INVESTOR PRESENTATION

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BezeqFourth Quarter Full Year 2007Investor
Presentation
INVESTOR PRESENTATION February 2007
First Nine Months Third Quarter 2007 Investor
Presentation December 2007
March 2007
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Forward-Looking Statements Safe Harbor

• This presentation contains general data and
  information as well as forward looking statements
  about Bezeq. Such statements, along with
  explanations and clarifications presented by
  Bezeqs 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.

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Overview of the Israeli telecom marketBezeq has
strength across the board
Israeli telecom market (2006)
Total NIS 27.3 bn
Source MOC

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Relative spending in Israel on telecommunication
services is considerably higher than in Europe
Annual expenditure on telecom relative to number
of households, 2006 (Euro)
Annual expenditure on telecom as percent of GDP
,2006 ()
Average (w.o. Israel) 1,678 euro
Average (w.o. Israel) 2.6
Both as a percent of GDP and relative to number
of households, the Israeli telecom expenditure is
high
Source European Information Technology
Observatory 2007, WorldBank, states central
bureaus of statistics, CIA Analysis TASC
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Corporate Profile
Bezeq is the leading telecommunications provider
in Israel providing fixed line, mobile, ISP,
broadband, international long distance, data and
multi-channel TV services.
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Bezeq Group Profile
Businesses
Shareholders
Fixed Line Services Mobile Services
Multi-Channel TV ILD ISP Services Call
Center Services Internet Portal
Zeevi Communications Holdings 18
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Growth Opportunities

• The Bezeq Group is well positioned as the Company
  transitions from providing telephony and Internet
  infrastructure to become a leading supplier of
  advanced high speed Internet related products and
  services
• Potential significant cost synergies by sharing
  services across the group
• Potential for increased revenue synergies given
  changing regulatory landscape and new growth
  opportunities

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Fixed Line Services
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Fixed Line Voice and Broadband

• Comprehensive voice and broadband solutions for
  consumer business customers
• 1 service provider in voice telephony with 89
  market share (residential) and 94 (business)
• 1 service provider in broadband with 62
  market share
• 2.76 million access lines ( PSTN / ISDN)
• 942,000 ADSL subscriber lines

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Fixed Line
Broadband
Voice Telephony
Bezeqs DSL Subscriber Growth
Bezeq Access Lines (000s)
ARPU (NIS)
Subscribers (000s)
ARPU (NIS)
Subscribers (000s)
Voice Telephony Market Share Residential
Business
Broadband Market Share
Hot 38
Competitors 11
Bezeq estimate
Source MOC
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Organizational Restructuring Strategy

• Transition from geographical to customer
  focused organizational structure

PRIVATE SECTOR Personal voice services Home
networks Internet VAS
BUSINESS SECTOR Advanced voice and IT
services Hosted data centers and back up sites
Creating New
Creating a layer of new services
Preserving Existing
Growth from current portfolio of business and
consumer offerings
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Employees

• Retirement of 975 permanent employees between
  2007 and 2008
• Potential additional retirement of 1,225
  permanent employees between 2009 and 2013

8,096
7,693
7,658
7,489
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Cellular Services
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Pelephone - Cellular Services
Market Share
Subscriber Growth ARPU
Subscribers (000s)
ARPU (NIS)
Bezeq estimate
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Opportunities
Challenges

• Extend 3G subscriber leadership
• Drive higher ARPU from content services such as
  TV, mobile Internet and music applications
• Example exclusive rights to sell major sports
  events
• Focus on retention of existing subscribers via
  customer service, loyalty programs and marketing
  activities to improve customer satisfaction

• Cellular phone number portability impacts
  consumer churn rates
• Capital expenditures and staffing resources
  required to facilitate UMTS infrastructure
  deployment
• Possible market entrance of Mobile Virtual
  Network Operators (MVNOs)

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ILD, ISP Enterprise Services
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Bezeq International ISP services
ISP Market Share(1)
ISP Subscriber Growth ARPU
ARPU (NIS)
Subscribers (000s)
ILD Market Share(2)
(1) Based on subscribers (2) Based on Q3 07
revenues
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Growth Opportunities
Challenges

• Increased competition resulting from
  consolidation of smaller competitors
• Current need for VOB license

