Company presentation Q2 2013 Results 1 August 28, 2013 Safe - - PowerPoint PPT Presentation

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August 28, 2013

Partner Communications Company Ltd.

Company presentation

Q2 2013 Results

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• This presentation includes forward-looking statements within the meaning of Section 27A of

the US Securities Act of 1933, as amended, Section 21E of the US Securities Exchange Act of 1934, as amended, and the safe harbor provisions of the US Private Securities Litigation Reform Act of 1995. Words such as "believe", "anticipate", "expect", "intend", "seek", "will", "plan", "could", "may", "project", "goal", "target" and similar expressions often identify forward- looking statements but are not the only way we identify these statements. All statements other than statements of historical fact included in this press release regarding our future performance, plans to increase revenues or margins or preserve or expand market share in existing or new markets, reduce expenses and any statements regarding other future events

• r our future prospects, are forward-looking statements.
• We have based these forward-looking statements on our current knowledge and our present

beliefs and expectations regarding possible future events. These forward-looking statements are subject to risks, uncertainties and assumptions about Partner, consumer habits and preferences in cellular telephone usage, trends in the Israeli telecommunications industry in general, the impact of current global economic conditions and possible regulatory and legal

• developments. For a description of some of the risks we face, see "Item 3D. Key Information -

Risk Factors", "Item 4. - Information on the Company", "Item 5. - Operating and Financial Review and Prospects", "Item 8A. - Consolidated Financial Statements and Other Financial Information - Legal and Administrative Proceedings" and "Item 11. - Quantitative and Qualitative Disclosures about Market Risk" in the Company's 2012 Annual Report (20-F) filed with the SEC on March 19, 2013. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this press release might not occur, and actual results may differ materially from the results anticipated. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or

• therwise.

Safe Harbor Statement

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1.

Partner Highlights

2.

The Israeli Telecommunications Market

3.

Financial and Operational Performance

4.

Partner’s Strategic Direction

Agenda

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• 1. Partner Highlights

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At a Glance

A leading communications group operating under the “orange” and 012 Smile brands

Strong brand and market presence 29% estimated cellular market share Strong subscriber base

Evolving into a diversified Multi-Service Communications and Media group

High Speed Network, LTE Ready

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 Revenues of NIS 1,130 million ($ 312 million)

 Service Revenues of NIS 950 million ($ 263 million)  Equipment Revenues of NIS 180 million ($ 50 million)

 EBITDA* of NIS 280 million ($ 77 million), 25% of total revenues  Net profit of NIS 20 million ($ 6 million)  Free Cash Flow (before Interest): NIS 287million (US$ 79 million)  Cellular ARPU: NIS 83 ($23)  Cellular Churn: 9.4%

Q2 2013 Financial and Operational Highlights

* EBITDA – Adjusted EBITDA represents earnings before interest (finance costs, net), taxes, depreciation, amortization (including amortization of intangible assets, deferred expenses-right of use, and share based compensation expenses) and impairment charges, as a measure of operating profit. Please refer to the section “Use of Non-GAAP Financial Measures “ in the Company’s quarterly press release.

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• S.B. Israel Telecom Ltd. is an affiliate of Saban Capital Group, Inc. ("SCG"). SCG is

a leading private investment firm based in Los Angeles specializing in the media, entertainment, and communication industries.

• SCG was established by Mr. Haim Saban, co-founder of Fox Family Worldwide, a

global television broadcasting, production, distribution and merchandising company

• wned in partnership with Rupert Murdoch and The News Corporation following its

sale to The Walt Disney Company in October 2001. The firm currently makes both controlling and minority investments in public and private companies and takes an active role in its portfolio companies.

Ownership Structure

As of June 30, 2013

Partner’s Ownership Structure

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• 2. The Israeli Telecommunications Market

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Main Regulatory Actions*

Increasing competition - two new operators and three MVNOs Financial sanctions

• n licensees that

violate their license conditions MOC has published a consultation suggesting a tariff of 0.99 agora per minute for fixed line interconnection. MOC published the policy on fixed line wholesale market Reduction in cellular royalty rate to the Government for 2012 - 1.3%, 2013 - 0% IEC fiber optic project- an agreement was signed with ViaEuropa for the set-up of a FTTH infrastructure company

* Please also refer to the Company's 2012 Annual Report (20-F) filed with the SEC and the press release of March 19, 2013, and the Company’s Q2 2013 PR.

