Partner Communications Reports Third Quarter 2015 Results1

PARTNER REPORTED A LOSS OF NIS 9 MILLION FOR Q3'15

POST-PAID CELLULAR SUBSCRIBER BASE INCREASED BY 24,000 OFFSET BY A DECREASE OF 32,000 PRE-PAID SUBSCRIBERS IN Q3'15

NET DEBT DECREASED BY NIS 282 MILLION COMPARED TO Q3'14 TO NIS 2,355 MILLION

Third quarter 2015 highlights (compared with third quarter 2014)

  • Total Revenues: NIS 1,006 million (US$ 256 million), a decrease of 9%
  • Service Revenues: NIS 760 million (US$ 194 million), a decrease of 12%
  • Equipment Revenues: NIS 246 million (US$ 63 million), an increase of 2%
  • Operating Expenses (OPEX)2 including cost of equipment sold: NIS 844 million (US$ 215 million), an increase of 1%
  • Operating Expenses (OPEX)2: NIS 650 million (US $166 million), a decrease of 1%
  • Adjusted EBITDA3: NIS 196 million (US$ 50 million), a decrease of 30%
  • Adjusted EBITDA Margin: 19% of total revenues compared with 26%
  • Loss for the period: NIS 9 million (US$ 2 million), a reduction of NIS 49 million
  • Net Debt4: NIS 2,355 million (US$ 600 million), a decrease of NIS 282 million
  • Free Cash Flow (before interest)5: NIS 291 million (US$ 74 million), an increase of 160%
  • Cellular ARPU: NIS 71 (US$ 18), a decrease of 7%
  • Cellular Subscriber Base: approximately 2.74 million at quarter-end, a decrease of 5%

1 The financial results presented in this press release are unaudited.
2 Operating expenses include cost of service revenues, and selling, marketing & administrative expenses, and exclude depreciation and amortization and impairment charges.
3 For definition of Adjusted EBITDA measure, see “Use of Non-GAAP Financial Measures” below.
4 Total long term debt including current maturities less cash and cash equivalents.
5 Cash flows from operating activities before interest payments, net of cash flows used for investment activities.

ROSH HA’AYIN, Israel--()--Partner Communications Company Ltd. (“Partner” or the “Company”) (NASDAQ:PTNR) (TASE:PTNR), a leading Israeli communications operator, announced today its results for the quarter ended September 30, 2015.

Commenting on the third quarter of 2015 results, Mr. Isaac Benbenisti, CEO of Partner noted:

"The third quarter results reflect the telecommunications market environment in which competition in the cellular market remains intense and is characterized by continued price erosion. The reform of the fixed line wholesale market, which includes internet and fixed telephony services, has still not been implemented as anticipated, and we are experiencing many difficulties, as well as prolonged and cumbersome regulatory processes, which limit the potential to succeed and create a competitive telecommunications market. We hope that the Ministry of Communications will remove the barriers as soon as possible, in order to fully implement the reform and enable customers to experience a quality service with an advanced technology at attractive prices, in both internet and fixed telephony services.

In the cellular segment, we moved in the reported quarter to a positive recruitment of Post-Paid subscribers with an increase of 24,000 subscribers, in contrast to the previous three quarters in which there was a cumulative decline of 33,000 post-paid subscribers. We have seen growth in subscriber consumption of cellular data of approximately 70% over the last four quarters, a trend we believe will continue in the future. The move to the 4G network is expected to support this trend. We also observe an increase in data speeds and an improved customer service experience since we shifted to the 20 MHz frequency band, after receiving the new frequencies from the Ministry of Communications.

We have significantly scaled down our investments in infrastructure which decreased by approximately 50% in the first nine months of 2015, compared with the first nine months of 2014. The erosion in operating profitability does not allow us to make the same volume of investments as in the past.

We recorded a net loss for the Company for the reported quarter. This loss reflects, on the one hand, the intense competition in the cellular market over the last few years which has led to significant erosion in revenues in a relatively short period of time, and on the other hand, our limited ability to cut costs further. We are continuing to act to improve our results by focusing both on revenues as well as expenses, in order to provide comprehensive and quality service to our customers and to expand our value proposition and advantage in the telecommunications sector.”

