Cellcom Israel Announces Third Quarter 2011 Results

This quarter continued to reflect the continued impact of the regulatory changes and the increased competition, as previously expected and reported

Nov 15, 2011, 02:03 ET from Cellcom Israel Ltd.

NETANYA, Israel, November 15, 2011 /PRNewswire/ --

 

In this quarter we consolidated Netvision's results for September only

Cellcom Israel declares a third quarter dividend of NIS 1.90 per share (totals approx. NIS 189 million)

 

 

Third Quarter 2011 Highlights including Netvision's Results for September Only[1] (compared to the third quarter 2010):

  • Total Revenues totaled NIS 1,665 million ($449 million) compared to NIS 1,729 million ($466 million)
  • Total Revenues from services totaled NIS 1,193 million ($321 million) compared to NIS 1,509 million ($407 million) as a result of the regulatory changes and the increased competition
  • Revenues from content and value added services (including SMS) increased 2.4%, reaching 26.6% of services revenues[2]
  • EBITDA[3]totaled NIS 534 million ($144 million) compared to NIS 716 million ($193 million)
  • EBITDA margin 32.1% compared to 41.4%
  • Operating income totaled NIS 349 million ($94 million) compared to NIS 534 million ($144 million)
  • Net income totaled NIS 199 million ($54 million) compared to NIS 332 million ($89 million)
  • Free cash flow[3] totaled NIS 262[4] million ($71 million) compared to NIS 513 million ($138 million)
  • Cellular Subscriber base totaled approx. 3.391 million at the end of September 2011
  • 3G cellular subscribers reached approx. 1.282 million at the end of September 2011, representing 37.8% of total cellular subscriber base
  • The Company declared third quarter dividend of NIS 1.90 per share

1. On June 15, 2011, the Company and Netvision Ltd. ("Netvision") entered into a merger agreement. Netvision is a leading company in the Israeli communications market, which provides international long distance services, internet services (ISP), telephony services and other communication services. The transaction was completed on August 31, 2011. The consolidated financial results for the third quarter 2011 therefore include the results of Netvision only for the month of September 2011.

2. Excluding Netvision's services revenues.

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

4. The free cash flow for the third quarter 2011 is after elimination of the net cash flows used for the acquisition of Netvision in the amount of NIS 1,457 million (net of cash acquired in the amount of NIS 122 million).

Cellcom Israel Ltd. (NYSE: CEL TASE: CEL) ("Cellcom Israel", the "Company"), announced today its financial results for the third quarter of 2011. Revenues for the third quarter 2011 totaled NIS 1,665 million ($449 million); EBITDA for the third quarter 2011 totaled NIS 534 million ($144 million), or 32.1% of total revenues; and net income for the third quarter 2011 totaled NIS 199 million ($54 million). Basic earnings per share for the third quarter 2011 totaled NIS 2.00 ($0.54).

Commenting on the results, Amos Shapira, Chief Executive Officer said, "In the third quarter of 2011, we continued to see the impact of the regulatory changes, which came into effect at the beginning of the year, on our Company's results, as previously expected and reported.  Likewise, we also see the impacts of the merger with Netvision, which was completed at the end of August, with September being the first month in which we consolidated Netvision's results in our financial statements.  While the consolidation of Netvision's results in our financial report is only for September, I can say with great satisfaction that Netvision has demonstrated impressive results for its third quarter financial earnings, demonstrating growth in most parameters compared with the third quarter last year, among them a 24% increase in operating income and an 8% increase in EBITDA.

The cellular market underwent changes this year that significantly affected the level of competition and acceleration of price erosion, causing a decrease in revenues and profits. Notwithstanding, Cellcom Israel has continued to maintain its leading position, and even strengthen its  position among its competitors, both financially and public image wise. In the third quarter, we continued to improve our customer service following the challenges we faced at the beginning of the year, due to market changes. I believe that our focus throughout the years on every aspect concerning customer service is what created such a change in the cellular market and is what makes us today the leading cellular company in terms of financial and image parameters. The-Marker, an Israeli business newspaper, recently published an annual survey, regarding the cellular companies customers' recommendation index, which noted that although the Israeli cellular market's public image on the whole requires improvement, Cellcom Israel is the only company in the sector to improve compared with last year and moves to the leading position in the sector. This index joins other recent and similar publications over the past few months such as Globes' - another Israeli business newspaper- "2011 Brands Index" and complaints index from the "Israel Consumer Council" and the "Public Trust" organization. All of the above publications demonstrated that although Cellcom Israel is the largest cellular company in Israel, the number of Cellcom Israel's customer complaints is the lowest in the industry. While I am pleased with the improvements in our customer service, we will continue our efforts in order to maintain this improvement trend.

The Company's image as an attractive workplace was also substantially reinforced.  According to a recent survey, Cellcom Israel was ranked number one among cellular companies in Israel for students entering the workforce and ranked number five for Israeli companies overall.  Our advantage in competing for the best employees in Israel is a very important competitive tool for the Company in the market, both for now and in the future. Strong financial results as compared with our competitors, along with the strengthening in all our image parameters, better position us towards the additional  challenges expected in the communications industry in the future.

At a time when future challenges in the market are great due to increased competition, I think we can see that our consistent strategy of focusing on mobile communications - along with our development of unique management processes and professional staff of employees and managers with the motivation to win - is the right strategy and one that positioned us as market leaders.  I believe that our entry into the land line market through the acquisition of Netvision will only further strengthen our position. The changes expected in the coming year are not the first challenges to our market and I believe that just as we emerged stronger from previous challenges (such as number portability in 2008 and the significant regulatory changes at the beginning of 2011), the Company has the management team, employees and strength to continue doing so in the future.

We are in the midst of the merger process. The main strategic decisions related to the merged Group's future characteristics have been decided upon and we now have several teams in place led by an outstanding professional, Netvision's CEO and designated Cellcom Israel's CEO, Mr. Nir Sztern, along with the assistance of McKinsey, to plan the integration of the companies' units in more details. We are very pleased with the progress of the process and with the fertile involvement of tens of our managers in this process. I believe a merger between companies is first and foremost a merger of people, and we have the best people in both companies. We are executing this process transparently and professionally and making an effort to shorten it as much as possible, so that we can start harvesting the fruits of the merger as soon as possible. I believe that the main changes resulting from the merger may be completed by early 2012, and that we start to enjoy the fruits of the synergy during the first half of 2012.

