B Communications Reports Fourth Quarter and Full Year 2012 Financial Results

  B Communications Reports Fourth Quarter and Full Year 2012 Financial Results

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

Business Wire

RAMAT GAN, Israel -- March 14, 2013

B Communications Ltd. (NASDAQ Global Market: BCOM)(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
                                           
                                              Convenience
                                              translation into
                                              U.S. dollars
                              December 31,    (Note A)
                              2012   2011    2012
                              NIS     NIS     US$
  Short term liabilities      515     526     138
  Long term liabilities       3,542   3,874   949
  Total liabilities           4,057   4,400   1,087
  Cash and cash equivalents   694     354     186
  Total net debt              3,363   4,046   901
                                              
  * 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
                                                             
                                   Convenience                    Convenience
                                   translation                    translation
                                   into                           into
                   Quarter ended   U.S. dollars   Year ended      U.S. dollars
                   December 31,    (Note A)       December 31,    (Note A)
                   2012   2011    2012           2012   2011    2012
                   NIS     NIS     US$            NIS     NIS     US$
  Revenues         -       -       -              -       -       -
  Financial        (39)    (84)    (10)           (262)   (367)   (70)
  expenses, net
  Other expenses   (1)     (2)     -              (4)     (7)     (1)
  PPA
  amortization,    (50)    (117)   (13)           (333)   (407)   (89)
  net
  PPA onetime      -       (92)    -              -       (92)    -
  tax adjustment
  Interest in
  Bezeq's net      160     174     42             564     654     151
  income
  Net profit       70      (121)   19             (35)    (219)   (9)
  (loss)
                                                                  

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.

                                                           
  Bezeq Group           Q4      Q4      Change  FY 2012  FY 2011  Change
  (consolidated)         2012     2011
                         (NIS millions)             (NIS millions)
  Revenues               2,449    2,650    -7.6%    10,278    11,373    -9.6%
  Operating profit       772      698      10.6%    3,035     3,242     -6.4%
  EBITDA                 1,133    1,053    7.6%     4,471     4,637     -3.6%
  EBITDA margin          46.3%    39.7%             43.5%     40.8%
  Net profit
  attributable to        519      524      -1.0%    1,858     2,066     -10.1%
  Bezeq shareholders
  Diluted EPS (NIS)     0.19    0.19    0.0%    0.68     0.76     -10.5%
  Cash flow from         1,002    859      16.6%    4,014     3,186     26.0%
  operating activities
  Payments for           192      544      -64.7%   1,235     1,637     -24.6%
  investments, net
  Free cash flow ^1     810     315     157.1%  2,779    1,549    79.4%
  Net debt/EBITDA (end   1.79     1.57              1.79      1.57
  of period) ^2
  Net
  debt/shareholders'    3.25    2.75           3.25     2.75     
  equity (end of
  period)
                                                                        
  ^1 Free cash flow is defined as cash flows from operating activities less
  net payments for investments.
  ^2 EBITDA in this calculation refers to the trailing twelve months.
  

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:

           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
 A.    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.
  
           Use of non-IFRS Measurements: We and the Bezeq Group’s management
           regularly use supplemental non-IFRS financial measures internally
  B.       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.

 B Communications Ltd.
  Consolidated Statements of Financial Position as at December 31
  (In millions)
                                                          
                                                              Convenience
                                                              translation into
                                                              U.S. dollars
                                                              $1 = NIS 3.733
                                            2011     2012     2012
                                            NIS      NIS      US$
                                                              
  Assets
  Cash and cash equivalents                 1,369    862      231
  Investments including derivatives         1,284    1,379    369
  Trade receivables                         3,059    2,927    784
  Other receivables                         295      332      89
  Inventory                                 204      123      33
  Assets classified as held-for-sale        158      164      44
                                                              
  Total current assets                      6,369    5,787    1,550
                                                              
                                                              
  Investments including derivatives         119      90       24
  Long-term trade and other receivables     1,499    1,074    288
  Property, plant and equipment             7,143    6,630    1,776
  Intangible assets                         8,085    7,091    1,900
  Deferred and other expenses               412      401      107
  Investment in equity - accounted          1,059    1,005    269
  investees (mainly loans)
  Deferred tax assets                       223      126      34
                                                              
