[PPT] - Cellcom Company Presentation | 2015 1 FORWARD LOOKING STATEMENTS PowerPoint Presentation

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Cellcom

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Israel

Company Presentation | 2015

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FORWARD

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

f 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.

LOOKING STATEMENTS

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Cellcom

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Snapshot

Israel

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Israel’s largest Cellular Operator

2.835M Subscribers(1)
Largest market share of ~27%
Independent transmission network
Leading brand in Israel’s cellular market (3)

Fastest growing company in TV, Internet & fixed line services

ISP Service for appx. 685K Households (27% market share)
More then 10% of our ISP subscribers use our

wholesale internet infrastructure services

45% market share out of total wholesale subscribers
Reaching 4% of the TV market in one year
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 (3) According to Globes 2012-2015 brand index (an Israeli financial daily paper) (2)

Snapshot December 2015

Cellcom Israel Group

(2) (1,2)

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Residential Cellular services Internet Telephony

(VOB)

International Calls Triple play OTT TV

Full end-to-end service communications company

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Business Internet Security Cloud services Transmission Content Hosting Services

Offering our business customers

A large range of products

Cellular services Internet Telephony (VOB) International Calls Integration services

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Offering our customers comprehensive

telecommunications solutions

Growing in wireline services
Optimization of cost structure

(1) Based on the wholesale market, launched in February 2015 (1)

Our Strategy

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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 2016 - Year of change

(1) Subject to approval by the Anti-Trust commissioner and the Ministry of Communication in Israel (1)

Opportunities

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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

Total purchase price is NIS 1.17 billion representing NIS 1.0 billion EV
f Golan Telecom
The transaction represents a multiple of 5.0x FY2015 for

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 (1) (3) 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. (2)

Golan Transaction Summary

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Entered the Market in May 2012
Low Cost player with aggressive prices and basic service
Apx. 900K subscribers
32% Annual churn rate (Q4’14-Q3’15)
NIS 500 million revenues
NIS 53 ARPU (H1 2015)
NIS 204 million EBITDA

Snapshot

(2) (4) (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 (3) calculated annually based on the first 8 month of 2015 (4) Adjusted EBITDA before national roaming costs calculated annually based on the first 8 month of 2015 (3)

Golan Telecom

(1)

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2.8 0.9

Cellcom Golan

27% 9%

2G, 3G & 4G

Networks

national roaming using Cellcom's network

A highly complementary combination, with strong synergies

(1) As of December 2015 (2) Adjusted EBITDA before national roaming costs calculated annually based on the first 8 month of 2015

3.7 Consolidated Pro-forma 36%

2G, 3G & 4G Mobile Sub. Market Share (1)

Subscribers (m)

(1)

Highly Complementary

Combination

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Access to new households – an
pportunity to increase fixed line

penetration (using wholesale market) Fixed line services cross- selling

Cell phones, value added services, repair

services New offering

f mobile services
unify overlapping activities
Generate efficiencies in property,

logistics and procurement Cost synergies

(1) Golan doesn't sell cell phones (1)

Soft Synergies

SLIDE 13 13.8 10.3 9.7 8.2 7.8 7.8 7.8 6.5 6.5 Glentel Ziggo Holding Dodo Australia Telecom New Zealand Australia SkyWave Mobile Communications InTechnology Managed Services Enventis Corporation Telefônica Brasil S.A. Hispasat Source: public figures 2013-2015

Average Multiple x8.7

Golan Telecom 5.0

Telecom Transactions

EBITDA Multiple

13

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296 548 600

14

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

Golan Expenses 2015 Golan Expenses 2016 Debt to Cellcom if no closing is reached (1) Expenses = Revenues minus EBITDA , calculated annually based on the first 8 month of 2015 (2) Estimated total expenses according to 2015 expenses + annual payment increase to Cellcom (1) (1) (2) M’NIS

Golan

cost structure after Golan purchase agreement

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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

Television Market

Cellcom tv - A new tv experience

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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
Appx. 63,000 TV customers -

4% market share at the end of 2015

16 TV Subscribers Net adds 2015 (000’) HOT YES Cellcom (1) The figures are based on HOT and Bezeq reports for Q1-Q3 2015 and company estimations for Q4 2015 (1)

33

+8 +63

Growing in TV

Cellcom’s Tv Opportunity

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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

