Cellcom Israel Announces Second Quarter 2019 Results

NETANYA, Israel, Aug. 15, 2019 /PRNewswire/ --

Cellcom Israel concludes the second quarter of 2019 with a loss of NIS 35 million compared to a loss of NIS 37 million in the corresponding quarter of 2018. The loss includes approximately NIS 52 million of financing expenses which were adversely effected by the high index in the quarter (1.5%).

The Adjusted EBITDA([2]) increased to NIS 233([1]) million.

Free cash flow([2]) for the quarter totaled NIS 55 million and NIS 101 million for the first 6 months of 2019.

The Company's cellular subscribers base increased by approximately 45 thousand subscribers during this quarter.

Nir Sztern, the Company's CEO: "The financial report for the second quarter of 2019 reflects several encouraging results, including: stability of revenues during several consecutive quarters; increase in adjusted EBITDA compared to previous and corresponding quarters; strong free cash flow of NIS 101 million for the first 6 months of 2019. Nonetheless, financing expenses which increased due to the high index in the quarter, weighed down on the Company in this quarter too, which concluded in a loss."

Second Quarter 2019 Highlights (compared to second quarter of 2018):

    --  Total Revenues totaled NIS 920 million ($258 million) compared to NIS
        927 million ($260 million) in the second quarter last year, a decrease
        of 0.8%
    --  Service revenues totaled NIS 695 million ($195 million) compared to NIS
        694 million ($195 million) in the second quarter last year, an increase
        of 0.1%
    --  Operating income totaled NIS 6 million ($2 million) compared to
        Operating loss of NIS 5 million ($1 million) in the second quarter last
        year
    --  Loss totaled NIS 35 million ($10 million) compared to NIS 37 million
        ($10 million) in the second quarter last year
    --  Adjusted EBITDA(2) totaled NIS 233 million ($65 million) compared to NIS
        140 million ($39 million) in the second quarter last year, an increase
        of 66.4%
    --  Net cash from operating activities totaled NIS 219 million ($61 million)
        compared to NIS 179 million ($50 million) in the second quarter last
        year, an increase of 22.3%
    --  Free cash flow(2) totaled NIS 55 million ($15 million) compared to NIS
        56 million ($16 million) in the second quarter last year, a decrease of
        1.8%

Nir Sztern, the Company's Chief Executive Officer, referred to the results of the second quarter of 2019: "Alongside the intense competition in the communications market, the Cellcom group is in a substantial execution momentum and continues to develop its future growth engines. A few days ago we announced the completion of the investment transaction in IBC and the sale transaction of the fiber-optic infrastructure we deployed in residential areas, to IBC, placing IBC in an excellent position to continue a fast fiber deployment and bring the internet revolution to Israel.

"The financial report for the second quarter of 2019 reflects several encouraging results, including: stability of revenues during several consecutive quarters; increase in adjusted EBITDA compared to previous and corresponding quarters; strong free cash flow of NIS 101 million for the first 6 months of 2019. Nonetheless, financing expenses weighed down on the Company in this quarter too, which concluded in a loss. We believe that Cellcom's strategy, alongside developing new and strong growth engines will assist the Company's financial situation.

"Cellcom's financial situation is stable and strong. Though its debt rating decreased to A which is still a high rating, the company generates a positive cash flow and holds a cash balance of approximately NIS 1.3 billion at quarter end, very high liquidity and continues to have access to the Israeli capital market and debt market."

Shlomi Fruhling, the Company's Chief Financial Officer, said: "The Company's service revenues in the second quarter of 2019 totaled NIS 695 million. The revenues reflect a 2.5% increase compared to the previous quarter and stability compared to the corresponding quarter.

"Service revenues in the cellular segment totaled NIS 420 million in the second quarter of 2019, an increase of 4.0% compared to the previous quarter. The increase resulted from positive seasonality in roaming revenues and from increase in revenues from the network sharing agreements. Service revenues in the fixed-line segment totaled NIS 312 million in the second quarter of 2019, a decrease of 1.6% compared to the previous quarter. The entire decrease resulted from a decrease in operators liaison activity which was offset by the continued growth in internet and TV services.

"Adjusted EBITDA for the quarter totaled NIS 233 million, compared to NIS 224 million in the previous quarter.

"Financing expenses, net, in the second quarter of 2019, totaled NIS 52 million, compared to NIS 27 million in the previous quarter. The increase in financing expenses resulted mainly from an increase from linkage differences to the CPI, in connection with the Company's debentures, due to a high increase of 1.5% in the Israeli consumer price index during the quarter. The financing expenses deepened the loss for the second quarter which totaled NIS 35 million.

"Free cash flow for the second quarter of 2019 totaled NIS 55 million, compared to NIS 46 million in the previous quarter. The improvement in the FCF compared to the previous quarter resulted mainly from a decrease in investments. The Company's cash and cash equivalents balance at end of the second quarter of 2019 are approximately NIS 1.3 billion.

"After the reporting period, the Company completed the investment transaction in IBC and the sale transaction of its fiber-optic infrastructure in residential areas to IBC. Following the completion of the transactions, the Company is expected to substantially decrease its capital investments as early as 2020 and the expenses for wholesale market access payments as more and more customers transfer to IBC's fiber-optic infrastructure.

"The Company's Board of Directors decided not to distribute dividends in respect of the results of the second quarter of 2019, 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" or the "Group") announced today its financial results for the second quarter of 2019.

The Company reported that revenues for the second quarter of 2019 totaled NIS 920 million ($258 million); Adjusted EBITDA for the second quarter of 2019 totaled NIS 233 million ($65 million), or 25.3% of total revenues; loss for the second quarter of 2019 totaled NIS 35 million ($10 million). Basic loss per share for the second quarter of 2019 totaled NIS 0.30 ($0.08).

