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Partner Communications Reports Fourth Quarter and Annual 2012 Results1



  Partner Communications Reports Fourth Quarter and Annual 2012 Results1

 Annual Free Cash Flow before Interest Payments^2 Totaled NIS 1,243 Million;
         Free Cash Flow in the Fourth Quarter Totaled NIS 323 Million

 Annual Net Profit Totaled NIS 478 Million; Net Profit in the Fourth Quarter
                           Totaled NIS 102 Million

2012 Annual Highlights (compared with 2011)

  * Total Revenues: NIS 5,572 million (US$ 1,493 million), a decrease of 20%
  * Service Revenues: NIS 4,640 million (US$ 1,243 million), a decrease of 11%
  * OPEX^3: NIS 3,362 million (US $874 million), an improvement of 7%
  * Operating Expenses (OPEX)^3 including cost of equipment revenues: NIS
    4,081 million (US$ 1,093 million), an improvement of 17%
  * EBITDA^4: NIS 1,602 million (US$ 429 million), a decrease of 26%
  * EBITDA Margin: 29% of total revenues compared with 31%
  * Net Profit: NIS 478 million (US$ 128 million), an increase of 8%^5
  * Cellular ARPU: NIS 97 (US$ 26), a decrease of 13%

Q4 2012 Highlights (compared with Q4 2011)

  * Total Revenues: NIS 1,258 million (US$ 337 million), a decrease of 21%
  * Service Revenues: NIS 1,036 million (US$ 278 million), a decrease of 19%
  * OPEX^3: NIS 744 million (US $199 million), compared with NIS 889 million,
    an improvement of 16%
  * Operating Expenses (OPEX)^3 including cost of equipment revenues: NIS 944
    million (US$ 253 million) compared with NIS 1,142 million, an improvement
    of 17%
  * EBITDA^4: NIS 340 million (US$ 91 million), a decrease of 29%
  * EBITDA Margin: 27% of total revenues compared with 30%
  * Net Profit: NIS 102 million (US$ 27 million), compared with a loss of NIS
    188 million^5
  * Cellular ARPU: NIS 87 (US$ 23), a decrease of 18%
  * Cellular Subscriber Base: approximately 3 million at year-end

Business Wire

ROSH HA’AYIN, Israel -- February 27, 2013

Partner Communications Company Ltd. (“Partner” or the “Company")
(NASDAQ:PTNR)(TASE:PTNR) , a leading Israeli communications operator,
announced today its results for the year and quarter ended December 31, 2012.

Commenting on the fourth quarter and annual results, Mr. Haim Romano,
Partner's CEO, said:

“In 2012, the level of competition in the Israeli telecommunications market
greatly intensified and as a result, the significant price erosion in the
market impacted the Company's business results as reflected in our financial
statements. These trends have continued into the first months of 2013.
Nevertheless we have maintained robust free cash flow, whilst continuing to
invest in and develop the cellular market's most technologically advanced
infrastructure. We have also taken significant efficiency measures which
mitigated the impact of these trends on the erosion of the company's
profitability.

Despite a substantial decline in revenues, the Company reported strong cash
flow before interest payments in 2012 of NIS 1,234 million. At the same time,
the Company has significantly reduced net debt by NIS 827 million. Due to the
efficiency measures taken by the Company during the past year, operating
expenses in the fourth quarter of 2012 decreased by NIS 145 million compared
with the fourth quarter of 2011, while we improved organizational processes
and raised the quality of customer services.

The Company has invested approximately NIS 500 million, principally during
2012, in the Orange ultranet upgrade project. Partner's network is currently
the fastest^6 and most advanced network in Israel, and is the only network
supporting HD voice quality and preparation for 4G technology. To ensure
continued technological progress, network availability, internet capacity and
other added services at competitive prices, the Company intends to participate
in an expected tender for an allocation of new frequencies to be used for 4G.

The Company completed the integration with 012 Smile in most operational
areas, enabling the Company to provide further value for our customers through
bundled service packages that include cellular, fixed-line and ISP services.”

Mr. Haim Romano noted: “The Company is operating under two main brands and
adhered to its customer centric strategy, its dedication to excellent service
and its commitment to offers tailored to customer needs. The Orange  brand
provides customized solutions with maximum availability in all customer
interfaces, physical and digital, and was ranked first among all major
cellular operators in Israel in the "Market-test index for customer
experience". The "012 mobile" cellular services are based mainly on
self-service through a website at attractive prices.

The Company will continue to implement the “clear” policy, which is unique to
the Company, and is based on simplicity, fairness and clarity in all the
Company's interfaces, under which the same plans are offered to new and
existing customers and which contributes to the creation of customer loyalty
over time."

Mr. Haim Romano concluded: "the Company will continue to adhere to the
customer centric strategy and with the consistent investment in the Company’s
assets: customers, employees and the Orange brand."

Mr. Ziv Leitman, Partner's Chief Financial Officer commented on the quarterly
results:

“The financial results of the fourth quarter of 2012 compared to the previous
quarter reflect the downward pressure on revenues resulting from increasingly
intense competition in the telecommunications market, which was partially
offset by the continued impact of efficiency measures implemented by the
Company over the course of the past year.

During the fourth quarter of 2012, the Company continued to implement
efficiency measures and to adjust its cost structure to adapt to the new level
of revenues. In the fourth quarter, operating expenses (excluding cost of
equipment revenues, depreciation and amortization) decreased by approximately
NIS 50 million compared to the third quarter of 2012, mainly reflecting the
impact of efficiency measures. The Company began to implement significant
efficiency measures five quarters ago and operating expenses in the fourth
quarter of 2012 was lower by NIS 145 million compared with the fourth quarter
of 2011. The Company plans to continue in the coming quarters to implement
additional operational efficiency measures in order to further reduce
operating expenses.

As part of the efficiency measures, the Company has continued to adjust its
workforce to the changing market conditions and in the fourth quarter of 2012,
the number of positions (on a full time equivalent (FTE) basis) was reduced by
approximately 700. In total, during 2012, the number of reported positions was
reduced by 2,495 positions, or 32% of the Company’s workforce, principally by
lowering the level of new recruits. The number of employees on a FTE basis at
the end of December 2012 was 5,396.

The churn rate increased in the fourth quarter of 2012 to 10.9% from 10.4% in
the third quarter, reflecting an increase in the churn of Pre-Paid
subscribers, which was partially offset by a decrease in the churn of
Post-Paid subscribers.

ARPU totaled NIS 87 in the fourth quarter of 2012, compared with NIS 97 in the
previous quarter. The decrease was partially explained by the seasonal
decline, mainly in roaming revenues, and by the continued price erosion and
transition of customers to unlimited packages.

Equipment revenues in the fourth quarter of 2012 increased to NIS 222 million
compared with NIS 165 million in the previous quarter, mainly reflecting the
impact of the launched of the iPhone 5 in December 2012.

As a result of the above effects, the EBITDA for the fourth quarter of 2012
amounted to NIS 340 million compared to NIS 401 million in the previous
quarter.

The Company’s investments in fixed assets totaled NIS 123 million in the
fourth quarter of 2012 and total annual investments for 2012 were NIS 500
million, or 9% of annual revenues. At the same time, the Company continued to
report strong free cash flow (after interest payments), which totaled NIS 255
million this quarter. Over 2012, the Company generated free cash flow after
interest payments in the amount of NIS 1,034 million. The cash flow was
positively affected by a decrease in working capital, following lower
equipment sales over the course of the year and an increase in the proportion
of equipment sales by credit card and cash. This trend is expected to have
positively impact on the free cash flow in the coming quarters.

In light of its strong free cash flow, the Company made an early repayment of
bank loans during the fourth quarter of 2012 in the amount of NIS 300 million.
In 2013, therefore, only repayments of bonds are currently required, in an
amount of approximately NIS 300 million. The level of net debt was NIS 3,812
million at year-end 2012 compared to NIS 4,639 million at the end of the
previous year.

The competition and material price erosion that adversely affected our
financial results for the fourth quarter of 2012 are continuing in the first
quarter of 2013 and may continue further into the year, which could have a
material adverse effect on our financial results in the first quarter of 2013
and going forward."

