The Bezeq Era
Investors presentation, January 2015 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. The information contained in this presentation is subject to, and must be read in conjunction with, all other publically available information, including our Annual Report on Form 20-F for the year ended December 31, 2013, and other filings that we make from time to time including our quarterly data. Any person at any time acquiring securities must do so only on the basis of such person’s own judgment as to the merits or the suitability of the securities for its purpose and only based on such information as is contained in such public filings, after having taken all such professional or other advice as it considers necessary or appropriate in the circumstances and not in reliance on the information contained in the presentation. In making this presentation available, we give no advice and make no recommendation to buy, sell or otherwise deal in our shares or in any other securities or investments whatsoever. No offering of securities shall be made in the United States except pursuant to registration under the U.S. Securities Act of 1933, as amended, or an exemption therefrom. No offering of securities shall be made in Israel except pursuant to an effective prospectus under the Israeli Securities Law, 1968 or an exemption from the prospectus requirements under such law.
1 BCOM’s Profile
. B Communications Ltd. (TASE and Nasdaq: “BCOM”) is a telecommunications oriented holding company which is a subsidiary of Internet Gold and part of the Eurocom Group in Israel. The Company, which went public on NASDAQ in November 2007, was formerly known as 012 Smile Communications Ltd.
. BCOM holds the controlling interest (approximately 30.8%) in Bezeq, The Israel Telecommunication Corp. (“Bezeq”), Israel’s largest telecommunications provider (TASE: BEZQ).
. BCOM decreased its net debt from more than NIS 5 billion as of the date it acquired its controlling interest in Bezeq (in April 2010) to NIS 2.5 billion as of September 30, 2014.
. 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.
2 Eurocom Group Overview
• Founded in 1979 • One of Israel’s largest holding companiesEurocom with a strong presence Group in Israel overview 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 ensure the strong backing necessary to accelerate growth
• Diversified portfolio with investments in telecommunications, media, real estate, consumer electronics and financial services
Eurocom Communications
Telecom Consumer Investments & Telecom Services Media Satellite Services Real Estate Electronic Products Finance
Internet Gold YES – D.B.S. Satellite Space Eurocom Cellular Eurocom Real Enlight Energy Ltd. Golden Lines Ltd. Services (1998) Ltd. Communications Ltd. Communications Estate Ltd. (Nokia) B Communications Satcom Systems Ltd. Walla Eurocom Capital Eurocom Digital Midtown Finance Ltd. Communications Bezeq Satlink Communications Ltd. (Panasonic) Walla Shops Pelephone EITAG Ltd. D.M. Engineering Bezeq International Ltd.
Bezeq On-Line
Traded on TASE Traded on NASDAQ
3 3 Eurocom: Israel’s Largest Communications Footprint
Relative strength Company within the group Internet access 5 Internet Services Internet VAS residential 5 Internet business 5 e-Advertising 5 e-Commerce 5 Date Services 5 ILD International long distance 5 Fixed telephony 5 Mobile 5 Multi channel TV 5 Telecom & consumer electronics. 5 Satellite services 5
4 BCOM - Experienced, Disciplined Leadership