Main Consolidated Financial Results:


                       Q2/2019         Q2/2018  Change%   Q2/2019    Q2/2018



                   NIS million     US$ million
                               (convenience
                               translation)



         Total
         revenues          920              927    (0.8)%        258         260

    ---

         Operating
         Income
         (loss)              6              (5)      N/A          2         (1)

    ---

        Loss              (35)            (37)     5.4%       (10)       (10)

    ---

         Free
         cash
         flow               55               56    (1.8)%         15          16

    ---

         Adjusted
         EBITDA            233              140     66.4%         65          39

    ---

         Adjusted
         EBITDA,
         as
         percent
         of
         total
         revenues        25.3%           15.1%    67.5%

    ===

Main Financial Data by Operating Segments:


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

                                                                                 (***)



                         NIS million     Q2'19         Q2'18                     Change              Q2'19          Q2'18    Change     Q2'1
     9     Q2'18     Q2'19     Q2'18         Change

                                                                                   %                                            %                                                 
     
        %



               Total
                revenues                      582              591                    (1.5)%                    375      376     (0.3)%        (37)      (40)       920       927           (0.8)%

    ---

               Service
                revenues                      420              434                    (3.2)%                    312      300       4.0%        (37)      (40)       695       694             0.1%

    ---

               Equipment
                revenues                      162              157                      3.2%                     63       76    (17.1)%                             225       233           (3.4)%

    ---

               Adjusted
                EBITDA                        163               78                    109.0%                     70       62      12.9%                             233       140            66.4%

    ---

               Adjusted
                EBITDA,                     28.0%           13.2%                   112.1%                  18.7%   16.5%     13.3%                           25.3%     15.1%          67.5%
    as percent
     of total
     revenues

    ===

(*) 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 (second quarter of 2019 compared to second quarter of 2018):

Revenues for the second quarter of 2019 decreased 0.8% totaling NIS 920 million ($258 million), compared to NIS 927 million ($260 million) in the second quarter last year. The decrease in revenues is mainly attributed to a 3.4% decrease in equipment revenues.

Service revenues totaled NIS 695 million ($195 million) in the second quarter of 2019, a 0.1% increase from NIS 694 million ($195 million) in the second quarter last year.

Service revenues in the cellular segment totaled NIS 420 million ($118 million) in the second quarter of 2019, a 3.2% decrease from NIS 434 million ($122 million) in the second 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, which was partially offset by growth in revenues from the network sharing agreement.

Service revenues in the fixed-line segment totaled NIS 312 million ($87 million) in the second quarter of 2019, a 4.0% increase from NIS 300 million ($84 million) in the second quarter last year. The increase resulted mainly from an increase in revenues from internet and TV services. This increase was partially offset by a decrease in revenues from international calling services.

Equipment revenues totaled NIS 225 million ($63 million) in the second quarter of 2019, a 3.4% decrease compared to NIS 233 million ($65 million) in the second quarter last year. The decrease resulted mainly from a decrease in equipment sales in the fixed-line segment.

Cost of revenues for the second quarter of 2019 totaled NIS 679 million ($190 million), a 0.6% increase compared to NIS 675 million ($189 million) in the second quarter of 2018. This increase resulted mainly from increase in cost of access payments to Bezeq and content costs in the fixed-line segment, which were partially offset by one-time costs recorded in the second quarter last year.

Gross profit for the second quarter of 2019 decreased 3.6% to NIS 241 million ($68 million), compared to NIS 252 million ($71 million) in the second quarter of 2018. Gross profit margin for the second quarter of 2019 amounted to 26.2%, down from 27.2% in the second quarter of 2018.

Selling, Marketing, General and Administrative Expenses ("SG&A Expenses") for the second quarter of 2019 increased 1.3% to NIS 241 million ($68 million), compared to NIS 238 million ($67 million) in the second quarter of 2018. This increase is primarily as a result of an increase in expenses of salaries and commissions expenses which were capitalized as part of the customer acquisition costs, as a result of early adoption of an International Financial Reporting Standard (IFRS 15) as of the first quarter of 2017 (the "Adoption of IFRS 15"), that was partially offset by a decrease in salaries expenses.

Other income for the second quarter of 2019 totaled NIS 6 million ($2 million), compared with other expenses of NIS 19 million ($5 million) in the second quarter of 2018. The other income of the second quarter of 2019 mainly included an interest income from the sale of equipment by installments, compared to expenses in the second quarter of 2018 which included NIS 26 million of employee voluntary retirement plan expenses that was partially offset by interest income from sale of equipment by installments.

Operating income for the second quarter of 2019 totaled NIS 6 million ($2 million), compared to operating loss of NIS 5 million ($1 million) in the second quarter of 2018.

Adjusted EBITDA for the second quarter of 2019 increased by 66.4% totaling NIS 233 million ($65 million) compared to NIS 140 million ($39 million) in the second quarter of 2018. Adjusted EBITDA as a percent of revenues for the second quarter of 2019 totaled 25.3%, up from 15.1% in the second quarter of 2018.

Cellular segment Adjusted EBITDA for the second quarter of 2019 totaled NIS 163 million ($46 million), compared to NIS 78 million ($22 million) in the second quarter last year, an increase of 109.0%, which resulted mainly from a decrease in rent expenses in a total amount of NIS 61 million which were recognized as a right-of-use asset as a result of the initial implementation of IFRS 16 as of 1 January, 2019 and from a decrease in employee voluntary retirement plan expense that was recognized on the second quarter of 2018. This increase was partially offset by a decrease in revenues from services, which resulted mainly from ongoing erosion in the price of these services as a result of the competition in the cellular market.

Fixed-line segment Adjusted EBITDA for the second quarter of 2019 totaled NIS 70 million ($20 million), compared to NIS 62 million ($17 million) in the second quarter last year, a 12.9% increase, which resulted mainly from a decrease in rent expenses in a total amount of NIS 7 million which were recognized as a right-of-use asset as a result of the initial implementation of IFRS 16 as of 1 January, 2019, a decrease in employee voluntary retirement plan expense that was recorded in the second quarter of 2018 and due to the increase in activity in internet and TV fields.

Financing expenses, net for the second quarter of 2019 totaled NIS 52 million ($15 million), compared with NIS 43 million ($12 million) in the second quarter of 2018, an increase of 20.9%, which resulted mainly from linkage differences to CPI, in connection with the Company's debentures.

Loss for the second quarter of 2019 totaled NIS 35 million ($10 million), compared with loss of NIS 37 million ($10 million) in the second quarter of 2018.

Basic loss per share for the second quarter of 2019 totaled NIS 0.30 ($0.08), compared to basic loss per share of NIS 0.36 ($0.10) in the second quarter last year.

Operating Review

Main Performance Indicators - Cellular segment:


                                       Q2/2019 Q2/2018  Change (%)



        Cellular subscribers at the
         end of period (in thousands)    2,745    2,809       (2.3)%

    ---

        Churn Rate for cellular
         subscribers (in %)             11.3%   12.6%     (10.3)%

    ---

        Monthly cellular ARPU (in NIS)    51.9     51.8         0.2%

    ---

Cellular subscriber base - Cellular subscriber base of the company increased by 45,000 subscribers during the second quarter of 2019 and was approximately 2.745 million subscribers. At the end of the first quarter of 2019, the company deleted 153,000 subscribers from its subscriber base count, due to a change in the counting method of the company's cellular subscriber base. These subscribers generate negligible revenues to the Company.

