B Communication — Investor Presentation 2013

Nov 11, 2013

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The Bezeq Era

Investors presentation, November 2013

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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.

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BCOM’s Profile

• B Communications Ltd. (TASE and Nasdaq: “BCOM”) is a telecommunications-oriented holding company which is a subsidiary of Internet Gold.

• BCOM holds the controlling interest (approximately 30.95%) in Bezeq, The Israel Telecommunication Corp. (“Bezeq”), Israel’s largest telecommunications provider (TASE: BZEQ).

• *[)]

• As of September 30, 2013 BCOM’s NAV[(] is NIS 2.8 billion and its market cap is NIS 2 billion. As of November 7, 2013 BCOM’s NAV[(] *[)] is NIS 2.8 billion and its market cap. is 2.2 billion.

• BCOM decreased its debt from NIS 5.3 billion as of the date it acquired its controlling interest in Bezeq (in April 2010) to just NIS 2.7 billion as of September 30, 2013.

• On November 7, 2013 BCOM declared its first ever cash dividend in the amount of NIS 102 million.

• (*) NAV is defined as value of BCOM's shares according to Bezeq market cap less BCOM's net debt, based on Bezeq stock price as of September 30, 2013

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Eurocom Group Overview

• Founded in 1979

• One of Israel’s largest holding companies with a strong presence in Israel and a growing international presence Eurocom Group overview • Owned by Shaul Elovitch, Chairman of the Board of Directors (80% ownership) and Yossef Elovitch, Director (20% ownership)

• Solid financial base and strategic partnerships ensure the strong backing necessary to accelerate growth

• Diversified portfolio with investments in telecommunications, media, real estate, consumer electronics and financial services

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----- Start of picture text ----- Eurocom CommunicationsTelecom Consumer Investments &Telecom Services Media Satellite Services Real EstateElectronic Products FinanceGolden Lines Ltd.Internet Gold  YES – D.B.S. Satellite Services (1998) Ltd. Communications Ltd.Space  Eurocom Cellular Communications Eurocom RealEstate Ltd. Enlight energy Ltd. (Nokia) B Communications  Walla Satcom Sys Ltd. Eurocom Digital E.G.R.E. Ltd.  Eurocom Capital Finance Ltd. Satlink CommunicationsBezeqCommunications Ltd. (Panasonic) Pilat Media Walla ShopsGlobal Plc.PelephoneEITAG Ltd.D.M. Engineering Pointer Ltd.Bezeq International TelocationBezeq On-Line----- End of picture text -----

• Traded on TASE

• [Traded on NASDAQ]  Traded on TASE and AIM

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Eurocom: Israel’s Largest Communications Footprint

	Relative strengthCompanywithin thegroup
Internet access	5
Internet Services
Internet VAS residential	5
Internet business	5
e-Advertising	5
e-Commerce	5
Date Services	5
ILD	5
Fixed telephony	5
Mobile	5
Multi channel TV	5
Telecom & consumer electronics.	5
Satellite services	5

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BCOM - Experienced, Disciplined Leadership

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 Shaul Elovitch Founder & Chairman Over 30 years experience building leading communications businesses and other major investments businesses

Proven capabilities in:

• Strategy creation & strategic planning

• Marketing & brand development

• Operational & financial management

• Management of mergers & acquisitions

• Creation of partnerships

• Capital raising: 11 major transactions

  • 2 IPOs – IGLD and BCOM

  • 10 bond issues

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Doron Turgeman

CEO since 2011 & CFO from 2001 till 2011 19 years experience in management 17 years experience in communications

 Chairman of the board of directors of Bezeq and it’s subsidiaries

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Key Milestones for BCOM From small entrepreneurial business to large holding company

• Israeli telecom market commences privatization process

• Eurocom participates in the privatization process and forms a corporate vehicle for that purpose  Goal: to become one of Israel’s leading telecom service providers

• 1995  Internet emerges as a major commercial service  IGLD decides to focus on ISP activities

• To  Expansion into content and Value-Added Services

• 2000  Successful listing on NASDAQ (IGLD) (TASE dual listing 2005) 2000  Continuous organic growth  Restructure of IGLD into a holding company owning Smile Communications and Smile Media

• to  Acquisition and merger with 012 Golden Lines to form 012 Smile Communications

• 2007  Successful IPO and listing of 012 Smile Communications on NASDAQ and TASE (SMLC)  Continuous organic growth

• 2007  Crystallization of the strategy to become a leader in the Israeli telecom market

• to  Preparation for the next major M&A transaction while examining several opportunities  Sale of legacy 012 Smile.Communications assets

• 2009  Acquisition of the controlling interest in Bezeq – Israel’s telecom market leader

  • Acquisition of the controlling interest in Bezeq – Israel’s telecom market leader