Shaul Elovitch Proven capabilities in: Founder & Chairman • Strategy creation & strategic planning Over 30 years experience • Marketing & brand development building leading communications • Operational & financial management businesses and other major • Management of mergers & acquisitions investments businesses • Creation of partnerships • Capital raising: 13 major transactions •2 IPOs –IGLD and BCOM • 10 bond issues • $800 million international offering Doron Turgeman CEO since 2011 & CFO from 2001 till 2011 19 years experience in management 17 years experience in communications
Chairman of the board of directors of Bezeq and it’s subsidiaries 5 Key Milestones for BCOM From small entrepreneurial business to large holding company
Founded in 1999 under the name Goldtrade, operating in the field of e-commerce, as a subsidiary of IGLD, and as the operator of the e-commerce web site P1000 1999 In 2004, IGLD increases its holdings in the Company to 100% Restructure of IGLD into a holding company owning Smile Communications and Smile Media to As part of the restructure Goldtrade changes its name to Smile Communications, transfers its e- 2006 commerce activities to Smile Media and receives IGLD's communications activities Acquisition and merger with 012 Golden Lines to form 012 Smile Communications Successful IPO and listing of 012 Smile Communications on NASDAQ and TASE (SMLC)
2007 Continuous organic growth to Crystallization of the strategy to become a leader in the Israeli telecom market Preparation for the next major M&A transaction while examining several opportunities 2009
Sale of legacy 012 Smile Communications assets Acquisition of the controlling interest in Bezeq – Israel’s telecom market leader 2010 From April 2010 through September 2014, BCOM decreased its net debt from more than NIS 5 billion to NIS 2.5 billion. to On February 19, 2014, BCOM announced the completion of an international offering of US$ 800 million 2015 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 6 Group Structure
Eurocom Group Private
~70% • M.cap (Mil. NIS) - 352 ~30% Internet Gold • NAV(3) (Bil. NIS) - 1.1 Free float • Net debt (Mil. NIS) - 801 Golden Lines • Net debt / EBITDA – 4.04 • Listed - TASE, NASDAQ ~66.7% • M.cap (Bil. NIS) - 1.7 ~33.3% • NAV (2) (Bil. NIS) - 2.9 Free float BCOM • Net debt (Bil. NIS) – 2.46 • Net debt / EBITDA – 3.19 Fixed-line, broadband • Listed - TASE, NASDAQ infrastructure, data com ~31%
~69% • M.cap (Bil. NIS) – 17.4 • TTM EV/EBITDA (4) -5.3 Free float • Net debt / EBITDA (4) –1.4 • Listed - TASE
Call centre 100% 100% services Mobile telephony
and data Pay-TV (DTH) 100% 100%
ILD, ISP, enterprise solutions ~50% ~100% Walla! Internet Source: Company’s information, Bezeq’s investors’ presentation. portal (1) All figures are as of September 30, 2014, except for Market Cap. which is at January 21, 2015. (2) BCOM’s NAV is defined as value of BCOM’s shares according to Bezeq market cap, based on Bezeq stock price as of January 21, 2015 less BCOM’s net debt. (3) IGLD’s NAV is defined as value of IGLD’s shares according to BCOM’s NAV, based on Bezeq stock price as of January 21, 2015 less IGLD’s net debt. (4) Bezeq’s EV/EBITDA and Net Debt/EBITDA ratios are effected by the one-time capital gain generated from the sale of the "Yad2" web site. 7 Bezeq’s Dividend Policy distribution of 100% of its net income on a semi-annual basis
Dividend Yield from 2006 to 2014
Dividend yield (%)¹ • Based on its ownership interest, 26.4% BCOM (SP2) is entitled to receive ~ 31% of Bezeq’s annual dividends
• Since 2006, Bezeq has paid over 16.7% 17.6% NIS 22.8 billion (US$ 6.2 billion)
15.8% in dividends
12.8% • Bezeq paid all six equal special 12.0% 10.9% 10.4% dividend payments which were
8.1% declared by its Board of Directors and approved by the Israeli Court and the general meeting. The special dividend of NIS 3 billion in theaggregatewaspaidona semi-annual basis from 2011 to 2006A 2007A 2008A 2009A 2010A 2011A 2012A 2013A 2014A 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.
