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Cellcom Israel Announces Second Quarter 2007 Results

Cellcom Israel Continues to Present Growth and Efficiency, Despite Ongoing Price Erosion

NETANYA, Israel, August 14, 2007 /PRNewswire-FirstCall via COMTEX News Network/ --

Second Quarter 2007 Highlights (results compared to second quarter of 2006):

- Revenues from services increased 8% to NIS 1,322 million ($311 million)

- Revenues increased 5% to NIS 1,456 million ($343 million)

- Revenues from content and value added services increased 51% and reached 8% of revenues

- EBITDA (i) increased 13% to NIS 539 million ($127 million); EBITDA margin 37.0%, up from 34.6%

- Operating profit increased 26% to NIS 345 million ($81 million)

- Net income increased 48% to NIS 212 million ($50 million)

- Free Cash Flow (i) increased 42% to NIS 332 million ($78 million)

- Subscriber base increased by 32,000 during the quarter, reaching 2.96 million at the end of Q2

- 3G subscribers reached 212,000 at the end of Q2

- The Company Declared NIS 2.06 dividend per share for the second quarter

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

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

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

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

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

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

    Key Financial and Performance Indicators:


                             Q2/2007   Q2/2006   % Change   Q2/2007  Q2/2006
                                      million NIS              million US$
                                                              (convenience
                                                              translation)

    Revenues                   1,456       1,385     5.1%     343     326
    Services revenues          1,322       1,229     7.6%     311     289
    Handset and accessories
    revenues         134         156   (14.1%)     32      37
    Operating Profit             345         274    25.9%      81      64
    Net Income                   212         143    48.3%      50      34
    Cash Flow from Operating
    Activities, net of
    Investing Activities         332         233    42.5%      78      55
    EBITDA                       539         479    12.5%     127     113
    EBITDA, as percent of
    Revenues                    37.0%       34.6%      -     37.0%   34.6%
    Subscribers end of period   2,960       2,678    10.5%   2,960   2,678
    (in thousands) (ii)
    Estimated Market Share        34%         34%      -       34%     34%
    (iii)
    Churn Rate (in %)            3.9%        3.9%      -      3.9%    3.9%


                                     Q2/2007       Q2/2006      % Change

    Parameters Excluding Change in
    Subscriber Counting Method


    Average Monthly MOU (in minutes)    354           336          5.4%
    (ii)
    Monthly ARPU (in NIS) (ii)          152           153         (0.7%)
    Monthly ARPU (in US$) (ii)         35.8          36.0         (0.7%)

    Parameters Following Change in
    Subscriber Counting Method

    Average Monthly MOU (in minutes)    345           336          2.7%
    (ii)
    Monthly ARPU (in NIS) (ii)          148           153         (3.3%)
    Monthly ARPU (in US$) (ii)         34.8          36.0         (3.3%)


(ii) Until June 30, 2006, the Company had a subscriber counting methodology under which it deducted subscribers, identified as "silent" (inactive) for a period of three (3) consecutive months. A "silent" subscriber is a subscriber with no revenues generation or activity on the Cellcom Israel network by or in relation to this subscriber. Commencing July 1, 2006, the Company adopted a policy of deducting "silent" subscribers after six (6) months, since many subscribers, that were inactive for a period of three (3) months, became active again prior to the end of a six (6) month period. Cellcom Israel did not restate prior subscriber data to conform to the new presentation. The six (6) month method is, to the best of Cellcom Israel's knowledge, consistent with the policies adopted by other cellular providers in Israel. This change in methodology resulted in an increase of our reported number of subscribers by approximately 80,000, compared to the prior methodology, and affected other key performance indicators accordingly.

(iii) In order to estimate the Company's market share, the Company was required to estimate the number of subscribers of two additional Israeli cellular operators - Pelephone Communications Ltd. ("Pelephone") and Mirs Communications Ltd. ("Mirs"), as at June 30, 2007, since Pelephone had not yet published this information, and Mirs does not publish this information.