Cellular Churn Rate for the second quarter of 2019 totaled to 11.3%, compared to 12.6% in the second quarter last year. (Eliminating the subscribers' deletion due to changing subscribers counting method).

The monthly cellular Average Revenue per User ("ARPU") for the second quarter of 2019 totaled 51.9 NIS ($14.6), compared to NIS 51.8 ($14.5) in the second quarter last year. The increase in ARPU resulted mainly from increase of NIS 2.8 ($0.8) due to prepaid and M2M subscribers' deletion from the Company's cellular subscriber base, that was partially offset ongoing erosion in the prices of cellular services.

Main Performance Indicators - Fixed-line segment:


                                     Q2/2019 Q2/2018  Change (%)



                    Internet
                     infrastructure
                     field
                     subscribers -
                     (households) at     278      248        12.1%
    the end of
     period (in
     thousands)

    ---

                    TV field
                     subscribers -
                     (households) at
                     the                 239      195        22.6%
    end of period
     (in thousands)

    ===

In the second quarter of 2019, the Company's subscriber base in the TV field increased by approximately 12 thousand net households.

The Company's subscriber base in the internet infrastructure field remained the same compared to the last quarter, as a result of the company's decision to focus on transferring subscribers to independent fiber infrastructure and connecting customers to a standalone tv service.

Financing and Investment Review

Cash Flow

Free cash flow for the second quarter of 2019 totaled NIS 55 million ($15 million), compared to NIS 56 million ($16 million) in the second quarter of 2018, a 1.8% decrease. The decrease in free cash flow resulted mainly from a decrease of receipts from customers that was partially offset by a decrease in payments to end user equipment suppliers, tax payments and salaries expenses.

Total Equity

Total Equity as of June 30, 2019 amounted to NIS 1,628 million ($457 million) primarily consisting of undistributed accumulated retained earnings of the Company.

Cash Capital Expenditures in Fixed Assets and Intangible Assets and others

During the second quarter of 2019, the Company invested NIS 113 million ($32 million) in fixed assets and intangible assets and others (including, among others, investments in the Company's communications networks, investments in deploying of fiber optic, information systems, software and TV set-top boxes and capitalization of part of the customer acquisition costs as a result of the adoption of IFRS 15), compared to NIS 131 million ($37 million) in the second quarter of 2018.

Dividend

On August 14 2019, the Company's Board of Directors decided not to declare a cash dividend for the second quarter of 2019. 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 2018 Annual Report, under "Item 8 - Financial Information - A. Consolidated Statements and Other Financial Information - Dividend Policy".

Other developments during the second quarter of 2019 and subsequent to the end of the reporting period

Company's Investment Transaction in IBC and Company's sale of fiber-optic infrastructure transaction completed

In August 2019, following the Company's previous reports regarding a possible indirect co-investment of the Company and the Israel Infrastructure Fund, or IIF, in IBC Israel Broadband Company (2013) Ltd., or IBC, and a possible sale of the Company's independent fiber-optic infrastructure in residential areas to IBC, both transactions were completed.

    --  The Company paid the sum of appx. NIS 55 million (out of appx. NIS 110
        million) for its indirect stake in IBC, the majority of which shall be
        indirectly provided as shareholder loan to IBC.
    --  The Company received the sum of appx. NIS 180 million for its
        independent fiber-optic infrastructure in residential areas
        (representing independent fiber-optic infrastructure deployed until the
        closing), which was financed entirely through shareholder loans
        indirectly provided to IBC by the Company and IIF, each in the amount of
        appx. NIS 90 million. Additional consideration shall be paid for
        additional future deployment to be carried out by the Company.

For additional details see the Company's annual report for the year ended December 31, 2018 on Form 20-F dated March 18, 2019 under Item 4. "Information on the Company - A. History and Development of the Company - Fixed-line Infrastructure - Investment in IBC".

Frequencies Tender Published

In July 2019, the Company announced that the Israeli Ministry of Communications published a frequencies tender including for 5G services, expected to be conducted in Q4/2019. The tender is to include 30MHz in the 700MHz frequencies band, 60MHz in the 2600MHz frequencies band and 300 MHz in the 3500-3800 MHz frequencies band. The tender will be open for MNOs only, other than 100MHz in the 3500-3600 MHz frequencies band which will be open for any contender. New contenders may only provide specific 5G services. MNOs sharing a network shall provide a joint bid (subject to the tender committee's prior approval). The tender further sets maximum frequency allocation per network / new contender, coverage, timeline and quality requirements for winning certain frequencies. The tender also includes certain leniencies and performance based incentives.

The Company is studying the tender documents and at this time cannot evaluate its implications on the Company.

For additional details see the Company's most recent annual report for the year ended December 31, 2018 on Form 20-F, filed on March 18, 2019, under "Item 3. Key Information - D. Risk Factors - Risks Related to our Business - We face intense competition in all aspects of our business", "- We may be adversely affected by significant technological and other changes in the cellular communications industry" and "Item 4. Information on The Company - B. Business Overview - Network and Infrastructure- Spectrum allocation".

Rating Downgrade In Relation To Debentures Traded In Israel

In August 2019, the Company announced that Standard & Poor's Maalot, or Maalot, downgraded the Company's rating to ilA and maintained the Company's rating outlook at "negative", in relation to the Company's debentures traded on the Tel Aviv Stock Exchange.

According to Maalot's report, the downgrade of rating reflects Maalot's estimation that the intensive competition in the market will continue through 2019-2020 (at least) and further weakening of the Company's operational performance, which may result in Adjusted EBITDA margin of less than 20%; erosion in the Company's operational performance without substantial reduction of its debt will lead to increased leverage and finance risk; investment in IBC may benefit the Company's business profile in the mid-long range due to reduction of its dependency on Bezeq's internet infrastructure. According to Maalot's report, the "negative" forecast reflects Maalot's estimation of further erosion to the Company's operational performance due to the competition in the market, and given the high investment needs which may lead to very low free cash flow over the next 12 months.

The aforementioned downgrade does not increase the Company's interest payments on its current debt.

For additional details regarding the Company's public debentures and undertakings of the Company in relation to their rating included in the Company's shelf prospectus, see the Company's annual report on Form 20-F for the year ended December 31, 2018 filed on March 18, 2019, under "Item 5. Operating and Financial Review and Prospects - B. Liquidity and Capital Resources - Debt Service -Public Debentures" and our most recent report on Form 6-K dated March 19,2019.

A security rating is not a recommendation to buy, sell or hold securities, it may be subject to revision or withdrawal at any time by the assigning rating organization, and each rating should be evaluated independently of any other rating.

