(*)
The segment includes the cellular communications services, end user cellular equipment and supplemental services.
(**)
The segment includes landline telephony services, internet infrastructure and connectivity services, television services, end user fixed-line equipment and supplemental services.
(***)
Include cancellation of inter-segment revenues between "Cellular" and "Fixed-line" segments.
Financial Review (2016 full year compared to 2015):
Revenues for 2016 decreased 3.7% totaling NIS 4,027 million ($1,047 million), compared to NIS 4,180 million ($1,087 million) last year. The decrease in revenues is attributed to a 3.2% decrease in service revenues and a 5.2% decrease in equipment revenues.
Service revenues for 2016 totaled NIS 3,033 million ($789 million), a 3.2% decrease from NIS 3,132 million ($815 million) last year.
Service revenues in the cellular segment totaled NIS 2,162 million ($562 million) in 2016, a 4.9% decrease from NIS 2,273 million ($591 million) last year. This decrease resulted mainly from a decrease in cellular services revenues due to the ongoing erosion in the price of these services and churn of customers as a result of the competition in the cellular market. This decrease was partially offset by an increase in revenues from national roaming services.
Service revenues in the fixed-line segment totaled NIS 1,071 million ($279 million) in 2016, a 0.8% increase from NIS 1,063 million ($276 million) last year. This increase resulted mainly from an increase in revenues from the Internet and TV fields. Such increase was partially offset by a decrease in revenues from long distance calling services.
Equipment revenues totaled NIS 994 million ($258 million) in 2016, a 5.2% decrease compared to NIS 1,048 million ($272 million) last year. This decrease resulted mainly from a decrease in the quantity of end user equipment sold during 2016 in the cellular segment as compared to 2015. This decrease was partially offset by an increase in equipment sales in the fixed-line segment.
Cost of revenues totaled NIS 2,702 million ($703 million) in 2016, compared to NIS 2,763 million ($719 million) in 2015, a 2.2% decrease. This decrease resulted mainly from a decrease in costs of end user equipment sold, primarily as a result of a decrease in the quantity of end user equipment sold in cellular segment during 2016 as compared to 2015, which was partially offset by an increase in content costs related to the TV field and in costs related to the landline wholesale market.
Gross profit for 2016 decreased 6.5% to NIS 1,325 million ($344 million), compared to NIS 1,417 million ($368 million) in 2015. Gross profit margin for 2016 amounted to 32.9%, down from 33.9% in 2015.
Selling, Marketing, General and Administrative Expenses ("SG&A Expenses") for 2016 decreased 8.4% to NIS 994 million ($258 million), compared to NIS 1,085 million ($282 million) in 2015. This decrease is primarily a result of efficiency measures implemented by the Company, a one-time expense as a result of entering a collective employment agreement in 2015, and a decrease in depreciation and amortization expenses.
Other expenses for 2016 totaled NIS 21 million ($6 million), compared to other expenses of NIS 22 million ($6 million) in 2015. Other expenses for 2016 primarily include an expense for a new employee voluntary retirement plan in the amount of approximately NIS 13 million ($3 million), compared to an expense for the previous employee voluntary retirement plan in the amount of approximately NIS 25 million ($7 million) in 2015.
Operating income for 2016 is similar to 2015, NIS 310 million ($80 million). The decrease in the revenues was fully offset by a decrease in cost of revenues and Selling, Marketing, General and Administrative Expenses.
EBITDA for 2016 decreased by 1.6% totaling NIS 858 million ($223 million) compared to NIS 872 million ($227 million) in 2015. EBITDA for 2016, as a percent of revenues, totaled 21.3% up from 20.9% in 2015. The decrease in the EBITDA resulted mainly from the ongoing erosion in service revenues. The decrease was partially offset by a decrease in operating expenses, mainly as a result of efficiency measures implemented by the Company and from a one-time expense in 2015 as a result of entering a collective employment agreement.
Cellular segment EBITDA for 2016 totaled NIS 625 million ($163 million), compared to NIS 601 million ($156 million) last year, an increase of 4.0%, resulted mainly from a decrease in operating expenses, mainly as a result of efficiency measures implemented by the Company and from an increase in revenues from national roaming. Fixed-line segment EBITDA for 2016 totaled NIS 233 million ($61 million), compared to NIS 271 ($70 million) last year, a 14.0% decrease resulted mainly from an erosion in long distance calling services revenues and an erosion in the internet field profitability.
Financing expenses, net for 2016 decreased 15.3% and totaled NIS 150 million ($39 million), compared to NIS 177 million ($46 million) in 2015. The decrease mainly resulted from a decrease in interest expenses, associated with the Company's debentures, due to a lower debt level in 2016 compared to 2015.
Taxes on income for 2016 totaled NIS 10 million ($2 million) of tax expenses, compared to NIS 36 million ($9 million) tax expenses in 2015. The decrease resulted mainly from recording of tax income, as a result of a tax assessment agreement for the years 2012-2013 and a decrease in corporate tax rate for the following years.
Net Income for 2016 totaled NIS 150 million ($39 million), compared to NIS 97 million ($25 million) in 2015, a 54.6% increase.
Basic earnings per share for 2016 totaled NIS 1.47 ($0.38), compared to NIS 0.95 ($0.25) last year.
Financial Review (fourth quarter of 2016 compared to fourth quarter of 2015):
Revenues for the fourth quarter of 2016 decreased 5.9% totaling NIS 984 million ($256 million), compared to NIS 1,046 million ($272 million) in the fourth quarter last year. The decrease in revenues is attributed to a 5.0% decrease in service revenues and an 8.3% decrease in equipment revenues.
