Partner Communications Reports First Quarter 2014 Results1

  Partner Communications Reports First Quarter 2014 Results1                 ADJUSTED EBITDA INCREASED BY NIS 6 MILLION (2%)               PROFIT FOR THE PERIOD TOTALED NIS 52 MILLION, UP 68%         NET DEBT TOTALED NIS 2.8 BILLION, A DECREASE OF NIS 773 MILLION  First Quarter 2014 Highlights (compared with first quarter 2013)    *Total Revenues: NIS 1,103 million (US$ 316 million), a decrease of 4%   *Service Revenues: NIS 876 million (US$ 251 million), a decrease of 9%   *Equipment Revenues: NIS 227 million (US$ 65 million), an increase 24%   *Operating Expenses (OPEX)^2 including cost of equipment sold: NIS 843     million (US$242million), a decrease of 6%   *Operating Expenses (OPEX)^2: NIS 661 million (US $190 million), a decrease     of 8%   *Adjusted EBITDA^3: NIS 274 million (US$ 79 million), an increase of 2%   *Adjusted EBITDA Margin: 25% of total revenues compared with 23%   *Profit for the Period: NIS 52 million (US$ 15 million), an increase of 68%   *Net Debt^4: NIS 2,849 million (US$ 817 million), a decrease of NIS 773     million   *Free Cash Flow (before interest)^5: NIS 145 million (US$ 42 million), a     decrease of 29%   *Cellular ARPU: NIS 77 (US$ 22), a decrease of 6%   *Cellular Subscriber Base: approximately 2.94 million at quarter-end,     similar to the first quarter of 2013  Business Wire  ROSH HA’AYIN, Israel -- May 14, 2014  Partner Communications Company Ltd. (“Partner” or the “Company”) (NASDAQ and TASE: PTNR), a leading Israeli communications operator, announced today its results for the quarter ended March 31, 2014.  Commenting on the quarterly results, Mr. Haim Romano, Partner's CEO, noted: “The results of the first quarter of 2014 reflect the successful implementation of our strategic plan. Despite the intensified competition and price erosion which negatively affected our service revenues, we recorded this quarter an increase in adjusted EBITDA compared to the same quarter last year, for the first time since the fourth quarter of 2010. The improvement resulted from adapting our cost structure to our challenging business reality, as well as the activity of our Retail Division which contributed to the growth in equipment sales.  We continue to invest in the most advanced 4G network in Israel and other innovative technologies, investments which have totaled more than NIS 1 billion in the past two years. Partner is currently the only cellular operator in Israel that is ready to launch a 4G network. Subject to the Ministry of Communications' approval, the public in Israel will be able to enjoy the most advanced 4G technology using the 5 MHz frequency previously allocated to the Company. In addition, we expect to receive an additional allocation of frequencies from the Ministry of Communications that will enable us to offer the full service possible on 4G and 4G advanced networks.  We proved that it is possible to upgrade our customer service concurrently with implementing operational efficiency measures. Our activities to improve our quality of service were recognized in the recent customer complaints report published by the Ministry of Communications and in a report published by the Israeli Consumer Council, relating to 2013, which show that Partner had the fewest customer complaints and the fewest justified complaints in relation to its subscriber base and in comparison to other cellular companies. These reports, together with other surveys, conducted both internally and by independent third parties, attest to Partner's leadership position with respect to quality of service in the cellular market in Israel.  This quarter we added approximately 4,000 Post-Paid subscribers to our cellular subscriber base. It is the fourth consecutive quarter in which we have recorded an increase in our Post-Paid subscriber base.  This quarter, the Company was ranked in a BDI COFACE survey for the tenth consecutive year as the "best company to work for" in the cellular market, a survey that is based, among other things, on an employee survey. This survey reflects our employees' satisfaction and trust in the Company. In the past two years the Company has faced a complicated business reality which included efficiency measures and a reduction in workforce; however, despite all these we continued to nurture and invest in our unique corporate culture which places the employee in the center.  In the near future, the Ministry of Communications is also expected to announce its decision with respect to the fixed-line wholesale market, a decision which will likely have a material impact on our plans to expand our offering to our customers and to the general public, to include television.  We expect to receive during the next quarters the required regulatory approvals for our network sharing agreement with Hot Mobile, although the full impact of the agreement on our financial results will only begin in 2015.”  In conclusion, Mr. Romano commented: “Partner's financial strength, which enabled us to reduce our debt by an additional NIS 100 million since the beginning of 2014, and the loyalty of our customers and employees drive our ability to lead and succeed in a competitive market. We will continue to invest in our principal assets: our customers and employees, and to create value for our shareholders.”  Mr. Ziv Leitman, Partner's Chief Financial Officer commented on the quarterly results as compared to the previous quarter:  “During the first quarter of 2014, competition in the cellular market further intensified, which resulted in a sequential decline in revenues; however, at the same time, the Company continued to adjust its cost structure and implement operational efficiency measures which, among other things, led to a decrease of NIS14million in operating expenses (excluding cost of equipment sold and depreciation & amortization expenses) compared with the fourth quarter of 2013.  