CEL Cellcom Israel Ltd

NETANYA, Israel, March 26, 2018 /PRNewswire/ --

2017 Full Year Highlights (compared to 2016):

• Total Revenues totaled NIS 3,871 million ($1,117 million) compared to NIS 4,027 million ($1,161 million) last year, a decrease of 3.9%
• Service revenues totaled NIS 2,919 million ($842 million) compared to NIS 3,033 million ($875 million) last year, a decrease of 3.8%
• Operating income totaled NIS 297 million ($86 million) compared to NIS 310 million ($89 million) last year, a decrease of 4.2%
• Net income totaled NIS 113 million ($33 million) compared to NIS 150 million ($43 million) last year, a decrease of 24.7%
• Net income margin 2.9%, a decrease from 3.7% last year
• EBITDA¹ totaled NIS 853 million ($246 million) compared to NIS 858 million ($247 million) last year, a decrease of 0.6%
• EBITDA margin 22.0%, an increase from 21.3% last year
• Net cash from operating activities totaled NIS 774 million ($223 million) compared to NIS 781 million ($225 million) last year, a decrease of 0.9%
• Free cash flow¹ totaled NIS 325 million ($94 million) compared to NIS 416 million ($120 million) last year, a decrease of 21.9%
• Cellular subscriber base totaled approximately 2.817 million subscribers (at the end of December 2017)

Fourth Quarter 2017 Highlights (compared to fourth quarter of 2016):

• Total Revenues totaled NIS 975 million ($281 million) compared to NIS 984 million ($284 million) in the fourth quarter last year, a decrease of 0.9%
• Service revenues totaled NIS 712 million ($205 million) compared to NIS 719 million ($207 million) in the fourth quarter last year, a decrease of 1.0%
• Operating income totaled NIS 45 million ($13 million) compared to NIS 32 million ($9 million) in the fourth quarter last year, an increase of 40.6%
• Net income totaled NIS 10 million ($3 million) compared to NIS 14 million ($4 million) in the fourth quarter last year, a decrease of 28.6%
• Net income margin 1.0%, a decrease from 1.4% in the fourth quarter last year
• EBITDA¹ totaled NIS 189 million ($55 million) compared to NIS 173 million ($50 million) in the fourth quarter last year, an increase of 9.2%
• EBITDA margin 19.4%, an increase from 17.6% in the fourth quarter last year
• Net cash from operating activities totaled NIS 214 million ($62 million) compared to NIS 178 million ($51 million) last year, an increase of 20.2%
• Free cash flow¹ totaled NIS 77 million ($22 million) compared to NIS 83 million ($24 million) in the fourth quarter last year, a decrease of 7.2%

Nir Sztern, the Company's Chief Executive Officer, referred to the results of full year 2017 and fourth quarter of 2017:

"The high level of competition in the cellular market in 2017 continued to impact the results of the cellular segment. Alongside the competition, we accelerated our activities as a communications group, offering our customers a broad and full range of solutions, geared towards current communications era. Despite the continued competition, we ended 2017 with a growth of approximately 29,400 post-paid customers in the cellular segment.

In 2017, we again proved that Cellcom tv is the most successful and worthy alternative in the Israeli television broadcasting market.

We added to the rich world of content: the most talked about and sought after content from the prestigious content provider HBO, ten new channels including children channels in high demand, a high-quality documentary library and channel, blockbuster series and movies, all with no change in the price.

Today, it is clear to everyone that we offer a broad content offering, along with cost-effective price and a very advanced technological experience,  viewing capabilities of the entire content on all devices and platforms : Smart TVs with no converter, IOS and Android, as well as a built-in recording service for all channels going back a week.

Israeli consumer knows what he wants and especially what he needs and this winning combination of rich and high quality content, together with a most advanced technology and user experience, all packaged in a cost-effective and attractive price, has led us to a rapid growth trend throughout the year to 183,000 households, as of today.

