CELLCOM
ISRAEL LTD. ANNOUNCES FILING OF FINAL PROSPECTUS FOR
OFFERING
OF DEBENTURES IN ISRAEL
Netanya,
Israel – September 23, 2007 – Cellcom Israel Ltd. (the “Company”) announced that
the Company filed today a final prospectus ("Prospectus") for the
offering ("Offering") of two series of debentures, Series
C and Series D
("Debentures") with the Israeli Securities Authority and
the Tel Aviv Stock
Exchange ("TASE"). The Prospectus was filed after the Company
received today a
permit from the Israeli Securities Authority for the publication
of the
Prospectus. The Company also received the approval of the TASE for
the Prospectus and that the terms of the Debentures as set
forth in the
Prospectus comply with the TASE's regulations. The listing
of the Debentures on
the TASE is subject to a listing approval by the TASE, expected
to be granted
upon the publication of the complete terms of the
offering.
The
Debentures offered are in an aggregate principal amount of up
to NIS 850 million
for both Series C and Series D.
Each
series of Debentures will bear interest at an annual rate to
be determined
pursuant to a tender, which shall not exceed 4.7% per year for
Series C and 5.7%
per year for Series D, linked to the Israeli Consumer Price Index.
The
principal of Series C debentures is repayable in nine semiannual
payments
commencing March 2009, and the interest is repayable semiannually
commencing
March 2008. The principal of Series D Debentures is repayable in five
annual payments commencing July 2013, and the interest is repayable
annually
commencing July 2008.
The
amount
of Debentures offered and the maximum interest rate for each
series set out
above, may be changed in accordance with the Israeli securities
regulations and/or as described the Prospectus during the Offering.
The
Company may cancel the Offering if requests to purchase the Debentures
do not
reach a minimal amount of NIS 600,000,000, all subject to the
Company’s right to
change the terms of the Offering, as aforementioned.
The
Debentures will be unsecured and will not restrict the Company's
ability to
issue additional debentures of any class or distribute dividends
in the
future. The Debentures contain standard terms and
conditions.
The
Company intends to use the proceeds of the Offering for general
corporate
purposes, which may include financing of the Company's operating
and investment
activity including the financing of handset subsidies and other
costs related to
acquisition and retention of customers, among other things, in
anticipation of
the upcoming implementation of number portability and repayment
of outstanding
debt under the Company’s credit facility.
In
connection with the Offering of the Debentures in Israel, the
Company has
updated certain of the risk factors contained in its annual report
on Form 20-F
for the year ended December 31, 2006 and added certain risk factors
relating to the Debentures. The Company has also included in
the Prospectus
material changes which occurred following the publication of
its annual report
on Form 20-F for the year ended December 31, 2006.
The
risk factors contained in the Prospectus (excluding risk facotrs
relating
specifically to the Debentures) are as follows:
Risk
Factors
We
believe that the occurrence of any one or some combination of
the following
factors could have a material adverse effect on our business,
financial
condition or results of operations.
Risks
Related to our Business
We
operate in a heavily regulated industry, which can harm
our results of
operations.
A
substantial part of our operations is subject to the Israeli
Communications Law,
1982, the Israeli Wireless Telegraph Ordinance (New Version),
1972, the
regulations promulgated thereunder and the license for the provision
of cellular
services that we received from the Ministry of Communications
in accordance with
the Communications Law. The interpretation and implementation of the
provisions of our general license, as well as our other licenses,
are not
certain and disagreements have arisen and may arise in the future
between the
Ministry of Communications and us. The Communications Law and
regulations thereunder grant the Ministry of Communications extensive
regulatory
and supervisory authority with regard to our activities, as well
as the
authority to impose substantial sanctions in the event of a breach
of our
licenses. In the event that we materially violate the terms of our
licenses, the Ministry of Communications has the authority to
revoke
them.
Our
general license is valid until February 2022. It may be extended for
additional six-year periods upon our request to the Ministry
of Communications
and confirmation from the Ministry of Communications that we
have complied with
the provisions of our license and the applicable law, have continuously
invested
in the improvement of our service and network and have demonstrated
the ability
to do so in the future. Our other licenses are also limited in
time. However, our licenses may not be extended when necessary, or,
if extended, the extensions may be granted on terms that are
not favorable to
us. In addition, the Ministry of Communications may modify our
licenses without our consent and in a manner that could limit
our freedom to
conduct our business.
Further,
our business and results of operations could be materially and
adversely
affected by new legislation and decisions by our regulators that:
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reduce
tariffs, including interconnect and roaming tariffs,
limit our ability to
raise tariffs or otherwise intervene in the pricing
policies for our
products and services;
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increase
the number of competitors in the cellular market, including
by providing
MVNO licenses and/or mobile WiMAX
licenses;
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regulate
the termination of predefined term agreements, including
requiring us to
disconnect subscribers once the initial term
expires;
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impose
new safety or health-related
requirements;
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impose
additional restrictions and/or requirements on the
construction and
operation of cell sites;
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impose
restrictions on the provision of content
services;
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limit
or otherwise intervene with the services or products
that we may sell;
or
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set
higher service standards.
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See
“Item
4.B
– Business Overview - Government Regulations ― Our Principal License” in
our annual report on Form 20-F for the year ended December 31,
2006.
If
we fail
to compensate for lost revenues resulting from past or future
legislative or
regulatory changes with alternative sources of income, our results
of operations
may be materially adversely affected.
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We
may face claims of being in violation of the law and
our license requiring
the implementation of number portability and the terms
of our license
governing the method of charging for SMS
messages.
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As
a
result of an amendment to the Communications Law in March 2005,
cellular and
landline telephone operators were required to implement number
portability by
September 1, 2006. Number portability would permit our subscribers to
change to another network operator without having to change their
telephone
numbers. Despite efforts to introduce the requisite technology and
coordinate the transition to number portability by September
1, 2006, currently
none of the cellular or landline operators has implemented number
portability. We, and two other cellular operators, Pelephone
Communications Ltd., or Pelephone, and Partner, have filed a
petition with the
Israeli High Court of Justice for the issuance of an order to
the Government of
Israel and the Ministry of Communications to show cause for their
failure to act
immediately in order to initiate an amendment to the Communications
Law
postponing the deadline for the implementation of number
portability. If an adequate relief is not granted, we may be exposed
to substantial sanctions and legal claims, including class actions
by
subscribers. See “Item 3.8 Material Changes – Number Portability” for
a notification provided to us by the MOC of its intention to
impose monetary
sanctions on us.
See
“Item
8 – Financial Information - Legal Proceedings—Purported class actions” of our
annual report on Form 20-F for the year ended December 31, 2006
for additional
details on a purported class action filed against us in that
respect.
