Cellcom Israel Announces First Quarter 2009 Results

Amid the world-wide economic stink, everything is coming up roses for this one....

PR Newswire

NETANYA, Israel, May 26, 2009 /PRNewswire-FirstCall via COMTEX/ --


- EBITDA(1) Up by 3.0%; Record EBITDA Margin of Over 39%

- Cellcom Israel Declares a First Quarter Dividend of NIS 3.36 per
Share (Totals Approx. NIS 330 Million)


First Quarter 2009 Highlights (compared to the first quarter 2008):

- Total Revenues from services increased 1.1% to NIS 1,373
million ($328 million)

- Revenues from content and value added services (including
SMS) increased 36.5%, reaching 14.7% of services revenues

- Total Revenues (including revenues from end-user equipment)
totaled NIS 1,561 million ($373 million), a 2.1% decrease resulting
from a 20.7% decrease in handset and accessories' revenues

- EBITDA increased 3.0% to NIS 611 million ($146 million);
EBITDA margin 39.1%, up from 37.2%

- Operating income increased 4.2% to NIS 442 million ($105
million)

- Net income increased 27.5% to NIS 348 million ($83 million)

- Subscriber base increased approx. 21,000 during the first
quarter; reaching approx. 3.208 million at the end of March 2009

- 3G subscribers reached approx. 833,000 at the end of March
2009, net addition of approx. 102,000 in the first quarter 2009

- The Company Declared first quarter dividend of NIS 3.36 per
share




Cellcom Israel Ltd. (CEL) ("Cellcom Israel", the "Company"), announced today its financial results for the first quarter of 2009. Revenues for the first quarter 2009 totaled NIS 1,561 million ($373 million); EBITDA for the first quarter 2009 totaled NIS 611 million ($146 million), or 39.1% of revenues; and net income for the first quarter 2009 reached NIS 348 million ($83 million). Basic earnings per share for the first quarter 2009 reached NIS 3.54 ($0.85).

Commenting on the results, Amos Shapira, Chief Executive Officer said, "We see a direct linkage between the "Public Trust" organization report recently published and the strengthening of Cellcom Israel's position in the past few years along with the improvement in its financial results. This report stated that Cellcom Israel provides the best quality of customer care in the Israeli Cellular market and that we received the lowest number of customer complaints although we have the highest number of subscribers in the Israeli cellular market. I believe this is the only and the worthwhile way to do business.

This quarter, Cellcom Israel continued to show strong profitability, with operating and net income increasing to new levels. These results are mainly due to our focusing on our core business, efficiency measures and improvement of our subscriber base. These achievements are especially noteworthy in light of the current macroeconomic environment, driving a decline in roaming revenues on inbound and outbound tourism, as well as an increase in allowance for doubtful accounts which may also have been influenced by the global economic slowdown, in addition to the challenging competitive landscape and ongoing price erosions. I want to thank all our employees and managers for the achievements this quarter, as well as for successfully implementing the widespread efficiency measures in this fluid economic environment, further enhancing our status as the leading cellular company in Israel."

"We at Cellcom Israel, the cellular company which serves the highest number of cellular subscribers in Israel, continue to focus on our primary source of business, mobile communications and value added services over our advanced cellular network characterized by the high speed and capacity of our HSPA technology. This is supported by our expansion into complementary business where we have identified both cost synergies and direct contribution to our business such as the fixed line services to the business community, provided over our fiber-optic cables and microwave links. I am pleased to announce that in the first quarter our content and value added services revenues grew by approximately 36% year over year, as we continued to drive additional growth in fixed line services. Our strategy of focusing in the core business and in those areas where we find synergy, enables us to act vigorously also in the aspect of improving reliability and service quality to our customers and in the aspect of increasing efficiency as well as continue to invest in technology and in enhancing our network's speed, subject to supporting equipment availability, while keeping our relative advantage."

"We continue to grow and expand our 3G subscriber base, and in the first quarter we once again witnessed an ongoing increase in 3G subscribers, reaching 833,000 at the end of March 2009. Most of these 102,000 additional 3G subscribers in this quarter are post-paid subscribers, characterized by higher ARPU."

