Washington, D.C. 20549
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
CELLCOM ISRAEL ANNOUNCES
FIRST QUARTER 2019 RESULTS
------------------------
Cellcom Israel concludes the first quarter of 2019 with a loss of NIS 16
3
million.
The Adjusted EBITDA
1
increased by approximately 20% compared to the corresponding quarter, to NIS 224
3
million.
Free cash flow totaled NIS 46 million compared to NIS 7 million in the previous quarter
----
First Quarter 2019 Highlights
(compared to first quarter of 2018):
§
|
Total Revenues
totaled NIS 928 million ($256 million) compared to NIS 933 million ($257 million) in the first quarter last year, a decrease of 0.5%
|
§
|
Service revenues
totaled NIS 678 million ($187 million) compared to NIS 701 million ($193 million) in the first quarter last year, a decrease of .3.3%
|
§
|
Operating income
totaled NIS 9 million ($2 million) compared to NIS 52
2
million ($14 million) in the first quarter last year, a decrease of 82.7%
|
§
|
Loss
totaled NIS 16 million ($4 million) compared to net income of NIS 7 million ($2 million) in the first quarter last year
3
.
|
§
|
Adjusted
EBITDA
1
totaled NIS 224
3
million ($62 million) compared to NIS 187
2
million ($51 million) in the first quarter last year, an increase of 19.8%
3
|
§
|
Net cash flow from operating activities
totaled NIS 303 million ($84 million)
compared to NIS 230 million ($63 million) in the first quarter
last year, an increase
of 31.7%
3
|
§
|
Free cash flow
1
totaled NIS 46 million ($13 million)
compared to NIS 84 million ($23 million) in the first quarter
last year, a decrease of 45.2%
|
1
Please see "Use of Non-IFRS financial measures" section in this press release.
2
Reclassified –Adjusted EBITDA before reclassification totaled NIS 180 million. Please see "Voluntary change in accounting policy" section in this press release.
3
As of January 1, 2019 the Company is applying International Financial Reporting Standard IFRS 16, Leases. The effects of applying the standard in the first quarter of 2019 amounted to an increase of NIS 63 million in Adjusted EBITDA, an increase of NIS 74 million in Cash flows from operating activities and an increase of NIS 4 million in the loss
.
Nir Sztern, the Company's Chief Executive Officer, referred to the results of the first quarter of 2019:
"Alongside with the success of our strategy to expand our activities in the fixed-line segment, the intensity of the competition in the cellular segment continues to have a negative impact on the results of this segment.
We ended the current quarter with a loss of NIS 16 million, compared to a loss of NIS 35 million in the previous quarter. Adjusted EBITDA for the quarter increased by approximately 20% compared to the same quarter last year, from NIS 187
2
million to NIS 224
3
million.
In this quarter, we recorded an increase in end-user equipment revenues, with an increase of 8% compared to the corresponding quarter last year, to NIS 250 million, which is mainly due to an increase in sales of end-user equipment in the fixed-line segment.
We continue the rapid deployment of Cellcom's independent fiber optic infrastructure in residential areas and expect the completion of the transaction for the sale of that fiber infrastructure to IBC, in the coming months (subject to the parties entering into a definitive agreement), together with the investment in IBC (subject to its approval), will contribute significantly to the results of the Company's operations and make a positive improvement to its free cash flow.
The rapid deployment rate will enable more than 750 thousand households to be within fiber network coverage by the end of 2022, with connection to a high-speed quality Internet infrastructure.
Recently, we announced the signing of an agreement with Netflix, the world's leading entertainment service, to distribute their service through direct access by Cellcom tv, including through an advanced based Android TV 4K set-top box.
Netflix's rich catalog joins Cellcom's vast content offering, which today already includes hundreds of series and films of the leading studios and the full HBO catalog.
During the first quarter, the Company's subscriber base in the television field grew by approximately 8,000 households, most of them customers of our excellent service packages, Triple and Quattro.