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

“During the third quarter of 2015, the competition in the cellular market continued to erode service revenues. However, this was more than offset by the effects of seasonal roaming revenues, among other things.

The churn rate for cellular subscribers stood at 10.8% in the third quarter of 2015 compared to 10.9% in the previous quarter and 12.0% for the third quarter of 2014, reflecting a decline in the churn of Post-Paid subscribers. Whilst this is the second consecutive quarterly decline in the churn rate, the churn rate remains high, reflecting the intense competition.

Cellular ARPU in the third quarter of 2015 totaled NIS 71, an increase from NIS 70 in the second quarter of 2015, resulting mainly from the seasonal roaming revenues, as explained above. The second and third quarters tend to be characterized by higher roaming revenues compared with the first and fourth quarters, which positively impacts on the ARPU level. We, nevertheless, continue to experience price erosion in our airtime and data packages and services.

Revenues and gross profit from equipment sales in the third quarter of 2015 decreased by NIS 41 million and NIS 15 million, respectively, compared to the previous quarter. The decrease was primarily due to significant handset sales in the third quarter to large corporate customers at prices generating lower than average profitability, as well as a change in product mix.

Operating expenses increased by NIS 49 million, primarily reflecting the NIS 35 million one-time expense of the employee retirement plan, as announced in the previous quarter.

Adjusted EBITDA in the third quarter of 2015 decreased by NIS 40 million, or 17%, compared with the previous quarter. Adjusted EBITDA for the cellular segment decreased by 14% while Adjusted EBITDA for the fixed-line segment decreased by 22%. The decreases mainly reflected the one-time expense of the employee retirement plan as well as the decline in gross profit from equipment sales. Adjusted EBITDA of the fixed-line segment was also negatively affected by the losses arising from the sale of internet services following implementation of the wholesale broadband market reforms. In addition, the implementation of the wholesale broadband market may have a further negative effect on our Adjusted EBITDA and on the Company's results for future periods. These factors were partially offset by income resulting from the new framework agreement with Orange in an amount of approximately NIS 22 million, and the positive impact of the seasonal roaming revenues.

Finance costs, net, totaled NIS 40 million this quarter, a decrease of 13% compared to the previous quarter, mainly reflecting lower linkage costs from the smaller increase in the Consumer Price Index level.

Overall, the Company recorded a loss for the third quarter of 2015 of NIS 9 million compared with a profit of NIS 9 million in the previous quarter. The decrease in profits largely reflected a one-time expense of the employee retirement plan, as well as lower gross profit from equipment sales, partially compensated for by the income from the new framework agreement with Orange and the positive impact of the seasonal roaming revenues.

Cash capital expenditures in fixed assets (CAPEX payments) in the third quarter of 2015 totaled NIS 62 million compared to NIS 110 million in the previous quarter, a decrease of 44% mainly due to the one-time payment to the Ministry of Communications during the second quarter of 2015 for the 4G frequencies, in the amount of NIS 34 million. On an accrual basis, investments in fixed assets in the first nine months of 2015 totaled NIS 185 million (including NIS 34 million for the 4G frequencies), compared with NIS 289 million in the first nine months of 2014.

Free cash flow (before interest payments) in the third quarter of 2015 totaled NIS 291 million, compared with NIS 24 million in the second quarter of 2015. The increase in free cash flow primarily reflected the one-time payment from Orange in the amount of approximately NIS 170 million (€40 million) as part of the new framework agreement with Orange, as well as the decrease in capital expenditures and the decrease in other items of working capital, partially offset by the decrease in Adjusted EBITDA.

As of September 30, 2015, net debt amounted to approximately NIS 2.4 billion (total long term debt and current maturities less cash and cash equivalents of NIS 1.4 billion). In the third quarter, net debt declined by NIS 271 million, largely a result of the positive free cash flow (after interest payments)."

