-          Net income attributable to shareholders for the first quarter of 2013 totaled NIS 45 million ($12 million) - 

Ramat Gan, Israel – May 13, 2013 – B Communications Ltd. (NASDAQ Global Market and TASE: BCOM) today reported its financial results for the first quarter ended March 31, 2013.

Bezeq’s Results: For the first quarter of 2013, the Bezeq Group reported revenues of NIS 2.4 billion ($ 659 million) and operating profit of NIS 761 million ($ 209 million). Bezeq’s EBITDA for the first quarter totaled NIS 1.1 billion ($ 299 million), representing an EBITDA margin of 45%. Net income for the period attributable to the shareholders of Bezeq totaled NIS 497 million ($ 136 million). Bezeq’s cash flow from operating activities totaled NIS 972 million ($ 266 million) during the first quarter of 2013.

Cash Position: As of March 31, 2013, B Communications’ unconsolidated cash and cash equivalents (including dividend receivable) totaled NIS 1 billion ($ 276 million), its unconsolidated total debt was NIS 4 billion ($ 1.1 billion), and its net debt totaled NIS 3 billion ($ 831 million).

B Communications’ Unconsolidated Balance Sheet Data*

* Does not include the balance sheet of Bezeq.

Dividend from Bezeq: On May 13, 2013, B Communications is expected to receive two dividend payments from Bezeq which together total NIS 421 million ($ 115 million). These dividend payments include a current dividend of NIS 266 million ($ 73 million), representing B Communications’ share of Bezeq’s net profit for the second half of 2012, and a special dividend of NIS 155 million ($ 42 million), representing B Communications’ share of the fifth installment of six special dividend payments declared by Bezeq and approved by its shareholders in 2011.

B Communications’ First Quarter Financial Results

B Communications’ consolidated revenues for the first quarter of 2013 were NIS 2.4 billion
($ 659 million), a 12% decrease compared with NIS 2.7 billion reported in the first quarter of 2012. For both the current and the prior-year periods, B Communications’ consolidated revenues consisted entirely of Bezeq’s revenues.

During the first quarter of 2013, B Communications recorded net amortization expenses related to its Bezeq purchase price allocation (“Bezeq PPA”) of NIS 186 million ($ 51 million) in its consolidated financial statements. From April 14, 2010, the date of the acquisition of its interest in Bezeq, until March 31, 2013, B Communications has amortized approximately 53% of the total Bezeq PPA. The Bezeq PPA amortization expense is a non-cash expense that is subject to adjustment. If, for any reason, B Communications finds it necessary or appropriate to make adjustments to amounts already expensed, it may result in significant changes to its audited financial reports, as well as to future financial statements.

B Communications’ financial expenses, net: B Communications’ unconsolidated net financial expenses for the first quarter of 2013 totaled NIS 48 million ($ 13 million). These expenses consisted primarily of NIS 45 million ($ 12 million) of interest and CPI linkage expenses on the long-term loans incurred to finance the Bezeq acquisition and expenses of NIS 13 million ($ 4 million) related to its publicly traded debentures. These expenses were offset in part by financial income of NIS 7 million
($ 2 million) generated by short term investments.

Our unconsolidated net financial expenses in the first quarter of 2013 decreased by 17.2% compared with the first quarter of 2012. The decrease is primarily attributable to lower interest and CPI linkage expenses due to the reduction in the amount of the outstanding bank loans that we initially incurred to purchase our controlling interest in Bezeq.

B Communications’ net income attributable to shareholders for the first quarter of 2013 totaled NIS 45 million ($ 12 million), compared to NIS 16 million reported in the first quarter of 2012.  

B Communications’ Unconsolidated Financial Results

Comments of Management

Commenting on the results, Doron Turgeman, CEO of B Communications’ said, “The first quarter was another stable period for Bezeq, demonstrating the cash flow-generating power of its formidable position in Israel’s telecommunications market. Due to Bezeq’s continued uninterrupted payment of both regular and special dividends, we have succeeded in building our cash reserves to their current strong level. We are extremely proud of the net income that we reported this quarter. We are currently examining a number of available alternatives to restructure our outstanding loans as a key to improving our financial position and operating metrics.”

Bezeq Group Results (Consolidated) 

To provide further insight into its results, the Company is providing the following summary of the consolidated financial report of the Bezeq Group for the first quarter ended March 31, 2013. For a full discussion of Bezeq’s results for the first quarter of 2013, please refer to its website: http://ir.bezeq.co.il.

Revenues of the Bezeq Group in the first quarter of 2013 amounted to NIS 2.41 billion ($ 659 million) compared with NIS 2.74 billion in the corresponding quarter of 2012, a decrease of 12.2%. The reduction in the Bezeq Group revenues was primarily due to a decrease in revenues from the cellular segment, specifically due to a reduction in revenues from handset sales (decrease of NIS 160 million) together with a decrease in revenues from cellular services (decrease of NIS 120 million). In addition, revenues from the fixed-line segment decreased NIS 70 million.

Operating profit of the Bezeq Group in the first quarter of 2013 amounted to NIS 761 million ($ 209 million) compared with NIS 850 million in the corresponding quarter of 2012, a decrease of 10.5%. Earnings before interest, taxes, depreciation and amortization (EBITDA) of the Bezeq Group in the first quarter of 2013 amounted to NIS 1.09 billion ($ 299 million) (EBITDA margin of 45.3%) compared with NIS 1.21 billion (EBITDA margin of 44.1%) in the corresponding quarter of 2012, a decrease of 9.9%. Net profit attributable to Bezeq shareholders amounted to NIS 497 million ($ 136 million) compared with NIS 582 million in the corresponding quarter of 2012, a decrease of 14.6%. The decline in profitability metrics was primarily due to a decrease in profitability in the cellular segment as a result of increased competition in the sector.

Cash flow from operating activities of the Bezeq Group in the first quarter of 2013 amounted to NIS 972 million ($ 266 million) compared with NIS 998 million in the corresponding quarter of 2012, a decrease of 2.6%. Free cash flow of the Bezeq Group in the first quarter of 2013 amounted to NIS 726 million ($ 199 million) compared with NIS 585 million in the corresponding quarter of 2012, an increase of 24.1%. The increase in free cash flow was due the completion of major infrastructure projects initiated in prior years, specifically the NGN and submarine cable.

