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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Internet Gold Golden Lines Ltd (CE) | USOTC:IGLDF | OTCMarkets | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 1.97 | 0.00 | 01:00:00 |
99.1
|
The attached exhibits pertain to Bezeq The Israel Telecommunication Corp. Ltd., a controlled subsidiary of B Communications Ltd., itself a subsidiary of Internet Gold ("Bezeq", and together with its subsidiaries, the “Group”): Full Financial Statements (Unaudited) and Periodic Report of the Group as at March 31, 2015.
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INTERNET GOLD-GOLDEN LINES LTD.
(Registrant)
|
|||
By:
|
/s/ Doron Turgeman | ||
Doron Turgeman | |||
Chief Executive Officer | |||
99.1
|
The attached exhibits pertain to Bezeq The Israel Telecommunication Corp. Ltd., a controlled subsidiary of B Communications Ltd., itself a subsidiary of Internet Gold ("Bezeq", and together with its subsidiaries, the “Group”): Full Financial Statements (Unaudited) and Periodic Report of the Group as at March 31, 2015.
|
|
Bezeq The Israel Telecommunication
Corporation Limited
|
|
Condensed Consolidated Interim
Financial Statements
|
|
As at March 31, 2015
|
|
(Unaudited)
|
The information contained in these financial statements constitutes a translation of the financial information published by the Company. The Hebrew version was submitted by the Company to the relevant authorities pursuant to Israeli law, and represents the binding version and the only one having legal effect. This translation was prepared for convenience purposes only.
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Contents
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Page
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2
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Condensed Consolidated Interim Financial Statements as at March 31, 2015 (Unaudited)
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3
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5
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5
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6
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7
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8 | ||
1
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General
|
8
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2
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Basis of Preparation
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8
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3
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Reporting Principles and Accounting Policy
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9
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4
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Group Entities
|
8
|
5
|
Contingent Liabilities
|
13
|
6
|
Capital
|
15
|
7
|
Revenues
|
15
|
8
|
General and Operating Expenses
|
16
|
9
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Other Operating Expenses (Income), Net
|
16
|
10
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Financial Instruments
|
17
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11
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Segment Reporting
|
19
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12
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Condensed Financial Statements of Pelephone, Bezeq International, and DBS
|
23
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13
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Subsequent Events
|
26
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Somekh Chaikin
8 Hartum Street, Har Hotzvim
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Telephone | 972 2 531 2000 |
PO Box 212, Jerusalem 91001 | Fax | 972 2 531 2044 |
Israel | Internet | www.kpmg.co.il |
Condensed Consolidated Interim Statements of Financial Position
|
March 31, 2015
|
March 31, 2014
|
December 31, 2014
|
||||||||||
(Unaudited)
|
(Unaudited)
|
(Audited)
|
||||||||||
Assets
|
NIS million
|
NIS million
|
NIS million
|
|||||||||
Cash and cash equivalents
|
1,168 | 1,049 | 660 | |||||||||
Investments
|
2,541 | 1,345 | 2,223 | |||||||||
Trade receivables
|
2,290 | 2,499 | 2,227 | |||||||||
Other receivables
|
271 | 293 | 238 | |||||||||
Inventory
|
87 | 100 | 96 | |||||||||
Assets classified as held for sale
|
15 | 50 | 22 | |||||||||
Total current assets
|
6,372 | 5,336 | 5,466 | |||||||||
Trade and other receivables
|
541 | 618 | 566 | |||||||||
Broadcasting rights, net of rights exercised
|
460 | - | - | |||||||||
Property, plant and equipment
|
6,956 | 6,008 | 6,079 | |||||||||
Goodwill (see Note 4.2)
|
2,478 | 1,172 | 1,040 | |||||||||
Intangible assets (see Note 4.2)
|
2,025 | 867 | 753 | |||||||||
Deferred and other expenses
|
256 | 260 | 253 | |||||||||
Investments in equity-accounted investees (see Note 4.2)
|
29 | 1,032 | 1,057 | |||||||||
Investments
|
103 | 81 | 99 | |||||||||
Deferred tax assets
|
- | 29 | - | |||||||||
Total non-current assets
|
12,848 | 10,067 | 9,847 |
Total assets
|
19,220 | 15,403 | 15,313 |
Condensed Consolidated Interim Statements of Financial Position (Contd.)
|
March 31, 2015
|
March 31, 2014
|
December 31, 2014
|
||||||||||
(Unaudited)
|
(Unaudited)
|
(Audited)
|
||||||||||
Liabilities and equity
|
NIS million
|
NIS million
|
NIS million
|
|||||||||
Debentures, loans and borrowings
|
1,852 | 1,113 | 1,481 | |||||||||
Trade payables
|
1,074 | 624 | 664 | |||||||||
Other payables, including derivatives
|
953 | 818 | 710 | |||||||||
Liability to Eurocom DBS Ltd, related party (see Note 4.2.2)
|
781 | - | - | |||||||||
Current tax liabilities
|
670 | 529 | 600 | |||||||||
Provisions
|
84 | 122 | 62 | |||||||||
Employee benefits
|
274 | 269 | 259 | |||||||||
Dividend payable
|
- | 802 | - | |||||||||
Total current liabilities
|
5,688 | 4,277 | 3,776 | |||||||||
Loans and debentures
|
10,060 | 8,604 | 8,606 | |||||||||
Employee benefits
|
238 | 235 | 233 | |||||||||
Provisions
|
69 | 68 | 69 | |||||||||
Deferred tax liabilities
|
23 | 32 | 17 | |||||||||
Derivatives
|
126 | 21 | 94 | |||||||||
Deferred income and others
|
92 | 74 | 77 | |||||||||
Total non-current liabilities
|
10,608 | 9,034 | 9,096 | |||||||||
Total liabilities
|
16,296 | 13,311 | 12,872 | |||||||||
Total equity
|
2,924 | 2,092 | 2,441 |
Total liabilities and equity
|
19,220 | 15,403 | 15,313 |
Shaul Elovitch
|
Stella Handler
|
David (Dudu) Mizrahi
|
||
Chairman of the Board of Directors
|
CEO
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Deputy CEO and CFO
|
Condensed Consolidated Interim Statements of Income
|
Three months ended
|
Year ended
|
|||||||||||||||
March 31
|
December 31
|
|||||||||||||||
2015
|
2014
|
2014
|
||||||||||||||
(Unaudited)
|
(Unaudited)
|
(Audited)
|
||||||||||||||
Note
|
NIS million
|
NIS million
|
NIS million
|
|||||||||||||
Revenues
|
7 | 2,174 | 2,311 | 9,055 | ||||||||||||
Costs of activity
|
||||||||||||||||
Depreciation and amortization
|
317 | 314 | 1,281 | |||||||||||||
Salaries
|
439 | 448 | 1,768 | |||||||||||||
General and operating expenses
|
8 | 799 | 869 | 3,366 | ||||||||||||
Other operating income, net
|
9 | (17 | ) | (8 | ) | (586 | ) | |||||||||
Total operating expenses
|
1,538 | 1,623 | 5,829 | |||||||||||||
Operating profit
|
636 | 688 | 3,226 | |||||||||||||
Financing expenses (income)
|
||||||||||||||||
Financing expenses
|
101 | 113 | 486 | |||||||||||||
Financing income
|
(64 | ) | (71 | ) | (356 | ) | ||||||||||
Financing expenses, net
|
37 | 42 | 130 | |||||||||||||
Profit after financing expenses, net
|
599 | 646 | 3,096 | |||||||||||||
Share in the losses (profits) of equity-accounted investees
|
(16 | ) | 19 | 170 | ||||||||||||
Profit before income tax
|
615 | 627 | 2,926 | |||||||||||||
Income tax
|
152 | 170 | 815 | |||||||||||||
Profit for the period
|
463 | 457 | 2,111 | |||||||||||||
Earnings per share (NIS)
|
||||||||||||||||
Basic and diluted earnings per share
|
0.17 | 0.17 | 0.77 |
Condensed Consolidated Interim Statements of Comprehensive Income
|
Three months ended
|
Year ended
|
|||||||||||
March 31
|
December 31
|
|||||||||||
2015
|
2014
|
2014
|
||||||||||
(Unaudited)
|
(Unaudited)
|
(Audited)
|
||||||||||
NIS million
|
NIS million
|
NIS million
|
||||||||||
Profit for the period
|
463 | 457 | 2,111 | |||||||||
Items of other comprehensive income (net of tax) (mainly including hedging transactions and actuarial gains)
|
17 | 13 | (36 | ) | ||||||||
Total comprehensive income for the period
|
480 | 470 | 2,075 |
Condensed Consolidated Interim Statements of Changes in Equity
|
Share capital
|
Share premium
|
Capital reserve for employee options
|
Capital reserve for transactions between a corporation and a controlling shareholder
|
Other reserves
|
Deficit
|
Total
|
||||||||||||||||||||||
NIS million
|
NIS million
|
NIS million
|
NIS million
|
NIS million
|
NIS million
|
NIS million
|
||||||||||||||||||||||
Three months ended March 31, 2015 (Unaudited)
|
||||||||||||||||||||||||||||
Balance as at January 1, 2015
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3,855 | 253 | 131 | 390 | (105 | ) | (2,083 | ) | 2,441 | |||||||||||||||||||
Profit for the period
|
- | - | - | - | - | 463 | 463 | |||||||||||||||||||||
Other comprehensive income for the period, net of tax
|
- | - | - | - | 17 | - | 17 | |||||||||||||||||||||
Total comprehensive income for the period
|
- | - | - | - | 17 | 463 | 480 | |||||||||||||||||||||
Transactions with shareholders recognized directly in equity
|
||||||||||||||||||||||||||||
Exercise of options for shares
|
3 | 19 | (19 | ) | - | - | - | 3 | ||||||||||||||||||||
Balance as at March 31, 2015
|
3,858 | 272 | 112 | 390 | (88 | ) | (1,620 | ) | 2,924 | |||||||||||||||||||
Three months ended March 31, 2014 (Unaudited)
|
||||||||||||||||||||||||||||
Balance as at January 1, 2014
|
3,842 | 143 | 242 | 390 | (67 | ) | (2,127 | ) | 2,423 | |||||||||||||||||||
Profit for the period
|
- | - | - | - | - | 457 | 457 | |||||||||||||||||||||
Other comprehensive income for the period, net of tax
|
- | - | - | - | 13 | - | 13 | |||||||||||||||||||||
Total comprehensive income for the period
|
- | - | - | - | 13 | 457 | 470 | |||||||||||||||||||||
Transactions with shareholders recognized directly in equity
|
||||||||||||||||||||||||||||
Dividend to Company shareholders
|
- | - | - | - | - | (802 | ) | (802 | ) | |||||||||||||||||||
Share-based payments
|
- | - | (1 | ) | - | - | - | (1 | ) | |||||||||||||||||||
Exercise of options for shares
|
2 | 18 | (18 | ) | - | - | - | 2 | ||||||||||||||||||||
Balance as at March 31, 2014
|
3,844 | 161 | 223 | 390 | (54 | ) | (2,472 | ) | 2,092 | |||||||||||||||||||
Year ended December 31, 2014 (Audited)
|
||||||||||||||||||||||||||||
Balance as at January 1, 2014
|
3,842 | 143 | 242 | 390 | (67 | ) | (2,127 | ) | 2,423 | |||||||||||||||||||
Income in 2014
|
- | - | - | - | - | 2,111 | 2,111 | |||||||||||||||||||||
Other comprehensive income (loss) for the year, net of tax
|
- | - | - | - | (38 | ) | 2 | (36 | ) | |||||||||||||||||||
Total comprehensive income for 2014
|
- | - | - | - | (38 | ) | 2,113 | 2,075 | ||||||||||||||||||||
Transactions with shareholders recognized directly in equity
|
||||||||||||||||||||||||||||
Dividend to Company shareholders
|
- | - | - | - | - | (2,069 | ) | (2,069 | ) | |||||||||||||||||||
Share-based payments
|
- | - | (1 | ) | - | - | - | (1 | ) | |||||||||||||||||||
Exercise of options for shares
|
13 | 110 | (110 | ) | - | - | - | 13 | ||||||||||||||||||||
Balance as at December 31, 2014
|
3,855 | 253 | 131 | 390 | (105 | ) | (2,083 | ) | 2,441 |
Condensed Consolidated Interim Statements of Cash Flows
|
Three months ended
|
Year ended
|
|||||||||||
March 31
|
December 31
|
|||||||||||
2015
|
2014
|
2014
|
||||||||||
(Unaudited)
|
(Unaudited)
|
(Audited)
|
||||||||||
NIS million
|
NIS million
|
NIS million
|
||||||||||
Cash flows from operating activities
|
||||||||||||
Profit for the period
|
463 | 457 | 2,111 | |||||||||
Adjustments:
|
||||||||||||
Depreciation and amortization
|
317 | 314 | 1,281 | |||||||||
Profit from sale of the shares of Coral Tell Ltd.
