israel that offers a quatro package. This advantage allows us to face the competition in the cellular segment, such that even as cellular prices decrease, we are successful in selling a complete communications package, and through this we increase total income per household. In the cellular segment, we finished the first quarter with an addition of 5,000 subscribers, all post-paid subscribers.

In this quarter also, we continued to lay down our fiber-optic infrastructure to the home, in order to make "Super Fiber", our fast and quality internet service, accessible to households, as part of our quatro, triple and bundle offerings.

Further, we continued to advance a possible investment in Israel Broadband Company (IBC) and after we issued a non-binding letter of intent and reached understanding with the Israeli Electric Company (IEC) regarding an update of IEC's services prices to IBC, if we invest in IBC, we conduct negotiations with IBC and its shareholders for investing in IBC. In the last few days, the Ministry of Communications published a hearing as to the reduction of the universal deployment to which IBC is bound by its license, the approval of which shall assist in advancing the negotiations among the parties.

We recently have been informed that, once again, the IDF (the Israeli Defense Forces) selected Cellcom Israel Group to be the cellular operator for the IDF soldiers for the coming three years. This win reflects, once again, the significant trust in Cellcom Israel's network as well as our high level of service, and we are very proud of it.

We continue to act in order to reduce the Company's expenses and examine various ways to become more efficient, in order to cope with the price erosion in the cellular segment. A few days ago we announced the launch of a voluntary retirement plan that will be another layer of streamlining the Company's expenses."

Shlomi Fruhling, Chief Financial Officer, said:

"During the first quarter of 2018 the erosion in revenues from cellular services continued as a result of the intensified competition in the market, as well as due to the change in the classification of the consideration from Golan as of the coming into force of the sharing agreement with Golan in the second quarter of 2017, compared to national roaming revenues in the same quarter last year. Despite the continued competition, we experienced a decrease in the churn rate of cellular subscribers as compared with the previous quarter and the same quarter last year. After the end of the quarter, Xfone launched its services as the 6th Mobile Network operator (MNO) in Israel, and since its entrance, we are experiencing an additional increase in the competition level in the market, reflected in an increased amount of transfers among the operators and a decrease in the pricing level in the market. The continuation of this trend is expected to negatively impact the Company's cellular segment results.

Our subscriber base in the TV and internet services continued to grow during the quarter, with most of the subscribers joining these services as part of our triple and quatro offering. Fixed line segment revenues grew by approximately 9% compared with the same quarter last year due to the continued growth in subscriber base and the classification of part of the consideration from the sharing agreement with Golan to the fixed line segment.

The free cash flow in the first quarter of 2018 reached NIS 84 million, a 27.3% increase compared to the same period last year. The increase in the free cash flow was mainly due to a reduction in payments to suppliers and was partially offset by a decrease in receipts from customers for services and end user equipment.

The Board of Directors decided not to distribute a dividend for the first quarter of 2018, in light of the intense competition in the market and its negative impact on the Company's results of operations and in order to continue to strengthen the Company's balance sheet. The board will review its decision in the future, taking into consideration developments in market conditions and the Company's needs."

Cellcom Israel Ltd. (NYSE: CEL) (TASE: CEL) ("Cellcom Israel" or the "Company" or the "Group") announced today its financial results for the first quarter of 2018.
The Company reported that revenues for the first quarter of 2018 totaled NIS 933 million ($265 million); EBITDA for the first quarter of 2018 totaled NIS 180 million ($51 million), or 19.3% of total revenues; net income for the first quarter of 2018 totaled NIS 7 million ($2 million). Basic earnings per share for the first quarter of 2018 totaled NIS 0.08 ($0.02).

Main Consolidated Financial Results:


                                                   Q1/2018           Q1/2017  Change %   Q1/2018     Q1/2017
                                                   -------           -------   -------    -------     -------

                                         NIS million       US$ million
                                                           (convenience
                                                            translation)
                                                              ------------

    Total revenues                                     933                959     (2.7)%        265          273
    --------------                                     ---                ---      -----         ---          ---

    Operating Income                                    45                 67    (32.8)%         13           19
    ----------------                                   ---                ---     ------         ---          ---

    Net Income                                           7                 26    (73.1)%          2            7
    ----------                                         ---                ---     ------         ---          ---

    Free cash flow                                      84                 66      27.3%         24           19
    --------------                                     ---                ---       ----         ---          ---

    EBITDA                                             180                201    (10.4)%         51           57
    ------                                             ---                ---     ------         ---          ---

    EBITDA, as percent of total revenues             19.3%             21.0%    (8.1)%
    ====================================              ====               ====      =====

Main Financial Data by Operating Segments:



                                                                Cellular (*)        Fixed-line (**)           Consolidation
                                                                                                               adjustments         Consolidated results

                                                                                                                   (***)
                                                                                                  ===

    NIS million                                             Q1'18                 Q1'17                          Change            Q1'18                  Q1'17                          Change            Q1'18          Q1'17    Q1'18         Q1'17               Change

                                                                                                                     %                                                                       %                                                                          %
                                                                                                  ---                                                                     ---

    Total revenues                                                          630                    692                      (9.0)%                    343                    316                        8.5%           (40)     (49)           933           959                  (2.7)%
    --------------                                                          ---                    ---                       -----                     ---                    ---                         ---             ---       ---            ---           ---                   -----

    Service revenues                                                        437                    509                     (14.1)%                    304                    279                        9.0%           (40)     (49)           701           739                  (5.1)%
    ----------------                                                        ---                    ---                      ------                     ---                    ---                         ---             ---       ---            ---           ---                   -----

    Equipment revenues                                                      193                    183                        5.5%                     39                     37                        5.4%              -        -           232           220                    5.5%
    ------------------                                                      ---                    ---                         ---                     ---                    ---                         ---             ---      ---           ---           ---                     ---

    EBITDA                                                                  112                    159                     (29.6)%                     68                     42                       61.9%              -        -           180           201                 (10.4)%
    ------                                                                  ---                    ---                      ------                     ---                    ---                        ----             ---      ---           ---           ---                  ------

    EBITDA, as percent of                                                 17.8%                 23.0%                    (22.6)%                  19.8%                 13.3%                      48.9%                                 19.3%         21.0%                (8.1)%
      total revenues
      ==============

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

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

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

Financial Review (first quarter of 2018 compared to first quarter of 2017):

Revenues for the first quarter of 2018 decreased 2.7% totaling NIS 933 million ($265 million), compared to NIS 959 million ($273 million) in the first quarter last year. The decrease in revenues is attributed to a 5.1% decrease in service revenues, which was partially offset by a 5.5% increase in equipment revenues.

Service revenues totaled NIS 701 million ($199 million) in the first quarter of 2018, a 5.1% decrease compared to NIS 739 million ($210 million) in the first quarter last year.

