SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 6-K
 
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15a-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
 
Report on Form 6-K dated
 
August 16, 2017
 
Partner Communications Company Ltd.
(Translation of Registrant's Name Into English)
 
8 Amal Street
Afeq Industrial Park
Rosh Ha'ayin 48103
Israel
                       
(Address of Principal Executive Offices)
 
(Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F.)
 
Form 20-F ☒  Form 40-F ☐
 
(Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.)
 
Yes ☐  No ☒
 
(If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82-               )
 
This Form 6-K is incorporated by reference into the Company's Registration Statements on Form S-8 filed with the Securities and Exchange Commission on December 4, 2002 (Registration No. 333-101652), September 5, 2006 (Registration No. 333-137102), September 11, 2008 (Registration No. 333-153419), August 17, 2015 (Registration No. 333-206420), November 12, 2015 (Registration No. 333-207946) and on March 14, 2016 (Registration No. 333-210151)
 
Enclosure: Partner Communications reports second quarter 2017 results

 

 
PARTNER COMMUNICATIONS REPORTS
SECOND QUARTER 2017 RESULTS1
 
ADJUSTED EBITDA2 TOTALED NIS 252 MILLION
 
OPEX2 TOTALED NIS 489 MILLION, A DECLINE OF NIS 83 MILLION FROM Q2 2016
 
ADJUSTED FREE CASH FLOW2 TOTALED NIS 208 MILLION
 
Second quarter 2017 highlights (compared with second quarter 2016)
 
·
Total Revenues: NIS 805 million (US$ 230 million), a decrease of 10%
 
·
Service Revenues: NIS 646 million (US$ 185 million), a decrease of 7%
 
·
Equipment Revenues: NIS 159 million (US$ 45 million), a decrease of 22%
 
·
Total Operating Expenses (OPEX): NIS 489 million (US$ 140 million), a decrease of 15%
 
·
Adjusted EBITDA: NIS 252 million (US$ 72 million), an increase of 11%
 
·
Adjusted EBITDA Margin2: 31% of total revenues compared with 25%
 
·
Profit for the Period: NIS 34 million (US$ 10 million), an increase of 31%
 
·
Net Debt2: NIS 1,081 million (US$ 309 million), a decrease of NIS 883 million
 
·
Adjusted Free Cash Flow (before interest): NIS 208 million (US$ 59 million), an increase of NIS 48 million
 
·
Cellular ARPU: NIS 62 (US$ 18), a decrease of 5%
 
·
Cellular Subscriber Base: approximately 2.66 million at quarter-end, a decrease of 1%
 
Rosh Ha'ayin, Israel, August 16, 2017 – Partner Communications Company Ltd. ("Partner" or the "Company") (NASDAQ and TASE: PTNR), a leading Israeli communications operator, announced today its results for the quarter ended June 30, 2017.
 
Commenting on the second quarter 2017 results, Mr. Isaac Benbenisti, CEO of Partner noted:
 
"The second quarter results portray a net increase in the number of cellular subscribers, continued efficiency measures implemented in the Company and an increase in operating profit.
 
1 The quarterly financial results are unaudited.
2  For the definition of this and other Non-GAAP financial measures, see "Use of Non-GAAP Financial Measures" in this press release.
 
In the last quarter, we continued to establish our leadership in the cellular segment, and we reported an increase in the number of Post-Paid subscribers, who account for 85% of the Company's cellular subscriber base, for the eighth consecutive quarter. We continue to deploy 4.5G network throughout the country and at the same time we continue to implement MIMO 4X4 technology in our cellular network, which will enable us to offer cellular internet at speeds of up to 400 Mbps. In addition, we continue to develop additional capabilities for Partner's unique IoT (Internet of Things) Pro network, which are for private use and adapted to the specific needs of business subscribers.
 
We opened the second half of 2017 with the initial marketing of Partner TV services and triple services which include internet and fixed-line telephony, in addition to TV. Over 20,000 consumers have requested to join Partner TV, reflecting the strong interest in the Israeli market to switch to a more advanced TV service at a more attractive price. In the last two weeks we have already begun installations in the homes of consumers. In addition, the localized launch of Netflix in Israel, and our partnership with the world's leading internet television network, will enable us to offer a unique value-added offering to Partner TV customers.
 
Last week we revealed additional news, with the announcement regarding the expansion of Partner's fiber optic network, which enables private customers, already at this point in time, internet services at speeds of up to 1,000Mbps and we have already reached tens of thousands of households. In the coming months we plan to significantly expand our deployments within the cities with a reach of additional tens of thousands of homes using Partner's fiber infrastructure. This is in addition to growing numbers of business customers already enjoying the advantages of Partner's fiber optic network, which is deployed in central business areas in various cities in Israel and is connected to economic centers worldwide.
 
The positive quarterly results, together with the successful launch of Partner TV and the progress in fiber deployment, are the result of long-term plans that we started over two years ago, designed to provide our customers with added value across the variety of communication services we offer as a comprehensive communications group."
 
Mr. Dudu Mizrahi, Partner's Chief Financial Officer, commented on the second quarter results of 2017:
 
"The past months at Partner have been characterized by activity in a wide range of operational and financial areas, and continued efficiency measures in the Company, all alongside the planning of future investments by the Company.
 
During the last quarter, the Company's cellular subscriber base grew by 4 thousand subscribers, with the Post-Paid subscribers increasing by 14 thousand subscribers while the Pre-Paid subscribers base declined by 10 thousand subscribers. An increase in the size of the subscriber base together with an increase in ARPU, as a result of seasonality and price stability in calls and data packages, resulted in a quarterly increase in revenues from cellular services.
 
2
In the equipment sales operations, the steps that we have taken in the past few months resulted in an improvement in gross profit from equipment sales to NIS 33 million with profitability of 21% compared to gross profit of NIS 26 million and profitability of 16% in the first quarter of 2017.
 
Further, in the second quarter, following the trend we have seen in previous quarters, we continued to reduce the Company's OPEX, which contributed to the improvement in the Company's EBITDA compared to the previous quarter as well as to the parallel quarter last year. In the second quarter of 2017, the higher EBITDA was a result of the growth in service revenues, the improvement in gross profit from equipment sales and the continued decline in OPEX.
 
We continue to report strong adjusted free cash flow before interest payments, which totaled NIS 208 million in the second quarter of 2017, an increase of 30% compared to the second quarter of 2016 and a 65% increase compared to the first quarter of 2017.
 
With respect to financing, during the past quarter we took a number of steps including a capital raise of approximately NIS 190 million, early repayments of loans from banks and financial institutions in a total amount of NIS 700 million in June and NIS 175 million in July, while at the same time raising new debt by issuing bonds in an amount of approximately NIS 255 million in July. These measures strengthened the Company's balance sheet and will reduce the Company's finance expenses, in order to enable us to realize Partner's strategic plans."
 
