Cellcom Israel Announces Second Quarter 2020 Results
NETANYA, Israel, Aug. 17, 2020 /PRNewswire/ --
Cellcom Israel concludes the second quarter of 2020 with a loss of NIS 46 million compared to a loss of NIS 35 million in the corresponding quarter of 2019.
Adjusted EBITDA([1]) decreased to NIS 222 million.
Free cash flow([1]) for the quarter totaled NIS 24 million compared to NIS 55 million in the corresponding quarter of 2019, results mainly from grant payments in an amount of NIS 40 million in respect of a voluntary retirement plan.
Avi Gabbay, the Company's CEO:
Second Quarter 2020 Highlights (compared to second quarter of 2019):
-- Total Revenues totaled NIS 855 million ($247 million) compared to NIS
920 million ($265 million) in the second quarter last year, a decrease
of 7.1%
-- Service revenues totaled NIS 683 million ($197 million) compared to NIS
695 million ($201 million) in the second quarter last year, a decrease
of 1.7%
-- Operating loss totaled NIS 22 million ($6 million) compared to Operating
income of NIS 6 million ($2 million) in the second quarter last year
-- Loss totaled NIS 46 million ($13 million) compared to NIS 35 million
($10 million) in the second quarter last year
-- Adjusted EBITDA([1]) totaled NIS 222 million ($64 million) compared to
NIS 233 million ($67 million) in the second quarter last year, a
decrease of 4.7%
-- Net cash from operating activities totaled NIS 196 million ($57 million)
compared to NIS 219 million ($63 million) in the second quarter last
year, a decrease of 10.5%
-- Free cash flow([1]) totaled NIS 24 million ($7 million) compared to NIS
55 million ($16 million) in the second quarter last year, a decrease of
56.4%
Avi Gabbay, the Company's Chief Executive Officer, referred to the results of the second quarter of 2020:
"In the second quarter we dealt with the impact of the Corona virus crisis which led to a decrease in the Company's revenues. Thanks to a quick response by the Company's management in cooperation with the employee's representatives, we were able to reduce operating expenses and offset a significant part of the effects of the crisis and provide a very good service to our customers, despite the limitations of the pandemic quarantine and the social distance-working requirement.
"We are currently continuing to take comprehensive and in-depth actions to generate further efficiencies and improve the Company's financial and operational parameters. The steps we are taking today are expected to allow the Company to deal with the Corona virus crisis and emerge from it a more efficient and focused Company.
"We recently successfully concluded our participation in the frequency tender which includes the 5G frequencies. We are very pleased with the results, that will enable us to launch a new network and we intend to provide our customers with a fast, widely deployed and quality network.
"Currently, there are over 400,000 households at buildings that are connected to IBC's fiber infrastructure. We continue to focus on transferring our internet and television customers to fiber infrastructure while improving the segment profitability, and reducing payments to Bezeq.
"I am pleased to announce that we have received all the regulatory approvals required for the purchase of Golan Telecom. The execution of the transaction will strengthen Cellcom Israel's position as a leading communications company and is expected to make a significant addition to the Company's Adjusted EBITDA and Free Cash Flow."
Areli Beker, the Company's replacement Chief Financial Officer, said:
"The results of the second quarter were adversely affected by the Corona crisis which mainly caused a decrease in roaming service revenues from the Company's customers abroad and from tourists arriving in Israel. In addition, there was a decrease in revenues from end-user equipment as a result of the temporary closure of service centers and points of sale during the quarter. The Company management has taken steps to reduce operating expenses during the closure period in order to mitigate the effect of the decrease in revenues. We expect that also the remaining quarters of this year will be adversely affected by Corona virus crisis.
"The Company continues to experience increase in the fixed-line segment revenues thanks to the recruitment of new internet and television customers and the transfer of existing customers to the fiber infrastructure.
"The Company's Adjusted EBITDA in the second quarter of 2020 totaled NIS 222 million, a 4.7% decrease compared to the corresponding quarter in 2019 resulting from a decrease in the Company's revenues, which was partially offset by a temporary decrease in salary expenses as a result of placing employees on temporary unpaid leave. Further, the Company reduced its marketing and sales expenses by temporarily closing its frontal points of sale and reducing its salesforce. In addition, the Company continues the process of streamlining its salaries expenses and operating expenses.
"The Company's depreciation expenses increased during the quarter mainly due to the acceleration of the depreciation of its CRM system, after resolving to replace it with another system.
"Free Cash Flow for the second quarter of 2020 totaled NIS 24 million, compared to NIS 55 million in the corresponding quarter. The low free cash flow in the second quarter was mainly due to payment for early retirement grants as part of the early retirement plan.
"The Company's Board of Directors decided not to distribute dividends for the second quarter of 2020, in light of the continued increased 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 and, 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 2020.
The Company reported that revenues for the second quarter of 2020 totaled NIS 855 million ($247 million); Adjusted EBITDA for the second quarter of 2020 totaled NIS 222 million ($64 million), or 26.0% of total revenues; loss for the second quarter of 2020 totaled NIS 46 million ($13 million). Basic loss per share for the second quarter of 2020 totaled NIS 0.30 ($0.09).
Main Consolidated Financial Results:
Q2/2020 Q2/2019 Change%
Q2/2020
Q2/2019
NIS million US$ million
(convenience
translation)
Total revenues 855 920 (7.1)% 247 265
---
Operating Income (loss) (22) 6 N/A (6) 2
---
Loss (46) (35) 31.4% (13) (10)
---
Free cash flow 24 55 (56.4)% 7 16
---
Adjusted EBITDA 222 233 (4.7)% 64 67
---
Adjusted EBITDA, 26.0% 25.3% 2.8%
as percent of
total revenues
===
Main Financial Data by Operating Segments:
Cellular (*) Fixed-line (**) Consolidation
adjustments Consolidated results
(***)
NIS million Q2'20 Q2'19 Change Q2'20 Q2'19 Change Q2'20 Q2'19 Q2'20 Q2'1
9 Change
% % %
---
Total revenues 532 582 (8.6)% 364 375 (2.9)% (41) (37) 855 920 (7.1)%
---
Service revenues 385 420 (8.3)% 339 312 8.7% (41) (37) 683 695 (1.7)%
---
Equipment revenues 147 162 (9.3)% 25 63 (60.3)% 172 225 (23.6)%
---
Adjusted EBITDA 125 163 (23.3)% 97 70 38.6% 222 233 (4.7)%
---
Adjusted EBITDA, 23.5% 28.0% (16.1)% 26.6% 18.7% 42.2% 26.0% 25.3% (2.8)%
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 2020 compared to second quarter of 2019):
Revenues for the second quarter of 2020 decreased 7.1% totaling NIS 855 million ($247 million), compared to NIS 920 million ($265 million) in the second quarter last year. The decrease in revenues is mainly attributed to a 23.6% decrease in equipment revenues and a 1.7% decrease in service revenues.