8 Bezeq Overview
9 Bezeq is Israel’s largest telecom group and the most comprehensive infrastructure and service provider
Bezeq Group Market cap: NIS 20bn (as of December 4, 2014) LTM Revenue: NIS 9.2bn LTM Adj. EBITDA6: NIS 4.5bn
100% 100% 100% 49.8%2 Fixed-Line Cellular ISP, ILD and Pay-TV (DTH) (Telephony, Broadband and Enterprise Data Transmission)
(Pelephone)
2.2mm access lines/1.3mm 2.6mm subscribers Largest ISP with 41% 623K subscribers broadband Internet lines 5 Among top three incumbent market share Sole licensed DTH provider #1 Fixed-Line telephony cellular providers with 26% 1 Offering full suite of data in Israel with 41% Pay-TV provider with 63% market market share share transfer, network and ICT market share #1 Broadband solutions for small and large infrastructure provider with enterprises 65% market share
LTM Revenue: NIS 4.3bn LTM Revenue: NIS 3.6bn LTM Revenue: NIS 1.5bn LTM Revenue: NIS 1.7bn 46% of total revenues3 38% of total revenues3 3 16% of total revenues LTM EBITDA:NIS 564mm LTM EBITDA: NIS 2.6bn LTM EBITDA: NIS 883mm LTM EBITDA: NIS 361mm YES results are not consolidated 4 4 68% of total EBITDA 23% of total EBITDA 9% of total EBITDA4 into Bezeq financials2
Note: LTM results and KPIs as of 3Q ’14; Subscriber based market share data as of 3Q ’14 1 Company estimates; Captures private and business sector 2 50.2% held by Eurocom. Following a Supreme Court decision which prevents Bezeq from getting control of YES, as of August 2009, Bezeq ceased consolidating YES financial results and started accounting for its investment in YES according to the equity method (impact on Bezeq’s net income) 3 Breakdown based on gross revenue (pre elimination of inter-company revenues) 4 Breakdown based on aggregate EBITDA generated by Bezeq Fixed-Line, Pelephone and Bezeq International (pre elimination of inter-company items) 5 Company estimates; Based on total broadband Internet infrastructure access services subscribers in the market 6 Adjusted EBITDA represents profit before income tax, share of loss of equity-accounted investee, financing expenses, net and depreciation and amortization. EBITDA includes sale of Coral-tell Ltd. (“Yad2”) for NIS 582 10 million Bezeq is the historical incumbent and since its privatization in 2005 has been controlled under a Control Permit attached to the 30% stake
History and milestones
1984 19901990 200520052009 20102010 2012 2013 2014
Listing on the TASE B-Com acquires the Bezeq Fiber deployment will reach control stake from Apax- International 1,000,000 households by the end Saban-Arkin for NIS launches its of 2014 Privatization of Bezeq 6.5bn submarine cable Pelephone launches High Speed 4G Apax-Saban-Arkin services Bezeq begins operating as a consortium purchases Moti Elmaliach appointed CEO of governmental company the control stake for NIS Bezeq International responsible for all 4.2bn communications services in Wholesale regulation approved Israel Bezeq launches the NGN network Stella Handler appointed Pelephone launches High Speed GSM+ network CEO of Bezeq (Fixed-Line) Board approves dividend policy of 100% of net FTTH/FTTB deployment income underway (BFIBER)
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 11 Bezeq operates in an attractive macroeconomic environment with unique characteristics
The Israeli economy benefits from positive fundamentals as reflected in its A+/A1 (stable)1 sovereign credit rating
Consistent high GDP growth...... with strong underlying population growth
Real GDP (rebased to 100) % Population 1.8% 1.9% 1.8% 1.9% 1.9% Israel Eurozone USA growth in 190 2000- +3.4% +1.0% +1.7% Israel Israel population (mm) 2012 170 CAGR 8.0 8.1 8.2 2012- +3.9% +0.8% +2.3% 7.7 7.8 150 2016E 7.6 130 CAGR
110
90 2009 2010 2011 2012 2013 2Q 2014
The Israeli telecommunications market is growing ...and Bezeq is the largest player in the market with the alongside the growth in population... largest revenue share