Net financial debt of the Bezeq Group was NIS 7.30 billion ($ 2.0 billion) at March 31, 2013 compared with NIS 6.65 billion as at March 31, 2012.

Notes:

1. A.      Convenience Translation to Dollars: For the convenience of the reader, certain of the reported NIS figures of March 31, 2013 have been presented in millions of U.S. dollars, translated at the representative rate of exchange as of March 31, 2013 (NIS 3.648 = U.S. Dollar 1.00). The U.S. dollar ($) amounts presented should not be construed as representing amounts receivable or payable in U.S. dollars or convertible into U.S. dollars, unless otherwise indicated.

1. B.       Use of non-IFRS Measurements: We and the Bezeq Group’s management regularly use supplemental non-IFRS financial measures internally to understand, manage and evaluate our business and make operating decisions. We believe these non-IFRS financial measures provide consistent and comparable measures to help investors understand the Bezeq Group’s current and future operating cash flow performance.

These non-IFRS financial measures may differ materially from the non-IFRS financial measures used by other companies.

EBITDA is a non-IFRS financial measure generally defined as earnings before interest, taxes, depreciation and amortization. The Bezeq Group defines EBITDA as net income before financial income (expenses), net, impairment and other charges, expenses recorded for stock compensation in accordance with IFRS 2, income tax expenses and depreciation and amortization. We present the Bezeq Group’s EBITDA as a supplemental performance measure because we believe that it facilitates operating performance comparisons from period to period and company to company by backing out potential differences caused by variations in capital structure, tax positions (such as the impact of changes in effective tax rates or net operating losses) and the age of, and depreciation expenses associated with, fixed assets (affecting relative depreciation expense).

EBITDA should not be considered in isolation or as a substitute for net income or other statement of operations or cash flow data prepared in accordance with IFRS as a measure of profitability or liquidity. EBITDA does not take into account our debt service requirements and other commitments, including capital expenditures, and, accordingly, is not necessarily indicative of amounts that may be available for discretionary uses. In addition, EBITDA, as presented in this press release, may not be comparable to similarly titled measures reported by other companies due to differences in the way that these measures are calculated.

Reconciliation between the Bezeq Group’s results on an IFRS and non-IFRS basis is provided in a table immediately following the Company's consolidated results. Non-IFRS financial measures consist of IFRS financial measures adjusted to exclude amortization of acquired intangible assets, as well as certain business combination accounting entries. The purpose of such adjustments is to give an indication of the Bezeq Group’s performance exclusive of non-cash charges and other items that are considered by management to be outside of its core operating results. The Bezeq Group’s non-IFRS financial measures are not meant to be considered in isolation or as a substitute for comparable IFRS measures, and should be read only in conjunction with its consolidated financial statements prepared in accordance with IFRS.

About B Communications Ltd.

B Communications is a telecommunications-oriented holding company and its primary holding is its controlling interest in Bezeq, The Israel Telecommunication Corp., Israel’s largest telecommunications provider (TASE: BZEQ). B Communications shares are traded on NASDAQ and the TASE under the symbol BCOM For more information please visit the following Internet sites:

www.bcommunications.co.il

www.ir.bezeq.co.il

www.eurocom.co.il

www.igld.com

Forward-Looking Statements

This press release contains forward-looking statements that are subject to risks and uncertainties.  Factors that could cause actual results to differ materially from these forward-looking statements include, but are not limited to, general business conditions in the industry, changes in the regulatory and legal compliance environments, the failure to manage growth and other risks detailed from time to time in B Communications’ filings with the Securities Exchange Commission.  These documents contain and identify other important factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements.  Stockholders and other readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made.  We undertake no obligation to update publicly or revise any forward-looking statement.

For further information, please contact:

Idit Cohen – IR Manager

idit@igld.com / Tel: +972-3-924-0000

Investor relations contacts:

Mor Dagan – Investor Relations

mor@km-ir.co.il / Tel: +972-3-516-7620

B Communications Ltd.

Condensed Consolidated Statements of Financial Position as at

(In millions)

*   Restated following the retrospective application of the amendment to IAS 19, Employee Benefits. 

B Communications Ltd.

Condensed Consolidated Statements of Financial Position as at (cont’d)

(In millions)

*   Restated following the retrospective application of the amendment to IAS 19, Employee Benefits. 

B Communications Ltd.

Condensed Consolidated Statements of Income for the

(In millions, except per share data)

*   Restated following the retrospective application of the amendment to IAS 19, Employee Benefits. 

B Communications Ltd.

Reconciliation for NON-IFRS Measures

EBITDA

The following is a reconciliation of the Bezeq Group operating income to EBITDA:

In millions

*   Restated following the retrospective application of the amendment to IAS 19, Employee Benefits. 

Free Cash Flow

The following table shows the calculation of the Bezeq Group free cash flow:

In millions

-          Continued On-Track Progress Driven By Bezeq’s Continued Strong Cash Generation - 

Ramat Gan, Israel – March 14, 2013 – B Communications Ltd. (NASDAQ Global Market and TASE: BCOM) today reported its financial results for the fourth quarter and year ended December 31, 2012.

Bezeq’s Results: For the fourth quarter of 2012, the Bezeq Group reported revenues of NIS 2.45 billion ($ 656 million) and operating profit of NIS 772 million ($ 207 million). Bezeq’s EBITDA for the fourth quarter totaled NIS 1.1 billion ($ 304 million), representing an EBITDA margin of 46%. Net income for the period attributable to the shareholders of Bezeq totaled NIS 519 million ($ 139 million). Bezeq’s cash flow from operating activities totaled NIS 1 billion ($ 268 million) during the fourth quarter of 2012.

Cash Position: As of December 31, 2012, B Communications’ unconsolidated cash and cash equivalents totaled NIS 694 million ($ 186 million), its unconsolidated total debt was NIS 4.1 billion ($ 1.1 billion) and its net debt was NIS 3.4 billion ($ 901 million).