Service revenues totaled NIS 683 million ($197 million) in the second quarter of 2020, a 1.7% decrease from NIS 695 million ($201 million) in the second quarter last year.
Service revenues in the cellular segment totaled NIS 385 million ($111 million) in the second quarter of 2020, a 8.3% decrease from NIS 420 million ($121 million) in the second quarter last year. This decrease resulted mainly from decrease of the Company's roaming services activities as a result of the Corona virus crisis.
Service revenues in the fixed-line segment totaled NIS 339 million ($98 million) in the second quarter of 2019, a 8.7% increase from NIS 312 million ($90 million) in the second quarter last year. The increase resulted mainly from an increase in revenues from internet and TV services and increase in revenues from minutes sales among international operators (hubbing services).
Equipment revenues totaled NIS 172 million ($50 million) in the second quarter of 2020, a 23.6% decrease compared to NIS 225 million ($65 million) in the second quarter last year. The decrease resulted mainly from a decrease in the quantity of end user equipment sold in the fixed-line and cellular segments, which was affected as a result of Corona crisis by the temporary closure of the Company's points of sale and walk in centers during this quarter in accordance with the restrictions imposed on the economy.
Cost of revenues for the second quarter of 2020 totaled NIS 664 million ($192 million), a 2.2% decrease compared to NIS 679 million ($196 million) in the second quarter of 2019. This decrease resulted mainly from decrease in the quantity of end user equipment sold in the fixed-line and cellular segments, decrease in the roaming expenses as a result of the Corona virus crisis and decrease in other operational expenses.
Gross profit for the second quarter of 2020 decreased 20.7% to NIS 191 million ($55 million), compared to NIS 241 million ($70 million) in the second quarter of 2019. Gross profit margin for the second quarter of 2020 amounted to 22.3%, down from 26.2% in the second quarter of 2019.
Selling, Marketing, General and Administrative Expenses and Credit losses ("SG&A Expenses") for the second quarter of 2020 decreased 8.7% to NIS 220 million ($63 million), compared to NIS 241 million ($70 million) in the second quarter of 2019. This decrease resulted mainly from a decrease in salaries and advertising expenses as a result of the temporary closure of the company's points of sale and sending employees on unpaid leave (that ended) following the Corona virus, as well from the company's workforce streamlining due to the retirement of employees as part of the voluntary retirement plan which was recorded in the fourth quarter of 2019. This decrease was partially offset by increase in depreciation expenses following accelerated depreciation of the CRM system in an amount of NIS 17 million as a result of replacing it with another system in the next year.
Operating loss for the second quarter of 2020 totaled NIS 22 million ($6 million), compared to operating income of NIS 6 million ($2 million) in the second quarter of 2019. The operating loss includes the accelerated depreciation of the CRM system in an amount of NIS 17 million.
Adjusted EBITDA for the second quarter of 2020 decreased by 4.7% totaling NIS 222 million ($64 million) compared to NIS 233 million ($67 million) in the second quarter of 2019. Adjusted EBITDA as a percent of revenues for the second quarter of 2020 totaled 26.0%, up from 25.3% in the second quarter of 2019.
Cellular segment Adjusted EBITDA for the second quarter of 2020 totaled NIS 125 million ($36 million), compared to NIS 163 million ($47 million) in the second quarter last year, a decrease of 23.3%, which resulted mainly from a decrease in roaming services activities and a decrease in the contribution of end-user equipment sales following the temporary closure of the frontal selling points and the temporary reduction of their costs as a result of the Corona virus pandemic. This decrease was partially offset as a result of reduction in operating expenses incurred by the Company, such as placing employees on unpaid leave (that ended) and savings in current operating expenses during the quarter.
Fixed-line segment Adjusted EBITDA for the second quarter of 2020 totaled NIS 97 million ($28 million), compared to NIS 70 million ($20 million) in the second quarter last year, a 38.6% increase, which resulted mainly from increase in activity in internet and TV fields and decrease in operating expenses.
Financing expenses, net for the second quarter of 2020 totaled NIS 34 million ($10 million), compared with NIS 52 million ($15 million) in the second quarter of 2019, a decrease of 34.6%, which resulted mainly from a decrease in interest expenses and linkage differences to the consumer price index in connection with the Company's debentures and a decrease in the volume of the Company's debt.
Loss for the second quarter of 2020 totaled NIS 46 million ($13 million), compared with loss of NIS 35 million ($10 million) in the second quarter of 2019.
Basic loss per share for the second quarter of 2020 totaled NIS 0.30 ($0.09), similar to basic loss per share of NIS 0.30 ($0.09) in the second quarter last year.
Operating Review
Main Performance Indicators - Cellular segment:
Q2/2020 Q2/2019 Change (%)
Cellular subscribers at 2,734 2,745 (0.4)%
the end of period (in thousands)
---
Churn Rate for cellular 8.7% 11.3% (23.0)%
subscribers (in %)
---
Monthly cellular ARPU (in NIS) 46.9 51.9 (9.6)%
---
Cellular subscriber base - Cellular subscriber base of the company decreased by 13,000 subscribers (all of them prepaid subscribers) during the second quarter of 2020 and was approximately 2.734 million subscribers.
Cellular Churn Rate for the second quarter of 2020 totaled 8.7%, compared to 11.3% in the second quarter last year.
The monthly cellular Average Revenue per User ("ARPU") for the second quarter of 2020 totaled 46.9 NIS ($13.5), compared to NIS 51.9 ($14.9) in the second quarter last year. The decrease in ARPU resulted mainly from decrease in demand for the Company's roaming services and the ongoing erosion in the prices of cellular services.
