Cellcom Israel Announces Fourth Quarter and Full Year 2018 Results

NETANYA, Israel, March 18, 2019 /PRNewswire/ --

- - -

2018 Full Year Highlights (compared to 2017):

    --  Total Revenues totaled NIS 3,688 million ($984 million) compared to NIS
        3,871 million ($1,033 million) last year, a decrease of 4.7%
    --  Service revenues totaled NIS 2,784 million ($743 million) compared to
        NIS 2,919 million ($779 million) last year, a decrease of 4.6%
    --  Operating income totaled NIS 74 million ($20 million) compared to NIS
        297 million ($79 million) last year, a decrease of 75.1%
    --  Loss totaled NIS 64 million ($17 million) compared to net income of NIS
        113 million ($30 million) last year
    --  Adjusted EBITDA(1) totaled NIS 660 million ($176 million) compared to
        NIS 853 million ($228 million) last year, a decrease of 22.6%
    --  Net cash from operating activities totaled NIS 770 million ($205
        million) compared to NIS 774 million ($207 million) last year, a
        decrease of 0.5%
    --  Free cash flow(1) totaled NIS 181 million ($48 million) compared to NIS
        325 million ($87 million) last year, a decrease of 44.3%



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

Fourth Quarter 2018 Highlights (compared to fourth quarter of 2017):

    --  Total Revenues totaled NIS 918 million ($245 million) compared to NIS
        975 million ($260 million) in the fourth quarter last year, a decrease
        of 5.8%
    --  Service revenues totaled NIS 677 million ($181 million) compared to NIS
        712 million ($190 million) in the fourth quarter last year, a decrease
        of 4.9%
    --  Operating income totaled NIS 8 million ($2 million) compared to NIS 45
        million ($12 million) in the fourth quarter last year, a decrease of
        82.2%
    --  Loss totaled NIS 35 million ($9 million) compared to net income of NIS
        10 million ($3 million) in the fourth quarter last year.
    --  Adjusted EBITDA(1) totaled NIS 163 million ($43 million) compared to NIS
        189 million ($50 million) in the fourth quarter last year, a decrease of
        13.8%
    --  Net cash from operating activities totaled NIS 167 million ($45 million)
        compared to NIS 214 million ($57 million) in the fourth quarter last
        year, a decrease of 22.0%
    --  Free cash flow(1) totaled NIS 7 million ($2 million) compared to NIS 77
        million ($21 million) in the fourth quarter last year, a decrease of
        90.9%

Nir Sztern, the Company's Chief Executive Officer, referred to the results of full year 2018 and fourth quarter of 2018:

"2018 was a year full of activities in the cellular and fixed-line segments. It was a year in which we strengthened our position in the fixed line segment. We continued to recruit customers to Cellcom tv and established our position as the best alternative in the TV market in Israel. At the same time, we increased investments and the rate of deployment of, our fiber optic network in residential areas, and strengthened our position as a supplier of fixed line communications services to business customers.

Thanks to this successful activity and despite the high level of competition, the fixed-line segment's revenues in 2018 increased by 9% compared to 2017.

Alongside the success in the fixed-line segment, the cellular sector in Israel today is suffering from hyper competition and multiple players competing on price. This competition has led to continued erosion in cellular prices and a decline in the average revenue per subscriber. In light of this situation, over the course of 2018 we acted to improve the profitability in this segment and we will continue to take steps to improve profitability also in 2019.

The Israeli telecommunications market is in a difficult state, and without an urgent regulatory intervention to resolve the crisis, a genuine damage to investments is expected.
In view of the competition challenges in the cellular sector, we continued to act in order to reduce the Company's expenses and have taken many steps to improve and streamline the processes of sales, support and service. We intend to continue acting to reduce the Company's expenses in 2019.

We recently announced the signing of the investment transaction in IBC through a partnership that shall be established by Cellcom and the Israel Infrastructure Fund (IIF) and signing of an Indefeasible Right of Use (IRU) agreement as to IBC's fiber optic network. The investment agreement in subject to regulatory approvals. The signing of the transaction is a breakthrough event for the coming years.

IBC, under its new ownership of Cellcom, IIF and IEC, will bring the fiber-optic message of a up to 1 gigabyte per second, to over 1 million Israeli households in 5 years, and will allow Cellcom to offer fast internet service which shall improve the Israeli customer's internet and TV experience. The transaction is also expected to result in substantial savings over time in Cellcom's expenses and consequently have a positive effect on the Company's results of operations and free cash flow.

We also announced the signing of a memorandum of understanding with IIF for the sale of Cellcom's fiber network in residential areas to IBC, once the IBC transaction is completed and subject to further agreement with the IEC and regulatory approvals.

Upon completion of the fiber network sale, the IRU agreement shall apply to the infrastructure purchased from Cellcom, so that the total amount of fiber-optic deployed at street level, is expected to surpass 400,000 potential customers, at the end of 2019. The sale of Cellcom's fiber-optic infrastructure to IBC is expected to benefit Cellcom's cash flow, improve financial ratios, and reduce its level of Capex in the coming years, and provide IBC with a substantial asset and a substantial advance on its deployment and business plans.

I would like to thank the Company's employees, managers and shareholders for the extensive work, and contribution to the success of the company."

Shlomi Fruhling, Chief Financial Officer, said:

"2018 was characterized by a continued growth in the fixed-line segment. At the same time however, there was intensified competition in the cellular sector with the entrance of a sixth cellular operator, which was reflected in a temporary increase in portability and continued erosion in revenues from cellular services compared to the previous year.

Revenues from services in the cellular segment declined by 10.3% compared with the previous year, mainly due to the continued erosion in the prices of cellular services in light of competition in the market and the impact of the network sharing agreement with Golan.

Revenue from fixed-line services grew by 4.2% compared with the previous year. The increase was mainly due to the continued recruitment of customers to Cellcom tv as well as to Internet services, and from fixed-line communications services provided based on the network sharing agreement with Golan.

Revenue from equipment in 2018 declined by 5.0% compared with last year. The decrease was mainly due to lower sales of end user equipment in the cellular segment, which was partially offset by an increase in end user equipment sales in the fixed-line segment.

Free cash flow for the year 2018 amounted to NIS 181 million, a decrease of 44.3% compared with the previous year. The decrease in the annual free cash flow was mainly due to a decrease in receipts from end user equipment sold and decrease from service revenues.

The completion of the investment transaction in IBC subject to its terms and the required approvals, and in particular, the IRU agreement which Cellcom entered with IBC, is expected to reduce the Company's investments in fiber deployment starting in 2020 and to positively impact the Company's cash flow. Furthermore, over time, and according to the deployment of IBC's fiber network, savings in cash flows and expenses for payments access and trafic to Bezeq and HOT are also expected. The sale of Cellcom's fiber network in residential areas to IBC, if executed, is expected to generate cash flow for the Company, and to create a significant asset and bring an immediate operating cash flow to IBC.

The Company's Board of Directors decided not to distribute dividends in respect of the results of the fourth quarter of 2018, in view of the continued intensified competition in the market and its negative impact on the Company's operating results and in order to continue to strengthen the Company's balance sheet. The Board of Directors will review its decision in accordance with the development of market conditions, while taking into account the Company's needs."

Cellcom Israel Ltd. (NYSE: CEL) (TASE: CEL) ("Cellcom Israel" or the "Company") announced today its financial results for the fourth quarter and full year ended December 31, 2018.

