Cellcom Israel announces Third Quarter 2020 Results
NETANYA, Israel, Nov. 23, 2020 /PRNewswire/ --
Cellcom Israel concludes the third quarter of 2020 with an increase of 3% in revenues compared to the third quarter last year. Revenues totaled NIS 956 million. However, corona virus crisis continues to adversely affect the Company's results and led to a loss of NIS 37(3) million and Adjusted EBITDA(1 )of NIS 231 million for the third quarter
THIRD QUARTER 2020(3) HIGHLIGHTS (compared to third quarter of 2019):
-- Total Revenues totaled NIS 956 million ($278 million) compared to NIS
928 million ($270 million) in the third quarter last year, an increase
of 3.0%.
-- Service revenues totaled NIS 695 million ($202 million) compared to NIS
709 million ($206 million) in the third quarter last year, a decrease of
2.0%.
-- Equipment revenues totaled NIS 261 million ($76 million) compared to NIS
219 million ($64 million) in the third quarter last year, an increase of
19.2%.
-- Operating loss totaled NIS 6 million ($1 million) compared to Operating
income of NIS 36 million ($10 million) in the third quarter last year.
-- Loss totaled NIS 37 million ($10 million) compared to NIS 2 million ($1
million) in the third quarter last year.
-- Adjusted EBITDA(1) totaled NIS 231(3) million ($67 million) compared to
NIS 271 million ($79 million) in the third quarter last year, a decrease
of 14.8%.
-- Net cash from operating activities totaled NIS 202 million ($59 million)
compared to NIS 273 million ($79 million) in the third quarter last
year, a decrease of 26.0%.
-- Free cash flow(1) totaled NIS 44 million ($13 million) compared to NIS
53 million ($15 million) in the third quarter last year (excluding a
total of approximately NIS 181 million resulting from the sale of
independent fiber optic infrastructure of the company in residential
areas to IBC).
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 third
quarter of 2020 and the third
quarter of 2019 amounted to an
increase of NIS 64 million and
NIS 72 million in Adjusted
EBITDA respectively, an
increase of NIS 65 million and
NIS 71 million in Cash flows
from operating activities
respectively.
3 The Group's results include
Golan's results from the date
closing of the transaction,
i.e. as of September 2020
Avi Gabbay, the Company's Chief Executive Officer, referred to the results of the third quarter of 2020:
"In the third quarter, we continued to deal with the effects of the Corona virus pandemic which continued to adversely affect the Company's results. Given the many challenges, we are working to adjust our expense structure and remain focused on providing excellent service to our customers.
We continue to grow our TV and Internet subscriber-base and continue to transfer existing customers to fiber optic. Cellcom Israel currently has approximately 80,000 active fiber customers out of approximately 500,000 households in connected buildings to the IBC's fiber infrastructure.
During the quarter, an investment agreement was signed for HOT to enter as a partner in IBC, pending regulatory approvals. The agreement will allow for a significant expansion in the scope of optical fiber deployment and at an accelerated pace. The wide deployment will transform Cellcom Israel from a company that relies on the fixed network of others to a partner in an extensive and independent infrastructure.
This quarter, we completed the acquisition of Golan Telecom Ltd. ("Golan"). The transaction strengthens Cellcom Israel's position as a leading communications company and is expected to significantly contribute to Cellcom Israel's adjusted EBITDA and free cash flow.
We received the license for 5G and we are setting up sites that will support this network alongside the expansion of our 4G network which improves the network's performance and the level of service to our customers."
Shai Amsalem, the Company's Chief Financial Officer, said:
"The current quarter includes for the first time, the consolidation of Golan's results, the acquisition of which was completed in late August and therefore the consolidation includes the results of only one month. The results of the third quarter, reflect the continued impact of the Corona virus pandemic which caused a sharp decline in roaming revenues from our customers travelling abroad and tourists arriving in Israel.
The Company's operating expenses declined by NIS 20 million year over year and reflect the effect of the efficiency measures implemented by the Company. Operating expenses compared with the previous quarter increased due to an increase in activity in the Company's service centers and points of sale.
Revenues from fixed-line services continued to grow, thanks to the recruitment of new Internet and TV customers and the transfer of existing customers to the fiber infrastructure.
Revenues from the sale of equipment in the cellular sector increased compared to the same period last year due to among other aspects an increase in online sales. At the same time, these sales carry low gross profit margin.
The Company's adjusted EBITDA in the third quarter of 2020 amounted to NIS 231 million, reflecting a decrease of 14.8% compared with the corresponding quarter last year, mainly in light of the sharp decline in the Company's revenue from roaming services.
Free cash flow for the third quarter of 2020 amounted to NIS 44 million, compared with NIS 53 million in the corresponding quarter (excluding the proceeds from the sale of our fiber network in residential neighborhoods to IBC). The decrease in free cash flow was mainly due to the continued impact of the decline in roaming revenues."
Cellcom Israel Ltd. (NYSE: CEL; TASE: CEL) ("Cellcom Israel" or the "Company" or the "Group") announced today its financial results for the third quarter of 2020.
