| [November 08, 2005] |
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Partner Communications Reports Third Quarter 2005 Results
ROSH HA'AYIN, Israel --(Business Wire)-- Nov. 8, 2005 -- Partner Communications Company Ltd. (Nasdaq:PTNR)(LSE:PCCD)(TASE:PTNR), a leading Israeli mobile communications operator, today announced its results for the third quarter of 2005. Partner reported revenues in Q3 2005 of NIS 1,352.3 million (US$ 294.1 million), EBITDA of NIS 382.7 million (US$ 83.2 million), equivalent to 28.3% of total revenue, and net income of NIS 30.9 million (US$ 6.7 million).
Commenting on the results, Partner's CEO, Amikam Cohen, said: "Q3 2005 was the quarter in which our efforts to lead the 3G revolution in Israel stepped up a gear. We launched three more 3G handsets and a range of 3G content services. To encourage take-up we significantly increased, for a limited period in Q3, the introductory handset subsidies we offered to new and upgrading 3G subscribers. The take-up has been highly encouraging: 3G subscriber numbers more than doubled in the quarter, and at the end of the quarter, over 73,000 3G subscribers were already experiencing the wide range of our exciting 3G services. We plan to market a wider range of handsets in 2006, and we expect handset costs and subsidies to come down." -0- *T Q3 2004 vs. Q3 2005 Comparison Q3 2004 Q3 2005 Change Revenues (NIS millions) 1,348.4 1,352.3 0.3% EBITDA (NIS millions) 413.8 382.7 (7.5%) Operating Profit (NIS millions) 275.9 211.2 (23.5%) Net Income (NIS millions) 114.9 30.9 (73.1%) Cash flow from operating activities net of investing activities (NIS millions) 269.5 46.1 (82.9%) Subscribers (thousands) 2,269 2,480 9.3% Estimated Market Share (%) 32 32 - Quarterly Churn Rate (%) 2.6 3.2 21.9% Average Monthly Usage per Subscriber (minutes) 291 306 5.1% Average Monthly Revenue per Subscriber (NIS) 176 162 (8.0%) Average Subscriber Acquisition Costs (NIS) 277 363 31.0% -------------------------------------------------------------- *T
Financial Review
In Q3 2005 Partner's revenues totaled NIS 1,352.3 million (US$ 294.1 million), approximately equivalent to the revenues of NIS 1,348.4 million in Q3 2004 and up 8.1% from NIS 1,250.9 million in Q2 2005. Compared with Q3 2004, revenues were higher primarily as a result of a larger subscriber base and increased minutes of use, but this was offset primarily by the impact of the reduction in interconnection tariffs which went into effect in March 2005. Compared with Q2 2005, the increase was driven by the seasonal growth in service revenues and growth in handset sales.
Content and data revenues for Q3 2005 accounted for 8.0% of total revenues, up from 6.4% in Q3 2004, despite the reduction in SMS interconnection tariffs, and up from 7.3% in Q2 2005. Data and content non-SMS revenues increased by 50.1% in Q3 2005 compared with Q3 2004.
Compared with Q3 2004, the cost of revenues related to services rose by 5.4% from NIS 752.5 million to NIS 792.8 million (US$ 172.4 million) in Q3 2005, and rose by 8.7% compared with NIS 729.5 million in Q2 2005. In relation to Q3 2004, the increase was due to higher depreciation and amortization charges related to the 3G network, offset by lower variable airtime costs resulting from the reduction in interconnect tariffs mandated by the Ministry of Communications. The increase compared with Q2 2005 was due primarily to higher variable airtime costs. The cost of revenues related to equipment was NIS 231.0 million (US$ 50.2 million) in Q3 2005, an increase of 20.3% from NIS 192.1 million in Q3 2004 and an increase of 46.3% from NIS 157.9 million in Q2 2005. The increase, as compared with both Q3 2004 and Q2 2005, was due to an increase in the number and average cost of handsets sold.
Overall, gross profit was NIS 328.5 million (US$ 71.4 million) in Q3 2005, representing a 18.6% decrease from NIS 403.8 million in Q3 2004, and a 9.6% decrease from NIS 363.4 million in Q2 2005. The decrease, compared with Q3 2004, was driven by the additional handset subsidies to increase 3G subscriber penetration and the increased level of depreciation and amortization on the 3G network. Compared with Q2 2005, the decrease was almost entirely from the additional handset subsidies to increase 3G subscriber penetration.
