---

 

 

 

 

NIS MILLION (except EPS)		2012				2013				2014				2015		3		2016
Revenues			5,572				4,519				4,400				4,111				3,544
Cost of revenues			4,031				3,510				3,419				3,472				2,924
Gross profit			1,541				1,009				981				639				620
S,G&A			787				679				631				640				689
Income with respect to settlement agreement with Orange															61				217
Other income			111				79				50				47				45
Operating profit			865				409				400				107				193
Finance costs, net			234				211				159				143				105
Income tax expenses			153				63				79				4				36
Profit (loss) for the year			478				135				162				(40	)			52
Earnings (loss) per share (basic, NIS)			3.07				0.87				1.04				(0.26	)			0.33

NIS MILLION (except EPS)			Q4’15	3			Q1’16				Q2’16				Q3’16				Q4’16
Revenues			1,007				977				897				849				821
Cost of revenues			928				797				730				691				706
Gross profit			79				180				167				158				115
S,G&A			175				194				166				158				171
Income with respect to settlement agreement with Orange			38				54				54				55				54
Other income			10				14				12				9				10
Operating profit (loss)			(48	)			54				67				64				8
Finance costs, net			39				24				28				30				23
Income tax expenses (income)			(22	)			16				13				15				(8	)
Profit (loss) for the period			(65	)			14				26				19				(7	)
Earnings (loss) per share (basic, NIS)			(0.42	)			0.09				0.17				0.12				(0.04	)

NIS MILLION (except EPS)		Q4'16				Q4'153				% Change
Revenues			821				1,007				-18	%
Cost of revenues			706				928				-24	%
Gross profit			115				79				+46	%
Operating profit (loss)			8				(48	)			N/A
Profit (loss) for the period			(7	)			(65	)			-89	%
Earnings (loss) per share (basic, NIS)			(0.04	)			(0.42	)			-90	%
Adjusted Free cash flow (before interest)			269				230				+17	%

---

 

 

 

		2012				2013				2014				2015				2016
Adjusted EBITDA (NIS million)			1,602				1,114				1,096				876				834
Adjusted EBITDA (as a % of total revenues)			29	%			25	%			25	%			21	%			24	%
Adjusted Free Cash Flow (NIS millions)			1,234				1,041				520				566				758
Cellular Subscribers (end of period, thousands)			2,976				2,956				2,837				2,718				2,686
Estimated Cellular Market Share (%)			29	%			29	%			28	%			27	%			26	%
Annual Cellular Churn Rate (%)			38	%			39	%			47	%			46	%			40	%
Average Monthly Revenue per Cellular Subscriber (ARPU) (NIS)			97				83				75				69				65

 

		Q4'16				Q4'15				Change
Adjusted EBITDA (NIS million)			164				217				-24	%
Adjusted EBITDA (as a % of total revenues)			20	%			22	%			-2
Cellular Subscribers (end of period, thousands)			2,686				2,718				-32
Quarterly Cellular Churn Rate (%)			9.4	%			11.1	%			-1.7
Monthly Average Revenue per Cellular User (ARPU) (NIS)			62				67				-5

 

 

		Cellular Segment												Fixed-Line Segment												Elimination								Consolidated
NIS Million		2016				2015				Change %				2016				2015				Change %				2016				2015				2016				2015				Change %
Total Revenues			2,828				3,348				-16	%			929				974				-5	%			(213	)			(211	)			3,544				4,111				-14	%
Service Revenues			2,099				2,297				-9	%			866				906				-4	%			(213	)			(211	)			2,752				2,992				-8	%
Equipment Revenues			729				1,051				-31	%			63				68				-7	%			-				-				792				1,119				-29	%
Operating Profit			68				72				-6	%			125				133				-6	%			-				-				193				205				-6	%
Adjusted EBITDA			562				597				-6	%			272				279				-3	%			-				-				834				876				-5	%

 

		Cellular Segment												Fixed-Line Segment												Elimination								Consolidated
NIS Million		Q4'16				Q4'15				Change %				Q4'16				Q4'15				Change %				Q4'16				Q4'15				Q4'16				Q4'15				Change %
Total Revenues			656				819				-20	%			216				245				-12	%			(51	)			(57	)			821				1,007				-18	%
Service Revenues			498				550				-9	%			205				223				-8	%			(51	)			(57	)			652				716				-9	%
Equipment Revenues			158				269				-41	%			11				22				-50	%			-				-				169				291				-42	%
Operating Profit (loss)			(10	)			22				N/A				18				28				-36	%			-				-				8				50				-84	%
Adjusted EBITDA			109				152				-28	%			55				65				-15	%			-				-				164				217				-24	%

* Exclude impact of impairment charges of NIS 98 million on fixed-line segment operating profit in Q4 2015.

