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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15a-16 OF

THE SECURITIES EXCHANGE ACT OF 1934

Report on Form 6-K dated

 

March 27, 2019

(Translation of Registrant’s Name Into English)

 

8 Amal Street

Afeq Industrial Park

Rosh Ha’ayin 48103

Israel

(Address of Principal Executive Offices)

 

(Indicate by check mark whether the registrant files or will file annual reports

under cover of Form 20-F or Form 40-F.)

 

Form 20-F ☒          Form 40-F ☐

 

(Indicate by check mark whether the registrant by furnishing the

information contained in this Form is also thereby furnishing the information to the

Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.)

 

Yes ☐          No ☒

 

(If “Yes” is marked, indicate below the file number assigned to the

registrant in connection with Rule 12g3-2(b): 82- _________)

 

This Form 6-K is incorporated by reference into the Company’s Registration Statements on Form S-8 filed with the Securities and Exchange Commission on December 4, 2002 (Registration No. 333-101652), September 5, 2006 (Registration No. 333-137102), September 11, 2008 (Registration No. 333-153419), August 17, 2015 (Registration No. 333-206420), November 12, 2015 (Registration No. 333-207946), March 14, 2016 (Registration No. 333-210151) and on December 27, 2017 (Registration No. 333-222294), November 21, 2018 (Registration No. 333-228502)

 

Enclosure: Partner Communications reports fourth quarter and annual 2018 results

 

 

 

ANNUAL ADJUSTED EBITDA² TOTALED NIS 722 MILLION

 

ANNUAL PROFIT TOTALED NIS 56 MILLION

 

PARTNER’S CEO, ISAAC BENBENISTI, NOTED: “PARTNER TV IS THE FASTEST GROWING

SUBSCRIBERS AS OF TODAY, AND 'PARTNER FIBER' OPTIC INFRASTRUCTURE HAS

NEARLY 20% OF ALL HOUSEHOLDS CONNECTED TO THE INTERNET IN ISRAEL.”

 

NET DEBT² REMAINS BELOW NIS 1 BILLION WITH NET DEBT TO EBITDA RATIO OF 1.3

 

2018 Annual Highlights (compared with 2017)

 

·	Total Revenues: NIS 3,259 million (US$ 870 million), a decrease of NIS 9 million

·	Service Revenues: NIS 2,524 million (US$ 673 million), a decrease of 2%

·	Equipment Revenues: NIS 735 million (US$ 196 million), an increase of 7%

·	Total Operating Expenses (OPEX)2: NIS 1,996 million (US$ 533 million), an increase of 3%

·	Adjusted EBITDA2: NIS 722 million (US$ 193 million), a decrease of 21%

·	Adjusted EBITDA Margin2: 22% of total revenues compared with 28%

·	Profit for the Year: NIS 56 million (US$ 15 million) a decrease of 51%

·	Net Debt: NIS 950 million (US$ 253 million), an increase of NIS 44 million

·	Adjusted Free Cash Flow (before interest)2: NIS 124 million (US$ 33 million), a decrease of NIS 475 million

·	Cellular ARPU: NIS 58 (US$ 15), a decrease of 6%

·	Cellular Subscriber Base3: approximately 2.65 million at year-end, a decrease of 1%

·	TV Subscriber Base: approximately 122 thousand subscribers at year-end, an increase of 79 thousand subscribers (an increase of 184%)

 

Fourth quarter 2018 highlights (compared with fourth quarter 2017)

 

·	Total Revenues: NIS 814 million (US$ 217 million), a decrease of 2%

·	Service Revenues: NIS 625 million (US$ 167 million), a decrease of 1%

·	Equipment Revenues: NIS 189 million (US$ 50 million), a decrease of 7%

 

 

·	Total Operating Expenses (OPEX): NIS 502 million (US$ 134 million), a decrease of 3%

·	Adjusted EBITDA: NIS 172 million (US$ 46 million), an increase of 9%

·	Adjusted EBITDA Margin: 21% of total revenues compared with 19%

·	Profit for the Period: NIS 19 million (US$ 5 million), an increase of NIS 69 million

·	Net Debt: NIS 950 million (US$ 253 million), an increase of NIS 44 million

·	Adjusted Free Cash Flow (before interest): Negative NIS 22 million (US$ -6 million), a decrease of NIS 85 million

·	Cellular ARPU: NIS 57 (US$ 15), a decrease of 3%

·	Cellular Subscriber Base: approximately 2.65 million at quarter-end, a decrease of 1%

·	TV Subscriber Base: approximately 122 thousand subscribers at quarter-end, an increase of 79 thousand subscribers (an increase of 184%)

 

Rosh Ha’ayin, Israel, March 27, 2019 – Partner Communications Company Ltd. (“Partner” or the “Company”) (NASDAQ and TASE: PTNR), a leading Israeli communications provider, announced today its results for the quarter and year ended December 31, 2018.

 

Commenting on the results for the fourth quarter and full year 2018, Mr. Isaac Benbenisti, CEO of Partner noted:

 

“The 2018 annual results express Partner's strength in the Israeli telecommunications market. In the complex competitive reality, Partner succeeded in ending the fourth quarter with a profit of NIS 19 million and an annual profit of NIS 56 million.

 

We continue to focus on, among other matters, providing value to the customer, for example through exclusive technologies such as VoLTE and WiFi calling, and investing significant resources on maintaining the customer satisfaction of our existing customer base, in order to preserve our particularly low churn rate.

 

Partner TV is the fastest growing TV service in Israel with a subscriber base of 140 thousand subscribers as of today, while, in 2018 alone, 79 thousand subscribers were added. Partner TV's advanced interface is best adapted to new viewing habits and has set a new standard in the multi-channel television market in Israel.

 

Partner's fiber optic infrastructure, Partner Fiber, is growing at the fastest rate in the market. In recent months, we have expanded our deployment in dozens of cities, and today we are already reaching over 350 thousand households with Partner's fiber, nearly 20% of all households connected to the internet in Israel.

 

In addition, and in light of the challenges facing the companies operating in the telecommunications sector, we succeeded, in cooperation with the employees' representatives and the Histadrut labor union, to reach at the beginning of this month, a new collective agreement that takes care of the employees' welfare, and directly links Partner's success to employee compensation.”

 

Mr. Tamir Amar, Partner's Chief Financial Officer, commented on the results:

 

“During 2018, Partner further consolidated its status as a total service communications provider with impressive growth in the Company’s new revenue engines of TV services and fiber optics infrastructure.

 

We invested significant resources in smart and extensive deployment of our fiber-optic network, while maintaining relatively low levels of debt leverage. We intend to realize to the full the advantage we have over our competitors in network coverage and in our value propositions that combine TV and internet services, in order to increase profitability in the fixed-line segment and in support of our efforts to establish Partner as a leading communications infrastructure company. The new revenue engines are developing rapidly, and serve to strengthen the Company's resilience in light of the unrestrained competition in the Israeli cellular market – competition which was further intensified with the entrance of an additional, sixth cellular operator, and which led to even stronger price erosion than during the preceding year.