Selling and marketing expenses decreased by 10.6% in Q3 2005 to NIS 72.1 million (US$ 15.7 million) from NIS 80.7 million in Q3 2004, but increased by 10.2% from NIS 65.4 million in Q2 2005. The increase compared with Q2 2005 was principally due to distribution and marketing costs related to 3G promotions.
General and administrative expenses in Q3 2005 decreased by 4.1% to NIS 45.2 million (US$ 9.8 million) compared with NIS 47.1 million in Q3 2004 and decreased by 2.1% from NIS 46.2 million compared with Q2 2005.
Overall, operating profit for Q3 2005 was NIS 211.2 million (US$ 45.9 million), representing a decrease of 23.5% from NIS 275.9 million in Q3 2004, and a decrease of 16.1% from NIS 251.8 million in Q2 2005. The Company recorded quarterly EBITDA of NIS 382.7 million (US$ 83.2 million) compared with EBITDA in Q3 2004 of NIS 413.8 million, a decrease of 7.5%, and a decrease of 9.1% compared with NIS 420.8 million in Q2 2005. In revenue terms, EBITDA decreased to 28.3% of revenues in Q3 2005, down from 30.7% in Q3 2004 and from 33.6% in Q2 2005.
Financial expenses in Q3 2005 were NIS 148.8 million (US$ 32.4 million), up 237.8% from NIS 44.0 million in Q3 2004, and up 79.6% compared with NIS 82.8 million in Q2 2005. The increase was primarily driven by a one-off charge in the amount of NIS 63 million related to the redemption of the US$ 175 million 13% Senior Subordinated Notes on August 15, 2005, as well as interest charges related to both the redeemed Notes and the new CPI-linked shekel-denominated Notes.
Net income in the third quarter of 2005 was NIS 30.9 million (US$ 6.7 million), representing a decrease of 73.1% from NIS 114.9 million in Q3 2004, and 73.3% from NIS 115.8 million in Q2 2005. The decrease compared with both Q3 2004 and Q2 2005 can be primarily attributed to the one-off charges related to the redemption of the 13% Senior Subordinated Notes on August 15, 2005 and the additional activation, retention, and selling and marketing costs associated with the drive to increase 3G subscriber penetration.
Basic earnings per share, based on the average number of shares outstanding during the quarter, were NIS 0.20 (4 US cents) in Q3 2005, down from NIS 0.63 in Q3 2004 and NIS 0.73 in Q2 2005. Fully diluted earnings per share in Q3 2005 were also NIS 0.20 (4 US cents), down from NIS 0.62 in Q3 2004 and down from NIS 0.72 in Q2 2005.
Funding and Investing Review
On August 15, 2005, the Company redeemed its outstanding US$ 175 million 13% Senior Subordinated Notes, due 2010. According to the terms of the Notes, the redemption price was 106.5% of the principal amount. The redemption, which was financed from our new bank facility and funds generated from current operations, concluded the refinancing of the Company's long term debt into lower cost CPI linked shekel-denominated debt.
In Q3 2005 cash flows generated from operating activities, net of cash flows from investing activities, totaled NIS 46.1 million (US$ 10.0 million), compared with NIS 269.5 million in Q3 2004, a decrease of 82.9%, and compared with NIS 132.8 million in Q2 2005, a decrease of 65.3%. The decrease from Q3 2004 incorporated both a decrease in cash flows from operating activities and an increase in payments for investments in fixed assets. The decrease from Q2 2005 was primarily due to a decrease in cash flows from operating activities, following payment of the one-off charges related to the redemption of the US$ 175 million 13% Senior Subordinated Notes.
Net investment in fixed assets totaled NIS 76.8 million (US$ 16.7 million) in Q3 2005, down from NIS 170.7 million in Q3 2004 and down from NIS 139.4 million in Q2 2005. In Q2 2005 the Company substantially completed the build-out of its 3G network, which started early in 2004. Therefore, the investment level in the current quarter was lower.