Key Financial Results  (unaudited)
 
NIS MILLION           2008          2009        2010        2011^8       2012
Revenues              6,302         6,079       6,674       6,998        5,572
Cost of               3,868         3,77        4,093       4,978        4,031
revenues
Gross profit          2,434         2,309       2,581       2,02         1,541
S,G&A                 672           677         785         1,002        787
Impairment of         -             -           -           87           -
goodwill
Other income          64            69          64          105          111
Operating             1,826         1,701       1,86        1,036        865
profit
Financial             184           176         181         294          234
costs, net
Income tax            444           384         436         299          153
expenses
Net Profit            1,198         1,141       1,243       443          478
Earnings per
share (basic,         7.71          7.42        8.03        2.85         3.07
NIS)
Free cash flow        1,401         1,021       1,502       1,082        1,234
                                                                          
NIS MILLION           Q4'11^8       Q1'12       Q2'12       Q3'12        Q4'12
Revenues              1,589         1,571       1,428       1,315        1,258
Cost of               1,279         1,128       1,000       934          969
revenues
Gross profit          310           443         428         381          289
S,G&A                 309           222         213         192          160
Impairment of         87            -           -           -            -
goodwill
Other income          31            27          30          28           26
Operating             -55           248         245         217          155
profit (loss)
Financial             55            55          73          68           38
costs, net
Income tax            78            47          52          39           15
expenses
Net profit            (188)         146         120         110          102
(loss)
Earnings
(Losses) per          (1.21)        0.94        0.77        0.71         0.65
share (basic,
NIS)
Free cash flow        292           223         313         375          323
                                                                          
Key Operating Indicators:
                      2008          2009        2010        2011         2012
EBITDA (NIS           2,298         2,304       2,57        2,178        1,602
millions)
EBITDA as a
percentage of         36%           38%         38%         31%          29%
total revenues
Cellular
Subscribers           2,898         3,042       3,16        3,176        2,976
(end of period,
thousands)
Estimated
Cellular Market       32%           32%         32%         32%          29%
Share (%)
Annual Cellular       18%           18%         21%         29%          38%
Churn Rate (%)
Average Monthly
Usage per
Cellular              365           364         366         397          450
Subscriber
(MOU) (minutes)
Average Monthly
Revenue per
Cellular              161           151         122^1       111          97
Subscriber
(ARPU) (NIS)
No. Fixed Lines
(end of period,       *             *           69          292          288
thousands)
ISP Subscribers
(end of period,       *             *           60          632          587
thousands)
* Prior to 2010, the Company did not operate a fixed line service nor have ISP
subscribers.
 

Partner Consolidated Results (unaudited)
 
                Cellular Segment                     Fixed Line Segment                   Elimination             Consolidated
NIS             2012        2011        Change       2012        2011        Change       2012        2011        2012        2011          Change
Millions                                %                                    %                                                              %
Total           4,488       5,996       -25%         1,246       1,153       +8%          (162)       (151)       5,572       6,998         -20%
Revenues
Service                                                                                                           4,640
Revenues        3,592       4,248       -15%         1,21        1,127       +7%          (162)       (151)                   5,224         -11%
                                                                                                                   
Equipment       896         1,748       -49%         36          26          +38%         -           -           932         1,774         -47%
Revenues
Operating       742         1,287       -42%         123         71^8        +73%         -           -           865         1,358^8       -36%
Profit
EBITDA          1,314       1,896       -31%         288         282         +2%          -           -           1,602       2,178         -26%
                                                                                                                                             
                Cellular Segment                     Fixed Line Segment                   Elimination             Consolidated
NIS             Q4’12       Q4’11       Change       Q4’12       Q4’11       Change       Q4’12       Q4’11       Q4’12       Q4’11         Change
Millions                                %                                    %                                                              %
Total           997         1,299       -23%         307         333         -8%          (46)        (43)        1,258       1,589         -21%
Revenues
Service         788         1,005       -22%         294         324         -9%          (46)        (43)        1,036       1,286         -19%
Revenues
Equipment       209         294         -29%         13          9           +44%         -           -           222         303           -27%
Revenues
Operating       112         260         -57%         43          7^8         +514%        -           -           155         267^8         -42%
Profit
EBITDA          256         407         -37%         84          71          +18%         -           -           340         478           -29%
                                                                                                                                             

Financial Review

Total revenues in 2012 were NIS 5,572 million (US$ 1,493 million), a decrease
of 20% from NIS 6,998 million in 2011. Partner concluded the acquisition of
012 Smile, an Israeli operator of international telecoms services and local
fixed line services and a provider of internet services, in March 2011. The
consolidated results of 2011 therefore only included the results of 012 Smile
from March 2011 forward.

In Q4 2012, total revenues were NIS 1,258 million (US$ 337 million), a
decrease of 21% from NIS 1,589 million in Q4 2011.

Annual service revenues totaled NIS 4,640 million (US$ 1,243 million) in 2012,
decreasing by 11% from NIS 5,224 million in 2011.

Service revenues for the cellular segment in 2012 were NIS 3,592 million (US$
962 million), decreasing by 15% from NIS 4,248 million in 2011. The decrease
was mainly a result of the intense price erosion of cellular services
including voice and data services, following the entry of new competitors (new
operators and MVNO's) in the first half of the year, as well as the continued
decrease in revenues from  roaming services. The decrease also reflected the
lower Post-Paid cellular subscriber base which decreased by approximately 4%
on an average basis over the past year.

Service revenues for the fixed line segment reached NIS 1,210 million (US$ 324
million) in 2012, an increase of 7% compared with NIS 1,127 million in 2011.
The increase largely reflects the contribution of 012 Smile to the Group’s
results for the full year in 2012, compared to only ten months in 2011 (from
the date of acquisition in March 2011). The impact of 012 Smile’s contribution
was partially offset by price erosion in fixed line services due to tougher
competitive market conditions, and a gradual decrease in the average number of
internet service subscribers over the period.

For Q4 2012, service revenues totaled NIS 1,036 million (US$ 278 million),
decreasing by 19% from NIS 1,286 million in Q4 2011. For the cellular segment,
service revenues in Q4 2012 were NIS 788 million (US$ 211 million), a decrease
of 22% from NIS 1,005 million in Q4 2011. The decrease was explained largely
by the same factors as the annual decrease. For the fixed line segment,
service revenues totaled NIS 294 million (US$ 79 million) in Q4 2012, a
decrease of 9% from NIS 324 million in Q4 2011. The decrease mainly reflected
price erosion in fixed line services including voice and internet services, as
well as a decrease in the average number of internet service subscribers over
the period.

Equipment revenues in 2012 totaled NIS 932 million (US$ 250 million), a
decrease of 47% compared with NIS 1,774 million in 2011. The decrease largely
reflected a significant decrease in the quantity of cellular equipment sold,
reflecting increased competition from independent handset suppliers, the
impact of the Company’s strategy to require more stringent payment terms, a
general decrease in market demand, and an end to the use of special discounts
for customers with new handsets.

In Q4 2012, equipment revenues were NIS 222 million (US$ 59 million),
decreasing by 27% from NIS 303 million in Q4 2011. As with the annual results,
the quarterly decrease was due to a significant reduction in the quantity of
cellular equipment sold, for the same reasons as the annual decrease. Sales in
the fourth quarter were positively affected by the launch of the iPhone 5
model in December 2012.

Operating expenses (including cost of service revenues, selling, marketing and
administrative expenses and excluding depreciation and amortization) totaled
NIS 3,262 million (US$ 874 million) in 2012, a decrease of 7% or NIS 255
million from 2011, largely reflecting the series of efficiency measures
undertaken over the last year, and in particular the reduction of the
workforce by approximately 40% over the period. The decrease was despite the
full-year contribution of 012 Smile in 2012 compared with only a ten-month
contribution in 2011.

For Q4 2012, operating expenses totaled NIS 744 million (US$ 199 million), a
decrease of 16% or NIS 145 million from Q4 2011, as described above as well as
a one-time reduction in site-rental expenses of NIS 18 million.