 

 

In 2016, total revenues were NIS 3,544 million (US$ 922 million), a decrease of 14% from NIS 4,111 million in 2015.

 

Annual service revenues in 2016 totaled NIS 2,752 million (US$ 716 million), a decrease of 8% from NIS 2,992 million in 2015.

 

Service revenues for the cellular segment in 2016 totaled NIS 2,099 million (US$ 546 million), a decrease of 9% from NIS 2,297 million in 2015.  The decrease was mainly a result of the continued downward pressures on the prices of post-paid and pre-paid cellular services as a result of the continued competition in the cellular market. As an illustration of the continued fierce competition in the cellular market, approximately 2.3 million cellular subscribers are estimated to have switched operators within the Israeli market (with number porting) in 2016, only slightly fewer than the estimated 2.5 million switchers in 2014 and 2015. Price erosion was also caused by the significant amount of cellular subscribers who moved between different rate plans or packages (generally with a lower monthly fee) within the Company.

 

In addition, cellular segment service revenues were negatively affected by a decrease in revenues from wholesale services provided to other operators hosted on the Company’s network, and in particular as a result of termination of the Right of Use Agreement with HOT Mobile from the second quarter of 2016, as a result of which revenues recorded related to the Right of Use Agreement decreased from approximately NIS 120 million in 2015 to approximately NIS 51 million in 2016. This decrease was partially offset by the revenue recognition of the Lump Sum payment from HOT Mobile under the Network Sharing Agreement in an amount of approximately NIS 23 million in 2016.

 

Pre-Paid cellular subscribers contributed service revenues in a total amount of approximately NIS 180 million (US$ 47 million) in 2016, a decrease of 22% from approximately NIS 230 million in 2015, as a result of the price erosion in pre-paid services and the decrease in the number of Pre-Paid subscribers, which was largely attributed to Pre-Paid subscribers moving to Post-Paid subscriber packages as a result of the significant price difference of these products, as well as to increased competition for Pre-Paid subscribers.

 

Service revenues for the fixed-line segment in 2016 totaled NIS 866 million (US$ 225 million), a decrease of 4% from NIS 906 million in 2015. The decrease mainly reflected a decrease in revenues from international calls (including in the market for wholesale international traffic) as well as decreases in revenues from other fixed-line services including local lines and ISP services.

 

For Q4 2016, total revenues were NIS 821 million (US$ 214 million), a decrease of 18% from NIS 1,007 million in Q4 2015. Service revenues in Q4 2016 totaled NIS 652 million (US$ 170 million), a decrease of 9% from NIS 716 million in Q4 2015. Service revenues for the cellular segment in Q4 2016 totaled NIS 498 million (US$ 130 million), a decrease of 9% from NIS 550 million in Q4 2015. The decrease resulted from the same reasons as described with respect to the annual decrease. Service revenues for the fixed-line segment in Q4 2016 totaled NIS 205 million (US$ 53 million), a decrease of 8% from NIS 223 million in Q4 2015, the decrease reflecting lower revenues in a number of different fixed-line services.

 

Equipment revenues in 2016 totaled NIS 792 million (US$ 206 million), a decrease of 29% from NIS 1,119 million in 2015, largely reflecting a decrease in the volume of equipment sales, mainly related to the tightening of the Company’s customer credit policy.

 

Gross profit from equipment sales in 2016 was NIS 144 million (US$ 37 million), compared with NIS 239 million in 2015, a decrease of 40%, reflecting both the decrease in the volume of equipment sales, as described above, and lower profit margins from sales which was also largely due to the tightening of the Company’s customer credit policy, as well as to a change in product mix towards products with lower profit margins.

 

Equipment revenues in Q4 2016 totaled NIS 169 million (US$ 44 million), a decrease of 42% from NIS 291 million in Q4 2015, again largely reflecting a decrease in the volume of equipment sales.

 

Gross profit from equipment sales in Q4 2016 was NIS 18 million (US$ 5 million), compared with NIS 61 million in Q4 2015, a decrease of 70%, again reflecting both the decrease in the volume of equipment sales and lower profit margins from sales.

