1. | Press Release, Dated May 14, 2007 | |
2. | Convenience Translation from Hebrew of the Quarterly Report for March 31, 2007 | |
3. | Cellcom Israel Ltd. and its Consolidated Subsidiaries Financial Statements as at March 31, 2007 (unaudited) |
§
|
Revenues
increased 7% to NIS 1,438 million ($346 million); Revenues from content
and value added services (excluding SMS) increased
42%
|
§
|
Sales,
Marketing, General and Administration Expenses as percent of revenues
dropped from 23.3% to 21.4%
|
§
|
EBITDA1
increased 20%
to NIS 535 million ($129 million); EBITDA margin increased from 33.4%
to
37.2%
|
§
|
Operating
profit increased 50% to NIS 347 million ($84
million)
|
§
|
Net
income
increased 43% to NIS 208 million ($50 million); EPS totaled NIS 2.13
($0.51) per share
|
§
|
Free
Cash
Flow2
increased 86%
to NIS 169 million ($41 million)
|
§
|
Board
of
Directors declared approximately NIS 198 million, NIS 2.03 per share,
cash
dividend for first quarter
|
US Dial-in Number: 1 888 407 2553 | UK Dial-in Number: 0 800 917 5108 |
Israel Dial-in Number: 03 918 0609 | International Dial-in Number: +972 3 918 0609 |
Q1/2007
|
Q1/2006
|
%
Change
|
Q4/2006
|
%
Change
|
|
EBITDA
(m.
NIS)
|
535.0
|
447.0
|
19.7%
|
435.0
|
23.0%
|
EBITDA
(m.
US$)
|
$128.8
|
$107.6
|
19.7%
|
$104.7
|
23.0%
|
EBITDA,
as
percent of Revenues
|
37.2%
|
33.4%
|
11.4%
|
30.4%
|
22.4%
|
Subscribers
end period (in thousands)
|
2,928
|
2,641
|
10.9%
|
2,884
|
1.5%
|
Churn
Rate (in
%)
|
3.80%
|
4.80%
|
-20.8%
|
3.90%
|
-2.6%
|
Parameters
Excluding Change in Subscriber Counting
Method
|
|||||
Average
Monthly MOU (in minutes)
|
350
|
323
|
8.4%
|
355
|
-1.4%
|
Monthly
ARPU
(in NIS)
|
149
|
150
|
-0.6%
|
152
|
-2.0%
|
Monthly
ARPU
(in US$)
|
$35.9
|
$36.1
|
-0.6%
|
$36.6
|
-2.0%
|
Parameters
Following Change in Subscriber Counting
Method
|
|||||
Average
Monthly MOU (in minutes)
|
341
|
323
|
5.6%
|
344
|
-0.9%
|
Monthly
ARPU
(in NIS)
|
145
|
150
|
-3.3%
|
147
|
-1.4%
|
Monthly
ARPU
(in US$)
|
$34.9
|
$36.1
|
-3.3%
|
$35.4
|
-1.4%
|
million
NIS
|
Q1/2007
|
%
of
Revenues |
Q1/2006
|
%
of
Revenues |
%
Change |
Revenues
from
Sales and Services
|
1,438.0
|
100.0%
|
1,340.0
|
100.0%
|
7.3%
|
Cost
of Sales
and Services
|
783.0
|
54.5%
|
796.0
|
59.4%
|
-1.6%
|
Gross
Profit
|
655.0
|
45.5%
|
544.0
|
40.6%
|
20.4%
|
SG&A
Expenses - Sales, Marketing, General and Administration
|
308.0
|
21.4%
|
312.0
|
23.3%
|
-1.3%
|
Operating
Profit
|
347.0
|
24.1%
|
232.0
|
17.3%
|
49.6%
|
Finance
and
Other Income (Expenses), net
|
-42.0
|
-2.9%
|
-25.0
|
-1.9%
|
68.0%
|
Income
before
Tax on Income
|
305.0
|
21.2%
|
207.0
|
15.4%
|
47.3%
|
Taxes
on
Income
|
97.0
|
6.7%
|
62.0
|
4.6%
|
56.5%
|
Net
Income
|
208.0
|
14.5%
|
145.0
|
10.8%
|
43.4%
|
Free
Cash Flow
|
169.0
|
11.8%
|
91.0
|
6.8%
|
85.7%
|
million
US$
|
Q1/2007
|
%
of
Revenues |
Q1/2006
|
%
of
Revenues |
%
Change
|
Revenues
from
Sales and Services
|
$346.1
|
100.0%
|
$322.5
|
100.0%
|
7.3%
|
Cost
of Sales
and Services
|
188.4
|
54.5%
|
191.6
|
59.4%
|
-1.6%
|
Gross
Profit
|
157.6
|
45.5%
|
130.9
|
40.6%
|
20.4%
|
SG&A
Expenses - Sales, Marketing,
General
and
Administration
|
74.1
|
21.4%
|
75.1
|
23.3%
|
-1.3%
|
Operating
Profit
|
83.5
|
24.1%
|
55.8
|
17.3%
|
49.6%
|
Finance
and
Other Income (Expenses), net
|
-10.1
|
-2.9%
|
-6.0
|
-1.9%
|
68.0%
|
Income
before
Tax on Income
|
73.4
|
21.2%
|
49.8
|
15.4%
|
47.3%
|
Taxes
on
Income
|
24.5
|
6.7%
|
14.9
|
4.6%
|
64.5%
|
Net
Income
|
48.9
|
14.5%
|
34.9
|
10.8%
|
40.0%
|
Free
Cash Flow
|
40.7
|
11.8%
|
21.9
|
6.8%
|
85.7%
|
Company
Contact
Shiri
Israeli
Investor
Relations Coordinator
investors@cellcom.co.il
Tel:
+972 52
998 9755
|
Investor
Relations Contact
Ehud
Helft /
Ed Job
CCGK
Investor
Relations
ehud@gkir.com
/
ed.job@ccgir.com
Tel:
(US) 1
866 704 6710 / 1 646 213 1914
|
Convenience
|
|||||||||
translation
|
|||||||||
into
US dollar
|
|||||||||
March
31,
|
March
31,
|
March
31,
|
December
31,
|
||||||
2007
|
2007
|
2006
|
2006
|
||||||
NIS
millions
|
US$
millions
|
NIS
millions
|
NIS
millions
|
||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Audited)
|
Current
assets
|
|||||||||||||
Cash
and cash
equivalents
|
225
|
54
|
235
|
56
|
|||||||||
Trade
receivables
|
1,274
|
307
|
1,252
|
1,242
|
|||||||||
Other
receivables and debits
|
139
|
33
|
148
|
123
|
|||||||||
Inventory
|
137
|
33
|
149
|
131
|
|||||||||
1,775
|
427
|
1,784
|
1,552
|
||||||||||
Long-term
receivables and debits
|
524
|
126
|
468
|
526
|
|||||||||
Fixed
assets, net
|
2,453
|
590
|
(**)(*)
2,694
|
(**)(*)
2,550
|
|||||||||
Other
assets and deferred
|
|||||||||||||
expenses,