Main Performance Indicators - Fixed-line segment:
Q2/2020 Q2/2019 Change (%)
Internet infrastructure field
subscribers -(households) at
the end of period (in
thousands) 283 278 1.8%
---
TV field subscribers -at the 245 239 2.5%
end of period (in thousands)
===
In the second quarter of 2020, the Company's subscriber base in the TV field decreased by approximately 1,000 net subscribers and the Company's subscriber base in the internet infrastructure field increased by approximately 4,000 net households. The decrease in the subscriber base in the TV field was due to a change in the counting method. During this quarter, the Company changed the way of counting TV subscribers by advancing the date of withdrawal from its subscriber base, from the date of returning the equipment to the Company to the date in which the subscriber's request to disconnect from the service was received. The Company applied the change retroactively and as a result deleted approximately 5,000 subscribers.
Financing and Investment Review
Cash Flow
Free cash flow for the second quarter of 2020 totaled NIS 24 million ($7 million), compared to NIS 55 million ($16 million) in the second quarter of 2019, a 56.4% decrease. The decrease in free cash flow resulted mainly from grant payments in an amount of NIS 40 million in respect of a voluntary retirement plan recorded in 2019 and a decrease in receipts from customers which was offset by a decrease in payments to suppliers and decrease in salary payments.
Total Equity
Total Equity as of June 30, 2020 amounted to NIS 1,874 million ($541 million). During the quarter, options in an amount of NIS 48 million were exercised.
Cash Capital Expenditures in Fixed Assets and Intangible Assets and others
During the second quarter of 2020, the Company invested NIS 114 million ($33 million) in fixed assets and intangible assets and others (including, among others, investments in the Company's communications networks, information systems, software and TV set-top boxes and capitalization of part of the customer acquisition costs as a result of the adoption of IFRS 15), compared to NIS 113 million ($33 million) in the second quarter of 2019.
Dividend
On August 16 2020, the Company's Board of Directors decided not to declare a cash dividend for the second quarter of 2020. In making its decision, the board of directors considered the Company's dividend policy and business status and decided not to distribute a dividend at this time, given the intensified competition and its adverse effect on the Company's results of operations, and in order to strengthen the Company's balance sheet. The board of directors will re-evaluate its decision in future quarters. No future dividend declaration is guaranteed and is subject to the Company's board of directors' sole discretion, as detailed in the Company's annual report for the year ended December 31, 2019 on Form 20-F dated March 23, 2020, or the 2019 Annual Report, under "Item 8 - Financial Information - A. Consolidated Statements and Other Financial Information - Dividend Policy".
Other developments during the second quarter of 2020 and subsequent to the end of the reporting period
Golan Transaction
Following its previous announcements regarding a binding memorandum of understanding for the purchase of Golan Telecom and approval of the transaction by the Israeli Competition Authority, the Israeli Ministry of Communications approved the transaction subject to certain conditions, including turning Golan Telecom into an MVNO for an interim period and a demand that Golan Telecom will return certain monetary benefits Golan Telecom previously received, in the sum of approximately NIS 75 million, which Golan Telecom disputes. A final decision by the MOC regarding such dispute shall be made at a later date. The Company is evaluating the conditions.
For additional details see the Company's most recent annual report for the year ended December 31, 2019 on Form 20-F, filed on March 23, 2020, under "Item 4. Information on the Company -A. History and Development of the Company - Our History" and the Company's current report on Form 6-K dated June 10, 2020 and July 16, 2020.
Update On The Corona Virus And Implications
Following previous announcements, the Company's results for the second quarter of 2020 continues to reflect the negative effects of the Corona virus pandemic on the Company's roaming services and end-user equipment sales.
As previously announced, the Company expects its roaming services to continue to be adversely affected by the Corona virus pandemic through 2020.
For additional details see the Company's 2019 Annual Report under "Item 3. Risk Factors - The Corona Virus may adversely affect our results of operations" and "Item 5. Operating and Financial Review and Prospects - A. Operating Results - Overview - General".
Regulation
Conclusion of the Frequencies tender
The frequencies tender which includes frequencies for 5G services that was previously reported by the Company, took place in August 2020. The Company and its partners to the shared cellular network - Golan and Marathon 018 Xfone won 10MHz in the 700MHz frequencies band, 20MHz in the 2600MHz frequencies band and 100MHz in the 3500-3800 MHz frequencies band (as did the other participants) and will pay for such frequencies (in September 2022) license fees in an amount of approximately NIS 115 million. The frequencies won are sufficient for the shared network needs in both quantity and quality.
For additional details see the Company's 2019 Annual Report under "Item 3. Key Information - D. Risk Factors - Risks Related to our Business - We operate in a heavily regulated industry, which can harm our results of operations. Regulation in Israel has materially adversely affected our results", "We face intense competition in all aspects of our business", "We may not be able to obtain permits to construct and operate cell sites", "We may be required to indemnify certain local planning and building committees in respect of claims against them", "- 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", " - Government Regulations - Permits for cell site construction".
Fiber-optic deployment policy - Updates
In July 2020, the Israeli Minister of Communications announced that subject to certain modifications, he had resolved to adopt the recommendations of the inter-ministry team, which was tasked with examining the need to update the fiber-optic deployment and service obligations of landline operators who own their own infrastructure, which were published in November 2019 in relation to Bezeq, the Israeli Communications Company Ltd., and in June 2020, in relation to Hot Telecom L.P., or Hot.. In respect of HOT, the resolution includes, among others, the following: (1) Hot will be subject to a minimum deployment obligation of 30%, as well as an obligation to meet a 1:1 deployment ratio between the periphery and the center of Israel, in case it chooses to deploy an ultra-broadband network that is not based on its existing access infrastructure; (2) Hot will be able to participate in the competitive procedures for the deployment of advanced infrastructure (which the team referred to in its recommendations regarding Bezeq) that are not based on Hot's existing access network; (3) Hot will be able to use ultra-boardband networks of other operators in areas where these operators are required to provide a wholesale service, through the wholesale market.
With respect of the beginning of funds collection for the trust and the competitive procedure, the resolution determines: (1) to advance the collection of funds for the trust to be established for deployment of advanced infrastructure in incentive areas by one year, to begin in 2021; (2) in the first three years of the trust's operation it will be possible to consider various criteria for selecting winners in the competitive procedure beyond the test of economic efficiency, in a scope of 10% of the households to be deployed in the incentive areas each year;
In June 2020, the Israeli Ministry of Communications resolved that in providing fiber-optic Internet connectivity services to private subscribers, license holders will not be able to offer subscribers offers on different terms or at a different rate, based on the proposed infrastructure.
