Cellcom Israel Announces Fourth Quarter and Full Year 2009 Results

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Cellcom Israel Announces Fourth Quarter and Full Year 2009 Results

NETANYA, Israel, March 2, 2010--

   
    - Cellcom Israel Concludes a Record Year in Terms of Revenues, Operating
      income, EBITDA(1), Net income and Free Cash Flow(1) and Presents 2009
      Highest Revenues and Profitability in the Israeli Cellular Market

    - Net Income for 2009 Increased 19.5%(2);

    - Cellcom Israel Declares a Fourth Quarter Dividend of NIS 2.60 per Share
      (Totals Approx. NIS 257 Million), Reaching an Annual Dividend for 2009
      of Approx. NIS 1.2 Billion

    2009 Full Year Highlights (compared to 2008(3)):

    - Total Revenues increased 1.0% reaching NIS 6,483 million
      ($1,717 million)

    - Total Revenues from services increased 1.1% to NIS 5,732
      million ($1,518 million)

    - Revenues from content and value added services (including
      SMS) increased 30.9%, representing 15.4% of services revenues

    - EBITDA increased 1.9% to NIS 2,529 million ($670 million);
      EBITDA margin 39%, up from 38.7%

    - Operating income increased 4.6% to NIS 1,768 million ($468
      million)

    - Net income(2) increased 19.5% to NIS 1,182 million ($313
      million)

    - Free cash flow(1) increased 24.7% to NIS 1,518 million ($402 million)

    - Subscriber base increased by approx. 105,000 net subscribers
      during 2009, mostly post-paid subscribers; reaching approx. 3.292
      million at the end of December 2009

    - 3G subscribers reached approx. 997,000 at the end of
      December 2009, net addition of approx. 266,000 during 2009

    - The Company declared a fourth quarter dividend of NIS 2.60
      per share

    Fourth Quarter 2009 Highlights (compared to fourth quarter of
2008(1):

     
    - Total Revenues increased 4.3% reaching NIS 1,639 million
      ($434 million)

    - Total Revenues from services increased 1.5% to NIS 1,446
      million ($383 million)

    - Revenues from content and value added services (including
      SMS) increased 26.0%, representing 16.7% of services revenues

    - EBITDA increased 3.7% to NIS 610 million ($162 million)

    - Operating income increased 7.4% to NIS 419 million ($111
      million)

    - Net income increased 11.5% to NIS 271 million ($72 million)

    - Subscriber base increased by approx. 33,000 net subscribers
      during the fourth quarter 2009, mostly post-paid subscribers;

    - 3G increased by approx. 56,000 net subscribers during the
      fourth quarter 2009

    Cellcom Israel Ltd. (NYSE: CEL TASE: CEL) ("Cellcom Israel" or
the "Company"), announced today its financial results for the fourth quarter
and full year ended December 31, 2009. Revenues for the fourth quarter and
full year 2009 totaled NIS 1,639 million ($434 million) and NIS 6,483 million
($1,717 million), respectively; EBITDA for the fourth quarter 2009 totaled
NIS 610 million ($162 million), or 37.2% of total revenues, and for full year
2009 totaled NIS 2,529 million ($670 million), or 39.0% of total revenues;
and net income for the fourth quarter and full year 2009 reached NIS 271
million ($72 million) and NIS 1,182 million ($313 million), respectively.
Basic earnings per share for the fourth quarter and full year 2009 reached
NIS 2.75 ($0.73) and NIS 12.01 ($3.18), respectively.

    Commenting on the results, Amos Shapira, Chief Executive
Officer said, "During 2009, we achieved record results for the third
consecutive year, as we demonstrated continued growth in all financial
parameters. This year we strengthened our leading position in the Israeli
cellular market with the highest revenue and profitability and we continued
our growth momentum, presenting the highest revenue, operating income,
EBITDA, net income and free cash flow in the Company's history. This positive
momentum continued in the fourth quarter of 2009, in which we presented our
strongest fourth quarter results to date.

    In 2009, we continued to increase our customer base, ending
the year with close to 3.3 million subscribers, with a 36% increase in our 3G
subscriber base, reaching approximately 1 million subscribers, representing
over 30% of our total subscriber base. On the revenues side, our continued
focus on growth drivers, led us this year to an increase of approximately 31%
in revenues from content and value added services. This year we also
continued to keep a tight rein on expenses and maintained the deep efficiency
measures implemented in recent years. As always, we believe that a prudent
and tight cost management is a necessity, especially in times of global
recession and heightened competition.

    At Cellcom Israel, our goal to build a company based upon
consistent and stable long-term growth, leads us to focus on our core
competencies, cellular communications, and continue to leverage it by
developing new businesses while taking advantage of cost synergies. As part
of our focus on content and value added services, in 2009, we have
collaborated in the creation of original, innovative and unique cellular
content, which was widely viewed in Israel and was sold for distribution to
cellular operators in other countries. This year, revenues from content and
value added services continued to increase rapidly, constituting one of our
main growth drivers. Notwithstanding, the average monthly revenue per
subscriber decreased in 2009, compared with 2008, by over 3%, while average
monthly minutes of use increased by approximately 1%, reflecting the ongoing
airtime price erosion in 2009 by over 4%.