% of total market revenue Duopoly in infrastructure market with Bezeq Aggregate Partner 1,818 1,879 1,940 2,007 2,062 and HOT as sole owners of fixed-line mobile, Group infrastructure broadband 18% internet and High penetration and usage rates across all fixed-line 9,411 9,372 9,616 9,682 9,750 Bezeq 2 Group telephony Cellcom telecommunications services 45% lines ('000s) Group 20% Technology driven market with rapid 3,453 3,543 3,514 3,508 3,509 adoption rate of new technologies HOT 17% 2010A 2011A 2012A 2013A 3Q 2014 Strong brand appreciation and loyalty with Total fixed line subscribers Total mobile subscribers Total 2013 revenue: high premium Total broadband subscribers 3 $7.2bn 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 3 Based on aggregate revenues of the 4 largest telecom groups: Bezeq (incl. YES), HOT, Cellcom and Partner; USD/NIS conversion based on exchange rate of 3.47 as of December 31, 2013 12 Bezeq’s leading position is supported by its fully owned advanced network infrastructure and technology across all lines of business
Bezeq Fixed-Line Pelephone
Extended optical fiber deployment underway – Bfiber Fast and advanced network (FTTH/FTTB) Rolling out High Speed 4G network , using LTE Fiber rollout is on track to reach 1,000,000 households by end technology. of 2014 In 2015 majority of the population will enjoy 4G The only fixed-line company with a nationwide fiber network coverage Covers substantially all of Israel with 2 switch farms Implementing VDSL and vectoring technologies connected to approximately 2,200 sites Highly advanced nationwide NGN network that has led to The network performances expected to upsurge impressive achievements following the LTE frequency tender Average speed among Bezeq subscribers has increased from 17.3 Mbps in Q3 2013 to 24.0 Mbps in Q3 2014
Bezeq International YES
Advanced infrastructure following the launch of submarine cable in 2012 (“Jonah”) Pioneer in HD broadcasting, advanced set-top box Among the most advanced in the world (40G upgradable to 100G) combining PVR, VOD & HD, and streamer Key differentiator over competition Leader in value added services based on Hybrid Only Israeli ISP to own an international infrastructure satellite-IP platform and Progressive Download technology Increased capacity and Internet performance Potential revenue streams from future sale of additional cable capacity Launched “yes Multiroom” service (first in Israel) Full cable redundancy Recently launched “yes Go” - TV Everywhere service (first in Israel) Marseille Sofia Istanbul Thessalonica Rome Bari Jonah cable Ariel cable Athens Palermo Catania Chania Cypru s Israel Haif a Tel-Aviv Jordan 13 Bezeq Fixed-Line is the leading company in Telephony, Broadband and Data Transmission Services
Bezeq has been consistently increasing its market share in ...and broadband ARPU1 continues to increase and drive the broadband infrastructure market... revenues
Broadband Bezeq market 59.1 % 60.3 % 62.9 % 64.7 % ’11- 3Q ’14 LTM share (%) revenues 1,092 1,166 1,287 1,354 CAGR: 8.1% Growth in (NIS mm) Bezeq 94 broadband 80 81 84 84 67 72 subs (000's) 61 61 ARPU (NIS) 58 55 45 Growth in HOT’s ARPU 57 62 662 total broadband market subs (000's) 2011A 2012 A 2013 A 9M 2014A 2011A 2012A 2013A LTM Sept 14
Since 2011 the number of telephony lines has decreased ...and the decline which characterized 2012-2013 has moderately and remained meaningful... abated during 2014 and nearly stopped
Bezeq access lines Cancellation of “Naked DSL” net adds (000’s) Unlimited packages introduced to the market by mobile operators 0 -1 -2 -7 -9 Bezeq access lines (000’s) -18
2,367 -26 2,268 2,216 2,205
2011A 2012A 2013A 3Q 2014A 1Q 13A 2Q 13A 3Q 13A 4Q 13A 1Q 14A 2Q 14A 3Q 14A
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. 2 Represents HOT Q1 ’13 ARPU; Broadband ARPU not available after Q1 ’13; Q4 ’12 ARPU not available 14 Bezeq Fixed-Line presents high performance compare to global benchmark indicators
Incumbent rolling 12 month fixed broadband market share Incumbent retail wireline line loss by operator gains (Q3-14) (Q3-14 YoY change %)
