Cellcom Israel Announces Second Quarter 2012 Results

NETANYA, Israel, August 14, 2012 /PRNewswire/ --

During the first half of 2012 the Company successfully completed further strategic steps in adjustment to the market conditions:

• Successful merger of Cellcom Israel with Netvision - forming unified headquarters with substantial cost savings. The Company's subsidiary, Netvision, is retaining its profitability level, and presenting an EBITDA ^[1]   of NIS 140 million for the first half of 2012, despite the increased competition in the ISP market
• Efficiency measures - operational efficiency measures which will lead to savings at an annual run rate of NIS 300 million
• Winning the Israeli Defense Force (IDF) tender for cellular services
• Transition from a cellular company to a communications group - offering integrated communications packages such as "Cellcom Total"

For the second half of 2012:

• The Company intends to cope with the changing market conditions by taking further significant operational efficiency measures
• Strengthening Cellcom Israel's position as a communications group while laying the foundation for future opportunities and entry into new areas of activity such as the landline wholesale market, cellular credit card and the examination of entry into IPTV
• The Company will add approx. 60,000 new IDF subscribers and will approach additional related potential subscribers

Second  Quarter 2012 Highlights ^[2]   (compared  with  the  second  quarter 2011):

• Free cash flow ^[3]   totaled NIS 284 million ( $73 million), a 63.2% increase
• Total Revenues totaled NIS 1,498 million ( $382 million), a 5.7% decrease
• Total Revenues from services totaled NIS 1,182 million ( $301 million), a 4.5% increase
• EBITDA totaled NIS 474 million ( $121 million), a 16.3% decrease
• EBITDA margin 31.6%, down from 35.6%
• Operating profit totaled NIS 282 million ( $72 million), a 29.0% decrease
• Net income totaled NIS 121 million ( $31 million), a 50.4% decrease
• Cellular Subscriber base totaled approx. 3.333 million at the end of June 2012

Cellcom Israel Ltd. (NYSE: CEL TASE: CEL) ("Cellcom Israel", the "Company"), announced today its financial results for the second quarter of 2012. Revenues for the second quarter 2012 totaled NIS 1,498 million ( $382 million); EBITDA for the second quarter 2012 totaled NIS 474 million ( $121 million), or 31.6% of total revenues; and net income for the second quarter 2012 totaled NIS 121 million ( $31 million). Basic earnings per share for the second quarter 2012 totaled NIS 1.22 ($0.31).

Ami Arel, Chairman of the Company's Board of Directors, said: "In the first half of 2012 a new management was formed, and the results demonstrate that this management, led by Nir Sztern, is working to achieve the required efficiency measures. I am pleased with the new management's function which is planning and executing the changes needed in order to adjust the Company to market conditions".

Commenting on the results, Nir Sztern, Chief Executive Officer, said: "In our second quarter 2012 results, we see the successful continued implementation of the Company's strategy: the Netvision merger, operational excellence and the transition into a communications group.

The Company completed the merger of Netvision and Cellcom Israel quickly and determinedly while maintaining similar levels of Netvision's profitability compared with the parallel period before the merger, despite the increased competition in the ISP market. The aggressive efficiency measures implemented by the Company through adjustments to the existing head count, a reduction in overhead expenses and improvement of work processes, have led, thus far, to savings at a run rate of NIS 300 million per year. In addition, unique marketing plans were launched, such as "Cellcom Total". A plan that combines an unlimited package for three cellular subscribers, internet and landline services, and which has been greatly successful among our customers and reflects the first step towards materializing our future growth potential as a communications group".

Regarding the competition in the market, Nir Sztern noted: "This quarter does not reflect the full impact of the increased market competition following the entry of the new competitors and the new pricing plans, characterized by unlimited packages at significantly lower prices, from mid May of this year, whose full impact we will see in the coming quarters. While we are witnessing an increase in churn rate, most of our customers are choosing to remain loyal to the Company thanks to our quality customer service.

In the coming quarters, the Company will continue to implement efficiency measures in order to achieve additional significant savings, and act to retain its customer base while recruiting new customers, including approximately 60,000 subscribers of the Israeli Defense Forces (IDF) and approaching additional potential subscribers related to them, following our winning the IDF's tender. We are encouraged by the success of "Cellcom Total" and estimate that the landline wholesale market together with entry into additional areas of activity such as cellular credit card and examination of the entry into IPTV, will be an opportunity to continue and establish our position as a leading communications group. In addition, we expect an increase in revenues from hosting services we provide Golan Telecom and Home Cellular, which begun operating during the second quarter".

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