In July 2020, the Ministry of Communications resolved that a holder of a general license to provide landline services which is interested in deploying fiber optic infrastructure in an existing building (five apartments or more) should offer other such license holders to jointly use the fiber infrastructure to be deployed in the building and bear its relative share of the infrastructure costs. The fiber-optic infrastructure that will be deployed in the building must allow for future joint usage of at least one more license holder in addition to the operators who have agreed on the joint usage. For additional details see the Company's annual report on Form 20-F dated March 23, 2020 under "Item 3. Key Information - D. Risk Factors - We operate in a heavily regulated industry, which can harm our results of operations. Regulation in Israel has materially adversely affected our results","- We face intense competition in all aspects of our business" and "Item 4. Information on The Company - B. Business Overview - Competition - Fixed-line Segment" and "- Government Regulations - Fixed-line Segment - Wholesale land-line market".
Structural Separation - Update; Further leniencies on Marketing bundled services in the Hot Group
In June 2020, the inter-ministry team appointed by the Israeli Ministry of Communications in June 2018 to examine the update of the structural separation obligation in Bezeq and Hot Groups submitted its recommendations to the Israeli Minister of Communications (which were also filed with the Israeli Supreme Court in response to the petition filed by Bezeq requesting the immediate cancelation of the structural separation imposed on it). According to the recommendations the current provisions regarding structural separation in Bezeq and Hot groups should not be revoked at this time and should be further examined pursuant to changes in the market. At the same time, the team concluded that certain changes could be made to the overall regulation, which would also affect the structural separation in the Bezeq and Hot groups.
Further in June 2020, the Israeli Ministry of Communications resolved to allow Hot and Hot Communications Systems Ltd. to market bundled services for the private sector that also include the connectivity services of their affiliate Hot-Net , as of 15.7.2020, under certain conditions. For additional details see the Company's annual report on Form 20-F dated March 23, 2020 under "Item 3. Key Information - D. Risk Factors - We operate in a heavily regulated industry, which can harm our results of operations. Regulation in Israel has materially adversely affected our results " and "Item 4. Information on the Company - B. Business Overview - Competition - Communications groups and structural separation"; "Government Regulations - Fixed-line Segment - Wholesale landline market "
Holdings of Israeli entities in the Company
In July 2020, the Israeli Ministry of communication resolved to amend the Company's license in a way that (1) the requirement for a minimum holding of 5% of the issued capital and each of the other means of control of the licensee by Israeli entities (Israeli citizens and residents) who are among the founding shareholders or their successors, and (2) the appointment of one tenth of the members of the licensee's board of directors by such Israeli entities, will be void once the licensee receives alternate instructions by the Israeli General Security Service. The Company has not yet received such instructions .For additional details see the Company's annual report on Form 20-F dated March 23, 2020 under "Item 3. Key Information - D. Risk Factors - There are certain restrictions in our licenses relating to the ownership of our shares" and "Item 4. Information on the Company - B. Business Overview - Government Regulations - Cellular Segment ".
Changes to the Board of Directors
In June 2020, Mr. Samy Bakalash resigned his office as director of the Company, following his appointment as CEO of the Israeli Parliament.
In August 2020, Mr. Ephraim Kunda completed his term as a director of the company.
For additional details see the Company's annual report on Form 20-F dated March 23, 2020 under "Item 6. Directors, Senior Management and Employees" - A. Directors and Senior Management" and the Company's current report on Form 6-K dated June 16, 2020.
Share Incentive Plan
In June 2020, the Company's board of directors resolved to grant employees of the Company (who are not office holders or directors) a total amount of approximately 2.416 million options at an exercise price of NIS 12.35 and approximately 631 thousand RSUs, under the Company's 2015 Share Incentive Plan, in accordance with the provisions of the previously announced February 2020 collective employment agreement.
In June 2020, the Company's board of directors resolved to grant approximately 4.03 million options under the Company's 2015 Share Incentive Plan, to certain non-directors office holders (preceded by the Company's compensation committee's resolution to that end) and certain senior employees, to be vested in three equal installments on each of the first, second and third anniversary of the grant at an exercise price of NIS 13.16 for the first installment, NIS 14.21 for the second installment and NIS 15.40 for the third installment. The options of the first installment may be exercised within 18 months from their vesting, and the options of the second and third installments may be exercised within 12 month from their vesting.
For additional details see the Company's most recent annual report for the year ended December 31, 2019 on Form 20-F, filed on March 23, 2020, under "Item 6. Directors, senior management and employees - D. Employees" and E. Share Ownership - Share Incentive Plan" and the Company's current report on Form 6-K dated June 7 and 16, 2020.
Conference Call Details
The Company will be hosting a conference call regarding its results for the second quarter of 2020 on Monday, August 17, 2020 at 10:00 am ET, 07:00 am PT, 3:00 UK time, 17:00 Israel time. On the call, management will review and discuss the results, and will be available to answer questions. To participate, please either access the live webcast on the Company's website, or call one of the following teleconferencing numbers below. Please begin placing your calls at least 10 minutes before the conference call commences. If you are unable to connect using the toll-free numbers, please try the international dial-in number.
US Dial-in Number: 1 888 668 9141
Israel Dial-in Number: 03 918 0609
International Dial-in Number: +972 3 918 0609
at: 10:00 am Eastern Time; 07:00 am Pacific Time; 15:00 UK Time; 17:00 Israel Time
To access the live webcast of the conference call, please access the investor relations section of Cellcom Israel's website: www.cellcom.co.il. After the call, a replay of the call will be available under the same investor relations section.
About Cellcom Israel
Cellcom Israel Ltd., established in 1994, is a leading Israeli communications group, providing a wide range of communications services. Cellcom Israel is the largest Israeli cellular provider, providing its approximately 2.734 million cellular subscribers (as at June 30, 2020) 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 2019 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 3.466 = US$ 1 as published by the Bank of Israel for June 30, 2020.