B Communications’ Unconsolidated Balance Sheet Data*

In millions

* Does not include the balance sheet of Bezeq.

Dividends from Bezeq: On October 10, 2012, B Communications received two dividend payments from Bezeq, which together totaled NIS 464 million ($ 124 million). These dividend payments included a current dividend of NIS 309 million ($ 83 million), representing B Communications’ share of Bezeq’s net profit for the first half of 2012, and a special dividend of NIS 155 million ($ 41 million), representing its share of the fourth installment of six NIS 500 million ($ 134 million) special dividend payments declared by Bezeq and approved by its shareholders in 2011.

In accordance with Bezeq’s dividend policy, its Board of Directors recommended the distribution of 100% of profits for the second half of 2012 as a cash dividend of NIS 861 million ($ 231 million) to shareholders. Together with this regular dividend, Bezeq will make the fifth installment of the special dividend of NIS 500 million ($ 134 million). The total dividend to be distributed will be NIS 1.361 billion ($ 365 million, or approximately NIS 0.50 per share). The regular dividend, which is subject to shareholder approval, is expected to be paid together with the special dividend on May 13, 2013 to shareholders of record as of May 1, 2013. B Communications’ share of the dividend distribution is expected to be approximately NIS 422 million ($ 113 million).

B Communications’ Fourth Quarter and Full Year Consolidated Financial Results

B Communications’ revenues for the fourth quarter of 2012 were NIS 2,449 million ($ 656 million), an 8% decrease compared to NIS 2,650 million reported in the fourth quarter of 2011. For the full year 2012, B Communications’ revenues totaled NIS 10,278 million ($ 2,753 million), a 10% decrease compared to NIS 11,373 million reported in 2011. For both the current and the prior-year periods, B Communications’ revenues consisted entirely of its share of Bezeq’s revenues.

During the fourth quarter of 2012, B Communications recorded net amortization expenses related to its Bezeq purchase price allocation (“Bezeq PPA”) of NIS 160 million ($43 million). From April 14, 2010, the date of the acquisition of its interest in Bezeq, until December 31, 2012, B Communications has amortized approximately 55% of the total Bezeq PPA. The Bezeq PPA amortization expense is a non-cash expense that is subject to adjustment. If, for any reason, B Communications finds it necessary or appropriate to make adjustments to amounts already expensed, it may result in significant changes to its audited financial reports, as well as to future financial statements.

Financial expenses, net: B Communications’ unconsolidated net financial expenses for the fourth quarter of 2012 totaled NIS 39 million ($ 10 million). These expenses consisted primarily of NIS 35 million ($ 9 million) of interest and CPI linkage expenses on the long-term loans incurred to finance the Bezeq acquisition and expenses of NIS 16 million ($ 4 million) related to its publicly traded debentures. These expenses were offset in part by financial income of NIS 11 million ($ 3 million) generated by short term investments. The decrease in financial expenses recorded in the fourth quarter was primarily attributable to the 0.66% decrease in the Israeli CPI, to which approximately half of B Communications’ total debt is linked.

B Communications’ unconsolidated net financial expenses for 2012 totaled NIS 262 million ($ 70 million). These expenses consisted primarily of NIS 237 million ($ 63 million) of interest and CPI linkage expenses on the long-term loans incurred to finance the Bezeq acquisition and NIS 53 million ($ 14 million) of expenses related to its publicly traded debentures. These expenses were offset in part by financial income of NIS 29 million ($ 8 million) generated by short term investments.

B Communications’ net profit attributable to shareholders for the fourth quarter totaled NIS 70 million ($ 19 million), compared to a net loss of NIS 121 million reported in the fourth quarter of 2011. For the full year 2012, B Communications’ net loss attributable to shareholders totaled NIS 35 million ($ 9 million), compared to a net loss of NIS 219 million reported in 2011.

B Communications’ Unconsolidated Financial Results  

In millions

Comments of Management

Commenting on the results, Doron Turgeman, CEO of B Communications said, “Against the backdrop of an exceedingly challenging communications market, the stable platform and unique strength of Bezeq, our base asset, continues to prove its long-term cash-generating power. During 2012, we succeeded in increasing our unconsolidated cash reserves to their current strong level of almost NIS 700 million ($ 188 million). In the quarters ahead, we will continue our efforts to strengthen our financial stability and liquidity. We are in the process of examining a number of offers received recently for the potential re-structuring of our outstanding loans as a key to improving our financial position. We are extremely proud of the net income reported this quarter and looking forward, we believe in our ability to maintain profitability in light of the fact that we expect to record lower PPA amortization expenses in future periods.”  

The financial results presented in this press release are preliminary unaudited financial results. The final and complete results for the fourth quarter and full year ended December 31, 2012 will be published when the Company publishes its audited financial reports and files its Annual Report on Form 20-F for 2012.

Bezeq Group Results (Consolidated) 

To provide further insight into its results, the Company is providing the following summary of the consolidated financial report of the Bezeq Group for the fourth quarter and year ended December 31, 2012. For a full discussion of Bezeq’s results for the fourth quarter and full year of 2012, please refer to its website: http://ir.bezeq.co.il.

Revenues of the Bezeq Group in 2012 amounted to NIS 10.28 billion compared to NIS 11.37 billion in 2011, a decrease of 9.6%. The reduction in the Bezeq Group’s revenues was primarily due to a decrease in revenues from its cellular segment, specifically due to a reduction in revenues from handset sales (decrease of NIS 704 million) together with a decrease in revenues from cellular services (decrease of NIS 376 million). Bezeq Group’s revenues in the fourth quarter of 2012 amounted to NIS 2.45 billion compared to NIS 2.65 billion in the corresponding quarter of 2011, a decrease of 7.6%.

