Classified in: Business, Covid-19 virus
Subjects: EARNINGS, Conference Call, Webcast

Partner Communications Reports Fourth Quarter and Annual 2019 Results1

Partner Communications Company Ltd. ("Partner" or the "Company") (NASDAQ and TASE: PTNR), a leading Israeli communications provider, announced today its results for the quarter and year ended December 31, 2019.

Commenting on the results for the fourth quarter and full year 2019, Mr. Isaac Benbenisti, CEO of Partner noted:

"We ended 2019 with growth in fixed line segment revenues, an independent fiber optic infrastructure that already reaches approximately 600 thousand households, and 199 thousand subscribers connected to Partner TV, once again the fastest growing TV service in Israel in 2019.

In the cellular segment we concluded 2019 with an increase of 11 thousand subscribers, while we successfully implemented our subscriber value strategy, which resulted in an increase in subscriber loyalty and the lowest churn rate since 2011, totaling 7.2% in the fourth quarter and 31% for the entire year.

2020 started with an extraordinary global health crisis of unprecedented scope and impact on the global and domestic market. Partner is facing this exceptional situation in a position of strength relative to its peers, in light of our net debt which totals NIS 957 million and our level of cash, which is significantly higher than our interest and principal payments for the coming two years.

We have also made the necessary operational adjustments to support the continuation of business operations during this period, and we have taken steps to adjust the Company's cost structure to the new reality. We are experiencing a significant increase in the use of our services: domestic cellular services, internet and TV, and we continue to provide millions of our customers with the infrastructure which is so critical for all of us ? stable, reliable and fast communication. We are also looking ahead, and taking steps to prepare for when this crisis is behind us."

Mr. Tamir Amar, Partner's Chief Financial Officer, commented on the results:

"During 2019, Partner continued to strengthen its position as a comprehensive telecommunications group which was reflected, among other elements, in the significant continued growth in the Company's growth engines which include TV services and fiber optic infrastructure, and the stabilizing trend in the cellular market.

Although profit for the quarter decreased by 63% compared to the same quarter in the preceding year, the fourth quarter results reflected the continued positive trend with service revenues growth, growth in the fixed-line segment Adjusted EBITDA, the continued improvement in the cellular segment operating results and positive free cash flow.

In the cellular segment, we continued to reduce erosion in cellular service revenues alongside a decline in churn rate which totaled 7.2% in Q4 2019 and 31% in 2019 compared to 8.5% in Q4 2018 and 35% in 2018. In addition, we recorded growth in the subscriber base both in the fourth quarter and the year as well as relatively low erosion in ARPU which totaled NIS 55 in the fourth quarter and NIS 57 in 2019 compared to NIS 57 in Q4 2018 and NIS 58 in 2018.

These results reflected the progress we are making in executing the Company's strategy to increase value for the customer, to focus on continued improvement in service and expand our product offering, despite the continued competition during 2019.

Adjusted EBITDA in 2019 totaled NIS 853 million or NIS 696 million excluding the impact of IFRS 16, compared to NIS 722 million in 2018. This outcome reflects the Company's strict control over its OPEX while it expands into new areas of activity.

Adjusted EBITDA increased in the fourth quarter and totaled NIS 217 million compared to NIS 172 million in Q4 2018. The effect of IFRS 16 totaled NIS 40 million in the quarter and therefore, excluding the effect of IFRS 16, Adjusted EBITDA increased by 3% compared to Q4 2018. The improvement in the fourth quarter resulted mainly from the increase in Adjusted EBITDA in the fixed-line segment alongside stability in the cellular segment.

The Company's balance sheet reflected net debt of less than NIS 1 billion and a low net debt to Adjusted EBITDA ratio of 1.1 at the end of 2019. In the beginning of January 2020, the Company successfully completed an equity raise of NIS 276 million, net, with the purpose of supporting the Company's growth engines and of preserving our competitive advantage and thus being prepared for new growth opportunities.

Adjusted Free Cash Flow (before interest) in 2019 totaled NIS 49 million. We continue to invest in fiber optic deployment and even accelerated deployment in 2019. This investment was possible due to our financial strength and strong balance sheet and it positions us at the technological forefront in Israel, as reflected in the continued growth in our TV subscriber base which stands at 199 thousand subscribers as of today, and in the sustained high deployment rates of our fiber optic infrastructure which reaches today 600 thousand households across Israel.