|
- | - | (582 | ) | ||||||||
Share in the losses (profits) of equity-accounted investees
|
(16 | ) | 19 | 170 | ||||||||
Financing expenses, net
|
67 | 63 | 229 | |||||||||
Profit from gaining control in an investee (see Note 4.2)
|
(12 | ) | - | - | ||||||||
Capital gains, net
|
(11 | ) | (17 | ) | (175 | ) | ||||||
Share-based payments
|
- | (1 | ) | (1 | ) | |||||||
Income tax expenses
|
152 | 170 | 815 | |||||||||
Miscellaneous
|
(1 | ) | (3 | ) | (3 | ) | ||||||
Change in inventory
|
9 | 21 | 28 | |||||||||
Change in trade and other receivables
|
84 | 163 | 549 | |||||||||
Change in trade and other payables
|
(45 | ) | (62 | ) | (39 | ) | ||||||
Change in provisions
|
3 | (4 | ) | (63 | ) | |||||||
Change in employee benefits
|
4 | 13 | 3 | |||||||||
Net income tax paid
|
(53 | ) | (90 | ) | (527 | ) | ||||||
Net cash from operating activities
|
961 | 1,043 | 3,796 | |||||||||
Cash flow used for investing activities
|
||||||||||||
Investment in intangible assets and deferred expenses
|
(66 | ) | (48 | ) | (194 | ) | ||||||
Proceeds from the sale of property, plant and equipment
|
13 | 29 | 230 | |||||||||
Acquisition of financial assets held for trading and others
|
(440 | ) | (210 | ) | (2,720 | ) | ||||||
Proceeds from the sale of financial assets held for trading and others
|
121 | - | 1,635 | |||||||||
Cash in a company consolidated for the first time (see Note 4.2.4)
|
299 | - | - | |||||||||
Purchase of property, plant and equipment
|
(302 | ) | (267 | ) | (1,081 | ) | ||||||
Payments for long-term investments
|
(4 | ) | (3 | ) | (19 | ) | ||||||
Net consideration for the sale of Coral Tell Ltd. shares
|
- | - | 596 | |||||||||
Miscellaneous
|
1 | 2 | 7 | |||||||||
Net cash used for investing activities
|
(378 | ) | (497 | ) | (1,546 | ) | ||||||
Cash flows used in financing activities
|
||||||||||||
Repayment of debentures and loans
|
(58 | ) | (82 | ) | 1,446 | |||||||
Issue of debentures and receipt of loans
|
- | - | (1,149 | ) | ||||||||
Dividends paid
|
- | - | (2,069 | ) | ||||||||
Interest paid
|
(20 | ) | (27 | ) | (431 | ) | ||||||
Miscellaneous
|
3 | 2 | 3 | |||||||||
Net cash used for financing activities
|
(75 | ) | (107 | ) | (2,200 | ) | ||||||
Increase in cash and cash equivalents, net
|
508 | 439 | 50 | |||||||||
Cash and cash equivalents at beginning of period
|
660 | 610 | 610 | |||||||||
Cash and cash equivalents at end of period
|
1,168 | 1,049 | 660 |
1.
|
General
|
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1.1
|
Reporting Entity
|
|
1.2
|
Material events in the reporting period
|
2.
|
Basis of Preparation
|
|
2.1
|
The condensed interim consolidated financial statements have been prepared in accordance with IAS 34 – Interim Financial Reporting, and Chapter D of the Securities Regulations (Periodic and Immediate Reports), 1970.
|
|
2.2
|
The condensed consolidated interim financial statements do not contain all the information required in full annual financial statements, and should be reviewed in the context of the annual financial statements of the Company and its subsidiaries as at December 31, 2014 and the year then ended, and their accompanying notes (“the Annual Financial Statements”). The notes to the interim financial statements include only the material changes that have occurred from the date of the most recent Annual Financial Statements until the date of these consolidated interim financial statements.
|
|
2.3
|
The condensed consolidated interim financial statements were approved by the Board of Directors on May 20, 2015.
|
|
2.4
|
Use of estimates and judgment
|
Subject
|
Principal assumptions
|
Possible effects
|
Reference
|
|||
Fair value measurement of the Company's investment in DBS prior to gaining control in DBS
|
Assumption of expected cash flows from the operations of DBS, discount rate and market participant assumptions.
|
Change in profit/loss from gaining control
|
Note 4.2
|
|||
Attribution of excess cost arising from acquisition of control in DBS
|
Assumption of expected cash flows from identifiable assets in the business combination, timing of recognition, and scope of the deferred tax asset for carry forward losses
|
Change in the value of identifiable tangible and intangible assets in the business combination and changes in the value of goodwill
|
Note 4.2
|
|||
Fair value measurement of contingent consideration in a business combination
|
Assumption of expected cash flows and assumption of DBS's losses for tax purposes.
|
Change in the value of a liability for contingent consideration recognized in a business combination
|
Note 4.2 and Note 10.1.3
|
3.
|
Reporting Principles and Accounting Policy
|
|
3.1
|
The Group's accounting policy applied in these condensed consolidated interim financial statements is consistent with the policy applied in the Annual Financial Statements, except as described in section 3.2 below.
|
|
3.2
|
Accounting policy for new transactions or events
|
|
3.2.1
|
The Group implemented the acquisition method for all business combinations. The acquisition date is the date on which the acquirer obtained control over the acquiree.
|
|
3.2.2
|
The Group recognized goodwill at acquisition based on the fair value of the consideration transferred, and the fair value at the acquisition date of any pre-existing equity right of the Group in the acquiree, less the net amount of the identifiable assets acquired and the liabilities assumed.
|
|
3.2.3
|
The consideration transferred includes the fair value of the assets transferred to the previous owners of the acquiree and the liabilities incurred by the acquirer to the previous owners of the acquiree, including the obligation to acquire the acquiree''s equity instruments. In addition, the consideration transferred includes the fair value of any contingent consideration.
|
|
3.2.4
|
In a step acquisition, the difference between the fair value at the acquisition date of the Group’s pre-existing equity rights in the acquiree and the carrying amount at that date is recognized in the statement of income under other operating income or expenses.
|
|
3.2.5
|
The Group implements the anticipated acquisition method, whereby it undertook to acquire the equity instruments of a subsidiary in return for cash or another financial asset. The commitment to acquire a subsidiary's equity instruments is recognized as a financial liability at the present value. The commitment is recognized at the agreement date, if the preconditions to the agreement are not under the Group's control.
Based on the anticipated acquisition method, non-controlling interests are derecognized at the recognition date of the commitment to acquire the subsidiary's equity instruments. Accordingly, the Group's share in the subsidiary's equity and operating expenses includes the share of the holders of non-controlling interests.
|
|
3.2.6
|
Costs associated with the acquisition that were incurred by the acquirer in the business combination such as advisory, legal, valuation and other professional or consulting fees are expensed in the period the services are received.
|
4.
|
Group Entities
|
|
4.1
|
A detailed description of the Group entities appears in Note 10 to the Annual Financial Statements. Below is a description of the material changes that occurred in connection with the Group entities since publication of the Annual Financial Statements.
|
|
4.2
|
Business combination with DBS Satellite Services (1998) Ltd. ("DBS") that occurred in the period
|
|
4.2.1
|
As described in Note 10.1.2 to the annual financial statements, the Company holds 49.78% of the share capital of DBS and it holds options that confer the right to 8.6% in DBS shares, which the Company is unable to exercise. Accordingly, the Company accounted for its investment in DBS in accordance with the equity method.
On March 26, 2014, the Company received the decision of the Antitrust Authority, according to which, under the terms set out in the decision, the merger between the Company and DBS ("the Merger") will be permitted.
|
|
4.2.2
|
An increase in the Company's holding in DBS to 58.4% constitutes acquisition of control in DBS, therefore, the Company consolidates the financial statements of DBS as from March 23, 2015 (the date that the general meeting approved exercise of the option to DBS shares by the Company). In view of the Company's holding of 49.78% of DBS shares prior to gaining control, the acquisition transaction was accounted for as a step acquisition.
|
|
4.2.3
|
At the date of the business acquisition, the Company presented its investment in shares, share options and loans to DBS prior to acquisition of control, according to the equity method based on a valuation by an independent assessor whose opinion is attached to these financial statements. In accordance with the valuation, the value of the Company's investments prior to acquisition of control is estimated at NIS 1.076 billion. Accordingly, the Company recognized a profit of NIS 12 million from the gain of control under other operating income in the statement of income for the three months ended March 13, 2015.
|
|
4.2.4
|
Identifiable assets and liabilities acquired (according to provisional amounts set out below):
|
March 23, 2015
|
||||
(Unaudited)
|
||||
NIS million
|
||||
Cash and cash equivalents
|
299 | |||
Trade and other receivables
|
184 | |||
Broadcasting rights
|
449 | |||
Property, plant and equipment
|
801 | |||
Intangible assets (including excess cost attributed to customer relations and brand as described below)
|
1,284 | |||
Debentures, loans, and borrowings (including excess cost attributed to debentures as described below)
|
(1,947 | ) | ||
Trade payables and other liabilities
|
(632 | ) | ||
Contingent liabilities (including excess cost attributed to contingent liabilities as described below)
|
(19 | ) | ||
Identifiable assets, net
|
419 |
March 23, 2015
|
||||
(Unaudited)
|
||||
NIS million
|
||||
Customer relations (see section A below)
|
790 | |||
Brand (see section B below)
|
347 | |||
Goodwill (see section C below)
|
1,438 | |||
Total excess cost attributed to intangible assets
|
2,575 | |||
Debentures (see section D below)
|
(160 | ) | ||
Contingent liabilities (see section E below)
|
(10 | ) | ||
Total excess cost
|
2,405 |
|
A.
|
Customer relations: The valuation was based on the income approach, using the multi-period excess earning method. Under this approach, the value of the asset is derived from the present value of the cash flows that are expected to arise from it over the remaining economic life of the asset. Amortization will be based on the customer churn rate.
|
|
B.
|
Brand value: The valuation was prepared in accordance with the relief from royalty method. In accordance with this method, the value of the asset is estimated as the present value of the appropriate royalty that the entity would have to pay a third party for the use of the asset, if the company did not own it. The useful life of the brand assumed in the model is 12 years.
|
|
C.
|
Goodwill: Following the acquisition of control, goodwill was recognized as follows:
|
March 23, 2015
|
||||
(Unaudited)
|
||||
NIS million
|
||||
Consideration value
|
781 | |||
Fair value of the investment in DBS prior to the acquisition
|
1,076 | |||
Less the fair value of net identifiable assets
|
(419 | ) | ||
Goodwill
|
1,438 |
|
D.
|
Debentures: The excess cost reflects the fair value of the debentures at the acquisition date based on a capitalization rate of 1.9%-2.3%.
|
|
E.
|
Contingent liabilities: The excess cost represents a present obligation arising from a class action filed by DBS customers.
|
|
4.2.5
|
The management estimates that had the business combination taken place on January 1, 2015, the revenue in the consolidated statement of income would have increased by NIS 434 million and there would have been no significant change in consolidated profit. When determining the amounts, the management assumed that the fair value adjustments at the date of the business combination, which were determined provisionally, are the same as the adjustments that would have been received had the business combination taken place on January 1, 2015.
|
|
4.2.6
|
Since the beginning of its operations, DBS has accumulated considerable losses. In 2014, DBS recorded a loss of NIS 322 million. As a result of these losses, as at March 31, 2015, DBS had an equity deficit and a working capital deficit of NIS 4,667 million and NIS 525 million, respectively.
|
|
4.2.7
|
As at March 31, 2015, DBS is in compliance with the financial covenants established under the financing and debenture agreements. As at March 31, 2015, DBS is in compliance with the debt/EBITDA ratio covenant established in Deed of Trust B (as at March 31, 2015, the debt/EBITDA ratio was 2.6). Furthermore, DBS is in compliance with the debt/EBITDA ratio covenant set out in Debenture 2012 (as at March 31, 2015, the debt/EBIDTA ratio was 2.5) and the debt/E-C ratio covenant set out in Debenture 2012 (as at March 31, 2015, the debt-E-C ratio was 6.4).
|
|
4.2.8
|
The management of DBS believes that the financing resources available to DBS, which include the working capital deficit, and its debt raising activities, will be sufficient for the operations of DBS for the coming year, based on the forecasted cash flows approved by DBS’s board of directors. If additional resources are required to meet its operational requirements for the coming year, DBS will adjust its operations to preclude the need for additional resources beyond those available to it.
|
5.
|
Contingent Liabilities
|
|
5.1
|
Below is a description of the contingent liabilities of the Group (including DBS) as at March 31, 2015, classified into groups with similar characteristics:
|
Provision
|
Additional exposure
|
Exposure for claims that cannot yet be assessed
|
||||||||||||
Claims group
|
Nature of the claims
|
NIS million
|
||||||||||||
Claims of employees and former employees of Group companies
|
Mainly collective and individual claims filed by employees and former employees of the Company in respect of recognition of various salary components as components for calculation of payments to Company employees, some of which have wide ramifications in the Company.
|
9 | 131 | - | ||||||||||
Customer claims
|
Mainly motions for certification of class actions concerning contentions of unlawful collection of payment and impairment of the service provided by the Group companies.
|
40 | 2,670 | 456 | ||||||||||
Supplier and communication provider claims
|
Legal claims for compensation for alleged damage as a result of the supply of the service and/or the product.
|
3 | 122 | - | ||||||||||
Claims for punitive damages, real estate and infrastructure
|
Claims for alleged physical damage or damage to property caused by Group companies and in relation to real estate and infrastructure.