The fourth quarter of 2017 is a record quarter for customers joining our quattro service, a service that combines the Cellcom tv service with internet, home telephony and cellular services. Within a short period of time, the quattro package has become a highly desired product among our customers, giving the customer a worthwhile value proposition that strengthens loyalty to the Group's services.

We are vigorously working in the internet infrastructure market to accelerate the deployment of optic fiber cables to the customer's home in order to provide our customers with high quality and high speed internet service. We launched the "Super Fiber" service, which enables customers with up to a 1 gigabyte surfing speed as a component in our quattro packages. We are preparing to continue the deployment of fixed line infrastructure using several alternatives simultaneously - independent deployment of fibers in residential neighborhoods, negotiation of a cooperation in deployment with Partner and examination of an investment in IBC. This, in order to cement ourselves as a dominant player in the fixed-line infrastructure market and to reduce expenses.

Alongside these growth engines, we are also continuing the momentum in the field of IoT and Smart Cities, a field in which we have recently won a number of significant tenders.

In 2017 also, we continued our streamlining measures, under the framework of which we took many varied steps to reduce our expenses and improve our operating excellence in both the mobile and fixed-line worlds, while improving processes of managing these worlds alongside improvement in the service and sales worlds.

I would like to thank the employees and the managers for working tirelessly for the Company's success and to the shareholders for their trust in the Company."

Shlomi Fruhling, Chief Financial Officer, said:

"2017 was characterized by accelerated growth in the fixed line segment and continued competition in the cellular segment, as expressed in the erosion of revenue from services as compared with last year.

Cellular segment revenues declined by 10.0% compared with last year and were mainly effected from reclassification of the consideration from the sharing agreement with Golan, that came into effect in April 2017, between cellular segment revenues, fixed line segment revenues and reduction of expenses, compared to the classification to cellular segment revenues in 2016, and from the heightened competition in the cellular market. However, excluding said reclassification effects, we saw a decrease in the level of revenues erosion compared to previous years.

In the fixed line segment, we recorded an 8.9% growth in service revenues compared to last year, mainly due to the continued customer recruitment to Cellcom tv and internet services, mainly through our triple and quadruple-play offerings and due to the said reclassification of part of the revenues from the sharing agreement to the fixed line segment. We ended 2017 with a 53% growth in the TV subscriber base, and we reached profitability in the TV operation with a positive contribution to the EBITDA.

Our free cash flow in 2017 was NIS 325 million, a 21.9% decrease from 2016. The decrease was mainly due to an increase in investments in the fixed line segment due to the increase in activity in the TV field and growth in number of customers, as well as an increase in capital expenditures in fixed line infrastructure.

The Company's Board of Directors decided not to distribute a dividend for the fourth quarter of 2017, given the continued high level of competition in the market and its adverse effect on the Company's operating results and in order to further strengthen the Company's balance sheet. The Board of Directors will re-evaluate its decision as market conditions develop, and taking into consideration the Company's needs."

Cellcom Israel Ltd. (NYSE: CEL; TASE: CEL) ("Cellcom Israel" or the "Company") announced today its financial results for the fourth quarter and full year ended December 31, 2017.

The Company reported that revenues for the fourth quarter and full year 2017 totaled NIS 975 million ($281 million) and NIS 3,871 million ($1,117 million), respectively; EBITDA for the fourth quarter 2017 totaled NIS 189 million ($55 million), or 19.4% of total revenues, and for the full year 2017 totaled NIS 853 million ($246 million), or 22.0% of total revenues; net income for the fourth quarter and full year 2017 totaled NIS 10 million ($3 million) and NIS 113 million ($33 million), respectively. Basic earnings per share for the fourth quarter and full year 2017 totaled NIS 0.08 ($0.02) and NIS 1.11 ($0.32), respectively.

Main Consolidated Financial Results:

Main Financial Data by Operating Segments:

Financial Review (2017 full year compared to 2016):

Revenues for 2017 decreased 3.9% totaling NIS 3,871 million ($1,117 million), compared to NIS 4,027 million ($1,161 million) last year. The decrease in revenues is attributed to a 3.8% decrease in service revenues and a 4.2% decrease in equipment revenues.

