B Communication

Earnings Release • Nov 30, 2021

Bezeq Group Investor Presentation Q3-2021

Forward-Looking Information and Statement (Disclaimer)

This presentation contains general data and information as well as forward looking statements about Bezeq The Israel Telecommunications Corp., Ltd ("Bezeq"). Such statements, along with explanations and clarifications presented by Bezeq's representatives, include expressions of management's expectations about new and existing programs, opportunities, technology and market conditions. Although Bezeq believes its expectations are based on reasonable assumptions, these statements are subject to numerous risks and uncertainties. These statements should not be regarded as a representation that anticipated events will occur or that expected objectives will be achieved. In addition, the realization and/or otherwise of the forward looking information will be affected by factors that cannot be assessed in advance, and which are not within the control of Bezeq, including the risk factors that are characteristic of its operations, developments in the general environment, external factors, and the regulation that affects Bezeq's operations.

This presentation contains partial information from the public reports of Bezeq under the Israeli Securities Law 5728-1968 (the "Securities Law"), which reports can be accessed at the Israeli Securities Authority's website, www.magna.isa.gov.il. A review of this presentation is not a substitute for a review of the detailed reports of Bezeq under the Securities Law and is not meant to replace or qualify them; rather, the presentation is prepared merely for the convenience of the reader, with the understanding that the detailed reports are being reviewed simultaneously. No representation is made asto the accuracy or completeness of the information contained herein.

The information included in this presentation is based on information included in Bezeq's public filings. However, some of the information may be presented in a different manner and/or breakdown and/or is differently edited. In any event of inconsistency between Bezeq's public filings and the information contained in this presentation,the information included in the public filings shall prevail.

The information contained in this presentation or which will be provided orally during the presentation thereof, does not constitute or form part of any invitation or offer to sell, or any solicitation of any invitation or offer to purchase or subscribe for, any securities of Bezeq or any other entity, nor shall the information or any part of it or the fact of its distribution form the basis of, or be relied on in connection with or relating to any action, contract, commitment or to the securities of Bezeq. The presentation does not constitute a recommendation or opinion or substitute for the discretion of any investor.

Q3-2021 Financial Results Highlights

• Revenues totaled NIS 2.1 billion, down 1.7%

• Adjusted EBITDA* of NIS 938 million, up 2.6%; Adjusted EBITDA margin of 43.8%
• Adjusted net profit* of NIS 295 million, up 1.7%
• Free cash flow of NIS 377 million, up 32.3%
• Net debt decreased by NIS 1.03 billion with improved liquidity ratios
• Publication of Bezeq's updated ESG report human rights policy

Bezeq Fixed-Line

• Continued massive deployment of fiber which reached our target of 1m homes passed as of today
• Stable revenues in Q3 2021
• Continued improvement in key operating metrics
  • Increase in retail broadband Internet subscribers for a sixth consecutive quarter
  • 7.0% increase in retail broadband Internet ARPU
  • Continued growth in sales of BE router and wi-fi enhancers. Launch of new BE2 router

Subsidiary Companies

• Pelephone posted strong financial results:
  • 5.3% increase in revenues from services and 38.3% increase in EBITDA
  • Continued growth in postpaid subscribers
  • Growth in 5G subscribers
• Improved results in yes
  • 16.0% increase in free cash flow
  • Stable number of yes subscribers with increase in IP subscribers to 37%
  • NIS 2 increase in ARPU

Regulation

• Cancellation of infrastructure and ISP separation to begin at the end of March 2022.
• Hearing held on reduction in telephony tariffs. A decision has not yet been reached on the matter.
• MOC approved the merger of Bezeq International into yes

All results in this presentation are in comparison to the corresponding period or June 30, 2020

Bezeq Group – Quarterly Key Financial Metrics|NIS Million

• Revenues decrease mainly in Bezeq International
• Salary expenses continued decrease in headcount in subsidiary companies as part of the ongoing streamlining plan
• Operating expenses decrease mainly in cost of terminal equipment in Pelephone and interconnect fees to telecom operators in-line with the decrease in revenues

Bezeq Group – Quarterly Key Financial Metrics |NIS Million

Increase in profitability despite decrease in revenues in Q3 2021

Bezeq Group – Key Financial Metrics (9M-2021)| NIS Million

Bezeq Group - Financial Debt| NIS Million

14% y-o-y Decrease in Net Debt

Continued decrease in net debt

• Decrease of NIS 1,030 million y-o-y, ~14%

Further improvement in coverage ratio

• Net debt/EBITDA ratio decreased to 1.9 from 2.2 in 30.9.2020

Israeli debt ratings

Rating Agency	Rating	Outlook
S&P Global Maalot	ilAA-	Stable
Midroog	Aa3.il	Stable