Service revenues in the cellular segment totaled NIS 437 million ($124 million) in the first quarter of 2018, a 14.1% decrease compared to NIS 509 million ($145 million) in the first quarter last year. This decrease resulted mainly from the ongoing erosion in the price of these services as a result of the competition in the cellular market and from the difference between the national roaming services revenues in the first quarter of 2017 and the revenues for rights of use in cellular networks according to the network sharing agreement with Golan Telecom Ltd. ("Golan", the "Network Sharing Agreement with Golan")(3), which came into force as of the beginning of the second quarter of 2017.

Service revenues in the fixed-line segment totaled NIS 304 million ($87 million) in the first quarter of 2018, a 9.0% increase compared to NIS 279 million ($79 million) in the first quarter last year. This increase resulted mainly from fixed-line communications services provided according to the Network Sharing Agreement with Golan, as well as from an increase in revenues from TV and internet services.

Equipment revenues totaled NIS 232 million ($66 million) in the first quarter of 2018, a 5.5% increase compared to NIS 220 million ($63 million) in the first quarter last year. This increase resulted mainly from an increase in the amount of end user equipment sold in the cellular segment.

Cost of revenues for the first quarter of 2018 were similar to the first quarter of 2017 and totaled NIS 665 million ($189 million). In the first quarter of 2018, there was an increase in cost of equipment, which resulted mainly from an increase in the quantity of end user equipment sold in the cellular segment and an increase in costs of TV services content and in costs related to internet services in the fixed-line segment, which were fully offset, mainly from Golan's participation in operating costs according to the Network Sharing Agreement with Golan, a decrease in depreciation expenses and a decrease in costs of extended warranty services for end user equipment.

Gross profit for the first quarter of 2018 totaled NIS 268 million ($76 million), an 8.8% decrease compared to NIS 294 million ($84 million) in the first quarter of 2017. Gross profit margin for the first quarter of 2018 amounted to 28.7%, down from 30.7% in the first quarter of 2017.

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

Selling, Marketing, General and Administrative Expenses ("SG&A Expenses") for the first quarter of 2018 decreased 1.8% to NIS 223 million ($63 million), compared to NIS 227 million ($65 million) in the first quarter of 2017. This decrease is primarily a result of a decrease in doubtful accounts expenses. This decrease was partially offset by an increase in amortization expenses of salaries and commissions expenses which were capitalized as part of the customer acquisition costs, as a result of early adoption of a new International Financial Reporting Standard (IFRS 15) as of the first quarter of 2017 (the "Adoption of IFRS15").

Operating income for the first quarter of 2018 decreased by 32.8% to NIS 45 million ($13 million) from NIS 67 million ($19 million) in the first quarter of 2017.

EBITDA for the first quarter of 2018 decreased by 10.4% to NIS 180 million ($51 million), compared to NIS 201 million ($57 million) in the first quarter of 2017. EBITDA as a percent of revenues for the first quarter of 2018 totaled 19.3%, down from 21.0% in the first quarter of 2017. The decrease in EBITDA is attributed to a 29.6% decrease in the cellular segment EBITDA, which was partially offset by a 61.9% increase in the fixed line segment EBITDA.

Cellular segment EBITDA for the first quarter of 2018 totaled NIS 112 million ($32 million), compared to NIS 159 million ($45 million) in the first quarter last year, a decrease of 29.6%, which resulted mainly from a decrease in service revenues as mentioned above, and from the difference between national roaming services revenues in the first quarter of 2017 and the revenues for rights of use in cellular networks according to the Network Sharing Agreement with Golan in the first quarter of 2018.

Fixed-line segment EBITDA for the first quarter of 2018 totaled NIS 68 million ($19 million), compared to NIS 42 million ($12 million) in the first quarter last year, a 61.9% increase, mainly as a result of an increase in revenues from fixed-line communications services provided according to the Network Sharing Agreement with Golan, and from an increase in activity in the internet and TV fields.

Financing expenses, net for the first quarter of 2018 increased by 6.5% and totaled NIS 33 million ($10 million), compared to NIS 31 million ($9 million) in the first quarter of 2017.

Net Income for the first quarter of 2018 totaled NIS 7 million ($2 million), compared to NIS 26 million ($7 million) in the first quarter of 2017, a 73.1% decrease.

Basic earnings per share for the first quarter of 2018 totaled NIS 0.08 ($0.02), compared to NIS 0.25 ($0.07) in the first quarter last year.

Operating Review

Main Performance Indicators - Cellular segment:


                                    Q1/2018 Q1/2017  Change (%)
                                    ------- -------  ---------

    Cellular subscribers at the end
     of period (in thousands)         2,822    2,792                  1.1%
    -------------------------------   -----    -----                   ---

    Churn Rate for cellular
     subscribers (in %)               9.5%   12.0%              (20.8)%
    -----------------------             ---     ----                ------

    Monthly cellular ARPU (in NIS)     51.8     60.2               (14.0)%
    -----------------------------      ----     ----                ------

Cellular subscriber base - at the end of the first quarter of 2018 the Company had approximately 2.822 million cellular subscribers. During the first quarter of 2018 the Company's cellular subscriber base increased by approximately 5,000 net cellular subscribers.

Cellular Churn Rate for the first quarter of 2018 totaled to 9.5%, compared to 12.0% in the first quarter last year.

The monthly cellular Average Revenue per User ("ARPU") for the first quarter of 2018 totaled NIS 51.8 ($14.7), compared to NIS 60.2 ($17.1) in the first quarter last year. The decrease in ARPU resulted mainly from the ongoing erosion in the prices of cellular services, resulting from the intensified competition in the cellular market and from the difference between national roaming services revenues in the first quarter of 2017 and the revenues for rights of use in cellular networks according to the Network Sharing Agreement with Golan in the first quarter of 2018.

Main Performance Indicators - Fixed-line segment:


                                            Q1/2018 Q1/2017  Change (%)
                                            ------- -------  ---------

    Internet infrastructure field
     subscribers                                235      173            35.8%
    -(households) at the end of period  (in
     thousands)
    ---------------------------------------

    TV field subscribers - (households) at
     the                                        184      124            48.4%
    end of period  (in thousands)
    ============================

In the first quarter of 2018, the Company's subscriber base in the internet infrastructure field increased by approximately 13,000 net households, and the Company's subscriber base in the TV field increased by 14,000 net households.

Financing and Investment Review

The Company's liquidity requirements relate primarily to working capital requirements, debt service, capital expenditures for the expansion and enhancement of its networks, end user equipment and payment of dividends, to the extent declared. The Company has historically funded these requirements through cash flows from operations and raising new debt. Going forward, the Company may also seek to fund these requirements through issuances of equity securities, including ordinary shares.