The additional amount of exposure for punitive damages does not include claims for which the insurance coverage is not disputed.
|
2 | 63 | - | ||||||||||
Claims by enterprises and companies
|
Claims alleging liability of the Group companies in respect of their activities and/or the investments made in various projects.
|
11 | 46 | 2,000 | * | |||||||||
Claims by the State and authorities
|
Various claims by the State of Israel, government institutions and authorities (“the Authorities”). These are mainly procedures related to regulations relevant to the Group companies and financial disputes concerning monies paid by the Group companies to the authorities (including property taxes) or by the authorities to the Group companies.
|
15 | 35 | - | ||||||||||
Total legal claims against the Company and subsidiaries
|
80 | 3,067 | 2,456 |
|
*
|
A claim filed by shareholders against the Company and officers in the Company amounting to NIS 1.1 billion or NIS 2 billion (according to the method of calculating the damage to be determined).
|
|
5.2
|
Subsequent to the reporting date, claims amounting to NIS 52 million were filed against Group companies, and another claim without a monetary estimate. At the approval date of the financial statements, the chances of these claims cannot yet be assessed. In addition, claims with exposure of NIS 36 million came to an end.
|
6.
|
Capital
|
|
6.1
|
Below are details of the Company's equity:
|
Registered
|
Issued and paid up
|
|||||||||||||||||||||
March 31, 2015
|
March 31, 2014
|
December 31, 2014
|
March 31, 2015
|
March 31, 2014
|
December 31, 2014
|
|||||||||||||||||
(Unaudited)
|
(Unaudited)
|
(Audited)
|
(Unaudited)
|
(Unaudited)
|
(Audited)
|
|||||||||||||||||
Number of shares
|
Number of shares
|
Number of shares
|
Number of shares
|
Number of shares
|
Number of shares
|
|||||||||||||||||
2,825,000,000 | 2,825,000,000 | 2,825,000,000 | 2,746,010,675 | 2,731,837,758 | 2,743,283,920 |
|
6.2
|
On May 6, 2015, the general meeting of the Company's shareholders approved the recommendation of the Company's Board of Directors of March 25, 2015 to distribute a cash dividend of NIS 844 million to the Company's shareholders. The dividend will be paid on May 27, 2015.
|
7.
|
Revenues
|
Three months ended
|
Year ended
|
|||||||||||
March 31
|
December 31
|
|||||||||||
2015
|
2014
|
2014
|
||||||||||
(Unaudited)
|
(Unaudited)
|
(Audited)
|
||||||||||
NIS million
|
NIS million
|
NIS million
|
||||||||||
Domestic fixed-line communication
|
||||||||||||
Fixed-line telephony
|
395 | 417 | 1,636 | |||||||||
Internet - infrastructure
|
383 | 332 | 1,394 | |||||||||
Transmission and data communication
|
207 | 207 | 802 | |||||||||
Other services
|
58 | 57 | 220 | |||||||||
1,043 | 1,013 | 4,052 | ||||||||||
Cellular telephony
|
||||||||||||
Cellular services and terminal equipment
|
486 | 623 | 2,399 | |||||||||
Sale of terminal equipment
|
224 | 280 | 966 | |||||||||
710 | 903 | 3,365 | ||||||||||
International communications, internet and NEP services
|
371 | 332 | 1,425 | |||||||||
Other
|
50 | 63 | 213 | |||||||||
2,174 | 2,311 | 9,055 |
8.
|
General and Operating Expenses
|
Three months ended
|
Year ended
|
|||||||||||
March 31
|
December 31
|
|||||||||||
2015
|
2014
|
2014
|
||||||||||
(Unaudited)
|
(Unaudited)
|
(Audited)
|
||||||||||
NIS million
|
NIS million
|
NIS million
|
||||||||||
Terminal equipment and materials
|
226 | 262 | 928 | |||||||||
Interconnectivity and payments to domestic and international operators
|
212 | 206 | 847 | |||||||||
Maintenance of buildings and sites
|
150 | 156 | 639 | |||||||||
Marketing and general
|
119 | 139 | 555 | |||||||||
Services and maintenance by sub-contractors
|
34 | 40 | 137 | |||||||||
Vehicle maintenance
|
35 | 37 | 154 | |||||||||
Content services
|
13 | 15 | 58 | |||||||||
Collection fees
|
10 | 14 | 48 | |||||||||
799 | 869 | 3,366 |
9.
|
Other Operating Expenses (Income), Net
|
Year
|
||||||||||||
Three months ended
|
ended
|
|||||||||||
March 31
|
December 31
|
|||||||||||
2015
|
2014
|
2014
|
||||||||||
(Unaudited)
|
(Unaudited)
|
(Audited)
|
||||||||||
NIS million
|
NIS million
|
NIS million
|
||||||||||
Profit from gaining control in DBS Satellite Services (1998) Ltd.
|
12 | - | - | |||||||||
Profit from the sale of property, plant and equipment (mainly real estate)
|
11 | 12 | 167 | |||||||||
Profit from copper sales
|
- | 5 | 8 | |||||||||
Elimination of provision for contingent liabilities, net
|
- | - | 23 | |||||||||
Profit from sale of the shares of Coral Tell Ltd.
|
- | - | 582 | |||||||||
Other operating income
|
23 | 17 | 780 | |||||||||
Provision for contingent liabilities, net
|
6 | - | - | |||||||||
Provision for severance pay in voluntary redundancy
|
- | 8 | 176 | |||||||||
Expenses for collective agreement at Pelephone
|
- | - | 18 | |||||||||
Others
|
- | 1 | - | |||||||||
Total other operating expenses
|
6 | 9 | 194 | |||||||||
(17 | ) | (8 | ) | (586 | ) |
10.
|
Financial Instruments
|
|
10.1.
|
Fair value
|
|
10.2.1
|
Financial instruments at fair value for disclosure purposes only
The table below shows the differences between the carrying amount and the fair value of financial liabilities. The methods used to estimate the fair values of financial instruments are described in Note 28.7 to the Annual Financial Statements.
|
March 31, 2015
|
March 31, 2014
|
December 31, 2014
|
||||||||||||||||||||||
Carrying amount (including accrued interest)
|
Fair value
|
Carrying amount (including accrued interest)
|
Fair value
|
Carrying amount (including accrued interest)
|
Fair value
|
|||||||||||||||||||
(Unaudited)
|
(Unaudited)
|
(Audited)
|
||||||||||||||||||||||
NIS million
|
NIS million
|
NIS million
|
||||||||||||||||||||||
Bank loans (unlinked)
|
2,131 | 2,328 | 2,105 | 2,240 | 2,112 | 2,292 | ||||||||||||||||||
Debentures issued to the public (CPI-linked)
|
3,793 | 4,072 | 3,154 | 3,420 | 3,820 | 4,033 | ||||||||||||||||||
Debentures issued to the public (unlinked)
|
1,354 | 1,432 | 1,354 | 1,471 | 1,335 | 1,426 | ||||||||||||||||||
Debentures issued to financial institutions (unlinked)
|
410 | 480 | 410 | 456 | 403 | 467 | ||||||||||||||||||
Debentures issued to financial institutions (CPI-linked)
|
1,748 | 1,908 | - | - | - | - | ||||||||||||||||||
9,436 | 10,220 | 7,023 | 7,587 | 7,670 | 8,218 |
|
10.2.2
|
Fair value hierarchy
|
March 31, 2015
|
March 31, 2014
|
December 31, 2014
|
||||||||||
(Unaudited)
|
(Unaudited)
|
(Audited)
|
||||||||||
NIS million
|
NIS million
|
NIS million
|
||||||||||
Level 1: investment in exchange-traded funds and financial funds
|
1,392 | 1,281 | 1,513 | |||||||||
Level 2: forward contracts
|
(144 | ) | (34 | ) | (110 | ) | ||||||
Level 3: contingent consideration for a business combination (Note 4.2)
|
(101 | ) | - | - | ||||||||
Level 3: investment in non-marketable shares
|
9 | 11 | 9 | |||||||||
1,156 | 1,258 | 1,412 |
|
10.2.3
|
Information about fair value measurement of contingent consideration in a business combination (Level 3)
Below is the fair value of the contingent consideration liability for a business combination, as described in Note 4.2:
|
March 31, 2015
|
||||||||
Maximum additional consideration under the agreement
|
Fair value
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
NIS million
|
NIS million
|
|||||||
Additional consideration for tax synergy (first additional consideration)(A)
|
200 | 84 | ||||||
Additional consideration for the business results of DBS (second additional consideration) (B)
|
170 | 17 | ||||||
370 | 101 |
|
A.
|
First additional consideration
|
|
B.
|
Second additional consideration
|
11.
|
Segment Reporting
|
|
11.1.
|
Operating segments
|
Three months ended March 31, 2015 (Unaudited)
|
||||||||||||||||||||||||||||
Domestic fixed-line communication
|
Cellular communications
|
International communications and internet services
|
Multi-channel television*
|
Other
|
Adjustments
|
Consolidated
|
||||||||||||||||||||||
NIS million
|
NIS million
|
NIS million
|
NIS million
|
NIS million
|
NIS million
|
NIS million
|
||||||||||||||||||||||
Revenues from external sources
|
1,042 | 709 | 368 | 440 | 49 | (440 | ) | 2,168 | ||||||||||||||||||||
Inter-segment revenues
|
71 | 18 | 25 | - | 4 | (112 | ) | 6 | ||||||||||||||||||||
Total revenues
|
1,113 | 727 | 393 | 440 | 53 | (552 | ) | 2,174 | ||||||||||||||||||||
Depreciation and amortization
|
176 | 104 | 32 | 76 | 3 | (74 | ) | 317 | ||||||||||||||||||||
Segment results – operating profit
|
547 | 32 | 61 | 59 | (2 | ) | (61 | ) | 636 | |||||||||||||||||||
Financing expenses
|
98 | 3 | 4 | 104 | - | (108 | ) | 101 | ||||||||||||||||||||
Financing income
|
(44 | ) | (17 | ) | (3 | ) | (42 | ) | (4 | ) | 46 | (64 | ) | |||||||||||||||
Total financing expenses (income), net
|
54 | (14 | ) | 1 | 62 | (4 | ) | (62 | ) | 37 | ||||||||||||||||||
Segment profit (loss) after financing expenses, net
|
493 | 46 | 60 | (3 | ) | 2 | 1 | 599 | ||||||||||||||||||||
Share in profits (losses) of associates
|
- | - | - | - | - | 16 | 16 | |||||||||||||||||||||
Segment profit (loss) before income tax
|
493 | 46 | 60 | (3 | ) | 2 | 17 | 615 | ||||||||||||||||||||
Income tax
|
126 | 10 | 16 | - | - | - | 152 | |||||||||||||||||||||
Segment results – net profit (loss)
|
367 | 36 | 44 | (3 | ) | 2 | 17 | 463 |
Three months ended March 31, 2014 (Unaudited)
|
||||||||||||||||||||||||||||
Domestic fixed-line communication
|
Cellular communications
|
International communications and internet services
|
Multi-channel television *
|
Other
|
Adjustments
|
Consolidated
|
||||||||||||||||||||||
NIS million
|
NIS million
|
NIS million
|
NIS million
|
NIS million
|
NIS million
|
NIS million
|
||||||||||||||||||||||
Revenues from external sources
|
1,011 | 902 | 331 | 424 | 62 | (424 | ) | 2,306 | ||||||||||||||||||||
Inter-segment revenues
|
66 | 15 | 24 | - | 5 | (105 | ) | 5 | ||||||||||||||||||||
Total revenues
|
1,077 | 917 | 355 | 424 | 67 | (529 | ) | 2,311 | ||||||||||||||||||||
Depreciation and amortization
|
168 | 106 | 32 | 70 | 7 | (69 | ) | 314 | ||||||||||||||||||||
Segment results – operating profit
|
504 | 126 | 58 | 73 | 1 | (74 | ) | 688 | ||||||||||||||||||||
Financing expenses
|
106 | 6 | 5 | 123 | 2 | (129 | ) | 113 | ||||||||||||||||||||
Financing income
|
(50 | ) | (24 | ) | (3 | ) | (16 | ) | - | 22 | (71 | ) | ||||||||||||||||
Total financing expenses (income), net
|
56 | (18 | ) | 2 | 107 | 2 | (107 | ) | 42 | |||||||||||||||||||
Segment profit (loss) after financing expenses, net
|
448 | 144 | 56 | (34 | ) | (1 | ) | 33 | 646 | |||||||||||||||||||
Share in profits (losses) of associates
|
- | - | 1 | - | - | (20 | ) | (19 | ) | |||||||||||||||||||
Segment profit (loss) before income tax
|
448 | 144 | 57 | (34 | ) | (1 | ) | 13 | 627 | |||||||||||||||||||
Income tax
|
116 | 36 | 15 | - | 3 | - | 170 | |||||||||||||||||||||
Segment results – net profit (loss)
|
332 | 108 | 42 | (34 | ) | (4 | ) | 13 | 457 |
Year ended December 31, 2014 (Audited)
|
||||||||||||||||||||||||||||
Domestic fixed-line communication
|
Cellular communications
|
International communications and internet services
|
Multi-channel television *
|
Other
|
Adjustments
|
Consolidated
|
||||||||||||||||||||||
NIS million
|
NIS million
|
NIS million
|
NIS million
|
NIS million
|
NIS million
|
NIS million
|
||||||||||||||||||||||
Revenues from external sources
|
4,045 | 3,361 | 1,419 | 1,724 | 209 | (1,724 | ) | 9,034 | ||||||||||||||||||||
Inter-segment revenues
|
272 | 58 | 85 | - | 17 | (411 | ) | 21 | ||||||||||||||||||||
Total revenues
|
4,317 | 3,419 | 1,504 | 1,724 | 226 | (2,135 | ) | 9,055 | ||||||||||||||||||||
Depreciation and amortization
|
688 | 430 | 130 | 297 | 23 | (287 | ) | 1,281 | ||||||||||||||||||||
Segment results – operating profit
|
1,980 | 449 | 232 | 273 | 629 | (337 | ) | 3,226 | ||||||||||||||||||||
Financing expenses
|
472 | 21 | 18 | 620 | 2 | (647 | ) | 486 | ||||||||||||||||||||
Financing income
|
(285 | ) | (77 | ) | (9 | ) | (26 | ) | (11 | ) | 52 | (356 | ) | |||||||||||||||
Total financing expenses (income), net
|
187 | (56 | ) | 9 | 594 | (9 | ) | (595 | ) | 130 | ||||||||||||||||||
Segment profit (loss) after financing expenses, net
|
1,793 | 505 | 223 | (321 | ) | 638 | 258 | 3,096 | ||||||||||||||||||||
Share in profits (losses) of associates
|
- | - | 1 | - | (3 | ) | (168 | ) | (170 | ) | ||||||||||||||||||
Segment profit (loss) before income tax
|
1,793 | 505 | 224 | (321 | ) | 635 | 90 | 2,926 | ||||||||||||||||||||
Income tax
|
478 | 132 | 60 | 1 | 147 | (3 | ) | 815 | ||||||||||||||||||||
Segment results – net profit (loss)
|
1,315 | 373 | 164 | (322 | ) | 488 | 93 | 2,111 |
11.2.