The Company reported that revenues for the fourth quarter and full year 2018 totaled NIS 918 million ($245 million) and NIS 3,688 million ($984 million), respectively; Adjusted EBITDA for the fourth quarter 2018 totaled NIS 163 million ($43 million), or 17.8% of total revenues, and for the full year 2018 totaled NIS 660 million ($176 million), or 17.9% of total revenues; loss for the fourth quarter and full year 2018 totaled NIS 35 million ($9 million) and NIS 64 million ($17 million), respectively. Basic loss per share for the fourth quarter and full year 2018 totaled NIS 0.3 ($0.08) and NIS 0.58 ($0.15), respectively.

Main Consolidated Financial Results:


                                                                           NIS millions                       % of Revenues    % Change  US$ millions

                                                                                                                            (convenience

                                                                                                                            translation)



                                                             2018     2017        2018        2017        2018        2017




       Revenues - services                                 2,784    2,919       75.5%      75.4%     (4.6)%        743              779



       Revenues - equipment                                  904      952       24.5%      24.6%     (5.0)%        241              254




       
                Total revenues                         3,688    3,871      100.0%     100.0%     (4.7)%        984            1,033



       Cost of revenues - services                       (2,019) (2,035)    (54.7)%    (52.5)%     (0.8)%      (539)           (543)



       Cost of revenues - equipment                        (642)   (645)    (17.5)%    (16.7)%     (0.5)%      (171)           (172)




       
                Total cost of revenues               (2,661) (2,680)    (72.2)%    (69.2)%     (0.7)%      (710)           (715)




       
                Gross profit                           1,027    1,191       27.8%      30.8%    (13.8)%        274              318



       Selling and marketing expenses                      (567)   (479)    (15.3)%    (12.4)%      18.4%      (151)           (128)



       General and administrative expenses                 (360)   (426)     (9.8)%    (11.0)%    (15.5)%       (96)           (114)



       Other income (expenses), net                         (26)      11      (0.7)%       0.2%        N/A        (7)               3




       
                Operating income                          74      297        2.0%       7.6%    (75.1)%         20               79



       Financing expenses, net                             (144)   (144)     (3.9)%     (3.7)%       0.0%       (39)            (39)




       
                Profit (loss) before taxes on income    (70)     153      (1.9)%       3.9%        N/A       (19)              40




       Tax benefit (taxes on income)                           6     (40)      0.2 %     (1.0)%        N/A          2             (10)




       
                Net income (loss)                       (64)     113      (1.7)%       2.9%        N/A       (17)              30

    ===


       
                Free cash flow                           181      325        4.9%       8.4%    (44.3)%         48               87

    ===


       
                Adjusted EBITDA                          660      853       17.9%      22.0%    (22.6)%        176              228

    ===


                                                 Q4/2018                       Q4/2017  Change%   
     
     Q4/2018    
     
     Q4/2017



                                             NIS million                   US$ million
                                                         (convenience translation)




       Total revenues                               918                            975    (5.8)%            245             260

    ---


       Operating Income                               8                             45   (82.2)%              2              12

    ---


       Net Income (loss)                           (35)                            10       N/A            (9)              3

    ---


       Free cash flow                                 7                             77   (90.9)%              2              21

    ---


       Adjusted EBITDA                              163                            189   (13.8)%             43              50

    ---


       Adjusted EBITDA, as percent of total       17.8%                         19.4%   (8.2)%


       revenues

    ===

Main Financial Data by Operating Segments:


                                                   Cellular (*)           Fixed-line (**)               Inter-segment   Consolidated results

                                                                                          adjustments

                                                                                             (***)



                          NIS million  2018   2017              Change                             2018                   2017                   Change  2018   2017        2018        2017          Change

                                                                %                                                                               %                                                %



             Total revenues           2,385  2,699                 (11.6)%                        1,464                  1,348                     8.6% (161) (176)      3,688       3,871          (4.7)%

    ---


            Service                  1,730  1,929                 (10.3)%                        1,215                  1,166                     4.2% (161) (176)      2,784       2,919          (4.6)%
    revenues

    ---


            Equipment                  655    770                 (14.9)%                          249                    182                    36.8%                    904         952          (5.0)%
    revenues

    ---


            Adjusted                   391    595                 (34.3)%                          269                    258                     4.3%                    660         853         (22.6)%
    EBITDA

    ---


            Adjusted                 16.4% 22.0%                (25.5)%                        18.4%                 19.1%                  (3.7)%                  17.9%      22.0%        (18.6)%


            EBITDA, as

             percent of total


            revenues

    ===


                                      Cellular (*) Fixed-line (**)  Inter-segment   Consolidated results

                                                                     adjustments

                                                                        (***)



                          NIS million     Q4'18         Q4'17           Change              Q4'18          Q4'17     Change     Q4'18     Q4'17     Q4'18     Q4'17     Change

                                                                          %                                             %                                                  %



             Total revenues                    575              655         (12.2)%                    383      362        5.8%      (40)      (42)       918       975       (5.8)%

    ---


            Service                           416              451          (7.8)%                    301      303      (0.7)%      (40)      (42)       677       712       (4.9)%
    revenues

    ---


            Equipment                         159              204         (22.1)%                     82       59       39.0%                           241       263       (8.4)%
    revenues

    ---


            Adjusted                           97              118         (17.8)%                     66       71      (7.0)%                           163       189      (13.8)%
    EBITDA

    ---


            Adjusted                        16.9%           18.0%         (6.1)%                  17.2%   19.6%    (12.2)%                         17.8%     19.4%     (8.2)%

             EBITDA, 
              as

             percent of total

             r
              evenues

    ===

(*) The segment includes the cellular communications services, end user cellular equipment and supplemental services.
(**) The segment includes landline telephony services, internet services, television services, transmission services, end user fixed-line equipment and supplemental services.
(***) Include cancellation of inter-segment revenues between "Cellular" and "Fixed-line" segments.


Financial Review (2018 full year compared to 2017):

Revenues for 2018 decreased 4.7% totaling NIS 3,688 million ($984 million), compared to NIS 3,871 million ($1,033 million) last year. The decrease in revenues is attributed to a 4.6% decrease in service revenues and a 5.0% decrease in equipment revenues.

Service revenues for 2018 totaled NIS 2,784 million ($743 million), a 4.6% decrease from NIS 2,919 million ($779 million) last year.

Service revenues in the cellular segment totaled NIS 1,730 million ($462 million) in 2018, a 10.3% decreased from NIS 1,929 million ($515 million) last year. This decrease resulted mainly from the ongoing erosion in the price of these services as a result of the competition in the cellular market and from the difference between the national roaming services revenues in 2017 and the revenues for rights of use in cellular networks in 2018 according to the network sharing agreement with Golan which came into force as of the beginning of the second quarter of 2017[2].

Service revenues in the fixed-line segment totaled NIS 1,215 million ($324 million) in 2018, an 4.2% increase from NIS 1,166 million ($311 million) last year. This increase resulted mainly from an increase in revenues from TV and internet services, as well as from fixed-line communications services provided according to the network sharing agreement with Golan from the second quarter of 2017.

Equipment revenues totaled NIS 904 million ($241 million) in 2018, a 5.0% decrease compared to NIS 952 million ($254 million) last year. This decrease resulted mainly from a decrease in the quantity of end user equipment sold during 2018 in the cellular segment as compared to 2017. This decrease was partially offset by an increase in equipment sales in the fixed-line segment.

