Cellcom Israel Company Presentation Q2 16
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, 2015. 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. 2
Cellcom Snapshot Israel 3
Cellcom Israel Group Snapshot June 2016 Cellular Israel s largest Cellular Operator Fixed - Line Fastest growing company in TV, Internet & fixed line services 2.812M Subscribers Largest market share of ~27% Independent transmission network Leading brand in Israel s cellular market ISP Service for appx. 685K Households (27% market share) Internet infrastructure service for appx. 136K households (wholesale). More then 10% of our ISP subscribers use our wholesale internet infrastructure services TV service for appx. 87K TV households. Reaching (1,3) 5.7% of the TV market Leading advanced communications solutions provider for business customers (1,3) (4) (2) As of June 30, 2016 (2) As of December 31, 2015 (3) Based on company estimations and public figures (4) According to Globes 2012-2016 brand index (an Israeli financial daily paper) 4
Full end-to-end service communications company Residential Internet Triple play Telephony (VOB) Cellular services International Calls OTT TV 5
Offering our business customers A large range of products Business Cellular services Internet Telephony (VOB) Internet Security Cloud services Transmission International Calls Content Integration services Hosting Services
Our Strategy Offering our customers comprehensive telecommunications solutions Growing in wireline services Optimization of cost structure Internet service based on the wholesale market, launched in February 2015 7
Television Market Cellcom tv - A new tv experience Our offer to the Israeli Market includes: Linear channels including the Israeli Digital terrestrial broadcasting Video on Demand library Live and catch up sports channels Access to internet video content from selected internet sites Music streaming service An improved and advanced user experience Highly competitive price 8
Growing in TV Cellcom s tv Opportunity Two large Multichannel pay-tv incumbents and Cellcom Israel as a newcomer with hybrid OTT-DTT service The incumbents price levels are relatively high at between $60-120 per month The company offers OTT-TV services for 25$ per month TV Subscribers net adds Since Cellcom tv launch +87 Thousands Appx. 87,000 TV customers 5.7% market share -34-9 HOT YES Cellcom The figures are for Q1 15-Q2 16 based on Bezeq, HOT and company reports for Q1 2015-Q2 2016 9
Growing in Fixed Line Cellcom s Fixed line Opportunity Key advantages of Cellcom which are expected to facilitate expansion in the landline business : Triple play package the first of its kind in Israel providing Cellcom tv, Internet access and infrastructure and telephony for a highly competitive price Large subscriber base: appx. 2.8 million cellular subscribers, appx. 27% market share in ISP market and appx. 138 thousand VOB subs Leveraging the fiber network infrastructure Broadband Subscribers Net adds since wholesale launch Thousands +136 (appx. 1,780 KM of fiber optic infrastructure) together with the wholesale market aiming -14 to increase market share in the business sector The figures are for Q1 15-Q2 16 based on Bezeq, HOT and company reports for Q1 2015-Q2 2016-181 Bezeq HOT Cellcom 10
Aggressive Triple play offer Price Nis Aggregate ARPU Nis (2) (2) (2) ARPU includes Internet + ISP+ Telephony + TV (2) The figures are based on HOT and Bezeq reports for 2015 11
On going Cutting Costs Reduction of head count Dealers commission reduction Reduction of advertising and sales promotion expenses IT Systems and building maintenance expenses reduction Warranty and repair services expenses reduction Reduction in walk in centers branches and office space 12
On going Cutting Costs Employee Positions SG&A (M Nis) 7,254 5,435 4,403 3,921 3,645 1,676 1,494 1,287 1,135 1,065 2011 2012 2013 2014 2015 Number of Full-Time Equivalent Positions at the end of 2015 based on company reports 2011 2012 2013 2014 2015 13
Financial and Operational Results 14
Financials Last 4 Quarters Revenues M Nis ARPU Nis EBITDA M Nis 1,032 1,046 1,022 1,029 66.0 63.0 65.2 66.0 235 225 238 238 Q3'15 Q4'15 Q1'16 Q2'16 Q3'15 Q4'15 Q1'16 Q2'16 Q3'15 Q4'15 Q1'16 Q2'16 The figures are based on company reports for the relevant quarters 15
Decreasing Leverage The company substantially reduced the level of financial debt B Nis 6.6 6.5 5.0 5.9 4.6 4.2 5.4 3.8 4.9 4.6 3.3 4.1 3.8 4.0 3.0 2.9 2.7 2.6 Q2'12 Q4'12 Q2'13 Q4'13 Q2'14 Q4'14 Q2'15 Q4'15 Q2'16 Debt Net Debt The figures are based on company reports for the relevant quarters (2) Net Debt defined as credit and loans from banks and others and debentures, net of cash and cash equivalents and current investments in tradable securities 16
Debt Structure as of June 30, 2016 Series Name Amount Coupon Duration Linkage Yield to Maturity Series B Series D Series E Series F Series G Series H Series I Loan A 220 695 164 729 285 950 804 200 5.30% 5.19% 6.25% 4.60% 6.99% 1.98% 4.14% 4.60% 0.53 0.48 0.52 2.16 1.49 4.94 5.05 3.24 CPI Linked CPI Linked Fixed CPI Linked Fixed CPI Linked Fixed Fixed 1.67% 1.19% 1.24% 1.63% 1.67% 2.94% 4.05% - Total 4,046 In June 2016, the first loan under the loan agreement entered by the Company and two financial institutions in May 2015, was provided to the Company. For additional details see the Company's most recent annual report for the year ended December 31, 2015 on Form 20-F, filed on March 21, 2016, under "Item 5B. Liquidity and Capital Resources Other Credit Facilities". 17
Financial highlights Q2 16 Vs. Q2 15 Q2 15 (M NIS) Q2 16 (M NIS) yoy % Total Revenues 1,040 1,029-1.1% Service Revenues 786 782-0.5% Equipment Revenues 254 247-2.8% EBITDA 216 238 +10.2% EBITDA Margin 20.8% 23.1% +11.1% Net Income 12 44 +266.7% Free Cash Flow 119 103-13.4% Cellular ARPU 65.5 66.0 +0.8% Cellular Churn % 10.2% 10.6% +3.9% 18
Contact us Shlomi Fruhling Chief Financial Officer Elad Levy Investor Relations Manager E-mail: investors@cellcom.co.il Tel : + 972 52 9989735 Fax: + 972 52 9989700 19