Cash Flow

Free cash flow for the first quarter of 2018, totaled NIS 84 million ($24 million), compared to NIS 66 million ($19 million) in the first quarter of 2017 (after elimination of a loan provided to Golan Telecom in the amount of NIS 130 million, as previously reported), a 27.3% increase. The increase in free cash flow, resulted mainly from decrease in payments to suppliers and was partially offset by a decrease in receipts from customers for services and end user equipment.

Total Equity

Total Equity as of March 31, 2018 amounted to NIS 1,414 million ($402 million) primarily consisting of undistributed accumulated retained earnings of the Company.

Cash Capital Expenditures in Fixed Assets and Intangible Assets and others

During the first quarter of 2018, the Company invested NIS 146 million ($42 million) in fixed assets and intangible assets and others (including, among others, investments in the Company's communications networks, information systems, software and TV set-top boxes and capitalization of part of the customer acquisition costs as a result of the adoption of IFRS 15), compared to NIS 140 million ($40 million) in the first quarter 2017.

Dividend

On May 29, 2018, the Company's Board of Directors decided not to declare a cash dividend for the first quarter of 2018. In making its decision, the board of directors considered the Company's dividend policy and business status and decided not to distribute a dividend at this time, given the intensified competition and its adverse effect on the Company's results of operations, and in order to strengthen the Company's balance sheet. The board of directors will re-evaluate its decision in future quarters. No future dividend declaration is guaranteed and is subject to the Company's board of directors' sole discretion, as detailed in the Company's annual report for the year ended December 31, 2017 on Form 20-F dated March 26, 2018, or the 2017 Annual Report, under "Item 8 - Financial Information - A. Consolidated Statements and Other Financial Information - Dividend Policy".

Debentures, Material Loans and Financial Liabilities

For information regarding the Company's outstanding debentures as of March 31, 2018, see "Disclosure for Debenture Holders" section in this press release.

For information regarding the Company's material loans as of March 31, 2018, 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 March 31, 2018, see "Disclosure for Debenture Holders" section in this press release.

Other developments during the first quarter of 2018 and subsequent to the end of the reporting period

Network Sharing Agreement

In April 2018, Marathon 018 Xfone Ltd., with which the Company entered a network sharing agreement, commenced operating in the Israeli cellular market.

For additional details, see the Company's 2017 Annual Report under "Item 3. Key Information - D. Risk Factors - Risks Related to our Business - We face intense competition in all aspects of our business" and "Item 4. Information on the Company - B. Business Overview - Networks and Infrastructure - Cellular Segment- Network Sharing Agreements" and "- Competition - Cellular Segment".

Negotiations regarding Collective Employment Agreement and Voluntary Retirement Plan

The Company is in advanced stages of negotiations with its employees' representatives and the Histadrut (an Israeli union labor) regarding a new collective employment agreement, which the Company anticipates will be similar to the Company's previous collective employment agreement (which expired at the end of 2017) and will include certain nonmaterial additions.

In addition, in May 2018, the Group, in collaboration with the employees representatives, launched a new voluntary retirement plan for employees. As of the date of this report, the number of employees who will join the plan and the expense the Company will record with respect to this plan, are unknown.

For additional details including regarding the Company's previous collective employment agreement see the Company's 2017 Annual Report under "Item 3. Key Information - D. Risk Factors - Risks Related to our Business - The unionizing of our employees may prevent us from executing necessary organizational and personnel changes, result in increased costs or disruption to our operation" and "Item 6. Directors, senior management and employees - D. Employees."

Regulation

In May 2018, the Ministry of Communications amended the Group's licenses to regulate the manner of response of call centers, including measurable parameters for response times. The amendment shall come into force in March 2019. The Company is studying the amendment and at this stage cannot estimate the amendment's effect on its results of operations.

For additional details see the Company's 2017 Annual Report under "Item 3. Key Information - D. Risk Factors - Risks Related to our Business - We operate in a heavily regulated industry, which can harm our results of operations. Regulation in Israel has materially adversely affected our results" and under "Item 4. Information on The Company - B. Business Overview - Government Regulations - Cellular Segment - Our Cellular License."

Conference Call Details

The Company will be hosting a conference call regarding its results for the first quarter of 2018 on Wednesday, May 30, 2018 at 10:00 am ET, 07:00 am PT, 15:00 UK time, 17:00 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 0644     International Dial-in Number:
                                            +972 3 918 0644

    at: 10:00 am Eastern Time; 07:00 am Pacific Time; 15:00 UK Time;
     17:00 Israel Time

To access the live webcast of the conference call, please access the investor relations section of Cellcom Israel's website: www.cellcom.co.il. After the call, a replay of the call will be available under the same investor relations section.

About Cellcom Israel

Cellcom Israel Ltd., established in 1994, is a leading Israeli communications group, providing a wide range of communications services. Cellcom Israel is the largest Israeli cellular provider, providing its approximately 2.822 million cellular subscribers (as at March 31, 2018) with a broad range of services including cellular telephony, roaming services for tourists in Israel and for its subscribers abroad, text and multimedia messaging, advanced cellular content and data services and other value-added services in the areas of music, video, mobile office etc., based on Cellcom Israel's technologically advanced infrastructure. The Company operates an LTE 4 generation network and an HSPA 3.5 Generation network enabling advanced high speed broadband multimedia services, in addition to GSM/GPRS/EDGE networks. Cellcom Israel offers Israel's broadest and largest customer service infrastructure including telephone customer service centers, retail stores, and service and sale centers, distributed nationwide. Cellcom Israel further provides OTT TV services (as of December 2014), internet infrastructure (as of February 2015) and connectivity services and international calling services, as well as landline telephone services in Israel. Cellcom Israel's shares are traded both on the New York Stock Exchange (CEL) and the Tel Aviv Stock Exchange (CEL). For additional information please visit the Company's website http://investors.cellcom.co.il.

Forward-Looking Statements

The following information contains, or may be deemed to contain forward-looking statements (as defined in the U.S. Private Securities Litigation Reform Act of 1995 and the Israeli Securities Law, 1968). In some cases, you can identify these statements by forward-looking words such as "may," "might," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential" or "continue," the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to risks, uncertainties and assumptions about the Company, may include projections of the Company's future financial results, its anticipated growth strategies and anticipated trends in its business. These statements are only predictions based on the Company's current expectations and projections about future events. There are important factors that could cause the Company's actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. Factors that could cause such differences include, but are not limited to: changes to the terms of the Company's license, new legislation or decisions by the regulator affecting the Company's operations, new competition and changes in the competitive environment, the outcome of legal proceedings to which the Company is a party, particularly class action lawsuits, the Company's ability to maintain or obtain permits to construct and operate cell sites, and other risks and uncertainties detailed from time to time in the Company's filings with the U.S. Securities and Exchange Commission, including under the caption "Risk Factors" in its Annual Report for the year ended December 31, 2017.