Key Financial Results6 (unaudited)

NIS Million (except EPS)   Q3'15   Q3'14   % Change
Revenues   1,006   1,102   -9%
Cost of revenues 827 850 -3%
Gross profit 179 252 -29%
Operating profit 32 110 -71%
Profit (loss) for the period (9) 40 N/A
Earnings (loss) per share (basic, NIS) (0.06) 0.26 N/A
Free cash flow (before interest)   291   112   +160%

Key Operating Indicators (unaudited)

    Q3'15   Q3'14   Change
Adjusted EBITDA (NIS million)   196   282   -30%
Adjusted EBITDA as a percentage of total revenues 19% 26% -7
Cellular Subscribers (end of period, thousands) 2,739 2,894 -155
Quarterly Cellular Churn Rate (%) 10.8% 12.0% -1.2
Monthly Average Revenue per Cellular User
(ARPU) (NIS)
  71   76   -7%

Partner Consolidated Results (unaudited)

  Cellular Segment   Fixed-Line Segment   Elimination   Consolidated
NIS Million   Q3'15   Q3'14   Change %   Q3'15   Q3'14   Change %   Q3'15   Q3'14   Q3'15   Q3'14   Change %
Total Revenues 821  

876

  -6% 237   281   -16% (52)   (55) 1,006   1,102   -9%
Service Revenues 587

658

-11% 225 259 -13% (52) (55) 760 862 -12%
Equipment Revenues 234

218

+7% 12 22 -45% - - 246 240 +2%
Operating Profit 10

57

-82% 22 53 -58% - - 32 110 -71%
Adjusted EBITDA   137  

191

  -28%   59  

91

  -35%   -   -   196   282   -30%

6 See also definitions in footnotes 2-5.

Financial Review (Consolidated)

In Q3 2015, total revenues were NIS 1,006 million (US$ 256 million), a decrease of 9% from NIS 1,102 million in Q3 2014.

Service revenues in Q3 2015 totaled NIS 760 million (US$ 194 million), a decrease of 12% from NIS 862 million in Q3 2014.

Service revenues for the cellular segment in Q3 2015 were NIS 587 million (US$ 150 million), a decrease of 11% from NIS 658 million in Q3 2014. The decrease was mainly the result of the continued price erosion of Post-Paid and Pre-Paid cellular services due to intense competition, partially offset by an increase in revenues from wholesale services that the Company provides to other operators hosted on the Company’s network, and in particular as a result of the Rights of Use agreement with HOT Mobile.

Service revenues for the fixed-line segment in Q3 2015 totaled NIS 225 million (US$ 57 million), a decrease of 13% compared with NIS 259 million in Q3 2014. The decrease mainly reflected lower revenues from international calls and internet services.

Equipment revenues in Q3 2015 totaled NIS 246 million (US$ 63 million), an increase of 2% from NIS 240 million in Q3 2014. The increase largely reflected a higher average price per device sold due to a change in product mix, and was recorded despite a decrease in the amount of devices sold.

Gross profit from equipment sales in Q3 2015 was NIS 52 million (US$ 13 million), compared with NIS 64 million in Q3 2014, a decrease of 19%, primarily due to a decrease in the amount of devices sold, despite an increase in the profit per device sold.

Operating expenses (‘OPEX’, including cost of service revenues, selling, marketing and administrative expenses and excluding depreciation and amortization) totaled NIS 650 million (US$ 166 million) in Q3 2015, a decrease of 1% or NIS 7 million from Q3 2014. The decrease largely reflected lower payments to other telecommunication providers, partially offset by the impact of the one-time expense of the employee retirement plan, as well as an increase in doubtful accounts expenses. Operating expenses including depreciation and amortization expenses in Q3 2015 decreased by 2% compared with Q3 2014.

Adjusted EBITDA in Q3 2015 totaled NIS 196 million (US$ 50 million), a decrease of 30% from NIS 282 million in Q3 2014.

Adjusted EBITDA for the cellular segment was NIS 137 million (US$ 35 million) in Q3 2015, a decrease of 28% from NIS 191 million in Q3 2014, mainly reflecting the decrease in service revenues and lower gross profit from equipment sales. As a percentage of total cellular revenues, Adjusted EBITDA for the cellular segment in Q3 2015 was 17%, compared to 22% in Q3 2014.

Adjusted EBITDA for the fixed-line segment was NIS 59 million (US$ 15 million) in Q3 2015, a decrease of 35% from NIS 91 million in Q3 2014. The decrease reflected the lower service revenues and lower gross profit from equipment sales, partially offset by the lower operating expenses. As a percentage of total fixed-line revenues, Adjusted EBITDA for the fixed-line segment in Q3 2015 was 25% compared with 32% in Q3 2014.