 

Total operating expenses (‘OPEX’) totaled NIS 2,324 million (US$ 604 million) in 2016, a decrease of 6% or NIS 139 million from 2015. The decrease mainly reflected decreases in expenses related to the cellular network following the implementation of the cost sharing mechanism under the Network Sharing Agreement with HOT Mobile, in expenses related to payments to communication and content providers, and in other expense items reflecting the impact of various efficiency measures undertaken, including a reduction in payroll and related expenses resulting from the reduction in the size of the Company workforce by approximately 14% on an average basis (average of workforce at beginning and end of year). These decreases were partially offset by increases in expenses related to the rebranding of the Company, as well as an increase in bad debts and allowance for doubtful accounts expenses.

 

Including depreciation and amortization expenses and other expenses (mainly amortization of employee share based compensation), OPEX in 2016 decreased by 8% compared with 2015, mainly for the same reasons as explained above, in addition to the impact of the impairment charges of NIS 98 million which were recorded in 2015.

 

For Q4 2016, OPEX totaled NIS 570 million (US$ 148 million), a decrease of 6% or NIS 38 million from Q4 2015. The decrease mainly reflected a decrease in expenses related to the cellular network following the implementation of the cost sharing mechanism under the Network Sharing Agreement with HOT Mobile and in expenses related to payments to communication and content providers. These decreases were partially offset by the one-time expense of the new collective employment agreement in an amount of approximately NIS 12 million and a one-time expense of approximately NIS 7 million relating to the early termination of an operating lease. Including depreciation and amortization expenses and impairment charges and other expenses (mainly amortization of employee share based compensation), OPEX in Q4 2016 decreased by 17% compared with Q4 2015, mainly reflecting the impact of the impairment charges totaling NIS 98 million which were recorded in Q4 2015.

 

In 2016, the Company recorded income with respect to the settlement agreement of the Orange brand agreement in an amount of NIS 217 million (US$ 56 million) compared with NIS 61 million recorded in 2015.

 

The recognition of the advance payments received from Orange will cease from the third quarter of 2017. Therefore the recognition of the advance payments in 2017 will be limited to an amount of NIS 108 million.

 

Other income, net, totaled NIS 45 million (US$ 12 million) in 2016, compared to NIS 47 million in 2015, a decrease of 4%, mainly reflecting a decrease in income from the unwinding of trade receivables.

 

Operating profit for 2016 was NIS 193 million (US$ 50 million), an increase of 80% compared with NIS 107 million in 2015. Compared with operating profit before the impact of the impairment charges in 2015, operating profit in 2016 decreased by 6%.

 

For Q4 2016, operating profit was NIS 8 million (US$ 2 million), compared with operating loss of NIS 48 million in Q4 2015. Compared with operating profit before the impact of the impairment charges in Q4 2015, operating profit in Q4 2016 decreased by 84%.

 

Adjusted EBITDA in 2016 totaled NIS 834 million (US$ 217 million), a decrease of 5% from NIS 876 million in 2015. As a percentage of total revenues, Adjusted EBITDA in 2016 was 24% compared with 21% in 2015.

 

Adjusted EBITDA for the cellular segment was NIS 562 million (US$ 146 million), in 2016, a decrease of 6% from NIS 597 million in 2015, reflecting the impact of the decreases in service revenues and in gross profit from equipment sales, partially offset by a reduction in total operating expenses and the increase in income with respect to the settlement agreement with Orange. As a percentage of total cellular segment revenues, Adjusted EBITDA for the cellular segment in 2016 was 20% compared with 18% in 2015.

 

Adjusted EBITDA for the fixed-line segment was NIS 272 million (US$ 71 million) in 2016, a decrease of 3% from NIS 279 million in 2015, mainly reflecting the impact of the decreases in service revenues and in gross profit from equipment sales, partially offset by a reduction in total operating expenses. As a percentage of total fixed-line segment revenues, Adjusted EBITDA for the fixed-line segment in 2016 was 29%, unchanged from 2015.

 

For Q4 2016, Adjusted EBITDA totaled NIS 164 million (US$ 43 million), a decrease of 24% from NIS 217 million in Q4 2015. Adjusted EBITDA for the cellular segment was NIS 109 million (US$ 28 million) in Q4 2016, a decrease of 28% from NIS 152 million in Q4 2015. As a percentage of total cellular segment revenues, Adjusted EBITDA for the cellular segment in Q4 2016 was 17% compared with 19% in Q4 2015. Adjusted EBITDA for the fixed-line segment was NIS 55 million (US$ 14 million) in Q4 2016, a decrease of 15% from NIS 65 million in Q4 2015. As a percentage of total fixed-line segment revenues, Adjusted EBITDA for the fixed-line segment in Q4 2016 was 25% compared with 27% in Q4 2015.