Mr. Shapira added: "Recently, I announced my retirement after six years in office. I had both the privilege and an obligation to lead this wonderful organization through an exciting and incredibly challenging time.  The cellular market today is completely different from what it was six years ago, both from the technological perspective as well as the customer usage perspective.  Mobile devices are no longer just for, but rather also for, phone calls.  The slogan "mobile is everything" is true now more than ever. Likewise, the level of competition is not like it used to be in the past.  With all this, we have dealt successfully and improved our position, moving from second to the leading position in the industry. The smiles of Cellcom Israel employees and managers along with the Board of directors' trust, gave me the energy required for this position and I thank them for this as I know this is not something to take for granted.

Although I will continue in my post until the end of 2011, this will be the last quarter I report our results to you. Starting next quarter, Mr. Nir Sztern, current CEO of Netvision, and appointed by the Board of directors to be the next CEO of Cellcom Israel, will be reporting the results. Nir began his career in the communications market at Cellcom Israel seventeen years ago and he has since performed successfully several roles in the communications industry. He has extensive experience in both mobile and landline communications, and this will serve as an important asset to his ability to lead the merged group to manage future market challenges.  In the last two months I have worked with Nir closely, in  leading the teams of the merger and was introduced to his great abilities. I have no doubt that Nir, together with the management team and employees of Cellcom Israel and Netvision, will successfully continue to lead the industry in the future".

Yaacov Heen, Chief Financial Officer, commented: "As we previously expected and reported, the reduction of interconnect fees and the continued price erosion had an adverse effect on our service revenues and profitability and we estimate that they will continue to affect our results for the fourth quarter as well. In the third quarter we consolidated Netvision's results for the month of September, which contributed NIS 98 million to total revenues and NIS 20 million to EBITDA. Turning to our results excluding Netvision: our total revenues decreased by 9.4% and service revenues decreased by 27% as compared with the third quarter last year, mostly due to the reduction of interconnect fees, but also due to the intensified competition. Revenues from content and value added services increased by 2.4% and EBITDA decreased by approximately 28.2% compared with the third quarter last year. As in the first half of the year, regulatory changes and accelerated competition led to a material increase in the Company's gross recruitment of subscribers, as well as to a 112% increase in revenues from handsets and accessories compared with the third quarter last year, most of which resulted from an increased sale of smartphones and advanced 3G handsets. In addition, the increased sale of handsets continue to cause a decrease in our free cash flow compared with the third quarter last year, due to an increase in the immediate payment to vendors for handset purchases, as opposed to spreading the proceeds from those sales, which are paid in installments by our customers (generally in 36 installments), although we can see an improvement in our free cash flow this quarter compared with the previous quarter.

During the quarter, we successfully raised approximately NIS 1.1 billion debt, through the expansion of existing series of debentures in a public tender, and for which we received demands of approximately NIS 2 billion. Overall, we have raised debt of approximately NIS 2.16 billion this year. The success of our latest debt raising, in a time of market turmoil, expresses the confidence of the investor community in our company.

For the third quarter of 2011, the Company will distribute a dividend of approximately NIS 189 million, representing approximately 95% of the third quarter net income to our shareholders."

Main Consolidated Financial Indicators (including Netvision's Results for September only):

 


                        Q3/2011 Q3/2010 % Change     Q3/2011    Q3/2010
                        million NIS                million US$
                                             (convenience translation)
    Total revenues    1,665   1,729   (3.7%)       448.5      465.8
    Operating
    Income              349     534  (34.6%)        94.0      143.9
    Net Income          199     332  (40.1%)        53.6       89.4
    Free cash flow
    (*)                 262     513  (48.9%)        70.6      138.2
    EBITDA              534     716  (25.4%)       143.9      192.9
    EBITDA, as
    percent of
    Revenues           32.1%   41.4% (22.5%)


(*) After elimination of the net cash flows used for the acquisition of Netvision in the amount of NIS 1,457 million ($393 million) (net of cash acquired in the amount of NIS 122 million ($33 million)).

Main Financial and Performance Indicators by Companies:

 


                      Cellcom Israel without             Consolidation
                        Netvision          Netvision  adjustments  Consoli-
                                             (*)        (**)         dated
                                                                   results

                                   Change  September
                 Q3/2011  Q3/2010    (%)        2011               Q3/2011
    Total
    revenues       1,567    1,729   (9.4%)       105         (7)     1,665
    Total
    Services
    revenues
    (including
    revenues
    from
    content and
    value added
    services)      1,101    1,509  (27.0%)        99         (7)     1,193
    Revenues
    from
    content and
    value added
    services         293      286     2.4%         -          -        293
    Handset and
    accessories
    revenues         466      220   111.8%         6          -        472
    Operating
    Income           350      534  (34.4%)        10        (11)       349
    EBITDA           514      716  (28.2%)        20          -        534
    EBITDA, as
    percent of
    Revenues        32.8%    41.4% (20.8%)      19.0%         -       32.1%
    Cellular
    subscribers
    end of
    period (in
    thousands)     3,391    3,376    0.4%
    Monthly
    cellular
    ARPU           105.1    145.9  (28.0%)
    Average
    Monthly
    cellular
    MOU              357      334    6.9


 

(*) Since the merger transaction was completed on August 31, 2011, the consolidated financial results include Netvision's results only for September 2011.

(**)Include inter-company revenues between Cellcom Israel and Netvision, and amortization expenses attributable to the merger.

Financial Review (all financial data in this section includes Netvision's data for September only)

Revenues for the third quarter of 2011 totaled NIS 1,665 million ($449 million), a 3.7% decrease compared to NIS 1,729 million ($466 million) in the third quarter last year. Netvision's contribution to total revenues for the third quarter of 2011 totaled NIS 98 million ($26 million) excluding inter-company revenues. Excluding Netvision's contribution, total revenues decreased by 9.4% compared to the third quarter last year.