Operating profit for Q3 2015 was NIS 32 million (US$ 8 million), a decrease of 71% compared with operating profit of NIS 110 million in Q3 2014.

Finance costs, net in Q3 2015 were NIS 40 million (US$ 10 million), a decrease of 20%, compared with NIS 50 million in Q3 2014. The decrease was mainly a result of lower losses from foreign exchange movements.

Income tax expenses in Q3 2015 were NIS 1 million, despite the loss before tax, due to unrecognized expenses for tax purposes.

Overall, the Company recorded a loss in Q3 2015 of NIS 9 million (US$ 2 million), compared with a profit of NIS 40 million in Q3 2014. The change was primarily a result of the lower Adjusted EBITDA, partially offset by lower finance costs, net and lower tax expenses.

Based on the weighted average number of shares outstanding during Q3 2015, basic loss per share or ADS, was NIS 0.06 (US$ 0.01), compared to a profit of NIS 0.26 in Q3 2014.

Cellular Segment Operational Review

At the end of the third quarter of 2015, the Company's cellular subscriber base (including mobile data and 012 Mobile subscribers) was approximately 2.74 million, including approximately 2.14 million Post-Paid subscribers or 78% of the base, and approximately 603 thousand Pre-Paid subscribers, or 22% of the subscriber base.

During the third quarter of 2015, the cellular subscriber base declined by approximately 8 thousand subscribers. Post-Paid subscriber base increased by approximately 24 thousand subscribers, while Pre-Paid subscriber base declined by approximately 32 thousand subscribers.

The quarterly churn rate for cellular subscribers in Q3 2015 was 10.8%, compared with 12.0% in Q3 2014 and 10.9% in Q2 2015, largely reflecting lower churn of Post-Paid subscribers.

Total cellular market share (based on the number of subscribers) at the end of Q3 2015 was estimated to be approximately 27%, compared to 27% in Q2 2015 and 29% in Q3 2014.

The monthly Average Revenue per User (“ARPU”) for cellular subscribers in Q3 2015 was NIS 71 (US$ 18), a decrease of 7% from NIS 76 in Q3 2014 and an increase of 1% from NIS 70 in Q2 2015. The decrease in ARPU compared to the comparable quarter last year mainly reflected the continued price erosion due to the intense competition in the market, as described above.

Funding and Investing Review

In Q3 2015, cash flow generated from operating activities before interest payments, net of cash flow used for investing activities ("Free Cash Flow"), totaled NIS 291 million (US$ 74 million), an increase of 160% from NIS 112 million in Q3 2014, reflecting the one-time payment in Q3 2015 from Orange in the amount of approximately NIS 170 million (€ 40 million) as part of the new framework agreement with Orange, as well as the decrease in CAPEX payments, partially offset by the decrease in Adjusted EBITDA.

Cash generated from operations increased by 46% to NIS 353 million (US$ 90 million) in Q3 2015 from NIS 242 million in Q3 2014. This was mainly explained by the one-time payment from Orange, partially offset by the decrease in Adjusted EBITDA. Operating working capital decreased by NIS 180 million in Q3 2015, compared with a decrease of NIS 9 million in Q3 2014, again primarily reflecting the payment from Orange.

The level of cash capital expenditures in fixed assets (CAPEX payments) including intangible assets but excluding capitalized subscriber acquisition and retention costs, net, was NIS 62 million (US$ 16 million) in Q3 2015, a decrease of 52% from NIS 128 million in Q3 2014.

Net debt at the end of Q3 2015 amounted to NIS 2,355 million (US$ 600 million), compared with NIS 2,637 million at the end of Q3 2014, a decrease of NIS 282 million.

Business Developments

Allocation of Options and Restricted Shares

On November 10, 2015, the Company approved the allocation of 3,991,650 options and 1,889,306 restricted shares to the Company's office holders (excluding the CEO) and other managers, all in accordance with the Company's Equity Incentive Plan, as amended. The vesting of these options and the earning of these restricted shares are subject to performance conditions set by the Company's management bodies.