 
NIS Million
  
Q2'17
    
Q1'17
  
Comments
Service Revenues
    
646
      
640
    
Equipment Revenues
    
159
      
163
  
Decrease in fixed-line equipment sales
Total Revenues
    
805
      
803
    
Gross profit from equipment sales
    
33
      
26
  
Change in product mix with increase in profit margins
OPEX
    
489
      
496
    
Adjusted EBITDA
    
252
      
233
    
Profit for the Period
    
34
      
51
  
Finance expenses in Q2 2017 included one-time early repayment expense of NIS 25 million
Capital Expenditures (additions)
    
61
      
40
    
Adjusted free cash flow (before interest payments)
    
208
      
126
    
Net Debt
    
1,081
      
1,415
  
Decline in debt results from positive free cash flow and capital raise of approximately NIS 190 million
 
3
 
 
NIS Million
  
Q2'17
    
Q1'17
    
Comments
Cellular Post-Paid Subscribers (end of period, thousands)
    
2,273
       2,259      
Cellular Pre-Paid Subscribers (end of period, thousands)
     389       399      
Monthly Average Revenue per Cellular User (ARPU) (NIS)
     62      
61
     Increase as a result of seasonality and price stability in call and data packages
Quarterly Cellular Churn Rate (%)
    
9.0
%
     9.8 %   Decline in churn rate of both Post-Paid subscribers and Pre-Paid subscribers
 
Key Financial Results

NIS MILLION (except EPS)
  
Q2'17
    
Q2'16
    
% Change
  
Revenues
    
805
      
897
      
-10
%
Cost of revenues
    
637
      
730
      
-13
%
Gross profit
    
168
      
167
      
+1
%
Operating profit
    
103
      
67
      
+54
%
Profit for the period
    
34
      
26
      
+31
%
Earnings per share (basic, NIS)
    
0.21
      
0.17
      
+24
%
Adjusted free cash flow (before interest)
    
208
      
160
      
+30
%
 
Key Operating Indicators
 
   
Q2'17
    
Q2'16
    
Change
  
Adjusted EBITDA (NIS million)
    
252
      
228
      
+11
%
Adjusted EBITDA (as a % of total revenues)
    
31
%
    
25
%
    
+6
  
Cellular Subscribers (end of period, thousands)
    
2,662
      
2,700
      
-38
  
Quarterly Cellular Churn Rate (%)
    
9.0
%
    
9.8
%
    
-0.8
  
Monthly Average Revenue per Cellular User (ARPU) (NIS)
    
62
      
65
      
-3
  
 
Partner Consolidated Results
 
   
Cellular Segment
    
Fixed-Line Segment
    
Elimination
    
Consolidated
  
NIS Million
  
Q2'17
    
Q2'16
    
Change %
    
Q2'17
    
Q2'16
    
Change %
    
Q2'17
    
Q2'16
    
Q2'17
    
Q2'16
    
Change %
  
Total Revenues
    
642
      
715
      
-10
%
    
206
      
236
      
-13
%
    
(43
)
    
(54
)
    
805
      
897
      
-10
%
Service Revenues
    
497
      
527
      
-6
%
    
192
      
219
      
-12
%
    
(43
)
    
(54
)
    
646
      
692
      
-7
%
Equipment Revenues
    
145
      
188
      
-23
%
    
14
      
17
      
-18
%
    
-
      
-
      
159
      
205
      
-22
%
Operating Profit
    
81
      
31
      
+161
%
    
22
      
36
      
-39
%
    
-
      
-
      
103
      
67
      
+54
%
Adjusted EBITDA
    
196
      
155
      
+26
%
    
56
      
73
      
-23
%
    
-
      
-
      
252
      
228
      
+11
%

4
 
Financial Review
 
In Q2 2017, total revenues were NIS 805 million (US$ 230 million), a decrease of 10% from NIS 897 million in Q2 2016.
 
Service revenues in Q2 2017 totaled NIS 646 million (US$ 185 million), a decrease of 7% from NIS 692 million in Q2 2016.
 
Service revenues for the cellular segment in Q2 2017 totaled NIS 497 million (US$ 142 million), a decrease of 6% from NIS 527 million in Q2 2016. The decrease was mainly the result of two factors, the continued price erosion of cellular services (both Post-Paid and Pre-Paid) due to the continued competitive market conditions and one-time revenue items in Q2 2016.
 
Service revenues for the fixed-line segment in Q2 2017 totaled NIS 192 million (US$ 55 million), a decrease of 12% from NIS 219 million in Q2 2016. The decrease reflected the continuing decrease in revenues from international calls as well as other fixed line services.
 
Equipment revenues in Q2 2017 totaled NIS 159 million (US$ 45 million), a decrease of 22% from NIS 205 million in Q2 2016, largely reflecting a decrease in the volume of equipment sales.
 
Gross profit from equipment sales in Q2 2017 was NIS 33 million (US$ 9 million), compared with NIS 42 million in Q2 2016, a decrease of 21%, mainly reflecting the decrease in the volume of equipment sales.
 
Total operating expenses ('OPEX') totaled NIS 489 million (US$ 140 million) in Q2 2017, a decrease of 15% or NIS 83 million from Q2 2016. The decrease mainly reflected a decline in expenses related to the cellular network as well as a decrease in other expenses reflecting the impact of various efficiency measures undertaken as part of a long-term plan to reduce the Company's cost base. Including depreciation and amortization expenses and other expenses (mainly amortization of employee share based compensation), OPEX in Q2 2017 decreased by 13% compared with Q2 2016, mainly for the same reasons as above.
 
In Q2 2017, the Company recorded income with respect to the settlement agreement regarding the Orange brand in an amount of NIS 54 million (US$ 15 million), unchanged from Q2 2016. Q2 2017 is the last quarter the Company will record income with respect to the settlement agreement regarding the Orange brand.
 
Other income, net, totaled NIS 8 million (US$ 2 million) in Q2 2017, compared to NIS 12 million in Q2 2016, a decrease of 33%, mainly reflecting a decrease in income from the unwinding of trade receivables.
 
Operating profit for Q2 2017 was NIS 103 million (US$ 29 million), an increase of 54% compared with NIS 67 million in Q2 2016.
 
Adjusted EBITDA in Q2 2017 totaled NIS 252 million (US$ 72 million), an increase of 11% from NIS 228 million in Q2 2016. As a percentage of total revenues, Adjusted EBITDA in Q2 2017 was 31% compared with 25% in Q2 2016.
 
5
Adjusted EBITDA for the cellular segment was NIS 196 million (US$ 56 million), in Q2 2017, an increase of 26% from NIS 155 million in Q2 2016, reflecting the decrease in OPEX partially offset by a decrease in service revenues and gross profit from equipment sales. As a percentage of total cellular segment revenues, Adjusted EBITDA for the cellular segment in Q2 2017 was 31% compared with 22% in Q2 2016.
 
Adjusted EBITDA for the fixed-line segment was NIS 56 million (US$ 16 million) in Q2 2017, a decrease of 23% from NIS 73 million in Q2 2016, reflecting the decrease in service revenues, partially offset by a decrease in OPEX and an increase in gross profit from equipment sales. As a percentage of total fixed-line segment revenues, Adjusted EBITDA for the fixed-line segment in Q2 2017 was 27%, compared with 31% in Q2 2016.
 
Finance costs, net in Q2 2017 were NIS 54 million (US$ 15 million), an increase of 93% compared with NIS 28 million in Q2 2016, largely a result of one-time early repayment expenses of NIS 25 million in Q2 2017.
 
Income taxes for Q2 2017 were NIS 15 million (US$ 4 million), compared with NIS 13 million in Q2 2016.
 
Profit in Q2 2017 was NIS 34 million (US$ 10 million), compared with a profit of NIS 26 million in Q2 2016, an increase of 31%.
 
Based on the weighted average number of shares outstanding during Q2 2017, basic earnings per share or ADS, was NIS 0.21 (US$ 0.06), compared to basic earnings per share of NIS 0.17 in Q2 2016.
 
Cellular Segment Operational Review
 
At the end of Q2 2017, the Company's cellular subscriber base (including mobile data and 012 Mobile subscribers) was approximately 2.66 million including approximately 2.27 million Post-Paid subscribers or 85% of the base, and approximately 389 thousand Pre-Paid subscribers, or 15% of the subscriber base.
 