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• 3. Financial and Operational Performance

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Q2 2013 Financial Highlights

in NIS millions Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Revenues

1,428 1,315 1,258 1,144 1,130

Cost of Revenues

1,000 934 969 901 878

Gross Profit

428 381 289 243 252

S,G&A

213 192 160 171 171

Other income

30 28 26 23 21

Operating Profit

245 217 155 95 102

Financial Costs, net

73 68 38 49 71

Income Taxes

52 39 15 15 11

Net Profit

120 110 102 31 20

EBITDA*

423 401 340 268 280

* EBITDA – Adjusted EBITDA represents earnings before interest (finance costs, net), taxes, depreciation, amortization (including amortization of intangible assets, deferred expenses-right of use, and share based compensation expenses) and impairment charges, as a measure of operating profit. Please refer to the section “Use of Non-GAAP Financial Measures “ in the Company’s quarterly press release.

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Cellular Subscribers (In thousands)

* Cellular subscribers at the end of the period

2,231 2,290 2,282 2,102 2,102 2,103 811 870 894 874 830 818

3,042 3,160 3,176 2,976 2,932 2,921

500 1,000 1,500 2,000 2,500 3,000 3,500

2009 2010 2011 2012 Q1'13 Q2'13

Post-paid Pre-paid

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Fixed Line Subscribers (In thousands)

292 295 292 285 281 282 288 293 294 632 632 632 618 609 594 587 581 572

100 200 300 400 500 600 700 800

Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13 Number of Fixed Lines ISP Subscribers

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151 122 111 97 101 83 364 366 397 450 437 532

250 300 350 400 450 500

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50 75 100 125 150 2009 2010 2011 2012 Q2'12 Q2'13

MOU (minutes) ARPU (NIS)

ARPU MOU

Cellular ARPU and MOU

* The ARPU for 2010 has been restated under the interconnect tariff of 2011, for purposes of comparison MOU- the Company believes that reporting MOU is no longer beneficial to understanding the results of operation, and therefore the Company is considering ending reporting MOU as of the end of 2013.

*

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Quarterly Cellular Churn Rate

6.5% 7.2% 8.2% 8.0% 8.9% 10.4% 10.9% 10.4% 9.4%

0% 2% 4% 6% 8% 10% 12% Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13

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Total Revenues (In million NIS)

Results include 012 Smile from March 2011

5,424 5,662 5,224 4,640 1,213 950 655 1,012 1,774 932 215 180

6,079 6,674 6,998 5,572 1,428 1,130 1,000 2,000 3,000 4,000 5,000 6,000 7,000 2009 2010 2011 2012 Q2'12 Q2'13 Service Revenues Equipment Revenues

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EBITDA* (In million NIS)

* EBITDA represents earnings before interest (finance costs, net), taxes, depreciation, amortization (including amortization of intangible assets, deferred expenses-right of use, and share based compensation expenses) and impairment charges, as a measure of operating profit. Please refer to the section “Use of Non-GAAP Financial Measures “ in the Company’s quarterly press release Results include 012 Smile from March 2011

2,304 2,570 2,178 1,602 423 280

38% 39% 31% 29% 30% 25%

0% 5% 10% 15% 20% 25% 30% 35% 40%

• 500

1,000 1,500 2,000 2,500 2009 2010 2011 2012 Q2'12 Q2'13

% total revenues NIS millions

EBITDA EBITDA margin

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OPEX (In million NIS)

OPEX includes cost of service revenues, and selling, marketing and administrative expenses, and excludes depreciation and amortization and impairment charges

913 952 889 872 853 793 744 720 700

500 600 700 800 900

Q2' 11 Q3' 11 Q4' 11 Q1' 12 Q2' 12 Q3' 12 Q4' 12 Q1' 13 Q2' 13

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Net Debt / EBITDA*

Net Debt at the end of the period, EBITDA for the last four quarters

2,102 3,395 4,639 3,812 3,622 3,446 0.9 1.3 2.1 2.4 2.5 2.7

• 0.5

1.0 1.5 2.0 2.5 3.0 3.5

• 500

1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 5,500 2009 2010 2011 2012 Q1'13 Q2'13 Net Debt / EBITDA NIS millions

Net Debt Net debt / EBITDA

* EBITDA represents earnings before interest (finance costs, net), taxes, depreciation, amortization (including amortization of intangible assets, deferred expenses-right of use, and share based compensation expenses) and impairment charges, as a measure of operating profit. Please refer to the section “Use of Non-GAAP Financial Measures “ in the Company’s quarterly press release

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EBITDA - CAPEX* (In million NIS)

* Cash capital expenditures in fixed assets including intangible assets but excluding capitalized subscriber acquisition and retention costs, net,