Conference Call Details

Partner will hold a conference call on Wednesday, November 11, 2015 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: +972.3.918.0664
North America toll-free: +1.866.860.9642
A live webcast of the call will also be available on Partner's Investors Relations website at: www.orange.co.il/en/Investors-Relations/lobby/
If you are unavailable to join live, the replay of the call will be available from November 11, 2015 until November 19, 2015, at the following numbers:
International: +972.3.925.5930
North America toll-free: +1.877.456.0009
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 the continued anticipated growth of subscriber consumption of cellular data, which are subject to the expansion of the 4G network in the timeframe and with the functionalities currently anticipated, and to the impacts which future shifts in technology and consumer habits may have on subscriber demand. We also state that we are continuing to seek to improve results at both the revenue and cost levels while maintaining quality offerings and services for our subscribers, an objective which is subject to changes in the overall economic and technological environment, actions which may be taken by our competitors, and limits which exist on potential further cost reductions. 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 potential difficulties which may arise from future and excessive regulatory requirements, as well as consumer habits and preferences in cellular telephone usage, trends in the Israeli telecommunications industry in general, and the impact of global economic conditions. 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 financial results presented in this press release are unaudited financial results.
The results were prepared in accordance with IFRS, other than Adjusted EBITDA and free cash flow, which are non-GAAP financial measures.
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, 2015: US $1.00 equals NIS 3.923. 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 share based compensation expenses) 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. Reconciliation between our net cash flow from operating activities and Adjusted EBITDA on a consolidated basis is presented in the attached summary financial results.

About Partner Communications

Partner Communications Company Ltd. is a leading Israeli provider of telecommunications services (cellular, fixed-line telephony and internet services) under the orange™ 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: www.orange.co.il/en/Investors-Relations/lobby/

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,
2015   2014   2015
(Unaudited)   (Audited)   (Unaudited)
In millions
CURRENT ASSETS
Cash and cash equivalents 1,418 663 361
Trade receivables 1,084 948 277
Other receivables and prepaid expenses 38 34 10
Deferred expenses – right of use 36 34 9
Inventories 91 138 23
Income tax receivable *
Derivative financial instruments *   *   *
2,667   1,817   680
 
NON CURRENT ASSETS
Trade Receivables 493 418 126
Deferred expenses – right of use 90 97 23
Property and equipment 1,449 1,661 369
Licenses and other intangible assets 1,009 1,079 257
Goodwill 407 407 104
Prepaid expenses 3 3 1
Deferred income tax asset 24   14   6
3,475   3,679   886
 
TOTAL ASSETS 6,142   5,496   1,566

* Representing an amount of less than 1 million.

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,
2015   2014   2015
(Unaudited) (Audited) (Unaudited)
In millions
CURRENT LIABILITIES
Current maturities of notes payable and borrowings 323 309 82
Trade payables 743 804 189
Payables in respect of employees 90 95 23
Other payables (mainly institutions) 62 43 16
Deferred revenues 116 35 30
Provisions 66 58 17
Income tax payable 39 38 10
Derivative financial instruments 1   3   *
1,440   1,385   367
 
NON CURRENT LIABILITIES
Notes payable 1,735 1,733 442
Borrowings from banks and others 1,715 1,233 437
Liability for employee rights upon retirement, net 48 51 13
Dismantling and restoring sites obligation 36 35 9
Other non-current liabilities 81 16 21
Deferred tax liability 13   4   3
3,628   3,072   925
 
TOTAL LIABILITIES 5,068   4,457   1,292
 
EQUITY

Share capital - ordinary shares of NIS 0.01

par value: authorized - December 31, 2014

and September 30, 2015 - 235,000,000

shares; issued and outstanding -

2 2 1
December 31, 2014 – **156,072,945 shares

September 30, 2015 – **156,085,896 shares

Capital surplus 1,102 1,102 280
Accumulated retained earnings 321 286 82
Treasury shares, at cost

December 31, 2014 - 4,467,990 shares

September 30, 2015 - 4,461,975 shares

(351)   (351)   (89)
TOTAL EQUITY 1,074   1,039   274
TOTAL LIABILITIES AND EQUITY 6,142   5,496   1,566

* Representing an amount of less than 1 million.
** Net of treasury shares.