Recently we announced the signing of a collective agreement with the employees union and the Histadrut, for the years 2019-2020. The agreement we signed is based on an innovative and unique model that takes care of employees' welfare and directly links the success of the Company to the compensation of its employees. This agreement is expected to reduce the Company's expenses compared to the expenses under the previous agreement, and to have a positive cumulative effect of approximately NIS 54 million on the Company's Adjusted EBITDA for the years 2019-2020 compared with the previous collective agreement."
Shlomi Fruhling, the Company's Chief Financial Officer, said:
"The Company's revenues from services in the first quarter of 2019 amounted to NIS 678 million, similar to that of the previous quarter. In the fixed-line segment, the Company recorded continued growth, which was offset by a reduction in revenues from cellular services as a result of seasonality and the increased competition in the market.
In the first quarter of 2019, the Company began reporting in accordance with IFRS 16. The main effect of the implementation of the standard, is the transition from recognition of lease payments as an operating expense to recognition of these expenses as assets, and the recording of depreciation expenses in respect thereof. The effect of the standard on the adjusted EBITDA in the first quarter is an addition of NIS 63 million.
We continue with our efforts to reduce the Company's expenses. In May, a collective agreement was signed between the Company and the employees' union and the Histadrut, which relates to the years 2019 and 2020, in which the cumulative contribution to Adjusted EBITDA to the Company, compared with the collective agreement of 2018 is NIS 54 million. As part of the agreement, eligible employees will be granted options and restricted share units at a total value of NIS 14 million, which they will be able to exercise on fixed dates over a 4 year period, and restricted share units to the employees' non-profit organization at a value of NIS 5 million.
Adjusted EBITDA in the quarter amounted to NIS 224 million and included an addition of NIS 63 million in respect of the initial implementation of IFRS 16, as compared with Adjusted EBITDA in the previous quarter of NIS 170
2
million.
Free cash flow for the first quarter of 2019 amounted to NIS 46 million, compared to NIS 7 million in the previous quarter. The improvement in free cash flow was mainly due to a decrease in payments for equipment.
The Company's Board of Directors decided not to distribute dividends in respect of the results of the first quarter of 2019, in view of the continued intensified competition in the market and its negative impact on the Company's operating results and in order to continue to strengthen the Company's balance sheet. The Board of Directors will review its decision in accordance with the development of market conditions, while taking into account the Company's needs."
Netanya,
Israel – May 28, 2019
–
Cellcom Israel Ltd. (NYSE: CEL; TASE: CEL) ("Cellcom Israel" or the "Company" or the "Group")
announced today its financial results for the first quarter of 2019.
The Company reported that revenues for the first quarter of 2019 totaled NIS 928 million ($256 million);
Adjusted EBITDA for the first quarter of 2019 totaled NIS 224 million ($62 million), or 24.1% of total revenues; loss for the first quarter of 2019 totaled NIS 16 million ($4 million). Basic loss per share for the first quarter of 2019 totaled NIS 0.14 ($0.04).