Service revenues for 2017 totaled NIS 2,919 million ($842 million), a 3.8% decrease from NIS 3,033 million ($875 million) last year.

Service revenues in the cellular segment totaled NIS 1,929 million ($556 million) in 2017, a 10.8% decrease from NIS 2,162 million ($624 million) last year. This decrease resulted mainly from the ongoing erosion in the price of these services as a result of the competition in the cellular market and from the difference between the national roaming services revenues in 2016 and the revenues for rights of use in cellular networks according to the network sharing agreement with Golan which came into force as of the beginning of the second quarter of 2017 (the "Network Sharing Agreement with Golan")[2].

Service revenues in the fixed-line segment totaled NIS 1,166 million ($336 million) in 2017, an 8.9% increase from NIS 1,071 million ($309 million) last year. This increase resulted mainly from an increase in revenues from TV and internet services, as well as from fixed-line communications services provided according to the Network Sharing Agreement with Golan, which were partially offset as a result of the discontinuance of consolidation of Internet Rimon Israel 2009 Ltd. ("Internet Rimon"), following the sale of the Group's holdings in Internet Rimon in the second quarter of 2017 (the "Sale of Internet Rimon").

Equipment revenues totaled NIS 952 million ($275 million) in 2017, a 4.2% decrease compared to NIS 994 million ($286 million) last year. This decrease resulted mainly from a decrease in the quantity of end user equipment sold during 2017 in the cellular segment as compared to 2016. This decrease was partially offset by an increase in equipment sales in the fixed-line segment.

Cost of revenues totaled NIS 2,680 million ($773 million) in 2017, compared to NIS 2,702 million ($779 million) in 2016, a 0.8% decrease. This decrease resulted mainly from Golan's participation in operating costs according to the Network Sharing Agreement with Golan, as well as 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 the cellular segment during 2017 as compared to 2016. This decrease was partially offset by an increase in content costs related to the TV field and in costs related to internet services in the fixed-line segment.

Gross profit for 2017 decreased 10.1% to NIS 1,191 million ($344 million), compared to NIS 1,325 million ($382 million) in 2016. Gross profit margin for 2017 amounted to 30.8%, down from 32.9% in 2016.

Selling, Marketing, General and Administrative Expenses ("SG&A Expenses") for 2017 decreased 9.0% to NIS 905 million ($261 million), compared to NIS 994 million ($287 million) in 2016. This decrease is primarily a result of a decrease in salaries and commissions expenses due to the capitalization of part of the customer acquisition costs as a result of the early adoption of a new International Financial Reporting Standard (IFRS 15) since the first quarter of 2017 (the "Adoption of IFRS15"). The effect of the adoption of the standard on 2017 expenses totaled NIS 93 million ($27 million).

Other income for 2017 totaled NIS 11 million ($3 million), compared to other expenses of NIS 21 million ($6 million) in 2016. Other income for 2017 mainly include a gain from the Sale of Internet Rimon, in the amount of approximately NIS 10 million ($3 million). Other expenses for 2016, mainly include an expense for employee voluntary retirement plan in the amount of approximately NIS 13 million ($4 million).

Operating income for 2017 decreased 4.2% to NIS 297 million ($86 million) from NIS 310 million ($89 million) in 2016.

EBITDA for 2017 decreased by 0.6% totaling NIS 853 million ($246 million) compared to NIS 858 million ($247 million) in 2016. EBITDA for 2017, as a percent of revenues, totaled 22.0% up from 21.3% in 2016.

Cellular segment EBITDA for 2017 totaled NIS 595 million ($172 million), compared to NIS 625 million ($180 million) last year, a decrease of 4.8%, which resulted mainly from the difference between national roaming services revenues in 2016 and the revenues for rights of use in cellular networks according to the Network Sharing Agreement with Golan in 2017, and from the ongoing erosion in cellular service revenues. This decrease was partially offset by a decrease in selling and marketing expenses due to the capitalization of part of the customer acquisition costs as a result of the Adoption of IFRS15.