See
"Item
4. Information on the Company – B. Business Overview – Government Regulations –
Number Portability; B. Business Overview - Competition” of our annual report on
Form 20-F for the year ended December 31, 2006 for additional
details.
In
2005,
our license was amended to regulate charging for SMS messages
sent outside our
network, which, under one interpretation of the amendment, may
lead to claims of
our not being in compliance with our license. To date, we have
fulfilled the license requirements, even under this potential
interpretation,
with respect to SMS messages sent to subscribers of one other
cellular
operator. However, due to technological difficulties which we and our
competitors face and have not yet been resolved, we may face
claims, if such
interpretation of the amendment prevails, of not having implemented
the
amendment with respect to SMS messages sent to subscribers of
two
other
operators. We
had notified the Ministry of Communications of our technological
inability to
fully implement the amendment, if it is so interpreted. The Ministry
of Communications had proposed an amendment to our license to
resolve this
problem, which we believe is unsatisfactory because it does not
change the
charging criteria but mainly proposes certain customer notification
requirements. Until such time as the cellular operators develop the
necessary interfaces or our license is amended, we may be exposed,
if such an
interpretation prevails, to substantial sanctions and legal claims.
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We
may not be able to obtain permits to construct and
operate cell
sites.
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We
depend
on our network of cell sites to maintain and enhance network
coverage for our
subscribers. In addition, where necessary, we provide certain
subscribers with bi-directional amplifiers, also known as “repeaters,” to remedy
weak signal reception in indoor locations. Some of these repeaters
are located outdoors on rooftops. We also deploy and operate
microwave sites as part of our transmission network. The construction
and operation of these various facilities are highly regulated
and require us to
obtain various consents and permits. See “Item 4.B – Business
Overview - Government Regulations—Permits for Cell Site Construction” of our
annual report on Form 20-F for the year ended December 31, 2006.
We
have
experienced difficulties in obtaining some of these consents
and permits,
particularly in obtaining building permits for cell sites from
local planning
and building authorities. As of June 30, 2007, we operated
approximately 7.4% of our cell sites without building permits
or applicable
exemptions. Although, in relation to approximately 5% of our cell
sites we are in the process of seeking to obtain building permits
or to modify
them to satisfy applicable exemptions, we may not be able to
obtain all the
necessary permits or make the necessary modifications. Approximately
26% of our cell sites operate without building permits in reliance
on an
exemption from the requirement to obtain a building permit, mainly
for radio
access devices. Our reliance upon the exemption for radio access
devices has been challenged by local planning and building authorities
in the
courts, mostly unsuccessfully. Recently a Magistrate Court has ruled,
contrary to the rulings of other Magistrate Courts, that with
respect to radio
access devices, our reliance on that exemption is invalid and
that we are
required to receive building permits for the construction and
use of the
facility and the accompanying equipment. The issue is awaiting
consideration in
the court of appeals (the District Court); other similar challenges,
as well as
other claims asserting that those cell sites and other facilities
do not meet
other legal requirements continue. See Item 3.8 “Material Changes – Site
Licensing” below for additional details in regards to the Magistrate Court's
decision and another petition filed against us in that respect.
In addition, we
operate other cell sites in a manner that is not fully compatible
with the
building permits issued for these cell sites which may, in some
cases,
constitute grounds for termination of their lease agreements
or claims for
breach of such agreements. Our rooftop microwave sites and repeaters
operate in reliance upon an exemption from the requirement to
obtain a building
permit. Substantially all of our outdoor microwave sites are
rooftops. It is unclear whether other types of repeaters require a
building permit. Our reliance on an exemption from the requirement to
obtain building permits for the microwave sites and repeaters
has not, to date,
been subject to judicial challenge. Operation of a cell site or other
facility without a building permit or not in accordance with
the permit or other
legal requirements may result in the issuance of a demolition
order for the cell
site or other facility or the bringing of criminal charges against
us and our
officers and directors. Certain of our cell sites have been subject
to demolition orders. In addition, criminal charges have been
brought against us
and our officers and directors in connection with cell sites
that were alleged
to have been constructed without the required permits. As of June 30,
2007, 34 cell sites are the subject of criminal proceedings;
demolition orders
have been granted with respect to seven cell sites while the
remaining 27 cell
sites are the subject of further litigation. Certain of our officers
and directors are also named in a number of these criminal proceedings
as
defendants. Should any of our officers or directors be found guilty
of an offence, although this has not occurred to date, they may
face monetary
penalties and a term of imprisonment. Our sites may be the subject of
further demolition orders and we or our officers and directors
may face further
criminal charges.
Pursuant
to the Israeli Non-Ionizing Radiation Law, 2006, which is effective,
for the
most part, as of January 1, 2007, the granting or renewal of
an operating permit
by the Israeli Ministry of Environmental Protection for a cell
site or other
facility is subject to the receipt of a building permit or the
facility being
exempt from the requirement to obtain a building permit. Should we
fail to obtain building permits for our cell sites or other facilities,
including in the event that our reliance upon an exemption from
the requirement
to obtain building permits for these cell sites and other facilities
is found
invalid, the Ministry of Environmental Protection will not grant
or renew our
operating permits for those cell sites and other facilities.
Recently, the
Ministry of Environmental Protection has withheld the grant and/or
renewal of
operating permits in a few instances, where the local planning
and building
committee’s engineer objected to our reliance upon the said exemption for
radio
access devices. Operating a cell site or a facility without an
operating permit
could subject us and our officers and directors to criminal,
administrative and
civil liability.
If
we are
unable to obtain or renew building or other consents and permits
for our
existing sites or other facilities, we will be required to demolish
or relocate
these cell sites and facilities. Our inability to relocate cell sites
or other facilities in a timely manner and/or construct and operate
new cell
sites or other facilities – if we are unable to obtain
the
necessary consents and permits and/or rely on the exemption from
the requirement
to obtain a building permit, could adversely affect our existing
network,
resulting in the loss of subscribers, prevent us from meeting
the network
coverage and quality requirements contained in our license and
adversely impact
our network build-out, all of which may have a material adverse
effect on our
results of operations and financial condition.
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We
may be required to indemnify certain local planning
and building
committees in respect of claims against
them.
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Under
the
Israeli Planning and Building Law, 1965, by approving a building
plan, local
planning and building committees may be held liable to compensate
for
depreciation of properties included in or neighboring the approved
plan.
In
January
2006, the law was amended to require an applicant, as a precondition
to
obtaining a cell site construction permit from a planning and
building
committee, to provide a letter to the committee indemnifying
it for possible
depreciation claims. As of June 30, 2007, we have provided over 100
indemnification letters to local planning and building
committees. Calls upon our indemnities may have a material adverse
effect on our financial condition and results of operations. Further,
if we are required to make substantial payments under the indemnity
letters, it
could trigger a default under our credit facility. We may also decide
to demolish or relocate existing cell sites to less favorable
alternatives and
to construct new cell sites in alternative, less suitable locations
or not at
all, due to the obligation to provide indemnification. As a result,
our existing service may be impaired or the expansion of our
network coverage
could be limited.