Main
Consolidated
Financial Results:
|
Q1/2019
|
Q1/2018
|
Change%
|
Q1/2019
|
Q1/2018
|
|
NIS million
|
US$
million
(convenience translation)
|
Total revenues
|
928
|
933
|
(0.5)%
|
256
|
257
|
Operating Income
|
9
|
52
|
(82.7)%
|
2
|
14
|
Net Income (Loss)
|
(16)
3
|
7
|
N/A
|
(4)
|
2
|
Free cash flow
|
46
|
84
|
(45.2)%
|
13
|
23
|
Adjusted EBITDA
|
224
3
|
187
2
|
19.8%
|
62
|
|
Adjusted EBITDA, as percent of total revenues
|
24.1%
|
20.0%
|
20.5%
|
|
|
Main Financial Data by Operating Segments:
|
Cellular (*)
|
Fixed-line (**)
|
Consolidation adjustments
(***)
|
Consolidated results
|
NIS million
|
Q1'19
|
Q1'18
|
Change
%
|
Q1'19
|
Q1'18
|
Change
%
|
Q1'19
|
Q1'18
|
Q1'19
|
Q1'18
|
Change
%
|
Total revenues
|
562
|
630
|
(10.8)%
|
409
|
343
|
19.2%
|
(43)
|
(40)
|
928
|
933
|
(0.5)%
|
Service revenues
|
404
|
437
|
(7.6)%
|
317
|
304
|
4.3%
|
(43)
|
(40)
|
678
|
701
|
(3.3)%
|
Equipment revenues
|
158
|
193
|
(18.1)%
|
92
|
39
|
135.9%
|
-
|
-
|
250
|
232
|
7.8%
|
Adjusted EBITDA
|
146
|
119
2
|
22.7%
|
78
|
68
|
14.7%
|
-
|
-
|
224
|
187
2
|
19.8%
|
Adjusted EBITDA, as percent of total revenues
|
26.0%
|
18.9%
|
37.6%
|
19.1%
|
19.8%
|
(3.5)%
|
|
|
24.1%
|
20%
|
20.5%
|
(*)
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, transmission services, end user fixed-line equipment and supplemental services.
|
(***) Include cancellation of inter-segment revenues between "Cellular" and "Fixed-line" segments.
Financial Review (first quarter of 2019 compared to first quarter of 2018):
Revenues
for the first quarter of 2019 decreased 0.5% totaling NIS 928 million ($256 million), compared to NIS 933 million ($257 million) in the first quarter last year. The decrease in revenues is attributed to a 3.3% decrease in service revenues, which was partially offset by a 7.8% increase in equipment revenues.
Service revenues
in the first quarter of 2019 totaled NIS 678 million ($187 million), a 3.3% decrease compared to NIS 701 million ($193 million) in the first quarter last year.
Service revenues in the cellular segment
totaled NIS 404 million ($111 million) in the first quarter of 2019, a 7.6% decrease compared to NIS 437 million ($120 million) in the first quarter 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.
Service revenues in the fixed-line segment
totaled NIS 317 million ($87 million) in the first quarter of 2019, a 4.3% increase compared to NIS 304 million ($84 million) in the first quarter last year. This increase resulted mainly from an increase in revenues from internet and TV services.
Equipment revenues
totaled NIS 250 million ($69 million) in the first quarter of 2019, a 7.8% increase compared to NIS 232 million ($64 million) in the first quarter last year. The increase resulted mainly from an increase in the amount of end user equipment sold in the fixed-line segment which was partially offset by a decrease in the amount of end user equipment sold in the cellular segment.
Cost of revenues
totaled NIS 695 million ($191 million) in the first quarter of 2019, a 4.5% increase compared to NIS 665 million ($183 million) in the first quarter last year. The increase in cost of revenues resulted mainly from an increase in cost of equipment caused mainly by an increase in the quantity of end user equipment sold in the fixed-line segment. This increase was partially offset by a decrease in costs of end user equipment sold in cellular segment and from an increase in costs of TV services content and in costs related to internet services in the fixed-line segment.
Gross profit
for the first quarter of 2019 totaled NIS 233 million ($65 million), a 13.1% decrease compared to NIS 268 million ($74 million) in the first quarter of 2018. Gross profit
margin
for the first quarter of 2019 amounted to 25.1%, down from 28.7% in the first quarter of 2018.
Selling, Marketing, General and Administrative Expenses
("SG&A Expenses") for the first quarter of 2019 increased 2.7% to NIS 229 million ($64 million), compared to NIS 223 million ($61 million) in the first quarter of 2018. This increase is primarily a result of an increase in amortization expenses of salaries and commissions expenses, which were capitalized as part of the customer acquisition costs, according to International Financial Reporting Standard 15 (IFRS 15). This increase was partially offset by a decrease in doubtful accounts expenses and welfare expenses.
Operating income
for the first quarter of 2019 decreased 82.7% to NIS 9 million ($2 million) from NIS 52 million ($14 million) in the first quarter of 2018.