Bezeq 2.8% Austria 0.1%
UK 0.9% Bezeq -0.8%
Austria 0.5% Portugal -2.4%
Belgium 0.3% Germany -3.6%
Sweden 0.2% France -3.7%
The Neths -0.2% UK -3.9%
Europe -0.6% Belgium -4.0%
France -0.8% Europe -4.4%
Portugal -1.3% Denmark -5.0%
Germany -1.3% Neths -6.2%
Norway -1.5% Sweden -7.6%
Denmark -2.4% Norway -12.9%
15 Source: Company data, Credit Suisse research Q3 2014 Bezeq International is the leading ISP, ILD and business solutions provider
…and Bezeq International has been outgrowing peers The ISP market has been growing consistently with and successfully increasing its market share in the ISP the broadband infrastructure market... market
Total broadband Bezeq international ISP infrastructure subs market share (%) (000’s) 2,062 2,007 1,940 1,879 41.0% 40.0% 38.9% 37.5% 35.9%
2011A 2012A 2013A Sept 2014 2010A 2011A 2012A 2013A 3Q 2014A
...offsetting decline in ILD and allowing it to maintain ISP, ICT and data are Bezeq International’s growth overall stable EBITDA level and margin despite engines... competition
% of total Bezeq EBITDA 25.9% 26.5% 69.5% 71.4% 72% 24.9% 24.5% International margin (%) revenues Bezeq 355 357 361 1,032 Internation 352 al EBITDA 941 957 ISP, ICT and data (NIS mm) revenues1 (NIS mm)
2011A 2012A 2013A 2011A 2012A 2013A LTM Sept 2014
Source: Company data and competitors’ public filings 1 Total revenues excluding ILD revenue 16 YES (Multi Channel Satellite TV - DTH) presents sustained growth in market share
YES’s unparalleled content offering continues to be a key ...while maintaining stable ARPU despite premium differentiator vs. HOT... pricing
Which company broadcast the best 8 wins in “docaviv 1 content? YES ARPU festival” 2014 (NIS) 233 234 234 233 47 wins in the 2014 Emmy awards (films, series and Documentaries films) HOT’s Pay-TV 209 ARPU2 7 out of the 10 most watched series in the US are broadcasted on yes HOT yes. 2013A 1Q 14A 2Q 14A 3Q 14A
Growth in subscribers and market share continues…
YES Market 39.5% 40.2% 40.7% 41.0% 41.2% 42.0% share %
Net growth in Pay-TV market (000’s subs) 5 YES 10 6 10 8 6 2 (6) (3) HOT (4) (12) (13)
Q2 2013A Q3 2013A Q4 2013A Q1 2014A Q2 2014A Q3 2014A
Source: Company data and competitors’ public filings 1 According to TNS Israel, September 2014, conducted at yes’s request 2 HOT no longer reports Pay-TV ARPU as of Q1 ’13 17 Bezeq Group - Financial overview
…and has delivered consistent expansion in EBITDA1 Bezeq has substantial revenue level… margin…
Consolidated revenue (NIS mm) Consolidated Adj. EBITDA (NIS mm) Adj. EBITDA excl. Pelephone (NIS mm) Consolidated Adj. EBITDA margin 48.6% 11,373 43.6% 10,278 40.9% 43.2% 9,563 9,202 4,477 4,474 4,650 4,130
5,825 5,810 3,591 5,754 5,635 3,065 2,729 3,054
2011A 2012A 2013A LTM Sept 2014 2011A 2012A 2013A LTM Sept 2014
...which combined with stable capex levels... …resulted in high levels of OpFCF3 and cash conversion
% of Capex % 16.7% 15.0% 12.8% 13.9% consolidated 59.1% 65.6% 70.3% 71.4% of Revenue Adj. EBITDA3 1,903 (OpFCF 3,196 2,937 2,902 conversion 2,747 1,540 ratio) 1,228 1,278 Consolidated 1,637 OpFCF 1,235 (NIS mm) 916 1,038
2011A 2012A 2013A LTM Sept 2014 2011A 2012A 2013A LTM Sept 2014 Consolidated capex (NIS mm) Net capex (NIS mm)2 1 Adjusted EBITDA represents profit before income tax, share of loss of equity-accounted investee, financing expenses, net and depreciation and amortization. The EBITDA includes Coral tell Ltd. (Yad2) sale which amounted 582 million NIS 2 Net capex reflects cash flows received from disposal of real estate and copper 18 3 Operating Free Cash Flow defined as Consolidated Adj. EBITDA – Consolidated Capex Facing the future
Expanding our innovative product offerings Ongoing investment in advanced to increase revenues, stickiness and expand infrastructure and technological leadership – Company’s footprint – TV Everywhere, LTE, Fiber, submarine cable and advanced advanced STB, Cloud, Smart Home, M- multichannel TV technologies Payments, M2M, etc.