During the second quarter of 2017, the cellular subscriber base increased by approximately 4 thousand subscribers. The Post-Paid subscriber base increased by approximately 14 thousand subscribers, while the Pre-Paid subscriber base declined by approximately 10 thousand subscribers.
 
The quarterly churn rate for cellular subscribers in Q2 2017 was 9.0%, compared with 9.8% in Q2 2016. The decline in churn rate reflected a decline in both Post-Paid and Pre-Paid subscriber churn.
 
Total cellular market share (based on the number of subscribers) at the end of Q2 2017 was estimated to be approximately 26%, unchanged from Q2 2016.
 
6
The monthly Average Revenue per User ("ARPU") for cellular subscribers in Q2 2017 was NIS 62 (US$ 18), a decrease of 5% from NIS 65 in Q2 2016. The decrease mainly reflected the continued price erosion in key cellular services due to the persistent competition in the cellular market and one-time revenue items recorded in Q2 2016.
 
Funding and Investing Review
 
In Q2 2017, Adjusted Free Cash Flow totaled NIS 208 million (US$ 59 million), an increase of 30% from NIS 160 million in Q2 2016.
 
Cash generated from operations increased by 24% to NIS 268 million (US$ 77 million) in Q2 2017 from NIS 217 million in Q2 2016. The increase mainly reflected the increase in Adjusted EBITDA and the smaller decrease in operating assets and liabilities, which was mainly explained by the significant decrease in the volume of equipment sales under long-term payment plans.
 
Cash capital expenditures ('CAPEX payments'), as represented by cash flows used for the acquisition of property and equipment and intangible assets, were NIS 60 million (US$ 17 million) in Q2 2017, an increase of 5% from NIS 57 million in Q2 2016.
 
The level of Net Debt at the end of Q2 2017 amounted to NIS 1,081 million (US$ 309 million), compared with NIS 1,964 million at the end of Q2 2016.
 
Business Developments
 
Further to the Company's previous reports, regarding its intentions to early repay borrowings from banks and institutions, in June 2017 the Company repaid borrowings in a total amount of NIS 700 million (US$ 200 million) (borrowings C, D, E, F, G & H) and in July 2017 an additional amount of NIS 175 million (US$ 50 million) (borrowings G & I).
 
As previously reported by the Company on June 18, 2017, the Company issued shares of the Company. The total net consideration received was approximately NIS 190 million (US$ 54 million).
 
As previously reported by the Company on July 20, 2017, the Company issued new Notes (Series F), traded on TASE, in a principal amount of NIS 255 million (US$ 73 million), repayable in five equal annual installments in the years 2020 through 2024. The principal bears fixed annual interest of 2.16%, payable on a semiannual basis starting December 2017.
 
Regulatory Developments
 
In May 2017, the Ministry of Communications published its decision regarding the requirement of Bezeq to offer its telephony services to other operators in a resale format as of July 2017, instead of the planned full wholesale telephony services which was scheduled to begin in May 2015. The price paid to Bezeq by the operators for the resale telephony is suggested by the Ministry to be set substantially higher than the prices set for the planned full wholesale telephony product.
 
7
According to the decision, the date of implementation of the full wholesale telephony service has been postponed at the latest by July 18, 2018. However, the Ministry will consider whether to extend the temporary resale arrangement or to make it permanent in light of the competitive situation over the coming year.
 
The Ministry allowed interested parties to present their positions regarding the prices set for the resale format and the Company filed its response with the Ministry. The Company argued for lower tariffs for the resale telephony product and insisted that this arrangement can only be a temporary arrangement. The Minister committed that any possible change to the price (that may result from the hearing) would be applied retroactively.
 
In addition, in June 2017 the Ministry of Communications published the maximum tariffs for HOT's wholesale bit-stream internet access service. The Ministry has yet to publish its decisions regarding several critical issues which have so far delayed the actual implementation of this wholesale market. In addition, HOT has failed to implement some aspects of the service and these await enforcement by the Ministry. Therefore, there is no clear deadline for the implementation of the service.
 
IFRS 15
 
In May 2014, a new revenue recognition standard was issued (IFRS 15). The new standard is effective for annual reporting periods beginning on or after January 1, 2018, according to its transition provisions. Earlier application is permitted.
 
The Company has identified a number of relevant issues. Currently the most significant issue identified is the treatment of the costs of obtaining contracts with customers which, under the new standard, are to be capitalized under certain conditions, while currently these costs are generally recognized as incurred.  According to the standard, sale commissions and incentives paid to employees and resellers for obtaining contracts with customers will be recognized as assets, and amortized to profit or loss when the related goods and services are transferred to the customers. The capitalization of these costs of obtaining contracts is expected to have a material positive effect on our results of operations in the coming years, which is expected to be leveled off in later years. 
 
In addition, the Company is in the process of preparing for the implementation of the requirement of the standard to allocate revenues to performance obligations identified, including preparing for the application of the portfolio approach under certain conditions, establishing customer groupings and other related issues.
 
The Company is making progress in implementing the required adjustments into the Company's information systems which are expected to be completed in the third quarter of 2017. The Company aims to adopt the standard as early as possible, subject to the completion of the required adjustments to the information systems.
 
The Company plans to apply the standard according to the modified retrospective approach. Under this approach, entities will recognize transitional adjustments in retained earnings on the date of initial application, i.e. without restating the comparative period; and applying the new rules to contracts that are not completed as of the date of initial application.
 
The Company is currently unable to quantify the impact of the implementation of IFRS 15.


8
 
Conference Call Details
 
Partner will hold a conference call on Wednesday, August 16, 2017 at 10.00AM Eastern Time / 5.00PM Israel Time.
To join the call, please dial the following numbers (at least 10 minutes before the scheduled time):
International: +972.3.918.0610
North America toll-free: +1.888.668.9141
A live webcast of the call will also be available on Partner's Investors Relations website at: www.partner.co.il/en/Investors-Relations/lobby/
If you are unavailable to join live, the replay of the call will be available from August 16, 2017 until September 06, 2017, at the following numbers:
International: +972.3.925.5941
North America toll-free: +1.877.456.0009
In addition, the archived webcast of the call will be available on Partner's Investor Relations website at the above address for approximately three months.

Forward-Looking Statements
 
This press release includes forward-looking statements within the meaning of Section 27A of the US Securities Act of 1933, as amended, Section 21E of the US Securities Exchange Act of 1934, as amended, and the safe harbor provisions of the US Private Securities Litigation Reform Act of 1995. Words such as "estimate", "believe", "anticipate", "expect", "intend", "seek", "will", "plan", "could", "may", "project", "goal", "target" and similar expressions often identify forward-looking statements but are not the only way we identify these statements. Specific statements have been made regarding the Company's continued investment and development in  its cellular network to offer its customers additional capabilities for Partner's IoT Pro network and higher internet speeds; the anticipated unique value-added offerings to Partner TV customers; the planned deployments of Partner's fiber optic infrastructure to reach additional tens of thousands of homes; the expected reduction in the Company's finance expenses and strengthened ability to realize our strategic plans as a result of refinancing measures taken by the Company and the expected material positive effect on our results of operations in the coming years as a result of the capitalization of the costs of securing contracts which is expected to be leveled off in later years. In addition, all statements other than statements of historical fact included in this press release regarding our future performance are forward-looking statements. We have based these forward-looking statements on our current knowledge and our present beliefs and expectations regarding possible future events. These forward-looking statements are subject to risks, uncertainties and assumptions, including: (i) technological, technical or other operational difficulties that might delay or block the Company from: continuing to invest and develop its cellular network and fiber optic infrastructure to achieve the stated objectives; (ii) whether the Company will have the financial resources and commercial strategies which allow it to successfully offer its customers unique value-added offerings in the TV market and bundled services or reach the targeted expansion in the number of customers served by its fiber optic infrastructure; and the extent to which the Company's finance expenses will be and remain reduced and its results operations improved as a result, respectively, of the refinancing measures taken and the capitalization of the costs of securing contracts. The future results may differ materially from those anticipated herein. For further information regarding risks, uncertainties and assumptions about Partner, trends in the Israeli telecommunications industry in general, the impact of current global economic conditions and possible regulatory and legal developments, and other risks we face, see "Item 3. Key Information - 3D. Risk Factors", "Item 4. Information on the Company", "Item 5. Operating and Financial Review and Prospects", "Item 8. Financial Information - 8A. Consolidated Financial Statements and Other Financial Information - 8A.1 Legal and Administrative Proceedings" and "Item 11. Quantitative and Qualitative Disclosures about Market Risk" in the Company's Annual Reports on Form 20-F filed with the SEC, as well as its immediate reports on Form 6-K furnished to the SEC. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
 
The quarterly financial results presented in this press release are unaudited financial results.
 