Service revenues decreased 20.9% as a result of the regulatory changes, from NIS 1,509 million ($407 million) in the third quarter of 2010 to NIS 1,193 million ($321 million) in the third quarter of 2011. After elimination of Netvision's contribution to service revenues for the third quarter 2011 in the amount of NIS 92 million ($25 million) (excluding inter-company revenues), service revenues decreased by 27%.

The decrease in service revenues resulted mainly from a significant decrease in interconnect fees paid to us by other local operators, due to the reduction in interconnect tariffs as of January 1, 2011, as well as from the ongoing airtime price erosion, due to the increased competition in the market. The decrease in service revenues was partially offset by an increase of 2.4% in content and value added services (including SMS) revenues in the third quarter 2011, compared to the third quarter last year. Revenues from content and value added services for the third quarter 2011 totaled NIS 293 million ($79 million), or 26.6% of service revenues (excluding Netvision's service revenues).

Handset and accessories revenues increased by 114.5%, from NIS 220 million ($59 million) in the third quarter last year, to NIS 472 million ($127 million) in the third quarter of 2011. Netvision's contribution to those revenues for the third quarter 2011 totaled NIS 6 million ($2 million). The increase in handset and accessories revenues was due to an increase in the number of cellular handsets sold during the third quarter of 2011 compared to the third quarter last year, as well as a change in the mix of handsets sold, in favor of smartphones and advanced 3G handsets. The increase in the number of handsets sold resulted from the accelerated competition following the regulatory changes.

Cost of revenues for the third quarter of 2011 excluding Netvision's contribution decreased by 3.3% and totaled NIS 810 million ($237 million), compared to NIS 838 million ($226 million) in the third quarter last year. Cost of revenues for the third quarter including Netvision's contribution in the amount of NIS 70 million ($19 million) (after elimination of inter-company expenses of NIS 7 million ($2 million)), increased by 5% totaling NIS 880 million ($237 million). This decline in cost of revenues after elimination of Netvision's contribution primarily resulted from a significant decrease in total interconnect fees paid to other local cellular operators following the reduction in interconnect tariffs as of January 1, 2011. The decrease in cost of revenues also resulted from a decrease in amortization expenses, attributed, among others, to capitalized handsets subsidies, due to a significant decrease in such subsidies. These decreases were partially offset by a significant increase in cellular handsets cost resulted mainly from an increase in the number of handsets sold during the third quarter of 2011 compared to the third quarter last year, as well as from a change in the mix of handsets sold, in favor of smartphones and advanced 3G handsets.

Gross profit for the third quarter of 2011 decreased 11.9% to NIS 785 million ($211 million), compared to NIS 891 million ($240 million) in the third quarter of 2010. Gross profit margin for the third quarter 2011 decreased to 47.1% from 51.5% in the third quarter last year.

Selling, Marketing, General and Administrative Expenses ("SG&A Expenses") for the third quarter of 2011 totaled NIS 435 million ($117 million), compared to NIS 356 million ($96 million) in the third quarter last year. The increase in SG&A Expenses reflects primarily the impact of the regulatory changes, resulting in an increase in the number of customers' queries to our sales and service centers, which led to an increase in the Company's sales and customer service force leading to an increase in payroll expenses, as well as an increase in sales commissions. The increase in sales commissions also resulted from an increase in the number of sales transactions in the third quarter of 2011 compared to the third quarter last year.

Operating income for the third quarter 2011 totaled NIS 349 million ($94 million), compared to NIS 534 million ($144 million) in the third quarter last year, a 34.6% decrease.

EBITDA for the third quarter 2011 decreased 25.4% to NIS 534 million ($144 million), compared to NIS 716 million ($193 million) in the third quarter of 2010. Netvision's contribution to EBITDA for the third quarter 2011 totaled NIS 20 million ($5 million). EBITDA as a percent of total revenues after elimination of Netvision's contribution to EBITDA and total revenues totaled 32.8%, a decrease from 41.4% in the third quarter last year. EBITDA as a percent of total revenues including Netvision's contribution totaled 32.1%.

Financing expenses, net for the third quarter 2011 totaled NIS 90 million ($24 million), compared to NIS 88 million ($24 million) in the third quarter last year. Interest expenses, associated with the Company's debentures, increased in the third quarter of 2011, compared to the third quarter of 2010, due to the higher debt level following the issuance of additional debentures in the first and third quarters this year. This increase was offset by a decrease in Consumer Price Index (CPI) linkage expenses, associated with the Company's debentures, resulted from a decreased inflation in the third quarter this year compared to third quarter last year.Financing expenses were also affected by gain from currency hedging transactions in the third quarter of 2011, due to a 8.7% depreciation of the NIS against the US dollar, compared to loss from those hedging transactions in the third quarter last year due to a 5.4% appreciation in that quarter. The increase in gain from currency hedging transactions was partially offset by loss from CPI hedging transactions in the third quarter this year compared to gain from those hedging transactions in the third quarter last year.

Net Income for the third quarter 2011 totaled NIS 199 million ($54 million), compared to NIS 332 million ($89 million) in the third quarter last year. This decrease mainly resulted from the decrease in service revenues.  

Basic earnings per share for the third quarter 2011 totaled NIS 2.00 ($0.54), compared to NIS 3.36 ($0.91) in the third quarter 2010.

Operating Review (data refers to cellular subscribers only)

New Cellular Subscribers - at the end of September 2011 the Company had approximately 3.391 million cellular subscribers. During the third quarter of 2011 the Company recruited approximately 25,000 net subscribers, out of which most of them post-paid subscribers.

In the third quarter of 2011, the Company added approximately 62,000 net new 3G cellular subscribers to its 3G subscriber base, reaching approximately 1.282 million 3G subscribers at the end of September 2011, representing 37.8% of the Company's total cellular subscriber base, an increase from the 33% 3G subscribers represented of total subscribers at the end of September 2010.

The Churn Rate of cellular subscribers in the third quarter 2011 was 5.7%, compared to 6.4% in the previous quarter and 4.6% in the third quarter last year. The churn in the third quarter of 2011 was affected by the intensified competition and the regulatory change regarding the reduction in early termination fees, enabling subscribers to terminate a contract with a commitment for a certain period by paying a negligible amount of early termination fee without having to wait to the end of the commitment period. Furthermore, the churn for those quarters was impacted by the churn of pre-paid subscribers, characterized by lower contribution, and subscribers with collection problems.

