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B Communications Ltd.

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FY2022 Annual Report · B Communications Ltd.
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B Communications Ltd. 

2022 Annual Report  

  Chapter A - Description of the Corporation's Business 

  Chapter B - Report of the Board of Directors on the State of the Corporation's business 

  Chapter C - Financial Statements 

  Chapter D - Additional Details on the Corporation and Corporate Governance Questionnaire 

  Chapter E - Report on the Effectiveness of Internal Control   

THIS  DOCUMENT  IS  AN  ENGLISH  TRANSLATION  OF  THE  HEBREW 
VERSION  OF  THE  COMPANY’S  FINANCIAL  STATEMENTS  AND  THE 
MANAGEMENT  DISCUSSION  AND  ANALYSIS  FOR  FISCAL  YEAR  2022 
(THE  “REPORTS”).  THE  HEBREW  VERSION  OF  THE  REPORTS  IS  THE 
BINDING VERSION AND THE ONLY VERSION HAVING LEGAL EFFECT. 
THE ENGLISH TRANSLATION HAS BEEN CREATED FOR THE PURPOSE 
OF CONVENIENCE ONLY. THE APPROVAL OF THE COMPANY’S BOARD 
OF DIRECTORS WAS GIVEN TO THE HEBREW VERSION ONLY AND NO 
SUCH APPROVAL HAS BEEN GIVEN TO THE ENGLISH TRANSLATION. 
THIS ENGLISH TRANSLATION WAS NOT SUBMITTED TO THE ISRAELI 
IS  NOT  REVIEWED  BY  ANY 
SECURITIES  AUTHORITY  AND 
REGULATORY AUTHORITY. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

Chapter A 

Description of the Corporation's Business 

2022 Periodic Report 

ב 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

Chapter A - Description of the Corporation's Business - Table of Contents 

1. 

Description of the general development of the Group's business 

1 

1.1.  Group activity and description of the development of its business .................... 1 

1.2. 

Areas of activity .................................................................................................. 10 

1.3. 

Investments in the corporation's capital and transactions in its shares ............ 10 

1.4. 

Dividend distribution .......................................................................................... 11 

1.5. 

Financial information regarding the areas of activity of the Group ................... 12 

1.6. 

Forecast in relation to the Group  ...................................................................... 19 

1.7.  General environment and the influence of external factors on the group's activities

 ............................................................................................................................ 20 

1.8. 

Bezeq Group business strategy .......................................................................... 32 

1.9. 

Incident outside the scope of the corporation's business.................................. 34 

1.10.  Corporate accountability (ESG) .......................................................................... 35 

2. 

Bezeq – Interior landline communications 

36 

2.1.  General information about the field of activity .................................................. 36 

2.2. 

Products and services ......................................................................................... 41 

2.3. 

Products and services revenue segmentation.................................................... 44 

2.4. 

Customers ........................................................................................................... 44 

2.5.  Marketing, distribution and service.................................................................... 44 

2.6. 

Competition ........................................................................................................ 45 

2.7. 

Property, plant and equipment and facilities ..................................................... 51 

2.8. 

Intangible assets ................................................................................................. 56 

2.9.  Human capital ..................................................................................................... 56 

2.10.  Equipment and suppliers .................................................................................... 59 

2.11.  Working equity ................................................................................................... 60 

2.12. 

Investments ........................................................................................................ 60 

2.13.  Funding ............................................................................................................... 60 

2.14.  Taxation .............................................................................................................. 62 

2.15.  Environmental risks and their ways of management ......................................... 62 

2.16.  Restrictions and supervision of Brezeq’s operations ......................................... 63 

2.17.  Material agreements .......................................................................................... 83 

2.18.  Legal Proceedings ............................................................................................... 85 

2.19.  Targets and Business Strategy ............................................................................ 92 

2.20.  Discussion of risk factors .................................................................................... 93 

3. 

Pelephone - Mobile radio (cellular telephony) 

99 

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Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

3.1.  General information about the field of activity .................................................. 99 

3.2. 

Services and products ....................................................................................... 102 

3.3. 

Products and services revenue segmentation.................................................. 103 

3.4. 

Customers ......................................................................................................... 104 

3.5.  Marketing, distribution and service.................................................................. 104 

3.6. 

Competition ...................................................................................................... 104 

3.7. 

Property, plant and equipment and facilities ................................................... 105 

3.8. 