 

The Company intends to deploy a fiber optic network with an extensive and significant coverage of potential households in Israel within three to four years from today, with an expected payback period for the project overall of seven years. CAPEX payments relating to the fiber optic network are expected to remain stable at a level similar to that in 2018.

 

Profit for the year 2018 was NIS 56 million, a decrease of 51% compared with 2017. Adjusted EBITDA in 2018 totaled NIS 722 million, a decrease of 21% from 2017. Adjusted EBITDA for the cellular segment decreased by 26% mainly reflecting the impact of the decreases in service revenues and in income with respect to the settlement agreement with Orange, which ceased being recognized from the end of the second half of 2017; these decreases were partially offset mainly by the reduction in OPEX. Despite the decrease in profit which resulted from the unrestrained competition in the cellular market from price players, Partner focused on a strategy of providing value to the customer, the unique technological advantages of our network and our customer service, the results of which were reflected by one of the lowest churn rates in the market and an ARPU of NIS 57 for the fourth quarter and NIS 58 for the year 2018.

 

While total operating expenses (OPEX) increased in 2018 compared to 2017 by NIS 50 million, this was explained principally by increased expenses related to the growth in TV services as well as internet services.

 

Adjusted EBITDA for the fixed-line segment decreased in 2018 compared to 2017 by 4%, mainly reflecting the increased OPEX related to TV services and internet services, which more than offset the increases in revenues from TV services and internet services and in gross profit from equipment sales.

 

The gross profit margin from equipment sales further improved in 2018, from 21% in 2017 to 23% in 2018, together with a continued improvement in the quality of equipment sales as reflected by, among other things, the significant decrease of 42% in credit losses, from NIS 52 million in 2017 to NIS 30 million in 2018.

 

Adjusted Free Cash Flow (before interest) totaled NIS 124 million in 2018, after the Company’s significant investments to support its new revenue engines related to the fiber optics network and TV services; CAPEX payments, including investments in new revenue engines, totaled NIS 502 million in 2018, an increase of 34% from 2017. The Company also made additional payments for deferred expenses – Rights of Use (ROU) totaling NIS 107 million in 2018, compared with NIS 113 million in 2017.

 

The Company’s balance sheet demonstrates its financial strength, with net debt remaining below NIS 1 billion and a net debt to EBITDA ratio of 1.3 at year-end 2018. During 2018 we executed a buy-back of our shares and acquired 6.5 million shares at a total cost of NIS 100 million (including commissions) at an average price of NIS 15.38 per share. Our relatively low level of debt leverage, together with our ability to access additional fund sources through existing future debt issuance commitments, leaves us in a good position to be able to continue to invest in new growth opportunities, as necessary.

 

In the previous quarter, we announced the first step of our plan to expand the Company's activities to the fintech and finance areas, under the name "Partner Finance". We continue to examine possible activities in the finance arena, both within the Company and through co-operation with external parties.”

 

NIS Million	Q3’18	Q4’18	Comments
Service Revenues	654	625	The decrease resulted from a decrease in cellular service revenues as a result of seasonality
Equipment Revenues	168	189	The increase mainly reflected a change in the product mix
Total Revenues	822	814
Gross profit from equipment sales	44	42
OPEX	504	502
Adjusted EBITDA	201	172	The decrease mainly reflected the decrease in service revenues
Profit for the Period	26	19	The decrease mainly resulted from the decrease in Adjusted EBITDA, partially offset by one-time income as a result of an income tax audit
Capital Expenditures (additions)	111	177	The increase resulted mainly from increased investments in the optic fiber network and in IT systems
Adjusted free cash flow (before interest payments)	70	(22)	The decrease mainly reflected the decrease in Adjusted EBITDA and the larger increase in operating assets and liabilities
Net Debt	898	950

	Q3’18	Q4’18	Comments
Cellular Post-Paid Subscribers (end of period, thousands)	2,333	2,3614	Increase of 28 thousand subscribers. Excluding the impact of the addition of M2M subscribers, the cellular Post-Paid subscriber base would have decreased by 6 thousand subscribers
Cellular Pre-Paid Subscribers (end of period, thousands)	297	285	Decrease of 12 thousand subscribers
Monthly Average Revenue per Cellular User (ARPU) (NIS)	60	57	The decrease mainly reflected seasonality effects
Quarterly Cellular Churn Rate (%)	8.0%	8.5%	Increase in both Pre-Paid and Post-Paid churn rates

 

 

NIS MILLION (except EPS)	2014	20155	2016	2017*	2018*
Revenues	4,400	4,111	3,544	3,268	3,259
Cost of revenues	3,419	3,472	2,924	2,627	2,700
Gross profit	981	639	620	641	559
S,G&A and credit losses	631	640	689	465	471
Income with respect to settlement agreement with Orange		61	217	108
Other income	50	47	45	31	28
Operating profit	400	107	193	315	116
Finance costs, net	159	143	105	180	53
Income tax expenses	79	4	36	21	7
Profit (Loss) for the year	162	(40)	52	114	56
Earnings (Loss) per share (basic, NIS)	1.04	(0.26)	0.33	0.70	0.34

 

* The Company adopted IFRS 15 from the beginning of 2017. For more information see the Company’s Annual Report on Form 20-F for the year ended December 31, 2018.

 

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NIS MILLION (except EPS)	Q4’17	Q1’18	Q2’18	Q3’18	Q4’18
Revenues	834	826	797	822	814
Cost of revenues	711	688	661	657	694
Gross profit	123	138	136	165	120
S,G&A and credit losses	130	113	121	124	113
Other income	7	7	7	7	7
Operating profit	0	32	22	48	14
Finance costs, net	88	18	13	10	12
Income tax expenses (income)	(38)	5	7	12	(17)
Profit (loss) for the period	(50)	9	2	26	19
Earnings (loss) per share (basic, NIS)	(0.30)	0.05	0.01	0.16	0.12

 

NIS MILLION (except EPS)	Q4'17	Q4'18	% Change
Revenues	834	814	-2%
Cost of revenues	711	694	-2%
Gross profit	123	120	-2%
Operating profit	0	14
Profit (loss) for the period	(50)	19
Earnings (loss) per share (basic, NIS)	(0.30)	0.12
Adjusted free cash flow (before interest)	63	(22)

 

 

	2014	2015	2016	2017	2018
Adjusted EBITDA (NIS million)	1,096	876	834	917	722
Adjusted EBITDA (as a % of total revenues)	25%	21%	24%	28%	22%
Adjusted Free Cash Flow (NIS millions)	520	566	758	599	124
Cellular Subscribers (end of period, thousands)	2,837	2,718	2,686	2,662	2,646
Estimated Cellular Market Share (%)	28%	27%	26%	25%	25%
Annual Cellular Churn Rate (%)	47%	46%	40%	38%	35%
Average Monthly Revenue per Cellular Subscriber (ARPU) (NIS)	75	69	65	62	58
TV subscribers (end of period, thousands)				43	122

 

 