In
addition, local planning and building committees have sought
to join cellular
operators, including us, as defendants in depreciation claims
made against them
even though indemnification letters were not provided. We were joined
as defendants in a small number of cases. It is possible that the
joining of cellular operators to similar claims will continue
despite the
absence of an indemnification letter. This practice increases the
risk that we may be exposed to material liability as a result
of depreciation
claims.
In
February 2007, the Israeli Minister of Interior Affairs extended
the limitation
period within which depreciation claims may be brought under
the Planning and
Building Law from three years from approval of the building plan
to the later of
one year from receiving a building permit for a cell site and
six months from
the construction of a cell site. The Minister retains the general
authority to extend such period further. This extension of the
limitation period increases our potential exposure to depreciation
claims. In
addition, should the Planning and Building Law be construed or
amended to allow
a longer period of limitation for depreciation claims than the
current
limitation period set in that law, our potential exposure to
depreciation claims
would increase.
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Alleged
health risks relating to non-ionizing radiation generated
from cell sites
and cellular telecommunications devices may harm our
prospects.
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Handsets,
accessories and various types of cell sites are known to be sources
of
non-ionizing radiation emissions. While, to the best of our
knowledge, the handsets that we market comply with the applicable
legislation
that relate to acceptable “specific absorption rate,” or SAR, levels, we rely on
the SAR levels published by the manufacturers of these handsets
and do not
perform independent inspections of the SAR levels of these
handsets. As the manufacturers’ approvals refer to a prototype
handset, we have no information as to the actual level of SAR
of the handsets
throughout the lifecycle of the handsets, including in the case
of handset
repair. See “Item 4.B – Business Overview - Government
Regulations—Handsets” of our annual report on Form 20-F for the year ended
December 31, 2006. Concerns regarding cell sites have already caused
us difficulties in obtaining or renewing leases for cell sites. If
health concerns over non-ionizing radiation increase, any adverse
findings in
new studies of non-ionizing radiation are published or if non-ionizing
radiation
levels are found to be higher than the standards set for handsets
and cell sites, consumers may be discouraged from using cellular
handsets and
regulators may impose additional restrictions on the construction
and operation
of cell sites or handset usage. As a result, we may experience
increased difficulty in obtaining leases for new cell site locations
or renewing
leases for existing locations (although, in total we have experienced
renewal
problems with approximately 5% of our cell site leases each year);
we may be
exposed to property depreciation claims; we may lose revenues
due to decreasing
usage of our services; we may be subject to increased regulatory
costs; and we
may be subject to health-related claims for substantial sums. We have
not obtained insurance for these potential claims. An adverse outcome
to, or settlement of, any health - related litigation against
us or any other
provider of cellular services could have a material adverse effect
on our
results of operations, financial condition or prospects.
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We
face intense competition in all aspects of our
business.
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The
Israeli cellular telephone market is highly competitive. We compete
for subscribers with three other cellular operators. While we enjoy
the largest market share, estimated to be 34.3% as of June 30,
2007, two of our
competitors, Partner and Pelephone, enjoy estimated market shares
of 31.6% and
29.1% respectively, with MIRS Motorola Communications Ltd., or
MIRS, estimated
to have a market share of 5%. The current competitive pressure in the
Israeli market results primarily from the highly penetrated state
of the market.
See “Item 4.B –
Business
Overview - The Telecommunications Industry in Israel” of our annual report on
Form 20-F for the year ended December 31, 2006. This means that
market growth is
limited and cellular operators compete intensely to retain their
own subscribers
and attract those of their competitors. Competition has recently
intensified due
to the anticipated implementation of number portability. Any
of the following
developments in our market is expected to increase competition
further and may
result in a loss of subscribers, increased subscriber acquisition
and retention
costs and ultimately reduced profitability for us:
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the
implementation of number portability, as it would eliminate
one of the
deterrents to switching between cellular
operators;
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Pelephone’s
offering of certain services jointly with its parent
company, Bezeq, the
incumbent landline operator; although Bezeq and Pelephone
may not offer
integrated or combined packages of cellular and landline telephone and
other telecommunication services currently, the Ministry
of Communications
has stated that once Bezeq’s share of the Israeli landline telephone
market falls below 85% (Bezeq does not publish its
market share), it would
be permitted to offer certain services jointly with
its subsidiaries
subject to regulatory limitations;
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the
entry into the Israeli cellular market by mobile virtual
network
operators, or MVNOs, could increase competition and
thus may have
materially adverse affect on our revenues; In August
2007, the government
has instructed the MOC to take all necessary measures
to allow MVNOs to
provide cellular services as of December 31, 2007;
See “Item 3.8 Material
Changes – MVNO operation” below for additional
details;
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a
proposed amendment to the Israeli Restrictive Trade
Practices Law, 1988 to
grant the Commissioner of Restrictive Trade Practices
broader authority to
take action against oligopolies where there is insufficient
competition,
including the authority to issue orders to remove or
to ease entry or
transfer barriers, should the Commissioner conclude
that this would
increase competition; if the Commissioner were to decide
that the Israeli
cellular market was oligopolistic and insufficiently
competitive, this
could lead to measures by the Commissioner which could
limit our freedom
to manage our business, increase the competitive pressures
that we face
and adversely affect our results of
operations.
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the
entry into the cellular market of mobile WiMAX technology
(by a new
entrant or by a cellular operator); The MOC is expected
to publish a WiMAX
frequencies tender in the near future;
and
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the
contemplated building of a UMTS network by Pelephone
(according to
Pelephone’s announcements), as it would strengthen Pelehone’s ability to
compete in the provision of inbound and outbound roaming
services.
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We
could be subject to legal claims due to the inability
of our information
systems to fully support our calling
plans.
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In
order
to attract and retain the maximum number of subscribers in our
highly
competitive market, we design specific calling plans to suit
the preferences of
various subscriber groups. We require sophisticated information
systems to record accurately subscriber usage pursuant to the
particular terms
of each subscriber’s plan as well as accurate database management and operation
of a very large number of calling plans. From time to time, we have
detected some discrepancies between certain calling plans and
the information
processed by our internal information systems, such as applying
an incorrect
rebate or applying an incorrect tariff to a service resulting
in a higher
charge. We have invested substantial resources to refine and improve
our information and control systems and ensure that our new calling
plans are
appropriately processed by our information systems; we have also
taken steps to
remedy the identified discrepancies and have established reserves
where the
discrepancies are quantifiable. Despite our substantial investments,
we may experience discrepancies in the future due to the multiplicity
of our
plans and the scope of the processing tasks. Number portability,
when
implemented, may lead to further discrepancies. Further, while
we invest
substantial efforts in monitoring our employees and third-party
distributors and
dealers that market our services, it is possible that some of
our employees,
distributors or dealers may offer terms and make (or fail to
make)
representations to existing and prospective subscribers that
do not fully
conform to applicable law, our license or the terms of our calling
plans. As a result of these discrepancies, we may be subject to
subscribers’ claims, including class action claims, and substantial sanctions
for breach of our license that may materially adversely affect
our results of
operations.