Fixed-line segment EBITDA for 2017 totaled NIS 258 million ($74 million), compared to NIS 233 million ($67 million) last year, a 10.7% increase, mainly as a result of an increase in revenues from fixed-line communications services provided according to the Network Sharing Agreement with Golan, from an increase in revenues from TV services and from a decrease in operating expenses, which resulted mainly from the capitalization of part of the customer acquisition costs as a result of the Adoption of IFRS15. This increase was partially offset as a result of an erosion in the internet field profitability.

Financing expenses, net for 2017 decreased 4.0% and totaled NIS 144 million ($42 million), compared to NIS 150 million ($43 million) in 2016. The decrease resulted mainly from higher gains in the Company's investment portfolio in 2017 compared to 2016. This decrease was partially offset by a decrease in interest income from installment sales of handsets, due to a decrease in the quantity of end user equipment sold during 2017 in the cellular segment as compared to 2016.

Taxes on income for 2017 totaled NIS 40 million ($11 million) of tax expenses, compared to NIS 10 million ($3 million) tax expenses in 2016. The increase resulted mainly from a tax income recorded in 2016, as a result of a tax assessment agreement for the years 2012-2013 and from a reduction in corporate tax rate for the years 2017 and on, which came into effect in 2016, following which the Company recorded a deferred tax income in 2016.

Net Income for 2017 totaled NIS 113 million ($33 million), compared to NIS 150 million ($43 million) in 2016, a 24.7% decrease.

Basic earnings per share for 2017 totaled NIS 1.11 ($0.32), compared to NIS 1.47 ($0.42) last year.

Financial Review (fourth quarter of 2017 compared to fourth quarter of 2016):

Revenues for the fourth quarter of 2017 decreased 0.9% totaling NIS 975 million ($281 million), compared to NIS 984 million ($284 million) in the fourth quarter last year. The decrease in revenues is attributed to a 1.0% decrease in service revenues and a 0.8% decrease in equipment revenues.

Service revenues totaled NIS 712 million ($205 million) in the fourth quarter of 2017, a 1.0% decrease from NIS 719 million ($207 million) in the fourth quarter last year.

Service revenues in the cellular segment totaled NIS 451 million ($130 million) in the fourth quarter of 2017, a 10.2% decrease from NIS 502 million ($145 million) in the fourth quarter last year. This decrease resulted mainly from the ongoing erosion in the prices of these services as a result of the competition in the cellular market and from the difference between the national roaming services revenues in the fourth quarter of 2016 and the revenues for rights of use in cellular networks according to the Network Sharing Agreement with Golan in the fourth quarter of 2017.

Service revenues in the fixed-line segment totaled NIS 303 million ($87 million) in the fourth quarter of 2017, a 13.5% increase from NIS 267 million ($77 million) in the fourth quarter last year. This increase resulted mainly from fixed-line communications services provided according to the Network Sharing Agreement with Golan, as well as from an increase in revenues from TV and internet services. This increase was partially offset as a result of the discontinuance of consolidation of Internet Rimon following the Sale of Internet Rimon.

Equipment revenues in the fourth quarter of 2017 totaled NIS 263 million ($76 million), a 0.8% decrease compared to NIS 265 million ($76 million) in the fourth quarter last year.

Cost of revenues for the fourth quarter of 2017 totaled NIS 680 million ($196 million), compared to NIS 697 million ($201 million) in the fourth quarter of 2016, a 2.4% decrease. This decrease resulted mainly from Golan's participation in operating costs according to the Network Sharing Agreement with Golan, as well as from an increase of a provision for claims recorded in the fourth quarter of 2016. This decrease was partially offset by an increase in content costs related to the TV field and in costs related to internet services in the fixed-line segment.