Adjusted
EBITDA
for the first quarter of 2019 increased 19.8% to NIS 224 million ($62 million), compared to NIS 187
2
million ($51 million) in the first quarter of 2018. Adjusted
EBITDA as a percent of revenues for the first quarter of 2019 totaled 24.1%, up from 20.0% in the first quarter of 2018. The increase in Adjusted
EBITDA is attributed to a 22.7% increase in the cellular segment Adjusted EBITDA, and a 14.7% increase in the fixed-line segment Adjusted EBITDA. The increase in Adjusted EBITDA resulted mainly from decrease in rent expenses in a total amount of NIS 63 million which were recognized as a right-of-use asset as a result of the initial implementation of IFRS 16 as of 1 January, 2019.
Cellular segment Adjusted
EBITDA for the first quarter of 2019 totaled NIS 146 million ($40 million), compared to NIS 119
2
million ($33 million) in the first quarter last year, an increase of 22.7%, which resulted mainly from a decrease in rent expenses in a total amount of NIS 56 million which were recognized as a right-of-use asset as a result of the initial implementation of IFRS 16 as of 1 January, 2019. This increase was partially offset by a decrease in revenues from services, which resulted mainly from ongoing erosion in the price of these services as a result of the competition in the cellular market.
Fixed-line segment Adjusted
EBITDA for the first quarter of 2019 totaled NIS 78 million ($21 million), compared to NIS 68 million ($19 million) in the first quarter last year, a 14.7% increase, which resulted mainly from a decrease in rent expenses in a total amount of NIS 7 million which were recognized as a right-of-use asset as a result of the initial implementation of IFRS 16 as of 1 January, 2019 and an increase in the amount of end user equipment sold in the fixed-line segment.
Financing expenses, net
for the first quarter of 2019 decreased by 32.5% and totaled NIS 27 million ($7 million), compared to NIS 40
2
million ($11 million) in the first quarter of 2018. The decrease resulted mainly from profits in the Company's tradable investment portfolio due to a rise in the securities market in the first quarter of 2019. This decrease was partially offset by an increase in financing expenses as a result of the initial implementation of IFRS 16 as of 1 January, 2019.
Loss
for the first quarter of 2019 totaled NIS 16
3
million ($4 million), compared to net income of NIS 7 million ($2 million) in the first quarter of 2018.
Basic loss per share
for the first quarter of 2019 totaled NIS 0.14 ($0.04), compared to basic earnings per share of NIS 0.08 ($0.02) in the first quarter last year.
Operating Review
Main Performance Indicators
- Cellular segment
:
|
Q1/2019
|
Q1/2018
|
Change (%)
|
Cellular subscribers at the end of period (in thousands)
|
2,853
|
2,822
|
1.1%
|
Churn Rate for cellular subscribers (in %)
|
11.0%
|
9.5%
|
15.8%
|
Monthly cellular ARPU (in NIS)
|
47.2
|
51.8
|
(8.9)%
|
Cellular subscriber base
-
at the end of the first quarter of 2019 the Company had approximately 2.853 million cellular subscribers. During the first quarter of 2019 the Company's cellular subscriber base increased by approximately 2 thousand net cellular subscribers.
Cellular Churn Rate
for the first quarter of 2019 totaled to 11.0%, compared to 9.5% in the first quarter last year.
The monthly cellular
Average Revenue per User ("ARPU")
for the first quarter of 2019 totaled NIS 47.2 ($13.0), compared to NIS 51.8 ($14.3) in the first quarter last year. The decrease in ARPU resulted mainly from the ongoing erosion in the prices of cellular services.
Main Performance Indicators - Fixed-line segment:
|
Q1/2019
|
Q1/2018
|
Change (%)
|
Internet infrastructure field -
subscribers
(households) at the end of period (in thousands)
|
278
|
235
|
18.3%
|
TV field -
subscribers
(households) at the end of period (in thousands)
|
227
|
184
|
23.4%
|
In the first quarter of 2019, the Company's subscriber base in the internet infrastructure field increased by approximately 9 thousand net households, and the Company's subscriber base in the TV field increased by approximately 8 thousand net households.
