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Cellcom Israel Announces Third Quarter 2009 Results With Record Revenues, Operating Income and EBITDA[1]
Cellcom Israel Declares a Third Quarter Dividend of NIS 2.90 Per Share (Totals Approx. NIS 286 Million)
NETANYA, Israel, November 16 /PRNewswire-FirstCall/ --
Third Quarter 2009 Highlights (compared to the third quarter 2008[2]):
- Total Revenues increased 1.5% reaching NIS 1,675 million
($446 million)
- Total Revenues from services increased 0.9% to NIS 1,493
million ($397 million)
- Revenues from content and value added services (including
SMS) increased 32.4%, representing 15.3% of services revenues
- EBITDA[3] increased 2.6% to NIS 670 million ($178 million);
EBITDA margin 40%3, up from 39.6%
- Operating income increased 5.4% to NIS 468 million ($125
million)
- Net income[4] increased 19.4% to NIS 289 million ($77
million)
- Free cash flow1 totaled NIS 454 million ($121 million)
- Subscriber base increased by approx. 31,000 net subscribers
during the quarter, mostly post-paid subscribers; reaching approx.
3.259 million at the end of September 2009
- 3G subscribers reached approx. 941,000 at the end of
September 2009, net addition of approx. 64,000 in the third quarter
2009
- The Company declared a third quarter dividend of NIS 2.90
per share
Cellcom Israel Ltd. (NYSE:
Commenting on the results,
After substantial amount of quarters of rapid growth of content and SMS revenues, this quarter we have also became the cellular operator with the highest revenues in this area. Furthermore, this quarter our landline service revenues to the business segment continued to grow, as we continue to leverage our fiber optic and microwave infrastructure.
We at Cellcom Israel, remain focused on the Company's core competencies, cellular communications, while continuing to develop new businesses in areas, which are synergetic to our core business and can produce reasonable return on both the organizational and management investment. Our strategy to focus in the core business is the main factor for our being market leaders in terms of revenues, profit and profit margins and now also in content and SMS revenues. Along with our effort to generate revenues and profitability growth, we continue tirelessly our efficiency measures in any area or business of the Company. All these efforts to increase revenues, develop additional businesses and continue with efficiency measures, go hand in hand with our improved customer service, as reflected in the "Public Trust" organization report, which stated that Cellcom Israel provides the best quality of customer care in the Israeli Cellular market and that we received the lowest number of customer complaints although we have the highest number of subscribers in the Israeli cellular market.
We believe that our steadfast focus on our core competencies and proven business strategy, paired with our strong cash flow, will enable us to continue to successfully navigate our business. Furthermore, we believe that the dynamic changes in the local communications market may create many opportunities. We will identify and track these opportunities once they arise, and analyze them with a goal to continuing to generate long term growth", concluded Mr. Shapira.
Main Financial and Performance Indicators[5]:
Q3/2009 Q3/2008 % Change Q3/2009 Q3/2008
million NIS million US$
(convenience
translation)
Total Services revenues 1,493 1,480 0.9% 397.3 393.8
Revenues from content and
value added services 229 173 32.4% 60.9 46.0
Handset and accessories
revenues 182 170 7.1% 48.4 45.2
Total revenues 1,675 1,650 1.5% 445.7 439.1
Operating income 468 444 5.4% 124.5 118.1
Net Income 289 242 19.4% 76.9 64.4
EBITDA, after elimination
of a one-time provision[3]
in Q3/2009 670 653 2.6% 178.3 173.8
EBITDA, as percent of
Revenues, after
elimination of a one-time
provision[3] in Q3/2009 40.0% 39.6% 1.0%
Subscribers end of period
(in thousands) 3,259 3,157 3.2%
Monthly ARPU 150.4 154.3 (2.5%) 40.0 41.1
Average Monthly MOU * 338.1 336.3 0.5%
* Following the regulatory requirement to change the basic airtime
charging unit from twelve-seconds to one-second units commencing
Financial Review
Revenues for the third quarter of 2009 increased 1.5% totaling
The higher service revenues resulted mainly from a 32.4% increase in
content and value added services (including SMS) revenues in the third
quarter 2009, compared to the third quarter last year. Revenues from content
and value added services reached
Cost of revenues for the third quarter of 2009 totaled
Gross profit for the third quarter of 2009 increased 2.6%, reaching
Selling, Marketing, General and Administrative Expenses ("SG&A Expenses")
for the third quarter of 2009 decreased 0.3% to
Operating income for the third quarter 2009 increased 5.4%, reaching a
record of
EBITDA for the third quarter 2009, excluding the above mentioned one-time
provision, increased 2.6% to a record of
Financing Expenses, net for the third quarter 2009 totaled
Income tax for the third quarter 2009 decreased 38.7%, totaling
Net Income for the third quarter 2009, including the effects of the above
mentioned one-time provision and one-time tax income, increased 19.4% to
Operating Review
New Subscribers - at the end of
In the third quarter of 2009, the Company added approximately 64,000 net
new 3G subscribers to its 3G subscriber base, reaching approximately 941,000
3G subscribers at the end of
The Churn Rate in the third quarter 2009 totaled to 4.9%, compared to 4.4% in the third quarter last year. The quarterly churn remains primarily impacted by the churn of lower contribution pre-paid subscribers and subscribers with collection problems.