Financial Review

Revenues for the second quarter ended June 30, 2007 totaled NIS 1,456 million ($343 million), a 5.1% increase compared to NIS 1,385 million ($326 million) in the same quarter last year. The increase in revenues resulted primarily from a 7.6% increase in revenues from services, to NIS 1,322 million ($311 million) compared to NIS 1,229 million ($289 million) in the same quarter last year. This increase is attributed mainly to an increase of approximately 14% in airtime usage (outgoing and incoming), following the increase in the Company's subscriber base and Minutes of Use ("MOU") per subscriber. Revenues also benefited from a 51.3% increase in revenues from content and value added services (including SMS), which totaled, in the second quarter of 2007, NIS 118 million ($28 million), representing 8.1% of total revenues, primarily due to the increase in the Company's 3G subscriber base and a 5.5% increase in usage among the existing subscribers. The increase in revenues was partially offset by a decline in interconnection rates and the change in the pricing of calls ending in the voicemail. The increase in revenues was also partially offset by a decrease of 14.1% in handset and accessories revenues, totaled NIS 134 million ($32 million) in the second quarter of 2007, compared to NIS 156 million ($37 million) in the same quarter last year. This decrease resulted mainly from a decline in average income per handset, attributed to the extensive sales campaigns launched during the second quarter of 2007.

Cost of Revenues for the second quarter of 2007 totaled NIS 785 million ($185 million), a decline of 1.5% compared to NIS 797 million ($188 million) in the second quarter last year. This decline is primarily due to a 10.5% decline in the cost of handset and accessories revenues, resulted mainly from an increasing efficiency in purchasing of handsets and a decline in costs of accessories sold during the second quarter of 2007. The decline in cost of handset and accessories revenues was partially offset by a 1.3% increase in cost of services revenues, mainly due to an increase in usage leading to an increase in interconnect fees and content costs, partially offset by a decline in depreciation expenses.

Gross profit margin for the second quarter of 2007 increased to 46.1%, compared to 42.5% in the second quarter last year. Gross profit for the quarter totaled NIS 671 million ($158 million), a 14.1% increase compared to NIS 588 million ($138 million), in the second quarter last year.

Selling, Marketing, General and Administration Expenses ("SG&A expenses") for the second quarter of 2007 totaled NIS 326 million ($77 million), an increase of 3.8% compared to NIS 314 million ($75 million) in the same period last year. The increase in SG&A expenses is primarily due to increased marketing activities, which included, among other things, a 43% increase in advertising expenses. On the other hand, the SG&A as percentage of revenues was reduced by 1.3% compared to the second quarter of last year, as a result of ongoing efficiency measures implemented Company wide.

Operating profit increased 25.9%, from NIS 274 million ($64 million) in the second quarter last year, to NIS 345 million ($81 million) in the second quarter of 2007. EBITDA for the second quarter of 2007 totaled NIS 539 million ($127 million), a 12.5% increase compared to NIS 479 million ($113 million) in the same quarter last year. EBITDA, as a percent of revenues, increased from 34.6% in the second quarter last year to 37.0% in this quarter.

Finance Expenses, net for the second quarter of 2007 totaled NIS 19 million ($4 million), compared to NIS 55 million ($13 million) in the same period last year. The decline in finance expenses primarily follows the absence of linkage differences relating to the Company's debentures to the Israeli Consumer Price Index ("CPI") in the current quarter, compared to a NIS 20 million ($5 million) CPI linkage differences expense in the same quarter last year. This was in addition to profits generated on the hedging portfolio the Company manages against currency, interest and CPI exposures. The profit on the hedging portfolio, recorded under finance expenses, totaled NIS 10 million in the second quarter of 2007, compared to a NIS 6 million loss in the same quarter last year. The profit on the hedging portfolio stems primarily from the impact of the 2.3% depreciation of the NIS against the US dollar on the hedging portfolio this quarter, compared to a 4.8% appreciation in the same quarter last year, as well as an increase in inflation expectations, which contributed to a profit on the CPI hedging transactions.

Net Income for the second quarter of 2007 increased 48.3% to NIS 212 million ($50 million), compared to NIS 143 million ($30 million) in the second quarter last year.

Basic earnings per share for the second quarter of 2007 totaled NIS 2.17 ($0.51), compared to NIS 1.47 ($0.35) in the second quarter last year.

Operating Review

New Subscribers - at the end of the second quarter of 2007 the Company had approximately 2.960 million subscribers. During the second quarter of 2007, the Company added approximately 32,000 net new subscribers, compared to a net increase of approximately 37,000 subscribers in the same period last year. The number of 3G subscribers as at the end of the second quarter of 2007 totaled approximately 212,000 subscribers.

