FORM
6-K
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Report
of Foreign Private Issuer
Pursuant
to Rule 13a-16 or 15d-16 of
the
Securities Exchange Act of 1934
For May
17, 2010
Commission
File Number: 001-33271
CELLCOM
ISRAEL LTD.
10
Hagavish Street
Netanya,
Israel 42140
________________________________________________
(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
X
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):
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 X
If “Yes”
is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): Not
Applicable
Index
1. Press Release
2. Proxy Statement
Item
1
CELLCOM
ISRAEL ANNOUNCES
FIRST
QUARTER 2010 RESULTS
Cellcom
Israel continues to present an increase in service revenues, operating income,
EBITDA and EBITDA margin,
despite
the ongoing price erosions and growing competition;
EBITDA margin reached 40.4%;
EBITDA1 up by 1.8%
Cellcom
Israel declares a first quarter dividend of NIS 3.64 per share
(totals
approx. NIS 360 million)
First
Quarter 2010 Highlights (compared to the
first quarter 20092):
|
§
|
Total Revenues from services
increased 3% to NIS 1,414 million ($381
million)
|
|
§
|
Revenues from content and value
added services (including SMS) increased 24.3%, reaching 17.8% of
services revenues
|
|
§
|
Total Revenues (including
revenues from end-user equipment) increased 1.2% to NIS 1,580
million ($426 million)
|
|
§
|
EBITDA increased
1.8% to NIS 638 million ($172 million); EBITDA margin
40.4%, up from
40.2%
|
|
§
|
Operating income
increased 4.6% to NIS 457 million ($123
million)
|
|
§
|
Net income totaled NIS
314 million ($85 million), a 9% decrease,
attributed to the increase in financing expenses,
net
|
|
§
|
Subscriber base
increased approx. 21,000 during the first quarter, all post-paid
subscribers; reaching approx. 3.313 million at the end of March
2010
|
|
§
|
3G subscribers reached
approx. 1.037 million at the end of March 2010, net addition of approx.
40,000 in the first quarter 2010
|
|
§
|
The Company Declared
first quarter dividend of NIS 3.64 per
share
|
Netanya, Israel – May 17, 2010 – Cel
lcom Israel Ltd. (NYSE: CEL
TASE: CEL) ("Cellcom Israel", the "Company"), announced today its financial
results for the first quarter of 2010. Revenues for the first quarter 2010
totaled NIS 1,580 million ($426 million); EBITDA for the first quarter 2010
totaled NIS 638 million ($172 million), or 40.4% of total revenues; and net
income for the first quarter 2010 totaled NIS 314 million ($85 million). Basic
earnings per share for the first quarter 2010 totaled NIS 3.18
($0.86).
1 Please see
"Use of Non-GAAP financial measures" section at the end of this press
release.
|
2
|
Following
the change in accounting policy in the second quarter of 2009 regarding
recognition of certain subscriber acquisition and retention costs for
capitalization, comparison data for the first quarter 2009 was changed to
reflect the retrospective application of that
change.
|
-1-
Commenting on the results, Amos
Shapira, Chief Executive Officer said, "Cellcom Israel continues its
strong performance in the first quarter of 2010 with sustained growth in service
revenues, EBITDA, EBITDA margin, operating income and subscriber
base.
While the
cellular market in Israel is evolving, we have maintained our position as the
cellular operator with the best financial performance in Israel and as market
leader in terms of subscriber base as well as in total revenues. I believe this
is a result of our strategy of focusing on cellular communications while being
committed to delivering quality customer service. Likewise, our
ability to leverage our core business through new synergetic and growth
opportunities while prudently managing expenses, further solidifies and supports
our leading position and strong financial performance.
We are
satisfied with the improvement in the growth rate of airtime minutes, which
totaled 4.8% in the first quarter this year compared to 2.5% in the first
quarter last year, as well as the service revenues growth, totaled 3% this
quarter compared to 1.1% in the first quarter last year. Furthermore, in the
first quarter 2010, we continued to expand our 3G subscriber base, reaching
1.037 million at the end of March 2010, representing 31.3% of our total
subscriber base.
We
operate in a heavily regulated industry and face an increasing number of
proposed regulatory changes. The Israeli Ministry of Communications recently
announced that it is considering a substantial decrease of interconnect tariffs
among Israeli operators3.
This proposed decrease follows other regulatory changes that are currently under
its consideration. We intend to object to the decrease of interconnect tariffs
as suggested, especially to the way it is implemented, which may have an adverse
effect on the Company's results, and we plan to take measures to mitigate its
impact.
We
recently finalized the acquisition of the assets and operation of Dynamica, one
of our major dealers, whose communications chain store will continue its
operation as our wholly owned subsidiary while benefiting from the
synergies between Dynamica’s operations and Cellcom Israel’s. I want to take
this opportunity to welcome all Dynamica's managers and employees to Cellcom
Israel's family. I look forward to working together in the future so that we can
continue to provide our customers with quality service and advanced products and
handsets."
Commenting
on the change in the Company's VP of business customers, Mr. Shapira thanked the
outgoing Mr. Poran on behalf of the Company's employees, management and
shareholders for his term of office and loyal partnership and wished him
success. With regard to the new VP, Mr. Shapira said: "Moty Caspy, one of the
Company's top managers, has contributed greatly to the Company's success. We
take great pride in appointing one of our own managers, who grew in the company,
to the VP business customers position and wish Moty success in his new
position."
|
3
|
See
"Other developments during the first quarter of 2010 and subsequent to the
end of the reporting period", under "Regulation – Tariff
Supervision", below, for additional
details.
|
-2-
Yaacov Heen, Chief Financial Officer,
commented: "We are very pleased with our results. Despite the
ongoing airtime price erosion resulting from the high market competition, we
have seen a 3% rise in revenues from services. Likewise, we have
shown quarter over quarter growth in other key areas including a 4.6% increase
in operating income, a 1.2% increase in total revenues, a 24.3% increase in
content and value added services revenues and a 1.8% increase in EBITDA with
EBITDA margin of 40.4%. In spite of the growth in these key performance
indicators, we presented a 9% decrease in net income, which is fully attributed
to the increase in our financing expenses, net. This quarter, we also continued
to present a strong free cash flow, totaling NIS 387 million, which enable us to
distribute a dividend of approximately NIS 360 million, representing
approximately 115% of net income for the first quarter, to our
shareholders.”
Main
Financial and Performance Indicators*:
|
Q1/2010
|
Q1/2009
|
%
Change
|
Q1/2010
|
Q1/2009
|
|
|
million
NIS
|
million
US$
(convenience
translation)
|
||||
|
Total
Services revenues
|
1,414
|
1,373
|
3.0%
|
380.8
|
369.8
|
|
Revenues
from content and value added services
|
251
|
202
|
24.3%
|
67.6
|
54.4
|
|
Handset
and accessories revenues
|
166
|
188
|
(11.7%)
|
44.7
|
50.6
|
|
Total
revenues
|
1,580
|
1,561
|
1.2%
|
425.5
|
420.4
|
|
Operating
Income
|
457
|
437
|
4.6%
|
123.1
|
117.7
|
|
Net
Income
|
314
|
345
|
(9.0%)
|
84.6
|
92.9
|
|
Free cash flow
1
|
387
|
393
|
(1.5%)
|
104.2
|
105.8
|
|
EBITDA
|
638
|
627
|
1.8%
|
171.8
|
168.9
|
|
EBITDA,
as percent of Revenues
|
40.4%
|
40.2%
|
0.5%
|
||
|
Subscribers
end of period
(in
thousands)
|
3,313
|
3,208
|
3.3%
|
||
|
Monthly
ARPU
|
139.1
|
139.9
|
(0.6%)
|
37.5
|
37.7
|
|
Average
Monthly MOU
|
328
|
323
|
1.6%
|
||
|
*
|
Following
the change in accounting policy in the second quarter of 2009 regarding
recognition of certain subscriber acquisition and retention costs for
capitalization, comparison data for the first quarter 2009 was changed to
reflect the retrospective application of that
change.
|
Financial
Review
Revenues for the first quarter of 2010 totaled
NIS 1,580 million ($426 million), a 1.2% increase compared to NIS 1,561 million
($420 million) in the first quarter last year. The increase in revenues resulted
from an increase in revenues from services, reaching NIS 1,414 million ($381
million) in the first quarter of 2010, up from NIS 1,373 million ($370 million)
in the first quarter last year. The higher service revenues resulted mainly from
an increase of approximately 24% in content and value added services (including
SMS) revenues in the first quarter 2010, compared to the first quarter last
year. Revenues from content and value added services reached NIS 251 million
($68 million), or 17.8% of service revenues.
Furthermore, the increase in landline services revenues during the quarter also
contributed to the higher service revenues. These increases were partially
offset by the ongoing airtime price erosion. The increase in service revenues
was partially offset by a 11.7% decrease in
-3-
handset and accessories’
revenues, from NIS 188
million ($51 million) in the first quarter last year, to NIS 166 million ($45
million) in the first quarter 2010, due to a decrease in the average handset sale price and
in the number of handsets sold in the first quarter 2010 compared to the first
quarter last year, resulted from a different mix of marketing activities in
these two quarters.