2009  From April 2010 through September 2013, BCOM repaid ~ NIS 2.6 billion of the debt incurred to fund its to April 2010 acquisition of the controlling interest in Bezeq. 2013

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Group Structure

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----- Start of picture text ----- Eurocom Group Private~79%• M.cap (Mil. NIS) - 760Free float ~21% Internet Gold •• NetNAVdebt (Mil. [(] ** [)] (Mil. NIS)NIS)-- 1,060786Golden Lines • Net debt / EBITDA – 4.85• Listed - TASE, NASDAQ~68%• M.cap (Bil. NIS) – 2~32% • NAV [(] ** [)] (Bil. NIS) - 2.76Free float BCOM • Net debt (Bil. NIS) – 2.7• Net debt / EBITDA – 3.99• Listed - TASE, NASDAQ~31%~69% • M.cap (Bil. NIS) – 17.7Free float •• TTM EV/EBITDA -Net debt / EBITDA 6.0– 1.97• Listed - TASEFixed-line, broadband 100% 100%infrastructure, data com Mobile telephonyand data100% 100% ILD, ISP,Call centreenterpriseservicessolutions~50% ~100%Pay-TV (DTH) InternetWalla!portal----- End of picture text -----

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

• All figures and ratios are as of September 30, 2013.

• ** NAV is defined as value of BCOM's shares according to Bezeq market cap less BCOM's net debt, based on Bezeq stock price as of Sep 30, 2013

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Bezeq Overview

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Bezeq: Israel’s Most Comprehensive Communications Infrastructure and Service Provider

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----- Start of picture text ----- Bezeq GroupLevel B2012 Rev. NIS 10.28bn2012 EBITDA NIS 4.47bn100% 100% 100% 49.8%¹  100% 100%Level BFixed-Line Bezeq Int’l Pelephone yes Bezeq on line Walla!Fixed-line, broadband ILD, ISP, Mobile telephony Pay-TV Call centre Internet portalinfrastructure, data com enterprise solutions and data (DTH) servicese – Commerce2012 Rev. NIS 4.63bn 2012 Rev. NIS 1.34bn 2012 Rev. NIS 4.47bn 2012 Rev. NIS 1.64bne - Advertising2012 EBITDA NIS 2.68bn 2012 EBITDA NIS 355mm 2012 EBITDA NIS 1.42bn 2012 EBITDA NIS 501mm----- End of picture text -----

¹ 50.2% held by Eurocom. Following a Supreme Court decision which prevents Bezeq from acquiring control of yes, as of August 21, 2009, Bezeq ceased consolidating yes’ s financial results and began accounting for its investment in yes according to the equity method

Listed on TASE

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Bezeq’s Results (NIS Millions)

EBITDA

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----- Start of picture text ----- Revenues EBITDA43.0% 40.8% 43.5%11,9875,15311,373 4,637 4,47110,2782010 2011 20122010 2011 2012----- End of picture text -----

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----- Start of picture text ----- Net income attributable to shareholders2,4432,0661,8582010 2011 2012----- End of picture text -----

Free cash flow *

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----- Start of picture text ----- 2,7792,2071,5492010 2011 2012----- End of picture text -----

Source : Bezeq’s press release

2008 and 2009 figures do not consolidate YES results

• Free cash flow is defined as free cash flows from operating activities less net capex paymants

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Bezeq Overview

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Level B Pelephone Mobile telephony and data

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----- Start of picture text ----- Bezeq Fixed-Line Pelephone Bezeq InternationalFixed-line, broadband infrastructure, data com Mobile telephony and data ILD, ISP, enterprise solutions----- End of picture text -----

	Fiscal year	ending December	31	CAGR		Fiscal year	ending December	31	CAGR		Fiscal year ending December	Fiscal year ending December	31	CAGR
NISmm	2010A	2011A	2012A	10–12	NISmm	2010A	2011A	2012A	10–12	NISmm	2010A	2011A	2012A	10–12
Revenue	5,263	4,648	4,630	-6.21%	Revenue	5,732	5,548	4,468	-11.71%	Revenue	1,380	1,354	1,340	-1.46%
% growth	-0.8%	-11.7%	-0.4%		% growth	6.6%	-3.2%	-19.5%		% growth	4.7%	-1.9%	-1.0%
EBITDA	2,733	2,346	2,689	-0.81%	EBITDA	1,984	1,921	1,423	-15.31%	EBITDA	414	350	355	-7.40%
% margin	51.9%	50.5%	58.1%		% margin	34.6%	34.6%	31.8%		% margin	30.0%	25.8%	26.5%
Capex, net	900	937	658	-14.49%	Capex, net	397	382	381	-2.04%	Capex, net	180	288	173	-1.96%
% of rev.	17.1%	20.2%	14.2%		% of rev.	6.9%	6.9%	8.5%		% of rev.	13.0%	21.3%	12.9%
FCF1	1,240	1,169	1,351	4.38%	FCF1	822	418	1,347	28.01%	FCF1	110	(44)	99	-5.13%
% of rev.	23.6%	25.2%	29.2%		% of rev.	14.3%	7.5%	30.1%		% of rev.	8.0%	-3.2%	7.4%

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• Most advanced communications network in Israel.

