Partner Communications Company Ltd. ("the Company", "Partner") is a leading Israeli provider of telecommunications services (cellular, fixed-line telephony, internet
and television services) under the Partner brand, and cellular services also under the 012 Mobile brand. The Company is incorporated and domiciled in Israel and its principal executive office’s address is 8 Amal Street, Afeq Industrial
Park, Rosh-Ha'ayin 48103, Israel.
The Company's share capital consists of ordinary shares, which are traded on the Tel Aviv Stock Exchange Ltd. ("TASE") under the symbol "PTNR". American Depositary
Shares ("ADSs"), each representing one of the Company’s ordinary shares, are quoted on the NASDAQ Global Select Market™, under the symbol "PTNR". See also note 21(a).
On January 29, 2013, S.B. Israel Telecom Ltd., an affiliate of Saban Capital Group Inc., became the Company's principal shareholder.
These consolidated financial statements of the Company as of December 31, 2018, are comprised of the Company and its subsidiaries and consolidated partnerships (the
"Group"). See the list of subsidiaries and consolidated partnerships and principles of consolidation in note 2(c)(1). See also 2(c)(2) with respect to investment in PHI.
The operating segments were determined based on the reports reviewed by the Chief Executive Officer (CEO) who is responsible for allocating resources and assessing
performance of the operating segments, and therefore is the Chief Operating Decision Maker ("CODM"), and supported by budget and business plans structure, different regulations and licenses (see (c) below). The CEO considers the business
from two operating segments, as follows (see also note 5):
The cellular segment includes basic cellular telephony services, text messaging, internet browsing and data transfer, content services, roaming services, and services
provided to other operators that use the Company's cellular network. The two payment methods offered to our customers are pre-paid and post-paid. Pre-paid services are offered to customers that purchase credit in advance of service use.
Post-paid services are offered to customers with bank and credit arrangements. Most of the cellular tariff plans are bundles which include unlimited volumes of calls time and text messaging (with fair use limits), as well as limited data
packages. Cellular content and value-added services offered include multimedia messaging, cyber protection, cloud backup, ringtones, the Apple Music streaming service, and a range of advanced business services.
International roaming services abroad for the Company’s customers include airtime calls, text messaging and data services on networks with which the Company has a
commercial roaming relationship. Partner also provides inbound roaming services to the customers of foreign operators with which the Company has a commercial roaming relationship.
Optional services such as equipment extended warranty plans and international calling plans are also provided for an additional monthly charge or included in specific
tariff plans. We also provide cellular phone repair services for independent merchants.
In addition, the cellular segment includes wholesale cellular services provided to virtual operators who use the Partner cellular network to provide services to their customers.
The fixed-line segment includes: (a) Internet services that provide access to the internet through both fiber optics and wholesale broadband access, ISP services and
internet Value Added Services (“VAS”) such as cyber protection, anti-virus and anti-spam filtering; and fixed-line voice communication services provided through Voice Over Broadband (“VOB”); (b) For business customers, SIP voice trunks,
Network Termination Point Services ("NTP") – under which the Group supplies, installs, operates and maintains endpoint network equipment and solutions, including providing and installing equipment and cabling within a subscriber's place of
business or premises, hosting services, transmission services, Primary Rate Interface (“PRI”) and other fixed-line communications solution services; (c) International Long Distance services (“ILD”): outgoing and incoming international
telephony, hubbing, roaming and signaling and calling card services; (d) Television services over the Internet ("TV").
The cellular segment and the fixed-line segment also include sales and leasing of telecommunications, audio visual and related devices: mainly cellular handsets,
tablets (handheld computers), laptops, landline phones, modems, datacards, domestic routers, servers and related equipment, integration project hardware and a variety of digital audio visual devices including smart watches, car dashboard
cameras, televisions, digital cameras, games consoles, audio accessories and related devices.
Each segment is divided into services and equipment revenues, and the related cost of revenues. The operating segments include the following measures: revenues, cost of
revenues, operating profit and segment Adjusted EBITDA (see note 5(2)). The CODM does not examine assets or liabilities for the segments separately for the purposes of allocating resources and assessing performance of the operating segments
and they are not therefore presented in note 5 segment information.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - GENERAL (continued)
c. Group licenses
The Group operates under the following licenses that were received from the Israeli Ministry of Communications ("MOC") and from the Israeli Civil Administration
("CA"):
|
Type of services
|
Area of service
|
License owner
|
Granted by
|
Valid through
|
Guarantees made
(NIS millions)
|
(1)
|
Cellular
|
Israel
|
Partner Communications Company Ltd.
|
MOC
|
Feb, 2022
|
80
|
(2)
|
Cellular
|
West Bank
|
Partner Communications Company Ltd.
|
CA
|
Feb, 2022
|
4
|
(3)
|
ISP
|
Israel
|
Partner Communications Company Ltd.
|
MOC
|
Mar, 2023
|
|
(4)
|
ISP
|
West Bank
|
Partner Communications Company Ltd.
|
CA
|
Mar, 2023
|
|
(5)
|
ISP
|
Israel
|
012 Smile Telecom Ltd.
|
MOC
|
Cancelled*
|
|
(6)
|
ISP
|
West Bank
|
012 Smile Telecom Ltd.
|
CA
|
Cancelled*
|
|
(7)
|
ILD
|
Israel
|
012 Smile Telecom Ltd.
|
MOC
|
Cancelled*
|
5
|
(8)
|
ILD
|
West Bank
|
012 Smile Telecom Ltd.
|
CA
|
Cancelled*
|
0.25
|
(9)
|
Fixed
|
Israel
|
012 Telecom Ltd.
|
MOC
|
Cancelled*
|
5
|
(10)
|
Fixed
|
West Bank
|
012 Telecom Ltd.
|
CA
|
Cancelled*
|
0.25
|
(11)
|
Fixed
(incl. ISP, ILD, NTP)
|
Israel
|
Partner Land-line Communication Solutions - Limited Partnership
|
MOC
|
Jan, 2027
|
5
|
(12)
|
Fixed
(incl. ISP, ILD, NTP)
|
West Bank
|
Partner Land-line Communication Solutions - Limited Partnership
|
CA
|
Jan, 2027
|
0.25
|
(13)
|
NTP
|
Israel
|
012 Smile Telecom Ltd.
|
MOC
|
Cancelled*
|
|
The Group also has a trade license that regulates issues of servicing and trading of equipment, and a number of encryption licenses that permits dealing with means of
encryption within the framework of providing radio telephone services to the public.
With respect to license (1), the Company is entitled to request an extension of the license for additional periods of six years, at the discretion of the MOC. Should
the license not be renewed, the new license-holder is obliged to purchase the communications network and all the rights and obligations of the subscribers for a fair price, as agreed between the parties or as determined by an arbitrator.
(*) Cancelled in 2019 per requests filed by the Group.
Other licenses may be extended for various periods, at the discretion of the MOC or CA, respectively.
See also note 17(5) as to additional guarantees made to third parties.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
|
a.
|
Basis of preparation of the financial statements
|
The consolidated financial statements of the Company ("the financial statements") have been prepared in accordance with International Financial Reporting Standards
(IFRSs), as issued by the International Accounting Standards Board (IASB).
The principal accounting policies set out below have been consistently applied to all periods presented unless otherwise stated.
(2) Use of estimates and judgments
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates, and requires management to exercise its
judgment in the process of applying the Group's accounting policies. Areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 4.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
|
b.
|
Foreign currency translations
|
(1) Functional and presentation currency
The consolidated financial statements are measured and presented in New Israeli Shekels ("NIS"), which is the Group's functional and presentation currency as it is the
currency of the primary economic environment in which the Group operates. The amounts presented in NIS millions are rounded to the nearest NIS million.
(2) Transactions and balances
Foreign currency transactions are translated into NIS using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the income
statement in finance costs, net.
(3) Convenience translation into U.S. Dollars (USD or $ or dollar)
The NIS figures at December 31, 2018 and for the period then ended have been translated into dollars using the representative exchange rate of the dollar at December
31, 2018 (USD 1 = NIS 3.748). The translation was made solely for convenience, is supplementary information, and is distinguished from the financial statements. The translated dollar figures should not be construed as a representation that
the Israeli currency amounts actually represent, or could be converted into, dollars.
|
c.
|
Interests in other entities
|
(1) Subsidiaries
The consolidated financial statements include the accounts of the Company and entities controlled by the Company. Control exists when the Company has the power over the
investee; has exposure, or rights, to variable returns from involvement in the investee; and has the ability to use its power over the investee to affect its returns. Subsidiaries and partnerships are fully consolidated from the date on
which control is transferred to the Company.
Inter-company transactions, balances, income and expenses on transactions between Group companies are eliminated in preparing the consolidated financial statements.
Non-controlling interests in the results and equity of a subsidiary are shown separately in the consolidated statements of profit or loss, statement of comprehensive
income, statement of changes in equity and balance sheet respectively.
List of wholly owned Subsidiaries and partnerships:
|
§
|
Partner Land-Line Communication Solutions - Limited Partnership
|
|
§
|
Partner Future Communications 2000 Ltd. ("PFC")
|
|
§
|
Partner Communication Products 2016 - Limited Partnership
|
|
§
|
Partner Business Communications Solution - Limited Partnership – not active
|
Other subsidiaries 51% owned:
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
c. Interests in other entities (continued)
(2) Investment in PHI
In November 2013, the Company and Hot Mobile Ltd. entered into a network sharing agreement ("NSA") and a right of use agreement. Pursuant to the NSA, the parties
created a 50-50 limited partnership - P.H.I. Networks (2015) Limited Partnership ("PHI"), which operates and develops a radio access network shared by both parties, starting with a pooling of both parties' radio access network
infrastructures creating a single shared pooled radio access network. PHI began its operations in July 2015, managing the networks.
As of December 31, 2018 the Company does not control PHI nor does it have joint control over it. The investment in PHI is accounted for using the equity method of
accounting. Under the equity method, the investment is initially recognized at cost, and adjusted thereafter to recognize the investor’s share of the post-establishment profits or losses of the investee in profit or loss, and the group’s
share of movements in other comprehensive income of the investee in other comprehensive income. See also note 9 with respect to a subsequent event of change in the governance of PHI that caused the Company to account for PHI as a joint
operation from January 1, 2019.
Unrealized gains on transactions between the Group and the associate are eliminated to the extent of the Group’s interest in these entities. Unrealized losses are also
eliminated unless the transaction provides evidence of an impairment of the asset transferred.
See also note 9 for information about transactions and balances with respect to the investment in PHI – as a related party.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
Inventories of equipment: cellular handsets and fixed telephones, tablets, laptops, datacards, servers, spare parts, ISP modems, related equipment, accessories and
other inventories are stated at the lower of cost or net realizable value. Cost is determined on the "first-in, first-out" basis. The Group determines its allowance for inventory obsolescence and slow moving inventory based upon past
experience, expected inventory turnover, inventory ageing and current and future expectations with respect to product offerings.
|
e.
|
Property and equipment
|
Property and equipment are initially stated at cost.
Costs are included in the assets' carrying amounts or recognized as separate assets, as appropriate, only when it is probable that future economic benefits associated
with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance that do not meet the above criteria are charged to the statement of income during the financial period in which they
are incurred.
Costs include expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct
labor, any other costs directly attributable to bringing the asset to a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located.
Changes in the obligation to dismantle and remove assets on sites and to restore the sites, on which they are located, other than changes deriving from the passing of
time, are added or deducted from the cost of the assets in the period in which they occur. The amount deducted from the cost of the asset shall not exceed the balance of the carrying amount on the date of change, and any balance is
recognized immediately in profit or loss. See (m)(2).
Purchased software that is integral to the functionality of the related equipment is capitalized as part of that equipment.
Property and equipment is presented less accumulated depreciation, and accumulated impairment losses. An asset’s carrying amount is written down immediately to its
recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (see (i)).
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
|
e.
|
Property and equipment (continued)
|
Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, as follows:
|
years
|
Communications network:
|
|
Physical layer and infrastructure
|
10 - 25 (mainly 15, 10)
|
Other Communication network
|
3 - 15 (mainly 5, 10, 15)
|
Computers, software and hardware for information systems
|
3-10 (mainly 3-5)
|
Office furniture and equipment
|
7-15
|
Optic fibers and related assets
|
7-25 (mainly 25)
|
Subscribers equipment and installations
|
2 - 4
|
Property
|
25
|
Leasehold improvements are depreciated by the straight-line method over the term of the lease (including reasonably assured option periods), or the estimated useful life (between 5 to 10
years) of the improvements, whichever is shorter.
|
f.
|
Licenses and other intangible assets
|
|
(1)
|
Licenses costs and amortization (see also note 1(c)):
|
|
(a)
|
The licenses to operate cellular communication services were recognized at cost. Borrowing costs which served to finance the license fee - incurred until the commencement of utilization of the license - were capitalized to cost
of the license.
|
|
(b)
|
Partner Land-line Communication solutions – limited partnership's license for providing fixed-line communication services is stated at cost.
|
The other licenses of the Group were received with no significant costs.
The licenses are amortized by the straight-line method over their useful lives (see note 1(c)) excluding any ungranted possible future extensions that are not under
the Group's control. The amortization expenses are included in the cost of revenues.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
|
f.
|
Licenses and other intangible assets (continued)
|
Acquired computer software licenses are capitalized on the basis of the costs incurred to acquire and to bring to use the specified software.
Development costs, including employee costs, that are directly attributable to the design and testing of identifiable and unique software products controlled by the Group
are recognized as intangible assets when the capitalization criteria under IAS 38 are met. Other development expenditures that do not meet the capitalization criteria, such as software maintenance, are recognized as an expenses as incurred.
Computer software costs are amortized over their estimated useful lives (3 to 10 years) using the straight-line method, see also note 11.
|
(3)
|
Customer relationships:
|
The Company has recognized as intangible assets customer relationships that were acquired in a business combination and recognized at fair value as of the acquisition
date. Customer relationships are amortized to selling and marketing expenses over their estimated useful economic lives (5 to 10 years) based on the straight line method.
|
(4)
|
012 Smile trade name:
|
Trade name was acquired in a business combination. In 2015, the Group decided to cease the usage of the "012 Smile" trade name in 2017. As a result the Group revised
its expected useful life to end in 2017 as a change in accounting estimate. As a result the amortization expenses of the 012 Smile trade name increased by NIS 1 million, NIS 16 million, and NIS 6 million in 2015, 2016, 2017 respectively,
see also notes 4(a)(2), and 13(2). As of December 31, 2017 the trade name was fully amortized.
|
(5)
|
Capitalization of costs to obtaining customers contracts:
|
Commencing January 1, 2017 (see note 2(n)) costs of obtaining contracts with customers are recognized as assets when the costs are incremental to obtaining the
contracts, and it is probable that the Group will recover these costs. The assets are amortized to selling and marketing expenses in accordance with the expected service period (mainly over 2-3 years), using the portfolio approach, see also
notes 4(a)(1) and 11. Other costs incurred that would arise regardless of whether a contract with a customer was obtained are recognized as an expense when incurred.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
Right of use (ROU) of international fiber optic cables was acquired in a business combination, subsequent additions and right of use in PHI's assets are recognized at
cost. The ROU with respect of fiber optic cables is presented as deferred expenses (current and non-current) and is amortized to cost of revenues on a straight line basis over a period beginning each acquisition of additional ROU in this
framework and until 2030 (including expected contractual extension periods). See also notes 12 and 17(4). Other costs of right to use PHI's assets are presented as deferred expenses and amortized on a straight line basis over the assets'
useful lives.
Goodwill acquired in a business combination represents the excess of the consideration transferred over the net fair value of the identifiable assets acquired, and
identifiable liabilities and contingent liabilities assumed. The goodwill has an indefinite useful economic life and is not subject to amortization; rather is measured at cost less accumulated impairment losses. For the purpose of
impairment testing, goodwill is allocated to a group of CGUs under the fixed line segment that is expected to benefit from the synergies of the combination. The group of CGUs represents the lowest level within the entity which the goodwill
is monitored for internal management purposes.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate that the carrying amount may
not be recoverable. Any impairment loss would be recognized for the amount by which the carrying amount of goodwill exceeded its recoverable amount. The recoverable amount is the higher of value-in-use and the fair value less costs to sell.