Operating profit for 2012 was NIS 865 million (US$ 232 million), a decrease of
17% compared with reported operating profit for 2011 including an impairment
charge impact of NIS 322 million (related principally to certain fixed line
assets acquired in connection with the purchase of 012 Smile). The decrease
amounted to 36% when compared with operating profit before the impact of the
impairment.

In Q4 2012, operating profit was NIS 155 million (US$ 42 million), compared
with a reported operating loss in Q4 2011 of NIS 55 million due to the
impairment charge impact of NIS 322 million in the quarter. Compared to
operating profit before the impairment charge impact in Q4 2011, operating
profit for Q4 2012 decreased by 42%.

Annual EBITDA totaled NIS 1,602 million (US$ 429 million) in 2012, a decrease
of 26% from NIS 2,178 million in 2011. EBITDA for the cellular segment was NIS
1,314 million (US$ 352 million) in 2012, decreasing by 31% from NIS 1,896
million in 2011, reflecting the impact of the reduction in service revenues
and in gross profit from equipment revenues, partially offset by the reduction
in operating expenses (including cost of service revenues, selling, marketing
and administrative expenses and excluding depreciation and amortization), as
described above. EBITDA for the fixed line segment in 2012 was NIS 288 million
(US$ 77 million), an increase of 2% from NIS 282 million in 2011, reflecting
the reduction in operating expenses and the impact of the full-year
contribution of 012 Smile in 2012 compared with only ten months in 2011,
partially offset by the reduction in service revenues.

For Q4 2012, EBITDA was NIS 340 million (US$ 91 million), a decrease of 29%
from NIS 478 million in Q4 2011. The cellular segment contributed EBITDA of
NIS 256 million (US$ 69 million) in the quarter, decreasing by 37% from Q4
2011, and the fixed line segment contributed EBITDA of NIS 84 million (US$ 23
million), an increase of 18% compared with Q4 2011.

Financial expenses, net in 2012 were NIS 234 million (US$ 63 million), a
decrease of 20% compared with NIS 294 million. The decrease was mainly due to
the lower level of average debt in 2012 compared with 2011 (see Funding and
Investing Review below), together with a lower level of expenses linked to
changes in the consumer price index (“CPI”) of 1.4% over 2012 compared with
2.6% over 2011.

In Q4 2012, financial expenses, net, totaled NIS 38 million (US$ 10 million),
a decrease of 31% compared with NIS 55 million in Q4 2011, reflecting a lower
level of expenses linked to changes in the consumer price index (“CPI”) of
-0.7% in Q4 2012 compared with -0.2% in Q4 2011, as well as the lower level of
average debt.

Net profit in 2012 was NIS 478 million (US$ 128 million), an increase of 8%
compared with reported net profit in 2011 of NIS 443 million, including the
impact of the impairment in the amount of NIS 311 million, and a decrease of
37% compared with net profit in 2011 before the impact of the impairment.

Q4 2012 net profit was NIS 102 million (US$ 27 million), compared with a
reported net loss of NIS 188 million in Q4 2011 including the impact of the
impairment, and a decrease of 17% compared with a net profit of NIS 123
million before the impact of the impairment.

Based on the weighted average number of shares outstanding during 2012, basic
earnings per share or ADS, was NIS 3.07 (US$ 0.82), an increase of 8% compared
to NIS 2.85 in 2011.

The effective tax rate of the Company for the fourth quarter was 13% compared
to an average of 26% for the first three quarters of the year.

The effective tax rate for 2012 was 24%, compared with 29% in 2011 (before the
impact of the impairment). The decrease in the tax rate as above was mainly
due to the utilization of previously unrecognized tax losses and other
temporary differences against taxable income.

Funding and Investing Review

In 2012, cash flows generated from operating activities before interest
payments, net of cash flows used for investing activities ("Free Cash Flow"),
totaled NIS 1,234 million (US$ 331 million), an increase of 14% from NIS 1,082
million for 2011 (without taking into account the cash outflow of NIS 597
million used for the acquisition of 012 Smile.

Cash generated from operations increased by 9% from NIS 1,570 million in 2011
to NIS 1,705 million (US$ 458 million) in 2012. This was mainly explained by
the changes in operating working capital. In 2012 working capital decreased by
NIS 268 million, primarily due to a decrease of NIS 467 million in trade
receivables reflecting the decrease in handset sales purchased in 36 monthly
installment payment plans, while in 2011, operating working capital increased
by NIS 266 million, primarily reflecting the impact of the significant
increase in handset sales over that period. The change in working capital was
partially offset by the decrease in profit before depreciation and
amortization as described above.

The level of investment in fixed assets including intangible assets but
excluding capitalized subscriber acquisition and retention costs, net, was NIS
492 million (US$ 132 million) in 2012, an increase of 4% from NIS 471 million
in 2011, and the equivalent of 9% of total revenues in 2012 compared with 7%
in 2011. Most of the investments were made in the Orange ultranet upgrade
project which included improvements to the Company's cellular network, as well
as in information systems and software, and in the optical fiber transmission
network.

The amount of subscriber acquisition and retention costs, net, that was
capitalized by the Company decreased from NIS 33 million in 2011 to NIS 9
million (US$ 2 million) in 2012, reflecting the impact of the amendment to the
Communications Law, introduced in February 2011, which restricts the
imposition of subscriber exit fines for cellular subscribers and in August
2011 for fixed-line subscribers.

In Q4 2012, free cash flow was NIS 323 million (US$ 87 million), an increase
of 11% compared with NIS 292 million in Q4 2011, reflecting a 6% increase in
operating cash flow, partially offset by a 8% decrease in investment in fixed
assets including intangible assets but excluding capitalized subscriber
acquisition and retention costs.  As stated above, the improvement was due to
a greater decrease in working capital, partially offset by a decrease in
profit before depreciation and amortization.

The level of net debt^10 at the end of 2012 was NIS 3,812 million (US$ 1,021
million), compared with NIS 4,639 million at the end of 2011.

Cellular Segment Financial Review^11
 
NIS             2012        2011        Change       Q4’12       Q4’11       Change
Millions                                %                                    %
Total           4,488       5,996       -25%         997         1,299       -23%
Revenues
Service         3,592       4,248       -15%         788         1,005       -22%
Revenues
Equipment       896         1,748       -49%         209         294         -29%
Revenues
Operating       742         1,287       -42%         112         260         -57%
Profit
EBITDA          1,314       1,896       -31%         256         407         -37%
                                                                              

Total revenues for the cellular segment  in 2012 were NIS 4,488 million (US$
1,202 million), a decrease of 25% from NIS 5,996 million in 2011. In Q4 2012,
total revenues were NIS 997 million (US$ 267 million), a decrease of 23% from
NIS 1,299 million in Q4 2011.

Annual service revenues for the cellular segment were NIS 3,592 million (US$
962 million) in 2012, decreasing by 15% from NIS 4,248 million in 2011. The
decrease was mainly a result of the intense price erosion of cellular services
including voice and data services, following the entry of new competitors
(MVNO’s and new operators) and the offering of "unlimited plans" in the first
half of the year, as well as the continued decrease in revenues from  roaming
services. The decrease also reflected the lower Post-Paid cellular subscriber
base which decreased by approximately 4% on an average basis over the past
year.

In Q4 2012, service revenues for the cellular segment  were NIS 788 million
(US$ 211 million), a decrease of 22% from NIS 1,005 million in Q4 2011.

Pre-Paid subscribers contributed service revenues in a total amount of
approximately NIS 475 million (US$  127  million)  in 2012, a decrease of 5%
from approximately NIS 500 million in 2011, as a result of the price erosion
and the decrease in the number of Pre-Paid subscribers.

Revenues from  cellular data and content services excluding SMS^12  in 2012
totaled NIS 559 million (US$ 150 million), a decrease of 16% compared with NIS
666 million in 2011. The decrease mainly reflected the price erosion of data
and content services including browsing and other services, the lower
Post-Paid subscriber base, and the impact of new consumer protection
regulations in 2011 which led to a reduction in content service revenues (see
the Company's 2011 Annual Report for further details).

