WASHINGTON, D.C. 20549
ANNUAL REPORT
FILED PURSUANT TO SECTION 12, 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
☐ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(Exact Name of Registrant as Specified in its Charter)
(Jurisdiction of Incorporation or Organization)
AFEQ INDUSTRIAL PARK
ROSH-HA’AYIN 48103
ISRAEL
(Address of Principal Executive Offices)
ExecutiveOffices@partner.co.il
(Name, Telephone, E-mail and/or facsimile Number and Address of Company Contact Person)
Title of each class | Name of each exchange on which registered | |
American Depositary Shares, each representing | The NASDAQ Global Select Market | |
one ordinary share, nominal value NIS 0.01 per share | ||
Ordinary Shares, nominal value NIS 0.01 per share* | The NASDAQ Global Select Market |
Large Accelerated Filer ☐ | Accelerated Filer ☒ | Non-Accelerated Filer ☐ |
5 | ||
5 | ||
5 | ||
30 | ||
68 | ||
68 | ||
104 | ||
130 | ||
133 | ||
139 | ||
139 | ||
151 | ||
153 | ||
154 | ||
154 | ||
154 | ||
155 | ||
155 | ||
155 | ||
156 | ||
156 | ||
156 | ||
156 | ||
156 | ||
157 | ||
157 |
FORWARD-LOOKING STATEMENTS |
Year ended December 31, | ||||||||||||||||||||||||
2016 | 2017 ** | 2018 ** | 2019 *** | 2020 *** | 2020 *** | |||||||||||||||||||
New Israeli Shekels in millions (except per share data) | US$ in millions(1) | |||||||||||||||||||||||
Consolidated Statement of Income Data | ||||||||||||||||||||||||
Revenues, net | 3,544 | 3,268 | 3,259 | 3,234 | 3,189 | 992 | ||||||||||||||||||
Cost of revenues | 2,924 | 2,627 | 2,700 | 2,707 | 2,664 | 829 | ||||||||||||||||||
Gross profit | 620 | 641 | 559 | 527 | 525 | 163 | ||||||||||||||||||
Selling and marketing expenses | 426 | 269 | 293 | 301 | 291 | 90 | ||||||||||||||||||
General and administrative expenses | 181 | 144 | 148 | 149 | 145 | 45 | ||||||||||||||||||
Credit losses | 82 | 52 | 30 | 18 | 23 | 7 | ||||||||||||||||||
Income with respect to Settlement agreement with Orange | 217 | 108 | ||||||||||||||||||||||
Other income, net | 45 | 31 | 28 | 28 | 30 | 9 | ||||||||||||||||||
Operating profit | 193 | 315 | 116 | 87 | 96 | 30 | ||||||||||||||||||
Finance income | 13 | 4 | 2 | 7 | 8 | 2 | ||||||||||||||||||
Finance expenses | 118 | 184 | 55 | 75 | 77 | 24 | ||||||||||||||||||
Finance costs, net | 105 | 180 | 53 | 68 | 69 | 22 | ||||||||||||||||||
Profit before income tax | 88 | 135 | 63 | 19 | 27 | 8 | ||||||||||||||||||
Income tax expenses | 36 | 21 | 7 | * | 10 | 3 | ||||||||||||||||||
Profit for the year | 52 | 114 | 56 | 19 | 17 | 5 | ||||||||||||||||||
Earnings per ordinary share and per ADS | ||||||||||||||||||||||||
Basic: | 0.33 | 0.70 | 0.34 | 0.12 | 0.09 | 0.03 | ||||||||||||||||||
Diluted: | 0.33 | 0.69 | 0.34 | 0.12 | 0.09 | 0.03 | ||||||||||||||||||
Weighted average number of shares outstanding (in thousands) | ||||||||||||||||||||||||
Basic: | 156,268 | 162,733 | 165,979 | 162,831 | 182,331 | 182,331 | ||||||||||||||||||
Diluted (for calculation above): | 158,096 | 164,537 | 166,962 | 163,608 | 183,188 | 183,188 |
Year ended December 31, | ||||||||||||||||||||||||
2016 | 2017 * | 2018 * | 2019 ** | 2020 ** | 2020 ** | |||||||||||||||||||
New Israeli Shekels in millions | US$ in millions(1) | |||||||||||||||||||||||
Other Financial Data | ||||||||||||||||||||||||
Capital expenditures (2) | 202 | 417 | 499 | 578 | 595 | 185 | ||||||||||||||||||
Adjusted EBITDA (3) | 834 | 917 | 722 | 853 | 822 | 256 | ||||||||||||||||||
Statement of Cash Flow Data | ||||||||||||||||||||||||
Net cash provided by operating activities | 945 | 973 | 625 | 837 | 786 | 244 | ||||||||||||||||||
Net cash used in investing activities | (639 | ) | (72 | ) | (351 | ) | (1,181 | ) | (581 | ) | (180 | ) | ||||||||||||
Net cash provided by (used in) financing activities | (516 | ) | (750 | ) | (725 | ) | 227 | (128 | ) | (40 | ) | |||||||||||||
Financial Position Data (at year end) | ||||||||||||||||||||||||
Current assets | 2,339 | 2,009 | 1,254 | 1,664 | 1,496 | 465 | ||||||||||||||||||
Non current assets | 2,858 | 2,709 | 2,722 | 3,351 | 3,629 | 1,129 | ||||||||||||||||||
Lease - right of use (**) | 582 | 663 | 206 | |||||||||||||||||||||
Property and equipment | 1,207 | 1,180 | 1,211 | 1,430 | 1,495 | 465 | ||||||||||||||||||
Intangible and other assets | 793 | 697 | 617 | 538 | 521 | 162 | ||||||||||||||||||
Goodwill | 407 | 407 | 407 | 407 | 407 | 127 | ||||||||||||||||||
Deferred income tax asset | 41 | 55 | 38 | 41 | 29 | 9 | ||||||||||||||||||
Total assets | 5,197 | 4,718 | 3,976 | 5,015 | 5,125 | 1,594 | ||||||||||||||||||
Current liabilities (4) | 1,607 | 1,811 | 1,150 | 1,489 | 1,334 | 414 | ||||||||||||||||||
Non current liabilities (4) | 2,479 | 1,473 | 1,420 | 2,109 | 2,068 | 644 | ||||||||||||||||||
Total liabilities | 4,086 | 3,284 | 2,570 | 3,598 | 3,402 | 1,058 | ||||||||||||||||||
Total equity | 1,111 | 1,434 | 1,406 | 1,417 | 1,723 | 536 | ||||||||||||||||||
Total liabilities and equity | 5,197 | 4,718 | 3,976 | 5,015 | 5,125 | 1,594 |
(1) | The NIS figures at December 31, 2020, and for the 12-month period then ended have been translated throughout this Annual Report into dollars using the representative exchange rate of the dollar at December 31, 2020 (USD 1 = NIS 3.215). The translation was made solely for convenience, is supplementary information, and is distinguished from the financial statements. The translated dollar figures should not be construed as a representation that the Israeli currency amounts actually represent, or could be converted into, dollars. See also “Item 3A. Key Information – Selected Financial Data – Exchange Rate Data”. |
(2) | Capital Expenditures represent additions to property and equipment (see note 10 to our consolidated financial statements) and intangible assets (see note 11 to our consolidated financial statements). |
(3) | Adjusted EBITDA as reviewed by the Chief Operating Decision Maker (CODM) represents Earnings Before Interest (finance costs, net), Taxes, Depreciation and Amortization (including amortization of intangible assets, deferred expenses-right of use and impairment charges) and Other expenses (mainly amortization of share-based compensation). Adjusted EBITDA is not a financial measure under IFRS and may not be comparable to other similarly titled measures for other companies. Adjusted EBITDA may not be indicative of the Group's historic operating results nor is it meant to be predictive of potential future results. The usage of the term "Adjusted EBITDA" is to highlight the fact that the Amortization includes amortization of deferred expenses – right of use and amortization of employee share-based compensation and impairment charges. |
(4) | See Note 15 to the consolidated financial statements for information regarding long-term liabilities and current maturities of long-term borrowings and notes payable. |
Year ended December 31, | ||||||||||||||||||||||||
2016 | 2017 ** | 2018 ** | 2019 *** | 2020 *** | 2020 *** | |||||||||||||||||||
New Israeli Shekels in millions | US$ in millions (1) | |||||||||||||||||||||||
Reconciliation Between Profit and Adjusted EBITDA | ||||||||||||||||||||||||
Profit | 52 | 114 | 56 | 19 | 17 | 5 | ||||||||||||||||||
Depreciation and amortization expenses | 595 | 580 | 592 | 751 | 714 | 222 | ||||||||||||||||||
Finance costs, net | 105 | 180 | 53 | 68 | 69 | 22 | ||||||||||||||||||
Income tax expenses | 36 | 21 | 7 | * | 10 | 3 | ||||||||||||||||||
Other (****) | 46 | 22 | 14 | 15 | 12 | 4 | ||||||||||||||||||
Adjusted EBITDA (2) | 834 | 917 | 722 | 853 | 822 | 256 |
(1) | The translations of NIS amounts into US dollars appearing throughout this Annual Report have been made at the exchange rate on December 31, 2020, of NIS 3.215 = US$1.00 as published by the Bank of Israel, unless otherwise specified. See “Item 3A. Key Information – Selected Financial Data – Exchange Rate Data”. |
(2) | Adjusted EBITDA as reviewed by the CODM represents Earnings Before Interest (finance costs, net), Taxes, Depreciation and Amortization (including amortization of intangible assets, deferred expenses-right of use and impairment charges) and Other expenses (mainly amortization of share-based compensation). Adjusted EBITDA is not a financial measure under IFRS and may not be comparable to other similarly titled measures for other companies. Adjusted EBITDA may not be indicative of the Group's historic operating results nor is it meant to be predictive of potential future results. The usage of the term "Adjusted EBITDA" is to highlight the fact that the Amortization includes amortization of deferred expenses – right of use and amortization of employee share-based compensation and impairment charges. |
At December 31, | ||||||||||||
2018 | 2019 | 2020 | ||||||||||
Cellular Industry Data | ||||||||||||
Estimated population of Israel (in millions) (1) | 9.0 | 9.1 | 9.3 | |||||||||
Estimated Israeli cellular telephone subscribers (in millions) (2) | 10.6 | 10.6 | 10.4 | |||||||||
Estimated Israeli cellular telephone penetration (3) | 118 | % | 116 | % | 112 | % |
Year ended December 31, | ||||||||||||||||||||
2016 | 2017 | 2018 | 2019 | 2020 | ||||||||||||||||
Company's Data | ||||||||||||||||||||
Cellular subscribers (000’s) (at period end) (4) (5) | 2,686 | 2,662 | 2,646 | 2,657 | 2,836 | |||||||||||||||
Pre-paid cellular subscribers (000’s) (at period end) (4) | 445 | 354 | 285 | 291 | 341 | |||||||||||||||
Post-paid cellular subscribers (000’s) (at period end) (4) | 2,241 | 2,308 | 2,361 | 2,366 | 2,495 | |||||||||||||||
Share of total Israeli cellular subscribers (at period end) (5) | 26 | % | 25 | % | 25 | % | 25 | % | 27 | % | ||||||||||
Average monthly revenue per cellular subscriber including roaming (“ARPU”) (NIS) (6) | 65 | 62 | 58 | 57 | 51 | |||||||||||||||
Churn rate for cellular subscribers (7) | 40 | % | 38 | % | 35 | % | 31 | % | 30 | % | ||||||||||
TV subscribers (000’s) (at period end) (8) | 43 | 122 | 188 | 232 | ||||||||||||||||
Infrastructure-based internet subscribers (000’s) (at period end) (9) | 268 | 329 | ||||||||||||||||||
Fiber-optic subscribers (000’s) (at period end) (10) | 76 | 139 | ||||||||||||||||||
Homes Connected (HC) to the fiber-optic infrastructure (000’s) (at period end) (11) | 324 | 465 | ||||||||||||||||||
Estimated cellular coverage of Israeli population (at period end) (12) | 99 | % | 99 | % | 99 | % | 99 | % | 99 | % | ||||||||||
Number of employees (full time equivalent) (at period end) (13) | 2,686 | 2,797 | 2,782 | 2,834 | 2,655 |
(1) | The population estimates are as published by the Central Bureau of Statistics in Israel as of December 31, 2020. |
(2) | We have estimated the total number of Israeli cellular telephone subscribers based on Partner subscriber data as well as information contained in published reports and public statements issued by operators and data regarding the number of subscribers porting between operators. |
(3) | Total number of estimated Israeli cellular telephone subscribers expressed as a percentage of the estimated population of Israel. The total number of estimated cellular telephone subscribers includes dormant subscribers as well as other subscribers who are not included in the Israeli population figures, such as Palestinians, visitors, and foreign workers, as well as SIM cards used in modems, datacards and other cellular devices. |
(4) | In accordance with general practice in the cellular telephone industry, we use the term “subscriber”, unless the context otherwise requires, to indicate a subscription that provides access to the PSTN using cellular technology, rather than either a bill-paying customer who may have a number of subscriptions, or a cellular device user who may share the device with a number of other users. Subscribers include customers of both post-paid and pre-paid services under the Partner and 012 Mobile brands, and also include subscribers to dedicated data packages for use with data cards or USB modems. A pre-paid subscriber is recognized as such only following the actual use of his pre-paid SIM card and only once they have generated revenues in the amount of at least one shekel (excluding VAT). |
(5) | Total number of Partner subscribers expressed as a percentage of the estimated total number of Israeli cellular subscribers. |
(6) | We have calculated our average monthly revenue per cellular subscriber by (i) dividing, for each month in the relevant year, the total cellular segment service revenues during the month by the average number of our cellular subscribers during that month, and (ii) dividing the sum of all such results by the number of months in the relevant period. The impact on ARPU for 2018 of the inclusion of M2M subscriptions in the subscriber base starting in Q4 2018 was negligible (see Note 4 above.) |
(7) | We define the “churn rate” as the total number of cellular subscribers (excluding M2M subcriptions) who disconnect from our network, either involuntarily or voluntarily, in a given period expressed as a percentage of the average of the number of our subscribers at the beginning and end of such period. Our churn rate includes subscribers who have not generated revenue for us for a period of the last six consecutive months ending at a reporting date. This includes cellular subscribers who have generated minute revenues only from incoming calls directed to their voice mail. Involuntary churn includes disconnections due to non-payment of bills or suspected fraudulent use, and voluntary churn includes disconnections due to subscribers terminating their use of our services. |
(8) | TV subscribers – active subscriptions to Partner TV, each of which may have a number of users over a number of different platforms. TV subscribers include subscriptions within time-limited trial periods without charge to the customer. Partner TV was launched in 2017. |
(9) | Infrastructure-based internet subscribers – active subscribers to an end-to-end service including both infrastructure (either through the wholesale market on Bezeq/Hot infrastructure and or through Partner's fiber-optic infrastructure) and access to the internet. |
(10) | Fiber-optic subscribers – active subscribers to an end-to-end service including both Partner’s fiber-optic infrastructure and access to the internet. |
(11) | Homes Connected (HC) to the fiber-optic infrastructure – The total number of residential households within buildings connected to Partner's fiber-optic infrastructure. |
(12) | We measure cellular coverage using computerized models of our network, radio propagation characteristics and topographic information to predict signal levels at two meters above ground level in areas where we operate a network site. According to these coverage results, we estimate the population serviced by our network and divide this by the estimated total population of Israel. Population estimates are published by the Central Bureau of Statistics in Israel. |
(13) | A full-time employee is contracted to work a standard 182 hours per month. Part-time employees are converted to full-time equivalents by dividing their contracted hours per month by the full-time standard. The result is added to the number of full-time employees to determine the number of employees on a full-time equivalent basis. Starting in 2019, the number of full-time employees also includes the number of full-time employees of PHI on a proportional basis of Partner's share in the subsidiary (50%). See also "Item 6D Employees". |
1) | Pursuant to the Competition Commissioner Approval - as of April 22, 2021, the Competition Commissioner will be entitled to notify Partner and HOT Mobile that the network sharing is terminated, if at that time the Competition Commissioner will be of the opinion that PHI or its activities may adversely affect competition, in which case the parties will be required to cease sharing the active part of the shared network within two years and the passive parts within five years from the Competition Commissioner's notice to that effect; |
2) | In the event we are found to be in breach of any of the conditions set out in the Competition Commissioner Approval or in the MoU's Approval, the Competition Commissioner Approval or the MoU Approval might be terminated, which could create significant uncertainty as to the management of the shared radio access network; |
3) | PHI is operating under a special license granted by the Ministry of Communications on August 9, 2015. The term of the license is 10 years from the grant thereof. If the term of the license will not be extended, we may not be able to continue sharing the network. |
Competition in the cellular market. Over the past few years, the entrance of new operators and regulatory changes at the time of their entrance which removed portability barriers between cellular operators, combined with various benefits and leniencies awarded to them by the MoC, resulted in increased competition in the market and has continued to lead to high levels of portability of cellular subscribers between cellular operators, which has negatively affected, and may continue to negatively affect, our results of operations. Cellcom Israel Ltd. ("Cellcom"), Golan Telecom Ltd. ("Golan Telecom") and Marathon 018 Xfone Ltd. ("Xfone") have a network sharing agreement which enabled Xfone to enter the market as the sixth facility-based operator. Xfone's entry into the market has increased competition levels in the cellular market, thus negatively affecting our results of operations. In June 2020, the Competition Authority approved Cellcom's purchase of Golan's entire share capital and in August 2020 Cellcom completed the purchase of Golan Telecom's entire share capital.