Although the Company believes the expectations reflected in the forward-looking statements contained herein are reasonable, it cannot guarantee future results, level of activity, performance or achievements. Moreover, neither the Company nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. The Company assumes no duty to update any of these forward-looking statements after the date hereof to conform its prior statements to actual results or revised expectations, except as otherwise required by law.

The Company prepares its financial statements in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB). Unless noted specifically otherwise, the dollar denominated figures were converted to US$ using a convenience translation based on the New Israeli Shekel (NIS)/US$ exchange rate of NIS 3.514 = US$ 1 as published by the Bank of Israel for March 31, 2018.

Use of non-IFRS financial measures

EBITDA is a non-IFRS measure and is defined as income before financing income (expenses), net; other income (expenses), net (excluding expenses related to employee voluntary retirement plans and gain (loss) due to sale of subsidiaries); income tax; depreciation and amortization and share based payments. This is an accepted measure in the communications industry. The Company presents this measure as an additional performance measure as the Company believes that it enables us to compare operating performance between periods and companies, net of any potential differences which may result from differences in capital structure, taxes, age of fixed assets and related depreciation expenses. EBITDA should not be considered in isolation, or as a substitute for operating income, any other performance measures, or cash flow data, which were prepared in accordance with Generally Accepted Accounting Principles as measures of profitability or liquidity. EBITDA does not take into account debt service requirements, or other commitments, including capital expenditures, and therefore, does not necessarily indicate the amounts that may be available for the Company's use. In addition, EBITDA as presented by the Company may not be comparable to similarly titled measures reported by other companies, due to differences in the way these measures are calculated. See the reconciliation of net income to EBITDA under "Reconciliation of Non-IFRS Measures" in the press release.

Free cash flow is a non-IFRS measure and is defined as the net cash provided by operating activities (including the effect of exchange rate fluctuations on cash and cash equivalents) excluding a loan to Golan Telecom, minus the net cash used in investing activities excluding short-term investment in tradable debentures and deposits and proceeds from sales of such debentures (including interest received in relation to such debentures) and deposits. See "Reconciliation of Non-IFRS Measures" below.


    Company Contact         Investor Relations Contact

    Shlomi Fruhling         Ehud Helft

    Chief Financial Officer GK Investor & Public Relations

    investors@cellcom.co.il cellcom@GKIR.com

    Tel: +972-52-998-9735   Tel: +1-617-418-3096
    ---------------------   --------------------

Financial Tables Follow


                                                                                   Cellcom Israel Ltd.

                                                                                (An Israeli Corporation)



    Condensed Consolidated Interim Statements of Financial Position (Unaudited)
    --------------------------------------------------------------------------



                                                                                                            Convenience

                                                                                                            translation

                                                                                                         into US dollar

                                                                     March 31,               March 31,        March 31,   December 31,

                                                                          2017                     2018              2018            2017
                                                                          ----                     ----              ----            ----

                                                          NIS millions                    US$ millions     NIS millions
                                                          ------------                    ------------     ------------


    Assets

    Cash and cash equivalents                                              589                      593               169             527

    Current investments,
     including derivatives                                                 283                      361               103             364

    Trade receivables                                                    1,293                    1,276               363           1,280

    Current tax assets                                                      47                        3                 1               4

    Other receivables                                                       71                       82                23              89

    Inventory                                                               67                       69                19              70
                                                                           ---                      ---               ---             ---


    Total current assets                                                 2,350                    2,384               678           2,334
                                                                         -----                    -----               ---           -----


    Trade and other receivables                                            914                      881               251             895

    Property, plant and
     equipment, net                                                      1,628                    1,588               452           1,598

    Intangible assets and
     others, net                                                         1,230                    1,271               362           1,260

    Deferred tax assets                                                      1                        1                 -              -
                                                                           ---                      ---               ---            ---


    Total non- current assets                                            3,773                    3,741             1,065           3,753
                                                                         -----                    -----             -----           -----


    Total assets                                                         6,123                    6,125             1,743           6,087
                                                                         =====                    =====             =====           =====


    Liabilities

    Current maturities of
     debentures and of loans
     from financial
     institutions                                                          709                      565               161             618

    Trade payables and accrued
     expenses                                                              639                      674               192             652

    Current tax liabilities                                                  1                        -                -              4

    Provisions                                                             101                       94                27              91

    Other payables, including
     derivatives                                                           243                      255                72             277
                                                                           ---                      ---               ---             ---


    Total current liabilities                                            1,693                    1,588               452           1,642
                                                                         -----                    -----               ---           -----



    Long-term loans from
     financial institutions                                                340                      462               132             462

    Debentures                                                           2,511                    2,487               708           2,360

    Provisions                                                              30                       21                 6              21

    Other long-term liabilities                                             33                       18                 5              15

    Liability for employee
     rights upon retirement,
     net                                                                    12                       15                 4              15

    Deferred tax liabilities                                               137                      120                34             131
                                                                           ---                      ---               ---             ---


    Total non- current
     liabilities                                                         3,063                    3,123               889           3,004
                                                                         -----                    -----               ---           -----


    Total liabilities                                                    4,756                    4,711             1,341           4,646
                                                                         -----                    -----             -----           -----


    Equity attributable to
     owners of the Company

    Share capital                                                            1                        1                 -              1

    Cash flow hedge reserve                                                (1)                       -                -              -

    Retained earnings                                                    1,348                    1,409               401           1,436


    Non-controlling interest                                                19                        4                 1               4
                                                                           ---                      ---               ---             ---


    Total equity                                                         1,367                    1,414               402           1,441
                                                                         -----                    -----               ---           -----


    Total liabilities and
     equity                                                              6,123                    6,125             1,743           6,087
                                                                         =====                    =====             =====           =====


                                                                       Cellcom Israel Ltd.