The results were prepared in accordance with IFRS, other than the non-GAAP financial measures presented in the section, "Use of Non-GAAP Financial Measures".

The financial information is presented in NIS millions (unless otherwise stated) and the figures presented are rounded accordingly.

The convenience translations of the New Israeli Shekel (NIS) figures into US Dollars were made at the rate of exchange prevailing at June 30, 2017: US $1.00 equals NIS 3.496. The translations were made purely for the convenience of the reader.

9

 
Use of Non-GAAP Financial Measures
 
The following non-GAAP measures are used in this report. These measures are not financial measures under IFRS and may not be comparable to other similarly titled measures for other companies. Further, the measures may not be indicative of the Company's historic operating results nor are meant to be predictive of potential future results.
 
Non-GAAP Measure
Calculation
Most Comparable IFRS Financial Measure
Adjusted EBITDA*
 
 
 
 
 
 
Adjusted EBITDA:
Profit (Loss)
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)
Profit (Loss)
     
Adjusted EBITDA margin (%)
Adjusted EBITDA margin (%):
  
  Adjusted EBITDA
divided by
Total revenues
  
Adjusted Free Cash Flow**
Adjusted Free Cash Flow:
Cash flows from operating activities
deduct
Cash flows from investing activities
add
Short-term investment in (proceeds from) deposits
Cash flows from operating activities
deduct
Cash flows from investing activities
Total Operating Expenses (OPEX)
Total Operating Expenses:
Cost of service revenues
add
Selling and marketing expenses
add
General and administrative expenses
deduct
Depreciation and amortization expenses,
Other expenses (mainly amortization of employee share based compensation)
Sum of:
Cost of service revenues,
Selling and marketing expenses,
General and administrative expenses
Net Debt
Net Debt:
Current maturities of notes payable and borrowings
add
Notes payable
add
Borrowings from banks and others
deduct
Cash and cash equivalents
deduct
Short-term deposits
Sum of:
Current maturities of notes payable and borrowings,
Notes payable,
Borrowings from banks and others
 
 
* Adjusted EBITDA is fully comparable with EBITDA measure which was provided in reports for prior periods.
**Adjusted Free Cash Flow measure is fully comparable to Free Cash Flow measure which was provided in reports for prior periods.

10
About Partner Communications
 
Partner Communications Company Ltd. is a leading Israeli provider of telecommunications services (cellular, fixed-line telephony, internet services and television services). Partner's ADSs are quoted on the NASDAQ Global Select Market™ and its shares are traded on the Tel Aviv Stock Exchange (NASDAQ and TASE: PTNR).
For more information about Partner, see: http://www.partner.co.il/en/Investors-Relations/lobby
 
Contacts:
Dudu Mizrahi
Chief Financial Officer
Tel: +972-54-781-4951
 
Liat Glazer Shaft
Head of Investor Relations and Corporate Projects
Tel: +972-54-781-5051
E-mail: investors@partner.co.il
 

11

 
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
 
   



New Israeli Shekels
    
 
Convenience translation into U.S. Dollars
  
   
June 30,
    
December 31,
    
June 30,
  
   
2017
    
2016
    
2017
  
   
(Unaudited)
    
(Audited)
    
(Unaudited)
  
   
In millions
  
CURRENT ASSETS
                  
Cash and cash equivalents
    
897
      
716
      
257
  
Short-term deposits
            
452
          
Trade receivables
    
863
      
990
      
247
  
Other receivables and prepaid expenses
    
54
      
57
      
15
  
Deferred expenses – right of use
    
37
      
28
      
11
  
Inventories
    
96
      
96
      
27
  
     
1,947
      
2,339
      
557
  
                         
NON CURRENT ASSETS
                        
Trade receivables
    
245
      
333
      
70
  
Prepaid expenses and other
    
2
      
2
      
1
  
Deferred expenses – right of use
    
109
      
75
      
31
  
Property and equipment
    
1,125
      
1,207
      
322
  
Licenses and other intangible assets
    
711
      
793
      
203
  
Goodwill
    
407
      
407
      
116
  
Deferred income tax asset
    
45
      
41
      
13
  
     
2,644
      
2,858
      
756
  
                         
TOTAL ASSETS
    
4,591
      
5,197
      
1,313
  

12
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
 
   


New Israeli Shekels
    
Convenience translation into U.S. Dollars
  
   
June 30,
    
December 31,
    
June 30,
  
   
2017
    
2016
    
2017
  
   
(Unaudited)
    
(Audited)
    
(Unaudited)
  
   
In millions
  
CURRENT LIABILITIES
                  
 Current maturities of notes payable and borrowings
    
699
      
498
      
200
  
Trade payables
    
643
      
681
      
184
  
Payables in respect of employees
    
76
      
101
      
22
  
Other payables (mainly institutions)
    
10
      
28
      
3
  
Income tax payable
    
78
      
45
      
22
  
Deferred income with respect to settlement agreement with Orange
                        
Deferred revenues from HOT mobile
    
31
      
31
      
9
  
Other deferred revenues
    
39
      
38
      
11
  
Provisions
    
75
      
77
      
21
  
     
1,651
      
1,607
      
472
  
NON CURRENT LIABILITIES
                        
Notes payable
    
649
      
646
      
186
  
Borrowings from banks and others
    
630
      
1,550
      
180
  
Liability for employee rights upon retirement, net
    
36
      
39
      
10
  
 Dismantling and restoring sites obligation
    
28
      
35
      
8
  
        Deferred revenues from HOT mobile
    
180
      
195
      
51
  
 Other non-current liabilities
    
20
      
14
      
6
  
   
1,543
      
2,479
      
441
  
TOTAL LIABILITIES
    
3,194
      
4,086
      
913
  
                       
EQUITY
                        
Share capital - ordinary shares of NIS 0.01 par value: authorized - December 31, 2016 and
   June 30, 2017 - 235,000,000 shares; issued and outstanding -
    
2
      
2
      
1
  
December 31, 2016 – *156,993,337 shares
                        
June 30, 2017 – *167,296,026 shares
                        
 Capital surplus
    
1,218
      
1,034
      
348
  
 Accumulated retained earnings
    
454
      
358
      
130
  
 Treasury shares, at cost December 31, 2016 – **3,603,578 shares June 30, 2017 – **3,525,463 shares
    
(277
)
    
(283
)
    
(79
)
TOTAL EQUITY
    
1,397
      
1,111
      
400
  
TOTAL LIABILITIES AND EQUITY
    
4,591
      
5,197
      
1,313
  
 
*   Net of treasury shares.
** Including, restricted shares in amount of 2,143,957 and 2,061,201 as of June 30, 2017 and December 31, 2016 respectively held by trustee under the Company's Equity Incentive Plan, such shares will become outstanding upon completion of vesting conditions.
13