SMS service revenues^12, on an allocated basis as explained below, totaled NIS
433 million (US$ 116 million) in 2012, a decrease of 5% compared with NIS 456
million in 2011.

Since approximately two-thirds of outgoing airtime, content and data
(including SMS) revenues is derived from customers who subscribe to bundled
packages which include airtime, data and SMS, the separate reporting of data
and content service revenues relies heavily on the allocation methodology and
application of those revenues between the different services offered in the
bundled packages. Furthermore, the proportion of customers with unlimited
packages which offer unlimited use of voice and SMS, as well as certain
browsing volumes, continues to rise, and this trend is expected to continue.
The Company has therefore concluded that the separate reporting of content and
SMS revenues is no longer beneficial to understanding the Company’s results of
operation, and will not provide this breakdown in future results releases.

Revenues from cellular equipment sales in 2012 totaled NIS 896 million (US$
240 million), decreasing by 49% from NIS 1,748 million in 2011. The decrease
largely reflected a significant decrease in the quantity of cellular equipment
sold, reflecting increased competition from independent handset suppliers, the
impact of the Company’s strategy to require more stringent payment terms, a
general decrease in market demand, and an end to the use of special discounts
for customers with new handsets.

In Q4 2012 revenues from cellular equipment sales totaled NIS 209 million (US$
56 million), decreasing by 29% from NIS 294 million in Q4 2011. As with the
annual results, the quarterly decrease was due to a significant reduction in
the quantity of cellular equipment sold, for the same reasons as the annual
decrease. However, sales in the fourth quarter were supported by the launch of
the iPhone 5 model in December 2012.

The gross profit from cellular equipment sales in 2012 was NIS 109 million
(US$ 29 million), compared with NIS 369 million in 2011, a decrease of 70%.
This was mainly due to the lower quantity of cellular equipment sales, as well
as a decrease in the profit achieved per sale, reflecting the increased
competition in the handset market.

For Q4 2012, the  gross profit from cellular equipment sales was NIS 19
million (US$ 5 million), compared with NIS 49 million in Q4 2011, a decrease
of 61%, reflecting the same trends as the annual decrease.

Operating expenses for the cellular segment (including cost of service
revenues, selling, marketing and administrative expenses and excluding
depreciation and amortization and impairment charges) totaled NIS 2,497
million (US$ 669 million) in 2012, a decrease of 12% or NIS 326 million from
2011. Including depreciation and amortization expenses, operating expenses
decreased by 11%.

The cost of service revenues (excluding inter-segment costs) decreased by 10%
from NIS 2,601 million in 2011 to NIS 2,351 million (US$ 630 million) in 2012,
largely as a result of (i) the decrease in payroll and related expenses
following the reduction in the level of workforce and other efficiency
measures, (ii) lower royalty expenses due to the state (as a result of lower
service revenues combined with the lower royalty rate of 1.3% for 2012,
compared with 1.75% for 2011), and (iii) lower payments to content suppliers.

Selling, marketing, general and administration expenses for the cellular
segment in 2012 amounted to NIS 584 million (US$ 156 million), decreasing by
18% from NIS 712 million in 2011. The decrease mainly reflected decreases in
payroll and related expenses following the reduction in the level of workforce
and other efficiency measures taken, lower selling commissions and a decrease
in marketing and advertising expenses.

For Q4 2012, operating expenses for the cellular segment, excluding
depreciation and amortization, decreased by 15% compared with Q4 2011, and
operating expenses for the cellular segment, including depreciation and
amortization, decreased by 13% compared with Q4 2011, for reasons similar to
that of the annual decrease, as well as a one-time reduction in site-rental
expenses of NIS 18 million.

Overall, operating profit for the cellular segment in 2012 was NIS 742 million
(US$ 199 million), decreasing by 42% compared with NIS 1,287 million in 2011,
reflecting the impact of the reduction in service revenues and in gross profit
from equipment revenues, partially offset by the reduction in operating
expenses, as described above.

In Q4 2012, operating profit for the cellular segment was NIS 112 million (US$
30 million), decreasing by 57% compared with NIS 260 million in Q4 2011.

EBITDA for the cellular segment totaled NIS 1,314 million (US$ 352 million) in
2012, a decrease of 31% from NIS 1,896 million in 2011, again reflecting the
impact of the reduction in service revenues and in gross profit from equipment
revenues, partially offset by the reduction in operating expenses, as
described above. As a percentage of total cellular revenues, EBITDA in 2012
was 29%, compared with 32% in 2011.

In Q4 2012, EBITDA for the cellular segment was NIS 256 million (US$ 69
million), compared to NIS 407 million in Q4 2011, a decrease of 37%. As a
percentage of total cellular revenues, EBITDA in Q4 2012 was 26%, compared
with 31% in Q4 2011.

Cellular Segment Operational Review

At the end of December 2012, the Company's active cellular subscriber base
(including mobile data and 012 Mobile subscribers) was approximately 2.98
million including approximately 2.1 million Post-Paid subscribers or 71% of
the base, and approximately 874 thousand Pre-Paid subscribers, or 29% of the
subscriber base.

Over 2012, the subscriber base declined by approximately 200 thousand, of
which 180 thousand was Post-Paid subscribers, compared with an increase in the
subscriber base of 16 thousand in 2011. The significant decrease in annual net
additions reflected the intensification of the competition in the market. The
Company’s strategy is to maintain a balance between reducing the churn of
existing customers and the slowdown of the trend of price erosion and its
impact on ARPU.

The annual churn rate for cellular subscribers in 2012 was 38%, an increase of
9 percentage points compared with 29% in 2011. The quarterly churn rate for Q4
2012 was 10.9% compared with 8.2% in Q4 2011 and 10.4% in Q3 2012. Following
the trend of the previous quarters, the high rate of churn reflected
principally the impact on the Post-Paid subscriber market of the two new
cellular operators and MVNOs who continue to market aggressive offerings in an
attempt to capture market share.

Total cellular market share (based on the number of subscribers) at the end of
2012 was estimated to be approximately 29%, compared with 32% at the end of
the previous year.

The monthly Average Revenue Per User (“ARPU”) for cellular subscribers for the
year 2012 was NIS 97 (US$ 26), a decrease of approximately 13% from NIS 111 in
2011. In Q4 2012, ARPU was NIS 87 (US$ 23), a decrease of 18% from NIS 106 in
Q4 2011. The decrease reflected principally the ongoing price erosion in
airtime and content services as well as weaker roaming revenues, as described
above.

The monthly average Minutes of Use per subscriber (“MOU”) for cellular
subscribers in 2012 was 450 minutes, an increase of 13% from 397 minutes in
2011. This increase largely reflected the continued increase in the proportion
of cellular subscribers with bundled packages that include large or unlimited
quantities of minutes. In addition, the significant growth of the use of
cellular internet browsing in 2012 led to an increase in the amount of data
traffic carried by the Partner cellular network by approximately 80% compared
with 2011.

In Q4 2012, MOU was 483 minutes compared with 407 minutes in Q4 2011, for the
same reason as the annual increase.

Fixed Line Segment Review^13
 
NIS             2012        2011        Change       Q4’12       Q4’11       Change
Millions                                %                                    %
Total           1,246       1,153       +8%          307         333         -8%
Revenues
Service         1,210       1,127       +7%          294         324         -9%
Revenues
Equipment       36          26          +38%         13          9           +44%
Revenues
Operating
Profit ^        123         71          +73%         43          7           +514%
14
EBITDA          288         282         +2%          84          71          +18%
 

Total Revenues in 2012 for the fixed line segment reached NIS 1,246 million
(US$ 334 million), an increase of 8% compared with NIS 1,153 million in 2011.
In Q4 2012, total revenues were NIS 307 million (US$ 82 million) in the fixed
line segment, a decrease of 8% compared with NIS 333 million in Q4 2011.

Service revenues for the fixed line segment reached NIS 1,210 million (US$ 324
million) in 2012, an increase of 7% compared with NIS 1,127 million in 2011.
The increase largely reflects the contribution of 012 Smile to the Group’s
results for a full year in 2012, compared with only ten months in 2011 (from
the date of acquisition in March 2011). The impact of 012 Smile’s contribution
was partially offset by price erosion in fixed line services due to tougher
competitive market conditions, and a gradual decrease in the average number of
internet service subscribers over the period.