Operational Review
In Q3 2005, approximately 71,000 net active subscribers joined the Company compared with approximately 67,000 in Q3 2004 and approximately 37,000 in Q2 2005. The quarterly churn rate increased to 3.2% from 2.6% in Q3 2004 and decreased from 3.6% in Q2 2005. The changes in the churn rates resulted primarily from the prepaid sector. The Company's active subscriber base at the end of September 2005 was approximately 2,480,000, including approximately 486,000 business subscribers or 19% of the base, approximately 1,255,000 postpaid private subscribers, or 51% of the base, and approximately 739,000 prepaid subscribers, or 30% of the base. Of the Company's subscriber base, approximately 73,000 are 3G subscribers. Overall, we estimate our total market share to be around 32%.
ARPU in Q3 2005 was approximately NIS 162 (US$ 35), compared with approximately NIS 176 in Q3 2004 and NIS 157 in Q2 2005. The decrease compared with Q3 2004 was primarily driven by the reduction in interconnection charges.
The average minutes of use for Q3 2005 was approximately 306 minutes per month, compared with 291 minutes per month in Q3 2004 and 296 minutes per month in Q2 2005.
In Q3 2005, the average cost of acquiring new subscribers (SAC) was approximately NIS 363 (US$ 79), up from NIS 277 in Q3 2004 and from NIS 263 in Q2 2005. The increase compared with both Q3 2004 and Q2 2005 principally reflects the higher introductory handset subsidies provided to 3G subscribers.
Outlook and Guidance
Commenting on the Company's outlook, Mr. Alan Gelman, Partner's Chief Financial Officer said: "In the third quarter we invested in two major courses of action which significantly impacted on our quarterly operating results; one to promote future revenue growth and one to reduce future financial expenses.
As part of our 3G strategy and to establish future incremental revenue streams, we temporarily increased handset subsidies and consequently incurred an increased gross loss on handsets of approximately NIS 40 million compared with Q3 2004 and NIS 35 million compared with the previous quarter. As part of the restructuring of our debt into lower cost CPI linked shekel-denominated debt, we redeemed our expensive US$ 175 million 13% Senior Subordinated Notes and incurred a one-off charge in the amount of NIS 63 million. Since handset subsidies in Q4 will be lower than Q3, we expect our fourth quarter results to support the annual guidance we gave on February 7, 2005, our main objective being to maintain 2005 EBITDA at the level achieved in 2004."
Conference Call Details
Partner Communications will hold a conference call to discuss the company's third-quarter results on Tuesday, November 08, 2005, at 16:00 Israel local time (09AM EST). This conference call will be broadcast live over the Internet and can be accessed by all interested parties through our investor relations web site at http://www.investors.partner.co.il.
To listen to the broadcast, please go to the web site at least 15 minutes prior to the start of the call to register, download and install any necessary audio software. For those unable to listen to the live broadcast, an archive of the call will be available via the Internet (at the same location as the live broadcast) shortly after the call ends, and until midnight of November 15, 2005.
About Partner Communications
Partner Communications Company Ltd. (Partner) is a leading Israeli mobile communications operator providing GSM/ GPRS/ UMTS services and wire free applications under the orange(TM) brand. The Company commenced full commercial operations in January 1999 and, through its network, provides quality service and a range of features to 2,480 million subscribers in Israel (as of 30 September, 2005). Partner subscribers can use roaming services in 161 destinations using 344 GSM networks. The Company launched its 3G service in 2004. Partner's ADSs are quoted on NASDAQ under the symbol PTNR and on the London Stock Exchange under the symbol PCCD. Its shares are quoted on the Tel Aviv Stock Exchange under the symbol PTNR.
Partner is a subsidiary of Hutchison Telecommunications International Limited (Hutchison Telecom). Hutchison Telecom is a leading listed telecommunications operator (SEHK: 2332; NYSE: HTX) focusing on dynamic markets. It currently offers mobile and fixed-line telecommunication services in Hong Kong, and operates or is rolling out mobile telecommunication services in India, Israel, Macau, Thailand, Sri Lanka, Ghana, Indonesia and Vietnam.
For more information about Partner, see www.investors.partner.co.il.
Notes: Some of the information in this release contains forward-looking statements that involve risks and uncertainties within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to risks, uncertainties and assumptions about us.