1,747 2,175 1,707 1,110 310 158

• 400

800 1,200 1,600 2,000 2,400

2009 2010 2011 2012 Q2'12 Q2'13

* EBITDA represents earnings before interest (finance costs, net), taxes, depreciation, amortization (including amortization of intangible assets, deferred expenses-right of use, and share based compensation expenses) and impairment charges, as a measure of operating profit. Please refer to the section “Use of Non-GAAP Financial Measures “ in the Company’s quarterly press release

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557 395 471 492 113 122 6,079 6,674 6,998 5,572 1,428 1,130 9% 6% 7% 9% 8% 11% 2% 4% 6% 8% 10% 12% 14% 16%

• 1,000

2,000 3,000 4,000 5,000 6,000 7,000

2009 2010 2011 2012 Q2'12 Q2'13

Capex as % Total Revenues NIS millions

CAPEX Revenues CAPEX margin

CAPEX* / Revenues

* Cash capital expenditures in fixed assets including intangible assets but excluding capitalized subscriber acquisition and retention costs,, net,

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Free Cash Flow (In million NIS)

Free Cash Flow- Cash flows generated from operating activities before interest payments, net of cash flows used for investments activities, after elimination of cash flows used for the acquisition of 012 Smile

1,021 1,502 1,082 1,234 313 287

• 200

400 600 800 1,000 1,200 1,400 1,600

2009 2010 2011 2012 Q2'12 Q2'13

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EBITDA Evolution Q1’13-Q2’13 (In million NIS)

268 280

Q1 2013 Q2 2013

EBITDA represents earnings before interest (finance costs, net), taxes, depreciation, amortization (including amortization of intangible assets, deferred expenses-right of use, and share based compensation expenses) and impairment charges, as a measure of operating profit. Please refer to the section "Use of Non-GAAP Measures" in the Company's quarterly press release. The analysis presented includes intersegment revenues and expenses.

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EBITDA Evolution Q2’12-Q2’13 (In million NIS)

423 280

Q2 2012 Q2 2013

EBITDA represents earnings before interest (finance costs, net), taxes, depreciation, amortization (including amortization of intangible assets, deferred expenses-right of use, and share based compensation expenses) and impairment charges, as a measure of operating profit. Please refer to the section "Use of Non-GAAP Measures" in the Company's quarterly press release. The analysis presented includes intersegment revenues and expenses.

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Balance Sheet, June 30, 2013 (In million NIS)

Assets Liabilities and Equity Cash and cash equivalents 513 Current maturities of Notes payables and loans 332 Trade receivables and other 1,334 Trade payables 765 Inventories 106 Other current liabilities 288 Total Current Assets 1,953 Total Current Liabilities 1,385 Trade receivables and other 509 Long term borrowings 3,627 Property and equipment 1,846 Other liabilities 87 Goodwill 407 Total Long-term Liabilities 3,714 Intangible assets 1,180 Total Long-term Assets 3,942 Equity 796 Total Assets 5,895 Total Liabilities and Equity 5,895

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Dividend Distribution

No decision regarding dividend distribution was made in the second quarter of 2013.

187 410 752 841 1,059 1,220 350 160

• 1,091

351 1,400 53% 60% 80% 80% 93% 98% 79% 33% 20% 40% 60% 80% 100% 120% 140% 160% 180% 200%

• 500

1,000 1,500 2,000 2,500 3,000 2005 2006 2007 2008 2009 2010 2011 2012 2013

Dividend distributed Buy back One Time

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• 4. Partner’s Strategic Direction

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Our Strategy

Customer centric strategy Strong Branding Operational Excellence Growth in mobile broadband Innovation and technological leadership

• Excellence in

customer experience

• Advanced

quality service

• High level of

customer service

• Customer value

management

• Focused

marketing strategy

• Focus on

service, innovation & advanced technology

• Integration with

012 Smile

• Realizing the full

marketing and product potential

• Cost savings
• Capitalizing on

the rapid increase in demand for ubiquitous mobile data services and devices

• Innovative

products and services

• Commitment to

network quality

• Preparing for 4G

network

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In Summary- Why Partner

Advanced network Customer centric Strategy Strong Brand Innovation

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Ziv Leitman, CFO investors@orange.co.il +972 54 781 4951 Yaffa Cohen-Ifrah, Head of Investor Relations Yaffa.cohenifrah@orange.co.il +972 54 909 9039 Investors’ website: http://www.orange.co.il/en/Investors-Relations/lobby/

The future is bright. The future is Orange.