	Q4'17	Q4'18	Change
Adjusted EBITDA (NIS million)	158	172	+9%
Adjusted EBITDA (as a % of total revenues)	19%	21%	+2
Cellular Subscribers (end of period, thousands)	2,662	2,646	-16
Quarterly Cellular Churn Rate (%)	9.9%	8.5%	-1.4
Monthly Average Revenue per Cellular User (ARPU) (NIS)	59	57	-2

 

 

	Cellular Segment			Fixed-Line Segment			Elimination		Consolidated
NIS Million	2017	2018	% Change	2017	2018	% Change	2017	2018	2017	2018	% Change
Total Revenues	2,588	2,486	-4%	853	944	+11%	(173)	(171)	3,268	3,259	0%
Service Revenues	1,978	1,843	-7%	777	852	+10%	(173)	(171)	2,582	2,524	-2%
Equipment Revenues	610	643	+5%	76	92	+21%	-	-	686	735	+7%
Operating Profit	244	68	-72%	71	48	-32%	-	-	315	116	-63%
Adjusted EBITDA	710	524	-26%	207	198	-4%	-	-	917	722	-21%

 

	Cellular Segment			Fixed-Line Segment			Elimination		Consolidated
NIS Million	Q4'17	Q4'18	% Change	Q4'17	Q4'18	% Change	Q4'17	Q4'18	Q4'17	Q4'18	% Change
Total Revenues	660	612	-7%	219	244	+11%	(45)	(42)	834	814	-2%
Service Revenues	478	447	-6%	197	220	+12%	(45)	(42)	630	625	-1%
Equipment Revenues	182	165	-9%	22	24	+9%	-	-	204	189	-7%
Operating Profit (Loss)	2	2	0%	(2)	12		-	-	0	14
Adjusted EBITDA	124	119	-4%	34	53	+56%	-	-	158	172	+9%

 

 

In 2018, total revenues were NIS 3,259 million (US$ 870 million), compared with NIS 3,268 million in 2017.

 

Annual service revenues in 2018 totaled NIS 2,524 million (US$ 673 million), a decrease of 2% from NIS 2,582 million in 2017.

 

Service revenues for the cellular segment in 2018 totaled NIS 1,843 million (US$ 492 million), a decrease of 7% from NIS 1,978 million in 2017.  The decrease was mainly a result of the continued downward pressures on the prices of Post-Paid and Pre-Paid cellular services as a result of the continued competition in the cellular market.

 

Service revenues for the fixed-line segment in 2018 totaled NIS 852 million (US$ 227 million), an increase of 10% from NIS 777 million in 2017. This increase mainly reflected an increase in revenues from TV services and from internet services, partially offset by a decrease in revenues from international calling services (including the market for wholesale international traffic) which were adversely affected both by the increased penetration of internet-based solutions and increased competition from other service providers.

 

In Q4 2018, total revenues were NIS 814 million (US$ 217 million), a decrease of 2% from NIS 834 million in Q4 2017.

 

Service revenues in Q4 2018 totaled NIS 625 million (US$ 167 million), a decrease of 1% from NIS 630 million in Q4 2017.

 

Service revenues for the cellular segment in Q4 2018 totaled NIS 447 million (US$ 119 million), a decrease of 6% from NIS 478 million in Q4 2017. The decrease was mainly the result of the continued price erosion of cellular services (both Post-Paid and Pre-Paid) due to the continued competitive market conditions.

 

Service revenues for the fixed-line segment in Q4 2018 totaled NIS 220 million (US$ 59 million), an increase of 12% from NIS 197 million in Q4 2017. The increase reflected revenues from TV services (which started in Q3 2017) and internet services, which were partially offset principally by the decline in revenues from international calling services.

 

Equipment revenues in 2018 totaled NIS 735 million (US$ 196 million), an increase of 7% from NIS 686 million in 2017, largely reflecting an increase in sales volumes of both cellular devices and other digital audio, visual and related equipment.

 

Gross profit from equipment sales in 2018 was NIS 166 million (US$ 44 million), compared with NIS 142 million in 2017, an increase of 17%. This increase reflected increases in gross profit from equipment sales for both the cellular and fixed-line segments, largely a result of higher volumes of equipment sales in both segments.

 

 

Equipment revenues in Q4 2018 totaled NIS 189 million (US$ 50 million), a decrease of 7% from NIS 204 million in Q4 2017, reflecting both a lower volume of equipment sales as well as a lower average price per sale due to a change in the product mix.

 

Gross profit from equipment sales in Q4 2018 was NIS 42 million (US$ 11 million), compared with NIS 40 million in Q4 2017, an increase of 5%, mainly reflecting higher profit margins from sales due to a change in the product mix.

 

Total operating expenses (‘OPEX’) totaled NIS 1,996 million (US$ 533 million) in 2018, an increase of 3% or NIS 50 million from 2017. This increase mainly reflected an increase in expenses related to TV services and internet services. Excluding the effect of the increase in these costs on operating expenses, total operating expenses would have decreased in 2018, mainly reflecting decreases in (i) international call expenses, (ii) credit losses and (iii) other expense items, including as a result of various efficiency measures. Including depreciation and amortization expenses and other expenses (mainly amortization of employee share based compensation), OPEX in 2018 increased by 2% compared with 2017, mainly for the same reasons as explained above.

 

Total operating expenses (‘OPEX’) totaled NIS 502 million (US$ 134 million) in Q4 2018, a decrease of 3% or NIS 17 million from Q4 2017. The decrease mainly reflected decreases in (i) international call expenses, (ii) legal claims expenses, (iii) credit losses, (iv) advertising and marketing expenses and (v) other expense items. These decreases more than offset the increase in expenses relating to the growth in TV and internet services. Including depreciation and amortization expenses and other expenses (mainly amortization of employee share based compensation), OPEX in Q4 2018 decreased by 3% compared with Q4 2017.

 

In 2017, the Company recorded income with respect to the settlement agreement of the Orange brand agreement in an amount of NIS 108 million. No income was recorded in 2018, and none will be recorded for future periods, with respect to the settlement agreement.

 

Operating profit for 2018 totaled NIS 116 million (US$ 31 million), a decrease of 63% compared with NIS 315 million in 2017. See Adjusted EBITDA analysis for each segment below.

 

Adjusted EBITDA in 2018 totaled NIS 722 million (US$ 193 million), a decrease of 21% from NIS 917 million in 2017. As a percentage of total revenues, Adjusted EBITDA in 2018 was 22% compared with 28% in 2017.

 

Adjusted EBITDA for the cellular segment was NIS 524 million (US$ 140 million) in 2018, a decrease of 26% from NIS 710 million in 2017, reflecting the impact of the decreases in service revenues and in income with respect to the settlement agreement with Orange, which was partially offset by the reduction in total operating expenses, and the increase in gross profits from cellular segment equipment sales.  As a percentage of total cellular segment revenues, Adjusted EBITDA for the cellular segment in 2018 was 21% compared with 27% in 2017.