• | requiring us to dedicate a substantial portion of our cash flow from operations to service our debt, thereby reducing the funds available for financing ongoing operating expenses and future business development; |
• | limiting our flexibility in planning for, or reacting to, changes in our industry and business as well as in the economy generally; |
• | increasing the likelihood of a downgrade in the rating of our notes by the rating company; |
• | increasing the risk of a substantial impairment in the value of our telecommunications assets; and |
• | limiting our ability to obtain the additional financing we may need to serve our debt, operate, develop and expand our business on acceptable terms or at all. |
• | In April 1998, we received our license to establish and operate a cellular telephone network in Israel. |
• | In January 1999, we launched full commercial operations with approximately 88% population coverage and established a nationwide distribution. |
• | In October 1999, we completed our initial public offering of ordinary shares in the form of American Depositary Shares, and received net proceeds of approximately NIS 2,092 million, with the listing of our American Depositary Shares on NASDAQ and the London Stock Exchange. We used part of these net proceeds to repay approximately NIS 1,494 million in indebtedness to our principal shareholders, and the remainder to finance the continued development of our business. (In March 2008, we voluntarily delisted our ADSs from the London Stock Exchange.) |
• | In August 2000, we completed an offering, registered under the US Securities Act of 1933, as amended, of $175 million (approximately $170.5 million after deducting commissions and offering expenses) in 13% unsecured senior subordinated notes due 2010. These notes were redeemed in August 2005. |
• | In July 2001, we registered our ordinary shares for trading on the Tel Aviv Stock Exchange. |
• | In December 2001, the Ministry of Communications awarded us two bands of spectrum: one band of GSM 1800 spectrum and one band of 2100 UMTS third generation spectrum. |
• | In June 2002, our license was extended until February 2022. |
• | In December 2004, we commercially launched our 3G network. |
• | In March 2005, we completed a debt offering, raising NIS 2.0 billion in a public offering in Israel of notes due 2012. |
• | In April 2005, we repurchased approximately 33.3 million shares from our Israeli founding shareholders, representing approximately 18.1% of our outstanding shares immediately before the repurchase. |
• | In the third quarter of 2005, our Board of Directors and shareholders approved the distribution of our first cash dividend, in the amount of NIS 0.57 per share, totaling approximately NIS 86.4 million. |
• | In March 2006, we launched services based on the High Speed Downlink Packet Access (“HSDPA”) technology. |
• | In July 2006, we purchased Med-1 I.C.–1 (1999) Ltd.’s fiber-optic transmission business for approximately NIS 71 million, in order to enable us to reduce our transmission costs as well as to provide our business customers with bundled services of transmission of data and voice and fixed-line services. |
• | In January 2007, we were granted a domestic fixed license by the Ministry of Communications, and in February 2007 we were granted a network termination point license. |
• | In December 2008 and January 2009, we launched three additional non-cellular business lines: VoB telephony services, ISP services and Web VOD (video on demand). |
• | In October 2009, Scailex Corporation Ltd. ("Scailex') became our principal shareholder through acquiring the entire interest in the Company of our previous controlling shareholder. |
• | In February 2010, following the District Court’s approval, a total amount of NIS 1.4 billion or approximately NIS 9.04 per share was paid on March 18, 2010, to shareholders and ADS holders of record on March 7, 2010, as a special dividend distribution. |
• | In March 2011, we acquired all of the outstanding shares of 012 Smile Telecom Ltd., a leading provider of broadband and traditional telecommunications services in Israel. The acquisition of 012 Smile supported our strategy of becoming a leading comprehensive communications group, expanding our range of services and products. |
• | In January 2013, S.B. Israel Telecom Ltd. ("S.B. Israel Telecom"), an affiliate of Saban Capital Group, a private investment firm, based in Los Angeles, California, specializing in the media, entertainment and communications industries, became our principal shareholder through acquiring 30.87% of our issued and outstanding shares, principally from our previous controlling shareholder, Scailex. |
• | In November 2013, we entered into a 15-year Network Sharing Agreement with HOT Mobile pursuant to which the parties agreed to create a 50-50 limited partnership to operate and develop a cellular network to be shared by both parties (among others, as a result of pooling both parties’ radio access network infrastructures to create a single radio access network). The Network Sharing Agreement was approved by the Israeli anti-trust authorities, subject to conditions in May 2014, and by the Ministry of Communications in April 2015. Following approval by the Minister of Communications, the Network Sharing Agreement with HOT Mobile entered into effect. See “Item 4B.8 Our Network”. |
• | In July 2014, we commercially launched limited 4G services in Israel over a frequency band of only 5 MHz in the 1800 spectrum. |
• | In March 2015, the acting Minister of Communications approved the results of the tender bid process in which we won an additional 5 MHz in the 1800 spectrum (in addition to our 10 MHz frequency bands in the 1800 spectrum). |
• | In February 2016, we rebranded our products and services that were previously under the “Orange” brand to be under the new “Partner” brand. See "Item 5A.1c Settlement Agreement with Orange Brand Services Ltd." |
• | In June 2017, we launched Partner TV service based on Over the Internet (OTT) platform which completed our offering as a comprehensive communications company. |
• | In August 2017, we launched the commercial phase and accelerated deployment of our fiber-optic infrastructure in residential areas throughout the country. |
• | In November 2019, the MoC appointed a permanent receiver for the Company shares held by S.B. Israel Telecom and granted the receiver a permit to exercise means of control of the Company by himself. See "Item 3D.3a Approximately 27.12% of our issued and outstanding shares and voting rights are held by a receiver (under Israeli law), who might not act in the best interests of the Company or its shareholders." |
• | In August 2020, the Company acquired through an MoC tender 2x5 MHz in the 700 band, 2x10 MHz in the 2600 band and 50 MHz in the 3500 band (as the 5G frequency). |
- | the cellular segment, our main business, which represents the largest portion of our total revenues. The cellular business segment includes cellular communications services such as airtime calls, international roaming services, text messaging, internet browsing, value-added and content services, handset repair services and services provided to other operators that use the Company's cellular network. The Company also sells and leases a range of equipment related to cellular services. See "Item 4B.5a Cellular Services and Products". |
- | the fixed-line segment, which includes a number of services provided over fixed-line networks including (a) Internet services including access to the internet through both fiber-optics and wholesale broadband access, ISP services, internet Value Added Services (“VAS”) such as cyber protection, anti-virus and anti-spam filtering, and fixed-line voice communication services provided through Voice Over Broadband (“VOB”); (b) Business solutions including SIP voice trunks, Network Termination Point Services ("NTP") – under which the Group supplies, installs, operates and maintains endpoint network equipment and solutions, including providing and installing equipment and cabling within a subscriber's place of business or premises, hosting services, transmission services, Primary Rate Interface (“PRI”) and other fixed-line communications solution services; (c) International Long Distance services (“ILD”): outgoing and incoming international telephony, hubbing, roaming and signaling and calling card services; and (d) Television services over the Internet ("TV"). In addition, this segment includes sales and leasing of fixed-line and home devices and equipment. See "Item 4B.5b Fixed-line Services and Products". |
• | High Rate of Unlimited Packages. Israeli cellular operators provide, among other price-competitive offers, a particularly high rate of unlimited voice and text packages, and various data packages consisting of relatively high volumes of data at competitive prices. |
• | Lack of Migration Barriers, High Churn and Recruitment Rate of Subscribers. The Israeli cellular market to date has limited migration barriers. There is full number portability. Operators are prohibited from selling SIM locked handsets and are no longer able to link the sale of handsets to services. In addition, operators are no longer allowed to charge exit fees from residential or small business customers or offer better tariff plans to new customers. As a result of this, as well as the entrance of new competitors, there is a high rate of churn and recruitment rate of subscribers in the Israeli cellular market. |
• | Multiple Operators in a Small Market. The regulatory changes in the telecommunications industry, particularly with respect to additional entrants that include cellular operators and MVNOs, have created multiple operators in a relatively small market, which has led to a high level of competition in the industry. |
• | Favorable Geography. Israel covers an area of approximately 8,000 square miles (20,700 square kilometers) and its population tends to be centered in a small number of densely populated areas. In addition, the terrain of Israel is relatively flat. These factors facilitate the roll out, maintenance and subsequent upgrades of a cellular network in a cost effective manner. |
• | Offer our customers a range of cellular and fixed-line services and added value services. For our core businesses we intend to continue to offer our customers a wide integrated and customized range of cellular and fixed-line telecommunications services. In addition, we offer our customers tailored value-added services that combine an entire array of solutions including: network and data infrastructures, advanced information security solutions, integration solutions, and for our business customers, designated services for customers with multiple branches and commercial networks, business information storage in a secured and advanced data center and cloud services. Our value strategy, ‘Partner More’, allows us to offer our customers for each of our products, packages that include value-added services and provide the customer with a richer experience than the basic services. This strategy generates more revenue per customer. This strategy of offering our customers higher value services at competitive prices has proven itself since the cellular churn rate in 2020 was the lowest since 2011, which attests to our customers' satisfaction and loyalty. |
• | Increase penetration of Partner TV Service. In June 2017, we were the first telecom company in Israel to launch Over the Top television services ("OTT") based on the Android TV platform. In 2020, based on all the published reports of the players in the market, we continued to be the fastest growing TV service in Israel, with a growing market share, as a result of among other factors, the innovative and advanced interface that enables us to connect our customers “Any place, Any time, Any device” (AAA). Our strategy is to offer our customers unique television services, by partnering with world-leading media service providers, at attractive prices. As part of our strategy, we continue to be a super aggregator which enables our customers the ability to access the leading streaming services in the world including Netflix, Amazon Prime Video, Spotify and YouTube, using a single interface as well as cloud gaming services. Partner was one of the first companies in the world to offer bundled packages with Partner TV and Netflix. As part of our activity in the addressable TV market, in 2020, we integrated a programmatic ad system in order to offer advertisers advanced advertising abilities. For our achievements in pursuing this strategy, see "Business Overview- 4B.5b Fixed-line Services and Products-Television Services". We continue to grow our TV service and as of year end 2020, we reached approximately 232,000 subscribers. |
• | Further extend deployment of a fiber-optic infrastructure over which the Company offers high quality internet services which will increase our independence vis-à-vis the fixed-line infrastructure operators. Our investment in our fiber-optic infrastructure, which we commercially launched in August 2017, is part of our strategy to maintain our technological leadership in the market. Our fiber-optic infrastructure, which has already reached approximately two thirds of the cities throughout Israel, enables us as a comprehensive communications group to offer increased internet speeds compared to current market offerings, enhance the quality of service and customer experience, and provide additional advanced services. The combination of the fiber-optic network and Partner TV Service, which can be offered over our fiber-optic infrastructure, provides us with a unique advantage and reduces our dependency on the fixed-line infrastructure operators, thus reducing our on-going operating costs, which has proven to be essential during COVID-19, when internet demand significantly spiked. In addition, our strategy of connecting our fiber-optic infrastructure to Bezeq's network at the local level (to the Multi-Service Access Gateway -"MSAG" component) has reduced and will continue to reduce the cost of our use of Bezeq's BSA wholesale service. By connecting our fiber-optic infrastructure to Bezeq's MSAGs we save a substantial portion of the cost involved in providing the wholesale infrastructure service (such a connection at the local level reduces the cost of the variable component from the wholesale tariff). To date, we already reached more than 760 thousand households with our independent fiber-optic infrastructure while we continue to connect customers at the highest internet speed in Israel of up to 1000 Mb per second in dozens of cities throughout the country and the number of fiber-optic subscribers totaled 139 thousand as of year end 2020. As a result of regulatory decisions regarding deployment, we were able to further decrease our installation costs during 2020. In 2021, we intend to accelerate the deployment of our fiber-optic infrastructure as well as to connect additional customers to the service. See "Item 5D.2 Outlook". The independent network will also constitute a base for future cellular technology network development. In addition, there is potential for future investments in the fiber-optic infrastructure to be shared through cooperation with other operators and/or potential wholesale activities. |
• | Lead in technology and innovation in our cellular network in order to remain at the technological edge. Based on public reports, Partner's shared radio network has the widest 4G coverage in Israel compared to other cellular operators. See "Item 4B.8 OUR NETWORK". As part of our strategy to remain a leading telecommunications operator in the cellular market and offer more advanced services, we intend to continue investing in 2021 in both our shared network as well as in our core cellular network. We intend to continue to expand advanced technologies, for instance LTE Advanced, VoLTE, Wi-Fi calling and Nb-IoT. Following our strategic accomplishment in August 2020 of acquiring 4G and 5G frequencies in the frequency auction tender, during 2021, the Company will continue to expand the roll out of the 5G network towards becoming the leading 5G network in Israel. |
• | Implement an ESG approach in the Company's business operations. Partner has adopted the Environmental, Social and Governance (ESG) approach for management and measurement of the impact on the Company's operations on environmental and social issues. |
• | Preserve and enhance customer satisfaction to strengthen customer loyalty and decrease churn. In order to increase customer satisfaction, we constantly strive to provide advanced services at a high level of technology and simplify processes and information. Towards this goal, we strive to provide our customers with value-added services and a high level of accessible customer service at our service centers, call centers, and digital channels, as well as through our in-house technicians for fixed-line services. |
• | Increase our online services for our customers. To provide our customers with advanced digital services, we are constantly developing possibilities for our customers to purchase services and self services as well as equipment through digital means and cellular apps. |
• | Continue to be a major player in the retail sale of handsets and accessories. We continuously adapt ourselves to the changing needs of our customers, while offering new and innovative equipment and accessory developments and changes in the telecommunications market. |
• | Continue to examine new potential growth engines. As part of our strategy, we continue to examine new potential growth engines, including through a company acquisition or independent organic activity. |
• | ISP services. As an internet service provider providing access to the World Wide Web, we offer our customers, in addition to access, additional ISP services including email accounts, Wi-Fi networking as well as additional value added services such as anti-virus and anti-spam filtering. We also offer a bundled package that includes infrastructure and ISP access services following the wholesale market reform, a triple package that includes in addition to the bundled package also TV services and since 2017, we also offer access services over our own fiber-optic fixed-line infrastructure in certain parts of the country, with speeds up to 1 GB. As of March 2020, tens of thousands of households are able to connect to Partner's fiber services. Furthermore, we offer our business customers additional tailored value services that combine an entire array of solutions including: network and data infrastructures, advanced information security solutions, integration solutions, designated services for customers with multiple branches and commercial networks, business information storage in a secured and advanced data center and cloud services. ISP services include the leasing of related equipment including modems and routers. |
• | ILD services. As an international long distance provider, we offer our residential and business customers international telephony services including direct international dialing services, international and domestic pre-paid and post-paid calling cards, and call-back services. Most of the pre-paid calling cards are sold to foreign workers in Israel. In addition, we offer our business customers international toll-free numbers that offer fixed rates on calls from many countries around the world. As an international long distance provider, we also provide hubbing traffic routing between network operators for termination of long distance calls outside of Israel. |
• | Transmission. We provide fixed-line transmission and data capacity services. Our fixed-line capacity also includes capacity which we lease from other fixed-line telecommunications service providers as well as inland fiber-optic infrastructure and complimentary micro wave radio links. The services we offer include primarily connectivity services, on an SDH (Synchronous Digital Hierarchy) transmission network, by which we provide high quality, dedicated, point-to-point connection for business customers and telecommunications providers, as well as fixed-line services to business customers. We also provide international transmission services to our business customers between Israel and other countries. |
• | VoB and PRI. The VOB service allows business and residential customers to make and receive telephone calls over the Internet through an internet connection. The PRI is a landline network service connecting organizational switchboards to Partner's network and allows business customers to make multiple calls simultaneously. We offer traditional voice services to business customers throughout Israel. |
• | High speed broadband fiber-optic based network. In 2017, we launched the commercial phase and acceleration of our fiber-optic infrastructure in residential areas throughout the country, which provides for the first time a more advanced and cost-effective alternative to the existing fixed infrastructure in Israel. To date we have already reached more than 760 thousand households across Israel with our fiber-optic based infrastructure and the number of fiber-optic subscribers totaled 139 thousand as of year-end 2020. See "Item 4B.8d Fiber-optic infrastructure". |
4B.6b - i | Direct Sales Channels |
• | A team of representatives and customer account managers that support small to medium-sized businesses; |
• | A team of corporate representatives and customer account managers who support large corporate customers; |
• | A Small Medium Enterprises (“SME”) sales-force team focuses on individual and small business customers; |
• | A telemarketing department conducts direct sales by phone (to private and business customers) and initiates contacts with prospective customers. |
• | Door to door teams that specialize in the sale of fiber and infrastructure services. |
4B.6b - ii | Indirect Sales Channels |
4B.6b - iii | Online Sales Channels |
• | Prohibition on exchange of information that is not required for the activities of PHI under the Restrictive Trade Practices Law, 1988 ("Restrictive Trade Practices Law"). See 4B.12e - xi Anti-Trust Regulation."; |
• | Limitations with respect to serving as an officer or employee in either Partner or HOT Mobile concurrent with serving as an officer or employee of PHI and certain cooling off periods were set in case of transition of officers and employees from PHI to the companies. However, this should not prevent PHI from employing employees or officers, who are currently serving as employees or officers in the companies and does not prevent an office holder in Partner or HOT Mobile from serving as a director in PHI's general partner's board of directors; |
• | Rules regarding the administration and documentation of the meetings of PHI organs were set; |
• | Either of the companies shall be allowed, at any time and at its sole discretion, to engage in an agreement with a third party for the provision of cellular telecommunications services that involves use of the core network of that company. All of the rights and obligations deriving from such service agreement shall apply solely to that company and PHI shall not be a party to such service agreement and will not be entitled to payments payable pursuant to it; |
• | After a period of seven years from the date of the Commissioner’s approval or after a period of six years from the issue date of all the approvals of the Ministry of Communications, whichever is earlier, the Commissioner shall be allowed to notify the companies of the cancellation of his resolution, if he has concluded that the establishment of PHI, its existence or operations are liable to be substantively detrimental to the competition (“Cancellation Notice”). If a Cancellation Notice is issued, a graduated layout of dismantling PHI activity was set in the Commissioner resolution, as follows: |
a. | at the end of two years after the issuance of the Cancellation Notice, PHI shall cease all activity apart from the management, maintenance and operation of the passive elements of the network. |
b. | at the end of five years after the issuance of the Cancellation Notice, the companies shall dismantle PHI and shall separate their assets fully and entirely. |
• | Our radio access network domain consists of 1,950 macro GSM base transceiver stations, 22 micro GSM base transceiver stations and 104 indoor GSM transceiver stations, all linked to 7 base station controllers (HDBSC); |
• | 2,283 macro UMTS base transceiver base stations (eNodesBs), 39 micro UMTS base transceiver stations and 563 indoor UMTS transceiver stations, all linked to 14 radio network controllers; |
• | 2,260 macro LTE base transceiver base stations (eNodesBs), 28 micro LTE base transceiver stations and 308 indoor LTE transceiver stations; |
• | 261 Macro 5G NSA base transceiver base stations (gNodeBs). |
• | erection and operating permits from the Ministry of Environmental Protection; |
• | permits from the Civil Aviation Authority, in certain cases; and |
• | permits from the Israeli Defense Forces. |
• | sports and kids content channels; |
• | set top boxes for our TV service manufactured by Technicolor SA; |
• | back office & content management system(CMS) manufactured by SeaChange International Inc.; |
• | video content distribution system (CDN) manufactured by Broadpeak; |
• | encoding systems manufactured by Harmonic & AWS Elemental; |
• | TV application installed on set top boxes, PCs Apple TV boxes, tablets and cellular devices manufactured by I Feel Smart. |
Estimated Market Shares* | 2016 | 2017 | 2018 | 2019 | 2020 | |||||||||||||||
Partner | 26 | % | 25 | % | 25 | % | 25 | % | 27 | % | ||||||||||
Cellcom** | 28 | % | 27 | % | 27 | % | 26 | % | 31 | % | ||||||||||
Pelephone | 23 | % | 23 | % | 21 | % | 22 | % | 23 | % | ||||||||||
HOT Mobile | 14 | % | 15 | % | 15 | % | 13 | % | 13 | % | ||||||||||
Others | 9 | % | 10 | % | 12 | % | 14 | % | 6 | % |
4B.12e - i | Results of the 5G frequencies tender |
4B.12e - ii | MoC’s update to Bezeq's wholesale BSA tariffs applicable to its existing copper network |
4B.12e - iii | MoC decision regarding Bezeq’s wholesale BSA tariff applicable to its future fiber-optic network |
4B.12e - iv | Upgrade of Bezeq’s existing copper infrastructure to VDSL35b Technology |
4B.12e - v | MoC decision regarding the joint use of fiber-optic infrastructure in existing residential buildings |
4B.12e - vi | Voluntary Tariffs for wholesale BSA service on Hot Telecom’s network |
4B.12e - vii | Amendment to the Communications Law regarding the deployment of fiber-optic infrastructures in Israel |
4B.12e - viii | Structural separation provisions applicable to the Bezeq and Hot groups |
4B.12e - ix | Approval of the HOT-IBC Merger |