Main Consolidated Financial Results:
Q3/2020(3) Q3/2019 Change%
Q3/2020
Q3/2019
NIS million US$ million
(convenience translation)
Total revenues 956 928 3.0% 278 270
---
Operating (loss) Income (6) 36 (1) 10
---
Loss (37) (2) 1,750% (10) (1)
---
Free cash flow 44 234 (81.2)% 13 68
---
Adjusted EBITDA 231 271 (14.8)% 67 79
---
Adjusted EBITDA, as percent of total 24.2% 29.2% (17.1)%
revenues
===
Main Financial Data by Operating Segments:
Cellular (*) Fixed-line (**) Inter-segment
adjustments Consolidated results
(***)
NIS million Q3'20 Q3'19 Change Q3'20 Q3'19 Change Q3'20 Q3'19 Q3'20 Q3'1
9 Change
% % %
Total revenues 637 611 4.3% 365 358 2.0% (46) (41) 956 928 3.0%
---
Service revenues 414 439 (5.7)% 327 311 5.1% (46) (41) 695 709 (2.0)%
---
Equipment revenues 223 172 29.7% 38 47 (19.1)% 261 219 19.2%
---
Adjusted EBITDA 114 185 (38.4)% 117 86 36.0% 231 271 (14.8)%
---
Adjusted EBITDA, as percent of total 17.9% 30.3% (40.9)% 32.1% 24.0% 33.8% 24.2% 29.2% (17.1)%
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 (THIRD QUARTER OF 2020 COMPARED TO THIRD QUARTER OF 2019):
The Group's results include Golan's results as of September 2020
Revenues for the third quarter of 2020 increased 3.0% totaling NIS 956 million ($278 million), compared to NIS 928 million ($270 million) in the third quarter last year. The increase in revenues is mainly attributed to a 19.2% increase in equipment revenues, which was partially offset by a 2.0% decrease in service revenues.
Service revenues totaled NIS 695 million ($202 million) in the third quarter of 2020, a 2.0% decrease from NIS 709 million ($206 million) in the third quarter last year.
Service revenues in the cellular segment totaled NIS 414 million ($120 million) in the third quarter of 2020, a 5.7% decrease from NIS 439 million ($128 million) in the third quarter last year. This decrease resulted mainly from decrease of the Company's roaming services activities as a result of the Corona virus crisis which was partially offset by revenues from Golan (consolidated as of September).
Service revenues in the fixed-line segment totaled NIS 327 million ($95 million) in the third quarter of 2019, a 5.1% increase from NIS 311 million ($90 million) in the third quarter last year. The increase resulted mainly from an increase in revenues from internet and TV services.
Equipment revenues totaled NIS 261 million ($76 million) in the third quarter of 2020, a 19.2% increase compared to NIS 219 million ($64 million) in the third quarter last year. The increase resulted, among other things, from an increase in the quantity of end user equipment sold online in the cellular segment.
Cost of revenues for the third quarter of 2020 totaled NIS 744 million ($216 million), a 12.9% increase compared to NIS 659 million ($192 million) in the third quarter of 2019. This increase resulted mainly from an increase in the quantity of end user equipment sold in the cellular segment, an increase in the costs of interconnect as a result of an increase in minutes and additional expenses of Golan which was consolidated into the Group's results as of September. This increase was partially offset by decrease of TV services' content costs.
Gross profit for the third quarter of 2020 decreased 21.2% to NIS 212 million ($62 million), compared to NIS 269 million ($78 million) in the third quarter of 2019. Gross profit margin for the third quarter of 2020 amounted to 22.2%, down from 29.0% in the third quarter of 2019. This is, among other things, due to increase in sales of end user equipment at a low gross profit.
Selling, Marketing, General and Administrative Expenses and Credit losses ("SG&A Expenses") for the third quarter of 2020 decreased 6.6% to NIS 227 million ($66 million), compared to NIS 243 million ($71 million) in the third quarter of 2019. This decrease resulted mainly from a decrease in salaries and advertising expenses as a result of streamlining the Company's made.
Operating loss for the third quarter of 2020 totaled NIS 6 million ($1 million), compared to operating income of NIS 36 million ($10 million) in the third quarter of 2019. The operating loss is mainly due to the adverse effect of Corona virus crisis over the Company's revenues from roaming services.
Adjusted EBITDA for the third quarter of 2020 decreased by 14.8% totaling NIS 231 million ($67 million) compared to NIS 271 million ($79 million) in the third quarter of 2019. Adjusted EBITDA as a percent of revenues for the third quarter of 2020 totaled 24.2%, down from 29.2% in the third quarter of 2019.
Cellular segment Adjusted EBITDA for the third quarter of 2020 totaled NIS 114 million ($33 million), compared to NIS 185 million ($54 million) in the third quarter last year, a decrease of 38.4%, which resulted mainly from a decrease in roaming services activities as a result of the Corona virus crisis and a decrease in the contribution of end-user equipment sales.
Fixed-line segment Adjusted EBITDA for the third quarter of 2020 totaled NIS 117 million ($34 million), compared to NIS 86 million ($25 million) in the third quarter last year, a 36.0% increase, which resulted mainly from increase in activity in internet and TV fields, as well as, due to cost savings related to the fixed-line segment as a result of transfer subscribers to fiber infrastructure and decrease of TV's content costs.
Financing expenses, net for the third quarter of 2020 totaled NIS 32 million ($9 million), compared with NIS 31 million ($9 million) in the third quarter of 2019, an increase of 3.2%.
Loss for the third quarter of 2020 totaled NIS 37 million ($10 million), compared with loss of NIS 2 million ($1 million) in the third quarter of 2019. As stated, the loss is mainly due to the adverse effect of the Corona virus crisis on the Company's revenues from roaming services.
Basic loss per share for the third quarter of 2020 totaled NIS 0.22 ($0.07), compared to basic loss per share of NIS 0.01 ($0.003) in the third quarter last year.
OPERATING REVIEW
MAIN PERFORMANCE INDICATORS - CELLULAR SEGMENT:
Q3/2020(3) Q3/2019 Change (%)
Cellular subscribers at the
end of period (in thousands) 3,641 2,767 31.6%
---
Churn Rate for cellular
subscribers (in %) 8.7% 11.4% (23.7)%
---
Monthly cellular ARPU (in NIS) 45.7 53.2 (14.0)%
---
(3) Includes Golan's indicators from September, 2020.
Cellular subscriber base of the Company at the end of the third quarter of 2020 was 3.641 million subscribers. The increase in subscriber base is due to the completion of the Golan acquisition.
Cellular Churn Rate for the third quarter of 2020 totaled 8.7%, compared to 11.4% in the third quarter last year.