In Q4 2012 service revenues for the fixed line segment totaled NIS 294 million
(US$ 79 million), a decrease of 9% from NIS 324 million in Q4 2011. The
decrease mainly reflected price erosion in fixed line services including voice
and internet services, as well as a decrease in the average number of internet
service subscribers over the period.

The total number of active fixed lines including 012 Smile was approximately
288,000 at the end of 2012, compared with approximately 292  thousand at the
end of 2011, and 282 thousand and the end of the Q3 2012.

The ISP subscriber base was approximately 587 thousand as of the end of 2012,
compared with approximately 632 thousand at the end of 2011 and 594 thousand
at the end of Q3 2012. The decrease in the number of ISP subscribers was
mainly due to the increase in the intensity of competition in the market
largely related to the entry of new competitors in the market.

Revenues from equipment sales in the fixed line segment in 2012 totaled NIS 36
million (US$ 10 million), compared with NIS 26 million in 2011. In Q4 2012
equipment sales totaled NIS 13 million (US$ 3 million), compared with NIS 9
million in Q4 2011.

Operating expenses for the fixed line segment (including cost of service
revenues, selling, marketing and administrative expenses and excluding
depreciation and amortization) totaled NIS 927 million (US$ 248 million) in
2012, an increase of 10% or NIS 85 million from 2011. The increase was
explained by the full-year contribution of 012 Smile in 2012 compared with
only a 10 month contribution in 2011. Including depreciation and amortization
expenses but excluding the impact of the impairment, operating expenses
increased by 4%.

The cost of service revenues (excluding inter-segment costs) for the fixed
line segment increased by 5% from NIS 821 million in 2011, before the impact
of the impairment, to NIS 861 million (US$ 231 million) in 2012. The increase
was largely due to the full-year contribution of 012 Smile in 2012 compared
with the ten-month contribution in 2011, and was partially offset by a
decrease in depreciation and amortization expenses following the impairment,
as well as lower infrastructure expenses.

Selling, marketing, general and administration expenses for the fixed line
segment in 2012 amounted to NIS 203 million (US$ 54 million), unchanged from
2011 before the impact of the impairment. This was despite the full-year
contribution of 012 Smile in 2012 compared with the ten-month contribution in
2011, and mainly reflected lower payroll and related expenses.

For Q4 2012, operating expenses for the fixed line segment, excluding
depreciation and amortization, decreased by 16% compared with Q4 2011, largely
a result of lower payroll and related expenses, infrastructure expenses,
selling commissions and marketing expenses. Operating expenses for the fixed
line segment in Q4 2012 including depreciation and amortization decreased by
20% compared with Q4 2011 before the impact of the impairment, for the same
reasons, as well as a decrease in depreciation and amortization expenses
following the impairment in Q4 2011.

Operating profit for the fixed line segment was NIS 123 million (US$ 33
million) in 2012, an increase of 73% compared to NIS 71 million in 2011,
excluding the impact of the impairment (reported operating loss in 2011 was
NIS 251 million and included the impact of impairment in the amount of NIS 
322  million). The increase in operating profit, (excluding the impact of the
impairment), reflected principally the impact of the efficiency measures which
reduced operating expenses over the period, as well the impact of the
full-year contribution of 012 Smile in 2012 compared with only ten months in
2011.

In Q4 2012 operating profit for the fixed line segment  was NIS 43 million
(US$ 12 million), compared to NIS 7 million in Q4 2011 before the impact of
the impairment (reported operating loss in Q4 2011 was NIS 315 million and
included the impact of impairment in the amount of NIS  322  million).

EBITDA for the fixed line segment in 2012 was NIS 288 million (US$ 77
million), an increase of 2% from NIS 282 million in 2011, mainly reflecting
the reduction in operating expenses, partially offset by the reduction in
service revenues.

In Q4 2012, EBITDA for the fixed line segment totaled NIS 84 million (US$ 23
million), compared with NIS 71 million in 2011, an increase of 18%, mainly a
result of the 20% reduction in operating expenses.

Business and Regulatory Developments

Regulatory Developments

1. Ministry of Communications hearing with respect to roaming services

In January 2013, the Ministry of Communications published a hearing with
respect to charging for roaming services abroad according to which, as a
default, new and existing subscribers would be blocked from cellular internet
abroad. A subscriber that attempts to use cellular internet abroad without a
package would receive a SMS message regarding the tariff and the manner in
which it can be purchased. A subscriber that purchases a package will receive
an updated detailed SMS at 50% and 85% utilization of each component of the
package.

Once the package is 100% utilized, the services will be blocked except for the
ability to send charged SMS messages and to dial a collect-customer service
number that will allow removal of the blockage. A subscriber that consumes
roaming services without a pre-purchased package shall be blocked once he has
spent NIS 100, and may request removal of the blockage through the
collect-customer service number. Depending on the outcome of this hearing, our
revenues from roaming services may be negatively impacted.

2. Criteria for determining the severity of the offense with respect to
financial sanctions

Following the amendment to the Telecommunications Law in August 2012, which
authorized the Minister of Communications to impose financial sanctions on
licensees that violate their license conditions, the Ministry of
Communications recently published criteria by which the amount of the monetary
sanction will be determined, including, inter alia, the extent to which there
is a violation to cause harm in providing telecommunications services properly
and on a regular basis, the number of subscribers affected by the violation
and the period of the violation.

3. Amendments to the ISP consumer licenses

In October 2012, following a hearing process conducted by the Ministry of
Communications the Ministry included consumer amendments to the internet
access provider general licenses, some of which became effective in December
2012 and others which are due to be effective during 2013. The amendments
include, inter alia, a requirement to include a summary of the main terms of
the subscriber agreement on the front page of the agreement, the obligation to
document specific customer service requests, the obligation to record each
phone transaction and to submit them to the Ministry of Communications upon
request, and setting rules for the provision of cash rebates for overcharging.

Business Developments

1. Changes in the Company's Controlling Shareholders

On January 29, 2013 the Company announced the closing of the transaction
between Scailex Corporation Ltd. ("Scailex") and S.B. Israel Telecom Ltd.
("S.B. Israel Telecom"), an affiliate of Saban Capital Group Inc., pursuant to
which Scailex sold and transferred to S.B. Israel Telecom approximately 28.82%
of the issued and outstanding share capital of Partner. In addition, the
Company has been informed by S.B. Israel Telecom that its transaction with
Leumi Partners, for the purchase of approximately 2.06% of the issued and
outstanding share capital of Partner, has been completed with the closing of
the transaction between Scailex and S.B. Israel Telecom.

Accordingly, following the consummation of the above transactions, S.B. Israel
Telecom holds approximately 30.87% of the issued and outstanding share capital
of the Company.

In addition, S.B. Israel Telecom and Scailex, which still holds approximately
15.72% of Partner issued and outstanding share capital, have signed a
shareholders’ agreement regarding, among others, the exercise of their voting
rights and their consent regarding nomination of directors in Partner.

For more information, see the Company's press release and immediate report on
Form 6-K dated January 29, 2013.

2. Changes in the Company's Board of Directors

Following the completion of the transaction between Scailex and S.B. Israel
Telecom, Mr. Avi Zeldman and Dr. Shlomo Nass resigned from Partner's Board of
Directors and the following new directors were appointed: Mr. Arieh Saban, Mr.
Adam Chesnoff, Mr. Shlomo Rodav, Mr. Fred Gluckman, Mr. Elon Shalev, Mr.
Sumeet Jaisinghani and Mr. Yoav Rubinstein.

Conference Call Details

Partner will hold a conference call on Wednesday, February 27, 2013 at 10.00
a.m. Eastern Time / 5.00 p.m. Israel Time.