Tal Raz, Chief Financial Officer, commented: "We are especially pleased with the substantial growth in our profitability, primarily with the increase in revenues from content and value added services as well as fixed line revenues, while revenue per airtime minute continued to erode by approximately 2% in the first quarter compared to the first quarter last year. The growth in profitability is mainly attributable to our diligent cost management, which led to marketing, sales, general and administrative expenses remaining at the same level as in the first quarter last year. Furthermore, our Free Cash Flow(1) rose once again, totaling NIS 393 million for the quarter, up 454% from the first quarter last year, enabling us a dividend distribution of approximately NIS 330 million, representing 95% of net income, to our shareholders."


Main Financial and Performance Indicators:

Q1/2009 Q1/2008 % Change Q1/2009 Q1/2008

million NIS million US$
(convenience
translation)

Total Services revenues 1,373 1,358 1.1% 327.8 324.3

Revenues from content and
value added services 202 148 36.5% 48.2 35.3
Handset and accessories
revenues 188 237 (20.7%) 44.9 56.6
Total revenues 1,561 1,595 (2.1%) 372.7 380.9
Operating Profit 442 424 4.2% 105.5 101.2
Net Income 348 273 27.5% 83.1 65.2
Cash Flow from Operating
Activities, net of
Investing Activities 393 71 453.5% 93.8 17.0
EBITDA 611 593 3.0% 145.9 141.6
EBITDA, as percent of
Revenues 39.1% 37.2% 5.1%
Subscribers end of period
(in thousands) 3,208 3,096 3.6%
Estimated Market Share(2) 34.8% 34.6%
Monthly ARPU 139.9 144.5 (3.2%) 33.4 34.5
Average Monthly MOU * 323.0 327.2 (1.3%)





* Following the regulatory requirement to change the basic airtime charging unit from twelve-second to one-second units commencing January 1, 2009, MOU for the first quarter 2008 has been adjusted to the same per-one second unit basis to enable a comparison. MOU for the first quarter of 2008 based on the former charging units was 350.5 minutes.

Financial Review

Revenues for the first quarter of 2009 totaled NIS 1,561 million ($373 million), a 2.1% decrease compared to NIS 1,595 million ($381 million) in the first quarter last year. The decrease in revenues resulted mainly from a 20.7% decrease in handset and accessories' revenues, from NIS 237 million ($57 million) in the first quarter last year, to NIS 188 million ($45 million) in the first quarter 2009, primarily due to the higher number of handsets and accessories sold in the first quarter last year. This decrease was partially offset by an increase in revenues from services, reaching NIS 1,373 million ($328 million), up from NIS 1,358 million ($324 million) in the first quarter last year. The higher service revenues resulted mainly from an increase of approximately 36% in content and value added services (including SMS) revenues in the first quarter 2009, compared to the first quarter last year. Revenues from content and value added services reached NIS 202 million ($48 million), or 14.7% of service revenues. Furthermore, the increase in landline services revenues during the quarter also contributed to the higher service revenues. These increases were partially offset by the reduction of interconnect tariffs, approximately 2% fewer working days in the first quarter of 2009 compared to the first quarter last year, ongoing airtime price erosion as well as a substantial decrease in revenues from roaming services following the significant reduction in incoming and outgoing tourism resulting from the global economic slowdown.

Cost of revenues for the first quarter of 2009 totaled NIS 806 million ($192 million), down 8.3% from NIS 879 million ($210 million) in the first quarter last year. This decline primarily follows the lower handset costs resulting from the decline in number of handsets sold during the first quarter of 2009, in addition to lower depreciation expenses. These decreases were partially offset by an increase in cost of content and value-added services due to increased usage.

Gross profit for the first quarter of 2009 incresed 5.4% reaching NIS 755 million ($180 million), compared to NIS 716 million ($171 million) in the first quarter of 2008. Gross profit margin for the first quarter 2009 increased to 48.4% from 44.9% in the first quarter last year, mainly due to the significant decrease in handsets sales during the quarter compared to the first quarter last year, which produce lower margins.