                                                                    (An Israeli Corporation)


    Condensed Consolidated Interim Statements of Income (Unaudited)
    --------------------------------------------------------------


                                                                                                              Convenience

                                                                                                              translation

                                                                                                           into US dollar

                                                                      Three-month            Three- month      Year ended

                                                                      period ended           period ended
                                                                                                             December 31,
                                                                        March 31,               March 31,
                                                                       ---------

                                                                                       2017           2018             2018        2017
                                                                                       ----           ----             ----        ----

                                                                     NIS millions            US$ millions    NIS millions
                                                                     ------------            ------------    ------------


    Revenues                                                                            959            933              265       3,871

    Cost of revenues                                                                  (665)         (665)           (189)    (2,680)
                                                                                       ----           ----             ----      ------


    Gross profit                                                                        294            268               76       1,191


    Selling and marketing expenses                                                    (114)         (132)            (37)      (479)

    General and administrative expenses                                               (113)          (91)            (26)      (426)

    Other income, net                                                                     -             -               -         11
                                                                                        ---           ---             ---        ---


    Operating profit                                                                     67             45               13         297


    Financing income                                                                     16             11                3          52

    Financing expenses                                                                 (47)          (44)            (13)      (196)
                                                                                        ---            ---              ---        ----

    Financing expenses, net                                                            (31)          (33)            (10)      (144)


    Profit before taxes on income                                                        36             12                3         153


    Taxes on income                                                                    (10)           (5)             (1)       (40)
                                                                                        ---            ---              ---         ---

    Profit for the period                                                                26              7                2         113
                                                                                        ===            ===              ===         ===

    Attributable to:

    Owners of the Company                                                                25              7                2         112

    Non-controlling interests                                                             1              -               -          1

    Profit for the period                                                                26              7                2         113
                                                                                        ===            ===              ===         ===


    Earnings per share

    Basic earnings per share (in NIS)                                                  0.25           0.08             0.02        1.11
                                                                                       ====           ====             ====        ====


    Diluted earnings per share (in NIS)                                                0.25           0.08             0.02        1.10
                                                                                       ====           ====             ====        ====


    Weighted-average number of shares used in the calculation of                100,604,795    101,044,557      101,044,557 100,654,935
     basic earnings per share (in shares)



    Weighted-average number of shares used in the calculation of                101,390,301    101,141,836      101,141,836 100,889,661
     diluted earnings per share (in shares)



                                                                          Cellcom Israel Ltd.

                                                                        (An Israeli Corporation)


    Condensed Consolidated Interim Statements of Cash Flows (Unaudited)
    ------------------------------------------------------------------



                                                                                                                    Convenience

                                                                                                                    translation

                                                                                                                 into US dollar

                                                                          Three-month               Three- month                  Year ended


                                                                          period ended              period ended                December 31,

                                                                                                       March 31,
                                                                           March 31,
                                                                           ---------


                                                                                    2017           2018                      2018                2017
                                                                                    ----           ----                      ----                ----

                                                                          NIS millions              US$ millions                NIS millions
                                                                          ------------              ------------                ------------


    Cash flows from operating activities

    Profit for the period                                                             26              7                         2                 113

    Adjustments for:

    Depreciation and amortization                                                    133            133                        38                 555

    Share based payments                                                               1              2                         -                  2

    Gain on sale of property, plant and equipment                                      -             -                        -                (1)

    Gain on sale of shares in a consolidated                                           -             -                        -               (10)
    company

    Income tax expense                                                                10              5                         1                  40

    Financing expenses, net                                                           31             33                        10                 144


    Changes in operating assets and liabilities:

    Change in inventory                                                              (3)             1                         -                (6)

    Change in trade receivables (including long-term amounts)                         60             15                         5                 132

    Change in other receivables (including long-term amounts)                      (152)             9                         3               (191)

    Change in trade payables, accrued expenses and provisions                       (11)            31                         8                (27)

    Change in other liabilities (including long-term amounts)                        (6)             5                         1                  28

    Payments for derivative hedging contracts, net                                     -           (2)                        -                (3)

    Income tax paid                                                                 (12)           (9)                      (3)               (44)

    Income tax received                                                                -             -                        -                 42
                                                                                     ---           ---                      ---                ---

    Net cash from operating activities                                                77            230                        65                 774
                                                                                     ---            ---                       ---                 ---


    Cash flows from investing activities

    Acquisition of property, plant, and equipment                                   (93)          (99)                     (28)              (346)

    Additions to intangible assets and others                                       (47)          (47)                     (13)              (237)

    Change in current investments, net                                                 1            (1)                        -               (77)

    Payments for other derivative contracts, net                                     (1)             -                        -                  -

    Proceeds from sale of property, plant and equipment                                -             -                        -                  1

    Interest received                                                                  4              4                         1                  12

    Proceeds from sale of shares in a consolidated                                     -             -                        -                  3
    company, net of cash disposed

    Net cash used in investing activities                                          (136)         (143)                     (40)              (644)
                                                                                    ----           ----                       ---                ----


                                                                                   Cellcom Israel Ltd.

                                                                                 (An Israeli Corporation)


    Condensed Consolidated Interim Statements of Cash Flows (Unaudited) (cont`d)
    ---------------------------------------------------------------------------



                                                                                                              Convenience

                                                                                                              translation

                                                                                                           into US dollar

                                                      Three-month                             Three- month                  Year ended

                                                                                              period ended
                                                      period ended                                                        December 31,
                                                                                                 March 31,

                                                       March 31,
                                                       ---------


                                                                 2017                        2018                      2018                2017
                                                                 ----                        ----                      ----                ----

                                                      NIS millions                            US$ millions                NIS millions
                                                      ------------                            ------------                ------------


    Cash flows from financing
     activities

    Payments for derivative
     contracts, net                                                 -                          -                        -                (3)

    Receipt of long-term loans
     from financial
     institutions                                                   -                          -                        -                200

    Repayment of debentures                                     (514)                      (362)                    (103)              (864)

    Proceeds from issuance of
     debentures, net of
     issuance costs                                                 -                        396                       113                   -

    Dividend paid                                                   -                          -                        -                (1)

    Interest paid                                                (78)                       (55)                     (16)              (175)
                                                                  ---                         ---                       ---                ----


    Net cash used in financing
     activities                                                 (592)                       (21)                      (6)              (843)
                                                                 ----                         ---                       ---                ----


    Changes in cash and cash
     equivalents                                                (651)                         66                        19               (713)


    Cash and cash equivalents
     as at the beginning of the
     period                                                     1,240                         527                       150               1,240
                                                                -----                         ---                       ---               -----


    Cash and cash equivalents
     as at the end of the
     period                                                       589                         593                       169                 527
                                                                  ===                         ===                       ===                 ===


                                        Cellcom Israel Ltd.