Churn Rate during the second quarter of 2007 remained at 3.9%, as in the second quarter of 2006. The major part of churn during the second quarter of 2007 is attributed to pre-paid subscribers.

Average subscriber Minutes of Use ("MOU") in the second quarter of 2007, excluding the effect of the change in subscriber counting method, increased 5.4% to 354 minutes, compared to 336 minutes in the second quarter last year (following the change in the subscriber counting method, MOU totaled 345 minutes, a 2.7% increase).

The monthly Average Revenue per User (ARPU) in the second quarter of 2007, excluding the effect of the change in subscriber counting method, totaled NIS 152 ($35.8), compared to NIS 153 ($36.0) in the second quarter last year, a 0.7% decrease (following the change in the subscriber counting method, ARPU totaled NIS 148 ($34.8), a 3.3% decrease). ARPU continues to decline, while average MOU, as well as content and value added services usage, continues to increase, due to the continued erosion in airtime tariffs, over 6%, compared to the second quarter of last year.

Financing and Investment Review

Cash Flow

Free cash flow (Cash provided by operating activities, net of cash used in investing activities) for the second quarter of 2007 totaled NIS 332 million ($78 million), a 42.5% increase from the NIS 233 million ($55 million) generated in the second quarter last year. The Company continues to generate, on an ongoing basis, significant levels of free cash flow, as a result of increased revenues, improved collection, cost efficiencies and a decline in cash used in investing activities.

Shareholders' Equity

Shareholders' Equity as of June 30, 2007, primarily consisting of accumulated undistributed retained earnings, totaled NIS 846 million ($199 million).

Investment in Fixed Assets

During the second quarter of 2007 the Company invested NIS 117 million ($28 million) in fixed assets (including investment in information systems and software recorded under other assets in the balance sheet), compared to NIS 142 million ($33 million) in the same quarter last year.

Dividend

On Aug 13, 2007, the Company's board of directors declared a cash dividend in the amount of NIS 2.06 per share, and in the aggregate amount of approximately NIS 201 million, subject to withholding tax described below. The dividend will be payable to all shareholders of record at the end of the trading day in the NYSE on August 23, 2007. The payment date will be September 6, 2007. For dividend paid in US$, the Company will convert the NIS to US$ based upon the representative rate of exchange published by the Bank of Israel on September 4, 2007. According to the Israeli tax law, the Company will deduct at source 20% of the dividend amount payable to each shareholder, as aforesaid, subject to applicable exemptions. The amount of dividends declared per share for the second quarter does not necessarily reflect dividends for future quarterly periods, which may change in accordance with the Company's dividend policy. Dividend declaration is not guaranteed and is subject to the Company's board of directors' sole discretion, as detailed in the Company's annual report for the year 2006 (20-F), under "Item 8 - Financial Information - Dividend Policy".

Other developments during the second quarter and after the balance sheet date

Site Licensing - in July 2007, subsequent to the balance sheet date, the Company received a Magistrates Court ruling determining that the exemption from the requirement to obtain a building permit for radio access devices, according to the Communications Law (Bezeq and Transmissions), 1982 (the "Exemption"), is not applicable to radio access devices on a cellular network, and, as such, the Company is required to receive permits for the erection and use of the facility and the accompanying equipment. This ruling contradicts previous Magistrate Court rulings, which determined that the Exemption is also applicable to radio access devices in a cellular network. This issue is under consideration in the court of appeals (the District Court).

In July 2007, subsequent to the balance sheet date, the Company was served with a petition filed with the Israeli High Court of Justice. The petition was filed against the Israeli Minister of Environmental Protection, the Minister of Interior and the Minister of Communications; the Company and three other cellular operators have been joined as formal respondents. The said petition seeks to cancel the Exemption, based on which Cellcom Israel installed radio access devices without seeking building permits. The petitioners also request the annulment of any environmental permits granted, and that no additional environmental permits will be granted, for radio access devices by the Ministry of Environmental Protection, based on the Exemption. The petition includes a request to grant an interim order preventing the issuance of any permits, based on the Exemption, for the building and/or operation of cell sites, until the court will have decided on the main petition. At this preliminary stage, Cellcom Israel's management is unable to assess the petition's chances of success. For additional details see our most recent annual report for year 2006 (20-F) under "Item 3. Key Information - D. Risk Factors - Risks related to our business - We may not be able to obtain permits to construct cell sites" as well as under "Item 4. Information on the Company - B. Business Overview - Government Regulations - Permits for Cell Site Construction - Site Licensing" .