Please call the following numbers (at least 10 minutes before the scheduled
time) in order to participate: International: +972.3. 918.0609, North America
toll-free: + 1.888.668.9141

A live webcast of the call will also be available on Partner's website at:
http://www.orange.co.il/en/Investors-Relations/lobby/

If you are unavailable to join live, the replay numbers are:

International: +972.3.925.5904, North America: +1.888.782.4291

Both the replay of the call and the webcast will be available from February
27, 2013 until March 6, 2013.

Forward-Looking Statements

This press release includes forward-looking statements within the meaning of
Section 27A of the US Securities Act of 1933, as amended, Section 21E of the
US Securities Exchange Act of 1934, as amended, and the safe harbor provisions
of the US Private Securities Litigation Reform Act of 1995. Words such as
"believe", "anticipate", "expect", "intend", "seek", "will", "plan", "could",
"may", "project", "goal", "target" and similar expressions often identify
forward-looking statements but are not the only way we identify these
statements. All statements other than statements of historical fact included
in this press release regarding our future performance, plans to increase
revenues or margins or preserve or expand market share in existing or new
markets, plans to reduce expenses, and any statements regarding other future
events or our future prospects, are forward-looking statements.

We have based these forward-looking statements on our current knowledge and
our present beliefs and expectations regarding possible future events. These
forward-looking statements are subject to risks, uncertainties and assumptions
about Partner, consumer habits and preferences in cellular telephone usage,
trends in the Israeli telecommunications industry in general, the impact of
current global economic conditions and possible regulatory and legal
developments. For further information regarding of some of the risks we face,
see "Item 3.  Key Information - 3D. Risk  Factors", "Item  4. Information  on 
the  Company", "Item 5. Operating  and  Financial  Review  and  Prospects",
"Item 8. Financial Information - 8A. Consolidated Financial Statements and
Other Financial Information – 8A.1 Legal and Administrative Proceedings" and
"Item 11. Quantitative and Qualitative Disclosures about Market Risk" in the
Company's 2011 Annual Report (20-F) filed with the SEC on March 22, 2012, as
amended on March 26, 2012.  In  light  of  these  risks, uncertainties and
assumptions, the forward-looking events discussed in this press release might
not occur, and actual results may differ materially from the results
anticipated. We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.

The financial results presented in this press release are unaudited financial
results.

The results were prepared in accordance with IFRS, other than EBITDA and free
cash flow before interest payments, which are non-GAAP financial measures.

The financial information is presented in NIS millions (unless otherwise
stated) and the figures presented are rounded accordingly.

The convenience translations of the Nominal New Israeli Shekel (NIS) figures
into US Dollars were made at the rate of exchange prevailing at December 31,
2012: US $1.00 equals NIS 3.733. The translations were made purely for the
convenience of the reader.

Use of Non-GAAP Financial Measures:

Earnings before financial interest, taxes, depreciation, amortization and
exceptional items (including impairment charges) ('EBITDA') is presented
because it is a measure commonly used in the telecommunications industry and
is presented solely to enhance the understanding of our operating results.
This measure, however, should not be considered as an alternative to operating
income or income for the year as indicators of our operating performance.
Similarly, this measure should not be considered as an alternative to cash
flow from operating activities as a measure of liquidity. EBITDA is not a
measure of financial performance under generally accepted accounting
principles and may not be comparable to other similarly titled measures for
other companies. EBITDA may not be indicative of our historic operating
results nor is it meant to be predictive of potential future results.

Reconciliation between our net cash flow from operating activities and EBITDA
on a consolidated basis is presented in the attached summary financial
results.

About Partner Communications

Partner Communications Company Ltd. ("Partner") is a leading Israeli provider
of telecommunications services (cellular, fixed-line telephony and internet
services) under the orange™ brand and the 012 Smile brand. The Company
provides mobile communications services to over 3 million subscribers in
Israel. Partner’s ADSs are quoted on the NASDAQ Global Select Market™ and its
shares are traded on the Tel Aviv Stock Exchange (NASDAQ and TASE: PTNR).

For more information about Partner, see:
http://www.orange.co.il/en/Investors-Relations/lobby/

 
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(unaudited)
                                                              Convenience
                                    New Israeli shekels       translation into
                                                              U.S. dollars
                                    December 31,
                                    2011          2012        2012
                                    In millions
CURRENT ASSETS                                               
Cash and cash equivalents           532           548         147
Trade receivables                   1,518         1,397       375
Other receivables and prepaid       41            47          13
expenses
Deferred expenses - right of        19            22          6
use
Inventories                         162           98          26
Income tax receivable               12            7           2
Derivative financial                24            1           *
instruments
                                    2,308         2,120       569
                                                               
NON CURRENT ASSETS
Trade receivables                   856           509         136
Deferred expenses – right of        142           138         37
use
Assets held for employee            3
rights upon retirement, net
Advance payment in respect of
the acquisition of 012 smile
Property and equipment              2,051         1,990       533
Licenses and other intangible       1,290         1,217       326
assets
Goodwill                            407           407         109
Deferred income tax asset           30            36          9
                                    4,779         4,297       1,150
                                                               
TOTAL ASSETS                        7,087         6,417       1,719
 
* Representing an amount less than 1 million
 
 
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(unaudited)
 
                                                              Convenience
                                    New Israeli shekels       translation into
                                                              U.S. dollars
                                    December 31,
                                    2011          2012        2012
                                    In millions
CURRENT LIABILITIES
Current maturities of notes
payable and current                 498           306         82
borrowings
Trade payables                      913           866         231
Parent group-trade                  142           70          19
Other payables                      216           169         45
Deferred revenue                    52            40          11
Provisions                          65            60          16
Derivative financial                3             14          4
instruments
                                    1,889         1,525       408
                                                               
                                                               
NON CURRENT LIABILITIES
Notes payable                       2,605         2,321       622
Bank borrowings                     2,068         1,733       464
Liability for employee rights       48            50          13
upon retirement, net
Dismantling and restoring           25            28          8
sites obligation
Other non-current liabilities       10            10          3
Deferred tax liability              17            9           2
                                    4,773         4,151       1,112
                                                               
TOTAL LIABILITIES                   6,662         5,676       1,520
                                                               
EQUITY
Share capital - ordinary
shares of NIS 0.01
par value: authorized -
December 31, 2011
and 2012 - 235,000,000
shares;
issued and outstanding -
December 31, 2011 –
*155,645,708 shares
December 30, 2012 –                 2             2           1
*155,645,708 shares
Capital surplus                     1,100         1,100       295
Accumulated deficit                 (326)         (10)        (3)
Treasury shares, at cost -
December                            (351)         (351)       (94)
31, 2011 and 2012 - 4,467,990
shares
TOTAL EQUITY                        425           741         199
TOTAL LIABILITIES AND EQUITY        7,087         6,417       1,719
 
* Net of treasury shares
 

 
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
 
                                                                  Convenience
                              New Israeli Shekels                 translation
                                                                  into
                                                                  U.S. Dollars
                              Year ended December 31
                              2010        2011        2012        2012
                              In millions (except earnings per share)
Revenues                      6,674       6,998       5,572       1,493
Cost of revenues              4,093       4,978       4,031       1,080
Gross profit                  2,581       2,020       1,541       413
                                                                   
Selling and marketing         479         711         551         148
expenses
General and                   306         291         236         63
administrative expenses
Impairment of goodwill                    87
Other income, net             64          105         111         30
Operating profit              1,860       1,036       865         232
Finance income                28          39          27          7
Finance expenses              209         333         261         70
Finance costs, net            181         294         234         63
Profit before income          1,679       742         631         169
tax
Income tax expenses           436         299         153         41
Profit for the year           1,243       443         478         128
                                                                   
Earnings per share
Basic                         8.03        2.85        3.07        0.82
Diluted                       7.95        2.84        3.07        0.82
 
 
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
 
                                                                  Convenience
                              New Israeli Shekels                 translation
                                                                  into
                                                                  U.S. Dollars
                              Year ended December 31
                              2010        2011        2012        2012
                              In millions
Profit for the year           1,243       443         478         128
Other comprehensive
income (losses):
Actuarial losses, net         (8)         (21)        (17)        (4)
on defined benefit plan
Income taxes relating
to actuarial losses on        2           5           4           1
defined benefit plan
Other comprehensive
income (losses) for the       (6)         (16)        (13)        (3)
year, net of income
taxes
                                                                   