                                      (An Israeli Corporation)


    Reconciliation for Non-IFRS Measures
    ------------------------------------



    EBITDA


    The following is a reconciliation of net income to EBITDA:



                                         Three-month period ended            Year ended

                        March 31,                                 December 31,
                        ---------                                 ------------

                                            2017       2018             Convenience                     2017
                                            ----       ----                                             ----

               translation

              into US dollar
              --------------

                                 2018
                                 ----

                                          NIS millions             US$ millions             NIS millions
                                          ------------             ------------             ------------

    Profit for the
     period                                   26          7                                 2             113

    Taxes on income                           10          5                                 1              40

    Financing income                        (16)      (11)                              (3)           (52)

    Financing expenses                        47         44                                13             196

    Other income                               -         -                                -            (1)

    Depreciation and
     amortization                            133        133                                38             555

    Share based
     payments                                  1          2                                 -              2
                                             ---        ---                               ---            ---

    EBITDA                                   201        180                                51             853
                                             ===        ===                               ===             ===


    Free cash flow


    The following table shows the calculation of free cash flow:


                                       Three-month period ended                 Year ended

                            March 31,                                         December 31,
                            ---------                                         ------------

                                               2017            2018                 Convenience           2017
                                               ----            ----                                       ----

                     translation

                   into US dollar
                   --------------

                                            2018
                                            ----

                                       NIS millions   US$ millions               NIS millions
                                       ------------   ------------               ------------

    Cash flows from
     operating
     activities(*)                               77             230                                 65      774

    Loan to Golan
     Telecom                                    130               -                                 -     130

    Cash flows from
     investing
     activities                               (136)          (143)                              (40)   (644)

    Sale of short-
     term tradable
     debentures and
     deposits (**)                              (5)            (3)                               (1)      65
                                                ---             ---                                ---      ---

    Free cash flow                               66              84                                 24      325
                                                ===             ===                                ===      ===



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

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


                                                                   Cellcom Israel Ltd.

                                                                 (An Israeli Corporation)


    Key financial and operating indicators
    --------------------------------------


    NIS millions
     unless otherwise
     stated                                Q1-2017        Q2-2017                 Q3-2017          Q4-2017           Q1-2018           FY-2017
    -----------------                      -------        -------                 -------          -------           -------           -------


    Cellular service
     revenues                                         509             481                      488               451               437               1,929

    Fixed-line
     service revenues                                 279             292                      292               303               304               1,166


    Cellular equipment
     revenues                                         183             192                      191               204               193                 770

    Fixed-line
     equipment
     revenues                                          37              39                       47                59                39                 182


    Consolidation
     adjustments                                     (49)           (42)                    (43)             (42)             (40)              (176)
    -------------                                     ---             ---                      ---               ---               ---                ----

    Total revenues                                    959             962                      975               975               933               3,871


    Cellular EBITDA                                   159             158                      160               118               112                 595

    Fixed-line EBITDA                                  42              79                       66                71                68                 258
    -----------------                                 ---             ---                      ---               ---               ---                 ---

    Total EBITDA                                      201             237                      226               189               180                 853


    Operating profit                                   67             102                       83                45                45                 297

    Financing
     expenses, net                                     31              44                       39                30                33                 144

    Profit for the
     period                                            26              45                       32                10                 7                 113


    Free cash flow                                     66              77                      105                77                84                 325


    Cellular
     subscribers at
     the end of period
     (in 000's)                                     2,792           2,779                    2,805             2,817             2,822               2,817

    Monthly cellular
     ARPU (in NIS)                                   60.2            57.0                     57.8              53.6              51.8                57.1

    Churn rate for
     cellular
     subscribers (%)                               12.0%          10.8%                   11.5%            11.5%             9.5%              45.8%


                                                                                                                                                                            Cellcom Israel Ltd.


    Disclosure for debenture holders as of March 31, 2018
    -----------------------------------------------------


    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   As of 31.03.2018                                               As of 29.05.2018                        Interest Rate (fixed)       Principal Repayment
                                                                                                                                        Issuance                                                                                                                                                                Dates             Interest Repayment Dates(3)    Linkage                 Trustee
                                                                                                                                                                                                                                                                                                                                                                             Contact Details
    ---                                                                                                                                                                                                                                                                                                                                                                  ---   ---------------

    Principal                                                                                                                                          Debenture Balance   Value in
     Balance on                                                                                                                                                       Books (2)
     Trade                                                                                                  Linked Principal Balance   Interest Accumulated in Books                                 Market Value            Principal Balance on Trade   Linked Principal Balance   From                       To

    F(4)(5)(6)**                                                                                                              20/03/12      714.802         428.881         438.142            4.688        442.830     467.995         428.881         441.150                       4.60%   05.01.17                   05.01.20           January-5 and July-5         Linked to CPI             Strauss Lazar Trust Company (1992)
                                                                                                                                                                                                                                                                                                                                                                                         Ltd. Ori Lazar. 17 Yizhak Sadeh St.,
                                                                                                                                                                                                                                                                                                                                                                                         Tel Aviv. Tel: 03- 6237777.

    G (4)(5)(6)                                                                                                               20/03/12      285.198          85.559          85.593            1.393         86.986      90.984          85.559          85.588                       6.99%   05.01.17                   05.01.19           January-5 and July-5         Not linked                Strauss Lazar Trust Company (1992)
                                                                                                                                                                                                                                                                                                                                                                                         Ltd. Ori Lazar. 17 Yizhak Sadeh St.,
                                                                                                                                                                                                                                                                                                                                                                                         Tel Aviv. Tel: 03- 6237777.

    H(4)(5)(7)**                                                                                                              08/07/14      949.624         949.624         874.140            4.379        878.519     988.463         949.624         877.565                       1.98%   05.07.18                   05.07.24           January-5 and July-5         Linked to CPI             Mishmeret Trust Company Ltd. Rami
                                                                                                            03/02/15*                                                                                                                                                                                                                                                                      Sebty. 48 Menachem Begin Rd. Tel
                                                                                                            11/02/15*                                                                                                                                                                                                                                                                      Aviv. Tel: 03-6374355.

    I (4)(5)(7)**                                                                                                             08/07/14      804.010         804.010         776.532            7.752        784.284     882.803         804.010         777.590                       4.14%   05.07.18                   05.07.25           January-5 and July-5         Not linked                Mishmeret Trust Company Ltd. Rami
                                                                                                            03/02/15*                                                                                                                                                                                                                                                                      Sebty. 48 Menachem Begin Rd. Tel
                                                                                                            11/02/15*                                                                                                                                                                                                                                                                      Aviv. Tel: 03-6374355.
                                                                                                            30/03/16*

    J (4)(5)                                                                                                                  26/09/16      103.267         103.267         102.391            0.589        102.980     111.332         103.267         102.820                       2.45%   05.07.21                   05.07.26           January-5 and July-5         Linked to CPI             Mishmeret Trust Company Ltd. Rami
                                                                                                                                                                                                                                                                                                                                                                                         Sebty. 48 Menachem Begin Rd. Tel
                                                                                                                                                                                                                                                                                                                                                                                         Aviv. Tel: 03-6374355.

    K (4)(5)(8)**                                                                                                             26/09/16      303.971         303.971         301.318            2.513        303.831     327.498         303.971         301.389                       3.55%   05.07.21                   05.07.26           January-5 and July-5         Not linked                Mishmeret Trust Company Ltd. Rami
                                                                                                                                                                                                                                                                                                                                                                                         Sebty. 48 Menachem Begin Rd. Tel
                                                                                                                                                                                                                                                                                                                                                                                         Aviv. Tel: 03-6374355.