Service revenues totaled NIS 719 million ($187 million) in the fourth quarter of 2016, a 5.0% decrease from NIS 757 million ($197 million) in the fourth quarter last year.
Service revenues in the cellular segment totaled NIS 502 million ($131 million) in the fourth quarter of 2016, an 8.1% decrease from NIS 546 million ($142 million) in the fourth quarter last year. This decrease resulted mainly from a decrease in cellular services revenues due to the ongoing erosion in the price of these services and churn of customers as a result of the competition in the cellular market.
Service revenues in the fixed-line segment totaled NIS 267 million ($69 million) in the fourth quarter of 2016, a 1.5% increase from NIS 263 million ($68 million) in the fourth quarter last year. This increase resulted mainly from an increase in revenues from the Internet and TV fields. Such increase was fully offset by a decrease in revenues from long distance calling services.
Equipment revenues in the fourth quarter of 2016 totaled NIS 265 million ($69 million), an 8.3% decrease compared to NIS 289 million ($75 million) in the fourth quarter last year. This decrease resulted mainly from a decrease in the amount of end user equipment sold in the cellular segment during the fourth quarter of 2016 as compared to the fourth quarter of 2015. This decrease was partially offset by an increase in equipment sales in the fixed-line segment.
Cost of revenues for the fourth quarter of 2016 totaled NIS 697 million ($181 million), compared to NIS 688 million ($179 million) in the fourth quarter of 2015, a 1.3% increase. This increase resulted mainly from an increase in content costs related to the TV field and in costs related to the landline wholesale market field which was partially offset by a decrease in the costs of end user equipment sold, primarily as a result of a decrease in the quantity of end user equipment sold in the cellular segment during the fourth quarter of 2016 as compared to the fourth quarter of 2015.
Gross profit for the fourth quarter of 2016 decreased 19.8% to NIS 287 million ($75 million), compared to NIS 358 million ($93 million) in the fourth quarter of 2015. Gross profit margin for the fourth quarter of 2016 amounted to 29.2%, down from 34.2% in the fourth quarter of 2015.
Selling, Marketing, General and Administrative Expenses ("SG&A Expenses") for the fourth quarter of 2016 decreased 9.4% to NIS 251 million ($65 million), compared to NIS 277 million ($72 million) in the fourth quarter of 2015. This decrease is primarily a result of a decrease in depreciation and amortization expenses and efficiency measures implemented by the Company.
Operating income for the fourth quarter of 2016 decreased by 59.5% to NIS 32 million ($8 million) from NIS 79 million ($21 million) in the fourth quarter of 2015. The decrease in the operating income resulted from a decrease in revenues primarily due to the ongoing erosion in service revenues.
EBITDA for the fourth quarter of 2016 decreased by 23.1% totaling NIS 173 million ($45 million) compared to NIS 225 million ($59 million) in the fourth quarter of 2015. EBITDA as a percent of revenues for the fourth quarter of 2016 totaled 17.6%, down from 21.5% in the fourth quarter of 2015. The decrease in the EBITDA resulted mainly from the ongoing erosion in service revenues and an increase of a provision for claims recorded in the fourth quarter of 2016. The decrease was partially offset by a decrease in operating expenses, mainly as a result of efficiency measures implemented by the Company.
Cellular segment EBITDA for the fourth quarter of 2016 totaled NIS 117 million ($30 million), compared to NIS 154 million ($40 million) in the fourth quarter last year, a decrease of 24.0%, resulted mainly from a decrease in service revenues as mentioned above. Fixed-line segment EBITDA for the fourth quarter of 2016 totaled NIS 56 million ($15 million), compared to NIS 71 million ($18 million) in the fourth quarter last year, a 21.1% decrease, mainly as a result of an erosion in long distance calling services revenues and an erosion in the internet field profitability.
Financing expenses, net for the fourth quarter of 2016 decreased 16.7% and totaled NIS 40 million ($10 million), compared to NIS 48 million ($12 million) in the fourth quarter of 2015. The decrease resulted mainly from hedging transactions losses in the fourth quarter of 2015 regarding the Israeli Consumer Price Index, associated with the Company's debentures.
Taxes on income for the fourth quarter of 2016 totaled NIS 22 million ($6 million) of tax income, compared to NIS 12 million ($3 million) of tax expenses in the fourth quarter of 2015. The decrease resulted mainly from tax income which was recorded in this quarter as a result of a decrease in corporate tax rate for the following years.
Net Income for the fourth quarter of 2016 totaled NIS 14 million ($4 million), compared to NIS 19 million ($5 million) in the fourth quarter of 2015, a 26.3% decrease.
Basic earnings per share for the fourth quarter of 2016 totaled NIS 0.12 ($0.03), compared to NIS 0.18 ($0.05) in the fourth quarter last year.
Operating Review
Main Performance Indicators - Cellular segment:
2016
2015
Change (%)
Cellular subscribers at the end of period (in thousands)
2,801
2,835
(1.2%)
Churn Rate for cellular subscribers (in %)
42.4%
42.0%
1.0%
Monthly cellular ARPU (in NIS)
63.3
65.0
(2.6%)
Q4/2016
Q4/2015
Change (%)
Churn Rate for cellular subscribers (in %)
10.4%
11.1%
(6.3%)
Monthly cellular ARPU (in NIS)
59.3
63.0
(5.9%)
Cellular subscriber base - at the end of 2016 the Company had approximately 2.801 million cellular subscribers, a decrease of approximately 34,000 subscribers net, or approximately 1.2%, compared to the cellular subscriber base at the end of 2015. In the fourth quarter of 2016, the Company's cellular subscriber base decreased by approximately 21,000 net cellular subscribers.