Operating profit of the Bezeq Group in 2012 amounted to NIS 3.04 billion compared to NIS 3.24 billion in 2011, a decrease of 6.4%. Earnings before interest, taxes, depreciation and amortization (EBITDA) of the Bezeq Group in 2012 amounted to NIS 4.47 billion (EBITDA margin of 43.5%) compared to NIS 4.64 billion (EBITDA margin of 40.8%) in 2011, a decrease of 3.6%. Net profit attributable to Bezeq’s shareholders amounted to NIS 1.86 billion compared to NIS 2.07 billion in 2011, a decrease of 10.1%. Overall, the decline in profitability metrics was due to a decrease in profitability of the cellular segment, partially offset by a decrease in a provision for employee retirement.

Operating profit of the Bezeq Group in the fourth quarter of 2012 amounted to NIS 772 million, compared to NIS 698 million in the corresponding quarter of 2011, an increase of 10.6%. EBITDA of the Bezeq Group in the fourth quarter of 2012 amounted to NIS 1.13 billion (EBITDA margin of 46.3%), compared to NIS 1.05 billion (EBITDA margin of 39.7%) in the corresponding quarter of 2011, an increase of 7.6%. The increase in operating profit and EBITDA was primarily due to an increase in gains from the sale of real estate and copper as well as a reduction in a provision for employee retirement compared to the fourth quarter of 2011. Net profit attributable to Bezeq’s shareholders in the fourth quarter of 2012 amounted to NIS 519 million compared to NIS 524 million in the corresponding quarter of 2011, a decrease of 1.0%. The minor decline in net profit was due to the increase in corporate tax expenses.

Cash flow from operating activities of the Bezeq Group in 2012 amounted to NIS 4.01 billion compared to NIS 3.19 billion in 2011, an increase of 26.0%. Cash flow from operating activities of the Bezeq Group in the fourth quarter of 2012 amounted to NIS 1.00 billion compared to NIS 859 million in the corresponding quarter of 2011, an increase of 16.6%. The increase was primarily due to improved working capital in the cellular segment as a result of a decrease in trade receivables.

Free cash flow of the Bezeq Group in 2012 amounted to NIS 2.78 billion compared to NIS 1.55 billion in 2011, an increase of 79.4%. Free cash flow of the Bezeq Group in the fourth quarter of 2012 amounted to NIS 810 million compared to NIS 315 million in the corresponding quarter of 2011, an increase of 157.1%. The increase in free cash flow was due to an increase in cash flow from operating activities as well as the completion of major infrastructure projects initiated in prior years specifically Bezeq’s NGN and submarine cable.

As of December 31, 2012, the Bezeq Group’s gross financial debt was NIS 9.55 billion, compared to NIS 9.58 billion as of December 31, 2011. The Bezeq Group’s net financial debt was NIS 8.00 billion compared with NIS 7.28 billion as of December 31, 2011. At December 31, 2012, the Bezeq Group’s net financial debt to EBITDA ratio was 1.79, compared with 1.57 at December 31, 2011.

Notes:

1. A.       Convenience Translation to Dollars: For the convenience of the reader, certain of the reported NIS figures of December 31, 2012 have been presented in millions of U.S. dollars, translated at the representative rate of exchange as of December 31, 2012 (NIS 3.733 = U.S. Dollar 1.00). The U.S. dollar ($) amounts presented should not be construed as representing amounts receivable or payable in U.S. dollars or convertible into U.S. dollars, unless otherwise indicated.

1. B.       Use of non-IFRS Measurements: We and the Bezeq Group’s management regularly use supplemental non-IFRS financial measures internally to understand, manage and evaluate our business and make operating decisions. We believe these non-IFRS financial measures provide consistent and comparable measures to help investors understand the Bezeq Group’s current and future operating cash flow performance.

These non-IFRS financial measures may differ materially from the non-IFRS financial measures used by other companies.

EBITDA is a non-IFRS financial measure generally defined as earnings before interest, taxes, depreciation and amortization. The Bezeq Group defines EBITDA as net income before financial income (expenses), net, impairment and other charges, expenses recorded for stock compensation in accordance with IFRS 2, income tax expenses and depreciation and amortization. We present the Bezeq Group’s EBITDA as a supplemental performance measure because we believe that it facilitates operating performance comparisons from period to period and company to company by backing out potential differences caused by variations in capital structure, tax positions (such as the impact of changes in effective tax rates or net operating losses) and the age of, and depreciation expenses associated with, fixed assets (affecting relative depreciation expense).

EBITDA should not be considered in isolation or as a substitute for net income or other statement of operations or cash flow data prepared in accordance with IFRS as a measure of profitability or liquidity. EBITDA does not take into account our debt service requirements and other commitments, including capital expenditures, and, accordingly, is not necessarily indicative of amounts that may be available for discretionary uses. In addition, EBITDA, as presented in this press release, may not be comparable to similarly titled measures reported by other companies due to differences in the way that these measures are calculated.

Reconciliation between the Bezeq Group’s results on an IFRS and non-IFRS basis is provided in a table immediately following the Company's consolidated results. Non-IFRS financial measures consist of IFRS financial measures adjusted to exclude amortization of acquired intangible assets, as well as certain business combination accounting entries. The purpose of such adjustments is to give an indication of the Bezeq Group’s performance exclusive of non-cash charges and other items that are considered by management to be outside of its core operating results. The Bezeq Group’s non-IFRS financial measures are not meant to be considered in isolation or as a substitute for comparable IFRS measures, and should be read only in conjunction with its consolidated financial statements prepared in accordance with IFRS.

About B Communications Ltd.

B Communications is a telecommunications-oriented holding company and its primary holding is its controlling interest in Bezeq, The Israel Telecommunication Corp., Israel’s largest telecommunications provider (TASE: BZEQ). B Communications shares are traded on NASDAQ and the TASE under the symbol BCOM For more information please visit the following Internet sites:

www.bcommunications.co.il

www.ir.bezeq.co.il

www.eurocom.co.il

www.igld.com

Forward-Looking Statements

This press release contains forward-looking statements that are subject to risks and uncertainties.  Factors that could cause actual results to differ materially from these forward-looking statements include, but are not limited to, general business conditions in the industry, changes in the regulatory and legal compliance environments, the failure to manage growth and other risks detailed from time to time in B Communications’ filings with the Securities Exchange Commission.  These documents contain and identify other important factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements.  Stockholders and other readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made.  We undertake no obligation to update publicly or revise any forward-looking statement.