The cellular subscriber churn rate during the first quarter of 2014 increased to 11.6% from 10.7% in the previous quarter, as a result of the intensified competition mentioned above. This is the second consecutive quarter of an increase in the churn rate following three quarters of declines.  ARPU in the first quarter of 2014 totaled NIS 77, decreasing by NIS 4 compared with the previous quarter. The decline in ARPU resulted primarily from continued price erosion of cellular services, a result of the intensified competition, as well as fewer work days during the quarter and seasonal effects.  Revenues from equipment sales in the first quarter of the year grew by 11% compared with the previous quarter, primarily resulting from an increase in sales of tablets and the commercial efforts of the recently established Retail Division. Gross profit from equipment sales in the first quarter of 2014 increased by NIS 26 million, primarily due to sourcing activities and the commercial policies of the Retail Division.  Adjusted EBITDA decreased by NIS 8 million in the first quarter of 2014 compared with the previous quarter, largely a result of the decline in cellular service revenues, partially offset by the increase in gross profit from equipment sales and the decline in operating expenses.  Finance costs, net, in this quarter decreased from the previous quarter by NIS 14 million, mainly due to a decline in CPI linkage expenses and the one-time bank loans repayment fee of NIS 8 million which was recorded in the previous quarter, partially offset by lower gains from foreign exchange movements.  Profit in the first quarter of 2014 increased to NIS 52 million compared with NIS 46 million in the previous quarter, mainly due to the decline in finance costs, net, partially offset by the decline in Adjusted EBITDA.  Free cash flow (after interest payments) in the first quarter totaled NIS 139 million, compared with NIS 209 million in the fourth quarter of 2013. The decrease in free cash flow mainly reflected changes in operating working capital which decreased by NIS 43 million this quarter compared with a decrease of NIS105million in the previous quarter.  As of March 31, 2014, net debt amounted to approximately NIS 2.8billion. In April 2014, the Company made an early repayment of bank loans totaling NIS 100million (whose original repayment schedule was as follows: NIS 25 million in 2014, 2015, 2016, and 2017) at a one-time prepayment cost of NIS 6 million which will be recorded in the second quarter of 2014. Since January 2013, the Company has made early repayments of loans in the total amount of NIS 717 million.”  Key Financial Results^6 (unaudited)  NIS MILLION (except EPS)          Q1'14  Q1'13  % Change Revenues                          1,103  1,144  -4% Cost of revenues                   849     901     -6% Gross profit                       254     243     +5% Operating profit                   99      95      +4% Profit for the period              52      31      +68% Earnings per share (basic, NIS)    0.33    0.20    +65% Free cash flow (before interest)  145    203    -29%  Key Operating Indicators:                                                    Q1'14  Q1'13  Change Adjusted EBITDA (NIS million)                      274    268    +2% Adjusted EBITDA as a percentage of total revenues   25%     23%     +2 Cellular Subscribers (end of period, thousands)     2,936   2,932   +4 Quarterly Cellular Churn Rate (%)                   11.6%   10.4%   +1.2 Monthly Average Revenue per Cellular User          77     82     -6% (ARPU) (NIS)  Partner Consolidated Results (unaudited)              Cellular Segment         Fixed Line Segment       Elimination     Consolidated NIS         Q1’14  Q1’13  Change   Q1’14  Q1’13  Change   Q1’14  Q1’13   Q1’14  Q1’13  Change Million                       %                          %                                            % Total         900    900    0%         254    290    -12%       (51)   (46)      1,103  1,144  -4% Revenues Service       680     724     -6%        247     283     -13%       (51)    (46)      876     961     -9% Revenues Equipment     220     176     +25%       7       7       0%         -       -         227     183     +24% Revenues Operating     63      52      +21%       36      43      -16%       -       -         99      95      +4% Profit Adjusted    199    186    +7%      75     82     -9%      -      -       274    268    +2% EBITDA  Financial Review (Consolidated)  In Q1 2014, total revenues were NIS 1,103 million (US$ 316 million), a decrease of 4% from NIS1,144 million in Q1 2013.  Service revenues in Q1 2014 totaled NIS 876 million (US$ 251 million), a decrease of 9% from NIS 961 million in Q1 2013.  Service revenues for the cellular segment in Q1 2014 were NIS 680 million (US$ 195 million), a decrease of 6% from NIS 724 million in Q1 2013. The decrease was mainly the result of the continued price erosion of Post-Paid and Pre-Paid cellular services due to the intensified competitive environment.  Service revenues for the fixed line segment totaled NIS 247 million (US$ 71 million) in Q1 2014, a decrease of 13% compared with NIS 283 million in Q1 2013. The decrease mainly reflected price erosion in fixed line services including local calls, long distance calls and internet services.  Equipment revenues in Q1 2014 totaled NIS 227 million (US$ 65 million), an increase of 24% compared with NIS 183 million in Q1 2013. The growth was attributable to both an increase in the average unit price and in the number of unit sales.  