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We
are exposed to, and currently are engaged in, a variety
of legal
proceedings, including class action
lawsuits.
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We
provide
services to millions of subscribers on a daily basis. As a result of
the scope and magnitude of our operations we are subject to the
risk of a large
number of lawsuits, including class action suits by consumers
with respect to
billing and other practices. These actions may be costly to defend
and could result in significant judgments against us. The Israeli
Class Actions Law, 2006 and the 2005 amendment to the Israeli
Consumer
Protection Law, 1981 include provisions that expand the causes
of action for
which a class of litigants may bring suit, including with regard
to any damages
allegedly incurred prior to the effective date of these laws,
reducing the
minimal requirements for certification of a class action lawsuit
and reducing
the qualifications required to be a lead plaintiff in a class
action
lawsuit. These laws have increased and may continue to increase the
number of requests for certification of class actions against
us, our legal
exposure and our legal costs in defending against such suits,
which as a result
may materially and adversely affect our financial results. Currently,
we are
engaged in a number of purported class action suits as a defendant,
some of
which are for substantial amounts. For a summary of certain material
legal proceedings against us, see “Item 8 – Financial Information - Legal
Proceedings” of our annual report on Form 20-F for the year ended December
31,
2006 and our report on Form 6-K filed on August 14, 2007.
We
are
subject to the risk of intellectual property rights claims against
us, including
in relation to innovations we develop ourselves. These claims
may require us to
initiate or defend protracted and costly litigation, regardless
of the merits of
these claims. If any of these claims succeed, we may be forced to pay
damages or may be required to obtain licenses for the infringing
product or
service. If we cannot obtain all necessary licenses on commercially
reasonable terms, we may be forced to stop using or selling the
products and
services, which could adversely affect our ability to provide
certain services
and products.
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We
may be subject to increased regulation in respect of
handset
sales.
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The
Ministry of Communications is considering adopting changes to
the licenses of
the cellular operators that would prohibit cellular operators
from offering
calling plans that include handset subsidies to subscribers who
purchase their
handsets from the operators, unless the same terms are also offered
to
subscribers who purchase their handsets elsewhere. If such proposed
changes are adopted, this would impair our ability to offer handsets
to our
subscribers at subsidized prices or in conjunction with attractive
calling
plans. This may lead to difficulties in selling advanced handsets
that have the potential to generate high content-related revenues,
which in turn
may reduce our potential revenues or require higher subscriber
acquisition costs
and adversely affect our results of operations.
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We
rely on interconnecting telecommunications providers
and could be
adversely affected if these providers fail to provide
these services
without disruption and on a consistent
basis.
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Our
ability to provide commercially viable cellular telephone services
depends upon
our ability to interconnect with the telecommunications networks
of landline,
cellular telephone and international operators in Israel in order
to complete
calls between our subscribers and parties on a landline or other
cellular
telephone network, as well as third parties abroad. All landline,
cellular telephone and international operators in Israel are
required to provide
interconnection to, and not to discriminate against, any other
licensed
telecommunications operator in Israel. We have no control over the
quality and timing of the investment and maintenance activities
that are
necessary for these entities to provide us with interconnection
to their
respective telecommunications networks. The failure of these or other
telecommunications providers to provide reliable interconnections
to us on a
consistent basis could have an adverse effect on our business,
financial
condition or results of operations. Such adverse effect may intensify
upon
implementation of number portability since our ability to implement
number
portability, provide our services and our basic ability to port
numbers between
operators are dependant on number portability implementation
by interconnecting
local operators, as further discussed under “We may face claims of being in
violation of the law and our license requiring the implementation
of number
portability and the terms of our license governing the method
of charging for
SMS messages.” above.
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There
are certain restrictions in our license relating to
the ownership of our
shares.
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Our
license restricts ownership of our ordinary shares and who can
serve as our
directors as follows:
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our
founding shareholder, Discount Investment Corporation
Ltd., or DIC (or its
transferee or transferees, if approved in advance by
the Ministry of
Communications as “founding shareholders”), must own at least 26% of each
of our means of control;
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Israeli
citizens and residents among our founding shareholders
(or their approved
transferees) must own at least 20% of our outstanding
share capital and
each of our other means of control (DIC has agreed
to comply with this
requirement);
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a
majority of our directors must be Israeli citizens
and
residents;
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at
least 20% of our directors must be appointed by Israeli
citizens and
residents among our founding shareholders;
and
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we
are required to have a committee of our Board of Directors
that deals with
matters relating to state security, which must be comprised
of at least
four directors (including an external director) having
the requisite
security clearance by Israel’s General Security
Service.
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If
these
requirements are not complied with, we could be found to be in
breach of our
license and our license could be changed, suspended or revoked.
In
addition, our license provides that, without the approval of
the Ministry of
Communications, no person may acquire or dispose of shares representing
10% or
more of our outstanding share capital. Further, our directors and
officers and any holder of ordinary shares representing 5% or
more of our
outstanding share capital may not own 5% or more of Bezeq or
any of our
competitors or serve as a director or officer of such a company,
subject to
certain exceptions which require the prior approval of the Ministry
of
Communications.
To
ensure
that an unauthorized acquisition of our shares would not jeopardize
our license,
our articles of association provide that any shares acquired
without approval
required under our license will not be entitled to voting rights.
If
our
service is to be determined by the Israeli Government to be an
“essential
service”, the Prime Minister and the Ministry of Communications could
impose
additional limitations including a heightened requirement of
Israeli ownership
of our ordinary shares.
Although
our articles of association contain certain provisions that are
aimed at
reducing the risk that holdings or transfers of our ordinary
shares will
contravene our license, we cannot entirely control these and
other matters
required by our license, the violation of which could be a basis
for suspending
or revoking our license. See “Item
4.B –
Business Overview – Government Regulations ― Our Principal License” of our
annual report on Form 20-F for the year ended December 31,
2006.
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We
may be adversely affected by the significant technological
and other
changes in the cellular communications
industry.
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The
cellular market is known for rapid and significant technological
change. Our current technologies, including our 3.5G technologies,
may be overtaken rapidly, requiring us to invest in alternative
technologies to
remain competitive. Further, technologies such as satellite-based
personal communications services, wireless broadband access services
such as
WiMAX and other technologies that have the capacity to handle
cellular calls may
enter our market and compete with traditional cellular providers,
thus further
intensifying the competition we face and requiring us to reduce
prices, thus
adversely affecting our results of operations. The MOC is expected
to publish a
WiMAX frequencies tender in the near future.
