Partner Communications Reports Third Quarter 2016 Results(1)

Regulatory News:

Partner Communications Company Ltd. (NASDAQ:PTNR) (TASE:PTNR):

Third quarter 2016 highlights (compared with third quarter 2015)
  • Total Revenues: NIS 849 million (US$ 226 million), a decrease of 16%
  • Service Revenues: NIS 698 million (US$ 186 million), a decrease of 8%
  • Equipment Revenues: NIS 151 million (US$ 40 million), a decrease of 39%
  • Operating Expenses (OPEX) 2 : NIS 570 million (US$ 152 million), a decrease of 12%
  • Adjusted EBITDA: NIS 220 million (US$ 59 million), an increase of 12%
  • Adjusted EBITDA Margin: 26% of total revenues compared with 19%
  • Profit for the period: NIS 19 million (US$ 5 million), compared with a loss of NIS 9 million
  • Net Debt: NIS 1,768 million (US$ 470 million), a decrease of NIS 587 million
  • Free Cash Flow (before interest) 2 : NIS 215 million (US$ 57 million), a decrease of 26%
  • Cellular ARPU: NIS 66 (US$ 18), a decrease of 7%
  • Cellular Subscriber Base: approximately 2.69 million at quarter-end, a decrease of 2%

Partner Communications Company Ltd. (" Partner" or the " Company") (NASDAQ and TASE: PTNR), a leading Israeli communications provider, announced today its results for the quarter ended September 30, 2016.

Commenting on the results of the third quarter of 2016, Mr. Isaac Benbenisti, CEO of Partner, noted:

"In the cellular segment, the number of post-paid subscribers increased in the third quarter by approximately 24,000, and the downward trend in the churn rate of all cellular subscribers continued to a rate of 9.7% .

In addition, we successfully completed a pilot of a WiFi Calling service which enables calls to be placed over the wireless internet, thereby expanding our network's coverage to places including underground shelters and parking lots. Last month we launched for the first time in Israel the service for use with Android-based handsets, and in the coming months we will expand the service to iPhone devices and other popular handsets. In addition, we have begun to upgrade a number of sites to the 4.5G standard (LTE Advanced) so that we can continue to offer our customers the most advanced and leading network in Israel .

In the business division, we are already beginning to see the results of the work done in the past few months, by expanding our agreements with strategic customers and by signing agreements with new customers, as a result of an updated operation model with comprehensive value offers .

In the fixed-line segment, the project to unify the operations of 012 Smile under the Partner brand, that will be completed in 2017, significantly progressed in the third quarter and most of the private internet customers already enjoy Partner's advanced service. The completion of the project in the coming months, will provide us with a comprehensive overview of the services that we provide to our customers, so that we may offer them integrated and customized offers .

The telecommunications market is currently at a crossroads; a reform in the telecommunications field, as part of the legislation of the Arrangements Law, has been brought before the Israeli parliament with the aim of decreasing prices for consumers. Informed decisions by the regulator will increase competition in the telecommunications market. The main benefactor of such a reform will be the Israeli consumer .

In preparation of our entrance into the television market, we expect that the implementation of the "Must Sell" requirement of sports content, as part of the said reform, will enable significant reform of the television market, which is currently controlled by a duopoly, and is expected to lead to a decrease in prices in the multi-channel television market in Israel, considered today one of the most expensive in the world.

Mr. Ziv Leitman, Partner's Chief Financial Officer, commented on the results of the third quarter of 2016 as compared to the second quarter of 2016:

"During the third quarter of 2016, the erosion of cellular services revenues continued due to the ongoing strong competition, at a rate similar to that of the previous quarter.

Cellular ARPU in the third quarter of 2016 totaled NIS 66, an increase of one shekel from the second quarter of 2016, reflecting an increase in seasonal roaming revenues.

Compared to the previous quarter, revenues and gross profit from equipment sales in the third quarter of 2016 decreased by NIS 54 million and NIS 14 million, respectively to NIS 151 million and NIS 28 million, respectively, continuing the downward trend from the second quarter. The decrease in gross profit was due to both a further decline in the quantity of sales, mainly related to the tightening of the Company's customer credit policy, and a change in the product mix.

Operating expenses (OPEX) decreased by NIS 2 million compared with the previous quarter, to NIS 570 million.

Adjusted EBITDA in the third quarter of 2016 decreased by NIS 8 million, or 4%, compared with the previous quarter, mainly reflecting the decline in gross profit from equipment sales, which more than offset the increase in service revenues and decline in OPEX.