|
Adjustment of profit or loss for reporting segments
|
Three months ended March 31
|
Year ended December 31, 2014 | |||||||||||
2015
|
2014
|
|||||||||||
(Unaudited)
|
(Unaudited)
|
(Audited)
|
||||||||||
NIS million
|
NIS million
|
NIS million
|
||||||||||
Operating profit for reporting segments
|
699 | 761 | 2,934 | |||||||||
Cancellation of results for a segment classified as an associate *
|
(59 | ) | (73 | ) | (273 | ) | ||||||
Financing income (expenses), net
|
(37 | ) | (42 | ) | (130 | ) | ||||||
Share in profits (losses) of associates
|
16 | (19 | ) | (170 | ) | |||||||
Profit (loss) for operations classified in other categories and other adjustments
|
(4 | ) | - | 565 | ||||||||
Consolidated profit before income tax
|
615 | 627 | 2,926 |
|
*
|
The Company's investment in DBS was accounted for using the equity method up to March 25, 2015. As from this date, the financial statements of DBS are consolidated with the financial statements of the Group as described in Note 4 above. The Group reports on multi-channel TV as an operating segment without adjustment to ownership rates in each reporting period, as described in Note 26 to the annual financial statements.
|
12.
|
Condensed Financial Statements of Pelephone, Bezeq International, and DBS
|
12.1.
|
Pelephone Communications Ltd.
Selected data from the statement of financial position
|
March 31, 2015
|
March 31, 2014
|
December 31, 2014
|
||||||||||
(Unaudited)
|
(Unaudited)
|
(Audited)
|
||||||||||
NIS million
|
NIS million
|
NIS million
|
||||||||||
Current assets
|
1,695 | 1,828 | 1,658 | |||||||||
Non-current assets
|
1,866 | 1,996 | 1,883 | |||||||||
3,561 | 3,824 | 3,541 | ||||||||||
Current liabilities
|
750 | 906 | 610 | |||||||||
Long-term liabilities
|
89 | 128 | 86 | |||||||||
Total liabilities
|
839 | 1,034 | 696 | |||||||||
Capital
|
2,722 | 2,790 | 2,845 | |||||||||
3,561 | 3,824 | 3,541 |
Three months
|
Year ended
|
|||||||||||
March 31
|
December 31,
|
|||||||||||
2015
|
2014
|
2014
|
||||||||||
(Unaudited)
|
(Unaudited)
|
(Audited)
|
||||||||||
NIS million
|
NIS million
|
NIS million
|
||||||||||
Revenues from services
|
499 | 637 | 2,453 | |||||||||
Revenues from sales of terminal equipment
|
228 | 280 | 966 | |||||||||
Total revenues from services and sales
|
727 | 917 | 3,419 | |||||||||
Cost of services and sales
|
607 | 681 | 2,537 | |||||||||
Gross profit
|
120 | 236 | 882 | |||||||||
Selling and marketing expenses
|
63 | 83 | 309 | |||||||||
General and administrative expenses
|
25 | 27 | 106 | |||||||||
Other operating expenses
|
- | - | 18 | |||||||||
88 | 110 | 433 | ||||||||||
Operating profit
|
32 | 126 | 449 | |||||||||
Financing expenses
|
3 | 6 | 21 | |||||||||
Financing income
|
(17 | ) | (24 | ) | (77 | ) | ||||||
Financing income, net
|
(14 | ) | (18 | ) | (56 | ) | ||||||
Profit before income tax
|
46 | 144 | 505 | |||||||||
Income tax
|
10 | 36 | 132 | |||||||||
Profit for the period
|
36 | 108 | 373 |
12.2.
|
Bezeq International Ltd.
Selected data from the statement of financial position
|
March 31, 2015
|
March 31, 2014
|
December 31, 2014
|
||||||||||
(Unaudited)
|
(Unaudited)
|
(Audited)
|
||||||||||
NIS million
|
NIS million
|
NIS million
|
||||||||||
Current assets
|
544 | 515 | 487 | |||||||||
Non-current assets
|
750 | 751 | 730 | |||||||||
1,294 | 1,266 | 1,217 | ||||||||||
Current liabilities
|
437 | 363 | 313 | |||||||||
Long-term liabilities
|
71 | 122 | 79 | |||||||||
Total liabilities
|
508 | 485 | 392 | |||||||||
Capital
|
786 | 781 | 825 | |||||||||
1,294 | 1,266 | 1,217 |
Three months
|
Year ended
|
|||||||||||
March 31
|
December 31,
|
|||||||||||
2015
|
2014
|
2014
|
||||||||||
(Unaudited)
|
(Unaudited)
|
(Audited)
|
||||||||||
NIS million
|
NIS million
|
NIS million
|
||||||||||
Revenues from services
|
393 | 355 | 1,504 | |||||||||
Operating expenses
|
251 | 218 | 951 | |||||||||
Gross profit
|
142 | 137 | 553 | |||||||||
Selling and marketing expenses
|
53 | 50 | 209 | |||||||||
General and administrative expenses
|
28 | 29 | 112 | |||||||||
81 | 79 | 321 | ||||||||||
Operating profit
|
61 | 58 | 232 | |||||||||
Financing expenses
|
4 | 5 | 18 | |||||||||
Financing income
|
(3 | ) | (3 | ) | (9 | ) | ||||||
Financing expenses (income), net
|
1 | 2 | 9 | |||||||||
Share in profits of equity-accounted associates
|
- | 1 | 1 | |||||||||
Profit before income tax
|
60 | 57 | 224 | |||||||||
Income tax
|
16 | 15 | 60 | |||||||||
Profit for the period
|
44 | 42 | 164 |
12.3.
|
DBS Satellite Services (1998) Ltd.
Selected data from the statement of financial position
|
March 31, 2015
|
March 31, 2014
|
December 31, 2014
|
||||||||||
(Unaudited)
|
(Unaudited)
|
(Audited)
|
||||||||||
NIS million
|
NIS million
|
NIS million
|
||||||||||
Current assets
|
481 | 290 | 434 | |||||||||
Non-current assets
|
1,398 | 1,346 | 1,386 | |||||||||
1,879 | 1,636 | 1,820 | ||||||||||
Current liabilities
|
1,006 | 939 | 980 | |||||||||
Long-term liabilities
|
1,422 | 1,413 | 1,450 | |||||||||
Loans from shareholders
|
4,118 | 3,661 | 4,054 | |||||||||
Total liabilities
|
6,546 | 6,013 | 6,484 | |||||||||
Capital deficit
|
(4,667 | ) | (4,377 | ) | (4,664 | ) | ||||||
1,879 | 1,636 | 1,820 |
Three months
|
Year ended
|
|||||||||||
March 31
|
December 31,
|
|||||||||||
2015
|
2014
|
2014
|
||||||||||
(Unaudited)
|
(Unaudited)
|
(Audited)
|
||||||||||
NIS million
|
NIS million
|
NIS million
|
||||||||||
Revenues from services
|
440 | 424 | 1,724 | |||||||||
Operating expenses
|
295 | 269 | 1,110 | |||||||||
Gross profit
|
145 | 155 | 614 | |||||||||
Selling and marketing expenses
|
36 | 40 | 154 | |||||||||
General and administrative expenses
|
50 | 42 | 187 | |||||||||
86 | 82 | 341 | ||||||||||
Operating profit
|
59 | 73 | 273 | |||||||||
Financing expenses
|
104 | 123 | 620 | |||||||||
Financing income
|
(42 | ) | (16 | ) | (26 | ) | ||||||
Financing expenses (income), net
|
62 | 107 | 594 | |||||||||
Loss before income tax
|
(3 | ) | (34 | ) | (321 | ) | ||||||
Income tax
|
- | - | 1 | |||||||||
Loss for the period
|
(3 | ) | (34 | ) | (322 | ) |
13.
|
Subsequent Events
|
|
13.1
|
In April and May 2015, the Company entered into agreements with banks, whereby the Company received an undertaking from the banks to provide credit to the Company to refinance its future debt in June 2016 in a total amount of NIS 900 million, with a duration of 4.6 years (payable in five equal annual payments commencing on June 1, 2019 through to June 1, 2023), and a fixed NIS unlinked interest rate of 3.7%.
The terms of the undertaking and the loans to be provided thereunder include terms that are similar to the terms provided for other loans taken by the Company, as described in Note 11.2.1 to the annual financial statements, including the following: an undertaking to refrain from creating additional liens on the Company's assets (with certain restrictions); an undertaking that if the Company assumes an undertaking towards a party in respect of compliance with financial covenants, the Company will also assume the same undertaking for this credit (subject to certain exceptions); and standard terms for immediate repayment (such as default events, insolvency, liquidation or receivership, and cross default with certain restrictions), which will also apply, with the required changes, to the period of the undertaking to provide credit.
|
|
13.2
|
In April 2015, DBS issued additional debentures (Series B) by expanding the series, amounting to NIS 198 million. For information about the terms of the debentures, see Note 10.1.5 to the Annual Financial Statements.
|
The information contained in this financial information report constitutes a translation of the financial information published by the Company. The Hebrew version was submitted by the Company to the relevant authorities pursuant to Israeli law, and represents the binding version and the only one having legal effect. This translation was prepared for convenience purposes only.