• FTTC, all IP, infrastructure for consumer and business customers.

• 99% of Israeli households covered.

• 2.7 million cellular customers

• HSPA (High Access Packet Speed) cellular technology offering 3.75 G speed.

• Essential to accessing higher value segments of the market.

• Strong platform for rising smartphone demand and advanced data services.

• Leading broadband Internet service in Israel Approximately 39% Internet market share.

• Israel’s largest data center.

• New high- speed submarine cable system deployed between Israel and Europe.

• Increasing bandwidth at affordable rates.

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

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Bezeq’s Dividend Policy

distribution of 100% of its after-tax profit on a semi-annual basis

Dividend Yield from 2006 to 2013

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----- Start of picture text ----- Dividend yield (%)¹----- End of picture text -----

• Based on its ownership interest, BCOM will receive ~ 31% of Bezeq’s annual dividends

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----- Start of picture text ----- 26.4%16.0%16.7%15.8%12.8%12.0%10.4% 8.1%2006A 2007A 2008A 2009A 2010A 2011A 2012A 2013A----- End of picture text -----

• Since 2006, Bezeq has paid over NIS 20.7 billion (US$ 5.8 billion) in dividends

• Bezeq has paid all six equal special dividend payments which were declared by the Board of Directors and approved by the Israeli Court. The special dividend of NIS 3 billion in aggregate was paid on a semi-annual basis from 2011 to 2013.

Source: Bezeq

¹ Based on the sum of regular and special dividends paid during the fiscal year divided by Bezeq’s market cap as of December 31.

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BCOM’s Cash Position

As of September 30, 2013, BCOM’s unconsolidated cash and cash equivalents totaled NIS 1.36 billion, its unconsolidated total debt was NIS 4.07 billion, and its net debt totaled NIS 2.7 billion.

BCOM’s Unconsolidated Balance Sheet Data As of September 30, 2013*

Short term liabilitiesLong term liabilitiesTotal liabilitiesCash and cash equivalentsTotal net debt	NIS millions
	5873,482
	4,0691,359
	2,710

• Does not include the balance sheet of Bezeq.

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Improving Financial Position Through Modifications of Financing Agreement with a Consortium of Israeli Banks

On November 2013 BCOM an amendment to its with a signed financing agreement consortium of Israeli banks led by Bank Hapoalim, thereby modifying the agreement it used to finance the purchase of its controlling interest in Bezeq.

The modifications are expected to immediately improve BCOM’s financial position by gradually decreasing the amount of repayments due through the end of 2016 and increasing the reserves available for distribution and other uses.

The update includes the following elements:

• Permits early repayment of NIS 400 million of the bank debt from which NIS 300 million will repay a loan tranche that is repaid semi-annually and NIS 100 million will repay a bullet loan tranche, both bearing floating interest.

• Decreases mandatory bank debt repayments by approximately NIS 150 million per year

from approximately NIS 480 million per year to approximately NIS 330 million per year during 2014 to 2016.

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Improving Financial Position Through Modifications of Financing Agreement with a Consortium of Israeli Banks

The update includes the following elements (cont’d):

• Permits B Communications (SP2) Ltd. , BCOM’s wholly-owned subsidiary that holds Bezeq shares, to distribute a dividend totaling NIS 250 million by November 10, 2013.

• Revises existing covenants to allow SP2 to distribute up to 75% of the reserves that it accumulates.

• Replaces the NIS 79 million "phantom option" liability that was scheduled to be repaid in three annual payments with a bullet loan that is scheduled to be repaid in one payment in 2017.

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Proforma Net Financial Debt

	Proforma Net Financial Debt as of September 30, 2013After early repayment	Proforma Net Financial Debt as of September 30, 2013After early repayment	Proforma Net Financial Debt as of September 30, 2013After early repayment	Proforma Net Financial Debt as of September 30, 2013After early repayment
		NIS Millions
	BCOM*	SPC1	SPC2	BCOM + SPC's
Gross financial debtCash and cash equivalents	894556	56043	2,126339	3,580938
Net financial debt	338	517	1,787	2,642
* Not including Bezeq shares (~1%) held directly by BCOM valued at ~ NIS 190 million as of November 7, 2013.