• | IBC will be required deploy its network to 1.7 million households within 5 years; |
• | IBC will be required to provide a "shelf offer" to any operator interested in purchasing its services. This shelf offer will include the services and the terms specified in IBC’s IRU Agreements with Cellcom and HOT and be subject to a minimum obligation regarding the number of lines to be purchased and offer a reduced tariff to any operator purchasing 5% or more of the number of households accessible to IBC’s network; |
• | IBC would also be obliged to offer up to 10% discount on its wholesale prices to any operator who would purchase over 15,000 lines. |
4B.12e - x | Hearings and Examinations |
• | Hearings regarding a reform in the structure of the Internet Market. The fixed internet access market in Israel was historically divided into two tiers of services: infrastructure services and ISP (internet service provider) service. This split was intended to allow entry of new competitors, which provide services over Bezeq's infrastructure. On October 4, 2020, the MoC published a hearing regarding a reform in the structure of the Internet Market (the “First Hearing”). The First Hearing was aimed at ending the split of this segment into two tiers and allowing Bezeq and Hot Telecom to market a unified product (comprised of both infrastructure and ISP components). This proposed reform was not intended to apply to the business sector. According to the First Hearing, the proposed reform was meant to enter into force on January 1, 2022 allowing ISPs to prepare for the change in the structure of this market. The Company has filed its position regarding this hearing. The Company agreed with the consumer need for a unified service but has argued that Bezeq and HOT should not be allowed to market the unified product before competition (via the wholesale market) has been based. |
• | Hearing regarding metering of the cellular licenses’ coverage obligations. In order to increase the effective supervision of the cellular licenses’ coverage obligations the MoC proposed to set updated, equal and uniform indices. In order to achieve this stated goal, The MoC suggested several measures including: requiring periodic reports regarding cellular coverage, requiring specific reports (at the polygon level) concerning cellular coverage in response to complaints in this matter. |
• | Hearing regarding data requirements on the consumption of communication services. In order to improve its view of the market and consumer characteristics, the MoC proposed that licensees would be required to provide it with ongoing (monthly) detailed reports concerning all subscribers and the services provided to each of them. This data includes identifying details of the subscriber (such as his address), detail of the service package he is provided with (including the date of subscription and the prices thereof), and detailed data concerning each service provided to the subscriber. Although the MoC stated that it intends to tokenize this data (thus un-personalizing it), we believe this data requirement still raises serious privacy protection issues which the company has specified in its written position regarding this hearing. |
• | Hearing regarding a proposed framework for the shutdown of 2G and 3G cellular networks. In order to improve spectral efficiency, the MoC has published a hearing which proposes a framework for the shutdown of 2G and 3G networks and free up their spectral assets to be used in 4G and 5G networks. The proposed framework includes the following steps: Shutdown of 2G and 3G network by year end 2025; Operators will not be allowed to activate new lines in 2G or 3G technologies beginning July 1st. 2022; No 2G or 3G user-end equipment will be allowed to be imported beginning July 1st. 2021. As part of this the MoC stated that it may terminate the use of the spectrum awarded to us and which is currently used for 2G and 3G. We strongly oppose such moves as they conflict with the terms of the award of such frequencies, will hinder our ability to respond to increased demand and would void any incentive for re-farming of frequencies used by 2G and 3G networks to more advanced networks (4G and 5G). |
• | Bezeq – Yes merger. In March 2014, the Antitrust Commissioner approved a merger between Bezeq and its subsidiary, DBS Satellite Services (1998) Ltd. ("Yes"), a multi-channel pay TV provider, subject to certain conditions. These conditions, included, among other things, the following: (1) Bezeq and Yes shall not be a party to exclusivity arrangements regarding audio-visual content which is not locally produced by it (or for it); and (2) The Bezeq groups TV services are to be provided and sold under equal terms to all of Bezeq’s subscribers, whether they purchase other services from Bezeq or not. Under this condition, if the Bezeq Group chooses to sell a triple-play package at a certain price, it must sell the TV services at a separate price so that the price of the TV services will be the same whether the services were purchased as part of the Triple-play package or whether they were purchased as stand-alone TV services. In November 2020 the Competition Authority published a consultation in which it considered amending the above-mentioned conditions in order to allow the Bezeq Group to sell service packages that include television services without the obligation to sell the television services at a separate price that will be uniform for package purchasers and those who do not purchase packages. In addition, the Commissioner considered amending the term prohibiting exclusivity so that it does not apply to the purchase of foreign content. On the other hand, the Commissioner proposed that with regard to sports content and local content that does not fall within the definition of the term Local Productions, the original condition will remain in force. The Company filed a detailed position strongly opposing the proposed amendments to the merger conditions. As of date, the Competition Authority has yet to publish its decision on this matter. |
4B.12e - xi | Anti-Trust Regulation. |
• | observing the provisions of the Telecommunications Law, the Wireless Telegraphy Ordinance, the regulations and the provisions of our license; |
• | acting to continuously improve our mobile telephone services, their scope, availability, quality and technology, and that there has been no act or omission by us harming or limiting competition in the mobile telephone sector; |
• | having the ability to continue to provide mobile telephone services of a high standard and to implement the required investments in the technological updating of our system in order to improve the scope of such services, as well as their availability and quality; and |
• | using the spectrum allocated to us efficiently, compared to alternative applications. |
• | We have illegally ceased, limited or delayed any one of our services; |
• | Any means of control in Partner or control of Partner has been transferred in contravention of our license; |
• | We fail to invest the required amounts in the establishment and operation of the mobile radio telephone system in accordance with our undertakings to the Ministry of Communications; |
• | We have harmed or limited competition in the area of mobile radio telephone services; |
• | A receiver or temporary liquidator is appointed for us, an order is issued for our winding up or we have decided to voluntarily wind up; or |
• | Partner, an Office Holder in Partner or an Interested Party in Partner or an Office Holder in an Interested Party of Partner is an Interested Party in a competing mobile radio telephone operator or is an Office Holder in a competing mobile radio telephone operator or in an interested party in a competing mobile radio telephone operator without first obtaining a permit from the Ministry of Communications to do so or has not fulfilled one of the conditions included in such permit. See “Item 4B.12f Our Mobile Telephone License-Our Permit Regarding Cross Ownership.” |
• | We must at all times be a company registered in Israel. |
• | Our founding shareholders and their approved substitutes must hold, in the aggregate, at least 26% of each of our means of control. Furthermore, the maintenance of at least 26% of our means of control by our founding shareholders and their approved substitutes allows Partner to be protected from a license breach that would result from a transfer of shares for which the authorization of the Ministry of Communications was required, but not obtained. |
• | Until February 2021, at least 5% of our issued and outstanding share capital and of each of our means of control had to have been held by Israeli entities from among our founding shareholders and their approved substitutes See "Item 3D.1l Our cellular telephone license imposes certain obligations on our shareholders and restrictions on who can own our shares. Ensuring compliance with these obligations and restrictions may be outside our control. If the obligations or restrictions are not respected by our shareholders, we could be subject to significant monetary sanctions or lose our license." “Israeli entities” are defined as individuals who are citizens and residents of Israel and entities formed in Israel and controlled, directly or indirectly, by individuals who are citizens and residents of Israel, provided that indirect control is only through entities formed in Israel, unless otherwise approved by the Israeli Prime Minister or Minister of Communications. |
• | Until February 2021, at least 10% of our Board of Directors had to be appointed by Israeli entities, as defined above, provided that if the Board of Directors was comprised of up to 14 members, only one such director must be so appointed, and if the Board of Directors was comprised of between 15 and 24 members, only two such directors must be so appointed. See 3D.1l Our cellular telephone license imposes certain obligations on our shareholders and restrictions on who can own our shares. Ensuring compliance with these obligations and restrictions may be outside our control. If the obligations or restrictions are not respected by our shareholders, we could be subject to significant monetary sanctions or lose our license. |
• | Matters relating to national security shall be dealt with only by a Board of Directors' committee that has been formed for that purpose. The committee includes at least 4 members, of which at least one is an external director. Only directors with the required clearance and those deemed appropriate by Israel’s General Security Service may be members of this committee. Resolutions approved by this committee shall be deemed adopted by the Board of Directors. |
• | The Ministry of Communications shall be entitled to appoint an observer to the Board of Directors and its committees, subject to certain qualifications and confidentiality undertakings. |
• | voting rights in Partner; |
• | the right to appoint a director or managing director of Partner; |
• | the right to participate in Partner’s profits; or |
• | the right to share in Partner’s remaining assets after payment of debts when Partner is wound up. |
• | the founding shareholders or their approved substitutes of Partner continue to hold in the aggregate at least 26% of the means of control of Partner; |
• | our Articles of Association include the provisions described in this paragraph; |
• | we act in accordance with such provisions; |
• | our Articles of Association provide that an ordinary majority of the voting power at the general meeting of Partner is entitled to appoint all the directors of Partner other than external directors. |
• | Founding shareholders or their approved substitutes must hold at least 26% of the means of control of Partner. |
• | Until February 2021, at least 5% of our issued share capital and of each of our means of control had to have been held by Israeli entities from among our founding shareholders and their approved substitutes. See "Item 3D.1l Our cellular telephone license imposes certain obligations on our shareholders and restrictions on who can own our shares. Ensuring compliance with these obligations and restrictions may be outside our control. If the obligations or restrictions are not respected by our shareholders, we could be subject to significant monetary sanctions or lose our license. |
• | The majority of our directors, and our general manager, must be citizens and residents of Israel. |
• | Neither the general manager of Partner nor a director of Partner may continue to serve in office if he has been convicted of certain legal offenses. |
• | No trust fund, insurance company, investment company or pension fund that is an Interested Party in Partner may: (a) hold, either directly or indirectly, more than 5% of any means of control in a competing mobile radio telephone operator without having obtained a permit to do so from the Ministry of Communications, or (b) hold, either directly or indirectly, more than 5% of any means of control in a competing mobile radio telephone operator in accordance with a permit from the MoC, and in addition have a representative or appointee who is an Office Holder in a competing mobile radio telephone operator, unless it has been legally required to do so, or (c) hold, either directly or indirectly, more than 10% of any means of control in a competing mobile radio telephone operator, even if it received a permit to hold up to 10% of such means of control. |
• | No trust fund, insurance company, investment company or a pension fund that is an Interested Party in a competing mobile radio telephone operator may: (a) hold, either directly or indirectly, more than 5% of any means of control in Partner, without having obtained a permit to do so from the Ministry of Communications; or (b) hold, directly or indirectly, more than 5% of any means of control in Partner in accordance with a permit from the Ministry of Communications, and in addition have a representative or appointee who is an Office Holder in Partner, unless it has been legally required to do so; or (c) hold, either directly or indirectly, more than 10% of any means of control in Partner, even if it received a permit to hold up to 10% of such means of control. |
• | Partner, an Office Holder or Interested Party in Partner, or an Office Holder in an Interested Party in Partner does not control a competing mobile radio telephone operator, is not controlled by a competing mobile radio telephone operator, by an Office Holder or an Interested Party in a competing mobile radio telephone operator, by an Office Holder in an Interested Party in a competing mobile radio telephone operator, or by a person or corporation that controls a competing mobile radio telephone operator. |
• | A change has occurred in the suitability of Partner to implement the actions and services that are the subject of our license. |
• | A change in our license is required in order to ensure effective and fair competition in the telecommunications sector. |
• | A change in our license is required in order to ensure the standards of availability and grade of service required of Partner. |
• | A change in telecommunications technology justifies a modification of our license. |
• | A change in the electromagnetic spectrum needs justifies, in the opinion of the Ministry of Communications, changes in our license. |
• | Considerations of public interest justify modifying our license. |
• | A change in government policy in the telecommunications sector justifies a modification of our license. |
• | A change in our license is required due to its breach by Partner. |
• | “Office Holder” means a director, manager, company secretary or any other senior officer that is directly subordinate to the general manager. |
• | “Control” means the ability to, directly or indirectly, direct the activity of a corporation, either alone or jointly with others, whether derived from the governing documents of the corporation, from an agreement, oral or written, from holding any of the means of control in the corporation or in another corporation, or which derives from any other source, and excluding the ability derived solely from holding the office of director or any other office in the corporation. Any person controlling a subsidiary or a corporation held directly by him will be deemed to control any corporation controlled by such subsidiary or by such controlled corporation. It is presumed that a person or corporation controls a corporation if one of the following conditions exist: (1) such person holds, either directly or indirectly, fifty percent (50%) or more of any means of control in the corporation; (2) such person holds, either directly or indirectly, a percentage of any means of control in the corporation which is the largest part in relation to the holdings of the other Interested Parties in the corporation; or (3) such person has the ability to prevent the taking of business decisions in the corporation, with the exception of decisions in the matter of issuance of means of control in a corporation or decisions in the matters of sale or liquidation of most businesses of the corporation, or fundamental changes of these businesses. |
• | “Controlling Corporation” means a company that has control, as defined above, of a foreign mobile radio telephone operator. |
• | “Interested Party” means a person who either directly or indirectly holds 5% or more of any type of means of control, including holding as an agent. |
Year ended December 31, | ||||||||
2019 | 2020 | |||||||
Revenues (NIS million) | 3,234 | 3,189 | ||||||
Operating profit (NIS million) | 87 | 96 | ||||||
Profit before income taxes (NIS million) | 19 | 27 | ||||||
Profit for the year (NIS million) | 19 | 17 | ||||||
Capital expenditures (additions) (NIS million) | 578 | 595 | ||||||
Net cash provided by operating activities (NIS million) | 837 | 786 | ||||||
Net cash used in investing activities (NIS million) | (1,181 | ) | (581 | ) | ||||
Cellular Subscribers (end of period, thousands) | 2,657 | 2,836 | ||||||
Annual cellular churn rate (%) | 31 | % | 30 | % | ||||
Average monthly revenue per cellular subscriber (ARPU) (NIS) | 57 | 51 | ||||||
TV subscribers (end of period, thousands) | 188 | 232 | ||||||
Infrastructure-based internet subscribers (end of period, thousands) | 268 | 329 | ||||||
Fiber-optic subscribers (end of period, thousands) | 76 | 139 | ||||||
Homes Connected (HC) to the fiber-optic infrastructure (end of period, thousands) | 324 | 465 |
Non-GAAP Measure | Calculation | Most Comparable IFRS Financial Measure |
Adjusted EBITDA Adjusted EBITDA margin (%) | Profit add Income tax expenses, Finance costs, net, Depreciation and amortization expenses (including amortization of intangible assets, deferred expenses-right of use and impairment charges), Other expenses (mainly amortization of share-based compensation). Adjusted EBITDA divided by Total revenues | Profit |
Adjusted Free Cash Flow | Net cash provided by operating activities add Net cash used in investing activities deduct Proceeds from (investment in) deposits, net deduct Lease principal payments deduct Lease interest payments | Net cash provided by operating activities add Net cash used in investing activities |
Total Operating Expenses (OPEX) | Cost of service revenues add Selling and marketing expenses add General and administrative expenses add Credit losses deduct Depreciation and amortization expenses deduct Other expenses (mainly amortization of employee share-based compensation) | Sum of: Cost of service revenues, Selling and marketing expenses, General and administrative expenses, Credit losses |
Net Debt | Current maturities of notes payable and borrowings add Notes payable add Borrowings from banks add Financial liability at fair value deduct Cash and cash equivalents deduct Short-term and long-term deposits | Sum of: Current maturities of notes payable and borrowings, Notes payable, Borrowings from banks, Financial liability at fair value Less Sum of: Cash and cash equivalents, Short-term deposits, Long-term deposits |
Various line items excluding the impact of the implementation of IFRS 16 | Line item less the amount of the impact of IFRS 16 | The corresponding line item as reported in the Company’s financial statements |
New Israeli Shekels in millions | ||||||||||||
January 1, 2019 | ||||||||||||
Company's share (50%) in PHI's accounts** | Intercompany elimination | Total | ||||||||||
CURRENT ASSETS | ||||||||||||
Cash and cash equivalents | * | * | ||||||||||
Current assets | 69 | (62 | ) | 7 | ||||||||
NON CURRENT ASSETS | ||||||||||||
Property and equipment and intangible assets | 142 | 142 | ||||||||||
Lease-right of use | 355 | 355 | ||||||||||
CURRENT LIABILITIES | ||||||||||||
Current borrowings from banks | 13 | 13 | ||||||||||
Trade payables and other current liabilities | 55 | 55 | ||||||||||
Other current liabilities | 65 | 65 | ||||||||||
NON CURRENT LIABILITIES | ||||||||||||
Lease liabilities | 290 | 290 | ||||||||||
Deferred revenues | 142 | (142 | ) | |||||||||
EQUITY | 1 | (1 | ) | - |
As of December 31, | ||||||||||||||||
2017 | 2018 | 2019 | 2020 | |||||||||||||
Terminal growth rate | 0.9 | % | 1 | % | 1 | % | 1 | % | ||||||||
After-tax discount rate | 9.3 | % | 9.5 | % | 8.0 | % | 7.5 | % | ||||||||
Pre-tax discount rate | 11.2 | % | 11.5 | % | 9.6 | % | 9.0 | % |
March 31, 2020 | |
Terminal growth rate | 1.0% |
After-tax discount rate | 8.25% |
Pre-tax discount rate | 9.9% |
• | fixed payments (including in-substance fixed payments), less any lease incentives receivable |
• | variable lease payment that are based on an index or a rate (such as CPI) |
• | amounts expected to be payable by the lessee under residual value guarantees |
• | the exercise price of a purchase option if the lessee is reasonably certain to exercise that option |
• | payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option, and |
• | lease payments (principal and interest) to be made under reasonably certain extension options |
• | the amount of the initial measurement of lease liability |
• | any lease payments made at or before the commencement date less any lease incentives received |
• | any initial direct costs (except for initial application), and |
• | restoration costs |
• | the lease liability was measured for leases previously classified as an operating leases under IAS 17 at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate at the date of initial application; |
• | Accounting together a portfolio of leases with similar characteristics provided that it is reasonably expected that the effects on the financial statements of applying this standard to the portfolio would not differ materially from applying this Standard to the individual leases within that portfolio. And using a single discount rate to a portfolio of leases with reasonably similar characteristics (such as leases with a similar remaining lease term for a similar class of underlying asset in a similar economic environment); |
• | rely on its assessment of whether leases are onerous applying IAS 37 Provisions, Contingent Liabilities and Contingent Assets immediately before the date of initial application as an alternative to performing an impairment review; |
• | not reassess whether a contract is, or contains, a lease at the date of initial application, and therefore IFRS 16 was not applied to contracts that were not previously identified as containing a lease. |
• | Initial direct costs were excluded from the measurement of the right-of-use asset at the date of initial application; |
• | use hindsight, such as in determining the lease term if the contract contains options to extend or terminate the lease. |
New Israeli Shekels in millions | ||||||||||||
As at January 1, 2019 | ||||||||||||
Previous accounting policy | Effect of change | According to IFRS16 as reported | ||||||||||
Non-current assets - Lease – right of use | - | 656 | 656 | |||||||||
Non-current assets - Deferred income tax asset | 38 | 6 | 44 | |||||||||
Current liabilities - Lease liabilities | - | 137 | 137 | |||||||||
Non-current liabilities - Lease liabilities | - | 546 | 546 | |||||||||
Equity | 1,406 | (21 | ) | 1,385 |
New Israeli Shekels in millions | ||||
Operating lease commitments (undiscounted) disclosed as at December 31, 2018 | 372 | |||
Discounted using the lessee's incremental borrowing rate as of the date of initial application | 328 | |||
Group's share in PHI's lease liability | 355 | |||
Lease liability recognized as at January 1, 2019 | 683 | |||
Of which are: | ||||
Current lease liabilities | 137 | |||
Non-current liabilities | 546 |
• | Transmission, communication and content providers |
• | Depreciation and amortization |
• | Cost of equipment and accessories |
• | Wages, employee benefits expenses and car maintenance |
• | Internet infrastructure and service providers |
• | Network and cable maintenance |
• | Operating lease, rent and overhead expenses |
• | Costs of handling, replacing or repairing equipment |
• | IT support and other operating expenses |
• | Amortization of deferred expenses - rights of use |
• | Depreciation and amortization |
• | Wages, employee benefits expenses and car maintenance |
• | Advertising and marketing |
• | Selling commissions, net |
• | Operating lease, rent and overhead expenses |
• | Wages, employee benefits expenses and car maintenance |
• | Professional fees |
• | Depreciation |
• | Credit card and other commissions |
• | Unwinding of trade receivables |
• | Interest expenses |
• | Interest for lease liabilities |
• | Finance charges for financial liability |
• | Net foreign exchange rate gains |
• | Interest income from cash, cash equivalents and deposits |
• | Cellular subscriber base |
• | Cellular average monthly revenue per subscriber (ARPU) |
• | Cellular Churn rate |
• | TV subscriber base |
• | Infrastructure-based internet subscribers |
• | Fiber-optic subscribers |
• | Homes Connected (HC) to the fiber-optic infrastructure |
(1) | Assessing the useful lives of non-financial assets: |
(2) | Assessing the recoverable amount for impairment tests of non-financial assets |
March 31, 2020 | ||||
Terminal growth rate | 1.0 | % | ||
After-tax discount rate | 8.25 | % | ||
Pre-tax discount rate | 9.9 | % |
(3) | Assessing the recoverable amount for impairment tests of goodwill |
(4) | Assessing impairment of financial assets |
(5) | Considering the likelihood of contingent losses and quantifying possible legal settlements: |
New Israeli Shekels | ||||||||||||||||
Year ended December 31, 2020 | ||||||||||||||||
In millions | ||||||||||||||||
Cellular segment | Fixed-line segment | Elimination | Consolidated | |||||||||||||
Segment revenue – Services | 1,647 | 861 | 2,508 | |||||||||||||
Inter-segment revenue – Services | 16 | 132 | (148 | ) | ||||||||||||