Gross profit from equipment sales in Q1 2014 was NIS 45 million (US$ 13 million), compared with NIS 4 million in Q1 2013. The increase resulted primarily from improved profit margins, as well as the sale in Q1 2013 of subsidized handsets to large corporate customers that did not meet the capitalization criteria.  Operating expenses (‘OPEX’, including cost of service revenues, selling, marketing and administrative expenses and excluding depreciation and amortization) totaled NIS 661 million (US$190 million) in Q1 2014, a decrease of 8% or NIS 59 million from Q1 2013. The decrease largely reflected the efficiency measures undertaken as well as lower interconnect expenses due in part to the reduction in the fixed line termination (interconnect) charge by approximately 60% in December 2013. Including depreciation and amortization expenses, OPEX in Q1 2014 decreased by 6% compared with Q1 2013.  Adjusted EBITDA in Q1 2014 totaled NIS 274 million (US$ 79 million), an increase of 2% from NIS268 million in Q1 2013.  Adjusted EBITDA for the cellular segment was NIS 199 million (US$ 57 million) in Q1 2014, increasing by 7% from NIS 186 million in Q1 2013, reflecting the impact of lower operating expenses and higher gross profit from equipment sales, partially offset by the decrease in service revenues. As a percentage of total cellular revenues, Adjusted EBITDA for the cellular segment in Q1 2014 was 22%, slightly higher than 21% in Q1 2013.  Adjusted EBITDA for the fixed line segment decreased by 9% from NIS 82 million in Q1 2013 to NIS 75 million (US$ 22 million) in Q1 2014, reflecting the decline in service revenues partially offset by lower operating costs. As a percentage of total fixed line revenues, Adjusted EBITDA for the fixed line segment in Q1 2014 was 30%, compared with 28% in Q1 2013.  Operating profit for Q1 2014 was NIS 99 million (US$ 28 million), an increase of 4% compared with operating profit in Q1 2013 of NIS 95 million.  Finance costs, net in Q1 2014 were NIS 24 million (US$ 7 million), a decrease of 51%, compared with NIS 49 million in Q1 2013. The decrease was mainly a result of lower CPI (consumer price index) linked interest expenses due to the lower CPI level, as well as lower interest expenses resulting from the lower level of average debt (see Funding and Investing Review below).  Profit in Q1 2014 was NIS 52 million (US$ 15 million), an increase of 68% compared with profit in Q1 2013 of NIS 31 million. The increase in profit resulted from improved Adjusted EBITDA and lower finance costs, net.  Based on the weighted average number of shares outstanding during Q1 2014, basic earnings per share or ADS, was NIS 0.33 (US$ 0.10), an increase of 65% compared to NIS 0.20 in Q12013.  The effective tax rate for Q1 2014 was 31%, compared with 33% in Q1 2013. The decrease in the effective tax rate was mainly due to the lower percentage of unrecognized expenses than in the comparable quarter last year, due to the increase in profit before tax.  Cellular Segment Operational Review  At the end of the first quarter 2014, the Company's cellular subscriber base (including mobile data and 012Mobile subscribers) was approximately 2.94 million including approximately 2.14million Post-Paid subscribers or 73% of the base, and approximately 799 thousand Pre-Paid subscribers, or 27% of the subscriber base.  During the first quarter of 2014, the cellular subscriber base declined by approximately 20,000 subscribers. In contrast to the Pre-Paid subscriber base which decreased by approximately 24,000, largely reflecting seasonal trends, the Post-Paid subscriber base increased by approximately 4,000.  The quarterly churn rate for cellular subscribers in Q1 2014 increased to 11.6%, compared with 10.4% in Q1 2013 and 10.7% in Q4 2013, with the increase reflecting the intensified competition in the cellular market.  Total cellular market share (based on the number of subscribers) at the end of Q1 2014 was estimated to be approximately 29%, unchanged from year-end 2013.  The monthly Average Revenue per User (“ARPU”) for cellular subscribers in Q1 2014 was NIS77 (US$ 22), a decrease of 6% from NIS 82 in Q1 2013 and a decrease of 5% from NIS81 in Q4 2013. The decrease in ARPU compared to the parallel quarter mainly reflected the continued price erosion due to the intensified competition in the market, as described above. The sequential decrease in ARPU also resulted from the continued price erosion, as well as from fewer work days during the quarter and seasonal effects.  Funding and Investing Review  In Q1 2014, cash flow generated from operating activities before interest payments, net of cash flow used for investing activities ("Free Cash Flow"), totaled NIS 145 million (US$42million), a decrease of 29% from NIS203 million in Q1 2013.  Cash generated from operations decreased by 23% to NIS 259 million (US$ 74 million) in Q1 2014 from NIS 336 million in Q1 2013. This was mainly explained by changes in operating working capital movements, partially offset by the increase in profit. The decrease in operating working capital in Q1 2014 was NIS 43 million compared with a decrease of NIS 120 million in Q1 2013.  The level of cash capital expenditures in fixed assets (Capex) including intangible assets but excluding capitalized subscriber acquisition and retention costs, net, was NIS 113 million (US$32million) in Q1 2014, a decrease of 13% from NIS 130 million in Q1 2013.  The level of net debt at the end of Q1 2014 amounted to NIS 2,849 million (US$ 817 million), compared with NIS 3,622 million at the end of Q1 2013, a decrease of NIS 773 million.  