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If
we cannot obtain or maintain favorable roaming arrangements
our services
may be less attractive or less
profitable.
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We
rely on
agreements to provide roaming capability to our subscribers in
many areas
outside Israel. As of June 30, 2007, we had roaming arrangements with
483 cellular providers in 171 countries around the world. However, as
we cannot control the quality of the service that they provide,
it may be
inferior to the quality of service that we provide. Equally, our
subscribers may not be able to use some of the advanced features
that they enjoy
when making calls on our network. Some of our competitors may be able
to obtain lower roaming rates than we do because they may have
larger call
volumes or because of their affiliations with other international
cellular
operators. If our competitors’ providers can deliver a higher quality
or a more cost effective roaming service, then subscribers may
migrate to those
competitors and our results of operation could be adversely
affected. Further, we may not be able to compel providers to
participate in our technology migration and enhancement
strategies. As a result, our ability to implement technological
innovations could be adversely affected if these overseas providers
are unable
or unwilling to cooperate with the further development of our
network or if they
cease to provide services comparable to those we offer on our
network.
Following
new European regulation of roaming tariffs, which reduced tariffs
for calls made
by members of the European Union among themselves, several European
Union member
operators have raised roaming tariffs for calls to and from non-European
Union
member operators, resulting in higher roaming tariffs for our
subscribers. If additional European Union member operators raise
their tariffs and/or if we are not able to raise our tariffs
or otherwise
compensate for the higher roaming expenses this could adversely
affect our
profitability and results of operations.
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Our
substantial debt increases our exposure to market risks,
may limit our
ability to incur additional debt that may be necessary
to fund our
operations and could adversely affect our financial
stability.
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As
of June
30, 2007, our total indebtedness was approximately NIS 3,204
million and may
reach NIS 4,054 million, upon completion of this offering. Our credit
facility and the indentures governing our outstanding debentures
and the
Debentures being offered by this prospectus currently permit
us to incur
additional indebtedness, subject to maintaining certain financial
ratios and
other restrictions contained in our credit facility. Our substantial
debt could adversely affect our financial condition by, among
other
things:
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increasing
our vulnerability to adverse economic, industry or
business conditions,
including increases in prevailing interest rates, particularly
because our
outstanding debentures and the Debentures are linked
to the Israeli CPI,
and our credit facility bears interest at a variable
rate;
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limiting
our flexibility in planning for, or reacting to, changes
in our industry
and the economy in general;
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requiring
us to dedicate a substantial portion of our cash flow
from operations to
service our debt, thus reducing the funds available
for operations and
future business development; and
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limiting
our ability to obtain additional financing to operate,
develop and expand
our business.
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Our
freedom to operate our business is limited as a result
of certain
restrictive covenants contained in our credit facility
and our outstanding
indentures.
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Our
credit
facility contains a number of restrictive covenants that limit
our operating and
financial flexibility. These covenants include, among other things,
limitations on liens (also contained in the indentures governing
our outstanding
debentures), on the incurrence of indebtedness, on the provision
of loans and
guarantees and on acquisitions, dispositions of assets, mergers
and other
changes of control. Our credit facility also contains covenants
regarding maintaining certain levels of financial ratios during
the term of the
facility, including as a condition to the distribution of
dividends. Our ability to continue to comply with these and other
obligations depends in part on the future performance of our
business. Such obligations may hinder our ability to finance our
future operations or the manner in which we operate our business. In
particular, any non-compliance with performance-related covenants
and other
undertakings of our credit facility, outstanding debentures and
Debentures could
result in an acceleration of our outstanding debt under our credit
facility,
outstanding debentures and Debentures and restrict our ability
to obtain
additional funds, which could have a material adverse effect
on our business,
financial condition or results of operations. Further, our inability
to maintain the financial ratios required under our credit facility
for the
distribution of dividends may limit our ability to distribute
dividends.
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Our
business results may be affected by currency fluctuations,
by our currency
hedging positions and by changes in the Israeli Consumer
Price Index and
by changes in the Tel Aviv interbank offered rate
(Telbor).
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A
substantial amount of our cash payments are incurred in, or linked
to, non-NIS
currencies. In particular, in 2005 and
2006, and in the six-month period ended June 30,
2007,
payments in U.S. dollars or linked to the U.S. dollar represented
approximately
19%, 26% and 24%, respectively, of total cash outflow. These payments
included capital expenditures, cell site rental fees, payments
to equipment
suppliers and, in 2006 and in the six-month period ended June
30, 2007, payments
of principal and interest on our credit facility. As almost all of
our cash receipts are in NIS, any devaluation of the NIS against
those non-NIS
currencies in which we make payments, particularly the U.S. dollar,
will
increase the NIS cost of our non-NIS denominated or linked expenses
and capital
expenditures.
We
engage
in currency hedging transactions to reduce the impact of these
currency
fluctuations on our cash flows and results of operations. We
recognize freestanding derivative financial instruments as either
assets or
liabilities in our balance sheet and we measure those instruments
at fair
value. However, accounting for changes in the fair value of a
derivative instrument, such as a currency hedging instrument,
depends on the
intended use of the derivative instrument and the resulting
designation. For a foreign exchange derivative instrument designated
as a cash flow hedge, the effective portion of the derivative
instrument is
initially reported as a component of our shareholders’ equity and subsequently
recognized in our income statement as the hedged item affects
earnings. For derivative instruments that are not designated as cash
flow hedges, changes in fair value are recognized in our income
statement
without any reference to the change in value of the related budgeted
expenditures. These differences could result in fluctuations in our
reported net income on a quarterly basis.
Further,
since the principal amount of, and interest that we pay on our
debentures,
including the Debentures being offered pursuant to this prospectus,
are linked
to the Israeli CPI, any increase in the Israeli CPI will increase
our financial
expenses and could adversely affect our results of operations.
Additionally,
since the interest rate under our credit facility is based on
the Tel Aviv
interbank offered rate (Telbor), any increase in that interest
rate will
increase our financial expenses and could adversely affect our
results of
operations.
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We
may not be able to fulfill our dividend policy in the
future;
implementation of our dividend policy will significantly
reduce our future
cash reserves.