Financing and Investment Review
Cash Flow
Free cash flow
for the first quarter of 2019, totaled NIS 46 million ($13 million), compared to NIS 84 million ($23 million) in the first quarter of 2018, a 45.2% decrease. The decrease in free cash flow, resulted mainly from a decrease in receipts from customers due to a decrease in company's revenues from services and end user equipment
,
and higher cash capital expenditures in fixed assets mainly from fiber-optic network deployment. This decrease was partially offset by decrease in payments to end user equipment suppliers.
Total Equity
Total Equity as of March 31, 2019 amounted to NIS 1,661 million ($457 million) primarily consisting of undistributed accumulated retained earnings of the Company.
Cash Capital Expenditures in Fixed Assets and Intangible Assets and others
During the first quarter of 2019, the Company invested NIS 184 million ($51 million) in fixed assets and intangible assets and others (including, among others, investments in the Company's communications networks, fiber-optic network, information systems, software and TV set-top boxes and capitalization of part of the customer acquisition costs as a result of IFRS 15), compared to NIS 146 million ($40 million) in the first quarter 2018.
Dividend
On May 27, 2019, the Company's Board of Directors decided not to declare a cash dividend for the first quarter of 2019. In making its decision, the board of directors considered the Company's dividend policy and business status and decided not to distribute a cash 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, 2018 on Form 20-F dated March 18, 2019, or the 2018 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 March 31, 2019, see "Disclosure for Debenture Holders" section in this press release.
In accordance with the company's deferred loan agreement with an Israeli bank from June 2017, in March 2019,
the loan in an amount of NIS 150 million was provided to the Company.
For information regarding the Company's material loans as of March 31, 2019, 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 March 31, 2019, see "Disclosure for Debenture Holders" section in this press release.
Other developments during the first quarter of 2019 and subsequent to the end of the reporting period
Collective Employment Agreement
In May 2019, following the previously announced labor dispute in the Company relating to the Company's intention to take streamlining measures and negotiations of a new collective employment agreement, the Company, the employees' representatives and the Histadrut, the union representing the Company's employees, entered a collective employment agreement, or the New Agreement, amending its collective employment agreement (for the years 2018-2020) entered in 2018, or the 2018 Agreement, under which: salary increase for 2019 will be annulled; the salary increase for 2020 will be postponed for at least 15 months and until a certain condition is met; the employees' welfare budget will be reduced; and the Company will grant entitled employees options and RSUs and RSUs to a non-profit organization for the employees, subject to all approvals and procedures required by law. The New Agreement further includes certain arrangements relating to the Company and employees' representatives relations and also includes the termination of the previously announced labor dispute. The New Agreement is expected to decrease the Company's costs related to the New Agreement, in comparison with the Company's costs related to the 2018 Agreement and is expected to have an accumulated positive effect (which effect does not take into account the non-cash expense the Company will incur for the equity grants) of approximately NIS 54 million on the Company's Adjusted EBITDA for the duration of the Agreement (2019–2020), in comparison with the effect that the 2018 Agreement was expected to have on the Company's Adjusted EBITDA for 2019 - 2020. Said forward-looking statements, relating to the potential benefits from the new collective employment agreement on the company's Adjusted EBITDA, are subject to uncertainties and assumptions about future employment developments and the Israeli telecommunication regulation and market condition.
For additional details see the Company's 2018 Annual Report under "Item 3. Key Information – D. Risk Factors – Risks Related to our Business – The unionizing of our employees may impede necessary organizational and personnel changes, result in increased costs or disruption to our operation" and Item 6. Directors, senior management and employees – D. Employees".