We have set ourselves the goal of maintaining a high credit rating in the AA group while adjusting our debt repayments to cash flow generation. We aim to maintain significant liquidity, while at the same time to return to dividend distributions to shareholders

Bezeq Group - 2021 Outlook

Based on the information known to the Bezeq Group today, the Group's updated Outlook for 2021 is as follows:

	Updated Outlook	Previous Outlook
(1) Adjusted net profit attributable to shareholders	NIS 1.1 billion	NIS 1.0 billion
Adjusted EBITDA (1)	NIS 3.65 billion	NIS 3.5 billion
(2) CAPEX	NIS 1.8 billion	NIS 1.7 billion

The Company shall report, as required, deviations of more/less than 10% of the amounts stated in the outlook

1) Adjusted net profit and Adjusted EBITDA – after adjusting for other operating expenses/income, net, one-time losses/gains from impairment/increase in value of assets and stock-based compensation.

2) CAPEX - gross paymentsforinvestmentsin fixed and intangible assets.

The Company's forecasts in this section are forward-looking information, as defined in the Securities Law. The forecasts are based on the Company's estimates, assumptions and expectations.

The Group's forecasts are based, among other things, on its estimates regarding the structure of competition in the telecommunications market and regulation in this sector, the economic situation and accordingly, the Group's ability to implement its plans in 2021. Actual results may differ from these estimates taking note of changes that may occur in the foregoing, in business conditions, and the effects of regulatory decisions, technology changes and developments in the structure of the telecommunications market, and so forth, or the realization of one or more of the risk factors listed in the Periodic Report of 2020. In addition, there is no certainty that the outlook will be fully or partially fulfilled, among other things, due to the COVID-19 pandemicand the resulting uncertainty.

Bezeq Fixed Line

Bezeq Fixed-Line – Q3-2021 Highlights

• Stable revenues despite 13.4% decrease in telephony revenues
• Stable revenues from broadband Internet services due to growth in retail subscribers for the sixth consecutive quarter and retail ARPU offset by the decrease in wholesale tariffs and subscribers
• Continued robust sales of equipment led to increased retail broadband ARPU
• Increase in revenues from the business sector 8.0% increase in revenues from transmission and data communications and 12.7% increase in revenues from cloud & digital services
• Continued massive deployment of fiber and customer connections. We reached our target of 1 million homes passed as of today (earlier than the target set for the end of the year)
• Cancellation of infrastructure and ISP separation approval of the agreement regulating the main performance indicators and the beginning of the "calibration period" for three months. Eliminating the split between Internet infrastructure and ISP services is expected to strengthen the company's value proposition in the field and improve its market positioning

Fiber Deployment Proceeding at Record Pace

40% of households in Israel

Bezeq Fixed-Line - Broadband Internet Services

Bezeq Retail Broadband Lines (Thousands)

• Stable revenues from broadband Internet services despite the sharp decrease in wholesale tariffs in 2021
• Continued growth in broadband Internet retail lines for the sixth consecutive quarter
• Continued growth in broadband Internet retail ARPU, positively impacted by the deployment of fiber
• Accelerated sales of equipment (BE router, Bspot, Be Mesh) as well as installation fees for fiber service also contributed to ARPU growth

Bezeq Fixed-Line - Full WiFi Differentiation

with High Quality Broadband Internet at Home

"Fixed broadband operators around the world should take note of the success that Bezeq has had with its strategy of focusing on home Wi-Fi and developing services based around its CPE" analysys mason, Nov 2021

Customers with BSPOT and MESH )in thousands(

~64% of the Company's retail customers choose to connect via the BE router

Bezeq Fixed-Line - Telephony Services

Access Lines )Thousands( 1,653 1,639 1,630 1,615 1,602 Q3-2020 Q4-2020 Q1-2021 Q2-2021 Q3-2021 3.1%

Telephony ARPL

• Decrease in telephony revenues in Q2-2021 due to lower impact of COVID-19
• Moderated rate of decline in telephony lines compared to pre-COVID years

Bezeq Fixed-Line - Revenues from Data|NIS Million

• Increase in revenues from transmission services for ISPs and business customers

Transmission & Data Cloud & Digital Services

• Increase in revenues from virtual exchanges and business directory services

Bezeq Fixed-Line – Key Financial Metrics| NIS million

Depreciation

• Salary expenses increase due to hiring of employees for the fiber project as well as the recognition of stock-based compensation
• Operating expenses – increase mainly due to the recognition of expenses of NIS 5 million for the universal fund for fiber deployment as well as an increase in subcontractor expenses