Number Portability - In May 2007, Israel's Ministry of Communications notified its intention to impose monetary sanctions on telephony companies, the Company and Cellcom Fixed Line Communications L.P. ("Cellcom Partnership") included, following non-implementation and operation of number portability as of September 1, 2006. The monetary sanction indicated in the notice of the Ministry of Communications for the period starting September 1, 2006 and ending November 30, 2007, is approximately NIS 3 million each for the Company and the Cellcom Partnership (a total of approximately NIS 6 million). Starting December 1, 2007 (the new date determined by the Ministry of Communications for the Number Portability implementation), insofar as the number portability is not implemented, the monetary sanction, for each additional day that number portability will not be implemented by the Company, will equal 2% of an amount equal to NIS 1.4 million, in addition to 2% of an amount equal to 0.25% of the Company's revenues in the previous year and in regards to Cellcom Partnership, 2% of an amount equal to NIS 200,000, in addition to 2% of an amount equal to 1.45% of Cellcom Partnership's revenues in the previous year. The Company and Cellcom Partnership submitted their objection to the said sanctions to the Minister of Communications. For additional details see our most recent annual report for year 2006 (20-F) under "Item 3. Key Information - D. Risk Factors - Risks related to our business - We may face claims of being in violation of the law and our license requiring the implementation of number portability and the terms of our license governing the method of charging for SMS messages; We face intense competition in all aspects of our business" , as well as under "Item 4. Information on the Company - B. Business Overview - Government Regulations - Number Portability; B. Business Overview - Competition".

Registration of the Company's Shares for Trading on the Tel Aviv Stock Exchange - Following receipt of the approval of the holders of each of the two series of the Company's debentures, which are listed in the Tel Aviv Stock Exchange ("TASE"), for reporting leniencies afforded under the Israeli Securities Law to Companies' whose securities are listed both on the New York Stock Exchange ("NYSE") and the TASE, the Company's shares, which are traded on the NYSE, have been listed for trade on the TASE starting July 1, 2007, and the Company has begun applying the previously mentioned reporting leniencies.

Conference Call Details

The Company will be hosting a conference call on Tuesday, August 14, 2007 at 09:00am EDT, 04:00pm Israel time, and 02:00pm UK time. On the call, management will review and discuss the results, and will be available to answer questions. To participate, please either access the live webcast on the Company's website, or call one of the following teleconferencing numbers below. Please begin placing your calls at least 10 minutes before the conference call commences. If you are unable to connect using the toll-free numbers, please try the international dial-in number.

    US Dial-in Number: 1-888-407-2553
    UK Dial-in Number: 800-917-5108
    Israel Dial-in Number: +972-(0)-3-918-0609
    International Dial-in Number: +972-3-918-0609

at: 9:00 am Eastern Time; 6:00 am Pacific Time; 2:00 pm UK Time; 4:00 pm Israel Time

To access the live webcast of the conference call, please access the investor relations section of Cellcom Israel's website: http://investors.ircellcom.co.il/events.cfm. After the call, a replay of the call will be available under the same investor relations section. A dial-in replay of the call will also be available from August 14, 2007 until August 16, 2007 by dialing one of the following numbers - 1-888-295-2634 (US); 800-917-4256 (UK) and +972-3-925-5928 (International).

About Cellcom Israel

Cellcom Israel Ltd., established in 1994, is the leading Israeli cellular provider; Cellcom Israel provides its 2.960 million subscribers (as at June 2007) with a broad range of value added services including cellular and landline telephony, roaming services for tourists in Israel and for its subscribers abroad and additional services in the areas of music, video, mobile office etc., based on Cellcom Israel's technologically advanced infrastructure. The Company operates an HSDPA 3.5 Generation network enabling the fastest high speed content transmission available in the world, in addition to GSM/GPRS/EDGE and TDMA networks. Cellcom Israel offers Israel's broadest and largest customer service infrastructure including telephone customer service centers, retail stores, and service and sale centers, distributed nationwide. Through its broad customer service network Cellcom Israel offers its customers technical support, account information, direct to the door parcel services, internet and fax services, dedicated centers for the hearing impaired, etc. In April 2006 Cellcom Israel, through Cellcom Fixed Line Communications L.P., a limited partnership wholly-owned by Cellcom Israel, became the first cellular operator to be granted a special general license for the provision of landline telephone communication services in Israel, in addition to data communication services. Cellcom Israel's shares are traded both on the New York Stock Exchange (CEL) and the Tel Aviv Stock Exchange (CEL).

