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Investor Presentation • Aug 12, 2021

Bezeq Group Investor Presentation Q2-2021

August 12, 2021

August 12, 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.

Group Vision

To lead the Israeli telecommunications market, providing a full range of products and services for the residential and business markets and striving for continuous improvement in business results

Bezeq Group Focus

• Accelerated deployment of fiber optics for the residential sector as a growth engine, while continuing to strengthen our position in the business sector
• Focus on customer premises through a combination of fiber infrastructure, triple play and related products (such as router and wi-fi enhancers)
• In H1 2022 Bezeq will be able to offer unified broadband Internet services (infrastructure and ISP(
• Structural change in yes and Bezeq International:
  • Spin-off of the ICT business division to a separate company to focus on a segment with significant growth potential
  • Merge Bezeq International's consumer activities into yes to strengthen TV and Internet offering and leverage Group's fiber infrastructure through triple play offering
• Deepen streamlining in key subsidiary companies while improving free cash flow
• Pelephone will focus on marketing 5G growth engine and ARPU enhancement

Focus on Building Infrastructure and Growth Engines

3

Q2-2021 Financial Results Highlights

Bezeq Fixed-Line

• Stable revenues and 8.9% increase in adjusted net profit*
• Continued improvement in key operating metrics
  • Increase in retail broadband Internet subscribers for a fifth consecutive quarter
  • 8.2% increase in retail broadband Internet ARPU
  • Continued growth in sales of BE router and wi-fi enhancers. Launch of new BE2 router
• Continued massive deployment of fiber 718k homes passed as of today
• Revenues grew 2.1% to NIS 2.2 billion
• Adjusted EBITDA* of NIS 944 million, down 0.7% y-o-y; Adjusted EBITDA margin of 42.9%
• Adjusted net profit* of NIS 304 million, up 20.6% y-o-y
• Free cash flow of NIS 85 million, a decline of 41.0% y-o-y primarily due to increased capex
• Net debt decreased by NIS 877 million y-o-y and liquidity ratios improved
• 81% increase in Bezeq's ESG grade with Bloomberg

Subsidiary Companies

• Pelephone posted strong financial results y-o-y :
  • 7.7% increase in revenues and 11.2% increase in EBITDA
  • Continued growth in postpaid subscribers
  • Successful deployment and growth in 5G subscribers
• Improved results in yes
  • Significant improvement in free cash flow in yes which turned positive in 1H 2021
  • Continued growth in yes subscribers with increase in IP subscribers to 33%

Regulation

• MOC approved cancellation of infrastructure and ISP separation. Bezeq may offer unified broadband Internet in H1 2022
• Hearing held on reduction in telephony tariffs
• MOC approved the merger of Bezeq International into yes

Progress on Structural Change

• Bezeq's Board of Directors approved the structural change that includes the spin-off of the ICT business division into a new and separate company, and the merger of Bezeq International's private sector ISP operations into yes (following approval of the Minister of Communications)
• The new ICT company will allow managementto focus on realizing its potential in the IT market
  • The Israeli IT market size is estimated to be approximatelyUSD8 billion per year and growing rapidly
  • Bezeq International has a significant presence in this market (revenues of hundreds of millions of shekels per year)
  • The new company aims to combine organic growthwith targetedacquisitions
• The merger of Bezeq International's consumer activities into yes will allow us to implement, for the first time, an effective triple play strategy based on yes's strong brand and quality TV product together with Bezeq's fiber infrastructure,supporting growthforthe Groupin the residential sector
• In light of the company's intentions, the Histadrut labor union declared a labor dispute. The company will conduct negotiationswith the employee representatives

Bezeq Group Financial Results

Bezeq Group – Quarterly Key Financial Metrics|NIS Million

• Increase in revenues in Pelephone and Bezeq Online
• Increase in salary expenses of Bezeq Fixed-Line, Pelephone
  • Bezeq Fixed-Line Recognition of stock-based compensation
  • Pelephone Employees furloughed in Q2-20 due to COVID-19
• Increase in operating expenses mainly in Bezeq Fixed-Line and Pelephone
  • Bezeq Fixed-Line Impacted by initial recognition of universal fund for fiber deployment, COVID-19 impact in Q2-20 and the deployment of fiber in the current quarter
  • Pelephone Increase in cost of handsets in-line with the increase in handset revenues as well as costs relating to the new cloud system

Bezeq Group – Quarterly Key Financial Metrics |NIS Million

Bezeq Group – Key Financial Metrics (H1-2021) |NIS Million

Subscribers (end of quarter, in thousands)

Bezeq Group - Financial Debt | NIS Million

12% y-o-y Decrease in Net Debt

Continued decrease in net debt

• Decrease of NIS 877 million y-o-y, ~12%

Further improvement in coverage ratio

• Net debt/EBITDA ratio decreased to 2.0 from 2.3 in Q2-20

Israeli debt ratings

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

Bezeq Group - 2021 Outlook

As of the date of publishing the Q2-21 report, there is no change to the Bezeq Group's outlook for 2021, as published in the Company's periodic report for the year 2020. We continue to expect:

	Updated Outlook
Adjusted net profit attributable to shareholders1	NIS 1.0 billion
1 Adjusted EBITDA	NIS 3.5 billion
CAPEX 2	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. Adjusted EBITDA and Adjusted Net Profit in 2020 were NIS 3.66 billion and NIS 1.14 billion,respectively.