Finance costs, net, totaled NIS 30 million in the reported quarter, an increase of NIS 2 million compared to the previous quarter, primarily reflecting the impact of foreign exchange movements in the quarter, partially offset by lower early debt repayment costs.

Profit for the third quarter of 2016 totaled NIS 19 million compared with NIS 26 million in the previous quarter, largely reflecting the reduction in Adjusted EBITDA.

Cash capital expenditures (CAPEX payments) 2 in the third quarter of 2016 totaled NIS 44 million compared to NIS 57 million in the previous quarter, a decrease of 23%.

Free cash flow (before interest payments) in the reported quarter totaled NIS 215 million, compared with NIS 160 million in the previous quarter. The increase in free cash flow primarily reflected the lower CAPEX payments, as well as a decrease in other operating working capital items.

As of September 30, 2016, net debt amounted to approximately NIS 1.77 billion (total short and long term debt and current maturities of NIS 2.91 billion less cash and cash equivalents of NIS 1.14 billion)."

Key Financial Results
NIS Million (except EPS)   Q3'16   Q3'15   % Change
Revenues   849   1,006   -16%
Cost of revenues   691   827   -16%
Gross profit   158   179   -12%
Operating profit   64   32   +100%
Profit (Loss) for the period   19   (9)   N/A
Earnings (Loss) per share (basic, NIS)   0.12   (0.06)   N/A
Free cash flow (before interest payments)   215   291   -26%

Key Operating Indicators
    Q3'16   Q3'15   Change
Adjusted EBITDA (NIS million)   220   196   +12%
Adjusted EBITDA (as a % of total revenues)   26%   19%   +7
Cellular Subscribers (end of period, thousands)   2,693   2,739   -46
Quarterly Cellular Churn Rate (%)   9.7%   10.8%   -1.1
Monthly Average Revenue per Cellular User (ARPU) (NIS)   66   71   -5

Partner Consolidated Results
    Cellular Segment   Fixed-Line Segment   Elimination   Consolidated
NIS Million   Q3'16   Q3'15  

Change %
  Q3'16   Q3'15  

Change %
  Q3'16   Q3'15   Q3'16   Q3'15  

Change %
Total Revenues   670   821   -18%   232   237   -2%  

(53)
 

(52)
  849   1,006   -16%
Service Revenues   531   587   -10%   220   225   -2%  

(53)
 

(52)
  698   760   -8%
Equipment Revenues   139   234   -41%   12   12   0%   -   -   151   246   -39%
Operating Profit   36   10   +260%   28   22   +27%   -   -   64   32   +100%
Adjusted EBITDA   156   137   +14%   64   59   +8%   -   -   220   196   +12%

Financial Review

In Q 3 201 6, total revenues were NIS 849 million (US$ 226 million), a decrease of 16% from NIS 1,006 million in Q3 2015.

Service revenues in Q3 2016 totaled NIS 698 million (US$ 186 million), a decrease of 8% from NIS 760 million in Q3 2015.

Service revenues for the cellular segment in Q3 2016 totaled NIS 531 million (US$ 141 million), a decrease of 10% from NIS 587 million in Q3 2015. The decrease was mainly the result of both the continued price erosion of airtime packages (both Post-Paid and Pre-Paid), due to the competitive market conditions, as well as the decline in revenues related to the network Right of Use Agreement with Hot Mobile which was substituted with the Network Sharing Agreement from the second quarter of 2016.

Service revenues for the fixed-line segment in Q3 2016 totaled NIS 220 million (US$ 59 million), a decrease of 2% from NIS 225 million in Q3 2015.

Equipment revenues in Q3 2016 totaled NIS 151 million (US$ 40 million), a decrease of 39% from NIS 246 million in Q3 2015. The decrease largely reflected a decline in the quantities of cellular and other devices and accessories sold.

Gross profit from equipment sales in Q3 2016 was NIS 28 million (US$ 7 million), compared with NIS 52 million in Q3 2015, a decrease of 46%, again largely reflecting the reduction in the quantity of sales, as well as a decrease in sales profit margins due to a change in the product mix.

Operating expenses (OPEX) totaled NIS 570 million (US$ 152 million) in Q3 2016, a decrease of 12% or NIS 80 million from Q3 2015. The decrease largely reflected the one-time expense of the employee retirement plan in Q3 2015 in an amount of NIS 35 million. The decrease also reflected a decline in cellular network-related operating expenses following the implementation of the cost sharing mechanism under the Network Sharing Agreement with Hot Mobile and a decrease in salary and related expenses, partially offset by higher expenses related to bad debts and doubtful accounts. Operating expenses including depreciation and amortization expenses in Q3 2016 decreased by 11% compared with Q3 2015.