The monthly cellular Average Revenue per User ("ARPU") for the third quarter of 2020 totaled 45.7 NIS ($13.3), compared to NIS 53.2 ($15.5) in the third quarter last year. The decrease in ARPU resulted mainly from decrease in demand of the Company's roaming services as a result of the Corona virus crisis and the ongoing erosion in the prices of cellular services.
MAIN PERFORMANCE INDICATORS - FIXED-LINE SEGMENT:
Q3/2020 Q3/2019 Change (%)
Internet
infrastructure
field
subscribers 289 278 4.0%
-(households) at
the end of
period (in
thousands)
---
TV field
subscribers -at
the end of
period (in
thousands) 251 247 1.6%
===
In the third quarter of 2020, the Company's subscriber base in the TV field increased by approximately 6,000 net subscribers and the Company's subscriber base in the internet infrastructure field increased by approximately 6,000 net households.
FINANCING AND INVESTMENT REVIEW
Cash Flow
Free cash flow for the third quarter of 2020 totaled NIS 44 million ($13 million), compared to NIS 234 million ($68 million) in the third quarter of 2019. In the corresponding quarter, the Company received an amount of approx. NIS 181 million as a result of the sale of the Company's independent fiber optic infrastructure in residential areas to IBC. The decrease in the free cash flow from NIS 53 million ($15 million) to NIS 44 million ($13 million) is mainly due the decrease in receipts from roaming services which was offset by a decrease in capital expenditures in fixed assets and intangible assets.
Total Equity
Total Equity as of September 30, 2020 amounted to NIS 1,918 million ($558 million). During the quarter, series 4 options in an amount of NIS 75 million were exercised which mainly increased the equity.
Cash Capital Expenditures in Fixed Assets and Intangible Assets and others
During the third quarter of 2020, the Company invested NIS 108 million ($31 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 149 million ($43 million) in the third quarter of 2019.
Dividend
On November 22, 2020, the Company's Board of Directors decided not to declare a cash dividend for the third 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 filed on 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 THIRD QUARTER OF 2020 AND SUBSEQUENT TO THE END OF THE REPORTING PERIOD
Golan Transaction
Following the Company's previous announcements regarding the signing of a binding memorandum of understanding for the purchase of Golan Telecom Ltd., or Golan, and approval of the transaction by the Israeli Competition Authority and the Israeli Ministry of Communications, or MOC, the Company concluded the acquisition of Golan's entire share capital, for a total sum of approximately NIS 613 million (approximately NIS 545 million plus an amount equal to the cash and deposits of Golan as of the closing date and minus transaction expenses as agreed between the parties) on August 26, 2020.
In addition, as previously reported, Golan's MNO license was replaced with an MVNO license for an interim period, following the deposit of a bank guarantee by Golan with the MOC, in the sum of approximately NIS 75 million, in respect of the demand that Golan will return certain monetary benefits previously received from the MOC, which Golan disputes.
IBC Transaction
In September 2020, the Company announced that it, together with the Israel Infrastructure Fund, or IIF, entered into an investment transaction with Hot Telecommunication Systems Ltd., (together with its affiliates "Hot") in IBC Israel Broadband (2013) Ltd., or IBC, composed of several agreements, or the Transaction. In addition to standard and customary conditions, the Transaction includes an undertaking to substantially increase the deployment of IBC's fiber-optic network over the next few years and the following:
Investment Agreements - Entered between the partnership through which the Company and IIF, hold 70% of IBC's share capital, or the IBC Partnership, and Hot. Under the Investment Agreements, Hot shall become an equal partner in the IBC Partnership, and hold indirectly 23.3% of IBC's share capital, by making an investment substantially equal to the investment made by each of the Company and IIF until the closing date of the Transaction. Further, the Investment Agreements include certain additional governance rights and dead lock mechanisms.
IRU Agreement - Entered between IBC and Hot, under which Hot undertakes to purchase an indefeasible right, to use IBC's fiber-optic network.
Services Agreement - Entered between IBC and Hot, under which IBC undertakes to purchase certain services from Hot and may purchase additional services.
IBC also undertakes to continue to purchase from the Company certain services supplied to it by the Company prior to the closing date.
The completion of the Transaction is subject to regulatory change and required approvals, including regulatory and third party approvals. The Company cannot guarantee such change will be made and approvals will be granted.
For additional details see the Company's 2019 Annual Report under "Item 4 - Information on the Company - B. Business Overview - Networks and Infrastructure - Fixed-line Segment - Investment in IBC and sale of fiber-optic infrastructure to IBC".
Update On The Corona Virus And Implications
Following previous announcements, the Company's results for the third quarter of 2020 continues to reflect the negative effects of the Corona virus pandemic on the Company's roaming services.
As previously announced, the Company expects its roaming services to continue to be adversely affected by the Corona virus pandemic, mainly due to implications on the outbound and inbound tourism in Israel, a parameter that directly affects revenues from international roaming services.
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
Frequencies
Following the Company's previous announcements regarding the frequencies, including 5G frequencies, won by the Company and its partners to the shared cellular network in the 2020 frequencies tender (and the completion of the acquisition of Golan by the Company), the MOC approved the frequencies allocation between the Company and Marathon 018 Xfone, or Xfone, and in October 2020, the MOC allocated such frequencies designated for the Company to the Company and amended its cellular license accordingly.
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" and the Company report for the second quarter 2020 under "Other developments during the second quarter of 2020 and subsequent to the end of the reporting period - Regulation - Conclusion of the Frequencies Tender".
Network Deployment
In November 2020, the MOC published a hearing proposing the following: (1) require cellular operators to execute an additional stage in their universal deployment obligation for 4G networks, within 2 years from resolution on the matter (excluding Xfone, whose 2 years period shall commence only on 2022); (2) change the current regulation which allows national roaming and network sharing only between a veteran operator (i.e. the Company, Pelephone and Partner) and a "new" operator (i.e. Xfone and Hot Mobile) and allow all cellular operators to voluntarily cooperate, using national roaming or network sharing configuration (MOCN) in certain periphery areas and a limited number of sites.