Words such as "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. All statements other than statements of historical fact included in this annual report regarding our future performance, plans to increase revenues or margins or preserve or expand market share in existing or new markets, reduce expenses and any statements regarding other future events or our future prospects, are forward-looking statements.
Because such statements involve risks and uncertainties, actual results may differ materially from the results currently expected. Factors that could cause such differences include, but are not limited to: -0- *T -- the effects of the high degree of regulation in the telecommunications market in which we operate; -- regulatory developments relating to tariffs, including interconnect tariffs; -- regulatory developments related to the implementation of number portability; -- the difficulties associated with obtaining all permits required for building and operating of antenna sites; -- alleged health risks related to antenna sites and use of telecommunication devices; -- the possible requirement to indemnify planning committees in respect of claims made against them relating to the depreciation of property values or to alleged health damages resulting from antenna sites; -- the effects of vigorous competition in the market in which we operate and for more valuable customers, which may decrease prices charged, increase churn and change our customer mix, profitability and average revenue per user, and the response of competitors to industry and regulatory developments; -- the impact of existing and new competitors in the market in which we compete, including competitors that may offer less expensive products and services, desirable or innovative products, technological substitutes, or have extensive resources or better financing; -- uncertainties about the degree of growth in the number of consumers in Israel using wireless personal communications services and the growth in the Israeli population; -- the risks associated with the implementation of a third generation (3G) network and business strategy, including risks relating to the operations of new systems and technologies, expenditures required and potential unanticipated costs, uncertainties regarding the adequacy of suppliers on whom we must rely to provide both network and consumer equipment and consumer acceptance of the products and services to be offered; -- the risks associated with technological requirements, technology substitution and changes and other technological developments; -- fluctuations in foreign exchange rates; -- the availability and cost of capital and the consequences of increased leverage; -- the results of litigation filed or that may be filed against us; and -- the possibility of the market in which we compete being impacted by changes in political, economic or other factors, such as monetary policy, legal and regulatory changes or other external factors over which we have no control; -- As well as the risk factors specified under the heading "Risk Factors" in our 2004 annual report on form 20-F filed with the SEC on April 22, 2005. *T
The attached summary financial statements were prepared in accordance with U.S. GAAP. The attached summary financial statements for Q3 2005 are unaudited.
The convenience translations of the Nominal New Israeli Shekel (NIS) figures into US Dollars were made at the rate of exchange prevailing at September 30, 2005: US$ 1.00 equals NIS 4.598. The translations were made purely for the convenience of the reader.
Earnings before interest, taxes, depreciation, amortization, exceptional items and capitalization of intangible assets ('EBITDA') is presented because it is a measure commonly used in the telecommunications industry and is presented solely in order to improve the understanding of the Company's operating results and to provide further perspective on these results. EBITDA, however, should not be considered as an alternative to operating income or income for the year as an indicator of the operating performance of the Company. Similarly, EBITDA should not be considered as an alternative to cash flows from operating activities as a measure of liquidity. EBITDA is not a measure of financial performance under generally accepted accounting principles and may not be comparable to other similarly titled measures for other companies. EBITDA may not be indicative of the historic operating results of the Company; nor is it meant to be predictive of potential future results.