Regarding the coronavirus crisis, from the beginning of March 2020 the crisis began to have a harmful effect on our business, revenues and results from operations. In particular, the significant fall in the volume of international travel by our customers has begun to cause a decrease in revenues from roaming services, and the closure of shopping malls has begun to affect the volume of sales of equipment and service revenues.

To date, the impact has been limited, since the crisis only began at the beginning of March 2020. In addition, the impact has been mitigated by a number of actions we have taken, including cutting costs and sending a large quantity of employees on unpaid leave. However, should these trends continue, the reduction in roaming revenues and in sales of equipment and services, together with an increase in bad debts that is likely to be caused by the high level of unemployment in Israel due to the coronavirus crisis, may have a material harmful effect on our results of operations and financial position for 2020."

Q4 2019 compared with Q3 2019

Key Financial Results

* The Company adopted IFRS 15 from the beginning of 2017 and IFRS 16 from the beginning of 2019. For more information see the Company's Annual Report on Form 20-F for the year ended December 31, 2019.

Key Operating Indicators

* The Company adopted IFRS 15 from the beginning of 2017 and IFRS 16 from the beginning of 2019. For more information see the Company's Annual Report on Form 20-F for the year ended December 31, 2019.

Partner Consolidated Results

* The Company adopted IFRS 16 from the beginning of 2019. For more information see the Company's Annual Report on Form 20-F for the year ended December 31, 2019.

Financial Review

In 2019, total revenues were NIS 3,234 million (US$ 936 million), a decrease of 1% from NIS 3,259 million in 2018.

Annual service revenues in 2019 totaled NIS 2,560 million (US$ 741 million), an increase of 1% from NIS 2,524 million in 2018.

Service revenues for the cellular segment in 2019 totaled NIS 1,798 million (US$ 520 million), a decrease of 2% from NIS 1,843 million in 2018. The decrease was mainly a result of the continued downward pressures on the prices of Post-Paid and Pre-Paid cellular services as a result of the continued competition in the cellular market.

Service revenues for the fixed-line segment in 2019 totaled NIS 925 million (US$ 268 million), an increase of 9% from NIS 852 million in 2018. This increase mainly reflected an increase in revenues from TV services and from internet services, partially offset by a decrease in revenues from international calling services (including the market for wholesale international traffic) which were adversely affected both by the increased penetration of internet-based solutions and increased competition from other service providers.

In Q4 2019, total revenues were NIS 834 million (US$ 241 million), an increase of 2% from NIS 814 million in Q4 2018.

Service revenues in Q4 2019 totaled NIS 636 million (US$ 184 million), an increase of 2% from NIS 625 million in Q4 2018.

Service revenues for the cellular segment in Q4 2019 totaled NIS 438 million (US$ 127 million), a decrease of 2% from NIS 447 million in Q4 2018. The decrease was mainly the result of the continued price erosion of cellular services due to the continued competitive market conditions.

Service revenues for the fixed-line segment in Q4 2019 totaled NIS 238 million (US$ 69 million), an increase of 8% from NIS 220 million in Q4 2018. The increase mainly reflected higher revenues from TV and internet services, which were partially offset principally by the decline in revenues from international calling services.

Equipment revenues in 2019 totaled NIS 674 million (US$ 195 million), a decrease of 8% from NIS 735 million in 2018, principally reflecting lower sales volumes of both cellular devices and other non-core equipment.

Gross profit from equipment sales in 2019 was NIS 144 million (US$ 42 million), compared with NIS 166 million in 2018, a decrease of 13%. This decrease mainly reflected the lower sales volumes, as well a decrease in profit margins for equipment sales due to a change in the product mix.

Equipment revenues in Q4 2019 totaled NIS 198 million (US$ 57 million), an increase of 5% from NIS 189 million in Q4 2018, largely reflecting an increase in sales volumes.

Gross profit from equipment sales in Q4 2019 was NIS 37 million (US$ 11 million), compared with NIS 42 million in Q4 2018, a decrease of 12%, mainly reflecting a change in the product mix which led to a decrease in the average profit per sale.