Changes in Management

In August 2019, Ms. Sharon Amit announced her resignation from her position as VP of human resources of the Company. Ms. Amit will continue to serve until her replacement is nominated.

For additional details, see the Company's annual report on Form 20-F for the year ended December 31, 2018 filed on March 18, 2019, under "Item 6. Directors, Senior Management and Employees - A. Directors and Employees".

Conference Call Details

The Company will be hosting a conference call regarding its results for the second quarter of 2019 on Thursday, August 15, 2019 at 09:00 am ET, 06:00 am PT, 2:00 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   UK Dial-in Number: 0 800 4048
      866 744 5399           418


     Israel Dial-in Number: International Dial-in Number:
      03 918 0691            +972 3 918 0691


     at: 09:00 am Eastern   14:00 UK Time; 16:00 Israel
      Time;  06:00 am        Time
      Pacific Time;

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

About Cellcom Israel

Cellcom Israel Ltd., established in 1994, is a leading Israeli communications group, providing a wide range of communications services. Cellcom Israel is the largest Israeli cellular provider, providing its approximately 2.745 million cellular subscribers (as at June 30, 2019) with a broad range of services including cellular telephony, roaming services for tourists in Israel and for its subscribers abroad, text and multimedia messaging, advanced cellular content and data services and other value added services in the areas of music, video, mobile office etc., based on Cellcom Israel's technologically advanced infrastructure. The Company operates an LTE 4 generation network and an HSPA 3.5 Generation network enabling advanced high speed broadband multimedia services, in addition to GSM/GPRS/EDGE networks. Cellcom Israel offers Israel's broadest and largest customer service infrastructure including telephone customer service centers, retail stores, and service and sale centers, distributed nationwide. Cellcom Israel further provides OTT TV services, internet infrastructure and connectivity services and international calling services, as well as landline telephone services in Israel. Cellcom Israel's shares are traded both on the New York Stock Exchange (CEL) and the Tel Aviv Stock Exchange (CEL). For additional information please visit the Company's website http://investors.cellcom.co.il.

Forward-Looking Statements

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

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 3.566 = US$ 1 as published by the Bank of Israel for June 30, 2019.

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.

Financial Tables Follow


                                                                                               
       
              Cellcom Israel Ltd.


                                                                                                 
       (An Israeli Corporation)





     
                Condensed Consolidated Interim Statements of Financial Position (Unaudited)




                                                                             June30,                   June30,               
        
     June 30,                  December 31,
     2018

                                                                                2018                       2019                           2019


                                                                        NIS millions                      US$ millions                       
     
     NIS millions





                   Assets


      Cash and cash equivalents                                                  831                        855                            240                                1,202


      Current investments,
       including derivatives                                                     398                        428                            120                                  404


      Trade receivables                                                        1,215                      1,124                            315                                1,152


      Current tax assets                                                          12                          8                              2                                   11


      Other receivables                                                           86                         81                             23                                   84



     Inventory                                                                   68                         60                             17                                   94





                   Total current assets                                        2,610                      2,556                            717                                2,947





      Trade and other
       receivables                                                               868                        836                            234                                  852


      Property, plant and
       equipment, net                                                          1,602                      1,639                            460                                1,652


      Intangible assets and
       others, net                                                             1,284                      1,306                            366                                1,298


      Right-of-use assets,
       net and Investment
       property                                                                                            759                            213





                   Total non- current
                    assets                                                     3,754                      4,540                          1,273                                3,802





                   Total assets                                                6,364                      7,096                          1,990                                6,749





                   Liabilities


      Current maturities of
       debentures and of loans
       from financial
       institutions                                                              647                        512                            144                                  620


      Current maturities of
       lease liabilities                                                                                   218                             61


      Trade payables and
       accrued expenses                                                          655                        692                            194                                  696



     Provisions                                                                 103                        103                             29                                  105


      Other payables, including
       derivatives                                                               327                        258                             72                                  257





                   Total current liabilities                                   1,732                      1,783                            500                                1,678





      Long-term loans from
       financial institutions                                                    334                        300                             84                                  334



     Debentures                                                               2,498                      2,711                            760                                2,911


      Long-term lease
       liabilities                                                                                         556                            156



     Provisions                                                                  21                         21                              6                                   20


      Other long-term
       liabilities                                                                 3                          4                              1                                   16


      Liability for employee
       rights upon retirement,
       net                                                                        15                         14                              4                                   14


      Deferred tax liabilities                                                   108                         79                             22                                   99





                   Total non- current
                    liabilities                                                2,979                      3,685                          1,033                                3,394





                   Total liabilities                                           4,711                      5,468                          1,533                                5,072





                   Equity attributable to
                    owners of the Company



     Share capital                                                                1                          1                                                                  1



     Share premium                                                              259                        335                             94                                  325


      Receipts on account of
       share options                                                              17                                                                                           10


      Retained earnings                                                        1,372                      1,290                            362                                1,339




                   Non-controlling interest                                        4                          2                              1                                    2





                   Total equity                                                1,653                      1,628                            457                                1,677





                   Total liabilities and
                    equity                                                     6,364                      7,096                          1,990                                6,749


                                                                                                                                            
       
               Cellcom Israel Ltd.


                                                                                                                                              
        (An Israeli Corporation)





              
                
                  Condensed Consolidated Interim Statements of Income 
                  (Unaudited)

    ---



                                                                                                                                                     Convenience                                                                                               Convenience
                                                                                                                                                     translation                                                                                               translation
                                                                                                                                                  into US dollar                                                                                            into US dollar


                                                                                                          For the six     
     
      For the six                                                 For the three   
      
      For the three      
       
           For the
                                                                                               months ended                   months ended                                      months ended                      months ended               year ended
                                                                                                  June 30,                        June 30,                                         June 30,                           June 30,             December 31,



                                                                                                                  2018                 2019                                                           2019                   2018                      2019                       2019          2018

                                                                                                                                                                                                                                                                                           ---

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






              Revenues                                                                                          1,860                1,848                                                            518                    927                       920                        258         3,688



              Cost of revenues                                                                                (1,340)             (1,374)                                                         (385)                 (675)                    (679)                     (190)      (2,661)

                                                                                                                                                                                                                                                                                           ---




              
                Gross profit                                                                           520                  474                                                            133                    252                       241                         68         1,027





              Selling and marketing                                                                             (276)               (307)                                                          (86)                 (144)                    (149)                      (42)        (567)
    expenses



              General and administrative                                                                        (185)               (163)                                                          (46)                  (94)                     (92)                      (26)        (360)
    expenses