Segment revenue – Equipment | 545 | 136 | 681 | |||||||||||||
Total revenues | 2,208 | 1,129 | (148 | ) | 3,189 | |||||||||||
Segment cost of revenues – Services | 1,272 | 856 | 2,128 | |||||||||||||
Inter-segment cost of revenues - Services | 131 | 17 | (148 | ) | ||||||||||||
Segment cost of revenues – Equipment | 451 | 85 | 536 | |||||||||||||
Cost of revenues | 1,854 | 958 | (148 | ) | 2,664 | |||||||||||
Gross profit | 354 | 171 | 525 | |||||||||||||
Operating expenses (1) | 300 | 159 | 459 | |||||||||||||
Other income, net | 19 | 11 | 30 | |||||||||||||
Operating profit | 73 | 23 | 96 | |||||||||||||
Adjustments to presentation of Segment Adjusted EBITDA | ||||||||||||||||
–Depreciation and amortization | 450 | 264 | 714 | |||||||||||||
–Other (2) | 10 | 2 | 12 | |||||||||||||
Segment Adjusted EBITDA (3) | 533 | 289 | 822 | |||||||||||||
Reconciliation of profit for the year to Adjusted EBITDA | ||||||||||||||||
Profit for the year | 17 | |||||||||||||||
Depreciation and amortization | 714 | |||||||||||||||
Finance costs, net | 69 | |||||||||||||||
Income tax expenses | 10 | |||||||||||||||
Other (2) | 12 | |||||||||||||||
Adjusted EBITDA (3) | 822 |
New Israeli Shekels | ||||||||||||||||
Year ended December 31, 2019 | ||||||||||||||||
In millions | ||||||||||||||||
Cellular segment | Fixed line segment | Elimination | Consolidated | |||||||||||||
Segment revenue - Services | 1,783 | 777 | 2,560 | |||||||||||||
Inter-segment revenue - Services | 15 | 148 | (163 | ) | ||||||||||||
Segment revenue - Equipment | 571 | 103 | 674 | |||||||||||||
Total revenues | 2,369 | 1,028 | (163 | ) | 3,234 | |||||||||||
Segment cost of revenues - Services | 1,367 | 810 | 2,177 | |||||||||||||
Inter-segment cost of revenues - Services | 147 | 16 | (163 | ) | ||||||||||||
Segment cost of revenues - Equipment | 464 | 66 | 530 | |||||||||||||
Cost of revenues | 1,978 | 892 | (163 | ) | 2,707 | |||||||||||
Gross profit | 391 | 136 | 527 | |||||||||||||
Operating expenses (1) | 334 | 134 | 468 | |||||||||||||
Other income, net | 20 | 8 | 28 | |||||||||||||
Operating profit | 77 | 10 | 87 | |||||||||||||
Adjustments to presentation of segment Adjusted EBITDA | ||||||||||||||||
–Depreciation and amortization | 542 | 209 | 751 | |||||||||||||
–Other (2) | 16 | (1 | ) | 15 | ||||||||||||
Segment Adjusted EBITDA (3) | 635 | 218 | 853 | |||||||||||||
Reconciliation of profit for the year to Adjusted EBITDA | ||||||||||||||||
Profit for the year | 19 | |||||||||||||||
Depreciation and amortization | 751 | |||||||||||||||
Finance costs, net | 68 | |||||||||||||||
Income tax expenses | * | |||||||||||||||
Other (2) | 15 | |||||||||||||||
Adjusted EBITDA (3) | 853 |
New Israeli Shekels | ||||||||||||||||
Year ended December 31, 2018* | ||||||||||||||||
In millions | ||||||||||||||||
Cellular segment | Fixed-line segment | Elimination | Consolidated | |||||||||||||
Segment revenue – Services | 1,827 | 697 | 2,524 | |||||||||||||
Inter-segment revenue – Services | 16 | 155 | (171 | ) | ||||||||||||
Segment revenue – Equipment | 643 | 92 | 735 | |||||||||||||
Total revenues | 2,486 | 944 | (171 | ) | 3,259 | |||||||||||
Segment cost of revenues – Services | 1,435 | 696 | 2,131 | |||||||||||||
Inter-segment cost of revenues - Services | 154 | 17 | (171 | ) | ||||||||||||
Segment cost of revenues – Equipment | 509 | 60 | 569 | |||||||||||||
Cost of revenues | 2,098 | 773 | (171 | ) | 2,700 | |||||||||||
Gross profit | 388 | 171 | 559 | |||||||||||||
Operating expenses (1) | 343 | 128 | 471 | |||||||||||||
Other income, net | 23 | 5 | 28 | |||||||||||||
Operating profit | 68 | 48 | 116 | |||||||||||||
Adjustments to presentation of Segment Adjusted EBITDA | ||||||||||||||||
–Depreciation and amortization | 442 | 150 | 592 | |||||||||||||
–Other (2) | 14 | 14 | ||||||||||||||
Segment Adjusted EBITDA (3) | 524 | 198 | 722 | |||||||||||||
Reconciliation of profit for the year to Adjusted EBITDA | ||||||||||||||||
Profit for the year | 56 | |||||||||||||||
Depreciation and amortization | 592 | |||||||||||||||
Finance costs, net | 53 | |||||||||||||||
Income tax expenses | 7 | |||||||||||||||
Other (2) | 14 | |||||||||||||||
Adjusted EBITDA (3) | 722 |
Three months ended | ||||||||||||||||
NIS in millions | March 31 | June 30 | Sept. 30 | Dec. 31 | ||||||||||||
(Unaudited) | ||||||||||||||||
Service Revenues | ||||||||||||||||
2018 | 625 | 620 | 654 | 625 | ||||||||||||
2019 | 624 | 642 | 658 | 636 | ||||||||||||
2020 | 629 | 616 | 631 | 632 |
Principal amount | Annual interest rate | Interest payment terms | Original issuance date | |||||
Notes payable series D | 109 | ‘Makam’(**) plus 1.2% | Quarterly | April 2010 | ||||
Notes payable series F | 512 | 2.16% fixed | Semi-annual | July 2017 | ||||
Notes payable series G(*) | 824 | 4% fixed | Annual | January 2019 |
Period | Interest rate (Makam+1.2%) | |||
October 1, 2020 to December 30, 2020 | 1.25 | % | ||
July 1, 2020 to September 30, 2020 | 1.23 | % | ||
March 31, 2020 to June 30, 2020 | 1.41 | % | ||
December 31, 2019 to March 30, 2020 | 1.34 | % |
2021 | 2022 | 2023 | 2024 to 2025 | 2026 and thereafter | Total | |||||||||||||||||||
New Israeli Shekels in millions | ||||||||||||||||||||||||
Principal payments of long-term indebtedness: | ||||||||||||||||||||||||
Notes payable series D | 109 | 109 | ||||||||||||||||||||||
Notes payable series F | 128 | 128 | 128 | 128 | 512 | |||||||||||||||||||
Notes payable series G | 82 | 82 | 165 | 495 | 824 | |||||||||||||||||||
Total | 237 | 210 | 210 | 293 | 495 | 1,445 |
Annual interest rate | Interest payment terms | Original reception date | ||||
Borrowing P | 2.38% fixed | Quarterly | December 2017 | |||
Borrowing Q | 2.5% fixed | Quarterly | December 2017 |
2021 | 2022 | 2023 | 2024 | Total | ||||||||||||||||
New Israeli Shekels in millions | ||||||||||||||||||||
Borrowing P | 30 | 29 | 59 | |||||||||||||||||
Borrowing Q | 23 | 23 | 23 | 10 | 79 | |||||||||||||||
53 | 52 | 23 | 10 | 138 |
Current Portion Payable in 2021 as of December 31, 2020 | NIS in millions | |||
Principal on notes payable | 237 | |||
Principal on borrowings | 53 | |||
Accrued interest on notes payable | 44 | |||
Accrued interest on borrowings | 3 | |||
Total | 337 |
• | Cash on hand; |
• | Operating cash flows, net of cash flows used for investing activities; |
• | Untradeable option warrants; |
• | Issuance of notes payable and long-term borrowings; |
• | Share issuance; |
• | Short-term deposits; |
• | Long-term deposits; and |
• | Short term credit facility. |
Reconciliation of cash flows to Adjusted Free Cash Flow | Year ended December 31, | |||||||
2019 | 2020 | |||||||
NIS in millions | ||||||||
Net cash provided by operating activities | 837 | 786 | ||||||
Net cash used in investing activities | (1,181 | ) | (581 | ) | ||||
Less investment in deposits, net | 552 | 14 | ||||||
Lease principal payments | (139 | ) | (129 | ) | ||||
Lease interest payments | (20 | ) | (18 | ) | ||||
Adjusted Free Cash Flow | 49 | 72 |
Payments due by period (NIS in millions) | ||||||||||||||||||||
Contractual Obligations | Total | 2021 | 2022-2023 | 2024-2025 | 2026 and thereafter | |||||||||||||||
Notes Series D* | 110 | 110 | ||||||||||||||||||
Notes Series F* | 534 | 138 | 267 | 129 | ||||||||||||||||
Notes Series G* | 1,003 | 33 | 227 | 215 | 528 | |||||||||||||||
Long term borrowings* | 143 | 56 | 77 | 10 | ||||||||||||||||
Lease liabilities | 786 | 135 | 206 | 149 | 296 | |||||||||||||||
Trade payables | 666 | 666 | ||||||||||||||||||
Payables in respect of employees | 38 | 38 | ||||||||||||||||||
Other payables | 12 | 12 | ||||||||||||||||||
Other non-current liabilities | 32 | 32 | ||||||||||||||||||
Contribution to defined benefit plan | 7 | 7 | ||||||||||||||||||
Commitments to pay for inventory purchases** | 265 | 265 | ||||||||||||||||||
Commitments to pay for property, equipment purchases and software elements purchases (capital expenditures)** | 64 | 64 | ||||||||||||||||||
Commitments to pay for rights of use of capacities** | 119 | 51 | 63 | 5 | ||||||||||||||||
Commitment to pay for capacities maintenance** | 13 | 4 | 9 | |||||||||||||||||
Total Contractual Cash Obligations | 3,792 | 1,579 | 881 | 508 | 824 |
Name of Director | Age | Position | ||
Osnat Ronen (5) (6) | 58 | Chairman of the Board of Directors | ||
Barry Ben Zeev (1)(2)(3)(4) | 69 | Director | ||
Richard Hunter | 51 | Director | ||
Roly Klinger(1)(2)(3)(4) | 61 | Director | ||
Jonathan Kolodny(1)(2)(3)(4) | 51 | Director | ||
Michal Maron-Brikman(1)(2)(3)(4) | 51 | Director | ||
Yehuda Saban | 41 | Director | ||
Yossi Shachak | 75 | Director | ||
Ori Yaron | 55 | Director | ||
Shlomo Zohar(4) | 69 | Director |
(1) | Member of the Audit Committee |
(2) | Member of the Compensation Committee |
(3) | External Director under the Israeli Companies Law (See “Item 6C Board Practices”) |
(4) | Independent Director under NASDAQ rules and under the Israeli Companies Law |
(5) | Independent Director under NASDAQ rules |
(6) | Appointed by the Israeli founding shareholders |
Name of Officer | Age | Position | ||
Isaac Benbenisti | 56 | Chief Executive Officer | ||
Yuval Keinan | 46 | Deputy Chief Executive Officer | ||
Tamir Amar | 47 | Chief Financial Officer & VP Fiber-Optics | ||
Liran Dan | 42 | Vice President Strategy & Business Development | ||
Yaron Eisenstein | 48 | Vice President Technologies & IT Division | ||
Snir Niv* | 34 | Vice President Regulations Division | ||
Einat Rom | 55 | Vice President, Human Resources & Administration | ||
Yakov Truzman | 50 | Vice President Business & Sales Division | ||
Hadar Vismunski-Weinberg** | 47 | Vice President, Chief Legal Counsel & Corporate Secretary | ||
Terry Yaskil | 47 | Vice President Marketing & Customer Service Division |
A. | The table below sets forth information regarding compensation on an individual basis for the five Office Holders with the highest compensation for the year 2020. |
Details of the Compensation Recipient | Compensation for services (the compensation amounts are displayed in terms of cost for the Company) (NIS thousands) | Other compensation & vehicle (the compensation amounts are displayed in terms of cost for the Company) (NIS thousands) | Total (NIS thousands) | |||||||||||||||||||
Name | Position | Payroll & Related expenses | Annual Bonus | Share-based payments | Other | |||||||||||||||||
Isaac Benbenisti | Chief Executive Officer | 2,458 | 1,707 | 1,872 | (1) | 194 | (2) | 6,231 | (3) | |||||||||||||
Yuval Keinan | Deputy Chief Executive Officer | 1,818 | 1,200 | 766 | (4) | 128 | (2) | 3,912 | ||||||||||||||
Tamir Amar | Chief Financial Officer&VP Fiber-Optics | 1,488 | 611 | 388 | (5)(8) | 194 | (2) | 2,681 | ||||||||||||||
Yakov Truzman | Vice President Business & Sales Division | 1,306 | 515 | 424 | (6)(8) | 127 | (2) | 2,372 | ||||||||||||||
Hadar Vismunski-Weinberg | Legal Counsel & Corporate Secretary | 1,092 | 413 | 734 | (7)(8) | 128 | 2,367 |
(1) | In 2015, 1,471,971 share options were granted to Mr. Isaac Benbenisti, in his capacity as the Company's CEO with a vesting period of up to three years at an exercise price of NIS 18.08 that constitutes a premium of 5% on the average share price of the Company on the Tel-Aviv Stock Exchange, during the 30 days preceding the grant date. The theoretical fair value of the share options (according to Black-Scholes model) as measured on the day of the grant was approximately NIS 8 million. Mr. Benbenisti's options vest in three tranches: 33% of the entire amount on October 28, 2016, 33% of the entire amount on October 28, 2017 and the balance on October 28, 2018. Mr. Benbenisti's eligibility to exercise each of the above detailed tranches will be available to him until October 27, 2021. In 2018, 810,027 share options and 194,064 restricted shares were granted to Mr. Isaac Benbenisti, in his capacity as the Company's CEO with a vesting period of up to four years. The exercise price of the options is NIS 18.86 which constitutes a premium of 5% on the average share price of the Company on the Tel-Aviv Stock Exchange, during the 30 days preceding the grant date. The theoretical fair value of the share options (according to Black-Scholes model) as measured on the day of the grant was approximately NIS 3.4 million and the fair value of the restricted shares was approximately NIS 3.4 million. Mr. Benbenisti's options and restricted shares vest in four tranches: 25% of the entire amount on October 28, 2019, 25% of the entire amount on October 28, 2020, 25% of the entire amount on October 28, 2021 and the balance on October 28, 2022. Mr. Benbenisti's eligibility to exercise each of the share options above detailed tranches will be available to him until October 27, 2024. With respect to the restricted shares granted to the CEO in 2018, performance targets which constitute a precondition to vesting and a mechanism for deferring vesting were defined as further detailed above under CEO Equity Incentive Grant. |
(2) | “Other compensation” includes: expenses for retirement that were accumulated during the reporting period of this Annual Report and will be paid only upon retirement and vehicle expenses. |
(3) | For further information regarding the CEO's compensation see above under CEO Compensation. |
(4) | In 2016, 269,000 share options and 114,000 restricted shares were granted to Mr. Yuval Keinan with a vesting period of up to three years and subject to the fulfillment of performance targets. The theoretical fair value of the share options (according to Black-Scholes model) as measured on the day of the grant was approximately NIS 1.3 million and the fair value of the restricted shares was approximately NIS 2 million. In 2019, 277,134 share options and 86,889 restricted shares were granted to Mr. Yuval Keinan with a vesting period of up to three years and subject to the fulfillment of performance targets. The theoretical fair value of the share options (according to Black-Scholes model) as measured on the day of the grant was approximately NIS 0.9 million and the fair value of the restricted shares was approximately NIS 1.4 million. |
(5) | In 2018, 245,887 share options and 79,118 restricted shares were granted to Mr. Tamir Amar with a vesting period of up to three years and subject to the fulfillment of performance targets. The theoretical fair value of the share options (according to Black-Scholes model) as measured on the day of the grant was approximately NIS 0.9 million and the fair value of the restricted shares was approximately NIS 1.4 million. |
(6) | In 2018, 272,968 share options and 86,451 restricted shares were granted to Mr. Yakov Truzman with a vesting period of up to three years and subject to the fulfillment of performance targets. The theoretical fair value of the share options (according to Black-Scholes model) as measured on the day of the grant was approximately NIS 0.9 million and the fair value of the restricted shares was approximately NIS 1.4 million. |
(7) | In 2017, 147,352 share options and 64,183 restricted shares were granted to Mrs. Hadar Vismunski-Weinberg with a vesting period of up to three years and subject to the fulfillment of performance targets. The theoretical fair value of the share options (according to Black-Scholes model) as measured on the day of the grant was approximately NIS 0.9 million and the fair value of the restricted shares was approximately NIS 1.4 million. In 2020, 152,078 share options and 61,414 restricted shares were granted to Mrs. Hadar Vismunski-Weinberg with a vesting period of up to three years and subject to the fulfillment of performance targets. The theoretical fair value of the share options (according to Black-Scholes model) as measured on the day of the grant was approximately NIS 0.7 million and the fair value of the restricted shares was approximately NIS 1.0 million. |
(8) | These sums represent the relative portion of the expenses of all option and restricted share allocations recorded during the reported period and include expenses for the 2020 vesting period of options and restricted shares (including those which have not fully vested yet). |
– | In order to comply with the conditions and restrictions imposed on us by the Ministry of Communications, including in our mobile license, in relation to ownership or control over us, under certain events specified in our Articles of Association, the Board of Directors may determine that certain ordinary shares are dormant shares. Consequently, we received an exemption from NASDAQ with respect to its requirement (now under NASDAQ Rule 5640) that voting rights of existing shareholders of publicly traded common stock registered under Section 12 of the US Securities Exchange Act cannot be disparately reduced or restricted through any corporate action or issuance. |
– | As permitted under Israeli Companies Law, the Company’s Board of Directors generally proposes director nominees for shareholder approval. The conditions of NASDAQ Rule 5605(e), that director nominees must either be selected or recommended to the Board by the independent directors or a nomination committee comprised solely of independent directors, are thus not satisfied. |
– | According to applicable Israeli legal requirements, the establishment or amendment of certain stock option or purchase plans requires the approval of the company’s Board of Directors and approval of the shareholders’ meeting only for the grant of equity compensation to the Chief Executive Officer, directors or controlling partners. We received an exemption from the requirement set out in NASDAQ Rule 5635(c) that listed companies receive shareholder approval when certain stock option or purchase plans are to be established or materially amended, or certain other equity compensation arrangement made or materially amended, based on the fact that the NASDAQ requirement is inconsistent with the applicable Israeli legal requirements described above. |
– | The Israeli Companies Law, requires that at least two members of the Board of Directors satisfy the conditions of ”external directors”, which also satisfies the conditions of an Israeli independent director (“bilty taluy”). Four of our ten directors are external directors and satisfy the conditions of both Israeli independent directors and independent directors according to NASDAQ criteria. Two additional directors, (who are not external directors) satisfy the conditions of independent directors according to NASDAQ criteria, one of whom satisfies the conditions of an Israeli independent director, therefore the requirement of NASDAQ Rule 5605(b), that a majority of the Board of Directors be comprised of independent directors, is presently satisfied. However, in previous years and possibly in the future, we were and may not be in compliance with this NASDAQ requirement, since it is not a requirement under Israeli Companies law as stated above. |
1. | Financial liability incurred by, or imposed upon the Office Holder in favor of another person in accordance with a judgment, including a judgment given in a settlement or a judgment of an arbitrator, approved by an authorized court; |
2. | Reasonable legal expenses, including attorney fees, incurred by the Office Holder or which he was ordered to pay by an authorized court in the context of a proceeding filed against him by Partner or on Partner’s behalf or by a third party, in a criminal proceeding in which he was acquitted or in a criminal proceeding in which he was convicted of an offense which does not require criminal intent; |
3. | Reasonable legal expenses, including attorney fees, incurred by the Office Holder due to an investigation or proceeding conducted against him by an authority authorized to conduct such investigation or proceeding and which ended without filing of an indictment against him and without the imposition of a financial liability as a substitute for a criminal proceeding or that was ended without filing of an indictment against him but for which he was subject to a financial liability as a substitute for a criminal proceeding relating to an offense which does not require criminal intent, within the meaning of the relevant terms under the law or in connection with a financial sanction(“itzum caspi”); |
4. | Payment to an injured party as a result of a violation set forth in Section 52.54(a)(1)(a) of the Israeli Securities Law, including by indemnification in advance or expenses incurred in connection with a proceeding (“halich”) under Chapters H3, H4 or I1 of the Israeli Securities Law, or under Chapter 4 of Part 9 of the Israeli Companies Law, in connection with any affairs, including reasonable legal expenses, which term includes attorney fees, including by indemnification in advance; and |
5. | Expenses, including reasonable legal fees, including attorney fees, incurred by an Office Holder with respect to a proceeding in accordance with the Restrictive Trade Practices Law- 1988 ("Restrictive Trade Practices Law"). |
1. | a breach of the duty of loyalty toward us, unless the Office Holder acted in good faith and had reasonable grounds to assume that the action would not harm Partner’s interest; |
2. | a breach of the duty of care done intentionally or recklessly (“pzizut”) other than if made only by negligence; |
3. | an act intended to unlawfully yield a personal profit; |
4. | a fine, a civil fine (“knas ezrahi”), a financial sanction (“itzum kaspi”) or a penalty (“kofer”) imposed on him; and |
5. | a proceeding (“halich”). |
(1) | The breach of the duty of care towards the Company or towards any other person; |
(2) | The breach of the duty of loyalty towards the Company provided that the Office Holder has acted in good faith and had reasonable grounds to assume that the action would not harm the Company; |
(3) | A financial liability imposed on him in favor of another person; |
(4) | A payment which the office holder is obligated to pay to an injured party as set forth in section 52.54(a)(1)(a) of the Securities Law and expenses that the Office Holder incurred in connection with a proceeding under Chapters H3, H4 or I1 of the Securities Law, or under Chapter 4 of Part 9 of the Israeli Companies Law, in connection with any affairs, including reasonable legal expenses, which term includes attorney fees. |
(5) | Expenses, including reasonable legal expenses fees, including attorney fees, incurred by the Office Holder with respect to a proceeding in accordance with the Restrictive Trade Practices Law. |
(6) | Any other matter in respect of which it is permitted or will be permitted under any law to insure the liability of an Office Holder in the Company. |
2018 | 2019** | 2020 | ||||||||||
Customer service* | 1,452 | 1,456 | 1,370 | |||||||||
Sales and sales support* | 550 | 541 | 491 | |||||||||
Information technology | 379 | 403 | 388 | |||||||||
Marketing and Content | 55 | 56 | 52 | |||||||||
Finance | 83 | 88 | 85 | |||||||||
Human Resources, Administration & Security | 87 | 91 | 86 | |||||||||
Operations & Logistics | 124 | 136 | 122 | |||||||||
Remaining operations | 52 | 63 | 61 | |||||||||
TOTAL | 2,782 | 2,834 | 2,655 | *** |
Option expiration Year | Number of outstanding options held | Weighted average exercise price (NIS) | ||||||
2021 | 1,240,971 | 17.99 | ||||||
2023 | 357,766 | 19.39 | ||||||
2024 | 1,605,078 | 18.63 | ||||||
2025 | 393,421 | 16.61 | ||||||
2026 | 464,142 | 13.94 | ||||||
TOTAL | 4,061,378 | 17.77 |
Option expiration Year | Number of outstanding options held | Weighted average exercise price (NIS) | ||||||
2021 | 971,971 | 18.08 | ||||||
2024 | 810,027 | 18.86 | ||||||
TOTAL | 1,781,998 | 18.43 |
Through December 31, 2020 | ||||||||
Number of options | Number of RSAs | |||||||
Granted | 36,108,430 | 5,907,609 | ||||||
Shares issued upon exercises and vesting | (6,574,778 | ) | (3,229,106 | ) | ||||
Cancelled upon net exercises, expiration and forfeitures | (22,504,229 | ) | (1,671,080 | ) | ||||
Outstanding | 7,029,423 | 1,007,423 | ||||||
Of which: | ||||||||
Exercisable | 4,071,714 | |||||||
Vest in 2021 | 1,788,172 | 611,551 | ||||||
Vest in 2022 | 800,789 | 263,183 | ||||||
Vest in 2023 | 368,748 | 132,689 |
Name | Shares beneficially owned | Issued Shares (1)% | Issued and Outstanding Shares (1)% | |||||||||
S.B. Israel Telecom Ltd.(2) | 49,862,800 | 26.17 | 27.12 | |||||||||
Phoenix-Excellence Group (3) | 14,706,330 | 7.72 | 8.00 | |||||||||
Meitav Dash Group (4) | 14,612,353 | 7.67 | 7.95 | |||||||||
Menora Mivtachim Group (5) | 13,589,742 | 7.13 | 7.39 | |||||||||
Harel Group (6) | 12,945,310 | 6.79 | 7.04 | |||||||||
Clal Insurance Group (7) | 12,669,049 | 6.65 | 6.89 | |||||||||
Psagot Investment House (8) | 9,488,171 | 4.98 | 5.16 | |||||||||
Treasury shares (9) | 6,733,049 | 3.53 | - | |||||||||
Public (10) | 55,961,953 | 29.36 | 30.45 | |||||||||
Total | 190,568,757 | 100.00 | 100.00 |
(1) | As shown above and used throughout this Annual Report, the term “Issued and Outstanding Shares” does not include any treasury shares held by the Company. Treasury shares, which are included in “Issued Shares”, have no voting, dividend or other rights under the Israeli Companies Law, as long as they are held by the Company (“dormant shares”). |
(2) | S.B. Israel Telecom, an affiliate of Saban Capital Group LLC, a private investment firm, based in Los Angeles, California, specializing in the media, entertainment and communications industries, is the registered owner of 49,862,800 shares in the Company’s share register. On November 11, 2019, S.B. Israel Telecom filed an amendment to its Schedule 13D with the SEC stating that it had no sole or shared voting or dispositive power over any shares of the Company, and that as a result of the Receiver Appointment (as defined in the filed amendment), as of November 12, 2019, the Reporting Persons (as defined in the filed amendment) ceased to beneficially own any ordinary shares of the Company. On November 12, 2019, the District Court of Tel Aviv issued a judicial order which appointed attorney Ehud Sol as receiver (the "Receiver") for all of the Company’s shares held by S.B. Israel Telecom. See "Item 3D.3a Approximately 27.12% of our issued and outstanding shares and voting rights are held by a receiver (under Israeli law), who might not act in the best interests of the Company or its shareholders." |
