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Cellcom Israel Announces Second Quarter 2012 Results

Regulation

Royalties

Following previous reports as to the expected changes in royalties paid by the Company to the Ministry of Communications, following a petition filed by the Company and two other cellular operators, the Communications Regulations (Bezeq and Transmissions) (Royalties) 2001, were amended on August 1., as follows:
  • For cellular services - from January 1, 2012 to May 23, 2012 - 2.5%; from May 24, 2012 to July 31, 2012 - 1%; from August 1, 2012 to December 31, 2012 - 0.292% provided the 2012 annual rate shall be 1.3% and  as of January 1, 2013 - 0%.
  • For landline and long distance services (for which the Company pays 1% for 2012) - as of January 1, 2013 - 0%.

For additional details see the Company's most recent annual report on Form 20-F for the year ended December 31, 2011 under "Item 4. Information on the Company - Government Regulations - Royalties" and " - Tariff Supervision".

Long distance services or ILD services

In a hearing published by the Ministry of Communications on July 2012 regarding proposed changes to cooperation of cellular operators with ILD operators for prepaid calling cards, which, if adopted, would eliminate any such cooperation, the Ministry of Communications noted that a revised examination of the ILD market structure and its independence is required. The Company cannot estimate at this stage what changes, if any, would be introduced in relation to ILD services.

For additional details regarding ILD services see the Company's most recent annual report for the year ended December 31, 2011, on Form 20-F, under Item 4. Information on the Company - Government Regulations - Long Distance Services" and "Netvision - Telephony Business".  

Changes in the Board of Directors

Messrs. Shay Livnat, Tal Raz and Assaf Topaz concluded their term as directors of the Company in July and August 2012. Mr. Ari Bronshtein, a member of the Company's board of directors, was designated by Discount Investment Company Ltd. as its appointee to the Company's Board of Directors, as of August 1, 2012, instead of Mr. Topaz. Mr. Bronshtein's appointment is in accordance with the requirement of the Company's telecommunications license and articles of association that at least 20% of the Company directors be appointed by Israeli citizens and residents from among the Company's founding shareholders.

For further details see the Company's most recent annual report on Form 20-F for the year ended December 31, 2011 under "Item 6. Directors, Senior Management and Employees - C. Board Practices- Board of Directors and Officers" and "External Directors - Israeli-Appointed Directors".

2006 Share Incentive Plan

In August 2012, our board of directors resolved to enlarge the pool of options or restricted stock units, or RSUs, of the Company's 2006 Share Incentive Plan, or the Plan, by 1 million options or RSUs and to grant 2,688,726 options to certain non director officers and senior employees, out of which 350,000 options to the Company's CEO, at an exercise price of US$ 5.91 per share. The board of directors further decided to annul the previous grant of 1,550,000 options to certain non-director officers and senior employees, including the Company's CEO, which the board had approved in May 2012, but was not carried out. The options granted will be vested in 2 equal installments on each of the first and second anniversary of the date of the board's decision. The options of the first installment may be exercised within 24 months from their vesting and the second installment may be exercised with 18 month from their vesting.

For additional details see the Company's annual report for the year ended December 31, 2011 on Form 20-F, under "Item 6 - Directors, Senior Management and Employees - Share Ownership - 2006 Share Incentive Plan" and the Company's current report on the Company's results of operations in the first quarter 2012, on Form 6-K filed on May 15, 2012  under "Other developments during the first quarter of 2012 and subsequent to the end of the reporting period - 2006 Share Incentive Plan".

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