    We continue to monitor the dynamic changes in the local
communications market in order to identify new business and growth areas. The
strategy of focusing on our core business continued to prove itself, as we
steadily increased revenues and profitability, achieved new records, and
provided our customers with quality service and the most advanced handsets,
all while prudently managing expenses. We are committed to continue this path
for our customers, shareholders and dedicated employees."

    Yaacov Heen, Chief Financial Officer, commented: "Our record
results in 2009 are the result of a 31% increase in revenues from content and
value added services, our ongoing efficiency measures and growing landline
revenues. These three positive effects compensate the decline in roaming
revenues attributed, among others, to the macro-economic environment, and the
decrease in airtime revenues, attributed to the ongoing price erosion. In
2009, we continued to generate a strong free cash flow, reaching a record of
NIS 1,518 million, an increase of approximately 25% from the previous year.
2009 was characterized by uncertainties and constituted a great challenge
regarding planning and managing our business operation in terms of both
revenues and expenses. We are proud with our developed capabilities, both
technological and managerial-operational, which helped us to improve our
efficiency, leading to an additional improvement in our business and
financial performance. As in the past, we gladly share our success with our
shareholders and as such, we will distribute a dividend of approximately NIS
257 million, representing approximately 95% of the fourth quarter net income.
Our total dividends distributed in 2009, amounted to approximately NIS 1.2
billion, or a 12.4% dividend yield for the year."

   
    Main Financial Highlights(3):

                             Million NIS      % of      % Change  Million US$
                                            Revenues
                                                                 (convenience
                                                                 translation)

                             2009   2008   2009   2008            2009   2008
    Revenues - Services     5,732  5,672  88.4%  88.4%     1.1%  1,518  1,503
    Revenues - Equipment      751    745  11.6%  11.6%     0.8%    199    197
    Total revenues          6,483  6,417 100.0% 100.0%     1.0%  1,717  1,700
    Cost of revenues
    - Services              2,643  2,641  40.8%  41.1%     0.1%    700    700
    Cost of revenues
    - Equipment               690    755  10.6%  11.8%   (8.6%)    183    200
    Total cost of revenues  3,333  3,396  51.4%  52.9%   (1.9%)    883    900
    Gross Profit            3,150  3,021  48.6%  47.1%     4.3%    834    800
    Marketing and
    Sales Expenses            716    701  11.0%  10.9%     2.1%    189    185
    General and
    Administration
    Expenses                  660    659  10.2%  10.3%     0.2%    175    175
    Other (Income)
    Expenses, net               6   (29)   0.1% (0.4%)               2    (8)
    Operating income        1,768  1,690  27.3%  26.3%     4.6%    468    448
    Financing expenses,
    net                     (219)  (310) (3.4%) (4.8%)  (29.4%)   (58)   (82)
    Income before
    Income Tax              1,549  1,380  23.9%  21.5%    12.2%    410    366
    Income Tax                367    391   5.7%   6.1%   (6.1%)     97    104
    Net Income              1,182    989  18.2%  15.4%    19.5%    313    262
    Free Cash Flow          1,518  1,217  23.4%  19.0%    24.7%    402    322

    Key Performance Indicators:

                                      2009   2008    % Change     2009   2008
                                             Million NIS          Million US$
                                                                 (convenience
                                                                 translation)
    EBITDA                           2,529       2,482     1.9%    670    657
    EBITDA, as percent of Revenues   39.0%       38.7%     0.8%
    Subscribers end of period
    (in thousands)                   3,292       3,187     3.3%
    Churn Rate (in %)                19.6%       18.9%     3.7%
    Average Monthly MOU
    (in minutes) *                     331         329     0.6%
    Monthly ARPU (in NIS)              144         149   (3.4%)   38.1   39.5

    * Following the regulatory requirement to change the basic
airtime charging unit from twelve-seconds to one-second units commencing
January 1, 2009, MOU for 2008 has been adjusted to the same per-one second
unit basis to enable a comparison. MOU for 2008 based on the former charging
units was 350 minutes.

    Financial Review

    Revenues for 2009 increased 1.0% totaling NIS 6,483 million
($1,717 million), compared to NIS 6,417 million ($1,700 million) last year.
The increase in revenues is attributed to a 1.1% increase in revenues from
services, which reached NIS 5,732 million ($1,518 million) in 2009 as
compared to NIS 5,672 million ($1,503 million) last year. The increase also
resulted from a 0.8% increase in handset and accessories' revenues, which
increased from NIS 745 million ($197 million) in 2008, to NIS 751 million
($199 million) in 2009.

    The increase in service revenues in 2009 was mainly due to a
31% increase in revenues from content and value added services (including
SMS), which totaled in 2009 NIS 882 million ($234 million), representing
15.4% of service revenues, compared to NIS 674 million ($179 million) or
11.9% of service revenues in 2008, as well as a significant increase in
revenues from land-line services. The increase in service revenues was
partially offset by a substantial decrease in roaming revenues following the
reduction in incoming and outgoing tourism resulting from the global economic
slowdown. The increase in service revenues was also offset in part by a
decrease in domestic airtime revenues mainly due to the ongoing airtime price
erosion.