In Q3 2016 the Company continued to record income with respect to the settlement agreement with Orange in an amount of NIS 55 million (US$ 15 million), compared with an amount of NIS 23 million which was recorded in Q3 2015.

Adjusted EBITDA in Q3 2016 totaled NIS 220 million (US$ 59 million), an increase of 12% from NIS 196 million in Q3 2015.

Adjusted EBITDA for the cellular segment was NIS 156 million (US$ 42 million) in Q3 2016, an increase of 14% from NIS 137 million in Q3 2015. The increase principally reflected the decrease in operating expenses (OPEX) as well as the increase in income with respect to the settlement agreement with Orange, which were partially offset by the decreases in service revenues and in gross profit from equipment sales. As a percentage of total cellular revenues, Adjusted EBITDA margin for the cellular segment in Q3 2016 was 23% compared with 17% in Q3 2015.

Adjusted EBITDA for the fixed-line segment was NIS 64 million (US$ 17 million) in Q3 2016, an increase of 8% from NIS 59 million in Q3 2015. The increase mainly reflected the decrease in operating expenses (OPEX), which was partially offset by the decreases in service revenues and in gross profit from equipment sales. As a percentage of total fixed-line revenues, Adjusted EBITDA margin for the fixed line segment in Q3 2016 was 28% compared with 25% in Q3 2015.

Operating profit for Q3 2016 was NIS 64 million (US$ 17 million), an increase of 100% compared with operating profit of NIS 32 million in Q3 2015.

Finance costs, net in Q3 2016 were NIS 30 million (US$ 8 million), a decrease of 25% compared with NIS 40 million in Q3 2015. The decrease was mainly due to lower interest expenses as a result of the lower average level of debt.

Income tax expenses for Q3 2016 were NIS 15 million (US$ 4 million), compared with NIS 1 million in Q3 2015, mainly reflecting the increase in profit before tax.

Profit in Q3 2016 totaled NIS 19 million (US$ 5 million), compared with a loss of NIS 9 million in Q3 2015.

Based on the weighted average number of shares outstanding during Q3 2016, basic earnings per share or ADS, was NIS 0.12 (US $ 0.03), compared to a basic loss per share or ADS of NIS 0.06 in Q3 2015.

Cellular Segment Operational Review

At the end of the third quarter of 2016, the Company's cellular subscriber base (including mobile data and 012 Mobile subscribers) was approximately 2.69 million, including approximately 2.22 million Post-Paid subscribers or 82% of the base, and approximately 478 thousand Pre-Paid subscribers, or 18% of the subscriber base.

During the third quarter of 2016, the cellular subscriber base declined by approximately 7 thousand subscribers. The Post-Paid subscriber base increased by approximately 24 thousand subscribers, while the Pre-Paid subscriber base declined by approximately 31 thousand subscribers.

The quarterly churn rate for cellular subscribers in Q3 2016 was 9.7%, compared with 10.8% in Q3 2015.

Total cellular market share (based on the number of subscribers) at the end of Q3 2016 was estimated to be approximately 27%, unchanged from Q3 2015.

The monthly Average Revenue per User (" ARPU") for cellular subscribers in Q3 2016 was NIS  66 (US$ 18), a decrease of 7% from NIS 71 in Q3 2015. The decrease in ARPU mainly reflected both the continued price erosion of airtime packages and the decline in revenues related to the Right of Use Agreement with Hot Mobile which was substituted with the Network Sharing Agreement from the second quarter of 2016.

Funding and Investing Review

In Q3 2016, cash flow generated from operating activities before interest payments (NIS 253 million) , net of cash flow used for investing activities (NIS 38 million) (' Free Cash Flow (before interest)'), totaled NIS 215 million (US$ 57 million), a decrease of 26% from NIS 291 million in Q3 2015, reflecting a decrease in cash generated from operations, partially offset by lower CAPEX payments.

Cash generated from operations decreased by 28% to NIS 253 million (US$ 67 million) in Q3 2016 from NIS 353 million in Q3 2015. The decrease in cash generated from operations reflected the one-time payment from Orange in an amount of approximately NIS 170 million in Q3 2015, compared with a payment from Hot Mobile in an amount of NIS 35 million in Q3 2016. The payment from Hot Mobile was part of the lump sum of NIS 250 million under the Network Sharing Agreement, which is expected to be paid in full by the end of 2016. In addition, the decrease reflected the decrease in operating assets, which was mainly explained by the decrease in equipment sales under installment payment plans.

Cash capital expenditures (CAPEX payments) totaled NIS 44 million (US$ 12 million) in Q3 2016, a decrease of 31% from NIS 64 million in Q3 2015.