The Company is studying the hearing and at this preliminary stage cannot assess the implications on its results of operations, should the proposed be approved.
For additional details see the Company's 2019 Annual Report under Item 3. Key Information - D. Risk Factors - Risks Related to our Business -"We may not be able to obtain permits to construct and operate cell sites" and "Item 4. Information on The Company - B. Business Overview - Cellular Segment - Network and Infrastructure- Permits for Cell Site Construction" and "Network sharing agreements", "Government Regulations - Cellular Segment - Network Sharing" and "Permits for cell site construction".
Cell Sites
Further to previous reports of claims made by several local planning and building authorities that the Israeli cellular operators may not receive building permits in reliance on the Israeli National Zoning Plan 36 for Communications, or the Plan, for cell sites operating in frequencies not detailed in the Plan and conflicting District Court decisions on the matter, on August 2020, the Israeli Supreme Court ruled that the Plan applies to all cell sites set in the Plan, whether or not the frequencies in which they operate are detailed in the Plan, in accordance with the opinion of the Israeli Ministry of Justice and the Israeli cellular operators position.
For additional details see the Company's 2019 Annual Report under Item 3. Key Information - D. Risk Factors - Risks Related to our Business -"We may not be able to obtain permits to construct and operate cell sites", and "Item 4. Information on The Company - B. Business Overview - Network and Infrastructure- Permits For Cell Site Construction - National Zoning Plan 36 - Site Licensing".
Network Sharing Agreement
In November 2020, the Company announced that its cellular sharing network partner, Marathon 018 Xfone Ltd., or Xfone, has not paid the monthly payment due October 31, 2020, under the sharing network agreement, or Debt. The Company issued a demand for the immediate payment of the Debt to Xfone and intends to act diligently to exercise its rights under the agreement. At this preliminary stage, the Company cannot assess the implications on the Company's results.
For additional details regarding the materiality of the network sharing agreement on the Company's results, see the Company's 2019 Annual Report under "Item 3. Risk Factors - Our network sharing agreements consideration constitute a significant portion of our revenues" and Item 4. Information on the Company - B. Business Overview - Networks and Infrastructure - Network sharing agreements".
Changes to the Board of Directors
In September 2020, the Company's board of directors appointed Mr. Eran Shenar and Ms. Diana Ingrid Elsztein-Dan as members of the Company's Board of Directors. Mr. Shenar was nominated to the board by the Company's employees, as per the February 2020 collective employment agreement.
Mr. Shenar is the founder and co-owner of Best-Medical Center as of 2019 and of the Multidisciplinary Center of Gastroenterology since 2015 and has served as a business and financial consultant since 2010. From 2009 to 2011 Mr. Shenar served as a director and chairman of the finance committee of Sinopsis Ltd. and a partner in Altos Private Equity. From 2007 to 2009 he served as CEO of Katzir holding fund and as a director in various private companies. From 2003 to 2007 he served as the manager of the Strauss-Elite merger (2003) and Strategic control manager in Strauss-Elite Group and from 1998 - 2003 he served as a manager in the financial advisory division of Somech-Chaikin, KPMG. Mr. Shenar is a Certified Public Accountant and holds an M.B.A. with major in finance, strategy and entrepreneurship and a B.A. in economics and accounting, both from the Tel-Aviv University.
Ms. Diana Ingrid Elsztain -Dan has served as an economist at Magen Eco-Energy Ltd. since 2014. From 2019 to 2020 Ms. Elsztain -Dan served as director of Discount Investment Corporation Ltd. and from 2016 to 2020, she served as director of IDB Development Corporation Ltd., Shufersal Ltd. and Shufersal Nadlan Ltd. From 2014 to 2016 she served as a cost accountant at Ginegar Plastic Products Ltd. and from 2000 to 2012 as a cost accountant at Polysack Plastic Industries Ltd. From 1996 to 2000 she served as an accounts manager at Polysack R.a.c.s Ltd and Chemada Fine Chemicals Ltd. Ms. Diana Elsztain -Dan holds an M.B.A. in Business Administration and Management from the UBA University, Argentina. Ms. Elsztain -Dan is the sister of Mr. Eduardo Elsztain, the former indirect controlling shareholder of the Company.
In September 2020, Mr. Shai Amsalem was appointed as the Company's CFO.
Mr. Amsalem has served as CFO of Golan Telecom Ltd. since 2017. From 2012 to 2016 he served as CFO of Tiv Taam Group. From 2010 to 2012 he served as CFO of Rav-Bariach (08) Industries Ltd. and from 2006 to 2009 he served as CFO of Gibor Sport Active wear Ltd. Mr. Amsalem is a Certified Public Accountant and holds an M.B.A. with major in finance and a B.A. with major in accounting, both from the College of Management.
In October 2020, Mr. Ilan Sigal was appointed as the Company's VP Business Development and as CEO of Golan Telecom (a wholly owned subsidiary of the Company) effective February 1, 2021.
Mr. Sigal has served as VP marketing of Pelephone communications Ltd., and VP marketing and business development of Yes - D.B.S Satellite Services (1998) Ltd. and Bezeq International Ltd. since January 2019 and from 2016 as VP marketing of Pelephone communications Ltd. From 2010 to 2016 he served as a marketing division manager of Bezeq, the Israeli Telecommunications Company Ltd. for the private and SOHO sectors and from 2007 to 2010 he served as its internet marketing department manager for the private sector. From 2004 to 2007 he served as a marketing department manager of Internet Gold-Golden Lines ltd. for the private sector. Mr. Sigal holds an M.B.A. from the Ono Academic College and a B.A. with major in communications and management, from the College of Management.
In November 2020, Mr. Eli Adadi was appointed as the Company's VP Retail, effective November 23, 2020.