Selling, Marketing, General and Administrative Expenses ("SG&A Expenses") for the first quarter of 2009 totaled NIS 311 million ($74 million), similar to the first quarter of 2008. The SG&A Expenses in the first quarter 2009 were mainly impacted by a significant increase in bad debts and doubtful accounts expenses, mainly following number portability, which allows subscribers to switch to another cellular operator without settling their outstanding debt. The increase in bad debt and doubtful accounts may also have been influenced by the global economic slowdown. This increase was offset mainly by a decrease in salaries and related expenses.

Operating income for the first quarter 2009 increased 4.2%, reaching NIS 442 million ($105 million), compared to NIS 424 million ($101 million) in the first quarter last year. Operating income for the first quarter of 2008 included a one-time gain of approximately NIS 19 million, relating mainly to the sale of certain surplus underground pipes for fiber optic cables and the sale of a plot of land in Modi'in, Israel.

EBITDA for the first quarter 2009 increased 3.0%, reaching NIS 611 million ($146 million), compared to NIS 593 million ($142 million) in the first quarter of 2008. EBITDA as a percent of revenues, reached 39.1% compared to 37.2% in the first quarter last year. The higher operating income, EBITDA and EBITDA margins primarily follows the ongoing efficiency measures and prudent expense management throughout the quarter.

Financing Income, net for the first quarter 2009 totaled NIS 28 million ($7 million), compared to financing expenses net of NIS 45 million ($11 million) in the first quarter last year. This change resulted mainly from deflation of 0.7% in the first quarter this year, compared to an inflation of 0.4% in the first quarter last year, which led to an income from linkage to the Israeli Consumer Price Index (CPI), associated with the Company's debentures, compared to linkage expenses in the first quarter last year. Financing income also benefited from gains from the Company's hedging portfolio mainly resulted from a depreciation of 10% of the NIS against the US dollar in the first quarter of 2009, compared to an appreciation of 8% in the first quarter last year, which resulted in a loss from currency hedging transactions in the first quarter last year. The financing income was partially offset by lower interest income relating to the Company's short term deposits as well as expenses from foreign currency differences relating to trade payables balances in the first quarter 2009, compared to an income from foreign currency differences in the first quarter last year, following the depreciation of the NIS against the US dollar in the first quarter of 2009.

Net Income for the first quarter 2009 increased 27.5%, reaching NIS 348 million ($83 million), compared to NIS 273 million ($65 million) in the first quarter last year. Basic earnings per share for the first quarter 2009 totaled NIS 3.54 ($0.85), compared to NIS 2.80 ($0.67) in the first quarter 2008.

Operating Review

New Subscribers - at the end of March 2009 the Company had approximately 3.208 million subscribers. During the first quarter of 2009 the Company added approximately 21,000 net new subscribers, most of them post-paid subscribers.

In the first quarter of 2009, the Company added approximately 102,000 net new 3G subscribers to its 3G subscriber base, reaching approximately 833,000 3G subscribers at the end of March 2009, representing 26% of the Company's total subscriber base.

The Churn Rate in the first quarter 2009 was 5.0%, compared to 5.3% in the first quarter last year. The churn for both quarters primarily consists from lower contribution pre-paid subscribers and subscribers with collection problems.

Average monthly subscriber Minutes of Use ("MOU") in the first quarter 2009 totaled 323 minutes, compared to 327.2 minutes in the first quarter 2008, a decrease of 1.3%. The decline in usage level is mainly due to fewer working days in the first quarter of 2009 than in the first quarter last year. Following the regulatory requirement to change the basic airtime charging units from twelve-second to one-second units commencing January 1, 2009, MOU for the first quarter 2008 has been adjusted to the same per-one second unit basis to enable a comparison. MOU for the first quarter of 2008 based on the former charging units was 350.5 minutes.

