Post on 12-Oct-2020
Company presentation
Partner Communications Company Ltd.
Q2 2010
Safe Harbor Statement
g This presentation 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 "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 presentation 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.
g 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 about Partner, the macro economic environment, consumer habits and preferences in cellular telephone usage, trends in the Israeli telecommunications industry in general, the impact of current global economic conditions and possible regulatory and legal developments. For a description of some of the risks we face, see "Item 3D. Key Information - Risk Factors", "Item 4. - Information on the Company", "Item 5. -Operating and Financial Review and Prospects“, "Item 8A. - Consolidated Financial Statements and Other Financial Information - Legal and Administrative Proceedings" and “Item 11. Quantitative and Qualitative Disclosures about Market Risks” in the Company’s 2009 Annual Report (20-F) filed with the SEC. In light of these risks, uncertainties , assumptions, and the global recession, the impact of which is still unknown, the forward-looking events discussed in this presentation might not occur, and actual results may differ materially from the results anticipated. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
3
Agenda
1. Partner in a Nutshell
2. The Israeli Telecommunications Market
3. Partner’s Financial and Operational Results
4. Partner’s Strategic Direction
4
Partner TodayA Company with Key Assets
� A leading cellular company operating in Israel under the “orange” brand
� The strongest telecom brand in Israel
� A 32% estimated market share
� The highest industry ARPU, leader in content & data revenues
� Outstanding customer service
� Significant customer interaction
� Operational excellence
� Attractive dividend yield
� A company committed to shareholders’ return
� Addressing new areas of activity: ISP, fixed telephony and Media
5
New Ownership Structure
g In October 2009, Scailex Corporation completed the acquisition of the controlling equity interest in Partner from Hutchison Telecom (through its subsidiary Advent)
g Scailex is an Israeli company whose shares are traded on the Tel Aviv Stock Exchange (SCIX) and are quoted on "Pink Quote" (SCIXF.PK). Scailexcurrently operates in two major domains of activity: n The sole import, distribution and
maintenance of Samsung mobile handset products and accessories primarily to the three major cellular operators in Israel
n Management of its own financial assets
Ilan Ben-Dov
66.79%
Suny Telecom
8.53%
Public
19.26%
TAO
4.8%
Suny Electronics82.34%
Ilan Ben-Dov0.95%
Public16.57%
SCAILEX CORPORATION
LTD.
SCAILEX OWNERSHIP
Partner's Ownership Structure
Public,
45.61%
Israeli
Holders,
3.27%
Leumi
Partners ,
4.96%
Suny,
1.40%
Scailex,
44.76%
6
Financial Results
g Record Revenues of NIS 1.68 billion ($ 433 million)
g Record content and data revenues of NIS 273 million ($ 70 million), or 19% of service revenues
g Record EBITDA of NIS 646 million ($ 167 million), representing 39% of total revenues and 46% of service revenues
g Net income of NIS 293 million ($ 76 million)
g Quarterly dividend of approximately NIS 290 million ($ 75 million)
g 105% growth (vs. Q2 09) in the fixed line business revenues to NIS 45 million ($ 12 million)
Operational Performance
g Addition of 28K new subscribers
g Addition of 78K 3G subscribers
g ARPU of NIS 149 ($ 38)
Q2/10 Highlights
The convenience translations of the Nominal Israeli Shekel (NIS) figures into US Dollars were made at the exchange rate prevailing at June 30, 2010: US$ equals NIS 3.875. The translations are purely for the convenience of the reader.