For further information, please contact:

Idit Cohen – IR Manager

idit@igld.com / Tel: +972-3-924-0000

Investor relations contacts:

Mor Dagan – Investor Relations

mor@km-ir.co.il / Tel: +972-3-516-7620

B Communications Ltd.

Consolidated Statements of Financial Position as at December 31

(In millions)

B Communications Ltd.

Consolidated Statements of Financial Position as at December 31

(In millions)

B Communications Ltd.

Consolidated Statements of income for the year ended December 31

(In millions, except per share data)

B Communications Ltd.

Reconciliation for NON-IFRS Measures

EBITDA

The following is a reconciliation of the Bezeq Group operating income to EBITDA:

In millions

Free Cash Flow

The following table shows the calculation of the Bezeq Group free cash flow:

In millions

B Communications Reports Financial Results For The Third Quarter of 2012

-          Progress In Line With Our Strategic Plan Driven By Bezeq’s Continued Strong Cash Generation - 

Ramat Gan, Israel – November 8, 2012 – B Communications Ltd. (NASDAQ Global Market and TASE: BCOM) today reported its financial results for the third quarter ended September 30, 2012.

Bezeq’s Results: For the third quarter of 2012, the Bezeq Group reported revenues of NIS 2.5 billion ($ 638 million) and operating profit of NIS 667 million ($ 171 million). Bezeq’s EBITDA for the third quarter totaled NIS 1 billion ($ 262 million), representing an EBITDA margin of 41%. Net income for the period attributable to the shareholders of Bezeq totaled NIS 342 million ($ 87 million). Bezeq’s cash flow from operating activities totaled NIS 1 billion ($ 262 million) during the third quarter of 2012.

Dividend from Bezeq: On October 10, 2012, B Communications received two dividend payments from Bezeq which together totaled NIS 464 million ($ 119 million). These dividend payments included a current dividend of NIS 309 million ($ 79 million), representing B Communications’ share of Bezeq’s net profit for the first half of 2012, and a special dividend of NIS 155 million ($ 40 million), representing B Communications’ share of the fourth installment of six special dividend payments declared by Bezeq and approved by its shareholders last year.

Cash Position: As of September 30, 2012, B Communications’ unconsolidated cash and cash equivalents (including dividend receivable) totaled NIS 853 million ($ 218 million), its unconsolidated total debt was NIS 4.2 billion ($ 1.1 billion), and its net debt totaled NIS 3.3 billion ($ 849 million).

B Communications’ Unconsolidated Balance Sheet Data*

* Does not include the balance sheet of Bezeq.

B Communications’ Third Quarter Consolidated Financial Results

B Communications’ revenues for the third quarter of 2012 were NIS 2,494 million ($ 638 million), a 15% decrease compared with NIS 2,917 million ($ 746 million) reported in the third quarter of 2011. For both the current and the prior-year periods, B Communications’ revenues consisted entirely of its share of Bezeq’s revenues.

B Communications’ net loss attributable to shareholders for the third quarter totaled NIS 55 million ($ 14 million), compared to NIS 31 million ($ 8 million) reported in the third quarter of 2011. This reflects the impact of two significant expenses:

• Amortization of tangible and identifiable intangible assets resulting from the Bezeq acquisition: According to the rules of business combination accounting, the total purchase price of the Bezeq acquisition was allocated to Bezeq’s tangible and identifiable intangible assets based on their estimated fair values as determined by an analysis performed by an independent valuation firm. B Communications is amortizing certain of the acquired identifiable intangible assets in accordance with the economic benefit expected from such assets using an accelerated method of amortization.

During the third quarter of 2012, B Communications recorded amortization expenses related to the Bezeq purchase price allocation (“Bezeq PPA”) of NIS 307 million ($78 million), net. From the Bezeq acquisition date (April 14, 2010) until the end of the reporting quarter, B Communications has amortized approximately 53% of the total Bezeq PPA. It expects to amortize an additional 5% in the fourth quarter of 2012.

The Company’s Bezeq PPA amortization expense is a non-cash expense that is subject to adjustment. If, for any reason, the Company finds it necessary or appropriate to make adjustments to amounts already expensed, it may result in significant changes to future financial statements.

• Financial expenses: B Communications’ unconsolidated financial expenses for the third quarter totaled NIS 65 million ($ 17 million). These expenses consisted primarily of NIS 64 million ($ 16 million) of interest and CPI linkage expense on the long-term loans incurred to finance the Bezeq acquisition and NIS 14 million ($ 4 million) of expenses related to the Company’s debentures. These expenses were offset by financial income of NIS 13 million ($ 3 million) generated by our short term investments. The significant financial expenses recorded in the third quarter were due primarily to high CPI linkage expenses attributed to the 0.85% increase in the Israeli CPI, to which approximately half of B Communications’ total debt is linked.

B Communications’ Unconsolidated Financial Results

Comments of Management

Commenting on the results, Doron Turgeman, CEO of B Communications’ said, “The third quarter of 2012 was another stable period for Bezeq, demonstrating the cash flow-generating power of its formidable position in Israel’s telecommunications market. Due to the continued uninterrupted payment of both regular and special dividends, including the latest installment which we received last month, we have succeeded in building our cash reserves to their current strong level, and are on track with plans to continue expanding our financial stability and liquidity in the quarters to come. Despite current conditions in the Israeli capital market, as a long-term communications player with loans that are not burdened by share price-related covenants, we are able to manage our cash position entirely according to plan, relying upon steady and visible cash flow to fulfill all loan commitments while continuing to accelerate our repayments.”

          Bezeq Group Results (Consolidated) 

To provide further insight into its results, the Company has provided the following summary of the consolidated financial report of the Bezeq Group’s quarter ended September 30, 2012. For a full discussion of Bezeq’s results for the quarter, please refer to http://ir.bezeq.co.il.