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In
February 2006, we adopted a dividend policy targeting a payout
ratio of at least
75% of our net income under Israeli GAAP in each calendar year,
subject to any
applicable law, our license and contractual obligations and provided
that such
distribution would not be detrimental to our cash needs or to
any plans approved
by our Board of Directors. Our credit facility limits our ability to
pay dividends, including by limiting our distribution of dividends
in respect of
any financial year so that any distributions based on retained
earnings
accumulated since January 1, 2006, do not exceed the lesser of
(a) 75% of our
aggregate net income from January 1, 2006 to the date of distribution
and
(b) the aggregate “eligible dividend amount” from January 1, 2006 to the
date of distribution, the “eligible dividend amount” being the lesser of (i) our
net income for each financial year and (ii) the excess of free
cash flow over
110% of total debt service for each financial year. In addition, we
are also permitted to make distributions out of the NIS 285 million
adjustment
to retained earnings. See “Item 5 - Operating and Financial Review and Prospects
— Overview — New Israeli accounting standard affecting measurement of fixed
assets” of our annual report on Form 20-F for the year ended December
31, 2006.
Our license requires that we and our 10% shareholders maintain
at least $200
million of combined shareholders’ equity. See “Item 5 - Operating and
Financial Review and Prospects—Liquidity and Capital Resources—Debt service” of
our annual report on Form 20-F for the year ended December 31,
2006. Dividend
payments are not guaranteed and our Board of Directors may decide,
in its
absolute discretion, at any time and for any reason, not to pay
dividends.
Further,
our dividend policy, to the extent implemented, will significantly
reduce our
future cash reserves and may adversely affect our ability to
fund unexpected
capital expenditures as well as our ability to make interest
and principal
repayments on our outstanding debentures, the Debentures, and credit
facility. As a result, we may be required to borrow additional money
or raise capital by issuing equity securities, which may not
be possible on
attractive terms or at all.
If
we are
unable to fulfill our dividend policy, or pay dividends at levels
anticipated by
investors in our shares, the market price of our shares may be
negatively
affected and the value of our investors’ investment may be reduced.
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We
rely on a limited number of suppliers for key equipment
and
services.
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We
depend
upon a small number of suppliers to provide us with key equipment
and
services. For example, Nokia Siemens Israel provides our network
system based on GSM/GPRS/EDGE technology, our UMTS/HSDPA core
system and related
products and services; LM Ericsson Israel supplies our radio
access network and
related products and services based on UMTS/HSDPA technology;
Amdocs Israel
provides us with services with respect to the operating of, and
the
implementation of developments to, our billing system; and Be’eri Printers
provides our printing supplies and invoices as well as the distribution,
packaging and delivery of invoices and other mail to the postal
service
distribution centers. In addition, we lease a portion of our
transmission capacity from Bezeq, the incumbent landline operator.
Bezeq has
experienced labor disputes, including stoppages, during the privatization
process and liberalization of the landline market, and additional
disruptions,
stoppages and slowdowns may be experienced in the future. If
these suppliers
fail to provide equipment or services to us on the requisite
standards of
quality and on a timely basis, we may be unable to provide services
to our
subscribers in an optimal manner until an alternative source
can be found and
our license may be at risk of revocation for failure to satisfy
the required
service standards.
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We
are a member of the IDB group of companies, one of
Israel’s largest
business groups. This may limit our ability to expand our
business, to acquire other businesses or to borrow
money from Israeli
banks.
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We
are an
indirect subsidiary of IDB, one of Israel’s largest business groups. Other
indirect subsidiaries of IDB also operate in the Israeli communication
market
providing high speed Internet, international telephone services
and wireline and
landline communication services. As a result, conflicts of interest
may arise
between us and other IDB group companies. Due to the limited size of
the Israeli market and due to the high level of regulation of
the Israeli
market, in particular in the communications market, our being
a member of the
IDB group of companies may limit our ability to expand our business
in the
future, to form joint ventures and strategic alliances and conduct
other
strategic transactions with other participants in the Israeli
communications
market.
In
addition, pursuant to the “Guidelines for Sound Bank Administration” issued by
the Israeli Supervisor of Banks, the amount that an Israeli bank
may lend to one
group of borrowers and to each of the six largest borrowers of
such banking
corporation is limited. Since we are a member of IDB’s group of
borrowers, these guidelines may limit the ability of Israeli
banks to lend money
to us, although this has not occurred to date.
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We
are controlled by a single shareholder who can significantly
influence
matters requiring shareholders’
approval.
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As
of June
30, 2007, DIC held, directly and indirectly, approximately 59%
of our
outstanding share capital (DIC’s holdings of our outstanding share capital is
expected to change to 56% on or about September 24, 2007. See
our current report
on Form 6-K filed with the Securities and Exchange Commission
on September 19,
2007). Pursuant to a shareholders agreement among DIC and certain of
our minority shareholders, who in the aggregate own 5.5% of our
ordinary shares,
DIC has been granted the voting rights in respect of those shares. In
addition to DIC’s shareholdings and such additional voting rights, it has the
right to appoint the 20% of our directors that we are required
by our license
and articles of association to have appointed by Israeli citizens
and residents
among our founding shareholders. Accordingly, subject to legal
limitations, DIC has control over all matters requiring shareholder
approval,
including the election and removal of our directors and the approval
of
significant corporate transactions. This concentration of ownership
could delay or prevent proxy contests, mergers, tender offers,
open-market
purchase programs or other purchases of our ordinary shares that
might otherwise
give our shareholders the opportunity to realize a premium over
the
then-prevailing market price for our ordinary shares.
Further,
as a foreign private issuer, we are exempt from the application
of the NYSE
rules requiring the majority of the members of our Board of Directors
to be
independent and requiring our Board of Directors to establish
independent
nomination and compensation committees. Accordingly, our minority
shareholders, outstanding debentures and Debenture holders are
denied the
protection intended to be afforded by these corporate governance
standards.
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We
have not yet evaluated our internal control over financial
reporting in
compliance with Section 404 of the Sarbanes-Oxley
Act.
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We
are
required to comply with the internal control evaluation and certification
requirements of Section 404 of the Sarbanes-Oxley Act by the
end of our 2007
fiscal year. We have begun the process of determining whether our
existing internal control over financial reporting systems is
compliant with
Section 404. If it is determined that we are not in compliance with
Section 404, we may be required to implement new internal control
procedures. We
may experience higher than anticipated operating expenses as
well as external
auditor fees during the implementation of these changes and
thereafter. If we are unable to implement these changes effectively
or efficiently, it could harm our operations, financial reporting
or results of
operations and could result in our conclusion that our internal
controls over
financial reporting are not effective.
Risks
Relating to Operating in Israel
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We
conduct our operations in Israel and therefore our
results may be
adversely affected by political, economic and military
instability in
Israel.
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Our
operations, our network and some of our suppliers are located
in
Israel. Accordingly, political, economic and military conditions in
Israel may directly affect our business. Since the establishment of
the State of Israel in 1948, a number of armed conflicts have
taken place
between Israel and its Arab neighbors. Any hostilities involving
Israel or the interruption or curtailment of trade within Israel
or between
Israel and its trading partners could adversely affect our operations
and could
make it more difficult for us to raise capital. Since September 2000,
there has been a high level of violence between Israel and the
Palestinians.