 

Finance costs, net in 2016 were NIS 105 million (US$ 27 million), a decrease of 27% compared with NIS 143 million in 2015. The decrease reflected lower interest payment expenses due to the lower average level of debt, as well as gains from foreign exchange movements in 2016 compared with losses from foreign exchange movements in 2015 and lower early debt repayment expenses, which were partially offset by higher linkage expenses due to the higher CPI level.

 

For Q4 2016, finance costs, net were NIS 23 million (US$ 6 million), a decrease of 41% compared with NIS 39 million in Q4 2015. The decrease mainly reflected the early repayment fees for loans which were recorded in Q4 2015 in an amount of NIS 13 million, as well as lower interest expenses as a result of the lower average level of debt, partially offset by higher CPI linkage expenses.

 

Income taxes for 2016 were NIS 36 million (US$ 9 million), compared with NIS 4 million in 2015. In January 2016, the Law for the Amendment of the Income Tax Ordinance (No. 216) was published, enacting a reduction of corporate tax rate, from 26.5% to 25%, for the years 2016 and thereafter. In addition, in December 2016, the Economic Efficiency Law (Legislative Amendments for Implementing the Economic Policy for the 2017 and 2018 Budget Year) 2016 was published, enacting that the corporate tax rate will be 24% in 2017 and 23% in 2018 and thereafter. These reductions of the corporate tax rate resulted in a reduction of NIS 7 million in the Group's deferred tax assets in 2016, which was recognized as an income tax expense.

 

The Company’s effective tax rate is expected to continue to be higher than the corporate tax rate mainly due to nondeductible expenses.

 

Overall, the company's profit in 2016 was NIS 52 million (US$ 14 million), compared with a loss of NIS 40 million in 2015. Compared with profit excluding the impact of the impairment charges in 2015, profit in 2016 increased by 62%.

 

For Q4 2016, reported loss was NIS 7 million (US$ 2 million), a decrease of 89% compared with a loss of NIS 65 million in Q4 2015 and a decrease in profit of NIS 14 million compared with profit before the impact of the impairment charges, of NIS 7 million in Q4 2015.

 

Based on the weighted average number of shares outstanding during 2016, basic earnings per share or ADS, was NIS 0.33 (US$ 0.09), compared to basic loss per share of NIS 0.26 in 2015.

 

For Q4 2016, based on the weighted average number of shares outstanding during Q4 2016, basic loss per share or ADS, was NIS 0.04 (US$ 0.01), compared to basic loss per share of NIS 0.42 in Q4 2015.

 

 

At the end of 2016, the Company's cellular subscriber base (including mobile data and 012 Mobile subscribers) was approximately 2.69 million including approximately 2.24 million Post-Paid subscribers or 83% of the base, and approximately 445,000 Pre-Paid subscribers, or 17% of the subscriber base.

 

Over 2016, the cellular subscriber base declined by approximately 32,000. The Pre-Paid subscriber base decreased by approximately 117,000, while the Post-Paid subscriber base increased by approximately 85,000. The decrease in the Pre-Paid subscriber base was largely attributed to the Pre-Paid subscribers moving to Post-Paid subscriber packages as a result of the significant price difference of these products, as well as to increased competition for Pre-Paid subscribers.

 

The annual churn rate for cellular subscribers in 2016 was 40%, a decrease of 6 percentage points compared with 46% in 2015, and 47% in 2014.

 

Total cellular market share (based on the number of subscribers) at the end of 2016 was estimated to be approximately 26%, similar to 2015 year-end.

 

During Q4 2016, the cellular subscriber base declined by approximately 7,000 subscribers, with the Post-Paid subscriber base increasing by approximately 26,000 subscribers and the Pre-Paid subscriber base declining by approximately 33,000 subscribers.

 

The monthly Average Revenue per User (“ARPU”) for cellular subscribers in 2016 was NIS 65 (US$ 17), a decrease of 6% from NIS 69 in 2015. The decrease mainly reflected the continued price erosion in the key cellular services including airtime, content, data and browsing, due to the persistent competition in the cellular market, as well as a decrease in revenues from wholesale services provided to other operators hosted on the Company’s network and in particular as a result of termination of the Right of Use Agreement with HOT Mobile from the second quarter of 2016.

