cellcom -...
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CellcomIsrael
Q1’20
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The following information contains, or may be deemed to contain forward-looking statements (as defined in the
U.S. Private Securities Litigation Reform Act of 1995 and the Israeli Securities Law, 1968). In some cases, you can
identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “expect,” “plan,”
“anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” the negative of these terms and other
comparable terminology. These forward-looking statements, which are subject to risks, uncertainties and
assumptions about us, may include projections of our future financial results, our anticipated growth strategies and
anticipated trends in our business. These statements are only predictions based on our current expectations and
projections about future events. There are important factors that could cause our actual results, level of activity,
performance or achievements to differ materially from the results, level of activity, performance or achievements
expressed or implied by the forward-looking statements. Factors that could cause such differences include, but are
not limited to: changes to the terms of our license, new legislation or decisions by the regulator affecting our
operations, the outcome of legal proceedings to which we are a party, particularly class action lawsuits, our ability
to maintain or obtain permits to construct and operate cell sites, and other risks and uncertainties detailed from
time to time in our filings with the U.S. Securities and Exchange Commission, including under the caption “Risk
Factors” in our Annual Report for the year ended December 31, 2019.
Although we believe the expectations reflected in the forward-looking statements contained herein are reasonable,
we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any
other person assumes responsibility for the accuracy and completeness of any of these forward-looking
statements. We assume no duty to update any of these forward-looking statements after the date hereof to
conform our prior statements to actual results or revised expectations, except as otherwise required by law.
This document does not constitute an offer to sell, or a solicitation of an offer to purchase, any securities. Any
securities referred to herein have not been and will not be registered under the U.S. Securities Act of 1933, as
amended (the “Securities Act”), and may not be offered or sold within the United States absent registration or an
applicable exemption from, or in a transaction not subject to, the registration requirements of the Securities Act.
There is no intention to register any securities referred to herein in the United States or to make a public offering of
the securities in the United States.
FORWARDLOOKING STATEMENTS
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Full End-To-End Service Communications Group
Mobile
Fixed lineResidential
Fixed lineBusiness
Appx. 2.7 million Mobile subs
26% Market share
Leading brand in Israel’s mobile market
Appx. 279k Broadband subs
246k TV subs (13% market share)
Fixed line telephony
Optical fibers
International calls
Cyber security
Cloud services
Transmission
Hosting services
Integration services
Leading the TV revolution in Israel with OTT TV service
The largest cellular provider in Israel
(1)
(1)
IOT
(1)
(1) As of Q1’20 based on companies’ reports and Company’s estimation(2) The decrease in TV subscribers was due to a change in the counting method. As of this quarter, the company is changing the way that TV subscribers are counted in a way that does not include subscribers holding the cellcom tv light app that
did not activate the service. As a result, the company erased 14,000 subscribers from its active customer base.
(2)
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CellcomStrengths
Largest Cellular operator in Israel, with 26% market share
Cellular Network sharing agreements with two MNO’s
Leading the OTT TV revolution in Israel, with 14% TV market share
Fiber infrastructure using IRU agreement with IBC
(1)
(1) As of Q1’20 based on companies’ reports and Company’s estimation
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CoronavirusEffects
Decrease in roaming revenues from outbound tourism and
inbound tourism
Decrease in end user equipment sales as a result of selling
points being closed. During May the company re-opened
most of the selling points
losses in the Company's investment portfolio, as a result of
market declines during the quarter
The Company has taken significant measures to mitigate
the impact on profitability during the pandemic quarantine :
Reduce operating expenses and investments
A large part of the company's employees was on unpaid leave of
absence
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Cellular Segment Sales of bundled packages of cellular + fixed line products.
The first and only operator in Israel to offer quad play
Successful marketing of complete communications
packages increases our total income per household even as
cellular prices decrease
Network sharing agreements with two MNO’s help reducing
opex and capex
Sales of VAS products (cyber security, streaming music,
backup, etc.)
Maintaining Market Leadership
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Golan TelecomPurchase
In February 2020, Cellcom entered into a binding MOU for the
purchase of Golan Telecom's shares. The transaction is subject to
certain conditions, including the receipt of regulatory approvals
Total purchase price is NIS 590 million and additional payments
The sum of NIS 590 shall be paid in cash in two installments:
NIS 413 million upon completion of the transaction
NIS 177 million within 3 years from completion thereof
The Company will issue and deposit 8.2 million shares of the
Company with a trustee. The Escrowed Shares may be sold in
order to finance the deferred payment including upon an
acceleration event
(1) The transaction includes standard and customary conditions and representations and is subject to the completion of due diligence by the Company without negative finding having an adverse material effect over the value of the Company in comparison to the information provided prior to signing of the MOU, receipt of regulatory approvals and material third parties' approval and absence of material adverse change to Golan Telecom's condition (as defined in the MOU).