TOTAL COMPREHENSIVE
INCOME                        1,237       427         465         125
FOR THE YEAR
                                                                   

 
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
SEGMENT INFORMATION
(unaudited)
 
                     New Israeli Shekels
                     Year ended December 31, 2012
                     In millions
                     Cellular       Fixed
                     segment        line          Elimination       Consolidated
                                    segment
                                                                     
Segment
revenue -            3,564          1,076                           4,640
Services
Inter-segment
revenue -            28             134           (162)
Services
Segment
revenue -            896            36                              932
Equipment
Total revenues       4,488          1,246         (162)             5,572
                                                                     
Segment cost
of revenues –        2,351          861                             3,212
Services
Inter-segment
cost of              134            28            (162)
revenues-
Services
Segment cost
of revenues -        787            32                              819
Equipment
Cost of              3,272          921           (162)             4,031
revenues
Gross profit         1,216          325                             1,541
                                                                     
Operating            584            203                             787
expenses
Other income,        110            1                               111
net
Operating            742            123                             865
profit
Adjustments to
presentation
of EBITDA            562            164                             726
–Depreciation
and
amortization
–Other               10             1                               11
EBITDA               1,314          288                             1,602
                                                                     
Reconciliation
of EBITDA to
profit before
income tax
- Depreciation
and                                                                 726
amortization
- Finance                                                           234
costs, net
- Other                                                             11
Profit before                                                       631
income tax
 
 
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
SEGMENT INFORMATION
(unaudited)
 
                     New Israeli Shekels
                     Year ended December 31, 2011
                     In millions
                     Cellular       Fixed
                     segment        line          Elimination       Consolidated
                                    segment
Segment
revenue -            4,219          1,005                           5,224
Services
Inter-segment
revenue -            29             122           (151)
Services
Segment
revenue -            1,748          26                              1,774
Equipment
Total revenues       5,996          1,153         (151)             6,998
                                                                     
Segment cost
of revenues –        2,601          969                             3,570
Services
Inter-segment
cost of              122            29            (151)
revenues-
Services
Segment cost
of revenues -        1,379          29                              1,408
Equipment
Cost of              4,102          1,027         (151)             4,978
revenues
Gross profit         1,894          126                             2,020
                                                                     
Operating            712            290                             1,002
expenses
Impairment of                       87                              87
goodwill
Other income,        105                                            105
net
Operating            1,287          (251)                           1,036
profit (loss)
Adjustments to
presentation
of EBITDA
–Depreciation
and                  590            182                             772
amortization
–Impairment of
intangible
assets,                             349                             349
deferred
expenses and
goodwill
–Other               19             2                               21
EBITDA               1,896          282                             2,178
                                                                     
Reconciliation
of EBITDA to
profit before
income tax
- Depreciation
and                                                                 (772)
amortization
- Impairment
of intangible
assets,                                                             (349)
deferred
expenses and
goodwill
- Finance                                                           (294)
costs, net
- Other                                                             (21)
Profit before                                                       742
income tax
                                                                     

PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
 
                                                           Convenience
                   New Israeli shekels                     translation into
                                                           U.S. dollars
                                                           12 month   3 month
                   12 month              3 month           period     period
                   period ended          period ended      ended      ended
                   December 31,          December 31,      December   December
                                                           31,        31,
                   2012       2011       2012      2011    2012       2012
                   In millions
CASH FLOWS
FROM OPERATING                                                       
ACTIVITIES:
Cash generated
from               1882       1881       475       478     505        127
operations
(Appendix A)
Income tax         (177)      (311)      (28)      (58)    (47)       (7)
paid
Net cash
provided by        1,705      1,570      447       420     458        120
operating
activities
                                                                       
CASH FLOWS
FROM INVESTING
ACTIVITIES:
Acquisition of
property and       (367)      (349)      (89)      (102)   (98)       (24)
equipment
Acquisition of
intangible         (133)      (155)      (34)      (34)    (36)       (9)
assets
Acquisition of
012 smile, net
of cash                       (597)
acquired of
NIS 23 million
(Appendix B)
Interest           9          12         3         2       2          1
received
Proceeds from
sale of            2          3          1         3       1          *
property and
equipment
Proceeds from
derivative
financial          18         1          (5)       3       5          (1)
instruments,
net
Net cash used
in investing       (471)      (1,085)    (124)     (128)   (126)      (33)
activities
                                                                       
                                                                       
CASH FLOWS
FROM FINANCING
ACTIVITIES:
Proceeds from
exercise of
stock options                 1
granted to
employees
Non-current
bank borrowing                900
received
Proceeds from
issuance of
notes payable,                1,136
net of
issuance costs
Dividend paid      (167)      (659)      (7)       (134)   (45)       (2)
Repayment of       (2)        (4)                  (1)     (1)
finance lease
Interest paid      (200)      (235)      (68)      (83)    (54)       (18)
Repayment of
current                       (128)
borrowings
Repayment of
non-current        (455)      (699)      (300)             (122)      (81)
bank
borrowings
Repayment of       (394)      (586)                (197)   (106)       
notes payables
Net cash used
in financing       (1,218)    (274)      (375)     (415)   (328)      (101)
activities
INCREASE
(DECREASE) IN      16         211        (52)      (123)   4          (14)
CASH AND CASH
EQUIVALENTS
CASH AND CASH
EQUIVALENTS AT     532        321        600       655     143        161
BEGINNING OF
PERIOD
CASH AND CASH
EQUIVALENTS AT     548        532        548       532     147        147
END OF PERIOD
 
*Representing an amount less than 1 million
 
 
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
 
 

Appendix A - Cash generated from operations and supplemental information
                                                           Convenience
                   New Israeli shekels                     translation into
                                                           U.S. dollars
                                                           12 month   3 month
                   12 month              3 month           period     period
                   period ended          period ended      ended      ended
                   December 31           December 31       December   December
                                                           31,        31,
                   2012       2011       2012      2011    2012       2012
                   In millions
Cash generated
from
operations:
Profit (loss)      478        443        102       (188)   128        27
for the period
Adjustments
for:
Depreciation
and                700        743        176       186     188        47
amortization
Amortization
of deferred        26         29         7         9       7          2
expenses-
Right of use
Impairment of
deferred                      148                  148
expenses-
Right of use
Impairment of                 87                   87
goodwill
Impairment of
intangible                    114                  97
assets
Employee share
based              11         19         2         5       3          *
compensation
expenses
Liability for
employee
rights upon        (12)       (26)       (4)       (12)    (3)        (1)
retirement,
net
Finance costs,     38         71         (14)      (2)     10         (4)
net
Gain (loss)
from change in
fair value of      15         (19)       21        (9)     4          6
derivative
financial
instruments
Interest paid      200        235        68        83      54         18
Interest           (9)        (12)       (3)       (2)     (2)        (1)
received
Deferred           (10)       2          1         9       (2)        (*)
income taxes
Income tax         177        311        28        58      47         8
paid
Capital loss
on sale of         *          2          *         1       *          *
property and
equipment
Changes in
operating
assets and
liabilities:
Decrease
(increase) in
accounts
receivable:
Trade              467        (190)      122       53      125        33
Other              (5)        44         2         14      (1)        1
Increase
(decrease) in
accounts
payable and
accruals:
Parent             (72)       70         (39)      (12)    (19)       (10)
group-trade
Trade              (107)      (37)       21        10      (29)       6
Other payables     (44)       (91)       (32)      (39)    (12)       (9)
Provisions         (5)        36         1         (6)     (1)        *
Deferred           (11)       *          1         2       (3)        *
revenue
Increase in
deferred           (25)       (27)                 (12)    (7)
expenses-
Right of use
Current income     5          (13)       11        11      1          3
tax liability
Decrease
(increase) in      65         (58)       4         (13)    17         1
inventories
Cash generated
from               1882       1881       475       478     505        127
operations:
^At December 31, 2011, 2010 and 2012 trade payables include NIS 220 million,
NIS 217 million and NIS 280 million, in respect of acquisition of intangible
assets and property and equipment, respectively.