 
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 
   
New Israeli shekels
    
Convenience translation into U.S. dollars
  
   
6 month
period ended
 June 30
    
3 month
period ended
 June 30
    
6 month
period ended
 June 30,
    
3 month
period ended
 June 30,
  
   
2017
    
2016
    
2017
    
2016
    
2017
    
2017
  
   
(Unaudited)
    
(Unaudited)
    
(Unaudited)
    
(Unaudited)
    
(Unaudited)
    
(Unaudited)
  
   
In millions (except per share data)
  
Revenues, net
    
1,608
      
1,874
      
805
      
897
      
460
      
230
  
Cost of revenues
    
1,291
      
1,527
      
637
      
730
      
369
      
182
  
Gross profit
    
317
      
347
      
168
      
167
      
91
      
48
  
                                                 
Selling and marketing expenses
    
151
      
232
      
77
      
105
      
43
      
22
  
General and administrative expenses
    
100
      
128
      
50
      
61
      
29
      
14
  
Income with respect to settlement agreement with Orange
    
108
      
108
      
54
      
54
      
31
      
15
  
Other income, net
    
17
      
26
      
8
      
12
      
5
      
2
  
Operating profit
    
191
      
121
      
103
      
67
      
55
      
29
  
Finance income
    
1
      
14
      
1
      
6
      
*
      
*
  
Finance expenses
    
78
      
66
      
55
      
34
      
22
      
15
  
Finance costs, net
    
77
      
52
      
54
      
28
      
22
      
15
  
Profit before income tax
    
114
      
69
      
49
      
39
      
33
      
14
  
Income tax expenses
    
29
      
29
      
15
      
13
      
9
      
4
  
Profit for the period
    
85
      
40
      
34
      
26
      
24
      
10
  
                                                 
Earnings per share
                                                
Basic
    
0.54
      
0.26
      
0.21
      
0.17
      
0.15
      
0.06
  
Diluted
    
0.54
      
0.26
      
0.21
      
0.17
      
0.15
      
0.06
  
                                                 
Weighted average number of shares outstanding
  (in thousands)
                                                
Basic
    
157,746
      
156,091
      
158,442
      
156,092
      
157,746
      
158,442
  
Diluted
    
159,555
      
157,605
      
159,970
      
157,669
      
159,555
      
159,970
  
 
* Representing an amount of less than 1 million.

14

 
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
   
New Israeli shekels
    
Convenience translation into U.S. dollars
  
   
6 month
period ended
 June 30,
    
3 month
period ended
 June 30,
    
6 month
period ended
 June 30,
    
3 month
period ended
 June 30,
  
   
2017
    
2016
    
2017
    
2016
    
2017
    
2017
  
   
(Unaudited)
    
(Unaudited)
    
(Unaudited)
    
(Unaudited)
    
(Unaudited)
    
(Unaudited)
  
   
In millions
  
Profit for the period
    
85
      
40
      
34
      
26
      
24
      
10
  
Other comprehensive income for the period, net of income tax
    
-
      
-
      
-
      
-
      
-
      
-
  
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD
    
85
      
40
      
34
      
26
      
24
      
10
  
 
15
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
INTERIM SEGMENT INFORMATION & ADJUSTED EBITDA RECONCILIATION
 
   
New Israeli Shekels
    
New Israeli Shekels
  
   
Six months ended June 30, 2017
    
Six months ended June 30, 2016
  
   
In millions (Unaudited)
    
In millions (Unaudited)
  
 
  
Cellular segment
    
Fixed line segment
    
Reconciliation
for
consolidation
    
Consolidated
    
Cellular
segment
    
Fixed line
segment
    
Reconciliation
for
consolidation
    
Consolidated
  
Segment revenue - Services
    
977
      
309
            
1,286
      
1,060
      
342
            
1,402
  
Inter-segment revenue - Services
    
9
      
77
      
(86
)
            
10
      
99
      
(109
)
        
Segment revenue - Equipment
    
290
      
32
              
322
      
432
      
40
              
472
  
Total revenues
    
1,276
      
418
      
(86
)
    
1,608
      
1,502
      
481
      
(109
)
    
1,874
  
Segment cost of revenues – Services
    
735
      
293
              
1,028
      
851
      
302
              
1,153
  
Inter-segment cost of  revenues-
   Services
    
76
      
10
      
(86
)
            
98
      
11
      
(109
)
        
Segment cost of revenues - Equipment
    
240
      
23
              
263
      
342
      
32
              
374
  
Cost of revenues
    
1,051
      
326
      
(86
)
    
1,291
      
1,291
      
345
      
(109
)
    
1,527
  
Gross profit
    
225
      
92
              
317
      
211
      
136
              
347
  
Operating expenses (3)
    
207
      
44
              
251
      
301
      
59
              
360
  
Income with respect to settlement
   agreement with Orange
    
108
                      
108
      
108
                      
108
  
Other income, net
    
16
      
1
              
17
      
24
      
2
              
26
  
Operating profit
    
142
      
49
              
191
      
42
      
79
              
121
  
Adjustments to presentation of 
   segment Adjusted  EBITDA
                                                                
    –Depreciation and amortization
    
215
      
68
                      
230
      
75
                  
    –Other (1)
    
11
                              
25
      
(1
)
                
Segment Adjusted EBITDA (2)
    
368
      
117
                      
297
      
153
                  
Reconciliation of  segment subtotal
   Adjusted EBITDA to profit for the
   period
                                                                
Segments subtotal Adjusted
  EBITDA (2)
                            
485
                              
450
  
    -  Depreciation and amortization
                            
(283
)
                            
(305
)
    -  Finance costs, net
                            
(77
)
                            
(52
)
    -  Income tax expenses
                            
(29
)
                            
(29
)
    -  Other (1)
                            
(11
)
                            
(24
)
Profit for the period
                            
85
                              
40
  
 
16
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
INTERIM SEGMENT INFORMATION & ADJUSTED EBITDA RECONCILIATION
 
   
New Israeli Shekels
    
New Israeli Shekels
  
   
Three months ended June 30, 2017
    
Three months ended June 30, 2016
  
   
In millions (Unaudited)
    
In millions (Unaudited)
  
 
  
Cellular segment
    
Fixed line segment
    
Reconciliation
for
consolidation
    
Consolidated
    
Cellular
segment
    
Fixed line
segment
    
Reconciliation
for
consolidation
    
Consolidated
  
Segment revenue - Services
    
493
      
153
            
646
      
521
      
171
            
692
  
Inter-segment revenue - Services
    
4
      
39
      
(43
)
            
6
      
48
      
(54
)
        
Segment revenue - Equipment
    
145
      
14
              
159
      
188
      
17
              
205
  
Total revenues
    
642
      
206
      
(43
)
    
805
      
715
      
236
      
(54
)
    
897
  
Segment cost of revenues – Services
    
363
      
148
              
511
      
415
      
152
              
567
  
Inter-segment cost of  revenues-
   Services
    
38
      
5
      
(43
)
            
48
      
6
      
(54
)
        
Segment cost of revenues - Equipment
    
117
      
9
              
126
      
149
      
14
              
163
  
Cost of revenues
    
518
      
162
      
(43
)
    
637
      
612
      
172
      
(54
)
    
730
  
Gross profit
    
124
      
44
              
168
      
103
      
64
              
167
  
Operating expenses (3)
    