 

For Q4 2016, ARPU for cellular subscribers was NIS 62 (US$ 16), a decrease of 7% from NIS 67 in Q4 2015, largely for the same reasons as the annual decrease in ARPU.

 

 

In 2016, Adjusted Free Cash Flow totaled NIS 758 million (US$ 197 million), an increase of 34% from NIS 566 million in 2015.

 

Cash generated from operations increased by 2% to NIS 945 million (US$ 245 million) in 2016 from NIS 922 million in 2015. The increase mainly reflected the significant decrease in operating assets, which was mainly explained by the significant decrease in the volume of equipment sales under long-term payment plans in 2016 compared with in 2015. In addition, the increase reflected the payment by HOT Mobile in 2016 of the lump sum of NIS 250 million under the Network Sharing Agreement. These two factors were partially offset by the payment in 2015 of €90 million received from Orange as part of the settlement agreement of the Orange brand agreement, and by the decrease in Adjusted EBITDA excluding the recorded income with respect to the settlement agreement of the Orange brand agreement.

 

Cash capital expenditures (CAPEX payments), as represented by cash flows used for the acquisition of property and equipment and intangible assets, were NIS 196 million (US$ 51 million) in 2016, a decrease of 45% from NIS 359 million in 2015. On an accrual basis, additions to property and equipment and to intangible assets totaled NIS 202 million (US$ 53 million), a decrease of 25% compared with NIS 271 million in 2015, which included a one-time payment to the Ministry of Communications for the 4G frequencies in the amount of NIS 34 million.

 

For Q4 2016, Adjusted Free Cash Flow, totaled NIS 269 million (US$ 70 million), an increase of 17% from NIS 230 million in Q4 2015. Cash generated from operations increased by 10% to NIS 313 million (US$ 81 million) in Q4 2016 from NIS 285 million in Q4 2015. The increase mainly reflected the decrease in operating assets and the final payment of NIS 180 million by HOT Mobile as part of the lump sum under the Network Sharing Agreement. These two factors were partially offset by the payment in Q4 2015 of €50 million received from Orange as part of the settlement agreement of the Orange brand agreement, and by the decrease in Adjusted EBITDA excluding the recorded income with respect to the settlement agreement of the Orange brand agreement. Cash capital expenditures (CAPEX payments) were NIS 47 million (US$ 12 million) in Q4 2016, a decrease of 16% from NIS 56 million in Q4 2015.

 

The level of Net debt at the end of 2016 amounted to NIS 1,526 million (US$ 397 million), compared with NIS 2,175 million at the end of 2015.

 

 

Partner will hold a conference call on Thursday, March 30, 2017 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: +972.3.918.0610

North America toll-free: +1.888.668.9141

 

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 March 30, 2017 until April 9, 2017, at the following numbers:

 

International: +972.3.925.5930

North 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.

 

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 future entry of cellular networks worldwide into fifth generation (5G), the Company’s strategic projects for the coming years, that are intended to diversify our revenue streams for the Company and to enable us to offer our customers a full communications offering through an independent and advanced infrastructure; the operating system that we expect to provide to our customers in the future TV project; the dependency of the Company's fiber optic based infrastructure project, among others, on the regulator's assistance and steps that the regulator will take to ensure we will not be blocked in establishing our new and advanced network; the developments in the IoT fields that depend on development of the communications infrastructures; and the expected decrease of the Israeli corporate tax rate and its impact on the Company's effective tax rate. 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 (i) technological, technical or other difficulties that might delay or block the Company from establishing independent communication infrastructure; (ii) lack of receipt of the regulator's assistance in developing the infrastructures in the communications market and assistance in creating a true and better alternative for the consumer in light of the competitors that currently control the market and (iii) whether the Company will have the financial resources and commercial strategies which allow it to successfully achieve its strategic Company projects. The 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 in the section, “Use of 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 December 31, 2016: US $1.00 equals NIS 3.845. The translations were made purely for the convenience of the reader.

 

 

The following non-GAAP measures are used in this report. These measures are not financial measures under IFRS and may not be comparable to other similarly titled measures for other companies. Further, the measures may not be indicative of the Company’s historic operating results nor are meant to be predictive of potential future results.