Hamas, an Islamist movement responsible for many attacks, including
missile
strikes, against Israelis, won the majority of the seats in the
Parliament of
the Palestinian Authority in January 2006 and took control of
the entire Gaza
Strip, by force, in June 2007. These developments have further
strained
relations between Israel and the Palestinian Authority. Further,
in the summer
of 2006, Israel engaged in a war with Hezbollah, a Lebanese Islamist
Shiite
militia group, which involved thousands of missile strikes and
disrupted most
day-to-day civilian activity in northern Israel. Any armed conflicts,
terrorist activities or political instability in the region would
likely
negatively affect business conditions and could harm our results
of operations,
including following termination of such conflicts due to a decrease
in the
number of tourists visiting Israel.
In
addition, in the event that the State of Israel relinquishes
control over
certain territories currently held by it to the Palestinian Authority,
we will
not be able to provide service from our cell sites located in
Israeli populated
areas and on connecting roads in these territories. This may result
in the loss of subscribers and revenues and in a decrease in
our market
share.
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Our
freedom and ability to conduct our operations may be
limited during
periods of national
emergency.
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The
Communications Law grants the Prime Minister of Israel the authority,
for
reasons of state security or public welfare, to order a telecommunications
license holder to provide services to security forces, to perform
telecommunication activities or to establish a telecommunications
facility as
may be required for the security forces
to
carry
out their duties. Further, the Israeli Equipment Registration and IDF
Mobilization Law, 1987, also permits the registration of engineering
equipment
and facilities and the taking thereof for the use of the Israel
Defense
Forces. This law further sets the payment for use and compensation
for damages caused to the operator as a result of such taking. Our
general license also permits the Israeli Government, during national
emergencies
or for reasons of national security, to take all necessary actions
in order to
ensure state security, including taking control of our network,
and requires us
to cooperate with such actions. If national emergency situations
arise in the future and if we are to be subject during such time
to any of the
foregoing actions, this could adversely affect our ability to
operate our
business and provide services during such national emergencies
and adversely
affect our business operations.
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Provisions
of Israeli law and our license may delay, prevent or
impede an acquisition
of us, which could prevent a change of
control.
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Israeli
corporate law regulates mergers, requires tender offers for acquisitions
of
shares above specified thresholds, requires special approvals
for transactions
involving directors, officers or significant shareholders and
regulates other
matters that may be relevant to these types of transactions. For
example, a merger may not be completed unless at least 50 days
have passed from
the date that a merger proposal was filed by each merging company
with the
Israel Registrar of Companies and at least 30 days from the date
that the
shareholders of both merging companies approved the merger. In
addition, a majority of each class of securities of the target
company is
required to approve a merger. Further, the provisions of our license
require the prior approval of the Ministry of Communication for
changes of
control in our Company.
Furthermore,
Israeli tax considerations may make potential transactions unappealing
to us or
to our shareholders whose country of residence does not have
a tax treaty with
Israel exempting such shareholders from Israeli tax. For example,
Israeli tax
law does not recognize tax-free share exchanges to the same extent
as U.S. tax
law. With respect to mergers, Israeli tax law allows for tax
deferral in certain
circumstances but makes the deferral contingent on the fulfillment
of numerous
conditions, including a holding period of two years from the
date of the
transaction during which sales and dispositions of shares of
the participating
companies are restricted. Moreover, with respect to certain share
swap transactions, the tax deferral is limited in time, and when
the time
expires, tax then becomes payable even if no actual disposition
of the shares
has occurred.
These
provisions could delay, prevent or impede an acquisition of us,
even if such an
acquisition would be considered beneficial by some of our
shareholders.
The
material changes contained in the Prospectus are as
follows:
Material
Changes
Number
Portability
In
May
2007, the MOC notified us of its intention to impose monetary
sanctions on
telephony operators, including us, following non-implementation
and operation of
number portability as of September 1, 2006. The intended monetary
sanction
applicable to us for the period commencing September 1, 2006
and ending November
30, 2007 equals approximately NIS 6.0 million. Commencing December
1, 2007 (the
new date determined by the MOC for the implementation of number
portability),
insofar as the number portability is not implemented, the intended
monetary
sanction for each additional day that number portability will
not be implemented
by us, will equal approximately NIS 0.3 million. We have submitted
our objection
to the said intended sanctions to the MOC.
See
Item
3.7 “Risk Factors – Risks related to our business – We may face claims of being
in violation of the law and our license requiring the implementation
of number
portability and the terms of our license governing the method
of charging for
SMS messages; We face intense competition in all aspects of our
business”
above.
See
Item
4. “Information on the Company – B. Business Overview – Government Regulations –
Number Portability; B. Business Overview - Competition” of our annual report on
Form 20-F for the year ended December 31, 2006, for additional
details.
MVNO
In
August
2007, the Israeli government instructed the MOC to take all measures
necessary
to allow any mobile virtual network operator, or MVNO, wishing
to provide
cellular services to the public using the network of a cellular
operator to do
so as of December 31, 2007. In the event that an MVNO and the
cellular operator will not have reached an agreement as to the
provision of
service by way of MVNO within six months from the date the MVNO
has approached
the cellular operator, the MOC is authorized to examine the causes
thereof
and,
should
the
MOC determine that the same is due to noncompetitive behavior
of the cellular
operator or market failure, the MOC may use its authority to
provide
instructions. Such instructions may include intervening in the
terms of the
agreement, including by setting the price of the service.
The
previous government decision on that matter, from September 2006,
appointed a
governmental committee to examine the possibility of implementing
MVNO operation
in Israel. Following that decision, the MOC has been conducting
an examination,
using an international consulting firm. The MOC did not publish
its findings and
recommendations and, to the best of our knowledge, is expected
to hold a hearing
in the coming weeks.
See
Item
3.7 “Risk Factors - Risks related to our business – we face intense competition
in all aspects of our business” above.
See
Item
4. “Information on the Company – B. Business Overview –
Competition; - Government Regulations – Mobile Virtual Network
Operator” of our most recent annual report on Form 20-F for the year ended
December 31, 2006, for additional details.
Change
of Charging Units
In
September 2007, our general license was amended to the effect
that prevents us
from offering our subscribers calling plans using airtime charging
units other
than the basic airtime charging unit set in the general license
(which is
currently up to a 12-second unit and as of January 1, 2009 will
become a
one-second unit).
We
have
been taking steps to address the effects of this amendment to
our license and at
this time are unable to assess the potential effect of the amendment
on our
results of operations.
See
“Item
3.7 Risk Factors – Risks related to our Business – We operate in a heavily
regulated industry, which can harm our results of operations”
above.