105
      
22
              
127
      
137
      
29
              
166
  
Income with respect to settlement
   agreement with Orange
    
54
                      
54
      
54
                      
54
  
Other income, net
    
8
                      
8
      
11
      
1
              
12
  
Operating profit
    
81
      
22
              
103
      
31
      
36
              
67
  
Adjustments to presentation of 
   segment Adjusted  EBITDA
                                                                
    –Depreciation and amortization
    
107
      
35
                      
113
      
37
                  
    –Other (1)
    
8
      
(1
)
                    
11
      
*
                  
Segment Adjusted EBITDA (2)
    
196
      
56
                      
155
      
73
                  
Reconciliation of  segment subtotal
   Adjusted EBITDA to profit for the
   period
                                                                
Segments subtotal Adjusted
   EBITDA (2)
                            
252
                              
228
  
    -  Depreciation and amortization
                            
(142
)
                            
(150
)
    -  Finance costs, net
                            
(54
)
                            
(28
)
    -  Income tax expenses
                            
(15
)
                            
(13
)
    -  Other (1)
                            
(7
)
                            
(11
)
Profit for the period
                            
34
                              
26
  
 
*   Representing an amount of less than 1 million.
17


 
PARTNER COMMUNICATIONS COMPANY LTD.
   (An Israeli Corporation)
   INTERIM SEGMENT INFORMATION & ADJUSTED EBITDA RECONCILIATION
 
(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; it is fully comparable to EBITDA information which has been previously provided for prior periods.
 
(3)
Operating expenses include selling and marketing expenses and general and administrative expenses.
 
18
 
  PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
   



New Israeli Shekels
    
 
Convenience translation into
 U.S. Dollars
  
   
6 months ended June 30,
  
   
2017
    
2016
    
2017
  
   
(Unaudited)
    
(Unaudited)
    
(Unaudited)
  
   
In millions
  
CASH FLOWS FROM OPERATING ACTIVITIES:
                  
Cash generated from operations (Appendix)
    
464
      
391
      
134
  
Income tax paid
    
(2
)
    
(12
)
    
(1
)
Net cash provided by operating activities
    
462
      
379
      
133
  
                         
CASH FLOWS FROM INVESTING ACTIVITIES:
                        
Acquisition of property and equipment
    
(86
)
    
(71
)
    
(25
)
Acquisition of intangible assets
    
(43
)
    
(34
)
    
(12
)
Proceeds from short-term deposits
    
452
              
129
  
Interest received
    
1
      
*
      
*
  
     Proceeds from (repayment of) derivative financial instruments, net
    
*
      
*
      
*
  
Net cash provided by (used in) investing activities
    
324
      
(105
)
    
92
  
                         
CASH FLOWS FROM FINANCING ACTIVITIES:
                        
Share issuance
    
190
              
54
  
Interest paid
    
(75
)
    
(66
)
    
(21
)
Current borrowings received
            
24
          
Repayment of non-current borrowings
    
(720
)
    
(7
)
    
(206
)
Repayment of notes payable
            
(235
)
        
Net cash used in financing activities
    
(605
)
    
(284
)
    
(173
)
                         
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
181
      
(10
)
    
52
  
                         
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
716
      
926
      
205
  
                         
CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
897
      
916
      
257
  
 
* Representing an amount of less than 1 million.
 
19
 
  PARTNER COMMUNICATIONS COMPANY LTD.
   (An Israeli Corporation)
   INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Appendix - Cash generated from operations and supplemental information
 
   



New Israeli Shekels
    
 
Convenience translation into
 U.S. Dollars
  
   
6 months ended June 30,
  
   
2017
    
2016
    
2017
  
   
(Unaudited)
    
(Unaudited)
    
(Unaudited)
  
   
In millions
  
                   
Cash generated from operations:
                  
       Profit for the period
    
85
      
40
      
24
  
      Adjustments for:
                        
Depreciation and amortization
    
265
      
290
      
76
  
Amortization of deferred expenses - Right of use
    
18
      
14
      
5
  
Employee share based compensation expenses
    
11
      
24
      
3
  
Liability for employee rights upon retirement, net
    
(3
)
    
(3
)
    
(1
)
Finance costs, net
    
*
      
(2
)
    
*
  
Change in fair value of derivative financial instruments
    
(1
)
    
*
      
*
  
Interest paid
    
75
      
66
      
21
  
Interest received
    
(1
)
    
*
      
*
  
Deferred income taxes
    
(5
)
    
11
      
(1
)
Income tax paid
    
2
      
12
      
1
  
Changes in operating assets and liabilities:
                        
Decrease in accounts receivable:
                        
Trade
    
215
      
27
      
61
  
Other
    
3
      
7
      
1
  
Increase (decrease) in accounts payable and accruals:
                        
Trade
    
(8
)
    
(9
)
    
(2
)
Other payables
    
(41
)
    
(21
)
    
(11
)
Provisions
    
(2
)
    
4
      
(1
)
Deferred income with respect to settlement agreement with Orange
    
(108
)
    
(108
)
    
(31
)
Deferred revenues from HOT mobile
    
(15
)
    
27
      
(4
)
Other deferred revenues
    
2
      
*
      
1
  
Increase in deferred expenses - Right of use
    
(61
)
    
(31
)
    
(17
)
Current income tax
    
33
      
6
      
9
  
Decrease in inventories
    
*
      
37
      
*
  
Cash generated from operations
    
464
      
391
      
134
  
 
* Representing an amount of less than 1 million.
 
At June 30, 2017 and 2016, trade and other payables include NIS 95 million ($27 million) and NIS 95 million, respectively, in respect of acquisition of intangible assets and property and equipment; payments in respect thereof are presented in cash flows from investing activities.
 
These balances are recognized in the cash flow statements upon payment.
20

 
Reconciliation of Non-GAAP Measures:
 
Adjusted Free Cash Flow
  
 
 
New Israeli Shekels
    
Convenience translation into
 U.S. Dollars
    
Convenience translation into
 U.S. Dollars
  
   
6 months
period ended
June 30,
    
6 months
period ended
June 30,
    
3 months
period ended
June 30,
    
3 months
period ended
June 30,
    
6 months
period ended
June 30,
    
3 months
period ended
June 30,
  
   
2017
    
2016
    
2017
    
2016
    
2017
    
2017
  
   
(Unaudited)
    
(Unaudited)
    
(Unaudited)
    
(Unaudited)
    
(Unaudited)
    
(Unaudited)
  
   
In millions
  
Net cash provided by operating activities
    
462
      
379
      
268
      
217
      
132
      
77
  
Net cash used in investing activities
    
324
      
(105
)
    
190
      
(57
)
    
93
      
54
  
Short-term investment in deposits
    
(452
)
            
(250
)
            
(129
)
    
(71
)
Adjusted Free Cash Flow
    
334
      
274
      
208
      
160
      
96
      
60
  
                                                 
Interest paid
    
(75
)
    
(66
)
    
(58
)
    
(41
)
    
(22
)
    
(17
)
Adjusted Free Cash Flow After Interest
    
259
      
208
      
150
      
119
      
75
      
43
  

Total Operating Expenses (OPEX)
  

 
New Israeli Shekels
    
Convenience translation into
 U.S. Dollars
    
Convenience translation into
 U.S. Dollars
  
   
6 months
period ended
June 30,
    
6 months
period ended
June 30,
    
3 months
period ended
June 30,
    
3 months
period ended
June 30,
    
6 months
period ended
June 30,
    
3 months
period ended
June 30,
  
   
2017
    
2016
    
2017
    
2016
    
2017
    
2017
  
   
(Unaudited)
    
(Unaudited)
    
(Unaudited)
    
(Unaudited)
    
(Unaudited)
    
(Unaudited)
  
   
In millions
  
Cost of revenues – Services
    
1,028
      
1,153
      
511
      
567
      
294
      
146
  
Selling and marketing expenses
    
151
      
232
      
77
      
105
      
43
      
22
  
General and administrative expenses
    
100
      
128
      
50
      
61
      
29
      
14
  
Depreciation and amortization (2)
    
(283
)
    
(305
)
    
(142
)
    
(150
)
    
(81
)
    
(41
)
Other (1)
    
(11
)
    
(24
)
    
(7
)
    
(11
)
    
(3
)
    
(1
)
OPEX
    
985
      
1,184
      
489
      
572
      
282
      
140
  
 
(1)
Mainly amortization of employee share based compensation.
 