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Dividend distribution

• On November 7, 2013, BCOM's board of directors declared a cash dividend in the amount of NIS 3.41 per share, and in the aggregate amount of approximately NIS 102 million (approximately $ 0.97 per share and approximately $ 29 million in the aggregate, based on the representative rate of exchange on November 6, 2013).

• The dividend will be payable to all of the Company’s shareholders of record at the end of the trading day on the NASDAQ Global Market on November 18, 2013. The payment date will be December 3, 2013.

• The actual US$ amount for dividend paid in US$ will be converted from NIS based upon the representative rate of exchange published by the Bank of Israel on November 18, 2013).

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Projection of Future Debt Repayment

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----- Start of picture text ----- (NIS millions)70066739600497 495500 228239 39400 117 11460 60 6130019420031929279 282 28510014302013 2014 2015 2016Consortium of banks led by Bank Hapoalim - Semi annual installments Consortium of banks led by Bank Hapoalim - Bullet loansDebentures Migdal Insurance GroupOther----- End of picture text -----

• All amounts include future estimated interest payments

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BCOM’s Bonds Overview

Key terms of Series A & B bonds:

A & B bonds details:

• Non-convertible bonds

• The bonds are unsecured

• Holders of series A bonds have negative pledge

• Holders of series B bonds have no legal collateral or any encumbrance

• Listed on TASE

	A & B bonds details:
	Bond Series	BCOM - A	BCOM - B
	Par Value Outstanding (NIS Millions)Coupon (%)	1534.75	7066.5
	YTM (Yield to Maturity %)	1.01	4.02
	Duration (Years)	1.3	3.50
	Maturity	Mar 15, 2016	Mar 31, 2019
	Avg. volume (NIS thousands)Linkage	540CPI	1,500-
	Par Value	125.02	100.75
	Market price	131	109.74
	% of Par Value	104.8%	108.9%
	52 Week High	131.9	109.8
	52 Week Low	114.1	82.1
	* As of November 7, 2013

The following are the general principal covenants for immediate repayment under the Deed of Trust (relevant only to Series B):

• In the event that Eurocom Communications Ltd. does not hold (direct or indirect) control of BCOM

• In the event that BCOM does not hold (direct or indirect) control or a controlling block of Bezeq

• In the event that BCOM performs an effective expansion of the bond series (Series B) and as a result, the company rating for these bonds downgraded

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Group’s Net Debt to EBITDA Build-Up

Cash and cash equivalentsMarketable securities	September 30, 2013Liquidity ReservesBezeqBCOMNIS Millions300713956646	September 30, 2013Liquidity ReservesBezeqBCOMNIS Millions300713956646	September 30, 2013Liquidity ReservesBezeqBCOMNIS Millions300713956646
	300956	713646
Total Liquidity reserves	1,256	1,359
Gross financial debt as of September 30, 2013Net financial debt as of September 30, 2013Proportional TTM EBITDA as of September 30, 2013Proportional Net debt - IGLD Group as of September 30, 2013Proportional Net debt / TTM EBITDA as of September 30, 2013Bezeq's Market Cap. *EV/EBITDA *Estimated NAV *Consolidated LTV Ration	9,8388,582	4,0692,710
	4,3482,6601.97	1,3465,3703.99
	17,6716.0	5,4682,75850%

• ** Based on Bezeq's stock price as of September 30, 2013.

• ** NAV is defined as value of BCOM's shares according to Bezeq market cap less BCOM's net debt, based on

• ** Bezeq stock price as of Sep 30, 2013.

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BCOM’s NAV Vs Market Cap

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----- Start of picture text ----- 10,0008,0006,0004,4324,0002,6721,8162,0002100(2,000)(4,000)(6,000)Value of BCOM's share in Bezeq BCOM's Net Debt BCOM's NAV BCOM's Market Cap----- End of picture text -----

• NAV is defined as value of BCOM's shares according to Bezeq market cap less BCOM's net debt, based on Bezeq stock price as of Sep 30, 2013

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Depreciation & amortization of

assets acquired and liabilities assumed as part of the Bezeq acquisition

• As a result of the Bezeq acquisition, BCOM assigned fair value to the assets acquired and liabilities assumed using the acquisition method.

• The difference between the book value and the fair value of those assets and liabilities was recognized as an asset or liability in BCOM’s consolidated balance sheet at the date of the Bezeq acquisition.

• The assets and liabilities recognized are depreciated in accordance with relevant accounting principles over their estimated useful life.

• From April 14, 2010, the date of the Bezeq acquisition, until September 30, 2013, BCOM depreciated approximately 57% of the net value of the assets and liabilities recognized.

• Looking forward BCOM expects the depreciation run rate to decrease each year.

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Introducing the Bezeq Era

Thank you

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