For additional information please visit the Company's website http://investors.ircellcom.co.il

The Company presents its financial statements using Israeli General Accepted Accounting Principles. The dollar denominated figures were converted to US$ using a convenience translation based on the US$\New Israeli Shekel (NIS) conversion rate of NIS 4.249 = US$1 as published by the Bank of Israel on June 29, 2007.

Forward-Looking Statements

The following information contains, or may be deemed to contain forward-looking statements (as defined in the U.S. Private Securities Litigation Reform Act of 1995 and the Israeli Securities Law, 1969). In some cases, you can identify these statements by forward-looking words such as "may," "might," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential" or "continue," the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include projections of our future financial results, our anticipated growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. Factors that could cause such differences include, but are not limited to: changes to the terms of our license, new legislation or decisions by the regulator affecting our operations, the outcome of legal proceedings to which we are a party, particularly class action lawsuits, our ability to maintain or obtain permits to construct and operate cell sites, and other risks and uncertainties detailed from time to time in our filings with the U.S. Securities and Exchange Commission, including under the caption "Risk Factors" in our most recent Annual Report for the year ended December 31, 2006.

Although we believe the expectations reflected in the forward-looking statements contained herein are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. We assume no duty to update any of these forward-looking statements after the date hereof to conform our prior statements to actual results or revised expectations, except as otherwise required by law.

Use of non-GAAP financial measures

EBITDA is a non-GAAP measure and is defined as income before financial income (expenses), net; other income (expenses), net; income tax; depreciation and amortization. This is an accepted measure in the communications industry. The Company presents this measure as an additional performance measure as the Company believes that it enables us to compare operating performance between periods and companies, net of any potential differences which may result from differences in capital structure, taxes, age of fixed assets and related depreciation expenses. EBITDA should not be considered in isolation, or as a substitute for operating income, any other performance measures, or cash flow data, which were prepared in accordance with Generally Accepted Accounting Principles as measures of profitability or liquidity. EBITDA does not take into account debt service requirements, or other commitments, including capital expenditures, and therefore, does not necessarily indicate the amounts that may be available for the Company's use. In addition, EBITDA may not be comparable to similarly titled measures reported by other companies, due to differences in the way these measures are calculated. See the reconciliation between the net income and the EBITDA presented at the end of this Press Release.

Free cash flow is a non-GAAP measure and is defined as the net cash provided by operating activities minus the net cash used in investing activities. See the reconciliation note at the end of this Press Release.

                               Cellcom Israel Ltd.
                            (An Israeli Corporation)

    Condensed Consolidated Balance Sheets

                                                             Convenience
                                                             translation
                                                            into US dollar

                                 June 30,    December     June 30,   December
                                                31,                     31,
                                   2007        2006         2007       2006
                               NIS millions     NIS     US$ millions    US$
                                             millions                millions
                               (Unaudited)   (Audited)  (Unaudited) (Audited)


    Current assets
    Cash and cash equivalents      372            56        88          14
    Trade receivables, net       1,331         1,242       313         292
    Other receivables              133           123        31          29
    Inventory                      125           131        29          31

                                 1,961         1,552       461         366

    Long-term receivables          491           526       116         124

    Property, plant and
    equipment, net               2,384 (**)(*) 2,550       561 (**)(*) 600

    Other assets, net              671      (**) 695       158    (**) 163

    Total assets                 5,507         5,323     1,296       1,253

    (*) Restated due to initial implementation of a new Israeli Accounting
    Standard.

    (**) Reclassified due to initial implementation of a new Israeli
    Accounting Standard.