Mr. Adadi has served as CEO of Dynamica Communications Chain Stores Ltd., our wholly owned subsidiary and as manager of our retail apparatus, since 2011. From 2009 to 2011 he served as our sales and revenues manager for the private sector. Mr. Adadi holds an M.B.A. with major in marketing and a B.A. in Business Administration, both from the Ben-Gurion University.
For additional details see the Company's 2019 Annual Report under "Item 6. Directors, Senior Management and Employees" - A. Directors and Senior Management".
Developments Regarding Controlling Shareholder
Following previous announcements regarding receivership actions taken in relation to the Company indirect controlling shareholder, Discount Investment Corporation Ltd., or DIC's shares, the court appointed receivers to DIC's shares pledged in favor of the debenture holders of IDB Development Corporation Ltd., or IDB, representing approximately 70.14% of DIC's share capital and an additional [temporary] receiver to additional pledged DIC shares representing approximately 12.12% of DIC's share capital. The receivers received offers for the purchase of the pledged DIC shares and on November 20, 2020, the court approved the sale of DIC's pledged shares to a group of investors led by Mega Or Holdings Ltd subject to further approvals as may be required by law. Pursuant to the Company's licenses such transfer of control requires the approval of the Israeli Ministry of Communications yet to be provided.
For additional details see the Company's 2019 Annual Report, under "Item 3. Key Information - D. Risk Factors - We are controlled by a single shareholder who can significantly influence matters requiring shareholders' approval", "Item 4 - Information on the Company - B. Business Overview - Government Regulations Cellular Segment" "Item 7 - Major Shareholders and Related Party Transactions - A. Major Shareholders".
Debentures, Material Loans and Financial Liabilities
In October 2020, the Company repaid in early repayment part of the loan in accordance with the loan agreement from June 2017 with Israeli bank, which provided to the Company in March 2019, in amount of approximately NIS 113 million.
For information regarding the Company's debentures and material loans, including the terms of the loan, see the Company's 2019 Annual Report under "Item 5B. Liquidity and Capital Resources - Debt Service - Public Debentures" and "-Other Credit Facilities".
Affirmation of the Company's Rating in Relation to Debentures Traded In Israel*
In August 2020, Standard & Poor's Maalot, or Maalot, affirmed the Company's rating at ilA and maintained the Company's rating outlook at "negative", in relation to the Company's debentures traded on the Tel Aviv Stock Exchange. Among its main assumptions for the rating and outlook, Maalot noted: a significant decrease in revenues from roaming services as well as a decrease in revenues from the sale of end-user equipment, as a result of the Corona virus pandemic; the completion of the acquisition of Golan, during the third quarter 2020; continued erosion in cellular segment revenues in light of the competition in the market; a decrease in the Company's revenues and EBITDA in 2020 and a certain increase in 2021, and a certain increase in the Company's revenues and EBITDA due to the acquisition of Golan.
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 2019 Annual Report under "Item 5. Operating and Financial Review and Prospects - B. Liquidity and Capital Resources - Debt Service -Public Debentures".
*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.
CONFERENCE CALL DETAILS
The Company will be hosting a conference call regarding its results for the third quarter of 2020 on Monday, November 23, 2020 at 9:00 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: 1 888 642 5032
Israel Dial-in Number: 03 918 0609
International Dial-in Number: +972 3 918 0609
at: 09:00 am Eastern Time; 06:00 am Pacific Time; 14:00 UK Time; 16:00 Israel Time
To access the live webcast of the conference call, please access the investor relations section of Cellcom Israel's website: www.cellcom.co.il. After the call, a replay of the call will be available under the same investor relations section.
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 cellular subscribers with a broad range of services including cellular telephony, roaming services, text and multimedia messaging, advanced cellular and data services and other value-added services in the areas of mobile office, data protection etc., based on Cellcom Israel's technologically advanced infrastructure. The Company operates advanced networks enabling high speed broadband and advanced multimedia services. Cellcom Israel offers nationwide customer service including telephone customer service, retail stores, and service and sale centers. 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 3.441 = US$ 1 as published by the Bank of Israel for September 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) that is not part of the Company's operation; income tax; depreciation and amortization, share of profit (losses) of equity accounted investees and share based payments. This is an accepted measure in the communications industry. The Company presents this measure as an additional performance measure as the Company believes that it enables us to compare operating performance between periods and companies, net of any potential differences which may result from differences in capital structure, taxes, age of fixed assets and related depreciation expenses. Adjusted EBITDA should not be considered in isolation, or as a substitute for operating income, any other performance measures, or cash flow data, which were prepared in accordance with Generally Accepted Accounting Principles as measures of profitability or liquidity. Adjusted EBITDA does not take into account debt service requirements, or other commitments, including capital expenditures, and therefore, does not necessarily indicate the amounts that may be available for the Company's use. In addition, Adjusted EBITDA as presented by the Company may not be comparable to similarly titled measures reported by other companies, due to differences in the way these measures are calculated. See the reconciliation of net income to Adjusted EBITDA under "Reconciliation of Non-IFRS Measures" in the press release.
