B Communication — Investor Presentation 2016

Jun 1, 2016

The Bezeq Era

June 2016

Forward-Looking Statement

This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are statements that are not historical facts and may include financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future operations, products and services, and statements regarding future performance. 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. Those factors include the factors indicated in our filings with the Securities and Exchange Commission (SEC). For more details, refer to our SEC filings and the amendments thereto, including our Annual Report on Form 20-F and Current Reports on Form 6-K. We undertake no obligation to update forward-looking statements to reflect subsequent occurring events or circumstances, or to changes in our expectations, except as may be required by law.

Investment Considerations

• Owns a controlling stake in an asset with strong, consistent cash flow generation.
• Trades at a significant discount to Net Asset Value.
• 11% Dividend yield is expected from BCOM's dividend distribution in June 29, 2016 of NIS 355 million. Three dividend payments during 2015 in a total amount of NIS 127 million as part of the Company's commitment to return capital to shareholders.
• Decreased net debt from more than NIS 5 billion in April 2010 (when BCOM acquired the controlling interest in Bezeq) to just NIS 1.7 billion as of March 2016 (after giving effect to the sale of 4.18% of its Bezeq shares for NIS 982 million).
• Pushed out maturities in February 2014 to 2021 by refinancing debt used to acquire stake in Bezeq through the Rule 144A / Reg S offering private placement of \$800 million of senior secured notes.

About BCOM

• B Communications Ltd. is a holding company with a controlling interest (approximately 26.3%) in Bezeq, The Israel Telecommunication Corp. ("Bezeq"), Israel's largest telecommunications provider (TASE: BEZQ).
• BCOM is a subsidiary of Internet Gold and part of the Eurocom Group in Israel. The Company, which was formerly known as 012 Smile Communications, went public on Nasdaq in November 2007.

At A Glance
BCOM
NASDAQ & TASE
Ramat Gan, Israel
\$25.94
\$14.31-\$31.86
29.9 Million
\$775 Million

As of May 30, 2016

Dividend Distributions

• The Company distributed a cash dividend of NIS 127 million (NIS 4.24 per share) during 2015, a 6.1% dividend yield.
• On May 26, 2016, the Company's board of directors declared a cash dividend of NIS 355 million (NIS 11.88 per share). The payment day will be June 29,2016. The NIS 355 million dividend distribution during 2016 represents a 11.6% dividend yield based on BCOM's share price as of May 25, 2016.

NAV Breakdown

Data

of shares No BCOM	29 889 045 , ,
of shares held by BCOM No Bezeq	728 373 713 , ,
share (NIS) Bezeq price @ May 31 2016 ,	7 45
of shares No Bezeq	2 765 444 146 , , ,
Bezeq's market (NIS millions) cap	20 603 ,
BCOM's calculation NAV	Millions NIS
of Market value BCOM's holdings in @ 31 2016 Bezeq May ,	426 5 ,
BCOM's debt* net	1 512 ,
Potential BCOM's NAV	3 914 ,
Potential Upside market price over	NIS
BCOM's share price based calculation NAV on	130 96
BCOM's share price @ May 31 2016 ,	100 90
Potential Upside (%)	29 8%

* BCOM's net debt as of March 31, 2016 adjusted by dividend received from Bezeq on May 30, 2016.

Experienced, Disciplined Leadership

Shaul Elovitch

Founder & Chairman Over 40 years experience building leading communications businesses and other major investments businesses

Doron Turgeman

CEO since 2011 & CFO from 2001 till 2011 20 years experience in management 18 years experience in communications

Proven capabilities in:

• Strategy creation & strategic planning
• Marketing & brand development
• Operational & financial management
• Management of mergers & acquisitions
• Creation of partnerships
• Capital raising: 13 major transactions
  • 2 IPOs IGLD and BCOM
  • 11 bond issues
  • \$800 million Rule 144A offering

Bezeq and B-Com are ultimately controlled by the Eurocom Group, the most experienced operator in the Israeli telecommunications field