Gross profit for the fourth quarter of 2017 increased 2.8% to NIS 295 million ($85 million), compared to NIS 287 million ($83 million) in the fourth quarter of 2016. Gross profit margin for the fourth quarter of 2017 amounted to 30.3%, up from 29.2% in the fourth quarter of 2016.

Selling, Marketing, General and Administrative Expenses ("SG&A Expenses") for the fourth quarter of 2017 decreased 0.8% to NIS 249 million ($72 million), compared to NIS 251 million ($72 million) in the fourth quarter of 2016. This decrease is primarily a result of a decrease in salaries and resellers commissions expenses due to the capitalization of part of the customer acquisition costs as a result of the Adoption of IFRS15 (the effect of the adoption of the standard on the expenses in the fourth quarter of 2017 totaled NIS 21 million ($6 million)), as well as a decrease in advertising expenses. This decrease was partially offset by an increase in doubtful accounts expenses.

Operating income for the fourth quarter of 2017 increased by 40.6% to NIS 45 million ($13 million) from NIS 32 million ($9 million) in the fourth quarter of 2016.

EBITDA for the fourth quarter of 2017 increased by 9.2% totaling NIS 189 million ($55 million) compared to NIS 173 million ($50 million) in the fourth quarter of 2016. EBITDA as a percent of revenues for the fourth quarter of 2017 totaled 19.4%, up from 17.6% in the fourth quarter of 2016.

Cellular segment EBITDA for the fourth quarter of 2017 increased by 0.9% totaling NIS 118 million ($34 million) compared to NIS 117 million ($34 million) in the fourth quarter last year. This increase resulted mainly from a decrease in cost of revenues and Selling, Marketing, General and Administrative Expenses in this segment, which resulted mainly from a decrease in selling and marketing expenses due to the capitalization of part of the customer acquisition costs as a result of the Adoption of IFRS15. This increase was partially offset by a decrease in service revenues in the cellular segment, which resulted mainly from the ongoing erosion in the prices of these services, and from the difference between the national roaming services revenues in the fourth quarter of 2016 and the revenues for rights of use in cellular networks according to the Network Sharing Agreement with Golan in the fourth quarter of 2017.

Fixed-line segment EBITDA for the fourth quarter of 2017 totaled NIS 71 million ($20 million), compared to NIS 56 million ($16 million) in the fourth quarter last year, a 26.8% increase, mainly as a result of an increase in revenues from fixed-line communications services provided according to the Network Sharing Agreement with Golan and from an increase in activity in the internet and TV fields. This increase was partially offset from the discontinuance of consolidation of Internet Rimon following the Sale of Internet Rimon.

Financing expenses, net for the fourth quarter of 2017 decreased 25.0% and totaled NIS 30 million ($9 million), compared to NIS 40 million ($12 million) in the fourth quarter of 2016. The decrease resulted mainly from gains in the Company's investment portfolio in the fourth quarter of 2017 as opposed to losses in the corresponding quarter of 2016.

Taxes on income for the fourth quarter of 2017 totaled NIS 5 million ($1 million) of tax expenses, compared to NIS 22 million ($6 million) of tax income in the fourth quarter of 2016. The increase resulted mainly from deferred tax income which was recorded in the fourth quarter last year, as a result of a decrease in corporate tax rate for the years 2017 and on.

Net Income for the fourth quarter of 2017 totaled NIS 10 million ($3 million), compared to NIS 14 million ($4 million) in the fourth quarter of 2016, a 28.6% decrease.

Basic earnings per share for the fourth quarter of 2017 totaled NIS 0.08 ($0.02), compared to NIS 0.12 ($0.03) in the fourth quarter last year.

OPERATING REVIEW

Main Performance Indicators - Cellular segment:

Cellular subscriber base - at the end of 2017 the Company had approximately 2.817 million cellular subscribers, an increase of approximately 16,000 subscribers net, or approximately 0.6%, compared to the cellular subscriber base at the end of 2016[3]. In the fourth quarter of 2017, the Company's cellular subscriber base increased by approximately 12,000 net cellular subscribers.