Use of non-IFRS financial measures
Adjusted EBITDA is a non-IFRS measure and is defined as income before financing income (expenses), net; other income (expenses), net (excluding expenses related to employee voluntary retirement plans and gain (loss) due to sale of subsidiaries); income tax; depreciation and amortization and share based payments. This is an accepted measure in the communications industry. The Company presents this measure as an additional performance measure as the Company believes that it enables us to compare operating performance between periods and companies, net of any potential differences which may result from differences in capital structure, taxes, age of fixed assets and related depreciation expenses. Adjusted EBITDA should not be considered in isolation, or as a substitute for operating income, any other performance measures, or cash flow data, which were prepared in accordance with Generally Accepted Accounting Principles as measures of profitability or liquidity. Adjusted EBITDA does not take into account debt service requirements, or other commitments, including capital expenditures, and therefore, does not necessarily indicate the amounts that may be available for the Company's use. In addition, Adjusted EBITDA as presented by the Company may not be comparable to similarly titled measures reported by other companies, due to differences in the way these measures are calculated. See the reconciliation of net income to Adjusted EBITDA under "Reconciliation of Non-IFRS Measures" in the press release.
Free cash flow is a non-IFRS measure and is defined as the net cash provided by operating activities (including the effect of exchange rate fluctuations on cash and cash equivalents) excluding a loan to Golan Telecom, minus the net cash used in investing activities excluding short-term investment in tradable debentures and deposits and proceeds from sales of such debentures (including interest received in relation to such debentures) and deposits. See "Reconciliation of Non-IFRS Measures" below.
Company Contact Investor Relations Contact
Areli Beker
Ehud Helft
Replacement Chief Financial Officer
GK Investor & Public Relations
investors@cellcom.co.il
cellcom@GKIR.com
Tel: +972 52 998 9735
Tel: +1 617 418 3096
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Financial Tables Follow
Cellcom Israel Ltd.
(An Israeli Corporation)
Condensed Consolidated Interim Statements of Financial Position (Unaudited)
---
Convenience
translation
into US dollar
June 30, June 30,
June 30,
December 31,
2019 2020 2020 2019
NIS millions
US$ millions
NIS millions
Assets
Cash and cash equivalents 855 919 265 1,006
Current investments, including derivatives 428 488 141 473
Trade receivables 1,124 1,106 319 1,142
Current tax assets 8 3 1 3
Other receivables 81 86 25 69
Inventory 60 94 27 66
Total current assets 2,556 2,696 778 2,759
Trade and other receivables 836 692 200 782
Property, plant and equipment, net 1,639 1,335 385 1,432
Intangible assets and others, net 1,306 1,249 360 1,294
Investments in equity accounted investees 146 42 150
Right-of-use assets, net and Investment property 759 664 192 745
Total non- current assets 4,540 4,086 1,179 4,403
Total assets 7,096 6,782 1,957 7,162
Liabilities
Current maturities of debentures and of loans from 512 324 93 509
financial institutions
Current maturities of lease liabilities 218 212 61 226
Trade payables and accrued expenses 692 615 177 687
Current tax liabilities 5 1 6
Provisions 103 94 27 99
Other payables, including derivatives 258 235 69 299
Total current liabilities 1,783 1,485 428 1,826
Long-term loans from financial institutions 300 163 47 300
Debentures 2,711 2,711 782 2,511
Long-term lease liabilities 556 471 136 533
Provisions 21 23 7 22
Other long-term liabilities 4 3 1 4
Liability for employee rights upon retirement, net 14 18 5 19
Deferred tax liabilities 79 34 10 60
Total non- current liabilities 3,685 3,423 988 3,449
Total liabilities 5,468 4,908 1,416 5,275
Equity attributable to owners of the Company
Share capital 1 2 1 2
Share premium 335 702 203 623
Receipts on account of share options 15 4 24
Retained earnings 1,290 1,155 333 1,236
Non-controlling interest 2 2
Total equity 1,628 1,874 541 1,887
Total liabilities and equity 7,096 6,782 1,957 7,162
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
year
months ended months ended months ended months ended ended
June 30, June 30, December 31,
June 30, June 30, For the three
2019 2020 2020 2019 2020 2020 2019
NIS millions US$
millions NIS millions US$
millions
NIS millions
Revenues 1,848 1,747 504 920 855 247 3,708
Cost of revenues (1,374) (1,308) (377) (679) (664) (192) (2,725)
Gross profit 474 439 127 241 191 55 983
Selling and marketing (307) (264) (76) (149) (119) (34) (610)
expenses
General and administrative (149) * (169) (49) (82) * (90) (26) (300) *
expenses
Credit losses (14) * (22) (6) (10) * (11) (3) (29) *
Other income (expenses), net 11 12 3 6 7 2 (20)
Operating profit (loss) 15 (4) (1) 6 (22) (6) 24
Financing income 29 6 2 12 10 3 49
Financing expenses (108) (104) (30) (64) (44) (13) (193)
Financing expenses, net (79) (98) (28) (52) (34) (10) (144)
Share in losses of equity accounted
investees (7) (2) (2) (1) (10)
Loss before taxes on income (64) (109) (31) (46) (58) (17) (130)
Tax benefit 13 20 6 11 12 4 23
Loss for the period (51) (89) (25) (35) (46) (13) (107)
Attributable to:
Owners of the Company (51) (89) (25) (35) (46) (13) (107)
Non-controlling interests
Loss for the period (51) (89) (25) (35) (46) (13) (107)
Loss per share
Basic loss per share (in NIS) (0.44) (0.60) (0.17) (0.30) (0.30) (0.09) (0.90)
Diluted loss per share (in NIS) (0.44) (0.60) (0.17) (0.30) (0.30) (0.09) (0.90)
Weighted-average number of shares used in
the calculation of basic loss per share (in
shares) 116,196,729 148,643,153 148,643,153 116,196,729 149,227,462 149,227,462 118,376,455
Weighted-average number of shares used in
the calculation of diluted loss per share
(in shares) 116,196,729 148,643,153 148,643,153 116,196,729 149,227,462 149,227,462 118,376,455
* Reclassified.