    Revenues for the fourth quarter of 2009 increased 4.3%
totaling NIS 1,639 million ($434 million), compared to NIS 1,572 million
($416 million) in the fourth quarter last year. The increase in revenues is
attributed to a 1.5% increase in revenues from services, which reached NIS
1,446 million ($383 million) in the fourth quarter 2009 as compared to NIS
1,424 million ($377 million) in the fourth quarter last year. The increase
also resulted from a 30.4% increase in handset and accessories' revenues,
which rose from NIS 148 million ($39 million) in the fourth quarter last
year, to NIS 193 million ($51 million) in the fourth quarter 2009.

    The higher service revenues resulted mainly from a 26.0%
increase in content and value added services (including SMS) revenues in the
fourth quarter 2009, compared to the fourth quarter last year. Revenues from
content and value added services reached NIS 242 million ($64 million), or
16.7% of service revenues in the fourth quarter. Furthermore, the increase in
landline services revenues during the quarter also contributed to the higher
service revenues. These increases were partially offset by the ongoing
airtime price erosion as well as a substantial decrease in revenues from
roaming services following the reduction in incoming and outgoing tourism.

    Cost of revenues for 2009 totaled NIS 3,333 million ($883
million), compared to NIS 3,396 million ($900 million) in 2008, a decrease of
1.9%. The decrease primarily resulted from a decrease of 8.6% in equipment
cost of revenues, while services cost of revenues slightly increased. The
decrease in equipment cost of revenues primarily resulted from a decrease in
the total amount of handsets sold during 2009 compared with 2008, mainly due
to more aggressive sales campaigns launched in 2008 compared with 2009. This
decrease was partially offset by an increase in the average handset cost due
to a larger amount of advanced 3G handsets sold during 2009. The increase in
services cost of revenues in 2009 compared with 2008, resulted mainly from an
increase in interconnect fees due to an increase in the number of outgoing
calls completed in other operators' networks, an increase in cost of content
and value-added services due to increased usage and a one-time provision in
the amount of NIS 15 million related to a dispute with the Ministry of
Communications regarding frequencies fees. These increases were offset mainly
by a decrease in roaming related expenses due to the reduction in outgoing
tourism, in depreciation expenses and in royalties paid to the Ministry of
Communications resulting from a decline in the royalties' rate. Cost of
revenues also reflects the deferral of handsets subsidies, which amounted to
NIS 75 million ($20 million) in 2009 compared to NIS 77 million ($20 million)
last year, and the amortization of such deferred handsets subsidies, which
totaled NIS 80 million ($21 million) in 2009 compared to NIS 71 million ($19
million) in 2008.

    Cost of revenues for the fourth quarter of 2009 totaled NIS
847 million ($224 million) similar to the fourth quarter last year. Cost of
revenues was affected by an increase in equipment cost of revenues due to a
larger amount of handsets sold during the fourth quarter 2009, compared with
the fourth quarter of 2008 and an increase in the average handset cost due to
a larger amount of advanced 3G handsets sold during the fourth quarter of
2009. Cost of revenues was also affected by an increase in interconnect fees
due to an increase in the number of outgoing calls completed in other
operators' networks and an increase in cost of content and value-added
services due to increased usage. These increases were offset by a decrease in
roaming related expenses due to the reduction in outgoing tourism, in
depreciation expenses and in royalties paid to the Ministry of Communications
resulting from a decline in the royalties' rate. Cost of revenues also
reflects the deferral of handsets subsidies, which amounted to NIS 22 million
($6 million) in the fourth quarter of 2009 compared to NIS 23 million ($6
million) in the fourth quarter last year. The amortization of such deferred
handsets subsidies totaled NIS 19 million ($5 million) in the fourth quarter
2009 compared to NIS 21 million ($6 million) in the fourth quarter 2008.

    Gross profit for 2009 increased 4.3%, reaching NIS 3,150
million ($834 million), compared to NIS 3,021 million ($800 million) in 2008.
Gross profit margin for 2009 reached 48.6%, up from 47.1% in 2008. Gross
profit for the fourth quarter 2009 increased 9.2%, reaching NIS 792 million
($210 million), compared to NIS 725 million ($192 million) in the fourth
quarter 2008. Gross profit margin for the fourth quarter 2009 reached 48.3%,
up from 46.1% in the fourth quarter 2008.

    Selling, Marketing, General and Administrative Expenses
("SG&A Expenses") for 2009 increased 1.2% to NIS 1,376 million
($365 million), compared to NIS 1,360 million ($360 million) in
2008. The increase in SG&A Expenses was mainly due to an increase in
amortization expenses related to deferred sales commissions, as well as a
significant increase in bad debts and doubtful accounts, mainly due to the
global economic slowdown and following the implementation of number
portability, which allows subscribers to switch to another cellular operator
without settling their outstanding debt first. These increases were partially
offset by a decrease in advertising and customer retention expenses, a
decrease in payroll expenses, mainly due to a decrease in compensation
expenses related to our share incentive plan, mostly expensed during 2008, as
well as a decrease in maintenance cost related to our information systems.
SG&A Expenses also reflect the deferral of sales commissions in 2009, which
amounted to approximately NIS 64 million ($17 million) compared to
approximately NIS 60 million ($16 million) in 2008. Amortization of such
deferred sales commissions increased in 2009 to approximately NIS 60 million
($16 million) compared to approximately NIS 36 million ($10 million) in 2008.