net
|
679
|
164
|
(**)
730
|
(**)
695
|
|||||||||
Total
assets
|
5,431
|
1,307
|
5,676
|
5,323
|
Current
liabilities
|
|||||||||||||
Short-term
credit from banks
|
121
|
29
|
320
|
-
|
|||||||||
Trade
payables
|
715
|
172
|
788
|
819
|
|||||||||
Other
payables
and credits
|
500
|
121
|
283
|
496
|
|||||||||
1,336
|
322
|
1,391
|
1,315
|
||||||||||
Long-term
liabilities
|
|||||||||||||
Debentures
|
1,989
|
479
|
1,749
|
1,989
|
|||||||||
Long-term
loans from banks
|
1,076
|
259
|
1,658
|
1,208
|
|||||||||
Other
long-term payables and credits
|
15
|
3
|
2
|
2
|
|||||||||
Deferred
taxes
|
203
|
49
|
*231
|
*212
|
|||||||||
3,283
|
790
|
3,640
|
3,411
|
||||||||||
Shareholders’
equity
|
812
|
195
|
645*
|
597*
|
|||||||||
Total
liabilities and shareholders’ equity
|
5,431
|
1,307
|
5,676
|
5,323
|
Convenience
|
|||||||||
translation
|
|||||||||
into
US dollars
|
|||||||||
Three
month
|
Three
month
|
Three
month
|
|||||||
period
ended
|
period
ended
|
period
ended
|
Year
ended
|
||||||
March
31,
|
March
31,
|
March
31,
|
December
31,
|
||||||
2007
|
2007
|
2006
|
2006
|
||||||
NIS
millions
|
US$
millions
|
NIS
millions
|
NIS
millions
|
||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Audited)
|
Income
from
sales and services
|
1,438
|
346
|
1,340
|
5,622
|
|||||||||
Cost
of sales
and services
|
783
|
188
|
*
796
|
*
3,273
|
|||||||||
Gross
profit
|
655
|
158
|
544
|
2,349
|
|||||||||
Selling
and
marketing expenses
|
149
|
36
|
153
|
656
|
|||||||||
General
and
administrative expenses
|
159
|
38
|
159
|
659
|
|||||||||
Operating
income
|
347
|
84
|
232
|
1,034
|
|||||||||
Financial
expenses, net
|
(43
|
)
|
(11
|
)
|
(21
|
)
|
(155
|
)
|
|||||
Other
income
(expenses), net
|
1
|
-
|
(4
|
)
|
*(6
|
)
|
|||||||
Income
before income tax
|
305
|
73
|
207
|
873
|
|||||||||
Income
tax
|
97
|
23
|
62
|
*
314
|
|||||||||
Net
income
|
208
|
50
|
145
|
559
|
|||||||||
Earnings
per share
|
|
||||||||||||
Basic
and
diluted earnings per ordinary shares in NIS
|
2.13
|
0.51
|
*
1.49
|
*
5.73
|
Convenience
|
|||||||||
translation
|
|||||||||
into
US dollars
|
|||||||||
Three
month
|
Three
month
|
Three
month
|
|||||||
period
ended
|
period
ended
|
period
ended
|
Year
ended
|
||||||
March
31,
|
March
31,
|
March
31,
|
December
31,
|
||||||
2007
|
2007
|
2006
|
2006
|
||||||
NIS
millions
|
US$
millions
|
NIS
millions
|
NIS
millions
|
||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Audited)
|
Cash
flows from operating activities
|
|||||||||||||
Net
income
|
208
|
50
|
*
145
|
*
559
|
|||||||||
Adjustments
required to present cash flows
|
|||||||||||||
from
operating
activities (Appendix A)
|
135
|
33
|
*
152
|
*
918
|
|||||||||
Net
cash
provided by operating activities
|
343
|
83
|
297
|
1,477
|
|||||||||
Cash
flows from investing activities
|
|||||||||||||
Acquisition
of
fixed assets
|
(153
|
)
|
(37
|
)
|
(**)
(156
|
)
|
(**)
(526
|
)
|
|||||
Proceeds
from
sales of fixed assets
|
1
|
-
|
-
|
15
|
|||||||||
Investment
in
other assets
|
(22
|
)
|
(5
|
)
|
(**)
(50
|
)
|
(**)
(122
|
)
|
|||||
Net
cash used
in investing activities
|
(174
|
)
|
(42
|
)
|
(206
|
)
|
(633
|
)
|
|||||
Cash
flows from financing activities
|
|||||||||||||
Receipt
of
long-term loans from banks
|
-
|
-
|
1,649
|
2,155
|
|||||||||
Payment
of
long-term loans
|
-
|
-
|
(6
|
)
|
(1,175
|
)
|
|||||||
Proceeds
from
issuance of debentures
|
-
|
-
|
42
|
290
|
|||||||||
Cash
dividend
paid
|
-
|
-
|
(3,313
|
)
|
(3,830
|
)
|
|||||||
Net
cash used
in financing activities
|
-
|
-
|
(1,628
|
)
|
(2,560
|
)
|
|||||||
Increase
(decrease) in cash and cash
|
169
|
41
|
(1,537
|
)
|
(1,716
|
)
|
|||||||
equivalents
|
|||||||||||||
Balance
of cash and cash equivalents at
|
|||||||||||||
beginning
of the period
|
56
|
13
|
1,772
|
1,772
|
|||||||||
Balance
of cash and cash equivalents at
|
|||||||||||||
end
of
the period
|
225
|
54
|
235
|
56
|
Convenience
|
|||||||||
translation
|
|||||||||
into
US dollars
|
|||||||||
Three
month
|
Three
month
|
Three
month
|
|||||||
period
ended
|
period
ended
|
period
ended
|
Year
ended
|
||||||
March
31,
|
March
31,
|
March
31,
|
December
31,
|
||||||
2007
|
2007
|
2006
|
2006
|
||||||
NIS
millions
|
US$
millions
|
NIS
millions
|
NIS
millions
|
||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Audited)
|
Income
and expenses not involving cash
|
|||||||||||||
flows
|
|||||||||||||
Depreciation
and amortization
|
188
|
45
|
*
215
|
*
830
|
|||||||||
Deferred
income taxes
|
(2
|
)
|
-
|
(7
|
)
|
*
(20
|
)
|
||||||
Erosion
of
long-term loans and other
|
(13
|
)
|
(3
|
)
|
(15
|
)
|
(109
|
)
|
|||||
liabilities,