 

Adjusted EBITDA for the fixed-line segment was NIS 198 million (US$ 53 million) in 2018, a decrease of 4% from NIS 207 million in 2017, mainly reflecting the increased operating expenses related to TV and internet services, which more than offset the increase in revenues from TV services and internet services and in gross profit from equipment sales. As a percentage of total fixed-line segment revenues, Adjusted EBITDA for the fixed-line segment in 2018 was 21%, compared with 24% in 2017.

 

Operating profit for Q4 2018 was NIS 14 million (US$ 4 million), an increase of NIS 14 million compared to Q4 2017. See Adjusted EBITDA analysis for each segment below.

 

Adjusted EBITDA in Q4 2018 totaled NIS 172 million (US$ 46 million), an increase of 9% from NIS 158 million in Q4 2017. As a percentage of total revenues, Adjusted EBITDA in Q4 2018 was 21% compared with 19% in Q4 2017.

 

Adjusted EBITDA for the cellular segment was NIS 119 million (US$ 32 million) in Q4 2018, a decrease of 4% from NIS 124 million in Q4 2017, mainly reflecting the decrease in cellular service revenues and in gross profit from equipment sales, partially offset by the decline in cellular OPEX. As a percentage of total cellular segment revenues, Adjusted EBITDA for the cellular segment in Q4 2018 was 19% unchanged from Q4 2017.

 

Adjusted EBITDA for the fixed-line segment was NIS 53 million (US$ 14 million) in Q4 2018, an increase of 56% from NIS 34 million in Q4 2017, mainly reflecting the increase in fixed line service revenues and gross profit from equipment sales, partially offset by the increase in OPEX mainly relating to TV and internet services. As a percentage of total fixed-line segment revenues, Adjusted EBITDA for the fixed-line segment in Q4 2018 was 22%, compared with 16% in Q4 2017.

 

Finance costs, net in 2018 were NIS 53 million (US$ 14 million), a decrease of 71% compared with NIS 180 million in 2017. The decrease largely reflected the impact of early debt repayment expenses in 2017 in an amount of NIS 94 million which were mainly related to the early repayment of borrowings during 2017 in a total amount of NIS 1,283 million, in addition to a decrease in interest expenses reflecting the lower average level of indebtedness and a lower average interest rate, partially offset by early loan repayment expenses of NIS 9 million recorded in 2018.

 

Finance costs, net in Q4 2018 were NIS 12 million (US$ 3 million), a decrease of 86% compared with NIS 88 million in Q4 2017. The decrease largely reflected impact of the early debt repayment expenses that were recorded in Q4 2017 in an amount of NIS 65 million, as well as lower interest expenses in view of the lower average debt level and a lower average interest rate.

 

Income tax expenses for 2018 were NIS 7 million (US$ 2 million), a decrease of 67% compared with NIS 21 million in 2017. An income tax audit of the Company, concluded in 2017, resulted in a one-time income of NIS 10 million in income tax expenses and in an additional one-time deferred tax income of NIS 9 million. A one-time income of NIS 16 million in income tax expenses was recorded in 2018, mainly due to an income tax audit of the Company's subsidiary.

 

Income tax expenses for Q4 2018 were an income of NIS 17 million (US$ 5 million), compared with income of NIS 38 million in Q4 2017, largely reflecting the change in profit/loss before income tax and the one-time impacts described above.

 

Overall, the company's profit in 2018 totaled NIS 56 million (US$ 15 million), a decrease of 51% compared with profit of NIS 114 million in 2017.

 

Profit in Q4 2018 was NIS 19 million (US$ 5 million), compared with a loss of NIS 50 million in Q4 2017, an increase of NIS 69 million.

 

Based on the weighted average number of shares outstanding during 2018, basic earnings per share or ADS, was NIS 0.34 (US$ 0.09) compared with NIS 0.70 in 2017.

 

Based on the weighted average number of shares outstanding during Q4 2018, basic earnings per share or ADS, was NIS 0.12 (US$ 0.03), compared with basic loss per share of NIS 0.30 in Q4 2017.

 

 

At the end of 2018, the Company's cellular subscriber base (including mobile data, 012 Mobile subscribers and M2M subscriptions) was approximately 2.65 million, including approximately 2.36 million Post-Paid subscribers or 89% of the base, and approximately 285 thousand Pre-Paid subscribers, or 11% of the subscriber base.

 

Over 2018, the cellular subscriber base declined by approximately 16 thousand. The Pre-Paid subscriber base decreased by approximately 69 thousand, while the Post-Paid subscriber base increased by approximately 53 thousand.

 

The number of post-paid subscribers for the quarters between the fourth quarter of 2017 and the third quarter of 2018 were retrospectively decreased related to an amendment in the large business customer subscriber base.

 

In view of the expected growing impact of M2M (machine to machine) activity on our business, as from Q4 2018, M2M subscriptions are included in the Post-Paid subscriber base on a standardized basis, according to which the number of M2M subscriptions included is calculated by dividing total revenues from M2M subscriptions by the average revenue from a dedicated data package subscriber.  This change had the effect of increasing the Post-Paid subscriber base for Q4 2018 by approximately 34 thousand subscribers. Excluding the inclusion of M2M subscriptions, the Post-Paid subscriber base would have increased by approximately 19 thousand in 2018 and the total cellular subscriber base would have declined, net, by approximately 50 thousand.

 

The annual churn rate for cellular subscribers in 2018 was 35%, a decrease of 3 percentage points compared with 38% in 2017, and a decrease of 5 percentage points compared with 40% in 2016.

 

The monthly Average Revenue per User (“ARPU”) for cellular subscribers in 2018 was NIS 58 (US$ 15), a decrease of 6% from NIS 62 in 2017 (the impact on ARPU of the inclusion of M2M subscriptions in the subscriber base from Q4 2018 was negligible). The decrease mainly reflected the continued price erosion in cellular services due to the persistently high competition in the cellular market.

 

Total cellular market share (based on the number of subscribers) at the end of 2018 was estimated to be approximately 25%, unchanged from year-end 2017.

 

During the fourth quarter of 2018, the cellular subscriber base increased by approximately 16 thousand subscribers. The Post-Paid subscriber base increased by approximately 28 thousand subscribers, while the Pre-Paid subscriber base decreased by approximately 12 thousand subscribers. Excluding the inclusion of M2M subscriptions as explained above, the Post-Paid subscriber base would have decreased during the fourth quarter by approximately 6 thousand and the total cellular subscriber base would have declined, net, by approximately 18 thousand.

 

The quarterly churn rate for cellular subscribers in Q4 2018 was 8.5%, compared with 9.9% in Q4 2017.

 

The monthly Average Revenue per User (“ARPU”) for cellular subscribers in Q4 2018 was NIS 57 (US$ 15), a decrease of 3% from NIS 59 in Q4 2017. The decrease mainly reflected the continued price erosion in key cellular services due to the competition in the cellular market.

 

 

In 2018, Adjusted Free Cash Flow totaled NIS 124 million (US$ 33 million), a decrease of 79% from NIS 599 million in 2017.