Total operating expenses (?OPEX') totaled NIS 1,885 million (US$ 545 million) in 2019, a decrease of 6% or NIS 111 million from 2018. This decrease mainly reflected the impact of the implementation of IFRS 16 in 2019, which reduced total operating expenses by NIS 157 million, and decreases in other expenses including in credit losses and in international calling services expenses. These decreases were partly offset by an increase in expenses related to TV services and internet services. Including depreciation and amortization expenses and other expenses (mainly amortization of employee share based compensation), OPEX in 2019 increased by 2% compared with 2018, mainly as a result of expenses related to TV services and internet services partly offset by decreases in other expenses as described above.

Total operating expenses (?OPEX') totaled NIS 467 million (US$ 135 million) in Q4 2019, a decrease of 7% or NIS 35 million from Q4 2018. The decrease mainly reflected the impact of the implementation of IFRS 16 which totaled NIS 40 million. Including depreciation and amortization expenses and other expenses (mainly amortization of employee share based compensation), OPEX in Q4 2019 decreased by 2% compared with Q4 2018 mainly as a result of a decrease in depreciation expenses of NIS 15 million resulting from a change in the estimated useful life of the Company's cellular license. This change is expected to reduce depreciation and amortization expenses in the years 2020 and 2021 by an annual amount of approximately NIS 60 million.

Operating profit for 2019 totaled NIS 87 million (US$ 25 million), a decrease of 25% compared with NIS 116 million in 2018. The impact of the adoption of IFRS 16 on operating profit in 2019 was an increase of NIS 11 million. The decrease in operating profit mainly reflected the increase in operating expenses including depreciation and amortization expenses and the decrease in gross profit from equipment sales, which more than offset the increase in service revenues. See Adjusted EBITDA analysis for each segment below.

Adjusted EBITDA in 2019 totaled NIS 853 million (US$ 247 million), an increase of 18% from NIS 722 million in 2018. The impact of the adoption of IFRS 16 on Adjusted EBITDA in 2019 was an increase of NIS 157 million. As a percentage of total revenues, Adjusted EBITDA in 2019 was 26% compared with 22% in 2018.

Adjusted EBITDA for the cellular segment was NIS 635 million (US$ 184 million) in 2019, an increase of 21% from NIS 524 million in 2018, reflecting the impact of the adoption of IFRS 16 on OPEX in an amount of NIS 141 million and a decrease in other OPEX, partially offset by a decrease in cellular service revenues and a decrease in gross profit from equipment sales in the cellular segment. As a percentage of total cellular segment revenues, Adjusted EBITDA for the cellular segment in 2019 was 27% compared with 21% in 2018.

Adjusted EBITDA for the fixed-line segment was NIS 218 million (US$ 63 million) in 2019, an increase of 10% from NIS 198 million in 2018. Adjusted EBITDA excluding the impact of IFRS 16 was NIS 202 million, an increase of 2% from 2018, which resulted from the growth in TV and internet services and the increase in gross profit from fixed-line equipment sales, which were partially offset by the negative impact from the decline in international calling services. As a percentage of total fixed-line segment revenues, Adjusted EBITDA for the fixed-line segment in 2019 was 21%, unchanged from 2018.

Operating profit for Q4 2019 was 30 million (US$ 9 million), an increase of 114% compared with NIS 14 million in Q4 2018. The increase mainly resulted from the adoption of IFRS 16 which decreased OPEX, as can be seen in Adjusted EBITDA, and increased depreciation and amortization expenses as a result of IFRS 16, which were partially offset by a decrease in depreciation of NIS 15 million resulting from a change in the estimated useful life of the Company's cellular license. See Adjusted EBITDA analysis for each segment below.

Adjusted EBITDA in Q4 2019 totaled NIS 217 million (US$ 63 million), an increase of 26% or NIS 45 million from NIS 172 million in Q4 2018. The impact of the adoption of IFRS 16 on Adjusted EBITDA in Q4 2019 was an increase of NIS 40 million. As a percentage of total revenues, Adjusted EBITDA in Q4 2019 was 26% compared with 21% in Q4 2018.

Adjusted EBITDA for the cellular segment was NIS 156 million (US$ 45 million) in Q4 2019, an increase of 31% from NIS 119 million in Q4 2018, mainly reflecting the impact of the adoption of IFRS 16 which increased cellular segment Adjusted EBITDA by NIS 36 million, and a decrease in other cellular OPEX, partially offset by a decrease in cellular service revenues. As a percentage of total cellular segment revenues, Adjusted EBITDA for the cellular segment in Q4 2019 was 26% compared with 19% in Q4 2018.