Eurocom was founded in 1979

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• One of Israel's largest holding companies with a strong presence in Israel and a growing international presence
• Owned by Shaul Elovitch, Chairman of the Board of Directors (80% ownership) and Yossef Elovitch, Director (20% ownership)
• Solid financial base and strategic partnerships support growth
• Investments in telecommunications, satellite services, media, consumer electronics, real estate and additional fields

-To be reflected in OM per LW's comments -CLM: Clarify comment regarding Bezeq on-line South

Key Milestones for BCOM

From small entrepreneurial business to large holding company

1999 to 2006	 Founded in 1999 under the name Goldtrade, operating in the field of e-commerce, as a subsidiary of IGLD, and as the operator of the e-commerce web site P1000 In 2004, IGLD increases its holdings in the Company to 100%   Restructure of IGLD into a holding company owning Smile Communications and Smile Media  As part of the restructure Goldtrade changes its name to Smile Communications, transfers its e commerce activities to Smile Media and receives IGLD's communications activities Acquisition and merger with 012 Golden Lines to form 012 Smile Communications  Successful IPO and listing of 012 Smile Communications on NASDAQ and TASE (SMLC) 
2007 to 2009	Continuous organic growth   Crystallization of the strategy to become a leader in the Israeli telecom market  Preparation for the next major M&A transaction while examining several opportunities
2010 to 2016	 Sale of legacy 012 Smile Communications assets  Acquisition of the controlling interest in Bezeq – Israel's telecom market leader  From April 2010 through March 2016, BCOM decreased its net debt from more than NIS 5 billion to NIS 1.7 billion On February 2, 2016, BCOM announced the sale of 4.18% of Bezeq's shares for NIS 982 million   On February 19, 2014, BCOM announced the completion of an international offering of US\$ 800 million senior secured notes that was used to fully refinance the bank and institutional debt that it incurred to acquire its controlling interest in Bezeq Focus on continuous deleveraging and creation of shareholder value 

Source: Company's information, Bezeq's investors' presentation.

• (1) Net debt figures are as of March 31, 2016. Holding percentage figures are as of May 31, 2016.
• (2) IGLD's NAV is defined as value of IGLD's shares according to BCOM's NAV, based on Bezeq stock price as of May 31, 2016, less IGLD's net debt as of March 31, 2016.
• (3) BCOM's NAV is defined as value of BCOM's shares according to Bezeq market cap, based on Bezeq stock price as of May 31, 2016, less BCOM's net debt as of March 31, 2016 adjusted by dividend received from Bezeq on May 30, 2016.
• (4) Bezeq's EV/EBITDA and Net Debt/EBITDA ratios are effected by the full consolidation of Yes financials as of March 26,2015.

Market Value of BCOM's holding in Bezeq Vs. LTV

Reduction in BCOM's Net Debt From the Bezeq acquisition until March 2016 (NIS Billions)

Tender Offer to Purchase Senior Secured Notes

On May 26, 2016 the Company announced that its wholly-owned subsidiary, B Communications (SP4) LP, has invited holders of the Company's 7⅜% Senior Secured Notes due 2021 to submit tenders to purchase their Notes for cash within a purchase price range between \$1.00 to \$1.07, on the terms and subject to the conditions contained in its Tender Offer Memorandum dated May 26, 2016.

The Tender Offer will be \$244 million aggregate principal amount of Notes (or such lesser amount of Notes as are validly tendered and not validly withdrawn), subject to rounding and pro ration. The purchase of the Notes (if any) under the Tender Offer will be made from funds made available by the Company, including cash-on-hand and the net cash proceeds from the Company's sale of 115,500,000 ordinary shares of Bezeq in February 2016.