 

Cash generated from operations totaled NIS 625 million (US$ 167 million) in 2018 compared with NIS 973 million in 2017, a decrease of 36%. The decrease mainly reflected a smaller decrease in trade receivables of NIS 124 million in 2018 compared with NIS 283 million in 2017 which was mainly explained by fewer receipts from customers for previous equipment sales under long-term payment plans. Cash generated from operations in 2018 was also adversely affected by a decrease in trade payables.

 

Cash capital expenditures (CAPEX payments), as represented by cash flows used for the acquisition of property and equipment and intangible assets, were NIS 502 million (US$ 134 million) in 2018, an increase of 34% from NIS 376 million in 2017. The increase mainly reflected the increased investments in the optic fiber network, and the costs of equipment, including installation, leased to subscribers (mainly related to TV services).

 

In Q4 2018, Adjusted Free Cash Flow totaled negative NIS 22 million (US$ -6 million), a decrease of 135% from NIS 63 million in Q4 2017.

 

Cash generated from operating activities decreased by 31% to NIS 121 million (US$ 32 million) in Q4 2018 from NIS 176 million in Q4 2017. The decrease mainly reflected the decrease in trade payables and other payables.

 

Cash capital expenditures (‘CAPEX payments’), as represented by cash flows used for the acquisition of property and equipment and intangible assets, were NIS 143 million (US$ 38 million) in Q4 2018, an increase of 27% from NIS 113 million in Q4 2017, mainly reflected increased investments in the optic fiber network.

 

The level of Net Debt at the end of 2018 amounted to NIS 950 million (US$ 253 million), compared with NIS 906 million at the end of 2017.

 

 

At the beginning of January 2019, an amendment to the NSA between the Company and Hot Mobile was signed, as a result of which, control over PHI is now borne 50-50 by the Company and Hot Mobile, and each nominates an equal number of directors (3 directors). Since, thereafter, decisions about the Relevant Activities of PHI require the unanimous consent of both the Company and Hot Mobile, PHI is now considered a joint arrangement controlled by the Company and Hot Mobile (joint operation). For further details and implications, see note 9 to our consolidated financial statements and Item 5A.1d in the Company’s Annual Report on Form 20-F for the year ended December 31, 2018.

 

 

The new leases standard, IFRS 16, comes into effect on 1 January 2019. The standard will affect primarily the accounting for the Group’s operating leases. As described in note 9 to our consolidated financial statements, in January 2019 the governance of PHI was changed and PHI will be accounted for as a joint operation by the Company. Therefore the below estimates of the expected effect of the standard are presented including the Company's share in relation to its interests in the assets, liabilities and expenses of PHI. The below estimates of impacts from the implementation of IFRS 16 are based on contract terms and discount rates that existed as of December 31, 2018, and under the assumption that they will not change during 2019. Upon the implementation of IFRS 16 on January 1, 2019 the Group expects to recognize right-of-use assets of approximately NIS 660 million, lease liabilities of approximately NIS 690, a charge to accumulated earnings of approximately NIS 20 million, and a deferred tax asset in an immaterial amount.

 

In the consolidated statement of income for 2019 lease expenses are expected to decrease by approximately NIS 150 million, amortization expenses and interest expenses are expected to increase by approximately NIS 160 million, and profit is expected to decrease by an immaterial amount. In the consolidated statement of cash flows for 2019 cash from operating activities is expected to increase by approximately NIS 140 million and cash from financing activities is expected to decrease by approximately NIS 140 million. See also note 3 to our consolidated financial statements.

 

 

On March 26, 2019, the Company's Board of Directors authorized the Company's management to examine the possible deferred expansion of series G debentures of the Company, subject to prior approval of the Board of Directors and market conditions.

 

 

Partner will hold a conference call on Wednesday, March 27, 2019 at 10.00AM Eastern Time / 5.00PM Israel Time.

To join the call, please dial the following numbers (at least 10 minutes before the scheduled time):

International: +972.3.918.0664

North America toll-free: +1.888.407.2553

A live webcast of the call will also be available on Partner's Investors Relations website at: www.partner.co.il/en/Investors-Relations/lobby/

If you are unavailable to join live, the replay of the call will be available from March 27, 2019 until April 11, 2019, at the following numbers:

International: +972.3.925.5927

North America toll-free: +1.888.326.9310

In addition, the archived webcast of the call will be available on Partner's Investor Relations website at the above address for approximately three months.

 

This press release includes forward-looking statements within the meaning of Section 27A of the US Securities Act of 1933, as amended, Section 21E of the US Securities Exchange Act of 1934, as amended, and the safe harbor provisions of the US Private Securities Litigation Reform Act of 1995. Words such as "estimate", “believe”, “anticipate”, “expect”, “intend”, “seek”, “will”, “plan”, “could”, “may”, “project”, “goal”, “target” and similar expressions often identify forward-looking statements but are not the only way we identify these statements. Specific statements have been made regarding the investment of significant resources in order to maintain customer satisfaction and preserve low churn rate; the realization of the advantages that we have over our competitors in order to increase profitability in the fixed-line segment and establish the Company as a leading communications infrastructure company; the Company's expectation that its new revenue engines will serve to strengthen the Company's resilience in light of competition; the Company's ability to continue to invest in new growth opportunities in light of its relatively low level of debt leverage; the possible expansion of the Company's activities in the fintech and finance sectors, with respect to the implementation of the IFRS 16 standard on the results of the Company and PHI and on their financial statements; and the possible deferred expansion of series G debentures. In addition, all statements other than statements of historical fact included in this press release regarding our future performance are forward-looking statements. We have based these forward-looking statements on our current knowledge and our present beliefs and expectations regarding possible future events. These forward-looking statements are subject to risks, uncertainties and assumptions, including, the availability of financing to enable the Company to maintain customer satisfaction and to preserve low churn rate; the Company’s technical and financial ability to continue to realize the advantages it has over its competitors in order to increase profitability in the fixed-line segment and establish the Company as a leading communications infrastructure company; anticipated benefits from the investment in the Company's fiber optic infrastructure and TV service in light of competition; as well as the risks entailed in the entry into new sectors and markets. Future results may differ materially from those anticipated herein. For further information regarding risks, uncertainties and assumptions about Partner, trends in the Israeli telecommunications industry in general, the impact of current global economic conditions and possible regulatory and legal developments, and other risks we face, see “Item 3. Key Information - 3D. Risk Factors”, “Item 4. Information on the Company”, “Item 5. Operating and Financial Review and Prospects”, “Item 8. Financial Information - 8A. Consolidated Financial Statements and Other Financial Information - 8A.1 Legal and Administrative Proceedings” and “Item 11. Quantitative and Qualitative Disclosures about Market Risk” in the Company’s Annual Reports on Form 20-F filed with the SEC, as well as its immediate reports on Form 6-K furnished to the SEC. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

The quarterly financial results presented in this press release are unaudited financial results.

The results were prepared in accordance with IFRS, other than the non-GAAP financial measures presented in the section, “Use of Non-GAAP Financial Measures”.