Value-in-use is determined by discounting expected future cash flows using a pre-tax discount rate. Any impairment is recognized immediately as an expense and is not subsequently reversed. See also note 13(1) with respect to impairment
tests.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
|
i.
|
Impairment tests of non-financial assets with finite useful economic lives
|
Assets that are subject to depreciation and amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may
not be recoverable. If such indications exist an impairment loss is recognized for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is determined for an individual asset, unless the
asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. If this is the case, recoverable amount is determined for the cash-generating unit (CGU) to which the asset belongs. The
recoverable amount is the higher of an asset's fair value less costs to sell and value-in-use. Value-in-use is determined by discounting expected future cash flows using a pre-tax discount rate.
An impairment loss recognized for an asset (or CGU) other than goodwill shall be reversed if, and only if, there has been a change in the estimates used to determine
the asset's (or CGU's) recoverable amount since the last impairment loss was recognized. If this is the case, the carrying amount of the asset (or CGU) shall be increased to its recoverable amount. The increased carrying amount of an
asset (or CGU) other than goodwill attributable to a reversal of an impairment loss shall not exceed the carrying amount that would have been determined (net of amortization or depreciation) had no impairment loss been recognized for the
asset (or CGU) in prior years. A reversal of an impairment loss is recognized immediately in the statement of income.
From January 1, 2018 the Group applies IFRS 9 and classifies its financial instruments (only debt instruments) in the following categories: (1)
amortized cost (AC), (2) at fair value through profit or loss (FVTPL: only embedded derivatives), (3) at fair value through other comprehensive income (FVTOCI, not exist), see note 3(1). The classification depends on the business model for
managing the financial instruments and the contractual terms of the cash flows. See note 6(c) as to classification of financial instruments to the categories.
At initial recognition, the group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through
profit or loss (FVTPL), transaction costs that are directly attributable to the acquisition of the financial asset. Financial assets are classified as current if they are expected to mature within 12 months after the end of the reporting
period; otherwise they are classified as non-current.
Financial liabilities are included in current liabilities, except for maturities greater than 12 months after the end of the reporting period, which are classified as
non-current liabilities. See also note 15.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
j. Financial instruments (continued)
(1) FVTPL category:
Gains or losses arising from changes in the fair value of embedded derivative financial instruments are presented in the income statement within "finance costs, net" in
the period in which they arise. These financial instruments are classified into 2 levels based on their valuation method (see also notes 6(c), 6(a)(2)(c)):
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included within level 1 that are observable for the assets or liabilities, either directly (as prices) or indirectly (derived
from prices).
(2) Amortized cost category:
The group classifies its financial assets, such as trade receivables, at amortized cost only if both of the following criteria are met: (1) the asset is held within a
business model whose objective is to collect the contractual cash flows, and (2) the contractual terms give rise to cash flows that are solely payments of principal and interest. Financial assets with embedded derivatives are considered in
their entirety when determining whether their cash flows are solely payment of principal and interest.
Amortized cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at
amortized cost. Interest income from trade receivables is included in the income statement under other income, net (see note 23) using the effective interest rate method. Any gain or loss arising on derecognition is recognized directly in
profit or loss and presented in finance income/expense together with foreign exchange gains and losses. Impairment expenses (credit losses) are presented as separate line item in the statement of profit or loss.
Cash and cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk
of changes in value, which include short-term bank deposits (up to 3 months from date of deposit) that are not restricted as to withdrawal or use.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
j. Financial instruments (continued)
Financial assets at amortized cost are presented net of impairment losses:
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired based on the
expected credit loss model. The assets that are subject to the expected credit loss model are mainly the trade receivables. While cash and cash equivalents, short-term deposits and contract assets are also subject to the impairment
requirements of IFRS 9, the identified impairment loss was immaterial.
From January 1, 2018, the Group assesses on a forward looking basis the expected credit losses associated with its debt instruments carried at amortized cost. The
impairment methodology applied depends on whether there has been a significant increase in credit risk. For trade receivables and contract assets the Group applies IFRS 9 simplified approach to measuring expected credit losses which uses a
lifetime expected loss allowance.
To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and period of payments and period past due. The
expected loss rates are based on the payment profiles of sales, and the corresponding historical credit losses experienced. The historical loss rates are adjusted to reflect current and forward-looking information on factors affecting the
ability of the customers to settle the receivables.
Financial liabilities, such as borrowings and notes payable, are initially recognized at fair value, net of transaction costs incurred, and subsequently measured at
amortized cost. Any difference between the fair value (net of transaction costs) and the redemption amount is recognized in profit or loss over the period of the borrowings using the effective interest method.
Offsetting:
Financial assets and liabilities are offset and the net amount reported in the statement of financial position when the Group has currently a legal enforceable right to
offset the recognized amounts and has an intention to settle on a net basis or realize the asset and settle the liability simultaneously. The legal enforceable right must not be contingent on future events and must be enforceable in the
normal course of business and in the event of default, insolvency or bankruptcy of the company or the counterparty.
Financial instruments for periods before January 1, 2018, were measured according to IAS 39 Financial instruments: Recognition and
measurement. Under which non-derivative financial assets with fixed or determinable payments that were not quoted in an active market were categorized as Loans and Receivables, which were measured similar to the Amortized Cost
category, less impairment losses. During 2016 and 2017 assessments were made whether objective evidence existed that a financial asset or a group of financial assets were impaired, and the trade receivables were presented net of allowance
for doubtful accounts.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
(i) Post-employment benefits
1. Defined contribution plan
According to Section 14 of the Israeli Severance Pay Law the Group's liability for some of the employee rights upon retirement is covered by regular contributions to
various pension schemes. The schemes are generally funded through payments to insurance companies or trustee-administered funds. These plans are defined contribution plans, since the Group pays fixed contributions into a separate and
independent entity. The Group has no legal or constructive obligations to pay further contribution if the fund does not hold sufficient assets to pay all employees the benefit relating to employee service in the current or prior periods.
The amounts funded as above are not reflected in the statement of financial position. Obligations for contributions to defined contribution pension plans are recognized as an expense in the statement of income when they are due.
2. Defined benefit plan
Labor laws, agreements and the practice of the Group, require paying retirement benefits to employees dismissed or retiring in certain other circumstances (except for
those described in 1 above), measured by multiplying the years of employment by the last monthly salary of the employee (i.e. one monthly salary for each year of tenure), the obligation of the Group to pay retirement benefits is treated as
a defined benefit plan.
The liability recognized in the statement of financial position in respect of the defined benefit plan is the present value of the defined benefit obligation at end of
the reporting period less the fair values of plan assets.
The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. According to IAS 19 employee benefits, the present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of deep market for high-quality corporate bonds.
Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive
income in the period in which they arise. Interest costs in respect of the defined benefit plan are charged or credited to finance costs.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
|
k.
|
Employee benefits (continued)
|
(ii) Termination benefits
Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in
exchange for these benefits. The Group recognizes termination benefits when it is demonstrably legally or constructively committed either: terminating the employment of current employees according to a detailed formal plan without
possibility of withdrawal; or providing termination benefits as a result of an offer made to encourage voluntary redundancy.
(iii) Short term employee benefits
1. Vacation and recreation benefits
The employees are legally entitled to vacation and recreation benefits, both computed on an annual basis. This entitlement is based on the term of employment. This
obligation is treated as a short term benefit under IAS 19. The Group charges a liability and expense due to vacation and recreation pay, based on the benefits that have been accumulated for each employee, on an undiscounted basis.
2. Profit-sharing and bonus plans
The Group recognizes a liability and an expense for bonuses based on consideration of individual performance and the Group's overall performance. The Group recognizes a
provision where contractually obliged or where there is a past practice that has created a constructive obligation.
3. Other short term benefits
The Group recognized expenses for other short term benefits provided by the collective employment agreement (see note 28).
The Group operates an equity-settled share-based compensation plan to its employees, under which the Group receives services from employees as consideration for equity
instruments of the Group. The fair value of the employee services received in exchange for the grant of the equity instruments is recognized as an expense. The total amount to be expensed is determined by reference to the fair value of the
equity instruments granted, at the grant date. Non-market vesting conditions are included among the assumptions used to estimate the number of options expected to vest. The total expense is recognized during the vesting period, which is the
period over which all of the specified vesting conditions of the share-based payment are to be satisfied. At the end of each reporting period, the Group revises its estimates of the number of equity instruments that are expected to vest
based on the vesting conditions, and recognizes the impact of the revision of original estimates, if any, in the statement of income, with corresponding adjustment to accumulated earnings.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will
require settling the obligation, and the amount has been reliably estimated. See note 14.
|
(1)
|
In the ordinary course of business, the Group is involved in a number of lawsuits and litigations. The costs that may result from these lawsuits are only accrued for when it is probable that a liability, resulting from past
events, will be incurred and the amount of that liability can be quantified or estimated within a reasonable range. The amount of the provisions recorded is based on a case-by-case assessment of the risk level, and events arising
during the course of legal proceedings that may require a reassessment of this risk, and where applicable discounted at a pre-tax discount rate that reflects current market assessments of the time value of money and the
risks specific to the liability. The Group's assessment of risk is based both on the advice of legal counsel and on the Group's estimate of the probable settlements amount that are expected to be incurred, if any. See also note
20.
|
|
(2)
|
The Company is required to incur certain costs in respect of a liability to dismantle and remove assets and to restore sites on which the assets were located. The dismantling costs are calculated according to best estimate of
future expected payments discounted at a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time
is recognized as finance costs.
|
|
(3)
|
Provisions for equipment warranties include obligations to customers in respect of equipment sold. Where there are a number of similar obligations, the likelihood that an outflow will be required in a settlement is determined
by considering the class of obligations as a whole. A provision is recognized even if the likelihood of an outflow with respect to any item included in the same class of obligations may be small.
|
|
(4)
|
Group's share in provisions recognized by PHI is recognized to the extent probable that the Group will be required to cover, see also notes 9, 14.
|
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
In the third quarter of 2017 the Group has early adopted with a date of initial application of January 1, 2017 (the transition date) IFRS 15, Revenue from Contracts with Customers, and its clarifications ("IFRS 15", "The Standard") using the cumulative effect approach, which effect was immaterial as of the transition date.
The standard outlines a single comprehensive model of accounting for revenue arising from contracts with customers and supersedes IAS 18, Revenue, and IAS 11, Construction contracts (the "previous standards"). The model includes five steps for analyzing transactions so as to determine when to recognize revenue and at
what amount:
|
1)
|
Identifying the contract with the customer.
|
|
2)
|
Identifying separate performance obligations in the contract.
|
|
3)
|
Determining the transaction price.
|
|
4)
|
Allocating the transaction price to separate performance obligations.
|
|
5)
|
Recognizing revenue when the performance obligations are satisfied.
|
(1) Identifying the contract with the customer
Two or more contracts entered into at or near the same time with the same customer (or related parties of the customer) are accounted for as a single contract if one or
more of the following criteria are met:
a. The contracts are negotiated as a package with a single commercial objective;
b. The amount of consideration to be paid in one contract depends on the price or performance of the other contract;
c. The goods or services promised in the contracts (or some goods or services promised in each of the contracts) are a single performance
obligation.
(2) Identifying performance obligations
The Group assesses the goods or services promised in the contract with the customer and identifies as performance obligation any promise to transfer to the customer one
of the following:
|
(a)
|
Goods or services (or a bundle of goods or services) that are distinct; or
|
|
(b)
|
A series of distinct goods or services that are substantially the same and have the same pattern of transfer to the customer.
|
Goods or services are identified as being distinct when the customer can benefit from the good or service on its own or together with other resources that are readily
available to the customer and the Group’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract. An option that grants the customer the right to purchase additional goods or
services constitutes a separate performance obligation in the contract only if the options grant the customer a material right it would not have received without the original contract.
The performance obligations are mainly services, equipment and options to purchase additional goods or services that provide a material right to the customer.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
n. Revenues (continued)
(3) Determining the transaction price
The transaction price is also adjusted for the effects of the time value of money if the contract includes a significant financing component (such as sales of equipment
with non-current credit arrangements, mainly in 36 monthly installments) and for any consideration payable to the customer.
The Group applies a practical expedient in the standard and does not adjust the transaction price for the effects of a significant financing component if, at contract
inception, the Group expects the period between customer payment and the transfer of goods or services to be one year or less. The financing component is recognized in other income-net over the period which is calculated according to the
effective interest method. See also note 23 – unwinding of trade receivables and note 7(a).
(4) Allocating the transaction price to separate performance obligations
In a transaction that constitutes a revenue arrangement with multiple performance obligations, the transaction price is allocated to separate performance obligations
based of their relative stand-alone selling prices, see also note 4(b)(2).
(5) Satisfaction of performance obligations
The Group recognizes revenue when it satisfies performance obligations by transferring control over the goods or services to the customers.
Revenues from services and from providing rights to use the Group's assets, (see note 1(b)) (either month-by-month or long term arrangements) are recognized over time,
as the services are rendered to the customers, since the customer receives and uses the benefits simultaneously , and provided that all other revenue recognition criteria are met.
Revenue from sale of equipment (see note 1(b)) is recognized at a point of time when the control over the equipment is transferred to the customer (mainly upon
delivery) and all other revenue recognition criteria are met.
(6) Principal – Agent consideration
The Group determines whether it is acting as a principal or as an agent for each performance obligation. The Group is acting as a principal if it controls a promised
good or service before they are transferred to a customer. Indicators for acting as a principal include: (1) the Group is primarily responsible for fulfilling the promise to provide the specified good or service, (2) the Group has inventory
risk in the specified good or service and (3) the Group has discretion in establishing the price for the specified good or service. On the other hand, the Group is acting as an agent or an intermediary, if these criteria are not met. When
the Group is acting as an agent, revenue is recognized in the amount of any fee or commission to which the Group expects to be entitled in exchange for arranging for the other party to provide its goods or services. A Group’s fee or
commission might be the net amount of consideration that the Group retains after paying the other party the consideration received in exchange for the goods or services to be provided by that party. The Group determined that it is acting as
an agent in respect of certain content services provided by third parties to customers; therefore the revenues recognized from these services are presented on a net basis in the statement of income.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
n. Revenues (continued)
(7) Recognition of receivables
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. Trade receivables are recognized when the
control over the goods or services is transferred to the customer, and at the amount that is unconditional because only the passage of time is required before the payment is due. The Group holds the trade receivables with the objective to
collect the contractual cash flows, and the contractual terms give rise to cash flows that are solely payments of principal and interest. Therefore they are subsequently measured at amortized cost using the effective interest method. See
also note 7 and also note 6(a)(3) regarding trade receivables credit risk.
(8) Recognition of contract assets and contract liabilities
A contract asset is a Group’s right to consideration in exchange for goods or services that the entity has transferred to a customer when
that right is conditioned on something other than the passage of time (for example, the Group’s future performance).
A contract liability is a Group’s obligation to transfer goods or services to a customer for which the entity has received
consideration (or the amount is due) from the customer; therefore the Group records contract liabilities for payments received in advance for services, such as transmission services and pre-paid calling cards, as deferred revenues until
such related services are provided.
Contract assets and contract liabilities arising from the same contract are offset and presented as a single asset or liability.
(9) Transition to the new revenue recognition model and practical expedients applied:
The Group applied IFRS 15 using the cumulative effect approach as from the transition date, without a restatement of comparative figures. As part of the initial
implementation of IFRS 15, the Group has chosen to apply the expedients in the transitional provisions, according to which the cumulative effect approach is applied only for contracts not yet complete at the transition date, and therefore
there is no change in the accounting treatment for contracts completed at the transition date. The Group also applied the practical expedient of examining the aggregate effect of contracts changes that occurred before the transition date,
instead of examining each change separately. Contracts that are renewed on a monthly basis and may be cancelled by the customer at any time, without penalty, were considered completed contracts at the transition date. The transition
resulted in an immaterial amount on the statement of financial position as of the transition date, as the cumulative effect as of the transition date was immaterial.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
n. Revenues (continued)
(10) Other practical expedients implemented:
The Group applies IFRS 15 practical expedient to the revenue model to a portfolio of contracts with similar characteristics if the Group reasonably expects that the
financial statement effects of applying the model to the individual contracts within the portfolio would not differ materially.
The Group applies a practical expedient in the standard and measures progress toward completing satisfaction of a performance obligation and recognizes revenue based on
billed amounts if the Group has a right to invoice a customer at an amount that corresponds directly with its performance to date; for which, or where the original expected duration of the contract is one year or less, the group also
applies the practical expedient in the standard and does not disclose the transaction price allocated to unsatisfied, or partially unsatisfied, performance obligations, such as constrained variable consideration.