    SG&A Expenses for the fourth quarter of 2009
increased 6.6% to NIS 371 million ($98 million), compared to NIS 348 million
($92 million) in the fourth quarter of 2008. The increase in SG&A Expenses in
the quarter was mainly due to a significant increase in bad debts and
doubtful accounts expenses, an increase in sales commissions, as well as in
employees recruitment expenses. These increases were partially offset by a
decrease in payroll expenses, mainly due to a decrease in compensation
expenses related to our share incentive plan, as well as in depreciation
expenses. SG&A Expenses also reflect the deferral of sales commissions in the
fourth quarter 2009, which amounted to approximately NIS 18 million ($5
million) compared to approximately NIS 14 million ($4 million) in the fourth
quarter last year. Amortization of such deferred sales commissions increased
in the fourth quarter of 2009 to approximately NIS 15 million ($4 million)
compared to approximately NIS 13 million ($3 million) in the fourth quarter
last year.

    Operating income for 2009 increased 4.6%, reaching a record of
NIS 1,768 million ($468 million), compared to NIS 1,690 million ($448
million) last year. Operating income for the fourth quarter 2009 increased
7.4% to NIS 419 million ($111 million), compared to NIS 390 million ($103
million) in the fourth quarter last year.

    EBITDA for 2009 increased 1.9%, reaching to a record of NIS
2,529 million ($670 million), compared to NIS 2,482 million ($657 million) in
2008. EBITDA, as a percent of revenues, totaled 39.0%, compared to 38.7% in
2008. EBITDA for the fourth quarter 2009 increased 3.7% to NIS 610 million
($162 million) compared to NIS 588 million ($156 million) in the fourth
quarter last year. EBITDA for the fourth quarter 2009, as a percent of
quarterly revenues, totaled 37.2%.

    Financing Expenses, net for 2009 totaled NIS 219 million ($58
million), compared to NIS 310 million ($82 million) in 2008. The decrease was
primarily due to gains from the Company's hedging portfolio, mainly from
Israeli Consumer Price Index (CPI) hedging transactions, as well as from
embedded derivatives income in 2009 compared with embedded derivatives
expense in 2008, mainly due to the one-time reversal of financing income in
the amount of NIS 29 million in the second quarter of 2008, following a
clarification of the Israel Accounting Standard Board to the International
Accounting Standard no. 39. The decrease in financing expenses, net also
resulted from a decrease in CPI linkage expenses associated with the
Company's debentures due to the decreased inflation rate of 3.8% in 2009
compared with 4.5% in 2008. These decreases were partially offset by an
increase in interest expenses associated with the Company's debentures, due
to the increase in the Company's outstanding indebtedness following the
issuance of its new series of debentures and the expansion of an existing
series in April 2009.

    Financing Expenses, net for the fourth quarter 2009 totaled
NIS 58 million ($15 million), compared to NIS 47 million ($12 million) in the
fourth quarter last year. The increase resulted mainly from the increase in
interest and CPI linkage expenses, associated with the Company's debentures,
resulting from the increased debt level and higher inflation in the fourth
quarter this year, as compared to the fourth quarter last year. The increase
was partially offset by a decrease in foreign currency differences associated
with trade payables balances, as well as a decrease in losses from the
Company's hedging portfolio, mainly from CPI hedging transactions.

    Income tax for 2009 decreased 6.1%, totaling NIS 367 million
($97 million), compared to NIS 391 million ($104 million) last year. The
decrease resulted from the reduction in Corporate tax rate to 26% in 2009
from 27% in 2008 and a reduction of deferred tax liabilities and the
recognition of a one-time tax income of approximately NIS 41 million in the
third quarter of 2009, due to the enactment of the Economic efficiency
improvement Law (legislative amendments for the implementation of the
Economic program for the years 2009 and 2010), in July 2009, which provides,
among others, for an additional gradual reduction of the Corporate tax rate
from 25% for the 2010 tax year down to 18% for the 2016 tax year and
thereafter. The decrease in income tax was partially offset by an increase in
income before income tax.

    Net Income for 2009 reaching a record of NIS 1,182 million
($313 million) compared to NIS 989 million ($262 million) in 2008, an
increase of 19.5%, or 15.4% after elimination of the one-time tax income as
mentioned above. Net income for the fourth quarter 2009 increased 11.5% to
NIS 271 million ($72 million), compared to NIS 243 million ($64 million) in
the fourth quarter last year. Basic earnings per share for 2009 totaled NIS
12.01 ($3.18), compared to NIS 10.12 ($2.68) in 2008. Basic earnings per
share for the fourth quarter 2009 totaled NIS 2.75 ($0.73), compared to NIS
2.48 ($0.66) in the fourth quarter last year.