Revenues of the Bezeq Group in the third quarter of 2012 amounted to NIS 2.49 billion compared with NIS 2.92 billion in the corresponding quarter of 2011, a decrease of 14.5%. Most of the decrease in the Bezeq Group’s revenues was due to lower revenues from the sale of cellular handsets and the erosion of revenues from cellular services.

Operating profit of the Bezeq Group in the third quarter of 2012 amounted to NIS 667 million, compared with NIS 944 million in the corresponding quarter of 2011, a decrease of 29.3%. Earnings before interest, taxes, depreciation and amortization (EBITDA) in the third quarter of 2012 amounted to NIS 1.03 billion (EBITDA margin of 41.1%), compared with NIS 1.30 billion (EBITDA margin of 44.6%) in the corresponding quarter of 2011, a decrease of 21.1%. Net profit attributable to Bezeq shareholders in the third quarter of 2012 amounted to NIS 342 million compared with NIS 550 million in the corresponding quarter of 2011, a decrease of 37.8%. The decrease in profitability metrics was primarily due to a decrease in profitability in the cellular segment as well as lower capital gains from real estate and copper sales in the Fixed-line segment compared to the corresponding quarter of 2011.

Cash flow from operating activities in the third quarter of 2012 amounted to NIS 1.02 billion compared with NIS 882 million in the corresponding quarter of 2011, an increase of 16.1% mainly due to improved working capital in the cellular segment.  Free cash flow in the third quarter of 2012 amounted to NIS 754 million compared with NIS 508 million in the corresponding quarter of 2011, an increase of 48.4%. The increase in free cash flow was due to an increase in cash flow from operating activities as well as the completion of large infrastructure projects initiated in prior years.

Gross capital expenditures (CAPEX), in the third quarter of 2012 amounted to NIS 346 million compared with NIS 437 million in the corresponding quarter of 2011, a decrease of 20.8%. The Bezeq Group’s CAPEX to consolidated sales ratio in the third quarter of 2012 was 13.9%, compared with 15.0% in the corresponding quarter of 2011.

As of September 30, 2012, gross financial debt of the Bezeq Group was NIS 8.94 billion, compared with NIS 9.61 billion as of September 30, 2011. The net financial debt of the Bezeq Group was NIS 7.19 billion compared with NIS 5.99 billion as of September 30, 2011. At the end of September 2012, the Bezeq Group’s net financial debt to EBITDA ratio was 1.64, compared with 1.24 at the end of September 2011.

Notes:

1. A.     Convenience Translation to Dollars: For the convenience of the reader, certain of the reported NIS figures of September 30, 2012 have been presented in millions of U.S. dollars, translated at the representative rate of exchange as of September 30, 2012 (NIS 3.912 = U.S. Dollar 1.00). The U.S. dollar ($) amounts presented should not be construed as representing amounts receivable or payable in U.S. dollars or convertible into U.S. dollars, unless otherwise indicated.

B.     Use of non-IFRS Measurements: We and the Bezeq Group’s management regularly use supplemental non-IFRS financial measures internally to understand, manage and evaluate our business and make operating decisions. We believe these non-IFRS financial measures provide consistent and comparable measures to help investors understand the Bezeq Group’s current and future operating cash flow performance.

These non-IFRS financial measures may differ materially from the non-IFRS financial measures used by other companies.

EBITDA is a non-IFRS financial measure generally defined as earnings before interest, taxes, depreciation and amortization. The Bezeq Group defines EBITDA as net income before financial income (expenses), net, impairment and other charges, expenses recorded for stock compensation in accordance with IFRS 2, income tax expenses and depreciation and amortization. We present the Bezeq Group’s EBITDA as a supplemental performance measure because we believe that it facilitates operating performance comparisons from period to period and company to company by backing out potential differences caused by variations in capital structure, tax positions (such as the impact of changes in effective tax rates or net operating losses) and the age of, and depreciation expenses associated with, fixed assets (affecting relative depreciation expense).

EBITDA should not be considered in isolation or as a substitute for net income or other statement of operations or cash flow data prepared in accordance with IFRS as a measure of profitability or liquidity. EBITDA does not take into account our debt service requirements and other commitments, including capital expenditures, and, accordingly, is not necessarily indicative of amounts that may be available for discretionary uses. In addition, EBITDA, as presented in this press release, may not be comparable to similarly titled measures reported by other companies due to differences in the way that these measures are calculated.

Reconciliation between the Bezeq Group’s results on an IFRS and non-IFRS basis is provided in a table immediately following the Bezeq Group’s consolidated results. Non-IFRS financial measures consist of IFRS financial measures adjusted to exclude amortization of acquired intangible assets, as well as certain business combination accounting entries. The purpose of such adjustments is to give an indication of the Bezeq Group’s performance exclusive of non-cash charges and other items that are considered by management to be outside of its core operating results. The Bezeq Group’s non-IFRS financial measures are not meant to be considered in isolation or as a substitute for comparable IFRS measures, and should be read only in conjunction with its consolidated financial statements prepared in accordance with IFRS.

About B Communications Ltd.

B Communications is a telecommunications-oriented holding company and its primary holding is its controlling interest in Bezeq, The Israel Telecommunication Corp., Israel’s largest telecommunications provider (TASE: BZEQ). B Communications shares are traded on NASDAQ and the TASE under the symbol BCOM For more information please visit the following Internet sites:

www.bcommunications.co.il

www.ir.bezeq.co.il

www.eurocom.co.il

www.igld.com

Forward-Looking Statements

This press release contains forward-looking statements that are subject to risks and uncertainties.  Factors that could cause actual results to differ materially from these forward-looking statements include, but are not limited to, general business conditions in the industry, changes in the regulatory and legal compliance environments, the failure to manage growth and other risks detailed from time to time in B Communications’ filings with the Securities Exchange Commission.  These documents contain and identify other important factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements.  Stockholders and other readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made.  We undertake no obligation to update publicly or revise any forward-looking statement.

For further information, please contact:

Idit Cohen – IR Manager

idit@igld.com / Tel: +972-3-924-0000

Investor relations contacts:

Mor Dagan – Investor Relations

mor@km-ir.co.il / Tel: +972-3-516-7620

B Communications Ltd.