(3) | Phoenix Holdings Ltd., an Israeli corporation listed on the Tel Aviv Stock Exchange (“Phoenix”), and Excellence Investments Ltd., an Israeli corporation listed on the Tel Aviv Stock Exchange (“Excellence”), which is controlled by Phoenix, hold shares in the Company directly and through its wholly owned subsidiaries. (Phoenix, Excellence and their subsidiaries collectively, the “Phoenix-Excellence Group”). These holdings are held according to the following segmentation: 2,219,702 ordinary shares are held by Excellance Investments, Kesem trust funds, 1,102,000 ordinary shares are held by Provident funds and Management Companies of Provident funds; 853,045 ordinary shares are held by Excellence ETFs; 993,855 ordinary shares are held by Phoenix "Nostro" accounts; 21,000 ordinary shares are held by Phoenix Pension funds; 27,000 ordinary shares are held by Linked insurance policies of Phoenix; 9,489,728 ordinary shares are held by Partnership for Israeli shares. On March 17, 2021, Phoenix-Excellence Group advised the Company that subsequent to March 1, 2021, their interest has increased to 16,768,306 ordinary shares. 1,935,000 shares of the 16,768,306 shares held by the Phoenix-Excellence Group, representing approximately 1.058% of our Issued and Outstanding shares and total voting rights, are registered in the Company’s Shareholders Register as part of the shares held by Israeli founding shareholders from among our founding shareholders and their approved substitutes. For further information regarding required holdings by Israeli founding shareholders, see "Item 3D.1l Our cellular telephone license imposes certain obligations on our shareholders and restrictions on who can own our shares. Ensuring compliance with these obligations and restrictions may be outside our control. If the obligations or restrictions are not respected by our shareholders, we could be subject to significant monetary sanctions or lose our license.” |
(4) | Meitav Dash Investments Ltd., an Israeli corporation listed on the Tel Aviv Stock Exchange, holds shares in the Company directly and through its wholly owned subsidiaries (Meitav Dash and their subsidiaries collectively, the “Meitav Dash Group”). These holdings are held according to the following segmentation: 10,417,969 ordinary shares are held by Meitav Dash provident funds; 2,658,067 ordinary shares are held by Meitav Dash mutual funds; 1,536,317 ordinary shares are held by Meitav Dash portfolio management. On March 17, 2021, Meitav Dash Group advised the Company that subsequent to March 1, 2021, their interest has decreased to 14,552,713 ordinary shares. 1,313,911 shares of the 14,552,713 held by the Meitav Dash Group, representing approximately 0.719% of our Issued and Outstanding shares and total voting rights, are registered in the Company’s Shareholders Register as part of the shares held by Israeli founding shareholders from among our founding shareholders and their approved substitutes. |
(5) | Menora Mivtachim Holdings Ltd., an Israeli corporation listed on the Tel Aviv Stock Exchange, holds shares in the Company directly and through its subsidiaries (Menora Mivtachim Holdings Ltd. and their subsidiaries collectively, the “Menora Mivtachim Group”). These holdings are held according to the following segmentation: 1,384 ordinary shares are held by Menora holdings; 232,431 ordinary shares are held by "Nostro" insurance; 29,859 ordinary shares are held by "Nostro" Shomera; 13,259,068 ordinary shares are held by Menora Mivtachim Pension and Provident funds. On March 17, 2021, Menora Mivtachim Group advised the Company that subsequent to March 1, 2021, their interest has decreased to 13,571,742 ordinary shares. |
(6) | Harel Insurance Investments & Financial Services Ltd., an Israeli corporation listed on the Tel Aviv Stock Exchange, holds shares in the Company directly and through its subsidiaries (the "Harel Group"). These holdings are held according to the following segmentation: 479,190 ordinary shares are held by "Mivtach"; 593,379 ordinary shares are held by provident funds; 331,941 ordinary shares are held by "Nostro"; 2,557,063 ordinary shares are held by Harel Group mutual funds; and 8,983,737 ordinary shares are held by "Amitim". On March 18, 2021, Harel Group advised the Company that subsequent to March 1, 2021, their interest has decreased to 12,752,334 ordinary shares. 815,531 shares of the 12,572,334 held by Harel Insurance Company Ltd., representing approximately 0.446% of our Issued and Outstanding shares and total voting rights, are registered in the Company’s Shareholders Register as part of the shares held by Israeli founding shareholders from among our founding shareholders and their approved substitutes. |
(7) | Clal Insurance Company Ltd. an Israeli corporation listed on the Tel Aviv Stock Exchange, holds shares in the Company directly and through its subsidiaries. (Clal Insurance Company Ltd. and their subsidiaries collectively, the “Clal Group”). These holdings are held according to the following segmentation: 762,955 ordinary shares are held by "Nostro"; 306,840 ordinary shares are held by "Atudot"; 11,599,254 ordinary shares are held by Clal Israel Pension and Provident funds. |
(8) | Psagot Investment House, Ltd. an Israeli corporation listed on the Tel Aviv Stock Exchange, holds shares in the Company directly and through its subsidiaries. These holdings are held according to the following segmentation: 7,746,322 ordinary shares are held by Psagot Investment House pension and provident funds and 1,746,823 ordinary shares are held by Psagot Investment House trust funds. On March 16, 2021, the Psagot Investment House, Ltd. advised the Company that subsequent to March 1, 2021, their interest has increased to 9,626,009 ordinary shares. |
(9) | Treasury shares do not have a right to dividends or to vote. During 2008, the Company repurchased 4,467,990 of the Company's shares and during 2018, the Company repurchased an additional 6,501,588 of the Company's shares, as part of buy-back plans. Since March 1, 2020, the Company has allocated under the Company’s 2004 Amended and Restated Equity Incentive Plan, 322,946 restricted shares from the treasury shares to a trustee on behalf of the Company’s employees. See “Item 6E.2 EQUITY INCENTIVE PLAN”. |
(10) | The shares under “Public” include 6,254,995 shares held by Israeli founding shareholders from among our founding shareholders and their approved substitutes including 937,283 Israeli founding shareholders shares which were issued following a public issuance of the Company shares during January 2020 and were approved by the Ministry of Communications on March 16, 2020. These shares, together with 1,935,000 shares held by the Phoenix-Excellence Group and 1,313,911 shares held by the Meitav Dash Group, represent approximately 4.99% of our issued shares (approximately 5.17% of the Issued and Outstanding Shares). For further information regarding required holdings by Israeli founding shareholders, see "Item 3D.1l Our cellular telephone license imposes certain obligations on our shareholders and restrictions on who can own our shares. Ensuring compliance with these obligations and restrictions may be outside our control. If the obligations or restrictions are not respected by our shareholders, we could be subject to significant monetary sanctions or lose our license.” |
1. | On July 15, 2014, a claim and a motion to certify the claim as a class action were filed against the Company and against additional cellular operators and content providers. The claim alleges that the cellular operators, including the Company, breached legal provisions and provisions of their licenses and thereby created a platform that led to the customers’ damages alleged in the claim. The total amount claimed against all of the defendants is estimated by the applicant to be approximately NIS 300 million. The claim is still in its preliminary stage of the motion to be certified as a class action. |
2. | On November 12, 2015, a claim and a motion to certify the claim as a class action were filed against the Company. The claim alleges that Partner required their customers to purchase a Smartbox device which is terminal equipment as a condition for using its fixed-line telephony services, an action which would not be in accordance with the provisions of its licenses. The total amount claimed against Partner is estimated by the plaintiff to be approximately NIS 116 million. In February 2019, the Court approved the request to certify the claim as a class action with certain changes. In March 2019, the Company filed an appeal of this decision. In February 2020, the Supreme Court dismissed the appeal request that was filed and the claim was reverted back to the District Court and the proceedings have resumed. |
3. | On November 12, 2015, a claim and a motion to certify the claim as a class action were filed against 012 Smile. The claim alleges that 012 Smile required their customers to purchase a Smartbox device which is terminal equipment as a condition for using its fixed-line telephony services, an action which would not be in accordance with the provisions of its licenses. The total amount claimed against 012 Smile is estimated by the plaintiff to be approximately NIS 64 million. In February 2019, the Court approved the request to certify the claim as a class action with certain changes. In March 2019, the Company filed an appeal of this decision. In February 2020, the Supreme Court dismissed the appeal request that was filed and the claim was reverted back to the District Court and the proceedings have resumed. |
4. | On January 4, 2016, a claim and a motion to certify the claim as a class action were filed against the Company. The claim alleges that Partner charges its customers the full price of telecommunication packages that are intended for use abroad despite the fact that the packages are not fully utilized and does not allow customers to transfer the balance to the next trip abroad or to receive a credit for the balance. The total amount claimed against Partner is estimated by the applicant to be approximately NIS 234 million. In April 2020, the Court dismissed the case and in June 2020 the plaintiffs filed an appeal of this decision. |
5. | On November 20, 2016, a claim and a motion to certify the claim as a class action were filed against the Company. On February 17, 2021, the applicant filed an amended motion that claimed, among other things, that the Company breached legal provisions when it does not update its customers who purchased equipment from the Company in a credit transaction regarding the required interest rate and/or that it does not specify the cash price and/or that it notes an incorrect interest rate. The total amount claimed against Partner is estimated by the applicant to be approximately NIS 157.5 million. |
6. | On October 24, 2017, a claim and a motion to certify the claim as a class action were filed against the Company and another cellular operator. The claim alleges that Partner harms the privacy of its customers by unlawfully using their location data. The total amount claimed against Partner is estimated by the applicant to be approximately NIS 1 billion. The claim is still in its preliminary stage of the motion to be certified as a class action. |
7. | On September 15, 2020, a claim and a motion to certify the claim as a class action were filed against the Company. The claim alleges that the Company unlawfully sent advertisement messages to customers that did not agree to receive such messages. The claim also alleges that advertisement messages were sent without including the possibility for the recipients to remove themselves from the Company's mailing lists or did not include means of contacting the Company or did not clarify that this is an advertisement and that the recipients had a right to send a refusal to receive the message and that the Company continued to send advertisement messages to customers that requested to be removed from the mailing lists. The total amount claimed against the Company was not stated by the applicants (however the claim was estimated by the applicants to be over NIS 2.5 million). The claim is still in its preliminary stage of the motion to be certified as a class action. |
8. | On November 1, 2020, a claim and a motion to certify the claim as a class action were filed against the Company. The claim alleges that the Company unlawfully displays advertising POP UP messages before and during TV services constitute spam. The total amount claimed against the Company is estimated by the applicants to be approximately NIS 175 million. The claim is still in its preliminary stage of the motion to be certified as a class action. |
9. | On November 2, 2020, a claim and a motion to certify the claim as a class action were filed against the Company and two of its subsidiaries, 012 Smile Telecom Ltd. and 012 Telecom Ltd. as well as against another operator. The claim alleges that the Company as well as the other respondents charged its customers a fee for ISP service after they began receiving this service from another company and that the respondents did not provide the service in return for payment. The total amount claimed from the Company was estimated by the applicants to be approximately NIS 2.5 million (however the claim was estimated by the applicants to be tens of millions of Shekels). The claim is still in its preliminary stage of the motion to be certified as a class action. |
10. | On November 2, 2020, a claim and a motion to certify the claim as a class action were filed against the Company and 012 Telecom Ltd. The claim alleges that the Company charged its customers a fee for ISP service after they began receiving this service from another company and that the respondents did not provide the service in return for payment. The total amount claimed against the Company was not stated by the applicants (however the claim was estimated by the applicants to be over NIS 2.5 million). The claim is still in its preliminary stage of the motion to be certified as a class action. |
11. | On December 15, 2020, a claim and a motion to certify the claim as a class action were filed against the Company and 012 Smile Telecom Ltd. The claim alleges that the Company charged its customers a fee for anti-virus and/or anti- spam services for email boxes while they did not use these services and that the Company does not keep records of their requests to receive these services. The total amount claimed against the Company was not stated by the applicant (however the claim was estimated by the applicant to be over NIS 2.5 million). The claim is still in its preliminary stage of the motion to be certified as a class action. |
1. | On September 7, 2010, a claim and a motion to certify the claim as a class action were filed against the Company. The claim alleges that the Company unlawfully charges its customers for services of various content providers, which are sent through text messages (SMS). The total amount claimed from the Company was estimated by the plaintiffs to be approximately NIS 405 million. The claim was certified as a class action in December 2016. In January 2017, the plaintiffs filed an appeal to the Supreme Court, regarding the definition of the group of customers. In November 2018, the Supreme Court dismissed the appeal and the claim was reverted back to the District Court. In February 2020, a settlement agreement was filed with the Court. |
2. | On July 14, 2010, a claim and a motion to certify the claim as a class action were filed against the Company. The claim alleges that Partner is breaching its contractual and/or legal obligation and/or is acting negligently by charging V.A.T for roaming services that are consumed abroad. The applicant demands to return the total amount of V.A.T that was charged by Partner for roaming services that were consumed abroad. The applicant also pursued an injunction that will order Partner to stop charging VA.T for roaming services that are consumed abroad. In August 2014, the claim was dismissed and in October 2014, the applicant filed an appeal with the Supreme Court. The hearing was held in May 2016 before an expanded panel of seven judges and the Supreme Court accepted the appeal in July 2017 and dismissed the District Court's decisions. The claim was reverted back to the District Court. In March 2020, a settlement agreement was filed for the Court's approval. |
3. | On August 8, 2012, a claim and a motion to certify the claim as a class action were filed against 012 Smile and another Internet Service Provider. The claim alleges that the respondents breached certain provisions of their licenses by not offering their services at a unified tariff to the same type of customers. The total amount claimed against 012 Smile, if the lawsuit is certified as a class action, was not stated by the applicant. In December 2019, the Court dismissed the motion and in January 2020, an appeal was filed with the Supreme Court. Following a hearing held in the Supreme Court, the applicant filed a request to expunge their appeal and on February 16, 2021, the Court expunged their appeal. |
4. | On August 18, 2019, a claim and a motion to certify the claim as a class action were filed against the Company. The claim alleges that the Company unlawfully charges customers that terminate their engagement with the Company, for speakers and/or tablets and/or other accessories they received from the Company as gifts while they were subscribers of the Company, and at a full and excessive price. The total amount claimed against the Company if the lawsuit is recognized as a class action, was not stated by the applicant. The parties filed a withdrawal settlement which was approved by the Court in April 2020. |
5. | On November 17, 2019, a claim and a motion to certify the claim as a class action were filed against the Company and two additional cellular operators. The claim alleges that the Company, as well as the other respondents collected money from its customers for content services for third parties, by using the means of payment that were given to the Company for the purpose of the cellular invoice payment for content services, without receiving consent from these customers prior to the charge, and/or without having documentation with respect to the customers' consent, unlawfully and against its license provisions and/or without the Company first ensuring that the customers received a document that complies with the Consumer Protection Law regarding the specific transaction for which it intends to collect money from them. The total amount claimed from each of the respondents if the lawsuit is recognized as a class action is NIS 400 million in addition to compensation in the amount of NIS 500 for each one of the group members for non-monetary damages which were allegedly caused to them. The group on whose behalf the claim was filed is all Partner subscribers who made such payments from September 2003 until the date that Partner is found to have stopped charging customers for such content services (from this group a group of customers charged for certain content services were excluded in light of other court decisions). In December 2020, the applicants notified that they wish to withdraw from the proceedings and the Court has yet to rule on the matter. |
1. | On May 4, 2015, a claim and a motion to certify the claim as a class action were filed against the Company. The claim alleges, that Partner discriminated between its cellular customers, including between new customers and existing customers, by offering the same type of customers, different terms, an action which would not be in accordance with the provisions of its license. The applicant noted that it cannot estimate the total amount claimed in the lawsuit, if the lawsuit is certified as a class action. In December 2019, the Court dismissed the motion and in January 2020, an appeal was filed with the Supreme Court. |
2. | On April 21, 2016, a claim and a motion to certify the claim as a class action were filed against 012 Smile. The claim alleges that the infrastructure included in the 012 Smile's plans does not support data speeds that the Company publishes to its customers. The total amount claimed against the Company if the lawsuit is certified as a class action was not stated by the plaintiffs. In January 2021, the Court approved the request to certify the claim as a class action. |
3. | On September 11, 2016, a claim and a motion to certify the claim as a class action were filed against 012 Smile and two other international long distance operators. The claim alleges that the respondents charged excessive tariffs from occasional customers for each long distance call minute, contrary to the Telecommunications Law (Telecommunications and Broadcasting), that allows a licensee to charge reasonable payment for a telecommunication service that it provides. The total amount claimed against 012 Smile if the lawsuit is certified as a class action was not stated by the applicant. In July 2019, the Court dismissed the motion and in October 2019, an appeal was filed with the Supreme Court. |
4. | On September 24, 2017, a claim and a motion to certify the claim as a class action were filed against the Company and Partner Land-Line. The claim alleges that the infrastructure included in the Company's plan does not support data speeds that the Company publishes to its customers. The applicant noted that it cannot estimate the total amount claimed in the lawsuit, should the lawsuit be certified as a class action. The claim is still in its preliminary stage of the motion to be certified as a class action. |
5. | On August 6, 2018, a claim and a motion to certify the claim as a class action were filed against the Company and 012 Smile and at a later date, following a revision to the motion, also against Partner Land-Line. The claim alleges that the respondents unlawfully charge its customers different and higher rates for international calls that are not included in their tariff plans, than those set forth in its customer tariff chart on the 012 Smile website. The applicants noted that it cannot estimate the total amount claimed in the lawsuit, should the lawsuit be certified as a class action. The claim is still in its preliminary stage of the motion to be certified as a class action. |
6. | On April 11, 2019, a claim and a motion to certify the claim as a class action were filed against the Company and additional telecommunication service companies. The claim alleges that the Company, as well as the other respondents, breached their obligations under the law and their license and does not inform its customers as required regarding a free content filtering service and prioritizes a paid service over a free service and the filtering service does not meet the legal requirements and those of the license and is ineffective. The total amount claimed against the respondents if the lawsuit is recognized as a class action, was not stated by the applicants. The claim is still in its preliminary stage of the motion to be certified as a class action. |
7. | On July 4, 2019, a claim and a motion to certify the claim as a class action were filed against the Company and two additional cellular operators. The claim alleges that the Company charges its customers for voicemail service without receiving their prior express consent for this service and for its charge and without a contractual right. The total amount claimed against the respondents if the lawsuit is recognized as a class action, was not stated by the applicants. The claim is still in its preliminary stage of the motion to be certified as a class action. |
8. | On April 1, 2020, a claim and a motion to certify the claim as a class action were filed against the Company. The claim alleges that the Company unlawfully charges its customers for anti-virus services that without their consent. The total amount claimed from the Company was not stated by the applicant but was estimated by the applicant to be at least tens of millions of NIS. The claim is still in its preliminary stage of the motion to be certified as a class action. |
9. | On November 26, 2020, a claim and a motion to certify the claim as a class action were filed against the Company and three of its subsidiaries. The claim alleges that the Company unlawfully reduced the operating hours of its customer service centers. The total amount claimed against the Company if the lawsuit is recognized as a class action, was not stated by the applicants. The claim is still in its preliminary stage of the motion to be certified as a class action. |
10. | On January 25, 2021, a claim and a motion to certify the claim as a class action were filed against the Company. The claim alleges that the Company does not disclose interest rates to customers that purchase items in credit transactions prior to the conclusion of the transaction. The total amount claimed against the Company was not stated by the applicant (however the claim was estimated by the applicant to be over NIS 2.5 million). The claim is still in its preliminary stage of the motion to be certified as a class action. |
11. | On February 25, 2021, a claim and a motion to certify the claim as a class action were filed against the Company. The claim alleges, among others, that the Company provided its customers with TV service for viewing through a free application, as an ancillary benefit to other services and that the Company began charging customers for the TV service upon the cancellation of the ancillary service. The total amount claimed against the Company was not stated by the applicant (however the claim was estimated by the applicant to be over NIS 2.5 million). The claim is still in its preliminary stage of the motion to be certified as a class action. |
• | General. |
• | Taxation of Israeli Residents |
• | Taxation of Non-Israeli Residents |
• | Taxation of Investors Engaged in a Business of Trading Securities |
• | Withholding at Source from Capital Gains from Traded Securities |
• | a citizen or individual resident of the United States for US federal income tax purposes; |
• | a corporation (or an entity taxable as a corporation for US federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia; |
• | an estate whose income is subject to US federal income taxation regardless of its source; or |
• | a trust if (A) a US court is able to exercise primary supervision over the trust’s administration and (B) one or more US persons have the authority to control all of the trust’s substantial decisions. |
As of December 31, (NIS equivalent in millions, except percentages) | ||||||||||||||||
2019 | 2020 | |||||||||||||||
Fair Value | Book Value | Fair Value | Book Value | |||||||||||||
NIS-denominated debt linked to the CPI | ||||||||||||||||
Trade payables (1) | 17 | 17 | 29 | 29 | ||||||||||||
Lease liabilities | 619 | 613 | 699 | 699 | ||||||||||||
NIS-denominated debt not linked to the CPI | ||||||||||||||||
Long-term variable interest Notes payable series D due 2021 | 219 | 218 | 110 | 109 | ||||||||||||
Weighted average interest rate payable | 1.53 | % | 1.31 | % | ||||||||||||
Long-term fixed Notes payable series F due 2024 | 1,040 | 1,021 | 524 | 512 | ||||||||||||
Weighted average interest rate payable | 2.16 | % | 2.16 | % | ||||||||||||
Long-term fixed Notes payable series G due 2027 | 383 | 350 | 939 | 824 | ||||||||||||