    Operating Review

    New Subscribers - at the end of 2009 the Company had
approximately 3.292 million subscribers. During 2009 the Company added
approximately 105,000 net new subscribers, mostly post-paid, out of which
approximately 33,000 joined the Company in the fourth quarter.

    In 2009, the Company added approximately 266,000 net new 3G
subscribers to its 3G subscriber base, out of which 56,000 in the fourth
quarter, reaching approximately 997,000 3G subscribers at the end of 2009.
The Company's 3G subscribers represented 30.3% of the Company's total
subscriber base at the end of 2009, an increase from the 22.9% 3G subscribers
represented of total subscribers at the end of 2008.

    The Churn Rate in 2009 totaled 19.6%, compared to 18.9% in
2008. The churn rate for the fourth quarter 2009 totaled to 4.8%, compared to
4.3% in the fourth quarter last year. Both annual and quarterly churn were
primarily impacted by the churn of pre-paid subscribers characterized by
lower contribution and subscribers with collection problems.

    Average monthly subscriber Minutes of Use ("MOU") in 2009
totaled 331 minutes, compared to 329 minutes in 2008, an increase of 0.6%.
MOU for the fourth quarter 2009 totaled 333 minutes, compared to 320 minutes
in the fourth quarter 2008, an increase of 4.1%, attributed mainly to the
occurrence of part of the Jewish holiday season, characterized by a reduced
usage, in the fourth quarter in 2008, compared to the third quarter in 2009.
Following the regulatory requirement to change the basic airtime charging
units from twelve-seconds to one-second units commencing January 1, 2009, MOU
for 2008 and for the fourth quarter 2008 has been adjusted to the same
per-one second unit basis to enable a comparison. MOU for 2008 and for the
fourth quarter of 2008 based on the former charging units was 350 and 338
minutes, respectively.

    The monthly Average Revenue per User (ARPU) for 2009 totaled
NIS 144 ($38.1), compared to NIS 149 ($39.5) in 2008, a 3.4% decrease. ARPU
for the fourth quarter 2009 totaled NIS 143 ($37.9), a 2.7% decrease,
compared to NIS 147 ($38.9) in the fourth quarter last year. Both annual and
quarterly decreases resulted, among others, from the lower roaming revenues
and the ongoing airtime price erosion in 2009 and the fourth quarter 2009,
compared with the corresponding periods in 2008.

    Financing and Investment Review

    Cash Flow

    Free cash flow for 2009 increased 24.7%, reaching NIS 1,518
million ($402 million), compared to NIS 1,217 million ($322 million)
generated in 2008. Free cash flow for the fourth quarter of 2009 totaled NIS
271 million ($72 million), compared to NIS 366 million ($97 million)
generated in the fourth quarter of 2008. Free cash flow for 2009 and for the
fourth quarter this year include NIS 212 million ($56 million) and NIS 88
million ($23 million), respectively, invested in the Company's current
debentures portfolio according to its investment policy.

    Shareholders' Equity

    Shareholders' Equity as of December 31, 2009 amounted to NIS
374 million ($99 million), primarily consisting of accumulated undistributed
retained earnings.

    Investment in Fixed Assets and Intangible Assets

    During 2009 and the fourth quarter 2009, the Company invested
NIS 663 million ($176 million) and NIS 223 million ($59 million),
respectively, in fixed assets and intangible assets (including, among others,
deferred sales commissions and handsets subsidies and investments in
information systems and software), compared to NIS 633 million ($168 million)
and NIS 190 million ($50 million) in 2008 and the fourth quarter 2008,
respectively.

    Dividend

    On March 2, 2010, the Company's board of directors declared a
cash dividend in the amount of NIS 2.60 per share, and in the aggregate
amount of approximately NIS 257 million (the equivalent of approximately
$0.68 per share and approximately $68 million in the aggregate, based on the
representative rate of exchange on February 26, 2010; The actual US$ amount
for dividend paid in US$ will be converted from NIS based upon the
representative rate of exchange published by the Bank of Israel on March 25,
2010), subject to withholding tax described below. The dividend will be
payable to all of the Company's shareholders of record at the end of the
trading day in the NYSE on March 15, 2010. The payment date will be March 31,
2010. According to the Israeli tax law, the Company will deduct at source 20%
of the dividend amount payable to each shareholder, as aforesaid, subject to
applicable exemptions. The dividend per share that the Company will pay for
the fourth quarter of 2009 does not reflect the level of dividends that will
be paid for future quarterly periods, which can change at any time in
accordance with the Company's dividend policy. A dividend declaration is not
guaranteed and is subject to the Company's board of directors' sole
discretion, as detailed in the Company's annual report for the year ended
December 31, 2009 on Form 20-F, under "Item 8 - Financial Information -
Dividend Policy".

    Conference Call Details

    The Company will be hosting a conference call on Tuesday,
March 2, 2010 at 10:00 am EST, 7:00 am PST, 15:00 GMT, 17:00 Israel time. On
the call, management will review and discuss the results, and will be
available to answer questions. To participate, please either access the live
webcast on the Company's website, or call one of the following
teleconferencing numbers below. Please begin placing your calls at least 10
minutes before the conference call commences. If you are unable to connect
using the toll-free numbers, please try the international dial-in number.