• Global activities
• ISP and data
• Network end point (BezeqCall operations)
• Integration
• IPTV
• Wi-Fi, Wi-Max

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Multi-Channel TV Services
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YES - Multi-Channel TV Services
Subscriber Growth ARPU
Market Share
ARPU (NIS)
Subscribers (000s)
Bezeq estimate
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Opportunities
Challenges

• Expansion of multi channel TV market to
  additional customer segments (Arab,
  Ultra-orthodox, Ethiopian, etc.)
• Expansion of product basket to subscribers
  (Telephony, Internet access and infrastructure,
  yesmax, VOD, etc.)
• Increase revenues from existing subscribers
  through expansion of content offering
• (Additional channels and packages, movies,
  games, interactive, etc.)
• Increase revenues from content through activities
  in other platforms (Internet, cellular, etc.)

• Current regulatory restrictions prevent yes from
  bundling services to match consumer purchasing
  patterns
• Limited exposure to VOD market
• Mature market segment to be penetrated through
  value added and differentiated consumer services

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Regulatory Environment
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Regulatory Environment

• Bezeq is seeking positive changes to the current
  regulatory policies in order to align it with
  existing regulatory policies in force in most
  countries
• Bezeq is a declared monopoly in the field of
  domestic fixed line communications services
• Some of the regulatory limitations on Bezeq
  include
• Structural separation requirement
• Prohibited bundling of services with subsidiary
  companies
• Tariff supervision
• Universal service obligation, and others
• A professional committee (Grunau Commission) was
  recently established by the Ministry of
  Communications (MOC) to review the Israeli
  telecom market and submit its recommendations
  regarding the appropriate policy for the coming
  years in a wide variety of fields
• Regulatory review of the MVNO industry with
  regards to the local Israeli market

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Group Financial Overview
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Financial Highlights Third Quarter
All data in NIS millions
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Financial Highlights First Nine Months
All data in NIS millions
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Key Financial Ratios Bezeq Group
Data as of Sept 30, 2007

• Total Debt / EBITDA 1.92
• Net Debt / EBITDA 1.26
• Net Debt / Equity 1.07
• Return on Equity 28.0
• Return on Capital Employed 19.0
• EBIT / (Total assets Current Liabilities)

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Key Financial Ratios Bezeq Group
Net Debt / Equity

• Q1 07 increase due to capital reduction
• \
• Bezeqs leverage is at the low end of its peer
  group

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Group Revenues
12,232
11,925
9,115
9,280
NIS Millions
2.6
1.8
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EBITDA
EBITDA EBITDA Margin Trends
EBITDA by Segment
NIS Millions
NIS Millions
First 9 Months 2007
3,146
219
254
7.1
1,025
8.1
32.5
1,648
100
32.9
31.9
33.9
32.8
52.3

• Pro-forma EBITDA for 2005 and 2006, excludes
  the impact of one-time provisions for
  restructuring and employee option plans.

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Cash Flow Trends Bezeq Group
9 Month Data
Full Year Data
NIS Millions
FY 2006
9M 2007
FY 2005
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Total Dividends Paid
NIS Millions

• Bezeq sees dividend yield as a key driver of
  shareholder return
• 2007 increase mainly due to capital reduction

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The Bezeq Investment Opportunity

• The dominant Israeli telecom group with leading
  market positions in all telecom sectors
• Significant earnings growth stemming from current
  restructuring and cost cutting initiatives
• New sources of growth from broadband, content,
  hosting and IT services
• Untapped group synergies and growth opportunities
• Returning value to shareholders through dividends

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Appendices
INVESTOR PRESENTATION February 2007
First Nine Months Third Quarter 2007 Investor
Presentation December 2007
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Debt Summary
All data in NIS millions
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Key Performance Indicators
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Key Performance Indicators
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Financial Highlights Fixed line
All data in NIS millions
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Financial Highlights Pelephone
All data in NIS millions
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Financial Highlights YES
All data in NIS millions
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Financial Highlights Bezeq International
All data in NIS millions
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Thank You
For additional information please visit our web
site www.bezeq.co.il
INVESTOR PRESENTATION February 2007
First Nine Months Third Quarter 2007 Investor
Presentation December 2007