Average monthly cellular Minutes of Use per subscriber ("MOU") in the third quarter 2011 totaled 357 minutes, compared to 334 minutes in the third quarter 2010, an increase of 6.9%.

The monthly cellular Average Revenue per User (ARPU) for the third quarter 2011 decreased 27.9% and totaled NIS 105.1 ($28.3), compared to NIS 145.9 ($39.3) in the third quarter last year. The decrease is attributed to the reduction in interconnect tariffs and to the ongoing airtime price erosion.

Financing and Investment Review (all financial data in this section includes Netvision's data for September only)

Cash Flow

Free cash flow for the third quarter of 2011, after elimination of the net cash flows used for the acquisition of Netvision in the amount of NIS 1,457 million ($393 million) (net of cash acquired in the amount of NIS 122 million ($33 million)), totaled NIS 262 million ($71 million), compared to NIS 513 million ($138 million) generated in the third quarter of 2010.  Cash flows from operating activities for the third quarter this year decreased, compared with the third quarter last year, mainly due to the significant increase in sales of cellular handsets, which led to an increase in the immediate payment to vendors for handset purchases, as opposed to spreading the proceeds from handsets sales, that are paid in installments (generally in 36 installments). The decrease in service revenues, resulted from the regulatory changes, also attributed to the decrease in cash flows from operating activities.

Total Equity

Total Equity as of September 30, 2011 amounted to NIS 292 million ($79 million), primarily consisting of accumulated undistributed retained earnings.

Investment in Fixed Assets and Intangible Assets

During the third quarter 2011, the Company invested NIS 134 million ($36 million) in fixed assets and intangible assets (including, among others, investments in information systems and software), compared to NIS 152 million ($41 million) in the third quarter 2010. The decrease resulted from the decrease in capitalization of cellular handsets subsidies and sales commissions due to the regulatory change relating to early termination fees.

Dividend

On November 14, 2011, the Company's board of directors declared a cash dividend in the amount of NIS 1.90 per share, and in the aggregate amount of approximately NIS 189 million (the equivalent of approximately $0.51 per share and approximately $51 million in the aggregate, based on the representative rate of exchange on November 11, 2011; The actual US$ amount for dividend paid in US$ will be converted from NIS based upon the representative rate of exchange published by the Bank of Israel on January 17, 2012), subject to withholding tax described below. The dividend will be payable to all of the Company's shareholders of record at the end of the trading day in the NYSE on January 5, 2012. The payment date will be January 19, 2012. According to the Israeli tax law, the Company will deduct at source 20% of the dividend amount payable to each shareholder, as aforesaid, subject to applicable exemptions. The dividend per share that the Company will pay for the third quarter of 2011 does not reflect the level of dividends that will be paid for future quarterly periods, which can change at any time in accordance with the Company's dividend policy. A dividend declaration is not 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, 2010 on Form 20-F, under "Item 8 - Financial Information - Dividend Policy".

Other developments during the third quarter of 2011 and subsequent to the end of the reporting period

Netvision

Following the Company's previous announcements regarding the merger transaction between the Company's subsidiary and Netvision Ltd., or Netvision, on August 31, 2011 the merger transaction was completed. The merger consideration in the total amount of NIS 1,570,409,980 (approximately NIS 49.68 per one Netvision share; or approximately $13.91 per one Netvision share based on NIS/$ exchange ratio of NIS 3.5720 per one $ as of August 30, 2011) was transferred by the Company for the benefit of the shareholders of Netvision as of August 31, 2011. The merger consideration included an interest at an effective rate of five percent (5%) per year, calculated based on actual days elapsed from April 1, 2011 and until the completion of the transaction, in accordance with the terms of the merger agreement. Effective as of August 31, 2011 all the outstanding shares of Netvision were transferred to the Company and Netvision became a private company wholly owned by the Company.

For additional details see the Company's current reports on Form 6-K filed on June 16, 2011 and July 28, 2011 under "Item 3 - Approval of merger between the Company's subsidiary and Netvision Ltd.", and see the Company's current report on the Company's results of operations in the second quarter of 2011 on Form 6-K, filed on August 8, 2011 under "Other developments during the second quarter of 2011 and subsequent to the end of the reporting period - Netvision".

Debt Raising

In August 2011, the Company issued additional debentures from the Company's existing Series D in a principal amount of NIS 622,000,000 at the price of NIS 1,194 per unit (each unit comprised of NIS 1,000 principal amount), representing an effective interest rate of 4.03% per annum, linked to the Israeli Consumer Price Index, or CPI; the interest rate of this series is fixed at 5.19% per annum, linked to the Israeli CPI.

The Company also issued additional debentures from the Company's existing Series E in a principal amount of NIS 378,000,000, at the price of NIS 1,053 per unit (each unit comprised of NIS 1,000 principal amount), representing an effective interest rate of 5.81% per annum; the interest rate of this series is fixed at 6.25% per annum, without linkage.

The debentures (rated ilAA/Negetive) were issued in a public offering in Israel based on the Company's Israeli 2011 shelf prospectus and were listed for trading on the Tel Aviv Stock Exchange.  

The total consideration received by the Company is approximately NIS 1.132 billion.

The Company used and intends to use the net proceeds from such offering for partial financing of the merger transaction with Netvision Ltd. and general corporate purposes, which may include financing the Company's operating and investment activity, refinancing of outstanding debt under the Company's debentures, and continued dividend distributions as customary in the Company, subject to the decisions of the Company's board of directors from time to time.

The offering described in this press release, was made in Israel to residents of Israel only. The said debentures were not and will not be registered under the U.S. Securities Act of 1933 and will not be offered or sold in the United States or to U.S. persons. This press release shall not constitute an offer to sell or the solicitation of an offer to buy any debentures.