Aggregate principal amount of Notes outstanding as of the date hereof: US\$800

The Offer will expire at 5:00 pm, London time, on June 27, 2016.

lion. The Offer will expire at [5:00] pm, [London time], on [June 27], 2016

Bezeq, Our Base Asset

Bezeq is Israel's largest telecom group and the most comprehensive infrastructure and service provider

Note: LTM results and KPIs as of 1Q '16; Subscriber based market share data as of 4Q '15

¹Company estimates; Captures private and business sector

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²Breakdown based on gross revenue (pre elimination of inter-company revenues)

³Breakdown based on aggregate EBITDA generated by Bezeq Fixed-Line, Pelephone and Bezeq International (pre elimination of inter-company items)

⁴ Company estimates; Based on total broadband Internet infrastructure access services subscribers in the market

⁵ Adjusted EBITDA represents profit before income tax, share of loss of equity-accounted investee, financing expenses, net and depreciation and amortization.

The Israeli economy benefits from positive fundamentals as reflected in its A+/A1 (stable)¹ sovereign credit rating

Consistent high GDP growth...

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The Israeli telecommunications market is growing alongside the growth in population...

...with strong underlying population growth

...and Bezeq is the largest player in the market with the largest revenue share

\$5.7bn³

• Duopoly in infrastructure market with Bezeq and HOT as sole owners of fixed-line infrastructure
• High penetration and usage rates across all telecommunications services
• Technology driven market with rapid adoption rate of new technologies
• Strong brand appreciation and loyalty with high premium
• Relatively young population

Source: EIU; Israel Central Bureau of Statistics; Company data; Public filings for competitors' data

1 Indicates credit rating and outlook by S&P / Moody's

² Mobile subscribers based on total UMTS subscribers for all MNOs; Broadband internet subscribers based on Bezeq and HOT subscribers; Fixed-Line telephony lines based on Bezeq, HOT, Cellcom, Partner and other operators

³Based on aggregate revenues of the 4 largest telecom groups: Bezeq (incl. YES), HOT, Cellcom and Partner; USD/NIS conversion based on exchange rate of 3.902 as of December 31, 2015

Bezeq is the historical incumbent and since its privatization in 2005 has been controlled under a Control Permit attached to the 30% stake

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Control permit

• Control in Bezeq is held by holders of a pre-approved permit from the Israeli Prime Minister and the Ministry of Communications ("Control Permit")
• Only a party that holds a Control Permit may exercise its holdings in such a manner as to direct the activities of Bezeq
• B-Com is the only shareholder that has a permit to direct the activities of Bezeq
• B-Com has nominated all of the members of Bezeq's board of directors who were elected by shareholders¹
• B-Com consolidates Bezeq's financial statements based on its de-facto control of Bezeq

Source: Company information

¹ Excluding employee representatives on the Board whose nominations require the prior approval of our ultimate controlling shareholder, Mr. Shaul Elovitch, as chairman of Bezeq's Board of Directors, pursuant to Bezeq's collective bargaining agreement

Bezeq's leading position is supported by its fully owned advanced network infrastructure and technology across all lines of business

Bezeq Fixed-Line Pelephone

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Madrid

Valencia

Paris

London PoP

• Extended optical fiber deployment underway – Bfiber (FTTH/FTTB)
  • Fiber rollout is on track to reach 1,300,000 households by end of 2015
  • The only fixed-line company with a nationwide fiber network
  • Implementing VDSL and vectoring technologies
• Highly advanced nationwide NGN network that has led to impressive achievements
  • Average speed among Bezeq subscribers has increased from 24.0 Mbps in Q3 2014 to 36.7 Mbps in Q3 2015

Bezeq International YES

• Advanced infrastructure following the launch of submarine cable in 2012 ("Jonah")
  • Among the most advanced in the world (40G upgradable to 100G)
• Key differentiator over competition Amsterdam
  • Only Israeli ISP to own an international infrastructure Frankfurt PoP Brussels Prague

• Increased capacity and Internet performance Bratislaw Vienna
• Potential revenue streams from future sale of additional cable capacity Zurich Budapest

Bucharest

Full cable redundancy Milan

• Fast and advanced network
  • Rolling out High Speed 4G network , using LTE technology.
  • In 2015 majority of the population will enjoy 4G coverage
  • Covers substantially all of Israel with 2 switch farms connected to approximately 2,200 sites
  • The network performances expected to upsurge following the LTE frequency tender

• Pioneer in HD broadcasting, advanced set-top box combining PVR, VOD & HD, and streamer
• Leader in value added services based on Hybrid satellite-IP platform and Progressive Download technology
  • Launched "yes Multiroom" service (first in Israel)
  • Recently launched "yes Go" TV Everywhere service (first in Israel)

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Since 2012 the number of telephony lines has decreased moderately and remained meaningful...