The monthly Average Revenue per User (ARPU) for the first quarter 2009 decreased 3.2% and totaled NIS 139.9 ($33.4), compared to NIS 144.5 ($34.5) in the first quarter last year.

Financing and Investment Review

Cash Flow

Free cash flow (Cash provided by operating activities, net of cash used in investing activities) for the first quarter of 2009 totaled NIS 393 million ($94 million), compared to NIS 71 million ($17 million) generated in the first quarter of 2008. The significant increase in Free Cash Flow resulted mainly from payments of expenses related to preparation for number portability which characterized the first quarter last year. The increase in Free Cash Flow also resulted from a decrease in income tax payments due to a one time catch up tax payment in the amount of NIS 70 million for 2007 accrued tax liability, made at the beginning of the first quarter 2008.

Shareholders' Equity

Shareholders' Equity as of March 31, 2009 amounted to NIS 439 million ($105 million), primarily consisting of accumulated undistributed retained earnings.

Investment in Fixed Assets and Intangible Assets

During the first quarter 2009, the Company invested NIS 98 million ($23 million) in fixed assets and intangible assets (including, among others, deferred commissions and investments in information systems and software), compared to NIS 116 million ($28 million) in the first quarter 2008.

Subscriber acquisition and retention costs

Under the Company's current accounting policies, capitalized customer acquisition and retention costs include only those deferred costs in respect of sales commissions related to the acquisition and retention of subscribers, if the costs can be measured reliably and are directly attributable to obtaining a specific subscriber.

The Company's current accounting policy is to recognize subsidies on handset sales as an expense in the period incurred. Management is evaluating certain subsidies, related to handsets sold together with a service agreement with guaranteed minimum future revenue, as additional costs that might be eligible for capitalization. If the Company were to defer and capitalize such subsidies, management estimates that the Company's retained earnings as of January 1, 2009 would increase by approximately NIS 90-100 million, the Company's EBITDA for the first quarter of 2009 would increase by approximately NIS 20-25 million and the Company's net income for the first quarter of 2009 would decrease by approximately NIS 5-10 million.

Dividend

On May 25, 2009, the Company's board of directors declared a cash dividend in the amount of NIS 3.36 per share, and in the aggregate amount of approximately NIS 330 million (the equivalent of approximately $0.84 per share and approximately $82 million in the aggregate, based on the representative rate of exchange on May 21, 2009; The actual US$ amount for dividend paid in US$ will be converted from NIS based upon the representative rate of exchange published by the Bank of Israel on June 18, 2009), subject to withholding tax described below. The dividend will be payable to all of the Company's shareholders of record at the end of the trading day in the NYSE on June 8, 2009. The payment date will be June 22, 2009. According to the Israeli tax law, the Company will deduct at source 20% of the dividend amount payable to each shareholder, as aforesaid, subject to applicable exemptions. The dividend per share that the Company will pay for the first quarter of 2009 does not reflect the level of dividends that will be paid for future quarterly periods, which can change at any time in accordance with the Company's dividend policy. A dividend declaration is not guaranteed and is subject to the Company's board of directors' sole discretion, as detailed in the Company's annual report for the year ended December 31, 2008 on Form 20-F, under "Item 8 - Financial Information - Dividend Policy".

Other developments

Shelf Prospectus and Issuance of Debentures

In March 2009, the Company filed a shelf prospectus with the Israeli Securities Authority and the Tel Aviv Stock Exchange. The shelf prospectus will allow the Company, from time to time, to offer and sell debt, equity and warrants in Israel, in one or more offerings, subject to a supplemental shelf offering report, in which the Company will describe the terms of the securities offered and the specific details of the offering.

In April 2009, subsequent the balance sheet date, the Company issued additional debentures from the Company's existing Series D in a principal amount of approximately NIS 186 million for a total consideration of approximately NIS 215 million. The interest rate of series D is fixed at 5.19% per annum, linked to the Israeli Consumer Purchase Index. The price for a NIS 1,000 par value unit offered in this issuance was set at NIS 1,161, representing an effective annual yield of 3.73%. The Company also issued a new series E debentures in a principal amount of approximately NIS 789 million at an interest rate of 6.25% per annum, without any linkage, for a total consideration of approximately NIS 785 million. The debentures (rated ilAA/Stable) were issued in a public offering in Israel based on the shelf prospectus and were listed for trading on the Tel Aviv Stock Exchange.