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
year
months ended months ended ended
months ended June 30, months ended June 30, December 31,
June 30, June 30, For the three
2019 2020 2020 2019 2020 2020 2019
NIS millions
US$ millions NIS millions US$
millions
NIS millions
Cash flows from operating
activities
Loss for the period (51) (89) (25) (35) (46) (13) (107)
Adjustments for:
Depreciation and amortization 439 460 133 225 240 69 898
Share based payments 2 8 2 2 4 1 8
Loss from (Gain on) sale of property, 1 1 (8)
plant and equipment and intangible
assets
Net change in fair value of 3 1 1 6
investment property
Gain on sale of shares in a (1) (1)
consolidated company
Tax benefit (13) (20) (6) (11) (12) (4) (23)
Financing expenses, net 79 98 28 52 34 10 144
Other expenses 3
Share in losses of equity accounted 7 2 2 1 10
investees
Changes in operating assets and liabilities:
Change in inventory 34 (28) (8) 25 (22) (6) 28
Change in trade receivables (including 51 113 33 67 41 12 80
long-term amounts)
Change in other receivables (including 1 (26) (8) (12) (19) (5) 13
long-term amounts)
Changes in trade payables, accrued (10) (28) (8) (93) 19 4 (27)
expenses and provisions
Change in other liabilities (including 3 (38) (11) 8 (36) (10) 23
long-term amounts)
Payments for derivative hedging (7) (17) (5) (6) (5) (2) (10)
contracts, net
Income tax paid (7) (6) (2) (4) (4) (1) (12)
Income tax received 10
Net cash from operating activities 522 436 126 219 196 56 1,036
Cash flows from investing activities
Acquisition of property, plant and (186) (137) (39) (59) (71) (20) (324)
equipment
Acquisition of intangible assets and (111) (95) (27) (54) (43) (12) (233)
others
Investment in equity accounted (3) (1) (157) *
investee
Change in current investments, net (9) (45) (13) (11) (54) (16) (49)
Receipts for other derivative 8 11 3 7 1 9
contracts, net
Proceeds from sale of property, plant 181
and equipment and intangible assets
Interest received 7 5 1 3 4 1 13
Cash disposed from sale of shares in a (4) (1) (4) (1)
consolidated company
Net cash used in investing activities (291) (268) (77) (114) (167) (48) (560)
* Reclassified.
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
months
year
ended ended ended
months ended June 30, months ended June 30, December 31,
June 30, June 30,
2019 2020 2020 2019 2020 2020 2019
---
NIS millions
US$ millions NIS millions US$
millions
NIS millions
Cash flows from financing activities
Payments for derivative contracts, net (1) (2)
Receipt of long-term loan from 150 150
financial institutions
Repayment of long-term loans from (212) (100) (29) (212) (100) (29) (212)
financial institutions
Repayment of debentures (308) (223) (65) (504)
Repurchase of own debentures (10)
Proceeds from issuance of 194 56 194 56 -
debentures, net
Interest paid (86) * (77) (22) (16) * (14) (4) (151)
Equity offering 5 1 5 1 309
Proceeds from exercise of share 65 19 48 14 4
options
Payment of principal of lease (122) * (118) (34) (53) * (50) (14) (256)
liabilities
---
Net cash from (used in) financing activities (578) (255) (74) (281) 83 24 (672)
---
Changes in cash and cash equivalents (347) (87) (25) (176) 112 32 (196)
Cash and cash equivalents as at the beginning of the period 1,202 1,006 290 1,031 807 233 1,202
Cash and cash equivalents as at the end of the period 855 919 265 855 919 265 1,006
===
* Reclassified.
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,
---
2019 2020
Convenience 2019
translation
into US dollar
2020
---
NIS millions
US$ millions
NIS millions
---
Loss for the period................................ (35) (46) (13) (107)
Tax benefit............................................ (11) (12) (4) (23)
Financing income................................... (12) (10) (3) (49)
Financing expenses.............................. 64 44 13 193
Other income........................................ 10
Depreciation and amortization.............. 225 240 69 898
Share of loss of equity accounted 2 1 10
investees (net of income tax)...............
Share based payments......................... 2 4 1 8
---
Adjusted EBITDA.................................... 233 222 64 940
===
Free cash flow
The following table shows the calculation of free cash flow:
Three-month period ended
Year ended
June 30,
December 31,
---
2019 2020
Convenience 2019
translation
into US dollar
2020
---
NIS millions
US$ millions
NIS millions
---
Cash flows from operating 161 140 40 756
activities(*)........................................
Cash flows from investing activities...... (115) (167) (48) (560)
Sale of short-term tradable 9 51 15 38
debentures and deposits (**)...........
Investment in equity accounted 157
investees...........................................
Free cash flow....................................... 55 24 7 391
===
(*) Including the effects of exchange rate fluctuations in cash and cash equivalents and lease payments.
(**) 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 Q1-2019 Q2-2019 Q3-2019 Q4-2019 Q1-2020 Q2-2020 FY-2019
--- ---
Cellular service revenues 404 420 439 416 396 385 1,679
Fixed-line service revenues 317 312 311 318 327 339 1,258
Cellular equipment revenues 158 162 172 169 156 147 661
Fixed-line equipment revenues 92 63 47 69 54 25 271
Consolidation adjustments (43) (37) (41) (40) (41) (41) (161)
---
Total revenues 928 920 928 932 892 855 3,708
Cellular adjusted EBITDA 146 163 185 133 131 125 627
Fixed-line adjusted EBITDA 78 70 86 79 113 97 313
---
Total adjusted EBITDA 224 233 271 212 244 222 940
Operating profit (loss) 9 6 36 (27) 18 (22) 24
Financing expenses, net 27 52 31 34 64 34 144
Loss for the period (16) (35) (2) (54) (43) (46) (107)
Free cash flow 46 55 234 56 57 24 391
Cellular subscribers at the end of period (in 000's) 2,853 2,745 2,767 2,744 2,747 2,734 2,744
Monthly cellular ARPU (in NIS) 47.2 51.9 53.2 50.5 48.1 46.9 50.7
Churn rate for cellular subscribers (%) 11.0% 11.3% 11.4% 11.3% 8.8% 8.7% 48.8%
Cellcom Israel Ltd.