 

Non-GAAP Measure	Calculation	Most Comparable IFRS Financial Measure
Adjusted EBITDA*             Adjusted EBITDA margin (%)	Adjusted EBITDA: Profit (Loss) add Income tax expenses, Finance costs, net, Depreciation and amortization expenses (including amortization of intangible assets, deferred expenses-right of use and impairment charges), Other expenses (mainly amortization of share based compensation)   Adjusted EBITDA margin (%): Adjusted EBITDA divided by Total revenues	Profit (Loss)
Adjusted Free Cash Flow**	Adjusted Free Cash Flow: Cash flows from operating activities deduct Cash flows from investing activities add Short-term investment in deposits	Cash flows from operating activities deduct Cash flows from investing activities
Total Operating Expenses (OPEX)	Total Operating Expenses: Cost of service revenues add Selling and marketing expenses add General and administrative expenses deduct Depreciation and amortization expenses, Other expenses (mainly amortization of employee share based compensation)	Sum of: Cost of service revenues, Selling and marketing expenses, General and administrative expenses
Net Debt	Net Debt: Current maturities of notes payable and borrowings add Notes payable add Borrowings from banks and others deduct Cash and cash equivalents deduct Short-term deposits	Sum of: Current maturities of notes payable and borrowings, Notes payable, Borrowings from banks and others

* Adjusted EBITDA is fully comparable with EBITDA measure which was provided in reports for prior periods.

**Adjusted Free Cash Flow measure is fully comparable to Free Cash Flow measure which was provided in reports for prior periods.

 

Partner Communications Company Ltd. is a leading Israeli provider of telecommunications services (cellular, fixed-line telephony and internet services). 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

 

Contacts:

Ziv Leitman Chief Financial Officer Tel: +972-54-781-4951

Liat Glazer Shaft Head of Investor Relations and Corporate Projects Tel: +972-54-781-5051 E-mail: investors@partner.co.il

 

 

PARTNER COMMUNICATIONS COMPANY LTD.

 

(An Israeli Corporation)

 

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

 

		New Israeli Shekels								Convenience translation into U.S. dollars
		December 31,
		2015				2016				2016
		In millions
CURRENT ASSETS
Cash and cash equivalents			926				716				186
Short-term deposits							452				118
Trade receivables			1,057				990				257
Other receivables and prepaid expenses			47				57				15
Deferred expenses – right of use			33				28				7
Inventories			120				96				25
Income tax receivable			2
			2,185				2,339				608
NON CURRENT ASSETS
Trade receivables			492				333				87
Deferred expenses – right of use			20				75				20
Property and equipment			1,414				1,207				314
Licenses and other intangible assets			956				793				206
Goodwill			407				407				106
Deferred income tax asset			49				41				10
Prepaid expenses and other			3				2				1
			3,341				2,858				744
TOTAL ASSETS			5,526				5,197				1,352

 

 

PARTNER COMMUNICATIONS COMPANY LTD.

 

(An Israeli Corporation)

 

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

 

		New Israeli Shekels								Convenience translation into U.S. dollars
		December 31,
		2015				2016				2016
		In millions
CURRENT LIABILITIES
Current maturities of notes payable and borrowings			554				498				130
Trade payables			715				681				177
Payables in respect of employees			77				101				26
Other payables (mainly institutions)			45				28				7
Income tax payable			52				45				12
Deferred income with respect to settlement
agreement with Orange			217				108				28
Deferred revenues from HOT mobile							31				8
Other deferred revenues			28				38				10
Provisions			77				77				20
			1,765				1,607				418
NON CURRENT LIABILITIES
Notes payable			1,190				646				168
Borrowings from banks and others			1,357				1,550				403
Liability for employee rights upon retirement, net			34				39				10
Dismantling and restoring sites obligation			36				35				9
Deferred income with respect to settlement
agreement with Orange			108
Deferred revenues from HOT mobile							195				51
Other non-current liabilities			16				14				4
			2,741				2,479				645
TOTAL LIABILITIES			4,506				4,086				1,063
EQUITY
Share capital – ordinary shares of NIS 0.01    par value: authorized – December 31, 2015    and 2016 – 235,000,000 shares;    issued and outstanding -			2				2				1
December 31, 2015 – *156,087,456 shares
December 31, 2016 – *156,993,337 shares
Capital surplus			1,102				1,034				269
Accumulated retained earnings			267				358				93
Treasury shares, at cost –    December 31, 2015 – **4,461,975 shares    December 31, 2016 – **3,603,578 shares			(351	)			(283	)			(74	)
TOTAL EQUITY			1,020				1,111				289
TOTAL LIABILITIES AND EQUITY			5,526				5,197				1,352

 

*	Net of treasury shares.