For additional details of the Company's Israeli shelf prospectus and public debentures see the Company's annual report for the year ended December 31, 2010 on Form 20-F, under "Item 5 - Operating and Financial Review and Prospects - B. Liquidity and Capital Resources - Debt Service", the Company's current report on the Company's results of operations in the first quarter of 2011 on Form 6-K filed on May 16, 2011, under "Other developments during the first quarter of 2011 and subsequent to the end of the reporting period - Issuance of Debentures", the Company's current report on the Company's results of operations in the second quarter of 2011 on Form 6-K filed on August 8, 2011, under "Other developments during the second quarter of 2011 and subsequent to the end of the reporting period - Shelf Prospectus and Decision to raise Debt" and the Company's current report on Form 6-K filed on August 8, 2011, August 17, 2011 and August 21, 2011; for details on the merger transaction with Netvision see above under "Netvision; for details of the Company's dividend policy see the Company's annual report for the year ended December 31, 2010 on Form 20-F under "Item 8. Financial Information - A. Consolidated Statements and Other Financial Information - Dividend Policy".

Regulation

Recommendations regarding Landline wholesale market - In October 2011, the public committee appointed by the Ministry of Communications to examine Bezeq's tariffs structure and tariffs for landline wholesale services and further mandated to review the possible annulment of the structural limitations currently imposed on Bezeq and its subsidiaries, published its recommendations. The recommendations are substantially similar to the previously reported interim recommendations and further include the following: (1) wholesale tariffs to be set by the regulators shall be maximum tariffs, based on cost plus incentive to make investments and shall be reviewed every 3 years. Until such tariffs shall be set, the tariff shall be fixed, regardless of customer's traits and amount to 75% of Bezeq's average retail price for private customers, during July to September 2011. (2) Structural separation imposed on the holders of landline general licenses, shall be replaced by accountancy separation within 6 months from the earlier of wholesale agreement execution or the provision of wholesale services, or upon wholesale tariffs setting, and by a restriction on information transfer between the retail and wholesale divisions of the landline general license holders. If no wholesale market is established within 2 years, the regulator shall resume structural separation between infrastructure and end-user services of landline general license holders.

The implementation of the recommendations, in whole or in part, is subject to the adoption thereof by the Minister of Communications and further legislative proceedings.

Netvision - while an effective wholesale landline market will enhance Netvision's ability to compete and extend its services offer, the recommendations regarding the structural separation and Bezeq's tariffs supervision may have a material adverse effect on its results of operation.

For additional details see the Company's most recent annual report on Form 20-F for the year ended December 31, 2010, under "Item 3. Key Information - D. Risk Factors - Risks related to our business -We face intense competition in all aspects of our business" as well as under "Item 4. Information on the Company - Competition" and the Company's current report on Form 6-K filed on June 16, 2011, under "Item 3 - Approval of merger between the Company's subsidiary and Netvision Ltd. - Summary of the Material Provisions of the Appraisal prepared by the Appraiser - Discounted Cash Flow Analysis".

MVNO Hosting Agreement - In August 2011, the Company entered a hosting agreement with Home Cellular Ltd., an Israeli Mobile Virtual Network Operator, or MVNO, under which the Company shall provide the MVNO certain hosting services.  

For additional details see the Company's most recent annual report on Form 20-F for the year ended December 31, 2010, 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" and " We face intense competition in all aspects of our business" as well as under "Item 4. Information on the Company - B. Business Overview - The Telecommunications Industry in Israel - Cellular services"; "Competition" and "Government Regulations - Mobile Virtual Network Operator".

National Roaming Agreement - In October 2011, The Company entered a national roaming agreement with Golan Telecom Ltd., an Israeli new UMTS operator, or Golan, under which the Company shall provide Golan national roaming services and shall also enable Golan with cell sites sharing.

For additional details see the Company's most recent annual report on Form 20-F for the year ended December 31, 2010, 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" and " We face intense competition in all aspects of our business" as well as under "Item 4. Information on the Company - B. Business Overview -Competition" and "Government Regulations -- Additional UMTS Operators", the Company's immediate report regarding the Company's results of operations in the first quarter of 2011 on form 6-K dated May 16, 2011, under "Other developments during the first quarter of 2011 and subsequent to the end of the reporting period - New UMTS Operators" and the Company's immediate report regarding the Company's results of operations in the second quarter of 2011 on form 6-K dated August 8, 2011, under "Other developments during the second quarter of 2011 and subsequent to the end of the reporting period - Regulation - Cell Site Sharing" and "New UMTS Operators".

Changes in Board of Directors and Management

Board of Directors - In August 2011 the Company received the resignation from office of Mr. Isaac Manor, a member of the Company's board of directors who had been appointed by Discount Investment Corporation Ltd., or DIC, and DIC's notification appointing Mr. Assaf Topaz in his place. Both the resignation and the appointment came into effect as of August 28, 2011. Mr. Topaz appointment is in accordance with the requirement of the Company's telecommunications license and articles of association that at least 20% of the Company directors be appointed by Israeli citizens and residents from among the Company's founding shareholders.

Mr. Topaz has served as Vice President of DIC since January 2010. From June 2005 to May 2009 Mr. Topaz served as Vice President, and from March 2004 to June 2005 he served as business development manager of Elron Electronic Industries Ltd. From 1998 to 2002, Mr. Topaz served as co-founder, chief operating officer and as member of the board of directors of Breach Security (formerly known as Gilian Technologies). Mr. Topaz holds a B.A. in Economics and Geography from the Hebrew University in Jerusalem, and a Master of Science in Management from Stanford University. Mr. Topaz is a son in law of Ruth Manor, one of the controlling shareholders of the Company.

For further details see the Company's most recent annual report on Form 20-F for the year ended December 31, 2010 under "Item 6. Directors, Senior Management and Employees - C. Board Practices- Board of Directors and Officers" and "External Directors - Israeli-Appointed Directors".

Chief Executive Officer - In October 2011, the Company received Mr. Amos Shapira's resignation from office as the Company's CEO after six years of tenure, effective December 31, 2011. The Company's board of directors has nominated Mr. Nir Sztern as the Company's CEO, effective January 1, 2012.