Share Incentive Plan
In May 2019, the Company's board of directors resolved to grant employees of the Company (who are not office holders or directors) and a non-profit organization for the employees a total amount of 2,923,476 options at an exercise price of NIS 15.66 and 1,014,517 RSUs. The grant will be carried out after the fulfilment of all approvals and procedures required by law. The options and RSUs granted to the employees will be vested in four equal installments on each of the first, second, third and fourth anniversary of the date of grant and the RSUs granted to the non-profit organization will be vested in two equal installments on each of the first and second anniversary of the date of grant. The options of the first installment may be exercised within 18 months from their vesting, and the options of the second, third and fourth installments may be exercised with 12 months from their vesting. For additional details see the Company's 2018 Annual Report under "- Item E. Share Ownership – Share Incentive Plan".
Early Repayment of Bank Loan
In April 2019, the Company made an early repayment of a loan under the Company's August 2015 loan agreement with an Israeli bank, provided to the Company in December 2016, in an outstanding principal amount of NIS 112 million (in addition to outstanding accumulated interest until date of repayment). The bank's loan from 2015 was one of the Company's more expensive and shorter duration debt and its early repayment will reduce the Company's leverage and save an accumulated amount of approximately NIS 9 million of interest expenses. For additional details regarding the Company's existing debentures and existing loan agreements, including the terms of the repaid bank's August 2015 loan and the bank's outstanding loan provided in March 2019 (according to the June 2017 loan agreement), see the Company's 2018 Annual Report under "Item 5B. Liquidity and Capital Resources – Debt Service – Public Debentures" and "-Other Credit Facilities".
Collaboration Agreement with Netflix
In May 2019, the Company announced a collaboration agreement with Netflix International B.V., the world’s leading internet entertainment provider, for the distribution of Netflix's services in Israel, including through direct access to the Netflix services from the Cellcom tv platform.
Change in Independent Auditors
In March 2019, Somekh Chaikin did not stand for re-election as the Company’s joint independent registered public accounting firm and Keselman & Keselman, a member of PricewaterhouseCoopers International Limited independent, was appointed by the Company's general meeting of shareholders, or the Meeting, as the independent auditor of the Company until the Company's next annual general meeting. For more information see the Company's proxy statement relating to the Meeting, filed on form 6-K dated February 14, 2019 and the Company's current report on Form 6-K dated April 1, 2019.
Changes in Directors and Management
In March 2019, Mr. Joseph Barnea and Ms. Ronit Baytel (external directors) and Mr. Shlomo Waxe (independent director) did not stand for reelection as directors and the Meeting appointed Mr. Gustavo Traiber (independent director), Ms. Varda Liberman and Mr. Shmuel Hauzer (external directors) as members of the board of directors of the Company. For more information see the Company's proxy statement relating to the Meeting, filed on form 6-K dated February 14, 2019 and the Company's current report on Form 6-K dated April 1, 2019. In May 2019, following Mr. Yaniv Gruenwald's resignation form his position as the Company's vice president of television and content in March 2019, the Company's board of directors has nominated Mr. Rafi Shauli as the Company's vice president of television and content, effective June 1, 2019.
Rafi Shauli has served as head of the Company's private customers marketing department in the marketing division from 2012. From 2008 to 2011, he served as director of products and business development in the marketing division of Yes and from 2011 to 2012 as director of products and business development in the marketing division of Bezeq. From 2005 to 2008, Mr. Shauli served as director of communications solutions for businesses in marketing department 013 Netvision. Mr. Shauli holds a B.A. in economics and statistics from the Hebrew university of Jerusalem.
Conference Call Details
The Company will be hosting a conference call regarding its results for the first quarter of 2019 on Tuesday, May 28, 2019 at 09:00 am ET, 06:00 am PT, 2:00 UK time, 16:00 Israel time. On the call, management will review and discuss the results, and will be available to answer questions. To participate, please either access the live webcast on the Company's website, or call one of the following teleconferencing numbers below. Please begin placing your calls at least 10 minutes before the conference call commences. If you are unable to connect using the toll-free numbers, please try the international dial-in number.