Intangible assets ............................................................................................... 107 

3.9.  Human capital ................................................................................................... 110 

3.10.  Suppliers ........................................................................................................... 112 

3.11.  Working equity ................................................................................................. 112 

3.12.  Taxation ............................................................................................................ 113 

3.13.  Environmental risks and their ways of management ....................................... 113 

3.14.  Restrictions and supervision of Pelephone’s operations ................................. 114 

3.15.  Material agreements ........................................................................................ 119 

3.16.  Legal proceedings ............................................................................................. 119 

3.17.  Targets and business strategy .......................................................................... 121 

3.18.  Expected development in the coming year ...................................................... 121 

3.19.  Discussion of risk factors .................................................................................. 121 

4. 

Bezeq International - Internet, international communications and network endpoint 
services 

128 

4.1.  General .............................................................................................................. 128 

4.2. 

Products and services ....................................................................................... 129 

4.3. 

Revenue ............................................................................................................ 130 

4.4. 

Customers ......................................................................................................... 123 

4.5.  Marketing, distribution and service.................................................................. 123 

4.6. 

Competition ...................................................................................................... 123 

4.7. 

Property, plant and equipment and facilities ................................................... 126 

4.8.  Human capital ................................................................................................... 134 

4.9. 

Suppliers ........................................................................................................... 136 

4.10.  Taxation ............................................................................................................ 137 

4.11.  Restrictions and supervision of Bezeq International's activities ...................... 138 

4.12.  Legal proceedings ............................................................................................. 139 

4.13.  Targets, business strategy and development prospects .................................. 132 

4.14.  Discussion of risk factors .................................................................................. 140 

5. 

DBS - Multi-channel TV 

145 

ד 

 
 
Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

5.1.  General information about the field of activity ................................................ 136 

5.2. 

Products and services ....................................................................................... 140 

5.3. 

Revenue from products and services ............................................................... 150 

5.4. 

Customers ......................................................................................................... 150 

5.5.  Marketing and distribution ............................................................................... 151 

5.6. 

Competition ...................................................................................................... 151 

5.7. 

Production capacity .......................................................................................... 153 

5.8. 

Property, plant and equipment, real estate and facilities ................................ 153 

5.9. 

Intangible assets ............................................................................................... 154 

5.10.  Broadcasting rights ........................................................................................... 155 

5.11.  Human capital ................................................................................................... 156 

5.12.  Suppliers ........................................................................................................... 157 

5.13.  Financing ........................................................................................................... 158 

5.14.  Taxation ............................................................................................................ 158 

5.15.  Restrictions and supervision of DBS ................................................................. 158 

5.16.  Material agreements ........................................................................................ 161 

5.17.  Legal proceedings ............................................................................................. 162 

5.18.  Targets and strategy ......................................................................................... 164 

5.19.  Discussion of risk factors .................................................................................. 165 

6. 

Appendix A - The Company 

172 

6.1. 

Financing ........................................................................................................... 172 

6.2. 

Legal proceedings ............................................................................................. 172 

7. 

8. 

Appendix A - Definitions 

Appendix B - Financial Indices and Key Performance Indicators 

175 

180 

ה 

 
 
 
Chapter A - Description of the Corporation's Business 

B.  Communications  Ltd.  (“the  Company")  together  with  the  subsidiary  Bezeq  the  Israeli  Telecommunications 
Corporation Ltd. ("Bezeq") and Bezeq’s wholly owned subsidiaries, whose financial statements are consolidated with 
Bezeq's statements, will be called together in this periodic report - "the Group” or "Bezeq Group".  

For convenience, Appendix A this chapter contains a glossary of terms in relation to the key terms mentioned in it.  

1.  Description of the general development of the Group's business 

1.1. 

Group activity and description of the development of its business 

1.1.2. 

General 

The Company was incorporated in Israel in 1999 under the name Gold E Ltd. and on March 
16, 2010 changed its name to its current name. From its inception until October 2007, the 
Company was fully owned by Internet Gold Ltd., in October 2007 the Company's shares 
were first issued on the NASDAQ stock exchange and in November 2007 the Company's 
shares were listed on the Tel Aviv Stock Exchange under a double listing arrangement. On 
December 2, 2019, the transaction with Searchlight II BZQ LP and a corporation controlled 
by  the  Forer  family  (TNR  Investments  Ltd.)  was  completed,  in  which  control  of  the 
Company  and  Bezeq  was  transferred  to  these  entities,  following  the  liquidation  of 
Eurocom Communications Ltd., in which the holdings in the Company of its subsidiary, 
Internet Gold, were sold. 