Average monthly subscriber Minutes of Use ("MOU") in the third quarter
2009 totaled 338.1 minutes, compared to 336.3 minutes in the third quarter
2008, an increase of 0.5%. Following the regulatory requirement to change the
basic airtime charging units from twelve-seconds to one-second units
commencing
The monthly Average Revenue per User (ARPU) for the third quarter 2009
and totaled
Financing and Investment Review
Cash Flow
Free cash flow for the third quarter of 2009 totaled
Shareholders' Equity
Shareholders' Equity as of
Investment in Fixed Assets and Intangible Assets
During the third quarter 2009, the Company invested
Dividend
On
Other developments during the third quarter of 2009 and subsequent to balance sheet date
Site Licensing
Following the previously reported recommendations of an Israeli
inter-ministry committee regarding the appropriateness of future application
of the exemption from obtaining building permits for radio access devices,
relied upon by cellular operators, including the Company, the Attorney
General of
As previously disclosed, additional hardship on the construction and
operation of cell sites is expected if the proposed changes to the National
Zoning Plan 36, which includes guidelines for constructing cell sites, are
approved by the National Committee and thereafter by the government of
For additional details see the Company's most recent annual report for
the year ended
Regulation
The Ministry of Communications has commenced examination of the
interconnect fees and pricing of a cellular network elements, following the
previously reported 2008 resolutions of the Israeli government to (1) examine
interconnect fees and further revise them and (2) to accelerate the
procedures necessary to allow the entry of MVNOs and additional
infrastructure based operators to the cellular market, which was followed by
an amendment to the Communication Law in
In addition, the Ministry of Communications has published general principles for an additional UMTS spectrum tender, expected to be published by the beginning of 2010. According to the principles published, which the MOC noted that may still change, the tender will include additional UMTS spectrum for two additional UMTS operators; participation will be allowed for new operators and MIRS communication Ltd. - the only cellular operator without a UMTS network; and the winners shall be awarded various benefits and leniencies such as discounts in spectrum fees and a five year exemption from royalties payment, rebates on spectrum allocation fees and license fees; additional means to facilitate their entry are under consideration.
For additional details see the Company's most recent annual report for
the year ended
Financing
In
For additional details on the Company's debt see the Company's most
recent annual report for the year ended
Conference Call Details
The Company will be hosting a conference call on
US Dial-in Number: 1-888-407-2553 UK Dial-in Number: 0800-917-9141
Israel Dial-in Number: 03-918-0650 International Dial-in Number: +972-3-918-0650
at:
To access the live webcast of the conference call, please access the investor relations section of Cellcom Israel's website: http://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 the leading Israeli cellular
provider; Cellcom Israel provides its approximately 3.259 million subscribers
(as at
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 us, may include
projections of our future financial results, our anticipated growth
strategies and anticipated trends in our business. These statements are only
predictions based on our current expectations and projections about future
events. There are important factors that could cause our 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 our license, new
legislation or decisions by the regulator affecting our operations, the
outcome of legal proceedings to which we are a party, particularly class
action lawsuits, our ability to maintain or obtain permits to construct and
operate cell sites, and other risks and uncertainties detailed from time to
time in our filings with the U.S. Securities and Exchange Commission,
including under the caption "Risk Factors" in our Annual Report for the year
ended
Although we believe the expectations reflected in the forward-looking statements contained herein are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. We assume no duty to update any of these forward-looking statements after the date hereof to conform our 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 US$\New Israeli Shekel (NIS) conversion
rate of
Use of non-GAAP financial measures
EBITDA is a non-GAAP measure and is defined as income before financing income (expenses), net; other income (expenses), net; income tax; depreciation and amortization. This is an accepted measure in the communications industry. The Company presents this measure as an additional performance measure as the Company believes that it enables us to compare operating performance between periods and companies, net of any potential differences which may result from differences in capital structure, taxes, age of fixed assets and related depreciation expenses. EBITDA should not be considered in isolation, or as a substitute for operating income, any other performance measures, or cash flow data, which were prepared in accordance with Generally Accepted Accounting Principles as measures of profitability or liquidity. EBITDA does not take into account debt service requirements, or other commitments, including capital expenditures, and therefore, does not necessarily indicate the amounts that may be available for the Company's use. In addition, EBITDA may not be comparable to similarly titled measures reported by other companies, due to differences in the way these measures are calculated. See the reconciliation between the net income and the EBITDA presented at the end of this Press Release.