The Group applies in certain circumstances where the customer has a material right to acquire future goods or services and those goods or services are similar to the
original goods or services in the contract and are provided in accordance with the same terms of the original contract, a practical alternative to estimating the stand-alone selling price of the customer option, and instead allocates the
transaction price to the optional goods or services by reference to the goods or services expected to be provided and the corresponding expected consideration.
(11) Capitalization of contract costs
The main effect of the Group’s application of IFRS 15 is the accounting treatment for the incremental costs of obtaining contracts with customers, which in accordance
with IFRS 15, are recognized as assets under certain conditions, see notes 2(f)(5), 11. Contract costs that were recognized as assets are presented in the statements of cash flows as part of cash flows used in investing activities.
(12) Use of judgments and estimates
Implementation of the accounting policy described above requires management to exercise discretion in estimates and judgments, see notes 4(a)(1) and 4(b)(2).
See additional information with respect to revenues in note 22(a).
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
n. Revenues (continued)
(13) Quantitative information with respect to transition to IFRS15
The tables below summarize the effects of IFRS 15 on the consolidated statement of financial position as at December 31, 2017 and on the consolidated statements of
income and cash flows for the year then ended.
Effect of change on consolidated statement of financial position:
|
|
New Israeli Shekels in millions
|
|
|
|
As of December 31, 2017
|
|
|
|
Previous accounting
policy
|
|
|
Effect of
change
|
|
|
According to IFRS15 as reported
|
|
Current assets - other receivables and prepaid expenses - Contract assets
|
|
|
-
|
|
|
|
2
|
|
|
|
2
|
|
Non-current assets - Costs to obtain contracts recognized in intangible assets, net – non-current assets
|
|
|
-
|
|
|
|
71
|
|
|
|
71
|
|
Deferred income tax asset
|
|
|
71
|
|
|
|
(16
|
)
|
|
|
55
|
|
Current liabilities - other deferred revenues – Contract liabilities
|
|
|
36
|
|
|
|
4
|
|
|
|
40
|
|
Non-current liabilities – other non-current liabilities – Contract liabilities
|
|
|
6
|
|
|
|
-
|
|
|
|
6
|
|
Deferred revenues from Hot Mobile – Contract liabilities (current and non-current)
|
|
|
195
|
|
|
|
-
|
|
|
|
195
|
|
Equity
|
|
|
1,381
|
|
|
|
53
|
|
|
|
1,434
|
|
Effect of change on consolidated statement of income:
|
|
New Israeli Shekels
In millions (except per share data)
|
|
|
|
Year ended December 31, 2017
|
|
|
|
Previous accounting
policy
|
|
|
Effect of
change
|
|
|
According to IFRS15 as reported
|
|
Revenues
|
|
|
3,270
|
|
|
|
(2
|
)
|
|
|
3,268
|
|
Selling and marketing expenses
|
|
|
340
|
|
|
|
(71
|
)
|
|
|
269
|
|
Operating profit
|
|
|
246
|
|
|
|
69
|
|
|
|
315
|
|
Profit before income tax
|
|
|
66
|
|
|
|
69
|
|
|
|
135
|
|
Income tax expenses
|
|
|
5
|
|
|
|
16
|
|
|
|
21
|
|
Profit for the year
|
|
|
61
|
|
|
|
53
|
|
|
|
114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense
|
|
|
567
|
|
|
|
13
|
|
|
|
580
|
|
Basic earnings per share
|
|
|
0.38
|
|
|
|
0.32
|
|
|
|
0.70
|
|
Diluted earnings per share
|
|
|
0.37
|
|
|
|
0.32
|
|
|
|
0.69
|
|
Effect of change on consolidated statement cash flows:
|
|
New Israeli Shekels in millions
|
|
|
|
Year ended December 31, 2017
|
|
|
|
Previous accounting
policy
|
|
|
Effect of
change
|
|
|
According to IFRS15 as reported
|
|
Net cash provided by operating activities
|
|
|
897
|
|
|
|
76
|
|
|
|
973
|
|
Net cash provided by (used in) investing activities
|
|
|
4
|
|
|
|
(76
|
)
|
|
|
(72
|
)
|
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)
The Group's leases primarily are operating leases. Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified
as operating leases. Payments made under operating leases (net of any incentives received from lessor) are charged to income statements on a straight-line basis over the lease term, including extending options which are reasonably certain.
The tax expense for the period comprises current and deferred tax. Tax is recognized in the income statement except to the extent that it relates to items recognized in
other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantially enacted as of the end of the reporting period. Management periodically
evaluates positions taken with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is recognized on temporary differences arising between that tax bases of assets and liabilities and their carrying amounts in the financial
statements. However, deferred tax liabilities are not recognized if they arise from initial recognition of goodwill. Deferred income tax is determined using the tax rates (and laws) that have been enacted or substantially enacted by the end
of the reporting period and are expected to apply when the related deferred income tax is realized or the deferred income tax liability is settled. Deferred income tax assets are recognized only to the extent that it is probable that future
taxable profit will be available against which the temporary differences can be utilized. Deferred income tax assets are presented as non-current, see also note 25.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the
deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on the same taxable entity where there is an intention to settle the balances on a net basis.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (continued)
Ordinary shares are classified as equity.
Company's shares acquired by the Company (treasury shares) are presented as a reduction of equity, at the consideration paid, including any incremental attributable
costs, net of tax. Treasury shares do not have a right to receive dividends or to vote. See also note 21(a).
|
r.
|
Earnings Per Share (EPS)
|
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue
during the year excluding ordinary shares purchased by the Company and held as treasury shares.
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume exercise of all dilutive potential ordinary
shares. The instruments that are potential dilutive ordinary shares are equity instruments granted to employees, see note 21(b). A calculation is done to determine the number of shares that could have been acquired at fair value (determined
as the average annual market share price of the company's shares) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is compared with the number of shares
that would have been issued assuming the exercise of the share options (see note 27).
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 – RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
(1) The following relevant new standards, amendments to standards or interpretations have been issued, and were effective for the first time for
financial periods beginning on or after January 1, 2018.
IFRS 9, Financial Instruments, addresses the classification, measurement and derecognition of financial assets and financial
liabilities, introduces new rules for hedge accounting and a new impairment model for financial assets. IFRS 9 retains but simplifies the measurement model and establishes three primary measurement categories for financial assets: amortized
cost, fair value through other comprehensive income and fair value through profit or loss (see note 6(c)). It introduces a new expected credit losses model that replaces the incurred loss impairment model used in IAS 39. For financial
liabilities there were no changes to classification and measurement except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. The Group applied
the new rules retrospectively from January 1, 2018, with the practical expedients permitted under the standard. The Group has elected not to restate comparative information. As a result, the comparative information provided continues to be
accounted for in accordance with the group’s previous accounting policy. The effect of IFRS 9 implementation was not material.
(2) The following relevant new standards, amendments to standards or interpretations have been issued, but are not effective for the financial
periods beginning January 1, 2018, and have not been early adopted:
(a) IFRS 16, Leases. It will result in almost all leases, where the Group is the lessee, being recognized on the balance
sheet, as the distinction between operating and finance leases is removed for lessees. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay lease payments are recognized on the statement of
financial position. The only exceptions for lessees are short-term (not applied) and low-value leases (applied) which will be recognized on a straight-line basis as expense in profit or loss. The statement of profit or loss will also be
affected because operating expense will be replaced with interest and depreciation. Operating cash flows will be higher as cash payments of the lease liability will be classified within financing activities. The accounting for lessors will
not significantly change.
The lease liability will subsequently be measured according to the effective interest method, with interest costs recognized in the statement of income as incurred.
Lease payments will be presented in the statement of cash flows under the cash used in financing activities. The right of use asset will subsequently be amortized according to the straight line method over the contract term using the
portfolio approach. The main lease contracts expected to affect the financial statements are operating leases where the Group leases offices, retail stores and service centers, cell sites, and vehicles, see note 19.
Assets and liabilities from a lease will initially be measured on a present value basis. Lease liabilities will include the net present value of the following lease
payments:
|
·
|
fixed payments (including in-substance fixed payments), less any lease incentives receivable
|
|
·
|
variable lease payment that are based on an index or a rate
|
|
·
|
amounts expected to be payable by the lessee under residual value guarantees
|
|
·
|
the exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and
|
|
·
|
payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
|
Right-of-use assets will be measured at cost comprising the following:
|
·
|
the amount of the initial measurement of lease liability
|
|
·
|
any lease payments made at or before the commencement date less any lease incentives received
|
|
·
|
any initial direct costs (except for initial application), and
|
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 – RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
(2) The following relevant new standards, amendments to standards or interpretations have been issued, but are not effective for the
financial periods beginning January 1, 2018, and have not been early adopted (continued):
(a) IFRS 16, Leases (continued):
The Group also plans to apply the following practical expedients:
|
·
|
practical expedient by class of underlying asset not to separate non-lease components (services) from lease components and, instead, account for each lease component and any associated non lease components as a single lease
component.
|
|
·
|
using a portfolio of leases with similar characteristics if the entity reasonably expects that the effects on the financial statements of applying this Standard to the portfolio would not differ materially from applying this
Standard to the individual leases within that portfolio. And using a single discount rate to a portfolio of leases with reasonably similar characteristics (such as leases with a similar remaining lease term for a similar class of
underlying asset in a similar economic environment).
|
The Group will apply the standard from its mandatory adoption date January 1, 2019. The Group intends to apply the simplified transition approach and will not restate comparative amounts for
the year prior to first adoption. Right-of-use assets for certain property leases will be measured on transition as if the new rules had always been applied. All other right-of-use assets will be measured at the amount equal to the lease
liability on adoption (adjusted for any prepaid or accrued lease expenses, dismantling and restoring obligations).
|
·
|
On transition the Group plans to use the following practical expedients:
|
|
·
|
the lease liability will be measured for leases previously classified as an operating leases under IAS 17 at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate at the
date of initial application;
|
|
·
|
will rely on its assessment of whether leases are onerous applying IAS 37 Provisions, Contingent Liabilities and Contingent Assets immediately before the date of initial application as an alternative to performing an impairment
review;
|
|
·
|
not reassess whether a contract is, or contains, a lease at the date of initial application, and therefore IFRS 16 will not be applied to contracts that were not previously identified as containing a lease.
|
|
·
|
Initial direct costs will be excluded from the measurement of the right-of-use asset at the date of initial application;
|
|
·
|
use hindsight, such as in determining the lease term if the contract contains options to extend or terminate the lease.
|
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 – RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
(2) The following relevant new standards, amendments to standards or interpretations have been issued, but are not effective for the
financial periods beginning January 1, 2018, and have not been early adopted (continued):
(a) IFRS 16, Leases (continued):
As described in note 9 in January 2019 the governance of PHI was changed and PHI will be accounted for as a joint operation by the Company. Therefore the below
estimates of the expected effect of the standard are presented including the Company's share in relation to its interests in the assets, liabilities and expenses of PHI. IFRS 16 will affect primarily the accounting for the Group’s operating
leases (see note 19). The below estimates of impacts from the implementation of IFRS 16 are based on contract terms and discount rates that existed as of December 31, 2018, and under the assumption that they will not change during 2019.
Upon the implementation of IFRS 16 on January 1, 2019 the Group expects to recognize right-of-use assets of approximately NIS 660 million, lease liabilities of approximately NIS 690, a charge to accumulated earnings of approximately NIS 20
million, and a deferred tax asset in an immaterial amount. In the consolidated statement of income for 2019 lease expenses are expected to decrease by approximately NIS 150 million, amortization expenses and interest expenses are expected
to increase by approximately NIS 160 million, and profit is expected to decrease by an immaterial amount. In the consolidated statement of cash flows for 2019 cash from operating activities is expected to increase by approximately NIS 140
million and cash from financing activities is expected to decrease by approximately NIS 140 million.
(b) Annual Improvements to IFRS Standards 2015-2017 Cycle amended IFRS 11 Joint arrangements and clarified that the party
obtaining joint control of a business that is a joint operation should not remeasure its previously held interest in the joint operation. The amendment is effective from January 1, 2019.
(c) Interpretation 23 Uncertainty over Income Tax Treatments, The interpretation explains how to recognize and measure
deferred and current income tax assets and liabilities where there is uncertainty over a tax treatment. The amendment is effective from January 1, 2019. Its effect on the financial statements is not expected to be material.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 – CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to
be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal actual results. The estimates and assumptions that have a
significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.
a. Critical accounting estimates and assumptions
|
(1)
|
Assessing the useful lives of non-financial assets:
|
The useful economic lives of the Group's non-financial assets are an estimate determined by management. The Group defines useful economic life of its assets in terms
of the assets' expected utility to the Group. This estimation is based on assumptions of future changes in technology or changes in the Group's intended use of these assets, and experience of the Group with similar assets, and legal or
contract periods where relevant. The assets estimated economic useful lives are reviewed, and adjusted if appropriate, at least annually. See also note 2(e) and note 2(f).
The useful economic lives of contract costs (see notes 2(n), 2(f)(5)) are an estimate determined by management. Contract costs are amortized in accordance with the
expected service period (mainly over 2-3 years), using the portfolio approach. The assets estimated economic useful lives are reviewed, and adjusted if appropriate, at least annually. See also note 11.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 – CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)
a. Critical accounting estimates and assumptions (continued)
|
(2)
|
Assessing the recoverable amount for impairment tests of assets with finite useful lives:
|
The Group is required to determine at the end of each reporting period whether there is any indication that an asset may be impaired. If indicators for impairment are
identified the Group estimates the assets' recoverable amount, which is the higher of an asset's fair value less costs to sell and value in use. The value-in-use calculations require management to make estimates of the projected future cash
flows. Determining the estimates of the future cash flows is based on management past experience and best estimate for the economic conditions that will exist over the remaining useful economic life of the Cash Generating Unit (CGU). See
also note 2(i).
No indicators for an impairment or reversal of impairment of assets with finite useful lives were identified in 2018.
Trends in the economic and financial environment, competition and regulatory authorities' decisions, or changes in competitors’ behavior in response to the economic
environment may affect the estimate of recoverable amounts in future periods. See also note 2(i).
Continued increases in the level of competition for cellular and fixed-line services may bring further downward pressure on prices which may require us to perform
further impairment tests of our assets. Such impairment tests may lead to recording additional significant impairment charges, which could have a material negative impact on our operating and profit.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 –CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)
a. Critical accounting estimates and assumptions (continued)
(3) Assessing the recoverable amount of goodwill for impairment tests:
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate that the carrying amount may not be recoverable.
The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. The recoverable amount of the fixed line segment to which goodwill has been allocated to have been determined based on value-in-use
calculations. For the purpose of the goodwill impairment tests as of December 31, 2016, 2017 and 2018 the recoverable amount was assessed by management with the assistance of external independent experts (BDO Ziv Haft Consulting &
Management Ltd.) based on value-in-use calculations. The value-in-use calculations use pre-tax cash flow projections covering a five-year period. Cash flows beyond the five-year period to be generated from continuing use are extrapolated
using estimated growth rates. The growth rate represents the long-term average growth rate of the fixed-line communications services business.
The key assumptions used in the December 31, 2018 test were as follows:
Terminal growth rate
|
1.0%
|
|
After-tax discount rate
|
9.5%
|
|
Pre-tax discount rate
|
11.5%
|
|
The impairment test as of December 31, 2018 was based on assessments of financial performance and future strategies in light of current and expected market and economic
conditions. Trends in the economic and financial environment, competition and regulatory authorities' decisions, or changes in competitors’ behavior in response to the economic environment may affect the estimate of recoverable amounts. See
also note 13(1) and note 2(h). No impairment charges were recognized with respect to goodwill in 2016, 2017 and 2018.
Sensitivity Analysis:
The headroom of the fixed line segment recoverable amount over the carrying amount as of December 31, 2016, 2017 and 2018 was approximately 23%, 23% and 21%
respectively. Sensitivity analysis was performed for the recoverable amount as of December 31, 2018 for a change of the after-tax discount rate within the range of ± 10% multiplied by the variable 9.5% (8.6% to 10.5%), assuming all other
variables constant. Sensitivity analysis was also performed for a change of the terminal permanent growth rate within the range of ± 1% of the variable 1.0% (0% to 2%), assuming all other variables constant. Results showed that no
impairment charge is required for both analyses.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 – CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)
a. Critical accounting estimates and assumptions (continued)
|
(4)
|
Assessing impairment of financial assets:
|
The allowance for credit losses for financial assets is based on assumptions about risk of default and expected loss rates. The Group uses judgment in
making these assumptions and selecting the inputs to the impairment calculation, based on the Group’s past history, existing market conditions as well as forward looking estimates at the end of each reporting period. Individual receivables
which are known to be uncollectable are written off by reducing the carrying amount directly. The other receivables are assessed collectively, grouped based on shared credit risk characteristics and the days past due.