Reconciliation between our cash flows from operating activities and EBIDTA is presented in the attached summary financial statements. -0- *T PARTNER COMMUNICATIONS COMPANY LTD. (An Israeli Corporation) CONDENSED CONSOLIDATED BALANCE SHEETS Convenience translation New Israeli shekels into U.S. dollars ------------------------------------ ------------------------- September December September December 30, 31, 30, 31, 2005 2004 2005 2004 -------------------------------------------------------------- (Unaudited) (Audited) (Unaudited) (Audited) -------------------------------------------------------------- In thousands -------------------------------------------------------------- A s s e t s CURRENT ASSETS: Cash and cash equivalents 3,078 4,611 669 1,003 Accounts receivable: Trade 750,259 625,220 163,171 135,977 Other 106,775 70,158 23,222 15,258 Inventories 129,470 101,656 28,158 22,109 Deferred income taxes 126,175 255,503 27,441 55,568 ------------------------------------------ T o t a l current assets 1,115,757 1,057,148 242,661 229,915 ------------------------------------------ INVESTMENTS AND LONG- TERM RECEIVABLES: Accounts receivables - trade 181,130 96,687 39,393 21,028 Funds in respect of employee rights upon retirement 74,117 69,128 16,119 15,034 ------------------------------------------ 255,247 165,815 55,512 36,062 ------------------------------------------ FIXED ASSETS, net of accumulated depreciation and amortization 1,820,629 1,843,182 395,961 400,866 ------------------------------------------ LICENSE AND DEFERRED CHARGES, net of amortization 1,343,916 1,325,592 292,283 288,298 ------------------------------------------ DEFERRED INCOME TAXES 82,053 94,442 17,845 20,540 ------------------------------------------ 4,617,602 4,486,179 1,004,262 975,681 ========================================== Date of approval of the financial statements: November 7, 2005 Convenience translation New Israeli shekels into U.S. dollars --------------------------------------------- September December September December 30, 31, 30, 31, 2005 2004 2005 2004 --------------------------------------------- (Unaudited) (Audited) (Unaudited) (Audited) --------------------------------------------- In thousands ------------------------------------------ Liabilities and shareholders' equity CURRENT LIABILITIES: Current maturities of long-term liabilities 34,342 7,469 Accounts payable and accruals: Trade 624,902 552,377 135,907 120,135 Other 213,941 307,364 46,529 66,847 Dividend payable 86,769 18,871 ------------------------------------------ T o t a l current liabilities 959,954 859,741 208,776 186,982 ------------------------------------------ LONG-TERM LIABILITIES: Bank loans, net of current maturities 809,313 1,185,088 176,014 257,740 Notes payable 2,006,580 753,900 436,403 163,963 Liability for employee rights upon retirement 99,303 92,808 21,597 20,185 Other liabilities, net of current maturities 19,805 7,567 4,307 1,646 ------------------------------------------ T o t a l long-term liabilities 2,935,001 2,039,363 638,321 443,534 ------------------------------------------ T o t a l liabilities 3,894,955 2,899,104 847,097 630,516 ------------------------------------------ SHAREHOLDERS' EQUITY: Share capital - ordinary shares of NIS 0.01 par value: authorized - December 31, 2004 and September 30, 2005 - 235,000,000 shares; Issued and outstanding - December 31, 2004 - 184,037,221 shares and September 30, 2005 - 152,224,013 shares 1,522 1,840 331 400 L e s s - receivable in respect of shares (2,260) (492) Capital surplus 2,394,223 2,362,027 520,710 513,707 Deferred compensation (15,210) (23,650) (3,309) (5,144) Accumulated deficit (1,657,888) (750,882) (360,567) (163,306) ------------------------------------------ T o t a l shareholders' equity 722,647 1,587,075 157,165 345,165 ------------------------------------------ 4,617,602 4,486,179 1,004,262 975,681 ========================================== PARTNER COMMUNICATIONS COMPANY LTD. (An Israeli Corporation) CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS New Israeli shekels ----------------------------------------------------- 9 month 3 month period ended period ended September 30, September 30, --------------------------- ------------------------- 2005 2004 2005 2004 -------------- ------------ ------------ ------------ (Unaudited) ----------------------------------------------------- In thousands (except per share data) ----------------------------------------------------- REVENUES - net: Services 3,487,020 3,438,005 1,208,953 1,204,141 Equipment 376,645 383,600 143,369 144,238 -------------- ------------ ------------ ------------ 3,863,665 3,821,605 1,352,322 1,348,379 -------------- ------------ ------------ ------------ COST OF REVENUES: Services 2,265,663 2,145,588 792,806 752,540 Equipment 