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Bezeq the Israel Telecommunication Corporation Ltd

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Bezeq the Israel Telecommunication Corporation Ltd March 2, 2010 Bezeq The Israel Telecommunication Corporation Ltd. Periodic Report for the Year 2009* Chapter A - Description of Company Operations Chapter B - Directors' Report on the State of the Company's Affairs Chapter C - Financial Statements Chapter D - Additional Information about the Company * The periodic report was drawn up in accordance with the Securities Regulations (Periodic and Immediate Reports), 5730 – 1970 Table of Contents 1. Description of General Development of Group Operations ..........................................1 1.1 Group Activity and Description of its Business Development...................................................1 1.2 Areas of Operation ....................................................................................................................3 1.3 Investments in Equity and Share Transactions.........................................................................4 1.4 Payment of Dividends ...............................................................................................................6 1.5 Financial Information Regarding Areas of Group Operations...................................................7 1.6 2010 Outlook...........................................................................................................................14 1.7 General Environment and Effect of External Factors on the Group’s Activities .....................14 1.8 The Group’s Strategy ..............................................................................................................14 2. Bezeq The Israel Telecommunication Corporation Limited (the Company) – Domestic Fixed-line Communications...........................................................................16 2.1 General Information on the Area of Operations......................................................................16 2.2 Products and Services ............................................................................................................18 2.3 Breakdown of Revenue and Profitability of Products and Services........................................20 2.4 Customers...............................................................................................................................21 2.5 Marketing, Distribution and Service ........................................................................................21 2.6 Competition .............................................................................................................................21 2.7 Property, Plant and Equipment, and Installations...................................................................27 2.8 Intangible Assets.....................................................................................................................30 2.9 Human Resources ..................................................................................................................31 2.10 Raw Materials and Suppliers, Purchase of Equipment, and Suppliers ..................................34 2.11 Working Capital.......................................................................................................................35 2.12 Investments.............................................................................................................................35 2.13 Financing.................................................................................................................................35 2.14 Taxation...................................................................................................................................37 2.15 Quality of the Environment......................................................................................................37 2.16 Restrictions on and Supervision of the Company's Operations..............................................38 2.17 Substantial Agreements..........................................................................................................46 2.18 Legal Proceedings ..................................................................................................................49 2.19 Business Objectives and Strategy ..........................................................................................53 2.20 Risk Factors ............................................................................................................................54 3. Mobile Radio Telephone – Pelephone Communications Ltd. .....................................57 3.1 General Information on Area of Operations............................................................................57 3.2 Products and Services ............................................................................................................60 3.3 Revenue and Profitability of Products and Services...............................................................61 3.4 New Products..........................................................................................................................61 3.5 Customers...............................................................................................................................62 3.6 Marketing, Distribution and Service ........................................................................................62 3.7 Competition .............................................................................................................................62 3.8 Seasonality..............................................................................................................................66 3.9 Property, Plant and Equipment ...............................................................................................66 3.10 Intangible Assets.....................................................................................................................68 3.11 Human Resources ..................................................................................................................68 3.12 Products and Suppliers...........................................................................................................69 3.13 Working Capital.......................................................................................................................70 A-i 3.14 Investment in Investees and in a Partnership.........................................................................71 3.15 Financing.................................................................................................................................71 3.16 Taxation...................................................................................................................................73 3.17 Environmental Quality.............................................................................................................73 3.18 Restrictions on and regulation of Pelephone’s operation .......................................................74 3.19 Material Agreements ...............................................................................................................84 3.20 Joint Venture Agreements.......................................................................................................84 3.21 Legal Proceedings ..................................................................................................................84 3.22 Goals and Business Strategy..................................................................................................88 3.23 Outlook for Development in 2009 ...........................................................................................89 3.24 Risk Factors ............................................................................................................................90 4. Bezeq International Ltd. - International communications and internet services.......93 4.1 General....................................................................................................................................93 4.2 Products and Services ............................................................................................................96 4.3 Revenue..................................................................................................................................97 4.4 New Products..........................................................................................................................97 4.5 Marketing, distribution and service .........................................................................................98 4.6 Competition .............................................................................................................................99 4.7 Seasonality........................................................................................................................... 100 4.8 Property, plant and equipment............................................................................................. 101 4.9 Intangible assets .................................................................................................................. 101 4.10 Human resources................................................................................................................. 101 4.11 Suppliers .............................................................................................................................. 102 4.12 Working Capital.................................................................................................................... 102 4.13 Credit Policies .....................................................................................................................
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