(2)
Including impairment charges.
 
21
Key Financial and Operating Indicators (unaudited)*

NIS M unless otherwise stated
  
Q2' 15
    
Q3' 15
    
Q4' 15
    
Q1' 16
    
 
Q2' 16
    
 
Q3' 16
    
 
Q4' 16
    
 
Q1' 17
    
 
Q2' 17
    
2015
    
2016
  
Cellular Segment Service Revenues
    
581
      
587
      
550
      
543
      
527
      
531
      
498
      
489
      
497
      
2,297
      
2,099
  
Cellular Segment Equipment Revenues
    
271
      
234
      
269
      
244
      
188
      
139
      
158
      
145
      
145
      
1,051
      
729
  
Fixed-Line Segment Service Revenues
    
226
      
225
      
223
      
222
      
219
      
220
      
205
      
194
      
192
      
906
      
866
  
Fixed-Line Segment Equipment Revenues
    
16
      
12
      
22
      
23
      
17
      
12
      
11
      
18
      
14
      
68
      
63
  
Reconciliation for consolidation
    
(50
)
    
(52
)
    
(57
)
    
(55
)
    
(54
)
    
(53
)
    
(51
)
    
(43
)
    
(43
)
    
(211
)
    
(213
)
Total Revenues
    
1,044
      
1,006
      
1,007
      
977
      
897
      
849
      
821
      
803
      
805
      
4,111
      
3,544
  
Gross Profit from Equipment Sales
    
67
      
52
      
61
      
56
      
42
      
28
      
18
      
26
      
33
      
239
      
144
  
Operating Profit (Loss)
    
67
      
32
      
(48
)
    
54
      
67
      
64
      
8
      
88
      
103
      
107
      
193
  
Cellular Segment Adjusted EBITDA
    
160
      
137
      
152
      
142
      
155
      
156
      
109
      
172
      
196
      
597
      
562
  
Fixed-Line Segment Adjusted EBITDA
    
76
      
59
      
65
      
80
      
73
      
64
      
55
      
61
      
56
      
279
      
272
  
Total Adjusted EBITDA
    
236
      
196
      
217
      
222
      
228
      
220
      
164
      
233
      
252
      
876
      
834
  
Adjusted EBITDA Margin (%)
    
23
%
    
19
%
    
22
%
    
23
%
    
25
%
    
26
%
    
20
%
    
29
%
    
31
%
    
21
%
    
24
%
OPEX
    
601
      
650
      
608
      
612
      
572
      
570
      
570
      
496
      
489
      
2,463
      
2,324
  
Impairment charges on operating profit
                    
98
                                                      
98
          
Income with respect to settlement agreement with Orange
            
23
      
38
      
54
      
54
      
55
      
54
      
54
      
54
      
61
      
217
  
Finance costs, net
    
46
      
40
      
39
      
24
      
28
      
30
      
23
      
23
      
54
      
143
      
105
  
Profit (loss)
    
9
      
(9
)
    
(65
)
    
14
      
26
      
19
      
(7
)
    
51
      
34
      
(40
)
    
52
  
Capital Expenditures (cash)
    
111
      
64
      
56
      
48
      
57
      
44
      
47
      
69
      
60
      
359
      
196
  
Capital Expenditures (additions)
    
84
      
51
      
86
      
34
      
40
      
44
      
84
      
40
      
61
      
271
      
202
  
Adjusted Free Cash Flow
    
24
      
291
      
230
      
114
      
160
      
215
      
269
      
126
      
208
      
566
      
758
  
Adjusted Free Cash Flow (After Interest)
    
(28
)
    
277
      
172
      
89
      
119
      
201
      
241
      
109
      
150
      
429
      
650
  
Net Debt
    
2,626
      
2,355
      
2,175
      
2,079
      
1,964
      
1,768
      
1,526
      
1,415
      
1,081
      
2,175
      
1,526
  
Cellular Subscriber Base (Thousands)
    
2,747
      
2,739
      
2,718
      
2,692
      
2,700
      
2,693
      
2,686
      
2,658
      
2,662
      
2,718
      
2,686
  
Post-Paid Subscriber Base (Thousands)
    
2,112
      
2,136
      
2,156
      
2,174
      
2,191
      
2,215
      
2,241
      
2,259
      
2,273
      
2,156
      
2,241
  
Pre-Paid Subscriber Base (Thousands)
    
635
      
603
      
562
      
518
      
509
      
478
      
445
      
399
      
389
      
562
      
445
  
Cellular ARPU (NIS)
    
70
      
71
      
67
      
67
      
65
      
66
      
62
      
61
      
62
      
69
      
65
  
Cellular Churn Rate (%)
    
10.9
%
    
10.8
%
    
11.1
%
    
11.2
%
    
9.8
%
    
9.7
%
    
9.4
%
    
9.8
%
    
9.0
%
    
46
%
    
40
%
Number of Employees (FTE)
    
3,354
      
3,017
      
2,882
      
2,827
      
2,740
      
2,742
      
2,686
      
2,580
      
2,582
      
2,882
      
2,686
  

*
See footnote 2 regarding use of non-GAAP measures.
 
22
Disclosure for notes holders as of June 30, 2017
 
Information regarding the notes series issued by the Company, in million NIS
 
Series
Original issuance date
Principal on the date of issuance
As of 30.06.2017
As of 20.07.2017
Interest rate
Principal repayment dates
Interest repayment dates
Linkage
Trustee contact details
Principal book value
Linked principal book value
Interest accumulated in books
Market value
Principal book value
Linked principal book value
From
To
      
C
25.04.10
24.02.11*
200
444
393
427
0
438
    
3.35%
+
CPI
30.12.16
30.12.18
30.6, 30.12
Linked to CPI
Hermetic Trust (1975) Ltd.
Merav Offer. 113 Hayarkon St., Tel Aviv. Tel: 03-5544553.
D
25.04.10
04.05.11*
400
146
546
546
0
552
    
1.34%
 
(MAKAM+1.2%)
30.12.17
30.12.21
30.3, 30.6, 30.9, 30.12
Variable interest MAKAM (2)
Hermetic Trust (1975) Ltd. Merav Offer. 113 Hayarkon St., Tel Aviv. Tel: 03-5544553.
E
25.04.10
04.05.11*
400
535
121
121
0
124
    
5.5%
30.12.13
30.12.17
30.6, 30.12
Not Linked
Mishmeret Trust Company Ltd. Rami Sebty. 48 Menachem Begin Rd. Tel
Aviv.Tel:03-6374355.
F
(1)
20.07.17
255
N/A
N/A
N/A
N/A
255
255
2.16%
25.06.20
25.06.24
25.6, 25.12
Not Linked
Hermetic Trust (1975) Ltd.
Merav Offer. 113 Hayarkon St., Tel Aviv. Tel: 03-5544553.
 