Free cash flow is a non-IFRS measure and is defined as the net cash provided by operating activities (including the effect of exchange rate fluctuations on cash and cash equivalents), minus the net cash used in investing activities, excluding acquisition or selling of a subsidiary, 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
Shai Amsalem
Elad Levy
Chief Financial Officer
Investor Relations Manager
investors@cellcom.co.il investors@cellcom.co.il
Tel: +972 52 998 9735
Tel: +972-52-998-4774
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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
September 30,
September 30,
September 30,
December 31,
2019 2020 2020 2019
NIS millions
US$ millions
NIS millions
Assets
Cash and cash equivalents 698 630 183 1,006
Current investments and deposits, including derivatives 430 123 36 473
Trade receivables 1,153 967 281 1,142
Current tax assets 3 3 1 3
Other receivables 32 * 46 13 32 *
Deferred expenses - right of use 34 * 58 17 37 *
Inventory 67 80 23 66
Total current assets 2,417 1,907 554 2,759
Trade and other receivables 478 * 217 63 459 *
Deferred expenses - right of use 331 * 308 90 323 *
Property, plant and equipment, net 1,456 1,363 396 1,432
Intangible assets and others, net 1,301 2,161 628 1,294
Investments in equity accounted investees 150 138 40 150
Right-of-use assets, net and Investment property 735 648 188 745
Total non- current assets 4,451 4,835 1,405 4,403
Total assets 6,868 6,742 1,959 7,162
Liabilities
Current maturities of debentures and of loans from financial institutions 509 513 149 509
Current taxation liabilities 8 6
Current maturities of lease liabilities 225 204 59 226
Trade payables and accrued expenses 662 653 190 687
Provisions 102 170 49 99
Other payables, including derivatives 272 214 62 299
Total current liabilities 1,778 1,754 509 1,826
Long-term loans from financial institutions 300 163 47 300
Debentures 2,517 2,336 679 2,511
Long-term lease liabilities 528 468 136 533
Provisions 22 30 9 22
Other long-term liabilities 3 3 1 4
Liability for employee rights upon retirement, net 14 18 5 19
Deferred tax liabilities 77 52 15 60
Total non- current liabilities 3,461 3,070 892 3,449
Total liabilities 5,239 4,824 1,401 5,275
Equity attributable to owners of the Company
Share capital 1 2 1 2
Share premium 335 792 230 623
Receipts on account of share options 24
Retained earnings 1,292 1,124 327 1,236
Non-controlling interests 1 2
Total equity 1,629 1,918 558 1,887
Total liabilities and equity 6,868 6,742 1,959 7,162
*Reclassified
Cellcom Israel Ltd.
(An Israeli Corporation)
Condensed Consolidated Interim Statements of Income (Unaudited)
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Convenience
Convenience
translation
translation
into US dollar
into US dollar
For the nine
For the nine For the three
For the three
For the
months ended months ended months ended months ended year ended
September 30, September 30, September 30, September 30, December 31,
2019 2020 2020 2019 2020 2020 2019
NIS millions
US$millions NIS millions
US$millions
NIS millions
Revenues 2,776 * 2,703 786 928 * 956 278 3,708
Cost of revenues (2,033) * (2,052) (596) (659) * (744) (216) (2,725)
Gross profit 743 651 190 269 212 62 983
Selling and marketing expenses (468) (411) (120) (161) (147) (43) (610)
General and administrative expenses (222) * (245) (71) (73) * (76) (22) (300) *
Credit losses (23) * (26) (8) (9) * (4) (1) (29) *
Other income (expenses), net 21 * 21 6 10 * 9 3 (20)
Operating profit (loss) 51 (10) (3) 36 (6) (1) 24
Financing income 41 6 2 13 10 3 49
Financing expenses (151) (136) (40) (44) (42) (12) (193)
Financing expenses, net (110) (130) (38) (31) (32) (9) (144)
Share in losses of equity accounted investees (4) * (9) (3) (4) * (2) (1) (10)
Profit (loss) before taxes on income (63) (149) (44) 1 (40) (11) (130)
Tax benefit (taxes 10 23 7 (3) 3 1 23
on income)
Loss for the period (53) (126) (37) (2) (37) (10) (107)
Attributable to:
Owners of the Company (52) (126) (37) (1) (37) (10) (107)
Non-controlling interests (1) (1)
Loss for the period (53) (126) (37) (2) (37) (10) (107)
Loss per share
Basic loss per share (in NIS) (0.45) (0.83) (0.24) (0.01) (0.22) (0.07) (0.90)
Diluted loss per share (in NIS) (0.45) (0.83) (0.24) (0.01) (0.22) (0.07) (0.90)
Weighted-average number of shares used in the calculation of
basic earnings (loss) per share (in shares) 116,196,729 150,284,438 150,824,438 116,196,729 162,810,134 118,376,455
162,810,134
Weighted-average number of shares used in the calculation of
diluted earnings (loss) per share (in shares) 116,196,729 150,824,438 150,824,438 116,196,729 162,810,134 118,376,455
162,810,134
*Reclassified
Cellcom Israel Ltd.
(An Israeli Corporation)
Condensed Consolidated Interim Statements of Cash Flows (Unaudited)
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Convenience
Convenience
translation
translation
into US dollar
into US dollar
For the nine
For the nine For the three
For the three
For the
months ended months ended months ended months ended year ended
September 30, September 30, September 30, September 30, December 31,
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 (53) (126) (37) (2) (37) (10) (107)
Adjustments for:
Depreciation and amortization 665 690 201 226 230 67 898
Share based payments 5 14 4 3 6 1 8
Gain on sale of property, plant and equipment and intangible assets (7) (8) (8)
Net change in fair value of investment property 4 5 1 4 2 1 6
Gain on sale of shares in a consolidated company (1)
Taxes on income (Tax benefit) (10) (23) (7) 3 (3) (1) (23)
Financing expenses, net 110 130 38 31 32 9 144
Other expenses 2 * 6 2 2 * 6 2 3
Share in losses of equity accounted investees 4 * 9 3 4 * 2 10
Changes in operating assets and liabilities:
Change in inventory 27 (14) (4) (7) 14 4 28
Change in trade receivables (including long-term amounts) 54 109 32 3 (4) (1) 80
Change in Deferred expenses - right of use (including long-term amounts) 14 (37) (11) 6 (12) (3) 20
Change in other receivables (including long-term amounts) 8 (19) (6) 15 (18) (5) (7)
Changes in trade payables, accrued expenses and provisions (44) (43) (13) (34) (15) (4) (27)
Change in other liabilities (including long-term amounts) 28 (57) (17) 25 (19) (6) 23
Payments for derivative hedging contracts, net (8) (1) (1) 16 5 (10)
Income tax paid (14) (4) (1) (7) 2 (12)
Income tax received 10 10 10
Net cash from operating activities 795 638 185 273 202 59 1,036
Cash flows from investing activities
Acquisition of property, plant and equipment (274) (195) (56) (88) (58) (17) (324)
Acquisition of intangible assets and others (172) (145) (42) (61) (50) (15) (233)
Investment in equity accounted investee (154) * (3) (1) (154) * (157)
Change in current investments, net (9) 401 117 446 130 (49)
Receipts for other derivative contracts, net 8 11 3 9
Proceeds from sale of property, plant and equipment and intangible assets 181 181 181
Interest received 9 5 1 2 13
Acquisition of subsidiary, net of cash acquired (608) (177) (608) (177)
Cash disposed from sale of shares in a consolidated company (1) 3 1
Net cash used in investing activities (411) (535) (155) (120) (267) (78) (560)
*Reclassified
Cellcom Israel Ltd.