Partner Creates Value for its Shareholdersg Since 2005 the Company has returned approximately NIS 6.7 billion ($1.7 billion) to its
shareholders
n Buy-back of 18% of Partner’s shares in 2005 (approximately NIS 1.1 billion)
n Buy-back in 2008 in an amount of NIS 351 million
n Approximately NIS 3.9 billion dividend distributed since 2005 (including Q2’10)
n In addition, NIS 1.4 billion one time dividend in 2010
g Dividend policy of at least 80% payout ratio in 2010
g Annual dividend yield of 13%
n Based on end of Q2 PPS and dividend paid during the LTM (not including one time dividend)*
* Dividend Per Share (LTM) = 13%
Price Per Share (June 30)
Return to Shareholders (NIS m)
187410
750 8411,060
351
1,400
620
1,091
-
500
1,000
1,500
2,000
2,500
2005 2006 2007 2008 2009 H1 10
NIS
millio
ns
Dividend announced Buy back One Time
8
Orange shops and orange stores
g More than 70 nationwide contact centers, highly efficient, owned and managed by the companyn 33 Service Centers
n 9 Orange Shops
n 36 Orange Stores
g High productivity
g Concept stores
g Sale of cellular, ISP & VOB services
9
Agenda
1. Partner in a Nutshell
2. The Israeli Telecommunications Market
3. Partner’s Financial and Operational Results
4. Partner’s Strategic Direction
Revenues
2009
Subscribers
EOP 09'
CAGR
09' - 12' *
Cellular 18,938 9,554 1.0%
Fixed telephony 3,892 3,226 -4.0%
ISP 1,673 NA 2.5%
MCTV 3,728 1,479 1.0%
ILD 1,677 NA -0.5%
Internet access 1,273 1,754 5.0%
Transmission 1,156 NA 6.0%
Total 32,337
10
The Israeli Telecom MarketLeadership of the Cellular Industry
g By end 2009, the Israeli telecom market represented revenues of approximately NIS 32 billion, of which 59% are attributed to cellular
g Partner generated more than NIS 6 billion revenues in 2009, more than any
other telecom area.
g Partner ~ 20% of total telecom market
* Based on 2009 companies’ reports and Partner's estimates.
New short term addressable market
for Partner
ILD, 5.2%
Internet
access, 3.9%
Fixed
telephony,
12.0%
ISP, 5.2%
MCTV, 11.5%
Transmission,
3.6%
Cellular, 58.6%
11
Regulatory Environment
g Reduction of interconnect tariffs to be paid to cellular operatorsn Possible 84% reduction in interconnect tariffs in 2010, followed by additional reductions in
2011-2014. Reductions are expected to have a material adverse effect on the Company’s earnings*
g The proposed 2010-2011Financial Arrangements Law**
n Regulation of national roaming in order to facilitate the entry of new cellular operators
n Increase in royalties from 1% today to 2% in 2011 and 2.5% in 2012 and 2013
n Limitation on exit fees that the cellular operators may impose on their private customers
g Multiple MVNO licenses issued
g A new committee (Haiak committee) has been set up to recommend on new Bezeq’s fixed line tariffs and future regulationsn Committees recommendations might introduce a new regulatory regime that will open the
fixed line market for competition - a potential upside
* For additional details on the possible reductions and their impact on the Company’s earnings, please see the Company’s press releases dated May 4, 2010, May 5, 2010 and June 24, 2010,
** For additional details on the 2010-2011Financials Arrangement Law, please see the Company’s Press release dated August 30, 2010
Please also refer to the Company's 2009 Annual Report (20-F) filed with the SEC.
12
Regulatory OpportunitiesRegulatory status/ Partner activity Expected TTM
Market Size
ILD g Following the MOC recent ruling on the ILD IC charging method + release of MVNO regulations
Mid-Short term
1.6B market
ISP g Partner’s new ISP business line Short term
1.6B market
Fixed voice g Partner’s new VOB business line Short term
4B market
Transmission g WLR* policy under MOC review
g Med-1 fiber optics Network
Mid-Short Term
1.2B market
Access g WLR* policy under MOC review Mid-Short Term
1.2B market
MCTV g Following Bezeq NGN, the average HH bandwidth is expected to increase to +10MB, allowing OTT IPTV
Long Term
3.7B market
Additional Topics:
� Corporate tax rate from 31% in 2006 to 25% in 2010 with further potential decrease to 16% in 2016.