See
“Item
4. Information on the Company – B. Business Overview – Government Regulations –
Tariff Supervision” and "Item 5. Operating and Financial Review and Prospects –
A. Operating Results – Overview – General" of our annual report on Form 20-F for
the year ended December 31, 2006, for additional details.
Site
Licensing
In
July
2007, a Magistrate Court ruled that the exemption from the requirement
to obtain
a building permit for radio access devices is not applicable
to radio access
devices on a cellular network and that, as such, we are required
to receive
building permits for the construction and use of the facility
and the
accompanying equipment. This ruling contradicts previous Magistrate
Court
rulings, which determined that the exemption is also applicable
to radio access
devices in a cellular network. This issue is under consideration
in the court of
appeals (the District Court).
In
July
2007, we were served with a petition filed with the Israeli High
Court of
Justice, filed against the Minister of Environmental Protection,
the Minister of
Interior and the MOC; we and three other cellular operators were
joined as
formal respondents. The petition sought to cancel the said exemption
for radio
access devices, to annul any environmental permits previously
granted and to
prevent the granting of environmental permits in the future by
the Ministry of
Environmental Protection for radio access devices, based on the
exemption. In
August 2007, the petition was dismissed in limine for failure
to exhaust the
relevant proceedings prior to filing of the petition, without
a consideration of
the merits of the case.
Recently,
the Ministry of Environmental Protection has withheld the grant
and/or renewal
of operating permits in a few instances, where the local planning
and building
committee’s engineer objected to our reliance upon the said exemption for
radio
access devices.
See
“Item
3.7 Risk Factors - Risks related to our business – We may not be able to obtain
permits to construct cell sites” above.
See
“Item
4. Information on the Company – B. Business Overview – Government Regulations –
Permits for Cell Site Construction – Site Licensing” of our annual report on
Form 20-F for the year ended December 31, 2006 for additional
details.
Purported
Class Actions
In
April
2007, a purported class action lawsuit was filed against us in
the District
Court of Tel-Aviv-Jaffa, by two plaintiffs who claim to be our
subscribers. The
claim alleges that we unlawfully and in violation of our license
raised our
rates in existing calling plans that include a commitment to
purchase certain
services for a fixed period. In May 2007, another purported class
action lawsuit
alleging claims of a similar nature was filed against us in the
same court by
two plaintiffs who claim to be our subscribers . If the claims
are certified as
class actions, the amounts claimed are estimated by the plaintiffs
to be
approximately NIS 230 million and NIS 875
million,
respectively. At this preliminary stage, we are unable to assess
the lawsuits'
chances of success. Accordingly, no provision has been made in
our financial
statements in respect of these claims.
In
July,
2007, pursuant to an appeal regarding the Tel Aviv-Jaffa District
Court's
decision in June 2004 to deny a purported class action lawsuit
filed against us
in August 2001 by one of our subscribers, in connection with
our outgoing call
tariffs for the "Talkman" (pre-paid) plan and the collection
of a distribution
fee for "Talkman" calling cards, the Supreme Court accepted a
joint petition
filed by both parties, in light of the Class Action Law, 2006,
to resubmit the
purported class action lawsuit for consideration in the District
Court of Tel
Aviv-Jaffa. If the claim is certified as a class action, the
amount claimed is
estimated by the plaintiff to be approximately NIS 135 million.
Based on advice
of counsel, we believe that we have good defenses against the
certification of
the lawsuit as a class action. Accordingly, no provision has
been included in
our financial statements in respect of this claim.
In
September 2007, a purported class action lawsuit filed against
us and two other
cellular operators in the District Court of Jerusalem, by three
plaintiffs who
claim to be subscribers of the defendants. The plaintiffs claim
that the
defendants charge their subscribers for SMS messages sent by
them to subscribers
who chose to disable receipt of SMS messages and/or mislead the
senders by an
indication on their cell phones that such messages were sent.
If the claim is
certified as a class action, the amount claimed from all three
defendants is
estimated by the plaintiffs to be approximately NIS 182,500,000,
without
specifying the amount claimed from us specifically. At this preliminary
stage,
we are unable to assess the lawsuit's chances of success. Accordingly,
no
provision has been included in our financial statements in respect
of this
claim.
Dividend
Distribution
On
June 7,
2007 we paid a cash dividend in the amount of NIS 2.03 per share,
and in the
aggregate amount of approximately NIS 198 million, to all shareholders
of record
as of May 25, 2007.
On
September 6, 2007 we paid a cash dividend in the amount of NIS
2.06 per share,
and in the aggregate amount of approximately NIS 201 million,
to all
shareholders of record as of August 23, 2007.
The
amount
of dividends declared per share for a certain quarter does not
necessarily
reflect dividends for future quarterly periods, which may change
in accordance
with our dividend policy. Dividend declaration is not guaranteed
and is subject
to our board of directors’ sole discretion, as detailed in our annual report on
Form 20-F for the year ended December 31, 2006, under “Item 8 - Financial
Information - Dividend Policy”.
The
Offering described in this Form 6-K is made in Israel to residents of
Israel only. The Debentures will be listed on the Tel Aviv Stock
Exchange only.
The Debentures have not and will not be registered under the
U.S. Securities Act
of 1933. Accordingly the Debentures may not be offered or sold
in the United
States. This Form 6-K shall not constitute an offer to sell or
the solicitation
of an offer to buy any debentures.
About
Cellcom Israel
Cellcom
Israel Ltd., established in 1994, is the leading Israeli cellular
provider;
Cellcom Israel provides its 2,960 million subscribers (as at
June 2007) with a
broad range of value added services including cellular and landline
telephony,
roaming services for tourists in Israel and for its subscribers
abroad and
additional services in the areas of music, video, mobile office
etc., based on
Cellcom Israel's technologically advanced infrastructure. The
Company operates
an HSDPA 3.5 Generation network enabling the fastest high speed
content
transmission available in the world, in addition to GSM/GPRS/EDGE
and TDMA
networks. Cellcom Israel offers Israel's broadest and largest
customer service
infrastructure including telephone customer service centers,
retail stores, and
service and sale centers, distributed nationwide. Through its
broad customer
service network Cellcom Israel offers its customers technical
support, account
information, direct to the door parcel services, internet and
fax services,
dedicated centers for the hearing impaired, etc. In April 2006
Cellcom Israel,
through Cellcom Fixed Line Communications L.P., a limited partnership
wholly-owned by Cellcom Israel, became the first cellular operator
to be granted
a special general license for the provision of landline telephone
communication
services in Israel, in addition to data communication services.
Cellcom Israel's
shares are traded both on the New York Stock Exchange (CEL) and
the Tel Aviv
Stock Exchange (CEL).
For
additional information please visit the Company's website
http://investors.ircellcom.co.il