Cost of revenues totaled NIS 2,661 million ($710 million) in 2018, compared to NIS 2,680 million ($715 million) in 2017, a 0.7% decrease. This decrease resulted mainly from decrease in costs of extended warranty services for end user equipment and decrease in depreciation expenses. This decrease was partially offset by an increase in content costs related to the TV field and in costs related to internet services in the fixed-line segment.




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

Gross profit for 2018 decreased 13.8% to NIS 1,027 million ($274 million), compared to NIS 1,191 million ($318 million) in 2017. Gross profit margin for 2018 amounted to 27.8%, down from 30.8% in 2017.

Selling, Marketing, General and Administrative Expenses ("SG&A Expenses") for 2018 decreased 2.4% to NIS 927 million ($247 million), compared to NIS 905 million ($242 million) in 2017. This increase is primarily a result of an increase in depreciation expenses due to the capitalization of part of the customer acquisition costs as a result of the early adoption of an International Financial Reporting Standard (IFRS 15) in the first quarter of 2017. This increase was partially offset by a decrease of salaries expenses and doubtful accounts expenses.

Other expenses for 2018 totaled NIS 26 million ($7 million), compared to other income of NIS 11 million ($3 million) in 2017. Other expenses for 2018, mainly include an expense for employee voluntary retirement plan. Other income for 2017 mainly include a gain from the Sale of Internet Rimon, in the amount of approximately NIS 10 million ($3 million).

Operating income for 2018 totaled NIS 74 million ($20 million) compared to NIS 297 million ($79 million) in 2017.

Adjusted EBITDA for 2018 decreased by 22.6% totaling NIS 660 million ($176 million) compared to NIS 853 million ($228 million) in 2017. Adjusted EBITDA for 2018, as a percent of revenues, totaled 17.9% down from 22.0% in 2017.

Cellular segment Adjusted EBITDA for 2018 totaled NIS 391 million ($104 million), compared to NIS 595 million ($159 million) last year, a decrease of 34.3%, which resulted mainly from the ongoing erosion in cellular service revenues.

Fixed-line segment Adjusted EBITDA for 2018 totaled NIS 269 million ($72 million), compared to NIS 258 million ($69 million) last year, a 4.3% increase. This increase resulted mainly from an increase in revenues from TV and internet services, as well as from fixed-line communications services provided according to the network sharing agreement with Golan from the second quarter of 2017, which was partially offset by an increase in content costs related to the TV field and in costs related to internet services.

Financing expenses, net for 2018 were similar to 2017 and totaled NIS 144 million ($39 million). The finance expenses increased as a result of losses in the Company's tradable investment portfolio as a result of decreases in the securities market mainly at the end of 2018. This expenses were offset by a decrease in the Company's average debt level and from a decrease in the interest rate on the Company's debt.

Taxes on income for 2018 totaled NIS 6 million ($2 million) of income tax, compared to NIS 40 million ($10 million) of tax expenses in 2017. The Company's income tax resulted mainly from the Company's loss before tax for which the Company recorded a tax income, which was partially offset by non-deductible expenses for tax purposes.

Loss for 2018 totaled NIS 64 million ($17 million), compared to net income of NIS 113 million ($43 million) in 2017.

Basic loss per share for 2018 totaled NIS 0.58 ($0.15), compared to basic earnings per share of NIS 1.11 ($0.30) last year.

FINANCIAL REVIEW (FOURTH QUARTER OF 2018 COMPARED TO FOURTH QUARTER OF 2017):

Revenues for the fourth quarter of 2018 decreased 5.8% totaling NIS 918 million ($245 million), compared to NIS 975 million ($260 million) in the fourth quarter last year. The decrease in revenues is attributed to a 4.9% decrease in service revenues and an 8.4% decrease in equipment revenues.

Service revenues totaled NIS 677 million ($181 million) in the fourth quarter of 2018, a 4.9% decrease from NIS 712 million ($190 million) in the fourth quarter last year.

Service revenues in the cellular segment totaled NIS 416 million ($111 million) in the fourth quarter of 2018, a 7.8% decrease from NIS 451 million ($120 million) in the fourth quarter last year. This decrease resulted mainly from the ongoing erosion in the prices of these services as a result of the competition in the cellular market.

Service revenues in the fixed-line segment totaled NIS 301 million ($80 million) in the fourth quarter of 2018, a 0.7% decrease from NIS 303 million ($81 million) in the fourth quarter last year. This decrease resulted mainly as a result of decrease from international calling services, partially offset by an increase in revenues from TV and internet services.

Equipment revenues in the fourth quarter of 2018 totaled NIS 241 million ($64 million), an 8.4% decrease compared to NIS 263 million ($70 million) in the fourth quarter last year. This decrease resulted mainly from a decrease in the quantity of end user equipment sold in the cellular segment which was partially offset by an increase in equipment sales in the fixed-line segment.

Cost of revenues for the fourth quarter of 2018 totaled NIS 676 million ($180 million), compared to NIS 680 million ($181 million) in the fourth quarter of 2017, a 0.6% decrease. This decrease resulted mainly from a decrease in the cost of end user equipment resulting from a decrease in the quantity of end user equipment sold. This decrease was partially offset by an increase in content costs related to the TV field and in costs related to internet services in the fixed-line segment.

Gross profit for the fourth quarter of 2018 decreased 18.0% to NIS 242 million ($65 million), compared to NIS 295 million ($79 million) in the fourth quarter of 2018. Gross profit margin for the fourth quarter of 2018 amounted to 26.4%, down from 30.3% in the fourth quarter of 2017.

Selling, Marketing, General and Administrative Expenses ("SG&A Expenses") for the fourth quarter of 2018 decreased 6.0% to NIS 234 million ($62 million), compared to NIS 249 million ($66 million) in the fourth quarter of 2017. This decrease is primarily a result of a decrease in salaries expenses and doubtful accounts expenses, which was partially offset by an increase depreciation expenses.

Operating income for the fourth quarter of 2018 decreased by 82.8% to NIS 8 million ($2 million) from NIS 45 million ($12 million) in the fourth quarter of 2018.

Adjusted EBITDA for the fourth quarter of 2018 decreased by 13.8% totaling NIS 163 million ($43 million) compared to NIS 189 million ($50 million) in the fourth quarter of 2017. Adjusted EBITDA as a percent of revenues for the fourth quarter of 2018 totaled 17.8%, down from 19.4% in the fourth quarter of 2017.

Cellular segment adjusted EBITDA for the fourth quarter of 2018 decreased by 17.8% totaling NIS 97 million ($26 million) compared to NIS 118 million ($31 million) in the fourth quarter last year. This decrease resulted mainly from a decrease in cellular segment service revenues as a result of the ongoing erosion in the prices of these services as a result of the competition in the cellular market.

Fixed-line segment adjusted EBITDA for the fourth quarter of 2018 totaled NIS 66 million ($18 million), compared to NIS 71 million ($16 million) in the fourth quarter last year, a 7.0% decrease, mainly as a result of a decrease from revenues of international calling services and increase in content of TV services.

Financing expenses, net for the fourth quarter of 2018 increased 50% and totaled NIS 45 million ($12 million), compared to NIS 30 million ($8 million) in the fourth quarter of 2017. The increase resulted mainly from losses in the Company's tradable investment portfolio due to a sharp decrease in the securities market.

Taxes on income for the fourth quarter of 2018 totaled NIS 2 million ($1 million) of income tax, compared to tax expenses of NIS 5 million ($1 million) in the fourth quarter of 2017. Income tax resulted mainly from loss before tax for which the company recorded a tax income, which was partially offset by non-deductible expenses for tax purposes.