    US Dial-in Number: 1-888-407-2553

    UK Dial-in Number: 0-800-917-5108

    Israel Dial-in Number: 03-918-0609

    International Dial-in Number: +972-3-918-0609

    at: 10:00 am Eastern Time; 07:00 am Pacific Time; 15:00 UK Time; 17:00
Israel Time

    To access the live webcast of the conference call, please
access the investor relations section of Cellcom Israel's website:
http://www.cellcom.co.il. After the call, a replay of the call will be
available under the same investor relations section.

    Annual report for 2009

    Cellcom Israel will be filing its annual report for the year
ended December 31, 2009 (on form 20-F) with the US Securities and Exchange
Commission today, March 2, 2010. The annual report will be available for
download at the Cellcom Israel's website in the investor relations section of
Cellcom Israel's website at: http://www.cellcom.co.il. Cellcom Israel will
furnish a hard copy to any shareholder who so requests, without charge. Such
requests may be sent through the Company's website or by sending a postal
mail request to Cellcom Israel Ltd., 10 Hagavish Street, Netanya, Israel
(attention: Chief Financial Officer).

    About Cellcom Israel

    Cellcom Israel Ltd., established in 1994, is the leading
Israeli cellular provider; Cellcom Israel provides its approximately 3.292
million subscribers (as at December 31, 2009) with a broad range of value
added services including cellular and landline telephony, roaming services
for tourists in Israel and for its subscribers abroad and additional services
in the areas of music, video, mobile office etc., based on Cellcom Israel's
technologically advanced infrastructure. The Company operates an HSPA 3.5
Generation network enabling advanced high speed broadband multimedia
services, in addition to GSM/GPRS/EDGE and TDMA networks. Cellcom Israel
offers Israel's broadest and largest customer service infrastructure
including telephone customer service centers, retail stores, and service and
sale centers, distributed nationwide. Through its broad customer service
network Cellcom Israel offers its customers technical support, account
information, direct to the door parcel services, internet and fax services,
dedicated centers for the hearing impaired, etc. As of 2006, Cellcom Israel,
through its wholly owned subsidiary Cellcom Fixed Line Communications L.P.,
provides landline telephone communication services in Israel, in addition to
data communication services. Cellcom Israel's shares are traded both on the
New York Stock Exchange (CEL) and the Tel Aviv Stock Exchange (CEL). For
additional information please visit the Company's website
http://www.cellcom.co.il

    Forward-Looking Statements

    The following information contains, or may be deemed to
contain forward-looking statements (as defined in the U.S. Private Securities
Litigation Reform Act of 1995 and the Israeli Securities Law, 1968). In some
cases, you can identify these statements by forward-looking words such as
"may," "might," "will," "should," "expect," "plan," "anticipate," "believe,"
"estimate," "predict," "potential" or "continue," the negative of these terms
and other comparable terminology. These forward-looking statements, which are
subject to risks, uncertainties and assumptions about us, may include
projections of our future financial results, our anticipated growth
strategies and anticipated trends in our business. These statements are only
predictions based on our current expectations and projections about future
events. There are important factors that could cause our actual results,
level of activity, performance or achievements to differ materially from the
results, level of activity, performance or achievements expressed or implied
by the forward-looking statements. Factors that could cause such differences
include, but are not limited to: changes to the terms of our license, new
legislation or decisions by the regulator affecting our operations, the
outcome of legal proceedings to which we are a party, particularly class
action lawsuits, our ability to maintain or obtain permits to construct and
operate cell sites, and other risks and uncertainties detailed from time to
time in our filings with the U.S. Securities and Exchange Commission,
including under the caption "Risk Factors" in our Annual Report for the year
ended December 31, 2009.

    Although we believe the expectations reflected in the
forward-looking statements contained herein are reasonable, we cannot
guarantee future results, level of activity, performance or achievements.
Moreover, neither we nor any other person assumes responsibility for the
accuracy and completeness of any of these forward-looking statements. We
assume no duty to update any of these forward-looking statements after the
date hereof to conform our prior statements to actual results or revised
expectations, except as otherwise required by law.

    The Company prepares its financial statements in accordance
with International Financial Reporting Standards (IFRS), as issued by the
International Accounting Standards Board (IASB). Unless noted specifically
otherwise, the dollar denominated figures were converted to US$ using a
convenience translation based on the US$\New Israeli Shekel (NIS) conversion
rate of NIS 3.775 = US$ 1 as published by the Bank of Israel on December 31,
2009.

    Use of non-GAAP financial measures

    EBITDA is a non-GAAP measure and is defined as income before
financing income (expenses), net; other income (expenses), net; income tax;
depreciation and amortization. This is an accepted measure in the
communications industry. The Company presents this measure as an additional
performance measure as the Company believes that it enables us to compare
operating performance between periods and companies, net of any potential
differences which may result from differences in capital structure, taxes,
age of fixed assets and related depreciation expenses. EBITDA should not be
considered in isolation, or as a substitute for operating income, any other
performance measures, or cash flow data, which were prepared in accordance
with Generally Accepted Accounting Principles as measures of profitability or
liquidity. EBITDA does not take into account debt service requirements, or
other commitments, including capital expenditures, and therefore, does not
necessarily indicate the amounts that may be available for the Company's use.
In addition, EBITDA may not be comparable to similarly titled measures
reported by other companies, due to differences in the way these measures are
calculated. See the reconciliation between the net income and the EBITDA
presented at the end of this Press Release.