Cellular Churn Rate for 2016 totaled 42.4%, compared to 42.0% in 2015. The cellular churn rate for the fourth quarter 2016 totaled to 10.4%, compared to 11.1% in the fourth quarter last year.
The monthly cellular Average Revenue per User ("ARPU") for 2016 totaled NIS 63.3 ($16.5) compared to NIS 65.0 ($16.9) in 2015. ARPU for the fourth quarter of 2016 totaled NIS 59.3 ($15.4), compared to NIS 63.0 ($16.4) in the fourth quarter last year. The decrease in ARPU resulted, among others, from the ongoing erosion in the prices of cellular services, resulting from the intense competition in the cellular market.
Main Performance Indicators - Fixed-line segment:
2016
2015
Change (%)
Internet infrastructure field- households at the end of period (in thousands)
163
95
71.6%
TV field- households at the end of period (in thousands)
111
63
76.2%
In the fourth quarter of 2016, the Company's households base in respect of internet infrastructure field and TV field had increased by approximately 17,000 net households and 12,000 net households, respectively.
Financing and Investment Review
Cash Flow
Free cash flow for 2016 totaled NIS 416 million ($108 million), compared to NIS 494 million ($128 million) in 2015, a 15.8% decrease. Free cash flow for the fourth quarter of 2016 totaled NIS 83 million ($22 million), compared to NIS 121 million ($31 million) in the fourth quarter of 2015, a 31.4% decrease. The decrease in free cash flow, both annual and quarterly, resulted mainly from a decrease in receipts from customers for services and end user equipment.
Total Equity
Total Equity as of December 31, 2016 amounted to NIS 1,340 million ($349 million) primarily consisting of undistributed accumulated retained earnings of the Company.
Cash Capital Expenditures in Fixed Assets and Intangible Assets
During 2016 and the fourth quarter of 2016, the Company invested NIS 368 million ($96 million) and NIS 96 million ($25 million), respectively in fixed assets and intangible assets (including, among others, investments in the Company's communications networks, information systems, software and TV set-top boxes), compared to NIS 396 million ($103 million) and NIS 89 million ($23 million) in 2015 and the fourth quarter 2015, respectively.
Dividend
On March 14, 2017, the Company's Board of Directors decided not to declare a cash dividend for the fourth quarter of 2016. In making its decision, the board of directors considered the Company's dividend policy and business status and decided not to distribute a dividend at this time, given the intensified competition and its adverse effect on the Company's results of operations, and in order to strengthen the Company's balance sheet. The board of directors will re-evaluate its decision in future quarters. No future dividend declaration is guaranteed and is subject to the Company's board of directors' sole discretion, as detailed in the Company's annual report for the year ended December 31, 2015 on Form 20-F dated March 21, 2016, under "Item 8 - Financial Information – A. Consolidated Statements and Other Financial Information - Dividend Policy".
Debentures
For information regarding the Company's summary of financial liabilities and details regarding the Company's outstanding debentures as of December 31, 2016, see "Disclosure for Debenture Holders" section in this press release.
Loans from Financial Institutions
Pursuant to a loan agreement entered by the Company and two financial institutions in May 2015, in June 2016 the first loan under the agreement in a principal amount of NIS 200 million was provided to the Company. Pursuant to a loan agreement between the Company and an Israeli bank from August 2015, in December 2016 a loan in the amount of NIS 140 million was provided to the Company. For details regarding the fulfillment of financial covenants included in the loan agreements, which are identical to those included in the Company's Debentures Series F through K, see comment no.1 to the table of "Aggregation of the information regarding the debenture series issued by the Company" under "Disclosure for Debenture Holders" section in this press release. For additional details regarding the loans see the Company's recent annual report for the year ended December 31, 2015 on Form 20-F, filed on March 21, 2016, under "Item 5B. Liquidity and Capital Resources – Other Credit Facilities".
Conference Call Details
The Company will be hosting a conference call regarding its results for the year 2016 and for the fourth quarter of 2016 on Wednesday, March 15, 2017 at 10:00 am ET, 07:00 am PT, 14:00 UK time, 16:00 Israel time. On the call, management will review and discuss the results, and will be available to answer questions. To participate, please either access the live webcast on the Company's website, or call one of the following teleconferencing numbers below. Please begin placing your calls at least 10 minutes before the conference call commences. If you are unable to connect using the toll-free numbers, please try the international dial-in number.
US Dial-in Number: 1 888 668 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: 10:00 am Eastern Time; 07:00 am Pacific Time; 14:00 UK Time; 16:00 Israel Time
To access the live webcast of the conference call, please access the investor relations section of Cellcom Israel's website: www.cellcom.co.il. After the call, a replay of the call will be available under the same investor relations section.
About Cellcom Israel
Cellcom Israel Ltd., established in 1994, is the largest Israeli cellular provider; Cellcom Israel provides its approximately 2.801 million cellular subscribers (as at December 31, 2016) with a broad range of value added services including cellular 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 LTE 4 generation network and an HSPA 3.5 Generation network enabling advanced high speed broadband multimedia services, in addition to GSM/GPRS/EDGE networks. Cellcom Israel offers Israel's broadest and largest customer service infrastructure including telephone customer service centers, retail stores, and service and sale centers, distributed nationwide. Through its broad customer service network Cellcom Israel offers technical support, account information, direct to the door parcel delivery services, internet and fax services, dedicated centers for hearing impaired, etc. Cellcom Israel further provides OTT TV services (as of December 2014), internet infrastructure (as of February 2015) and connectivity services and international calling services, as well as landline telephone communications services in Israel, in addition to data communications 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://investors.cellcom.co.il.