Adjusted EBITDA for the fixed-line segment was NIS 61 million (US$ 18 million) in Q4 2019, an increase of 15% from NIS 53 million in Q4 2018, reflecting the increase in service revenues of NIS 18 million in the fixed-line segment, as well as the impact on Adjusted EBITDA of the adoption of IFRS 16 of an increase of NIS 4 million. This increase was partially offset by an increase in OPEX mainly related to TV and internet services. As a percentage of total fixed-line segment revenues, Adjusted EBITDA for the fixed-line segment in Q4 2019 was 23%, compared with 22% in Q4 2018.

Finance costs, net in 2019 were NIS 68 million (US$ 20 million), an increase of 28% compared with NIS 53 million in 2018. The increase largely reflected the impact of the adoption of IFRS 16, which resulted in an increase of NIS 20 million in finance expenses, partially offset by income from foreign exchange linkage. The negative impact on interest expenses of the increase in the average level of debt in 2019 compared with the average debt in 2018 was offset by the lower average debt interest rate.

Finance costs, net in Q4 2019 were NIS 20 million (US$ 6 million), an increase of 67% compared with NIS 12 million in Q4 2018. The increase largely reflected the impact of the adoption of IFRS 16, which resulted in an increase of NIS 5 million in finance expenses, as well as a revaluation of financial liability at fair value and an increase in interest expenses due to an increase in the debt level, which were partially offset by income from foreign exchange linkages in Q4 2019 compared with foreign exchange linkage expenses in Q4 2018.

The Company did not record income tax expenses for 2019, compared with income tax expenses of NIS 7 million in 2018. In 2018, the Company recorded a one-time income of NIS 16 million in income tax expenses, mainly due to an income tax audit of the Company's subsidiary. In 2019, a one-time income of NIS 6 million was recorded in income tax expenses.

Income tax expenses for Q4 2019 were NIS 3 million (US$ 1 million), compared with income tax income of NIS 17 million in Q4 2018 in which a one-time income of NIS 16 million was recorded, mainly due to an income tax audit of the Company's subsidiary.

Overall, the Company's profit in 2019 totaled NIS 19 million (US$ 6 million), a decrease of 66% compared with profit of NIS 56 million in 2018. The impact of the adoption of IFRS 16 in 2019 on profit was a decrease of NIS 9 million.

Based on the weighted average number of shares outstanding during 2019, basic earnings per share or ADS, was NIS 0.12 (US$ 0.04) compared with NIS 0.34 in 2018.

Profit in Q4 2019 was NIS 7 million (US$ 2 million), a decrease of 63% compared with a profit of NIS 19 million in Q4 2018. The impact of the adoption of IFRS 16 on profit in Q4 2019 was a decrease of NIS 2 million. In addition, the impact on profit in Q4 2019 of the change in the estimated useful life of the cellular license was an increase of NIS 12 million.

Based on the weighted average number of shares outstanding during Q4 2019, basic earnings per share or ADS, was NIS 0.05 (US$ 0.01), compared with basic earnings per share of NIS 0.12 in Q4 2018.

Cellular Segment Operational Review

At the end of 2019, the Company's cellular subscriber base (including mobile data, 012 Mobile subscribers and M2M subscriptions) was approximately 2.66 million, including approximately 2.37 million Post-Paid subscribers or 89% of the base, and approximately 291 thousand Pre-Paid subscribers, or 11% of the subscriber base.

Over 2019, the cellular subscriber base increased by approximately 11 thousand. The Post-Paid subscriber base increased by approximately 5 thousand, and the Pre-Paid subscriber base increased by approximately 6 thousand.

The annual churn rate for cellular subscribers in 2019 was 31%, a decrease of 4 percentage points compared with 35% in 2018, and a decrease of 7 percentage points compared with 38% in 2017.

The monthly Average Revenue per User ("ARPU") for cellular subscribers in 2019 was NIS 57 (US$ 16), a decrease of 2% from NIS 58 in 2018. The decrease mainly reflected the continued price erosion in cellular services due to the persistently high competition in the cellular market.