Loss for the fourth quarter of 2018 totaled NIS 35 million ($9 million), compared to a net income of NIS 10 million ($3 million) in the fourth quarter of 2017.

Basic loss per share for the fourth quarter of 2018 totaled NIS 0.3 ($0.08), compared to basic earnings per share NIS 0.08 ($0.02) in the fourth quarter last year.

OPERATING REVIEW

Main Performance Indicators - Cellular segment:


                                               2018     2017   Change (%)




       Cellular subscribers at the end of    2,851    2,817         1.2%


       the period (in thousands)

    ---


       Churn Rate for cellular subscribers   43.2%   45.8%      (5.7)%


       (in %)

    ---


       Monthly cellular ARPU (in NIS)         51.3     57.1      (10.2)%

    ---

                                            Q4/2018 Q4/2017  Change (%)




       Churn Rate for cellular subscribers   11.1%   11.5%      (3.5)%


       (in %)

    ---


       Monthly cellular ARPU (in NIS)         49.0     53.6       (8.6)%

    ===

Cellular subscriber base - at the end of 2018 the Company had approximately 2.851 million cellular subscribers, an increase of approximately 34,000 subscribers net, or approximately 1.2%, compared to the cellular subscriber base at the end of 2017. In the fourth quarter of 2018, the Company's cellular subscriber base increased by approximately 26,000 subscribers net. As of the third quarter of 2018, the Company's counting mechanism of M2M (machine to machine) subscribers was changed, so as that M2M subscribers are added to the cellular subscriber base only upon first use instead of at the time of sale as was done until the change. This change did not have a material effect on the prior subscriber data.

Cellular Churn Rate for 2018 totaled 43.2%, compared to 45.8% in 2017. The cellular churn rate for the fourth quarter 2018 totaled to 11.1%, compared to 11.5% in the fourth quarter last year.

The monthly cellular Average Revenue per User ("ARPU") for 2018 totaled NIS 51.3 ($13.7) compared to NIS 57.1 ($15.2) in 2017. ARPU for the fourth quarter of 2018 totaled NIS 49 ($13.1), compared to NIS 53.6 ($14.3) in the fourth quarter last year. The decrease in ARPU, both annual and quarterly, resulted, among others, from the ongoing erosion in the prices of cellular services, resulting from the intense competition in the cellular market.

MAIN PERFORMANCE INDICATORS - FIXED-LINE SEGMENT:


                                                      2018 2017 Change (%)




       
                Internet infrastructure field     269  222      21.2%


       
                subscribers- (households) at the


       end of the period (in thousands)

    ---


       
                TV field subscribers-             219  170      28.8%


       (households) at the end of the


       period (in thousands)

    ===

In the fourth quarter of 2018, the Company's subscriber base in the internet infrastructure field increased by approximately 10,000 households net, and the Company's subscriber base in the TV field increased by 13,000 households net.

FINANCING AND INVESTMENT REVIEW:

Cash Flow

Free cash flow for 2018 totaled NIS 181 million ($48 million), compared to NIS 325 million ($87 million) in 2017, a 44.3% decrease. The decrease in annual free cash flow resulted mainly from a decrease in receipts from customers as a result of decrease in equipment sales, higher cash capital expenditures in fixed assets mainly from fiber-optic network deployment in 2018 as compared to 2017 and increase in salaries payments as a result of employee voluntary retirement plan. This decrease was partially offset by a decrease in tax payments, net, in 2018 as compared to 2017 and decrease in rent payments of the company, as a result of timing differences.

Free cash flow for the fourth quarter of 2018 totaled NIS 7 million ($2 million), compared to NIS 77 million ($21 million) in the fourth quarter of 2017, a 90.9% decrease. The decrease in quarterly free cash flow resulted mainly from a decrease in receipts from customers as a result of decrease in the Company's revenues and higher cash capital expenditures in fixed assets mainly from fiber-optic network deployment. This decrease was partially offset by a decrease in rent payments of the company due to timing differences and decrease in tax payments.

Total Equity

Total Equity as of December 31, 2018 amounted to NIS 1,677 million ($448 million) primarily consisting of undistributed accumulated retained earnings of the Company.

Cash Capital Expenditures in Fixed Assets and Intangible Assets and others

During 2018 and the fourth quarter of 2018 the Company invested NIS 593 million ($158 million) and NIS 156 million ($42 million), respectively, in fixed assets and intangible assets and others (including, among others, investments in the Company's communications networks, fiber-optic network, information systems, software and TV set-top boxes and capitalization of part of the customer acquisition costs as a result of the adoption of IFRS15), compared to NIS 583 million ($155 million) and NIS 138 million ($37 million) in 2017 and the fourth quarter of 2017, respectively.

Dividend

On March 17, 2019, the Company's Board of Directors decided not to declare a cash dividend for the fourth 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, 2018 on Form 20-F dated March 18, 2019, or the Company's 2018 Annual Report, under "Item 8 - Financial Information - A. Consolidated Statements and Other Financial Information - Dividend Policy".

Debentures, Material Loans and Financial Liabilities

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

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

CONFERENCE CALL DETAILS

The Company will be hosting a conference call regarding its results for the year 2018 and for the fourth quarter of 2018 on Monday, March 18, 2019 at 10:00 am ET, 07:00 am PT, 14:00 UK time, 16:00 Israel time. On the call, management will review and discuss the results, and will be available to answer questions. To participate, please either access the live webcast on the Company's website, or call one of the following teleconferencing numbers below. Please begin placing your calls at least 10 minutes before the conference call commences. If you are unable to connect using the toll-free numbers, please try the international dial-in number.

US Dial-in Number: 1 888 407 2553
UK Dial-in Number: 0 800 917 9141
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; 14:00 UK Time; 16:00 Israel Time

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

ANNUAL REPORT FOR 2018

Cellcom Israel will be filing its annual report for the year ended December 31, 2018 (on Form 20-F) with the US Securities and Exchange Commission on March 18, 2019. The annual report will be available for download from the investor relations section of Cellcom Israel's website: www.cellcom.co.il. Cellcom Israel will furnish a hard copy to any shareholder who so requests, without charge. Such requests may be sent through the Company's website or by sending a postal mail request to Cellcom Israel Ltd., 10 Hagavish Street, Netanya, Israel (attention: Chief Financial Officer).

About Cellcom Israel

Cellcom Israel Ltd., established in 1994, is a leading Israeli communications group, providing a wide range of communications services. Cellcom Israel is the largest Israeli cellular provider, providing its approximately 2.851 million cellular subscribers (as at December 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, internet infrastructure and connectivity services and international calling services, as well as landline telephone services in Israel. Cellcom Israel's shares are traded both on the New York Stock Exchange (CEL) and the Tel Aviv Stock Exchange (CEL). For additional information please visit the Company's website http://investors.cellcom.co.il.

Forward-Looking Statements

The following information contains, or may be deemed to contain forward-looking statements (as defined in the U.S. Private Securities Litigation Reform Act of 1995 and the Israeli Securities Law, 1968). In some cases, you can identify these statements by forward-looking words such as "may," "might," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential" or "continue," the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to risks, uncertainties and assumptions about the Company, may include projections of the Company's future financial results, its anticipated growth strategies and anticipated trends in its business. These statements are only predictions based on the Company's current expectations and projections about future events. There are important factors that could cause the Company's actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. Factors that could cause such differences include, but are not limited to: changes to the terms of the Company's license, new legislation or decisions by the regulator affecting the Company's operations, new competition and changes in the competitive environment, the outcome of legal proceedings to which the Company is a party, particularly class action lawsuits, the Company's ability to maintain or obtain permits to construct and operate cell sites, and other risks and uncertainties detailed from time to time in the Company's filings with the U.S. Securities and Exchange Commission, including under the caption "Risk Factors" in its Annual Report for the year ended December 31, 2018.