Mr. Sztern has served as the chief executive officer of Netvision Ltd. (which was recently merged into a wholly owned subsidiary of the Company), since 2010. From 2008 to 2010 he served as deputy CEO of Pelephone Communication Ltd. or Pelephone, an Israeli cellular operator and one of the Company's competitors, and from 2002 to 2008 as Pelephone's vice president of marketing. From 2001 to 2002 he served as vice president of marketing and sales of Barak 013 Ltd. or Barak, a long distance operator (which was later merged into Netvision Ltd.) and from 1999-2001 as head of Barak's marketing department. From 1994 to 1999 Mr. Sztern served as head of the Company's private sector marketing department. Mr. Sztern holds a B.A. in economics and management from the Tel Aviv University and an M.B.A. in business administration, from the Israeli branch of Manchester University.

Vice President of Human Recourses - In September 2011, the Company received Ms. Ronit Ben Basat's resignation from office as the Company's VP of Human Recourses, effective October 31, 2011. The Company's board of directors has nominated Ms. Sharon Amit as the Company's VP of Human Recourses, effective November 1, 2011.

Ms. Sharon Amit has served as Netvision's VP of Human Recourses since 2009. She served as VP of Human Recourses of Tikshoov Call Center from 2006 to 2009, of Bynat Computer Communications from 2002 to 2006 and of ADC Israel from 1996 to 2002. Ms. Amit holds a B.A. in English literature and East Asia science, from the Hebrew University in Jerusalem and an M.A. in labor studies from the Tel Aviv University.

Vice President of Pre Paid Activity - In October 2011, the Company's board of directors has nominated Mr. Timors Romashvily as the Company's Vice President of Pre Paid Activity, effective October 23, 2011.  Mr. Romashviliy shall report to the Company's VP Sales and Services.

Mr. Timors Romashvily has served as Netvision's head of pre-paid and international activity since 2007. From 2005 to 2007 he served as head of pre-paid activity in Barak and prior to that served in a variety of positions in Barak. Mr. Romashvily holds a B.A. in economics and management from the Economics Academy in Kiev, Ukraine.

Vice President of Information Technology - In November 2011, the Company's board of directors has nominated Mr. Ran Harpaz as the Company's Vice President of Information Technology, effective December 1, 2011.  Mr. Harpaz shall report to the Company's chief technology officer.

Mr. Ran Harpaz has served as Netvision's chief technology officer since 2008. From 2007 to 2008 he served as director of consumer experience of Paypal Ltd. (USA). From 2003 to 2007 he served as VP customer advocacy of Skybox Security Inc. (USA). From 2002 to 2003 he served as management consultant at McKinsey & Co. From 1997 to 2002 he served as VP research and development of Sanctum Inc. (Acquired by WatchFire/IBM).  Mr. Harpaz holds a LL.B in Law, a B.A. in economics and  M.B.A. in Finance all from the Tel Aviv University.

Conference Call Details

The Company will be hosting a conference call on Tuesday, November 15, 2011 at 9:00 am ET, 6:00 am PST, 14:00 GMT, 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: 1 888 668 9141        

UK Dial-in Number: 0 800 917 5108

Israel Dial-in Number: 03 918 0609        

International Dial-in Number:  +972 3 918 0609

at: 9:00 am ET; 6:00 am PST; 14:00 GMT; 16:00 Israel Time

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 3.391 million subscribers (as at September 30, 2011) with a broad range of value added services including cellular and landline telephony, roaming services for tourists in Israel and for its subscribers abroad and additional services in the areas of music, video, mobile office etc., based on Cellcom Israel's technologically advanced infrastructure. The Company operates an HSPA 3.5 Generation network enabling advanced high speed broadband multimedia services, in addition to GSM/GPRS/EDGE and TDMA 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. Through its broad customer service network Cellcom Israel offers its customers technical support, account information, direct to the door parcel services, internet and fax services, dedicated centers for the hearing impaired, etc. As of 2006, Cellcom Israel, through its wholly owned subsidiary Cellcom Fixed Line Communications L.P., provides landline telephone communication services in Israel, in addition to data communication services. 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://www.cellcom.co.il

About Netvision

Netvision is a leading company in the Israeli communications market, which provides international long distance services, internet services (ISP), landline telephony services and other communication services. On August 31, 2011, the merger transaction between Netvision and a subsidiary of Cellcom Israel was completed and Netvision became a wholly-owned subsidiary of Cellcom Israel.

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 December 31, 2010.  

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$\New Israeli Shekel (NIS) conversion rate of NIS 3.712 = US$ 1 as of 30 September, 2011 as published by the Bank of Israel.

Use of non-IFRS financial measures

EBITDA is a non-IFRS 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 IFRS 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-IFRS 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 tradable debentures. See the reconciliation note at the end of this Press Release.

 

Financial Tables Follow

Cellcom Israel Ltd.

(An Israeli Corporation)

Condensed Consolidated Interim Statements of Financial position

                              Convenience
                              translation
                                into US
                                 dollar
                   September   September    September
                      30,         30,          30,      December 31,
                     2011         2011         2010         2010
                      NIS
                   millions   US$ millions NIS millions NIS millions
                  (Unaudited) (Unaudited)  (Unaudited)   (Audited)
 
     Assets
     Cash and
     cash
     equivalents          869          234          777          533
     Current
     investments,
     including
     derivatives          479          129          414          404
     Trade
     receivables        1,862          502        1,563        1,478
     Other
     receivables           87           23           75           64
     Inventory            135           37          115          104
 
     Total
     current
     assets             3,432          925        2,944        2,583
 
     Trade and
     other
     receivables        1,282          345          597          597
     Property,
     plant and
     equipment,
     net                2,141          577        2,043        2,063
     Intangible
     assets, net        1,720          463          765          753
     Deferred
     taxes                 37           10            -            -
 
     Total non-
     current
     assets             5,180        1,395        3,405        3,413
 
     Total assets       8,612        2,320        6,349        5,996
 



Cellcom Israel Ltd.