Total cellular market share (based on the number of subscribers) at the end of 2019 was estimated to be approximately 25%, unchanged from year-end 2018.

During the fourth quarter of 2019, the cellular subscriber base increased by approximately 6 thousand. The Pre-Paid subscriber base increased by approximately 6 thousand, and the Post-Paid subscriber base was approximately unchanged.

The quarterly churn rate for cellular subscribers in Q4 2019 was 7.2%, compared with 8.5% in Q4 2018.

The monthly Average Revenue per User ("ARPU") for cellular subscribers in Q4 2019 was NIS 55 (US$ 16), a decrease of 4% from NIS 57 in Q4 2018 as a result of the continued price erosion in key cellular services due to the competition in the cellular market.

Funding and Investing Review

In 2019, Adjusted Free Cash Flow totaled NIS 49 million (US$ 14 million), a decrease of 60% from NIS 124 million in 2018.

Cash generated from operations totaled NIS 837 million (US$ 241 million) in 2019 compared with NIS 625 million in 2018, an increase of 34%. The increase mainly reflected the adoption of IFRS 16 in 2019, under which lease payments are recorded in cash flows from financing activities instead of in cash flows from operating activities in an amount totaling NIS 159 million, as well as the impact of the change in the accounting treatment of PHI from the beginning of 2019, whereby investments in PHI are recorded as cash flows from investing activities.

Lease payments, recorded in cash flows from financing activities under IFRS 16, totaled NIS 159 million (US$ 45 million) in 2019.

Cash capital expenditures (CAPEX payments), as represented by cash flows used for the acquisition of property and equipment and intangible assets, were NIS 629 million (US$ 182 million) in 2019, an increase of 25% from NIS 502 million in 2018. The increase largely reflected the change in the accounting treatment of PHI, as described above, as well as increases in investments in the fiber optic infrastructure and in the costs of equipment, including installation, leased to subscribers.

In Q4 2019, Adjusted Free Cash Flow (including lease payments) totaled NIS 16 million (US$ 5 million), an increase of NIS 38 million from a negative Adjusted Free Cash Flow of NIS 22 million in Q4 2018.

Cash generated from operating activities totaled NIS 178 million (US$ 52 million) in Q4 2019, an increase of 47% from NIS 121 million in Q4 2018, as a result of the adoption of IFRS 16 in 2019, under which lease payments, which totaled NIS 35 million in Q4 2019, are recorded in cash flows from financing activities instead of in cash flows from operating activities, and the impact of the change in the accounting treatment of PHI from the beginning of 2019.

Lease payments, recorded in cash flows from financing activities under IFRS 16, totaled NIS 35 million (US$ 10 million) in Q4 2019.

Cash capital expenditures (?CAPEX payments'), as represented by cash flows used for the acquisition of property and equipment and intangible assets, were NIS 127 million (US$ 37 million) in Q4 2019, a decrease of 11% from NIS 143 million in Q4 2018, reflecting a decrease in fiber optic infrastructure and IT payments compared to Q4 2018, partly offset by the impact of the change in the accounting treatment of PHI from the beginning of 2019.

The level of Net Debt at the end of 2019 amounted to NIS 957 million (US$ 277 million), compared with NIS 950 million at the end of 2018, an increase of NIS 7 million. In addition, in January 2020, the Company issued shares in a private placement and received a net consideration of NIS 276 million, which decreased the Company's net debt.

Other Important Developments

Changes in the Company's controlling shareholder and Board of Directors

On November 12, 2019, following a default in payment of amounts owed by S.B. Israel Telecom in connection with its acquisition in 2013 of shares currently representing approximately 27% of our share capital, attorney Ehud Sol was appointed by the court as receiver (the "Receiver") under Israeli law and granted substantial rights over the shares, including the right to vote. As a result, the Receiver has the power to substantially influence the nomination of the Company's Board of Directors and to play a preponderant if not decisive role in other decisions taken at meetings of our shareholders. The Receiver is expected to hold such rights until the shares are sold or transferred, actions that would require the court's approval. Seven of the eight members of our Board of Directors who had been nominated by S.B. Israel Telecom resigned shortly following the appointment of the Receiver.