net
|
|||||||||||||
Capital
losses
(gains)
|
1
|
-
|
4
|
*6
|
|||||||||
Amortization
of compensation related to
|
|||||||||||||
employee
stock
option grants
|
11
|
3
|
-
|
-
|
|||||||||
185
|
45
|
197
|
707
|
||||||||||
Changes
in assets and liabilities
|
|||||||||||||
Increase
in
trade receivables
|
|||||||||||||
(including
long-term amounts)
|
(30
|
)
|
(7
|
)
|
(31
|
)
|
(75
|
)
|
|||||
Decrease
(increase) in other receivables
|
|||||||||||||
and
debits
(including long-term amounts)
|
(20
|
)
|
(5
|
)
|
11
|
22
|
|||||||
Increase
in
inventories
|
(6
|
)
|
(1
|
)
|
(31
|
)
|
(13
|
)
|
|||||
Increase
(decrease) in trade payables
|
|||||||||||||
(including
long-term amounts)
|
-
|
-
|
(16
|
)
|
4
|
||||||||
Increase
(decrease) in other payables
|
|||||||||||||
and
credits
(including long-term amounts)
|
6
|
1
|
22
|
273
|
|||||||||
(50
|
)
|
(12
|
)
|
(45
|
)
|
211
|
|||||||
135
|
33
|
152
|
918
|
||||||||||
Appendix
B - Non-cash activities
|
|||||||||||||
Acquisition
of
fixed assets on credit
|
54
|
13
|
62
|
197
|
|||||||||
Three
Months Ended
March 31, |
Year
Ended
December 31, |
|||||||||
2007
|
2006
|
2006
|
||||||||
(In
NIS
millions)
|
||||||||||
Net
income
|
208
|
145
|
559
|
|||||||
Financial
expense (income), net
|
43
|
21
|
155
|
|||||||
Other
expenses
(income)
|
(1
|
)
|
4
|
6
|
||||||
Income
taxes
|
97
|
62
|
314
|
|||||||
Depreciation
and amortization
|
188
|
215
|
830
|
|||||||
EBITDA
|
535
|
447
|
1864
|
Three
Months
Ended March 31, |
Year
Ended
December 31, |
|||||||||
2007
|
2006
|
2006
|
||||||||
(In
NIS
millions)
|
||||||||||
Cash
flows
from operating activities
|
343
|
297
|
1477
|
|||||||
Cash
flows
from investing activities
|
(174
|
)
|
(206
|
)
|
(633
|
)
|
||||
Free
Cash
Flow
|
169
|
91
|
844
|
1.
|
Human
Assets
|
1.1.
|
On
May 8, 2007 the Company’s shareholders general meeting decided, after
receiving the approval of the Company's Audit Committee and Board
of
Directors (including in regards to Office Holders who are Controlling
shareholders, as defined in the Companies Law, 1999), to grant insurance
to present and future Office Holders of the Company, according to
the
D&O insurance policy purchased by the Company for the benefit of the
Company, Office Holders and several other employees of the Company
and/or
renewal and/or extension and/or substitution thereof under certain
conditions.
|
1.2.
|
On
May 8, 2007 the Company’s shareholders general meeting decided, after
receiving the approval of the Company's Audit Committee and Board
of
Directors, to approve to pay to any external director who shall be
appointed by the Company, an annual fee in an amount of NIS 100,000
and a
meeting attendance fee in an amount of NIS 3,000 or part thereof
according
to the Companies regulations (rules regarding fees and expenses to
external director), 2000, as adjusted for changes in the Israeli
CPI.
|
2. |
Information
regarding an extraordinary change in Cellcom's
business
|
Date: May 13, 2007 |
___________________________
|
(1)
|
Amos
Shapira - Chief Executive Officer
|
(2)
|
Tal
Raz - Chief Financial Officer
|
Three
months ended March 31,
|
|||||||
2006
|
2007
|
||||||
EBITDA
(in NIS millions)
|
447
|
535
|
|||||
EBITDA
margin
|
33.4
|
%
|
37.2
|
%
|
|||
Subscribers
at end of period(1) (in thousands)
|
2,641
|
2,928
|
|||||
Estimated
market share (2)
|
33
|
%
|
34
|
%
|
|||
Average
monthly usage per subscriber (MOU) (in minutes)(3)
|
323
|
341
|
|||||
Average
monthly revenue per subscriber (ARPU)(3)(4) (in NIS)
|
150
|
145
|
|||||
Period
churn rate
|
4.8
|
%
|
3.8
|
%
|
(1) |
Until
June 30, 2006, the Company had a three-month method of calculating
its
subscriber base, which means that it deducts subscribers from its
subscriber base after three months of no revenue generation or activity
on
the Company's network by or in relation to a subscriber. The Company
now
believes that waiting six months to deduct subscribers is preferable
since
many subscribers that were inactive for three months become active
again
before the end of six months. As a result, commencing July 1, 2006,
the
Company adopted a six-month method of calculating its subscriber
base, but
have not restated its prior subscriber data presented in this table
to
reflect this change. The six-month method is, to the best of its
knowledge, consistent with the methodology used by other cellular
providers in Israel. This change in methodology resulted in an increase
of
the Company's number of reported subscribers by approximately 80,000
compared to the prior methodology and affected its other key performance
indicators accordingly.