|
Contents
|
Page
|
2
|
|
Condensed Separate Interim Financial Information as at March 31, 2015 (Unaudited)
|
|
3
|
|
5
|
|
5
|
|
6
|
|
8
|
Somekh Chaikin
8 Hartum Street, Har Hotzvim
PO Box 212, Jerusalem 91001
Israel
|
Telephone
Fax
Internet
|
972 2 531 2000
972 2 531 2044
www.kpmg.co.il
|
March 31, 2015
|
March 31, 2014
|
December 31, 2014
|
||||||||||
(Unaudited)
|
(Unaudited)
|
(Audited)
|
||||||||||
NIS million
|
NIS million
|
NIS million
|
||||||||||
Assets
|
||||||||||||
Cash and cash equivalents
|
195 | 684 | 248 | |||||||||
Investments
|
2,495 | 1,341 | 2,175 | |||||||||
Trade receivables
|
789 | 746 | 720 | |||||||||
Other receivables
|
148 | 175 | 107 | |||||||||
Dividend receivable from investees
|
241 | 283 | - | |||||||||
Inventories
|
4 | 7 | 4 | |||||||||
Loans provided to investees
|
308 | 266 | 261 | |||||||||
Assets classified as held for sale
|
15 | 50 | 22 | |||||||||
Total current assets
|
4,195 | 3,552 | 3,537 | |||||||||
Trade and other receivables
|
38 | 47 | 51 | |||||||||
Property, plant and equipment
|
4,683 | 4,497 | 4,620 | |||||||||
Intangible assets
|
287 | 322 | 295 | |||||||||
Investment in investees
|
6,999 | 5,770 | 6,325 | |||||||||
Loans provided to investees
|
262 | 544 | 272 | |||||||||
Deferred tax assets
|
- | 28 | - | |||||||||
Investments
|
90 | 70 | 86 | |||||||||
Total non-current assets
|
12,359 | 11,278 | 11,649 | |||||||||
Total assets
|
16,554 | 14,830 | 15,186 |
March 31, 2015
|
March 31, 2014
|
December 31, 2014
|
||||||||||
(Unaudited)
|
(Unaudited)
|
(Audited)
|
||||||||||
NIS million
|
NIS million
|
NIS million
|
||||||||||
Liabilities
|
||||||||||||
Debentures, loans and borrowings
|
1,611 | 1,123 | 1,570 | |||||||||
Trade payables
|
153 | 130 | 167 | |||||||||
Other payables, including derivatives
|
674 | 632 | 553 | |||||||||
Liability to Eurocom DBS Ltd., a related party
|
781 | - | - | |||||||||
Current tax liabilities
|
623 | 524 | 590 | |||||||||
Provisions (Note 5)
|
51 | 106 | 48 | |||||||||
Employee benefits
|
222 | 229 | 223 | |||||||||
Dividend payable
|
- | 802 | - | |||||||||
Total current liabilities
|
4,115 | 3,546 | 3,151 | |||||||||
Loans and debentures
|
8,675 | 8,900 | 8,787 | |||||||||
Loan from an investee
|
434 | - | 434 | |||||||||
Employee benefits
|
196 | 199 | 203 | |||||||||
Deferred tax liabilities
|
10 | - | 1 | |||||||||
Derivatives
|
126 | 21 | 94 | |||||||||
Other liabilities
|
74 | 72 | 75 | |||||||||
Total non-current liabilities
|
9,515 | 9,192 | 9,594 | |||||||||
Total liabilities
|
13,630 | 12,738 | 12,745 | |||||||||
Equity
|
||||||||||||
Share capital
|
3,858 | 3,844 | 3,855 | |||||||||
Share premium
|
272 | 161 | 253 | |||||||||
Reserves
|
414 | 559 | 416 | |||||||||
Deficit
|
(1,620 | ) | (2,472 | ) | (2,083 | ) | ||||||
Total equity attributable to equity holders of the Company
|
2,924 | 2,092 | 2,441 | |||||||||
Total liabilities and equity
|
16,554 | 14,830 | 15,186 |
Shaul Elovitch
|
Stella Handler
|
Dudu Mizrahi
|
||
Chairman of the Board of Directors
|
CEO
|
Deputy CEO and CFO
|
Three months ended March 31
|
Year ended December 31
|
|||||||||||
2015
|
2014
|
2014
|
||||||||||
(Unaudited)
|
(Unaudited)
|
(Audited)
|
||||||||||
NIS million
|
NIS million
|
NIS million
|
||||||||||
Revenues (Note 2)
|
1,113 | 1,077 | 4,317 | |||||||||
Cost of Activities
|
||||||||||||
Depreciation and amortization
|
176 | 168 | 688 | |||||||||
Salaries
|
227 | 223 | 895 | |||||||||
Operating and general expenses (Note 3)
|
180 | 190 | 777 | |||||||||
Other operating expenses , net (Note 4)
|
(17 | ) | (8 | ) | (23 | ) | ||||||
Cost of Activities
|
566 | 573 | 2,337 | |||||||||
Operating profit
|
547 | 504 | 1,980 | |||||||||
Financing expenses (income)
|
||||||||||||
Financing expenses
|
98 | 106 | 472 | |||||||||
Financing revenues
|
(44 | ) | (50 | ) | (285 | ) | ||||||
Financing expenses, net
|
54 | 56 | 187 | |||||||||
Profit after financing expenses, net
|
493 | 448 | 1,793 | |||||||||
Share in earnings of investees, net
|
96 | 125 | 796 | |||||||||
Profit before income tax
|
589 | 573 | 2,589 | |||||||||
Income tax
|
126 | 116 | 478 | |||||||||
Profit for the period attributable to the owners of the Company
|
463 | 457 | 2,111 |
Three months ended March 31
|
Year ended December 31
|
|||||||||||
2015
|
2014
|
2014
|
||||||||||
(Unaudited)
|
(Unaudited)
|
(Audited)
|
||||||||||
NIS million
|
NIS million
|
NIS million
|
||||||||||
Profit for the period
|
463 | 457 | 2,111 | |||||||||
Items of other comprehensive income (loss) for the period including actuarial gains and hedging transactions, net of tax
|
17 | 13 | (36 | ) | ||||||||
Total comprehensive income for the period attributable to equity holders of the Company
|
480 | 470 | 2,075 |
Three months ended March 31
|
Year ended
December 31
|
|||||||||
2015
|
2014
|
2014
|
||||||||
(Unaudited)
|
(Unaudited)
|
(Audited)
|
||||||||
NIS million
|
NIS million
|
NIS million
|
||||||||
Cash flows from operating activities
|
||||||||||
Profit for the period
|
463 | 457 | 2,111 | |||||||
Adjustments:
|
||||||||||
Depreciation and amortization
|
176 | 168 | 688 | |||||||
Share in earnings of investees, net
|
(96 | ) | (125 | ) | (796 | ) | ||||
Financing expenses, net
|
61 | 61 | 219 | |||||||
Capital gain from increased control in an investee
|
(12 | ) | - | - | ||||||
Capital gain, net
|
(11 | ) | (17 | ) | (175 | ) | ||||
Share-based payment transactions
|
- | (1 | ) | (1 | ) | |||||
Income tax expenses
|
126 | 116 | 478 | |||||||
Sundries
|
(1 | ) | - | 4 | ||||||
Change in inventory
|
- | 1 | 3 | |||||||
Change in trade and other receivables
|
(74 | ) | (6 | ) | 56 | |||||
Change in trade and other payables
|
20 | 57 | 85 | |||||||
Change in provisions
|
3 | (4 | ) | (62 | ) | |||||
Change in employee benefits
|
(8 | ) | 6 | 3 | ||||||
Net cash (used in) from operating activities due to transactions with investees
|
(18 | ) | (4 | ) | 5 | |||||
Net income tax paid
|
(81 | ) | (93 | ) | (359 | ) | ||||
Net cash flows from operating activities
|
548 | 616 | 2,259 | |||||||
Cash flows from investing activities
|
||||||||||
Investment in intangible assets
|
(20 | ) | (19 | ) | (82 | ) | ||||
Proceeds from the sale of property, plant and equipment
|
12 | 28 | 221 | |||||||
Acquisition of financial assets held for trading and others
|
(440 | ) | (210 | ) | (2,654 | ) | ||||
Proceeds from the sale of financial assets held for trading and others
|
120 | - | 1,617 | |||||||
Purchase of property, plant and equipment
|
(211 | ) | (191 | ) | (740 | ) | ||||
Sundries
|
(3 | ) | (1 | ) | (14 | ) | ||||
Net cash from investment activities due to transactions with investees
|
(44 | ) | 244 | 931 | ||||||
Net cash used for investment activities
|
(586 | ) | (149 | ) | (721 | ) | ||||
Cash flow from finance activities
|
||||||||||
Issue of debentures and receipt of loans
|
- | - | 1,446 | |||||||
Repayment of debentures and loans
|
- | - | (920 | ) | ||||||
Dividend paid
|
- | - | (2,069 | ) | ||||||
Interest paid
|
(18 | ) | (22 | ) | (421 | ) | ||||
Sundries
|
3 | 2 | 3 | |||||||
Loan received from an investee
|
- | - | 434 | |||||||
Net cash used for financing activities
|
(15 | ) | (20 | ) | (1,527 | ) | ||||
Increase (decrease) in cash and cash equivalents
|
(53 | ) | 447 | 11 | ||||||
Cash and cash equivalents at beginning of period
|
248 | 237 | 237 | |||||||
Cash and cash equivalents at the end of the period
|
195 | 684 | 248 |
1.
|
Manner of preparing financial information
|
|
1.1.
|
Definitions
|
|
1.2.
|
Principles used for preparing financial information
|
2.
|
Revenues
|
Three months ended
|
Year ended
|
|||||||||||
March 31
|
December 31
|
|||||||||||
2015
|
2014
|
2014
|
||||||||||
(Unaudited)
|
(Unaudited)
|
(Audited)
|
||||||||||
NIS million
|
NIS million
|
NIS million
|
||||||||||
Fixed-line telephony
|
403 | 426 | 1,668 | |||||||||
Internet - infrastructure
|
383 | 332 | 1,394 | |||||||||
Transmission and data communication
|
266 | 259 | 1,022 | |||||||||
Other services
|
61 | 60 | 233 | |||||||||
1,113 | 1,077 | 4,317 |
3.
|
Operating and general expenses
|
Three months ended
|
Year ended
|
|||||||||||
March 31
|
December 31
|
|||||||||||
2015
|
2014
|
2014
|
||||||||||
(Unaudited)
|
(Unaudited)
|
(Audited)
|
||||||||||
NIS million
|
NIS million
|
NIS million
|
||||||||||
Maintenance of buildings and sites
|
51 | 55 | 217 | |||||||||
Marketing and general
|
42 | 42 | 188 | |||||||||
Interconnectivity and payments to communications operators
|
38 | 42 | 161 | |||||||||
Services and maintenance by sub-contractors
|
16 | 16 | 61 | |||||||||
Vehicle maintenance
|
17 | 17 | 76 | |||||||||
Terminal equipment and materials
|
11 | 12 | 49 | |||||||||
Collection commissions
|
5 | 6 | 25 | |||||||||
180 | 190 | 777 |
4.
|
Other operating expenses (income), net
|
Three months ended
|
Year ended
|
|||||||||||
March 31
|
December 31
|
|||||||||||
2015
|
2014
|
2014
|
||||||||||
(Unaudited)
|
(Unaudited)
|
(Audited)
|
||||||||||
NIS million
|
NIS million
|
NIS million
|
||||||||||
Income from increased control in DBS Satellite Services (1998) Ltd.
|
(12 | ) | - | - | ||||||||
Profit from disposal of property plant and equipment (mainly real estate property)
|
(11 | ) | (17 | ) | (175 | ) | ||||||
Provision for contingent claims, net
|
6 | - | (24 | ) | ||||||||
Provision for voluntary redundancy severance payments
|
- | 9 | 176 | |||||||||
Other operating expenses (income), net
|
(17 | ) | (8 | ) | (23 | ) |
5.
|
Contingent Liabilities
|
|
*
|
The total includes a claim of a shareholder against the company and officers in the company of NIS 1.1 billion and NIS 2 billion (according to the damage calculation method that will be determined).
|
6.
|
Dividends from investees
|
|
6.1
|
On March 11, 2015 the board of directors of Pelephone Communications Ltd. resolved to distribute a cash dividend to the Company in the amount of NIS 159 million in May 2015.
|
|
6.2
|
On March 10, 2015, the board of directors of Bezeq International Ltd. resolved to distribute a cash dividend to the Company in the amount of NIS 82 million in May 2015.
|
7.
|
Events in the reporting period
|
|
7.1
|
For information regarding the increase in control in DBS, see Note 4.2 of the Consolidated Financial Statements.
|
|
7.2
|
On March 8, 2015, the Company provided Bezeq International a loan in the amount of NIS 50 million to be repaid in one lump sum on March 8, 2016. This loan bears annual interest of 3.05%.
|
Bezeq The Israel Telecommunication
Corporation Limited
|
The information contained in these financial statements constitutes a translation of the financial information published by the Company. The Hebrew version was submitted by the Company to the relevant authorities pursuant to Israeli law, and represents the binding version and the only one having legal effect. This translation was prepared for convenience purposes only.
|
Contents
|
Page
|
3
|
|
4
|
|
7
|
Somekh Chaikin
8 Hartum Street, Har Hotzvim
|
Telephone | 972 2 531 2000 |
PO Box 212, Jerusalem 91001 | Fax | 972 2 531 2044 |
Israel | Internet | www.kpmg.co.il |
Pro Forma Condensed Consolidated Interim Statements of Income
|
Three months ended March 31, 2015
|
Three months ended March 31, 2014
|
|||||||||||||||||||||||
Prior to the pro forma event
|
Adjustments for pro forma information
|
Pro forma information
|
Prior to the pro forma event
|
Adjustments for pro forma information
|
Pro forma information
|
|||||||||||||||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
|||||||||||||||||||
NIS million
|
NIS million
|
NIS million
|
NIS million
|
NIS million
|
NIS million
|
|||||||||||||||||||
Revenues
|
2,174 | 434 | 2,608 | 2,311 | 420 | 2,731 | ||||||||||||||||||
Costs of activity
|
||||||||||||||||||||||||
Depreciation and amortization
|
317 | 113 | 430 | 314 | 117 | 431 | ||||||||||||||||||
Salaries
|
439 | 69 | 508 | 448 | 62 | 510 | ||||||||||||||||||
General and operating expenses
|
799 | 230 | 1,029 | 869 | 215 | 1,084 | ||||||||||||||||||
Other operating income, net
|
(17 | ) | 12 | (5 | ) | (8 | ) | - | (8 | ) | ||||||||||||||
1,538 | 424 | 1,962 | 1,623 | 394 | 2,017 | |||||||||||||||||||
Operating profit
|
636 | 10 | 646 | 688 | 26 | 714 | ||||||||||||||||||
Financing expenses (income)
|
||||||||||||||||||||||||
Financing expenses
|
101 | 32 | 133 | 113 | 24 | 137 | ||||||||||||||||||
Financing income
|
(64 | ) | (21 | ) | (85 | ) | (71 | ) | 21 | (50 | ) | |||||||||||||
Financing expenses, net
|
37 | 11 | 48 | 42 | 45 | 87 | ||||||||||||||||||
Profit after financing expenses, net
|
599 | (1 | ) | 598 | 646 | (19 | ) | 627 | ||||||||||||||||
Share in the losses (profits) of equity-accounted investees
|
(16 | ) | 17 | 1 | 19 | (18 | ) | 1 | ||||||||||||||||
Profit before income tax
|
615 | (18 | ) | 597 | 627 | (1 | ) | 626 | ||||||||||||||||
Income tax
|
152 | - | 152 | 170 | - | 170 | ||||||||||||||||||
Profit for the period
|
463 | (18 | ) | 445 | 457 | (1 | ) | 456 | ||||||||||||||||
Earnings per share (NIS)
|
||||||||||||||||||||||||
Basic and diluted earnings per share
|
0.17 | (0.01 | ) | 0.16 | 0.17 | - | 0.17 |
Shaul Elovitch
|
Stella Handler
|
David (Dudu) Mizrahi
|
||
Chairman of the Board of Directors
|
CEO
|
Deputy CEO and CFO
|
Condensed Consolidated Interim Statements of Comprehensive Income
|
Three months ended March 31, 2015
|
Three months ended March 31, 2014
|
|||||||||||||||||||||||
Prior to the pro forma event
|
Adjustments for pro forma information
|
Pro forma information
|
Prior to the pro forma event
|
Adjustments for pro forma information
|
Pro forma information
|
|||||||||||||||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
|||||||||||||||||||
NIS million
|
NIS million
|
NIS million
|
NIS million
|
NIS million
|
NIS million
|
|||||||||||||||||||
Profit for the period
|
463 | (18 | ) | 445 | 457 | (1 | ) | 456 | ||||||||||||||||
Items of other comprehensive income (net of tax)
|
17 | - | 17 | 13 | - | 13 | ||||||||||||||||||
Total comprehensive income for the period
|
480 | (18 | ) | 462 | 470 | (1 | ) | 469 |
Pro Forma Condensed Consolidated Interim Statements of Income (Contd.)