For additional details on the Company's debentures see the Company's annual report for the year ended December 31, 2008 on Form 20-F under "Item 5. Operating and Financial Review and Prospects - B. Liquidity and capital resources - Debt service - Public debentures" and the Company's immediate reports on form 6-K dated March 31, 2009; April 5, 2009 and April 6, 2009.

These reports are available on the Company's website at: http://www.cellcom.co.il

Conference Call Details

The Company will be hosting a conference call on Tuesday, May 26, 2008 at 10:00 am EDT, 05:00 pm Israel time, and 03:00 pm UK time. On the call, management will review and discuss the results, and will be available to answer questions. To participate, please either access the live webcast on the Company's website, or call one of the following teleconferencing numbers below. Please begin placing your calls at least 10 minutes before the conference call commences. If you are unable to connect using the toll-free numbers, please try the international dial-in number.

US Dial-in Number: 1-866-527-8676 UK Dial-in Number: 0-800-917-4613

Israel Dial-in Number: 03-918-0691 International Dial-in Number: +972-3-918-0691

at: 10:00 am Eastern Time; 07:00 am Pacific Time; 03:00 pm UK Time; 05:00 pm Israel Time

To access the live webcast of the conference call, please access the investor relations section of Cellcom Israel's website: http://www.cellcom.co.il. After the call, a replay of the call will be available under the same investor relations section.

About Cellcom Israel

Cellcom Israel Ltd., established in 1994, is the leading Israeli cellular provider; Cellcom Israel provides its approximately 3.208 million subscribers (as at March 31, 2009) with a broad range of value added services including cellular and landline telephony, roaming services for tourists in Israel and for its subscribers abroad and additional services in the areas of music, video, mobile office etc., based on Cellcom Israel's technologically advanced infrastructure. The Company operates an HSPA 3.5 Generation network enabling advanced high speed broadband multimedia services, in addition to GSM/GPRS/EDGE and TDMA networks. Cellcom Israel offers Israel's broadest and largest customer service infrastructure including telephone customer service centers, retail stores, and service and sale centers, distributed nationwide. Through its broad customer service network Cellcom Israel offers its customers technical support, account information, direct to the door parcel services, internet and fax services, dedicated centers for the hearing impaired, etc. As of 2006, Cellcom Israel, through its wholly owned subsidiary Cellcom Fixed Line Communications L.P., provides landline telephone communication services in Israel, in addition to data communication services. Cellcom Israel's shares are traded both on the New York Stock Exchange (CEL) and the Tel Aviv Stock Exchange (CEL). For additional information please visit the Company's website http://www.cellcom.co.il

Forward-Looking Statements

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, 2008.

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.

The Company prepares its financial statements in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB). Unless noted specifically otherwise, the dollar denominated figures were converted to US$ using a convenience translation based on the US$\New Israeli Shekel (NIS) conversion rate of NIS 4.188 = US$1 as published by the Bank of Israel on March 31, 2009.

Use of non-GAAP financial measures

EBITDA is a non-GAAP measure and is defined as income before financing income (expenses), net; other income (expenses), net; income tax; depreciation and amortization. This is an accepted measure in the communications industry. The Company presents this measure as an additional performance measure as the Company believes that it enables us to compare operating performance between periods and companies, net of any potential differences which may result from differences in capital structure, taxes, age of fixed assets and related depreciation expenses. EBITDA should not be considered in isolation, or as a substitute for operating income, any other performance measures, or cash flow data, which were prepared in accordance with Generally Accepted Accounting Principles as measures of profitability or liquidity. EBITDA does not take into account debt service requirements, or other commitments, including capital expenditures, and therefore, does not necessarily indicate the amounts that may be available for the Company's use. In addition, EBITDA may not be comparable to similarly titled measures reported by other companies, due to differences in the way these measures are calculated. See the reconciliation between the net income and the EBITDA presented at the end of this Press Release.