From January 1, 2018, upon the implementation of IFRS 9 the Group assesses on a forward looking basis the expected credit losses associated with its
debt instruments carried at amortized cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. For trade receivables and contract assets with and without significant financing
components, the Group applies IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on shared credit
risk characteristics and period past due. The expected loss rates are based on the payment profiles of sales, and the corresponding historical credit losses experienced. The historical loss rates are adjusted to reflect current and
forward-looking information on factors affecting the ability of the customers to settle the receivables. See notes 7, 6(a)(3), 2(j), 3(1).
|
(5)
|
Considering uncertain tax positions:
|
The assessment of amounts of current and deferred taxes requires the Group's management to take into consideration uncertainties that its tax position will be accepted
and of incurring any additional tax expenses. This assessment is based on estimates and assumptions based on interpretation of tax laws and regulations, and the Group's past experience. It is possible that new information will become known
in future periods that will cause the final tax outcome to be different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such
determination is made. See also notes 2(p) and note 25.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 – CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)
b. Critical judgments in applying the Group's accounting policies
(1) Considering the likelihood of contingent losses and quantifying possible legal settlements:
Provisions are recorded when a loss is considered probable and can be reasonably estimated. Judgment is necessary in assessing the likelihood that a pending claim or
litigation against the Group will succeed, or a liability will arise, quantifying the best estimate of final settlement. These judgments are made by management with the support of internal specialists, or with the support of outside
consultants such as legal counsel. Because of the inherent uncertainties in this evaluation process, actual results may be different from these estimates. See notes 2(m), 14 and 20.
(2) Considering contracts with customers with multiple performance obligations:
Some contracts with customers include several performance obligations, and consideration (including any discounts) is allocated to them based their relative stand-alone
selling prices.
Management estimates the stand-alone selling price at contract inception based on observable prices of the type of goods and services in similar circumstances to similar
customers. Where these are not directly observable (such as a service or equipment that are sold only in a bundle arrangement), they are estimated based on adjusted market approach or cost-plus expected margin. See also note 2(n).
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 – SEGMENT INFORMATION
|
|
New Israeli Shekels
|
|
|
|
Year ended December 31, 2018*
|
|
|
|
In millions
|
|
|
|
Cellular segment
|
|
|
Fixed-line segment
|
|
|
Elimination
|
|
|
Consolidated
|
|
Segment revenue - Services
|
|
|
1,827
|
|
|
|
697
|
|
|
|
|
|
|
2,524
|
|
Inter-segment revenue - Services
|
|
|
16
|
|
|
|
155
|
|
|
|
(171
|
)
|
|
|
|
|
Segment revenue - Equipment
|
|
|
643
|
|
|
|
92
|
|
|
|
|
|
|
|
735
|
|
Total revenues
|
|
|
2,486
|
|
|
|
944
|
|
|
|
(171
|
)
|
|
|
3,259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment cost of revenues - Services
|
|
|
1,435
|
|
|
|
696
|
|
|
|
|
|
|
|
2,131
|
|
Inter-segment cost of revenues- Services
|
|
|
154
|
|
|
|
17
|
|
|
|
(171
|
)
|
|
|
|
|
Segment cost of revenues - Equipment
|
|
|
509
|
|
|
|
60
|
|
|
|
|
|
|
|
569
|
|
Cost of revenues
|
|
|
2,098
|
|
|
|
773
|
|
|
|
(171
|
)
|
|
|
2,700
|
|
Gross profit
|
|
|
388
|
|
|
|
171
|
|
|
|
|
|
|
|
559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses (3)
|
|
|
343
|
|
|
|
128
|
|
|
|
|
|
|
|
471
|
|
Other income, net
|
|
|
23
|
|
|
|
5
|
|
|
|
|
|
|
|
28
|
|
Operating profit
|
|
|
68
|
|
|
|
48
|
|
|
|
|
|
|
|
116
|
|
Adjustments to presentation of segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
–Depreciation and amortization
|
|
|
442
|
|
|
|
150
|
|
|
|
|
|
|
|
|
|
–Other (1)
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Adjusted EBITDA (2)
|
|
|
524
|
|
|
|
198
|
|
|
|
|
|
|
|
|
|
|
|
New Israeli Shekels
|
|
|
|
Year ended December 31, 2018*
|
|
|
|
In millions
|
|
Reconciliation of segments subtotal Adjusted EBITDA to profit for the year
|
|
|
|
Segments subtotal Adjusted EBITDA (2)
|
|
|
722
|
|
Depreciation and amortization
|
|
|
(592
|
)
|
Finance costs, net
|
|
|
(53
|
)
|
Income tax expenses
|
|
|
(7
|
)
|
Other (1)
|
|
|
(14
|
)
|
Profit for the year
|
|
|
56
|
|
|
|
|
|
|
* See Notes 2(n), 2(f)(5) regarding the adoption of IFRS15, Revenue from Contracts with Customers. In 2018, costs of obtaining contracts with
customers were capitalized in the amounts of NIS 62 million and NIS 29 million for the cellular segment and the fixed-line segment, respectively. In 2018, amortization expenses of costs of obtaining contracts with customers for the cellular
segment and the fixed-line segment were recorded in the amounts of NIS 36 million and NIS 13 million, respectively.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 – SEGMENT INFORMATION (continued)
|
|
New Israeli Shekels
|
|
|
|
Year ended December 31, 2017*
|
|
|
|
In millions
|
|
|
|
Cellular segment
|
|
|
Fixed-line segment
|
|
|
Elimination
|
|
|
Consolidated
|
|
Segment revenue - Services
|
|
|
1,960
|
|
|
|
622
|
|
|
|
|
|
|
2,582
|
|
Inter-segment revenue - Services
|
|
|
18
|
|
|
|
155
|
|
|
|
(173
|
)
|
|
|
|
|
Segment revenue - Equipment
|
|
|
610
|
|
|
|
76
|
|
|
|
|
|
|
|
686
|
|
Total revenues
|
|
|
2,588
|
|
|
|
853
|
|
|
|
(173
|
)
|
|
|
3,268
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment cost of revenues - Services
|
|
|
1,470
|
|
|
|
613
|
|
|
|
|
|
|
|
2,083
|
|
Inter-segment cost of revenues- Services
|
|
|
154
|
|
|
|
19
|
|
|
|
(173
|
)
|
|
|
|
|
Segment cost of revenues - Equipment
|
|
|
490
|
|
|
|
54
|
|
|
|
|
|
|
|
544
|
|
Cost of revenues
|
|
|
2,114
|
|
|
|
686
|
|
|
|
(173
|
)
|
|
|
2,627
|
|
Gross profit
|
|
|
474
|
|
|
|
167
|
|
|
|
|
|
|
|
641
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses (3)
|
|
|
367
|
|
|
|
98
|
|
|
|
|
|
|
|
465
|
|
Income with respect to settlement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
agreement with Orange
|
|
|
108
|
|
|
|
|
|
|
|
|
|
|
|
108
|
|
Other income, net
|
|
|
29
|
|
|
|
2
|
|
|
|
|
|
|
|
31
|
|
Operating profit
|
|
|
244
|
|
|
|
71
|
|
|
|
|
|
|
|
315
|
|
Adjustments to presentation of segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
–Depreciation and amortization
|
|
|
445
|
|
|
|
135
|
|
|
|
|
|
|
|
|
|
–Other (1)
|
|
|
21
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
Segment Adjusted EBITDA (2)
|
|
|
710
|
|
|
|
207
|
|
|
|
|
|
|
|
|
|
|
|
New Israeli Shekels
|
|
|
|
Year ended December 31, 2017*
|
|
|
|
In millions
|
|
Reconciliation of segments subtotal Adjusted EBITDA to profit for the year
|
|
|
|
Segments subtotal Adjusted EBITDA (2)
|
|
|
917
|
|
Depreciation and amortization
|
|
|
(580
|
)
|
Finance costs, net
|
|
|
(180
|
)
|
Income tax expenses
|
|
|
(21
|
)
|
Other (1)
|
|
|
(22
|
)
|
Profit for the year
|
|
|
114
|
|
* See Notes 2(n), 2(f)(5) regarding the early adoption of IFRS15, Revenue from Contracts with Customers. In 2017 costs of obtaining contracts with
customers were capitalized in amounts of NIS 64 million and NIS 20 million for the cellular segment and the fixed-line segment, respectively. The adoption of IFRS15 resulted in an increase in amortization expenses in 2017 for the cellular
segment and the fixed-line segment in amounts of NIS 11 million and NIS 2 million, respectively.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 – SEGMENT INFORMATION (continued)
|
|
New Israeli Shekels
|
|
|
|
Year ended December 31, 2016
|
|
|
|
In millions
|
|
|
|
Cellular segment
|
|
|
Fixed-line segment
|
|
|
Elimination
|
|
|
Consolidated
|
|
Segment revenue - Services
|
|
|
2,080
|
|
|
|
672
|
|
|
|
|
|
|
2,752
|
|
Inter-segment revenue - Services
|
|
|
19
|
|
|
|
194
|
|
|
|
(213
|
)
|
|
|
|
|
Segment revenue - Equipment
|
|
|
729
|
|
|
|
63
|
|
|
|
|
|
|
|
792
|
|
Total revenues
|
|
|
2,828
|
|
|
|
929
|
|
|
|
(213
|
)
|
|
|
3,544
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment cost of revenues - Services
|
|
|
1,659
|
|
|
|
617
|
|
|
|
|
|
|
|
2,276
|
|
Inter-segment cost of revenues- Services
|
|
|
192
|
|
|
|
21
|
|
|
|
(213
|
)
|
|
|
|
|
Segment cost of revenues - Equipment
|
|
|
596
|
|
|
|
52
|
|
|
|
|
|
|
|
648
|
|
Cost of revenues
|
|
|
2,447
|
|
|
|
690
|
|
|
|
(213
|
)
|
|
|
2,924
|
|
Gross profit
|
|
|
381
|
|
|
|
239
|
|
|
|
|
|
|
|
620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses (3)
|
|
|
571
|
|
|
|
118
|
|
|
|
|
|
|
|
689
|
|
Income with respect to settlement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
agreement with Orange
|
|
|
217
|
|
|
|
|
|
|
|
|
|
|
|
217
|
|
Other income, net
|
|
|
41
|
|
|
|
4
|
|
|
|
|
|
|
|
45
|
|
Operating profit
|
|
|
68
|
|
|
|
125
|
|
|
|
|
|
|
|
193
|
|
Adjustments to presentation of segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
–Depreciation and amortization
|
|
|
447
|
|
|
|
148
|
|
|
|
|
|
|
|
|
|
–Other (1)
|
|
|
47
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
Segment Adjusted EBITDA (2)
|
|
|
562
|
|
|
|
272
|
|
|
|
|
|
|
|
|
|
|
|
New Israeli Shekels
|
|
|
|
Year ended December 31, 2016
|
|
|
|
In millions
|
|
Reconciliation of segments subtotal Adjusted EBITDA to profit for the year
|
|
|
|
Segments subtotal Adjusted EBITDA (2)
|
|
|
834
|
|
Depreciation and amortization
|
|
|
(595
|
)
|
Finance costs, net
|
|
|
(105
|
)
|
Income tax expenses
|
|
|
(36
|
)
|
Other (1)
|
|
|
(46
|
)
|
Profit for the year
|
|
|
52
|
|
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 – SEGMENT INFORMATION (continued)
|
(1)
|
Mainly amortization of employee share based compensation.
|
|
(2)
|
Adjusted EBITDA as reviewed by the CODM represents Earnings before Interest (finance costs, net), Taxes, Depreciation and Amortization (including amortization of intangible assets, deferred expenses-right of use and impairment
charges) and Other expenses (mainly amortization of share based compensation). Adjusted EBITDA is not a financial measure under IFRS and may not be comparable to other similarly titled measures for other companies. Adjusted EBITDA
may not be indicative of the Group's historic operating results nor is it meant to be predictive of potential future results. The usage of the term "Adjusted EBITDA" is to highlight the fact that the
Amortization includes amortization of deferred expenses – right of use and amortization of employee share based compensation and impairment charges.
|
|
(3)
|
Operating expenses include selling and marketing expenses, general and administrative expenses and credit losses.
|
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 – FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT
|
a.
|
Financial risk factors
|
The Group is exposed to a variety of financial risks: credit, liquidity and market risks as part of its normal course of business. The Group's risk management objective is to monitor risks
and minimize the possible influence that results from this exposure, according to its evaluations and expectations of the parameters that affect the risks. The Group did not enter into interest rate hedging transactions, CPI hedging
transactions nor free standing exchange rate forward transactions in 2016, 2017, 2018.
1. Risk Management
Risk management is carried out by the financial division under policies and/or directions resolved and approved by the audit committee and the board of directors.
2. Market risks
(a) Description of market risks
Cash flow risk due to interest rate changes and CPI changes
The Group is exposed to fluctuations in the Israeli Consumer Price index (CPI). See also note 19.
Furthermore, the Group's notes payable bearing variable interest rate cause cash flow risks. Based on simulations performed, an increase (decrease) of 1% interest rates
during 2018 in respect of the abovementioned financial instruments would have resulted in an annual increase (decrease) in interest expenses of NIS 4 million.
Foreign exchange risk
The Group's operating profit and cash flows are exposed to currency risk, mainly due to trade receivables and trade payables denominated in USD.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 – FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (continued)
|
a.
|
Financial risk factors (continued)
|
2. Market risks (continued)
(a) Description of market risks (continued)
Data regarding the US Dollar and Euro exchange rate and the Israeli CPI:
|
|
Exchange
|
|
|
Exchange
|
|
|
|
|
|
|
rate of one
|
|
|
rate of one
|
|
|
Israeli
|
|
|
|
Dollar
|
|
|
Euro
|
|
|
CPI*
|
|
At December 31:
|
|
|
|
|
|
|
|
|
|
2018
|
|
NIS 3.748
|
|
|
NIS 4.292
|
|
|
223.33 points
|
|
2017
|
|
NIS 3.467
|
|
|
NIS 4.153
|
|
|
221.57 points
|
|
2016
|
|
NIS 3.845
|
|
|
NIS 4.044
|
|
|
220.68 points
|
|
Increase (decrease) during the year:
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
8.1
|
%
|
|
|
3.3
|
%
|
|
|
0.8
|
%
|
2017
|
|
|
(9.8
|
)%
|
|
|
2.7
|
%
|
|
|
0.4
|
%
|
2016
|
|
|
(1.5
|
)%
|
|
|
(4.8
|
)%
|
|
|
(0.2
|
)%
|
* Index for each reporting period's last month, on the basis of 1993 average = 100 points.
Sensitivity analysis:
An increase (decrease) of 2% in the CPI as at December 31, 2016, 2017 would have decreased (increased) equity and profit by NIS 9 million and NIS 3 million, for the
years ended December 31, 2016 and 2017 respectively, assuming all other variables remain constant. As at December 2018, the company has no material liabilities linked to the CPI.
