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Cellcom Israel Announces Second Quarter 2012 Results

Yaacov Heen, Chief Financial Officer, commented: "The efficiency measures we implemented had a positive impact on the second quarter results and demonstrate our continued efforts in adjusting our expense structure to the revenue level.

As we anticipated in the previous quarter, our financing expenses increased due to the increase in the Israeli Consumer Price Index (CPI), which resulted in a significant decrease in our net income for the second quarter of 2012 compared with the first quarter.

Due to the accumulated impact of customers transferring to the new price plans we expect additional erosion to the Company's revenues in the following quarters. Furthermore, we expect that the efficiency measures, which were realized in the first half of 2012 and their continuum in the coming quarters, will moderate this effect.

Our free cash flow for the second quarter of 2012 totaled NIS 284 million, an approximately 63% increase compared with the second quarter 2011, and approximately 97% increase compared with the previous quarter. The improvement in free cash flow is primarily due to a decrease in handset sales, which led to a decrease in purchase of handsets, as well as due to our continued efficiency measures.

The second quarter results and the improvement in free cash flow demonstrate the Company's strength and ability to satisfy its obligations. With that, given the changing competitive environment and the desire to take precaution measures, the Company's board of directors decided not to distribute a dividend for the second quarter of 2012. The board of directors will re-evaluate its decision in the coming quarters."

Main  Consolidated   Financial  Results (financial data for Q2/2012 only, includes Netvision's results ):

                                  Q2/2012     Q2/2011 % Change Q2/2012 Q2/2011
                                                                 million US$
                                           million NIS           translation)
    Total revenues                  1,498        1,589  (5.7%)   381.9   405.0
    Operating profit                  282          397 (29.0%)    71.9   101.2
    Net income                        121          244 (50.4%)    30.8    62.2
    Free cash flow                    284          174   63.2%    72.4    44.4
    EBITDA                            474          566 (16.3%)   120.8   144.3
    EBITDA, as percent of total
    revenues                        31.6%        35.6% (11.2%)

Main Financial Data  by Companies:

                 Cellcom Israel without             Consolidation
                                                     adjustments  Consolidated
                       Netvision          Netvision      (*)        results
                Q2/2012  Q2/2011    (%)     Q2/2012                    Q2/2012
    revenues      1,239    1,589  (22.0%)       277          (18)        1,498
    [4]             942    1,131  (16.7%)       258          (18)        1,182
    revenues        297      458  (35.2%)        19             -          316
    profit          256      397  (35.5%)        55          (29)          282
    EBITDA          399      566  (29.5%)        75             -          474
    EBITDA, as
    percent of
    revenues      32.2%    35.6%   (9.6%)     27.1%             -        31.6%

(*)Include inter-company revenues between Cellcom Israel and Netvision, and amortization expenses attributable to the merger.

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