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,
2015   2014 2015   2014 2015 2015
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
In millions (except per share data)
Revenues, net 3,104 3,292 1,006 1,102 791 256
Cost of revenues 2,544 2,523 827 850 648 211
Gross profit 560 769 179 252 143 45
 
Selling and marketing expenses 295 335 102 108 75 26
General and administrative

expenses

170 147 79 47 43 20
Other income, net 60 40 34 13 15 9
Operating profit 155 327 32 110 40 8
Finance income 3 2 * 1 1 *
Finance expenses 107 125 40 51 28 10
Finance costs, net 104 123 40 50 27 10
Profit (loss) before income tax 51 204 (8) 60 13 (2)
Income tax expenses 26 66 1 20 7 *
Profit (loss) for the period 25 138 (9) 40 6 (2)
 
Earnings (loss) per share
Basic 0.16 0.89 (0.06) 0.26 0.04 (0.01)
Diluted 0.16 0.88 (0.06) 0.26 0.04 (0.01)
Weighted average number of shares outstanding (in thousands)
Basic 156,080 155,726 156,085 155,794 156,080 156,085
Diluted 156,148 156,349 156,349 156,362 156,148 156,349

* Representing an amount of less than 1 million.

PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
INTERIM CONDENSED CONSOLIDATED STATEMENTS
OF 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,
2015   2014 2015   2014 2015 2015
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
In millions

Profit (loss) for the period

25 138 (9) 40 6 (2)
Other comprehensive income

for the period, net of income tax

- - - - - -

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD

25 138 (9) 40 6 (2)

PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
SEGMENT INFORMATION

New Israeli Shekels     New Israeli Shekels
Nine months ended September 30, 2015 Nine months ended September 30, 2014
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

1,730

546

2,276 1,985 615 2,600
Inter-segment revenue - Services

17

137

(154) 20 139 (159)
Segment revenue - Equipment

782

46

  828 656 36   692
Total revenues

2,529

729

(154) 3,104 2,661 790 (159) 3,292
Segment cost of revenues – Services

1,410

484

1,894 1,475 523 1,998
Inter-segment cost of revenues- Services

135

19

(154) 137 22 (159)
Segment cost of revenues - Equipment

618

32

  650 500 25   525
Cost of revenues

2,163

535

(154) 2,544 2,112 570 (159) 2,523
Gross profit

366

194

560 549 220

769

Operating expenses

374

91

465 389 93

482

Other income, net

58

2

 

60 38 2

40

Operating profit

50

105

155

198 129

327

Adjustments to presentation of Adjusted EBITDA

–Depreciation and amortization

386

109

495

400 117

517

–Other (1)

9

*

9

3  

3

Adjusted EBITDA (2)

445

214

659

601 246

847

Reconciliation of Adjusted EBITDA to profit before tax

- Depreciation and amortization

495

517

- Finance costs, net

104

123

- Other (1)

9

3

Profit before income tax

51

204

* Representing an amount of less than 1 million.

PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
SEGMENT INFORMATION

New Israeli Shekels     New Israeli Shekels
Three months ended September 30, 2015 Three months ended September 30, 2014
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

581

179

760

652

210 862
Inter-segment revenue - Services

6

46

(52)

 

6

49 (55)
Segment revenue - Equipment

234

12

 

246

218

22   240
Total revenues

821

237

(52)

1,006

876

281 (55) 1,102
Segment cost of revenues – Services

468

165

633

495

179 674
Inter-segment cost of revenues- Services

45

7

(52)

48

7 (55)
Segment cost of revenues - Equipment

185

9

 

194

161

15   176
Cost of revenues

698

181

(52)

827

704

201 (55) 850
Gross profit

123

56

179

172

80 252
Operating expenses

146

35

181

127

28 155
Other income, net

33

1

34

12

1

13

Operating profit

10

22

32

57

53

110

Adjustments to presentation of Adjusted EBITDA

–Depreciation and amortization

126

37

163

133

38

171

–Other (1)

1

 

1

1

*

1

Adjusted EBITDA (2)

137

59

196

191

91

282

Reconciliation of Adjusted EBITDA to profit before tax

- Depreciation and amortization

163

171

- Finance costs, net

40

50

- Other (1)

1

1

Profit (loss) before income tax

(8)

60

* Representing an amount of less than 1 million.
(1) Mainly employee share based compensation expenses
(2) Adjusted EBITDA as reviewed by the CODM, 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 segment profit. Adjusted EBITDA is not a financial measure under IFRS and may not be comparable to other similarly titled measures in 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 employee share based compensation expenses; it is fully comparable to EBITDA information which has been previously provided for prior periods.