Weighted average interest rate payable | 4 | % | 4 | % | ||||||||||||
Long-term borrowing bearing fixed interest | 90 | 89 | 60 | 59 | ||||||||||||
Weighted average interest rate payable | 2.38 | % | 2.38 | % | ||||||||||||
Long-term borrowing bearing fixed interest | 105 | 102 | 82 | 79 | ||||||||||||
Weighted average interest rate payable | 2.5 | % | 2.5 | % | ||||||||||||
Financial liability at fair value (1) | 28 | 28 | 4 | 4 | ||||||||||||
Debt denominated in foreign currencies (1) | ||||||||||||||||
Trade payables denominated in USD | 194 | 194 | 92 | 92 | ||||||||||||
Trade payables denominated in other foreign currencies (mainly Euro) | 12 | 12 | 11 | 11 | ||||||||||||
Lease liabilities denominated in USD | 4 | 4 | 3 | 3 | ||||||||||||
Total | 2,711 | 2,648 | 2,553 | 2,421 |
Change | Equity | Profit | ||||||||||
New Israeli Shekels in millions | ||||||||||||
December 31, 2020 | ||||||||||||
Increase in the USD of | 10 | % | (7 | ) | (7 | ) | ||||||
Decrease in the USD of | (10 | )% | 7 | 7 |
Change | Equity | Profit | ||||||||||
New Israeli Shekels in millions | ||||||||||||
December 31, 2020 | ||||||||||||
Increase in the CPI of | 2 | % | (2 | ) | (2 | ) | ||||||
Decrease in the CPI of | (2 | )% | 2 | 2 |
• | pertain to the maintenance of our records that in reasonable detail accurately and fairly reflect our transactions during the year; |
• | provide reasonable assurance that our transactions are recorded as necessary to permit the preparation of our financial statements in accordance with generally accepted accounting principles; |
• | provide reasonable assurance that our receipts and expenditures are made only in accordance with authorizations of our management and Board of Directors (as appropriate); and |
• | provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. |
2019 | 2020 | |||||||
(NIS thousands) | (NIS thousands) | |||||||
Audit Fees (1) | 2,200 | 2,220 | ||||||
Audit-related Fees (2) | 210 | 385 | ||||||
Tax Fees (3) | 491 | 448 | ||||||
TOTAL | 2,901 | 3,053 |
(1) | Audit Fees consist of fees billed for the annual audit services engagement and other audit services, which are those services that only the external auditor can reasonably provide, and include the group audit; statutory audits; comfort letters and consents; and assistance with and review of documents filed with the SEC. |
(2) | Audit-related Fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and include consultations concerning financial accounting and reporting standards, as well as the purchase of an accounting database. |
(3) | Tax Fees include fees billed for tax compliance services, including the preparation of tax returns and claims for tax refund; tax consultations, such as assistance and representation in connection with tax audits and appeals, and requests for rulings or technical advice from the taxing authority. |
Page | |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | F-3-F-4 |
CONSOLIDATED FINANCIAL STATEMENTS: | |
Statements of Financial Position | F5-F-6 |
Statements of Income | F-7 |
Statements of Comprehensive Income | F-8 |
Statements of Changes in Equity | F-9 |
Statements of Cash Flows | F-10-F-11 |
Notes to financial statements | F-12-F-87 |
**4.(a).9 | Lease Agreement with Mivnei Taasia dated July 2, 1998 | |
4.(a).14-60 | [Reserved] | |
+++4.(a).65 | [Reserved] | |
4.(a).68 | [Reserved] | |
>>>>4.(a).69 | [Reserved] | |
4.(a).70 | [Reserved] | |
4.(a).71 | [Reserved] | |
4.(a).74-97 | [Reserved] | |
>>>>4.(b).2 | [Reserved] | |
+>>>4.(b).3 | [Reserved] | |
+>>6. | See note 2x to the consolidated financial statements for information explaining how earnings (loss) per share information was calculated. | |
** | Incorporated by reference to our registration statement on Form F-1 (No. 333-10992). | |
++ | Incorporated by reference to our annual report on Form 20-F for the fiscal year ended December 31, 2002. | |
+++ | Incorporated by reference to our annual report on Form 20-F for the fiscal year ended December 31, 2003. | |
^ | Incorporated by reference to our annual report on Form 20-F for the fiscal year ended December 31, 2004. | |
^^ | Incorporated by reference to our registration statement on Form F-6 (No. 333-132680). | |
^^^ | Incorporated by reference to our annual report on Form 20-F for the fiscal year ended December 31, 2005. | |
^^^^ | Incorporated by reference to our registration statement on Form F-6 (No. 333-177621). | |
>> | Incorporated by reference to our annual report on Form 20-F for the fiscal year ended December 31, 2007. | |
>>>> | Incorporated by reference to our annual report on Form 20-F for the fiscal year ended December 31, 2009. | |
>>>>> | Incorporated by reference to our annual report on Form 20-F for the fiscal year ended December 31, 2010. | |
+> | Incorporated by reference to our annual report on Form 20-F for the fiscal year ended December 31, 2011. | |
+>> | Incorporated by reference to our annual report on Form 20-F for the fiscal year ended December 31, 2012. | |
+>>> | Incorporated by reference to our annual report on Form 20-F for the fiscal year ended December 31, 2013. | |
+>>>>> | Incorporated by reference to our annual report on Form 20-F for the fiscal year ended December 31, 2015. | |
++** | Incorporated by reference to our annual report on Form 20-F for the fiscal year ended December 31, 2016 | |
# | Confidential treatment requested. |
Partner Communications Company Ltd. | ||
By: /s/ Isaac Benbenisti | ||
Isaac Benbenisti | ||
Chief Executive Officer | ||
March 25, 2021 | ||
By: /s/ Tamir Amar | ||
Tamir Amar | ||
Chief Financial Officer | ||
March 25, 2021 |
PARTNER COMMUNICATIONS COMPANY LTD.
Page | |
F - 3 - F - 4 | |
CONSOLIDATED FINANCIAL STATEMENTS: | |
F - 5 - F - 6 | |
F - 7 | |
F - 8 | |
F - 9 | |
F - 10 - F - 11 | |
F - 12 - F - 87 |
New Israeli Shekels | Convenience translation into U.S. dollars (note 2b3) | |||||||||||||||
December 31, | ||||||||||||||||
2019 | 2020 | 2020 | ||||||||||||||
Note | In millions | |||||||||||||||
CURRENT ASSETS | ||||||||||||||||
Cash and cash equivalents | 299 | 376 | 117 | |||||||||||||
Short-term deposits | 6 | 552 | 411 | 128 | ||||||||||||
Trade receivables | 7 | 624 | 560 | 174 | ||||||||||||
Other receivables and prepaid expenses | 39 | 46 | 14 | |||||||||||||
Deferred expenses – right of use | 12 | 26 | 26 | 8 | ||||||||||||
Inventories | 8 | 124 | 77 | 24 | ||||||||||||
1,664 | 1,496 | 465 | ||||||||||||||
NON CURRENT ASSETS | ||||||||||||||||
Long-term deposits | 6 | 155 | 48 | |||||||||||||
Trade receivables | 7 | 250 | 232 | 72 | ||||||||||||
Deferred expenses – right of use | 12 | 102 | 118 | 37 | ||||||||||||
Lease – right of use | 19 | 582 | 663 | 206 | ||||||||||||
Property and equipment | 10 | 1,430 | 1,495 | 465 | ||||||||||||
Intangible and other assets | 11 | 538 | 521 | 162 | ||||||||||||
Goodwill | 13 | 407 | 407 | 127 | ||||||||||||
Deferred income tax asset | 25 | 41 | 29 | 9 | ||||||||||||
Prepaid expenses and other assets | 1 | 9 | 3 | |||||||||||||
3,351 | 3,629 | 1,129 | ||||||||||||||
TOTAL ASSETS | 5,015 | 5,125 | 1,594 |
Isaac Benbenishti | Tamir Amar | Barry Ben-Zeev (Woolfson) | ||
Chief Executive Officer | Chief Financial Officer & | Director | ||
VP Fiber-Optics |
PARTNER COMMUNICATIONS COMPANY LTD.
New Israeli Shekels | Convenience translation into U.S. dollars (note 2b3) | |||||||||||||||
December 31, | ||||||||||||||||
2019 | 2020 | 2020 | ||||||||||||||
Note | In millions | |||||||||||||||
CURRENT LIABILITIES | ||||||||||||||||
Current maturities of notes payable and borrowings | 6,15 | 367 | 290 | 90 | ||||||||||||
Trade payables | 716 | 666 | 207 | |||||||||||||
Payables in respect of employees | 103 | 58 | 18 | |||||||||||||
Other payables (mainly institutions) | 23 | 29 | 9 | |||||||||||||
Income tax payable | 30 | 27 | 8 | |||||||||||||
Lease liabilities | 19 | 131 | 120 | 37 | ||||||||||||
Deferred revenues from HOT mobile | 9,22 | 31 | 31 | 10 | ||||||||||||
Other deferred revenues | 22 | 45 | 100 | 31 | ||||||||||||
Provisions | 14 | 43 | 13 | 4 | ||||||||||||
1,489 | 1,334 | 414 | ||||||||||||||
NON CURRENT LIABILITIES | ||||||||||||||||
Notes payable | 6,15 | 1,275 | 1,219 | 379 | ||||||||||||
Borrowings from banks | 6,15 | 138 | 86 | 27 | ||||||||||||
Financial liability at fair value | 6,15 | 28 | 4 | 1 | ||||||||||||
Liability for employee rights upon retirement, net | 16 | 43 | 42 | 13 | ||||||||||||
Lease liabilities | 19 | 486 | 582 | 181 | ||||||||||||
Deferred revenues from HOT mobile | 9,22 | 102 | 71 | 22 | ||||||||||||
Provisions and other non-current liabilities | 14,22 | 37 | 64 | 21 | ||||||||||||
2,109 | 2,068 | 644 | ||||||||||||||
TOTAL LIABILITIES | 3,598 | 3,402 | 1,058 | |||||||||||||
EQUITY | 21 | |||||||||||||||
Share capital – ordinary shares of NIS 0.01 par value: | ||||||||||||||||
authorized – December 31, 2019 and 2020 – 235,000,000 | ||||||||||||||||
shares; issued and outstanding - | 2 | 2 | 1 | |||||||||||||
December 31, 2019 – *162,915,990 shares | ||||||||||||||||
December 31, 2020 – *182,826,973 shares | ||||||||||||||||
Capital surplus | 1,077 | 1,311 | 408 | |||||||||||||
Accumulated retained earnings | 576 | 606 | 188 | |||||||||||||
Treasury shares, at cost – | ||||||||||||||||
December 31, 2019 – **8,275,837 shares | ||||||||||||||||
December 31, 2020 – **7,741,784 shares | (238 | ) | (196 | ) | (61 | ) | ||||||||||
TOTAL EQUITY | 1,417 | 1,723 | 536 | |||||||||||||
TOTAL LIABILITIES AND EQUITY | 5,015 | 5,125 | 1,594 |
Convenience | ||||||||||||||||||||
translation | ||||||||||||||||||||
into U.S. dollars | ||||||||||||||||||||
New Israeli Shekels | (note 2b3) | |||||||||||||||||||
Year ended December 31, | ||||||||||||||||||||
2018** | 2019 | 2020 | 2020 | |||||||||||||||||
Note | In millions (except earnings per share) | |||||||||||||||||||
Revenues, net | 5,22 | 3,259 | 3,234 | 3,189 | 992 | |||||||||||||||
Cost of revenues | 5,22 | 2,700 | 2,707 | 2,664 | 829 | |||||||||||||||
Gross profit | 559 | 527 | 525 | 163 | ||||||||||||||||
Selling and marketing expenses | 22 | 293 | 301 | 291 | 90 | |||||||||||||||
General and administrative expenses | 22 | 148 | 149 | 145 | 45 | |||||||||||||||
Credit losses | 7 | 30 | 18 | 23 | 7 | |||||||||||||||
Other income, net | 23 | 28 | 28 | 30 | 9 | |||||||||||||||
Operating profit | 116 | 87 | 96 | 30 | ||||||||||||||||
Finance income | 24 | 2 | 7 | 8 | 2 | |||||||||||||||
Finance expenses | 24 | 55 | 75 | 77 | 24 | |||||||||||||||
Finance costs, net | 24 | 53 | 68 | 69 | 22 | |||||||||||||||
Profit before income tax | 63 | 19 | 27 | 8 | ||||||||||||||||
Income tax expenses | 25 | 7 | * | 10 | 3 | |||||||||||||||
Profit for the year | 56 | 19 | 17 | 5 | ||||||||||||||||
Attributable to: | ||||||||||||||||||||
Owners of the Company | 57 | 19 | 17 | 5 | ||||||||||||||||
Non-controlling interests | (1 | ) | * | |||||||||||||||||
Profit for the year | 56 | 19 | 17 | 5 | ||||||||||||||||
Earnings per share | ||||||||||||||||||||
Basic | 27 | 0.34 | 0.12 | 0.09 | 0.03 | |||||||||||||||
Diluted | 27 | 0.34 | 0.12 | 0.09 | 0.03 |
New Israeli Shekels | Convenience translation into U.S. dollars (note 2b3) | |||||||||||||||||||
Year ended December 31, | ||||||||||||||||||||
2018** | 2019 | 2020 | 2020 | |||||||||||||||||
Note | In millions | |||||||||||||||||||
Profit for the year | 56 | 19 | 17 | 5 | ||||||||||||||||
Other comprehensive income, items | ||||||||||||||||||||
that will not be reclassified to profit or loss | ||||||||||||||||||||
Remeasurements of post-employment benefit | ||||||||||||||||||||
obligations | 16 | 1 | (2 | ) | 1 | * | ||||||||||||||
Income taxes relating to remeasurements of | ||||||||||||||||||||
post-employment benefit obligations | 25 | * | * | * | * | |||||||||||||||
Other comprehensive income (loss) | ||||||||||||||||||||
for the year, net of income taxes | 1 | (2 | ) | 1 | * | |||||||||||||||
TOTAL COMPREHENSIVE INCOME | ||||||||||||||||||||
FOR THE YEAR | 57 | 17 | 18 | 5 | ||||||||||||||||
Total comprehensive income attributable to: | ||||||||||||||||||||
Owners of the Company | 58 | 17 | 18 | 5 | ||||||||||||||||
Non-controlling interests | (1 | ) | * | |||||||||||||||||
TOTAL COMPREHENSIVE INCOME FOR THE YEAR | 57 | 17 | 18 | 5 |
Share capital | Non-controlling | |||||||||||||||||||||||||||||||
Number of | Capital | Accumulated | Treasury | |||||||||||||||||||||||||||||
Shares** | Amount | surplus | earnings | shares | Total | interests | Total equity | |||||||||||||||||||||||||
NIS In millions | ||||||||||||||||||||||||||||||||
New Israeli Shekels: | ||||||||||||||||||||||||||||||||
BALANCE AT JANUARY 1, 2018 | 168,243,913 | 2 | 1,164 | 491 | (223 | ) | 1,434 | 1,434 | ||||||||||||||||||||||||
CHANGES DURING THE YEAR ENDED DECEMBER 31, 2018 | ||||||||||||||||||||||||||||||||
Profit for the year | 56 | 56 | (1 | ) | 55 | |||||||||||||||||||||||||||
Other comprehensive income for the year, net of income taxes | 1 | 1 | 1 | |||||||||||||||||||||||||||||
Exercise of options and vesting of restricted shares granted to employees | 886,072 | (62 | ) | 62 | ||||||||||||||||||||||||||||
Employee share-based compensation expenses | 15 | 15 | 15 | |||||||||||||||||||||||||||||
Acquisition of treasury shares (note 21) | (6,501,588 | ) | (100 | ) | (100 | ) | (100 | ) | ||||||||||||||||||||||||
Non-controlling interests on acquisition of subsidiary | 1 | 1 | ||||||||||||||||||||||||||||||
BALANCE AT DECEMBER 31, 2018 | 162,628,397 | 2 | 1,102 | 563 | (261 | ) | 1,406 | * | 1,406 | |||||||||||||||||||||||
Adoption of IFRS 16 (notes 2 and 19) | (21 | ) | (21 | ) | (21 | ) | ||||||||||||||||||||||||||
BALANCE AT JANUARY 1, 2019 | 162,628,397 | 2 | 1,102 | 542 | (261 | ) | 1,385 | * | 1,385 | |||||||||||||||||||||||
CHANGES DURING THE YEAR ENDED DECEMBER 31, 2019 | ||||||||||||||||||||||||||||||||
Profit for the year | 19 | 19 | * | 19 | ||||||||||||||||||||||||||||
Other comprehensive loss for the year, net of income taxes | (2 | ) | (2 | ) | (2 | ) | ||||||||||||||||||||||||||
Exercise of options and vesting of restricted shares granted to employees | 287,593 | (23 | ) | 23 | ||||||||||||||||||||||||||||
Employee share-based compensation expenses | 17 | 17 | 17 | |||||||||||||||||||||||||||||
Transactions with non-controlling interests | (2 | ) | (2 | ) | * | (2 | ) | |||||||||||||||||||||||||
BALANCE AT DECEMBER 31, 2019 | 162,915,990 | 2 | 1,077 | 576 | (238 | ) | 1,417 | - | 1,417 | |||||||||||||||||||||||
CHANGES DURING THE YEAR ENDED DECEMBER 31, 2020 | ||||||||||||||||||||||||||||||||
Profit for the year | 17 | 17 | 17 | |||||||||||||||||||||||||||||
Other comprehensive income for the year, net of income taxes | 1 | 1 | 1 | |||||||||||||||||||||||||||||
Issuance of shares to shareholders (see note 21) | 19,330,183 | * | 276*** | 276 | 276 | |||||||||||||||||||||||||||
Exercise of options and vesting of restricted shares granted to employees | 580,800 | (42 | ) | 42 | ||||||||||||||||||||||||||||
Employee share-based compensation expenses | 12 | 12 | 12 | |||||||||||||||||||||||||||||
BALANCE AT DECEMBER 31, 2020 | 182,826,973 | 2 | 1,311 | 606 | (196 | ) | 1,723 | - | 1,723 | |||||||||||||||||||||||
Convenience translation into U.S. Dollars (note 2b3): | ||||||||||||||||||||||||||||||||
BALANCE AT JANUARY 1, 2020 | 162,915,990 | 1 | 335 | 179 | (74 | ) | 441 | - | 441 | |||||||||||||||||||||||
CHANGES DURING THE YEAR ENDED DECEMBER 31, 2020 | ||||||||||||||||||||||||||||||||
Profit for the year | 5 | 5 | 5 | |||||||||||||||||||||||||||||
Other comprehensive income for the year, net of income taxes | * | * | * | |||||||||||||||||||||||||||||
Issuance of shares to shareholders (see note 21) | 19,330,183 | * | 86*** | 86 | 86 | |||||||||||||||||||||||||||
Exercise of options and vesting of restricted shares granted to employees | 580,800 | (13 | ) | 13 | ||||||||||||||||||||||||||||
Employee share-based compensation expenses | 4 | 4 | 4 | |||||||||||||||||||||||||||||
BALANCE AT DECEMBER 31, 2020 | 182,826,973 | 1 | 408 | 188 | (61 | ) | 536 | - | 536 |
New Israeli Shekels | Convenience translation into U.S. dollars (note 2b3) | |||||||||||||||||||
Year ended December 31, | ||||||||||||||||||||
2018** | 2019 | 2020 | 2020 | |||||||||||||||||
Note | In millions | |||||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||||||
Cash generated from operations (Appendix) | 627 | 838 | 787 | 244 | ||||||||||||||||
Income tax paid | 25 | (2 | ) | (1 | ) | (1 | ) | * | ||||||||||||
Net cash provided by operating activities | 625 | 837 | 786 | 244 | ||||||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||||||
Acquisition of property and equipment | (343 | ) | (462 | ) | (409 | ) | (127 | ) | ||||||||||||
Acquisition of intangible and other assets | (159 | ) | (167 | ) | (164 | ) | (51 | ) | ||||||||||||
Acquisition of a business, net of cash acquired | (3 | ) | ||||||||||||||||||
Proceeds from (investment in) deposits, net | 150 | (552 | ) | (14 | ) | (4 | ) | |||||||||||||
Interest received | 24 | 1 | 1 | 6 | 2 | |||||||||||||||
Consideration received from sales of property and equipment | 23 | 3 | 2 | * | * | |||||||||||||||
Payment for acquisition of subsidiary, net of cash acquired | (3 | ) | ||||||||||||||||||
Net cash used in investing activities | (351 | ) | (1,181 | ) | (581 | ) | (180 | ) | ||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||||||
Lease principal payments | 19 | (139 | ) | (129 | ) | (40 | ) | |||||||||||||
Lease interest payments | 19 | (20 | ) | (18 | ) | (6 | ) | |||||||||||||
Share issuance, net of issuance costs | 21 | 276 | 86 | |||||||||||||||||
Acquisition of treasury shares | 21 | (100 | ) | |||||||||||||||||
Proceeds from issuance of notes payable, net of issuance costs | 6,15 | 150 | 562 | 466 | 145 | |||||||||||||||
Proceeds from issuance of option warrants exercisable for notes payables | 15 | 37 | ||||||||||||||||||
Interest paid | 24 | (69 | ) | (37 | ) | (49 | ) | (15 | ) | |||||||||||
Repayment of non-current borrowings | 15 | (382 | ) | (52 | ) | (52 | ) | (16 | ) | |||||||||||
Repayment of current borrowings | (13 | ) | ||||||||||||||||||
Repayment of notes payable | 15 | (324 | ) | (109 | ) | (620 | ) | (193 | ) | |||||||||||
Settlement of contingent consideration | (2 | ) | (1 | ) | ||||||||||||||||
Transactions with non-controlling interests | (2 | ) | ||||||||||||||||||
Net cash provided by (used in) financing activities | (725 | ) | 227 | (128 | ) | (40 | ) | |||||||||||||
INCREASE (DECREASE) IN CASH AND CASH | ||||||||||||||||||||
EQUIVALENTS | (451 | ) | (117 | ) | 77 | 24 | ||||||||||||||
CASH AND CASH EQUIVALENTS AT BEGINNING | ||||||||||||||||||||
OF YEAR | 867 | 416 | 299 | 93 | ||||||||||||||||
CASH AND CASH EQUIVALENTS AT END OF | ||||||||||||||||||||
YEAR | 416 | 299 | 376 | 117 |
New Israeli Shekels | Convenience translation into U.S. dollars (note 2b3) | |||||||||||||||||||
Year ended December 31, | ||||||||||||||||||||
2018** | 2019 | 2020 | 2020 | |||||||||||||||||
Note | In millions | |||||||||||||||||||
Cash generated from operations: | ||||||||||||||||||||
Profit for the year | 56 | 19 | 17 | 5 | ||||||||||||||||
Adjustments for: | ||||||||||||||||||||
Depreciation and amortization | 10,11 | 545 | 723 | 683 | 212 | |||||||||||||||
Amortization of deferred expenses - Right of use | 12 | 47 | 28 | 31 | 10 | |||||||||||||||
Employee share based compensation expenses | 21 | 15 | 17 | 12 | 4 | |||||||||||||||
Liability for employee rights upon retirement, net | 16 | 1 | 1 | (1 | ) | * | ||||||||||||||
Finance costs, net | 24 | (7 | ) | 5 | (2 | ) | (1 | ) | ||||||||||||
Lease interest payments | 19 | 20 | 18 | 6 | ||||||||||||||||
Interest paid | 24 | 69 | 37 | 49 | 15 | |||||||||||||||
Interest received | 24 | (1 | ) | (1 | ) | (6 | ) | (2 | ) | |||||||||||
Deferred income taxes | 25 | 16 | 4 | 12 | 4 | |||||||||||||||
Income tax paid | 25 | 2 | 1 | 1 | * | |||||||||||||||
Capital loss from property and equipment | * | (2 | ) | * | * | |||||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||||||
Decrease (increase) in accounts receivable: | ||||||||||||||||||||
Trade | 7 | 124 | 42 | 82 | 26 | |||||||||||||||
Other | 16 | (1 | ) | (6 | ) | (2 | ) | |||||||||||||
Increase (decrease) in accounts payable and accruals: | ||||||||||||||||||||
Trade | (69 | ) | 63 | (57 | ) | (18 | ) | |||||||||||||
Other payables | (18 | ) | 12 | (37 | ) | (12 | ) | |||||||||||||
Provisions | 14 | (11 | ) | (21 | ) | (30 | ) | (9 | ) | |||||||||||
Deferred revenues from HOT mobile | 9 | (31 | ) | (31 | ) | (31 | ) | (10 | ) | |||||||||||
Other deferred revenues | * | 4 | 55 | 17 | ||||||||||||||||
Increase in deferred expenses - Right of use | 12 | (107 | ) | (51 | ) | (47 | ) | (15 | ) | |||||||||||
Current income tax | 25 | (15 | ) | (5 | ) | (3 | ) | (1 | ) | |||||||||||
Decrease (increase) in inventories | 8 | (5 | ) | (26 | ) | 47 | 15 | |||||||||||||
Cash generated from operations: | 627 | 838 | 787 | 244 |
(1) | Expected credit losses – see note 7(b). |
(2) | Impairment tests - see note 13(2). |
(3) | Other critical accounting estimates and judgments: the Company reviewed its other critical accounting estimates and judgments and determined that they were not materially affected, see note 4. |
Type of services | Area of service | License owner | Granted by | License valid through | Guarantees made (NIS millions) | |
(1) | Cellular | Israel | Partner Communications Company Ltd. | MOC | Feb, 2022 | 21* |
(2) | Cellular | West Bank | Partner Communications Company Ltd. | CA | Feb, 2022 | 4 |
(3) | Cellular infrastructure | Israel | P.H.I Networks (2015) Lp. | MOC | Aug, 2025 | |
(4) | ISP | Israel | Partner Communications Company Ltd. | MOC | Mar, 2023 | |
(5) | ISP | West Bank | Partner Communications Company Ltd. | CA | Mar, 2023 | |
(6) | Fixed (incl. ISP, ILD, NTP) | Israel | Partner Land-line Communication Solutions - Limited Partnership | MOC | Jan, 2027 | 2 |
(7) | Fixed (incl. ISP, ILD, NTP) | West Bank | Partner Land-line Communication Solutions - Limited Partnership | CA | Jan, 2027 | 0.25 |
a. | Basis of preparation of the financial statements |
(1) | Basis of preparation |
(2) | Use of estimates and judgments |
b. | Foreign currency translations |
c. | Interests in other entities |
◾ | 012 Smile Telecom Ltd. |
◾ | 012 Telecom Ltd. |
◾ | Partner Land-Line Communication Solutions - Limited Partnership |
◾ | Partner Future Communications 2000 Ltd. ("PFC") |
◾ | Get Cell Communication Products Limited Partnership |
◾ | Partner Business Communications Solution - Limited Partnership – not active |
◾ | Iconz Holdings Ltd. |
d. | Inventories |
e. | Property and equipment |
e. | Property and equipment (continued) |
years | |
Communications network: | |
Physical layer and infrastructure | 10 - 25 (mainly 15, 10) |
Other Communication network | 3 - 15 (mainly 5, 10, 15) |
Computers, software and hardware for | |
information systems | 3-10 (mainly 3-5) |
Office furniture and equipment | 7-15 |
Optic fibers and related assets | 7-25 (mainly 25) |
Subscribers equipment and installations | 2 - 5 |
Property | 25 |
f. | Licenses and other intangible assets |
(1) | Licenses costs and amortization (see also note 1(c)): |
(a) | The licenses to operate cellular communication services were recognized at cost. Borrowing costs which served to finance the license fee - incurred until the commencement of utilization of the license - were capitalized to cost of the license. |
(b) | Partner Land-line Communication solutions – limited partnership's license for providing fixed-line communication services is stated at cost. |
f. | Licenses and other intangible assets (continued) |
(2) | Computer software: |
(3) | Customer relationships: |
(4) | Capitalization of costs to obtaining customers contracts: |
g. | Deferred expenses - Right Of Use (ROU) |
h. | Goodwill |
i. | Impairment tests of non-financial assets with finite useful economic lives |
j. | Financial instruments |
(1) | FVTPL category: |
k. | Employee benefits |
1. | Defined contribution plan |
l. | Share based payments |
m. | Provisions |
(1) | In the ordinary course of business, the Group is involved in a number of lawsuits and litigations. The costs that may result from these lawsuits are only accrued for when it is probable that a liability, resulting from past events, will be incurred and the amount of that liability can be quantified or estimated within a reasonable range. The amount of the provisions recorded is based on a case-by-case assessment of the risk level, and events arising during the course of legal proceedings that may require a reassessment of this risk, and where applicable discounted at a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the liability. The Group's assessment of risk is based both on the advice of legal counsel and on the Group's estimate of the probable settlements amount that are expected to be incurred, if any. See also note 20. |
(2) | The Company is required to incur certain costs in respect of a liability to dismantle and remove assets and to restore sites on which the assets were located. The dismantling costs are calculated according to best estimate of future expected payments discounted at a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognized as finance costs. |
(3) | Provisions for equipment warranties include obligations to customers in respect of equipment sold. Where there are a number of similar obligations, the likelihood that an outflow will be required in a settlement is determined by considering the class of obligations as a whole. A provision is recognized even if the likelihood of an outflow with respect to any item included in the same class of obligations may be small. |
n. | Revenues |
1) | Identifying the contract with the customer. |
2) | Identifying separate performance obligations in the contract. |
3) | Determining the transaction price. |
4) | Allocating the transaction price to separate performance obligations. |
5) | Recognizing revenue when the performance obligations are satisfied. |
(a) | Goods or services (or a bundle of goods or services) that are distinct; or |
(b) | A series of distinct goods or services that are substantially the same and have the same pattern of transfer to the customer. |
o. | Leases |
• | Non-lease components: practical expedient by class of underlying asset not to separate non-lease components (services) from lease components and, instead, account for each lease component and any associated non lease components as a single lease component. |