Continued emphasis on the Company's brands as “premium” by means of brand Continued investment in high quality differentiation in each market - leading customer service – shift towards self service, content in television, fast quality internet automation and proaction with value-added services, fast and advanced cellular network
Increasing synergy levels between Maintaining quality personnel and strong companies within the group to maximize management revenues, increase efficiency and reduce expenditures
19 Bezeq Group – Revenue and EBITDA by segment
Fixed-Line – Telephony, Broadband and Data Transmission Services (NIS mm) Comments Fixed-Line Revenue Fixed-Line EBITDA 58.1% 59.9% 60.6% Revenue growth in the broadband segment 4,648 4,630 4,478 4,332 50.5% driven by ARPU and bandwidth growth partially 2,689 2,681 2,624 2,346 offsetting decline in Fixed-Line telephony
2011A 2012A 2013A LTM Sept 2014 2011A 2012A 2013A LTM Sept 2014
Pelephone (NIS mm) Comments Pelephone Revenue Pelephone EBITDA Highly competitive environment impacted 5,548 4,468 34.6% 31.8% revenue and EBITDA 3,809 3,567 1,921 28.0% 24.8% Most of the decline due to decrease in 1,423 1,065 883 handsets sold and price erosion Despite revenue and margin contraction, cash flow remained strong throughout the period 2011A 2012A 2013A LTM Sept 2014 2011A 2012A 2013A LTM Sept 2014
Bezeq International (NIS mm) Comments Bezeq International Revenue Bezeq International EBITDA 1,474 Strong growth in revenues from ISP, data and 1,433 26.5% 25.9% 24.9% 24.5% ICT services offsetting decrease in ILD revenues 1,354 1,340 350 355 357 361 Steady EBITDA margins
2011A 2012A 2013A LTM Sept 2014 2011A 2012A 2013A LTM Sept 2014
YES (NIS mm) (Not consolidated) Comments
YES Revenue YES EBITDA 35.3% Revenue growth driven by subscribers growth 32.4% 33.2% 571 30.7% 564 and increased usage of advanced services 1,701 502 530 1,636 1,635 Steady EBITDA margins 1,619
20 2011A 2012A 2013A LTM Sept 2014 2011A 2012A 2013A LTM Sept 2014 Bezeq Group – KPIs
Subscribers (’000) ARPU (NIS)
1,308 1,335 84 84 85 1,263 1,289 80 81 82 Broadband 1,169 1,111
2011A 2012A 2013A Q1 14A Q2 14A Q3 14A 2011A 2012A 2013A Q1 14A Q2 14A Q3 14A
(2.5%) CAGR 2,367 76 74 2,268 2,216 2,214 2,205 2,205 73 Fixed–Line 64 63 63 telephony
2011A 2012A 2013A Q1 14A Q2 14A Q3 14A 2011A 2012A 2013A Q1 14A Q2 14A Q3 14A
(3.2%) CAGR
2,847 2,800 2,642 2,631 2,610 2,600 107 95 86 Mobile 80 79 78
2011A 2012A 2013A Q1 14A Q2 14A Q3 14A 2011A 2012A 2013A Q1 14A Q2 14A Q3 14A
2.3% CAGR 0.2% CAGR
601 607 613 623 586 578 232 234 233 234 234 233 Pay TV
2011A 2012A 2013A Q1 14A Q2 14A Q3 14A 2011A 2012A 2013A Q1 14A Q2 14A Q3 14A
21 Financials & KPI
22 BCOM’s Cash Position
As of September 30, 2014, BCOM’s unconsolidated liquidity balances totaled NIS 1.09 billion (including dividend receivable) and its unconsolidated total debt was NIS 3.55 billion. BCOM’s Unconsolidated Balance Sheet Data(1) As of September 30, 2014
NIS millions Debt(2) Senior Secured Notes 2,851 Series B Debentures 697 Total 3,548
Liquidity balances Dividend receivable(3) 391 Lockbox account 293 Unrestricted Cash 406 Total 1,090
(1) Does not include the balance sheet of Bezeq. (2) Debt does not include a tax prov ision of NIS 136 million in (2) BCOM's balance sheet. (3) The dividend was received in October 2014. 23 BCOM During 2014
January 1, 2014 December 31, 2014
BCOM's share in Bezeq's market cap (NIS Billions) 4.97 5.86
Net Financial Debt (NIS Billions)(1) 2.74 2.46
NAV (NIS Billions)(2) 2.23 3.41
Debt Weighted Duration (In years) 2.77 4.45
LTV (3) 55.1% 41.9%
Local rating of Series B Debentures A2 A1
Series B Debentures YTM 4.13% 2.68%
Total Liquidity (NIS Billions)(4) 0.66 1.00
12M Principal and Interest Payments (NIS Millions) 505 277
(1) Net financial debt reported at December 31, 2013 and September 30, 2014.