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 3.748 = US$ 1 as published by the Bank of Israel for December 31, 2018.

Use of non-IFRS financial measures

Adjusted 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. Adjusted EBITDA should not be considered in isolation, or as a substitute for operating income, any other performance measures, or cash flow data, which were prepared in accordance with Generally Accepted Accounting Principles as measures of profitability or liquidity. Adjusted EBITDA does not take into account debt service requirements, or other commitments, including capital expenditures, and therefore, does not necessarily indicate the amounts that may be available for the Company's use. In addition, Adjusted EBITDA as presented by the Company may not be comparable to similarly titled measures reported by other companies, due to differences in the way these measures are calculated. See the reconciliation of net income to Adjusted EBITDA under "Reconciliation of Non-IFRS Measures" in the press release.

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


                                    Company Contact                               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)





       
                Consolidated Statements of Financial Position

    ---



                                                                                                                                   
          
            Convenience


                                                                                                                                
          
          translation into


                                                                                                                                     
          
            US dollar


                                                                         
              
                December 31, 
     
     December 31,    
          
            December 31,


                                                                                                         2017              2018                             2018



                                                                         
              
                NIS millions 
     
     NIS millions    
          
            US$ millions






       
                Assets



       Cash and cash equivalents                                                                         527             1,202                              321



       Current investments, including derivatives                                                        364               404                              108



       Trade receivables                                                                               1,280             1,152                              307



       Current tax assets                                                                                  4                11                                3



       Other receivables                                                                                  89                84                               22



       Inventory                                                                                          70                94                               25






       
                Total current assets                                                               2,334             2,947                              786






       Trade and other receivables                                                                       895               852                              227



       Property, plant and equipment, net                                                              1,598             1,652                              441



       Intangible assets and others, net                                                               1,260             1,298                              346






       
                Total non- current assets                                                          3,753             3,802                            1,014






       
                Total assets                                                                       6,087             6,749                            1,800






       
                Liabilities



       Current maturities of debentures and of loans from                                                618               620                              165


       financial institutions



       Trade payables and accrued expenses                                                               652               696                              186



       Current tax liabilities                                                                             4



       Provisions                                                                                         91               105                               28



       Other payables, including derivatives                                                             277               257                               68






       
                Total current liabilities                                                          1,642             1,678                              447






       Long-term loans from financial institutions                                                       462               334                               89



       Debentures                                                                                      2,360             2,911                              777



       Provisions                                                                                         21                20                                5



       Other long-term liabilities                                                                        15                16                                4



       Liability for employee rights upon retirement, net                                                 15                14                                4



       Deferred tax liabilities                                                                          131                99                               26






       
                Total non- current liabilities                                                     3,004             3,394                              905






       
                Total liabilities                                                                  4,646             5,072                            1,352






       
                Equity attributable to owners of the Company



       Share capital                                                                                       1                 1



       Share premium                                                                                                      325                               87



       Receipts on account of share options                                                                                10                                3



       Retained earnings                                                                               1,436             1,339                              358





       
                Non-controlling interests                                                              4                 2






       
                Total equity                                                                       1,441             1,677                              448






       
                Total liabilities and equity                                                       6,087             6,749                            1,800


                                                                 
              
              Cellcom Israel Ltd.


                                                                     
            (An Israeli Corporation)





       
                Consolidated Statements of Income

    ---



                                                                                                                                                    
          
           Convenience


                                                                                                                                                
          
          translation into


                                                                                                                                                     
          
            US dollar


                                                         
       
       Year ended               
              
           Year ended    
       
       Year ended        
          
           Year ended


                                                       
       
       December 31,             
              
           December 31,  
       
       December 31,     
          
            December 31,


                                                                       2016                                         2017                   2018                              2018



                                                       
       
       NIS millions             
              
           NIS millions  
       
       NIS millions      
          
           US$ millions






       Revenues                                                      4,027                                        3,871                  3,688                               984



       Cost of revenues                                            (2,702)                                     (2,680)               (2,661)                            (710)






       
                Gross profit                                     1,325                                        1,191                  1,027                               274





       Selling and marketing expenses                                (574)                                       (479)                 (567)                            (151)



       General and administrative expenses                           (420)                                       (426)                 (360)                             (96)



       Other income (expenses), net                                   (21)                                          11                   (26)                              (7)






       
                Operating profit                                   310                                          297                     74                                20





       Financing income                                                 46                                           52                     46                                12



       Financing expenses                                            (196)                                       (196)                 (190)                             (51)




       Financing expenses, net                                       (150)                                       (144)                 (144)                             (39)





       
                Profit (loss) before taxes on                      160                                          153                   (70)                             (19)


       
                income





       Tax benefit (Taxes on income)                                  (10)                                        (40)                     6                                 2




       
                Profit (loss) for the year                         150                                          113                   (64)                             (17)




       
                Attributable to:



       Owners of the Company                                           148                                          112                   (62)                             (17)



       Non-controlling interests                                         2                                            1                    (2)




       
                Profit (loss) for the year                         150                                          113                   (64)                             (17)






       
                Earnings (loss) per share



       Basic earnings (loss) per share (in                            1.47                                         1.11                 (0.58)                           (0.15)


       NIS)






       Diluted earnings (loss) per share (in                          1.47                                         1.10                 (0.58)                           (0.15)


       NIS)






       Weighted-average number of shares                       100,604,578                                  100,654,935            107,499,543                       107,499,543


       used in the calculation of basic


       earnings (loss) per share (in shares)






       Weighted-average number of shares                       100,698,306                                  100,889,661            107,499,543                       107,499,543


       used in the calculation of diluted


       earnings (loss) per share (in shares)


                                                                          
            
                Cellcom Israel Ltd.


                                                                            
              (An Israeli Corporation)





       
                Consolidated Statements of Cash Flows

    ---



                                                                                                                                                             
        
             Convenience


                                                                                                                                                                       translation into


                                                                                                                                                              
        
              US dollar


                                                                    
       
           Year ended                 
              
       Year ended    
       
       Year ended      
        
             Year ended


                                                                  
       
           December 31,               
              
       December 31,  
       
       December 31,   
        
              December 31,


                                                                                      2016                                       2017                   2018                            2018



                                                                  
       
           NIS millions               
              
       NIS millions  
       
       NIS millions    
        
             US$ millions

                                                                                                                                                                                      ---


       
                Cash flows from operating activities



       Profit (loss) for the year                                                     150                                        113                   (64)                           (17)



       
                Adjustments for:



       Depreciation and amortization                                                  534                                        555                    584                             156



       Share based payments                                                             6                                          2                      2                               1



       Loss (gain) on sale of property, plant and                                      10                                        (1)                                                    -


       equipment



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



       Income tax expense (tax benefit)                                                10                                         40                    (6)                            (2)



       Financing expenses, net                                                        150                                        144                    144                              39





       
                Changes in operating assets and liabilities:



       Change in inventory                                                             21                                        (6)                  (24)                            (6)



       Change in trade receivables (including long-term                              (28)                                       132                    193                              51
    a
       mounts)



       Change in other receivables (including long-term                               (5)                                     (191)                  (21)                            (6)


       amounts)



       Change in trade payables, accrued expenses and                                   -                                      (27)                  (26)                            (7)


       provisions



       Change in other liabilities (including long-term                                20                                         28                     11                               2
    a
       mounts)