An increase (decrease) of 5% in the USD exchange rate as at December 31, 2016, 2017 and 2018 would have decreased (increased) equity and profit by NIS 3 million, NIS
3 million and NIS 3 million, for the years ended December 31, 2016, 2017 and 2018 respectively, assuming that all other variables remain constant.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 – FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (continued)
|
a.
|
Financial risk factors (continued)
|
2. Market risks (continued)
(b) Analysis of linkage terms of financial instruments balances
|
|
December 31, 2018
|
|
|
|
In or linked to USD
|
|
|
In or linked to other foreign currencies
(mainly EURO)
|
|
|
NIS unlinked
|
|
|
Total
|
|
|
|
New Israeli Shekels in millions
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
*
|
|
|
|
*
|
|
|
|
416
|
|
|
|
416
|
|
Trade receivables**
|
|
|
54
|
|
|
|
14
|
|
|
|
588
|
|
|
|
656
|
|
Other receivables
|
|
|
|
|
|
|
|
|
|
|
11
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade receivables
|
|
|
|
|
|
|
|
|
|
|
260
|
|
|
|
260
|
|
Total assets
|
|
|
54
|
|
|
|
14
|
|
|
|
1,275
|
|
|
|
1,343
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current maturities of notes payable and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
borrowings
|
|
|
|
|
|
|
|
|
|
|
161
|
|
|
|
161
|
|
Trade payables**
|
|
|
126
|
|
|
|
14
|
|
|
|
571
|
|
|
|
711
|
|
Payables in respect of employees
|
|
|
|
|
|
|
|
|
|
|
73
|
|
|
|
73
|
|
Other payables
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable
|
|
|
|
|
|
|
|
|
|
|
1,012
|
|
|
|
1,012
|
|
Borrowings from banks
|
|
|
|
|
|
|
|
|
|
|
191
|
|
|
|
191
|
|
Total liabilities
|
|
|
126
|
|
|
|
14
|
|
|
|
2,009
|
|
|
|
2,149
|
|
* Representing an amount of less than one million.
|
|
|
|
|
|
|
|
|
In or linked to foreign currencies
|
|
|
|
New Israeli Shekels in millions
|
|
**Accounts that were set-off under enforceable netting arrangements
|
|
|
|
Trade receivables gross amounts
|
|
|
141
|
|
Set-off
|
|
|
(73
|
)
|
Trade receivables, net
|
|
|
68
|
|
|
|
|
|
|
Trade payables gross amounts
|
|
|
213
|
|
Set-off
|
|
|
(73
|
)
|
Trade payables, net
|
|
|
140
|
|
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 – FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (continued)
|
a.
|
Financial risk factors (continued)
|
2. Market risks (continued)
(b) Analysis of linkage terms of financial instruments balances (continued)
|
|
December 31, 2017
|
|
|
|
In or linked to USD
|
|
|
In or linked to other foreign currencies
(mainly EURO)
|
|
|
NIS linked to CPI
|
|
|
NIS unlinked
|
|
|
Total
|
|
|
|
New Israeli Shekels in millions
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
2
|
|
|
|
4
|
|
|
|
|
|
|
861
|
|
|
|
867
|
|
Short term deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150
|
|
|
|
150
|
|
Trade receivables*
|
|
|
62
|
|
|
|
34
|
|
|
|
|
|
|
712
|
|
|
|
808
|
|
Other receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
232
|
|
|
|
232
|
|
Total assets
|
|
|
64
|
|
|
|
38
|
|
|
|
|
|
|
1,964
|
|
|
|
2,066
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current maturities of notes payable and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
borrowings
|
|
|
|
|
|
|
|
|
|
|
213
|
|
|
|
491
|
|
|
|
704
|
|
Trade payables*
|
|
|
143
|
|
|
|
32
|
|
|
|
|
|
|
|
612
|
|
|
|
787
|
|
Payables in respect of employees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78
|
|
|
|
78
|
|
Other payables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
972
|
|
|
|
972
|
|
Borrowings from banks and others
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
243
|
|
|
|
243
|
|
Total liabilities
|
|
|
143
|
|
|
|
32
|
|
|
|
213
|
|
|
|
2,417
|
|
|
|
2,805
|
|
|
|
In or linked to foreign currencies
|
|
|
|
New Israeli Shekels in millions
|
|
*Accounts that were set-off under enforceable netting arrangements
|
|
|
|
Trade receivables gross amounts
|
|
|
281
|
|
Set-off
|
|
|
(185
|
)
|
Trade receivables, net
|
|
|
96
|
|
|
|
|
|
|
Trade payables gross amounts
|
|
|
360
|
|
Set-off
|
|
|
(185
|
)
|
Trade payables, net
|
|
|
175
|
|
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 – FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (continued)
|
a.
|
Financial risk factors (continued)
|
2. Market risks (continued)
(c) Details regarding the derivative financial instruments
The notional amounts of derivatives as of December 31, 2017 and 2018 are as follows, based on the amounts of currencies to be received, translated into NIS at the exchange rates prevailing
at each of the reporting dates, respectively:
|
|
New Israeli Shekels
|
|
|
|
December 31
|
|
|
|
2017
|
|
|
2018
|
|
|
|
In millions
|
|
Embedded derivatives pay USD, receive NIS
|
|
|
3
|
|
|
|
1
|
|
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 – FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (continued)
|
a.
|
Financial risk factors (continued)
|
3. Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises
principally from the Group's trade receivables, from cash and cash equivalents and other receivables. Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. The Group conducts credit
evaluations on receivables of certain types over a certain amount, and requires collaterals against them. The impairment requirements are based on an expected credit loss model that replaces the IAS 39 incurred loss model. Accordingly, the
financial statements include appropriate allowances for expected credit losses. See also notes 2(j)(2) and 4(a)(4).
The face amount of financial assets represents the maximum credit exposure, see note 6(c).
The cash and cash equivalents are held in leading Israeli commercial banks, rated by Standard & Poor's Maalot at between ilAA+/Stable to ilAAA/stable.
The trade receivables are significantly widespread, and include individuals and businesses, and therefore have no representing credit rating.
See also note 7 as to the assessment by aging of the trade receivables and related allowance for credit losses.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 – FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (continued)
|
a.
|
Financial risk factors (continued)
|
4. Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group's approach to managing liquidity is to ensure,
as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, without incurring unacceptable losses or risking damage to the Group's reputation. The Group's policy is to ensure that it has sufficient
cash and cash equivalents to meet expected operational expenses and financial obligations.
Maturities of financial liabilities as of December 31, 2018:
|
|
2019
|
|
|
2020
|
|
|
2021
|
|
|
|
|
|
2024
|
|
|
Total
|
|
|
|
New Israeli Shekels in millions
|
|
Principal payments of long term indebtedness:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable series D
|
|
|
109
|
|
|
|
109
|
|
|
|
109
|
|
|
|
|
|
|
|
|
|
327
|
|
Notes payable series F
|
|
|
|
|
|
|
159
|
|
|
|
159
|
|
|
|
318
|
|
|
|
158
|
|
|
|
794
|
|
Borrowing P
|
|
|
29
|
|
|
|
29
|
|
|
|
30
|
|
|
|
30
|
|
|
|
|
|
|
|
118
|
|
Borrowing Q
|
|
|
23
|
|
|
|
23
|
|
|
|
23
|
|
|
|
45
|
|
|
|
11
|
|
|
|
125
|
|
Expected interest payments of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
long term borrowings and notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
payables
|
|
|
28
|
|
|
|
23
|
|
|
|
17
|
|
|
|
16
|
|
|
|
2
|
|
|
|
86
|
|
Trade and other payables
|
|
|
785
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
785
|
|
Total
|
|
|
974
|
|
|
|
343
|
|
|
|
338
|
|
|
|
409
|
|
|
|
171
|
|
|
|
2,235
|
|
Add offering expenses and discounts and premiums
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,237
|
|
See note 15 in respect of borrowings and notes payable.
|
b.
|
Capital risk management
|
Credit rating: According to Standard & Poor's Maalot ("S&P Maalot") credit rating, of August 13, 2018, the Company's ilA+/Stable credit
rating was unchanged.
See note 15(5) regarding financial covenants.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 – FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (continued)
|
c.
|
Fair values of financial instruments
|
As detailed in note 2(j) the financial instruments are categorized as following:
Fair Value through Profit or Loss (FVTPL); Amortized Cost (AC). See also note 15 in respect of borrowings and notes payable and note 7 with respect to trade receivables.
The financial instruments that are categorized FVTPL are mandatorily measured at FVTPL are derivative financial instruments. Their fair values are calculated by
discounting estimated future cash flows based on the terms and maturity of each contract and using forward rates for a similar instrument at the measurement date. All significant inputs in this technique are observable market data and rely
as little as possible on entity specific estimates – this method matches the "Level 2" fair value measurement level hierarchy, see also note 6(a)(2)(c).
There were no transfers between fair value levels during the year.
Carrying amounts and fair values of financial assets and liabilities, and their categories:
|
|
|
December 31, 2017
|
|
|
December 31, 2018
|
|
|
Category
|
|
Carrying amount
|
|
|
Fair value
|
|
|
Interest rate used (***)
|
|
|
Carrying amount
|
|
|
Fair value
|
|
|
Interest rate used (***)
|
|
|
|
|
New Israeli Shekels in millions
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
AC
|
|
|
867
|
|
|
|
867
|
|
|
|
|
|
|
416
|
|
|
|
416
|
|
|
|
|
Short term deposits
|
AC
|
|
|
150
|
|
|
|
150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade receivables
|
AC
|
|
|
1,040
|
|
|
|
1,040
|
|
|
|
4.47
|
%
|
|
|
916
|
|
|
|
916
|
|
|
|
4.52
|
%
|
Other receivables (**)
|
AC
|
|
|
9
|
|
|
|
9
|
|
|
|
|
|
|
|
11
|
|
|
|
11
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable series C
|
AC
|
|
|
213
|
|
|
|
219
|
|
|
Market quote
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable series D
|
AC
|
|
|
435
|
|
|
|
443
|
|
|
Market quote
|
|
|
|
327
|
|
|
|
332
|
|
|
Market quote
|
|
Notes payable series F
|
AC
|
|
|
650
|
|
|
|
659
|
|
|
Market quote
|
|
|
|
794
|
|
|
|
786
|
|
|
Market quote
|
|
Trade and other payables (**)
|
AC
|
|
|
865
|
|
|
|
865
|
|
|
|
|
|
|
|
785
|
|
|
|
785
|
|
|
|
|
|
Borrowing K
|
AC
|
|
|
75
|
|
|
|
75
|
|
|
|
3.71
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowing L
|
AC
|
|
|
200
|
|
|
|
200
|
|
|
|
4.25
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowing O
|
AC
|
|
|
100
|
|
|
|
110
|
|
|
|
4.34
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowing P
|
AC
|
|
|
125
|
|
|
|
125
|
|
|
|
2.38
|
%
|
|
|
118
|
|
|
|
120
|
|
|
|
1.54
|
%
|
Borrowing Q
|
AC
|
|
|
125
|
|
|
|
125
|
|
|
|
2.5
|
%
|
|
|
125
|
|
|
|
127
|
|
|
|
2.05
|
%
|
Interest payable (**)
|
AC
|
|
|
21
|
|
|
|
21
|
|
|
|
|
|
|
|
*
|
|
|
|
*
|
|
|
|
|
|
Derivative financial instruments
|
FVTPL
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 2
|
|
|
*
|
|
|
|
*
|
|
|
|
|
|
|
|
*
|
|
|
|
*
|
|
|
|
|
|
|
(*)
|
Representing an amount of less than NIS 1 million.
|
|
(**)
|
The fair value of these financial instruments equals their carrying amounts, as the impact of discounting is not significant.
|
|
(***)
|
The fair values of the notes payable quoted market prices at the end of the reporting period are within level 1 of the fair value hierarchy. The fair values of other instruments
under AC categories were calculated based on observable weighted average of interest rates derived from quoted market prices of the Group's notes payable and bank quotes of rates of similar terms and nature, are within level 2 of
the fair value hierarchy.
|
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 – TRADE RECEIVABLES
|
|
New Israeli Shekels
|
|
|
|
December 31
|
|
|
|
2017
|
|
|
2018
|
|
|
|
In millions
|
|
Trade (current and non-current)
|
|
|
1,260
|
|
|
|
1,130
|
|
Deferred interest income (note 2(n))
|
|
|
(27
|
)
|
|
|
(26
|
)
|
Allowance for credit loss
|
|
|
(193
|
)
|
|
|
(188
|
)
|
|
|
|
1,040
|
|
|
|
916
|
|
Current
|
|
|
808
|
|
|
|
656
|
|
Non – current
|
|
|
232
|
|
|
|
260
|
|
Non-current trade receivables bear no interest. These balances are in respect of equipment sold in installments (13-36 monthly payments (mainly 36)). The amount is
computed on the basis of the interest rate relevant at the date of the transaction (2017: 4.47% - 4.72%) (2018: 4.22% - 4.53%).
See also notes 2(j), 4(a)(4).
|
(b)
|
Impairment of financial assets:
|
The changes in the allowance for credit losses for the years ended December 31, 2016, 2017 and 2018 are as follows:
|
|
New Israeli Shekels
|
|
|
|
Year ended
|
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
|
In millions
|
|
Balance at beginning of year
|
|
|
169
|
|
|
|
190
|
|
|
|
193
|
|
Receivables written-off during the year as uncollectible
|
|
|
(61
|
)
|
|
|
(49
|
)
|
|
|
(35
|
)
|
Charge or expense during the year*
|
|
|
82
|
|
|
|
52
|
|
|
|
30
|
|
Balance at end of year
|
|
|
190
|
|
|
|
193
|
|
|
|
188
|
|
(*) Equivalent to net impairment losses on financial and contract assets, as presented in the statement of income as Credit losses.
See notes 6(a)(3), regarding trade receivables credit risk.
Allowance for credit losses resulting from services provided under operating lease are not separately disclosed due to immateriality.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 – TRADE RECEIVABLES (continued)
(b) Allowance for credit losses (continued)
The aging of gross trade receivables and their respective allowance for credit losses as of January 1, 2018 and December 31, 2018 is as follows:
|
|
New Israeli Shekels
|
|
|
New Israeli Shekels
|
|
|
|
January 1, 2018
|
|
|
December 31, 2018
|
|
|
|
In millions
|
|
|
In millions
|
|
|
|
Average
expected
loss rate
|
|
|
Gross
|
|
|
Allowance
|
|
|
Average
expected
loss rate
|
|
|
Gross
|
|
|
Allowance
|
|
Not passed due
|
|
|
1
|
%
|
|
|
977
|
|
|
|
13
|
|
|
|
2
|
%
|
|
|
900
|
|
|
|
19
|
|
Less than one year
|
|
|
50
|
%
|
|
|
112
|
|
|
|
56
|
|
|
|
56
|
%
|
|
|
94
|
|
|
|
53
|
|
More than one year
|
|
|
73
|
%
|
|
|
171
|
|
|
|
124
|
|
|
|
85
|
%
|
|
|
136
|
|
|
|
116
|
|
|
|
|
|
|
|
|
1,260
|
|
|
|
193
|
|
|
|
|
|
|
|
1,130
|
|
|
|
188
|
|
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 – INVENTORY
|
|
New Israeli Shekels
|
|
|
|
December 31
|
|
|
|
2017
|
|
|
2018
|
|
|
|
In millions
|
|
Handsets and devices
|
|
|
60
|
|
|
|
60
|
|
Accessories and other
|
|
|
8
|
|
|
|
6
|
|
Spare parts
|
|
|
19
|
|
|
|
23
|
|
ISP modems, routers, servers and related equipment
|
|
|
6
|
|
|
|
9
|
|
|
|
|
93
|
|
|
|
98
|
|
|
|
|
|
|
|
|
|
|
Write-offs recorded
|
|
|
5
|
|
|
|
4
|
|
Cost of inventory recognized as expenses and included in cost of revenues for the year ended
|
|
|
558
|
|
|
|
586
|
|
Cost of inventory used as fixed assets
|
|
|
30
|
|
|
|
8
|
|
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 – INVESTMENT IN PHI
Network sharing agreement and right of use
On November 8, 2013 the Company and Hot Mobile Ltd. ("Hot Mobile") (together: "the Parties") entered into a 15-year network sharing agreement (“NSA”), which was approved
by the Antitrust Commissioner , subject to certain conditions, and by the Ministry of Communications. Pursuant to the NSA, the Parties created a 50-50 limited partnership - P.H.I. Networks (2015) Limited Partnership (hereinafter "PHI"),
which operates and develops a radio access network shared by the Parties, starting with a pooling of the Parties radio access network infrastructures creating a single shared pooled radio access network (the "Shared Network"). The Parties
also established a 50-50 company limited by shares under the name Net 4 P.H.I Ltd., to be the general partner of the limited partnership.
In February 2016, HOT Mobile exercised its option under the NSA to advance the payment date of a onetime amount of NIS 250 million ("Lump Sum"), which was received by the
Group in 2016. Therefore in accordance the NSA from April 2016 onward (i) each party bears half of the expenditures relating to the Shared Network, and (ii) the bearing of the operating costs of the Shared Network is according to a
pre-determined mechanism, according to which one half of the operating costs is shared equally by the Parties, and one half is divided between the Parties according to the relative volume of traffic consumption of each party in the Shared
Network (the "Capex-Opex Mechanism"). The Lump Sum is treated by the Group as payments for rights of use of the Group's network and therefore recognized as deferred revenue which is amortized to revenues in the income statement over a
period of eight years, which is determined to be the shorter of the expected period of the arrangement or the expected life of the related assets, see note 22(a).