Cost of revenues for the first
quarter of 2010 totaled NIS 801 million ($216 million), a 1.2% decrease from NIS
811 million ($218 million) in the first quarter last year. This decline
primarily follows the lower handset costs resulting from a decrease in the
number of handsets sold during the first quarter of 2010 compared to the first
quarter last year, due to a different mix of marketing activities in these two
quarters. The decline in cost of revenues also resulted from an increased
efficiency in the cost of content and value added services, lower depreciation
expenses, as well as a decrease in royalties to the Ministry of Communications
resulting from a decline in the royalties' rate. These decreases were partially
offset by an increase in total interconnect fees due to a quantitative increase
in the number of outgoing calls completed in other operators'
networks.
Gross profit for the first
quarter of 2010 increased 3.9% reaching NIS 779 million ($210 million), compared
to NIS 750 million ($202 million) in the first quarter of 2009. Gross
profit margin for the first quarter
2010 increased to 49.3% from 48% in the first quarter last year.
Selling, Marketing, General and
Administrative Expenses ("SG&A Expenses") for the first quarter of
2010 totaled NIS 322 million ($87 million), compared to NIS 311 million ($84
million) in the first quarter last year. The increase in SG&A Expenses
resulted mainly from an increase in payroll expenses primarily attributed to an
increase in the Company's sales and customer service force.
Operating income for the first
quarter 2010 increased 4.6%, reaching NIS 457 million ($123 million), compared
to NIS 437 million ($118 million) in the first quarter last year.
EBITDA for the first quarter
2010 increased 1.8%, reaching NIS 638 million ($172 million), compared to NIS
627 million ($169 million) in the first quarter of 2009. EBITDA as a percent of
total revenues, reached 40.4% compared to 40.2% in the first quarter last
year.
Financing expenses, net for
the first quarter 2010 totaled NIS 36 million ($10 million), compared to
financing income net of NIS 28 million ($8 million) in the first quarter last
year. This change resulted from three main elements: (1) a loss from currency
hedging transactions due to an appreciation of 1.6% of the NIS against the US
dollar in the first quarter of 2010, compared to a gain from currency hedging
transactions in the first quarter last year due to a depreciation of 10.2% of
the NIS against the US dollar in the first quarter last year; (2) a loss from
the Israeli Consumer Price Index (CPI) hedging transactions in the first quarter
2010 resulting mainly from a deflation of 0.9% in the first quarter
this
-4-
year,
compared to a gain from CPI hedging transactions in the first quarter last year;
and (3) increased interest expenses, associated with the Company's debentures,
due to the increased debt level. These three impacts were partially offset by an
increased income from linkage to the CPI, associated with the Company's
debentures, due to the higher deflation in the first quarter of 2010 compared to
the first quarter last year, as well as from income from foreign currency
differences relating to trade payables balances in the first quarter 2010,
compared to expenses from foreign currency differences in the first quarter last
year, following the changes in the NIS/US dollar exchange rate.
Net
Income for the first
quarter 2010 totaled NIS 314 million ($85 million), compared to NIS 345 million
($93 million) in the first quarter last year. This decrease resulted from the
higher financing expenses. Basic earnings per
share for the first
quarter 2010 totaled NIS 3.18 ($0.86), compared to NIS 3.51 ($0.95) in the first
quarter 2009.
Operating
Review
New Subscribers – at the end
of March 2010 the Company had approximately 3.313 million subscribers. During
the first quarter of 2010 the Company added approximately 21,000 net new
subscribers, all of them post-paid subscribers.
In the
first quarter of 2010, the Company added approximately 40,000 net new 3G
subscribers to its 3G subscriber base, reaching approximately 1.037 million 3G
subscribers at the end of March 2010, representing 31.3% of the Company’s total
subscriber base, an increase from the 26% 3G subscribers represented of total
subscribers at the end of March 2009.
The Churn
Rate in the first quarter
2010 was 5.4%, compared to 5.0% in the first quarter last year. The churn for
both quarters was primarily impacted by the churn of pre-paid subscribers,
characterized by lower
contribution, and subscribers with collection problems.
Average
monthly subscriber Minutes of
Use ("MOU") in the first quarter 2010 totaled 328 minutes, compared to
323 minutes in the first quarter 2009, an increase of 1.6%.
The
monthly Average Revenue per
User (ARPU) for the first quarter 2010 decreased 0.6% and totaled NIS
139.1 ($37.5), compared to NIS 139.9 ($37.7) in the first quarter last
year.
Financing
and Investment Review
Cash
Flow
Free cash flow for the first
quarter of 2010 totaled NIS 387 million ($104 million), compared to NIS 393
million ($106 million) generated in the first quarter of 2009. The decrease in
free cash flow
-5-
resulted
mainly from payments for derivative hedging transactions and other derivative
transactions in the first quarter of 2010, compared to proceeds received from
such transactions in the first quarter last year.
Shareholders'
Equity
Shareholders'
Equity as of March 31, 2010 amounted to NIS 430 million ($116 million),
primarily consisting of accumulated undistributed retained
earnings.
Investment in Fixed Assets
and Intangible Assets
During
the first quarter 2010, the Company invested NIS 137 million ($37 million) in
fixed assets and intangible assets (including, among others, deferred sales
commissions and handsets subsidies and investments in information systems and
software), compared to NIS 114 million ($31 million) in the first quarter
2009.
Dividend
On May
16, 2010, the Company's board of directors declared a cash dividend in the
amount of NIS 3.64 per share, and in the aggregate amount of approximately NIS
360 million (the equivalent of approximately $0.97 per share and approximately
$96 million in the aggregate, based on the representative rate of exchange on
May 13, 2010; The actual US$ amount for dividend paid in US$ will be converted
from NIS based upon the representative rate of exchange published by the Bank of
Israel on June 7, 2010), subject to withholding tax described below. The
dividend will be payable to all of the Company’s shareholders of record at the
end of the trading day in the NYSE on May 27, 2010. The payment date will be
June 9, 2010. According to the Israeli tax law, the Company will deduct at
source 20% of the dividend amount payable to each shareholder, as aforesaid,
subject to applicable exemptions. The dividend per share that the Company will
pay for the first quarter of 2010 does not reflect the level of dividends that
will be paid for future quarterly periods, which can change at any time in
accordance with the Company’s dividend policy. A dividend declaration is not
guaranteed and is subject to the Company's board of directors’ sole discretion,
as detailed in the Company's annual report for the year ended December 31, 2009
on Form 20-F, under “Item 8 - Financial Information - Dividend
Policy”.
Other
developments during the first quarter of 2010 and subsequent to the end of the
reporting period
Regulation – Tariff
Supervision
In May
2010, following the previously reported examination conducted by the Israeli
Ministry of Communications, or MOC, regarding interconnect tariffs payable by
cellular operators, the MOC announced it is considering changes to
the Israeli regulations which set interconnect tariffs among Israeli operators,
as follows:
-6-
|
·
|
to
reduce the maximum interconnect tariff payable by a landline operator or a
cellular operator for the completion of a call on another cellular network
from the current tariff of NIS 0.251 per minute to NIS 0.0414 per minute
from August 1, 2010; to NIS 0.0354 per minute from January 1, 2011; to
0.0311 per minute from January 1, 2012; to NIS 0.0280 per minute from
January 1, 2013; and to NIS 0.0257 as of January 1,
2014.
|
|
·
|
to
reduce the maximum interconnect tariff payable by a cellular operator for
sending an SMS message to another cellular network from the current tariff
of NIS 0.0285 to NIS 0.0019 from August 1, 2010; to NIS 0.0017 from
January 1, 2011; to NIS 0.0016 from January 1, 2012; to NIS 0.0014 from
January 1, 2013; and to NIS 0.0013 from January 1,
2014.
|
|
·
|
the
tariffs do not include VAT will be updated annually from January 1, 2011,
based on the change in the Israeli CPI published in November of the
preceding year against the Israeli CPI published in January
2010.
|
The
Company and the other cellular operators may respond to the proposed changes
within 30 days, at which time the MOC is expected to make a final determination.
The Company can not assess at this stage the ultimate outcome of the hearing and
what the final maximum tariffs will be, but it is reviewing its possible effect
on its results of operations. If the changes as currently proposed are adopted,
then, absent any efforts to mitigate the expected loss of revenues, the
currently proposed changes are expected to have a monthly adverse effect
estimated at this stage to amount to approximately NIS 35 million on the
Company's EBITDA and approximately NIS 25 million on the Company's net income,
from August 2010. Additionally, such proposed changes may have additional
effects, such as on the volumes of outgoing and incoming calls to cellular
networks, and facilitation of MVNOs' entry to the market, all of which may have
a material adverse effect on the Company's results of operations. The Company
intends to take measures to mitigate as much as possible expected adverse
effects of such proposed changes, through revenue enhancement as well as cost
reduction. The Company cannot estimate at this stage the actual effects of the
changes, if adopted. The Company intends to object strongly to the
proposed changes but cannot predict the ultimate outcome of such
objections.
For
additional details see the Company’s most recent annual report for the year
ended December 31, 2009 on Form 20-F under “Item 3. Key Information – D. Risk
Factors – Risks related to our business – We operate in a heavily
regulated industry, which can harm our results of operations” and “we face intense
competition in all aspects of our business”, as well as under
“Item 4.
Information on the Company – B. Business Overview – Competition”, “Government
Regulations –Tariff Supervision” and “Mobile Virtual
Network Operator”.