    L**                                                                                                                       23/01/18      400.600         400.600         396.487            1.811        398.298     398.397         400.600         396.555                       2.50%   05.01.23                   05.01.28           January-5                    Not linked                Strauss Lazar Trust Company (1992)
                                                                                                                                                                                                                                                                                                                                                                                         Ltd. Ori Lazar. 17 Yizhak Sadeh St.,
                                                                                                                                                                                                                                                                                                                                                                                         Tel Aviv. Tel: 03- 6237777.

    Total                                                                                                                               3,561.472       3,075.912       2,974.603           23.125      2,997.728   3,267.472       3,075.912       2,982.657
    -----                                                                                                                               ---------       ---------       ---------           ------      ---------   ---------       ---------       ---------



    Comments:
    ---------

    (1)               For a summary of the terms of the
                      Company's outstanding debentures
                      see the Company's 2017 Annual
                      Report under "Item 5. Operating
                      and Financial Review and
                      Prospects - B. Liquidity and
                      Capital Resources - Debt Service
                      - Public Debentures". In the
                      reporting period, the Company
                      fulfilled all terms of the
                      debentures and Indentures.
                      Debentures financial covenants -
                      as of March 31, 2018 the net
                      leverage (net debt to EBITDA
                      excluding one time events ratio-
                      see definition in the reference
                      above to the Company's 2017
                      Annual Report) was 3.10. In the
                      reporting period, no cause for
                      early repayment occurred. (2)
                      Including interest accumulated in
                      the books. (3) Semi annual
                      payments. (4) Regarding the
                      debentures, the Company undertook
                      not to create any pledge on its
                      assets, as long as debentures or
                      loans are not fully repaid,
                      subject to certain exclusions.
                      (5) Regarding the debentures -
                      the Company has the right for
                      early redemption under certain
                      terms. (6) Regarding debenture
                      Series F and G - in June 2013,
                      following a second decrease of
                      the Company's debenture rating
                      since their issuance, the annual
                      interest rate has been increased
                      by 0.25% to 4.60% and 6.99%,
                      respectively, beginning July 5,
                      2013. (7) In February 2015,
                      pursuant to an exchange offer of
                      the Company's Series H and I
                      debentures for a portion of the
                      Company's outstanding Series D
                      and E debentures, respectively,
                      the Company exchanged
                      approximately NIS 555 million
                      principal amount of Series D
                      debentures with approximately NIS
                      844 million principal amount of
                      Series H debentures, and
                      approximately NIS 272 million
                      principal amount of Series E
                      debentures with approximately NIS
                      335 million principal amount of
                      Series I debentures. Series D and
                      E debentures were fully repaid in
                      July 2017 and in January 2017,
                      respectively. (8) In June 2017,
                      the Company undertook to issue
                      NIS 220 million principle amount
                      of additional series K debentures
                      in July 1, 2018, under certain
                      terms. See the Company's 2017
                      Annual Report, under "Item 5.
                      Operating and Financial Review
                      and Prospects - B. Liquidity and
                      Capital Resources - Debt Service
                      - Public Debentures".


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

    (**)              As of March 31, 2018, debentures
                      Series F,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.


                                                                                                             Cellcom Israel Ltd.


    Disclosure for debenture holders as of March 31, 2018 (cont'd)
    -------------------------------------------------------------


    Debentures Rating Details*
    -------------------------


                             Rating as of 31.03.18       Rating assigned upon        Recent date of rating as of     Additional ratings
                                                         (1)                                                        issuance of the Series      29.05.2018                      between original
                                                                                                                                                                                issuance and the recent
                                                                                                                                                                                date of rating as of
    Series                  Rating Company                                         Rating as of 29.05.2018                                                                      29.05.2018(2)
    ------                             --------------     ----------------------         -----------------------     -----------------------    ----------------------------   ------------------------

                                      Rating
                                      ------

                                       05/2012, 11/2012,
                                                                                                                                                                                      06/2013, 06/2014,
                                                                                                                                                                                      08/2014, 01/2015,
                                                                                                                                                                                      09/2015, 03/2016,
                                                                                                                                                                                      08/2016, 06/2017,
    F                       S&P Maalot                  A+                         A+                              AA                                                01/2018                    01/2018   AA,AA-,A+ (2)
    ---                                    ----------                        ---                             ---                         ---                         -------         ------------------   ------------

                                       05/2012, 11/2012,
                                                                                                                                                                                      06/2013, 06/2014,
                                                                                                                                                                                      08/2014, 01/2015,
                                                                                                                                                                                      09/2015, 03/2016,
                                                                                                                                                                                      08/2016, 06/2017,
    G                       S&P Maalot                  A+                         A+                              AA                                                01/2018                    01/2018   AA,AA-,A+ (2)
    ---                                    ----------                        ---                             ---                         ---                         -------         ------------------   ------------

    H                       S&P Maalot                  A+                         A+                              A+                                                01/2018          06/2014, 08/2014,
                                                                                                                                                                                      01/2015, 09/2015,
                                                                                                                                                                                      03/2016, 08/2016,
                                                                                                                                                                                       06/2017, 01/2018   A+ (2)
    ---                                    ----------                        ---                             ---                         ---                         -------         ------------------   -----

    I                       S&P Maalot                  A+                         A+                              A+                                                01/2018          06/2014, 08/2014,
                                                                                                                                                                                      01/2015, 09/2015,
                                                                                                                                                                                      03/2016, 08/2016,
                                                                                                                                                                                       06/2017, 01/2018   A+ (2)
    ---                                    ----------                        ---                             ---                         ---                         -------         ------------------   -----

    J                       S&P Maalot                  A+                         A+                              A+                                                01/2018          08/2016, 06/2017,
                                                                                                                                                                                                01/2018   A+ (2)
    ---                                    ----------                        ---                             ---                         ---                         -------         ------------------   -----

    K                       S&P Maalot                  A+                         A+                              A+                                                01/2018          08/2016, 06/2017,
                                                                                                                                                                                                01/2018   A+ (2)
    ---                                    ----------                        ---                             ---                         ---                         -------         ------------------   -----

    L                       S&P Maalot                  A+                         A+                              A+                                                01/2018                    01/2018   A+ (2)
    ---                     ----------                  ---                        ---                             ---                                               -------                    -------   -----


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

    (2) In May 2012, S&P Maalot updated the Company's rating from an "ilAA/negative" to an "ilAA-/negative". In November 2012, S&P Maalot affirmed the Company's rating of "ilAA-/negative". In June
     2013, S&P Maalot updated the Company's rating from an "ilAA-/negative" to an "ilA+/stable". In June 2014, August 2014, January 2015, September 2015, March 2016, August 2016, June 2017 and January
     2018, S&P Maalot affirmed the Company's rating of "ilA+/stable". For details regarding the rating of the debentures see the S&P Maalot report dated August 22, 2017, included in the Company's Shelf
     offering Report filled in the Israeli Securities Authority website ('MAGNA") on January 22, 2018.