Disclosure for debenture holders as of
June
30, 2020
---
Aggregation of the information regarding the debenture series issued by the Company (1), in million NIS
---
Series Original Issuance Date
Principal
As of 30.06.2020 As of 13.08.2020 Interest Rate (fixed) Principal Repayment
Dates
Interest
Linkage
Trustee
on the Date
Repayment
Contact Details
of Issuance
Dates (3)
--- ---
Principal Linked Principal Balance Interest Accumulated in Books Debenture Balance Value in
Books (2)
Market Value Principal Balance on Trade Linked Principal Balance
From
To
Balance on Trade
--- ---
H (4)(5)(6)**
08/07/14 949.624 721.714 685.749 6.93 692.679 584.664 607.759 572.987 1.98%
05.07.18
05.07.24
January-5
Linked to CPI
Mishmeret Trust Company Ltd.
03/02/15*
and July-5
Rami Sebty. 48 Menachem Begin Rd.
11/02/15*
Tel Aviv. Tel: 03-6374355.
--- ---
I (4)(5)(6)**
08/07/14 804.010 643.208 628.263 12.913 641.176 567.309 562.807 548.251 4.14%
05.07.18
05.07.25
January-5
Not linked
Mishmeret Trust Company Ltd.
03/02/15*
and July-5
Rami Sebty. 48 Menachem Begin Rd.
11/02/15*
Tel Aviv. Tel: 03-6374355.
28/03/16*
--- ---
J (4)(5)
25/09/16 103.267 104.088 103.526 1.237 104.763 96.245 103.267 103.431 2.45%
05.07.21
05.07.26
January-5
Linked to CPI
Mishmeret Trust Company Ltd.
and July-5
Rami Sebty. 48 Menachem Begin Rd.
Tel Aviv. Tel: 03-6374355.
--- ---
K (4)(5)**
25/09/16 710.634 710.634 706.413 12.234 718.647 677.163 710.634 706.459 3.55%
05.07.21
05.07.26
January-5
Not linked
Mishmeret Trust Company Ltd.
01/07/18*
and July-5
Rami Sebty. 48 Menachem Begin Rd.
10/12/18*
Tel Aviv. Tel: 03-6374355.
--- ---
L (4)(5)(7)**
24/01/18 835.937 824.979 773.754 10.001 783.755 717.731 824.979 774.498 2.50%
05.01.23
05.01.28
January-5
Not linked
Strauss Lazar Trust Company (1992) Ltd.
10/12/18*
Ori Lazar. 17 Yizhak Sadeh St.,
12/05/20*
Tel Aviv. Tel: 03- 6237777.
--- ---
Total 3,403.472 3,004.623 2,897.705 43.315 2,941.020 2,643.112 2,809.446 2,705.626
---
Comments:
(1) For a summary of the terms of the Company's outstanding debentures see the Company's 2019 Annual Report under "Item 5. Operating and Financial Review and Prospects - B. Liquidity and Capital Resources - Debt Service - Public Debentures". In the reporting period, the Company fulfilled all terms of the debentures and Indentures. Debentures financial covenants - as of June 30, 2020 the net leverage *** was 1.97. 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) 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. (7) In December 2019, the Company repurchased Series L Debentures for approximately NIS 10 million.
(*) On these dates additional debentures of the series were issued, the information in the table refers to the full series. (**) As of June 30, 2020, debentures Series H, I, K and L are material, which represent 5% or more of the total liabilities of the Company, as presented in the financial statements. (***) Net Leverage - the ratio of Net Debt to Adjusted EBITDA, excluding one-time influences. Net Debt defined as credit and loans from banks and others, debentures and interest payable, net of cash and cash equivalents and current investments in tradable securities. The definition of net leverage refers to Adjusted EBITDA for a period of 12 consecutive months. Accordingly, the net leverage ratio above includes the effects of the new standard IFRS 16 (applied by the Company as of January 1, 2019) on the Adjusted EBITDA for the year ended in June 30, 2020. For details of the effects of IFRS 16 on the Company's results see footnote 2 on page 1 of this press release and note 2 F to the Company's financial statement for the period ended on December 31, 2019.
Cellcom Israel Ltd.
Disclosure for debenture holders as of June 30, 2020 (cont`d)
Debentures Rating Details*
Series
Rating Company
Rating as of
Rating as of
Rating assigned upon
Recent date of rating Additional ratings between original issuance and
the recent date of rating as of 13.08.2020 (2)
30.06.2020
13.08.2020
issuance of the Series
as of 13.08.2020
--- ---
Rating
H
S&P Maalot
A
A
A+
05/2020
06/2014, 08/2014, 01/2015, 09/2015, 03/2016,
A+,A(2)
08/2016, 06/2017, 01/2018, 06/2018, 08/2018,
12/2018, 03/2019, 08/2019, 05/2020
--- ---
I
S&P Maalot
A
A
A+
05/2020
06/2014, 08/2014, 01/2015, 09/2015, 03/2016,
A+,A(2)
08/2016, 06/2017, 01/2018, 06/2018, 08/2018,
12/2018, 03/2019, 08/2019, 05/2020
--- ---
J
S&P Maalot
A
A
A+
05/2020
08/2016, 06/2017, 01/2018, 06/2018, 08/2018,
A+,A(2)
12/2018, 03/2019, 08/2019, 05/2020
--- ---
K
S&P Maalot
A
A
A+
05/2020
08/2016, 06/2017, 01/2018, 06/2018, 08/2018,
A+,A(2)
12/2018, 03/2019, 08/2019, 05/2020
--- ---
L
S&P Maalot
A
A
A+
05/2020
01/2018, 06/2018, 08/2018, 12/2018, 03/2019,
A+,A(2)
08/2019, 05/2020
--- ---
(1) In August 2019, S&P Maalot updated the Company's rating outlook from an ""ilA+/negative" to an "ilA/negative".
(2) In May 2012, S&P Maalot updated the Company's rating from an "ilAA/negative" to an "ilAA-/negative". In November 2012, S&P Maalot affirmed the Company's rating of "ilAA/negative". In June 2013, S&P Maalot updated the Company's rating from an "ilAA-/negative" to an "ilA+/stable". In June 2014, August 2014, January 2015, September 2015, March 2016, August 2016, June 2017, January 2018, June 2018, August 2018 and December 2018 S&P Maalot affirmed the Company's rating of "ilA+/stable". In March 2019, S&P Maalot updated the Company's rating outlook from an "ilA+/stable" to an "ilA+/negative". In August 2019, S&P Maalot updated the Company's rating outlook from an "ilA+/negative" to an "ilA/negative". In May 2020, S&P Maalot affirmed the Company's rating of "ilA/negative". For details regarding the rating of the debentures see the S&P Maalot report dated May 10, 2020, included in the Company's current report filled in the Israeli Securities Authority website ("MAGNA") on May 10, 2020.