|
(2) |
In
order to estimate the Company's market share, the Company had to
estimate
the number of subscribers of Pelephone and Mirs, as of March 31,
2007,
since Pelephone did not publish this information yet and Mirs does
not
publish any information.
|
(3) |
In
consideration of the change in the methodology of calculating the
subscriber base. If the methodology of calculating the Company's
subscriber base had not changed, the MOU for the three months ended
March
31, 2007 would have been 350 minutes, and the ARPU would have been
NIS
149.
|
(4) |
Average
monthly revenue per subscriber (ARPU) includes revenues from inbound
roaming services.
|
1. |
Financial
Condition
|
1.1
|
Company
Assets
|
1.2
|
Shareholder's
equity
|
1.3
|
Financial
debt
|
1.4
|
Current
liabilities
|
2. |
Results
of Operations
|
2.1 |
Income
from sales and services
|
2.2
|
Cost
of sales and services
|
2.3
|
Selling
and marketing expenses
|
2.4
|
General
and administrative expenses
|
2.5
|
Operating
income and EBITDA
|
2.6
|
Financial
expenses
|
3. |
Liquidity
and Capital Resources
|
4. |
Donations
and community involvement
|
Three
months ended March 31,
|
Year
ended December 31,
|
||||
2006
|
2007
|
2006
|
|||
104
|
353
|
3,571
|
5. |
Internal
audit update for the first quarter of
2007
|
5.1 |
The
internal auditor identity - as
of February 2007, at which time the Company became a public company,
the
internal auditor is subject to the administrative supervision of
the CEO
of the Company and presents all proposed audit plans to the Company's
board of directors, for approval.
|
5.2 |
Internal
auditor reports - the
internal auditor reports are presented in writing. Internal audit
reports
are regularly distributed to the chairman of the board of directors,
to
the chairman of the audit committee and its members, and to the
CEO.
|
6. |
Material
events during the reported
period
|
6.1 |
Israeli
Accounting Standard No. 27, “Property, plant and
equipment”
|
6.2 |
Registration
of the Company's ordinary shares for trading in the NYSE
|
7. |
Events
subsequent to balance sheet
date
|
7.1 |
Dividend
distribution
|
7.2
|
For
details regarding a lawsuit, which was served against the Company
in April
2007, and regarding a withdrawal of a motion for certification as
a class
action of a purported class action lawsuit in May 2007, see Note 3(A)
to the financial statements.
|
8. |
Disclosures
regarding exposures to market risks and their management
|
8.1 |
Exposure
to fluctuations in foreign currency exchange rates for payments of
acquisitions and expenses
|
8.2 |
Exposure
to fluctuations in foreign currency exchange rates and interest rates
of
loans
|
8.3
|
Exposure
to fluctuations in the Israeli CPI
regarding NIS denominated loans
|
8.4 |
Balance
sheet linkage table as of March 31, 2007
(in
NIS millions)
|
Balance
Sheet |
Adjusted
to CPI |
In
US $ or
adjusted to US $ |
In
other
foreign currency |
Not-adjusted
|
Non-
monetary items |
Total
|
||||||||||||||||
Cash
and cash equivalents
|
225
|
7
|
218
|
225
|
||||||||||||||||||
Trade
receivables
|
1,274
|
1,274
|
1,274
|
|||||||||||||||||||
Other
receivables and debits
|
139
|
1
|
65
|
73
|
139
|
|||||||||||||||||
Inventory
|
137
|
137
|
137
|
|||||||||||||||||||
Long-term
receivables
|
524
|
18
|
492
|
14
|
524
|
|||||||||||||||||
Fixed
Assets, net
|
2,453
|
2,453
|
2,453
|
|||||||||||||||||||
Other
assets, net
|
679
|
679
|
679
|
|||||||||||||||||||
Total
Assets
|
5,431
|
19
|
7
|
0
|
2,049
|
3,356
|
5,431
|
|||||||||||||||
Short-term
credit from banks
|
-121
|
-71
|
-50
|
-121
|
||||||||||||||||||
Trade
payables
|
-715
|
-61
|
-1
|
-653
|
-715
|
|||||||||||||||||
Other
payables and credits
|
-500
|
-24
|
-2
|
-474
|
-500
|
|||||||||||||||||
Debentures
|
-1,989
|
-1,993
|
4
|
-1,989
|
||||||||||||||||||
Long-term
loans from banks
|
-1,076
|
-636
|
-455
|
15
|
-1,076
|
|||||||||||||||||
Other
long-term payables and credits
|
-15
|
-15
|
-15
|
|||||||||||||||||||
Deferred
taxes
|
-203
|
-203
|
-203
|
|||||||||||||||||||
Total
Liabilities
|
-4,619
|
-2,017
|
-770
|
-1
|
-1,647
|
-184
|
-4,619
|
|||||||||||||||
Difference
|
812
|
-1,998
|
-763
|
-1
|
402
|
3,172
|
812
|
8.5
|
Derivative financial instrument compositions as of March 31, 2007 |
Thousands
of US Dollars
|
Thousands
of NIS
|
|||||||
Nominal
Value
|
Fair
Value
|
|||||||
Period
of less than
one year |
Period
greater
than one year |
Period
of less than
one year |
Period
greater than one
year |
|||||
Long
|
Short
|
Long
|
Short
|
Long
|
Short
|
Long
|
Short
|
|
Call
Options
|
||||||||
Hedging
goal - recognized for accounting purposes
|
||||||||
Hedging
goal - not recognized for accounting purposes
|
78,000
|
39,000
|
483
|
-96
|
||||
Not
for hedging goals
|
||||||||
Put
Options
|
||||||||
Hedging
goal - recognized for accounting purposes
|
||||||||
Hedging
goal - not recognized for accounting purposes
|
53,000
|
47,000
|
3,067
|
-4,673
|
||||
Not
for hedging goals
|
||||||||
Futures
|
||||||||
Hedging
goal - recognized for accounting purposes
|
108,000
|
-19,567
|
||||||
Hedging
goal - not recognized for accounting purposes
|
30,000
|
-1,688
|
||||||
Not
for hedging goals
|
||||||||
Swaps
|
170,000
|
-83,452
|
||||||
Thousands
of NIS
|
Thousands
of NIS
|
|||||||
Nominal
Value
|
Fair
Value
|
|||||||
Period
of less than one year
|
Period
greater than one year
|
Period
of less than one year
|
Period
greater than one year
|
|||||
Long
|
Short
|
Long
|
Short
|
Long
|
Short
|
Long
|
Short
|
|
Swap
IRS
|
400,000
|
-1,376
|
||||||
CPI
/ NIS
|
850,000
|
-16,897
|
Cellcom
Israel Ltd.