Bezeq Fixed-Line - Key Financial Metrics |NIS Million

3.5% 663 660 671 649 640 Q3-2020 Q4-2020 Q1-2021 Q2-2021 Q3-2021

• FCF in Q2-21 was impacted by increased Capex due to fiber deployment and payment of one-time grant to employees

226

18 * After adjusting for other operating expenses/income, net, one-time losses/gains from impairment/increase in value of assets and stock-based compensation

Bezeq Fixed-Line – Key Financial Metrics (9M-2021) |NIS million

Growth in retail broadband Internet revenues driven by increase in retail subscribers and ARPU

Success in sales of BE router and Wifi enhancers

Launch of nationwide deployment of fiber

Leading operations in business sector

Accelerated fiber deployment together with high quality service reflects potential for continued growth and strengthening of Bezeq's position in the residential broadband Internet market

Subsidiary Companies - The First Stage (2019-2021)

Steps Taken

• Reduced headcount by 1,500 employees during the period from Dec 2018 Sept 2021 through 45% reduction in senior management positions (including those reporting to senior management)
• Lowered operating expenses through joint procurement for all three companies and savings in real estate

Future Steps Planned

• Transition to one new CRM system – sales and services to customers through a wider approach (including triple play); savings in future investments and costs of support

Subsidiary Companies – Q3 2021 Highlights

Subscriber growth in Pelephone and yes and continued growth in business services in Bezeq

International

Improved profitabilitymetrics

• Free cash flow growth in all three subsidiary companies
• 37% of yes customers watching TV through IP broadcasting

Continued streamlining in employee headcount

Increase in number of Pelephone subscribers with accelerated deployment of 5G network

yes+ 2.0 The next generation of TV viewing

Subsidiary Companies – The Next Phase (2022-2024)

The process will yield further efficiencies that are expected to result in savings of tens of millions of shekels a year

• Progress in merger of Bezeq International into yes, which will strengthen the value proposition in the field of TV and the Internet
• Spin-off of ICT activity into a separate company in order to focus on an area that has the potential for significant growth

Deepen streamlining in subsidiary companies

Signed a collective agreement in yes and agreements in principle with the Histadrut Labor Federation and the workers' representatives at Pelephone and Bezeq International, based on implementation of the planned structural change in Bezeq International and yes

Subsidiary Companies - Marching on to Next Generation Technologies

New Generations of Technologies in all Subsidiary Companies

Subsidiary Companies - 20% Decrease in Salary Expenses*|NIS million

Streamlining measures led to a 20% decrease in salary expenses from Q3-2018 to Q3-2021

The Next Generation of Cellular in Israel

• Gradual deployment of 5G network
• Diverse handsets and plans
• Hundreds of thousands of 5G customers • 500k subscribers today with "5G" plans contributing to increase in ARPU
• Data communications and private broadband networks for businesses and organizations
• Exclusive use of frequencies gives Pelephone a competitive advantage

Pelephone was the first company to launch and operate its 5G network in Israel and it continues to lead in the field

Pelephone – Key Operational & Financial Metrics

Postpaid Subscribers (thousands)

Pelephone – Key Financial Metrics* (9M-2021)| NIS million

yes – Continued Subscriber Growth and IP Migration

Improvedcustomer experience along with savings in expenses

Significant improvement in cash flow with positive cash flow in 9M-2021

The next generation of TV viewing

Continued subscriber growth 38% of yes customers watch TV through IP broadcasting Leader in original production yes continues to lead in production of local content

Savingsin satellite costs after full transition to IP

14

• Savings in transition from expensive set-top boxes to cheaper streamers

yes – Key Operational & Financial Metrics

stable subscribers

yes – Significant Improvement in Cash Flow | NIS Million

Free Cash Flow Operating Cash Flow

32 נתוני פרופורמה

After a number of years, yes posts significant improvement in cash flow with positive free cash flow

yes – Key Financial Metrics* (9M-2021) | NIS million

33 includes pro forma numbers; * After adjusting for other operating expenses/income, net, one-time losses/gains from impairment/increase in value of assets and stock-based compensation.

Bezeq International – Leader in Business Solutions – Significant Operator in a Growing Market

Wide Range of Business Solutions

• Wide range of data centers in Israel
• Joint venture agreement to operate a sixth data center
• Growth in cloud solutions (business applications) and service contracts
• Growth in business and international data services
• Continued expansion through agreements with a wide variety of international business customers
• Winning significant and leading tenders in Israel

34

Bezeq International – Key Operational & Financial Metrics | NIS Million

35

50

Bezeq International – Key Financial Metrics* (9M-2021)|NIS million

•

Gross Capex Free Cash Flow

Strong financial results – increase in revenues and net profit

Significant investment in advanced infrastructures

Financial strength – significant decrease in net debt

Structural change – growth potential and streamlining

Thank you

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