On September 9, 2020, the Company announced the voluntary delisting of its shares from 
trading on the NASDAQ Stock Exchange, and as of that date, the Company's securities are 
traded on the Tel Aviv Stock Exchange only and the Company is a “reporting corporation” 
within the meaning of this term in the Securities Law, 5728-1968. ("Securities Law"). 

As of April 14, 2010, the Company operates in the field of communication, through its 
holdings in Bezeq shares. 

1.1.3. 

Acquisition of control of Bezeq 

On April 14, 2010, the Company completed an acquisition of 30.44% of the issued and 
paid-up equity and voting rights in Bezeq, in exchange for a total amount of approximately 
NIS 6.5 billion in cash and became the largest shareholder in Bezeq, and as of the financial 
statements  for  the  first  quarter  of  2010,  the  Company  consolidates  Bezeq's  financial 
statements in its own financial statements. 

As of the date of this report, the Company holds approximately 26.81% of Bezeq's issued 
and paid-up equity. 

For  further  details  regarding  the  control  of  the  Company  and  the  control  permit  in 
connection with the Company's holding in Bezeq shares, see Section 1.1.4 below. 

1.1.4. 

Bezeq Group - General 

radio 

As of the date of publication of this periodic report, Bezeq Group is a major provider of 
communications services in the State of Israel. Bezeq Group performs and provides a wide 
range of Bezeq operations and Bezeq services, including landline interior communication 
services,  mobile 
international 
communication services, and multi-channel television services over satellite and over the 
infrastructure  and  access  services,  call  center  services, 
Internet  (OTT),  Internet 
maintenance  and  development  of 
infrastructure,  providing 
communication services to other communication providers, including wholesale market 
services,  distribution  of  television  and  radio  broadcasts,  supply  and  maintenance  of 
equipment and services in customer premises (network endpoint services). 

telephone  services 

communication 

telephony), 

(cellular 

Bezeq was established in 1980 as a government company to which Bezeq's activities that 
had taken place up to that date in the Ministry of Communications were transferred, and 
it was privatized over the years. Since 1990,  the Company has been a public company 
whose shares are traded on the Stock Exchange. 

Below is a diagram of the structure of the holdings in the Group as of the date of approval 
of this report (March 14, 2022):  

 
Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

CThe 

ompany

(*)

26.80%

Bezeq Israel Telecommunications Corporation Ltd.

Bezeq 
Online

DBS

Bezeq 
International

Pelephone

100% 

100% 

100% 

100% 

 (*) Regarding the Company and the control of Bezeq - see Sections 1.1.1, 1.1.2 and 1.1.4 in this chapter.  

1.1.4. 

Control of the Company 

On December 2, 2019, a debt arrangement was completed between the Company and its 
bondholders, as part of which Searchlight II BZQ LP and a corporation controlled by the 
Forer  family  (TNR 
Investments  Ltd.)  purchased  control  of  the  Company  (and 
consequently, the control of Bezeq). It should be noted that as of the date of the report, 
Bezeq shares are held by the Company directly. 

As of the date of completion of the debt arrangement as stated above, the controlling 
shareholders of the Company are Searchlight II BZQ LP, a limited partnership incorporated 
in  the  Cayman  Islands  ("Searchlight")  and  TNR  Investments  Ltd.  ("TNR"),  a  private 
company  incorporated  in  Israel.  The  final  general  partner  of  Searchlight  is  Searchlight 
Capital  Partners  II  GP  LLC,  a  limited  liability  company  incorporated  in  the  State  of 
Delaware,  which  is  held  by  a  number  of  individuals  including  Eric  Zinterhofer,  Erol 
Uzumeri  and  Oliver  Harmaann,  the  latter  being  among  the  only  ones  to  receive  the 
Company's control permit from the Ministry of Communications. TNR is wholly owned 
and fully controlled by Mr. David Forer (50%) and Mrs. Michal Forer (50%). Searchlight 
and TNR are considered controlling shareholders in the Company by virtue of a control 
permit  dated  November  11,  2019  and  by  virtue  of  a  voting  agreement  between  them 
which gives them a cumulative holding, as of the date of publication of this report, of 
approximately 77.61% of the voting rights in the Company. 

