Cellcom Israel 1 Full End-To-End Service Communications Group - PowerPoint PPT Presentation

Cellcom Israel 1

Full End-To-End Service Communications Group (1) Appx. 2.8 million  26% Market  Leading brand in  Mobile subs share Israel ’ s mobile The largest cellular market Mobile provider in Israel  Fixed line  International Appx. 248k  195k TV subs  (1) telephony calls Broadband subs (11% market share) Leading the TV Fixed line Residential revolution in Israel with OTT TV service  Cyber security  Hosting services Fixed line  Integration services  Cloud services Business  Transmission  IOT 2 (1) As of Q2 ’ 18 based on companies ’ reports and Company ’ s estimation

Cellcom Israel Strategy  from a cellular  Optimization of  New Growth  cost structure company to a Engines comprehensive telecom group 3

From A cellular company To a Telecommunications Group 4

Cellular Segment Maintaining Market Leadership  Sales of bundled packages of cellular + fixed line products The first and only operator in Israel to offer quad play  Successful marketing of complete communication package increases our total income per household even as cellular prices decrease  Upsale of data packages  Sales of VAS products (cyber security, streaming music, backup, etc.) 5

Cellular Network Sharing Agreements  The company signed a network hosting and sharing agreement with Golan Telecom (Israeli MNO) which came into effect at the beginning of Q2- 2017  The Golan agreement is for a minimum of 10 years with average annual payments of approx. M ’ NIS 210-220 per year, starting with lower annual payments and increasing over time  The company entered an additional hosting and sharing agreement with Xfone (New Israeli MNO) which entered the cellular market in April 2018. The agreement (for the period of no less than 5 years) contains minimum annual payments, ranging between approx. M ’ NIS 20 in the first year and M ’ NIS 110 in the fifth year* 6 * After the fifth year of the agreement, the payment mechanism between the parties changes

TV Service Reaching 11% Market Share in TV in Three Years  Launched new TV service in December 2014  Hybrid solution of DTT linear TV plus OTT TV (VOD + channels)  Over 10,000 VOD assets for unlimited usage  Highly competitive price – NIS 99 Attractive Quad and Triple play offers  Multi screen strategy (IOS ,Android smart tv, set top boxes, Apple tv)  Cutting edge technology: full catch up and cloud PVR  Advanced intuitive user experience 7

Offering The Top Channels viewers really Want All the sports Current events The leading series from The leading studios The world ’ s leading children ’ s channels Entertainment, leisure, science and nature Cellcom channels 8

Fast Growth in The TV Market Cellcom tv subscribers since launch (Dec 2014) Thousands 195 184 170 154 137 124 111 99 87 74 63 50 37 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 9

Continued Growth in Broadband (1) 40% of wholesale market 248 235 222 206 189 173 156 146 136 120 94 70 32 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 10 (1) According to bezeq ’ s reports for Q1 ’ 18

Israel Internet infrastructure is lagging behind The reasons: • Duopoly in the infrastructure segment created a non-competitive market • There is no real incentive to invest in infrastructure Mb/sec (1) Internet Speed Israel ranks 70th in the world Israel (1) Mean download speed according to Cable 2018 report published on M-Lab site 11

Cellcom Israel ’ s opportunity  Unfulfilled need of high-speed internet  High market prices  Low Internet speed  Opportunity to change market shares 12

IBC owned by Cellcom Israel will (1) revolutionize Internet infrastructure in Israel  IBC has the exclusive right to deploy an optical infrastructure on the IEC infrastructure  IBC has a significant advantage in deployment costs in areas with high electricity infrastructure Households reach target  High performance capabilities of IEC Cellcom Israel + IBC (Thousand) 1,200  Reducing the need for deployment Above 900 permits Above 500  There is an existing deployment to about 150,000 households After 3 Years After 5 Years After 10 Years (1) The transaction is conditional on entering into final agreements and regulatory approvals. There is no certainty that the transaction will be completed. For full information, see the Company's 13 Immediate Report of dated August 8, 2018.

Benefits for Cellcom Israel  Integrates with Cellcom Israel ’ s strategy – leading the revolution in the fixed line market  Another product in the communications products basket that Cellcom Israel offers  Providing higher quality TV services  Providing new and advanced services  Significant savings in the amounts paid for Bezeq's Internet infrastructure and improved profitability in the fixed-line segment 14

(1) IBC – The transaction  Cellcom Israel will hold 70% of IBC shares for approx. NIS 100 million  An additional 30% will be held by the Israel Electric Company  Cellcom Israel reached agreements with the Israel Electric company regarding the rates of the works (deployment on the electricity network infrastructure) as the main contractor (1) The transaction is conditional on entering into final agreements and regulatory approvals. There is no certainty that the transaction will be completed. For full information, see the Company's 15 Immediate Report of August 8, 2018.

Aggressive Cost Reduction  Reduction of head count FTE Positions 7,254  launch of a new voluntary retirement plan that will be another layer in our ongoing expenses reduction process 3,358  Dealer commissions reduction 2011 2017  Reduction of advertising and sales promotion expenses SG&A (M ’ Nis)  IT systems and building maintenance 1,676 expenses reduction 905  Warranty and repair services expense reduction 2011 2017  Reduction in ‘ walk in center ’ branches and office space 16

IOT as a Growth Engine IOT – The Internet Of Things The ability to connect things in a smart way that will lead to efficiency, business growth and life quality improvement 17

The Cellcom Smart City Solution Combination of various solutions including : Waste Sensors of Water Energy management environmental management efficiency protection 18

Cellcom Israel “ Smart City ” offers end-to-end solutions  Own communications network End equipment and sensors  Integration  Information security Services and Communication  Extensive knowledge and experience in applications providing various solutions Security  Collaboration with leading vendors Platform Analysis 19

Winning Strategic Tendors of IoT The first tender in Israel, which is a complete “ Smart City ” Command & Control Endpoints Existing System System Upgrade in The City of Tel – Aviv – jaffa The Home Front Command Tender of IDF (1) - Turning The Old Management & Public WiFi Remote locking & Control systems announcement Connection Opening of the Shelters in Israel into (100 local system for delivering shelter “ Smart Shelters ” authorities) messages 20 (1) In cooperation with Team 3 Protection Systems Ltd 20

(1) Q2 2018 Key Financial Summary M ’ Nis Q2 ’ 17 Q2 ’ 18 YoY % Total Revenues 962 927 -3.6% Service Revenues 731 694 -5.1% Equipment Revenues 231 233 +0.9% EBITDA 237 133 -43.9% Net Income (loss) 45 (37) N.A. Free Cash Flow 77 56 -27.3% (1) All data should be reviewed in conjunction with the Company's press release and financial report for the Second quarter of 2018 21

Substantial Reduction of Financial Debt M ’ NIS Financial Debt, Net 4,553 3,842 2,951 2,747 2,553 2,547 2012 2013 2014 2015 2016 2017 (1) Based on company reports for the relevant years 22

Contact us Shlomi Fruhling Chief Financial Officer E-mail: investors@Cellcom.co.il Tel : + 972 52 9989735 Elad Levy Fax: + 972 52 9989700 Investors Relations Manager 23