Net debt at the end of Q3 2016 amounted to NIS 1,768 million (US$ 470 million), compared with NIS 2,355 million at the end of Q3 2015, a decrease of NIS 587 million.

Update on Legal Proceedings

On November 7, 2016, Partner was served with a lawsuit and a motion for the recognition of this lawsuit as a class action, filed against Partner, in the Tel-Aviv District Court. The claim alleges that Partner refunded its customers, in cases where it was apparent that they were overcharged, not in accordance with legal provisions. In addition, the claim alleges that Partner charges some of its customers that subscribe to the "One" service for the provision of this special service even though it was terminated. The plaintiff notes that it cannot estimate the total amount claimed in the lawsuit, should the lawsuit be certified as a class action. Partner is reviewing and assessing the lawsuit and is unable, at this preliminary stage, to evaluate, with any degree of certainty, the probability of success of the lawsuit or the range of potential exposure, if any.

Conference Call Details

Partner will hold a conference call on Wednesday, November 23, 2016 at 10.00AM Eastern Time / 5.00PM Israel Time .

To join the call, please dial the following numbers (at least 10 minutes before the scheduled time):

International: +972.3.918.0692North America toll-free: +1.888.281.1167

A live webcast of the call will also be available on Partner's Investors Relations website at: www.partner.co.il/en/Investors-Relations/lobby/

If you are unavailable to join live, the replay of the call will be available from November 23, 2016 until December 7, 2016, via the following numbers:

International: +972.3.925.5930North America toll-free: +1.888.782.4291

In addition, the archived webcast of the call will be available on Partner's Investor Relations website at the above address for approximately three months.

Forward-Looking Statements

This press release 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 "estimate", "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. Specific statements have been made regarding (i) the expansion of our network's coverage through WiFi Calling; and (ii) significant reform of the television market resulting from the implementation of the recommendations of the Filber Committee. In addition, all statements other than statements of historical fact included in this press release regarding our future performance 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, including, as regards in particular the statements identified above, (i) any unanticipated technological or other difficulty which may arise in connection with the expansion of our network's coverage though WiFi calling services; and (ii) delays or unexpected impacts in connection with the implementation of the Filber Committee recommendations. Future results may differ materially from those anticipated herein. For further information regarding risks, uncertainties and assumptions about Partner, trends in the Israeli telecommunications industry in general, the impact of current global economic conditions and possible regulatory and legal developments, and other risks we face, see "Item 3. Key Information - 3D. Risk Factors", "Item 4. Information on the Company", "Item 5. Operating and Financial Review and Prospects", "Item 8 Financial Information - 8A. Consolidated Financial Statements and Other Financial Information - 8A.1 Legal and Administrative Proceedings" and "Item 11. Quantitative and Qualitative Disclosures about Market Risk" in the Company's Annual Reports on Form 20-F filed with the SEC, as well as its immediate reports on Form 6-K furnished to the SEC. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

The quarterly financial results presented in this press release are unaudited financial results.

The results were prepared in accordance with IFRS, other than the non-GAAP financial measures presented below.

The financial information is presented in NIS millions (unless otherwise stated) and the figures presented are rounded accordingly.

The convenience translations of the New Israeli Shekel (NIS) figures into US Dollars were made at the rate of exchange prevailing at September 30, 2016: US $1.00 equals NIS 3.758. The translations were made purely for the convenience of the reader.

Use of Non-GAAP Financial Measures

'Adjusted EBITDA' represents earnings before interest (finance costs, net), taxes, depreciation, amortization (including amortization of intangible assets, deferred expenses-right of use, and amortization of share based compensation) and impairment charges, as a measure of operating profit. Adjusted EBITDA is not a financial measure under IFRS and may not be comparable to other similarly titled measures provided by other companies. Adjusted EBITDA may not be indicative of the Company's historic operating results nor is it meant to be predictive of potential future results. Adjusted EBITDA is presented solely to enhance the understanding of our operating results. We use the term "Adjusted EBITDA" to highlight the fact that amortization includes amortization of deferred expenses - right of use and employee share-based compensation expenses, but Adjusted EBITDA is fully comparable to EBITDA information which has been previously provided by Partner for prior periods.

'Cash capital expenditures' or 'CAPEX payments' represent cash flows used in acquisition of property and equipment and acquisition of intangible assets.

'Capital Expenditures (additions)' represents additions to property and equipment and intangible assets.

'Net Debt' represents notes payable and borrowings form banks and others including current maturities less cash and cash equivalents.