Forward-Looking Statements
The following information contains, or may be deemed to contain forward-looking statements (as defined in the U.S. Private Securities Litigation Reform Act of 1995 and the Israeli Securities Law, 1968). In some cases, you can identify these statements by forward-looking words such as "may," "might," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential" or "continue," the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to risks, uncertainties and assumptions about the Company, may include projections of the Company's future financial results, its anticipated growth strategies and anticipated trends in its business. These statements are only predictions based on the Company's current expectations and projections about future events. There are important factors that could cause the Company's actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. Factors that could cause such differences include, but are not limited to: changes to the terms of the Company's license, new legislation or decisions by the regulator affecting the Company's operations, new competition and changes in the competitive environment, the outcome of legal proceedings to which the Company is a party, particularly class action lawsuits, the Company's ability to maintain or obtain permits to construct and operate cell sites, and other risks and uncertainties detailed from time to time in the Company's filings with the U.S. Securities and Exchange Commission, including under the caption "Risk Factors" in its Annual Report for the year ended December 31, 2015.
Although the Company believes the expectations reflected in the forward-looking statements contained herein are reasonable, it cannot guarantee future results, level of activity, performance or achievements. Moreover, neither the Company nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. The Company assumes no duty to update any of these forward-looking statements after the date hereof to conform its prior statements to actual results or revised expectations, except as otherwise required by law.
The Company prepares its financial statements in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB). Unless noted specifically otherwise, the dollar denominated figures were converted to US$ using a convenience translation based on the New Israeli Shekel (NIS)/US$ exchange rate of NIS 3.845 = US$ 1 as published by the Bank of Israel for December 31, 2016.
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 (excluding expenses related to employee voluntary retirement plans); income tax; depreciation and amortization and share based payments. This is an accepted measure in the communications industry. The Company presents this measure as an additional performance measure as the Company believes that it enables us to compare operating performance between periods and companies, net of any potential differences which may result from differences in capital structure, taxes, age of fixed assets and related depreciation expenses. 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 as presented by the Company may not be comparable to similarly titled measures reported by other companies, due to differences in the way these measures are calculated. See the reconciliation of net income to EBITDA under "Reconciliation of Non-IFRS Measures" in the press release.
Free cash flow is a non-IFRS measure and is defined as the net cash provided by operating activities (including the effect of exchange rate fluctuations on cash and cash equivalents), minus the net cash used in investing activities excluding short-term investment in tradable debentures and deposits and proceeds from sales of such debentures (including interest received in relation to such debentures) and deposits. See "Reconciliation of Non-IFRS Measures" below.
Company Contact
Shlomi Fruhling
Chief Financial Officer
Tel: +972 52 998 9735
Investor Relations Contact
Ehud Helft
GK Investor & Public Relations
Tel: +1 617 418 3096
Financial Tables Follow
Cellcom Israel Ltd.
(An Israeli Corporation)
Consolidated Statements of Financial Position
Convenience
translation into
US dollar
December 31,
December 31,
December 31,
2015
2016
2016
NIS millions
NIS millions
US$ millions
Assets
Cash and cash equivalents
761
1,240
322
Current investments, including derivatives
281
284
74
Trade receivables
1,254
1,325
345
Current tax assets
-
25
6
Other receivables
104
61
16
Inventory
85
64
17
Total current assets
2,485
2,999
780
Trade and other receivables
785
796
207
Property, plant and equipment, net
1,745
1,659
432
Intangible assets, net
1,254
1,207
314
Deferred tax assets
9
1
-
Total non- current assets
3,793
3,663
953
Total assets
6,278
6,662
1,733
Liabilities
Current maturities of debentures
734
863
224
Trade payables and accrued expenses
677
675
176
Current tax liabilities
53
-
-
Provisions
110
108
28
Other payables, including derivatives
286
279
73
Total current liabilities
1,860
1,925
501
Long-term loans from financial institutions
-
340
88
Debentures
3,054
2,866
745
Provisions
20
30
8
Other long-term liabilities
24
31
8
Liability for employee rights upon retirement, net
12
12
3
Deferred tax liabilities
123
118
31
Total non- current liabilities
3,233
3,397
883
Total liabilities
5,093
5,322
1,384
Equity attributable to owners of the Company
Share capital
1
1
-
Cash flow hedge reserve
(2)
(1)
-
Retained earnings
1,170
1,322
344
Non-controlling interests
16
18
5
Total equity
1,185
1,340
349
Total liabilities and equity
6,278
6,662
1,733
Cellcom Israel Ltd.