|
Year ended December 31, 2014
|
||||||||||||
Prior to the pro forma event
|
Adjustments for pro forma information
|
Pro forma information
|
||||||||||
(Audited)
|
(Audited)
|
(Audited)
|
||||||||||
NIS million
|
NIS million
|
NIS million
|
||||||||||
Revenues
|
9,055 | 1,710 | 10,765 | |||||||||
Costs of activity
|
||||||||||||
Depreciation and amortization
|
1,281 | 484 | 1,765 | |||||||||
Salaries
|
1,768 | 267 | 2,035 | |||||||||
General and operating expenses
|
3,366 | 872 | 4,238 | |||||||||
Other operating income, net
|
(586 | ) | 1 | (585 | ) | |||||||
5,829 | 1,624 | 7,453 | ||||||||||
Operating profit
|
3,226 | 86 | 3,312 | |||||||||
Financing expenses (income)
|
||||||||||||
Financing expenses
|
486 | 98 | 584 | |||||||||
Financing income
|
(356 | ) | 188 | (168 | ) | |||||||
Financing expenses, net
|
130 | 286 | 416 | |||||||||
Profit after financing expenses, net
|
3,096 | (200 | ) | 2,896 | ||||||||
Share in losses of equity-accounted investees
|
170 | (165 | ) | 5 | ||||||||
Profit before income tax
|
2,926 | (35 | ) | 2,891 | ||||||||
Income tax
|
815 | 1 | 816 | |||||||||
Profit for the year
|
2,111 | (36 | ) | 2,075 | ||||||||
Earnings per share (NIS)
|
||||||||||||
Basic earnings per share
|
0.77 | (0.01 | ) | 0.76 | ||||||||
Diluted earnings per share
|
0.77 | (0.02 | ) | 0.75 |
Condensed Consolidated Interim Statements of Comprehensive Income
|
Year ended December 31, 2014
|
||||||||||||
Prior to the pro forma event
|
Adjustments for pro forma information
|
Pro forma information
|
||||||||||
(Audited)
|
(Audited)
|
(Audited)
|
||||||||||
NIS million
|
NIS million
|
NIS million
|
||||||||||
Profit for the year
|
2,111 | (36 | ) | 2,075 | ||||||||
Items of other comprehensive income (net of tax)
|
(36 | ) | - | (36 | ) | |||||||
Total comprehensive income for the year
|
2,075 | (36 | ) | 2,039 |
Notes to the Pro forma Consolidated Financial Statements
|
1.
|
General
|
|
1.1
|
These pro forma consolidated interim financial statements are prepared in accordance with Regulation 38B of the Israel Securities Regulations (Periodic and Immediate Reports), 1970 and refer to the gain of control in DBS. Up until March 23, 2015, the Company held 49.78% of DBS shares and accounted for this investment using the equity method. On this date, the general meeting of the Company's shareholders approved the acceptance of the merger terms and exercise of the option, and the Company's engagement in the Acquisition Transaction, as described in Note 4.2 to the Group's interim financial statements. As from March 23, 2015, the Company consolidates the financial statements of DBS in the Group's financial statements.
|
|
1.2
|
The pro forma consolidated interim financial statements are based on the condensed consolidated interim financial statements of the Company and the condensed interim financial statements of DBS as at March 31, 2015, which were prepared in accordance with IAS 34, Interim Financial Reporting.
|
2.
|
Assumptions and adjustments used to prepare the pro forma interim financial statements
|
|
2.1
|
The pro forma consolidated financial statements have been prepared to reflect the results of the Company's operations for the three months ended March 31, 2014 and March 31, 2015, and for the year ended December 31, 2014. The reports were prepared under the assumption that the business combination with DBS, which is described in Note 4.2 to the Group's condensed consolidated interim financial statements, was completed on January 1, 2013.
|
|
2.2
|
Prior to gaining control in DBS, as described above, the Company held 49.78% of its shares and accounted for this investment using the equity method. Accordingly, the consolidated statements of income included equity gains for this investment. For the purpose of the pro forma statement of income, the equity gains that were recognized up to March 31, 2015 were eliminated. In addition, a profit of NIS 12 million from acquisition of control was eliminated in the pro forma statement of income for the three months ended March 31, 2015.
|
|
2.3
|
Revenues and expenses arising from transactions between the Company and DBS were eliminated in the pro forma consolidated statements.
|
|
2.4
|
The pro forma statement of income included amortization of excess cost amounting to NIS 37 million and NIS 28 million for the three months ended March 31, 2015 and March 31, 2014, respectively, and NIS 149 million for the year ended December 31, 2014. The amortization was based on the estimated forecasted useful life of the excess cost as at the date of the business combination.
|
|
2.5
|
The Company assumes that there is no change in measurement of the fair value of DBS, allocation of excess cost, and the contingent consideration in the periods.
|
|
2.6
|
The Company assumes that the acquisition transaction, including the commitment to Eurocom, is valid throughout the reporting periods
|
The information contained in this report constitutes a translation of the information published by the Company. The Hebrew version was submitted by the Company to the relevant authorities pursuant to Israeli law, and represents the binding version and the only one having legal effect. This translation was prepared for convenience purposes only.
|
1.
|
Domestic Fixed-Line Communications
|
2.
|
Cellular Communications
|
3.
|
International Communications, Internet and NEP Services
|
4.
|
Multi-Channel Television
|
1-3.2015 | 1-3.2014 |
Increase (decrease)
|
||||||||||||||
NIS millions
|
NIS millions
|
NIS millions
|
%
|
|||||||||||||
Profit
|
463 | 457 | 6 | 1.3 | ||||||||||||
EBITDA
(operating profit before depreciation and amortization)
|
953 | 1,002 | (49 | ) | (4.9 | ) |
1.
|
The Board of Directors’ explanations on the state of the Company’s affairs, the results of its operations, equity, cash flows, and additional matters
|
1.1
|
Financial position
|
March 31, 2015
|
March 31, 2014
|
Increase (decrease)
|
|||||||||||||||
NIS millions
|
NIS millions
|
NIS millions
|
%
|
Explanation
|
|||||||||||||
Cash and current investments
|
3,709 | 2,394 | 1,315 | 54.9 |
This increase was mainly due to current investments in the Domestic Fixed-Line Communications segment, and by the first-time consolidation of NIS 299 million in cash from the Multi-Channel Television segment.
|
||||||||||||
Current and non-current trade and other receivables
|
3,102 | 3,410 | (308 | ) | (9.0 | ) |
This decrease was mainly attributable to a decrease in trade receivables in the Cellular Communications segment, as a result of a decrease in revenues from handsets sold in 36 installments, and a decrease in revenues from services. The decrease was partially offset by the first-time consolidation of NIS 184 million in trade and other receivables from the Multi-Channel Television segment.
|
||||||||||
Other current assets
|
102 | 150 | (48 | ) | (32.0 | ) |
The decrease was mainly attributable to a reduction in held-for-sale assets in the Domestic Fixed-Line Communications segment.
|
||||||||||
Broadcasting rights
|
460 | - | 460 | - |
The balance was due to the first-time consolidation of broadcasting rights from the Multi-Channel Television segment.
|
||||||||||||
Property, plant and equipment
|
6,956 | 6,008 | 948 | 15.8 |
The increase was mainly due to the first-time consolidation of NIS 801 million in property, plant and equipment from the Multi-Channel Television segment.
|
||||||||||||
Goodwill and intangible assets
|
4,503 | 2,039 | 2,464 | 120.8 |
The increase was due to the first-time consolidation of DBS, mainly comprising goodwill, customer relations and brand value - for a total amount of NIS 2,722 million (see Note 4.2.4 to the financial statements). This increase was partially offset, mainly by the de-consolidation of Corel-Tell Ltd. in the second quarter of 2014.
|
||||||||||||
Investments in investees as per the equity method
|
29 | 1,032 | (1,003 | ) | (97.2 | ) |
The decrease was due to the reversal of DBS's investment, presented as per the equity method.
|
||||||||||
Other non-current assets
|
359 | 370 | (11 | ) | (3.0 | ) | |||||||||||
Total assets
|
19,220 | 15,403 | 3,817 | 24.8 | |||||||||||||
Debt to financial institutions and debenture holders
|
11,912 | 9,717 | 2,195 | 22.6 |
The increase was mainly due to the first-time consolidation of NIS 1,947 million in debt balances from the Multi-Channel Television segment (including recognition of surplus acquisition costs). The increase was also due to debentures issued and loans received in 2014 in the Domestic Fixed-Line Communications segment, partially offset by the repayment of debentures and loans in the Domestic Fixed-Line Communications and Cellular Communications segments.
|
1.1
|
Financial Position (contd.)
|
March 31, 2015
|
March 31, 2014
|
Increase (decrease)
|
||||||||||||||||
NIS millions
|
NIS millions
|
NIS millions
|
%
|
Explanation
|
||||||||||||||
Liability towards Eurocom D.B.S. Ltd.
|
781 | - | 781 | - |
A commitment to pay the cash consideration and the contingent consideration for acquiring all of Eurocom D.B.S.'s holdings (see Notes 4.2.1 and 4.2.2).
|
|||||||||||||
Trade and other payables
|
2,027 | 1,442 | 585 | 40.6 |
The increase was mainly due to the first-time consolidation of NIS 632 million in trade and other payables from the Multi-Channel Television segment.
|
|||||||||||||
Dividends payable
|
- | 802 | (802 | ) | (100 | ) |
Difference in timing of a semi-annual dividend's approval by the general meeting.
|
|||||||||||
Other liabilities
|
1,576 | 1,350 | 226 | 16.7 |
The increase was mainly attributable to the Domestic Fixed-Line Communications Segment, due to derivatives and current tax liabilities.
|
|||||||||||||
Total liabilities
|
16,296 | 13,311 | 2,985 | 22.4 | ||||||||||||||
Total equity
|
2,924 | 2,092 | 832 | 39.8 |
This increase in equity was mainly due to a change in the timing of a semi-annual dividend's approval by the general meeting.
Equity comprises 15.2% of the balance sheet total, as compared to 13.6% of the balance sheet total on December 31, 2014.
|
1.2
|
Results of operations
|
|
1.2.1
|
Highlights
|
1-3.2015 | 1-3.2014 |
Increase (decrease)
|
|||||||||||||||
NIS millions
|
NIS millions
|
NIS millions
|
%
|
Explanation
|
|||||||||||||
Revenues
|
2,174 | 2,311 | (137 | ) | (5.9 | ) |
The decrease was due to lower revenues in the Cellular Communications segment, partially offset by an increase in revenues in the International Communications, Internet and NEP Services segment and the Domestic Fixed-Line Communications segment.
|
||||||||||
Depreciation and amortization expenses
|
317 | 314 | 3 | 1.0 | |||||||||||||
Salary expenses
|
439 | 448 | (9 | ) | (2.0 | ) |
The decrease was mainly attributable to downsizing in the Cellular Communications segment.
|
||||||||||
General and operating expenses
|
799 | 869 | (70 | ) | (8.1 | ) |
The decrease was mainly attributable to lower expenses in the Cellular Communications segment, partially offset by increased expenses in the International Communications, Internet and NEP Services segment.
|
||||||||||
Other operating income, net
|
17 | 8 | 9 | 112.5 | |||||||||||||
Operating profit
|
636 | 688 | (52 | ) | (7.6 | ) | |||||||||||
Finance expenses, net
|
37 | 42 | (5 | ) | (11.9 | ) | |||||||||||
Share in losses (earnings) of investees
|
(16 | ) | 19 | (35 | ) | - |
The difference was due to improved results in the Multichannel Television segment.
|
||||||||||
Income tax
|
152 | 170 | (18 | ) | (10.6 | ) |
The decrease was due to lower profits before income tax in the Cellular Communications segment.
|
||||||||||
Profit for the period
|
463 | 457 | 6 | 1.3 |
|
1.2.2
|
Operating segments
|
|
A
|
Revenue and operating profit data, presented by the Group’s operating segments:
|
1-3.2015
|
1-3.2014
|
|||||||||||||||
NIS millions
|
% of total revenues
|
NIS millions
|
% of total revenues
|
|||||||||||||
Revenues by operating segment
|
||||||||||||||||
Domestic Fixed-Line Communications
|
1,113 | 51.2 | 1,077 | 46.6 | ||||||||||||
Cellular Communications
|
727 | 33.4 | 917 | 39.7 | ||||||||||||
International Communications, Internet and NEP Services
|
393 | 18.1 | 355 | 15.4 | ||||||||||||
Multi-Channel Television
|
440 | 20.2 | 424 | 18.3 | ||||||||||||
Other and offsets*
|
(499 | ) | (22.9 | ) | (462 | ) | (20.0 | ) | ||||||||
Total
|
2,174 | 100 | 2,311 | 100 |
1-3.2015
|
1-3.2014
|
|||||||||||||||
NIS millions
|
% of segment revenues
|
NIS millions
|
% of segment revenues
|
|||||||||||||
Operating profit by segment
|
||||||||||||||||
Domestic Fixed-Line Communications
|
547 | 49.1 | 504 | 46.8 | ||||||||||||
Cellular Communications
|
32 | 4.4 | 126 | 13.7 | ||||||||||||
International Communications, Internet and NEP Services
|
61 | 15.5 | 58 | 16.3 | ||||||||||||
Multi-Channel Television
|
59 | 13.4 | 73 | 17.2 | ||||||||||||
Other and offsets*
|
(63 | ) | - | (73 | ) | - | ||||||||||
Consolidated operating profit/ % of Group revenues
|
636 | 29.3 | 688 | 29.8 |
|
(*)
|
Offsets are mainly attributable to the Multi-Channel Television segment, included in the reporting period as an associate company.