 

The financial information is presented in NIS millions (unless otherwise stated) and the figures presented are rounded accordingly.

 

The convenience translations of the New Israeli Shekel (NIS) figures into US Dollars were made at the rate of exchange prevailing at December 31, 2018: US $1.00 equals NIS 3.748. The translations were made purely for the convenience of the reader.

 

 

The following non-GAAP measures are used in this report. These measures are not financial measures under IFRS and may not be comparable to other similarly titled measures for other companies. Further, the measures may not be indicative of the Company’s historic operating results nor are meant to be predictive of potential future results.

 

Non-GAAP Measure	Calculation	Most Comparable IFRS Financial Measure
Adjusted EBITDA	Adjusted EBITDA: Profit (Loss) add Income tax expenses, Finance costs, net, Depreciation and amortization expenses (including amortization of intangible assets, deferred expenses-right of use and impairment charges), Other expenses (mainly amortization of share based compensation)	Profit (Loss)
Adjusted EBITDA margin (%)	Adjusted EBITDA margin (%): Adjusted EBITDA divided by Total revenues
Adjusted Free Cash Flow	Adjusted Free Cash Flow: Cash flows from operating activities deduct Cash flows from investing activities add Short-term investment in (proceeds from) deposits	Cash flows from operating activities deduct Cash flows from investing activities
Total Operating Expenses (OPEX)	Total Operating Expenses: Cost of service revenues add Selling and marketing expenses add General and administrative expenses add Credit losses deduct Depreciation and amortization expenses, Other expenses (mainly amortization of employee share based compensation)	Sum of: Cost of service revenues, Selling and marketing expenses, General and administrative expenses, Credit losses
Net Debt	Net Debt: Current maturities of notes payable and borrowings add Notes payable add Borrowings from banks and others deduct Cash and cash equivalents deduct Short-term deposits	Sum of: Current maturities of notes payable and borrowings, Notes payable, Borrowings from banks and others

 

 

Partner Communications Company Ltd. is a leading Israeli provider of telecommunications services (cellular, fixed-line telephony, internet services and TV services). Partner’s ADSs are quoted on the NASDAQ Global Select Market™ and its shares are traded on the Tel Aviv Stock Exchange (NASDAQ and TASE: PTNR).

For more information about Partner, see: http://www.partner.co.il/en/Investors-Relations/lobby

 

Contacts:

Tamir Amar Chief Financial Officer Tel: +972-54-781-4951 E-mail: investors@partner.co.il

 

PARTNER COMMUNICATIONS COMPANY LTD.

(An Israeli Corporation)

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

 

		New Israeli Shekels								Convenience translation into U.S. Dollars
		2017				2018				2018
		In millions
CURRENT ASSETS
Cash and cash equivalents			867				416				111
Short-term deposits			150
Trade receivables			808				656				175
Other receivables and prepaid expenses			48				33				9
Deferred expenses – right of use			43				51				14
Inventories			93				98				26
			2,009				1,254				335
NON CURRENT ASSETS
Trade receivables			232				260				69
Prepaid expenses and other			5				4				1
Deferred expenses – right of use			133				185				49
Property and equipment			1,180				1,211				323
Intangible and other assets			697				617				164
Goodwill			407				407				109
Deferred income tax asset			55				38				10
			2,709				2,722				725
TOTAL ASSETS			4,718				3,976				1,060

 

PARTNER COMMUNICATIONS COMPANY LTD.

(An Israeli Corporation)

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

 

		New Israeli Shekels								Convenience translation into U.S. Dollars
		2017				2018				2018
		In millions
CURRENT LIABILITIES
Current maturities of notes payable and borrowings			705				162				43
Trade payables			787				711				190
Payables in respect of employees			91				96				26
Other payables (mainly institutions)			31				10				3
Income tax payable			50				35				9
Deferred revenues from HOT mobile			31				31				8
Other deferred revenues			41				41				11
Provisions			75				64				17
			1,811				1,150				307
NON CURRENT LIABILITIES
Notes payable			975				1,013				270
Borrowings from banks and others			243				191				51
Liability for employee rights upon retirement, net			40				40				11
Dismantling and restoring sites obligation			27				13				3
Deferred revenues from HOT mobile			164				133				35
Other non-current liabilities			24				30				8
			1,473				1,420				378
TOTAL LIABILITIES			3,284				2,570				685
EQUITY
Share capital - ordinary shares of NIS 0.01    par value: authorized - December 31, 2017    and December 31, 2018 - 235,000,000 shares;    issued and outstanding -			2				2				1
December 31, 2017 – **168,243,913 shares
December 31, 2018 – **162,628,397 shares
Capital surplus			1,164				1,102				294
Accumulated retained earnings			491				563				150
Treasury shares, at cost December 31, 2017 – ***2,850,472 shares        December 31, 2018 – ***8,560,264 shares			(223	)			(261	)			(70	)
Non-controlling interests							*				*
TOTAL EQUITY			1,434				1,406				375
TOTAL LIABILITIES AND EQUITY			4,718				3,976				1,060

 

*	Representing an amount of less than 1 million.

**	Net of treasury shares.

***	Including, restricted shares in amount of 1,376,381 and 1,210,833 as of and December 31, 2017 and  December 31, 2018, respectively, held by a trustee under the Company's Equity Incentive Plan, such shares may become outstanding upon completion of vesting conditions.

 

PARTNER COMMUNICATIONS COMPANY LTD.

(An Israeli Corporation)

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

														Convenience
														translation
		New Israeli Shekels												into U.S. dollars
		Year ended December 31
		2016				2017				2018				2018
		In millions (except earnings per share)
Revenues, net			3,544				3,268				3,259				870
Cost of revenues			2,924				2,627				2,700				720
Gross profit			620				641				559				150
Selling and marketing expenses			426				269				293				78
General and administrative expenses			181				144				148				39
Credit losses			82				52				30				8
Income with respect to settlement agreement with Orange			217				108
Other income, net			45				31				28				7
Operating profit			193				315				116				32
Finance income			13				4				2				1
Finance expenses			118				184				55				16
Finance costs, net			105				180				53				15
Profit before income tax			88				135				63				17
Income tax expenses			36				21				7				2
Profit for the year			52				114				56				15
Attributable to:
Owners of the Company			52				114				57				15
Non-controlling interests											(1	)			*
Profit for the year			52				114				56				15
Earnings per share
Basic			0.33				0.70				0.34				0.09
Diluted			0.33				0.69				0.34				0.09

 

*   Representing an amount of less than 1 million.

 

 

PARTNER COMMUNICATIONS COMPANY LTD.