Free cash flow is a non-GAAP measure and is defined as the net cash provided by operating activities minus the net cash used in investing activities. See the reconciliation note at the end of this Press Release.


Financial Tables Follow


Cellcom Israel Ltd.

(An Israeli Corporation)

Condensed Consolidated Balance Sheets



Convenience
translation
into US
dollar
March 31, March 31, March 31, December
31,
2009 2009 2008 2008
NIS millions US$ NIS millions NIS
millions millions
(Unaudited) (Unaudited) (Unaudited) (Audited)
Assets
Cash and cash equivalents 152 36 826 275
Trade receivables 1,518 362 1,438 1,478
Other receivables,
including derivatives 138 33 125 112
Inventory 128 31 236 119

Total current assets 1,936 462 2,625 1,984

Trade and other
receivables 612 146 579 602
Property, plant and
equipment, net 2,100 502 2,265 2,159
Intangible assets, net 665 159 681 675

Total non- current assets 3,377 807 3,525 3,436

Total assets 5,313 1,269 6,150 5,420

Liabilities
Debentures current
maturities 327 78 280 329
Trade payables and
accrued expenses 686 164 709 677
Current tax liabilities 102 24 49 65
Provisions 52 13 91 47
Other current
liabilities, including
derivatives 318 76 341 385
Dividend declared - - 700 -

Total current liabilities 1,485 355 2,170 1,503

Debentures 3,213 767 3,425 3,401
Provisions 18 4 14 17
Other long-term
liabilities - - 2 1
Deferred taxes 158 38 143 156

Total non- current
liabilities 3,389 809 3,584 3,575

Total liabilities 4,874 1,164 5,754 5,078

Shareholders' equity
Share capital 1 - 1 1
Cash flow hedge reserve 8 2 (51) (11)
Retained earnings 430 103 446 352

Total shareholders'
equity 439 105 396 342

Total liabilities and
shareholders' equity 5,313 1,269 6,150 5,420




Cellcom Israel Ltd.

(An Israeli Corporation)

Condensed Consolidated Statements of Income


Year
Three-month period ended ended
March 31, December 31,

Convenience
translation
into US
dollar

2009 2009 2008 2008
NIS millions US$ NIS millions NIS
millions millions
(Unaudited) (Unaudited) (Unaudited) (Audited)

Revenues 1,561 373 1,595 6,417
Cost of revenues 806 193 879 3,402

Gross profit 755 180 716 3,015

Selling and marketing
expenses 157 38 156 701
General and administrative
expenses 154 37 154 659
Other (income) expenses,
net 2 - (18) (29)

Operating income 442 105 424 1,684

Financing income 60 14 62 83
Financing expenses (32) (7) (107) (393)
Financing costs, net 28 7 (45) (310)

Income before income tax 470 112 379 1,374
Income tax 122 29 106 389

Net income 348 83 273 985

Earnings per share
Basic earnings per share
in NIS 3.54 0.85 2.80 10.08

Diluted earnings per share
in NIS 3.51 0.84 2.76 9.92




Cellcom Israel Ltd.

(An Israeli Corporation)

Condensed Consolidated Statements of Cash Flows


Three- month period ended Year
March 31, ended
December
31,
Convenience
translation
into US
dollar
2009 2009 2008 2008
NIS millions US$ NIS millions NIS
millions millions
(Unaudited) (Unaudited) (Unaudited) (Audited)

Cash flows from operating
activities
Net income for the period 348 83 273 985

Adjustments to reconcile
net income to funds
generated from operations:
Depreciation 121 29 144 570

Amortization 46 11 43 181

Capital gain on sale of
land - - (9) (9)

Loss (gain) on sale of
assets 2 1 (9) (9)

Income tax expense 122 29 106 389

Financial (income) costs,
net (28) (7) 45 310

Share based payments - - 4 28

Changes in operating
assets and liabilities:
Changes in inventories (9) (2) 9 112