(1)
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Golan TelecomSnapshot2019
Entered the Market in May 2012
Apx. 927K subscribers
29% Annual churn rate
NIS 530 million revenues
Apx. NIS 48 ARPU
(1) Based on Electra Q4’19 reports
(1)
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2.7 0.9
CellcomIsrael
Golan
26% 9%
2G, 3G & 4GNetworks
A highly complementary combination, with strong synergies
3.6
Consolidated Pro-forma
35%
2G, 3G & 4G
Mobile Sub.Market Share
(1)
Subscribers (m)
(1)
Cellcom Israel & GolanHighly Complementary combination
(1) Based on company and Electra Q4’19 reports
(2) Golan provides 2G services using Cellcom Israel’s infrastructure . 3G & 4G services are provided over the companies shared
network
3G & 4G(2)
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Potentials Soft Synergies• unify overlapping activities• Generate efficiencies in property,
logistics and procurement• Roaming costs
Optional Cost synergies
• Handsets, value added services, repair services
Optional New offering of mobile services
• Access to new households – an opportunity to increase fixed line penetration (using wholesale market)
Fixed line servicescross- selling
(1)
(1) Golan doesn't sell cell phones
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Hybrid solution of DTT linear TV plus OTT TV (VOD + channels)
Advanced intuitive user experience
Over 10,000 VOD assets for unlimited usage
Highly competitive price Attractive Quad and Triple play offers
Multi screen strategy (IOS ,Android smart tv, set top boxes, Apple tv)
Partnership with Netflix and Amazon prime
Leading the TV revolution in Israel with OTT TV service
Cellcom tvReaching 14% Market Share
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Offering The Top ChannelsViewers Really Want
All the sports
Current events
The leading seriesFrom The leading
studios
The world’s leading children’s channels
Entertainment, leisure,
science and nature
Cellcom channels
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Continuing Growth in TV and Broadband Subscribers
Broadband Subscribers
TV Subscribers
ThousandsThousands
156
222
269 278 279
1 1 1 1 Q1'20
111
170
219
258 246
1 1 1 1 Q1'20
Based on company reports
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IBCLarge scale deployment in short time
Exclusive right to deploy an optical infrastructure on the IEC infrastructure
Significant advantage in deployment costs in areas with high electricity infrastructure
High performance capabilities of IEC
Reducing the need for deployment permits
Existing deployment to over 350,000 Home pass
(1) On July 31, 2019, the Company and Israel Infrastructure Fund's indirect investment in IBC, and the Company's sale of independent fiber- opticinfrastructure in residential areas to IBC, were both completed. For additional details see the Company's annual report on 20-F dated 23.3.2020
(2) Until 2043
(1)
(2)
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IRU Agreement
High return on investment IRU main points:
Fiber to the home right of use for appx. 25 years
IRU payments per household, paid over 9 years with interest
Annual maintenance fee
IRU benefits for Cellcom:
Reducing the Company's investments in fiber deployment and positively impacting the Company's cash flow
Savings in cash flow and expenses for access and traffic payments to Bezeq and HOT
1616
IBC Households Reach(Thousand)
Cellcom connected households (15% out of IBC Households reach)
18013511375Wholesale
annual expenses saving (M’NIS)
140105885965 Nis
15111395 370 Nis
173130108 80 Nis
184138115 85 Nis
Expected savings in cash flow and wholesale expenses
75
113
135
180
500
750
900
1,200
Wholesale Average Cost per
household
Cellcom connected households
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Cellcom Business Solutions
Handsets
Internet Security Cloud services Transmission
Hosting Services
Integration services
Telephony
International communication
IOT
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Cellcom Smart CityOffers end-to-end solutions
The ability to connect things in a smart way that will lead to efficiency, business growth and life quality improvement.
Combination of various solutions including:
Energyefficiency
Waste management
Sensors of environmental
protection
Water management
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Financial Overview
317 327
Q1'19 Q1'20
1,166 1,215 1,258
1 1 1
1,9291,730 1,679
1 1 1
20
Service RevenuesMitigating cellular revenues erosion effect with fixed line revenues growth
M’NIS
Fixed Line Service RevenuesCellular Service RevenuesM’NIS
404 396
Q1'19 Q1'20
Based on company reports
121
Adjusted EBITDA and Operating Profit
687
940
1 1
224 244
Q1'19 Q1'20
101
24
1 1
9
18
Q1'19 Q1'20
M’NIS
Adjusted EBITDA Operating ProfitM’NIS
(1) Please see "Use of Non-IFRS financial measures" section the company’s quarterly report dated May 21, 2020.(2) Adjusted EBITDA figures from 2019 include impact of adoption of IFRS 16. For more details see the company’s quarterly report dated May 21, 2020.(3) Adjusted EBITDA and operating profit for Q1’20 includes one time reduction of NIS 28 million in wholesale expenses paid to Bezeq.
Based on company reports
(2) (3) (2) (3)(2) (2)
Capex
181
391
1 1
22
Capex and Free Cash Flow
593 557
1 1
184
118
Q1'19 Q1'20
4657
Q1'19 Q1'20
M’NIS
Free Cash FlowM’NIS
Based on company reports
(1) Please see "Use of Non-IFRS financial measures" section the company’s quarterly report dated May 21, 2020.(2) Free cash flow for 2019 included an amount of approx. NIS 181 million from sale of independent fiber optic infrastructure of the company in residential areas to IBC
(2)
(1)
2.7472.547 2.553
2.264
1.897 1.890
1 1 1 1 1 Q1'20
Net DebtB’NIS
Reduction of Financial Debt
Based on company reports
(1) Net Debt defined as credit and loans from banks and others, debentures and interest payable, net of cash and cash equivalents and current investments in tradable securities.
(1)
3
1,238
819
139
Cash 31.03.20 Repayments04/2020-2021
Conservative Financial Policy
295
525475
515 515
366
253
121 121
50
88
7157 41
26
14
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Interest Principal
M’NIS
Cash vs. Debt repayment Debt Repayment Schedule
B’NIS
(1)
2020-2021
(1)
(1) As of March 30, 2020(2) In May, 2020 the company concluded a tender for a debt and option offering raising an immediate net consideration of NIS 200 million.
Based on company reports
958
(2)
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Contact us Shlomi Fruhling Chief Financial Officer
Elad LevyInvestors Relations Manager
Investors website: investors.cellcom.co.ilE-mail: [email protected] : + 972 52 9989735