(An Israeli Corporation)

CONDENSED CONSOLIDATED STATEMENTS

OF COMPREHENSIVE INCOME

 

		New Israeli Shekels												Convenience translation into U.S. dollars
		Year ended December 31
		2016				2017				2018				2018
		In millions
Profit for the year			52				114				56				15
Other comprehensive income, items
that will not be reclassified to profit or loss
Remeasurements of post-employment benefit obligations			(8	)			(2	)			1				*
Income taxes relating to remeasurements of
post-employment benefit obligations			2				1				*				*
Other comprehensive income (loss)
for the year, net of income taxes			(6	)			(1	)			1				*
TOTAL COMPREHENSIVE INCOME FOR THE YEAR			46				113				57				15
Total comprehensive income attributable to:
Owners of the Company			46				113				58				15
Non-controlling interests											(1	)			*
TOTAL COMPREHENSIVE INCOME FOR THE YEAR			46				113				57				15

 

*   Representing an amount of less than 1 million.

 

PARTNER COMMUNICATIONS COMPANY LTD.

(An Israeli Corporation)

SEGMENT INFORMATION & ADJUSTED EBITDA RECONCILIATION

		New Israeli Shekels
		Year ended December 31, 2018
		In millions
		Cellular segment				Fixed-line segment				Elimination				Consolidated
Segment revenue - Services			1,827				697								2,524
Inter-segment revenue - Services			16				155				(171	)
Segment revenue - Equipment			643				92								735
Total revenues			2,486				944				(171	)			3,259
Segment cost of revenues - Services			1,435				696								2,131
Inter-segment cost of  revenues- Services			154				17				(171	)
Segment cost of revenues - Equipment			509				60								569
Cost of revenues			2,098				773				(171	)			2,700
Gross profit			388				171								559
Operating expenses (3)			343				128								471
Other income, net			23				5								28
Operating profit			68				48								116
Adjustments to presentation of segment
Adjusted EBITDA
–Depreciation and amortization			442				150
–Other (1)			14
Segment Adjusted EBITDA (2)			524				198

 

		New Israeli Shekels
		Year ended December 31, 2018
		In millions
Reconciliation of segments subtotal Adjusted EBITDA to profit for the year
Segments subtotal Adjusted EBITDA (2)			722
Depreciation and amortization			(592	)
Finance costs, net			(53	)
Income tax expenses			(7	)
Other (1)			(14	)
Profit for the year			56

PARTNER COMMUNICATIONS COMPANY LTD.

(An Israeli Corporation)

SEGMENT INFORMATION & ADJUSTED EBITDA RECONCILIATION

		New Israeli Shekels
		Year ended December 31, 2017
		In millions
		Cellular segment				Fixed-line segment				Elimination				Consolidated
Segment revenue - Services			1,960				622								2,582
Inter-segment revenue - Services			18				155				(173	)
Segment revenue - Equipment			610				76								686
Total revenues			2,588				853				(173	)			3,268
Segment cost of revenues - Services			1,470				613								2,083
Inter-segment cost of  revenues- Services			154				19				(173	)
Segment cost of revenues - Equipment			490				54								544
Cost of revenues			2,114				686				(173	)			2,627
Gross profit			474				167								641
Operating expenses (3)			367				98								465
Income with respect to settlement
agreement with Orange			108												108
Other income, net			29				2								31
Operating profit			244				71								315
Adjustments to presentation of segment
Adjusted EBITDA
–Depreciation and amortization			445				135
–Other (1)			21				1
Segment Adjusted EBITDA (2)			710				207

 

		New Israeli Shekels
		Year ended December 31, 2017
		In millions
Reconciliation of segments subtotal Adjusted EBITDA to profit for the year
Segments subtotal Adjusted EBITDA (2)			917
Depreciation and amortization			(580	)
Finance costs, net			(180	)
Income tax expenses			(21	)
Other (1)			(22	)
Profit for the year			114

(1)	Mainly amortization of employee share based compensation.

(2)

Adjusted EBITDA as reviewed by the CODM represents Earnings Before Interest (finance costs, net), Taxes, Depreciation and Amortization (including amortization of intangible assets, deferred expenses-right of use and impairment charges) and Other expenses (mainly amortization of share based compensation). Adjusted EBITDA is not a financial measure under IFRS and may not be comparable to other similarly titled measures for other companies. Adjusted EBITDA may not be indicative of the Group's historic operating results nor is it meant to be predictive of potential future results. The usage of the term "Adjusted EBITDA" is to highlight the fact that the Amortization includes amortization of deferred expenses – right of use and amortization of employee share based compensation and impairment charges.

(3)	Operating expenses include selling and marketing expenses, general and administrative expenses and credit losses.

 

  PARTNER COMMUNICATIONS COMPANY LTD.

   (An Israeli Corporation)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

		New Israeli shekels																Convenience translation into U.S. dollars
		12 month period ended December 31,								3 month period ended December 31								12 month period ended December 31,				3 month period ended December 31,
		2017				2018				2017				2018				2018				2018
		(Audited)				(Audited)				(Unaudited)				(Unaudited)				(Audited)				(Unaudited)
		In millions
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash generated from operations (Appendix)			1,002				627				198				123				168				33
Income tax paid			(29	)			(2	)			(22	)			(2	)			(1	)			(1	)
Net cash provided by operating activities			973				625				176				121				167				32
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment			(223	)			(343	)			(77	)			(102	)			(92	)			(27	)
Acquisition of intangible and other assets			(153	)			(159	)			(36	)			(41	)			(42	)			(11	)
Proceeds from short-term deposits, net			302				150								291				40				78
Interest received			2				1				*				*				*				*
Consideration received from sales of property and equipment			*				3				*				*				1				*
Payment for acquisition of subsidiary, net of cash acquired							(3	)											(1	)
Net cash used in investing activities			(72	)			(351	)			(113	)			148				(94	)			40
CASH FLOWS FROM FINANCING ACTIVITIES:
Share issuance			190
Acquisition of treasury shares							(100	)							(18	)			(27	)			(5	)
Proceeds from issuance of notes payable, net of issuance costs			650				150				398				150				40				40
Interest paid			(165	)			(69	)			(80	)			(15	)			(18	)			(4	)
Non-current borrowings received			350								350
Repayment of non-current borrowings			(1,332	)			(382	)			(431	)			(7	)			(102	)			(2	)
Repayment of notes payables			(443	)			(324	)			(443	)			(324	)			(86	)			(86	)
Net cash used in financing activities			(750	)			(725	)			(206	)			(214	)			(193	)			(57	)
INCREASE (DECREASE) IN CASH AND     CASH  EQUIVALENTS			151				(451	)			(143	)			55				(120	)			15
CASH AND CASH EQUIVALENTS AT     BEGINNING OF PERIOD			716				867				1,010				361				231				96
CASH AND CASH EQUIVALENTS AT     END OF PERIOD			867				416				867				416				111				111

 

 

  PARTNER COMMUNICATIONS COMPANY LTD.