              Other income (expenses), net                                                                       (12)                  11                                                              3                   (19)                        6                          2             1

                                                                                                                                                                                                                                                                                           ---




              
                Operating profit (loss)                                                                 47                   15                                                              4                    (5)                        6                          2           101





              Financing income                                                                                     14                   29                                                              8                     11                        12                          3            19



              Financing expenses                                                                                 (97)               (108)                                                          (30)                  (54)                     (64)                      (18)        (190)

                                                                                                                                                                                                                                                                                           ---


              Financing expenses, net                                                                            (83)                (79)                                                          (22)                  (43)                     (52)                      (15)        (171)





              
                Loss before taxes on income                                                           (36)                (64)                                                          (18)                  (48)                     (46)                      (13)         (70)





              Tax benefit                                                                                           6                   13                                                              4                     11                        11                          3             6

                                                                                                                                                                                                                                                                                           ---


              
                Loss for the period                                                                   (30)                (51)                                                          (14)                  (37)                     (35)                      (10)         (64)

                                                                                                                                                                                                                                                                                           ===


              
                Attributable to:



                 Owners of the Company                                                                           (30)                (51)                                                          (14)                  (37)                     (35)                      (10)         (62)



                 Non-controlling interests                                                                                                                                                                                                                                                (2)




              
                Loss for the period                                                                   (30)                (51)                                                          (14)                  (37)                     (35)                      (10)         (64)

                                                                                                                                                                                                                                                                                           ===




              
                Loss per share



              Basic loss per share (in NIS)                                                                    (0.29)              (0.44)                                                        (0.12)                (0.36)                   (0.30)                    (0.08)       (0.58)

                                                                                                                                                                                                                                                                                           ===




              Diluted loss per share (in NIS)                                                                  (0.29)              (0.44)                                                        (0.12)                (0.36)                   (0.30)                    (0.08)       (0.58)

                                                                                                                                                                                                                                                                                           ===




              Weighted-average number of                                                                  101,446,365          116,196,729                                                    116,196,729            101,843,757               116,196,729                116,196,729   107,449,543
    shares used in the calculation of
    basic loss per share (in shares)

                                                                                                                                                                                                                                                                                           ===




              Weighted-average number of                                                                  101,446,365          116,196,729                                                    116,196,729            101,843,757               116,196,729                116,196,729   107,449,543
    shares used in the calculation of
    diluted loss per share (in shares)

                                                                                                                                                                                                                                                                                           ===


                                                                                                                              
              
                Cellcom Israel Ltd.


                                                                                                                                  
              (An Israeli Corporation)




                                                                                                             
       
                Condensed Consolidated Interim Statements of Cash Flows (Unaudited)




                                                                                                             
       
                Convenience                                                                                                                              
       
        Convenience
                                                                                                                 
                translation                                                                                                                                  
        translation
                                                                                                               
               into US dollar                                                                                                                                
       into US dollar


                                                                            For the six   
      
      For the six                 For the three                                          
              
       For the three                   
     
          For the
                                                                 months ended                  months ended      months ended                                                                      months ended                         year ended
                                                                  June 30,                         June 30,        June 30,                                                                            June 30,                       December 31,



                                                                                    2018                2019                                                                  2019                                            2018                                  2019                         2019        2018

                                                                                                                                                                                                                                                                                                        ---

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






              
                Cash flows from operating
    activities



              Loss for the period                                                  (30)               (51)                                                                 (14)                                           (37)                                 (35)                        (10)       (64)



              
                Adjustments for:



              Depreciation and amortization                                         278                 439                                                                   123                                             145                                   225                           63         584



              Share based payments                                                    2                   2                                                                     1                                                                                    2                            1           2



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



              tax benefit                                                           (6)               (13)                                                                  (4)                                           (11)                                 (11)                         (3)        (6)



              Financing expenses, net                                                83                  79                                                                    22                                              43                                    52                           15         171





              
                Changes in operating assets and
    liabilities:



              Change in inventory                                                     2                  34                                                                    10                                               1                                    25                            7        (24)



              Change in trade receivables (including                                 82                  51                                                                    14                                              74                                    67                           19         166
    long-term amounts)



              Change in other receivables (including                               (16)                  1                                                                                                                 (25)                                 (12)                         (3)       (21)
    long-term amounts)



              Changes in trade payables, accrued                                   (11)               (10)                                                                  (3)                                           (42)                                 (93)                        (26)       (26)
    expenses and provisions



              Change in other liabilities (including                                 41                   3                                                                     1                                              36                                     8                            2          11
    long-term amounts)



              Payments for derivative hedging                                       (2)                (7)                                                                  (2)                                                                                 (6)                         (2)          -
    contracts, net



              Income tax paid                                                      (14)                (7)                                                                  (2)                                            (5)                                  (4)                         (1)       (23)

                                                                                                                                                                                                                                                                                                        ---


              
                Net cash from operating activities                       409                 522                                                                   146                                             179                                   219                           62         770

                                                                                                                                                                                                                                                                                                        ---




              
                Cash flows from investing activities



              Acquisition of property, plant and                                  (168)              (186)                                                                 (52)                                           (69)                                 (59)                        (17)      (356)
    equipment



              Acquisition of intangible assets and                                (109)              (111)                                                                 (31)                                           (62)                                 (54)                        (15)      (237)
    others



              Change in current investments, net                                   (37)                (9)                                                                  (2)                                           (36)                                 (11)                         (3)       (56)



              Receipts for other derivative                                           3                   8                                                                     2                                               3                                     7                            2           3
    contracts, net



              Proceeds from sale of property,                                                                                                                                                                                                                                                            1
    plant and equipment



              Interest received                                                       7                   7                                                                     2                                               3                                     3                            1          14



              Proceeds from sale of shares in a                                       5                                                                                                                                       5                                                                            -
    consolidated company, net of cash
    disposed



              
                Net cash used in investing                             (299)              (291)                                                                 (81)                                          (156)                                (114)                        (32)      (631)
    activities

                                                                                                                                                                                                                                                                                                        ---


                                                                                                                                                          
         
                Cellcom Israel Ltd.