(An Israeli Corporation)
Condensed Consolidated Interim Statements of Cash Flows (cont'd) (Unaudited)
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Convenience
Convenience
translation
translation
into US dollar
into US dollar
For the nine
For the nine For the three
For the three
For the
months ended months ended months ended months ended year ended
September 30, September 30, September 30, September 30, December 31,
2019 2020 2020 2019 2020 2020 2019
---
NIS millions
US$ millions NIS millions
US$millions
NIS millions
Cash flows from financing activities
Payments for derivative contracts, net (1) (4) (1) (1) (3) (1) (2)
Receipt of long-term loan from financial institutions 150 150
Repayment of long-term loans from financial institutions (212) (100) (29) (212)
Repayment of debentures (504) (417) (121) (196) (194) (56) (504)
Repurchase of own debentures (10)
Proceeds from issuance of debentures, net 194 56 -
Interest paid (117) * (120) (35) (42) * (43) (13) (151)
Equity offering 5 1 309
Proceeds from exercise of share options 140 41 75 22 4
Payment of principal of lease liabilities (204) * (177) (51) (71) * (59) (17) (256)
Net cash used in financing activities (888) (479) (139) (310) (224) (65) (672)
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Changes in cash and cash equivalents (504) (376) (109) (157) (289) (84) (196)
Cash and cash equivalents as at the beginning of the period 1,202 1,006 292 855 919 267 1,202
Cash and cash equivalents as at the end of the period 698 630 183 698 630 183 1,006
===
*Reclassified
Cellcom Israel Ltd
(An Israeli Corporation)
Reconciliation for Non-IFRS Measures
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Adjusted EBITDA
The following is a reconciliation of loss to Adjusted EBITDA:
Three-month period ended
Year ended
September 30,
December 31,
---
2019 2020
Convenience 2019
translation
into US dollar
2020
NIS millions
US$ millions
NIS millions
---
Loss for the
period (2) (37) (10) (107)
Taxes on income
(tax benefit) 3 (3) (1) (23)
Financing income (13) (10) (3) (49)
Financing
expenses 44 42 12 193
Other income 6 1 10
Depreciation and
amortization 226 230 67 898
Share of loss of
equity accounted 4 2 1 10
investees (net of income
tax)
Share based
payments 3 6 1 8
---
Adjusted EBITDA 271 231 67 940
===
Free cash flow
The following table shows the calculation of free cash flow:
Three-month period ended
Year ended
September 30,
December 31,
---
2019 2020
Convenience 2019
translation
into US dollar
2020
---
NIS millions US$ millions
NIS millions
---
Cash flows from
operating
activities(*) 202 137 40 756
Cash flows from
investing
activities (120) (267) (77) (560)
Purchase (sale)
of short-term
tradable (2) (446) (130) 38
debentures and deposits
(**)
Acquisition
(sale) of shares
in a 154 620 180 157
consolidated company or
in equity
accounted investees
---
Free cash flow 234 44 13 391
===
(*) 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 Q3-2020 FY-2019
--- ---
Cellular service revenues 404 420 439 416 396 385 414 1,679
Fixed-line service revenues 317 312 311 318 327 339 327 1,258
Cellular equipment revenues 158 162 172 169 156 147 223 661
Fixed-line equipment revenues 92 63 47 69 54 25 38 271
Consolidation adjustments (43) (37) (41) (40) (41) (41) (46) (161)
---
Total revenues 928 920 928 932 892 855 956 3,708
Cellular adjusted EBITDA 146 163 185 133 131 125 114 627
Fixed-line adjusted EBITDA 78 70 86 79 113 97 117 313
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Total adjusted EBITDA 224 233 271 212 244 222 231 940
Operating profit (loss) 9 6 36 (27) 18 (22) (6) 24
Financing expenses, net 27 52 31 34 64 34 32 144
Loss for the period (16) (35) (2) (54) (43) (46) (37) (107)
Free cash flow 46 55 234 56 57 24 44 391
Cellular subscribers at the end of period (in 000's) 2,853 2,745 2,767 2,744 2,747 2,734 3,641 2,744
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Monthly cellular ARPU (in NIS) 47.2 51.9 53.2 50.5 48.1 46.9 45.7 50.7
---
Churn rate for cellular subscribers (%) 11.0% 11.3% 11.4% 11.3% 8.8% 8.7% 8.7% 48.8%
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Cellcom Israel Ltd.
Disclosure for debenture holders as of September 30, 2020
Aggregation of the information regarding the debenture series issued by the Company( (1)), in million NIS
Series Original Issuance Date Principal on the Date of
As of 30.09.2020 As of 23.11.2020 Interest Rate (fixed) Principal Repayment
Issuance Dates
Interest Repayment Dates (3)
Linkage
Trustee
Contact Details
---
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)**
08/07/14 949.624 608.299 575.783 2.871 578.654 605.328 608.299 579.259 1.98%
05.07.18
05.07.24
January-5 and July-5
Linked to CPI
Mishmeret Trust Company Ltd. Rami
03/02/15* Sebty. 48 Menachem Begin Rd. Tel
11/02/15* Aviv. Tel: 03-6374355.