 
^At December 31, 2011, 2010 and 2012 tax withholding related to dividend of
approximately NIS 17 million, NIS 6 million and NIS 0 million, respectively,
is outstanding. These balances are recognized in the cash flow statements upon
payment.

Appendix B – Acquisition of 012 Smile

On March 3, 2011, the Company obtained control of 012 Smile. The fair values
of assets acquired and liabilities assumed were as follows:

                                                             NIS in millions
Current assets                                               295
Deferred expenses                                            282
Property and equipment                                       159
Intangible assets                                            408
Goodwill                                                     494
Other non-current assets                                     21
Short term bank borrowings and current maturities of         (201)
long-term borrowings
Accounts payables and provisions                             (229)
Long term bank borrowings                                    (579)
                                                             650
Less: Advance payment in respect of the acquisition of       (30)
012 smile
Less: cash acquired                                          (23)
Net cash used in the acquisition of 012 Smile                597

The acquisition is accounted for using the purchase method. Under the purchase
method, assets and liabilities are recorded at their fair values on the
acquisition date and the total purchase price is allocated to the tangible and
intangible assets acquired and liabilities and contingent liabilities assumed.
The excess of the purchase price over the fair value of the identifiable net
assets acquired is recorded as goodwill.

PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
RECONCILIATION BETWEEN OPERATING CASH FLOWS AND EBITDA
 
                                                                                          Convenience translation into
                  New Israeli shekels                                                     U.S.
                                                                                          dollars
                                                                                          12 month          3 month
                  12 month                            3 month                             period            period
                  period ended                        period ended                        ended             ended
                  December 31,                        December 31,                        December          December
                                                                                          31,               31,
                  2012              2011              2012              2011              2012              2012
                  (Unaudited)       (Unaudited)       (Unaudited)       (Unaudited)       (Unaudited)       (Unaudited)
                  In millions
                                                                                                           
Net cash
provided by       1,705             1,570             447               420               458               120
operating
activities
                                                                                                             
Liability
for
employee          12                26                4                 12                3                 1
rights upon
retirement
Accrued
interest
and
exchange
and linkage       (222)             (289)             (51)              (77)              (60)              (14)
differences
on
long-term
liabilities
Increase
(decrease)
in accounts
receivable:
Trade             (467)             190               (122)             (53)              (125)             (33)
Other,
including
derivative        16                2                 (22)              7                 4                 (6)
financial
instruments
Decrease
(increase)
in accounts
payable and
accruals:
Trade             106               37                (22)              (10)              28                (6)
Shareholder
– current         72                (70)              39                12                19                10
account
Other             41                54                7                 43                11                2
Income tax        177               311               28                58                47                8
paid
Increase
(decrease)        (65)              58                (4)               13                (17)              (1)
in
inventories
Decrease in
assets            (1)               (1)                                 (2)               (*)
retirement
obligation
Financial         228               290               36                55                61                10
expenses
EBITDA            1,602             2,178             340               478               429               91
 
* Representing an amount less than 1 million
** The convenience translation of the New Israeli Shekel (NIS) figures into US dollars was made at the exchange
prevailing at December 31, 2012: US $1.00 equals 3.733 NIS.
*** Financial expenses excluding any charge for the amortization of pre-launch financial costs.
 

Key Financial and Operating Indicators (unaudited)^15
 
NIS M unless         Q1          Q2          Q3          Q4          Q1          Q2          Q3          Q4
otherwise            2011        2011        2011        2011        2012        2012        2012        2012        2011        2012
stated
Cellular
Segment              1,099       1,074       1,070       1,005       963         949         892         788         4,248       3,592
Service
Revenues
Cellular
Segment              555         520         379         294         323         207         157         209         1,748       896
Equipment
Revenues
Fixed Line
Segment              137         325         341         324         320         300         296         294         1,127       1,210
Service
Revenues
Fixed Line
Segment              4           7           6           9           7           8           8           13          26          36
Equipment
Revenues
Reconciliation
for                  -24         -39         -45         -43         -42         -36         -38         -46         -151        -162
consolidation
Total Revenues       1,771       1,887       1,751       1,589       1,571       1,428       1,315       1,258       6,998       5,572
Operating            400         377         314         -55         248         245         217         155         1,036       865
Profit
Cellular             540         502         447         407         363         367         328         256         1,896       1,314
Segment EBITDA
Fixed Line           45          84          82          71          75          56          73          84          282         288
Segment EBITDA
Total EBITDA         585         586         529         478         438         423         401         340         2,178       1,602
EBITDA Margin        33%         31%         30%         30%         28%         30%         30%         27%         31%         29%
(%)
OPEX                 763         913         952         889         872         853         793         744         3,517       3,262
Financial            59          99          81          55          55          73          68          38          294         234
Expenses, net
Net Profit           254         205         172         -188        146         120         110         102         443         478
Dividend             210         -           140         -           -           -           160         -           350         160
Declared
Capital              133         75          132         131         133         113         125         121         471         492
Expenditures
Free Cash Flow       256         158         376         292         223         313         375         323         1,082       1,234
Free Cash Flow       238         37          363         209         199         270         310         255         847         1,034
After Interest
Net Debt             4,856       4,856       4,718       4,639       4,450       4,209       4,072       3,812       4,639       3,812
Cellular
Subscriber           3,149       3,175       3,201       3,176       3,147       3,098       3,042       2,976       3,176       2,976
Base
(Thousands)
Number of
Fixed Lines          288         292         295         292         285         281         282         288         292         288
(Thousands)
ISP Subscriber
Base                 632         632         632         632         618         609         594         587         632         587
(Thousands)
ARPU Cellular        115         112         111         106         101         101         97          87          111         97
(NIS)
MOU Cellular         374         396         410         407         424         437         457         483         397         450
(Minutes)
Churn Rate           7.3%        6.5%        7.2%        8.2%        8.0%        8.9%        10.4%       10.9%       29%         38%
Cellular (%)
Number of
Employees                                    8,588       7,891       7,230       6,961       6,102       5,396       7,891       5,396
(FTE)
                                                                                                                                  

^1 The financial results presented in this press release are unaudited
financial results
^2 Cash flows from operating activities before interest payments, net of cash
flows used for investment activities.  For purposes of comparison with 2012,
the free cash flow for 2011 does not take into account the cash outflows of
NIS 597 million used for the acquisition of 012 Smile.
^3 Operating expenses include cost of service revenues, and selling, marketing
and administrative expenses, and exclude depreciation and amortization and
impairment charges.
^4 For definition of EBITDA measure, see “Use of Non-GAAP Financial Measures”
on page 19 below.
^5 In Q4 2011, the Company recorded an impairment charge on its fixed line
assets which reduced the annual and Q4 net profit by NIS 311 million. See
press release of March 22, 2012 for details.
^6 According to hundreds of thousands of independent monthly samples in
speedtest application
^7 See also definitions on first page.
^8 In Q4 2011, the Company recorded an impairment charge on its fixed line
assets which reduced the annual and Q4 operating profit by NIS 322 million and
the net profit by NIS 311 million. See press release of March 22, 2012 for
details.
^9 Reported ARPU for 2010 was NIS 148. The ARPU for 2010 has been restated
under the lower interconnect tariff effective in 2011, for the purpose of
comparison.
^10 Total current and non-current borrowings less cash and cash equivalents.
^11 Includes intersegment revenues and costs of revenues.
^12 In Q4 2011, the Company adjusted its allocation of credits between the
different cellular services. The service revenues for 2011 have been restated
under the new methodology for the purposes of comparison.
^13 The analysis includes intersegment revenues and costs of revenues.
^14 Excludes the impact of impairment charges of NIS 322 million on Q4 and
annual 2011, as explained on page 8
^15 See first page for definitions. Including the results of 012 Smile from
March 2011

Contact:

Partner Communications Company Ltd.
Mr. Ziv Leitman, +972-54-7814951
Chief Financial Officer
investors@orange.co.il
or
Ms. Yaffa Cohen-Ifrah, +972-54-9099039
Head of Investor Relations
Yaffa.cohenifrah@orange.co.il
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