* WLR - Wholesale Line Rental
13
The Cellular Market in IsraelTechnologyMajor Shareholder
No. of Subscribers *
Start of Operations
GSM, UMTS, HSDPA, HSUPAScailex Corporation3,096k1999Partner
GSM, TDMA, EDGE, HSDPA, HSUPAIDB Group3,341k1995Cellcom
NAMPS, CDMA, HSUPABezeq (Shaul Alovitz)2,807k1986Pelephone
iDENAltice (Patrick Drahi)~5001997MIRS
Q2 10 Estimated Market
Share (subscribers) *Subscriber Growth (EOP in ‘000)*
* As of Q2 10, in thousands (based on companies’ reports and Partner’s estimates)** Cellcom and Pelephone revenues are based on companies’ H1 2010 reports. Mirs revenues are based on Partner’s estimates
H1 2010 Estimated Market
Share (revenues) **
Mirs
5.1%
Pelephone
28.8%
Cellcom
34.2%
Partner
31.8%
355
834
2,3002,450
2,603
2,8843,074
3,1873,341
2,1322,287
2,4272,622 2,649
2,807
3,042 2,898
2,8602,668
2,5292,340
2,103
1,837
1,458
3,096
3,259
2,470
2,260
1,850
1,378
2,721
1,9551,7621,513
1,318
1,111
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 H1 10
Partner Cellcom Pelephone
Partner
33.1%Pelephone
28.6%
Cellcom
33.2%
Mirs
5.1%
14
Agenda
1. Partner in a Nutshell
2. The Israeli Telecommunications Market
3. Partner’s Financial and Operational Results
4. Partner’s Strategic Direction
2,340
3,096
2,103
2,529 2,6682,860
2,8983,042
-
500
1,000
1,500
2,000
2,500
3,000
3,500
2003 2004 2005 2006 2007 2008 2009 H1 10
156 158 158 161151
145 149
170
368358364365
336311
294286
-
50
100
150
200
2004 2005 2006 2007 2008 2009 Q110 Q210
AR
PU
(N
IS)
-
100
200
300
400
500
MO
U (
min
ute
s)
ARPU MOU
3.9%
5.2% 5.1%4.4% 4.3%
4.8%
3.9%4.2%
4.8%
0%
1%
2%
3%
4%
5%
6%
Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10
1,279
951
633
276
103-
1,433
19.4%16.8%
14.9%12.7%
10.1%8.7%7.6%
-
200
400
600
800
1,000
1,200
1,400
2004 2005 2006 2007 2008 2009 H1 10
0%
5%
10%
15%
20%
25%
30%
3G subs Content rev as % of service rev
Key Business IndicatorsSubscriber Growth (EOP, in 000’)
Change in subscribers
recognition policy
Quarterly Churn RateARPU and MOU*
3G Subscribers (EOP, in 000’) & Content Revenues
*From 2008 the calculation of ARPU has been modified to include revenues from sales of extended
handset warranties, in line with the industry standard. This has the effect of increasing ARPU for 2008
and 2009 by approximately 2 NIS
1,1261,265
2,3042,298
2,009
1,850
1,5691,576
1,380
34.5%
38.8%37.9%
36.5%
32.9%33.0%
30.6%30.7%30.9%
-
500
1,000
1,500
2,000
2,500
2003 2004 2005 2006 2007 2008 2009 H1 09 H1 10
NIS
mil
lio
ns
20%
25%
30%
35%
40%
EBITDA EBITDA margin
2,9263,263
6,0796,302
6,1145,607
5,123
390327677678623491454
8.9% 8.8%
10.2%10.8%
11.1% 11.2%12.0%
-
1,000
2,000
3,000
4,000
5,000
6,000
2005 2006 2007 2008 2009 H1 09 H1 10
NIS
mil
lio
ns
0%
2%
4%
6%
8%
10%
12%
14%
Revenues SG&A SG&A margin
3,2632,926
6,0796,3026,1145,607
5,1235,141
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2004 2005 2006 2007 2008 2009 H1 09 H1 10
NIS
millio
ns
16
Financial PerformanceTotal Revenue
EBITDA SG&AUS GAAP IFRS
2005: First decrease in Interconnect tariffs
US GAAP IFRS
US GAAP IFRS
12%
in NIS millions Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010
Revenues 1,514 1,575 1,578 1,587 1,676
Cost of Revenues 924 1,003 997 961 1,017
Gross Profit 590 572 581 626 659
SG&A 171 187 163 190 200
Other income 15 16 14 15 15
Operating Profit 434 401 432 451 474
Financial Costs - net 48 61 41 1 73
Income Taxes 98 77 97 113 108
Net Income 288 263 294 337 293
12% 12%
148
5,141
4,468
5,1235,607
6,1146,302
6,079
2,926
3,263
377674 546 442 529 488 526
317
8%
13%
9%
11%
5%
8%
9%
8%
11%
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2003
2004
2005
2006
2007
2008
2009
H1
09
H1
10
NIS
millio
ns
0%
2%
4%
6%
8%
10%
12%
14%
Revenues CAPEX CAPEX margin
1,934
2,764
1,997
2,570
2,258
1,956
2,102 2,073
3,5401.9
1.2
1.8
1.2
1.0
0.90.9 0.9
1.4
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
2003 2004 2005 2006 2007 2008 2009 H1 09 H1 10
NIS
millio
ns
-
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
Net Debt Net debt / EBITDA
1,062
9021,022
1,4091,480
1,780
1,548
688
-
400
800
1,200
1,600
2,000
2004 2005 2006 2007 2008 2009 H1 09 H1 10
NIS
mil
lio
ns
17
High Financing CapacityFixed Assets CAPEX / Revenue2
1The net debt as of June 30, 2010. Does not include dividend
payable.