|
|
1.2.2.
|
Operating segments
|
|
B
|
Domestic Fixed-Line Communications Segment
|
1-3.2015 | 1-3.2014 |
Increase (decrease)
|
|||||||||||||||
NIS millions
|
NIS millions
|
NIS millions
|
%
|
Explanation
|
|||||||||||||
Fixed-line telephony
|
403 | 426 | (23 | ) | (5.4 | ) |
The decrease was mainly due to a reduction in ARPU.
|
||||||||||
Internet - infrastructure
|
383 | 332 | 51 | 15.4 |
The increase was mostly attributable to growth in the number of internet subscribers and higher average revenues per user.
|
||||||||||||
Transmission, data communications and others
|
327 | 319 | 8 | 2.5 | |||||||||||||
Total revenues
|
1,113 | 1,077 | 36 | 3.3 | |||||||||||||
Depreciation and amortization
|
176 | 168 | 8 | 4.8 | |||||||||||||
Labor costs
|
227 | 223 | 4 | 1.8 | |||||||||||||
General and operating expenses
|
180 | 190 | (10 | ) | (5.3 | ) |
The decrease was mainly due to a reduction in building maintenance costs and call completion fees to telecom operators.
|
||||||||||
Other operating income, net
|
17 | 8 | 9 | 112.5 |
This increase was due to NIS 12 million in gains from assuming control of DBS.
|
||||||||||||
Operating profit
|
547 | 504 | 43 | 8.5 | |||||||||||||
Finance expenses, net
|
54 | 56 | (2 | ) | (3.6 | ) | |||||||||||
Income tax
|
126 | 116 | 10 | 8.6 | |||||||||||||
Segment profit
|
367 | 332 | 35 | 10.5 |
|
1.2.2
|
Operating segments
|
|
C
|
Cellular Communications segment
|
1-3.2015 | 1-3.2014 |
Increase (decrease)
|
|||||||||||||||
NIS millions
|
NIS millions
|
NIS millions
|
%
|
Explanation
|
|||||||||||||
Services
|
499 | 637 | (138 | ) | (21.7 | ) |
The decrease was due to a NIS 52 million reduction in hosting services revenues, following termination of the contract with HOT Mobile in December 2014. The decrease was further due to a reduction in the number of subscribers, lower rates due to increased market competition, and migration of existing customers to cheaper bundles at current market prices, both of which lowered ARPU.
|
||||||||||
Terminal equipment sales
|
228 | 280 | (52 | ) | (18.6 | ) |
The decrease was mainly due to lower sales volumes.
|
||||||||||
Total revenues
|
727 | 917 | (190 | ) | (20.7 | ) | |||||||||||
Depreciation and amortization
|
104 | 106 | (2 | ) | (1.9 | ) | |||||||||||
Labor costs
|
96 | 109 | (13 | ) | (11.9 | ) |
The decrease was mainly attributable to downsizing due to streamlining efforts.
|
||||||||||
General and operating expenses
|
495 | 576 | (81 | ) | (14.1 | ) |
The decrease was mainly due to lower terminal equipment sales costs, following a decrease in the number of units sold, which was partially offset by an increase in costs following a change in the sales mix. There was also a decrease in advertising expenses.
|
||||||||||
Operating profit
|
32 | 126 | (94 | ) | (74.6 | ) | |||||||||||
Finance income, net
|
14 | 18 | (4 | ) | (22.2 | ) |
The decrease in income was mainly due to a decrease in credit income from installment-based terminal equipment sales, and an increase in currency difference expenses following an increase in the USD exchange rate. These were partially offset by a decrease in interest expenses, due to a reduction in the average debt balance.
|
||||||||||
Income tax
|
10 | 36 | (26 | ) | (72.2 | ) |
The decrease was attributable to the reduction in income before taxes.
|
||||||||||
Segment profit
|
36 | 108 | (72 | ) | (66.7 | ) |
|
1.2.2
|
Operating segments
|
|
D
|
International Communications, Internet and NEP Services
|
1-3.2015 | 1-3.2014 |
Increase (decrease)
|
|||||||||||||||
NIS millions
|
NIS millions
|
NIS millions
|
%
|
Explanation
|
|||||||||||||
Revenues
|
393 | 355 | 38 | 10.7 |
The increase was attributable to greater revenues from enterprise communication solutions (ICT), higher internet revenues due to growth in the number of subscribers, higher revenues from call transfers between global communication carriers, and an increase in revenues from data communication services. The increase was partially offset by a reduction in revenues from outgoing calls, mainly due to ongoing competition with cellular operators.
|
||||||||||||
Depreciation and amortization
|
32 | 32 | - | - | |||||||||||||
Labor costs
|
77 | 75 | 2 | 2.7 |
This increase was mainly attributable to an increase in the number of employees providing outsourced services in ICT operations.
|
||||||||||||
General and operating expenses
|
223 | 190 | 33 | 17.4 |
The increase was due to an increase in ICT equipment costs, internet services, call transfers between global communication carriers, and data communication services, corresponding with the above revenues.
|
||||||||||||
Operating profit
|
61 | 58 | 3 | 5.2 | |||||||||||||
Finance expenses, net
|
1 | 2 | (1 | ) | (50.0 | ) | |||||||||||
Share in the earnings of associates
|
- | 1 | (1 | ) | (100.0 | ) | |||||||||||
Tax expenses
|
16 | 15 | 1 | 6.7 | |||||||||||||
Segment profit
|
44 | 42 | 2 | 4.8 |
|
1.2.2
|
Operating segments
|
|
E
|
Multi-Channel Television
|
1-3.2015 | 1-3.2014 |
Increase (decrease)
|
|||||||||||||||
NIS millions
|
NIS millions
|
NIS millions
|
%
|
Explanation
|
|||||||||||||
Revenues
|
440 | 424 | 16 | 3.8 |
This increase was mainly attributable to an increase in the average number of subscribers.
|
||||||||||||
Depreciation and amortization
|
76 | 70 | 6 | 8.6 | |||||||||||||
Labor costs
|
69 | 62 | 7 | 11.3 | |||||||||||||
General and operating expenses
|
236 | 219 | 17 | 7.8 |
This increase was mainly due to an increase in utilized broadcasting rights, and content costs.
|
||||||||||||
Operating profit
|
59 | 73 | (14 | ) | (19.2 | ) | |||||||||||
Finance expenses (income), net
|
(1 | ) | 18 | (19 | ) | (105.6 | ) |
This decrease was mainly due to linkage differences on debentures due to a greater drop in the CPI in the present Quarter, as compared to the same quarter last year.
|
|||||||||
Finance expenses for shareholder loans, net
|
63 | 89 | (26 | ) | (29.2 | ) |
The decrease was mainly due to linkage differences.
|
||||||||||
Segment loss
|
(3 | ) | (34 | ) | 31 | (91.2 | ) |
1.3
|
Cash flow
|
1-3.2015 | 1-3.2014 |
Change
|
|||||||||||||||
NIS millions
|
NIS millions
|
NIS millions
|
%
|
Explanation
|
|||||||||||||
Net cash from operating activities
|
961 | 1,043 | (82 | ) | (7.9 | ) |
The decrease in net cash from operating activities was mainly due to the Domestic Fixed-Line Communications segment, as a result of changes in the segment's working capital structure.
|
||||||||||
Net cash used in investing activities
|
(378 | ) | (497 | ) | 119 | (23.9 | ) |
The decrease in net cash used in investing activities was due to NIS 299 million in cash balances recognized after assuming control of DBS. This decrease was partially offset, mainly by a net increase in the purchase of held-for-trade financial assets, and acquisition of property, plant and equipment in the Domestic Fixed-Line Communications segment.
|
|||||||||
Net cash used in financing activities
|
(75 | ) | (107 | ) | 32 | (29.9 | ) |
The decrease in net cash used in financing activities was mainly due to a decrease in debenture repayments in the Cellular Communications segment.
|
|||||||||
Increase in cash
|
508 | 439 | 69 | 15.7 |
2.
|
Market Risk - Exposure and Management
|
|
2.1
|
Fair value sensitivity analysis data as of March 31, 2015 do not differ materially from sensitivity analysis data as of December 31, 2014, except for the effect of DBS's consolidation, which increased the Group's exposure to CPI changes by NIS 2 billion; exposure to changes in the real NIS-based interest rate - by NIS 2 billion; exposure to changes in the USD exchange rate - by NIS 1 billion; and exposure to changes in the USD-based interest rate - by NIS 0.8 billion.
|
|
2.2
|
The linkage bases report as of March 31, 2015 does not differ materially from the report as of December 31, 2014, except for a NIS 1.9 billion increase in CPI-linked liabilities, mainly due to DBS's consolidation.
|
3.
|
Aspects of Corporate Governance
|
3.1
|
Committee
|
3.2
|
Financial statements approval process
|
|
A.
|
The Financial Statements Review Committee discussed and finalized its recommendations to the Company's Board of Directors in its meetings of May 10, 2015, and May 17, 2015.
The Committee’s meeting on May 10, 2015, was attended by all Committee members and by the Deputy CEO and CFO, Mr. Dudu Mizrahi; Company Comptroller, Mr. Danny Oz; the Internal Auditor, Mr. Lior Segal; the Legal Counsel, Mr. Amir Nachlieli; Mr. Rami Nomkin - director; the external auditors; and other Company officers. In addition to the above persons, the Committee's meeting of May 17, 2015 was also attended by Company Secretary, Mrs. Linor Yochelman.
|
|
B.
|
The Committee reviewed, inter alia, the assessments and estimates made in connection with the financial statements; internal controls over financial reporting; full and proper disclosure in the financial statements; and the accounting policies adopted on material matters.
|
|
C.
|
The Committee submitted its recommendations to the Company’s Board of Directors in writing on May 17, 2015.
The Board of Directors discussed the Financial Statements Review Committee's recommendations and the financial statements on May 20, 2015.
|
|
D.
|
The Company’s Board of Directors believes that the Financial Statements Review Committee’s recommendations were submitted a reasonable time (three days) prior to the Board meeting, taking into account the scope and complexity of these recommendations.
|
|
E.
|
The Company’s Board of Directors adopted the Financial Statements Review Committee’s recommendations and resolved to approve the Company’s financial statements for the first quarter of 2015.
|
4.
|
Disclosure Concerning the Company’s Financial Reporting
|
4.1
|
Disclosure of material valuations
|
|
4.1.1
|
Valuation of Bezeq's investment in DBS:
|
Subject of valuation
|
Value of Bezeq's investment in D.B.S. Satellite Services (1998) Ltd., in shares, share options, and various shareholder loans. The valuation was made as part of a Company transaction leading to Bezeq assuming control of DBS's shares.
|
Date of valuation
|
March 23, 2015; the valuation was signed May 19, 2015.
|
Value prior to the valuation
|
The carrying amount of the Company's investment in DBS - NIS 1,064 million.
|
Value set in the valuation
|
NIS 1,076 million - value of Bezeq's investment in DBS.
|
Assessor’s identity and profile
|
Fahn Kanne Consulting Ltd. The valuation was made by a team headed by Mr. Shlomi Bartov, CPA, partner and CEO of Fahn Kanne Consulting. Mr. Bartov has extensive experience in consulting and supporting some of the largest companies in Israel.
Fahn Kanne Consulting is a subsidiary of Fahn Kanne & Co., a part of the Grant Thornton International Ltd. (GTIL) network, the special advisory services branch of the global Grant Thornton network specializing in spearheading international transactions, valuation and transaction consulting, global IPOs, executive consultancy and project financing.
The assessor has no dependence on the Company.
|
Valuation model
|
The valuation was conducted using the income approach, using the discounted cash flows (DCF) method. Value was assigned to share capital and shareholder debt based on the repayment order of the new shareholder loans and the extent of the shareholder's investments.
|
Assumptions used in the valuation
|
Discount rate - 8.5% (post-tax).
Permanent growth rate - 1%.
Scrap value of total value set in valuation - 80%.
|
|
4.1.2
|
Purchase Price Allocation (PPA) Valuation:
|
Subject of valuation
|
PPA upon assuming control of D.B.S. Satellite Services (1998) Ltd., by exercising the option to purchase 8.6% of the company's shares.
|
Date of valuation
|
March 23, 2015; the valuation was signed May 19, 2015.
|
Value prior to the valuation
|
N/A
|
Value set in the valuation
|
Brand value (before assigning deferred taxes) - NIS 347 million. Customer relations value (before assigning deferred taxes) - NIS 790 million. Goodwill (100%) (residual value) - NIS 841 million.
|
Assessor’s identity and profile
|
See above table - Section 4.1.1.
|
Valuation model
|
Fair value of customer relations was appraised using the income approach, using the multi-period excess earnings method.
Fair value for the brand was appraised using the relief from royalties approach.
|
Assumptions used in the valuation
|
Customer relations - Discount rate - 8.5% (post-tax).
Brand - Discount rate - 9.5% (post-tax).
|
4.2
|
Due to the material nature of legal actions brought against the Group, which cannot yet be assessed or for which the Group cannot yet estimate its exposure, the auditors drew attention to these actions in their opinion concerning the financial statements.
|
4.3
|
Material events subsequent to the financial statements’ date
For information on material events subsequent to the financial statements’ date, see Note 13 to the financial statements.
|
5.
|
Details of debt certificate series
Debentures (Series 5-8) are rated Aa2 Stable by Midroog Ltd. (“Midroog”) and ilAA/Stable by Standard & Poor’s Maalot Ltd. (“Maalot”).