Cellular Churn Rate for 2017 totaled 45.8%, compared to 42.4% in 2016. The cellular churn rate for the fourth quarter 2017 totaled to 11.5%, compared to 10.4% in the fourth quarter last year.

The monthly cellular Average Revenue per User ("ARPU") for 2017 totaled NIS 57.1 ($16.5) compared to NIS 63.3 ($18.3) in 2016. ARPU for the fourth quarter of 2017 totaled NIS 53.6 ($15.5), compared to NIS 59.3 ($17.1) in the fourth quarter last year. The decrease in ARPU, both annual and quarterly, resulted, among others, from the ongoing erosion in the prices of cellular services, resulting from the intense competition in the cellular market and from the difference between national roaming services revenues in 2016 and the revenues for rights of use in cellular networks according to the Network Sharing Agreement with Golan in 2017.

MAIN PERFORMANCE INDICATORS - FIXED-LINE SEGMENT:

In the fourth quarter of 2017, the Company's subscriber base in the internet infrastructure field increased by approximately 16,000 net households, and the Company's subscriber base in the TV field increased by 16,000 net households.

FINANCING AND INVESTMENT REVIEW

Cash Flow

Free cash flow for 2017 totaled NIS 325 million ($94 million), compared to NIS 416 million ($120 million) in 2016, a 21.9% decrease. The decrease in annual free cash flow resulted mainly from higher cash capital expenditures in fixed assets and intangible assets and others in the 2017 as compared to 2016, as well as from the difference between the receipts from rights of use in cellular networks according to the Network Sharing Agreement with Golan in 2017, and the receipts from national roaming services revenues in 2016. This decrease was partially offset by a decrease in tax payments, net, in 2017 as compared to 2016, which resulted, among others, from a receipt of a refund from the Israeli tax authorities in 2017.

Free cash flow for the fourth quarter of 2017 totaled NIS 77 million ($22 million), compared to NIS 83 million ($24 million) in the fourth quarter of 2016, a 7.2% decrease. The decrease in quarterly free cash flow resulted mainly from an increase in payments to payroll and other payables due to timing differences between the quarters. This decrease was partially offset by an increase in receipts from mobile operators in connection with the Company's roaming activity and a decrease in tax payments, net.

Total Equity

Total Equity as of December 31, 2017 amounted to NIS 1,441 million ($415 million) primarily consisting of undistributed accumulated retained earnings of the Company.

Cash Capital Expenditures in Fixed Assets and Intangible Assets and others

During 2017 and the fourth quarter of 2017 the Company invested NIS 583 million ($168 million) and NIS 138 million ($40 million), respectively, in fixed assets and intangible assets and others (including, among others, investments in the Company's communications networks, information systems, software and TV set-top boxes and capitalization of part of the customer acquisition costs as a result of the Adoption of IFRS15), compared to NIS 368 million ($106 million) and NIS 96 million ($28 million) in 2016 and the fourth quarter of 2016, respectively.

Dividend

On March 25, 2018, the Company's Board of Directors decided not to declare a cash dividend for the fourth quarter of 2017. 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, 2017 on Form 20-F dated March 26, 2018, or the Company's 2017 Annual Report, under "Item 8 - Financial Information – A. Consolidated Statements and Other Financial Information - Dividend Policy".

Debentures, Material Loans and Financial Liabilities

For information regarding the Company's outstanding debentures as of December 31, 2017, see "Disclosure for Debenture Holders" section in this press release.

For information regarding the Company's material loans as of December 31, 2017, see "Aggregation of the information regarding the Company's Material Loans" section in this press release.

For a summary of the Company's financial liabilities as of December 31, 2017, see "Disclosure for Debenture Holders" section in this press release.

