B Communications Reports Its Financial Results for the Fourth Quarter and Full Year of 2013

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

Bezeq’s Results: For the fourth quarter of 2013, the Bezeq Group reported revenues of NIS 2.4 billion ($694 million) and operating profit of NIS 593 million ($171 million). Bezeq’s EBITDA for the fourth quarter totaled NIS 921 million ($265 million), representing an EBITDA margin of 38%. Net income for the period attributable to Bezeq’s shareholders totaled NIS 352 million ($101 million). Bezeq's cash flow from operating activities during the period totaled NIS 935 million ($269 million).

Cash Position: As of December 31, 2013, B Communications’ unconsolidated cash and cash equivalents totaled NIS 664 million ($191 million), its unconsolidated total debt was NIS 3.5 billion ($1 billion) and its net debt totaled NIS 2.9 billion ($829 million).

B Communications' refinancing: On February 19, 2014, B Communications announced the closing of its successful private offering of $800 million of 7⅜% Senior Secured Notes due 2021 (the "Notes"). The Notes were offered and sold in the United States to qualified institutional buyers pursuant to Rule 144A under the U.S. Securities Act of 1933, as amended (the "Securities Act") and to certain qualifying investors in offshore transactions, including in Israel, in reliance on Regulation S under the Securities Act. The Notes have been admitted for trading on the system of the Tel Aviv Stock Exchange for trading by institutional investors, known as TACT Institutional.

B Communications used the net proceeds from the Notes offering to repay all amounts outstanding under the loans it incurred to acquire its controlling interest in Bezeq and to deposit funds into a debt service account. In addition, B Communications issued a notice that it will redeem all of its outstanding Series A Debentures on March 17, 2014 for the total consideration of NIS 203 million ($58 million).

Dividend from Bezeq: In accordance with Bezeq's dividend policy, its Board of Directors recommended the distribution of 100% of its profits for the second half of 2013 as a cash dividend of NIS 802 million ($231 million) to shareholders. The dividend, which is subject to shareholder approval, is expected to be paid on April 23, 2014 to shareholders of record as of April 6, 2014. B Communications’ share of the dividend distribution is expected to be approximately NIS 248 million ($71 million).

B Communications’ Fourth Quarter and Full Year Financial Results

B Communications’ consolidated revenues for the fourth quarter of 2013 were NIS 2,409 million ($694 million), a 1.6% decrease compared with NIS 2,449 million reported in the fourth quarter of 2012. For the full year 2013, B Communications’ revenues totaled NIS 9,563 million ($2,755 million), a 7% decrease compared to NIS 10,278 million reported in 2012. For both the current and the prior-year periods, B Communications’ consolidated revenues consisted entirely of Bezeq’s revenues.

During the fourth quarter of 2013, B Communications recorded net amortization expenses of NIS 133 million ($38 million) related to its Bezeq purchase price allocation (“Bezeq PPA”) in its consolidated financial statements. From April 14, 2010, the date of the acquisition of its interest in Bezeq, until December 31, 2013, B Communications has amortized approximately 60% 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’ unconsolidated net financial expenses for the fourth quarter of 2013 totaled NIS 64 million ($18 million). These expenses consisted primarily of NIS 57 million ($16 million) of interest and CPI linkage expenses on the long-term loans incurred to finance the Bezeq acquisition and expenses of NIS 17 million ($5 million) related to its publicly-traded debentures. These expenses were offset in part by financial income of NIS 10 million ($3 million) generated by short term investments.

B Communications’ unconsolidated net financial expenses for 2013 totaled NIS 236 million ($68 million). These expenses consisted primarily of NIS 223 million ($64 million) of interest and CPI linkage expenses on the long-term loans incurred to finance the Bezeq acquisition and NIS 57 million ($16 million) of expenses related to its publicly traded debentures. These expenses were offset in part by financial income of NIS 35 million ($10 million) generated by short term investments.

B Communications’ net income attributable to shareholders for the fourth quarter of 2013 was NIS 3 million ($1 million) compared to NIS 17 million in the fourth quarter of 2012. For the full year 2013, B Communications’ net income attributable to shareholders totaled NIS 116 million ($33 million) compared to NIS 46 million reported in 2012.