Offer by HOT Telecom to acquire all our shares

In press releases on January 29, 2020 and February 5, 2020, we announced HOT Telecom's proposal to acquire 100% of the Company's share capital. For further information on the above developments, please see our Annual Report on Form 20-F for the year ended December 31, 2019, to be filed with the U.S. Securities and Exchange Commission on the date of this press release.

Conference Call Details
Partner will hold a conference call on Thursday, March 26, 2020 at 11.00AM Eastern Time / 5.00PM Israel Time.
To join the call, please dial the following numbers (at least 10 minutes before the scheduled time):
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 Investors Relations website at: www.partner.co.il/en/Investors-Relations/lobby/
If you are unavailable to join live, the replay of the call will be available from March 26, 2020 until April 9, 2020, at the following numbers:
International: +972.3.925.5901
North America toll-free: +1.877.456.0009
In addition, the archived webcast of the call will be available on Partner's Investor Relations website at the above address for approximately three months.

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 "estimate", "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 communicates our belief that our entry point into the current global health crisis is relatively good compared to the market in light of our levels of net debt and cash. In addition, all statements other than statements of historical fact included in this press release regarding our future performance 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, including in particular the severity and duration of the impact on our business of the current health crisis, especially on our customers' international travel (which impacts our income from roaming fees), on the closure of shopping centers (which impacts our sales of services and equipment), on employee absences and disruptions in our equipment supply chain (which impact our ability to continue to provide services and sales of equipment), and on credit losses, which may be expected to increase. In light of the current unreliability of predictions as to the ultimate severity and duration of the health crisis, future results may differ materially from those currently anticipated. 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 immediate 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 quarterly financial results presented in this press release are unaudited financial results.
The results were prepared in accordance with IFRS, other than the non-GAAP financial measures presented in the section, "Use of 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 New Israeli Shekel (NIS) figures into US Dollars were made at the rate of exchange prevailing at December 31, 2019: US $1.00 equals NIS 3.456. The translations were made purely for the convenience of the reader.

Use of Non-GAAP Financial Measures

The following non-GAAP measures are used in this report. These measures are not financial measures under IFRS and may not be comparable to other similarly titled measures for other companies. Further, the measures may not be indicative of the Company's historic operating results nor are meant to be predictive of potential future results.

About Partner Communications

Partner Communications Company Ltd. is a leading Israeli provider of telecommunications services (cellular, fixed-line telephony, internet services and TV services). Partner's ADSs are quoted on the NASDAQ Global Select Markettm and its shares are traded on the Tel Aviv Stock Exchange (NASDAQ and TASE: PTNR).
For more information about Partner, see: http://www.partner.co.il/en/Investors-Relations/lobby

PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

* Representing an amount of less than 1 million.
** See report 20-F regarding the adoption of IFRS 16 ? Leases.

PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

* Representing an amount of less than 1 million.
** See report 20-F regarding the adoption of IFRS 16 ? Leases.
*** Net of treasury shares.
**** Including restricted shares in an amount of 1,210,833 and 1,247,583 as of December 31, 2018 and December 31, 2019, respectively, held by a trustee under the Company's Equity Incentive Plan, such shares may become outstanding upon completion of vesting conditions.

PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
CONDENSED CONSOLIDATED STATEMENTS OF INCOME

* Representing an amount of less than 1 million.
** See report 20-F regarding the adoption of IFRS 16 ? Leases.

PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
CONDENSED CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME

* Representing an amount of less than 1 million.
** See report 20-F regarding the adoption of IFRS 16 ? Leases.

PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
SEGMENT INFORMATION & ADJUSTED EBITDA RECONCILIATION

* Representing an amount of less than 1 million.
** See report 20-F regarding the adoption of IFRS 16 ? Leases. For the 12 months ended December 31, 2019 the impact of the adoption of IFRS 16 was an increase of NIS 141 million in the cellular segment Adjusted EBITDA and an increase of NIS 16 million in the fixed-line segment Adjusted EBITDA.

PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
INTERIM SEGMENT INFORMATION & ADJUSTED EBITDA RECONCILIATION

(1) Mainly amortization of employee share based compensation. (2) Adjusted EBITDA as reviewed by the CODM represents Earnings Before Interest (finance costs, net), Taxes, Depreciation and Amortization (including amortization of intangible assets, deferred expenses-right of use and impairment charges) and Other expenses (mainly amortization of share based compensation). Adjusted EBITDA is not a financial measure under IFRS and may not be comparable to other similarly titled measures for other companies. Adjusted EBITDA may not be indicative of the Group's historic operating results nor is it meant to be predictive of potential future results. The usage of the term "Adjusted EBITDA" is to highlight the fact that the Amortization includes amortization of deferred expenses ? right of use and amortization of employee share based compensation and impairment charges. (3) Operating expenses include selling and marketing expenses, general and administrative expenses and credit losses.
* See report 20-F regarding the adoption of IFRS 16 ? Leases.

PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

* Representing an amount of less than 1 million.
** See report 20-F regarding the adoption of IFRS 16 ? Leases.

PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Appendix - Cash generated from operations and supplemental information

* Representing an amount of less than 1 million.
** See report 20-F regarding the adoption of IFRS 16 ? Leases.

At December 31, 2019 and 2018, trade and other payables include NIS 115 million ($33 million) and NIS 157 million, respectively, in respect of acquisition of intangible assets and property and equipment; payments in respect thereof are presented in cash flows from investing activities.

These balances are recognized in the cash flow statements upon payment. Cost of inventory used as fixed assets during 2019 and 2018 were NIS 24 million (US$ 7 million) and NIS 8 million, respectively.

Reconciliation of Non-GAAP Measures:

1. Mainly amortization of employee share based compensation.

* See report 20-F regarding the adoption of IFRS 16 ? Leases.

Key Financial and Operating Indicators (unaudited) ****

* Figures from 2019 include impact of adoption of IFRS 16 - Leases (see also report 20-F).
** As from Q4 2018, M2M subscriptions are included in the post-paid subscriber base on a standardized basis. This change had the effect of increasing the Post-Paid subscriber base at December 31, 2018, by approximately 34 thousand subscribers. See also ?Cellular Segment Operational Review' section.
*** From 2019, the number of employees (FTE) also includes the number of FTE of PHI on a proportional basis of Partner's share in the subsidiary (50%).
****See footnote 2 regarding use of non-GAAP measures.

Disclosure for notes holders as of December 31, 2019

Information regarding the notes series issued by the Company, in million NIS

1. Following agreements with Israeli institutional investors, in December 2019 the Company issued an additional Series F Notes in a principal amount of NIS 227 million. For additional details see the Company's press release dated December 1, 2019.
2. In January 2019, the Company issued Series G Notes in a principal amount of NIS 225 million. In April 2019, the Company issued in a private placement 2 series of untradeable option warrants that are exercisable for the Company's Series G debentures. The exercise period of the first series is between July 1, 2019 and May 31, 2020 and of the second series is between July 1, 2020 and May 31, 2021. The Series G debentures that will be allotted upon the exercise of an option warrant will be identical in all their rights to the Company's Series G debentures immediately upon their allotment, and will be entitled to any payment of interest or other benefit, the effective date of which is due after the allotment date. The debentures that will be allotted as a result of the exercise of option warrants will be registered on the TASE. The total amount received by the Company on the allotment date of the option warrants is NIS 37 million. For additional details see the Company's press release dated April 17, 2019. Following partial exercise of option warrants from the first series, in July 2019, November 2019 and February 2020, the Company issued Series G Notes in a principal amount of NIS 38.5 million, NIS 86.5 million and NIS 15.1 million, respectively. As of today, the total future considerations expected to the Company in respect of the allotment of the option warrants and in respect of their full exercise (and assuming that there will be no change to the exercise price) is approximately NIS 163 million.
3. Regarding Series F and G Notes, the Company is required to comply with a financial covenant that the ratio of Net Debt to Adjusted EBITDA shall not exceed 5. Compliance will be examined and reported on a quarterly basis. For the purpose of the covenant, Adjusted EBITDA is calculated as the sum total for the last 12 month period, excluding adjustable one-time items. As of December 31, 2019, the ratio of Net Debt to Adjusted EBITDA was 1.1. Additional stipulations regarding Series F and G Notes mainly include: shareholders' equity shall not decrease below NIS 400 million and NIS 600 million, respectively; the Company shall not create floating liens subject to certain terms; the Company has the right for early redemption under certain conditions; the Company shall pay additional annual interest of 0.5% in the case of a two-notch downgrade in the Notes rating and an additional annual interest of 0.25% for each further single-notch downgrade, up to a maximum additional interest of 1%; the Company shall pay additional annual interest of 0.25% during a period in which there is a breach of the financial covenant. In any case, the total maximum additional interest for Series F and G, shall not exceed 1.25% or 1%, respectively. For more information see the Company's Annual Report on Form 20-F for the year ended December 31, 2019. In the reporting period, the Company was in compliance with all financial covenants and obligations and no cause for early repayment occurred.
4. 'MAKAM' is a variable interest based on the yield of 12 month government bonds issued by the government of Israel. The interest rate is updated on a quarterly basis.