                                                                                                                                                            
           (An Israeli Corporation)





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




                                                                                                                               
       
        Convenience                                                                        
       
        Convenience
                                                                                                                                   
        translation                                                                            
        translation
                                                                                                                                 
       into US dollar                                                                          
       into US dollar


                                                                                                                  For the six                        
      
          For the six                                 For the three                        
      
      For the three      
       
           For the
                                                                                                       months ended                                           months ended                       months ended                                          months ended               year ended
                                                                                                        June 30,                                                  June 30,                        June 30,                                                 June 30,             December 31,



                                                                                                                          2018                                         2019                                           2019                                        2018                      2019      2019        2018

                                                                                                                                                                                                                                                                                                             ---

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






              
                Cash flows from financing
    activities



              Payments for derivative contracts, net                                                                                                                                                                                                                                                       (15)



              Receipt of long-term loans from                                                                                                                         150                                             42                                                                                        -
    financial institutions



              Payments for long-term loans from                                                                          (50)                                       (212)                                          (60)                                       (50)                    (212)     (59)       (78)
    financial institutions



              Repayment of debentures                                                                                   (362)                                       (308)                                          (86)                                                                                   (556)



              Proceeds from issuance of                                                                                   396                                                                                                                                                                                997
    debentures, net of issuance costs



              Interest paid                                                                                              (65)                                        (75)                                          (21)                                       (10)                     (10)      (3)      (126)



              Acquisition of non-controlling                                                                                                                                                                                                                                                               (19)
    interests



              Equity offering                                                                                             275                                                                                                                                   275                                           275



              Proceeds from exercise of share                                                                                                                                                                                                                                                                59
    options



              Lease payments                                                                                                                                        (133)                                          (37)                                                                (59)     (17)          -






              
                Net cash from (used in) financing                                                              194                                        (578)                                         (162)                                        215                     (281)     (79)        537
    activities

                                                                                                                                                                                                                                                                                                             ---




              
                Changes in cash and cash                                                                       304                                        (347)                                          (97)                                        238                     (176)     (49)        676
    equivalents





              
                Cash and cash equivalents as at                                                                527                                        1,202                                            337                                         593                     1,031       289         527
    the beginning of the period



              
                Effects of exchange rate changes                                                                                                                                                                                                                                                 (1)
    on cash and cash equivalents




              
                Cash and cash equivalents as at                                                                831                                          855                                            240                                         831                       855       240       1,202
    the end of the period

                                                                                                                                                                                                                                                                                                             ===


                                               
              
                Cellcom Israel Ltd.


                                                   
              (An Israeli Corporation)





     
                Reconciliation for Non-IFRS Measures





     
                
                  Adjusted EBITDA





     The following is a reconciliation of loss to Adjusted EBITDA:




                                                                                               Three-month period ended            
              
                Year ended

                                                                                               June 30,            
             
                December 31,

                                                                                                                   ---

                                                                               2018       2019        
              
               Convenience                                   2018

                                                                                                  
              
               translation

                                                                                                                               into US dollar

                                                                                                                                         2019

                                                                                                                                                                          ---

                                                                                               NIS millions            
             
                US$ millions           
     
             NIS millions

                                                                                                                                                                        ---


     Loss for the period..........................                            (37)      (35)                                              (10)                          (64)



     Tax benefit......................................                        (11)      (11)                                               (3)                           (6)



     Financing income............................                             (11)      (12)                                               (3)                          (19)



     Financing expenses........................                                 54         64                                                 18                            190



     Depreciation and amortization.........                                    145        225                                                 63                            584



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




     Adjusted EBITDA.............................                              140        233                                                 65                            687

                                                                                                                                                                          ===



             
                
                  Free cash flow





             The following table shows the calculation of free cash flow:




                                                                                        Three-month period ended            
              
                Year ended

                                                                                        June 30,            
             
                December 31,

                                                                                                            ---

                                                                            2018   2019        
              
               Convenience                                   2018

                                                                                           
              
               translation

                                                                                                                        into US dollar

                                                                                                                                  2019

                                                                                                                                                                   ---

                                                                                        NIS millions            
             
                US$ millions           
     
             NIS millions

                                                                                                                                                                 ---


             Cash flows from operating                                      179    161                                                 45                            769
      activities(*).........................................



             Cash flows from investing activities.....                    (156) (115)                                              (32)                         (631)



             Sale of short-term tradable                                     33      9                                                  2                             43
      debentures and deposits (**).............

                                                                                                                                                                   ---


             Free cash flow.....................................             56     55                                                 15                            181

                                                                                                                                                                   ===

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

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


                                                                                          
       
                Cellcom Israel Ltd.


                                                                                            
         (An Israeli Corporation)





              
                
                  Key financial and operating indicators

    ---




              
                NIS millions unless otherwise stated                  Q1-2018       Q2-2018                        Q3-2018   Q4-2018    Q1-2019     Q2-2019      FY-2018

    ---                                                                                                                                                                          ---




              Cellular service revenues                                              437            434                             443        416         404          420         1,730



              Fixed-line service revenues                                            304            300                             310        301         317          312         1,215





              Cellular equipment revenues                                            193            157                             146        159         158          162           655



              Fixed-line equipment revenues                                           39             76                              52         82          92           63           249





              Consolidation adjustments                                             (40)          (40)                           (41)      (40)       (43)        (37)        (161)

    ---


              
                Total revenues                                            933            927                             910        918         928          920         3,688





              Cellular adjusted EBITDA                                               119             78                             118        103         146          163           418



              Fixed-line adjusted EBITDA                                              68             62                              73         66          78           70           269

    ---


              
                Total adjusted EBITDA                                     187            140                             191        169         224          233           687





              
                Operating profit (loss)                                    52            (5)                             40         14           9            6           101



              Financing expenses, net                                                 40             43                              37         51          27           52           171



              
                Profit (loss) for the period                                7           (37)                              1       (35)       (16)        (35)         (64)





              
                Free cash flow                                             84             56                              34          7          46           55           181





              Cellular subscribers at the end of                                   2,822          2,809                           2,825      2,851       2,853        2,745         2,851
    period (in 000's)



              Monthly cellular ARPU (in NIS)                                        51.8           51.8                            52.5       49.0        47.2         51.9          51.3



              Churn rate for cellular subscribers (%)                              9.5%         12.6%                          10.0%     11.1%      11.0%       11.3%        43.2%



         
                Cellcom Israel Ltd.