   (An Israeli Corporation)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Appendix - Cash generated from operations and supplemental information

 

		New Israeli shekels																Convenience translation into U.S. dollars
		12 month period ended December 31,								3 month period ended December 31,								12 month period ended December 31,				3 month period ended December 31,
		2017				2018				2017				2018				2018				2018
		(Audited)				(Audited)				(Unaudited)				(Unaudited)				(Audited)				(Unaudited)
		In millions
Cash generated from operations:
Profit (Loss) for the period			114				56				(50	)			19				15				5
Adjustments for:
Depreciation and amortization			540				545				141				139				145				37
Amortization of deferred expenses - Right of use			40				47				12				16				13				4
Employee share based compensation expenses			20				15				4				4				4				1
Liability for employee rights upon retirement, net			(1	)			1				2				*				*				*
Finance costs, net			(2	)			(7	)			1				(6	)			(2	)			(2	)
Change in fair value of derivative financial instruments			*				*				1				*				*				*
Interest paid			165				69				80				15				18				4
Interest received			(2	)			(1	)			*				(3	)			*				(1	)
Deferred income taxes			(13	)			16				(27	)			(1	)			4				*
Income tax paid			29				2				22				2				1				1
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable:
Trade			283				124				7				14				33				4
Other			6				16				11				18				4				5
Increase (decrease) in accounts payable and accruals:
Trade			69				(69	)			24				(23	)			(18	)			(6	)
Other payables			(3	)			(18	)			46				11				(5	)			3
Provisions			(2	)			(11	)			(3	)			(5	)			(3	)			(1	)
Deferred revenues with respect to settlement agreement with Orange			(108	)
Deferred revenues from HOT mobile			(31	)			(31	)			(8	)			(8	)			(8	)			(2	)
Other deferred revenues			3				*				(2	)			1				*				*
Increase in deferred expenses - Right of use			(113	)			(107	)			(27	)			(30	)			(28	)			(8	)
Current income tax liability			5				(15	)			(33	)			(22	)			(4	)			(6	)
Decrease (increase) in inventories			3				(5	)			(3	)			(18	)			(1	)			(5	)
Cash generated from operations			1,002				627				198				123				168				33

 

*   Representing an amount of less than 1 million.

 

 

 

Adjusted Free Cash Flow		New Israeli Shekels																Convenience translation into U.S. Dollars				Convenience translation into U.S. Dollars
		12 months period ended December 31,				12 months period ended December 31,				3 months period ended December 31,				3 months period ended December 31,				12 months period ended December 31,				3 months period ended December 31,
		2017				2018				2017				2018				2018				2018
		(Audited)				(Audited)				(Unaudited)				(Unaudited)				(Audited)				(Unaudited)
		In millions
Net cash provided by operating activities			973				625				176				121				167				32
Net cash used in investing activities			(72	)			(351	)			(113	)			148				(94	)			40
Short-term investment in deposits			(302	)			(150	)							(291	)			(40	)			(78	)
Adjusted Free Cash Flow			599				124				63				(22	)			33				(6	)
Interest paid			(165	)			(69	)			(80	)			(15	)			(18	)			(4	)
Adjusted Free Cash Flow After Interest			434				55				(17	)			(37	)			15				(10	)

Total Operating Expenses (OPEX)		New Israeli Shekels																Convenience translation into U.S. Dollars				Convenience translation into U.S. Dollars
		12 months period ended December 31,				12 months period ended December 31,				3 months period ended December 31,				3 months period ended December 31,				12 months period ended December 31,				3 months period ended December 31,
		2017				2018				2017				2018				2018				2018
		(Audited)				(Audited)				(Unaudited)				(Unaudited)				(Audited)				(Unaudited)
		In millions
Cost of revenues – Services			2,083				2,131				547				547				569				146
Selling and marketing expenses			269				293				80				72				78				19
General and administrative expenses			144				148				40				37				39				10
Credit losses			52				30				10				4				8				1
Depreciation and amortization			(580	)			(592	)			(153	)			(155	)			(158	)			(41	)
Other (1)			(22	)			(14	)			(5	)			(3	)			(3	)			(1	)
OPEX			1,946				1,996				519				502				533				134

 

(1)	Mainly amortization of employee share based compensation.

NIS M unless otherwise stated		Q3' 16				Q4' 16				Q1' 17				Q2' 17				Q3' 17				Q4' 17				Q1' 18				Q2' 18				Q3' 18				Q4' 18				2017				2018
Cellular Segment Service     Revenues			531				498				489				497				514				478				466				454				476				447				1,978				1,843
Cellular Segment Equipment     Revenues			139				158				145				145				138				182				178				157				143				165				610				643
Fixed-Line Segment Service     Revenues			220				205				194				192				194				197				202				210				220				220				777				852
Fixed-Line Segment Equipment      Revenues			12				11				18				14				22				22				23				20				25				24				76				92
Reconciliation for consolidation			(53	)			(51	)			(43	)			(43	)			(42	)			(45	)			(43	)			(44	)			(42	)			(42	)			(173	)			(171	)
Total Revenues			849				821				803				805				826				834				826				797				822				814				3,268				3,259
Gross Profit from Equipment Sales			28				18				26				33				43				40				43				37				44				42				142				166
Operating Profit			64				8				105				118				92				0				32				22				48				14				315				116
Cellular Segment Adjusted     EBITDA			156				109				187				210				189				124				134				126				145				119				710				524
Fixed-Line Segment Adjusted     EBITDA			64				55				64				59				50				34				43				46				56				53				207				198
Total Adjusted EBITDA			220				164				251				269				239				158				177				172				201				172				917				722
Adjusted EBITDA Margin (%)			26	%			20	%			31	%			33	%			29	%			19	%			21	%			22	%			24	%			21	%			28	%			22	%
OPEX			570				570				478				472				477				519				498				492				504				502				1,946				1,996
Income with respect to settlement
agreement with Orange			55				54				54				54																												108
Finance costs, net			30				23				23				54				15				88				18				13				10				12				180				53
Profit (Loss)			19				(7	)			64				46				54				(50	)			9				2				26				19				114				56
Capital Expenditures (cash)			44				47				82				76				105				113				138				104				117				143				376				502
Capital Expenditures (additions)			44				84				58				78				107				174				113				98				111				177				417				499
Adjusted Free Cash Flow			215				269				126				208				202				63				21				55				70				(22	)			599				124
Adjusted Free Cash Flow (after interest)			201				241				109				150				192				(17	)			(14	)			44				62				(37	)			434				55
Net Debt			1,768				1,526				1,415				1,081				887				906				919				893				898				950				906				950
Cellular Subscriber Base (Thousands)*			2,693				2,686				2,658				2,662				2,677				2,662				2,649				2,623				2,630				2,646				2,662				2,646
Post-Paid Subscriber Base (Thousands)*			2,215				2,241				2,259				2,273				2,306				2,308				2,318				2,323				2,333				2,361				2,308				2,361
Pre-Paid Subscriber Base (Thousands)			478				445				399				389				371				354				331				300				297				285				354				285
Cellular ARPU (NIS)			66				62				61				62				64				59				58				57				60				57				62				58
Cellular Churn Rate (%)*			9.7	%			9.4	%			9.8	%			9.0	%			9.3	%			9.9	%			8.9	%			10.1	%			8.0	%			8.5	%			38	%			35	%
Number of Employees (FTE)			2,742				2,686				2,580				2,582				2,696				2,797				2,778				2,808				2,821				2,782				2,797				2,782