...and the decline which characterized 2012-2013 has abated during 2014 and nearly stopped

Source: Company data and competitors' public filings

¹ Average revenue per user not including revenues from data communications and transmissions services, internet services, services to communications providers, and contract and other services. Based on average subscribers for the period.

Pelephone emerged with high ARPU following the turmoil in the Israeli mobile market...

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…only one to record net subscriber increase over the period...

...and by implementing efficiencies that led to improved cost base...

Source: Company data and competitors' public filings ¹ Calculated as total revenues less operating profit

…it was able to support high EBITDA margins

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Bezeq International is the leading ISP, ILD and business solutions provider

The ISP market has been growing consistently with the broadband infrastructure market...

ISP, ICT and data are Bezeq International's growth engines...

…and Bezeq International has been outgrowing peers and successfully increasing its market share in the ISP market

Bezeq international ISP market share (%)

...offsetting decline in ILD and allowing it to maintain overall stable EBITDA level and margin despite competition

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YES (Multi Channel Satellite TV - DTH) presents sustained growth in market share

YES's unparalleled content offering continues to be a key differentiator vs. HOT...

• 8 wins in "docaviv festival" 2014
• 47 wins in the 2014 Emmy awards (films, series and Documentaries films)
• 7 out of the 10 most watched series in the US are broadcasted on yes.

...while maintaining stable ARPU despite premium pricing

Growth in subscribers and market share continues…

Source: Company data and competitors' public filings ¹ According to TNS Israel, September 2014, conducted at yes's request

Bezeq Financials (NIS Millions)

Net income attributable to shareholders

Free cash flow *

Source : Bezeq's press release

* Free cash flow is defined as cash flows from operating activities less net payments for investments

Bezeq's Dividend Policy

distribution of 100% of its net income on a semi-annual basis

Dividend Yield from 2006 to 2016

Source: Bezeq

* Dividend Yield is based on average market cap during the period

• Based on its ownership interest, BCOM will receive ~ 26.3% of Bezeq's annual dividends
• Since 2006, Bezeq has paid over NIS 25.2 billion (US\$ 6.7 billion) in dividends
• On March 16, 2016, the Board of Directors of Bezeq resolved to recommend to the general meeting of its shareholders the distribution of a cash dividend of NIS 776 million, representing Bezeq's profits for the second half of 2015. The dividend was paid on May 30, 2016 to shareholders of record as of May 17, 2016. B Communications' share of the dividend distribution waNIS 204 million.

BCOM Financials

BCOM Solo P&L (NIS Millions)

BCOM's Prfit & Loss	Q2/2015	Q3/2015	Q4/2015	Q1/2016
G&A expenses	(2)	(2)	(2)	(3)
benefit Income tax	-	-	101	-
Financing net expenses ,	(85)	(59)	(84)	(90)
Total expenses	(87)	(61)	15	(93)
Bezeq's Interest in income net	148	125	113	80
amortization PPA net ,	(40)	(26)	(25)	(10)
income (loss) Net	21	38	103	(23)

BCOM's Cash Position

BCOM's Unconsolidated Balance Sheet Data*

	December 31 2015 ,	March 31 2016 ,
	millions NIS	millions NIS
Financial liabilities
Senior Secured Notes	2 718 ,	2 630 ,
(2) Series Debentures B	710	** 525
liability Tax	79	88
Total	3 507 ,	3 243 ,
Liquidity balances
Lockbox account	532	1 145 ,
(2) Unrestricted Cash	421	** 382
Total	953	1 527 ,
debt Net
Total	2 554 ,	1 716 ,

* Does not include the balance sheet of Bezeq.