         
                
                  Disclosure for debenture holders as of 
                
                
                  June
                
              
                   30, 2019

    ---




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

    ---




         Series                   
              Original         
              Principal        
              As of 30.06.2019                                                   As of 14.08.2019          Interest Rate (fixed)         Principal Repayment   
              Interest       
              Linkage   
            Trustee
                                   Issuance                    on the Date                                                                                                                                                 Dates                       Repayment
                                   Date                        of Issuance                                                                                                                                                                             Dates (3)                                      
            Contact Details



    ---                                                                                                                                                                                                                                                                                                                                          ---

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

    ---                                                                                                                                                                                                                                              ---

          F (4)(5)(6)**                  
              20/03/12        714.802         214.441         224.877            4.985         229.862        228.508         214.441         223.526         4.60%   
              05.01.17           
              05.01.20              
      January-5                 Linked to CPI              Strauss Lazar Trust Company (1992)
                                                                                                                                                                                                                                                                                                                            Ltd. Ori Lazar. 17 Yizhak Sadeh St.,
                                                                                                                                                                                                                                                                                                                            Tel Aviv. Tel: 03-6237777.
                                                                                                                                                                                                                                                                 and July-5

    ---                                                                                                                                                                                                                                                                                                                                                      ---

          H (4)(5)(7)(8)**               
              08/07/14        949.624         835.669         795.950            8.105         804.055        738.169         835.669         677.557         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)(8)**               
              08/07/14        804.010         723.609         703.413           14.445         717.858        657.680         723.609         623.438         4.14%   
              05.07.18           
              05.07.25              
      January-5             
       Not linked                 Mishmeret Trust Company Ltd. Rami
                                                                                                                                                                                                                                                                                                                            Sebty. 48 Menachem Begin Rd. Tel
                                                                                                                                                                                                                                                                                                                            Aviv. Tel: 03-6374355.
                                   03/02/15*                                                                                                                                                                                                                       and July-5
                                   11/02/15*
                                   28/03/16*

    ---                                                                                                                                                                                                                                                                                                                                                      ---

          J (4)(5)                       
              25/09/16        103.267         103.267         105.034            1.249         106.283        104.072         103.267         104.415         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         705.357           12.164         717.521        674.178         710.634         705.330         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         587.605            7.401         595.006        532.161         613.937         587.923         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                                                 3,896.274       3,201.557       3,122.236           48.349       3,170.585      2,934.768       3,201.557       2,922.189

    ---

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 June 30, 2019 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 2.75. In the reporting period, no cause for early repayment occurred. (2) Including interest accumulated in the books. (3) Semi-annual payments other than regarding Series L. (4) Regarding the debentures, the Company undertook not to create any pledge on its assets, as long as debentures or loans are not fully repaid, subject to certain exclusions. (5) Regarding the debentures - the Company has the right for early redemption under certain terms. (6) Regarding debenture Series F, in June 2013, following a second decrease of the Company's debenture rating since their issuance, the annual interest rate has been increased by 0.25% to 4.60% 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 July 5, 2019, after the end of the reporting period, the Company repaid principal payments of approximately NIS 196 million of Series H and I debentures (the ex-date of which was June 23, 2019).

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

(**) As of June 30, 2019, debentures Series H, I, K and L are material, which represent 5% or more of the total liabilities of the Company, as presented in the financial statements.

(***) The definition of net leverage refers to Adjusted EBITDA for a period of 12 consecutive months. Accordingly, the net leverage ratio above includes the effects of the new standard IFRS 16 (applied by the Company as of January 1, 2019) for the first and second quarters of 2019. For details of the effects of IFRS 16 on the Company's results see footnote 1 on page 1 of this press release and note 3 to the Company's financial statement for the period ended on June 30, 2019, included elsewhere in this report.



       
           Cellcom Israel Ltd.





       
           
                  Disclosure for debenture holders as of June 30, 2019 (cont`d)

    ---




       
           
                  Debentures Rating Details
                
                
                  *

    ---




       Series 
              Rating               
              Rating as of               
              Rating as of 
              Rating assigned upon 
              Recent date of rating                    Additional ratings between original issuance and the
                                                                                                                                                                                                  recent date of
               Company                         30.06.2019 (1)                                                issuance of the Series          as of 14.08.2019                         rating as of 14.08.2019 (2)
                                                                                   
              14.08.2019

    ---                                                                                                                                                                                                                                                                                         ---

                                                                                  
              Rating




       F      
              S&P Maalot           
              A+                         
              A            
              AA                                                 
      08/2019            05/2012, 11/2012, 06/2013, 06/2014, 08/2014, 01/2015, 09/2015, 03/2016, 08/2016, 06/2017, 01/2018,
                                                                                                                                                                                                                                                        06/2018, 08/2018, 12/2018, 03/2019, 08/2019 
     AA,AA-,A+,A (2)

    ---                                                                                                                                                                                                                                                                                                               ---


       H      
              S&P Maalot           
              A+                         
              A            
              A+                                                 
      08/2019            06/2014, 08/2014, 01/2015, 09/2015, 03/2016, 08/2016, 06/2017, 01/2018, 06/2018, 08/2018, 12/2018,
                                                                                                                                                                                                                                                                                   03/2019, 08/2019 
     A+,A (2)

    ---                                                                                                                                                                                                                                                                                                               ---


       I      
              S&P Maalot           
              A+                         
              A            
              A+                                                 
      08/2019            06/2014, 08/2014, 01/2015, 09/2015, 03/2016, 08/2016, 06/2017, 01/2018, 06/2018, 08/2018, 12/2018,
                                                                                                                                                                                                                                                                                   03/2019, 08/2019 
     A+,A (2)

    ---                                                                                                                                                                                                                                                                                                               ---


       J      
              S&P Maalot           
              A+                         
              A            
              A+                                                 
      08/2019                             
              08/2016, 06/2017, 01/2018, 06/2018, 08/2018, 12/2018, 03/2019, 08/2019 
     A+,A (2)

    ---                                                                                                                                                                                                                                                                                                               ---


       K      
              S&P Maalot           
              A+                         
              A            
              A+                                                 
      08/2019                             
              08/2016, 06/2017, 01/2018, 06/2018, 08/2018, 12/2018, 03/2019, 08/2019 
     A+,A (2)

    ---                                                                                                                                                                                                                                                                                                               ---


       L      
              S&P Maalot           
              A+                         
              A            
              A+                                                 
      08/2019                                              
               01/2018, 06/2018, 08/2018, 12/2018, 03/2019, 08/2019 
     A+,A (2)

    ---                                                                                                                                                                                                                                                                                                               ---

(1) In August 2019, S&P Maalot updated the Company's rating outlook from an "ilA+/negative" to an "ilA/negative".