       Payments for derivative hedging contracts, net                                   -                                       (3)



       Income tax paid                                                               (88)                                      (44)                  (23)                            (6)



       Income tax received                                                              1                                         42                                                     -




       
                Net cash from operating activities                                781                                        774                    770                             205






       
                Cash flows used in investing activities



       Acquisition of property, plant, and equipment                                (295)                                     (346)                 (356)                           (95)



       Additions to intangible assets and others                                     (73)                                     (237)                 (237)                           (63)



       Change in current investments, net                                             (9)                                      (77)                  (56)                           (15)



       Proceeds from sale of property, plant and                                        2                                          1                      1                               -


       equipment



       Interest received                                                               11                                         12                     14                               4



       Receipts from other derivative contracts, net                                    -                                                               3                               1



       Proceeds from sale of shares in a consolidated                                   -                                         3


       company, net of cash disposed

                                                                                                                                                                                      ---


       
                Net cash used in investing activities                           (364)                                     (644)                 (631)                          (168)


                                                                                   
         
              Cellcom Israel Ltd.


                                                                                       
       (An Israeli Corporation)





       
                Consolidated Statements of Cash Flows (cont'd)

    ---



                                                                                                                                                             
        
             Convenience


                                                                                                                                                                       translation into


                                                                                                                                                             
        
              US  dollar


                                                                      
       
       Year ended          
              
                Year ended    
       
       Year ended      
        
             Year ended


                                                                    
       
       December 31,        
              
                December 31,  
       
       December 31,   
        
              December 31,


                                                                                    2016                                         2017                   2018                            2018



                                                                    
       
       NIS millions        
              
                NIS millions  
       
       NIS millions    
        
             US$ millions

                                                                                                                                                                                      ---




       
                Cash flows used in financing


       
                activities



       Payments for derivative contracts, net                                      (13)                                         (3)                  (15)                            (4)



       Receipt of (Payments for) long-term                                          340                                          200                   (78)                           (21)


       loans from financial institutions



       Repayment of debentures                                                    (732)                                       (864)                 (556)                          (148)



       Proceeds from issuance of                                                    653                                                                997                             266


       debentures, net of issuance costs



       Dividend paid                                                                (1)                                         (1)                                                    -



       Interest paid                                                              (185)                                       (175)                 (126)                           (34)



       Acquisition of non-controlling                                                 -                                                              (19)                            (5)


       interests



       Equity offering                                                                -                                                               275                              73



       Proceeds from exercise of share                                                -                                                                59                              16


       options

                                                                                                                                                                                      ---




       
                Net cash from (used in) financing                                62                                        (843)                   537                             143


       
                activities






       
                Changes in cash and cash                                        479                                        (713)                   676                             180


       
                equivalents





       
                Cash and cash equivalents as at                                 761                                        1,240                    527                             141


       
                the beginning of the year



       
                Effects of exchange rate changes                                  -                                                               (1)


       
                on cash and cash equivalents

                                                                                                                                                                                      ---




       
                Cash and cash equivalents as at                               1,240                                          527                  1,202                             321


       
                the end of the year



                                                                                    
              
               Cellcom Israel Ltd.


                                                                                        
              (An Israeli Corporation)





       
                Reconciliation for Non-IFRS Measures

    ---






       
                
                  Adjusted EBITDA





       The following is a reconciliation of net income to adjusted EBITDA:


                                                                            Year ended December 31           
              
            Convenience

                                                                                                           
              
            translation

                                                                                                                                     into US dollar

                                                                                                            
              
            Year ended

                                                                                                           
              
            December 31

                                                                                                                                                  ---

                                                                                              2016                                                2017           2018                2018

                                                                                 NIS millions                                    NIS millions          NIS millions   
     
     US$ millions

                                                                                                                                                                                   ---

        Net income (loss).............................                                         150                                                 113           (64)               (17)


        Taxes on income (tax benefit).........                                                  10                                                  40            (6)                (2)


        Financing income.............................                                         (46)                                               (52)          (46)               (12)


        Financing expenses........................                                             196                                                 196            190                  51


        Other expenses (income)................                                                  8                                                 (1)                                -


        Depreciation and amortization..........                                                534                                                 555            584                 156


        Share based payments....................                                                 6                                                   2              2                   -



        Adjusted EBITDA..............................                                          858                                                 853            660                 176


                                                        Three-month period ended

                                                    
     
            December 31



                                                                            2016          2017           2018   
       
        Convenience

                                                              NIS millions       NIS millions  NIS millions   
       
       translation

                                                                                                                            into US dollar

                                                                                                                                      2018

                                                                                                                      US$ millions



      Net income (loss)............................                           14            10           (35)                            (9)



     Taxes on income (tax benefit)........                                 (22)            5            (2)                            (1)


      Financing income............................                          (13)         (17)          (13)                            (3)


      Financing expenses........................                              53            47             58                              15


      Other expenses..............................                             3             1



     Depreciation and amortization........                                  136           143            155                              41



     Share based payments.................                                    2



      Adjusted EBITDA............................                            173           189            163                              43


                                                                            
            
                Cellcom Israel Ltd.


                                                                              
               (An Israeli Corporation)







              
                Reconciliation for Non-IFRS Measures (cont'd)

    ---




              
                
                  Free cash flow





              The following table shows the calculation of free cash flow:




                                                                              Year ended December 31            
           
       Convenience

                                                                                                              
           
       translation

                                                                                                                                into US dollar

                                                                                                               
           
       Year ended

                                                                                                              
           
       December 31

                                                                                                                                             ---

                                                                                                2016                                         2017           2018                2018

                                                                                   NIS millions                             NIS millions          NIS millions   
     
     US$ millions

                                                                                                                                                                              ---


              Cash flows from operating                                                         781                                          774            769                 205
       activities(*)..........................................



              Loan to Golan Telecom..........................                                     -                                         130



              Cash flows from investing activities......                                      (364)                                       (644)         (631)              (168)



              Purchase (sale) of tradable                                                       (1)                                          65             43                  11
        debentures(**)...................................




              Free cash flow......................................                              416                                          325            181                  48


                                                                   Three-month period ended

                                                               
     
            December 31



                                                                                       2016          2017           2018   
       
        Convenience

                                                                         NIS millions       NIS millions  NIS millions   
       
       translation

                                                                                                                                       into US dollar

                                                                                                                                                 2018

                                                                                                                                 US$ millions




     Cash flows from operating                                                         178           214            165                              44

         activities(*)........................................


      Cash flows from investing activities....                                         (96)        (133)         (148)                           (39)



     Purchase (sale) of tradable                                                         1           (4)          (10)                            (3)

         debentures(**)..................................