and
its Consolidated Subsidiaries
Financial
Statements
As
at March 31, 2007
(Unaudited)
|
Cellcom
Israel Ltd. and its Consolidated Subsidiaries
|
|
Financial Statements as at March 31, 2007 |
Contents
|
|
Page
|
|
Interim
Consolidated Balance Sheets
|
2
|
Interim
Consolidated Statements of Income
|
4
|
Interim
Statements of Changes in Shareholders’ Equity
|
5-6
|
Interim
Consolidated Statements of Cash Flows
|
7-8
|
Notes
to the Interim Consolidated Financial Statements
|
9
|
Interim
Consolidated Balance
Sheets
|
Convenience
|
|||||||||||||
translation
|
|||||||||||||
into
US dollar
|
|||||||||||||
(Note
2C)
|
|||||||||||||
March
31,
|
March
31,
|
March
31,
|
December
31,
|
||||||||||
2007
|
2007
|
2006
|
2006
|
||||||||||
NIS
millions
|
US$
millions
|
NIS
millions
|
NIS
millions
|
||||||||||
(Unaudited)
|
(Unaudited)
|
|
(Unaudited)
|
|
(Audited)
|
|
Current
assets
|
|||||||||||||
Cash
and cash equivalents
|
225
|
54
|
235
|
56
|
|||||||||
Trade
receivables
|
1,274
|
307
|
1,252
|
1,242
|
|||||||||
Other
receivables and debits
|
139
|
33
|
148
|
123
|
|||||||||
Inventory
|
137
|
33
|
149
|
131
|
|||||||||
1,775
|
427
|
1,784
|
1,552
|
||||||||||
Long-term
receivables and debits
|
524
|
126
|
468
|
526
|
|||||||||
Fixed
assets, net
|
2,453
|
590
|
(**)(*)
2,694
|
(**)(*)
2,550
|
|||||||||
Other
assets and deferred expenses,net
|
679
|
164
|
(**)
730
|
(**)
695
|
|||||||||
5,431
|
1,307
|
5,676
|
5,323
|
Ami
Erel
|
Amos
Shapira
|
Tal
Raz
|
||
Chairman
of the Board of
|
Chief
Executive Officer
|
Chief
Financial Officer
|
||
Directors
|
Cellcom
Israel Ltd. and its Consolidated Subsidiaries
|
|
Interim
Consolidated Balance Sheets
|
Convenience
|
|||||||||||||
translation
|
|||||||||||||
into
US dollar
|
|||||||||||||
(Note
2C)
|
|||||||||||||
March
31,
|
March
31,
|
March
31,
|
December
31,
|
||||||||||
2007
|
2007
|
2006
|
2006
|
||||||||||
NIS
millions
|
US$
millions
|
NIS
millions
|
NIS
millions
|
||||||||||
(Unaudited)
|
(Unaudited)
|
|
(Unaudited)
|
|
(Audited)
|
|
Current
liabilities
|
|||||||||||||
Short-term
credit from banks
|
121
|
29
|
320
|
-
|
|||||||||
Trade
payables
|
715
|
172
|
788
|
819
|
|||||||||
Other
payables and credits
|
500
|
121
|
283
|
496
|
|||||||||
1,336
|
322
|
1,391
|
1,315
|
||||||||||
Long-term
liabilities
|
|||||||||||||
Debentures
|
1,989
|
479
|
1,749
|
1,989
|
|||||||||
Long-term
loans from banks
|
1,076
|
259
|
1,658
|
1,208
|
|||||||||
Other
long-term payables and credits
|
15
|
3
|
2
|
2
|
|||||||||
Deferred
taxes
|
203
|
49
|
*231
|
*212
|
|||||||||
3,283
|
790
|
3,640
|
3,411
|
||||||||||
Shareholders’
equity
|
812
|
195
|
*645
|
*597
|
|||||||||
5,431
|
1,307
|
5,676
|
5,323
|
Cellcom
Israel Ltd. and its Consolidated Subsidiaries
|
|
Interim
Consolidated Statements of Income
|
Convenience
|
|||||||||||||
translation
|
|||||||||||||
into
US dollars
|
|||||||||||||
(Note
2C)
|
|||||||||||||
Three
month
|
Three
month
|
Three
month
|
|||||||||||
period
ended
|
period
ended
|
period
ended
|
Year
ended
|
||||||||||
March
31
|
March
31
|
March
31
|
December
31,
|
||||||||||
2007
|
2007
|
2006
|
2006
|
||||||||||
NIS
million
|
US$
millions
|
NIS
million
|
NIS
millions
|
||||||||||
(Unaudited)
|
(Unaudited)
|
|
(Unaudited)
|
|
(Audited)
|
|
Income
from sales and services
|
1,438
|
346
|
1,340
|
5,622
|
|||||||||
Cost
of sales and services
|
783
|
188
|
*
796
|
*
3,273
|
|||||||||
Gross
profit
|
655
|
158
|
544
|
2,349
|
|||||||||
Selling
and marketing expenses
|
149
|
36
|
153
|
656
|
|||||||||
General
and administrative expenses
|
159
|
38
|
159
|
659
|
|||||||||
Operating
income
|
347
|
84
|
232
|
1,034
|
|||||||||
Financial
expenses, net
|
(43
|
)
|
(11
|
)
|
(21
|
)
|
(155
|
)
|
|||||
Other
income (expenses), net
|
1
|
-
|
(4
|
)
|
*(6
|
)
|
|||||||
Income
before income tax
|
305
|
73
|
207
|
873
|
|||||||||
Income
tax
|
97
|
23
|
62
|
*
314
|
|||||||||
Net
income
|
208
|
50
|
145
|
559
|
|||||||||
Earnings
per share
|
|||||||||||||
Basic
and diluted earnings per ordinary shares in NIS
|
2.13
|
0.51
|
*
1.49
|
*
5.73
|
Cellcom
Israel Ltd.