Free cash flow is a non-GAAP measure and is defined as the net cash provided by operating activities minus the net cash used in investing activities plus short-term investment in marketable debentures. See the reconciliation note at the end of this Press Release.
Financial Tables Follow
Cellcom Israel Ltd.
(An Israeli Corporation)
Condensed Consolidated Balance Sheets
Convenience
translation
into US
dollar
September 30, September September December
30, 30, 31,
2009 2009 *2008 *2008
NIS millions US$ NIS NIS
millions millions millions
(Unaudited) (Unaudited) (Unaudited) (Audited)
Assets
Cash and cash equivalents 976 260 195 275
Current investments, including
derivatives 213 57 **72 **68
Trade receivables 1,584 421 1,503 1,478
Other receivables 73 19 **59 **44
Inventory 123 33 137 119
Total current assets 2,969 790 1,966 1,984
Trade and other receivables 622 165 610 602
Property, plant and equipment, net 2,066 550 2,186 2,159
Intangible assets, net 707 188 739 743
Total non- current assets 3,395 903 3,535 3,504
Total assets 6,364 1,693 5,501 5,488
Liabilities
Debentures current maturities 341 91 331 329
Trade payables and accrued
expenses 788 210 708 677
Current tax liabilities 127 34 84 85
Provisions 78 20 77 47
Other current liabilities,
including derivatives 345 92 319 385
Total current liabilities 1,679 447 1,519 1,523
Debentures 4,179 1,112 3,417 3,401
Provisions 17 5 15 17
Other long-term liabilities 1 - 1 1
Deferred taxes 99 26 141 156
Total non- current liabilities 4,296 1,143 3,574 3,575
Total liabilities 5,975 1,590 5,093 5,098
Shareholders' equity
Share capital 1 - 1 1
Cash flow hedge reserve (24) (6) (44) (11)
Retained earnings 412 109 451 400
Total shareholders' equity 389 103 408 390
Total liabilities and
shareholders' equity 6,364 1,693 5,501 5,488
(*) Retrospective application due to accounting policy change regarding
"Subscriber Acquisition and Retention Costs"
(**) Reclassified
Cellcom Israel Ltd.
(An Israeli Corporation)
Condensed Consolidated Statements of Income
Nine- month period ended Three-month
period ended
September 30, September 30,
Convenience Convenience
translation translation
into US into US
dollar dollar
2009 2009 *2008 2009
NIS US$ NIS NIS
millions millions millions millions
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenues 4,844 1,289 4,845 1,675
Cost of
revenues 2,486 662 2,549 856
Gross profit 2,358 627 2,296 819
Selling and
marketing
expenses 520 138 521 185
General and
administrative
expenses 485 129 491 166
Other (income)
expenses, net 4 1 (16) -
Operating
income 1,349 359 1,300 468
Financing
income 141 37 94 29
Financing
expenses (302) (80) (357) (151)
Financing
expenses, net (161) (43) (263) (122)
Income before 1,188 316 1,037 346
income tax
Income tax 277 74 291 57
Net income 911 242 746 289
Earnings per
share
Basic earnings
per share in
NIS 9.26 2.46 7.64 2.94
Diluted
earnings per
share in NIS 9.17 2.44 7.52 2.91
(table continued)
Three- month period ended Year
ended
September 30, December
31,
Convenience
translation
into US
dollar
2009 *2008 *2008
US$ NIS NIS
millions millions millions
(Unaudited) (Unaudited) (Audited)
Revenues 446 1,650 6,417
Cost of
revenues 228 852 3,396
Gross profit 218 798 3,021
Selling and
marketing
expenses 49 188 701
General and
administrative
expenses 44 164 659
Other (income)
expenses, net - 2 (29)
Operating
income 125 444 1,690
Financing
income 7 14 83
Financing
expenses (40) (123) (393)
Financing
expenses, net (33) (109) (310)
Income before 92 335 1,380
income tax
Income tax 15 93 391
Net income 77 242 989
Earnings per
share
Basic earnings
per share in
NIS 0.78 2.48 10.12
Diluted
earnings per
share in NIS 0.77 2.44 9.96
(*) Retrospective application due to accounting policy change regarding
"Subscriber Acquisition and Retention Costs"
Cellcom Israel Ltd.