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

  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,
2015   2014 2015   2014 2015 2015
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
In millions
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash generated from operations (Appendix) 668 851 357 262 170 91
Income tax paid (31) (61) (4) (20) (8) (1)
Net cash provided by operating activities 637 790 353 242 162 90

CASH FLOWS FROM INVESTING ACTIVITIES:

Acquisition of property and equipment (179) (228) (42) (90) (46) (11)
Acquisition of intangible assets (124) (114) (22) (39) (32) (5)
Interest received 2 3 1 * 1 *
Consideration received from sales of property and equipment * *
Proceeds from (payments for) derivative financial instruments, net * (2) 1 (1) * *
Net cash used in investing activities (301) (341) (62) (130) (77) (16)

 

CASH FLOWS FROM FINANCING ACTIVITIES:

Repayment of non-current borrowings (177) (100) (45)
Non-current borrowings received 675 200 172 51
Interest paid (79) (81) (14) (6) (20) (3)
Net cash provided by (used in) financing activities 419 (181) 186 (6) 107 48

 

INCREASE IN CASH AND CASH EQUIVALENTS

755 268 477 106 192 122

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

663 481 941 643 169 239

CASH AND CASH EQUIVALENTS AT END OF PERIOD

1,418 749 1,418 749 361 361

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

Appendix - Cash generated from operations and supplemental information   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,
2015   2014 2015   2014 2015 2015
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
In millions
Cash generated from operations:
Profit for the period 25 138 (9) 40 6 (2)
Adjustments for:
Depreciation and amortization 467 489 153 161 119 39
Amortization of deferred expenses - Right of use 27 28 9 10 7 2
Employee share based compensation expenses 10 4 2 2 3 *
Liability for employee rights upon retirement, net (2) (2) (1) (1) *
Finance costs, net 1 6 6 7 * 2
Gain (loss) from change in fair value of derivative financial instruments (1) 5 1 5 * *
Interest paid 79 81 14 6 20 3
Interest received (2) (3) (1) * (1) *
Deferred income taxes (1) (1) (1) 2 * *
Income tax paid 31 61 4 20 8 1
Capital loss from property and equipment * *

Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable:

Trade (211) 111 (66) 53 (54) (17)
Other

(4)

(4) 3 6 (1) 1
Increase (decrease) in accounts payable and accruals:
Trade 53 (25) 29 (38) 13 7
Other payables 19 (7) 42 15 6 11
Provisions 8 (4) 11 (2) 2 3
Deferred revenue 143 (2) 151 (6) 37 38
Increase in deferred expenses - Right of use (22) (14) (8) (6) (6) (2)
Current income tax liability 1 7 (1) (2) * *
Decrease (increase) in inventories 47 (17) 19 (11) 12 5
Cash generated from operations 668 851 357 262 170 91
* Representing an amount of less than 1 million

At September 30, 2015 and 2014, trade and other payables include NIS 96 million ($24 million) and NIS 160 million, respectively, in respect of acquisition of intangible assets and property and equipment

PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
RECONCILIATION BETWEEN OPERATING CASH FLOWS AND ADJUSTED EBITDA

 

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,
2015   2014 2015   2014 2015 2015
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
In millions
 
Net cash provided by operating activities

637

790

353

242

162

90

 
Liability for employee rights upon retirement 2

2

1

1

*

Accrued interest and exchange and linkage differences on long-term liabilities

(74)

(79)

(17)

(11)

(19)

(4)

Increase (decrease) in accounts receivable:
Trade

211

(111)

66

(53)

54

16

Other, including derivative financial instruments

27

14

4

(4)

7

1

Decrease (increase) in accounts payable and accruals:
Trade

(53)