Forward Looking Statement
- The information above 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). Said
forward-looking statements, relating to the reduction of interconnect tariffs
and its influence on the Company's results of operations, are subject to
uncertainties and assumptions about the outcome of the aforesaid hearing and the
Company's ability to mitigate the expected lost revenues. The Company's
ability to mitigate the expected lost revenues could lead to materially
different outcome than that set forth above.
-7-
Cell
sites
Following
the previously reported opinion of the Israeli Attorney General, on March 2010
the Israeli Ministry of Interior Affairs submitted drat regulations, setting the
conditions for the application of the exemption from the requirement to obtain a
building permit for radio access devices, for the approval of the Economy
Committee of the Israeli Parliament. The draft regulations include substantial
limitations on the ability to construct radio access devices based on such
exemption, including a limitation of the number of such radio access devices to
5% of the total number of cell sites constructed or to be constructed with a
building permit in a certain area during a certain period, and to circumstances
in which a request for a building permit for the radio access device was filed
and no resolution has been granted within the timeframe set in the regulations.
For additional details see the Company's most recent annual report for the year
ended December 31,2009 on Form 20-F, under “Item 3. Key Information – D. Risk
Factors – Risks related to our business – We may not be able to obtain permits
to construct cell sites” as well as under "Item 4. Information on the Company –
B. Business Overview – Government Regulations – Permits for Cell site
Construction –Site Licensing”.
Change of VP business
customers
In April
2010, the Company announced on change of VP business customers. Mr. Refael
Poran, will be leaving his office as the Company's vice president of business
customers. Mr. Moty Caspy was appointed by the Company's board of directors as
the Company's vice president of business customers, effective May 1, 2010. Mr.
Poran will continue to serve in office until Mr. Caspy assumes his
responsibilities. For additional details see the Company's immediate reports (on
Form 6-K) dated April 15, 2010 and April 29, 2010.
Conference
Call Details
The
Company will be hosting a conference call on Monday, May 17, 2010 at 9:00 am ET,
6:00 am PT, 14:00 UK time, 16:00 Israel time. On the call, management will
review and discuss the results, and will be available to answer questions. To
participate, please either access the live webcast on the Company's website, or
call one of the following teleconferencing numbers below. Please
begin placing your calls at least 10 minutes before the conference call
commences. If you are unable to connect using the toll-free numbers, please try
the international dial-in number.
| US Dial-in Number: 1 888 281 1167 | UK Dial-in Number: 0 800 917 9141 |
| Israel Dial-in Number: 03 918 0685 | International Dial-in Number: +972 3 918 0685 |
at: 09:00
am ET; 06:00 am PT; 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.
-8-
About
Cellcom Israel
Cellcom
Israel Ltd., established in 1994, is the leading Israeli cellular provider;
Cellcom Israel provides its approximately 3.313 million subscribers (as at March
31, 2010) with a broad range of value added services including cellular and
landline telephony, roaming services for tourists in Israel and for its
subscribers abroad and additional services in the areas of music, video, mobile
office etc., based on Cellcom Israel's technologically advanced infrastructure.
The Company operates an HSPA 3.5 Generation network enabling advanced high speed
broadband multimedia services, in addition to GSM/GPRS/EDGE and TDMA networks.
Cellcom Israel offers Israel's broadest and largest customer service
infrastructure including telephone customer service centers, retail stores, and
service and sale centers, distributed nationwide. Through its broad customer
service network Cellcom Israel offers its customers technical support, account
information, direct to the door parcel services, internet and fax services,
dedicated centers for the hearing impaired, etc. As of 2006, Cellcom Israel,
through its wholly owned subsidiary Cellcom Fixed Line Communications L.P.,
provides landline telephone communication services in Israel, in addition to
data communication services. Cellcom Israel's shares are traded both on the New
York Stock Exchange (CEL) and the Tel Aviv Stock Exchange (CEL). For additional
information please visit the Company's website www.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 us, may include projections of our
future financial results, our anticipated growth strategies and anticipated
trends in our business. These statements are only predictions based
on our current expectations and projections about future
events. There are important factors that could cause our actual
results, level of activity, performance or achievements to differ materially
from the results, level of activity, performance or achievements expressed or
implied by the forward-looking statements. Factors that could cause such
differences include, but are not limited to: changes to the terms of our
license, new legislation or decisions by the regulator affecting our operations,
the outcome of legal proceedings to which we are a party, particularly class
action lawsuits, our ability to maintain or obtain permits to construct and
operate cell sites, and other risks and uncertainties detailed from time to time
in our filings with the U.S. Securities and Exchange Commission, including under
the caption “Risk Factors” in our Annual Report for the year ended December 31,
2009.
Although
we believe the expectations reflected in the forward-looking statements
contained herein are reasonable, we cannot guarantee future results, level of
activity, performance or achievements. Moreover, neither we nor any
other person assumes responsibility for the accuracy and completeness of any of
these forward-looking statements. We assume no duty to update any of
these forward-looking statements after the date hereof to conform our prior
statements to actual results or revised expectations, except as otherwise
required by law.
The
Company prepares its financial statements in accordance with International
Financial Reporting Standards (IFRS), as issued by the International Accounting
Standards Board (IASB). Unless noted specifically otherwise, the dollar
denominated figures were converted to US$ using a convenience translation based
on the US$\New Israeli Shekel (NIS) conversion rate of NIS 3.713 =
US$ 1 as published by the Bank of Israel on March 31, 2010.
Use
of non-GAAP financial measures
EBITDA is a non-GAAP measure
and is defined as income before financing income (expenses), net; other income
(expenses), net; income tax; depreciation and amortization. This is an accepted
measure in the communications industry. The Company presents this measure as an
additional performance measure as the Company believes that it enables us to
compare operating performance between periods and companies, net of any
potential differences which may result from
-9-
differences
in capital structure, taxes, age of fixed assets and related depreciation
expenses. EBITDA should not be considered in isolation, or as a substitute for
operating income, any other performance measures, or cash flow data, which were
prepared in accordance with Generally Accepted Accounting Principles as measures
of profitability or liquidity. EBITDA does not take into account debt service
requirements, or other commitments, including capital expenditures, and
therefore, does not necessarily indicate the amounts that may be available for
the Company's use. In addition, EBITDA may not be comparable to similarly titled
measures reported by other companies, due to differences in the way these
measures are calculated. See the reconciliation between the net income and the
EBITDA presented at the end of this Press Release.
Free cash flow is a non-GAAP
measure and is defined as the net cash provided by operating activities minus
the net cash used in investing activities plus short-term investment in
marketable debentures. See the reconciliation note at the end of this Press
Release.
|
Company
Contact
Yaacov
Heen
Chief
Financial Officer
investors@cellcom.co.il
Tel:
+972 52 998 9755
|
IR
Contacts
Porat
Saar & Kristin Knies
CCG
Investor Relations Israel & US
cellcom@ccgisrael.com
Tel:
+1 646 233 2161
|
Financial
Tables Follow
-10-
Cellcom
Israel Ltd.
(An
Israeli Corporation)
Condensed
Consolidated Statements of Financial position
|
Convenience
|
||||||||||||||||
|
translation
|
||||||||||||||||
|
into
US dollar
|
||||||||||||||||
|
March
31,
|
March
31,
|
March
31,
|
December
31,
|
|||||||||||||
|
2010
|
2010
|
*2009 |
2009
|
|||||||||||||
|
NIS
millions
|
US$
millions
|
NIS
millions
|
NIS
millions
|
|||||||||||||
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Audited)
|
|||||||||||||
|
Assets
|
||||||||||||||||
|
Cash
and cash equivalents
|
618 | 166 | 152 | 903 | ||||||||||||
|
Current
investments, including derivatives
|
383 | 103 | 72 | 272 | ||||||||||||
|
Trade
receivables
|
1,554 | 419 | 1,518 | 1,579 | ||||||||||||
|
Other
receivables
|
71 | 19 | 66 | 63 | ||||||||||||
|
Inventory
|
134 | 36 | 128 | 149 | ||||||||||||
|
Total
current assets
|
2,760 | 743 | 1,936 | 2,966 | ||||||||||||
|
Trade
and other receivables
|
584 | 157 | 612 | 606 | ||||||||||||
|
Property,
plant and equipment, net
|
2,060 | 555 | 2,100 | 2,096 | ||||||||||||
|
Intangible
assets, net
|
704 | 190 | 728 | 711 | ||||||||||||
|
Total
non- current assets
|
3,348 | 902 | 3,440 | 3,413 | ||||||||||||
|
Total
assets
|
6,108 | 1,645 | 5,376 | 6,379 | ||||||||||||
|
Liabilities
|
||||||||||||||||
|
Debentures
current maturities
|
344 | 93 | 327 | 350 | ||||||||||||
|
Trade
payables and accrued expenses
|
718 | 193 | 686 | 806 | ||||||||||||
|
Current
tax liabilities
|
83 | 22 | 120 | 67 | ||||||||||||
|
Provisions
|
87 | 24 | 52 | 84 | ||||||||||||
|
Other
current liabilities, including derivatives
|
364 | 98 | 318 | 405 | ||||||||||||
|
Total
current liabilities
|
1,596 | 430 | 1,503 | 1,712 | ||||||||||||
|
Debentures
|
3,983 | 1,073 | 3,213 | 4,185 | ||||||||||||
|
Provisions
|
17 | 4 | 18 | 16 | ||||||||||||
|
Other
long-term liabilities
|
1 | - | - | 1 | ||||||||||||
|
Deferred
taxes
|
81 | 22 | 158 | 91 | ||||||||||||
|
Total
non- current liabilities
|
4,082 | 1,099 | 3,389 | 4,293 | ||||||||||||
|
Total
liabilities
|
5,678 | 1,529 | 4,892 | 6,005 | ||||||||||||
|
Shareholders’
equity
|
||||||||||||||||
|
Share
capital
|
1 | - | 1 | 1 | ||||||||||||
|
Cash
flow hedge reserve
|
(24 | ) | (6 | ) | 8 | (23 | ) | |||||||||
|
Retained
earnings
|
453 | 122 | 475 | 396 | ||||||||||||
|
Total
shareholders’ equity
|
430 | 116 | 484 | 374 | ||||||||||||
|
Total
liabilities and shareholders’ equity
|
6,108 | 1,645 | 5,376 | 6,379 | ||||||||||||
(*) Retrospective
application due to accounting policy change regarding "Subscriber Acquisition
and Retention Costs"
-11-
Cellcom
Israel Ltd.