BCOM Solo- Assets (NIS millions)

	December 31 2015 ,	March 31 2016 ,
Statements of Financial Position	Audited	Unaudited
Assets
Cash and cash equivalents	181	722 *
including derivatives Investments	772	804
Other receivables	286	90
Total current assets	1 239 ,	1 616 ,
Investments in investee	3 590 ,	3 529 ,
Total non-current assets	3 590 ,	3 529 ,
Total assets	829 4 ,	5 145 ,

* Does not include private placement of series B Debentures, subsequent the balance sheet date, in the amount of NIS 162 million.

BCOM Solo - Liabilities (NIS millions)

	December 31 2015 ,	March 31 2016 , Unaudited
Statements of Financial Position	Audited
Liabilities
Short debentures term -	176	176 *
Other payables	117	159
Total liabilities current	293	335
Debentures	3 491 ,	* 3 070 ,
Total liabilities non-current	3 491 ,	3 070 ,
Total liabilities	3 784 ,	3 405 ,
Total equity	045 1 ,	740 1 ,
Total liabilities and equity	829 4 ,	5 145 ,

* Does not include private placement of series B Debentures, subsequent the balance sheet date, in the amount of NIS 162 million.

BCOM During Last 27 Months

	2014 January 1 ,	March 31 2016 ,
(1) of Value BCOM's holdings in shares (NIS Billions) Bezeq	97 4	6 17
Billions)(2) Financial Debt (NIS Net	2 74	1 72
Billions)(3) (NIS NAV	2 23	46 4
Dividend Yield LTM	9 4%	15 5%
(4) LTV	55%	28%
Debt Net to EBITDA	20 4	3 55
Total Liquidity (NIS Billions) *	0 66	1 53
Total Lockbox Liquidity (NIS Billions)	0 21	1 15

(1) BCOM's share in Bezeq's market cap is based on Bezeq's stock price as of March 31, 2016.

(2) Net financial debt as of December 31, 2013 and March 31, 2016.

(3) NAV is calculated as value of BCOM's holding of Bezeq share minus its Net Financial debt.

(4) LTV is calculated as BCOM's Net Financial debt divided by the value of its holding of Bezeq share.

* Total liquidity as of March 31, 2016 does not include NIS 162 million from private placement of series B Debenture, subsequent to the balance sheet date.

BCOM During Last 27 Months (continued)

	2014 January 1 ,	March 31 2016 ,
(1) Secured Financial Debt (NIS Billions) Net	2 05	1 10
Millions)(2) Potential Financial (NIS assets	* 155	549
Lockbox Senior Secured interest Notes 12M to	* 0 90	5 35
Debt Weighted Duration (In years)	2 77	3 96
of Local rating Series Debentures B	A2	Aa3
(3) Series Debentures B YTM	4 13%	1 30%
(3) Senior Secured Notes YTM	4% 7	6% 5
Senior Secured Spread (bps) Notes Over US Treasury	690	420

(1) Senior secured notes less total liquidity.

• (2) Include unpledged Bezeq shares and senior secured notes repurchase
• (3) YTM as of February 18, 2014 and as of May 31, 2016.

* Figures as of Feb 19, 2014.

BCOM's Debt Repayment Schedule (NIS millions)

Senior Secured Notes Series B Debentures

• All amounts include future estimated interest payments
• Repayment schedule as of May 30, 2016

Notes Repurchase Program

• On August 10, 2014 the Company announced that its Board of Directors had approved the buyback of up to \$50 million of the Company's 7⅜% Senior Secured Notes (the "Notes").
• On January 20, 2016, the Company announced the completion of its \$50 million repurchase program and the approval by its Board of Directors to extend and increase the program by an additional \$50 million. Through May 31, 2016, the Company purchased a total of \$65 million par value of the Notes.

The Bezeq Era

Thank you