(2) In May 2012, S&P Maalot updated the Company's rating from an "ilAA/negative" to an "ilAA-/negative". In November 2012, S&P Maalot affirmed the Company's rating of "ilAA-/negative". In June 2013, S&P Maalot updated the Company's rating outlook from an "ilAA-/negative" to an "ilA+/stable". In June 2014, August 2014, January 2015, September 2015, March 2016, August 2016, June 2017, January 2018, June 2018, August 2018 and December 2018, S&P Maalot affirmed the Company's rating of "ilA+/stable". In March 2019, S&P Maalot updated the Company's rating outlook from an "ilA+/stable" to an "ilA+/negative". In August 2019, S&P Maalot updated the Company's rating outlook from an "ilA+/negative" to an "ilA/negative". For details regarding the rating of the debentures see the S&P Maalot report dated August 5, 2019, filled with the Israeli Securities Authority website ('MAGNA") on August 5, 2019.

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


                                                                                                
              
                Cellcom Israel Ltd.





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

    ---




              Loan                                                 
              Provision Date             
              Principal         
           Interest Rate              Principal Repayment   
              Interest               
          Linkage
                                                                                                        Amount as of                 (nominal)               Dates (annual                    Repayment
                                                                                                        30.06.2019                                           payments)                        Dates (semi-
                                                                                                                                                                                              annual
                                                                                                                                                                                              payments)

    ---                                                                                                                                                                                                                                          ---

               From                                                 
              To

    ---


              Loan from financial                                                   
              06/2016             100           4.60%   
           30.06.18        
              30.06.21              
              June-30                
          Not
    institution (2)(3)(4)(5)(6)                                                                                                                                                                                                   linked
                                                                                                                                                                                                
              and December-31,
                                                                                                                                                                                                commencing
                                                                                                                                                                                                December 31,
                                                                                                                                                                                                2016 through
                                                                                                                                                                                                June 30, 2021

    ---                                                                                                                                                                                                                                            ---


              Loan from financial                                                   
              06/2017             150           5.10%   
           30.06.19        
              30.06.22              
              June-30                
          Not
    institution(2)(3)(4)(5)(6)                                                                                                                                                                                                    linked
                                                                                                                                                                                                
              and December-31,
                                                                                                                                                                                                commencing
                                                                                                                                                                                                December 31,
                                                                                                                                                                                                2017 through
                                                                                                                                                                                                June 30, 2022

    ---                                                                                                                                                                                                                                            ---


              Loan from bank(2)(3)(4)(5)(6)                                         
              03/2019             150           4.00%   
           30.03.21        
              30.03.24              
              March-31               
          Not
                                                                                                                                                                                                                                  linked
                                                                                                                                                                                                
              and September-30,
                                                                                                                                                                                                commencing
                                                                                                                                                                                                September 30,
                                                                                                                                                                                                2019 through
                                                                                                                                                                                                March 31,
                                                                                                                                                                                                                             2024

    ---                                                                                                                                                                                                                                            ---


              Total                                                                                              400

    ---

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 June 30, 2019 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 Adjusted EBITDA (which the Company used in previous periods)) was 2.75. (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.

(*) The definition of net leverage refers to Adjusted EBITDA for a period of 12 consecutive months. Accordingly, the net leverage ratio above includes the effects of the new standard IFRS 16 (applied by the Company as of January 1, 2019) for the first and second quarters of 2019. For details of the effects of IFRS 16 on the Company's results see footnote 1 on page 1 of this press release and note 3 to the Company's financial statement for the period ended on June 30, 2019, included elsewhere in this report.

Cellcom Israel Ltd.
Summary of Financial Undertakings (according to repayment dates) as of June 30, 2019

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


                                
              
                Principal payments      
     
                Gross interest
                                                                                      payments
                                                                                      (without
                                                                                    deduction of
                                                                                        tax)



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

        ---

            First
             year             339,055            80,369                                                              97,188

    ---

            Second
             year             115,500            80,369                                                              81,291

    ---

            Third
             year             169,857           218,396                                                              72,556

    ---

            Fourth
             year             169,857           310,483                                                              60,702

    ---

            Fifth
             year
             and on           381,999         1,353,480                                                             109,972

    ---

            Total           1,176,268         2,043,097                                                             421,709

    ---

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


                             
              
             Principal payments         
     
                Gross interest
                                                                                   payments
                                                                                   (without
                                                                                 deduction of
                                                                                     tax)



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

        ---

            First
             year                                                    100,000                                     12,267

    ---

            Second
             year                                                    100,000                                      7,390

    ---

            Third
             year                                                     50,000                                      2,550

    ---

            Fourth
             year

    ---

            Fifth
             year
             and on

    ---

            Total                                                    250,000                                     22,207

    ---

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


                    
     
              Principal payments            Gross interest
                                                      payments
                                                      (without
                                                    deduction of
                                                        tax)



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

        ---

             First
             year                                                                          6,008

    ---

             Second
             year                                                      37,500               5,992

    ---

             Third
             year                                                      37,500               4,500

    ---

             Fourth
             year                                                      37,500               3,000

    ---

             Fifth
             year
             and
             on                                                        37,500               1,502

    ---

            Total                                                     150,000              21,002

    ---

Cellcom Israel Ltd.

Summary of Financial Undertakings (according to repayment dates) as of June 30, 2019 (cont`d)

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

e. Total of sections a - d above, total credit from banks, non-bank credit and debentures based on the Company's "Solo" financial data (in thousand NIS).


                                
              
                Principal payments      
     
                Gross interest
                                                                                      payments
                                                                                      (without
                                                                                    deduction of
                                                                                        tax)



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

        ---

            First
             year             339,055           180,369                                                             115,464

    ---

            Second
             year             115,500           217,869                                                              94,672

    ---

            Third
             year             169,857           305,896                                                              79,606

    ---

            Fourth
             year             169,857           347,983                                                              63,702

    ---

            Fifth
             year
             and on           381,999         1,390,980                                                             111,473

    ---

            Total           1,176,268         2,443,097                                                             464,917

    ---

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       1,474          32                                                                  274

    ---

               Second
                year         263          32                                                                  211

    ---

               Third
                year         357         760                                                                  191

    ---

               Fourth
                year         357         764                                                                  157

    ---

               Fifth
                year
                and on       730       3,495                                                                  279

    ---

               Total       3,181       5,083                                                                1,112

    ---

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.

[1] As of January 1, 2019, the Company is applying International Financial Reporting Standard, IFRS 16, Leases. The effects of applying the standard in the second quarter of 2019 amounted to an increase of NIS 68 million in Adjusted EBITDA, an increase of NIS 59 million in Cash flows from operating activities and an increase of NIS 1 million in the loss.

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

Company Contact
Shlomi Fruhling
Chief Financial Officer
investors@cellcom.co.il
Tel: +972 52 998 9735


Investor Relations Contact
Ehud Helft
GK Investor & Public Relations
cellcom@GKIR.com
Tel: +1 617 418 3096

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SOURCE Cellcom Israel Ltd.