(An Israeli Corporation)
Condensed Consolidated Statements of Cash Flows
Nine-month period ended Three-month period ended
September 30, September 30,
Convenience Convenience
translation translation
into US into US
dollar dollar
2009 2009 *2008 2009
NIS millions US$ millions NIS millions NIS millions
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Cash flows
from
operating
activities
Net income
for the
period 911 242 746 289
Adjustments
to reconcile
net income
to funds
generated
from
operations:
Depreciation 353 94 428 115
Amortization 213 57 182 72
Capital gain
on sale of
land - - (9) -
Loss (gain)
on sale of
assets 5 1 (6) 1
Income tax
expense 277 74 291 57
Financial
(income)
costs, net 161 43 263 122
Share based
payments 1 - 20 1
Changes in
operating
assets and
liabilities:
Changes in
inventories (57) (15) 40 (29)
Changes in
trade
receivables
(including
long-term
amounts) (85) (23) (163) (34)
Changes in
other
receivables
(including
long-term
amounts) (45) (12) (44) 43
Changes in
trade
payables and
accrued
expenses 182 49 (175) 58
Changes in
other
liabilities
(including
long-term
amounts) (4) (1) 77 5
Proceeds
(payments)
for
inventory
hedging
contracts,
net 22 6 (34) 5
Proceeds
(payments)
for
derivative
contracts,
net 19 5 (8) (15)
Income tax
paid (290) (77) (355) (101)
Net cash
provided by
operating
activities 1,663 443 1,253 589
(table continued)
Three-month period ended Year ended
September 30, December
31,
Convenience
translation
into US
dollar
2009 *2008 *2008
US$ millions NIS millions NIS
millions
(Unaudited) (Unaudited) (Audited)
Cash flows
from
operating
activities
Net income
for the
period 77 242 989
Adjustments
to reconcile
net income
to funds
generated
from
operations:
Depreciation 31 142 570
Amortization 19 65 251
Capital gain
on sale of
land - - (9)
Loss (gain)
on sale of
assets - 2 (9)
Income tax
expense 15 93 391
Financial
(income)
costs, net 33 109 310
Share based
payments - 3 28
Changes in
operating
assets and
liabilities:
Changes in
inventories (8) (11) 36
Changes in
trade
receivables
(including
long-term
amounts) (9) (50) (117)
Changes in
other
receivables
(including
long-term
amounts) 12 (2) (34)
Changes in
trade
payables and
accrued
expenses 16 93 (271)
Changes in
other
liabilities
(including
long-term
amounts) 1 43 99
Proceeds
(payments)
for
inventory
hedging
contracts,
net 1 (14) (38)
Proceeds
(payments)
for
derivative
contracts,
net (4) (4) 18
Income tax
paid (27) (95) (451)
Net cash
provided by
operating
activities 157 616 1,763
(*) Retrospective application due to accounting policy
change regarding "Subscriber Acquisition and Retention Costs"
Cellcom Israel Ltd.