2 The Fixed Assets CAPEX investment refer to the “Cash
Flow from investing activities” for the years 2002-2007. In
2008 and later, it refers to “acquisition of property and
equipment”.
3 The CAPEX investment refer to “acquisition of property and
equipment” and “Acquisition of intangible assets”
Net debt / EBITDA1
EBITDA – CAPEX3
US GAAP IFRSUS GAAP IFRS
US GAAP IFRS
18
Agenda
1. Partner in a Nutshell
2. The Israeli Telecommunications Market
3. Partner’s Financial and Operational Results
4. Partner’s Strategy
Maintaining Wireless Leadership
19
New Communication servicesInternet Content
� ISP
� Fixed Telephony
� New telecom areas
� Market Share
� ARPU
� Brand
� Facilitate cost reduction and efficiency improvement
� Mobile and Nomadic
� Content as a growth engine
� Source of differentiation
� Move up along the value chain
Partner’s StrategyFocus on “Mobile Centric” while Broadening Portfolio
20
Remaining Mobile Centric
g Increase in mobile content consumption
g Data cards: complementary and DSL substitution
g Location based services: GPS
g Enterprise mobile services: e-mails, fleet management, M2M, etc.
21
The Rationale of Becoming an ISP and Fixed Line Provider
g ISP and VOB markets size ~NIS 5 B
g VOB is becoming mainstream technology
g VOB and mobile synergy: FMS/FMC
g Off load of data traffic from mobile backhauling to
wireline infrastructure
g Increase stickiness
g Presence in the customer premises is important:
Home gateway & SLA
g Leverage of Partner’s existing market presence &
brand
g Requires limited CAPEX investment
Entering The Home
Co
mm
un
ity
& U
GC
Forums, blogs, user generated video, talkbacks
VO
D
Local and international features & TV series
Mu
sic
The leading music store in Israel
Ga
me
s
Games arena offering games for heavy and casual gamers
Mo
bile
co
nte
nt
A leading Mobile content store
A rich Mix of TV, Music, UGS and Mobile Content
23
PRI and Transmission
� Approximately 1,400 km of distributed
nationwide optical network aimed at
business sector and for cellular network
needs
� Broad network “avenue” by four axes
length mutually backed up
� Full optical monitoring of all network
routes
� Communication stations (PoP) in major
business centers
24
In Summary� Partner offers a top quality network, an
excellent customer service, the number one
brand in the Israeli telecom industry and a
wide variety of value added services
� Future sources of growth
� Fixed Telephony and ISP
� Increase in data and content revenues
� Strong cash flow, and a significant dividend
yield
Keep in touchEmanuel Avner
VP finance and CFO
emanuel.avner@orange.co.il
+972 54 781 4951
Investors Web Site: http://www.orange.co.il/en/Investors-Relations/lobby/
Oded Degany
VP Corporate Development, Regulation & IRO
oded.degany@orange.co.il
+972 54 781 4151