570,464 518,418 231,022 192,077 -------------- ------------ ------------ ------------ 2,836,127 2,664,006 1,023,828 944,617 -------------- ------------ ------------ ------------ GROSS PROFIT 1,027,538 1,157,599 328,494 403,762 SELLING AND MARKETING EXPENSES 194,910 248,919 72,105 80,691 GENERAL AND ADMINISTRATIVE EXPENSES 132,935 131,628 45,222 47,134 -------------- ------------ ------------ ------------ OPERATING PROFIT 699,693 777,052 211,167 275,937 FINANCIAL EXPENSES - net 282,462 197,081 148,782 44,042 -------------- ------------ ------------ ------------ INCOME BEFORE TAXES ON INCOME 417,231 579,971 62,385 231,895 TAXES ON INCOME 145,960 239,834 31,441 116,992 -------------- ------------ ------------ ------------ NET INCOME FOR THE PERIOD 271,271 340,137 30,944 114,903 ============== ============ ============ ============ EARNINGS PER SHARE ("EPS"): Basic 1.65 1.86 0.20 0.63 ============== ============ ============ ============ Diluted 1.63 1.84 0.20 0.62 ============== ============ ============ ============ WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: Basic 164,847,982 183,275,823 151,907,587 183,538,076 ============== ============ ============ ============ Diluted 166,665,935 184,926,914 153,538,181 184,829,244 ============== ============ ============ ============ Convenience translation into U.S. dollars -------------------------- 9 month 3 month period ended period ended September 30 September 30 2005 2005 ------------- ------------ (Unaudited) --------------------------- In thousands (except per share data) --------------------------- REVENUES - net: Services 758,378 262,930 Equipment 81,915 31,181 -------------- ------------ 840,293 294,111 -------------- ------------ COST OF REVENUES: Services 492,750 172,424 Equipment 124,068 50,244 -------------- ------------ 616,818 222,668 -------------- ------------ GROSS PROFIT 223,475 71,443 SELLING AND MARKETING EXPENSES 42,390 15,682 GENERAL AND ADMINISTRATIVE EXPENSES 28,912 9,835 -------------- ------------ OPERATING PROFIT 152,173 45,926 FINANCIAL EXPENSES - net 61,431 32,358 -------------- ------------ INCOME BEFORE TAXES ON INCOME 90,742 13,568 TAXES ON INCOME 31,744 6,838 -------------- ------------ NET INCOME FOR THE PERIOD 58,998 6,730 ============== ============ EARNINGS PER SHARE ("EPS"): Basic 0.36 0.04 ============== ============ Diluted 0.36 0.04 ============== ============ WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: Basic 164,847,982 151,907,587 ============== ============ Diluted 166,665,935 153,538,181 ============== ============ PARTNER COMMUNICATIONS COMPANY LTD. (An Israeli Corporation) CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Convenience translation New Israeli into U.S. shekels dollars --------------------------------- 9 month period 9 month period ended ended September 30 September 30, ------------------ 2005 2004 2005 --------------------------------- (Unaudited) --------------------------------- In thousands --------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income for the period 271,271 340,137 58,998 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 521,303 412,248 113,376 Amortization of deferred compensation related to employee stock option grants, net 8,226 1,180 1,789 Liability for employee rights upon retirement 6,495 14,239 1,412 Accrued interest and exchange and linkage differences on long-term liabilities 90,062 21,235 19,588 Deferred income taxes 141,717 237,585 30,821 Income tax benefit in respect of exercise of option granted to employees 4,243 2,249 923 Capital loss (gain) on sale of fixed assets 420 (391) 91 Changes in operating assets and liabilities: Increase in accounts receivable: Trade (209,482)(187,956) (45,559) Other (36,617) (3,273) (7,964) Increase (decrease) in accounts payable and accruals: Trade 112,349 231,519 24,434 Other (93,423) (63,168) (20,318) Increase in inventories (27,814) (46,571) (6,049) Increase (decrease) in asset retirement obligations (194) 294 (42) Amount carried to deferred charges (13,874) (3,017) ----------------------------------- Net cash provided by operating activities 774,682 959,327 168,483 ----------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of fixed assets (467,505)(408,369) (101,676) Purchase of additional spectrum (41,539) (48,850) (9,034) Proceeds from sale of fixed assets 16 552 3 Funds in respect of employee rights upon retirement (4,989) (8,732) (1,085) ----------------------------------- Net cash used in investing activities (514,017)(465,399) (111,792) ----------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Financial lease undertaken 15,832 3,443 Repayment of financial lease (964) (210) Repurchase of company's shares (1,091,841) (237,460) Issuance of notes payable under a prospectus, net of issuance costs 1,929,486 419,636 Redemption