* A securities rating is not a recommendation to buy, sell or hold securities. Ratings may be subject to suspension, revision or withdrawal at any time, and each rating should be evaluated independently of any other rating.
Cellcom Israel Ltd.
Aggregation of the information regarding the Company's Material Loans ((1)), in million NIS
Loan
Provision Date Principal Amount as of Interest Rate (nominal) Principal Repayment
30.06.2020 Dates (annual
payments)
Interest Repayment Dates (semi-annual payments)
Linkage
---
From
To
---
Loan from financial
06/2016 50 4.60%
30.06.18
30.06.21
June-30
and December-31,
Not linked
institution (2)(3)(4)(5)(6)
commencing December 31, 2016
through June 30, 2021
---
Loan from financial
institution(2)(3)(4)(5)(6)
06/2017 100 5.10%
30.06.19
30.06.22
June-30
and December-31,
Not linked
commencing December 31, 2017
through June 30, 2022
---
Loan from
03/2019 150 4.00%
31.03.21
31.03.24
March-31
and September-30,
Not linked
bank(2)(3)(4)(5)(6)
commencing September 30, 2019
through March 31, 2024
---
Total 300
---
Comments:
(1) For a summary of the terms of the Company's loan agreements see the Company's 2019 Annual Report under "Item 5. Operating and Financial Review and Prospects - B. Liquidity and Capital Resources - Other Credit Facilities" and the reference therein to "- Debt Service - Public Debentures". (2) In the reporting period, the Company fulfilled all terms of the loan agreements. (3) Loan agreements financial covenants - as of June 30, 2020 the net leverage* was 1.97. (4) In the reporting period, no cause for early repayment occurred. (5) In the loan agreements, the Company undertook not to create any pledge on its assets, as long as the loans are not fully repaid, subject to certain exclusions. (6) According to the loan agreements the Company may prepay the loans, subject to a prepayment fee.
(*) Net Leverage - the ratio of Net Debt to Adjusted EBITDA, excluding one-time influences. Net Debt defined as credit and loans from banks and others, debentures and interest payable, net of cash and cash equivalents and current investments in tradable securities. The definition of net leverage refers to Adjusted EBITDA for a period of 12 consecutive months. Accordingly, the net leverage ratio above includes the effects of the new standard IFRS 16 (applied by the Company as of January 1, 2019) on the Adjusted EBITDA for the year ended in June 30, 2020. For details of the effects of IFRS 16 on the Company's results see footnote 2 on page 1 of this press release and note 2 F to the Company's financial statement for the period ended on December 31, 2019.
Cellcom Israel Ltd.
Summary of Financial Undertakings (according to repayment dates) as of June 30, 2020
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).
Gross
interest payments
(without deduction
of
Principal payments tax)
ILS linked
to CPI
to CPI ILS not linked Euro Dollar Other
---
First year 113,954 80,386 86,155
---
Second year 167,338 218,752 77,455
---
Third year 167,338 341,040 65,640
---
Fourth year 167,338 341,040 50,767
---
Fifth year and on 208,404 1,185,200 72,723
---
Total 824,372 2,166,418 352,740
---
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).
Gross
interest payments
(without deduction
of
Principal payments tax)
ILS linked
to CPI
to CPI ILS not linked Euro Dollar Other
---
First year 100,000 7,390
---
Second year 50,000 2,550
---
Third year
---
Fourth year
---
Fifth year and on
---
Total 150,000 9,940
---
c. Credit from banks in Israel based on the Company's "Solo" financial data (in thousand NIS) - None.
Gross
interest payments
(without deduction
of
Principal payments tax)
ILS linked
to CPI ILS not linked to CPI Euro Dollar Other
---
First year 37,500 5,992
---
Second year 37,500 4,500
---
Third year 37,500 3,000
---
Fourth year 37,500 1,502
---
Fifth year and on
---
Total 150,000 14,994
---
Cellcom Israel Ltd.
Summary of Financial Undertakings (according to repayment dates) as of June 30, 2020 (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).
Gross
interest payments
(without deduction
of
Principal payments tax)
ILS linked
to CPI ILS not linked to CPI Euro Dollar Other
---
First year 113,954 217,886 99,537
---
Second year 167,338 306,252 84,505
---
Third year 167,338 378,540 68,640
---
Fourth year 167,338 378,540 52,269
---
Fifth year and on 208,404 1,185,200 72,723
---
Total 824,372 2,466,418 377,674
---
f. Out of the balance sheet Credit exposure based on the Company's "Solo" financial data - None.
g. Out of the balance sheet Credit exposure of all the Company's consolidated companies, excluding companies that are reporting corporations and excluding the Company's data presented in section f above (in thousand NIS) - None.
h. Total balances of the credit from banks, non-bank credit and debentures of all the consolidated companies, excluding companies that are reporting corporations and excluding Company's data presented in sections a - d above (in thousand NIS) - None.
i. Total balances of credit granted to the Company by the parent company or a controlling shareholder and balances of debentures offered by the Company held by the parent company or the controlling shareholder (in thousand NIS) - None.
j. Total balances of credit granted to the Company by companies held by the parent company or the controlling shareholder, which are not controlled by the Company, and balances of debentures offered by the Company held by companies held by the parent company or the controlling shareholder, which are not controlled by the Company (in thousand NIS).
Principal payments Gross
interest
payments
(without
deduction
of
tax)
ILS linked
to CPI
to CPI ILS not linked Euro Dollar Other
---
First year 1 16 373
---
Second year 215 404 363
---
Third year 215 1,863 344
---
Fourth year 215 1,863 287
---
Fifth year and on 784 8,257 562
---
Total 1,430 12,403 1,929
---
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] Please see "Use of Non-IFRS financial measures" section in continued of this press release.
[2] As of January 1, 2019 the Company is applying International Financial Reporting Standard IFRS 16, Leases. The effects of applying the standard in the second quarter of 2020 and the second quarter of 2019 amounted to an increase of NIS 66 million and NIS 68 million in Adjusted EBITDA respectively, an increase of NIS 56 million and NIS 59 million in Cash flows from operating activities respectively.
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SOURCE Cellcom Israel Ltd.