Consolidated Statement of Financial Position

(In millions)

B Communications Ltd.

Consolidated Statement of Financial Position (cont’d)

(In millions)

B Communications Ltd.

Consolidated Statements of Income

(In millions, except per share data)

-          Continued On-Track Progress Driven By Bezeq’s Strong Cash Flow - 

Ramat Gan, Israel – August 2, 2012 – B Communications Ltd. (NASDAQ Global Market and TASE: BCOM) today reported its financial results for the quarter ended June 30, 2012.

Bezeq – On-Track Performance: The Bezeq Group reported another stable quarter, delivering revenues of NIS 2.6 billion ($ 661 million) and operating profit of NIS 746 million ($ 190 million) for the period. Bezeq’s EBITDA for the second quarter totaled NIS 1.1 billion ($ 281 million), representing an EBITDA margin of 42.5%. Net income for the period attributable to the shareholders of the Company totaled NIS 415 million ($ 106 million). Bezeq’s cash flow from operating activities totaled NIS 990 million ($ 252 million) during the quarter ended June 30, 2012.

Dividend from Bezeq: On May 22, 2012, B Communications received two dividend payments from Bezeq totaling NIS 489 million ($ 125 million), consisting of a current dividend of NIS 334 million ($ 85 million), representing B Communications’ share of Bezeq’s net profit for the second half of 2011, and a special dividend of NIS 155 million ($ 40 million), representing the third installment of the six special dividend payments declared by Bezeq and approved by its shareholders last year.

B Communications used the dividend proceeds for three purposes: (1) payment of NIS 254 million ($ 65 million) of its current loan repayment commitment, in-line with the original debt repayment schedule; (2) pre-payment of an additional NIS 188 million ($ 48 million) of its bank debt, consisting of a NIS 82 million ($ 21 million) pre-payment of short term debt originally scheduled for payment in November 2012 and a NIS 106 million ($ 27 million) pre-payment of a “bullet” principal payment due in November 2016, thereby reducing the size of the original NIS 700 million ($ 178 million) “bullet” loan to NIS 32 million ($ 8 million); and  (3) increasing current cash balances with the remaining NIS 47 million ($ 12 million).

Cash Position: As of June 30, 2012, B Communications’ unconsolidated cash and cash equivalents totaled NIS 400 million ($ 102 million), its unconsolidated total debt was NIS 4.1 billion ($ 1.1 billion) and its unconsolidated net debt totaled NIS 3.7 billion ($ 948 million).

B Communications’ Unconsolidated Balance Sheet Data*

* Does not include the balance sheet of Bezeq

B Communications’ Second Quarter Consolidated Financial Results

B Communications’ revenues for the second quarter were NIS 2,595 million ($ 661 million), a 10% decrease compared with NIS 2,893 million ($ 737 million) reported in the second quarter of 2011. For both the current and the prior-year periods, B Communications’ revenues consisted entirely of its share of Bezeq’s revenues.

B Communications’ net loss attributable to shareholders for the second quarter totaled NIS 66 million ($ 17 million), compared to a net loss attributable to shareholders of NIS 12 million ($ 3 million) reported in the second quarter of 2011. This net loss reflects the impact of two significant expenses:

• Amortization of tangible and identifiable intangible assets resulting from the Bezeq acquisition: According to the rules of business combination accounting, the total purchase price of the Bezeq acquisition was allocated to Bezeq’s tangible and identifiable intangible assets based on their estimated fair values as determined by an analysis performed by an independent valuation firm. B Communications is amortizing certain of the acquired identifiable intangible assets in accordance with the economic benefit expected from such assets using an accelerated method of amortization. 

During the second quarter of 2012, B Communications recorded amortization expenses related to the Bezeq purchase price allocation (“Bezeq PPA”) of NIS 305 million ($ 78 million), net. From the Bezeq acquisition date (April 14, 2010) until the end of the reporting quarter, B Communications amortized approximately 48% of the total Bezeq PPA. It expects to amortize an additional 9% in the last two quarters of 2012.

The Company’s Bezeq PPA amortization expense is a non-cash expense that is subject to adjustment. If, for any reason, the Company finds it necessary or appropriate to make adjustments to amounts already expensed, it may result in significant changes to future financial statements.

• Financial expenses: B Communications’ unconsolidated financial expenses for the second quarter totaled NIS 100 million ($ 25 million). These expenses consisted primarily of NIS 82 million ($ 21 million) interest and CPI linkage expense on the long-term loans incurred to finance the Bezeq acquisition and NIS 15 million ($ 4 million) of expenses related to the Company’s debentures. The significant financial expenses recorded in the second quarter were due primarily to high CPI linkage expenses attributed to the 1.25% increase in the Israeli CPI, to which approximately half of B Communications’ total debt is linked.

B Communications’ Unconsolidated Financial Results 

Comments of Management

Commenting on the results, Doron Turgeman, the CEO of B Communications, said, “Our significant progress over the past two years demonstrates the soundness in the structure of our work plan and of the capital structure that we negotiated with our lending banks. We are proud to have been able to accelerate the repayment plan, retiring over NIS 2 billion of our debt in just two years while continuing to build our cash reserves to their current level of approximately NIS 400 million. We plan to continue to improve our financial stability and liquidity in the quarters to come. We believe that our loan agreements, which do not have any loan to value covenants, have been advantageous to our Company. We are obviously well aware of the unfavorable state of the financial and capital markets in Israel, as well of the recent decline in Bezeq’s share price – a decline that we believe is temporary. Despite this environment, as a long term communications player, we will continue to manage our business according to plan and with our reliable strong cash flow we are confident that we will be able to fulfill all our loan commitments. 

Bezeq Group Results (Consolidated)

To provide further insight into its results, the Company has provided the following summary of the Bezeq Group’s consolidated financial report for the quarter ended June 30, 2012. For a full discussion of Bezeq’s results for the quarter, please refer to http://ir.bezeq.co.il.