(An
Israeli Corporation)
Condensed
Consolidated Statements of Income
|
Three-
month period ended
|
Year
ended
|
|||||||||||||||
|
March
31,
|
December
31,
|
|||||||||||||||
|
Convenience
|
||||||||||||||||
|
translation
|
||||||||||||||||
|
into
US dollar
|
||||||||||||||||
|
2010
|
2010
|
*2009 |
2009
|
|||||||||||||
|
NIS
millions
|
US$
millions
|
NIS
millions
|
NIS
millions
|
|||||||||||||
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Audited)
|
|||||||||||||
|
Revenues
|
1,580 | 426 | 1,561 | 6,483 | ||||||||||||
|
Cost
of revenues
|
801 | 216 | 811 | 3,333 | ||||||||||||
|
Gross
profit
|
779 | 210 | 750 | 3,150 | ||||||||||||
|
Selling
and marketing expenses
|
163 | 44 | 157 | 716 | ||||||||||||
|
General
and administrative expenses
|
159 | 43 | 154 | 660 | ||||||||||||
|
Other
(income) expenses, net
|
- | - | 2 | 6 | ||||||||||||
|
Operating
income
|
457 | 123 | 437 | 1,768 | ||||||||||||
|
Financing
income
|
23 | 6 | 60 | 151 | ||||||||||||
|
Financing
expenses
|
(59 | ) | (16 | ) | (32 | ) | (370 | ) | ||||||||
|
Financing
costs, net
|
(36 | ) | (10 | ) | 28 | (219 | ) | |||||||||
|
Income
before income tax
|
421 | 113 | 465 | 1,549 | ||||||||||||
|
Income
tax
|
107 | 28 | 120 | 367 | ||||||||||||
|
Net
income
|
314 | 85 | 345 | 1,182 | ||||||||||||
|
Earnings
per share
|
||||||||||||||||
|
Basic
earnings per share in NIS
|
3.18 | 0.86 | 3.51 | 12.01 | ||||||||||||
|
Diluted
earnings per share in NIS
|
3.16 | 0.85 | 3.48 | 11.90 | ||||||||||||
(*) Retrospective
application due to accounting policy change regarding "Subscriber Acquisition
and Retention Costs"
-12-
Cellcom
Israel Ltd.
(An
Israeli Corporation)
Condensed
Consolidated Statements of Cash Flows
|
Three-month
period ended
|
Year
ended
|
|||||||||||||||
|
March
31,
|
December
31,
|
|||||||||||||||
|
Convenience
|
||||||||||||||||
|
translation
|
||||||||||||||||
|
into
US dollar
|
||||||||||||||||
|
2010
|
2010
|
*2009 |
2009
|
|||||||||||||
|
NIS
millions
|
US$
millions
|
NIS
millions
|
NIS
millions
|
|||||||||||||
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Audited)
|
|||||||||||||
|
Cash
flows from operating activities
|
||||||||||||||||
|
Net
income for the period
|
314 | 85 | 345 | 1,182 | ||||||||||||
|
Adjustments
for:
|
||||||||||||||||
|
Depreciation
and Amortization
|
181 | 49 | 188 | 755 | ||||||||||||
|
Share
based payments
|
- | - | - | 1 | ||||||||||||
|
Loss
(gain) on sale of assets
|
- | - | 2 | 6 | ||||||||||||
|
Income
tax expense
|
107 | 28 | 120 | 367 | ||||||||||||
|
Financial
(income) expenses, net
|
36 | 10 | (28 | ) | 219 | |||||||||||
|
Changes
in operating assets and liabilities:
|
||||||||||||||||
|
Changes
in inventories
|
(5 | ) | (1 | ) | (25 | ) | (105 | ) | ||||||||
|
Changes
in trade receivables (including long- term amounts)
|
76 | 20 | (39 | ) | (69 | ) | ||||||||||
|
Changes
in other receivables (including long- term amounts)
|
(25 | ) | (7 | ) | (25 | ) | 2 | |||||||||
|
Changes
in trade payables and accrued expenses
|
(34 | ) | (9 | ) | 66 | 152 | ||||||||||
|
Changes
in other liabilities (including long-term amounts)
|
6 | 1 | 9 | (4 | ) | |||||||||||
|
Proceeds
(Payments) for derivative hedging contracts, net
|
(5 | ) | (1 | ) | 5 | 21 | ||||||||||
|
Income
tax paid
|
(100 | ) | (27 | ) | (90 | ) | (447 | ) | ||||||||
|
Net
cash from operating activities
|
551 | 148 | 528 | 2,080 | ||||||||||||
|
Cash
flows from investing activities
|
||||||||||||||||
|
Acquisition
of property, plant, and equipment
|
(105 | ) | (28 | ) | (112 | ) | (404 | ) | ||||||||
|
Acquisition
of intangible assets
|
(58 | ) | (16 | ) | (47 | ) | (173 | ) | ||||||||
|
Change
in current investments, net
|
(138 | ) | (37 | ) | - | (212 | ) | |||||||||
|
Proceeds
(payments) for other derivative contracts, net
|
(5 | ) | (1 | ) | ** 24 | ** 8 | ||||||||||
|
Proceeds
from sales of property, plant and equipment
|
1 | - | - | 2 | ||||||||||||
|
Interest
received
|
3 | 1 | - | 5 | ||||||||||||
|
Net
cash used in investing activities
|
(302 | ) | (81 | ) | (135 | ) | (774 | ) | ||||||||
(*) Retrospective
application due to accounting policy change regarding "Subscriber Acquisition
and Retention Costs"
(**)
Reclassified
-13-
Cellcom
Israel Ltd.
(An
Israeli Corporation)
Condensed
Consolidated Statements of Cash Flows (cont’d)
|
Three-month
period ended
|
Year
ended
|
|||||||||||||||
|
March
31,
|
December
31,
|
|||||||||||||||
|
Convenience
|
||||||||||||||||
|
translation
|
||||||||||||||||
|
into
US dollar
|
||||||||||||||||
|
2010
|
2010
|
2009
|
2009
|
|||||||||||||
|
NIS
millions
|
US$
millions
|
NIS
millions
|
NIS
millions
|
|||||||||||||
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Audited)
|
|||||||||||||
|
Cash
flows from financing activities
|
||||||||||||||||
|
Proceeds
from derivative contracts, net
|
13 | 3 | 4 | 33 | ||||||||||||
|
Proceeds
(Payments) for short term borrowings
|
(3 | ) | (1 | ) | - | 8 | ||||||||||
|
Repayment
of debentures
|
(171 | ) | (46 | ) | (164 | ) | (332 | ) | ||||||||
|
Proceeds
from issuance of debentures, net of issuance costs
|
- | - | - | 989 | ||||||||||||
|
Dividend
paid
|
(256 | ) | (69 | ) | (270 | ) | (1,186 | ) | ||||||||
|
Interest
paid
|
(117 | ) | (31 | ) | (86 | ) | (190 | ) | ||||||||
|
Net
cash used in financing activities
|
(534 | ) | (144 | ) | (516 | ) | (678 | ) | ||||||||
|
Changes
in cash and cash equivalents
|
(285 | ) | (77 | ) | (123 | ) | 628 | |||||||||
|
Balance of cash and
cash equivalents at beginning of the
period
|
903 | 243 | 275 | 275 | ||||||||||||
|
Balance of cash and
cash equivalents at end of the
period
|
618 | 166 | 152 | 903 | ||||||||||||
-14-
Cellcom
Israel Ltd.