US Dial-in Number: 1 866 860 9642
UK Dial-in Number: 0 800 051 8913
Israel Dial-in Number: 03 918 0687
International Dial-in Number: +972 3 918 0687
at: 09:00 am Eastern Time; 06:00 am Pacific Time; 14:00 UK Time; 16:00 Israel Time
To access the
live webcast
of the conference call, please access the investor relations section of Cellcom Israel's website: www.cellcom.co.il. After the call, a
replay
of the call will be available under the same investor relations section.
About Cellcom Israel
Cellcom Israel Ltd., established in 1994, is a leading Israeli communications group, providing a wide range of communications services. Cellcom Israel is the largest Israeli cellular provider, providing its approximately 2.853 million cellular subscribers (as at March 31, 2019) 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, internet infrastructure and connectivity services and international calling services, as well as landline telephone services in Israel. Cellcom Israel's shares are traded both on the New York Stock Exchange (CEL) and the Tel Aviv Stock Exchange (CEL). For additional information please visit the Company's website http://investors.cellcom.co.il.
Forward-Looking Statements
The following information contains, or may be deemed to contain forward-looking statements (as defined in the U.S. Private Securities Litigation Reform Act of 1995 and the Israeli Securities Law, 1968). In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to risks, uncertainties and assumptions about the Company, may include projections of the Company's future financial results, its anticipated growth strategies and anticipated trends in its business. These statements are only predictions based on the Company's current expectations and projections about future events. There are important factors that could cause the Company's actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. Factors that could cause such differences include, but are not limited to: changes to the terms of the Company's license, new legislation or decisions by the regulator affecting the Company's operations, new competition and changes in the competitive environment, the outcome of legal proceedings to which the Company is a party, particularly class action lawsuits, the Company's ability to maintain or obtain permits to construct and operate cell sites, and other risks and uncertainties detailed from time to time in the Company's filings with the U.S. Securities and Exchange Commission, including under the caption “Risk Factors” in its Annual Report for the year ended December 31, 2018.
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 3.632 = US$ 1 as published by the Bank of Israel for March 31, 2019.
Voluntary change in accounting policy
-
In 2019, the management has updated the accounting policy as follows: revenues from long-term credit arrangements (for more than 12 monthly payments) are recognized on the basis of the present value of future cash flows, discounted according to market interest rates at the time of the transaction. The difference between the original credit and its present value over the credit period, is recorded from 2019 as other income (previously was recorded as interest income). The application of the change in the new accounting policy was applied retrospectively. Therefore, the change's influence of the first quarter of 2018 was an increase of other income in approximately NIS 7 million, and as a result, an increase of approximately NIS 7 million in adjusted EBITDA and on the other hand, a decrease of approximately NIS 7 million in financing income
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Use of non-IFRS financial measures
Adjusted EBITDA
is a non-IFRS measure and is defined as income before financing income (expenses), net; other income (expenses), 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.
Adjusted EBITDA should not be considered in isolation, or as a substitute for operating income, any other performance measures, or cash flow data, which were prepared in accordance with Generally Accepted Accounting Principles as measures of profitability or liquidity. Adjusted EBITDA does not take into account debt service requirements, or other commitments, including capital expenditures, and therefore, does not necessarily indicate the amounts that may be available for the Company's use. In addition, Adjusted EBITDA as presented by the Company may not be comparable to similarly titled measures reported by other companies, due to differences in the way these measures are calculated. See the reconciliation of net income to Adjusted EBITDA under "Reconciliation of Non-IFRS Measures" in the press release.
Free cash flow
is a non-IFRS measure and is defined as the net cash provided by operating activities (including the effect of exchange rate fluctuations on cash and cash equivalents) excluding a loan to Golan Telecom given by 2017, 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 its deposits, and from 2019, with the initial application of IFRS 16, lease payments are also deducted which are presented in financing activity. See "Reconciliation of Non-IFRS Measures" below.
Company Contact
Shlomi Fruhling
Chief Financial Officer
investors@cellcom.co.il
Tel: +972 52 998 9735
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Investor Relations Contact
Ehud Helft
GK Investor & Public Relations
cellcom@GKIR.com
Tel: +1 617 418 3096
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