Regulatory Developments  1. Ministry of Communications Hearings  a) Schejter Committee  The Minister of Communications appointed Prof. Amit Schejter to head a committee tasked with drafting recommendations regarding the regulation of audio visual content transmitted over the internet and the introduction of new service providers. Partner filed its written position with the committee on April 24, 2014. The committee's recommendations are expected to be submitted to the Minister by August 2014. If the committee will recommend and the Minister of Communications will adopt its recommendation, according to which the regulatory regime that currently applies to the traditional broadcasters will be applied also to new competitors, such as the Company, then we may not be able to enter this market and to successfully launch our TV services.  b) Network Neutrality  On February 10, 2014, the Communications Law was amended so that its "Network Neutrality" rules are now broadened to apply to all operators in the telecommunications field and not only cellular operators and those engaged in the import, distribution, sale or maintenance of terminal equipment.  For further information, see the Company's 2013 Annual Report - "Item 3D. Key Information - Risk Factors - 3D.1 RISKS RELATING TO THE REGULATION OF OUR INDUSTRY - 3D.1c - Other regulatory developments may have a negative impact on the Company’s business and results of operation" and "Item 4 - Information on the Company - 4B. Business Overview - 4B.13 Regulation - 4B.13d Regulatory Developments - 4B.13d - viii - Network Neutrality".  2. Ministry of Communications Decisions  Following a hearing held by the Ministry of Communications, effective March 31, 2014, the mobile radio telephone (MRT) licenses of all cellular operators in Israel were amended so that as a default, access to cellular internet services outside Israel shall be blocked, unless the subscriber has requested access to such services, has purchased a roaming services package or has extended his existing package.  For further information, see the Company's 2013 Annual Report - "Item 4 - Information on the Company - 4B. Business Overview - 4B.13 - Regulation - 4B.13d Regulatory Developments - 4B.13d - i - New Roaming Regulation".  Conference Call Details  Partner will hold a conference call on Wednesday, May 14, 2014 at 10.00 a.m. Eastern Time / 5.00p.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: 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  The replay of the call will be available from  May 14, 2014 until May 21, 2014. The archived webcast will be available on the website.  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. In particular, this press release contains forward-looking statements regarding the anticipated offering by the Company of 4G services, and expected changes in the regulatory environment. In addition, 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 recent and future regulatory actions (specifically, whether the regulatory changes will occur and what their impact on Partner will be), as well as consumer habits and preferences in cellular telephone usage, trends in the Israeli telecommunications industry in general, and the impact of global economic conditions. Future results may differ materially from those anticipated herein. For further information regarding risks, uncertainties and assumptions about Partner, trends in the Israeli telecommunications industry in general, the impact of current global economic conditions and possible regulatory and legal developments, and other 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 Annual Reports on Form 20-F filed with the SEC, as well as its current reports on Form 6-K furnished to the SEC.  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 Adjusted EBITDA and free cash flow, which are non-GAAP financial measures.  The financial information is presented in NIS millions (unless otherwise stated) and thefigures presented are roundedaccordingly.  The convenience translations of the New Israeli Shekel (NIS) figures into US Dollars were made at the rate of exchange prevailing at March 31, 2014: US $1.00 equals NIS 3.487. The translations were made purely for the convenience of the reader.  Use of Non-GAAP Financial Measures:  ‘Adjusted EBITDA’ represents earnings before interest (finance costs, net), taxes, depreciation, amortization (including amortization of intangible assets, deferred expenses-right of use, and share based compensation expenses) and impairment charges, as a measure of operating profit. Adjusted EBITDA is not a financial measure under IFRS and may not be comparable to other similarly titled measures provided by other companies. Adjusted EBITDA may not be indicative of the Company’s historic operating results nor is it meant to be predictive of potential future results. Adjusted EBITDA is presented solely to enhance the understanding of our operating results. We use the term “Adjusted EBITDA” to highlight the fact that amortization includes amortization of deferred expenses – right of use and employee share-based compensation expenses, but Adjusted EBITDA is fully comparable to EBITDA information which has been previously provided by Partner for prior periods. Reconciliation between our net cash flow from operating activities and Adjusted 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. 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: www.orange.co.il/en/Investors-Relations/lobby/  ^1  The financial results presented in this press release are unaudited.  ^2  Operating expenses include cost of service revenues, and selling, marketing & administrative expenses, and exclude depreciation and amortization and impairment charges.  ^3  For definition of Adjusted EBITDA measure, see “Use of Non-GAAP Financial Measures” on page 11 below.  ^4  Total long term indebtedness including current maturities less cash and cash equivalents.  ^5  Cash flows from operating activities before interest payments, net of cash flows used for investment activities.  ^6 See also definitions on page 1.                       PARTNER COMMUNICATIONS COMPANY LTD.                             (An Israeli Corporation)         INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION                                                                Convenience                                New Israeli Shekels         translation into                                                               U.S. Dollars                                  March 31,    December 31,   March 31,                                  2014          2013           2014                                  (Unaudited)   (Audited)      (Unaudited)                                  In millions CURRENT ASSETS Cash and cash equivalents        620           481            178 Trade receivables                1,000         1,051          287 Other receivables and            50            45             14 prepaid expenses Deferred expenses – right of     28            28             8 use Inventories                      96            93             28 Income tax receivable            4             3              1 Derivative financial             1             2              * instruments                                  1,799         1,703          516                                                                NON CURRENT ASSETS Trade Receivables                310           289            89 Deferred expenses – right of     113           118            33 use Property and equipment           1,730         1,791          496 Licenses and other               1,141         1,167          327 intangible assets Goodwill                         407           407            117 Prepaid expenses                 5                            1 Deferred income tax asset        14            12             4                                  3,720         3,784          1,067                                                                TOTAL ASSETS                     5,519         5,487          1,583  * Representing an amount less than 1 million                       PARTNER COMMUNICATIONS COMPANY LTD.                             (An Israeli Corporation)         INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION                                                                Convenience                                 New Israeli Shekels         translation into                                                               U.S. Dollars                                  March 31,    December 31,   March 31,                                  2014          2013           2014                                  (Unaudited)   (Audited)      (Unaudited)                                  In millions CURRENT LIABILITIES Current maturities of notes      333           334            95 payable and bank borrowings Trade payables                   719           761            206 Payables in respect of           98            98             28 employees Other payables (mainly           65            45             19 institutions) Deferred revenues                38            37             11 Provisions                       73            67             21 Income tax payable               38            31             11 Derivative financial             *             1              * instruments                                  1,364         1,374          391                                                                NON CURRENT LIABILITIES Notes payable                    2,032         2,038          583 Bank borrowings                  1,104         1,109          317 Liability for employee rights    43            45             12 upon retirement, net Dismantling and restoring        32            31             9 sites obligation Other non-current liabilities    16            16             5 Deferred tax liability                        *                                                3,227         3,239          926                                                                TOTAL LIABILITIES                4,591         4,613          1,317                                                                EQUITY Share capital - ordinary shares of NIS 0.01  par value: authorized - December 31, 2013                2             2              1  and March 31, 2014 - 235,000,000 shares;  issued and outstanding - December 31, 2013 – **155,687,002 shares March 31, 2014 – **155,687,002 shares Capital surplus                  1,100         1,100          315 Accumulated retained earnings    177           123            51 Treasury shares, at cost - December 31, 2013                                  (351)         (351)          (101) and March 31, 2014 - 4,467,990 shares TOTAL EQUITY                     928           874            266 TOTAL LIABILITIES AND EQUITY     5,519         5,487          1,583  * Representing an amount less than 1 million  ** Net of treasury shares                       PARTNER COMMUNICATIONS COMPANY LTD.                             (An Israeli Corporation)               INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME                                                                Convenience                                 New Israeli Shekels        translation into                                                               U.S. Dollars                                   3 months ended March 31,                                   2014         2013          2014                                   (Unaudited)   (Unaudited)   (Unaudited)                                   In millions (except per share data) Revenues, net                     1,103         1,144         316 Cost of revenues                  849           901           243 Gross profit                      254           243           73                                                                Selling and marketing             117           118           34 expenses General and administrative        52            53            15 expenses Other income, net                 14            23            4 Operating profit                  99            95            28 Finance income                    12            3             3 Finance expenses                  36            52            10 Finance costs, net                24            49            7 Profit before income tax          75            46            21 Income tax expenses               23            15            6 Profit for the period             52            31            15                                                                Earnings per share Basic                             0.33          0.20          0.10 Diluted                           0.33          0.20          0.10                       PARTNER COMMUNICATIONS COMPANY LTD.                             (An Israeli Corporation)                    INTERIM CONDENSED CONSOLIDATED STATEMENTS                             OF COMPREHENSIVE INCOME                                                                Convenience                                New Israeli Shekels        translation into                                                               U.S. Dollars                                   3 months ended March 31,                                   2014         2013          2014                                   (Unaudited)   (Unaudited)   (Unaudited)                                   In millions Profit for the period             52            31            15 Other comprehensive income for the                           -             -             -  period, net of income taxes                                                                TOTAL COMPREHENSIVE INCOME        52            31            15 FOR THE PERIOD                       PARTNER COMMUNICATIONS COMPANY LTD.                             (An Israeli Corporation)                               SEGMENT INFORMATION                             New Israeli Shekels                             Three months ended March 31, 2014                             In millions (Unaudited)                             Cellular  Fixed-line  Elimination  Consolidated                             segment    segment Segment revenue –           673        203                        876 Services Inter-segment revenue –     7          44           (51) Services Segment revenue –           220        7                         227 Equipment Total revenues              900        254          (51)          1,103                                                                    Segment cost of revenues    496        171                        667 - Services Inter-segment cost of       43         8            (51) revenues- Services Segment cost of revenues    176        6                         182 - Equipment Cost of revenues            715        185          (51)          849 Gross profit                185        69                         254                                                                    Operating expenses          136        33                         169 Other income, net           14         *                          14 Operating profit            63         36                         99 Adjustments to presentation of Adjusted EBITDA –Depreciation and           135        39                         174 amortization –Other (1)                  1          *                          1 Adjusted EBITDA (2)         199        75                         274 Reconciliation of Adjusted EBITDA to profit before income tax - Depreciation and                                                (174) amortization - Finance costs, net                                              (24) - Other (1)                                                       (1) Profit before income tax                                          75  * Representing an amount less than 1 million.                       PARTNER COMMUNICATIONS COMPANY LTD.                             (An Israeli Corporation)                               SEGMENT INFORMATION                                                                                            New Israeli Shekels                             Three months ended March 31, 2013                             In millions (Unaudited)                             Cellular   Fixed-line   Elimination   Consolidated                             segment    segment Segment revenue –           717        244                        961 Services Inter-segment revenue –     7          39           (46) Services Segment revenue –           176        7                         183 Equipment Total revenues              900        290          (46)          1,144                                                                    Segment cost of revenues    528        194                        722 – Services Inter-segment cost of       39         7            (46) revenues- Services Segment cost of revenues    172        7                         179 - Equipment Cost of revenues            739        208          (46)          901 Gross profit                161        82                         243                                                                    Operating expenses          132        39                         171 Other income, net           23                                   23 Operating profit            52         43                         95 Adjustments to presentation of Adjusted EBITDA –Depreciation and           132        39                         171 amortization –Other (1)                  2                                    2 Adjusted EBITDA (2)         186        82                         268 Reconciliation of Adjusted EBITDA to profit before income tax - Depreciation and                                                (171) amortization - Finance costs, net                                              (49) - Other (1)                                                       (2) Profit before income tax                                          46  (1) Mainly employee share based compensation expenses.  (2) Adjusted EBITDA as reviewed by the CODM, represents Earnings Before Interest (finance costs, net), Taxes, Depreciation, Amortization (including amortization of intangible assets, deferred expenses-right of use, and share based compensation expenses) and impairment charges, as a measure of segment profit. Adjusted EBITDA is not a financial measure under IFRS and may not be comparable to other similarly titled measures in 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 Amortizationincludesamortization of deferred expenses – right of use and employee share based compensation expenses; it is fully comparable to EBITDA information which has been previously provided by Partner for prior periods.                       PARTNER COMMUNICATIONS COMPANY LTD.                             (An Israeli Corporation)             INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                                                                Convenience                                  New Israeli Shekels        translation into                                                               U.S. Dollars                                   3 months ended                                   March 31,                                   2014         2013          2014                                   (Unaudited)   (Unaudited)   (Unaudited)                                   In millions CASH FLOWS FROM OPERATING ACTIVITIES: Cash generated from operations    278           322           80 (Appendix) Income tax received (paid)        (19)          14            5 Net cash provided by operating    259           336           75 activities CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of property and       (83)          (98)          (24) equipment Acquisition of intangible         (31)          (35)          (9) assets Interest received                 1             2             * Proceeds from (payments for) derivative                        (1)           (2)           * financial instruments, net Net cash used in investing        (114)         (133)         (33) activities   CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of finance lease                      (1) Interest paid                     (6)           (11)          (2) Net cash used in financing        (6)           (12)          (2) activities INCREASE IN CASH AND CASH         139           191           40 EQUIVALENTS CASH AND CASH EQUIVALENTS AT      481           548           138 BEGINNING OF PERIOD CASH AND CASH EQUIVALENTS AT      620           739           178 END OF PERIOD                       PARTNER COMMUNICATIONS COMPANY LTD.                             (An Israeli Corporation)             INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  Appendix – Cash generated from operations and supplemental information                                                                Convenience                                  New Israeli Shekels        translation into                                                               U.S. Dollars                                   3 months ended                                   March 31,                                   2014         2013          2014                                   (Unaudited)   (Unaudited)   (Unaudited)                                   In millions                                                     Cash generated from operations: Profit for the period             52                  31      15 Adjustments for: Depreciation and amortization     165                 164     47 Amortization of deferred          9                   7       3 expenses - Right of use Employee share based              1                   2       * compensation expenses Liability for employee rights     (2)                 (2)     (1) upon retirement, net Finance costs (income), net       (12)                3       (3) Gain (loss) from change in fair value of                                   *                   (1)     * derivative financial instruments Interest paid                     6                   11      2 Interest received                 (1)                 (2)     (*) Deferred income taxes             (2)                 3       (1) Income tax paid (received)        19                  (14)    5 Changes in operating assets and liabilities: Decrease (increase) in accounts receivable: Trade                             30                  147     9 Other                             (10)                (10)    (3) Increase (decrease) in accounts payable and accruals: Trade                             (5)                 (10)    (1) Other payables                    21                  26      6 Provisions                        6                   3       2 Deferred revenue                  1                   (2)     * Increase in deferred expenses -   (4)                 (4)     (1) Right of use Current income tax liability      7                   25      2 Increase in inventories           (3)                 (55)    (1) Cash generated from operations    278                 322     80  *Representing an amount less than 1 million  At March 31, 2014 and 2013, trade and other payables include NIS 187 million ($54 million) and NIS229 million, respectively, in respect of acquisition of intangible assets and property and equipment.                       