of notes payable (793,100) (172,488) Proceeds from exercise of stock options granted to employees 30,442 18,629 6,621 Long-term bank loans received 497,001 108,091 Repayment of long term bank loans (849,054)(503,227) (184,658) ----------------------------------- Net cash used in financing activities (262,198)(484,598) (57,025) ----------------------------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,533) 9,330 (334) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,611 3,774 1,003 ----------------------------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD 3,078 13,104 669 =================================== Supplementary information on investing and financing activities not involving cash flows At September 30, 2005, and 2004, trade payables include NIS 84,644,000 ($ 18,409,000) (unaudited) and NIS 147,484,000 ($ 32,076,000) (unaudited) in respect of acquisition of fixed assets and additional spectrum, respectively. This balance will be given recognition in these statements upon payment. PARTNER COMMUNICATIONS COMPANY LTD. (An Israeli Corporation) RECONSILIATION BETWEEN OPERATING CASH FLOWS AND EBITDA Convenience translation into New Israeli shekels U.S. dollars ---------------------------------------- 9 Month Period Ended 9 Month Period September 30, Ended September 30, ---------------------------------------- 2005 2004 2005 -------------------------------------- (Unaudited) ---------------------------------------- In thousands ---------------------------------------- Net cash provided by operating activities 774,682 959,327 168,483 Liability for employee rights upon retirement (6,495) (14,239) (1,412) Accrued interest and exchange and linkage differences on long-term liabilities (90,062) (21,235) (19,588) Amount carried to differed charges 13,874 3,017 Increase in accounts receivable: Trade 209,482 187,956 45,559 Other 36,617 3,273 7,964 Decrease (increase) in accounts payable and accruals: Trade (112,349) (231,519) (24,434) Other 93,423 63,168 20,318 Increase in inventories 27,814 46,571 6,049 Decrease (Increase) in Assets Retirement Obligation 194 (294) 42 Financial Expenses 256,958 190,269 55,885 --------- --------- ------- EBITDA 1,204,138 1,183,277 261,883 --------- --------- ------- PARTNER COMMUNICATIONS COMPANY LTD. (An Israeli Corporation) New Israeli shekels ------------------------------------------------------ 3 month period ended ------------------------------------------------------ September December March June September 30, 31, 31, 30, 30, 2004 2004 2005 2005 2005 ---------- ---------- ---------- ---------- ---------- (Unaudited) ------------------------------------------------------ In thousands ------------------------------------------------------ REVENUES - net 1,348,379 1,319,132 1,260,468 1,250,875 1,352,322 COST OF REVENUES 944,617 951,008 924,825 887,474 1,023,828 ---------- ---------- ---------- ---------- ---------- GROSS PROFIT 403,762 368,124 335,643 363,401 328,494 SELLING AND MARKETING EXPENSES 80,691 76,325 57,363 65,442 72,105 GENERAL AND ADMINIS- TRATIVE EXPENSES 47,134 49,505 41,510 46,203 45,222 ---------- ---------- ---------- ---------- ---------- OPERATING PROFIT 275,937 242,294 236,770 251,756 211,167 FINANCIAL EXPENSES - net 44,042 63,464 50,854 82,826 148,782 ---------- ---------- ---------- ---------- ---------- INCOME BEFORE TAXES ON INCOME 231,895 178,830 185,916 168,930 62,385 TAXES ON INCOME 116,992 47,414 61,423 53,096 31,441 ---------- ---------- ---------- ---------- ---------- NET INCOME FOR THE PERIOD 114,903 131,416 124,493 115,834 30,944 ========== ========== ========== ========== ========== PARTNER COMMUNICATIONS COMPANY LTD. (An Israeli Corporation) Summary Operating Data Q3 2004 Q3 2005 ---------------------------------------------------- Subscribers (in thousands) 2,269 2,480 ---------------------------------------------------- Estimated share of total Israeli mobile telephone subscribers 32% 32% ---------------------------------------------------- Churn rate in quarter 2.6% 3.2% ---------------------------------------------------- Average monthly usage in quarter per subscriber (minutes) 291 306 ---------------------------------------------------- Average monthly revenue in year per subscriber, including in-roaming revenue (NIS) 176 162 ---------------------------------------------------- Number of 2G operational base stations (in parenthesis number of micro sites out of total number of base stations) 2,210 (730) 2,244 (723) ---------------------------------------------------- Subscriber acquisition costs in quarter per subscriber (NIS) 277 363 ---------------------------------------------------- Number of employees (full-time equivalent) 3,107 3,475 ---------------------------------------------------- *T
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