25

(29)

38

(14)

(7)

Other (175)

10

(205)

(9)

(45)

(52)

Income tax paid

31

61

4

20

8

1

Increase (decrease) in inventories

(47)

17

(19)

11

(12)

(5)

Increase (decrease) in assets retirement obligation

(1)

(1)

(1)

*

Financial expenses**

101

119

39

48

26

10

Adjusted EBITDA

659

847

196

282

168

50

* Representing an amount of less than 1 million
** Financial expenses excluding any charge for the amortization of pre-launch financial costs

Key Financial and Operating Indicators (unaudited)*

NIS M unless otherwise stated   Q3' 13   Q4' 13   Q1' 14   Q2' 14   Q3' 14   Q4' 14   Q1' 15   Q2' 15   Q3' 15     2013   2014
Cellular Segment Service Revenues 738 719 680 667 658 613 579 581 587 2,907 2,618
Cellular Segment Equipment Revenues 160 196 220 218 218 282 277 271 234 703 938
Fixed-Line Segment Service Revenues 267 258 247 248 259 250 232 226 225 1,085 1,004
Fixed-Line Segment Equipment Revenues 7 9 7 7 22 18 18 16 12 32 54

Reconciliation for consolidation

(54) (55) (51) (53) (55) (55) (52) (50) (52) (208) (214)
Total Revenues 1,118 1,127 1,103 1,087 1,102 1,108 1,054 1,044 1,006 4,519 4,400
Gross Profit from Equipment Sales 10 19 45 58 64 61 59 67 52 42 228
Operating Profit 109 103 99 118 110 73 56 67 32 409 400
Cellular Segment Adjusted EBITDA 201 199 199 211 191 161 148 160 137 784 762
Fixed-Line Segment Adjusted EBITDA 83 83 75 80 91 88 79 76 59 330 334
Total Adjusted EBITDA 284 282 274 291 282 249 227 236 196 1,114 1,096
Adjusted EBITDA Margin (%) 25% 25% 25% 27% 26% 22% 22% 23% 19% 25% 25%
OPEX 696 675 661 642 657 630 604 601 650 2,791 2,590
Finance costs, net 53 38 24 49 50 36 18 46 40 211 159
Profit (loss) 38 46 52 46 40 24 25 9 (9) 135 162
Capital Expenditures** 116 107 113 98 128 89 127 110 62 475 428
Free Cash Flow 273 278 145 192 112 71 21 24 291 1,041 520
Free Cash Flow After Interest 266 209 139 123 106 21 8 (28) 277 860 389
Net Debt 3,208 3,000 2,849 2,735 2,637 2,612 2,581 2,626 2,355 3,000 2,612
Cellular Subscriber Base (Thousands) 2,950 2,956 2,936 2,914 2,894 2,837 2,774 2,747 2,739 2,956 2,837
Post-Paid Subscriber Base (Thousands) 2,127 2,133 2,137 2,138 2,145 2,132 2,112 2,112 2,136 2,133 2,132
Pre-Paid Subscriber Base (Thousands) 823 823 799 776 749 705 662 635 603 823 705
Cellular ARPU (NIS) 84 81 77 76 76 71 69 70 71 83 75
Cellular Churn Rate (%) 8.8% 10.7% 11.6% 11.4% 12.0% 11.5% 12.7% 10.9% 10.8% 39% 47%
Number of Employees (FTE) 4,153 4,045 3,826 3,736

3,683

3,575 3,535 3,354 3,017 4,045 3,575

* See first page for definitions. 2013 and 2014 annual numbers are audited.
** Cash capital expenditures in fixed assets including intangible assets but excluding capitalized subscriber acquisition and retention cost, net.

Contacts

Partner Communications
Ziv Leitman
Chief Financial Officer
Tel: +972-54-781-4951
or
Liat Glazer Shaft
Head of Investor Relations and Corporate Projects
Tel: +972-54-781-5051
E-mail: investors@orange.co.il

Contacts

Partner Communications
Ziv Leitman
Chief Financial Officer
Tel: +972-54-781-4951
or
Liat Glazer Shaft
Head of Investor Relations and Corporate Projects
Tel: +972-54-781-5051
E-mail: investors@orange.co.il