(An
Israeli Corporation)
Reconciliation
for Non-GAAP Measures
EBITDA
The
following is a reconciliation of net income to EBITDA:
|
Three-month
period ended
March
31,
|
Year
ended
December
31,
|
|||||||||||||||
|
2010
NIS
millions
(Unaudited)
|
Convenience
translation
into US dollar
2010
US$
millions
(Unaudited)
|
2009
NIS
millions
(Unaudited)
|
2009
NIS
millions
(Audited)
|
|||||||||||||
|
Net
income
|
314 | 85 | 345 | 1,182 | ||||||||||||
|
Income
taxes
|
107 | 28 | 120 | 367 | ||||||||||||
|
Financing
income
|
(23 | ) | (6 | ) | (60 | ) | (151 | ) | ||||||||
|
Financing
expenses
|
59 | 16 | 32 | 370 | ||||||||||||
|
Other
expenses (income)
|
- | - | 2 | 6 | ||||||||||||
|
Depreciation
and amortization
|
181 | 49 | 188 | 755 | ||||||||||||
|
EBITDA
|
638 | 172 | 627 | 2,529 | ||||||||||||
Free
Cash Flow
The
following table shows the calculation of free cash flow:
|
Three-month
period ended
March
31,
|
Year
ended
December
31,
|
|||||||||||||||
|
2010
NIS
millions
(Unaudited)
|
Convenience
translation
into US dollar
2010
US$
millions
(Unaudited)
|
2009
NIS
millions
(Unaudited)
|
2009
NIS
millions
(Audited)
|
|||||||||||||
|
Cash
flows from operating activities
|
551 | 148 | 528 | 2,080 | ||||||||||||
|
Cash
flows from investing activities
|
(302 | ) | (81 | ) | (135 | ) | (774 | ) | ||||||||
|
short-term
Investment in marketable debentures
|
138 | 37 | - | 212 | ||||||||||||
|
Free
Cash Flow
|
387 | 104 | 393 | 1,518 | ||||||||||||
-15-
Item
2
|
Cellcom
Israel Ltd.
and
Subsidiaries
Financial
Statements
As
at March 31, 2010
(Unaudited)
|
1
Cellcom
Israel Ltd. and Subsidiaries
Condensed
Consolidated Interim Financial Statements as at March 31,
2010
Contents
Page
|
Condensed
Consolidated Interim Statements of Financial position
|
3
|
|
Condensed
Consolidated Interim Statements of Income
|
4
|
|
Condensed
Consolidated Interim Statements of Comprehensive Income
|
5
|
|
Condensed
Consolidated Interim Statements of Changes in shareholders'
equity
|
6
|
|
Condensed
Consolidated Interim Statements of Cash Flows
|
7
|
|
Condensed
notes to the Interim Consolidated Financial Statements
|
9
|
2
Cellcom
Israel Ltd. and Subsidiaries
Condensed Consolidated Interim Statements of Financial position
|
March
31,
2010
|
Convenience
translation
into
US dollar
(Note
2D)
March 31,
2010
|
March
31,
*2009
|
December
31,
2009
|
|||||||||||||
|
NIS
millions
|
US$
millions
|
NIS
millions
|
NIS
millions
|
|||||||||||||
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Audited)
|
|||||||||||||
|
Assets
|
||||||||||||||||
|
Cash
and cash equivalents
|
618 | 166 | 152 | 903 | ||||||||||||
|
Current
investments, including derivatives
|
383 | 103 | 72 | 272 | ||||||||||||
|
Trade
receivables
|
1,554 | 419 | 1,518 | 1,579 | ||||||||||||
|
Other
receivables
|
71 | 19 | 66 | 63 | ||||||||||||
|
Inventory
|
134 | 36 | 128 | 149 | ||||||||||||
|
Total
current assets
|
2,760 | 743 | 1,936 | 2,966 | ||||||||||||
|
Trade
and other receivables
|
584 | 157 | 612 | 606 | ||||||||||||
|
Property,
plant and equipment, net
|
2,060 | 555 | 2,100 | 2,096 | ||||||||||||
|
Intangible
assets, net
|
704 | 190 | 728 | 711 | ||||||||||||
|
Total
non- current assets
|
3,348 | 902 | 3,440 | 3,413 | ||||||||||||
|
Total
assets
|
6,108 | 1,645 | 5,376 | 6,379 | ||||||||||||
|
Liabilities
|
||||||||||||||||
|
Debentures
current maturities
|
344 | 93 | 327 | 350 | ||||||||||||
|
Trade
payables and accrued expenses
|
718 | 193 | 686 | 806 | ||||||||||||
|
Current
tax liabilities
|
83 | 22 | 120 | 67 | ||||||||||||
|
Provisions
|
87 | 24 | 52 | 84 | ||||||||||||
|
Other
current liabilities, including derivatives
|
364 | 98 | 318 | 405 | ||||||||||||
|
Total
current liabilities
|
1,596 | 430 | 1,503 | 1,712 | ||||||||||||
|
Debentures
|
3,983 | 1,073 | 3,213 | 4,185 | ||||||||||||
|
Provisions
|
17 | 4 | 18 | 16 | ||||||||||||
|
Other
long-term liabilities
|
1 | - | - | 1 | ||||||||||||
|
Deferred
taxes
|
81 | 22 | 158 | 91 | ||||||||||||
|
Total
non- current liabilities
|
4,082 | 1,099 | 3,389 | 4,293 | ||||||||||||
|
Total
liabilities
|
5,678 | 1,529 | 4,892 | 6,005 | ||||||||||||
|
Shareholders’
equity
|
||||||||||||||||
|
Share
capital
|
1 | - | 1 | 1 | ||||||||||||
|
Cash
flow hedge reserve
|
(24 | ) | (6 | ) | 8 | (23 | ) | |||||||||
|
Retained
earnings
|
453 | 122 | 475 | 396 | ||||||||||||
|
Total
shareholders’ equity
|
430 | 116 | 484 | 374 | ||||||||||||
|
Total
liabilities and shareholders’ equity
|
6,108 | 1,645 | 5,376 | 6,379 | ||||||||||||
(*)
Retrospective application due to accounting policy change – see note
2H
The
accompanying notes are an integral part of the interim consolidated financial
statements.
3
Cellcom
Israel Ltd. and Subsidiaries
Condensed
Consolidated Interim Statements of Income
|
Three-
month period ended
March
31,
|
Year
ended December
31,
|
|||||||||||||||
|
|
Convenience
|
|||||||||||||||
|
translation
|
||||||||||||||||
|
into
US dollar
|
||||||||||||||||
|
(Note
2D)
|
||||||||||||||||
|
2010
|
2010
|
*2009 | 2009 | |||||||||||||
|
NIS
millions
|
US$
millions
|
NIS
millions
|
NIS
millions
|
|||||||||||||
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Audited)
|
|||||||||||||
|
Revenues
|
1,580 | 426 | 1,561 | 6,483 | ||||||||||||
|
Cost
of revenues
|
801 | 216 | 811 | 3,333 | ||||||||||||
|
Gross
profit
|
779 | 210 | 750 | 3,150 | ||||||||||||
|
Selling
and marketing expenses
|
163 | 44 | 157 | 716 | ||||||||||||
|
General
and administrative expenses
|
159 | 43 | 154 | 660 | ||||||||||||
|
Other
expenses, net
|
- | - | 2 | 6 | ||||||||||||
|
Operating
income
|
457 | 123 | 437 | 1,768 | ||||||||||||
|
Financing
income
|
23 | 6 | 60 | 151 | ||||||||||||
|
Financing
expenses
|
(59 | ) | (16 | ) | (32 | ) | (370 | ) | ||||||||
|
Financing
income (expenses), net
|
(36 | ) | (10 | ) | 28 | (219 | ) | |||||||||
|
Income
before income tax
|
421 | 113 | 465 | 1,549 | ||||||||||||
|
Income
tax
|
107 | 28 | 120 | 367 | ||||||||||||
|
Net
income
|
314 | 85 | 345 | 1,182 | ||||||||||||
|
Earnings
per share
|
||||||||||||||||
|
Basic
earnings per share in NIS
|
3.18 | 0.86 | 3.51 | 12.01 | ||||||||||||
|
Diluted
earnings per share in NIS
|
3.16 | 0.85 | 3.48 | 11.90 | ||||||||||||
(*) Retrospective
application due to accounting policy change – see note 2H
The
accompanying notes are an integral part of the interim consolidated financial
statements.
4
Cellcom
Israel Ltd. and Subsidiaries
Condensed
Consolidated Interim Statements of Comprehensive Income
|
Three-
month period ended
March
31,
|
Year
ended
December
31,
|
|||||||||||||||
|
Convenience
|
||||||||||||||||
|
translation
|
||||||||||||||||
|
into
US dollar
|
||||||||||||||||
|
(Note
2D)
|
||||||||||||||||
|
2010
|
2010
|
*2009 | 2009 | |||||||||||||
|
NIS
millions
|
US$
millions
|
NIS
millions
|
NIS
millions
|
|||||||||||||
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Audited)
|
|||||||||||||
|
Net change in fair
value of cash flow hedges transferred
to profit and loss
|
3 | 1 | (1 | ) | (14 | ) | ||||||||||
|
Changes
in fair value of cash flow hedges
|
(3 | ) | (1 | ) | 20 | (2 | ) | |||||||||
|
Income
tax on other comprehensive income
|
(1 | ) | - | - | 4 | |||||||||||
|
Other
comprehensive income, net of income tax
|
(1 | ) | - | 19 | (12 | ) | ||||||||||
|
Net
income for the period
|
314 | 85 | 345 | 1,182 | ||||||||||||
|
Total
comprehensive income for the period
|
313 | 85 | 364 | 1,170 | ||||||||||||
(*)
Retrospective application due to accounting policy change – see note
2H
The
accompanying notes are an integral part of the interim consolidated financial
statements.