PARTNER COMMUNICATIONS COMPANY LTD.                             (An Israeli Corporation)         RECONCILIATION BETWEEN OPERATING CASH FLOWS AND ADJUSTED EBITDA                                                                Convenience                                  New Israeli shekels        translation into                                                               U.S. Dollars*                                   3 months ended March 31,                                   2014         2013          2014                                   (Unaudited)   (Unaudited)   (Unaudited)                                   In millions                                                                Net cash provided by operating    259           336           74 activities                                                                Liability for employee rights     2             2             1 upon retirement Accrued interest and exchange and linkage differences on        8             (10)          3 long-term liabilities Increase (decrease) in accounts receivable: Trade                             (30)          (147)         (9) Other, including derivative       13            16            4 financial instruments Decrease (increase) in accounts payable and accruals: Trade                             5             10            1 Other                             (28)          (29)          (8) Income tax paid (received)        19            (14)          5 Increase in inventories           3             55            1 Financial expenses**              23            49            7 Adjusted EBITDA                   274           268           79  * The convenience translation of the New Israeli Shekel (NIS) figures into US dollars was made at the exchange prevailing at March 31, 2014: US $1.00 equals 3.487 NIS.  ** Financial expenses excluding any charge for the amortization of pre-launch financial costs  Key Financial and Operating Indicators (unaudited)^7  NIS M unless     Q1'     Q2'     Q3'     Q4'     Q1'     Q2'     Q3'     Q4'     Q1' otherwise       12     12     12     12     13     13     13     13     14       2012   2013 stated Cellular Segment          963     949     892     788     724     726     738     719     680         3,592   2,907 Service Revenues Cellular Segment          323     207     157     209     176     171     160     196     220         896     703 Equipment Revenues Fixed Line Segment          320     300     296     294     283     277     267     258     247         1,210   1,085 Service Revenues Fixed Line Segment          7       8       8       13      7       9       7       9       7           36      32 Equipment Revenues Reconciliation for              -42     -36     -38     -46     -46     -53     -54     -55     -51         -162    -208 consolidation Total Revenues   1,571   1,428   1,315   1,258   1,144   1,130   1,118   1,127   1,103       5,572   4,519 Gross Profit from Equipment   42      33      16      22      4       9       10      19      45          113     42 Sales Operating        248     245     217     155     95      102     109     103     99          865     409 Profit Cellular Segment          363     367     328     256     186     198     201     199     199         1,314   784 Adjusted EBITDA Fixed Line Segment          75      56      73      84      82      82      83      83      75          288     330 Adjusted EBITDA Total Adjusted   438     423     401     340     268     280     284     282     274         1,602   1,114 EBITDA Adjusted EBITDA Margin    28%     30%     30%     27%     23%     25%     25%     25%     25%         29%     25% (%) OPEX             872     853     793     744     720     700     696     675     661         3,262   2,791 Finance costs,   55      73      68      38      49      71      53      38      24          234     211 net Profit (Loss)    146     120     110     102     31      20      38      46      52          478     135 Total Dividend   -       160     -       -       -       -       -       -       -           160     - Declared Capital          133     113     125     121     130     122     116     107     113         492     475 Expenditures^8 Free Cash Flow   223     313     375     323     203     287     273     278     145         1,234   1,041 Free Cash Flow   199     270     310     255     192     193     266     209     139         1,034   860 After Interest Net Debt         4,450   4,209   4,072   3,812   3,622   3,446   3,208   3,000   2,849       3,812   3,000 Cellular Subscriber       3,147   3,098   3,042   2,976   2,932   2,921   2,950   2,956   2,936       2,976   2,956 Base (Thousands) Post-Paid Subscriber       2,253   2,198   2,145   2,102   2,102   2,103   2,127   2,133   2,137       2,102   2,133 Base (Thousands) Pre-Paid Subscriber       894     900     897     874     830     818     823     823     799         874     823 Base (Thousands) Cellular ARPU    101     101     97      87      82      83      84      81      77          97      83 (NIS) Cellular Churn   8.0%    8.9%    10.4%   10.9%   10.4%   9.4%    8.8%    10.7%   11.6%       38%     39% Rate (%) Number of Employees       7,230  6,961  6,102  5,396  4,772  4,377  4,153  4,045  3,826    5,396  4,045 (FTE)  ^7 See first page for definitions. The annual results are audited.  ^8 Cash capital expenditures in fixed assets including intangible assets but excluding capitalized subscriber acquisition and retention cost, net.  Contact:  Partner Communications Contacts: Mr. Ziv Leitman, Tel: +972-54-781-4951 Chief Financial Officer or Ms. Elana Holzman, Tel: +972-54-781-4383 Head of Investor Relations E-mail: investors@orange.co.il  
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