The NSA term will be automatically extended for consecutive terms of five years each, unless either party provided the other party with prior notice of at least two years
prior to the commencement of the respective extended term. At any time after the eighth anniversary of the NSA's effective date (i.e. following April 2023), either party may provide the other party with two years termination notice, and
terminate the NSA, without cause, effective as of the end of the said two-year period. On the expiry of the NSA, other than following a material breach, the Parties shall divide the network between themselves according to a mechanism
provided by the NSA, based on the Parties then-respective interests in PHI, with priority that each party shall first receive its own assets.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 – INVESTMENT IN PHI (continued)
The associates of the Group as of December 31, 2018, of which the Group holds 50% of ownership interests are: P.H.I. Networks (2015) Limited Partnership ("PHI"), and Net
4 P.H.I Ltd. (see also note 2(c)(2)). Both are incorporated and operate in Israel. As of December 31, 2018 the board of directors of Net 4 P.H.I Ltd. consists of 3 directors nominated by the Company, 3 directors nominated by Hot Mobile and
one independent director who acts as a chairman. Net 4 P.H.I Ltd controls PHI. This governance provides that the Company does not control PHI nor does it have joint control over it, and the Company accounts for its investment in PHI
according to the equity method. Set out below is summarized financial information for the associates.
|
|
As at December 31
|
|
|
|
2017
|
|
|
2018
|
|
PHI's accounts 100%:
|
|
NIS in millions
|
|
|
NIS in millions
|
|
Current assets
|
|
|
119
|
|
|
|
137
|
|
Non-current assets
|
|
|
218
|
|
|
|
312
|
|
Current liabilities
|
|
|
117
|
|
|
|
135
|
|
Non-current liabilities
|
|
|
218
|
|
|
|
312
|
|
Net assets
|
|
|
2
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
Supplemental information relating to associates:
|
|
|
|
|
|
|
|
|
Commitments for operating leases and operating
|
|
|
|
|
|
|
|
|
expenses
|
|
|
443
|
|
|
|
781
|
|
Commitments to purchase fixed assets
|
|
|
2
|
|
|
|
6
|
|
Guarantees made to third parties
|
|
|
1
|
|
|
|
1
|
|
|
|
Year ended December 31
|
|
|
|
2017
|
|
|
2018
|
|
PHI's accounts 100%:
|
|
NIS in millions
|
|
|
NIS in millions
|
|
|
|
|
|
|
|
|
Summarized statement of income
|
|
|
|
|
|
|
Revenue
|
|
|
477
|
|
|
|
495
|
|
Pre-tax Profit
|
|
|
-
|
|
|
|
-
|
|
After-tax profit
|
|
|
-
|
|
|
|
-
|
|
Total comprehensive income
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Reconciliation to carrying amount:
|
|
|
|
|
|
|
|
|
Opening net assets of PHI
|
|
|
2
|
|
|
|
2
|
|
Profit for the period
|
|
|
-
|
|
|
|
-
|
|
Closing net assets of PHI
|
|
|
2
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
Carrying amount in PHI's net assets: Group's share (50%)
|
|
|
1
|
|
|
|
1
|
|
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 – INVESTMENT IN PHI (continued)
Balances and transactions with PHI – related party:
|
|
New Israeli Shekels
|
|
|
|
Year ended December 31
|
|
|
|
2017
|
|
|
2018
|
|
|
|
In millions
|
|
Cost of revenues
|
|
|
45
|
|
|
|
70
|
|
|
|
New Israeli Shekels
|
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2018
|
|
|
|
In millions
|
|
Deferred expenses - Right of use
|
|
|
95
|
|
|
|
131
|
|
Current assets (liabilities)
|
|
|
(43
|
)
|
|
|
(51
|
)
|
Non-current investment in PHI
|
|
|
1
|
|
|
|
1
|
|
Other non-current assets (liabilities)
|
|
|
(7
|
)
|
|
|
(14
|
)
|
The Company provided a guarantee to PHI's debt in an amount of NIS 50 million.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 – INVESTMENT IN PHI (continued)
Subsequent event: change in PHI's governance
At the beginning of January 2019 an amendment to the NSA agreement between the Company and Hot Mobile was signed and communicated to the MoC and Anti-trust regulator
which, among other things, cancelled the position of the independent director mentioned above who acted as a chairman, and no consideration was transferred between the Parties in relation to this
matter. The amendment did not change ownership shares, nor the CAPEX-OPEX mechanism described above. As a result of the amendment the control over PHI thereafter is borne 50-50 by the Company and Hot Mobile, each nominates an equal number
of directors (3 directors). Since, thereafter, decisions about the Relevant Activities of PHI require the unanimous consent of the Parties, PHI is considered a joint arrangement controlled by the Company and Hot Mobile (joint control).
The activities of the joint arrangement are primarily designed for the provision of output to the Parties. The joint arrangement terms give the Parties rights to the
assets, and obligations for the liabilities and expenses of PHI. Furthermore the Parties have rights to substantially all of the economic benefits of PHI's assets. PHI's liabilities are in substance satisfied by the cash flows received from
the Parties, as the Parties are substantially the source of cash flows contributing to the continuity of the operations of PHI. Starting January 1, 2019 the Company will account for its rights in the assets of PHI and obligations for the
liabilities and expenses of PHI as a joint operation, recognizing its share (50%) in the assets, liabilities, and expenses of PHI, instead of the equity method. Starting January 1, 2019 payments with respect to rights to use PHI's fixed
assets (see note 2(g)) will be presented in the statement of cash flows as cash used in investing activities instead of cash payments for deferred expenses used in operating activities.
The following table presents the Company's share (50%) in PHI's statement of financial position items as of December 31, 2018, for which the Company's investment in
PHI's net assets is recognized under the equity method. Starting January 1, 2019 they will be consolidated in the financial statements as the Company’s share in a joint operation.
|
|
New Israeli Shekels in millions
|
|
|
|
December 31, 2018**
|
|
|
|
Company's share (50%) in PHI's accounts
|
|
|
Intercompany elimination
|
|
|
Total
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
*
|
|
|
|
|
|
|
*
|
|
Current assets
|
|
|
69
|
|
|
|
(51
|
)
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON CURRENT ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment and intangible assets
|
|
|
142
|
|
|
|
|
|
|
|
142
|
|
Other non-current assets
|
|
|
14
|
|
|
|
(14
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Current borrowings from banks
|
|
|
13
|
|
|
|
|
|
|
|
13
|
|
Trade payables
|
|
|
52
|
|
|
|
|
|
|
|
52
|
|
Other current liabilities
|
|
|
3
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Dismantling and restoring sites obligation
|
|
|
14
|
|
|
|
|
|
|
|
14
|
|
Deferred revenues
|
|
|
142
|
|
|
|
(131
|
)
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
-
|
|
* Representing an amount of less than NIS 1 million.
** From the first quarter of 2019, the Company's interests in 50% of PHI's accounts will include a right-of-use non-current asset of approximately NIS 360 million, a lease current liability
of approximately NIS 70 million, and a lease non-current liability of approximately NIS 290 million, recognized upon the implementation of IFRS 16 leases see note 3(2)(a).
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 – PROPERTY AND EQUIPMENT
|
|
Communication network
|
|
|
Computers and information systems
|
|
|
Optic fibers and related assets
|
|
|
Subscribers equipment and installations
|
|
|
Property, leasehold improvements, furniture and equipment
|
|
|
Total
|
|
|
|
New Israeli Shekels in millions
|
|
Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2016
|
|
|
2,187
|
|
|
|
264
|
|
|
|
486
|
|
|
|
12
|
|
|
|
203
|
|
|
|
3,152
|
|
Additions in 2016
|
|
|
51
|
|
|
|
17
|
|
|
|
22
|
|
|
|
17
|
|
|
|
9
|
|
|
|
116
|
|
Disposals in 2016
|
|
|
235
|
|
|
|
74
|
|
|
|
|
|
|
|
|
|
|
|
78
|
|
|
|
387
|
|
Balance at December 31, 2016
|
|
|
2,003
|
|
|
|
207
|
|
|
|
508
|
|
|
|
29
|
|
|
|
134
|
|
|
|
2,881
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions in 2017
|
|
|
55
|
|
|
|
7
|
|
|
|
97
|
|
|
|
109
|
|
|
|
6
|
|
|
|
274
|
|
Disposals in 2017
|
|
|
165
|
|
|
|
60
|
|
|
|
1
|
|
|
|
|
|
|
|
3
|
|
|
|
229
|
|
Balance at December 31, 2017
|
|
|
1,893
|
|
|
|
154
|
|
|
|
604
|
|
|
|
138
|
|
|
|
137
|
|
|
|
2,926
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions in 2018
|
|
|
48
|
|
|
|
11
|
|
|
|
122
|
|
|
|
146
|
|
|
|
10
|
|
|
|
337
|
|
Disposals in 2018
|
|
|
322
|
|
|
|
17
|
|
|
|
11
|
|
|
|
4
|
|
|
|
24
|
|
|
|
378
|
|
Balance at December 31, 2018
|
|
|
1,619
|
|
|
|
148
|
|
|
|
715
|
|
|
|
280
|
|
|
|
123
|
|
|
|
2,885
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2016
|
|
|
1,231
|
|
|
|
191
|
|
|
|
183
|
|
|
|
1
|
|
|
|
132
|
|
|
|
1,738
|
|
Depreciation in 2016
|
|
|
223
|
|
|
|
29
|
|
|
|
35
|
|
|
|
6
|
|
|
|
23
|
|
|
|
316
|
|
Disposals in 2016
|
|
|
230
|
|
|
|
74
|
|
|
|
|
|
|
|
|
|
|
|
76
|
|
|
|
380
|
|
Balance at December 31, 2016
|
|
|
1,224
|
|
|
|
146
|
|
|
|
218
|
|
|
|
7
|
|
|
|
79
|
|
|
|
1,674
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation in 2017
|
|
|
204
|
|
|
|
22
|
|
|
|
36
|
|
|
|
24
|
|
|
|
15
|
|
|
|
301
|
|
Disposals in 2017
|
|
|
165
|
|
|
|
60
|
|
|
|
1
|
|
|
|
|
|
|
|
3
|
|
|
|
229
|
|
Balance at December 31, 2017
|
|
|
1,263
|
|
|
|
108
|
|
|
|
253
|
|
|
|
31
|
|
|
|
91
|
|
|
|
1,746
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation in 2018
|
|
|
174
|
|
|
|
13
|
|
|
|
39
|
|
|
|
66
|
|
|
|
12
|
|
|
|
304
|
|
Disposals in 2018
|
|
|
321
|
|
|
|
17
|
|
|
|
11
|
|
|
|
3
|
|
|
|
24
|
|
|
|
376
|
|
Balance at December 31, 2018
|
|
|
1,116
|
|
|
|
104
|
|
|
|
281
|
|
|
|
94
|
|
|
|
79
|
|
|
|
1,674
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2016
|
|
|
779
|
|
|
|
61
|
|
|
|
290
|
|
|
|
22
|
|
|
|
55
|
|
|
|
1,207
|
|
At December 31, 2017
|
|
|
630
|
|
|
|
46
|
|
|
|
351
|
|
|
|
107
|
|
|
|
46
|
|
|
|
1,180
|
|
At December 31, 2018
|
|
|
503
|
|
|
|
44
|
|
|
|
434
|
|
|
|
186
|
|
|
|
44
|
|
|
|
1,211
|
|
For depreciation and amortization presentation in the statement of income see note 22.
|
|
New Israeli Shekels
|
|
|
|
Year ended December 31
|
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
|
In millions
|
|
Cost additions include capitalization of salary and employee related expenses
|
|
|
29
|
|
|
|
33
|
|
|
|
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 – INTANGIBLE AND OTHER ASSETS
Intangible assets with finite economic useful lives:
|
|
Licenses
|
|
|
Costs of obtaining contracts with customers(2)
|
|
|
Trade name
|
|
|
Customer relationships
|
|
|
Subscriber acquisition and retention costs
|
|
|
Computer software(1)
|
|
|
Total
|
|
|
|
New Israeli Shekels in millions
|
|
Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At January 1, 2016
|
|
|
2,123
|
|
|
|
|
|
|
73
|
|
|
|
276
|
|
|
|
13
|
|
|
|
662
|
|
|
|
3,147
|
|
Additions in 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
82
|
|
|
|
86
|
|
Disposals in 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
110
|
|
|
|
114
|
|
At December 31, 2016
|
|
|
2,123
|
|
|
|
-
|
|
|
|
73
|
|
|
|
276
|
|
|
|
13
|
|
|
|
634
|
|
|
|
3,119
|
|
Transition to IFRS 15(2)
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
(13
|
)
|
|
|
|
|
|
|
(11
|
)
|
Additions in 2017
|
|
|
|
|
|
|
84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59
|
|
|
|
143
|
|
Disposals in 2017
|
|
|
|
|
|
|
|
|
|
|
73
|
|
|
|
|
|
|
|
|
|
|
|
128
|
|
|
|
201
|
|
At December 31, 2017
|
|
|
2,123
|
|
|
|
86
|
|
|
|
-
|
|
|
|
276
|
|
|
|
-
|
|
|
|
565
|
|
|
|
3,050
|
|
Additions in 2018
|
|
|
|
|
|
|
91
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
68
|
|
|
|
162
|
|
Disposals in 2018
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
141
|
|
|
|
143
|
|
At December 31, 2018
|
|
|
2,123
|
|
|
|
175
|
|
|
|
3
|
|
|
|
276
|
|
|
|
-
|
|
|
|
492
|
|
|
|
3,069
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At January 1, 2016
|
|
|
1,588
|
|
|
|
|
|
|
|
41
|
|
|
|
219
|
|
|
|
10
|
|
|
|
333
|
|
|
|
2,191
|
|
Amortization in 2016
|
|
|
88
|
|
|
|
|
|
|
|
21
|
|
|
|
18
|
|
|
|
5
|
|
|
|
117
|
|
|
|
249
|
|
Disposals in 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
110
|
|
|
|
114
|
|
At December 31, 2016
|
|
|
1,676
|
|
|
|
-
|
|
|
|
62
|
|
|
|
237
|
|
|
|
11
|
|
|
|
340
|
|
|
|
2,326
|
|
Transition to IFRS 15(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11
|
)
|
|
|
|
|
|
|
(11
|
)
|
Amortization in 2017
|
|
|
88
|
|
|
|
15
|
|
|
|
11
|
|
|
|
18
|
|
|
|
|
|
|
|
107
|
|
|
|
239
|
|
Disposals in 2017
|
|
|
|
|
|
|
|
|
|
|
73
|
|
|
|
|
|
|
|
|
|
|
|
128
|
|
|
|
201
|
|
At December 31, 2017
|
|
|
1,764
|
|
|
|
15
|
|
|
|
-
|
|
|
|
255
|
|
|
|
-
|
|
|
|
319
|
|
|
|
2,353
|
|
Amortization in 2018
|
|
|
88
|
|
|
|
49
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
86
|
|
|
|
241
|
|
Disposals in 2018
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
140
|
|
|
|
142
|
|
At December 31, 2018
|
|
|
1,852
|
|
|
|
62
|
|
|
|
-
|
|
|
|
273
|
|
|
|
-
|
|
|
|
265
|
|
|
|
2,452
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2016
|
|
|
447
|
|
|
|
-
|
|
|
|
11
|
|
|
|
39
|
|
|
|
2
|
|
|
|
294
|
|
|
|
793
|
|
At December 31, 2017
|
|
|
359
|
|
|
|
71
|
|
|
|
-
|
|
|
|
21
|
|
|
|
-
|
|
|
|
246
|
|
|
|
697
|
|
At December 31, 2018
|
|
|
271
|
|
|
|
113
|
|
|
|
3
|
|
|
|
3
|
|
|
|
-
|
|
|
|
227
|
|
|
|
617
|
|
|
|
New Israeli Shekels
|
|
|
|
Year ended December 31
|
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
|
In millions
|
|
(1) Cost additions include capitalization of salary and employee related expenses
|
|
|
36
|
|
|
|
44
|
|
|
|
54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) See adoption of IFRS 15 Revenues from Contracts with Customers in note 2(n) and note 2(f)(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For depreciation and amortization in the statement of income see note 22.
|
|
|
|
|
|
|
|
|
|
|
|
|
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 – DEFERRED EXPENSES – RIGHT OF USE
|
|
New Israeli Shekels in millions
|
|
Cost
|
|
|
|
Balance at January 1, 2016
|
|
|
436
|
|
Additional payments in 2016
|
|
|
80
|
|
Balance at December 31, 2016
|
|
|
516
|
|
Additional payments in 2017
|
|
|
113
|
|
Balance at December 31, 2017
|
|
|
629
|
|
Additional payments in 2018
|
|
|
107
|
|
Balance at December 31, 2018
|
|
|
736
|
|
|
|
|
|
|
Accumulated amortization and impairment
|
|
|
|
|
Balance at January 1, 2016
|
|
|
383
|
|
Amortization in 2016
|
|
|
30
|
|
Balance at December 31, 2016
|
|
|
413
|
|
Amortization in 2017
|
|
|
40
|
|
Balance at December 31, 2017
|
|
|
453
|
|
Amortization in 2018
|
|
|
47
|
|
Balance at December 31, 2018
|
|
|
500
|
|
|
|
|
|
|
Carrying amount, net at December 31, 2016
|
|
|
103
|
|
|
|
|
|
|
Carrying amount, net at December 31, 2017
|
|
|
176
|
|
Current
|
|
|
43
|
|
Non-current
|
|
|
133
|
|
|
|
|
|
|
Carrying amount, net at December 31, 2018
|
|
|
236
|
|
Current
|
|
|
51
|
|
Non-current
|
|
|
185
|
|
See also notes 17(4) and note 2(g).
