Cellcom Ups Q2 Profit

NETANYA, Israel -- Second Quarter 2007 Highlights (results compared to second quarter of 2006):

Cellcom Israel Ltd. (NYSE: CEL TASE: CEL) ("Cellcom Israel", the "Company"), announced today its financial results for the second quarter ended June 30, 2007. Revenues for the second quarter totaled NIS 1,456 million ($343 million); EBITDA totaled NIS 539 million ($127 million), or 37% of revenues; and net income reached NIS 212 million ($50 million), or NIS 2.17 per share ($0.51 per share).

Commenting on the results, Amos Shapira, Chief Executive Officer said, "Our continued growth in all parameters is especially significant given the increasing competition in the market and airtime price erosion, due to the additional mandated decline in interconnect tariffs, and the new regulatory regime regarding calls ending in voicemail, implemented in the first quarter this year. We achieved these results primarily due to our ongoing marketing efforts to increase usage and introduce new products, while reducing expenses and implementing efficiencies at all levels. During the second quarter we increased our expensing on customer retention and subscriber acquisition, mainly in anticipation of the impending number portability due to be implemented December 1, 2007, and expect to continue to do so in the second half of 2007. During the second quarter, we also continued to prioritize quality of service and customer satisfaction, and will continue to do so going forward". Mr. Shapira added: "These second quarter results enable the Company to declare a NIS 2.06 per share dividend."

(i) Please view section "Use of Non-GAAP financial measures" at the end of this press release.

Mr. Shapira added: "Since launching our advanced 3.5 Generation services over our advanced HSDPA network in the second half of last year, we have recruited appx. 212,000 subscribers benefiting from our advanced technology-based content and services. We are very satisfied with our 3G subscriber growth rate and with the increase in content and value added services revenues, currently representing 8% of total revenues. Furthermore, our increased marketing of landline services and transmission services, contributed to higher revenues from these services, serving as another growth driver for the Company, although, they are not material to our overall revenues".

Tal Raz, Chief Financial Officer commented: "We continue to show a substantial increase in profitability, despite the ongoing erosion in price per minute, resulting from lower interconnect rates, the new regulatory regime regarding calls ending in voicemail and increasing competition in the market. Despite of the increase of 5.4% in average monthly Minutes of Use (MOU), and the 51% increase in revenues from content and value added services, ARPU declined by 0.7%, compared to the second quarter of last year (excluding the impact of the change in subscribers counting methodology) as a result of the over 6% continued erosion in airtime tariffs, compared to the second quarter last year. Our higher profitability is mainly the result of 14% quantative increase in airtime minutes, increased revenues from content services and ongoing cost efficiencies implemented throughout the Company. One of the main indicators of these efficiency measures is the decline of 1.3% of selling and marketing expenses, as well as general and administrative expenses as a percentage of revenues, as compared to the second quarter of last year. Following the Company's strong performance, our free cash flow increased by over 42% this quarter over the same quarter last year, enabling us to distribute a NIS 2.06 dividend per share, representing a total of approximately NIS 201 million."

Mr. Raz concluded, "Following our successful listing of our securities for trading on the New York Stock Exchange in February this year, on July 1st, we further broadened our potential investor base by also registering our shares for trading on the Tel Aviv Stock Exchange. We are very excited by this move, as it will give the local Israeli capital market the opportunity to invest locally in the Company."

Cellcom Israel Ltd.