Cellcom risk analysis
Cellcom (CELJF) Risk Analysis
Risk Overview Q4, 2020
Source: the company's latest filing for the period ended Dec 31, 2020, filed Apr 28, 2021
Risk Change Over Time
No filing history is available.
- Share Price & Shareholder Rights - Risk 1Our network sharing agreement consideration constitute a significant portion of our revenues
Consideration from our network sharing agreement with Xfone is material to our results of operations. If the sharing agreement is terminated or its terms are changed such that payments to us are under the agreement are materially reduced or payments are not made to us over a period of time, for any reason whatsoever, it may lead to a material adverse effect on our results of operations. For details regarding breach of the sharing agreement by Xfone, notification of termination of the agreement by Xfone and legal proceedings the Company has initiated, see "Item 4. Information on the Company – B. Business Overview –– Network and Infrastructure – Cellular Segment – Network sharing agreement".
- Accounting & Financial Operations - Risk 2Our operating results, profitability and cash flow have decreased significantly in the past several years, resulting in loss. Further decline may adversely affect our financial condition.
As a result of substantial and continuing changes in our regulatory and business environment, our business results, profitability and cash flow decreased significantly over the past several years and in 2018, 2019 and 2020, resulted in loss. Further decline may adversely affect our financial condition. The main factors leading to the continued decrease in our results of operations were regulatory developments intended to increase competition in the Israeli communications market, which resulted in significant erosion in the prices charged for the provision of cellular services. Should the aggressive competition in the various markets in which we operate continue and given our large amount of debt and the additional investments we are required to make in relation to the 2020 frequencies tender, our results of operation and financial condition may be adversely affected and we may be prevented from making the investments necessary in order to maintain our competitive standing and potential future growth, and we may be required to raise additional debt on unfavorable terms.
- Accounting & Financial Operations - Risk 3Our handsets profitability have decreased and may decrease further.
Handsets sales account for a substantial portion of our revenues and profitability. In recent years additional competitors have entered the handset market and increased the competition in this market, which has contributed to the decrease in our profitability from handsets. The variety of marketing channels we use, including the increased part of transactions using our digital platform also led to a decrease in our profitability in 2020. Continuance of this trend or additional changes to this market, including the entry of additional competitors, including domestic and international retailers, changes of distribution channels or customers purchasing habits, inability to continue to market certain suppliers' products, which account for a big part of our sales (such as Samsung and Apple, which currently account for the majority of our sales, may materially adversely affect our handset profitability and our profitability in general. See also "We face intense competition in all aspects of our business." Further, if the Corona virus effects and regulatory restrictions on our operations continue for a long duration, they would adversely affect our handset sales and profitability therefrom. See "The Corona virus may adversely affect our results of operations.
Risk Highlights Q4, 2020
Risk Word Cloud
Risk Factors Full Breakdown - Total Risks 23
- Share Price & Shareholder Rights - Risk 1ChangedOur network sharing agreement consideration constitute a significant portion of our revenues
Consideration from our network sharing agreement with Xfone is material to our results of operations. If the sharing agreement is terminated or its terms are changed such that payments to us are under the agreement are materially reduced or payments are not made to us over a period of time, for any reason whatsoever, it may lead to a material adverse effect on our results of operations. For details regarding breach of the sharing agreement by Xfone, notification of termination of the agreement by Xfone and legal proceedings the Company has initiated, see "Item 4. Information on the Company – B. Business Overview –– Network and Infrastructure – Cellular Segment – Network sharing agreement".
- Share Price & Shareholder Rights - Risk 2Provisions of Israeli law and our license may delay, prevent or impede an acquisition of us, which could prevent a change of control.
The Companies Law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals for transactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions. Further, the provisions of our licenses require the prior approval of the Ministry of Communications for changes of control in our Company. Furthermore, Israeli tax considerations may make potential transactions unappealing to us or to our shareholders whose country of residence does not have a tax treaty with Israel exempting such shareholders from Israeli tax. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment of numerous conditions, including a holding period of two years from the date of the transaction during which sales and dispositions of shares of the participating companies are restricted. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when the time expires, tax then becomes payable even if no actual disposition of the shares has occurred. These provisions could delay, prevent or impede an acquisition of us, even if such an acquisition would be considered beneficial by some of our shareholders.
- Share Price & Shareholder Rights - Risk 3A substantial number of our ordinary shares could be sold into the public market, which could depress our share price.
Our largest shareholder, Koor, holds approximately 46.1% of our outstanding ordinary shares, as of March 31, 2021 (of which 5% are held (through a lending transaction which DIC recently informed of its termination) by two shareholders, which are considered joint controlling shareholders with Koor). The market price of our ordinary shares could decline as a result of future sales by Koor or other existing shareholders or the perception that these sales could occur. Sales may be made pursuant to a registration statement, filed with the U.S. Securities and Exchange Commission, or the SEC, pursuant to the terms of a registration rights agreement or otherwise, or in reliance on an exemption from or transaction not subject to the registration requirements of the Securities Act, including the exemptions provided by Rule 144. Any decline in our share price could also make it difficult for us to raise additional capital by selling shares. In addition, we may issue additional options for a price lower than our market price, which could, in turn, decrease our share price as well. See "Item 5. Operating and Financial Review and Prospects. – B. Liquidity and Capital Resources – General". In addition, under our 2015 option plan, options and Restricted Stock Units, or RSU, are subject to vesting schedules but vesting will be accelerated upon certain events including any sale or other disposition of all, or substantially all, of our outstanding shares. As of December 31, 2020 we had 14,493,651 shares reserved for issuance upon the exercise of options and RSUs. See "Item 6. Directors, Senior Management and Employment – E. Share Ownership –Share Incentive Plans".
See a full breakdown of risk according to category and subcategory. The list starts with the category with the most risk. Click on subcategories to read relevant extracts from the most recent report.