    Free cash flow is a non-GAAP measure and is defined as the net cash
provided by operating activities minus the net cash used in investing
activities plus short-term investment in marketable debentures. See the
reconciliation note at the end of this Press Release.

   
   
                             Financial Tables Follow

                               Cellcom Israel Ltd.

                            (An Israeli Corporation)

    Condensed Consolidated Statements of Financial Position

                                                                Convenience
                                                                translation
                                                                   Into
                                                                U.S. dollar
                            December  December  December        December 31
                               31        31        31
                             *2007      *2008     2009             2009
                              NIS        NIS       NIS         US$ millions
                            millions  millions  millions
    Assets
    Cash and cash                 
    equivalents                   911       275    903                  239
    Current investments,         
    including derivatives        **44      **68    272                   72
    Trade receivables           1,385     1,478  1,579                  418
    Other receivables            **52      **44     63                   18
    Inventory                     245       119    149                   39

    Total current assets        2,637     1,984  2,966                  786

    Trade and other               
    receivables                   575       602    606                  161
    Property, plant and         
    equipment, net              2,335     2,159  2,096                  555
    Intangible assets, net        747       743    711                  188

    Total non-current           
    assets                      3,657     3,504  3,413                  904

    Total assets                6,294     5,488  6,379                1,690

    Liabilities
    Short term Borrowings         353       329    350                   93
    Trade payables and           
    accrued expenses              953       677    806                  214
    Current tax                   
    liabilities                   140        85     67                   18
    Provisions                     91        47     84                   22
    Other current                 
    liabilities, including
    derivatives                   384       385    405                  107

    Total current               
    liabilities                 1,921     1,523  1,712                  454

    Long- term borrowings         343         -      -                    -
    Debentures                  2,983     3,401  4,185                1,109
    Provisions                     14        17     16                    4
    Other long-term                 
    liabilities                     3         1      1                    -
    Deferred taxes                149       156     91                   24

    Total non- current         
    liabilities                 3,492     3,575  4,293                1,137

    Total liabilities           5,413     5,098  6,005                1,591

    Shareholders' equity
    Share capital                   1         1      1                    -
    Cash flow hedge             
    reserve                      (33)      (11)   (23)                  (6)
    Retained earnings             913       400    396                  105

    Total shareholders'           
    equity                        881       390    374                   99

    Total liabilities and       
    shareholders' equity        6,294     5,488  6,379                1,690

    (*) Retrospective application due to accounting policy change regarding
"Subscriber Acquisition and Retention Costs"

    (**) Reclassified

   
                               Cellcom Israel Ltd.

                            (An Israeli Corporation)

    Condensed Consolidated Statements of Income

                                                                Convenience
                                                                translation
                                                                   into
                                                                U.S. dollar
                                                                Year ended
                                    Year ended December 31      December 31
                                   *2007     *2008      2009       2009
                                    NIS   NIS millions  NIS    US$ millions
                                 millions             millions

    Revenues                           6,050    6,417   6,483    1,717
    Cost of revenues                   3,315    3,396   3,333      883

    Gross profit                       2,735    3,021   3,150      834
    Selling and marketing expenses       685      701     716      189
    General and administrative           
    expenses                             653      659     660      175
    Other (income) expenses, net           3     (29)       6        2

    Operating income                   1,394    1,690   1,768      468
    Financing income                     140       83     151       40
    Financing expenses                 (287)    (393)   (370)     (98)
    Financing expenses, net            (147)    (310)   (219)     (58)

    Income before income tax           1,247    1,380   1,549      410
    Income tax                           328      391     367       97
    Net income                           919      989   1,182      313

    Earnings per share
    Basic earnings per share in NIS     9.42    10.12   12.01     3.18
    Diluted earnings per share in NIS   9.34     9.96   11.90     3.15

    (*) Retrospective application due to accounting policy change regarding
"Subscriber Acquisition and Retention Costs"

   
                               Cellcom Israel Ltd.