2) CAPEX - gross payments for investments in fixed and intangible assets. CAPEX in 2020 amounted to NIS 1.5 billion

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 – Q2-2021 Highlights

• Stable revenues y-o-y, despite 11.2% decrease in telephony revenues
• Stable revenues from broadband Internet services due to growth in retail subscribers for the fifth consecutive quarter and 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 10.0% increase y-o-y in revenues from transmission and data communications and 8.6% increase y-o-y in revenues from cloud & digital services
• Massive deployment of fiber and beginning of customer connections
  • 718K homes passed (ready for connection)
  • On track to reach our target of 1 million homes passed by year-end

Fiber Deployment Proceeding at Record Pace

Homes Passed (Ready for subscriber connections) (In thousands)

Haifa Nahariya Kiryat Bialik Acre Migdal Haemek Kiryat Shmona Metula Or Akivah Nesher Harish Tel Aviv Netanya Rehovot Holon Bat Yam Ramat Gan Herzilia Ramat Hasharon Raanana Nes Ziona Hadera Pardes Hannah Ashdod Ashkelon Sderot Beer Sheva Arad Omer Ofakim Irus Be'er Yaakov Bnei Brak Givatayim Gadera Kochav Yair Kfar Yonah Mazkeret Batya Netivot Pardesiah Tsurit Kadima Tsuran Kiryat Ata Kiryat Tivon Kiryat Yam Kiryat Motzkin

Petach Tikvah Rishon Letzion Kfar Saba Hod Hasharon Lod Ramle Modiin Rosh Haayin Ariel Maale Adumim Givat Zeev Mevaseret Zion Carmiel Nof Hagalil Afula Tiberias Or Yehudah Azur GivonHahadasha Givat Shmuel Gilon Ganei Tikvah Tirat Carmel Yehud-Monosson YokneamElit Maalot Tarshiha Tsur Yitzhak Tsfat Shoham

Jerusalem

Kiryat Gat Kiryat Malachi Beit Shemesh Kiryat Yearim

Dimona

Bezeq Fixed-Line - Broadband Internet Services

Bezeq Retail Broadband Lines (Thousands)

• Stable revenues from broadband Internet services y-o-y despite the sharp decrease in wholesale tariffs
• Continued growth in broadband Internet retail lines for the fifth consecutive quarter
• Unprecedented growth in broadband Internet retail ARPU, impacted by the deployment of fiber and accelerated sales of equipment (BE router, Bspot, Be Mesh)
• Launch of 2.5 Gbs plan in Q2-21

Bezeq Fixed-Line - Full WiFi Differentiation

with High Quality Broadband Internet at Home

• Improved broadband experience and customer retention through BE router and Bspot/Be Mesh services
• Launch of advanced Be Fiber router in Q2-21

Customers with BSPOT and MESH )in thousands(

~62% of the Company's retail customers choose to connect via the BE router

Bezeq Fixed-Line - Telephony Services

Telephony ARPL

• Lower telephony revenues in Q2-2021 due to lower impact of COVID-19

Bezeq Fixed-Line - Revenues from Transmission and Data Communications and Cloud & Digital Services |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

• Salary expenses in Q2-21 included recognition of stock-based compensation of NIS 5 million
• Operating expenses in Q2-21 were impacted by the recognition of expenses of NIS 10 million for the universal fund for fiber deployment, COVID-19 impact in Q2-20 and the deployment of fiber in the current quarter

Bezeq Fixed-Line - Key Financial Metrics |NIS Million

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

Bezeq Fixed-Line – Key Financial Metrics (H1-2021) |NIS million

H1-2020 H1-2021

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

H1-2020 H1-2021

22

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 ("Project Alpha")

Subsidiary Companies – Q2 2021 Highlights

All three companies posted subscriber growth

yes – Positive free cash flow of NIS 20 million in H1-2021

33% of yes customers watching TV through IP broadcasting

Continued streamlining in employee headcount pursuant to collective agreements

Launch of FIBER+ plans over fiber network in Bezeq International

Growth in Bezeq International's business and data operations

Subsidiary Companies - The First Stage (2019-2021)

Steps Taken

• Reduced headcount by 1,400 employees in the last 2.5 years (Dec 2018 June 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 - Marching on to Next Generation Technologies

New Generations of Technologies in all Subsidiary Companies

Subsidiary Companies - 21% Decrease in Salary Expenses*|NIS million

Streamlining measures led to a 21% y-o-y decrease in salary expenses from Q2-2018 to Q2-2021

The Next Generation of Cellular in Israel

• Gradual deployment of 5G network
• Diverse handsets and plans
• Hundreds of thousands of 5G customers • Over 400k 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

Pelephone – Key Operational & Financial Metrics

Postpaid Subscribers (thousands)

revenue decrease

Pelephone – Key Financial Metrics* (H1-2021)| NIS million

• Equipment revenues increased due to launch of new Iphone
• Service revenues Increase in roaming revenues and growth in postpaid subscribers, including 5G, partially offset by a decrease in revenues from incoming calls

138 131

5.1%

H1-2020 H1-2021

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

yes – Continued Subscriber Growth and IP Migration

Improvedcustomer experience along with savings in expenses

Continued subscriber growth

Significant improvement in cash flow with positive cash flow in H1-2021

Groundbreaking technology for watching live broadcasts without ³² delay

33% of yes customers watch TV through IP broadcasting

Leader in original production yes continues to lead in production of local content

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

Savingsin satellite costs after full transition to IP

14

yes – Key Operational & Financial Metrics

yes – Significant Improvement in Cash Flow | NIS Million

34 נתוני פרופורמה

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

yes – Key Financial Metrics* (H1-2021) | NIS million

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

Wide Range of Business Solutions

• Wide range of data centers in Israel
• 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
• Launch of FIBER+ plans over fiber optics

36

Bezeq International – Key Operational & Financial Metrics | NIS Million

65 49 4.6%

37

Operating Expenses

(excluding depreciation and other expenses)

Bezeq International – Key Financial Metrics* (Jan-Jun) |NIS million

•

Gross Capex Free Cash Flow

38 yes – 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.

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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