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CellcomIsrael
2020
2
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
3
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. 278k Broadband subs
258k TV subs (14% 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 Q4’19 based on companies’ reports and Company’s estimation
4
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 Q4’19 based on companies’ reports and Company’s estimation
5
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
6
Golan TelecomPurchase
In March 2020, Cellcom entered an agreement 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)
7
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)
8
2.7 0.9
CellcomIsrael
Golan
27% 9%
2G, 3G & 4GNetworks
A highly complementary combination, with strong synergies
3.6
Consolidated Pro-forma
36%
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 service using Cellcom Israel’s infrastructure . 3G & 4G services are provided over the companies shred
network
3G & 4G(2)
9
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
10
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
11
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
12
Growth in TV and Broadband Subscribers
Broadband Subscribers
TV Subscribers
ThousandsThousands
94
156
222
269 278
1 1 1 1 1
63
111
170
219
258
1 1 1 1 1
Based on company reports
13
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 300,000 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 quarterly report on Form 6-K dated 15.8.2019
(2) Until 2043
(1)
(2)
14
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
1515
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
16
Cellcom Business Solutions
Handsets
Internet Security Cloud services Transmission
Hosting Services
Integration services
Telephony
International communication
IOT
17
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
1 18
Financial Overview
1,215 1,258
1 1
1,730 1,679
1 1
1
Service RevenuesMitigating cellular revenues erosion effect with fixed line revenues growth
M’NIS
Fixed Line Service RevenuesCellular Service RevenuesM’NIS
Based on company reports
Adjusted EBITDA and Operating Profit
687
940
1 1
101
24
1 1
M’NIS
Adjusted EBITDA Operating ProfitM’NIS
(1) Please see "Use of Non-IFRS financial measures" section the company’s annual report dated March 23, 2020.(2) Adjusted EBITDA figures from 2019 include impact of adoption of IFRS 16. For more details see the company’s annual report dated March 23, 2020.(3) 2018 EBITDA includes an expense for an employee voluntary retirement plan in the amount of approximately NIS 26 million, 2019 EBITDA includes an expense for a new employee voluntary retirement plan in the amount of approximately NIS 45 million
Based on company reports
665
IFRS16
(1,2,3)
Capex
181
391
1 1
1
Capex and Free Cash Flow
593 557
1 1
M’NIS
Free Cash FlowM’NIS
Based on company reports
(1) Please see "Use of Non-IFRS financial measures" section the company’s annual report dated March 23, 2020.(2) Free cash flow for 2019 includes 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 1 1 1 1
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
1,478
1,045
194
Cash 31.12.19 Repayments2020-2021
Conservative Financial Policy
10589
7257 41
27
14519 526476
518 518
368
255
123 123
1 3
Interest Principal
M’NIS
Cash vs. Debt repayment Debt Repayment Schedule
B’NIS
(1)
2020-2021
(1)
(1) As of December 31, 2019
Based on company reports
1,239
Comprehensive
Restructuring Plan
September 2019
25
The plan goals, with a target to achieve them by the end of 2020
(1) Excluding special and unusual items
1. Return to positive net income
2. Reduce the Company’s net debt to EBITDA ratio (excluding IFRS16
ramifications) to below 3.00
3. Prepare the Company to better cope with market conditions, the intense
competition and future investments
The Plan includes the following major components and target timetable:
(1)
(1)
26
Cutting expensesGenerating higher free cash flow
(1) To be executed by the end of 2020
Annual reduction of appx. NIS 100-150 million from Q3 2019
(annual run rate) opex Level
Substantial reduction in manpower
Reducing payments to suppliers
Reduction of landline wholesale access fees
(1)
27
Reducing CapexGenerating higher free cash flow
(1) To be executed by the end of 2020, w/o new frequencies related capex
Annual capex reduction to NIS 450-500 million level
Reducing payments to suppliers
Lowering various engineering and IT investments
Stopping all fiber optic enrolment investments in residential
neighborhoods which was taken over by IBC
(1)
28
Strengthening our balance sheet and lowering our net debt
(1) Specific timing and structure to be determined in accordance with the evolvement of the Plan(2) This document does not constitute an offer to sell, or a solicitation of an offer to purchase, any securities. For additional details see
the Company's quarterly report dated November 27, 2019.(3) To be carried out by management, at its discretion, at such timing, amounts and structure, according to market conditions.
Capital Raising
Capital raising of appx. NIS 400 million
To be executed prior to 2019 year-end and in the form of an equity offering
Debt reduction
Open market repurchases of debentures up to NIS 150 million
Factoring
Factoring of customers' end-user equipment of appx. NIS 100-150 million
Presently under review due to operational complexity and related costs
Execution of the Plan may entail significant one-time expenses. Those are not included in the Plan
components above
(1)
(2)
(3)
3.32
2.89
1 1 Q4'20
29
Reducing our leverage
(1) EBITDA without IFRS16 ramifications
Net Debt / EBITDA(1)
Below 3.00
Reduce the Company’s net debt to EBITDA ratio (excluding IFRS16 ramifications) to below 3.00
30
Contact us Shlomi Fruhling Chief Financial Officer
Elad LevyInvestors Relations Manager
Investors website: investors.cellcom.co.ilE-mail: [email protected] : + 972 52 9989735