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I (4)(5)(6)**
08/07/14 804.010 562.807 549.009 5.554 554.563 588.640 562.807 549.808 4.14%
05.07.18
05.07.25
January-5 and July-5
Not linked Mishmeret Trust Company Ltd. Rami Sebty. 48 Menachem Begin Rd. Tel Aviv. Tel:
03-6374355.
03/02/15*
11/02/15*
28/03/16*
---
J (4)(5)
25/09/16 103.267 104.192 103.661 0.608 104.269 104.599 104.192 103.893 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)**
25/09/16 710.634 710.634 706.624 6.013 712.637 715.040 710.634 706.817 3.55%
05.07.21
05.07.26
January-5 and July-5
Not linked
Mishmeret Trust Company Ltd. Rami
01/07/18* Sebty. 48 Menachem Begin Rd. Tel Aviv. Tel: 03-6374355.
10/12/18*
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L (4)(5)(7)**
24/01/18 835.937 824.979 775.989 15.2 791.189 781.255 824.979 777.514 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*
12/05/20*
---
Total 3,403.472 2,810.911 2,711.066 30.246 2,741.312 2,794.862 2,810.911 2,717.291
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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 September 30, 2020 the net leverage *** was 2.65. 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 September 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 on September 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 September 30, 2020 (cont`d)
Debentures Rating Details*
Series
Rating
Rating as of Rating as of 23.11.2020
Rating assigned upon
Recent date of rating as Additional ratings between original issuance and the recent
date of rating
Company 30.09.2020 (1) issuance of the Series of 23.11.2020 as of 23.11.2020 (2)
--- ---
Rating
H
S&P
A
A
A+
08/2020
06/2014, 08/2014, 01/2015, 09/2015, 03/2016,
A+,A(2)
Maalot 08/2016, 06/2017, 01/2018, 06/2018, 08/2018,
12/2018, 03/2019, 08/2019, 05/2020, 08/2020
--- ---
I
S&P Maalot
A
A
A+
08/2020 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, 05/2020, 08/2020
A+,A(2)
--- ---
J
S&P Maalot
A
A
A+
08/2020
08/2016, 06/2017, 01/2018, 06/2018, 08/2018, 12/2018, 03/2019, 08/2019, 05/2020, 08/2020
A+,A(2)
--- ---
K
S&P Maalot
A
A
A+
08/2020
08/2016, 06/2017, 01/2018, 06/2018, 08/2018, 12/2018, 03/2019, 08/2019, 05/2020, 08/2020
A+,A(2)
--- ---
L
S&P Maalot
A
A
A+
08/2020
01/2018, 06/2018, 08/2018, 12/2018, 03/2019, 08/2019, 05/2020, 08/2020
A+,A(2)
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(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". In August 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 August 17, 2020, included in the Company's current report filled in the Israeli Securities Authority
website ("MAGNA") on August 17, 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
Interest Rate Principal Repayment
Dates
Interest
Linkage
as of 30.09.2020 (nominal) (annual payments) Repayment Dates
(semi-annual
payments)
---
From
To
---
Loan from financial institution
06/2016 50 4.60%
30.06.18
30.06.21
June-30
Not linked
(2)(3)(4)(5)(6)
and December-
31, 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
Not linked
and December-31, commencing December 31,
2017 through June 30, 2022
---
Loan from bank(2)(3)(4)(5)(6)(7)
03/2019 150 4.00%
31.03.21
31.03.24
March-31
Not linked
and September-30, 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 September 30, 2020 the net leverage* was 2.65. (4) In the reporting period, no cause for early repayment occurred. (5) In the loan agreements, the Company undertook not to create any pledge on its assets, as long as the loans are not fully repaid, subject to certain exclusions. (6) According to the loan agreements the Company may prepay the loans, subject to a prepayment fee. (7) In October 2020, the Company repaid part of the loan in early repayment, in amount of approximately NIS 113 million.
(*) 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 on September 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 September 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).
Principal payments Gross interest
payments
(without
deduction of
tax)
ILS
linked
to ILS not Euro Dollar Other
CPI linked to CPI
---
First
year 167,516 218,787 83,358
---
Second
year 167,516 218,787 71,538
---
Third
year 167,516 340,880 59,717
---
Fourth
year 167,516 340,880 44,844
---
Fifth
year
and on 41,234 965,634 58,907
---
Total 711,298 2,084,968 318,364
---
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 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.
Principal payments Gross interest
payments
(without
deduction of
tax)
ILS
linked
to ILS not Euro Dollar Other
CPI linked to CPI
---
First
year 37,500 5,248
---
Second
year 37,500 3,748
---
Third
year 37,500 2,248
---
Fourth
year 37,500 750
---
Fifth
year
and on
---
Total 150,000 11,994
---
Cellcom Israel Ltd.
Summary of Financial Undertakings (according to repayment dates) as of September 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).
Principal payments Gross interest
payments
(without
deduction of
tax)
ILS
linked
to ILS not Euro Dollar Other
CPI linked to CPI
---
First
year 167,516 356,287 95,996
---
Second
year 167,516 306,287 77,836
---
Third
year 167,516 378,380 61,965
---
Fourth
year 167,516 378,380 45,594
---
Fifth
year
and on 41,234 965,634 58,907
---
Total 711,298 2,384,968 340,298
---
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 188 370 391
---
Second
year 188 370 373
---
Third
year 188 2,023 356
---
Fourth
year 188 2,023 297
---
Fifth
year
and on 442 8,666 576
---
Total 1,194 13,452 1,993
---
k. Total balances of credit granted to the Company by consolidated companies and balances of debentures offered by the Company held by the consolidated companies (in thousand NIS) - None.
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SOURCE Cellcom Israel Ltd.