5
Cellcom
Israel Ltd. and Subsidiaries
Condensed
Consolidated Interim Statements of Changes in Shareholders' Equity
|
Share
capital amount
|
Cash
flow
hedge
reserve
|
Retained
earnings
|
Total
|
Convenience
translation
into
US dollar
(Note
2D)
|
||||||||||||||||
|
NIS
millions
|
US$
millions
|
|||||||||||||||||||
|
For
the three-month period ended
March 31, 2010
(Unaudited)
|
||||||||||||||||||||
|
Balance
as of January 1, 2010
(Audited)
|
1 | (23 | ) | 396 | 374 | 100 | ||||||||||||||
|
Comprehensive
income for the period
|
- | (1 | ) | 314 | 313 | 85 | ||||||||||||||
|
Cash
dividend paid
|
- | - | (257 | ) | (257 | ) | (69 | ) | ||||||||||||
|
Balance
as of March 31, 2010
(Unaudited)
|
1 | (24 | ) | 453 | 430 | 116 | ||||||||||||||
|
Share
capital amount
|
Cash
flow
hedge
reserve
|
Retained
earnings
|
Total
|
|||||||||||||||||
|
NIS
millions
|
||||||||||||||||||||
|
For
the three-month period ended
March 31, 2009
(Unaudited)
|
||||||||||||||||||||
|
Balance
as of January 1, 2009
(Audited)*
|
1 | (11 | ) | 400 | 390 | |||||||||||||||
|
Comprehensive
income for the period*
|
- | 19 | 345 | 364 | ||||||||||||||||
|
Cash
dividend paid
|
- | - | (270 | ) | (270 | ) | ||||||||||||||
|
Balance
as of March 31, 2009
(Unaudited)
|
1 | 8 | 475 | 484 | ||||||||||||||||
|
Share
capital amount
|
Cash
flow
hedge
reserve
|
Retained
earnings
|
Total
|
|||||||||||||||||
|
NIS
millions
|
||||||||||||||||||||
|
For
the year ended
December 31, 2009
(Audited)
|
||||||||||||||||||||
|
Balance
as of January 1, 2009
(Audited)*
|
1 | (11 | ) | 400 | 390 | |||||||||||||||
|
Comprehensive
income for the period
|
- | (12 | ) | 1,182 | 1,170 | |||||||||||||||
|
Share
based payments
|
- | - | 1 | 1 | ||||||||||||||||
|
Cash
dividend paid
|
- | - | (1,187 | ) | (1,187 | ) | ||||||||||||||
|
Balance
as of December 31, 2009
(Audited)
|
1 | (23 | ) | 396 | 374 | |||||||||||||||
(*)
Retrospective application due to accounting policy change – see note
2H
The
accompanying notes are an integral part of the interim consolidated financial
statements.
6
Cellcom
Israel Ltd. and Subsidiaries
Condensed
Consolidated Interim Statements of Cash Flows
|
Three-
month period ended
|
Year
ended
|
|||||||||||||||
|
March
31,
|
December
31,
|
|||||||||||||||
|
Convenience
|
||||||||||||||||
|
translation
|
||||||||||||||||
|
into
US dollar
|
||||||||||||||||
|
(Note
2D)
|
||||||||||||||||
|
2010
|
2010
|
*2009 | 2009 | |||||||||||||
|
NIS
millions
|
US$
millions
|
NIS
millions
|
NIS
millions
|
|||||||||||||
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Audited)
|
|||||||||||||
|
Cash
flows from operating activities
|
||||||||||||||||
|
Net
income for the period
|
314 | 85 | 345 | 1,182 | ||||||||||||
|
Adjustments
for:
|
||||||||||||||||
|
Depreciation
and Amortization
|
181 | 49 | 188 | 755 | ||||||||||||
|
Share
based payments
|
- | - | - | 1 | ||||||||||||
|
Loss
(gain) on sale of assets
|
- | - | 2 | 6 | ||||||||||||
|
Income
tax expense
|
107 | 28 | 120 | 367 | ||||||||||||
|
Financial
(income) expenses, net
|
36 | 10 | (28 | ) | 219 | |||||||||||
|
Changes
in operating assets and liabilities:
|
||||||||||||||||
|
Changes
in inventories
|
(5 | ) | (1 | ) | (25 | ) | (105 | ) | ||||||||
|
Changes
in trade receivables (including long- term amounts)
|
76 | 20 | (39 | ) | (69 | ) | ||||||||||
|
Changes
in other receivables (including long- term amounts)
|
(25 | ) | (7 | ) | (25 | ) | 2 | |||||||||
|
Changes
in trade payables and accrued expenses
|
(34 | ) | (9 | ) | 66 | 152 | ||||||||||
|
Changes
in other liabilities (including long-term amounts)
|
6 | 1 | 9 | (4 | ) | |||||||||||
|
Proceeds
(Payments) for derivative hedging contracts, net
|
(5 | ) | (1 | ) | 5 | 21 | ||||||||||
|
Income
tax paid
|
(100 | ) | (27 | ) | (90 | ) | (447 | ) | ||||||||
|
Net
cash from operating activities
|
551 | 148 | 528 | 2,080 | ||||||||||||
|
Cash
flows from investing activities
|
||||||||||||||||
|
Acquisition
of property, plant, and equipment
|
(105 | ) | (28 | ) | (112 | ) | (404 | ) | ||||||||
|
Acquisition
of intangible assets
|
(58 | ) | (16 | ) | (47 | ) | (173 | ) | ||||||||
|
Change
in current investments, net
|
(138 | ) | (37 | ) | - | (212 | ) | |||||||||
|
Proceeds
(payments) for other derivative contracts, net
|
(5 | ) | (1 | ) | **24 | **8 | ||||||||||
|
Proceeds
from sales of property, plant and equipment
|
1 | - | - | 2 | ||||||||||||
|
Interest
received
|
3 | 1 | - | 5 | ||||||||||||
|
Net
cash used in investing activities
|
(302 | ) | (81 | ) | (135 | ) | (774 | ) | ||||||||
(*)
Retrospective application due to accounting policy change – see note
2H
(**)
Reclassified – see note 2G
The
accompanying notes are an integral part of the interim consolidated financial
statements.
7
Cellcom
Israel Ltd. and Subsidiaries
Condensed
Consolidated Interim Statements of Cash Flows (cont'd)
|
Three-
month period ended
|
Year
ended
|
|||||||||||||||
|
March
31,
|
December
31,
|
|||||||||||||||
|
Convenience
|
||||||||||||||||
|
translation
|
||||||||||||||||
|
into
US dollar
|
||||||||||||||||
|
(Note
2D)
|
||||||||||||||||
|
2010
|
2010
|
2009
|
2009
|
|||||||||||||
|
NIS
millions
|
US$
millions
|
NIS
millions
|
NIS
millions
|
|||||||||||||
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Audited)
|
|||||||||||||
|
Cash
flows from financing activities
|
||||||||||||||||
|
Proceeds
from derivative contracts, net
|
13 | 3 | 4 | 33 | ||||||||||||
|
Proceeds
(Payments) for short term borrowings
|
(3 | ) | (1 | ) | - | 8 | ||||||||||
|
Repayment
of debentures
|
(171 | ) | (46 | ) | (164 | ) | (332 | ) | ||||||||
|
Proceeds
from issuance of debentures, net of issuance costs
|
- | - | - | 989 | ||||||||||||
|
Dividend
paid
|
(256 | ) | (69 | ) | (270 | ) | (1,186 | ) | ||||||||
|
Interest
paid
|
(117 | ) | (31 | ) | (86 | ) | (190 | ) | ||||||||
|
Net
cash used in financing activities
|
(534 | ) | (144 | ) | (516 | ) | (678 | ) | ||||||||
|
Changes
in cash and cash equivalents
|
(285 | ) | (77 | ) | (123 | ) | 628 | |||||||||
|
Balance
of cash and cash equivalents at beginning of
|
||||||||||||||||
|
the
period
|
903 | 243 | 275 | 275 | ||||||||||||
|
Balance
of cash and cash equivalents at end of
|
||||||||||||||||
|
the
period
|
618 | 166 | 152 | 903 | ||||||||||||
The
accompanying notes are an integral part of the interim consolidated financial
statements.
8
Cellcom
Israel Ltd. and Subsidiaries
Notes
to the Condensed Consolidated Interim Financial Statements
Note
1 - General
Cellcom
Israel Ltd. and its subsidiaries ("the Company") is a company incorporated and
domiciled in Israel and its official address is 10 Hagavish street, Netanya
42140, Israel. The condensed consolidated interim financial statements of the
Company as at and for the three months ended March 31, 2010 comprise of Cellcom
Israel Ltd. and its subsidiaries. The Company operates and maintains a cellular
mobile telephone system and provides cellular mobile telephone services in
Israel. The Company is a consolidated subsidiary of Discount Investment
Corporation (the parent company "DIC"), part of the IDB group.
Note
2 – Basis of Preparation
|
A.
|
Statement
of compliance
|
These
condensed consolidated interim financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRS) as issued by
the International Accounting Standard Board (IASB).
These
condensed consolidated interim financial statements have been prepared in
accordance with (IFRS) IAS 34 Interim Financial Reporting.
They do not include all of the information required for full annual financial
statements, and should be read in conjunction with the consolidated financial
statement of the Company as at and for the year ended December 31,
2009.
These
condensed consolidated financial statements were approved by the Board of
Directors on May 16, 2010.
|
B.
|
Functional
and presentation currency
|
These
condensed consolidated interim financial statements are presented in New Israeli
Shekels ("NIS"), which is the Company's functional currency, and are rounded to
the nearest million. NIS is the currency that represents the primary economic
environment where the Company operates in.
|
C.
|
Basis
of measurement
|
These
condensed consolidated interim financial statements have been prepared on the
basis of historical cost except for current investments and derivative financial
instruments that are presented according to their fair value.