    Condensed Consolidated Balance Sheets

                                                           Convenience
                                                           translation
                                                          into US dollar

                            June 30,   December 31,   June 30,   December 31,
                              2007         2006         2007         2006
                          NIS millions NIS millions US$ millions US$ millions
                          (Unaudited)   (Audited)   (Unaudited)   (Audited)

    Current liabilities
    Short-term bank credit      123         -           29           -
    Trade payables              724       819          170         193
    Other current
    liabilities                 510       496          120         117

                              1,357     1,315          319         310

    Long-term liabilities
    Long-term loans from
    banks                     1,092     1,208          257         284
    Debentures                1,989     1,989          468         468
    Deferred taxes              207   (*) 212           49      (*) 50
    Other long term
    liabilities                  16         2            4           -
                              3,304     3,411          778         802

    Shareholders' equity        846   (*) 597          199     (*) 141

    Total liabilities and
    shareholders' equity      5,507     5,323        1,296       1,253


    (*) Restated due to initial implementation of a new Israeli Accounting
    Standard.

    Condensed Consolidated Statements of Income


                     Six-month period ended    Three-month period
                            June 30,             ended June 30,

                        2007        2006        2007        2006
                         NIS         NIS         NIS         NIS
                      millions    millions    millions    millions
                     (Unaudited) (Unaudited) (Unaudited) (Unaudited)

    Revenues             2,894       2,724       1,456       1,385
    Cost of revenues     1,568   (*) 1,593         785     (*) 797

    Gross profit         1,326       1,131         671         588
    Selling and
    marketing
    expenses               313         305         164         152
    General and
    administrative
    expenses               321         321         162         162

    Operating income       692         505         345         274
    Financial
    expenses, net           62          75          19          55
    Other expenses,
    net                      -       (*) 6           1       (*) 2

    Income before          630         424         325         217
    income tax
    Income tax             210     (*) 136         113      (*) 74

    Net income             420         288         212         143

    Earnings per
    share
    Basic earnings
    per share (in
    NIS)                  4.31    (*) 2.95        2.17    (*) 1.47

    Diluted earnings
    per share (in
    NIS)                  4.27    (*) 2.95        2.15    (*) 1.47

    Weighted average
    number of shares
    used in the
    calculation of
    basic earnings
    per share (in
    thousands)          97,500      97,500      97,500      97,500
    Weighted average
    number of shares
    used in the
    calculation of
    diluted earnings
    per share (in
    thousands)          98,251      97,500      98,466      97,500


                        Convenience translation into
                                   US dollar
                          Six-month        Three-month
                        period ended      period ended
                        June 30,2007      June 30,2007

    Revenues                 681             343
    Cost of revenues         369             185

    Gross profit             312             158
    Selling and
    marketing
    expenses                  74              39
    General and
    administrative
    expenses                  76              38

    Operating income         162              81
    Financial
    expenses, net             14               4
    Other expenses,
    net                        -               -

    Income before            148              77
    income tax
    Income tax                49              27

    Net income                99              50

    Earnings per
    share
    Basic earnings
    per share (in
    NIS)                    1.01            0.51

    Diluted earnings
    per share (in
    NIS)                    1.00            0.51

    Weighted average
    number of shares
    used in the
    calculation of
    basic earnings
    per share (in
    thousands)            97,500          97,500
    Weighted average
    number of shares
    used in the
    calculation of
    diluted earnings
    per share (in
    thousands)            98,251          98,466


    (*) Restated due to initial implementation of a new Israeli Accounting
    Standard.

    Condensed Consolidated Statements of Cash Flows

                                   Six-month period ended
                                          June 30,
                                                          Convenience
                                                          translation
                                                         into US dollar
                               2007         2006            2007
                           NIS millions  NIS millions     US$ millions
                           (Unaudited)  (Unaudited)       (Unaudited)

    Cash flows from
    operating activities
    Net income                    420     (*) 288            99
    Adjustments required
    to present
    cash flows from
    operating activities
    (Appendix A)                  354     (*) 413            83

    Net cash provided by
    operating activities          774         701           182

    Cash flows from
    investing activities
    Additions to property,
    plant and
    equipment                   (228)   (**) (284)          (53)

    Proceeds from sales of
    property, plant and
    equipment                       1           5             -

    Investment in other
    assets                       (46)    (**) (98)          (11)

    Net cash used in
    investing activities        (273)        (377)          (64)

    Cash flows from
    financing activities

    Borrowings under
    short-term
    bank credit facility           -          315             -