'Free Cash Flow (before interest)' represents cash flows from operating activities before interest payments, net of cash flows used for investment activities.

'Free Cash Flow (after interest)' represents cash flows from operating activities before interest payments, net of cash flows used for investment activities and net of interest paid.

'Operating Expenses (OPEX)' represents cost of service revenues, selling, marketing and administrative expenses net of depreciation, amortization, impairment charges and other expenses (mainly employee share based compensation expenses).

About Partner Communications

Partner Communications Company Ltd. is a leading Israeli provider of communications services (cellular, fixed-line telephony and internet services) under the Partner brand and the 012 Smile brand. Partner's ADSs are quoted on the NASDAQ Global Select Market™ and its shares are traded on the Tel Aviv Stock Exchange (NASDAQ and TASE: PTNR) .

For more information about Partner, see: http://www.partner.co.il/en/Investors-Relations/lobby

1 The quarterly financial results are unaudited.

2 For the definition of this and other Non-GAAP financial measures, see "Use of Non-GAAP Financial Measures" in this press release.

PARTNER COMMUNICATIONS COMPANY LTD.(An Israeli Corporation)INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
     

New Israeli Shekels
 

Convenience translation into U.S. Dollars
September 30,   December 31, September 30,
2016 2015 2016
(Unaudited) (Audited) (Unaudited)
In millions
CURRENT ASSETS
Cash and cash equivalents 1,141 926 304
Trade receivables 1,055 1,057 281
Other receivables and prepaid expenses 40 47 11
Deferred expenses - right of use 23 33 5
Inventories 60 120 16
Income tax receivable   2  
2,319 2,185 617
 
NON CURRENT ASSETS
Trade Receivables 373 492 99
Deferred expenses - right of use 61 20 16
Property and equipment 1,234 1,414 328
Licenses and other intangible assets 822 956 219
Goodwill 407 407 108
Deferred income tax asset 36 49 10
Prepaid expenses and other 2 3 1
2,935 3,341 781
 
TOTAL ASSETS 5,254 5,526 1,398

PARTNER COMMUNICATIONS COMPANY LTD.(An Israeli Corporation)INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
    New Israeli Shekels  

Convenience translation into U.S. Dollars
September 30,   December 31, September 30,
2016 2015 2016
(Unaudited) (Audited) (Unaudited)
In millions
CURRENT LIABILITIES
Current maturities of notes payable and borrowings
and current borrowings 482 554 128
Trade payables 681 715 181
Payables in respect of employees 49 77 13
Other payables (mainly institutions) 37 45 10
Income tax payable 61 52 17
Deferred income with respect to settlement
agreement with Orange 163 217 43
Deferred revenues from HOT mobile 31 8
Other deferred revenues 34 28 9
Provisions 71 77 19
1,609 1,765 428
NON CURRENT LIABILITIES
Notes payable 1,090 1,190 290
Borrowings from banks and others 1,337 1,357 356
Liability for employee rights upon retirement, net 31 34 8
Dismantling and restoring sites obligation 35 36 9
Deferred income with respect to settlement
agreement with Orange 108
Deferred revenues from HOT mobile 23 6

Other non-current liabilities
14 16 4
2,530 2,741 673
 

TOTAL LIABILITIES
4,139 4,506 1,101
 
EQUITY

Share capital - ordinary shares of NIS 0.01

par value: authorized - December 31, 2015

and September 30, 2016 - 235,000,000 shares;

issued and outstanding -
2 2 1
December 31, 2015 - *156,087,456 shares
September 30, 2016 - *156,362,695 shares
Capital surplus 1,082 1,102 288
Accumulated retained earnings 362 267 96
Treasury shares, at cost

December 31, 2015 - **4,461,975 shares

September 30, 2016 - **4,214,608 shares
(331) (351) (88)
TOTAL EQUITY 1,115 1,020 297
TOTAL LIABILITIES AND EQUITY 5,254 5,526 1,398

* Net of treasury shares.

** Including restricted shares in amount of 2,787,197 and 2,911,806 as of September 30, 2016 and December 31, 2015, respectively, held by trustee under the Company's Equity Incentive Plan, such shares will become outstanding upon completion of vesting conditions.