|
|
Interim
Statements of Changes in Shareholders’
Equity
|
Capital
|
Cash
dividend
|
Convenience
|
||||||||||||||||||||
reserve
|
declared
|
translation
|
||||||||||||||||||||
regarding
|
subsequent
to
|
into
|
||||||||||||||||||||
Capital
|
employee
|
balance
|
Retained
|
U.S.
dollar
|
||||||||||||||||||
Share
capital
|
reserve
|
options
|
sheet
date
|
earnings
|
Total
|
(Note
2C)
|
||||||||||||||||
NIS
millions
|
NIS
millions
|
NIS
millions
|
NIS
millions
|
NIS
millions
|
NIS
millions
|
US$
millions
|
For
the three-month period
ended
March
31, 2007 (Unaudited)
|
||||||||||||||||||||||
Balance
as of January
1, 2007
(Audited)
(Note 2B(2))
|
1
|
(24
|
)
|
-
|
-
|
*
620
|
597
|
143
|
||||||||||||||
Influence
of first time implementation
of
new
accounting standards
as of
January
1, 2007 (Unaudited)(Note
2B(2))
|
-
|
-
|
-
|
-
|
(5
|
)
|
(5
|
)
|
(1
|
)
|
||||||||||||
|
||||||||||||||||||||||
Movement
in capital
reserve in respect
of hedging transactions,
net
|
-
|
1
|
-
|
-
|
-
|
1
|
-
|
|||||||||||||||
Amortization
of compensation
related
to employee stock
option grants
|
-
|
-
|
11
|
-
|
-
|
11
|
3
|
|||||||||||||||
Cash
dividend declared
subsequent
to balance
sheet date
|
-
|
-
|
-
|
198
|
(198
|
)
|
-
|
-
|
||||||||||||||
Net
income for the period
|
-
|
-
|
-
|
-
|
208
|
208
|
50
|
|||||||||||||||
|
||||||||||||||||||||||
Balance
as of March
31, 2007 (Unaudited)
|
1
|
(23
|
)
|
11
|
198
|
625
|
812
|
195
|
||||||||||||||
For
the three-month period
ended
March
31, 2006 (Unaudited)
|
||||||||||||||||||||||
Balance
as of January
1, 2006 (audited)
|
**
-
|
5
|
-
|
3,400
|
*492
|
3,897
|
938
|
|||||||||||||||
Movement
in capital
reserve in respect
of hedging transactions,
net
|
-
|
3
|
-
|
-
|
-
|
3
|
1
|
|||||||||||||||
Cash
dividend paid
|
-
|
-
|
-
|
(3,400
|
)
|
-
|
(3,400
|
)
|
(819
|
)
|
||||||||||||
Cash
dividend declared
subsequent
to balance
sheet date
|
-
|
-
|
-
|
330
|
(330
|
)
|
-
|
-
|
||||||||||||||
Net
income for the period
|
-
|
-
|
-
|
-
|
*
145
|
145
|
35
|
|||||||||||||||
Balance
as of March
31, 2006 (Unaudited)
|
**
-
|
8
|
-
|
330
|
307
|
645
|
155
|
Cellcom
Israel Ltd.
|
|
Interim
Statements of Changes in Shareholders’ Equity
(cont'd)
|
Capital
|
Cash
dividend
|
Convenience
|
||||||||||||||||||||
reserve
|
declared
|
translation
|
||||||||||||||||||||
regarding
|
subsequent
to
|
into
|
||||||||||||||||||||
Capital
|
employee
|
balance
|
Retained
|
U.S.
dollar
|
||||||||||||||||||
Share
capital
|
reserve
|
options
|
sheet
date
|
earnings
|
Total
|
(Note
2C)
|
||||||||||||||||
NIS
millions
|
NIS
millions
|
NIS
millions
|
NIS
millions
|
NIS
millions
|
NIS
millions
|
US$
millions
|
For
the year ended
December
31, 2006 (Audited)
|
||||||||||||||||||||||
Balance
as of January
1, 2006 (Audited)
|
**
-
|
5
|
-
|
3,400
|
*
492
|
3,897
|
938
|
|||||||||||||||
Allotment
to dividend
shares
|
1
|
-
|
-
|
-
|
(1
|
)
|
-
|
-
|
||||||||||||||
Movement
in capital
reserve in respect
of hedging transactions,
net
|
-
|
(29
|
)
|
-
|
-
|
-
|
(29
|
)
|
(7
|
)
|
||||||||||||
Cash
dividend paid
|
-
|
-
|
-
|
(3,400
|
)
|
(430
|
)
|
(3,830
|
)
|
(922
|
)
|
|||||||||||
Net
income for the year
|
-
|
-
|
-
|
-
|
*
559
|
559
|
135
|
|||||||||||||||
|
||||||||||||||||||||||
Balance
as of December 31, 2006 (Audited)
|
1
|
(24
|
)
|
-
|
-
|
620
|
597
|
144
|
Cellcom
Israel Ltd. and its Consolidated Subsidiaries
|
|
Interim
Consolidated Statements of Cash
Flows
|
Convenience
|
|||||||||||||
translation
|
|||||||||||||
into
US dollars
|
|||||||||||||
(Note
2C)
|
|||||||||||||
Three
month
|
Three
month
|
Three
month
|
|||||||||||
period
ended
|
period
ended
|
period
ended
|
Year
ended
|
||||||||||
March
31
|
March
31
|
March
31
|
December
31,
|
||||||||||
2007
|
2007
|
2006
|
2006
|
||||||||||
NIS
million
|
US$
millions
|
NIS
million
|
NIS
millions
|
||||||||||
(Unaudited)
|
(Unaudited)
|
|
(Unaudited)
|
|
(Audited)
|
|
Cash
flows from operating activities
|
|||||||||||||
Net
income
|
208
|
50
|
*
145
|
*
559
|
|||||||||
Adjustments
required to present cash flows
|
|||||||||||||
from
operating activities (Appendix A)
|
135
|
33
|
*
152
|
*
918
|
|||||||||
Net
cash provided by operating activities
|
343
|
83
|
297
|
1,477
|
|||||||||
Cash
flows from investing activities
|
|||||||||||||
Acquisition