CONFERENCE CALL DETAILS

The Company will be hosting a conference call regarding its results for the year 2017 and for the fourth quarter of 2017 on Monday, March 26, 2018 at 09:00 am ET, 06:00 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: 1 888 407 2553              UK Dial-in Number: 0 800 917 9141
Israel Dial-in Number: 03 918 0610               International Dial-in Number: +972 3 918 0610
at: 09:00 am Eastern Time; 06:00 am Pacific Time; 14:00 UK Time; 16:00 Israel Time

To access the live webcast of the conference call, please access the investor relations section of Cellcom Israel's website: www.cellcom.co.il. After the call, a replay of the call will be available under the same investor relations section.

ANNUAL REPORT FOR 2017

Cellcom Israel will be filing its annual report for the year ended December 31, 2017 (on Form 20-F) with the US Securities and Exchange Commission on March 26, 2018. The annual report will be available for download from the investor relations section of Cellcom Israel's website: www.cellcom.co.il. Cellcom Israel will furnish a hard copy to any shareholder who so requests, without charge. Such requests may be sent through the Company's website or by sending a postal mail request to Cellcom Israel Ltd., 10 Hagavish Street, Netanya, Israel (attention: Chief Financial Officer).

About Cellcom Israel

Cellcom Israel Ltd., established in 1994, is a leading Israeli communications group, providing a wide range of communications services. Cellcom Israel is the largest Israeli cellular provider, providing its approximately 2.817 million cellular subscribers (as at December 31, 2017) with a broad range of services including cellular telephony, roaming services for tourists in Israel and for its subscribers abroad, text and multimedia messaging, advanced cellular content and data services and other value-added services in the areas of music, video, mobile office etc., based on Cellcom Israel's technologically advanced infrastructure. The Company operates an LTE 4 generation network and an HSPA 3.5 Generation network enabling advanced high speed broadband multimedia services, in addition to GSM/GPRS/EDGE networks. Cellcom Israel offers Israel's broadest and largest customer service infrastructure including telephone customer service centers, retail stores, and service and sale centers, distributed nationwide. Cellcom Israel further provides OTT TV services (as of December 2014), internet infrastructure (as of February 2015) and connectivity services and international calling services, as well as landline telephone services in Israel. Cellcom Israel's shares are traded both on the New York Stock Exchange (CEL) and the Tel Aviv Stock Exchange (CEL). For additional information please visit the Company's website http://investors.cellcom.co.il.

Forward-Looking Statements

The following information contains, or may be deemed to contain forward-looking statements (as defined in the U.S. Private Securities Litigation Reform Act of 1995 and the Israeli Securities Law, 1968). In some cases, you can identify these statements by forward-looking words such as "may," "might," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential" or "continue," the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to risks, uncertainties and assumptions about the Company, may include projections of the Company's future financial results, its anticipated growth strategies and anticipated trends in its business. These statements are only predictions based on the Company's current expectations and projections about future events. There are important factors that could cause the Company's actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. Factors that could cause such differences include, but are not limited to: changes to the terms of the Company's license, new legislation or decisions by the regulator affecting the Company's operations, new competition and changes in the competitive environment, the outcome of legal proceedings to which the Company is a party, particularly class action lawsuits, the Company's ability to maintain or obtain permits to construct and operate cell sites, and other risks and uncertainties detailed from time to time in the Company's filings with the U.S. Securities and Exchange Commission, including under the caption "Risk Factors" in its Annual Report for the year ended December 31, 2017. 

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 3.467 = US$ 1 as published by the Bank of Israel for December 31, 2017.

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 and gain (loss) due to sale of subsidiaries); income tax; depreciation and amortization and share based payments. This is an accepted measure in the communications industry. The Company presents this measure as an additional performance measure as the Company believes that it enables us to compare operating performance between periods and companies, net of any potential differences which may result from differences in capital structure, taxes, age of fixed assets and related depreciation expenses. 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) excluding a loan to Golan Telecom, minus the net cash used in investing activities excluding short-term investment in tradable debentures and deposits and proceeds from sales of such debentures (including interest received in relation to such debentures) and deposits. See "Reconciliation of Non-IFRS Measures" below.

Financial Tables Follow