    Borrowings of
    long-term
    loans from banks               -        2,155             -

    Payment of long-term
    loans
    from banks                     -      (1,082)             -

    Proceeds from issuance
    of
    debentures, net of
    issuance cost                  -         290             -

    Paid dividend               (185)     (3,730)          (43)

    Net cash used by
    financing activities        (185)     (2,052)          (43)

    Increase (decrease) in
    cash and cash
    equivalents                  316      (1,728)           75

    Balance of cash and
    cash
    equivalents at
    beginning of the
    period                        56       1,772            13

    Balance of cash and
    cash
    equivalents at end of
    the period                   372         44             88

    (*) Restated due to initial implementation of a new Israeli Accounting
    Standard.

    (**) Reclassified due to initial implementation of a new Israeli
    Accounting Standard.

    Condensed Consolidated Statements of Cash Flows (cont'd)

    Appendix A - Adjustments required to present cash flows from operating
    activities

                                        Six-month period ended
                                               June 30,
                                                               Convenience
                                                               translation
                                                             into US dollar
                                    2007         2006            2007
                                 NIS millions NIS millions   US$ millions

                                (Unaudited)  (Unaudited)     (Unaudited)

    Income and expenses not
    involving cash flows
    Depreciation and
    amortization                       382      (*) 420            90
    Deferred taxes                     (2)      (*) (13)            -

    Exchange and linkage
    differences on long-term
    liabilities                         4           (47)            1
    Capital losses                      2         (*) 6             -
    Stock based compensation           18             -             4
                                      404           366            95

    Changes in assets and
    liabilities

    Decrease (increase) in
    trade receivables
    (including long-term
    amounts)                          (56)          28            (13)

    Decrease (increase) in
    other receivables
    (including long-term
    amounts)                          (14)          22             (3)
    Decrease (increase)
    in inventories                      6          (10)             1
    Increase (decrease) in
    trade payables (including
    long-term amounts)                 (8)        (111)            (2)

    Increase in other payables
    and credits (including
    long-term amounts)                 22          118              5
                                      (50)          47            (12)

    Total                             354          413             83


    Appendix B - Non- cash activities

    Acquisition of property,
    plant and equipment and
    other assets on credit            106          126             25

    Tax withheld regarding cash
    dividend                           13            -              3

    (*) Restated due to initial implementation of a new Israeli Accounting
    Standard.

    Reconciliation for Non-GAAP Measures

    EBITDA

    The following is a reconciliation of net income to EBITDA:

                                 Three-month period ended June 30,
                                                              Convenience
                                                              translation
                                                              into US dollar
                                     2007            2006          2007
                                 NIS millions   NIS millions  US$ millions

                                 (Unaudited)   (Unaudited)   (Unaudited)

    Net income                        212           143            50
    Financial expense (income),
    net                                19            55             4
    Other expenses (income)             1             2             0
    Income taxes                      113            74            27
    Depreciation and
    amortization                      194           205            46
    EBITDA                            539           479           127

    Free Cash Flow

    The following table shows the calculation of free cash flow:

                                  Three-month period ended June 30,
                                                              Convenience
                                                             translation
                                                             into US dollar
                                     2007          2006          2007
                                 NIS millions   NIS millions  US$ millions
                                  (Unaudited)   (Unaudited)  (Unaudited)

    Cash flows from operating
    activities                        431         404           101
    Cash flows from investing
    activities                        (99)       (171)          (23)
    Free Cash Flow                    332         233            78



    Company Contact:

    Shiri Israeli
    Investor Relations Coordinator
    investors@cellcom.co.il
    Tel: +972-52-998-9755

    Investor Relations Contact
    Ehud Helft / Ed Job
    CCGK Investor Relations
    ehud@gkir.com / ed.job@ccgir.com
    Tel: (US) +1-866-704-6710, +1-646-213-1914



SOURCE Cellcom Israel Ltd.

Company Contact: Shiri Israeli, Investor Relations Coordinator,
investors@cellcom.co.il, Tel: +972-52-998-9755; Investor Relations Contact, Ehud
Helft / Ed Job, CCGK Investor Relations, ehud@gkir.com, ed.job@ccgir.com, Tel: (US)
+1-866-704-6710, +1-646-213-1914
http://www.prnewswire.com

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