(1) In July 2017, after the balance sheet date, the Company issued Series F Notes in a principal amount of NIS 255 million. Regarding Series F Notes, the Company is required to comply with a financial covenant that the ratio of Net Debt to Adjusted EBITDA shall not exceed 5. Compliance will be examined and reported on a quarterly basis. For the definitions of Net Debt and Adjusted EBITDA see 'Use of non-GAAP measures' section above. For the purpose of the covenant, Adjusted EBITDA is calculated as the sum total for the last 12 month period, excluding adjustable one-time items. As of June 30, 2017, the ratio of Net Debt to Adjusted EBITDA was 1.2. Additional stipulations regarding Series F Notes are as follows: shareholders' equity shall not decrease below NIS 400 million; the Company shall not create floating liens subject to certain terms; the Company has the right for early redemption under certain conditions; the Company shall pay additional annual interest of 0.5% in the case of a two-notch downgrade in the Notes rating and an additional annual interest of 0.25% for each further single-notch downgrade, up to a maximum additional interest of 1%; the Company shall pay additional annual interest of 0.25% during a period in which there is a breach of the financial covenant.
 
The Company has additional financial covenants regarding its borrowings from financial institutions. See note 15 to the Company's 2016 annual financial statements.
 
In the reporting period, the Company was in compliance with all financial covenants and obligations and no cause for early repayment occurred.
 
(2) 'MAKAM' is a variable interest based on the yield of 12 month government bonds issued by the government of Israel. The interest rate is updated on a quarterly basis.
 
(*) On these dates additional Notes of the series were issued. The information in the table refers to the full series.
23

 
Disclosure for Notes holders as of June 30, 2017 (cont.)
 
Notes Rating Details*
 
 
 
Series
 
Rating Company
Rating as of 30.06.2017 and 15.08.2017 (1)
Rating assigned upon issuance of the Series
 
Recent date of rating as of 30.06.2017
 
Recent date of rating as of 15.08.2017
Additional ratings between original issuance and the recent date of rating as of 15.08.2017 (2)
Date
Rating
C
S&P Maalot
ilA+
ilAA-
07/2016
07/2017
07/2010, 09/2010,
10/2010, 09/2012,
12/2012, 06/2013,
07/2014, 07/2015,
07/2016, 07/2017
ilAA-/Stable, ilAA-/Stable,
ilAA-/Negative, ilAA-/Watch Neg,
ilAA-/Negative, ilAA-/Stable,
ilAA-/Stable, ilA+/Stable,
ilA+/Stable, ilA+/Stable
D
S&P Maalot
ilA+
ilAA-
07/2016
07/2017
E
S&P Maalot
ilA+
ilAA-
07/2016
07/2017
F
S&P Maalot
ilA+ (3)
ilA+
N/A
07/2017
07/2017
ilA+/Stable
 
(1) In July 2016 and July 2017, S&P Maalot affirmed the Company's rating of "ilA+/Stable".
 
(2) For details regarding the rating of the notes see the S&P Maalot report dated July 2, 2017 and July 27, 2017.
 
(3) Notes Series F was issued in July 2017, after the balance sheet date. Series F rating was assigned at the issuance date.
 
* A securities rating is not a recommendation to buy, sell or hold securities. Ratings may be subject to suspension, revision or withdrawal at any time, and each rating should be evaluated independently of any other rating
 
24

Summary of Financial Undertakings (according to repayment dates) as of June 30, 2017
 
a.
Notes issued to the public by the Company and held by the public, excluding such notes held by the Company's parent company, by a controlling shareholder, by companies controlled by them, or by companies controlled by the Company, based on the Company's "Solo" financial data (in thousand NIS).
 
   
Principal payments
      
   
 
 
ILS linked to CPI
    
 
 
ILS not linked to CPI
    
 
 
Euro
    
 
 
Dollar
    
 
 
Other
    
Gross interest payments (without deduction of tax)
  
First year
    
213,573
      
230,506
      
-
      
-
      
-
      
20,657
  
Second year
    
213,573
      
109,228
      
-
      
-
      
-
      
8,416
  
Third year
    
-
      
109,228
      
-
      
-
      
-
      
3,661
  
Fourth year
    
-
      
109,228
      
-
      
-
      
-
      
2,197
  
Fifth year and on
    
-
      
109,228
      
-
      
-
      
-
      
732
  
Total
    
427,146
      
667,418
      
-
      
-
      
-
      
35,663
  
 
b.
Private notes and other non-bank credit, excluding such notes held by the Company's parent company, by a controlling shareholder, by companies controlled by them, or by companies controlled by the Company, based on the Company's "Solo" financial data (in thousand NIS).
 
   
Principal payments
      
   
 
 
ILS linked to CPI
    
 
 
ILS not linked to CPI
    
 
 
Euro
    
 
 
Dollar
    
 
 
Other
    
Gross interest payments (without deduction of tax)
  
First year
    
-
      
257,045
      
-
      
-
      
-
      
34,055
  
Second year
    
-
      
142,500
      
-
      
-
      
-
      
25,441
  
Third year
    
-
      
163,333
      
-
      
-
      
-
      
18,748
  
Fourth year
    
-
      
140,833
      
-
      
-
      
-
      
11,785
  
Fifth year and on
    
-
      
183,333
      
-
      
-
      
-
      
8,857
  
Total
    
-
      
887,044
      
-
      
-
      
-
      
98,886
  
 
c.
Credit from banks in Israel based on the Company's "Solo" financial data – None.
 
d.
Credit from banks abroad based on the Company's "Solo" financial data – None.
 
25
Summary of Financial Undertakings (according to repayment dates) as of June 30, 2017 (cont.)
 
e.
Total of sections a - d above, total credit from banks, non-bank credit and notes based on the Company's "Solo" financial data (in thousand NIS).
 
   
Principal payments
      
   
 
 
ILS linked to CPI
    
 
 
ILS not linked to CPI
    
 
 
Euro
    
 
 
Dollar
    
 
 
Other
    
Gross interest payments (without deduction of tax)
  
First year
    
213,573
      
487,551
      
-
      
-
      
-
      
54,712
  
Second year
    
213,573
      
251,728
      
-
      
-
      
-
      
33,857
  
Third year
    
-
      
272,561
      
-
      
-
      
-
      
22,409
  
Fourth year
    
-
      
250,061
      
-
      
-
      
-
      
13,982
  
Fifth year and on
    
-
      
292,561
      
-
      
-
      
-
      
9,589
  
Total
    
427,146
      
1,554,462
      
-
      
-
      
-
      
134,549
  

f.
Off-balance sheet Credit exposure based on the Company's "Solo" financial data (in thousand NIS) – 50,000 (Guarantees on behalf of an associate, without expiration date).
 
g.
Off-balance sheet Credit exposure of all the Company's consolidated companies, excluding companies that are reporting corporations and excluding the Company's data presented in section f above – None.
 
h.
Total balances of the credit from banks, non-bank credit and notes of all the consolidated companies, excluding companies that are reporting corporations and excluding Company's data presented in sections a - d above - None.
 
i.
Total balances of credit granted to the Company by the parent company or a controlling shareholder and balances of notes offered by the Company held by the parent company or the controlling shareholder - None.
 
j.
Total balances of credit granted to the Company by companies held by the parent company or the controlling shareholder, which are not controlled by the Company, and balances of notes offered by the Company held by companies held by the parent company or the controlling shareholder, which are not controlled by the Company – None.
 
k.
Total balances of credit granted to the Company by consolidated companies and balances of notes offered by the Company held by the consolidated companies - None.
26


SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Current Report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
  Partner Communications Company Ltd.  
       
 
By:
/s/ David (Dudu) Mizrahi  
    Name: David (Dudu) Mizrahi  
    Title: Chief Financial Officer  

Dated: August 16, 2017
 
 
27