(An Israeli Corporation)
Consolidated Statements of Income
Convenience
translation into
US dollar
Year ended
Year ended
Year ended
Year ended
December 31,
December 31,
December 31,
December 31,
2014
2015
2016
2016
NIS millions
NIS millions
NIS millions
US$ millions
Revenues
4,570
4,180
4,027
1,047
Cost of revenues
(2,727)
(2,763)
(2,702)
(703)
Gross profit
1,843
1,417
1,325
344
Selling and marketing expenses
(672)
(620)
(574)
(149)
General and administrative expenses
(463)
(465)
(420)
(109)
Other expenses, net
(46)
(22)
(21)
(6)
Operating profit
662
310
310
80
Financing income
100
55
46
12
Financing expenses
(298)
(232)
(196)
(51)
Financing expenses, net
(198)
(177)
(150)
(39)
Profit before taxes on income
464
133
160
41
Taxes on income
(110)
(36)
(10)
(2)
Profit for the year
354
97
150
39
Attributable to:
Owners of the Company
351
95
148
39
Non-controlling interests
3
2
2
-
Profit for the year
354
97
150
39
Earnings per share
Basic earnings per share (in NIS)
3.51
0.95
1.47
0.38
Diluted earnings per share (in NIS)
3.48
0.95
1.47
0.38
Weighted-average number of shares used in the calculation of basic earnings per share (in shares)
99,924,306
100,589,458
100,604,578
100,604,578
Weighted-average number of shares used in the calculation of diluted earnings per share (in shares)
100,706,282
100,589,530
100,698,306
100,698,306
Cellcom Israel Ltd.
(An Israeli Corporation)
Consolidated Statements of Cash Flows
Convenience
translation into
US dollar
Year ended
Year ended
Year ended
Year ended
December 31,
December 31,
December 31,
December 31,
2014
2015
2016
2016
NIS millions
NIS millions
NIS millions
US$ millions
Cash flows from operating activities
Profit for the year
354
97
150
39
Adjustments for:
Depreciation and amortization
610
562
534
139
Share based payment
3
3
6
2
Loss (gain) on sale of property, plant and equipment
7
(1)
10
3
Income tax expense
110
36
10
2
Financing expenses, net
198
177
150
39
Changes in operating assets and liabilities:
Change in inventory
(5)
4
21
5
Change in trade receivables (including long-term amounts)
422
209
(28)
(7)
Change in other receivables (including long-term amounts)
(35)
(34)
(5)
(1)
Change in trade payables, accrued expenses and provisions
(24)
(54)
-
-
Change in other liabilities (including long-term amounts)
36
(95)
20
5
Payments for derivative hedging contracts, net
(6)
-
-
-
Income tax paid
(119)
(68)
(88)
(23)
Income tax received
6
-
1
-
Net cash from operating activities
1,557
836
781
203
Cash flows used in investing activities
Acquisition of property, plant, and
equipment
(289)
(305)
(295)
(77)
Acquisition of intangible assets
(77)
(91)
(73)
(19)
Dividend received
-
2
-
-
Change in current investments, net
(15)
231
(9)
(2)
Proceeds from other derivative contracts, net
4
-
-
-
Proceeds from sale of property, plant and equipment
4
4
2
-
Interest received
23
15
11
3
Repayment of a long-term deposit
-
48
-
-
Net cash used in investing activities
(350)
(96)
(364)
(95)
Cellcom Israel Ltd.
(An Israeli Corporation)
Consolidated Statements of Cash Flows (cont'd)
Convenience
translation into
US dollar
Year ended
Year ended
Year ended
Year ended
December 31,
December 31,
December 31,
December 31,
2014
2015
2016
2016
NIS millions
NIS millions
NIS millions
US$ millions
Cash flows used in financing activities
Payments for derivative contracts, net
(29)
(32)
(13)
(3)
Receipt (Repayment) of long-term loans from financial institutions
(12)
-
340
88
Repayment of debentures
(1,092)
(873)
(732)
(191)
Proceeds from issuance of debentures, net of issuance costs
326
(3)
653
170
Dividend paid
(4)
(1)
(1)
-
Interest paid
(295)
(227)
(185)
(48)
Net cash used in financing activities
(1,106)
(1,136)
62
16
Changes in cash and cash equivalents
101
(396)
479
124
Cash and cash equivalents as at the beginning of the year
1,057
1,158
761
198
Effect of exchange rate fluctuations on cash and cash equivalents
-
(1)
-
-
Cash and cash equivalents as at the end of the year
1,158
761
1,240
322
Cellcom Israel Ltd
(An Israeli Corporation)
Reconciliation for Non-IFRS Measures
EBITDA
The following is a reconciliation of net income to EBITDA:
Year ended December 31
Convenience
translation
into US dollar
Year ended
December 31
2014
NIS millions
2015
NIS millions
2016
NIS millions
2016
US$ millions
Net income
354
97
150
39
Income taxes
110
36
10
2
Financing income
(100)
(55)
(46)
(12)
Financing expenses
298
232
196
51
Other expenses (income)
7
(3)
8
2
Depreciation and amortization
610
562
534
139
Share based payments
3
3
6
2
EBITDA
1,282
872
858
223
Three-month period ended
December 31
2014
NIS millions
2015
NIS millions
2016
NIS millions
Convenience
translation
into US dollar
2016
US$ millions
Net income
55
19
14
4
Income taxes
20
12
(22)
(6)
Financing income
(28)
(11)
(13)
(4)
Financing expenses
84
59
53
14
Other expenses
3
1
3
1
Depreciation and amortization
148
143
136
35
Share based payments
-
2
2
1
EBITDA
282
225
173
45
Free cash flow
The following table shows the calculation of free cash flow:
Year ended December 31
Convenience
translation
into US dollar
Year ended
December 31
2014
NIS millions
2015
NIS millions
2016
NIS millions
2016
US$ millions
Cash flows from operating activities(*)
1,557
836
781
203
Cash flows from investing activities
(350)
(96)
(364)
(95)
Sale of tradable debentures(**)
(3)
(246)
(1)
-
Free cash flow
1,204
494
416
108
Three-month period ended
December 31
2014
NIS millions
2015
NIS millions
2016
NIS millions
Convenience
translation
into US dollar
2016
US$ millions
Cash flows from operating activities(*)
277
210
178
47
Cash flows from investing activities
(99)
8
(96)
(25)
Sale of tradable debentures(**)
(4)
(97)
1
-
Free cash flow
174
121
83
22
(*)
Including the effects of exchange rate fluctuations in cash and cash equivalents.