For current and historical ratings data for the debentures, see the Company's immediate report (amended) of April 21, 2015 (ref. no. 2015-01-004083) and its immediate report of August 13, 2014 (ref. no. 2015-01-133185) (Maalot), and its immediate reports of December 28, 2014 (ref. no. 2014-01-232224) and March 5, 2015 (ref. no. 2015-01-045085) (Midroog). The rating reports are included in this Board of Directors’ Report by way of reference.
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6.
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Miscellaneous
For information concerning the liabilities balances of the reporting corporation and those companies consolidated in its financial statements as of March 31, 2015, see the Company's reporting form on the MAGNA system, dated May 21, 2015.
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Shaul Elovitch
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Stella Handler
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Chairman of the Board
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CEO
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·
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Update to Chapter A (Description of Company Operations) of the Periodic Report for 2014
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·
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Directors' Report on the State of the Company's Affairs for the period ended March 31, 2015
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·
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Interim Financial Statements as at March 31, 2015
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The information contained in this report constitutes a translation of the information published by the Company. The Hebrew version was submitted by the Company to the relevant authorities pursuant to Israeli law, and represents the binding version and the only one having legal effect. This translation was prepared for convenience purposes only.
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1.
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General development of the Group's business
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A.
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Bezeq Fixed Line (the Company's operations as a domestic carrier)
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Q1 2015 | Q4 2014 | Q3 2014 | Q2 2014 | Q1 2014 | ||||||||||||||||
Revenues (NIS million)
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1,113 | 1,086 | 1,081 | 1,073 | 1,077 | |||||||||||||||
Operating profit (NIS million)
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547 | 507 | 498 | 471 | 504 | |||||||||||||||
Depreciation and amortization (NIS million)
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176 | 170 | 178 | 172 | 168 | |||||||||||||||
EBITDA (Operating proft before depreciation and amortization) (NIS million)(1)
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723 | 677 | 676 | 643 | 672 | |||||||||||||||
Net profit (NIS million)
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367 | 345 | 324 | 314 | 332 | |||||||||||||||
Cash flow from current operations (NIS million)
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548 | 499 | 599 | 545 | 616 | |||||||||||||||
Payments for investments in property, plant & equipment and intangible assets (NIS million)
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231 | 195 | 210 | 207 | 210 | |||||||||||||||
Proceeds from the sale of property, plant & equipment and intangible assets (NIS million)
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12 | 82 | 69 | 42 | 28 | |||||||||||||||
Free cash flow (NIS million) (2)
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329 | 386 | 458 | 380 | 434 | |||||||||||||||
Number of active subscriber lines at the end of the period (in thousands)(3)
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2,208 | 2,205 | 2,205 | 2,205 | 2,214 | |||||||||||||||
Average monthly revenue per line (NIS) (ARPL)(4)
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61 | 62 | 63 | 63 | 64 | |||||||||||||||
Number of outgoing minutes (in millions)
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1,459 | 1,482 | 1,588 | 1,522 | 1,608 | |||||||||||||||
Number of incoming minutes (in millions)
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1,428 | 1,440 | 1,498 | 1,424 | 1,467 | |||||||||||||||
Number of active subscriber lines at the end of the period (in thousands)(7)
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1,390 | 1,364 | 1,335 | 1,308 | 1,289 | |||||||||||||||
Number of active subscriber lines at the end of the period (in thousands) – wholesale (7)
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11 | - | - | - | - | |||||||||||||||
Average monthly revenue per Internet subscriber (NIS) - retail
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87 | 85 | 85 | 84 | 82 | |||||||||||||||
Average bundle speed per Internet subscriber (Mbps)(5)
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33.2 | 32.5 | 24.0 | 21.9 | 20.0 | |||||||||||||||
Churn rate (6)
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2.4 | % | 2.5 | % | 2.8 | % | 2.8 | % | 3.0 | % |
1
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The update is further to Regulation 39A of the Securities Regulations (Periodic and Immediate Reports), 1970, and includes material changes or innovations that have occurred in the corporation in any matter which must be described in the periodic report. The update relates to the Company's periodic report for the year 2014 and refers to the section numbers in Chapter A (Description of Company Operations) in the said periodic report.
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2
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Including revaluation profits in the amount of NIS 12 million due toincreased control of DBS. In accordance with a resolution passed by the Company’s Board of Directors’ on February 10, 2015, these revaluation profits will be excluded from the dividend distribution policy and will not be distributed as a dividend.
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(1)
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EBITDA (Operating profit before depreciation and amortization) is a financial index that is not based on generally accepted accounting principles. The Company presents this index as an additional index for assessing its business results since this index is generally accepted in the Company's area of operations which counteracts aspects arising from the modified capital structure, various taxation aspects and methods, and the depreciation period for fixed and intangible assets. This index is not a substitute for indices which are based on GAAP and it is not used as a sole index for estimating the results of the Company's activities or cash flows. Additionally, the index presented in this report is unlikely to be calculated in the same way as corresponding indices in other companies.
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(2)
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Free cash flow is a financial index which is not based on GAAP. Free cash flow is defined as cash from operating activities less cash for the purchase/sale of property, plant and equipment, and intangible assets, net. The Company presents free cash flow as an additional index for assessing its business results and cash flows because the Company believes that free cash flow is an important liquidity index that reflects cash resulting from ongoing operations after cash investments in infrastructure and other fixed and intangible assets.
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(3)
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Inactive subscribers are subscribers whose Bezeq lines have been physically disconnected (except for a subscriber during (roughly) the first three months of the collection process).
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(4)
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Excluding revenues from transmission services and data communication, internet services, services to communications operators and contractor and other works. Calculated according to average lines for the period.
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(5)
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For bundles with a range of speeds, the maximum speed per bundle is taken into account.
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(6)
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The number of telephony subscribers who left Bezeq Fixed Line during the period divided by the average number of registered telephony subscribers in the period.
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(7)
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Number of active internet lines including retail and wholesale lines. Retail - internet lines provided directly by the Company. Wholesale - internet lines provided through a wholesale service to other communications providers.
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B.
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Pelephone
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Q1 2015 | Q4 2014 | Q3 2014 | Q2 2014 | Q1 2014 | ||||||||||||||||
Revenue from services (NIS million)
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499 | 584 | 610 | 622 | 637 | |||||||||||||||
Revenues from sale of terminal equipment (NIS million)
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228 | 251 | 214 | 221 | 280 | |||||||||||||||
Total revenue (NIS million)
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727 | 835 | 824 | 843 | 917 | |||||||||||||||
Operating profit (NIS million)
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32 | 74 | 122 | 127 | 126 | |||||||||||||||
Depreciation and amortization (NIS million)
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104 | 111 | 108 | 105 | 106 | |||||||||||||||
EBITDA (Operating profit before depreciation and amortization) (NIS million)(1)
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136 | 184 | 231 | 232 | 232 | |||||||||||||||
Net profit (NIS million)
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36 | 59 | 100 | 106 | 108 | |||||||||||||||
Cash flow from current operations (NIS million)
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351 | 158 | 286 | 420 | 349 | |||||||||||||||
Payments for investments in property, plant and equipment and intangible assets (NIS million)
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72 | 80 | 83 | 85 | 73 | |||||||||||||||
Free cash flow (NIS million) (1)
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279 | 78 | 203 | 335 | 276 | |||||||||||||||
Number of subscribers at end of the period (thousands) (2)
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2,565 | 2,586 | 2,600 | 2,610 | 2,631 | |||||||||||||||
Average monthly revenue per subscriber (NIS) (ARPU) (3)
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65 | 75 | 78 | 79 | 80 | |||||||||||||||
Churn rate (4)
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6.5 | % | 5.6 | % | 7.3 | % | 6.5 | % | 7.5 | % |
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(1)
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Regarding the definition of EBITDA (Operating profit before depreciation and amortization) and free cash flows, see comments (1) and (2) in the Bezeq Fixed Line table.
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(2)
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Subscriber data include Pelephone subscribers (without subscribers from other operators hosted on the Pelephone network) and does not include subscribers connected to Pelephone services for six months or more but who are inactive. An inactive subscriber is one who in the past six months has not received at least one call, has not made one call / sent one SMS, performed no surfing activity on his phone or has not paid for Pelephone services. It is noted that a customer may have more than one subscriber number (“line”).
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(3)
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Average monthly revenue per subscriber. The index is calculated by dividing the average total monthly revenues from cellular services, from Pelephone subscribers and other telecom operators, including revenues from cellular operators who use Pelephone's network, repair services and extended warranty in the period, by the average number of active subscribers in the same period.
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(4)
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The churn rate is calculated at the ratio of subscribers who disconnected from the company's services and subscribers who became inactive during the period, to the average number of active subscribers during the period.
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C.
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Bezeq International
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Q1 2015 | Q4 2014 | Q3 2014 | Q2 2014 | Q1 2014 | ||||||||||||||||
Revenues (NIS million)
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393 | 398 | 385 | 366 | 355 | |||||||||||||||
Operating profit (NIS million)
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61 | 57 | 59 | 58 | 58 | |||||||||||||||
Depreciation and amortization (NIS million)
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32 | 33 | 32 | 33 | 32 | |||||||||||||||
Operating profit before depreciation and amortization (EBITDA) (NIS million)(1)
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93 | 90 | 92 | 90 | 90 | |||||||||||||||
Net profit (NIS million)
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44 | 39 | 42 | 41 | 42 | |||||||||||||||
Cash flow from current operations (NIS million)
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62 | 71 | 71 | 95 | 74 | |||||||||||||||
Payments for investments in property, plant and equipment and intangible assets (NIS million) (2)
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53 | 28 | 27 | 23 | 31 | |||||||||||||||
Free cash flow (NIS million) (1)
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9 | 43 | 44 | 72 | 43 | |||||||||||||||
Churn rate (3)
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4.1 | % | 4.7 | % | 4.5 | % | 3.7 | % | 4.0 | % |
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(1)
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Regarding the definition of EBITDA (Operating profit before depreciation and amortization) and cash flows, see comments (1) and (2) in the Bezeq Fixed Line table.
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(2)
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The item also includes long term investments in long-term assets.
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(3)
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The number of Internet subscribers who left Bezeq International during the period, divided by the average number of registered Internet subscribers in the period.
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D.
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DBS
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Q1 2015 | Q4 2014 | Q3 2014 | Q2 2014 | Q1 2014 | ||||||||||||||||
Revenues (NIS million)
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440 | 440 | 428 | 432 | 424 | |||||||||||||||
Operating profit (NIS million)
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59 | 57 | 67 | 76 | 73 | |||||||||||||||
Depreciation and amortization (NIS million)
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76 | 78 | 74 | 75 | 70 | |||||||||||||||
Operating profit before depreciation and amortization (EBITDA) (NIS million)(1)
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135 | 135 | 141 | 151 | 143 | |||||||||||||||
Net profit (loss) (NIS million)
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(3 | ) | (87 | ) | (115 | ) | (86 | ) | (34 | ) | ||||||||||
Cash flow from current operations (NIS million)
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149 | 122 | 106 | 101 | 113 | |||||||||||||||
Payments for investments in property, plant and equipment and intangible assets (NIS million)
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65 | 94 | 68 | 64 | 78 | |||||||||||||||
Free cash flow (NIS million) (1)
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84 | 27 | 38 | 38 | 35 | |||||||||||||||
Number of subscribers (at the end of the period, in thousands) (2)
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634 | 632 | 613 | 623 | 607 | |||||||||||||||
Average monthly revenues per subscriber (ARPU) (NIS)(3)
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232 | 234 | 234 | 233 | 234 | |||||||||||||||
Churn rate (4)
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3.3 | % | 2.9 | % | 3.1 | % | 3.2 | % | 3.6 | % |
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(1)
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Regarding the definition of EBITDA (Operating profit before depreciation and amortization) and cash flows, see comments (1) and (2) in the Bezeq Fixed Line table.
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(2)
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Subscriber – one household or one small business customer. In the event of a business customer with many reception points or a large number of decoders (such as a hotel, kibbutz or gym), the number of subscribers is calculated by dividing the total payment received from the business customer by the average revenue from a small business customer.
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(3)
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Monthly ARPU is calculated by dividing total DBS revenues (from content and equipment, premium channels, advanced products, and other services) by average number of customers.
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(4)
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Number of DBS subscribers who left DBS during the period, divided by the average number of DBS registered subscribers in the period.
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1.
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The Company conducted customer retention calls prior to completing the transition (to wholesale);
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2.
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The Company did not enable implementation of a verbal transition process during the interim period until the establishment of an automated interface;
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3.
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The Company did not comply with the timeframe prescribed for transferring an infrastructure subscriber from the Company to a service provider, and for transferring a subscriber between suppliers on the Company's infrastructure
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4.
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The Company operated the service provider call center in a limited scope compared with the other centers, thereby discriminating between the different types of subscribers.
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2.
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Bezeq (“the Company”) - Domestic fixed-line communications
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3.
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Mobile radio-telephone (cellular telephony) - Pelephone Communications Ltd. ("Pelephone")
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4.
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Bezeq International – international communications, Internet and NEP services - (“Bezeq International”)
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5.
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Multi-channel television - DBS Satellite Services (1998) Ltd. (“DBS”)
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May 20, 2015
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Date
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Bezeq - The Israel Telecommunication Corp. Ltd.
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