The amortization and impairment charges are charged to cost of revenues in the statement of income.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 – IMPAIRMENT TESTS
|
(1)
|
Goodwill impairment tests in the fixed-line segment
|
Goodwill in the fixed-line segment is allocated to a single group of CGUs which constitute all the operations of the fixed-line segment, in an amount of NIS 407
million.
For the purpose of the goodwill impairment tests in the fixed-line segment as of December 31, 2016, 2017 and 2018 the recoverable amount was assessed by management with
the assistance of an external independent experts (BDO Ziv Haft Consulting & Management Ltd.) based on value-in-use calculations. The value-in-use calculations use pre-tax cash flow projections covering a five-year period. Cash flows
beyond the five-year period to be generated from continuing use are extrapolated using estimated growth rates. The growth rate represents the long-term average growth rate of the fixed-line communications services business. The key
assumptions used are as follows:
|
|
As of December 31,
|
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
Terminal growth rate
|
|
|
0.5
|
%
|
|
|
0.9
|
%
|
|
|
1.0
|
%
|
After-tax discount rate
|
|
|
9.8
|
%
|
|
|
9.3
|
%
|
|
|
9.5
|
%
|
Pre-tax discount rate
|
|
|
11.9
|
%
|
|
|
11.2
|
%
|
|
|
11.5
|
%
|
The impairment tests in the fixed-line segment as of December 31, 2016, 2017 and 2018 were based on assessments of financial performance and future strategies in light
of current and expected market and economic conditions. Trends in the economic and financial environment, competition and regulatory authorities' decisions, or changes in competitors’ behavior in response to the economic environment may
affect the estimate of recoverable amounts. As a result of the impairment tests, the Group determined that no goodwill impairment existed as of December 31, 2016, 2017 and 2018. See also note 4(a)(3) and note 2(h).
|
(2)
|
Impairment tests of assets with finite useful lives
|
No indicators for impairment or reversal of impairment of assets with finite useful lives were identified in 2016, 2017 and 2018.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 – PROVISIONS
|
|
Group's share in PHI's provisions
(see note 9)
|
|
|
Dismantling and restoring sites obligation
|
|
|
Legal claims
(see note 20)
|
|
|
Equipment warranty
|
|
|
|
New Israeli Shekels in millions
|
|
Balance as at January 1, 2018
|
|
|
7
|
|
|
|
27
|
|
|
|
72
|
|
|
|
3
|
|
Additions during the year
|
|
|
7
|
|
|
|
*
|
|
|
|
18
|
|
|
|
6
|
|
Finance costs
|
|
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
Decrease during the year
|
|
|
|
|
|
|
**(14
|
)
|
|
|
(28
|
)
|
|
|
(7
|
)
|
Balance as at December 31, 2018
|
|
|
14
|
|
|
|
13
|
|
|
|
62
|
|
|
|
2
|
|
Non-current
|
|
|
14
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
62
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at December 31, 2017
|
|
|
7
|
|
|
|
27
|
|
|
|
72
|
|
|
|
3
|
|
Non-current
|
|
|
7
|
|
|
|
27
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
72
|
|
|
|
3
|
|
* Representing an amount of less than NIS 1 million
** Decrease in the provision due to assignment of cell-sites to PHI
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15 – BORROWINGS AND NOTES PAYABLE
|
(1)
|
Borrowings and Notes Payable
|
The Group's long term debt as of December 31, 2018 consists of borrowings from leading Israeli commercial banks and notes payable. The Group may,
at its discretion, execute an early repayment of the borrowings, subject to certain conditions, including that the Group shall reimburse the lender for losses sustained by it as a result of the early repayment. The reimbursement is mainly
based on the difference between the interest rate that the Group would otherwise pay and the current market interest rate on the early repayment date.
The notes payable are unsecured, non-convertible and listed for trade on the TASE.
The notes payable have been rated ilA+, on a local scale, by Standard & Poor’s Maalot.
Composition as of December 31, 2018:
|
Annual interest rate
|
Notes payable series D
|
'Makam'(*) plus 1.2%
|
Notes payable series F (**)
|
2.16% fixed
|
Borrowing P (received in 2017)
|
2.38% fixed
|
Borrowing Q (received in 2017)
|
2.5% fixed
|
(*) 'Makam' is a variable interest that is based on the yield of 12 month government bonds issued by the Government of Israel. The interest is updated on a quarterly basis.
The interest rates paid (in annual terms, and including the additional interest of 1.2%) for the period from October 1, 2018 to December 30, 2018 was 1.423%.
(**) See also note 15 (2) and 15 (4).
See note 6(a)(4) as to the balances and maturities of the borrowings and the notes payable.
See note 6(c) as to the fair value of the borrowings and the notes payable.
See note 15 (5) regarding financial covenants.
The following table details the changes in debentures, including cash flows from financing activities:
|
|
|
|
|
Movement in 2018
|
|
|
|
|
|
|
As at December 31, 2017
|
|
|
Cash flows used in financing activities, net
|
|
|
Non cash movements
|
|
|
As at
December 31, 2018
|
|
|
|
CPI adjustments and other finance costs
|
|
|
|
New Israeli Shekels in millions
|
|
Non-current borrowings, including current maturities
|
|
|
625
|
|
|
|
(382
|
)
|
|
|
|
|
|
243
|
|
Notes payable, including current maturities
|
|
|
1,298
|
|
|
|
(174
|
)
|
|
|
(1
|
)
|
|
|
1,123
|
|
Interest payable
|
|
|
21
|
|
|
|
(69
|
)
|
|
|
48
|
|
|
|
*
|
|
|
|
|
1,944
|
|
|
|
(625
|
)
|
|
|
47
|
|
|
|
1,366
|
|
* Representing an amount of less than NIS 1 million
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15 – BORROWINGS AND NOTES PAYABLE (continued)
|
(2)
|
Notes payable issuance
|
In July 2017, the Company issued Series F Notes in a principal amount of NIS 255 million, payable in 5 equal annual installments on June 25 of
each of the years 2020 through 2024. The principal bears fixed annual interest of 2.16%, payable on a semiannual basis on June 25 and December 25.
In December 2017, the Company expanded Series F Notes in a principal amount of NIS 389 million under the same conditions.
In December 2018, following an agreement from September 2017 with certain Israeli institutional investors, the Company expanded Series F Notes in
a principal amount of NIS 150 million under the same conditions.
The Company has engaged to expand Series F Notes in the future, see note 15(4) below.
In January 2019, the Company issued a new Series G Notes, in a principal amount of NIS 225 million, payable as follows: 4 annual installments of
NIS 22.5 million each, payable in June of each of the years 2022 through 2025, NIS 45 million payable in June 2026 and NIS 90 million payable in June 2027. The principal bears fixed annual interest of 4%, payable annually on June 25 of each
year.
|
(3)
|
Borrowings early repayments
|
In March 2018 the Company early repaid borrowings O and L in a total principal amount of NIS 300 million. In addition, the Company early repaid borrowing K in June
2018, in a principal amount of NIS 75 million.
The early repayments resulted in additional finance costs of NIS 18 million recorded in December 2017 and NIS 9 million recorded in March 2018.
|
(4)
|
Notes payable issuance commitments
|
In December 2017, the Company entered into an agreement with certain Israeli institutional investors, according to which the Company undertook to issue to the
institutional investors, and the institutional investors undertook to purchase from the Company, in the framework of a private placement, in an aggregate principal amount of NIS 126.75 million of additional Series F debentures in December
2019.
In January 2018, the Company entered into an agreement with certain Israeli institutional investors, according to which the Company undertook to issue to the
institutional investors, and the institutional investors undertook to purchase from the Company, in the framework of a private placement, in an aggregate principal amount of NIS 100 million of additional Series F debentures in December
2019.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15 – BORROWINGS AND NOTES PAYABLE (continued)
Regarding Series F Notes, Series G Notes (issued in January 2019) and borrowings P and Q, the Company is required to comply with a financial
covenant that the ratio of Net Debt to Adjusted EBITDA shall not exceed 5. Compliance will be examined and reported on a quarterly basis. For the purpose of the covenant, Adjusted EBITDA is calculated as the sum total for the last 12 month
period, excluding adjustable one-time items. As of December 31, 2018, the ratio of Net Debt to Adjusted EBITDA was 1.3.
Additional stipulations mainly include:
Shareholders' equity shall not decrease below NIS 400 million and no dividends will be declared if shareholders' equity will be below NIS 650
million regarding Series F notes and borrowing P. Shareholders' equity shall not decrease below NIS 600 million and no dividends will be declared if shareholders' equity will be below NIS 750 million regarding Series G notes. The Company
shall not create floating liens subject to certain terms. The Company has the right for early redemption under certain conditions. With respect to notes payable series F and series G: the Company shall pay additional annual interest of 0.5%
in the case of a two-notch downgrade in the Notes rating and an additional annual interest of 0.25% for each further single-notch downgrade, up to a maximum additional interest of 1%; the Company shall pay additional annual interest of
0.25% during a period in which there is a breach of the financial covenant; debt rating will not decrease below BBB- for a certain period. In any case, the total maximum additional interest for Series F and G, shall not exceed 1.25% or 1%,
respectively.
The Group was in compliance with the financial covenant and the additional stipulations for the year 2018.
|
(6)
|
Notes payable buy back
|
The Company's series B, C and E notes, which are traded on the Tel Aviv Stock Exchange, were partially repurchased in 2016 (these notes are considered legally extinguished) as follows:
In March 2016, the Company repurchased approximately NIS 43 million par value of notes payable series B, at an average transaction price of approximately 1.104 NIS par value. The total amount
paid was approximately NIS 48 million.
In March 2016, the Company repurchased approximately NIS 131 million par value of notes payable series E, at an average transaction price of approximately 1.073 NIS par value. The total
amount paid was approximately NIS 141 million.
In April 2016, the Company repurchased approximately NIS 54 million par value of notes payable series C, at an average transaction price of approximately 1.136 NIS par value. The total amount
paid was approximately NIS 61.5 million.
The buy-back costs of the aforementioned repurchases were recorded in finance expenses in an amount of NIS 12 million in 2016.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16 - LIABILITY FOR EMPLOYEE RIGHTS UPON RETIREMENT
Israeli labor laws and agreements require payment of severance pay upon dismissal of an employee or upon termination of employment in certain other circumstances. See also note 2(k).
|
(1)
|
Defined contribution plan
|
The Group had contributed NIS 14 million, NIS 17 million and NIS 20 million for the years 2016, 2017 and 2018 respectively, in accordance with Section
14 of the Israeli Severance Pay Law. See also note 2(k)(i)(1).
Liability for employee rights upon retirement, net is presented as non-current liability.
The amounts recognized in the statement of financial position, in respect of a defined benefit plan (see note 2(k)(i)(2)) and changes during the
year in the obligation recognized for post-employment defined benefit plans were as follows:
|
|
New Israeli Shekels in millions
|
|
|
|
Present value
of obligation
|
|
|
Fair value
of plan assets
|
|
|
Total
|
|
At January 1, 2017
|
|
|
142
|
|
|
|
(103
|
)
|
|
|
39
|
|
Current service cost
|
|
|
11
|
|
|
|
|
|
|
|
11
|
|
Past service cost
|
|
|
4
|
|
|
|
|
|
|
|
4
|
|
Interest expense (income)
|
|
|
4
|
|
|
|
(3
|
)
|
|
|
1
|
|
Employer contributions
|
|
|
|
|
|
|
(9
|
)
|
|
|
(9
|
)
|
Benefits paid
|
|
|
(25
|
)
|
|
|
17
|
|
|
|
(8
|
)
|
Remeasurements:
|
|
|
|
|
|
|
|
|
|
|
|
|
Experience loss
|
|
|
2
|
|
|
|
|
|
|
|
2
|
|
Loss (gain) from change in financial assumptions
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
Return on plan assets
|
|
|
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
At December 31, 2017
|
|
|
139
|
|
|
|
(99
|
)
|
|
|
40
|
|
Current service cost
|
|
|
11
|
|
|
|
|
|
|
|
11
|
|
Interest expense (income)
|
|
|
3
|
|
|
|
(1
|
)
|
|
|
2
|
|
Employer contributions
|
|
|
|
|
|
|
(8
|
)
|
|
|
(8
|
)
|
Benefits paid
|
|
|
(11
|
)
|
|
|
7
|
|
|
|
(4
|
)
|
Remeasurements:
|
|
|
|
|
|
|
|
|
|
|
|
|
Experience loss
|
|
|
2
|
|
|
|
|
|
|
|
2
|
|
Return on plan assets
|
|
|
|
|
|
|
(3
|
)
|
|
|
(3
|
)
|
At December 31, 2018
|
|
|
144
|
|
|
|
(104
|
)
|
|
|
40
|
|
Remeasurements are recognized in the statement of comprehensive income.
The expected contribution to the defined benefit plan during the year ending December 31, 2019 is approximately NIS 8 million.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16 - LIABILITY FOR EMPLOYEE RIGHTS UPON RETIREMENT (continued)
(2)
|
Defined benefit plan (continued)
|
The principal actuarial assumptions used were as follows:
|
|
December 31
|
|
|
|
2017
|
|
|
2018
|
|
Interest rate weighted average
|
|
|
2.73
|
%
|
|
|
3.29
|
%
|
Inflation rate weighted average
|
|
|
1.11
|
%
|
|
|
1.62
|
%
|
Expected turnover rate
|
|
|
9%-56
|
%
|
|
|
9%-56
|
%
|
Future salary increases
|
|
|
1%-6
|
%
|
|
|
1%-6
|
%
|
The sensitivity of the defined benefit obligation to changes in the principal assumptions is:
|
|
December 31, 2018
|
|
|
|
NIS in millions
|
|
|
|
Increase of 10% of the assumption
|
|
|
Decrease of 10% of the assumption
|
|
Interest rate
|
|
|
(0.8
|
)
|
|
|
0.6
|
|
Expected turnover rate
|
|
|
0.3
|
|
|
|
(0.4
|
)
|
Future salary increases
|
|
|
0.4
|
|
|
|
(0.4
|
)
|
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in
some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method has been applied as when calculating the pension liability recognized within
the statement of financial position. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous period.
The defined benefit plan exposes the Group to a number of risks, the most significant are asset volatility, and a risk that salary increases will be higher than expected
in the actuarial calculations. The assets are invested in provident funds, managed by managing companies and are subject to laws and regulations, and supervision (including investment portfolio) of the Capital Markets, Insurance and Saving
Division of the Israeli Ministry of Finance.