(appx. 1,750 KM of fiber optic infrastructure)

together with the wholesale market aiming

to increase market share in the business sector

17 Broadband Subscribers Net adds 2015 (000’) HOT Bezeq Cellcom

148
29

+94

(1) (1) The figures are based on HOT and Bezeq reports for Q1-Q3 2015 and company estimations for Q4 2015

Growing in Fixed Line

Cellcom’s Fixed line Opportunity

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Aggregate ARPU

Nis

Price

Nis (3) (2) (1)

Aggressive Triple play offer

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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

On going Cutting Costs

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SG&A (M’Nis) Positions

(1) Number of Full-Time Equivalent Positions (1)

On going Cutting Costs

1,676 1,494 1,287 1,135 1,065

2011 2012 2013 2014 2015

7,254 5,435 4,403 3,921 3,645

2011 2012 2013 2014 2015

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Results

Financial and Operational

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Financials

Last 4 Quarters

M’Nis

EBITDA

M’Nis

Revenues

Nis

ARPU

(1) The figures are based on company reports for the relevant quarters (2) The results for the first quarter of 2015 include a one-time expense in an amount of NIS 30 million. The results for the second quarter of 2015 include a one-time net expenses of NIS 25 million (2) (1) 196 216 235 225 Q1'15 Q2'15 Q3'15 Q4'15 65.5 65.5 66 63 Q1'15 Q2'15 Q3'15 Q4'15 1,062 1,040 1,032 1,046 Q1'15 Q2'15 Q3'15 Q4'15

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Decreasing

Leverage

The company substantially reduced the level of financial debt

(1) 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 Debt B’Nis (1) Net Debt (1) 6.1 6.7 6.5 6.0 5.4 4.9 4.6 4.1 3.8 4.9 5.0 4.6 4.3 3.9 3.3 3.0 2.9 2.7 Q4'11 Q2'12 Q4'12 Q2'13 Q4'13 Q2'14 Q4'14 Q2'15 Q4'15

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as of December 31, 2015

(1) In May and August 2015, the Company entered deferred loan agreements with Israeli financial institutions and a bank, for the total sum of NIS 540 million, under certain customary conditions (2) As of December 2015 Yield to Maturity Linkage Duration Coupon Amount Series Name 1.62% CPI Linked 0.52 5.30% 442 Series B 1.69% CPI Linked 0.98 5.19% 698 Series D 1.03% Fixed 0.49 6.25% 327 Series E 1.90% CPI Linked 2.60 4.60% 732 Series F 1.29% Fixed 1.92 6.99% 285 Series G 2.76% CPI Linked 5.38 1.98% 950 Series H 3.95% Fixed 5.44 4.14% 558 Series I 3,991 Total

Debt Structure

(1)

(2)

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2015

(M NIS)

2014

(M NIS)

yoy %

Total Revenues

4,180 4,570 (8.5%)

Service Revenues

3,132 3,565 (12.1%)

Equipment Revenues

1,048 1,005 4.3%

EBITDA

872 1,282 (32.0%)

EBITDA Margin

20.9% 28.0% (0.25%)

Net Income

97 354 (72.6%)

Free Cash Flow

494 1,204 (59.0%)

Cellular ARPU

65.0 72.1 (9.9%)

Cellular Churn %

42.0% 44.0% (4.5%)

Financial highlights

2015 Vs. 2014

(1) The results for the year 2015 include a one-time expense in a total amount of NIS 55 million. EBITDA for 2014 include two one time expenses in the net amount of 27 million. (1) (1) (1)

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Q4’15

(M NIS)

Q4’14

(M NIS)

yoy %

Total Revenues

1,046 1,140 (8.2%)

Service Revenues

757 835 (9.3%)

Equipment Revenues

289 305 (5.2%)

EBITDA

225 282 (20.2%)

EBITDA Margin

21.5% 24.7% (13.0%)

Net Income

19 55 (39.7%)

Free Cash Flow

121 174 (30.5%)

Cellular ARPU

62.4 67.8 (7.9%)

Cellular Churn %

11.1% 11.5% (3.4%)

Financial highlights

Q4’15 Vs. Q4’14

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Shlomi Fruhling

Chief Financial Officer

Elad Levy

Investor Relations Manager

E-mail: investors@Cellcom.co.il Tel : + 972 52 9989755 Fax: + 972 52 9989700

Cellcom Company Presentation | 2015 1 FORWARD LOOKING STATEMENTS - - PowerPoint PPT Presentation

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