of fixed assets
|
(153
|
)
|
(37
|
)
|
**(156
|
)
|
**(526
|
)
|
|||||
Proceeds
from sales of fixed assets
|
1
|
-
|
-
|
15
|
|||||||||
Investment
in other assets
|
(22
|
)
|
(5
|
)
|
**(50
|
)
|
**(122
|
)
|
|||||
Net
cash used in investing activities
|
(174
|
)
|
(42
|
)
|
(206
|
)
|
(633
|
)
|
|||||
Cash
flows from financing activities
|
|||||||||||||
Receipt
of long-term loans from banks
|
-
|
-
|
1,649
|
2,155
|
|||||||||
Payment
of long-term loans
|
-
|
-
|
(6
|
)
|
(1,175
|
)
|
|||||||
Proceeds
from issuance of debentures
|
-
|
-
|
42
|
290
|
|||||||||
Cash
dividend paid
|
-
|
-
|
(3,313
|
)
|
(3,830
|
)
|
|||||||
Net
cash used in financing activities
|
-
|
-
|
(1,628
|
)
|
(2,560
|
)
|
|||||||
Increase
(decrease) in cash and cash equivalents
|
169
|
41
|
(1,537
|
)
|
(1,716
|
)
|
|||||||
Balance
of cash and cash equivalents at
|
|||||||||||||
beginning
of the period
|
56
|
13
|
1,772
|
1,772
|
|||||||||
Balance
of cash and cash equivalents at
|
|||||||||||||
end
of the period
|
225
|
54
|
235
|
56
|
Cellcom
Israel Ltd. and its Consolidated Subsidiaries
|
|
Interim
Consolidated Statements of Cash Flows
(cont’d)
|
Convenience
|
|||||||||||||
translation
|
|||||||||||||
into
US dollars
|
|||||||||||||
(Note
2C)
|
|||||||||||||
Three
month
|
Three
month
|
Three
month
|
|||||||||||
period
ended
|
period
ended
|
period
ended
|
Year
ended
|
||||||||||
March
31
|
March
31
|
March
31
|
December
31,
|
||||||||||
2007
|
2007
|
2006
|
2006
|
||||||||||
NIS
million
|
US$
millions
|
NIS
million
|
NIS
millions
|
||||||||||
(Unaudited)
|
(Unaudited)
|
|
(Unaudited)
|
|
(Audited)
|
|
Income
and expenses not involving cash flows
|
|||||||||||||
Depreciation
and amortization
|
188
|
45
|
*
215
|
*
830
|
|||||||||
Deferred
income taxes
|
(2
|
)
|
-
|
(7
|
)
|
*
(20
|
)
|
||||||
Erosion
of long-term loans and other liabilities,
net
|
(13
|
)
|
(3
|
)
|
(15
|
)
|
(109
|
)
|
|||||
Capital
losses (gains)
|
1
|
-
|
4
|
*6
|
|||||||||
Amortization
of compensation related to
|
|||||||||||||
employee
stock option grants
|
11
|
3
|
-
|
-
|
|||||||||
185
|
45
|
197
|
707
|
||||||||||
Changes
in assets and liabilities
|
|||||||||||||
Increase
in trade receivables
|
|||||||||||||
(including
long-term amounts)
|
(30
|
)
|
(7
|
)
|
(31
|
)
|
(75
|
)
|
|||||
Decrease
(increase) in other receivables
|
|||||||||||||
and
debits (including long-term amounts)
|
(20
|
)
|
(5
|
)
|
11
|
22
|
|||||||
Increase
in inventories
|
(6
|
)
|
(1
|
)
|
(31
|
)
|
(13
|
)
|
|||||
Increase
(decrease) in trade payables
|
|||||||||||||
(including
long-term amounts)
|
-
|
-
|
(16
|
)
|
4
|
||||||||
Increase
(decrease) in other payables
|
|||||||||||||
and
credits (including long-term amounts)
|
6
|
1
|
22
|
273
|
|||||||||
(50
|
)
|
(12
|
)
|
(45
|
)
|
211
|
|||||||
135
|
33
|
152
|
918
|
||||||||||
Appendix
B - Non-cash activities
|
|||||||||||||
Acquisition
of fixed assets and other assets on credit
|
54
|
13
|
62
|
197
|
|||||||||
Cellcom
Israel Ltd. and its Consolidated Subsidiaries
|
|
Notes
to the Financial
Statements
|
A.
|
Cellcom
Israel Ltd. (hereinafter - “the Company”) was incorporated in Israel on
January 31, 1994. The Company commenced its operations on
June 27, 1994, after receiving a license from the Ministry of
Communications (hereinafter - “the MOC”) to establish, operate and
maintain a cellular mobile telephone system and provide cellular
mobile
telephone services in Israel. The Company began providing cellular
mobile
telephone services to the Israeli public on December 27, 1994. The
license is in effect until 2022.
|
B.
|
These
interim financial statements have been prepared in accordance with
generally accepted accounting principles in Israel with respect to
the
preparation of interim financial statements in accordance with Accounting
Standard No. 14 of the Israel Accounting Standards Board and the
provisions of Section D of the Securities Regulations (Periodic and
Immediate Reports) - 1970.
|
C.
|
These
interim financial statements have been prepared as at March 31, 2007
and
for the three-month period then ended. They should be reviewed in
conjunction with the Company's annual financial statements and
accompanying notes as at December 31, 2006 and for the year then
ended
(hereinafter - "annual financial
statements").