Expected maturity analysis of undiscounted defined benefits as at December 31, 2018:
|
|
NIS in millions
|
|
2019
|
|
|
27
|
|
2020
|
|
|
20
|
|
2021
|
|
|
12
|
|
2022 and 2023
|
|
|
20
|
|
2024 and thereafter
|
|
|
87
|
|
|
|
|
166
|
|
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17 – COMMITMENTS
|
(1)
|
Under the Telegraph Regulations the Company is committed to pay an annual fixed fee for each frequency used. For the years 2016, 2017 and 2018 the Company recorded expenses in a total amount of approximately NIS 64 million, NIS
63 million and NIS 76 million, respectively. Under the above Regulations should the Company choose to return a frequency, such payment is no longer due. Commencing August 2016, the total amount of frequency fees of both the
Company and Hot Mobile under the regulations are divided between the Company and Hot Mobile, through PHI ,according to the OPEX-CAPEX mechanism (see also note 9).
|
|
(2)
|
At December 31, 2018, the Group is committed to acquire property and equipment and software elements for approximately NIS 83 million.
|
|
(3)
|
At December 31, 2018, the Group is committed to acquire inventory in an amount of approximately NIS 817 million.
|
The Group signed long-term agreements with service providers to receive indefeasible Rights of Use (ROU) of international capacities through submarine infrastructures
(see note 12), most extendable until 2030. As of December 31, 2018, the Group is committed to pay for capacities over the following years an amount of NIS 188 million (excluding maintenance fees) as follows:
|
|
New Israeli Shekels in millions
|
|
2019
|
|
|
46
|
|
2020
|
|
|
45
|
|
2021
|
|
|
47
|
|
2022
|
|
|
47
|
|
2023
|
|
|
3
|
|
|
|
|
188
|
|
In addition, under the terms of the ROU agreements, as of December 31, 2018 the Group is committed to pay annual maintenance fees during the usage period. The total
aggregated expected maintenance fee for the years 2019 to 2023 is approximately NIS 40 million. Some payments under the ROU agreements are linked to the USD.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17 – COMMITMENTS (continued)
As of December 31, 2018, the Group has provided bank guarantees in respect of licenses (see note 1(c)) in an amount of NIS 100 million, in addition
to bank guarantees in favor of other parties in an aggregate amount of approximately NIS 23 million. Therefore, the total bank guarantees provided by the Group as of December 31, 2018 is NIS 123 million. In addition, the Company provided a
guarantee to PHI's debt in an amount of NIS 50 million.
In 2019 due to cancellation of licenses, the Company is in the process to cancel guarantees in an aggregate amount of NIS 10 million (see note
1(c)).
|
(6)
|
Covenants and negative pledge – see note 15(5).
|
|
(7)
|
See note 15(4) with respect of notes payable issuance commitments.
|
|
(8)
|
Operating leases – see note 19.
|
|
(9)
|
See note 9 with respect to network sharing and PHI's commitments.
|
NOTE 18 – DEFERRED INCOME WITH RESPECT TO SETTLEMENT AGREEMENT WITH ORANGE
In June 2015, the Company announced that it had entered into a settlement agreement with Orange Brand Services Ltd ("Orange") which created a new
framework for their relationship and provided both Partner and Orange the right to terminate the brand license agreement which had been in force since 1998. In accordance with the terms of the settlement agreement, the Company received
advance payments in a total of €90 million during 2015.
As set forth in the settlement agreement, the advance payments were recognized and reconciled evenly on a quarterly basis over a period until the
second quarter of 2017, against contingent marketing, sales, customer services and other expenses that were incurred over this period. The income was recorded in the Company’s income statement under “Income with respect to settlement
agreement with Orange". For 2015, 2016 and 2017, the Company recognized income with respect to the settlement agreement in an amount of NIS 61 million, NIS 217 million and NIS 108 million, respectively. Based on a legal opinion obtained by
the Company, the advance payments are considered compensation payments and are therefore not subject to VAT charges.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 19 – OPERATING LEASES
The Group has entered into operating lease agreements as follows:
|
(1)
|
The Group leases its headquarter facilities in Rosh Ha-ayin, Israel, with a total of approximately 51,177 gross square meters (including parking lots). The lease term is until the end of 2024. The
rental payments are linked to the Israeli CPI.
|
|
(2)
|
The Group also leases call centers, retail stores and service centers. The leases for each site have different lengths and specific terms. The lease agreements are for periods of two to ten years. The Group has options to
extend some lease contract periods for up to twenty years (including the original lease periods). Some of the rental payments are linked to the dollar or to the Israeli CPI. Some of the extension options include an increase of the
lease payment in a range of 2%-10%.
|
|
(3)
|
Lease agreements in respect of cell sites and switching stations throughout Israel are for periods of two to ten years. The Company has an option to extend some of the lease contract periods for up to ten years (including the
original lease periods). Some of the rental payments fees are linked to the dollar or linked to the Israeli CPI. Some of the extension options include an increase of the lease payment mostly in a range of 2%-10%. During 2017 and
2018 significant portion of cell sites were assigned to PHI.
|
|
(4)
|
As of December 31, 2018 operating lease agreements in respect of vehicles are for periods of up to three years. The rental payments are linked to the Israeli CPI.
|
|
(5)
|
Non-cancelable minimum operating lease rentals (undiscounted) in respect of the Company's leases are payable including option periods which are reasonably certain are as follows:
|
|
|
New Israeli Shekels
|
|
|
|
December 31, 2018
|
|
|
|
In millions
|
|
2019
|
|
|
76
|
|
2020-2021
|
|
|
114
|
|
2022-2023
|
|
|
87
|
|
2024-2025
|
|
|
51
|
|
2026-2027
|
|
|
18
|
|
2028 and thereafter
|
|
|
26
|
|
|
|
|
372
|
|
With respect to PHI's operating expenses commitment see note 9.
|
(6)
|
The rental expenses for the years ended December 31, 2016, 2017 and 2018 were approximately NIS 213 million, NIS 178 million, and NIS 169 million, respectively. Commencing April 2016, rent expenses of cell sites of the Company,
Hot Mobile and PHI are divided between the Company and Hot Mobile, through PHI, according to the OPEX-CAPEX mechanism (see also note 9).
|
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 20 – LAWSUITS AND LITIGATIONS
Total provision recorded in the financial statements in respect of all lawsuits against the Group amounted to NIS 62 million at December 31, 2018.
Described below are the main litigation and claims against the Group:
This category includes class actions and motions for the recognition of these lawsuits as class actions with respect to, among others, alleged claims regarding charges
and claims regarding alleged breach of the Consumer Protection Law, the Privacy Protection Law, the Communications Law (Telecommunications and Broadcasting), license provisions, other legal provisions and engagement agreements with
customers.
Described hereunder are the outstanding consumer class actions and motions for the recognition of these lawsuits as class actions, detailed according to the amount
claimed, as of the date of approval of these financial statements:
|
|
Number of
claims
|
|
|
Total claims amount (NIS million)
|
|
Up to NIS 100 million
|
|
|
23
|
|
|
|
582
|
|
NIS 101 - 400 million
|
|
|
5
|
|
|
|
1,118
|
|
NIS 401 million - NIS 1 billion
|
|
|
2
|
|
|
|
1,405
|
|
Unquantified claims
|
|
|
17
|
|
|
|
-
|
|
Total
|
|
|
47
|
|
|
|
3,105
|
|
With respect to 4 of the claims mentioned in the table above, the court approved these claims as class actions:
|
1.
|
On September 7, 2010, a claim and a motion to certify the claim as a class action were filed against Partner. The claim alleges that Partner unlawfully charged its customers for services of various content providers which are
sent through text messages (SMS). The total amount claimed from Partner was estimated by the plaintiffs to be approximately NIS 405 million. The claim was certified as a class action in December 2016. In January 2017, the
plaintiffs filed an appeal to the Supreme Court, regarding the definition of the group of customers. In November 2018, the Supreme Court dismissed the appeal and the claim was reverted back to the District Court. Partner estimates
that even if the claim will be decided in favor of the approved group of customers (as defined by the District Court), the damages that Partner will be required to pay for, will be immaterial.
|
|
2.
|
On April 3, 2012, a claim and a motion to certify the claim as a class action were filed against Partner. The claim alleges that Partner breached its license conditions in connection with benefits provided to customers that
purchased handsets from third parties. The amount claimed in the lawsuit was estimated by the plaintiffs to be approximately NIS 22 million. In September 2014, The Court approved the motion and recognized the lawsuit as a class
action. In July 2017, the parties filed a request to the Court to approve a settlement agreement. Partner estimates that the damages that Partner will be required to pay for will be immaterial.
|
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 20 – LAWSUITS AND LITIGATIONS (continued)
|
1.
|
Consumer claims (continued)
|
|
3.
|
On November 12, 2015, a claim and a motion to certify the claim as a class action were filed against Partner. The claim alleges that Partner required their customers to purchase a router and/or a call adaptor and/or terminal
equipment as a condition for using its fixed-line telephony services, an action which would not be in accordance with the provisions of its licenses. The total amount claimed against Partner is estimated by the plaintiff to be
approximately NIS 116 million. In February 2019, the Court approved the request to certify the claim as a class action. In March 2019, Partner filed an appeal of this decision. Partner estimates that the damages that Partner will
be required to pay for will be immaterial.
|
|
4.
|
On November 12, 2015, a claim and a motion to certify the claim as a class action were filed against 012 Smile. The claim alleges that 012 Smile required their customers to purchase a router and/or a call adaptor and/or
terminal equipment as a condition for using its fixed-line telephony services, an action which would not be in accordance with the provisions of its licenses. The total amount claimed against 012 Smile is estimated by the
plaintiff to be approximately NIS 64 million. In February 2019, the Court approved the request to certify the claim as a class action. In March 2019, the Company filed an appeal of this decision. The Company estimates that the
damages that the Company will be required to pay for will be immaterial.
|
With respect to 3 claims mentioned in the table above in a total amount of NIS 56 million (other than the 4 claims mentioned above), the parties filed requests to approve
settlement agreements and with respect to 4 additional claims in a total amount of NIS 358 million (other than the 4 claims mentioned above), the court approved settlement agreements and withdrawals.
|
2.
|
Employees and other claims
|
This category includes 1 claim: In March 2014, a claim and a motion to certify the claim as a class action were filed against the Company. The claim alleged that the
Company did not include in the severance pay calculation for its employees various components that constitute an addition to the salary for the severance pay calculation and thereby acted unlawfully. The total amount claimed from Partner
was estimated by the plaintiff to be approximately NIS 100 million. In November 2015, the plaintiff filed an amended claim and a motion to certify the claim as a class action. In November 2017, the parties filed a revised settlement
agreement which was approved by the Court in July 2018. Partner is currently implementing the amended settlement agreement. The damages that Partner is required to pay are immaterial.
In addition to all the above mentioned claims the Group is a party to various claims arising in the ordinary course of its operations.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 20 – LAWSUITS AND LITIGATIONS (continued)
|
B.
|
Contingencies in respect of building and planning procedures
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Section 197 of the Building and Planning Law states that a property owner has the right to be compensated by a local planning committee for reductions in property value
as a result of a new building plan.
In January 2006, the Non-ionizing Radiation Law was published, amending the Planning and Building Law so that local Planning and Building committees must require
indemnification letters against reduction in property value from the cellular operators requesting building permits.
Accordingly, on January 3, 2006, the National Council for Planning and Building published an interim decision conditioning the issuance of building permits for cell
site permits by local planning and building councils upon provision of a 100% indemnification undertaking by the cellular operators. This decision shall remain in effect until it is replaced with an amendment to the National Zoning Plan 36.
Between January 3, 2006 and December 31, 2018 the Company provided the local authorities with 490 indemnification letters as a pre-condition for obtaining building permits.
In case the Company shall be required to make substantial payments under the indemnity letters, it could have an adverse effect on the Company's financial results.
According to the company’s management estimation and based on its legal counsel, a provision in the financial statement was not included.
The Company assumes that the requirement to provide indemnification letters might require it to change locations of sites to different, less suitable locations and to
dismantle some of its sites. These changes in the deployment of the sites might have an adverse effect on the extent, quality and capacity of the network coverage.
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C.
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Investigation by the Israeli Tax Authority
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The Israeli Tax Authority is conducting an investigation that involves document collection and the questioning of among others, several Company employees, both past and current. The
investigation is seeking to determine whether there have been violations of the Eilat Free Trade Zone (Tax Exemptions and Reductions) - 1985 Law regarding the sale of cellular phones in the city of Eilat. The Company is fully cooperating
with the Israeli Tax Authority. At this stage, the Company is unable to estimate the impact of the investigation on the Company, its results and its condition, if any.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 21 – EQUITY AND SHARE BASED PAYMENTS
The Company's share capital consists of ordinary shares, which are traded on the Tel Aviv Stock Exchange Ltd. under the symbol "PTNR", and are quoted on the NASDAQ
Global Select Market™, in the form of American Depositary Shares ("ADSs"), each representing one of the Company’s ordinary shares, under the symbol "PTNR", according to the dual listing regulations. The ADSs are evidenced by American
Depositary Receipts ("ADRs"). Since November 2011, Citibank, N.A. serves as the Company's depository for ADSs. The holders of ordinary shares are entitled vote in the general meetings of shareholders and to receive dividends as declared.
Under the provisions of the Company's licenses (note 1(c)), restrictions are placed on transfer of the Company's shares and placing liens thereon. The restrictions
include the requirement of advance written consent of the Minister of Communications be received prior to transfer of 10% or more of the Company's shares to a third party. The restrictions require that the "founding shareholders or their
approved substitutes", as defined in the cellular license, hold at least 26% of the means of control in the Company, including 5% which must be held by Israeli shareholders (Israeli citizens and residents), who were approved as such by the
Minister of Communications.
Through December 31, 2008 the Company purchased its own 4,467,990 shares at the cost of NIS 351 million, and during 2018 the Company purchased its own 6,501,588 shares
at the cost of NIS 100 million (upon repurchase were recorded as "treasury shares"). In accordance with the Israeli Companies Law, the treasury shares are considered dormant shares as long as they are held by the Company, and as such they
do not bear any rights (including the right to vote in general meetings of shareholders and to receive dividends) until they are transferred to a third party. Some of the treasury shares were offered to employees under a share based
compensation plan: Company's Equity Incentive Plan as restricted shares awards ("RSAs") (see (b) below).
As of December 31, 2018 a total of 8,560,264 treasury shares remained, of which 1,210,833 were allocated to a trustee on behalf of the employees under the plan. The
RSAs offered under the plan are under the control of the Company until vested under the plan and therefore are not presented in the financial statements as outstanding shares until vested.
In June 2017, the Company issued 10,178,211 shares of the Company to the public and to institutional investors, following a tender under a shelf offering, and by way of
a private placement. The total net consideration received was approximately NIS 190 million. The offering expenses totaled NIS 7 million.
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b.
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Share based compensation to employees
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(1)
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Description of the Equity Incentive Plan
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Share options and restricted shares were granted to employees in accordance with Company's Equity Incentive Plan (the "Plan"). It includes
allocation of restricted shares ("RSAs") to the Company's employees and officers and determines the right to vote at the general meetings of shareholders and the right to receive dividends distributed with respect to the restricted shares.
The committee may set performance targets as a vesting criterion (independently or in combination with other criteria).
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 21 - EQUITY AND SHARE BASED PAYMENTS (continued)
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b.
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Share based compensation to employees (continued)
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(1)
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Description of the Equity Incentive Plan (continued)
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The total number of Company's shares reserved for issuance upon exercise of all options or upon the earning of the restricted shares granted under the Plan is
26,917,000, of which 7,076,034 remained ungranted as of December 31, 2018. The vesting of the options and the earning of the restricted shares are subject to vesting/restriction periods. The vesting of the options and the earning of the
restricted shares granted after June 2014 are also subject to performance conditions set by the Company's organs. The Company expects that the performance conditions will be met. The Plan's principal terms of the options include:
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Exercise price adjustment: The exercise price of options shall be reduced in the following events: (1) dividend distribution other than in the ordinary course: by the gross dividend amount so distributed per share, and
(2) dividend distribution in the ordinary course: the exercise price shall be reduced by the amount of a dividend in excess of 40% of the Company’s net income for the relevant period per share, or by the gross dividend amount so
distributed per share ("Full Dividend Mechanism"), depending on the date of granting of the options.
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Cashless exercise: Most of the options may be exercised only through a cashless exercise procedure, while holders of other options may choose between cashless exercise and the regular option exercise procedure. In
accordance with such cashless exercise, the option holder would receive from the Company, without payment of the exercise price, only the number of shares whose aggregate market value equals the economic gain which the option
holder would have realized by selling all the shares purchased at their market price, net of the option exercise price.
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(2)
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Information in respect of options and restricted shares granted under the Plan:
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