**	Including restricted shares in amount of 2,061,201 and 2,911,806 as of December 31, 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)

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

		New Israeli Shekels												Convenience translation into U.S. dollars
		Year ended December 31
		2014				2015				2016				2016
		In millions (except earnings per share)
Revenues, net			4,400				4,111				3,544				922
Cost of revenues			3,419				3,472				2,924				760
Gross profit			981				639				620				162
Selling and marketing expenses			438				417				426				111
General and administrative expenses			193				223				263				68
Income with respect to settlement
agreement with Orange							61				217				56
Other income, net			50				47				45				12
Operating profit			400				107				193				51
Finance income			3				13				13				3
Finance expenses			162				156				118				31
Finance costs, net			159				143				105				28
Profit (loss) before income tax			241				(36	)			88				23
Income tax expenses			79				4				36				9
Profit (loss) for the year			162				(40	)			52				14
Earnings (loss) per share
Basic			1.04				(0.26	)			0.33				0.09
Diluted			1.04				(0.26	)			0.33				0.09

 

 

PARTNER COMMUNICATIONS COMPANY LTD.

 

(An Israeli Corporation)

 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

		New Israeli Shekels												Convenience translation into U.S. dollars
		Year ended December 31
		2014				2015				2016				2016
		In millions
Profit (loss) for the year			162				(40	)			52				14
Other comprehensive income (loss), items
that will not be reclassified to profit or loss
Remeasurements of post-employment benefit obligations			(9	)			5				(8	)			(2	)
Income taxes relating to remeasurements of post-employment benefit obligations			2				(1	)			2				*
Other comprehensive income (loss) for the year, net of income taxes			(7	)			4				(6	)			(2	)
TOTAL COMPREHENSIVE INCOME (LOSS) FOR THE YEAR			155				(36	)			46				12

 

*   Representing an amount of less than 1 million.

PARTNER COMMUNICATIONS COMPANY LTD.

 

(An Israeli Corporation)

 

SEGMENT INFORMATION

 

		New Israeli Shekels
		Year ended December 31, 2016
		In millions
		Cellular segment				Fixed-line segment				Elimination				Consolidated
Segment revenue - Services			2,080				672								2,752
Inter-segment revenue - Services			19				194				(213	)
Segment revenue - Equipment			729				63								792
Total revenues			2,828				929				(213	)			3,544
Segment cost of revenues - Services			1,659				617								2,276
Inter-segment cost of  revenues- Services			192				21				(213	)
Segment cost of revenues - Equipment			596				52								648
Cost of revenues			2,447				690				(213	)			2,924
Gross profit			381				239								620
Operating expenses (3)			571				118								689
Income with respect to settlement agreement with Orange			217												217
Other income, net			41				4								45
Operating profit			68				125								193
Adjustments to presentation of Segment Adjusted EBITDA
–Depreciation and amortization			447				148								595
–Other (1)			47				(1	)							46
Segment Adjusted EBITDA (2)			562				272								834
Reconciliation of profit for the year to Adjusted EBITDA
Profit for the year															52
- Depreciation and amortization															595
- Finance costs, net															105
- Income tax expenses															36
- Other (1)															46
Adjusted EBITDA (2)															834

 

PARTNER COMMUNICATIONS COMPANY LTD.

 

(An Israeli Corporation)

 

SEGMENT INFORMATION

 

		New Israeli Shekels
		Year ended December 31, 2015
		In millions
		Cellular segment				Fixed-line segment				Elimination				Consolidated
Segment revenue - Services			2,275				717								2,992
Inter-segment revenue - Services			22				189				(211	)
Segment revenue - Equipment			1,051				68								1,119
Total revenues			3,348				974				(211	)			4,111
Segment cost of revenues - Services			1,856				736								2,592
Inter-segment cost of  revenues- Services			187				24				(211	)
Segment cost of revenues - Equipment			832				48								880
Cost of revenues			2,875				808				(211	)			3,472
Gross profit			473				166								639
Operating expenses (3)			506				134								640
Income with respect to settlement agreement with Orange			61												61
Other income, net			44				3								47
Operating profit			72				35								107
Adjustments to presentation of Segment Adjusted EBITDA
–Depreciation and amortization            (including impairment charges)			510				243								753
–Other (1)			15				1								16
Segment Adjusted EBITDA (2)			597				279								876
Reconciliation of loss for the year to Adjusted EBITDA
Loss for the year															(40	)
- Depreciation and amortization  (including impairment charges)															753
- Finance costs, net															143
- Income tax expenses															4
- Other (1)															16
Adjusted EBITDA (2)															876

(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 and impairment charges) and Other expenses (mainly amortization of share based compensation). 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; it is fully comparable to EBITDA information which has been previously provided for prior periods.