(An Israeli Corporation)
Condensed Consolidated Statements of Cash Flows (cont'd)
Three-month
Nine-month period ended period ended
September 30, September 30,
Convenience Convenience
translation translation
into US into US
dollar dollar
2009 2009 *2008 2009
NIS US$ NIS NIS
millions millions millions millions
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Cash flows
from
investing
activities
Acquisition
of property,
plant, and
equipment (285) (76) (323) (89)
Acquisition
of
intangible
assets (137) (37) (129) (48)
Change in
current
investments,
net (124) (33) - (124)
Payments for
derivative
hedging
contracts,
net - - (17) -
Proceeds
from sales
of property,
plant, and
equipment 2 1 13 2
Interest
received 4 1 15 -
Proceeds
from sale of
long term
assets - - 39 -
Net cash
used in
investing
activities (540) (144) (402) (259)
Cash flows
from
financing
activities
Proceeds
from
derivative
contracts,
net 9 2 17 5
Repayment of
long-term
loans from
banks - - (648) -
Repayment of
Debentures (332) (88) (125) (168)
Proceeds
from
issuance of
debentures,
net of
issuance
costs 989 263 589 -
Dividend
paid (898) (239) (1,225) (302)
Interest
paid (190) (50) (175) (112)
Net cash
provided by
(used in)
financing
activities (422) (112) (1,567) (577)
Changes in
cash and
cash
equivalents 701 187 (716) (247)
Balance of
cash and
cash
equivalents
at beginning
of the
period 275 73 911 1,223
Balance of
cash and
cash
equivalents
at end of
the period 976 260 195 976
(table continued)
Three-month period ended Year ended
September 30, December 31,
Convenience
translation
into US
dollar
2009 *2008 *2008
US$ NIS millions NIS millions
millions
(Unaudited) (Unaudited) (Audited)
Cash flows
from
investing
activities
Acquisition
of property,
plant, and
equipment (24) (98) (429)
Acquisition
of
intangible
assets (13) (35) (175)
Change in
current
investments,
net (33) - -
Payments for
derivative
hedging
contracts,
net - (7) (17)
Proceeds
from sales
of property,
plant, and
equipment 1 - 19
Interest
received - 2 17
Proceeds
from sale of
long term
assets - 2 39
Net cash
used in
investing
activities (69) (136) (546)
Cash flows
from
financing
activities
Proceeds
from
derivative
contracts,
net 1 2 31
Repayment of
long-term
loans from
banks - - (648)
Repayment of
Debentures (44) (125) (125)
Proceeds
from
issuance of
debentures,
net of
issuance
costs - - 589
Dividend
paid (80) (270) (1,525)
Interest
paid (30) (87) (175)
Net cash
provided by
(used in)
financing
activities (153) (480) (1,853)
Changes in
cash and
cash
equivalents (65) - (636)
Balance of
cash and
cash
equivalents
at beginning
of the
period 325 195 911
Balance of
cash and
cash
equivalents
at end of
the period 260 195 275
(*) Retrospective application due to accounting policy change regarding
"Subscriber Acquisition and Retention Costs"
Cellcom Israel Ltd.
(An Israeli Corporation)
Reconciliation for Non-GAAP Measures
EBITDA
The following is a reconciliation of net income to EBITDA:
Year
ended
Three-month period ended
December
September 30, 31,
Convenience
translation
into US
dollar
2009 2008 2008
2009
NIS NIS NIS
millions US$ millions millions millions
Net income.................... 289 77 242 989
Income taxes................... 57 15 93 391
Financing income............. (29) (8) (14) (83)
Financing expenses............ 151 40 123 393
Other expenses (income)........ - - 2 (29)
Depreciation and amortization 187 50 207 821
EBITDA........................ 655 174 653 2,482
Free cash flow
The following table shows the calculation of free cash flow:
Year
ended
Three-month period ended
December
September 30, 31,
Convenience
translation
into US
dollar
2009 2008 2008
2009
NIS NIS NIS
millions US$ millions millions millions
Cash flows from operating
activities.................... 589 157 616 1,763
Cash flows from investing
activities.................. (259) (69) (136) (546)
short-term Investment in
marketable debentures......... 124 33 - -
Free cash flow................ 454 121 480 1,217
[1] Please see "Use of Non-GAAP financial measures" section at the end of this press release.
[2] Following the change in accounting policy in the second quarter of 2009 regarding recognition of certain subscriber acquisition and retention costs for capitalization, comparison data for third quarter 2008 was changed to reflect the retrospective application of that change.
[3] After elimination of a one-time provision in the amount of
[4] Net income includes a one-time provision in the amount of
[5] Following the change in accounting policy in the second quarter of 2009 regarding recognition of certain subscriber acquisition and retention costs for capitalization, comparison data for third quarter 2008 was changed to reflect the retrospective application of that change.
Company Contact
Yaacov Heen
Chief Financial Officer
investors@cellcom.co.il
Tel: +972-52-998-9755
Investor Relations Contact
Ehud Helft / Ed Job
CCGK Investor Relations
ehud@gkir.com / ed.job@ccgir.com
Tel: (US) +1-866-704-6710 / +1-646-213-1914
SOURCE Cellcom Israel Ltd.
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