PARTNER COMMUNICATIONS COMPANY LTD.(An Israeli Corporation)INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME
    New Israeli shekels  

Convenience translation into U.S. dollars
9 month period ended September 30   3 month period ended September 30 9 month period ended September 30,   3 month period ended September 30,
2016   2015 2016   2015 2016 2016
(Unaudited) (Unaudited) (Unaudited)   (Unaudited) (Unaudited) (Unaudited)
In millions (except per share data)
Revenues, net 2,723 3,104 849 1,006 725 226
Cost of revenues 2,218 2,544 691 827 590 184
Gross profit 505 560 158 179 135 42
 
Selling and marketing
expenses 330 295 98 102 88 26
General and administrative
expenses 188 170 60 79 50 16
Income with respect to
settlement agreement
with Orange 163 23 55 23 43 15
Other income, net 35 37 9 11 10 2
Operating profit 185 155 64 32 50 17
Finance income 10 3 * * 3 *
Finance expenses 92 107 30 40 25 8
Finance costs, net 82 104 30 40 22 8
Profit (Loss) before income tax 103 51 34 (8) 28 9
Income tax expenses 44 26 15 1 12 4
Profit (Loss) for the period 59 25 19 (9) 16 5
 
Earnings (Loss) per share
Basic 0.38 0.16 0.12 (0.06) 0.10 0.03
Diluted 0.37 0.16 0.12 (0.06) 0.10 0.03

Weighted average number of shares outstanding (in thousands)
Basic 156,120 156,080 156,178 156,085 156,120 156,178
Diluted 157,925 156,148 157,953 156,349 157,925 157,953

* Representing an amount of less than 1 million.

PARTNER COMMUNICATIONS COMPANY LTD.(An Israeli Corporation)INTERIM CONDENSED CONSOLIDATED STATEMENTSOF COMPREHENSIVE INCOME

  New Israeli shekels  

Convenience translation into U.S. dollars
9 month period ended September 30,   3 month period ended September 30, 9 month period ended September 30,   3 month period ended September 30,
2016   2015 2016   2015 2016 2016
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
In millions

Profit (Loss) for the period
59 25 19 (9)   16 5
Other comprehensive income
for the period, net of income tax - - - - - -
TOTAL COMPREHENSIVE
INCOME FOR THE PERIOD 59 25 19 (9) 16 5

PARTNER COMMUNICATIONS COMPANY LTD.(An Israeli Corporation)SEGMENT INFORMATION & Adjusted EBITDA reconciliation
  New Israeli Shekels           New Israeli Shekels
Nine months ended September 30, 2016 Nine months ended September 30, 2015
In millions (Unaudited) In millions (Unaudited)

Cellular segment
     

Fixed line segment
     

Reconciliation for consolidation
      Consolidated

Cellular segment
     

Fixed line segment
     

Reconciliation for consolidation
      Consolidated
Segment revenue - Services 1,586 514 2,100

1,730

546
2,276
Inter-segment revenue - Services

15
147

(162)

17

137
(154)
Segment revenue - Equipment 571 52   623

782

46
  828
Total revenues 2,172

713

(162)

2,723

2,529

729
(154) 3,104
Segment cost of revenues - Services 1,261 460

1,721

1,410

484
1,894
Inter-segment cost of revenues - Services 146 16

(162)

 

135

19
(154)
Segment cost of revenues - Equipment 454 43  

497

 

618

32
  650
Cost of revenues 1,861 519

(162)
2,218

2,163

535
(154) 2,544
Gross profit 311 194 505

366

194
560
Operating expenses 428 90 518

374

91

 

465
Income with respect to settlement
agreement with Orange

163
163

23

23
Other income, net 32 3 35

35

2

37
Operating profit 78 107 185

50

105

155
Adjustments to presentation of Adjusted EBITDA
-Depreciation and amortization 338 110 448

386

109

495
-Other (1) 37   37

9

*

9
Adjusted EBITDA (2) 453 217 670

445

214

 

659

Reconciliation of Adjusted EBITDA toprofit for the period

 

 
- Depreciation and amortization

448

 

495
- Finance costs, net

82

 

104
- Income tax expenses

44

26
- Other (1)

37

 

 

9
Profit for the period

59

25

PARTNER COMMUNICATIONS COMPANY LTD.

(An Israeli Corporation)

SEGMENT INFORMATION & Adjusted EBITDA reconciliation

  New Israeli Shekels           New Israeli Shekels
Three months ended September 30, 2016 Three months ended September 30, 2015
In millions (Unaudited) In millions (Unaudited)

Cellular segment
     

Fixed line segment
     

Reconciliation for consolidation
      Consolidated

Cellular segment
     

Fixed line segment
     

Reconciliation for consolidation
      Consolidated
Segment revenue - Services 526 172 698

581

179

760
Inter-segment revenue - Services 5 48 (53)

6

46

(52)
Segment revenue - Equipment 139 12   151

234

12
 

246
Total revenues 670 232 (53) 849

821

237

(52)