  Total non-current assets                  18,540   16,417   4,398
                                                              
  Total assets                              24,909   22,204   5,948
                                                              

 B Communications Ltd.
  Consolidated Statements of Financial Position as at December 31
  (In millions)
                                                          
                                                              Convenience
                                                              translation into
                                                              U.S. dollars
                                                              $1 = NIS 3.733
                                            2011     2012     2012
                                            NIS      NIS      US$
                                                              
  Liabilities
  Short term bank credit, current
  maturities of long-term liabilities and   1,185    1,551    416
  debentures
  Trade payables                            892      792      212
  Other payables including derivatives      840      733      196
  Dividend payable                          669      669      179
  Current tax liabilities                   499      545      146
  Provisions                                186      155      42
  Employee benefits                         389      258      69
                                                              
  Total current liabilities                 4,660    4,703    1,260
                                                              
  Debentures                                5,403    5,015    1,343
  Bank loans                                6,753    6,453    1,729
  Loans from institutions and others        544      540      145
  Dividend payable                          636      -        -
  Employee benefits                         229      246      66
  Other liabilities                         186      67       18
  Provisions                                69       66       18
  Deferred tax liabilities                  1,426    1,054    282
                                                              
  Total non-current liabilities             15,246   13,441   3,601
                                                              
  Total liabilities                         19,906   18,144   4,861
                                                              
  Equity
  Total equity attributable to Company's    936      901      241
  shareholders
  Non controlling interest                  4,067    3,159    846
  Total equity                              5,003    4,060    1,087
                                                              
  Total liabilities and equity              24,909   22,204   5,948
                                                              

B Communications Ltd.
Consolidated Statements of income for the year ended December 31
(In millions, except per share data)
                                                          
                                                              Convenience
                                                              translation into
                                                              U.S. dollars
                                                              $1 = NIS 3.733
                                            2011     2012     2012
                                            NIS      NIS      US$
                                                              
Revenues                                    11,373   10,278   2,753
                                                              
Cost and expenses
Depreciation and amortization               2,984    2,805    751
Salaries                                    2,114    1,984    531
General and operating expenses              4,462    3,992    1,069
Other operating (income) expenses, net      326      (16)     (4)
                                                              
                                            9,886    8,765    2,347
                                                              
Operating income                            1,487    1,513    406
                                                              
Finance expenses, net                       498      376      101
                                                              
Income after financing expenses, net        989      1,137    305
                                                              
Share in losses of equity – accounted       216      245      66
investees
                                                              
Income before income tax                    773      892      239
                                                              
Income tax                                  653      406      109
                                                              
Net income for the year                     120      486      130
                                                              
Income (loss) attributable to:
Owners of the Company                       (219)    (35)     (9)
Non-controlling interest                    339      521      139
                                                              
Net income for the year                     120      486      130
                                                              
Loss per share, basic                       (7.34)   (1.16)   (0.31)
                                                              
Loss per share, diluted                     (7.38)   (1.18)   (0.32)
                                                              

B Communications Ltd.
Reconciliation for NON-IFRS Measures
EBITDA

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

In millions
                                                          
                                                              Convenience
                                                              translation into
                                                              U.S. dollars
                                                              $1 = NIS 3.733
                                                              Year ended
                              Year ended December 31,         December 31,
                              2011              2012         2012
                              NIS                NIS          US$
                                                              
Operating income              3,242              3,035        813
Depreciation and              1,395              1,436        385
amortization
                                                              
EBITDA                        4,637              4,471        1,198
                                                              

Free Cash Flow

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

In millions
                                                           
                                                             Convenience
                                                              translation into
                                                              U.S. dollars
                                                              $1 = NIS 3.733
                                                              Year ended
                                    Year ended December 31,   December 31,
                                    2011         2012        2012
                                    NIS           NIS         US$
                                                              
Cash flow from operating            3,186         4,014       1,075
activities
Purchase of property, plant and     (1,548)       (1,271)     (341)
equipment
Investment in intangible assets     (355)         (269)       (72)
and deferred expenses
Proceeds from the sale of
property, plant and equipment and   266           305         82
refund from the Ministry of
Communications
                                                              
Free cash flow                      1,549         2,779       744

Contact:

Idit Cohen – IR Manager
+972-3-924-0000
idit@igld.com
or
Investor relations contacts:
Mor Dagan - Investor Relations
+972-3-516-7620
mor@km-ir.co.il