      Free cash
       flow....................................                                          83            77              7                               2


               (*) 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                         Q1-2017 Q2-2017                              Q4-2017        Q1-2018     Q2-2018                      Q4-2018       FY-2017       FY-2018


       
                stated                                                                 Q3-2017                                                             Q3-2018

    ---                                                                                                                                                                                                         ---




       Cellular service revenues                                              509      481         488                        451             437          434             443           416         1,929          1,730



       Fixed-line service revenues                                            279      292         292                        303             304          300             310           301         1,166          1,215





       Cellular equipment revenues                                            183      192         191                        204             193          157             146           159           770            655



       Fixed-line equipment revenues                                           37       39          47                         59              39           76              52            82           182            249





       Consolidation adjustments                                             (49)    (42)       (43)                      (42)           (40)        (40)           (41)          (40)         (176)         (161)

    ---


       
                Total revenues                                            959      962         975                        975             933          927             910           918         3,871          3,688





       Cellular adjusted EBITDA                                               159      158         160                        118             112           71             111            97           595            391



       Fixed-line adjusted EBITDA                                              42       79          66                         71              68           62              73            66           258            269

    ---


       
                Total adjusted EBITDA                                     201      237         226                        189             180          133             184           163           853            660





       
                Operating profit (loss)                                    67      102          83                         45              45         (12)             33             8           297             74



       Financing expenses, net                                                 31       44          39                         30              33           36              30            45           144            144



       
                Profit (loss) for the period                               26       45          32                         10               7         (37)              1          (35)          113           (64)





       
                Free cash flow                                             66       77         105                         77              84           56              34             7           325            181





       Cellular subscribers at the end of                                   2,792    2,779       2,805                      2,817           2,822        2,809           2,825         2,851         2,817          2,851


       period (in 000's)



       Monthly cellular ARPU (in NIS)                                        60.2     57.0        57.8                       53.6            51.8         51.8            52.5          49.0          57.1           51.3



       Churn rate for cellular subscribers                                  12.0%   10.8%      11.5%                     11.5%           9.5%       12.6%          10.0%         11.1%         45.8%         43.2%


       (%)



                                                                                                                                      
              
                Cellcom Israel Ltd.







       
                
          Disclosure for debenture holders as of December 31, 2018

    ---




       
                
          Aggregation of the information regarding the debenture series issued by the Company (1), in million NIS

    ---






       Series                      Original Issuance Date     
              Principal        
              As of 31.12.2018                                                     As of 17.03.2019                       Interest Rate (fixed)        Principal Repayment
                                                                                                                                                                                                                                                            Dates              
              Interest               
            Linkage          
              Trustee

                                                             
              on the                                                                                                                                                                                     
            Repayment                                        
              Contact Details

                                                             
              Date of Issuance                                                                                                                                                                             
            Dates (3)



    ---                                                                                                                                                                                                                                                                                                                                                                                                                 ---

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


       Balance on Trade

    ---                                                                                                                                                                                                                                                            ---

        F (4)(5)(6)(8) **                
              20/03/12        714.802         428.881         444.421           10.021         454.442          230.454         214.441         221.601                      4.60%   
              05.01.17          
              05.01.20            
              January-5            
              Linked to        
              Strauss Lazar Trust Company (1992)

                                                                                                                                                                                                                                                                             
              and July-5             
            CPI              
              Ltd. Ori Lazar. 17 Yizhak Sadeh St.,

                                                                                                                                                                                                                                                                                                                                         
              Tel Aviv. Tel: 03- 6237777.

    ---                                                                                                                                                                                                                                                                                                                                                                                                                             ---

        G (4)(5)(6)(8)                   
              20/03/12        285.198          85.559          85.559            2.933          88.492           88.537           0.000           0.000                      6.99%   
              05.01.17          
              05.01.19            
              January-5            
              Not linked                  Strauss Lazar Trust Company (1992) Ltd. Ori Lazar. 17 Yizhak Sadeh St., Tel Aviv.
                                                                                                                                                                                                                                                                                                                                                       Tel: 03-6237777.

                                                                                                                                                                                                                                                                             
              and July-5

    ---                                                                                                                                                                                                                                                                                                                                                                                                                             ---

        H (4)(5)(7)**                    
              08/07/14        949.624         835.669         777.371            8.146         785.517          861.073         835.669         779.577                      1.98%   
              05.07.18          
              05.07.24            
              January-5            
              Linked to CPI               Mishmeret Trust Company Ltd. Rami Sebty. 48 Menachem Begin Rd. Tel Aviv. Tel:
                                                                                                                                                                                                                                                                                                                                                       03-6374355.

                          
             03/02/15*                                                                                                                                                                                                                                  
              and July-5

                          
             11/02/15*

    ---                                                                                                                                                                                                                                                                                                                                                                                                                             ---

        I (4)(5)(7)**                    
              08/07/14        804.010         723.609         700.557           14.691         715.248          753.856         723.609         701.924                      4.14%   
              05.07.18          
              05.07.25                       January-5 and July-5 
              Not linked                  Mishmeret Trust Company Ltd. Rami Sebty. 48 Menachem Begin Rd. Tel Aviv. Tel:
                                                                                                                                                                                                                                                                                                                                                       03-6374355.

                          
             03/02/15*

                          
             11/02/15*

                          
             28/03/16*

    ---                                                                                                                                                                                                                                                                                                                                                                                                                             ---

        J (4)(5)                         
              25/09/16        103.267         103.267         103.709            1.256         104.965          106.892         103.267         103.448                      2.45%   
              05.07.21          
              05.07.26                       January-5 and July-5 
              Linked to CPI               Mishmeret Trust Company Ltd. Rami Sebty. 48 Menachem Begin Rd. Tel Aviv. Tel:
                                                                                                                                                                                                                                                                                                                                                       03-6374355.

    ---                                                                                                                                                                                                                                                                                                                                                                                                                             ---

        K (4)(5)**                       
              25/09/16        710.634         710.634         704.778           12.372         717.150          711.131         710.634         705.075                      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.

                          
             01/07/18*

                          
             10/12/18*

    ---                                                                                                                                                                                                                                                                                                                                                                                                                             ---

        L(4)(5)**                        
              24/01/18        613.937         613.937         585.835           14.339         600.174          548.553         613.937         586.699                      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.

                          
             10/12/18*

    ---                                                                                                                                                                                                                                                                                                                                                                                                                             ---


       Total                                                   4,181.472       3,501.556       3,402.230           63.758       3,465.988        3,300.496       3,201.557       3,098.324

    ---

Comments:

(1) For a summary of the terms of the Company's outstanding debentures see the Company's 2018 Annual Report under "Item 5. Operating and Financial Review and Prospects - B. Liquidity and Capital Resources - Debt Service - Public Debentures". In the reporting period, the Company fulfilled all terms of the debentures and Indentures. Debentures financial covenants - as of December 31, 2018 the net leverage (net debt to Adjusted EBITDA excluding one-time events ratio- see definition in the reference above to the Company's 2018 Annual Report (The definition of Adjusted EBITDA is identical to the definition of EBITDA (which the Company used in previous periods)) was 3.45. In the reporting period, no cause for early repayment occurred. (2) Including interest accumulated in the books. (3) Semi-annual payments other than regarding Series L. (4) Regarding the debentures, the Company undertook not to create any pledge on its assets, as long as debentures or loans are not fully repaid, subject to certain exclusions. (5) Regarding the debentures - the Company has the right for early redemption under certain terms. (6) Regarding debenture Series F 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) On January 5, 2019, after the end of the reporting period, the Company repaid principal payments of approximately NIS 308 million of Series F and G debentures (the ex-date of which was December 24, 2018) and Series G debentures were fully repaid.