(**)
Net of interest received in relation to tradable debentures.
Cellcom Israel Ltd.
(An Israeli Corporation)
Key financial and operating indicators
NIS millions unless otherwise stated
Q1-2015
Q2-2015
Q3-2015
Q4-2015
Q1-2016
Q2-2016
Q3-2016
Q4-2016
FY-2015
FY-2016
Cellular service revenues
582
573
572
546
559
567
534
502
2,273
2,162
Fixed-line service revenues
269
264
267
263
264
264
276
267
1,063
1,071
Cellular equipment revenues
245
237
215
233
219
217
195
205
930
836
Fixed-line equipment revenues
17
17
28
56
29
30
39
60
118
158
Consolidation adjustments
(51)
(51)
(50)
(52)
(49)
(49)
(52)
(50)
(204)
(200)
Total revenues
1,062
1,040
1,032
1,046
1,022
1,029
992
984
4,180
4,027
Cellular EBITDA
130
149
168
154
178
181
149
117
601
625
Fixed-line EBITDA
66
67
67
71
60
57
60
56
271
233
Total EBITDA
196
216
235
225
238
238
209
173
872
858
Operating profit
55
80
96
79
101
104
73
32
310
310
Financing expenses, net
18
62
49
48
24
44
42
40
177
150
Profit for the period
26
12
40
19
59
44
33
14
97
150
Free cash flow
127
119
127
121
149
103
81
83
494
416
Cellular subscribers at the end of period (in 000's)
2,885
2,848
2,832
2,835
2,813
2,812
2,822
2,801
2,835
2,801
Monthly cellular ARPU (in NIS)
65.5
65.5
66.0
63.0
65.2
66.0
62.8
59.3
65.0
63.3
Churn rate for cellular subscribers (%)
11.9%
10.2%
10.1%
11.1%
11.1%
10.6%
10.5%
10.4%
42.0%
42.4%
Cellcom Israel Ltd.
Disclosure for debenture holders as of December 31, 2016
Aggregation of the information regarding the debenture series issued by the Company (1), in million NIS
Series
Original Issuance Date
Principal on the Date of Issuance
As of 31.12.2016
As of 14.03.2017
Interest Rate (fixed)
Principal Repayment Dates
Interest Repayment Dates (3)
Linkage
Trustee
Contact Details
Principal
Balance on Trade
Linked Principal Balance
Interest Accumulated in Books
Debenture Balance Value in Books (2)
Market Value
Principal Balance on Trade
Linked Principal Balance
From
To
B (4)(8)
22/12/05
02/01/06*
05/01/06*
10/01/06*
31/05/06*
925.102
185.020
220.220
11.544
231.764
231.831
-
-
5.30%
05.01.13
05.01.17
January-5
Linked to CPI
Hermetic Trust (1975) Ltd. Meirav Ofer Oren. 113 Hayarkon St., Tel Aviv. Tel: 03-5274867.
D (7)**
07/10/07
03/02/08*
06/04/09*
30/03/11*
18/08/11*
2,423.075
299.602
348.829
9.054
357.883
363.147
299.602
347.822
5.19%
01.07.13
01.07.17
July-1
Linked to CPI
Hermetic Trust (1975) Ltd. Meirav Ofer Oren. 113 Hayarkon St., Tel Aviv. Tel: 03-5274867.
E (7)(8)
06/04/09
30/03/11*
18/08/11*
1,798.962
163.633
163.622
10.115
173.737
173.795
-
-
6.25%
05.01.12
05.01.17
January-5
Not linked
Hermetic Trust (1975) Ltd. Meirav Ofer Oren. 113 Hayarkon St., Tel Aviv. Tel: 03-5274867.
F (4)(5)
(6)(8)**
20/03/12
714.802
714.802
730.637
16.454
747.091
700.899
643.322
656.254
4.60%
05.01.17
05.01.20
January-5
and July-5
Linked to CPI
Strauss Lazar Trust Company (1992) Ltd. Ori Lazar. 17 Yizhak Sadeh St., Tel Aviv. Tel: 03- 6237777.
G (4)(5)
(6)(8)**
20/03/12
285.198
285.198
285.414
9.777
295.191
246.571
228.158
228.325
6.99%
05.01.17
05.01.19
January-5
and July-5
Not linked
Strauss Lazar Trust Company (1992) Ltd. Ori Lazar. 17 Yizhak Sadeh St., Tel Aviv. Tel: 03- 6237777.
H (4)(5)(7)**
08/07/14
03/02/15*
11/02/15*
949.624
949.624
824.173
9.221
833.394
949.814
949.624
827.994
1.98%
05.07.18
05.07.24
January-5
and July-5
Linked to CPI
Mishmeret Trust Company Ltd. Rami Sebty. 48 Menachem Begin Rd. Tel Aviv. Tel: 03-6374355.