The value
of non monetary assets and equity items that were measured on the basis of
historical cost, have been adjusted for changes in the general purchasing power
of the Israeli currency -NIS, based upon changes in the Israeli Consumer Price
Index (“CPI”) until December 31, 2003, as until that date the Israeli economy
was considered hyperinflationary.
|
D.
|
Convenience
translation into U.S. dollars (“dollars” or
“$”)
|
For the
convenience of the reader, the reported NIS figures as of March 31, 2010, have
been presented in dollars, translated at the representative rate of exchange as
of March 31, 2010 (NIS 3.713 = US$ 1.00). The dollar amounts presented in these
financial statements should not be construed as representing amounts that are
receivable or payable in dollars or convertible into dollars, unless otherwise
indicated.
9
Cellcom
Israel Ltd. and Subsidiaries
Notes
to the Condensed Consolidated Interim Financial Statements
Note
2 – Basis of Preparation (cont'd)
|
E.
|
Use
of estimates and judgments
|
The
preparation of interim financial statements in conformity with IFRSs requires
management to make judgments, estimates and assumptions that affect the
application of accounting policies and the reported amounts of assets,
liabilities, income and expenses. Management determines estimates based upon
past experience, various factors, external sources and reasonable assumptions
according to the circumstances appropriate to each estimate. Actual results may
differ from these estimates.
Estimates
and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognized in the period in which the estimates are
revised and in any future periods affected. The estimates and underlying
assumptions that were applied in the preparation of these interim financial
statements are consistent with those applied in the preparation of the Company's
annual financial statements as at December 31, 2009.
|
F.
|
Exchange
rates and Consumer Price Indexes are as
follows:
|
|
Exchange
rates
of
US$
|
Consumer
Price
Index
(points)
|
|||||||
|
As
of March 31, 2010
|
3.713 | 204.4 | ||||||
|
As
of March 31, 2009
|
4.188 | 198.2 | ||||||
|
As
of December 31, 2009
|
3.775 | 206.2 | ||||||
|
Increase
(decrease) during the period:
|
||||||||
|
Three
months ended March 31, 2010
|
(1.6% | ) | (0.9% | ) | ||||
|
Three
months ended March 31, 2009
|
10.2% | (0.1% | ) | |||||
|
Year
ended December 31, 2009
|
(0.7% | ) | 3.9% | |||||
|
G.
|
The
company reclassified proceeds (payments) for other derivative contracts,
net from cash flows from operating activities to cash flows from investing
activities in the consolidated statements of cash flows for all periods
presented.
|
|
H.
|
Change
in accounting policy
|
In June
2009, the Company changed its accounting policy with respect to recognizing
losses from subsidized equipment sold together with a fixed-term service
contract that include minimum guaranteed revenue. The Company’s accounting
policy prior to the adoption of the accounting policy change was to recognize
losses from the sale of equipment upon delivery of the equipment to the
subscriber. The Company’s new accounting policy with respect to such
transactions is to capitalize such losses as long as the flow of the economic
benefits from the fixed-term service contract is considered enforceable. Such
losses are capitalized as intangible assets and amortized using the straight
line method over an 18 month period that represents the expected life of the
relationship with the subscriber which is not longer than their minimum
enforceable period. The Company believes that the new accounting policy better
reflects the subscriber acquisition cost and the benefits derived from the
subscriber and providing more relevant information regarding the results of
operations of the Company. The accounting policy change
was
retroactively applied to all reported periods.
10
Cellcom
Israel Ltd. and Subsidiaries
Notes
to the Condensed Consolidated Interim Financial Statements
Note
2 – Basis of Preparation (cont'd)
Presented
hereunder is the effect of the retrospective application on the relevant
items:
|
(1)
|
Effect
on the condensed consolidated interim statement of financial
position
|
|
March
31, 2009
|
||||
|
NIS
millions
|
||||
|
Intangible
assets, net prior to the accounting policy change
|
665 | |||
|
Effect
of retrospective application
|
63 | |||
|
Intangible
assets, net after retrospective application
|
728 | |||
|
Current
tax liabilities prior to the accounting policy change
|
102 | |||
|
Effect
of retrospective application
|
18 | |||
|
Current
tax liabilities after retrospective application
|
120 | |||
|
Retained
earnings prior to the accounting policy change
|
430 | |||
|
Effect
of retrospective application
|
45 | |||
|
Retained
earnings after retrospective application
|
475 | |||
|
(2)
|
Effect
on condensed consolidated interim statement of income and on condensed
consolidated interim statement of comprehensive
income
|
|
Three-month
period ended
|
||||
|
March
31, 2009
|
||||
|
NIS
millions
|
||||
|
Cost
of revenues prior to the accounting policy change
|
806 | |||
|
Effect
of retrospective application
|
5 | |||
|
Cost
of revenues after retrospective application
|
811 | |||
|
Income
tax prior to the accounting policy change
|
122 | |||
|
Effect
of retrospective application
|
(2 | ) | ||
|
Income
tax after retrospective application
|
120 | |||
|
Net
income prior to the accounting policy change
|
348 | |||
|
Effect
of retrospective application
|
(3 | ) | ||
|
Net
income for the period after retrospective application
|
345 | |||
|
Basic
earnings (loss) per share (in NIS) prior to the accounting policy
change
|
3.54 | |||
|
Effect
of retrospective application
|
(0.03 | ) | ||
|
Basic
earnings (loss) per share (in NIS) after retrospective
application
|
3.51 | |||
|
Diluted
earnings (loss) per share (in NIS) prior to the accounting policy
change
|
3.51 | |||
|
Effect
of retrospective application
|
(0.03 | ) | ||
|
Diluted
earnings (loss) per share (in NIS) after retrospective
application
|
3.48 | |||
11
Cellcom
Israel Ltd. and Subsidiaries
Notes
to the Condensed Consolidated Interim Financial Statements
Note
2 – Basis of Preparation (cont'd)
|
(3)
|
The
accounting policy change had a zero net effect on the cash flows from
operating activities, and no effect on cash flows used in investing and
financing activities in the condensed consolidated interim statements of
cash flows for the three months ended March 31,
2009.
|
Note
3 - Significant Accounting Policies
The accounting policies that were
applied in the preparation of these condensed interim financial statements are
consistent with those applied in the preparation of the Company's annual
financial statements as at December 31, 2009, except for those mentioned in Note
3A.
Presented
hereunder is a description of the changes in accounting policies that were
applied in these condensed consolidated interim financial statements and their
effect:
|
A.
|
First
adoption of new standards and
interpretations
|
|
1.
|
IFRS
3 Business Combinations and IAS 27 Consolidated and Separate Financial
Statements, revised (hereinafter - the Standards). The main revisions to
the new Standards are: a revised definition of business and business
combinations, a change in the measurement method of carried forward items
in business combinations, providing two measurement options regarding
non-controlling rights, a change in the accounting treatment of
transaction costs, the accounting treatment regarding piece by piece
acquisitions, the allocation of comprehensive income between shareholders,
the accounting for acquisitions or sales of equity rights while
maintaining control as equity transactions, the accounting for
transactions that result in gain or loss of control in full fair value, so
that the subsequent holdings after the loss of control are recognized
through profit and loss, and the original investment in obtaining control
is also recognized in fair value through profit and loss, and a broadening
of disclosure requirements. The Standards are applied prospectively to
business combinations starting, January 1,
2010.
|
|
2.
|
Amendment
to IAS 17, Leases – Classification of leases of land and buildings
(hereinafter – the Amendment) – In accordance with the Amendment, a lease
of land does not have to be classified as an operating lease in every case
that ownership is not expected to pass to the lessee at the end of the
lease period. In accordance with the amended standard, a land lease is to
be examined according to the regular criteria for classifying a lease as a
finance lease or as an operating lease.
The
Amendment also provides that when a lease includes both a land component
and a buildings component, the classification of each component should be
based on the criteria of the standard, with the principal consideration
regarding the classification of land being the fact that land normally has
an indefinite useful life. The Amendment is applied retrospectively
starting, January 1, 2010. The amendment has no material impact on the
Company's financial
statements.
|
|
3.
|
As from January 1, 2010 the
Company early adopted the revision to IAS 1, Presentation of Financial
Statements, which was issued in the framework of annual improvements to
IFRSs 2010, pursuant to which the Company presents in the statement of
changes in equity, for each component of equity, a reconciliation between
the carrying amount at the beginning of the period and the carrying amount
at its end, and provides separate disclosure for each change resulting
from profit or loss, other comprehensive income, and transactions with the
owners in their capacity as owners. The Company provides disclosure for
the said reconciliation with separate disclosure for each change resulting
from each component of other comprehensive income as part of the notes to
the annual financial statements.
|
12
Cellcom
Israel Ltd. and Subsidiaries
Notes
to the Condensed Consolidated Interim Financial Statements
Note
4 - Shareholders' Equity
On March
31, 2010, the Company paid a cash dividend in the amount of NIS 2.60 per share,
totaling approximately NIS 257 million.
On May
16, 2010, subsequent to the end of the reporting period, the Company’s Board of
Directors declared a cash dividend in the amount of NIS 3.64 per share, totaling
approximately NIS 360 million, to be paid on June 9, 2010, to the
shareholders of the Company of record at the end of the trading day in the NYSE
on May 27, 2010.
Note
5 - Contingent Liabilities
In the
ordinary course of business, the Company is involved in a number of lawsuits.