1,006
Segment cost of revenues - Services 410 158 568

468

165

633
Inter-segment cost of revenues - Services 48 5 (53)

45

7

(52)
Segment cost of revenues - Equipment 112 11   123

185

9
 

194
Cost of revenues 570 174 (53) 691

698

181

(52)

827
Gross profit 100 58 158

123

56

179
Operating expenses 127 31 158

146

35

181
Income with respect to settlement
agreement with Orange

55
55

23

23
Other income, net 8

1
9

10

1

11
Operating profit 36 28 64

 

10

22

32
Adjustments to presentation of Adjusted
EBITDA
-Depreciation and amortization 108 35 143

126

37

163
-Other (1) 12 1 13

1
 

1
Adjusted EBITDA (2) 156 64 220

137

59

196
Reconciliation of Adjusted EBITDA to
profit (loss) for the period
- Depreciation and amortization 143

163
- Finance costs, net 30

40
- Income tax expenses 15

1
- Other (1) 13

1
Profit (Loss) for the period 19 (9)

* Representing an amount of less than 1 million.

(1) Mainly amortization of employee share based compensation.

(2) Adjusted EBITDA as reviewed by the CODM represents Earnings Before Interest (finance costs, net), Taxes, Depreciation and Amortization (including amortization of intangible assets, deferred expenses-right of use, amortization of share based compensation and impairment charges), as a measure of operating profit. Adjusted EBITDA is not a financial measure under IFRS and may not be comparable to other similarly titled measures for other companies. Adjusted EBITDA may not be indicative of the Group's historic operating results nor is it meant to be predictive of potential future results. The usage of the term "Adjusted EBITDA" is to highlight the fact that the Amortization includes amortization of deferred expenses - right of use and amortization of employee share based compensation and impairment charges.

PARTNER COMMUNICATIONS COMPANY LTD.

(An Israeli Corporation)

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 

New Israeli Shekels
 

Convenience translation into U.S. Dollars
9 months ended September 30,
2016   2015 2016
(Unaudited) (Unaudited) (Unaudited)
In millions
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash generated from operations (Appendix) 652 668 174
Income tax paid (20) (31) (5)
Net cash provided by operating activities 632 637 169

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment

(97)
(179) (26)
Acquisition of intangible assets (52) (124) (14)
Interest received 2 2 1
Consideration received from sales of property and

equipment
4 1
Proceeds from (repayment of) derivative financial
instruments, net * * *
Net cash used in investing activities (143) (301) (38)

 

CASH FLOWS FROM FINANCING ACTIVITIES:
Interest paid (80) (79) (21)
Current borrowings received 52 14
Non-current borrowings received 675
Repayment of non-current borrowings (11) (177) (3)
Repayment of notes payable (235)   (63)
Net cash provided by (used in) financing activities (274) 419 (73)

 

INCREASE IN CASH AND CASH EQUIVALENTS
215 755 58

CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 926 663 246
 

CASH AND CASH EQUIVALENTS AT END OF
PERIOD 1,141 1,418 304

* Representing an amount of less than 1 million.

PARTNER COMMUNICATIONS COMPANY LTD.(An Israeli Corporation)INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Appendix A - Cash generated from operations and supplemental information
 

New Israeli Shekels
 

Convenience translation into U.S. Dollars
9 months ended September 30,
2016   2015 2016
(Unaudited) (Unaudited) (Unaudited)
In millions
 
Cash generated from operations:
Profit for the period 59 25 16
Adjustments for:
Depreciation and amortization 427 467 114
Amortization of deferred expenses - Right of use 21 27 6
Employee share based compensation expenses 36 10 10
Liability for employee rights upon retirement, net (3) (2) (1)
Finance costs, net 2 1 1
Change in fair value of derivative financial instruments * (1) *
Capital loss from property and equipment 1 *
Interest paid 80 79 21
Interest received (2) (2) (1)
Deferred income taxes 12 (1) 3
Income tax paid 20 31 5
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable:
Trade 122 (211) 33
Other 8 (4) 2
Increase (decrease) in accounts payable and accruals:
Trade (3) 53 (1)
Other payables (38) 19 (10)
Provisions (6) 8 (2)
Deferred income with respect to settlement
agreement with Orange (163) 150 (43)
Deferred revenues from HOT mobile 54 14
Other deferred revenues 6 (7) 2
Increase in deferred expenses - Right of use (52) (22) (14)
Current income tax liability 11 1 3
Decrease (increase) in inventories 60 47 16
Cash generated from operations 652 668 174

* Representing an amount of less than 1 million.