(3)	Operating expenses include selling and marketing expenses and general and administrative expenses.

 

 

  PARTNER COMMUNICATIONS COMPANY LTD.

 

   (An Israeli Corporation)

 

   INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

		New Israeli shekels																Convenience translation into U.S. dollars
		12 month period ended December 31,								3 month period ended December 31								12 month period ended December 31,				3 month period ended December 31,
		2015				2016				2015				2016				2016				2016
		(Audited)				(Audited)				(Unaudited)				(Unaudited)				(Audited)				(Unaudited)
		In millions
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash generated from operations (Appendix)			955				975				287				323				253				84
Income tax paid			(33	)			(30	)			(2	)			(10	)			(8	)			(3	)
Net cash provided by operating activities			922				945				285				313				245				81
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment			(216	)			(127	)			(37	)			(30	)			(33	)			(8	)
Acquisition of intangible assets			(143	)			(69	)			(19	)			(17	)			(18	)			(4	)
Short-term investment in deposits							(452	)							(452	)			(118	)			(118	)
Interest received			3				2				1								1
Proceeds from sale of property and equipment			1				7				1				3				2				1
Investment in PHI			(1	)							(1	)
Proceeds from (repayment of) derivative financial         instruments, net			*				*				*								*
Net cash used in investing activities			(356	)			(639	)			(55	)			(496	)			(166	)			(129	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options granted         to employees			*				*				*								*
Interest paid			(137	)			(108	)			(58	)			(28	)			(28	)			(7	)
Repayment of current borrowings															(52	)							(14	)
Non-current borrowings received			675				250								250				65				65
Repayment of non-current borrowings			(533	)			(15	)			(356	)			(4	)			(4	)			(1	)
Repayment of notes payables			(308	)			(643	)			(308	)			(408	)			(167	)			(106	)
Net cash used in financing activities			(303	)			(516	)			(722	)			(242	)			(134	)			(63	)
INCREASE (DECREASE) IN CASH AND CASH  EQUIVALENTS			263				(210	)			(492	)			(425	)			(55	)			(111	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			663				926				1,418				1,141				241				297
CASH AND CASH EQUIVALENTS AT END OF PERIOD			926				716				926				716				186				186

 

* Representing an amount of less than 1 million.

 

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
		12 month period ended December 31,								3 month period ended December 31,								12 month period ended December 31,				3 month period ended December 31,
		2015				2016				2015				2016				2016				2016
		(Audited)				(Audited)				(Unaudited)				(Unaudited)				(Audited)				(Unaudited)
		In millions
Cash generated from operations:
Profit (loss) for the period			(40	)			52				(65	)			(7	)			14				(2	)
Adjustments for:
Depreciation and amortization (including impairment)			641				565				174				138				147				36
Amortization (including impairment) of deferred expenses - Right of use			112				30				85				9				8				2
Amortization of employee share based compensation			17				45				7				9				12				2
Liability for employee rights upon retirement, net			(12	)			(3	)			(10	)							(1	)
Finance costs, net			(8	)			1				(9	)			(1	)			*				*
Change in fair value of derivative financial instruments			(2	)			*				(1	)			*				*				*
Interest paid			137				108				58				28				28				7
Interest received			(3	)			(2	)			(1	)			*				(1	)			*
Deferred income taxes			(40	)			10				(39	)			(2	)			3				(1	)
Income tax paid			33				30				2				10				8				3
Capital loss (gain) from property and equipment			*				*				*				(1	)			*				*
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable:
Trade			(183	)			226				28				104				58				27
Other			(13	)			(9	)			(9	)			(17	)			(2	)			(4	)
Increase (decrease) in accounts payable and accruals:
Trade			(5	)			(38	)			(58	)			(35	)			(10	)			(9	)
Other payables			(12	)			*				(31	)			38				*				10
Provisions			19				*				11				6				*				2
Deferred revenues with respect to settlement agreement with  Orange			325				(217	)			175				(54	)			(56	)			(14	)
Deferred revenues from HOT mobile							227								173				59				45
Other deferred revenues			(6	)			10				1				4				3				1
Increase in deferred expenses - Right of use			(34	)			(80	)			(12	)			(28	)			(22	)			(8	)
Current income tax liability			11				(4	)			10				(15	)			(1	)			(4	)
Decrease (increase) in inventories			18				24				(29	)			(36	)			6				(9	)
Cash generated from operations			955				975				287				323				253				84