                            (An Israeli Corporation)

    Condensed Consolidated Statements of Cash Flows

                                                                  Convenience
                                                                  translation
                                                                     into
                                                                  U.S. dollar
                                                                  Year ended
                                         Year ended December 31   December 31
                                          *2007   *2008     2009      2009
                                           NIS     NIS      NIS        US$
                                        millions millions millions  millions

    Cash flows from operating activities:
    Net income                              919     989   1,182    313
    Adjustments for:
    Depreciation and amortization           790     821     755    200
    Share based payments                     29      28       1      -
    Reversal of provision allowance        (10)       -       -      -
    Capital gain on sale of land              -     (9)       -      -
    Loss (gain) on sale of assets             4     (9)       6      2
    Income tax expense                      328     391     367     97
    Financial expenses, net                 147     310     219     58
    Changes in operating assets
    and liabilities:
    Changes in inventories                (191)      36   (105)   (28)
    Changes in trade receivables
    (including long-term amounts)          (99)   (117)    (69)   (18)
    Changes in other receivables
    (including long-term amounts)          (24)    (34)       2      1
    Changes in trade payables and           
    accrued expenses                        188   (271)     152     41
    Changes in other liabilities
    (including long-term amounts)            92      99     (4)    (1)
    Proceeds (Payments) for derivative     
    hedging contracts, net                 (24)    (38)      21      5
    Proceeds (payments) for other       
    derivative contracts, net              (16)      18       8      2
    Income tax paid                       (313)   (451)   (447)  (119)
    Net cash from operating activities    1,820   1,763   2,088    553

    Cash flows from investing activities
    Acquisition of property, plant, and           
    equipment                             (466)   (429)   (404)  (107)
    Acquisition of intangible assets       (97)   (175)   (173)   (46)
    Change in current investments, net        -       -   (212)   (56)
    Payments for derivative hedging
    contracts, net                         (12)    (17)       -      -
    Proceeds from sales of property,
    plant and equipment                       4      19       2      1
    Interest received                        23      17       5      1
    Proceed from sale of long term assets  (12)      39       -      -
    Net cash used in investing activities (560)   (546)   (782)  (207)

    Cash flows from financing activities
    Proceeds from (payment for)
    derivative contracts, net              (10)      31      33      9
    Proceeds from short term borrowings                       8      2
    Repayments of long-term
    loans from banks                      (645)   (648)       -      -
    Repayments of Debentures                  -   (125)   (332)   (88)
    Proceeds from issuance of debentures,
    net of issuance costs                 1,066     589     989    261
    Dividend paid                         (639) (1,525) (1,186)  (314)
    Interest paid                         (177)   (175)   (190)   (50)
    Net cash used in financing activities (405) (1,853)   (678)  (180)

    Changes in cash and cash equivalents    855   (636)     628    166
    Balance of cash and cash equivalents
    at beginning of the period               56     911     275     73
    Balance of cash and cash equivalents
    at end of the period                    911     275     903    239

     (*) Retrospective application due to accounting policy
    change regarding "Subscriber Acquisition and Retention Costs"

   
                               Cellcom Israel Ltd.

                            (An Israeli Corporation)

    Reconciliation for Non-GAAP Measures

    EBITDA

    The following is a reconciliation of net income to EBITDA:

                                                                Convenience
                                                                translation
                                                                  into US
                                                                  dollar
                                                                 Year ended
                                    Year ended Decmber 31       December 31
                                   2007      2008       2009
                                                                       2009
                                   NIS       NIS        NIS
                                millions  millions   millions   US$ millions

    Net income.....................919       989       1,182            313
    Income taxes...................328       391         367             97
    Financing income............ (140)      (83)       (151)           (40)
    Financing expenses.............287       393         370             98
    Other expenses (income)..........3      (29)           6              2
    Depreciation and amortization..790       821         755            200
    EBITDA.......................2,187     2,482       2,529            670

    Free cash flow

    The following table shows the calculation of free cash flow:

                                                                  Convenience
                                                                  translation
                                                                    into US
                                                                    dollar
                                                                  Year ended
                                      Year ended Decmber 31       December 31
                                   2007      2008       2009
                                                                      2009
                                   NIS       NIS        NIS
                                 millions  millions   millions   US$ millions

    Cash flows from operating
    activities....................1,820     1,763       2,088            553
    Cash flows from investing
    activities....................(560)     (546)       (782)          (207)
    short-term Investment in
    marketable debentures.............-         -         212             56
    Free cash flow................1,260     1,217       1,518            402

    ---------------------------------

    (1) In comparison to 2008. Net income for 2009 includes a one-time tax
income in the amount of NIS 41 million. After elimination of this one-time
effect, net income increased 15.4%. See "Income tax" section in this press
release.

    (2) Following the change in accounting policy in the second
quarter of 2009 regarding recognition of certain subscriber acquisition and
retention costs for capitalization, comparison data for fourth quarter and
full year 2008 were changed to reflect the retrospective application of that
change.

    (3) Following the change in accounting policy in the second quarter of
2009 regarding recognition of certain subscriber acquisition and retention
costs for capitalization, comparison data for 2008 were changed to reflect
the retrospective application of that change.

   
    Company Contact
    Yaacov Heen
    Chief Financial Officer
    investors@cellcom.co.il
    Tel: +972-52-998-9755

    IR Contacts
    Porat Saar & Kristin Knies
    CCG Investor Relations Israel & US
    cellcom@ccgisrael.com
    Tel: +1-646-233-2161

Source: Cellcom Israel Ltd.

Company Contact: Yaacov Heen, Chief Financial Officer, investors@cellcom.co.il, Tel: +972-52-998-9755; IR Contacts, Porat Saar & Kristin Knies, CCG Investor Relations Israel & US, cellcom@ccgisrael.com, Tel: +1-646-233-2161

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