I (4)(5)(7)**
08/07/14
03/02/15*
11/02/15*
30/03/16*
804.010
804.010
752.961
16.324
769.285
854.261
804.010
754.246
4.14%
05.07.18
05.07.25
January-5
and July-5
Not linked
Mishmeret Trust Company Ltd. Rami Sebty. 48 Menachem Begin Rd. Tel Aviv. Tel: 03-6374355.
J (4)(5)
26/09/16
103.267
103.267
102.229
0.665
102.894
102.968
103.267
102.246
2.45%
05.07.21
05.07.26
January-5 and July-5
Linked to CPI
Mishmeret Trust Company Ltd. Rami Sebty. 48 Menachem Begin Rd. Tel Aviv. Tel: 03-6374355.
K (4)(5)**
26/09/16
303.971
303.971
300.867
2.838
303.705
301.965
303.971
300.895
3.55%
05.07.21
05.07.26
January-5 and July-5
Not linked
Mishmeret Trust Company Ltd. Rami Sebty. 48 Menachem Begin Rd. Tel Aviv. Tel: 03-6374355.
Total
8,308.011
3,809.127
3,728.952
85.992
3,814.944
3,925.251
3,331.954
3,217.782
Comments:
(1)
In the reporting period, the Company fulfilled all terms of the debentures. The Company also fulfilled all terms of the Indentures and loan agreements. Debentures Series F through K financial and loan agreements covenants - as of December 31, 2016 the net leverage (net debt to EBITDA excluding one time events ratio- see definition in the Company's annual report for the year ended December 31, 2015 on Form 20-F, under "Item 5. Operating and Financial Review and Prospects – B. Liquidity and Capital Resources – Debt Service– Public Debentures") was 2.99 (the net leverage without excluding one-time events was 2.99). In the reporting period, no cause for early repayment occurred. (2) Including interest accumulated in the books. (3) Annual payments, excluding Series F through K debentures in which the payments are semi annual. (4) Regarding debenture Series B and F through K and loan agreements, the Company undertook not to create any pledge on its assets, as long as debentures or loans are not fully repaid, subject to certain exclusions. (5) Regarding debenture Series F through K and loan agreements - the Company has the right for early redemption under certain terms (see the Company's annual report for the year ended December 31, 2015 on Form 20-F, under "Item 5. Operating and Financial Review and Prospects– B. Liquidity and Capital Resources – Debt Service– Public Debentures" and "-Other Credit Facilities". (6) Regarding debenture Series F and G - in June 2013, following a second decrease of the Company's debenture rating since their issuance, the annual interest rate has been increased by 0.25% to 4.60% and 6.99%, respectively, beginning July 5, 2013. (7) In February 2015, pursuant to an exchange offer of the Company's Series H and I debentures for a portion of the Company's outstanding Series D and E debentures, respectively, or the Exchange Offer, the Company exchanged approximately NIS 555 million principal amount of Series D debentures with approximately NIS 844 million principal amount of Series H debentures, and approximately NIS 272 million principal amount of Series E debentures with approximately NIS 335 million principal amount of Series I debentures. (8) On January 5, 2017, after the end of the reporting period, the Company repaid principal payments of approximately NIS 514 million of Series B, E, F and G debentures.
(*)
On these dates additional debentures of the series were issued, the information in the table refers to the full series.
(**)
As of December 31, 2016, debentures Series D, F through I and K are material, which represent 5% or more of the total liabilities of the Company, as presented in the financial statements.
Cellcom Israel Ltd.
Disclosure for debenture holders as of December 31, 2016 (cont.)
Debentures Rating Details*
Series
Rating Company
Rating as of 31.12.2016 (1)
Rating as of 14.03.2017
Rating assigned upon issuance of the Series
Recent date of rating as of 14.03.2017
Additional ratings between original issuance and the recent date of rating as of 14.03.2017 (2)
Rating
B
S&P Maalot
A+
A+
AA-
08/2016
5/2006, 9/2007, 1/2008, 10/2008, 3/2009, 9/2010, 8/2011, 1/2012, 3/2012, 5/2012, 11/2012, 6/2013, 6/2014, 8/2014, 1/2015, 9/2015, 3/2016, 08/2016
AA-, AA,AA-,A+ (2)
D
S&P Maalot
A+
A+
AA-
08/2016
1/2008, 10/2008, 3/2009, 9/2010, 8/2011, 1/2012, 3/2012, 5/2012, 11/2012, 6/2013, 6/2014, 8/2014, 01/2015, 9/2015, 3/2016, 08/2016
AA-, AA,AA-,A+ (2)
E
S&P Maalot
A+
A+
AA
08/2016
9/2010, 8/2011, 1/2012, 3/2012, 5/2012, 11/2012, 6/2013, 6/2014, 8/2014, 01/2015, 9/2015, 3/2016, 08/2016
AA,AA-,A+ (2)
F
S&P Maalot
A+
A+
AA
08/2016
5/2012, 11/2012, 6/2013, 6/2014, 8/2014, 1/2015, 9/2015, 3/2016, 08/2016
AA,AA-,A+ (2)
G
S&P Maalot
A+
A+
AA
08/2016
5/2012, 11/2012, 6/2013, 6/2014, 8/2014, 1/2015, 9/2015, 3/2016, 08/2016
AA,AA-,A+ (2)
H
S&P Maalot
A+
A+
A+
08/2016
6/2014, 8/2014, 1/2015, 9/2015, 3/2016, 08/2016
A+ (2)
I
S&P Maalot
A+
A+
A+
08/2016
6/2014, 8/2014, 1/2015, 9/2015, 3/2016, 08/2016
A+ (2)
J
S&P Maalot
A+
A+
A+
08/2016
08/2016
A+ (2)
K
S&P Maalot
A+
A+
A+
08/2016
08/2016
A+ (2)
(1)
In August 2016, S&P Maalot affirmed the Company's rating of "ilA+/stable".