|
Exchange
rates
|
Consumer
Price
|
||||||
of
US$
|
Index
(points)
|
|
As
of March 31, 2007
|
4.155
|
184.4
|
|||||
As
of March 31, 2006
|
4.665
|
186.1
|
|||||
As
of December 31, 2006
|
4.225
|
184.9
|
|||||
Increase
(decrease) during the period:
|
|||||||
January
- March , 2007
|
(1.7%
|
)
|
(0.3%
|
)
|
|||
January
- March , 2006
|
1.3%
|
|
0.6%
|
|
|||
January
- December, 2006
|
(8.2%
|
)
|
(0.1%
|
)
|
A.
|
The
accounting policies 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, 2006,
except for those mentioned in Note 2B as
follows.
|
B.
|
Effect
of new Israeli Accounting
Standards
|
1.
|
Israeli
Accounting Standard No 26, “Inventory” (“Standard
No. 26”)
|
2.
|
Israeli
Accounting Standard No. 27, “Property, plant and equipment”
(“Standard
No. 27”)
|
(a)
|
It
measured the said liability as at January 1, 2007 in accordance with
generally accepted accounting principles, at the amount of NIS 12
million,
and recorded a tax asset in the amount of NIS 2
million.
|
B.
|
Effect
of new Israeli Accounting Standards
(cont’d)
|
2.
|
Israeli
Accounting Standard No. 27, “Property, plant and equipment”
(cont'd)
|
(b)
|
It
calculated the amount that would have been included in the cost of
the
asset on the date on which the liability was initially incurred by
capitalizing the amount of the liability mentioned in item (a) above
to
the date on which the liability was initially incurred (hereinafter
- the
capitalized amount) at the amount of NIS 9 million. The liability
was
capitalized using the best estimate of the historical capitalization
rates
suitable to the risk that was relevant to that liability during the
expired period; and,
|
(c)
|
It
calculated the accumulated depreciation on the capitalized amount
as at
January 1, 2007 on the basis of the useful life of the asset as at
that
date at the amount of NIS 4
million;
|
(d)
|
The
difference between the amount that was charged to the asset in accordance
with items (b) and (c) above, and the amount of the liability and
the tax
asset in accordance with item (a) above, in the amount of NIS 5 million,
was included in retained earnings as at January 1, 2007.
|
As
reported in
|
||||||||||
As
originally
|
Effect
of
|
these
financial
|
||||||||
reported
|
restatement
|
statements
|
||||||||
NIS
millions
|
NIS
millions
|
NIS
millions
|
(1) |
The
effect on the consolidated balance sheet as at March 31, 2006
(unaudited):
|
Fixed
assets
|
**2,336
|
358
|
2,694
|
|||||||
Long-term
liabilities - deferred
taxes
|
134
|
97
|
231
|
|||||||
Shareholders’
equity
|
384
|
261
|
645
|
Fixed
assets
|
**
2,153
|
397
|
2,550
|
|||||||
Long-term
liabilities - deferred
taxes
|
105
|
107
|
212
|
|||||||
Shareholders’
equity
|
307
|
290
|
597
|
B.
|
Effect
of new Israeli Accounting Standards
(cont’d)
|
2.
|
Israeli
Accounting Standard No. 27, “Property, plant and equipment”
(cont'd)
|
For
the three
|
For
the year
|
||||||
month
period
|
ended
|
||||||
ended
March 31,
|
December
31,
|
||||||
2006
|
2006
|
||||||
(Unaudited)
|
(Audited)
|
||||||
NIS
millions
|
NIS
millions
|
Net
earnings as reported in the past
|
132
|
517
|
|||||
Effect
of restatement:
|
|||||||
Decrease
in depreciation expenses
|
13
|
53
|
|||||
Increase
in capital losses
|
-
|
(1
|
)
|
||||
Increase
in deferred tax expenses
|
-
|
(10
|
)
|
||||
Net
earnings as reported in these financial statements
|
145
|
559
|
Basic
and diluted earnings per ordinary share as reported in the
past
|
1.36
|
5.30
|
|||||
Effect
of restatement
|
0.13
|
0.43
|
|||||
Basic
and diluted earnings per ordinary share as reported in these
financial statements
|
1.49
|
5.73
|
3.
|
Israeli
Accounting Standard No. 23, “The Accounting Treatment of Transactions
between an Entity and the Controlling Interest Therein” (“Standard No.
23”)
|
B.
|
Effect
of new Israeli Accounting Standards
(cont’d)
|
3.
|
Israeli
Accounting Standard No. 23, “The Accounting Treatment of Transactions
between an Entity and the Controlling Interest Therein” (“Standard No.
23”) (cont’d)
|
A.
|
Contingent
Liabilities
|
1. |
In
April 2007, subsequent to the balance sheet date, a purported
class action
lawsuit was filed against the Company in the District Court of
Tel-Aviv-Jaffa, by two plaintiffs who claim to be subscribers
of the
Company. The claim alleges that the Company unlawfully and in
violation of
its license raised its rates, in pricing plans that include a
commitment
to purchase certain services for a fixed
period.
|
2.
|
In May
2007, subsequent to the balance sheet date, a motion of certification
as a
class action, pursuant to the Class Actions Law, 2006, of a purported
class action lawsuit, filed in February 2007, alleging the Company
unlawfully collected VAT amount from subscribers who are residents
of
Eilat, was withdrawn. Had the lawsuit been certified as a class
action,
the amount claimed from the Company was estimated by the plaintiff
at
approximately NIS 33 million.
|
B.
|
Effects
of new legislation and
standards
|
On
May 13, 2007 the Company’s Board of Directors decided to distribute on
June 7, 2007 a cash dividend in the amount of NIS 2.03 per share,
totaling
approximately NIS 198 million, to the shareholders of the Company
of
record at the end of the trading day in the NYSE on May 25, 2007.
The
dividend is presented under a separate item of shareholders’
equity.
|
CELLCOM
ISRAEL LTD.
|
|||||||
Date:
|
May
14, 2007
|
By:
|
/s/
Liat Menahemi Stadler
|
||||
Name:
|
Liat
Menahemi Stadler
|
||||||
Title:
|
General
Counsel
|