* On these dates additional Notes of the series were issued. The information in the table refers to the full series. ** Representing an amount of less than NIS 1 million.

Disclosure for Notes holders as of December 31, 2019 (cont.)

Notes Rating Details*

(1) In August 2019, S&P Maalot has reaffirmed the Company's ilA+ credit rating and updated the Company's rating outlook to "Negative".

(2) For details regarding the rating of the notes see the S&P Maalot report dated August 5, 2019.

(3) In January 2019, the Company issued Series G Notes in a principal amount of NIS 225 million. In July 2019, the Company issued additional Series G Notes in a principal amount of NIS 38.5 million. In November 2019, the Company issued additional Series G Notes in a principal amount of NIS 86.5 million. In February 2020, the Company issued additional Series G Notes in a principal amount of NIS 15.1 million.

* A securities rating is not a recommendation to buy, sell or hold securities. Ratings may be subject to suspension, revision or withdrawal at any time, and each rating should be evaluated independently of any other rating

Summary of Financial Undertakings (according to repayment dates) as of December 31, 2019

a. Notes issued to the public by the Company and held by the public, excluding such notes held by the Company's parent company, by a controlling shareholder, by companies controlled by them, or by companies controlled by the Company, based on the Company's "Solo" financial data (in thousand NIS).

b. Private notes and other non-bank credit, excluding such notes held by the Company's parent company, by a controlling shareholder, by companies controlled by them, or by companies controlled by the Company, based on the Company's "Solo" financial data ? None.

c. Credit from banks in Israel based on the Company's "Solo" financial data (in thousand NIS).

Summary of Financial Undertakings (according to repayment dates) as of December 31, 2019 (cont.)

d. Credit from banks abroad based on the Company's "Solo" financial data ? None.

e. Total of sections a - d above, total credit from banks, non-bank credit and notes based on the Company's "Solo" financial data (in thousand NIS).

f. Off-balance sheet Credit exposure based on the Company's "Solo" financial data (in thousand NIS) ? 50,000 (Guarantees on behalf of a joint arrangement, without expiration date).

g. Off-balance sheet Credit exposure of all the Company's consolidated companies, excluding companies that are reporting corporations and excluding the Company's data presented in section f above - None.

h. Total balances of the credit from banks, non-bank credit and notes of all the consolidated companies, excluding companies that are reporting corporations and excluding Company's data presented in sections a - d above - None.

i. Total balances of credit granted to the Company by the parent company or a controlling shareholder and balances of notes offered by the Company held by the parent company or the controlling shareholder - None.

j. Total balances of credit granted to the Company by companies held by the parent company or the controlling shareholder, which are not controlled by the Company, and balances of notes offered by the Company held by companies held by the parent company or the controlling shareholder, which are not controlled by the Company ? None.

k. Total balances of credit granted to the Company by consolidated companies and balances of notes offered by the Company held by the consolidated companies - None.

In addition to the total credit above, Company's financial debt includes financial liability at fair value in respect of option warrants issued in May 2019. At December 31, 2019, this financial liability totals to an amount of NIS 28 million.

¹ The quarterly financial results are unaudited. The Company has applied the standard IFRS 16 ? Leases, from January 1, 2019. The effects of the application of the standard on the financial results are provided in this press release. The impact of the adoption of IFRS 16 on Adjusted EBITDA for Q4 2019 was an increase of NIS 40 million and for the year 2019, NIS 157 million.
² For the definition of this and other Non-GAAP financial measures, see "Use of Non-GAAP Financial Measures" in this press release.
³ In Q4 2015, the Company recorded an impairment charge on its fixed-line assets which reduced operating profit by NIS 98 million and profit by NIS 72 million in 2015.

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