(2)
In September 2007, S&P Maalot issued a notice that the AA- rating for debentures issued by the Company was in the process of recheck with positive implications (Credit Watch Positive). In October 2008, S&P Maalot issued a notice that the AA- rating for debentures issued by the Company is in the process of recheck with stable implications (Credit Watch Stable). This process was withdrawn upon assignment of AA rating in March 2009. In August 2011, S&P Maalot issued a notice that the AA rating for debentures issued by the Company is in the process of recheck with negative implications (Credit Watch Negative). In May 2012, S&P Maalot updated the Company's rating from an "ilAA/negative" to an "ilAA-/negative". In November 2012, S&P Maalot affirmed the Company's rating of "ilAA-/negative". In June 2013, S&P Maalot updated the Company's rating from an "ilAA-/negative" to an "ilA+/stable". In June 2014, August 2014, January 2015, September 2015, March 2016 and August 2016, S&P Maalot affirmed the Company's rating of "ilA+/stable". For details regarding the rating of the debentures see the S&P Maalot report dated August 23, 2016.
*
A securities rating is not a recommendation to buy, sell or hold securities. Ratings may be subject to suspension, revision or withdrawal at any time, and each rating should be evaluated independently of any other rating.
Cellcom Israel Ltd.
Summary of Financial Undertakings (according to repayment dates) as of December 31, 2016
a. Debentures issued to the public by the Company and held by the public, excluding such debentures held by the Company's parent company, by a controlling shareholder, by companies controlled by them, or by companies controlled by the Company, based on the Company's "Solo" financial data (in thousand NIS).
Principal payments
Gross interest payments (without deduction of tax)
ILS linked to CPI
ILS not linked to CPI
Euro
Dollar
Other
First year
635,476
219,313
-
-
-
151,339
Second year
331,941
222,524
-
-
-
101,017
Third year
331,941
165,619
-
-
-
77,439
Fourth year
331,941
80,263
-
-
-
58,843
Fifth year and on
702,484
860,430
-
-
-
148,057
Total
2,333,783
1,548,149
-
-
-
536,695
b. Private debentures and other non-bank credit, excluding such debentures held by the Company's parent company, by a controlling shareholder, by companies controlled by them, or by companies controlled by the Company, based on the Company's "Solo" financial data (in thousand NIS).
Principal payments
Gross interest payments (without deduction of tax)
ILS linked to CPI
ILS not linked to CPI
Euro
Dollar
Other
First year
-
-
-
-
-
16,060
Second year
-
78,000
-
-
-
14,213
Third year
-
78,000
-
-
-
10,541
Fourth year
-
78,000
-
-
-
6,874
Fifth year and on
-
106,000
-
-
-
3,881
Total
-
340,000
-
-
-
51,569
c. Credit from banks in Israel based on the Company's "Solo" financial data (in thousand NIS) - None.
d. Credit from banks abroad based on the Company's "Solo" financial data (in thousand NIS) - None.
Cellcom Israel Ltd.
Summary of Financial Undertakings (according to repayment dates) as of December 31, 2016 (cont.)
e. Total of sections a - d above, total credit from banks, non-bank credit and debentures based on the Company's "Solo" financial data (in thousand NIS).
Principal payments
Gross interest payments (without deduction of tax)
ILS linked to CPI
ILS not linked to CPI
Euro
Dollar
Other
First year
635,476
219,313
-
-
-
167,399
Second year
331,941
300,524
-
-
-
115,230
Third year
331,941
243,619
-
-
-
87,980
Fourth year
331,941
158,263
-
-
-
65,717
Fifth year and on
702,484
966,430
-
-
-
151,938
Total
2,333,783
1,888,149
-
-
-
588,264
f. Out of the balance sheet Credit exposure based on the Company's "Solo" financial data - None.
g. Out of the balance sheet Credit exposure of all the Company's consolidated companies, excluding companies that are reporting corporations and excluding the Company's data presented in section f above (in thousand NIS) - None.
h. Total balances of the credit from banks, non-bank credit and debentures of all the consolidated companies, excluding companies that are reporting corporations and excluding Company's data presented in sections a - d above (in thousand NIS) - None.
i. Total balances of credit granted to the Company by the parent company or a controlling shareholder and balances of debentures offered by the Company held by the parent company or the controlling shareholder (in thousand NIS) - None.
j. Total balances of credit granted to the Company by companies held by the parent company or the controlling shareholder, which are not controlled by the Company, and balances of debentures offered by the Company held by companies held by the parent company or the controlling shareholder, which are not controlled by the Company (in thousand NIS).
Principal payments
Gross interest payments (without deduction of tax)
ILS linked to CPI
ILS not linked to CPI
Euro
Dollar
Other
First year
5,627
1,360
-
-
-
869
Second year
833
476
-
-
-
521
Third year
833
341
-
-
-
475
Fourth year
833
138
-
-
-
430
Fifth year and on
8,542
6,348
-
-
-
1,216
Total
16,668
8,663
-
-
-
3,511
k. Total balances of credit granted to the Company by consolidated companies and balances of debentures offered by the Company held by the consolidated companies (in thousand NIS) - None.
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/cellcom-israel-announces-fourth-quarter-and-full-year-2016-results-300423931.html
SOURCE Cellcom Israel Ltd.
Related Links
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