    * A securities rating is not a recommendation to buy, sell or hold securities. Ratings may be subject to suspension, revision or withdrawal at any time, and each rating should be evaluated
     independently of any other rating.


                                                                                                      Cellcom Israel Ltd.


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



    Loan                                             Provision Date               Principal Amount as of     Interest Rate (nominal)  Principal Repayment
                                                                                  31.03.2018                                          Dates (annual
                                                                                                                                     payments)                 Interest Repayment Dates           Linkage
                                                                                                                                                           (semi-annual payments)
    ---                                                                                                                                                ---                                                    ---

    From                                             To
    ----                                             ---

    Loan from financial                                                06/2016           200         4.60%   30.06.18                30.06.21                   June-30 and December-31,           Not linked
    institution                                                                                                                                              commencing
                                                                                                                                                             December 31,
                                                                                                                                                             2016 through
                                                                                                                                                             June 30, 2021
    ---                                                                                                                                                  ---                                                    ---

    Loan from bank                                                     12/2016           140         4.90%   30.06.18                30.06.22                   June-30 and                        Not linked
                                                                                                                                                             December 30,
                                                                                                                                                             commencing
                                                                                                                                                             June 30, 2017
                                                                                                                                                             through June
                                                                                                                                                                                         30, 2022
    ---                                                                                                                                                  ---                                                    ---

    Loan from financial
     institution                                                       06/2017           200         5.10%   30.06.19                30.06.22                   June-30                            Not linked

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

    Total                                                                              540
    -----                                                                              ---

Comments:


    (1)              For a summary of the terms of
                     the Company's loan agreements
                     see the Company's 2017 Annual
                     Report under "Item 5. Operating
                     and Financial Review and
                     Prospects - B. Liquidity and
                     Capital Resources - Other
                     Credit Facilities" and the
                     reference therein to "- Debt
                     Service - Public Debentures".
                     (2) In the reporting period,
                     the Company fulfilled all terms
                     of the loan agreements. (3)
                     Loan agreements financial
                     covenants - as of March 31,
                     2018 the net leverage (net debt
                     to EBITDA excluding one-time
                     events ratio- see definition
                     in the reference above to the
                     Company's 2017 Annual Report)
                     was 3.10. (4) In the reporting
                     period, no cause for early
                     repayment occurred. (5) In the
                     loan agreements, the Company
                     undertook not to create any
                     pledge on its assets, as long
                     as the loans are not fully
                     repaid, subject to certain
                     exclusions. (6) According to
                     the loan agreements the Company
                     may prepay the loans, subject
                     to a prepayment fee. (7) In
                     June 2017, the Company entered
                     into an additional loan
                     agreement with the lender of
                     the Company's existing bank
                     loan for the provision of a
                     deferred loan in a principal
                     amount of NIS 150 million in
                     March 2019. See more
                     information in the reference
                     above to the Company's 2017
                     Annual Report.

Cellcom Israel Ltd.

Summary of Financial Undertakings (according to repayment dates) as of March 31, 2018

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               331,819       165,418               -                            -         -  97,804
    -----

    Second
     year               331,819        80,302               -                            -         -  76,751
    ------

    Third
     year               113,097        80,302               -                            -         -  61,126
    -----

    Fourth
     year               166,034       157,334               -                            -         -  53,540
    ------

    Fifth
     year and
     on                 538,733     1,104,645               -                            -         - 117,555
    ---------

    Total             1,481,502     1,588,001               -                            -         - 406,776
    -----             ---------     ---------             ---                          ---       --- -------

b. Private debentures and other non-bank credit, excluding such debentures held by the Company's parent company, by a controlling shareholder, by companies controlled by them, or by companies controlled by the Company, based on the Company's "Solo" financial data (in thousand NIS).


                           Principal payments          Gross interest payments
                                                     (without deduction of tax)
                                                     -------------------------

             ILS
            linked
              to
             CPI   ILS not linked to CPI      Euro             Dollar           Other
            ------ ---------------------      ----             ------           -----

     First
     year                              -      50,000                          -         -   - 18,241
     -----

     Second
     year                              -     100,000                          -         -   - 14,655
     ------

     Third
     year                              -     100,000                          -         -   -  9,812
     -----

     Fourth
     year                              -     100,000                          -         -   -  4,955
     ------

     Fifth
     year
     and
     on                                -      50,000                          -         -   -  1,264
     -----

    Total                              -     400,000                          -         -   - 48,927
    -----                            ---     -------                        ---       --- --- ------

c. Credit from banks in Israel based on the Company's "Solo" financial data (in thousand NIS).


                           Principal payments          Gross interest payments
                                                     (without deduction of tax)
                                                     -------------------------

             ILS
            linked
              to
             CPI   ILS not linked to CPI      Euro             Dollar           Other
            ------ ---------------------      ----             ------           -----

     First
     year                              -      28,000                          -         -   -  6,154
     -----

     Second
     year                              -      28,000                          -         -   -  4,800
     ------

     Third
     year                              -      28,000                          -         -   -  3,430
     -----

     Fourth
     year                              -      28,000                          -         -   -  2,056
     ------

     Fifth
     year
     and
     on                                -      28,000                          -         -   -    684
     -----

    Total                              -     140,000                          -         -   - 17,124
    -----                            ---     -------                        ---       --- --- ------

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

Cellcom Israel Ltd.

Summary of Financial Undertakings (according to repayment dates) as of March 31, 2018 (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               331,819       243,418               -                            -         - 122,198
    -----

    Second
     year               331,819       208,302               -                            -         -  96,206
    ------

    Third
     year               113,097       208,302               -                            -         -  74,367
    -----

    Fourth
     year               166,034       285,334               -                            -         -  60,551
    ------

    Fifth
     year and
     on                 538,733     1,182,645               -                            -         - 119,504
    ---------

    Total             1,481,502     2,128,001               -                            -         - 472,826
    -----             ---------     ---------             ---                          ---       --- -------

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                 955         543                 -                            -         -   419
    -----

    Second
     year                 955          99                 -                            -         -   362
    ------

    Third
     year                 858          99                 -                            -         -   337
    -----

    Fourth
     year               1,397         823                 -                            -         -   297
    ------

    Fifth
     year and
     on                 4,863       4,576                 -                            -         -   623
    ---------

    Total               9,028       6,140                 -                            -         - 2,038
    -----               -----       -----               ---                          ---       --- -----

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

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SOURCE Cellcom Israel Ltd.