(2) NAV is calculated as BCOM's share in Bezeq's market cap minus its Net Financial debt.
(3) LTV is calculated as BCOM's Net Financial debt divided by its share in Bezeq's market cap.
(4) For December 31, 2014 total liquidity was estimated based on liquidity balances for September 30, 2014 less
(4) interest payments on our Senior Secured Notes paid in Q4-14. 24 BCOM Solo- Asset Balances (NIS millions)
Statements of Financial Position December 31, 2013 September 30, 2014 Assets Cash and cash equivalents 129 22 Investments including derivatives 534 677 Other receivables 5 4 Dividend receivable - 390 Total current assets 668 1,093
Investments in investee 3,874 3,638 Total non-current assets 3,874 3,638
Total assets 4,542 4,731
25 BCOM Solo- Liability Balances (NIS millions)
Statements of Financial Position December 31, 2013 September 30, 2014 Liabilities Current maturities 233 - Short-term debentures 62 - Trade payables 2 1 Other payables including derivatives 171 252 Total current liabilities 468 253
Long term loans form banks and others 2,261 - Debentures 818 3,593 Total non-current liabilities 3,079 3,593
Total liabilities 3,547 3,846
Total equity 995 885
Total liabilities and equity 4,542 4,731
26 BCOM Solo P&L (NIS Millions)
Q1/2014 Q2/2014 Q3/2014 1-9/2014 BCOM's Prfit & Loss G&A expenses (1) (1) (1) (3) Financing expenses, net (1) (310) (100) (99) (509) Total expenses (311) (101) (100) (512) Interest in Bezeq's net income (2) 141 250 132 523 PPA amortization, net (33) (42) (34) (109) Net income (loss) (203) 107 (2) (98)
(1) Financing expenses in Q1/2014 included NIS 179 million of one-time expenses related to the early repayment of bank (1) and institutional loans and the early redemption of all outstanding Series A Debentures following the issuance of the (1) Senior Secured Notes. (2) Bezeq results for Q2/2014 included NIS 582 million one-time capital gain (before tax) from the sale of the "Yad2"
27 BCOM Debt Repayment Schedule (NIS millions)
3,000
2,500
2,000
2,842
1,500 2,842
1,000
500 277 448217 205 194 182 46 231 231 231 231 231 231 - 436 2015 2016 2017 2018 2019 2020 2021 425 Senior Secured Notes Series B Debentures 413 • All amounts include future estimated interest payments 28
231 BCOM NAV Calculation
According to Bezeq's Data Market Cap
No. of BCOM shares 29,889,045
No. of Bezeq shares held by BCOM 843,873,713
Bezeq share price (NIS) @ January 21, 2015 6.34
No. of Bezeq shares 2,743,327,617
Bezeq's market cap (NIS millions) 17,393
BCOM's NAV calculation NIS Millions
BCOM's share in Bezeq's market cap 5,350
BCOM's net debt 2,458
BCOM's NAV 2,892
General, operating and tax expenses 30
BCOM's adjusted NAV 2,862
Upside over market price NIS
BCOM's share price according to NAV 95.76
BCOM's share price @ January 21, 2015 56.71
Upside (%) 68.9% 29 Reduction in BCOM’s Net Debt From the Bezeq acquisition and until September 30, 2014 (NIS Millions)
1,400
400
14/04/10 30/09/10 31/03/11 30/09/11 31/03/12 30/09/12 31/3/13 30/9/13 31/3/14 30/9/14 (600)
(1,600)
(2,427) (2,698) (2,600) (2,642) (2,968) (3,308) (3,617) (3,600) (4,264) (3,986) (4,206) (4,428)
(4,600)
(5,600)
Cash and cash eqivalents Dividend receivable Loans from banks and institutions Debentures Other Net Finacial Debt
30 The Bezeq Era
Thank you
31