Changes in trade
receivables (including
long-
term amounts) (39) (9) (87) (117)

Changes in other
receivables (including
long-
term amounts) (25) (6) (9) (34)

Changes in trade payables
and accrued expenses 66 15 (177) (271)

Changes in other
liabilities (including
long-term
amounts) 9 2 30 99

Payments for inventory
hedging contracts, net 5 1 (9) (38)

Proceeds from (payments
for) derivative
contracts, net 24 6 (5) 18

Income tax paid (90) (21) (161) (451)

Net cash from operating
activities 552 132 188 1,763

Cash flows from investing
activities
Acquisition of property,
plant, and equipment (112) (27) (118) (429)

Acquisition of intangible
assets (47) (11) (54) (175)

Payments for derivative
hedging contracts, net - - (5) (17)

Proceeds from sales of
property, plant and
equipment - - 13 19

Interest received - - 10 17

Proceeds from sale of long
term receivables - - 37 39

Net cash used in investing
activities (159) (38) (117) (546)



Cellcom Israel Ltd.

(An Israeli Corporation)

Condensed Consolidated Statements of Cash Flows (cont'd)


Three-month period ended Year
March 31, ended
December
31,
Convenience
translation
into US
dollar
2009 2009 2008 2008
NIS millions US$ NIS millions NIS
millions millions
(Unaudited) (Unaudited) (Unaudited) (Audited)

Cash flows from financing
activities
Proceeds from derivative
contracts, net 4 1 7 31

Repayment of long-term
loans from banks - - (648) (648)

Repayment of Debentures (164) (39) - (125)

Proceeds from issuance of
debentures, net of
issuance costs - - 589 589

Dividend paid (270) (64) (16) (1,525)

Interest paid (86) (21) (88) (175)

Net cash used in financing
activities (516) (123) (156) (1,853)

Changes in cash and cash
equivalents (123) (29) (85) (636)

Balance of cash and cash
equivalents at
beginning of the period 275 65 911 911

Balance of cash and cash
equivalents at end of
the period 152 36 826 275



Cellcom Israel Ltd.

(An Israeli Corporation)

Reconciliation for Non-GAAP Measures

EBITDA

The following is a reconciliation of net income to EBITDA:


Year
Three-month period ended ended
March 31, December 31,


Convenience
translation
into US
dollar

2009 2009 2008 2008
NIS US$ NIS NIS
millions millions millions millions
(Unaudited) (Unaudited) (Unaudited) (Audited)

Net income...............348 83 273 985
Income taxes.............122 29 106 389
Financing income.........(60) (14) (62) (83)
Financing expenses........32 7 107 393
Other expenses (income)....2 - (18) (29)
Depreciation and
amortization.............167 40 187 751
EBITDA...................611 146 593 2,406




Free Cash Flow

The following table shows the calculation of free cash flow:



Year
Three-month period ended ended
March 31, December 31,

Convenience
translation
into US
dollar

2009 2009 2008 2008
NIS US$ NIS NIS
millions millions millions millions
(Unaudited) (Unaudited) (Unaudited) (Audited)

Cash flows from operating
activities...................552 132 188 1,763
Cash flows from investing
activities..................(159) (38) (117) (546)
Free Cash Flow...............393 94 71 1,217





(1) Please see "Use of Non-GAAP financial measures" section at the end of this press release.

(2) In order to estimate the Company's market share, the Company was required to estimate the number of subscribers of one additional Israeli cellular operator Mirs Communications Ltd. ("Mirs"), as at March 31, 2009, since Mirs does not publish this information.



Company Contact

Shiri Israeli
Investor Relations Coordinator
investors@cellcom.co.il
Tel: +972-52-998-9755

Investor Relations Contact
Ehud Helft / Ed Job
CCGK Investor Relations
ehud@gkir.com / ed.job@ccgir.com
Tel: (US) +1-866-704-6710 / +1-646-213-1914





SOURCE Cellcom Israel Ltd.


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