• | Discount rate: The lease payments are discounted using the lessee’s incremental borrowing rate, since the interest rate implicit in the lease cannot be readily determined. The lessee’s incremental borrowing rate is the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions. However, the Group is using the practical expedient of accounting together a portfolio of leases with similar characteristics provided that it is reasonably expected that the effects on the financial statements of applying this standard to the portfolio would not differ materially from applying this Standard to the individual leases within that portfolio. And using a single discount rate to a portfolio of leases with reasonably similar characteristics (such as leases with a similar remaining lease term for a similar class of underlying asset in a similar economic environment). The discount rates were estimated by management with the assistance of an independent external expert. |
• | Low-value leases: The low-value leases practical expedient is applied and these leases are recognized on a straight-line basis as expense in profit or loss. |
• | fixed payments (including in-substance fixed payments), less any lease incentives receivable |
• | variable lease payment that are based on an index or a rate (such as CPI) |
• | amounts expected to be payable by the lessee under residual value guarantees |
• | the exercise price of a purchase option if the lessee is reasonably certain to exercise that option |
• | payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option, and |
• | lease payments (principal and interest) to be made under reasonably certain extension options |
• | the amount of the initial measurement of lease liability |
• | any lease payments made at or before the commencement date less any lease incentives received |
• | any initial direct costs (except for initial application), and |
• | restoration costs |
p. | Tax expenses |
q. | Share capital |
r. | Earnings Per Share (EPS) |
s. | Government grants |
| (1) | Assessing the useful lives of non-financial assets: |
March 31, 2020 | |
Terminal growth rate | 1.0% |
After-tax discount rate | 8.25% |
Pre-tax discount rate | 9.9% |
Terminal growth rate | 1.0 | % | ||
After-tax discount rate | 7.5 | % | ||
Pre-tax discount rate | 9.0 | % |
(4) | Assessing impairment of financial assets: |
(5) | Considering the likelihood of contingent losses and quantifying possible legal settlements: |
New Israeli Shekels | ||||||||||||||||
Year ended December 31, 2020 | ||||||||||||||||
In millions | ||||||||||||||||
Cellular segment | Fixed-line segment | Elimination | Consolidated | |||||||||||||
Segment revenue - Services | 1,647 | 861 | 2,508 | |||||||||||||
Inter-segment revenue - Services | 16 | 132 | (148 | ) | ||||||||||||
Segment revenue - Equipment | 545 | 136 | 681 | |||||||||||||
Total revenues | 2,208 | 1,129 | (148 | ) | 3,189 | |||||||||||
Segment cost of revenues - Services | 1,272 | 856 | 2,128 | |||||||||||||
Inter-segment cost of revenues- Services | 131 | 17 | (148 | ) | ||||||||||||
Segment cost of revenues - Equipment | 451 | 85 | 536 | |||||||||||||
Cost of revenues | 1,854 | 958 | (148 | ) | 2,664 | |||||||||||
Gross profit | 354 | 171 | 525 | |||||||||||||
Operating expenses (3) | 300 | 159 | 459 | |||||||||||||
Other income, net | 19 | 11 | 30 | |||||||||||||
Operating profit | 73 | 23 | 96 | |||||||||||||
Adjustments to presentation of segment | ||||||||||||||||
Adjusted EBITDA | ||||||||||||||||
–Depreciation and amortization | 450 | 264 | ||||||||||||||
–Other (1) | 10 | 2 | ||||||||||||||
Segment Adjusted EBITDA (2) | 533 | 289 |
New Israeli Shekels | ||||
Year ended December 31, 2020 | ||||
In millions | ||||
Reconciliation of segments subtotal Adjusted EBITDA to profit for the year | ||||
Segments subtotal Adjusted EBITDA (2) | 822 | |||
Depreciation and amortization | (714 | ) | ||
Finance costs, net | (69 | ) | ||
Income tax expenses | (10 | ) | ||
Other (1) | (12 | ) | ||
Profit for the year | 17 |
New Israeli Shekels | ||||||||||||||||
Year ended December 31, 2019 | ||||||||||||||||
In millions | ||||||||||||||||
Cellular segment | Fixed-line segment | Elimination | Consolidated | |||||||||||||
Segment revenue - Services | 1,783 | 777 | 2,560 | |||||||||||||
Inter-segment revenue - Services | 15 | 148 | (163 | ) | ||||||||||||
Segment revenue - Equipment | 571 | 103 | 674 | |||||||||||||
Total revenues | 2,369 | 1,028 | (163 | ) | 3,234 | |||||||||||
Segment cost of revenues - Services | 1,367 | 810 | 2,177 | |||||||||||||
Inter-segment cost of revenues- Services | 147 | 16 | (163 | ) | ||||||||||||
Segment cost of revenues - Equipment | 464 | 66 | 530 | |||||||||||||
Cost of revenues | 1,978 | 892 | (163 | ) | 2,707 | |||||||||||
Gross profit | 391 | 136 | 527 | |||||||||||||
Operating expenses (3) | 334 | 134 | 468 | |||||||||||||
Other income, net | 20 | 8 | 28 | |||||||||||||
Operating profit | 77 | 10 | 87 | |||||||||||||
Adjustments to presentation of segment | ||||||||||||||||
Adjusted EBITDA | ||||||||||||||||
–Depreciation and amortization | 542 | 209 | ||||||||||||||
–Other (1) | 16 | (1 | ) | |||||||||||||
Segment Adjusted EBITDA (2) | 635 | 218 |
New Israeli Shekels | ||||
Year ended December 31, 2019 | ||||
In millions | ||||
Reconciliation of segments subtotal Adjusted EBITDA to profit for the year | ||||
Segments subtotal Adjusted EBITDA (2) | 853 | |||
Depreciation and amortization | (751 | ) | ||
Finance costs, net | (68 | ) | ||
Income tax expenses | * | |||
Other (1) | (15 | ) | ||
Profit for the year | 19 |
New Israeli Shekels | ||||||||||||||||
Year ended December 31, 2018* | ||||||||||||||||
In millions | ||||||||||||||||
Cellular segment | Fixed-line segment | Elimination | Consolidated | |||||||||||||
Segment revenue - Services | 1,827 | 697 | 2,524 | |||||||||||||
Inter-segment revenue - Services | 16 | 155 | (171 | ) | ||||||||||||
Segment revenue - Equipment | 643 | 92 | 735 | |||||||||||||
Total revenues | 2,486 | 944 | (171 | ) | 3,259 | |||||||||||
Segment cost of revenues - Services | 1,435 | 696 | 2,131 | |||||||||||||
Inter-segment cost of revenues- Services | 154 | 17 | (171 | ) | ||||||||||||
Segment cost of revenues - Equipment | 509 | 60 | 569 | |||||||||||||
Cost of revenues | 2,098 | 773 | (171 | ) | 2,700 | |||||||||||
Gross profit | 388 | 171 | 559 | |||||||||||||
Operating expenses (3) | 343 | 128 | 471 | |||||||||||||
Other income, net | 23 | 5 | 28 | |||||||||||||
Operating profit | 68 | 48 | 116 | |||||||||||||
Adjustments to presentation of segment | ||||||||||||||||
Adjusted EBITDA | ||||||||||||||||
–Depreciation and amortization | 442 | 150 | ||||||||||||||
–Other (1) | 14 | |||||||||||||||
Segment Adjusted EBITDA (2) | 524 | 198 |
New Israeli Shekels | ||||
Year ended December 31, 2018 | ||||
In millions | ||||
Reconciliation of segments subtotal Adjusted EBITDA to profit for the year | ||||
Segments subtotal Adjusted EBITDA (2) | 722 | |||
Depreciation and amortization | (592 | ) | ||
Finance costs, net | (53 | ) | ||
Income tax expenses | (7 | ) | ||
Other (1) | (14 | ) | ||
Profit for the year | 56 |
(1) | Mainly amortization of employee share based compensation. |
(2) | Adjusted EBITDA as reviewed by the CODM represents Earnings before Interest (finance costs, net), Taxes, Depreciation and Amortization (including amortization of intangible assets, deferred expenses-right of use and impairment charges) and Other expenses (mainly amortization of share based compensation). Adjusted EBITDA is not a financial measure under IFRS and may not be comparable to other similarly titled measures for other companies. Adjusted EBITDA may not be indicative of the Group's historic operating results nor is it meant to be predictive of potential future results. The usage of the term "Adjusted EBITDA" is to highlight the fact that the Amortization includes amortization of deferred expenses – right of use and amortization of employee share based compensation and impairment charges. |
(3) | Operating expenses include selling and marketing expenses, general and administrative expenses and credit losses. |
a. | Financial risk factors |
Exchange | Exchange | |||||||||||
rate of one | rate of one | Israeli | ||||||||||
Dollar | Euro | CPI* | ||||||||||
At December 31: | ||||||||||||
2020 | NIS 3.215 | NIS 3.944 | 223.11 points | |||||||||
2019 | NIS 3.456 | NIS 3.878 | 224.67 points | |||||||||
2018 | NIS 3.748 | NIS 4.292 | 223.33 points | |||||||||
Increase (decrease) during the year: | ||||||||||||
2020 | (7.0 | )% | 1.7 | % | (0.7 | )% | ||||||
2019 | (7.8 | )% | (9.6 | )% | 0.6 | % | ||||||
2018 | 8.1 | % | 3.3 | % | 0.8 | % |
December 31, 2020 | ||||||||||||||||||||
In or linked to USD | In or linked to other foreign currencies (mainly EURO) | NIS unlinked | Linked to the CPI | Total | ||||||||||||||||
New Israeli Shekels in millions | ||||||||||||||||||||
Current assets | ||||||||||||||||||||
Cash and cash equivalents | 2 | 4 | 370 | 376 | ||||||||||||||||
Short term deposits | 411 | 411 | ||||||||||||||||||
Trade receivables* | 29 | 7 | 524 | 560 | ||||||||||||||||
Other receivables | 7 | 7 | ||||||||||||||||||
Non- current assets | ||||||||||||||||||||
Long term deposits | 155 | 155 | ||||||||||||||||||
Trade receivables | 232 | 232 | ||||||||||||||||||
Total assets | 31 | 11 | 1,699 | - | 1,741 | |||||||||||||||
Current liabilities | ||||||||||||||||||||
Current maturities of notes payable and | ||||||||||||||||||||
borrowings | 290 | 290 | ||||||||||||||||||
Trade payables* | 92 | 11 | 534 | 29 | 666 | |||||||||||||||
Payables in respect of employees | 52 | 52 | ||||||||||||||||||
Other payables | 18 | 18 | ||||||||||||||||||
Lease liabilities | 1 | 119 | 120 | |||||||||||||||||
Non- current liabilities | ||||||||||||||||||||
Notes payable | 1,219 | 1,219 | ||||||||||||||||||
Borrowings from banks | 86 | 86 | ||||||||||||||||||
Financial liability at fair value | 4 | 4 | ||||||||||||||||||
Other non-current liabilities | 30 | 30 | ||||||||||||||||||
Lease liabilities | 2 | 580 | 582 | |||||||||||||||||
Total liabilities | 95 | 11 | 2,233 | 728 | 3,067 |
In or linked to foreign currencies | ||||
New Israeli Shekels in millions | ||||
*Accounts that were set-off under enforceable netting arrangements | ||||
Trade receivables gross amounts | 104 | |||
Set-off | (68 | ) | ||
Trade receivables, net | 36 | |||
Trade payables gross amounts | 171 | |||
Set-off | (68 | ) | ||
Trade payables, net | 103 |
December 31, 2019 | ||||||||||||||||||||
In or linked to USD | In or linked to other foreign currencies (mainly EURO) | NIS unlinked | Linked to the CPI | Total | ||||||||||||||||
New Israeli Shekels in millions | ||||||||||||||||||||
Current assets | ||||||||||||||||||||
Cash and cash equivalents | 35 | 264 | 299 | |||||||||||||||||
Short term deposits | 552 | 552 | ||||||||||||||||||
Trade receivables* | 45 | 12 | 567 | 624 | ||||||||||||||||
Other receivables | 15 | 15 | ||||||||||||||||||
Non- current assets | ||||||||||||||||||||
Trade receivables | 250 | 250 | ||||||||||||||||||
Total assets | 80 | 12 | 1,648 | - | 1,740 | |||||||||||||||
Current liabilities | ||||||||||||||||||||
Current maturities of notes payable and | ||||||||||||||||||||
borrowings | 366 | 366 | ||||||||||||||||||
Trade payables* | 194 | 12 | 493 | 17 | 716 | |||||||||||||||
Payables in respect of employees | 79 | 79 | ||||||||||||||||||
Other payables | 12 | 12 | ||||||||||||||||||
Lease liabilities | 1 | 130 | 131 | |||||||||||||||||
Non- current liabilities | ||||||||||||||||||||
Notes payable | 1,276 | 1,276 | ||||||||||||||||||
Borrowings from banks | 138 | 138 | ||||||||||||||||||
Financial liability at fair value | 28 | 28 | ||||||||||||||||||
Lease liabilities | 3 | 483 | 486 | |||||||||||||||||
Total liabilities | 198 | 12 | 2,392 | 630 | 3,232 |
In or linked to foreign currencies | ||||
New Israeli Shekels in millions | ||||
*Accounts that were set-off under enforceable netting arrangements | ||||
Trade receivables gross amounts | 126 | |||
Set-off | (69 | ) | ||
Trade receivables, net | 57 | |||
Trade payables gross amounts | 275 | |||
Set-off | (69 | ) | ||
Trade payables, net | 206 |
New Israeli Shekels in millions | ||||
Balance as at January 1, 2019 | - | |||
Issuance | 37 | |||
Finance costs | 7 | |||
Exercise | (16 | ) | ||
Balance as at December 31, 2019 | 28 | |||
Finance costs | 3 | |||
Exercise | (27 | ) | ||
Balance as at December 31, 2020 | 4 |
2021 | 2022 | 2023 | 2024 to 2025 | 2026 and thereafter | Total | |||||||||||||||||||
New Israeli Shekels in millions | ||||||||||||||||||||||||
Principal payments of long term indebtedness: | ||||||||||||||||||||||||
Notes payable series D | 109 | 109 | ||||||||||||||||||||||
Notes payable series F | 128 | 128 | 128 | 128 | 512 | |||||||||||||||||||
Notes payable series G | 82 | 82 | 165 | 495 | 824 | |||||||||||||||||||
Borrowing P | 30 | 29 | 59 | |||||||||||||||||||||
Borrowing Q | 23 | 23 | 23 | 10 | 79 | |||||||||||||||||||
Expected interest payments of | ||||||||||||||||||||||||
long term borrowings and notes | ||||||||||||||||||||||||
payables | 47 | 41 | 35 | 51 | 33 | 207 | ||||||||||||||||||
Lease liabilities | 135 | 111 | 95 | 149 | 296 | 786 | ||||||||||||||||||
Trade and other payables | 719 | 719 | ||||||||||||||||||||||
Total | 1,191 | 414 | 363 | 503 | 824 | 3,295 |
c. | Fair values of financial instruments |
December 31, 2019 | December 31, 2020 | |||||||||||||||||||||||||
Category | Carrying amount | Fair value | Interest rate used (**) | Carrying amount | Fair value | Interest rate used (**) | ||||||||||||||||||||
New Israeli Shekels in millions | ||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||
Cash and cash equivalents | AC | 299 | 299 | 376 | 376 | |||||||||||||||||||||
Short term deposits | AC | 552 | 552 | 411 | 411 | |||||||||||||||||||||
Long term deposits (***) | 155 | 155 | ||||||||||||||||||||||||
Trade receivables | AC | 874 | 876 | 4.00 | % | 792 | 794 | 3.60 | % | |||||||||||||||||
Other receivables (*) | AC | 16 | 16 | 7 | 7 | |||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||
Notes payable series D | AC | 218 | 219 | Market quote | 109 | 110 | Market quote | |||||||||||||||||||
Notes payable series F | AC | 1,021 | 1,040 | Market quote | 512 | 524 | Market quote | |||||||||||||||||||
Notes payable series G | AC | 350 | 383 | Market quote | 824 | 939 | Market quote | |||||||||||||||||||
Financial liability at fair value | FVTPL | |||||||||||||||||||||||||
| Level 3 | 28 | 28 | 4 | 4 | |||||||||||||||||||||
Other non-current liabilities (*) | AC | 30 | 30 | |||||||||||||||||||||||
Trade and other payables (*) | AC | 800 | 800 | 719 | 719 | |||||||||||||||||||||
Borrowing P | AC | 89 | 90 | 1.42 | % | 59 | 60 | 0.84 | % | |||||||||||||||||
Borrowing Q | AC | 102 | 105 | 1.42 | % | 79 | 82 | 0.93 | % | |||||||||||||||||
Lease liabilities | AC | 617 | 623 | 2.12 | % | 702 | 702 | 2.04 | % |
(*) | The fair value of these financial instruments equals their carrying amounts, as the impact of discounting is not significant. |
(**) | The fair values of the notes payable quoted market prices at the end of the reporting period are within level 1 of the fair value hierarchy. The fair values of other instruments under AC categories were calculated based on observable weighted average of interest rates derived from quoted market prices of the Group's notes payable and bank quotes of rates of similar terms and nature, are within level 2 of the fair value hierarchy. |
(***) | At December 31, 2020, long-term deposits are deposited for a period ending in June 2022. |
(a) | Composition: |
New Israeli Shekels | ||||||||
December 31, | ||||||||
2019 | 2020 | |||||||
In millions | ||||||||
Trade (current and non-current) | 1,061 | 963 | ||||||
Deferred interest income (note 2(n)) | (25 | ) | (23 | ) | ||||
Allowance for credit loss | (162 | ) | (148 | ) | ||||
874 | 792 | |||||||
Current | 624 | 560 | ||||||
Non – current | 250 | 232 |
(b) | Impairment of financial assets: |
New Israeli Shekels | ||||||||||||
Year ended | ||||||||||||
2018 | 2019 | 2020 | ||||||||||
In millions | ||||||||||||
Balance at beginning of year | 193 | 188 | 162 | |||||||||
Receivables written-off during the year as | ||||||||||||
uncollectible | (35 | ) | (44 | ) | (37 | ) | ||||||
Charge or expense during the year* | 30 | 18 | 23 | |||||||||
Balance at end of year | 188 | 162 | 148 |
New Israeli Shekels | New Israeli Shekels | |||||||||||||||||||||||
December 31, 2019 | December 31, 2020 | |||||||||||||||||||||||
In millions | In millions | |||||||||||||||||||||||
Average expected loss rate | Gross | Allowance | Average expected loss rate | Gross | Allowance | |||||||||||||||||||
Not passed due | 2 | % | 860 | 20 | 5 | % | 831 | 45 | ||||||||||||||||
Less than one year | 54 | % | 107 | 58 | 59 | % | 60 | 36 | ||||||||||||||||
More than one year | 89 | % | 94 | 84 | 94 | % | 72 | 67 | ||||||||||||||||
1,061 | 162 | 963 | 148 |
New Israeli Shekels | ||||||||
December 31, | ||||||||
2019 | 2020 | |||||||
In millions | ||||||||
Handsets and devices | 73 | 36 | ||||||
Accessories and other | 10 | 9 | ||||||
Spare parts | 26 | 20 | ||||||
ISP modems, routers, servers and related equipment | 15 | 12 | ||||||
124 | 77 | |||||||
Write-downs recorded | 6 | 7 | ||||||
Cost of inventory recognized as expenses and included in cost of revenues for the year ended | 539 | 544 | ||||||
Cost of inventory used as fixed assets | 24 | 8 |
New Israeli Shekels in millions | ||||||||||||
January 1, 2019 | ||||||||||||
Company's share (50%) in PHI's accounts** | Intercompany elimination | Total | ||||||||||
CURRENT ASSETS | ||||||||||||
Cash and cash equivalents | * | * | ||||||||||
Current assets | 69 | (62 | ) | 7 | ||||||||
NON CURRENT ASSETS | ||||||||||||
Property and equipment and intangible assets | 142 | 142 | ||||||||||
Lease – right of use | 355 | 355 | ||||||||||
CURRENT LIABILITIES | ||||||||||||
Current borrowings from banks | 13 | 13 | ||||||||||
Trade payables and other current liabilities | 55 | 55 | ||||||||||
Lease liabilities | 65 | 65 | ||||||||||
NON CURRENT LIABILITIES | ||||||||||||
Lease liabilities | 290 | 290 | ||||||||||
Deferred revenues | 142 | (142 | ) | - | ||||||||
EQUITY | 1 | (1 | ) | - |
Communication network | Computers and information systems | Optic fibers and related assets | Subscribers equipment and installations | Property, leasehold improvements, furniture and equipment | Total | |||||||||||||||||||
New Israeli Shekels in millions | ||||||||||||||||||||||||
Cost | ||||||||||||||||||||||||
Balance at January 1, 2018 | 1,893 | 154 | 604 | 138 | 137 | 2,926 | ||||||||||||||||||
Additions in 2018 | 48 | 11 | 122 | 146 | 10 | 337 | ||||||||||||||||||
Disposals in 2018 | 322 | 17 | 11 | 4 | 24 | 378 | ||||||||||||||||||
Balance at December 31, 2018 | 1,619 | 148 | 715 | 280 | 123 | 2,885 | ||||||||||||||||||
Share in PHI P&E included as of Jan 1, 2019 | 171 | 2 | 173 | |||||||||||||||||||||
Additions in 2019 | 91 | 3 | 146 | 172 | 6 | 418 | ||||||||||||||||||
Disposals in 2019 | 193 | 12 | 1 | 8 | 7 | 221 | ||||||||||||||||||
Balance at December 31, 2019 | 1,688 | 141 | 860 | 444 | 122 | 3,255 | ||||||||||||||||||
Additions in 2020 | 83 | 7 | 168 | 138 | 5 | 401 | ||||||||||||||||||
Disposals in 2020 | 418 | 72 | 9 | 30 | 27 | 556 | ||||||||||||||||||
Balance at December 31, 2020 | 1,353 | 76 | 1,019 | 552 | 100 | 3,100 | ||||||||||||||||||
Accumulated depreciation | ||||||||||||||||||||||||
Balance at January 1, 2018 | 1,263 | 108 | 253 | 31 | 91 | 1,746 | ||||||||||||||||||
Depreciation in 2018 | 174 | 13 | 39 | 66 | 12 | 304 | ||||||||||||||||||
Disposals in 2018 | 321 | 17 | 11 | 3 | 24 | 376 | ||||||||||||||||||
Balance at December 31, 2018 | 1,116 | 104 | 281 | 94 | 79 | 1,674 | ||||||||||||||||||
Share in PHI P&E included as of Jan 1, 2019 | 33 | 1 | 34 | |||||||||||||||||||||
Depreciation in 2019 | 170 | 13 | 45 | 99 | 9 | 336 | ||||||||||||||||||
Disposals in 2019 | 192 | 11 | 1 | 8 | 7 | 219 | ||||||||||||||||||
Balance at December 31, 2019 | 1,127 | 107 | 325 | 185 | 81 | 1,825 | ||||||||||||||||||
Depreciation in 2020 | 147 | 11 | 55 | 117 | 8 | 338 | ||||||||||||||||||
Disposals in 2020 | 421 | 71 | 10 | 28 | 28 | 558 | ||||||||||||||||||
Balance at December 31, 2020 | 853 | 47 | 370 | 274 | 61 | 1,605 | ||||||||||||||||||
Carrying amounts, net | ||||||||||||||||||||||||
At December 31, 2018 | 503 | 44 | 434 | 186 | 44 | 1,211 | ||||||||||||||||||
At December 31, 2019 | 561 | 34 | 535 | 259 | 41 | 1,430 | ||||||||||||||||||
At December 31, 2020 | 500 | 29 | 649 | 278 | 39 | 1,495 |
New Israeli Shekels | ||||||||||||
Year ended December 31 | ||||||||||||
2018 | 2019 | 2020 | ||||||||||
In millions | ||||||||||||
Cost additions include capitalization of salary and employee related expenses | 38 | 39 | 41 |
Licenses | Costs of obtaining contracts with customers | Customer relationships and other | Computer software(1) | Total | ||||||||||||||||
New Israeli Shekels in millions | ||||||||||||||||||||
Cost | ||||||||||||||||||||
At January 1, 2018 | 2,123 | 86 | 276 | 565 | 3,050 | |||||||||||||||
Additions in 2018 | 91 | 3 | 68 | 162 | ||||||||||||||||
Disposals in 2018 | 2 | 141 | 143 | |||||||||||||||||
At December 31, 2018 | 2,123 | 175 | 279 | 492 | 3,069 | |||||||||||||||
Share in PHI's accounts included as of Jan 1, 2019 | 5 | 5 | ||||||||||||||||||
Additions in 2019 | 95 | 6 | 59 | 160 | ||||||||||||||||
Disposals in 2019 | 61 | 61 | ||||||||||||||||||
At December 31, 2019 | 2,123 | 270 | 285 | 495 | 3,173 | |||||||||||||||
Additions in 2020 | 30 | 115 | 49 | 194 | ||||||||||||||||
Disposals in 2020 | 137 | 137 | ||||||||||||||||||
At December 31, 2020 | 2,153 | 385 | 285 | 407 | 3,230 | |||||||||||||||
Accumulated amortization | ||||||||||||||||||||
At January 1, 2018 | 1,764 | 15 | 255 | 319 | 2,353 | |||||||||||||||
Amortization in 2018 | 88 | 49 | 18 | 86 | 241 | |||||||||||||||
Disposals in 2018 | 2 | 140 | 142 | |||||||||||||||||
At December 31, 2018 | 1,852 | 62 | 273 | 265 | 2,452 | |||||||||||||||
Share in PHI's accounts included as of Jan 1, 2019 | 2 | 2 | ||||||||||||||||||
Amortization in 2019(2) | 73 | 79 | 2 | 87 | 241 | |||||||||||||||
Disposals in 2019 | 60 | 60 | ||||||||||||||||||
At December 31, 2019 | 1,925 | 141 | 275 | 294 | 2,635 | |||||||||||||||
Amortization in 2020(2) | 27 | 97 | 3 | 84 | 211 | |||||||||||||||
Disposals in 2020 | 137 | 137 | ||||||||||||||||||
At December 31, 2020 | 1,952 | 238 | 278 | 241 | 2,709 | |||||||||||||||
Carrying amounts, net | ||||||||||||||||||||
At December 31, 2018 | 271 | 113 | 6 | 227 | 617 | |||||||||||||||
At December 31, 2019 | 198 | 129 | 10 | 201 | 538 | |||||||||||||||
At December 31, 2020 | 201 | 147 | 7 | 166 | 521 |
New Israeli Shekels | ||||||||||||
Year ended December 31 | ||||||||||||
2018 | 2019 | 2020 | ||||||||||
In millions | ||||||||||||
(1) Cost additions include capitalization of salary and employee related expenses | 54 | 57 | 44 |
New Israeli Shekels in millions | ||||
Cost | ||||
Balance at January 1, 2018 | 629 | |||
Additional payments in 2018 | 107 | |||
Balance at December 31, 2018 | 736 | |||
Share in PHI's accounts included as of Jan 1, 2019 | (169 | ) | ||
Additional payments in 2019 | 51 | |||
Balance at December 31, 2019 | 618 | |||
Additional payments in 2020 | 47 | |||
Balance at December 31, 2020 | 665 | |||
Accumulated amortization and impairment | ||||
Balance at January 1, 2018 | 453 | |||
Amortization in 2018 | 47 | |||
Balance at December 31, 2018 | 500 | |||
Share in PHI's accounts included as of Jan 1, 2019 | (38 | ) | ||
Amortization in 2019 | 28 | |||
Balance at December 31, 2019 | 490 | |||
Amortization in 2020 | 31 | |||
Balance at December 31, 2020 | 521 | |||
Carrying amount, net at December 31, 2018 | 236 | |||
Carrying amount, net at December 31, 2019 | 128 | |||
Current | 26 | |||
Non-current | 102 | |||
Carrying amount, net at December 31, 2020 | 144 | |||
Current | 26 | |||
Non-current | 118 |
(1) | Annual goodwill impairment tests in the fixed-line segment |
As of December 31, | ||||||||||||
2018 | 2019 | 2020 | ||||||||||
Terminal growth rate | 1.0 | % | 1.0 | % | 1.0 | % | ||||||
After-tax discount rate | 9.5 | % | 8 | % | 7.5 | % | ||||||
Pre-tax discount rate | 11.5 | % | 9.6 | % | 9.0 | % |
(2) | Interim impairment tests of non-financial assets |
March 31, 2020 | ||||
Terminal growth rate | 1.0 | % | ||
After-tax discount rate | 8.25 | % | ||
Pre-tax discount rate | 9.9 | % |
Legal claims (see note 20) | Equipment warranty | Dismantling and restoring sites obligation | ||||||||||
New Israeli Shekels in millions | ||||||||||||
Balance as at January 1, 2020 | 42 | 1 | 23 | |||||||||
Additions during the year | 3 | 3 | * | |||||||||
Finance costs | * | |||||||||||
Decrease during the year | (33 | ) | (3 | ) | (2 | ) | ||||||
Balance as at December 31, 2020 | 12 | 1 | 21 | |||||||||
Non-current | 21 | |||||||||||
Current | 12 | 1 | ||||||||||
Balance as at December 31, 2019 | 42 | 1 | 23 | |||||||||
Non-current | 23 | |||||||||||
Current | 42 | 1 |
(1) | Borrowings and Notes Payable |
Annual interest rate | |
Notes payable series D | 'Makam'(*) plus 1.2% |
Notes payable series F (**) | 2.16% fixed |
Notes payable series G (***) | 4% fixed |
Borrowing P (received in 2017) | 2.38% fixed |
Borrowing Q (received in 2017) | 2.5% fixed |
(1) | Borrowings and Notes Payable (continued): |
Movements in 2020 | ||||||||||||||||||||
As at December 31, 2019 | Cash flows used in financing activities, net | Non cash movements | As at December 31, 2020 | |||||||||||||||||
CPI adjustments and other | Against lease ROU asset | |||||||||||||||||||
New Israeli Shekels in millions | ||||||||||||||||||||
Non-current borrowings* | 191 | (52 | ) | (1 | ) | 138 | ||||||||||||||
Notes payable* | 1,589 | (154 | ) | 22 | 1,457 | |||||||||||||||
Financial liability at fair value | 28 | (24 | ) | 4 | ||||||||||||||||
Interest payable | 8 | (49 | ) | 58 | 17 | |||||||||||||||
Lease liability | 617 | (147 | ) | 18 | 214 | 702 | ||||||||||||||
2,433 | (402 | ) | 73 | 214 | 2,318 |
Movements in 2019 | ||||||||||||||||||||||
Non cash movements | ||||||||||||||||||||||
As at December 31, 2018 | Cash flows provided by (used in) financing activities, net | Share in PHI's accounts included as at Jan. 1, 2019 | Adoption of IFRS 16 as at Jan. 1, 2019 | CPI adjustments and other | Against lease ROU asset | As at December 31, 2019 | ||||||||||||||||
New Israeli Shekels in millions | ||||||||||||||||||||||
Current borrowings | (13 | ) | 13 | |||||||||||||||||||
Non-current borrowings* | 243 | (52 | ) | 191 | ||||||||||||||||||
Notes payable* | 1,123 | 453 | 13 | 1,589 | ||||||||||||||||||
Financial liability at fair value | 37 | (9 | ) | 28 | ||||||||||||||||||
Interest payable | ** | (37 | ) | 45 | 8 | |||||||||||||||||
Lease liability | (159 | ) | 683 | 20 | 73 | 617 | ||||||||||||||||
1,366 | 229 | 13 | 683 | 69 | 73 | 2,433 |
(2) | Notes payable issuance |
(3) | Early redemption of Notes payable |
(4) | Borrowings early repayments |
(5) | Notes payable issuance commitments |
(6) | Private placement of option warrants |
(7) | Financial covenants |
(1) | Defined contribution plan |
The Group had contributed NIS 20 million, NIS 23 million and NIS 25 million for the years 2018, 2019 and 2020 respectively, in accordance with Section 14 of the Israeli Severance Pay Law. See also note 2(k)(i)(1).