(*) On these dates additional debentures of the series were issued, the information in the table refers to the full series.
(**) As of December 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 December 31, 2018 (cont'd)

    ---






       
          
         Debentures Rating Details*

    ---





        Series 
     Rating Company                   Rating as of 31.12.2018 (1)   
            Rating as of   
       Rating assigned upon     
         Recent date of rating as of           Additional ratings between original issuance and the recent
                                                                                                                                                                                  date of rating as of 17.03.2019 (2)

                                                                              
            17.03.2019     
       issuance of the Series   
         17.03.2019

    ---                                                                                                                                                                                                                                                                                           ---

                                                                                                              
              Rating



        F      
     S&P Maalot            
              A+                            
            A+             
       AA                                                         
     12/2018                                                     
              05/2012, 11/2012, 06/2013, 06/2014, 08/2014, 01/2015, 
     AA,AA-,A+ (2)

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

                                                                                                                                                                                                                                                                        
              08/2018, 12/2018

    ---                                                                                                                                                                                                                                                                                                               ---

        G      
     S&P Maalot            
              A+                            
            A+             
       AA                                                         
     12/2018 05/2012, 11/2012, 06/2013, 06/2014, 08/2014, 01/2015, 09/2015, 03/2016, 08/2016, 06/2017, 01/2018, 06/2018, 08/2018,
                                                                                                                                                                                                                                                                                              12/2018 
     AA,AA-,A+ (2)

    ---                                                                                                                                                                                                                                                                                                               ---

        H      
     S&P Maalot            
              A+                            
            A+             
       A+                                                         
     12/2018         
              06/2014, 08/2014, 01/2015, 09/2015, 03/2016, 08/2016, 06/2017, 01/2018, 06/2018, 08/2018, 12/2018 
     A+ (2)

    ---                                                                                                                                                                                                                                                                                                               ---

        I      
     S&P Maalot            
              A+                            
            A+             
       A+                                                         
     12/2018         
              06/2014, 08/2014, 01/2015, 09/2015, 03/2016, 08/2016, 06/2017, 01/2018, 06/2018, 08/2018, 12/2018 
     A+ (2)

    ---                                                                                                                                                                                                                                                                                                               ---

        J      
     S&P Maalot            
              A+                            
            A+             
       A+                                                         
     12/2018                                                      
              08/2016, 06/2017, 01/2018, 06/2018, 08/2018, 12/2018 
     A+ (2)

    ---                                                                                                                                                                                                                                                                                                               ---

        K      
     S&P Maalot            
              A+                            
            A+             
       A+                                                         
     12/2018                                                      
              08/2016, 06/2017, 01/2018, 06/2018, 08/2018, 12/2018 
     A+ (2)

    ---                                                                                                                                                                                                                                                                                                               ---

        L      
     S&P Maalot            
              A+                            
            A+             
       A+                                                         
     12/2018                                                      
              08/2016, 06/2017, 01/2018, 06/2018, 08/2018, 12/2018 
     A+ (2)

    ---                                                                                                                                                                                                                                                                                                               ---

(1) In December 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, January 2018, June 2018, August 2018 and December 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 23, 2018, included in the Company's Shelf offering Report filled in the Israeli Securities Authority website ('MAGNA") on December 06, 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              Principal Repayment   
              Interest        
             Linkage

                                                          
              31.12.2018    
              (nominal)                  Dates (annual         
              Repayment

                                                                                                                         payments)             
              Dates (semi-

                                                                                                                                               
              annual

                                                                                                                                               
              p
              ayments)

    ---                                                                                                                                                                                       ---

        From                    
              To

    ---

        Loan from
         financial                     
              06/2016           150         4.60%   
              30.06.18        
              30.06.21              
              June-30               
       Not linked

        institution (2)(3)(4)(5)(6)                                                                                                              
              and

                                                                                                                                                 
              December-31
              ,

                                                                                                                                                 
              commencing

                                                                                                                                                 
              December 31,

                                                                                                                                                 
              2016 through

                                                                                                                                                 
              June 30, 2021

    ---                                                                                                                                                                                         ---

        Loan from
         bank(2)(3)(4)(5)(6)           
              12/2016           112         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                     
              06/2017           200         5.10%   
              30.06.19        
              30.06.22              
              June-30               
       Not linked

        institution(2)(3)(4)(5)(6)                                                                                                               
              and

                                                                                                                                                 
              December-31,

                                                                                                                                                 
              commencing

                                                                                                                                                 
              December 31,

                                                                                                                                                 
              2017 through

                                                                                                                                                 
              J
              une 30, 2022

    ---                                                                                                                                                                                         ---


       Total                                                     462

    ---

Comments:

(1) For a summary of the terms of the Company's loan agreements see the Company's 2018 Annual Report under "Item 5. Operating and Financial Review and Prospects - B. Liquidity and Capital Resources - Other Credit Facilities" and the reference therein to "- Debt Service - Public Debentures". (2) In the reporting period, the Company fulfilled all terms of the loan agreements. (3) Loan agreements financial covenants - as of December 31, 2018 the net leverage (net debt to Adjusted EBITDA excluding one-time events ratio- see definition in the reference above to the Company's 2018 Annual Report (The definition of Adjusted EBITDA is identical to the definition of EBITDA (which the Company used in previous periods)) was 3.45. (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 2018 Annual Report.


Cellcom Israel Ltd.

Summary of Financial Undertakings (according to repayment dates) as of December 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                       ILS not                Euro                  Dollar Other

                CPI                       linked to CPI

        ---

            First
             year        336,152   165,386                                                          106,973

    ---

            Second
             year        336,152    80,260                                                           88,999

    ---

            Third
             year        167,756   218,496                                                           78,310

    ---

            Fourth
             year        167,756   218,496                                                           66,495

    ---

               Fifth
                year
               and on    337,266 1,445,522                                                          144,861

        ---

            Total      1,385,082 2,128,160                                                          485,638

    ---

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

                                                                  t
                                                                       ax)



               ILS
             linked
               to      ILS not                        Euro       Dollar    Other

              CPI   linked to CPI

        ---

             First
             year                                  100,000                       14,655

    ---

             Second
             year                                  100,000                        9,812

    ---

             Third
             year                                  100,000                        4,955

    ---

             Fourth
             year                                   50,000                        1,264

    ---

             Fifth
             year
             and
             on

    ---

            Total                                  350,000                       30,686

    ---

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

                                                                              t
                                                                                  ax)



                      ILS
                    linked
                      to           ILS not                        Euro       Dollar   Other

                     CPI        linked to CPI

          ---


       
         First year                                        28,000                       4,800

    ---


       
         Second year                                       28,000                       3,430

    ---


       
         Third year                                        28,000                       2,056

    ---


       
         Fourth year                                       28,000                         684

    ---


       
         Fifth year and on

    ---


       
         Total                                            112,000                      10,970

    ---

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

Cellcom Israel Ltd.

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

                                                                              t
                                                                                     ax)



            ILS linked
                 to                       ILS not                Euro                   Dollar Other

                CPI                       linked to CPI

        ---

            First
             year        336,152   293,386                                                           126,428

    ---

            Second
             year        336,152   208,260                                                           102,241

    ---

            Third
             year        167,756   346,496                                                            85,321

    ---

            Fourth
             year        167,756   296,496                                                            68,443

    ---

            Fifth
             year
             and on      377,267 1,445,522                                                           144,861

    ---

            Total      1,385,082 2,590,160                                                           527,294

    ---

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             ILS not              Euro                   Dollar Other

           to
           CPI              linked to

                            CPI

    ---

         First
         year     342   575                                                          247

    ---

         Second
         year     342   141                                                          219

    ---

         Third
         year     441   661                                                          207

    ---

         Fourth
         year     441   661                                                          173

    ---

         Fifth
         year
         and
         on       928 3,543                                                          355

    ---

        Total   2,494 5,580                                                        1,201

    ---

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.

View original content:http://www.prnewswire.com/news-releases/cellcom-israel-announces-fourth-quarter-and-full-year-2018-results-300813735.html

SOURCE Cellcom Israel Ltd.