(An Israeli Corporation)

Condensed Consolidated Interim Statements of Financial position (cont'd)

                                 Convenience
                                 translation
                                   into US
                                    dollar
                     September    September    September
                        30,          30,          30,      December 31,
                        2011         2011         2010         2010
                    NIS millions US$ millions NIS millions NIS millions
                    (Unaudited)  (Unaudited)  (Unaudited)   (Audited)
 
    Liabilities
    Borrowings and
    current
    maturities               681          183          347          348
    Trade payables
    and accrued
    expenses               1,016          274          697          716
    Current tax
    liabilities               58           16          161          132
    Provisions               112           30          107           84
    Other current
    liabilities,
    including
    derivatives              478          129          317          379
    Dividend
    declared                 232           62          310            -
 
    Total current
    liabilities            2,577          694        1,939        1,659
 
    Long-term loans
    from banks                23            6            -            -
    Debentures             5,464        1,472        3,891        3,913
    Provisions                21            6           18           17
    Other long-term
    liabilities               84           22            1            1
    Deferred taxes           151           41           74           65
 
    Total non-
    current
    liabilities            5,743        1,547        3,984        3,996
 
    Total
    liabilities            8,320        2,241        5,923        5,655
 
    Equity
    attributable to
    owners of the
    Company
    Share capital              1            -            1            1
    Cash flow hedge
    reserve                    -            -          (17)         (21)
    Retained
    earnings                 287           78          442          361
 
    Non-controlling
    interest                   4            1            -            -
 
    Total equity             292           79          426          341
 
    Total
    liabilities and
    shareholders'
    equity                 8,612        2,320        6,349        5,996



Cellcom Israel Ltd.

(An Israeli Corporation)

Condensed Consolidated Interim Statements of Income

                          Six-month period ended
                                September 30,

                                Convenience
                                translation
                                  into US
                                  dollar
                       2011        2011        2010
                        NIS         US$         NIS
                     millions    millions    millions
                    (Unaudited) (Unaudited) (Unaudited)
 
    Revenues              4,841       1,304       5,000
    Cost of
    revenues             (2,434)       (656)     (2,477)
 
    Gross profit          2,407         648       2,523
 
    Selling and
    marketing
    expenses               (700)       (189)       (554)
    General and
    administrative
    expenses               (489)       (131)       (477)
    Other expenses,
    net                     (1)           -         (2)
 
    Operating
    income                1,217         328       1,490
 
    Financing
    income                   87          23          68
    Financing
    expenses               (319)        (86)       (253)
    Financing
    expenses, net          (232)        (63)       (185)
 
    Income before
    income tax              985         265       1,305
    Income tax             (236)        (63)       (333)
 
    Net income              749         202         972
 
    Earnings per
    share
    Basic earnings
    per share in
    NIS                    7.53        2.03        9.83
 
    Diluted
    earnings per
    share in NIS           7.53        2.03        9.77
 



(Table continues)

 

                                                        
                         Three-month period ended       Year ended
                               September 30,             December
                                                            31,
                                Convenience
                                translation
                                  into US
                                  dollar
                       2011        2011        2010        2010
                        NIS         US$         NIS         NIS
                     millions    millions    millions    millions
                    (Unaudited) (Unaudited) (Unaudited)  (Audited)
 
    Revenues              1,665         448       1,729       6,662
    Cost of
    revenues               (880)       (237)       (838)     (3,322)
 
    Gross profit            785         211         891       3,340
 
    Selling and
    marketing
    expenses               (259)        (70)       (193)       (756)
    General and
    administrative
    expenses               (176)        (47)       (163)       (641)
    Other expenses,
    net                      (1)          -          (1)         (5)
 
    Operating
    income                  349          94         534       1,938
 
    Financing
    income                   35           9          23         106
    Financing
    expenses               (125)        (33)       (111)       (336)
    Financing
    expenses, net           (90)        (24)        (88)       (230)
 
    Income before
    income tax              259          70         446       1,708
    Income tax              (60)        (16)       (114)       (417)
 
    Net income              199          54         332       1,291
 
    Earnings per
    share
    Basic earnings
    per share in
    NIS                    2.00        0.54        3.36       13.04
 
    Diluted
    earnings per
    share in NIS           2.00        0.54        3.34       12.98
 


Cellcom Israel Ltd.

(An Israeli Corporation)


Condensed Consolidated Interim Statements of Cash Flows

                          Six - month period ended
                                September 30,

                                 Convenience
                                 translation
                                   into US
                                   dollar
                        2011        2011        2010
                         NIS         US$         NIS
                      millions    millions    millions
                     (Unaudited) (Unaudited) (Unaudited)
    Cash flows from
    operating
    activities
 
    Net income for
    the period               749         202         972
 
    Adjustments for:
    Depreciation and
    Amortization             519         140         544
    Share based
    payments                   4           1           1
    Loss on sale of
    assets                     1           -           2
    Income tax
    expense                  236          63         333
    Financing
    expenses, net            232          63         185
 
    Changes in
    operating assets
    and liabilities:
    Changes in
    inventories              (31)         (8)         (3)
    Changes in trade
    receivables
    (including long-
    term amounts)           (515)       (139)         76
    Changes in other
    receivables
    (including long-
    term amounts)             43          12         (30)
    Changes in trade
    payables and
    accrued expenses         165          45         (23)
    Changes in other
    liabilities
    (including
    long-term
    amounts)                  13           3         (21)
    Payments for
    derivative
    hedging
    contracts, net           (15)         (4)        (13)
    Income tax paid         (292)        (79)       (233)
    Net cash from
    operating
    activities             1,109         299       1,790


(Table continues)

 


                         Three-month period ended       Year ended
                               September 30,             December
                                                            31,
                                 Convenience
                                 translation
                                   into US
                                   dollar
                        2011        2011        2010        2010
                         NIS         US$         NIS         NIS
                      millions    millions    millions    millions
                     (Unaudited) (Unaudited) (Unaudited)  (Audited)
    Cash flows from
    operating
    activities
 
    Net income for
    the period               199          54         332       1,291
 
    Adjustments for:
    Depreciation and
    Amortization             183          49         181         724
    Share based
    payments                   3           1           1           1
    Loss on sale of
    assets                     1           -           1           5
    Income tax
    expense                   60          16         114         417
    Financing
    expenses, net             90          24          88         230
 
    Changes in
    operating assets
    and liabilities:
    Changes in
    inventories                7           2           2           -
    Changes in trade
    receivables
    (including long-
    term amounts)           (189)        (51)         13         172
    Changes in other
    receivables
    (including long-
    term amounts)             49          13         (17)         (6)
    Changes in trade
    payables and
    accrued expenses          48          13          13         (42)
    Changes in other
    liabilities
    (including
    long-term
    amounts)                   1           -          (8)        (16)
    Payments for
    derivative
    hedging
    contracts, net            (6)         (1)         (1)        (16)
    Income tax paid          (86)        (23)        (62)       (380)
    Net cash from
    operating
    activities               360          97         657       2,380



Cellcom Israel Ltd.