(2) | Defined benefit plan |
New Israeli Shekels in millions | ||||||||||||
Present value of obligation | Fair value of plan assets | Total | ||||||||||
At January 1, 2019 | 144 | (104 | ) | 40 | ||||||||
Current service cost | 12 | 12 | ||||||||||
Interest expense (income) | 4 | (2 | ) | 2 | ||||||||
Employer contributions | (9 | ) | (9 | ) | ||||||||
Benefits paid | (14 | ) | 10 | (4 | ) | |||||||
Remeasurements: | ||||||||||||
Experience loss | 4 | 4 | ||||||||||
Return on plan assets | (2 | ) | (2 | ) | ||||||||
At December 31, 2019 | 150 | (107 | ) | 43 | ||||||||
Current service cost | 10 | 10 | ||||||||||
Interest expense (income) | 4 | (2 | ) | 2 | ||||||||
Employer contributions | (8 | ) | (8 | ) | ||||||||
Benefits paid | (8 | ) | 4 | (4 | ) | |||||||
Remeasurements: | ||||||||||||
Experience loss | (2 | ) | (2 | ) | ||||||||
Return on plan assets | 1 | 1 | �� | |||||||||
At December 31, 2020 | 154 | (112 | ) | 42 |
(2) | Defined benefit plan (continued) |
December 31 | ||||||||
2019 | 2020 | |||||||
Interest rate weighted average | 2.33 | % | 2.12 | % | ||||
Inflation rate weighted average | 1.49 | % | 0.97 | % | ||||
Expected turnover rate | 9%-56 | % | 9%-56 | % | ||||
Future salary increases | 1%-6 | % | 1%-6 | % |
December 31, 2020 | ||||||||
NIS in millions | ||||||||
Increase of 10% of the assumption | Decrease of 10% of the assumption | |||||||
Interest rate | (0.7 | ) | 0.5 | |||||
Expected turnover rate | 0.1 | (0.1 | ) | |||||
Future salary increases | 0.5 | (0.5 | ) |
NIS in millions | ||||
2021 | 23 | |||
2022 | 22 | |||
2023 | 13 | |||
2024 and 2025 | 21 | |||
2026 and thereafter | 86 | |||
165 |
(1) | Results of Frequencies Tender and frequency fees |
(2) | At December 31, 2020, the Group is committed to acquire property and equipment and software elements for approximately NIS 64 million. |
(3) | At December 31, 2020, the Group is committed to acquire inventory in an amount of approximately NIS 265 million. |
(4) | Right of Use (ROU) |
New Israeli Shekels in millions | ||||
2021 | 50.5 | |||
2022 | 54.8 | |||
2023 | 8.4 | |||
2024 | 2.4 | |||
2025 | 2.4 | |||
118.5 |
(5) | Liens and guarantees |
(6) | Covenants and negative pledge – see note 15(7). |
(7) | See note 15(5) with respect of notes payable issuance commitments. |
(8) | Operating leases – see note 19. |
(9) | See note 9 with respect to network sharing and PHI's commitments. |
(1) | Buildings: The Group leases its headquarter facilities in Rosh Ha-ayin, Israel, with a total of approximately 51,177 gross square meters (including parking lots). The lease term was extended in October 2020 to end on December 31, 2029 and the Company expects to exercise its option to extend it until December 31, 2034. The rental payments are linked to the Israeli CPI. |
(2) | Cell sites: Lease agreements in respect of cell sites and switching stations throughout Israel are for periods of two to ten years. The Company has an option to extend some of the lease contract periods for up to ten years (including the original lease periods). Substantially all of the rental payments are linked to the Israeli CPI and a few are linked to the dollar. Some of the extension options include an increase of the lease payment mostly in a range of 2%-10%. Most of cell sites were assigned to PHI. |
(3) | Vehicles: The Group leases vehicles for periods of up to three years. The rental payments are linked to the Israeli CPI. |
New Israeli Shekels in millions | ||||||||||||||||
Lease right of use asset | Lease liability | |||||||||||||||
Buildings | Cell sites | Vehicles | ||||||||||||||
Balance as at January 1, 2019 | 252 | 362 | 42 | 683 | ||||||||||||
Amortization charges | (41 | ) | (78 | ) | (27 | ) | ||||||||||
Accretion of interest | 20 | |||||||||||||||
Non-cash movements | 11 | 46 | 15 | 73 | ||||||||||||
Lease payments (principal) cash outflow | (139 | ) | ||||||||||||||
Lease payments (interest) cash outflow | (20 | ) | ||||||||||||||
Balance as at December 31, 2019 | 222 | 330 | 30 | 617 | ||||||||||||
Amortization charges | (38 | ) | (71 | ) | (25 | ) | ||||||||||
Accretion of interest | 18 | |||||||||||||||
Non-cash movements | 114 | 65 | 36 | 214 | ||||||||||||
Lease payments (principal) cash outflow | (129 | ) | ||||||||||||||
Lease payments (interest) cash outflow | (18 | ) | ||||||||||||||
Balance as at December 31, 2020 | 298 | 324 | 41 | 702 | ||||||||||||
Current | 120 | |||||||||||||||
Non-Current | 298 | 324 | 41 | 582 | ||||||||||||
Balance as at December 31, 2019 | 222 | 330 | 30 | 617 | ||||||||||||
Current | 131 | |||||||||||||||
Non-Current | 222 | 330 | 30 | 486 |
A. | Claims |
1. | Consumer claims |
Claim amount | Number of claims | Total claims amount (NIS million) | ||||||
Up to NIS 100 million | 16 | 422 | ||||||
NIS 101 - 400 million | 7 | 1,512 | ||||||
NIS 401 million - NIS 1 billion | 2 | 1,405 | ||||||
Unquantified claims | 15 | - | ||||||
Total | 40 | 3,339 |
1. | On September 7, 2010, a claim and a motion to certify the claim as a class action were filed against Partner. The claim alleges that Partner unlawfully charged its customers for services of various content providers which are sent through text messages (SMS). The total amount claimed from Partner was estimated by the plaintiffs to be approximately NIS 405 million. The claim was certified as a class action in December 2016. In January 2017, the plaintiffs filed an appeal to the Supreme Court, regarding the definition of the group of customers. In November 2018, the Supreme Court dismissed the appeal and the claim was reverted back to the District Court. In February 2020 a settlement agreement was filed for the Court's approval in an immaterial amount. Partner estimates that the claim will not have a material effect on the Company's financial statements. |
A. | Claims (continued) |
1. | Consumer claims (continued) |
2. | On November 12, 2015, a claim and a motion to certify the claim as a class action were filed against Partner. The claim alleges that Partner required their customers to purchase a Smartbox device which is terminal equipment as a condition for using its fixed-line telephony services, an action which would not be in accordance with the provisions of its licenses. The total amount claimed against Partner is estimated by the plaintiff to be approximately NIS 116 million. In February 2019, the Court approved the request to certify the claim as a class action with certain changes. In March 2019, Partner filed an appeal of this decision. In February 2020, the Supreme Court dismissed the appeal request that was filed and the claim was reverted back to the District Court and the proceedings have resumed. Partner estimates that the claim will not have a material effect on the Company's financial statements. |
3. | On November 12, 2015, a claim and a motion to certify the claim as a class action were filed against 012 Smile. The claim alleges that 012 Smile required their customers to purchase a Smartbox device which is terminal equipment as a condition for using its fixed-line telephony services, an action which would not be in accordance with the provisions of its licenses. The total amount claimed against 012 Smile is estimated by the plaintiff to be approximately NIS 64 million. In February 2019, the Court approved the request to certify the claim as a class action with certain changes. In March 2019, the Company filed an appeal of this decision. In February 2020, the Supreme Court dismissed the appeal request that was filed and the claim was reverted back to the District Court and the proceedings have resumed. The Company estimates that the claim will not have a material effect on the Company's financial statements. |
4. | On April 21, 2016, a claim and a motion to certify the claim as a class action were filed against 012 Smile. The claim alleges that the infrastructure included in the 012 Smile's plans does not support data speeds that the Company publishes to its customers. The total amount claimed against the Company if the lawsuit is certified as a class action was not stated by the plaintiffs. In January 2021, the Court approved the motion and recognized the lawsuit as a class action. The Company estimates that the claim will not have a material effect on the Company's financial statements. |
5. | On November 13, 2017, a claim and a motion to certify the claim as a class action were filed against Partner and 012 Smile (initially the motion was filed only against 012 Smile). The claim alleges that Partner and 012 Smile charged their customers for incoming calls while they are abroad, without the calls for which they were charged being made, and without them having given a call forwarding provision. The total amount claimed is estimated by the plaintiff to be approximately NIS 53 million against Partner and approximately NIS 10 million against 012 Smile. In January 2021, the District Court approved the motion against Partner and recognized the lawsuit as a class action and dismissed the motion against 012 Smile. The Company estimates that the claim will not have a material effect on the Company's financial statements. |
6. | On February 28, 2017, a claim and a motion to certify the claim as a class action were filed against the Company. The claim alleges that the Company charged its cellular service customers who entered into agreements for fixed periods, a higher rate than agreed without receiving prior written notice. The total amount claimed from the Company was estimated by the plaintiffs to be approximately NIS 4.176 million. In March 2021, the Court approved the motion and recognized the lawsuit as a class action. The Company estimates that the claim will not have a material effect on the Company's financial statements. |
A. | Claims (continued) |
1. | Consumer claims (continued) |
B. | Contingencies in respect of building and planning procedures |
C. | Investigation by the Israeli Tax Authority |
a. | Share capital: |
b. | Share based compensation to employees |
(1) | Description of the Equity Incentive Plan |
- | Exercise price adjustment: The exercise price of options shall be reduced in the following events: (1) dividend distribution other than in the ordinary course: by the gross dividend amount so distributed per share, and (2) dividend distribution in the ordinary course: the exercise price shall be reduced the gross dividend amount so distributed per share ("Full Dividend Mechanism"), depending on the date of granting of the options. |
- | Cashless exercise: Most of the options may be exercised only through a cashless exercise procedure, while holders of other options may choose between cashless exercise and the regular option exercise procedure. In accordance with such cashless exercise, the option holder would receive from the Company, without payment of the exercise price, only the number of shares whose aggregate market value equals the economic gain which the option holder would have realized by selling all the shares purchased at their market price, net of the option exercise price. |
(2) | Information in respect of options and restricted shares granted under the Plan: |
Through December 31, 2020 | ||||||||
Number of options | Number of RSAs | |||||||
Granted | 36,108,430 | 5,907,609 | ||||||
Shares issued upon exercises and vesting | (6,574,778 | ) | (3,229,106 | ) | ||||
Cancelled upon net exercises, expiration | ||||||||
and forfeitures | (22,504,229 | ) | (1,671,080 | ) | ||||
Outstanding | 7,029,423 | 1,007,423 | ||||||
Of which: | ||||||||
Exercisable | 4,071,714 | |||||||
Vest in 2021 | 1,788,172 | 611,551 | ||||||
Vest in 2022 | 800,789 | 263,183 | ||||||
Vest in 2023 | 368,748 | 132,689 |
(3) | Options and RSAs status summary as of December 31, 2018, 2019 and 2020 and the changes therein during the years ended on those dates: |
Year ended December 31, | ||||||||||||||||||||||||
2018 | 2019 | 2020 | ||||||||||||||||||||||
Number | Weighted average exercise price | Number | Weighted average exercise price | Number | Weighted average exercise price | |||||||||||||||||||
Share Options: | NIS | NIS | ||||||||||||||||||||||
Outstanding at the beginning of the year | 8,708,483 | 29.67 | 9,697,266 | 28.19 | 9,020,689 | 23.62 | ||||||||||||||||||
Granted during the year | 2,536,362 | 18.59 | 1,232,226 | 16.21 | 1,035,635 | 14.24 | ||||||||||||||||||
Exercised during the year | (778,616 | ) | 17.11 | (70,824 | ) | 16.62 | (296,450 | ) | 14.71 | |||||||||||||||
Forfeited during the year | (307,055 | ) | 18.79 | (235,150 | ) | 18.74 | (252,547 | ) | 18.42 | |||||||||||||||
Expired during the year | (461,908 | ) | 28.17 | (1,602,829 | ) | 46.64 | (2,477,904 | ) | 34.10 | |||||||||||||||
Outstanding at the end of the year | 9,697,266 | 28.19 | 9,020,689 | 23.62 | 7,029,423 | 18.64 | ||||||||||||||||||
Exercisable at the end of the year | 6,266,965 | 33.39 | 5,623,921 | 27.11 | 4,071,714 | 20.04 | ||||||||||||||||||
Shares issued during the year due exercises | 94,276 | 3,166 | 46,747 | |||||||||||||||||||||
RSAs: | ||||||||||||||||||||||||
Outstanding at the beginning of the year | 1,344,297 | 1,209,521 | 1,230,464 | |||||||||||||||||||||
Granted during the year | 813,310 | 397,476 | 398,055 | |||||||||||||||||||||
Vested during the year | (791,796 | ) | (284,427 | ) | (534,053 | ) | ||||||||||||||||||
Forfeited during the year | (156,290 | ) | (92,106 | ) | (87,043 | ) | ||||||||||||||||||
Outstanding at the end of the year | 1,209,521 | 1,230,464 | 1,007,423 |
Options granted in 2018 | Options granted in 2019 | Options granted in 2020 | ||||||||||
Weighted average fair value of options granted using the | ||||||||||||
Black & Scholes option-pricing model – per option (NIS) | 4.36 | 3.34 | 3.71 | |||||||||
The above fair value is estimated on the grant date based on the following weighted average assumptions: | ||||||||||||
Expected volatility | 34.14 | % | 33.52 | % | 37.24 | % | ||||||
Risk-free interest rate | 0.79 | % | 0.57 | % | 0.21 | % | ||||||
Expected life (years) | 3.16 | 3 | 3 | |||||||||
Dividend yield | * | * | * |
b. | Share based compensation to employees (continued) |
Expire in | Number of share options | Weighted average exercise price in NIS | ||||||
2021 | 2,115,923 | 19.93 | ||||||
2022 | 373,810 | 26.54 | ||||||
2023 | 615,894 | 19.25 | ||||||
2024 | 2,210,116 | 18.60 | ||||||
2025 | 678,045 | 16.52 | ||||||
2026 | 1,035,635 | 14.24 | ||||||
7,029,423 | 18.64 |
New Israeli Shekels in millions | ||||||||
Deferred revenues from Hot mobile * | Other deferred revenues* | |||||||
Balance at January 1, 2019 | 164 | 45 | ||||||
Revenue recognized that was included in the contract liability balance at the beginning of the year | (31 | ) | (19 | ) | ||||
Increases due to cash received, excluding amounts recognized as revenues during the year | - | 27 | ||||||
Balance at December 31, 2019 | 133 | 53 | ||||||
Revenue recognized that was included in the contract liability balance at the beginning of the year | (31 | ) | (31 | ) | ||||
Increases due to cash received, excluding amounts recognized as revenues during the year | - | 78 | ||||||
Balance at December 31, 2020 | 102 | 100 |
Year ended December 31, 2020 New Israeli Shekels in millions | ||||||||||||||||
Cellular segment | Fixed-line segment | Elimination | Consolidated | |||||||||||||
Segment revenue - Services to private customers | 942 | 604 | (83 | ) | 1,463 | |||||||||||
Segment revenue - Services to business customers | 721 | 389 | (65 | ) | 1,045 | |||||||||||
Segment revenue - Services revenue total | 1,663 | 993 | (148 | ) | 2,508 | |||||||||||
Segment revenue - Equipment | 545 | 136 | 681 | |||||||||||||
Total Revenues | 2,208 | 1,129 | (148 | ) | 3,189 |
Year ended December 31, 2019 New Israeli Shekels in millions | ||||||||||||||||
Cellular segment | Fixed-line segment | Elimination | Consolidated | |||||||||||||
Segment revenue - Services to private customers | 990 | 513 | (87 | ) | 1,416 | |||||||||||
Segment revenue - Services to business customers | 808 | 412 | (76 | ) | 1,144 | |||||||||||
Segment revenue - Services revenue total | 1,798 | 925 | (163 | ) | 2,560 | |||||||||||
Segment revenue - Equipment | 571 | 103 | 674 | |||||||||||||
Total Revenues | 2,369 | 1,028 | (163 | ) | 3,234 |
Year ended December 31, 2018 New Israeli Shekels in millions | ||||||||||||||||
Cellular segment | Fixed-line segment | Elimination | Consolidated | |||||||||||||
Segment revenue - Services to private customers | 1,045 | 418 | (95 | ) | 1,368 | |||||||||||
Segment revenue - Services to business customers | 798 | 434 | (76 | ) | 1,156 | |||||||||||
Segment revenue - Services revenue total | 1,843 | 852 | (171 | ) | 2,524 | |||||||||||
Segment revenue - Equipment | 643 | 92 | 735 | |||||||||||||
Total Revenues | 2,486 | 944 | (171 | ) | 3,259 |
(b) Cost of revenues | New Israeli Shekels | |||||||||||
Year ended December 31, | ||||||||||||
2018 | 2019 | 2020 | ||||||||||
In millions | ||||||||||||
Transmission, communication and content providers | 742 | 746 | 786 | |||||||||
Cost of equipment and accessories | 543 | 500 | 510 | |||||||||
Depreciation and amortization | 457 | 603 | 546 | |||||||||
Wages, employee benefits expenses and car maintenance | 310 | 312 | 282 | |||||||||
Costs of handling, replacing or repairing equipment | 73 | 71 | 66 | |||||||||
Operating lease, rent and overhead expenses | 184 | 73 | 75 | |||||||||
Network and cable maintenance | 109 | 99 | 97 | |||||||||
Internet infrastructure and service providers | 143 | 173 | 157 | |||||||||
IT support and other operating expenses | 56 | 57 | 56 | |||||||||
Amortization of deferred expenses - rights of use | 47 | 28 | 31 | |||||||||
Other | 36 | 45 | 58 | |||||||||
Total cost of revenues | 2,700 | 2,707 | 2,664 |
(c) Selling and marketing expenses | New Israeli Shekels | |||||||||||
Year ended December 31, | ||||||||||||
2018 | 2019 | 2020 | ||||||||||
In millions | ||||||||||||
Wages, employee benefits expenses and car maintenance | 111 | 102 | 81 | |||||||||
Advertising and marketing | 46 | 44 | 42 | |||||||||
Selling commissions, net | 27 | 28 | 31 | |||||||||
Depreciation and amortization | 77 | 106 | 123 | |||||||||
Operating lease, rent and overhead expenses | 19 | 4 | 2 | |||||||||
Other | 13 | 17 | 12 | |||||||||
Total selling and marketing expenses | 293 | 301 | 291 |
(d) General and administrative expenses | New Israeli Shekels | |||||||||||
Year ended December 31, | ||||||||||||
2018 | 2019 | 2020 | ||||||||||
In millions | ||||||||||||
Wages, employee benefits expenses and car maintenance | 76 | 85 | 81 | |||||||||
Professional fees | 21 | 21 | 21 | |||||||||
Credit card and other commissions | 14 | 13 | 13 | |||||||||
Depreciation | 11 | 14 | 14 | |||||||||
Other | 26 | 16 | 16 | |||||||||
Total general and administrative expenses | 148 | 149 | 145 |
(e) Employee benefit expense | New Israeli Shekels | |||||||||||
Year ended December 31, | ||||||||||||
2018 | 2019 | 2020 | * | |||||||||
In millions | ||||||||||||
Wages, employee benefits expenses and car maintenance, | ||||||||||||
before capitalization | 543 | 543 | 482 | |||||||||
Less: expenses capitalized (notes 10, 11) | (92 | ) | (96 | ) | (85 | ) | ||||||
Service costs: defined benefit plan (note 16(2)) | 11 | 12 | 10 | |||||||||
Service costs: defined contribution plan (note 16(1)) | 20 | 23 | 25 | |||||||||
Employee share based compensation expenses (note 21(b)) | 15 | 17 | 12 | |||||||||
497 | 499 | 444 |
New Israeli Shekels | ||||||||||||
Year ended December 31, | ||||||||||||
2018 | 2019 | 2020 | ||||||||||
In millions | ||||||||||||
Unwinding of trade receivables | 25 | 23 | 21 | |||||||||
Other income, net | 3 | 5 | 9 | |||||||||
28 | 28 | 30 |
New Israeli Shekels | ||||||||||||
Year ended December 31, | ||||||||||||
2018 | 2019 | 2020 | ||||||||||
In millions | ||||||||||||
Net foreign exchange rate gains | * | 4 | 3 | |||||||||
Interest income from cash, cash equivalents and deposits | 2 | 3 | 5 | |||||||||
Finance income | 2 | 7 | 8 | |||||||||
Interest expenses | 47 | 40 | 53 | |||||||||
CPI linkage expenses | 3 | * | * | |||||||||
Interest for lease liabilities | 20 | 18 | ||||||||||
Finance charges for financial liabilities | 9 | 4 | ||||||||||
Other finance costs | 5 | 6 | 2 | |||||||||
Finance expenses | 55 | 75 | 77 | |||||||||
53 | 68 | 69 |
a. | Corporate income tax rates applicable to the Group |
Balance of deferred tax asset (liability) in respect of | As at January 1, 2018 | Charged to the income statement | As at December 31, 2018 | Charged to the income statement | Charged to retained earnings upon implementation of IFRS 16 | As at December 31, 2019 | Charged to the income statement | As at December 31, 2020 | ||||||||||||||||||||||||
Allowance for credit losses | 45 | (2 | ) | 43 | (4 | ) | 39 | (5 | ) | 34 | ||||||||||||||||||||||
Provisions for employee rights | 15 | 2 | 17 | 1 | 18 | (5 | ) | 13 | ||||||||||||||||||||||||
Depreciable fixed assets and software | (27 | ) | 8 | (19 | ) | 8 | (11 | ) | 12 | 1 | ||||||||||||||||||||||
Lease - Right-of-use assets | - | - | 17 | (151 | ) | (134 | ) | (18 | ) | (152 | ) | |||||||||||||||||||||
Leases liabilities | - | - | (15 | ) | 157 | 142 | 19 | 161 | ||||||||||||||||||||||||
Intangibles, deferred expenses and carry forward losses | 16 | (24 | ) | (8 | ) | (11 | ) | (19 | ) | (14 | ) | (33 | ) | |||||||||||||||||||
Options granted to employees | 6 | (1 | ) | 5 | 1 | 6 | * | 6 | ||||||||||||||||||||||||
Other | * | * | * | * | * | (1 | ) | (1 | ) | |||||||||||||||||||||||
Total | 55 | (17 | ) | 38 | (3 | ) | 6 | 41 | (12 | ) | 29 |
New Israeli Shekels | ||||||||
December 31, | ||||||||
2019 | 2020 | |||||||
In millions | ||||||||
Deferred tax assets | ||||||||
Deferred tax assets to be recovered after more than 12 months | 173 | 188 | ||||||
Deferred tax assets to be recovered within 12 months | 85 | 76 | ||||||
258 | 264 | |||||||
Deferred tax liabilities | ||||||||
Deferred tax liabilities to be recovered after more than 12 months | 164 | 184 | ||||||
Deferred tax liabilities to be recovered within 12 months | 53 | 51 | ||||||
217 | 235 | |||||||
Deferred tax assets, net | 41 | 29 |
c. | Following is a reconciliation of the theoretical tax expense, assuming all income is taxed at the regular tax rates applicable to companies in Israel (see (a) above), and the actual tax expense: |
New Israeli Shekels | ||||||||||||
Year ended December 31, | ||||||||||||
2018 | 2019 | 2020 | ||||||||||
In millions | ||||||||||||
Profit before taxes on income, | ||||||||||||
as reported in the income statements | 63 | 19 | 27 | |||||||||
Theoretical tax expense | 14 | 4 | 6 | |||||||||
Increase in tax resulting from disallowable deductions | 9 | 5 | 4 | |||||||||
Taxes on income in respect of previous years | (15 | ) | (7 | ) | 3 | |||||||
Temporary differences and tax losses for which no deferred income | ||||||||||||
tax asset was recognized | (1 | ) | (2 | ) | (3 | ) | ||||||
Income tax expenses | 7 | * | 10 |
d. | Taxes on income included in the income statements: |
New Israeli Shekels | ||||||||||||
Year ended December 31, | ||||||||||||
2018 | 2019 | 2020 | ||||||||||
In millions | ||||||||||||
For the reported year: | ||||||||||||
Current | 6 | 3 | 2 | |||||||||
Deferred, see (c) above | 17 | 4 | 5 | |||||||||
In respect of previous years: | ||||||||||||
Current | (15 | ) | (7 | ) | (4 | ) | ||||||
Deferred, see (c) above | (1 | ) | 7 | |||||||||
7 | * | 10 |
e. | Tax assessments: |
1) | The Company received final income tax assessments through the year ended December 31, 2015. |
2) | A Group's subsidiary received final income tax assessments through the year ended December 31, 2016. |
3) | As a general rule, income tax self-assessments filed by two other subsidiaries through the year ended December 31, 2015 are, by law, now regarded as final. |
f. | Tax losses carried forward to future years: |
a. | Key management compensation |
New Israeli Shekels | ||||||||||||
Year ended December 31 | ||||||||||||
2018 | 2019 | 2020 | ||||||||||
Key management compensation expenses comprised | In millions | |||||||||||
Salaries and short-term employee benefits | 22 | 27 | 21 | |||||||||
Long term employment benefits | 3 | 3 | 3 | |||||||||
Employee share-based compensation expenses | 9 | 12 | 7 | |||||||||
34 | 42 | 31 |
New Israeli Shekels | ||||||||
December 31, | ||||||||
2019 | 2020 | |||||||
Statement of financial position items - key management | In millions | |||||||
Current liabilities: | 10 | 9 | ||||||
Non-current liabilities: | 10 | 10 |
b. | In the ordinary course of business, key management or their relatives may have engaged with the Company with immaterial transactions that are under normal market conditions. |
c. | Principal shareholder: S.B. Israel Telecom, an affiliate of Saban Capital Group LLC, a private investment firm, based in Los Angeles, California, specializing in the media, entertainment and communications industries, is the registered owner of the shares in the Company’s share register. On November 11, 2019, S.B. Israel Telecom filed an amendment to its Schedule 13D with the SEC stating that it had no sole or shared voting or dispositive power over any shares of the Company, and that as a result of the Receiver Appointment (as defined in the filed amendment), as of November 12, 2019, the Reporting Persons (as defined in the filed amendment) ceased to beneficially own any ordinary shares of the Company. On November 12, 2019, the District Court of Tel Aviv ("the Court") issued a court order ("the Court Order") under which attorney Ehud Sol (the “Receiver") was appointed as receiver for 49,862,800 of the Company's shares, representing as of March 1, 2021, approximately 27.12% of our issued and outstanding share capital and the largest block of shares held by a single shareholder. The shares (the “Pledged Shares”) had been purchased by S.B. Israel Telecom Ltd. ("S.B. Israel Telecom") from Advent Investments Pte Ltd (“Advent”) in 2013; in connection with the purchase, S.B. Israel Telecom assumed certain debt owed to Advent, and agreed that such debt would be secured by, among other things, the Pledged Shares. S.B. Israel Telecom defaulted on the payment, and on November 11, 2019, consented to enforcement and foreclosure proceedings with respect to the Pledged Shares. |
Year ended December 31, | ||||||||||||
2018 | 2019 | 2020 | ||||||||||
Profit used for the computation of | ||||||||||||
basic and diluted EPS attributable to the owners of the Company (NIS in millions) | 57 | 19 | 17 | |||||||||
Weighted average number of shares used | ||||||||||||
in computation of basic EPS (in thousands) | 165,979 | 162,831 | 182,331 | |||||||||
Add - net additional shares from assumed | ||||||||||||
exercise of employee stock options and restricted | ||||||||||||
shared (in thousands) | 983 | 777 | 857 | |||||||||
Weighted average number of shares used in | ||||||||||||
computation of diluted EPS (in thousands) | 166,962 | 163,608 | 183,188 | |||||||||
Number of options and restricted shares not taken into | ||||||||||||
account in computation of diluted earnings per share, | ||||||||||||
because of their anti-dilutive effect (in thousands) | 9,609 | 8,952 | 6,466 |