The costs that may result from these lawsuits are only accrued for when it is
more likely than not that a liability, resulting from past events, will be
incurred and the amount of that liability can be quantified or estimated within
a reasonable range. The amount of the provisions recorded is based on a
case-by-case assessment of the risk level, and events arising during the course
of legal proceedings may require a reassessment of this risk. The Company’s
assessment of risk is based both on the advice of counsel and on the Company’s
estimate of the probable settlements amount that are expected to be incurred, if
such a settlement will be agreed by both parties. Described hereunder new
lawsuits filed during the period or updates of lawsuits presented in 2009 annual
financial statements:
|
1.
|
In
August 2001, a purported class action lawsuit was filed against the
Company in the District Court of Tel-Aviv–Jaffa by one of the Company’s
subscribers in connection with the Company's outgoing call tariffs on the
‘Talkman’ (pre-paid) plan and the collection of a distribution fee for
‘Talkman’ calling cards. In June 2004, the motion for certification as a
class action was denied. In September 2004, this decision was appealed to
the Israeli Supreme Court. In July 2007, pursuant to the appeal, the
Israeli Supreme Court granted a petition filed by both parties with mutual
consent, in light of the Israeli Class Action Law, 2006, to resubmit the
purported class action lawsuit for consideration in the District Court of
Tel Aviv-Jaffa. If the claim is certified as a class action, the amount
claimed is estimated by the plaintiff to be NIS 135 million. In
January 2010, the District Court accepted the Company's defense of
limitations for the period prior to March 1999. The Company cannot
quantify which portion of the claim was dismissed following that decision.
The plaintiff appealed the decision to the Supreme
court.
|
|
2.
|
In
December 2002, a purported class action lawsuit was filed against the
Company and another cellular operator in the District Court of
Tel-Aviv–Jaffa in connection with the Company’s incoming call tariff to
subscribers of other operators when calling the Company’s subscribers
during the period prior to the regulation of interconnect fees. In
December 2008, the motion for certification as a class action was
dismissed with prejudice. In January 2009, an appeal was filed with the
Supreme Court challenging the dismissal. In May 2010, subsequent to the
end of the reporting period, the Supreme Court dismissed the appeal
following its withdrawal by the appellants at the recommendation of the
Supreme Court. Had the lawsuit been certified as a class action, the
amount claimed was estimated by the plaintiffs to be NIS 1.6
billion.
|
|
3.
|
In
February 2008, a purported class action lawsuit was filed against the
Company in the District Court of Central Region, by plaintiffs claiming to
be subscribers of the Company, in connection with amounts the Company
allegedly overcharged, when the Company raised its tariffs for SMS
packages. In April 2010, subsequent to the end of the reporting period,
the court approved the settlement submitted by the parties, by which the
lawsuit is approved as a class action and
the
|
13
Cellcom
Israel Ltd. and Subsidiaries
Notes
to the Condensed Consolidated Interim Financial Statements
Note
5 - Contingent Liabilities (cont'd)
Company
returns a certain amount which it considers to be insignificant to its
subscribers for the dismissal of the lawsuit. The amount originally claimed, was
estimated by the plaintiffs to be approximately NIS 43 million.
|
4.
|
In
March 2008, a purported class action lawsuit was filed against the Company
in the District Court of Central Region, by plaintiffs alleging to be the
Company's subscribers in connection with allegations that the Company has
unlawfully charged its' subscribers for providing them with call details
records. In August 2009, the request to try the lawsuit as a class action
was approved in relation to an allegation that the Company breached the
agreements with its subscribers by charging them for the service it
previously provided free of charge, without obtaining
their consent. The Company
appealed the decision. In May 2010, subsequent to the end of the reporting
period, the Israeli Supreme Court did not accept its appeal on a decision
to approve the motion to certify the lawsuit as class action,
for reasons not related to the merits of the matter, and the lawsuit will
continue to be tried in the District Court as class action in relation to
such allegation. The total amount claimed from the Company is estimated by
the plaintiffs to be approximately NIS 440
million.
|
|
5.
|
In
July 2008, a purported class action lawsuit was filed against the Company
in the District Court of Tel Aviv-Jaffa, by a plaintiff alleging to be a
subscriber of the Company in connection with allegations that the Company
misleads and unlawfully charges its subscribers for a certain automatic
call completion service, even if not used. In April 2010, subsequent to
the end of the reporting period, the motion for certification as class
action was dismissed without prejudice and the lawsuit was dismissed with
prejudice, at the plaintiff's request. Had the lawsuit been certified as a
class action, the amount claimed was estimated by the plaintiff to be
approximately NIS 179.
|
|
6.
|
In
March 2009, a purported class action lawsuit was filed against the
Company, its chief executive officer and some of its directors, in the
District Court of Central Region, by a plaintiff alleging to be a
subscriber of the Company in connection with allegations that the Company
unlawfully sent its subscribers commercial messages. In June 2009, with
the consent of the plaintiff, the chief executive officer and the
directors were removed from the list of defendants. In April 2010,
subsequent to the end of the reporting period, the purported class action
was dismissed without prejudice, following the request of the plaintiff
and the Company's agreement to donate a certain insignificant amount to
worthy causes. Had the lawsuit been certified as a class action, the total
amount claimed from the Company was estimated by the plaintiff to be
approximately NIS 800 million.
|
|
7.
|
In
November 2009, a purported class action lawsuit was filed against the
Company, two other cellular operators and the Minister of Communications,
in the District Court of Jerusalem, by four plaintiffs alleging to be
subscribers of the two other cellular operators in connection with an
allegation that the defendant cellular operators unlawfully discriminated
against non orthodox customers by offering them less favorable prices and
terms. In February 2010, the motion for certification as a class action
was dismissed in limine. Had the lawsuit been certified as
a class action, the total amount claimed was estimated by the plaintiffs
to be approximately NIS 900 million, without specifying the amount
attributed to the Company
individually.
|
|
8.
|
In
March 2010, a purported class action lawsuit was filed against the Company
and another cellular operator, in the District Court of Tel-Aviv-Jaffa by
two plaintiffs alleging to be subscribers of the defendants, in connection
with allegations that the defendants breached their license by failing to
purchase insurance against monetary liability which the defendants
may
|
14
Cellcom
Israel Ltd. and Subsidiaries
Notes
to the Condensed Consolidated Interim Financial Statements
Note
5 - Contingent Liabilities (cont'd)
suffer
due to bodily damages that allegedly may be caused by cellular radiation. The
plaintiffs request the court to award compensation in an amount equal to the
insurance premiums allegedly payable for insuring such liability (estimated by
the plaintiffs to be NIS 300 million per year per defendant) for the past seven
years and to order the defendants to purchase such insurance
coverage in the future. If the lawsuit is certified as a class action, the total
amount claimed is estimated by the plaintiffs to be approximately NIS 4.2
billion, out of which NIS 2.1 billion is attributed to the Company.
Note
6 - Subsequent Events
|
1.
|
In
April 2010, subsequent to the end of the reporting period, the Company
concluded the purchase of one of its dealers' operation. The transaction
did not have a material impact on the presentation of the result of
operations and financial position.
|
|
2.
|
In
May 2010, subsequent to the end of the reporting period, the Israeli
Ministry of Communications, or MOC, announced it is
considering changes to the Israeli regulations which set
interconnect tariffs among Israeli operators, as
follows:
|
|
·
|
to
reduce the maximum interconnect tariff payable by a landline operator or a
cellular operator for the completion of a call on another cellular network
from the current tariff of NIS 0.251 per minute to NIS 0.0414 per minute
from August 1, 2010; to NIS 0.0354 per minute from January 1, 2011; to
0.0311 per minute from January 1, 2012; to NIS 0.0280 per minute from
January 1, 2013; and to NIS 0.0257 as of January 1,
2014.
|
|
·
|
to
reduce the maximum interconnect tariff payable by a cellular operator for
sending an SMS message to another cellular network from the current tariff
of NIS 0.0285 to NIS 0.0019 from August 1, 2010; to NIS 0.0017 from
January 1, 2011; to NIS 0.0016 from January 1, 2012; to NIS 0.0014 from
January 1, 2013; and to NIS 0.0013 from January 1,
2014.
|
|
·
|
the
tariffs do not include VAT will be updated annually from January 1, 2011,
based on the change in the Israeli CPI published in November of the
preceding year against the Israeli CPI published in January
2010.
|
The
Company and the other cellular operators may respond to the proposed changes
within 30 days, at which time the MOC is expected to make a final determination.
The Company can not assess at this stage the ultimate outcome of the hearing and
what the final maximum tariffs will be, but it is reviewing its possible effect
on its results of operations. If the changes as currently proposed are adopted,
then, absent any efforts to mitigate the expected loss of revenues, the
currently proposed changes are expected to have a monthly adverse effect
estimated at this stage to amount to approximately NIS 25 million on the
Company's net income, commencing August 2010. The Company intends to take
measures to mitigate as much as possible the expected adverse effects of such
proposed changes. The Company's ability to mitigate the expected lost revenues
could lead to materially different outcome than that set forth
above.
15
Signatures
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
CELLCOM
ISRAEL LTD.
|
||||||
|
Date:
|
May
17, 2010
|
By:
|
/s/ Liat
Menahemi Stadler
|
|||
|
Name:
|
Liat
Menahemi Stadler
|
|||||
|
Title:
|
General
Counsel
|
|||||