Israel Cellcom Company Presentation | 2015 1
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, 2014. 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
Snapshot Cellcom Israel 3
Cellcom Israel Group Snapshot December 2015 2.835M Subscribers (1) Israel’s largest Cellular Operator Largest market share of ~27 % (1,2) Independent transmission network Leading brand in Israel’s cellular market (3) ISP Service for appx. 685K Households (27% market share) Fastest growing company in TV, More then 10% of our ISP subscribers use our wholesale internet infrastructure services Internet & fixed line (2) services 45% market share out of total wholesale subscribers Reaching 4% of the TV market in one year (2) Holds large market share in ILD Leading advanced communications solutions provider for business customers (1) As of December 31, 2015 (2) Based on company estimations and public figures 4 (3) According to Globes 2012-2015 brand index (an Israeli financial daily paper)
Full end-to-end service communications company Residential Internet Triple play Telephony (VOB) OTT TV Cellular services International Calls 5
Offering our business customers A large range of products Business Cellular services Internet Security Internet Cloud services Telephony (VOB) Transmission International Calls Content Integration services Hosting Services
Our Strategy Offering our customers comprehensive telecommunications solutions Growing in wireline services (1) Optimization of cost structure (1) Based on the wholesale market, launched in February 2015 7
Opportunities 2016 - Year of change (1) Golan purchase transaction - If approved and consummated will lead to consolidation from 5 to 4 MNO’S in Israel and will further cement our position as the largest cellular operator in Israel Fixed Line market - 2016 positioning us strongly in the fixed line market, disrupting the current duopoly of Bezeq and Hot (1) Subject to approval by the Anti-Trust commissioner and the Ministry of Communication in Israel 8
Golan Transaction Summary In November 2015, Cellcom entered an agreement for the purchase Golan Telecom's shares. we have not received regulatory approval for the acquisition of Golan (1) Total purchase price is NIS 1.17 billion representing NIS 1.0 billion EV (2) of Golan Telecom The transaction represents a multiple of 5.0x FY2015 for (3) Golan Telecom Adj. EBITDA Cellcom currently expects to finance the transaction by: Equity offering of NIS 200 million Sellers' Convertible note of NIS 400 millions Existing cash and new debt (1) The Company estimates that the receipt of such approvals will be challenging specifically given the strong opposition to the transaction, and there is no certainty that such approvals will be granted. (2) NIS 0.16 billion working capital adjustments and tax shield. Golan's financial and operational information included in this press release was prepared by Golan and provided to the Company as part of Golan's representations in the Agreement (3) Adjusted EBITDA before national roaming costs calculated annually based on the first 8 month of 2015 9 For description of the main terms of the transaction see the Company's current report regarding the transaction on Form 6-K, dated 05/11/2015.
Golan Telecom (1) Snapshot Entered the Market in May 2012 Low Cost player with aggressive prices and basic service Apx. 900K subscribers (2) 32% Annual churn rate (Q4 ’ 14-Q3 ’ 15) NIS 500 million revenues (3) NIS 53 ARPU (H1 2015) (4) NIS 204 million EBITDA (1) Golan's financial and operational information included in this press release was prepared by Golan and provided to the Company as part of Golan's representations in the Agreement. Golan's financial information included in this press release was prepared by Golan in accordance with Israeli GAAP. Israeli GAAP differs from IFRS, and the differences could be material. The Company has not reviewed this information and takes no responsibility for it. (2) As of November 2015 calculated annually based on the first 8 month of 2015 (3) 10 (4) Adjusted EBITDA before national roaming costs calculated annually based on the first 8 month of 2015
Highly Complementary Combination Consolidated Cellcom Golan Pro-forma (1) Subscribers (m) 3.7 0.9 2.8 (1) Mobile Sub. 36% 27% 9% Market Share national roaming using Networks 2G, 3G & 4G 2G, 3G & 4G Cellcom's network A highly complementary combination, with strong synergies (1) As of December 2015 11 (2) Adjusted EBITDA before national roaming costs calculated annually based on the first 8 month of 2015
Soft Synergies • Access to new households – an Fixed line services opportunity to increase fixed line cross- selling penetration (using wholesale market) (1) New offering • Cell phones, value added services, repair of mobile services services • unify overlapping activities Cost synergies • Generate efficiencies in property, logistics and procurement 12 (1) Golan doesn't sell cell phones
Telecom Transactions EBITDA Multiple 13.8 10.3 9.7 8.2 7.8 7.8 7.8 6.5 6.5 5.0 Glentel Ziggo Holding Dodo Australia Telecom New SkyWave Mobile InTechnology Enventis Telefônica Brasil Hispasat Golan Telecom Zealand Australia Communications Managed Services Corporation S.A. Average Multiple x8.7 Source: public figures 2013-2015 13
Golan cost structure after Golan purchase agreement Golan's national payments to the Company on an annual basis increased to approximately NIS 252 million Golan to pay NIS 600 million to Cellcom if no closing is reached According to the agreement if the acquisition is not approved the parties shall negotiate a new network sharing agreement M’NIS 548 600 296 Debt to Cellcom if no (1) Golan Expenses 2016 (1) (2) Golan Expenses 2015 closing is reached (1) Expenses = Revenues minus EBITDA , calculated annually based on the first 8 month of 2015 14 (2) Estimated total expenses according to 2015 expenses + annual payment increase to Cellcom
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 application Access to internet video content from selected internet sites Music streaming service An improved and advanced user experience Highly competitive price 15
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 TV Subscribers (1) Net adds 2015 (000 ’) at between $60-120 per month +63 The company offers OTT-TV services for 25$ per month Appx. 63,000 TV customers - +8 4% market share at the end of 2015 -33 HOT Cellcom YES (1) The figures are based on HOT and Bezeq reports for Q1-Q3 2015 and company estimations for Q4 2015 16
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