Revenues of the Bezeq Group in the second quarter of 2012 amounted to NIS 2.60 billion compared with NIS 2.89 billion in the corresponding quarter of 2011, a decrease of 10.3 %. Most of the decrease in the Bezeq Group’s revenues is due to the decrease in revenues from the sale of cellular handsets and the erosion of revenues from cellular services.

Operating profit of the Bezeq Group in the second quarter of 2012 amounted to NIS 746 million, compared with NIS 935 million in the corresponding quarter of 2011, a decrease of 20.2%.  EBITDA in the second quarter of 2012 amounted to NIS 1.10 billion (EBITDA margin of 42.5%), compared with NIS 1.28 billion (EBITDA margin of 44.3%) in the corresponding quarter of 2011, a decrease of 14.0%. Net profit attributable to Bezeq shareholders in the second quarter of 2012 amounted to NIS 415 million compared with NIS 585 million in the corresponding quarter of 2011, a decrease of 29.1%. The decrease in operating profit, EBITDA and net profit is primarily attributable to a decrease in profitability in the cellular segment.

Cash flow from operating activities in the second quarter of 2012 amounted to NIS 990 million compared with NIS 670 million in the corresponding quarter of 2011, an increase of 47.8% due to improved working capital in the cellular segment. As a result of the increased cash flow from operating activities as well as the completion of large infrastructure projects, free cash flow in the second quarter of 2012 amounted to NIS 630 million compared with NIS 264 million in the corresponding quarter of 2011, an increase of 138.6%.

Gross capital expenditures (CAPEX), in the second quarter of 2012 amounted to NIS 382 million compared with NIS 495 million in the corresponding quarter of 2011, a decrease of 22.8%. The Bezeq Group’s CAPEX to consolidated revenues ratio in the second quarter of 2012 was 14.7%, compared with 17.1% in the corresponding quarter of 2011.

As of June 30, 2012, gross financial debt of the Bezeq Group was NIS 9.13 billion, compared with NIS 6.98 billion as of June 30, 2011. The net financial debt of the Bezeq Group was NIS 7.90 billion compared with NIS 6.50 billion as of June 30, 2011. At the end of June 2012, the Bezeq Group’s net financial debt to EBITDA ratio was 1.69, compared with 1.33 at the end of June 2011.

Notes:

1. A.     Convenience Translation to Dollars: For the convenience of the reader, certain of the reported NIS figures of June 30, 2012 have been presented in millions of U.S. dollars, translated at the representative rate of exchange as of June 30, 2012 (NIS 3.923 = U.S. Dollar 1.00). The U.S. Dollar ($) amounts presented should not be construed as representing amounts receivable or payable in U.S. Dollars or convertible into U.S. Dollars, unless otherwise indicated.  

B.     Use of non-IFRS Measurements: We and the Bezeq Group’s management regularly use supplemental non-IFRS financial measures internally to understand, manage and evaluate its business and make operating decisions. We believe these non-IFRS financial measures provide consistent and comparable measures to help investors understand the Bezeq Group’s current and future operating cash flow performance.

These non-IFRS financial measures may differ materially from the non-IFRS financial measures used by other companies.

EBITDA is a non-IFRS financial measure generally defined as earnings before interest, taxes, depreciation and amortization. The Bezeq Group defines EBITDA as net income before financial income (expenses), net, impairment and other charges, expenses recorded for stock compensation in accordance with IFRS 2, income tax expenses and depreciation and amortization. We present the Bezeq Group’s EBITDA as a supplemental performance measure because we believe that it facilitates operating performance comparisons from period to period and company to company by backing out potential differences caused by variations in capital structure, tax positions (such as the impact of changes in effective tax rates or net operating losses) and the age of, and depreciation expenses associated with, fixed assets (affecting relative depreciation expense).

EBITDA should not be considered in isolation or as a substitute for net income or other statement of operations or cash flow data prepared in accordance with IFRS as a measure of profitability or liquidity. EBITDA does not take into account our debt service requirements and other commitments, including capital expenditures, and, accordingly, is not necessarily indicative of amounts that may be available for discretionary uses. In addition, EBITDA, as presented in this press release, may not be comparable to similarly titled measures reported by other companies due to differences in the way that these measures are calculated.

Reconciliation between the Bezeq Group’s results on an IFRS and non-IFRS basis is provided in a table immediately following the Bezeq Group’s consolidated results. Non-IFRS financial measures consist of IFRS financial measures adjusted to exclude amortization of acquired intangible assets, as well as certain business combination accounting entries. The purpose of such adjustments is to give an indication of the Bezeq Group’s performance exclusive of non-cash charges and other items that are considered by management to be outside of its core operating results. The Bezeq Group’s non-IFRS financial measures are not meant to be considered in isolation or as a substitute for comparable IFRS measures, and should be read only in conjunction with its consolidated financial statements prepared in accordance with IFRS.

About B Communications Ltd.

B Communications is a telecommunications-oriented holding company and its primary holding is its controlling interest in Bezeq, The Israel Telecommunication Corp., Israel’s largest telecommunications provider (TASE: BZEQ). B Communications shares are traded on NASDAQ and the TASE under the symbol BCOM. For more information, please visit the following Internet sites:

www.igld.com

www.bcommunications.co.il

www.ir.bezeq.co.il

Forward-Looking Statements

This press release contains forward-looking statements that are subject to risks and uncertainties.  Factors that could cause actual results to differ materially from these forward-looking statements include, but are not limited to, general business conditions in the industry, changes in the regulatory and legal compliance environments, the failure to manage growth and other risks detailed from time to time in B Communications’ filings with the Securities Exchange Commission.  These documents contain and identify other important factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements.  Stockholders and other readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made.  We undertake no obligation to update publicly or revise any forward-looking statement.

For further information, please contact:

Idit Cohen – IR Manager

idit@igld.com / Tel: +972-3-924-0000

Investor relations contacts:

Mor Dagan – Investor Relations

mor@km-ir.co.il / Tel: +972-3-516-7620

B Communications Ltd.

Consolidated Statement of Financial Position

B Communications Ltd.

Consolidated Statement of Financial Position (cont’d)