(An Israeli Corporation)

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


                          Six - month period ended
                                September 30,
                                 Convenience
                                 translation
                                   into US
                                   dollar
                        2011        2011        2010
                         NIS         US$         NIS
                      millions    millions    millions
                     (Unaudited) (Unaudited) (Unaudited)
    Cash flows from
    investing
    activities
    Acquisition of
    property, plant,
    and equipment          (219)        (59)       (318)
    Acquisition of
    intangible
    assets                  (75)        (20)       (140)
    Acquisition of
    operation                 -           -        (108)
    Acquisition of
    subsidiary, net
    of cash acquired
    *                    (1,457)       (393)          -
    Change in
    current
    investments, net          3           1        (145)
    Payments for
    (proceeds from)
    other derivative
    contracts, net           (7)         (2)         (9)
    Proceeds from
    sales of
    property, plant
    and equipment             2           1           1
    Interest
    received                 27           7           7
    Net cash used in
    investing
    activities           (1,726)       (465)       (712)
 
    Cash flows from
    financing
    activities
    Proceeds from
    (payments for)
    derivative
    contracts, net           11           3          12
    Payments for
    short-term
    borrowings                -           -          (8)
    Repayment of
    debentures             (354)        (95)       (343)
    Proceeds from
    issuance of
    debentures, net
    of issuance
    costs                 2,165         583           -
    Dividend paid          (626)       (169)       (640)
    Interest paid          (243)        (65)       (225)
    Net cash
    provided from
    (used in)
    financing
    activities              953         257      (1,204)
 
    Changes in cash
    and cash
    equivalents             336          91        (126)
    Balance of cash
    and cash
    equivalents at
    beginning of the
    period                  533         143         903
    Balance of cash
    and cash
    equivalents at
    end of the
    period                  869         234         777


 

(Table continues)

                                                         Year ended
                          Three- month period ended
                                                          December
                                September 30,                31,
                                 Convenience
                                 translation
                                   into US
                                   dollar
                        2011        2011        2010        2010
                         NIS         US$         NIS         NIS
                      millions    millions    millions    millions
                     (Unaudited) (Unaudited) (Unaudited)  (Audited)
    Cash flows from
    investing
    activities
    Acquisition of
    property, plant,
    and equipment           (84)        (23)       (106)       (441)
    Acquisition of
    intangible
    assets                  (23)         (6)        (40)       (180)
    Acquisition of
    operation                 -           -           -        (108)
    Acquisition of
    subsidiary, net
    of cash acquired
    *                    (1,457)       (393)          -
    Change in
    current
    investments, net         (5)         (1)         (7)       (154)
    Payments for
    (proceeds from)
    other derivative
    contracts, net            2           1          (1)        (17)
    Proceeds from
    sales of
    property, plant
    and equipment             -           -           -           2
    Interest
    received                  7           2           3           9
    Net cash used in
    investing
    activities           (1,560)       (420)       (151)       (889)
 
    Cash flows from
    financing
    activities
    Proceeds from
    (payments for)
    derivative
    contracts, net            1           -          (5)         34
    Payments for
    short-term
    borrowings                -           -           -          (8)
    Repayment of
    debentures             (179)        (48)       (172)       (343)
    Proceeds from
    issuance of
    debentures, net
    of issuance
    costs                 1,132         305           -           -
    Dividend paid          (292)        (79)        (29)     (1,319)
    Interest paid          (120)        (32)       (108)       (225)
    Net cash
    provided from
    (used in)
    financing
    activities              542         146        (314)     (1,861)
 
    Changes in cash
    and cash
    equivalents            (658)       (177)        192        (370)
    Balance of cash
    and cash
    equivalents at
    beginning of the
    period                1,527         411         585         903
    Balance of cash
    and cash
    equivalents at
    end of the
    period                  869         234         777         533


* Business combination

Cellcom Israel Ltd.

(An Israeli Corporation)


Reconciliation for Non-IFRS Measures

EBITDA

The following is a reconciliation of net income to EBITDA:


                                                             
                         Three-month period ended        Year ended
                               September 30,              December
                                                             31,
                               Convenience
                               translation
                                 into US
                                  dollar
                      2011         2011        2010         2010
                      NIS                                    NIS
                    millions   US$ millions NIS millions  millions
                   (Unaudited) (Unaudited)  (Unaudited)   (Audited)
    Net income           199           54          332       1,291
    Income taxes          60           16          114         417
    Financing
    income               (35)          (9)         (23)       (106)
    Financing
    expenses             125           33          111         336
    Other expenses
    (income)               1            -            1           5
    Depreciation
    and
    amortization         183           49          181         724
    EBITDA               534          144          716       2,667



 

Free Cash Flow

The following table shows the calculation of free cash flow:


                             Three-month period ended        Year ended
                               September 30,              December
                                                             31,
                               Convenience
                               translation
                                 into US
                                  dollar
                      2011         2011        2010         2010
                      NIS                                    NIS
                    millions   US$ millions NIS millions  millions
                   (Unaudited) (Unaudited)  (Unaudited)   (Audited)
    Cash flows
    from operating
    activities            360          97         657        2,380
    Cash flows
    from investing
    activities        (*)(103)     (*)(27)       (151)        (889)
    Short-term
    Investment in
    tradable
    debentures              5           1           7          154
    Free cash flow        262          71         513        1,645


(*) After elimination of the net cash flows used for the acquisition of Netvision in the amount of NIS 1,457 million ($393 million) (net of cash acquired in the amount of NIS 122 million ($33 million)).


       
Company Contact
Yaacov Heen
Chief Financial Officer 
investors@cellcom.co.il
Tel: +972-52-998-9755

IR Contacts
Porat Saar
CCG Investor Relations Israel & US
cellcom@ccgisrael.com 
Tel: +1-646-233 2161

 

 

SOURCE Cellcom Israel Ltd.