Comments of Management

Commenting on the results, Mr. Doron Turgeman, B Communications’ CEO, stated, “2013 was a very good year for B Communications. We progressed in line with our business plan and met all of our goals, which are based on the stable platform and unique strength of Bezeq, our base asset, which continues to prove its long-term cash-generating power. We are very pleased with our 2013 results and with the results of our refinancing process which we announced on February 19, 2014. The demand for that offering, which was three times oversubscribed, speaks for itself. Since April 2010, when we acquired our controlling interest in Bezeq, we have decreased our net debt from more than NIS 5 billion to approximately NIS 3 billion as of today. We are now advancing to the next phase. Our new debt structure has significantly improved our financial condition, provides us with a more convenient loan repayment schedule and should improve our future free cash flow.”

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, 2013. For a full discussion of Bezeq’s results for the fourth quarter and full year of 2013, please refer to its website: http://ir.bezeq.co.il.

Revenues of the Bezeq Group amounted to NIS 9.56 billion ($2.76 billion) in 2013 compared with NIS 10.28 billion in 2012, a decrease of 7.0%. The reduction in the Bezeq Group’s revenues was primarily related to a decrease in the revenues of Pelephone due to increased competition in the market. The decrease was partially offset by an increase in the revenues of Bezeq International.

Revenues of the Bezeq Group in the fourth quarter of 2013 amounted to NIS 2.41 billion ($694 million) compared with NIS 2.45 billion in the corresponding quarter of 2012, a decrease of 1.6%.

Profitability metrics were influenced by an increase in the net provision for employee retirement expenses in Bezeq’s fixed-line segment, which amounted to NIS 90 million ($26 million) in 2013, of which NIS 54 million ($16 million) was recorded in the fourth quarter of 2013. By comparison, the provision for employee retirement expenses in 2012 amounted to NIS 32 million, of which NIS 19 million was recorded in the fourth quarter. In addition, in the fourth quarter of 2012 there was an exceptionally large amount of capital gains recorded from the sales of real estate and copper in the amount of NIS 130 million compared with NIS 35 million ($10 million) in the fourth quarter of 2013. Furthermore, in the fourth quarter of 2013, Pelephone recorded a one-time expense in the amount of NIS 61 million ($18 million) due to the implementation of an agreement with its employee labor union.

Operating profit of the Bezeq Group in 2013 amounted to NIS 2.82 billion ($812 million) compared with NIS 3.04 billion in 2012, a decrease of 7.3%. Operating profit in the fourth quarter of 2013 amounted to NIS 593 million ($171 million) compared with NIS 778 million in the corresponding quarter of 2012, a decrease of 23.8%.

Earnings before interest, taxes, depreciation and amortization (EBITDA) of the Bezeq Group in 2013 amounted to NIS 4.13 billion ($1.19 billion) (EBITDA margin of 43.2%) compared with NIS 4.48 billion in 2012 (EBITDA margin of 43.6%), a decrease of 7.8%. EBITDA in the fourth quarter of 2013 amounted to NIS 921 million ($265 million) (EBITDA margin of 38.2%) compared with NIS 1.14 billion (EBITDA margin of 46.5%) in the corresponding quarter of 2012, a decrease of 19.1%.

Net profit attributable to Bezeq shareholders in 2013 amounted to NIS 1.77 billion ($510 million) compared with NIS 1.86 billion in 2012, a decrease of 4.8%. Net profit in the fourth quarter of 2013 amounted to NIS 352 million ($101 million) compared with NIS 522 million in the corresponding quarter of 2012, a decrease of 32.6%.

Operating cash flow of the Bezeq Group in 2013 amounted to NIS 4.15 billion ($1.20 billion) compared with NIS 4.01 billion in 2012, an increase of 3.4%. Free cash flow in 2013 amounted to NIS 3.24 billion ($932 million) compared with NIS 2.78 billion in 2012, an increase of 16.4%.

Net financial debt of the Bezeq Group was NIS 8.09 billion ($2.33 billion) as of December 31, 2013 compared with NIS 8.00 billion as of December 31, 2012.

Notes:

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: BEZQ). 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.