At September 30, 2016 and 2015, trade and other payables include NIS 96 million ($26 million) and NIS 96 million, respectively, in respect of acquisition of intangible assets and property and equipment; payments in respect thereof are presented in cash flows from investing activities.

These balances are recognized in the cash flow statements upon payment.

Reconciliation of Non-GAAP Measures:

Free Cash Flow before and after interest paid
     

New Israeli Shekels
 

Convenience translation into U.S. Dollars
3 months ended September 30,
2016   2015 2016
(Unaudited) (Unaudited) (Unaudited)
In millions
Net cash provided by operating activities 253 353 67
Net cash used in investing activities (38) (62) (10)
Free Cash Flow (before interest) 215 291 57
 
Interest paid (14) (14) (4)
Free Cash Flow (after interest) 201 277 53

Operating Expenses (OPEX)
     

New Israeli Shekels
 

Convenience translation into U.S. Dollars
3 months ended September 30,
2016   2015 2016
(Unaudited) (Unaudited) (Unaudited)
In millions
Cost of revenues - Services 568 633 151
Selling and marketing expenses 98 102 26
General and administrative expenses 60 79 16
Depreciation and amortization (143) (163) (38)
Other (1) (13) (1) (3)

OPEX
570 650 152

(1) Mainly amortization of employee share based compensation.

Key Financial and Operating Indicators (unaudited) *

NIS M unless otherwise stated   Q3' 14   Q4' 14   Q1' 15   Q2' 15   Q3' 15   Q4' 15   Q1' 16   Q2' 16   Q3' 16       2014   2015
Cellular Segment Service Revenues   658   613   579   581   587   550   543   527   531 2,618   2,297
Cellular Segment Equipment Revenues   218   282   277   271   234   269   244   188   139 938   1,051
Fixed-Line Segment Service Revenues   259   250   232   226   225   223   222   219   220 1,004   906
Fixed-Line Segment Equipment Revenues   22   18   18   16   12   22   23   17   12 54   68
Reconciliation for consolidation   (55)   (55)   (52)   (50)   (52)   (57)   (55)   (54)   (53) (214)   (211)
Total Revenues   1,102   1,108   1,054   1,044   1,006   1,007   977   897   849 4,400   4,111
Gross Profit from Equipment Sales   64   61   59   67   52   61   56   42   28 228   239
Operating Profit (Loss)   110   73   56   67   32   (48)   54   67   64 400   107
Cellular Segment Adjusted EBITDA   191   161   148   160   137   152   142   155   156 762   597
Fixed-Line Segment Adjusted EBITDA   91   88   79   76   59   65   80   73   64 334   279
Total Adjusted EBITDA   282   249   227   236   196   217   222   228   220 1,096   876
Adjusted EBITDA Margin (%)   26%   22%   22%   23%   19%   22%   23%   25%   26% 25%   21%
OPEX   657   630   604   601   650   608   612   572   570 2,590   2,463
Impairment charges on operating profit                       98                 98

Income with respect to settlement agreementwith Orange
                  23   38   54   54   55     61
Finance costs, net   50   36   18   46   40   39   24   28   30 159   143
Profit (Loss)   40   24   25   9   (9)   (65)   14   26   19 162   (40)
Capital Expenditures (cash)   129   90   128   111   64   56   48   57   44 432   359
Capital Expenditures (additions)   118   145   50   84   51   86   34   40   44 434   271
Free Cash Flow Before Interest Payments   112   71   21   24   291   230   114   160   215 520   566
Free Cash Flow After Interest Payments   106   21   8   (28)   277   172   89   119   201 389   429
Net Debt   2,637   2,612   2,581   2,626   2,355   2,175   2,079   1,964   1,768 2,612   2,175
Cellular Subscriber Base (Thousands)   2,894   2,837   2,774   2,747   2,739   2,718   2,692   2,700   2,693 2,837   2,718
Post-Paid Subscriber Base (Thousands)   2,145   2,132   2,112   2,112   2,136   2,156   2,174   2,191   2,215 2,132   2,156
Pre-Paid Subscriber Base (Thousands)   749   705   662   635   603   562   518   509   478 705   562
Cellular ARPU (NIS)   76   71   69   70   71   67   67   65   66 75   69
Cellular Churn Rate (%)   12.0%   11.5%   12.7%   10.9%   10.8%   11.1%   11.2%   9.8%   9.7% 47%   46%
Number of Employees (FTE)  

3,683
  3,575   3,535   3,354   3,017   2,882   2,827   2,740   2,742 3,575   2,882

* See footnote 2 regarding use of non-GAAP measures.

View source version on businesswire.com: http://www.businesswire.com/news/home/20161122006234/en/

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