Cellcom Israel Ltd. has announced that following extensive work and analysis of various courses of action carried out by the Company in the past several months (certain aspects of it in consultation with Deloitte Israel, a firm in the Deloitte Global Network), the Company’s board of directors approved a comprehensive restructuring plan for the Company (“the “Plan”), which will strengthen the Company in facing the continued intense competition and low prices in the Israeli telecommunications market, should they remain in their current level. The board instructed the Company to take immediate action to execute the Plan.
The plan sets the following goals, to be achieved by the end of 2020
1.return to positive net income (excluding special and unusual items)
2.reduce the Company’s net debt to EBITDA (excluding IFRS16 ramifications and special and unusual items) ratio to below 3.
3.prepare the Company to better cope with market conditions, the intense competition and future investments
The Plan includes the following major components and timetable:
•Cutting expenses – annual reduction of appx. NIS 150 million from current OPEX level (to be fully executed by the end of 2020), including through broad reduction of expenses and payments to suppliers, substantial reduction in manpower (which at this point will not include sale and service customer facing personnel) and reduction of landline wholesale access fees.
Cost cutting initiatives will begin immediately and the Company intends to enter negotiations and collaboration with the employees’ representatives immediately after the Jewish holidays in October, in order to change the current collective employment agreement and reach new agreements.
•Cutting investments – reduction of the company CAPEX level to appx. NIS 450 – 500 million per annum, (to be fully executed by the end of 2020).
•Capital raising of appx. NIS 400 million.
•To be executed prior to 2019 year-end, as part of the Plan. Specific timing and structure to be determined in accordance with the evolvement of the Plan.
•Factoring of customers’ end-user equipment of appx. NIS 100 – 150 million.
Presently under advanced negotiations with financial institutions and banks. Subject to entering a definitive agreement.
•Debt reduction – Open market repurchases of the Company’s debentures up to NIS 150 million.
To be carried out by management, at its discretion, at such timing, amounts and structure, according to market conditions.
Execution of the Plan may entail significant one-time expenses. Those are not included in the Plan components above.
Ami Erel, the Company’s Chairman of the board of directors said: “We believe that restructuring the Company, in its operational, financial and reduction of Net debt to EBITDA ratio will enable the Company to participate in mergers, acquisitions and other opportunities that may present themselves in the telecommunications arena in the next few years.”
Nir Sztern, the Company’s CEO said: “After a few months of detailed analysis and thorough work, the company has a solid and comprehensive plan to lead it back to profitability and strengthen its balance sheet. The Company intends to substantially reduce costs and decrease the Company’s debt, as market conditions continue to be challenging. I am determined to execute the Plan and hope the employees’ representatives will demonstrate responsibility towards the Company and the need to lead it to safe grounds, for the benefit of its employees and shareholders. I intend to carry out the Plan as soon as possible.”