To  the  best  of  the  Company's  knowledge,  the  shareholders'  agreement  between 
Searchlight and TNR includes, among other things, a provision according to which as long 
as  the  holdings  of  an  "Israeli  factor"  in  Bezeq's  controlling  shareholder  are  required, 
Searchlight  will  grant  TNR  power  of  attorney  regarding  the  amount  of  shares  that  will 
allow TNR to vote at the general meetings of the Company, an amount of shares equal to: 
(a) the  number of shares held by TNR on the effective  date of the meeting, or (b)  the 
number of shares that reflects 19% of the issued equity and voting rights in the Company 
on the effective date of the meeting, whichever is higher. To the best of the Company's 
knowledge,  the  shareholders'  agreement  includes  additional  provisions,  including  an 
obligation by Searchlight to refrain from voting for the approval of certain issues without 
the consent of TNR. 

The control permit 

On November 11, 2019, the Minister of Communications, by virtue of his authority and by 
virtue  of  the  Prime  Minister's  authority  (jointly:  "the  Ministers")  transferred  thereto, 
granted Bezeq control permits under Article 4D of the Communications Law and Article 3 

2 

 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

of  the  Communications  Order  (Bezeq  and  Broadcasting)  (Determination  of  Essential 
Service Provided by Bezeq the Israel Telecommunications Coropration Ltd.), 5757-1997 
("Communications Order"), as follows: 

a.  A control permit for corporations is given to the Company, Searchlight corporations, 

and TNR ("Permit for Corporartions"). 

b.  A control permit for individuals to hold means of control in Bezeq and to control it is 
given to Michal Forer, David Forer, Oliver Harmaann, Erol Uzumeri, Eric Zinterhofer, 
and Darren Glatt1 ("Permit for Individuals").  

The Permit for Corporations and the Permit for Individuals will be jointly referred to as 
"the  Control  Permits"  and  the  parties  to  whom  such  permits  were  granted  will  be 
referred to as "the Permit Holders". It should be noted that as of October 11, 2021 and 
in accordance with the amendment to the control permit dated August 22, 2021, Bezeq 
shares are held by the Company directly. 

The Control Permits were issued for the control and possession of means of control in 
Bezeq at a  minimum rate of  not less than 25%2. The control permits allow the  Permit 
Holders to control Bezeq directly and indirectly, and they also allow Searchlight and TNR 
to make a "joint appointment" of directors, as defined in the Communications Order, in 
Bezeq and the Company. 

The  Control  Permits  also  stipulate  provisions  regarding  the  minimum  holding  rate  in 
Bezeq of an "Israeli entity" as defined in the Communications Order3.  

Preconditions set out in the Control Permits 

The control permit stipulates, inter alia, as follows: 

"3.1.  The Articles of Association of BCOM, Bezeq and its subsidiaries 

must include instructions as detailed below: 

A. 

 The  method  of  appointing  the  directors  set  forth  in  the 
Company's Articles of Association will not be changed without 
the prior written approval of the Minister of Communications; 

B.  The  Company  shall  report  to  the  Ministers  on  a  holder  of  a 
means of control therein holding excess holdings as soon as it 
becomes aware of the existence of such excess holdings; 

C.  The  Company  shall 

report 

the 
transformation  of  a  shareholder  therein  into  a  stakeholder  in 
Bezeq  within  48  hours  from  the  date  the  Company  became 
aware of the change. 

the  Ministers  on 

to 

3.2. 

 The  Articles  of  Association  of  the  subsidiaries  must  include 

1   The permit is given to Mr. Darren Glatt for his status in Searchlight in the context of the acquisition of control of the Company. In addition, 

he serves as Chairman of the Company's Board of Directors and as a director in Bezeq. 

2   The minimum rate is defined as 25% of any type of means of control in Bezeq, or a lower rate according to the approval of the Ministers by 
virtue of Article 3 (a2) of the Communications Order. The minimum rate may change if the Minister of Communications becomes convinced 
that the conditions set forth in Article 3 (a3) of the Communications Order are met. 

3   The Control Permits were issued subject to the fact that David and Michal Forer are citizens and residents of Israel, and it is stipulated therein 
that as long as the Communications Order requires the possession of a means of control by an Israeli entity, as defined in the Communications 
Order, TNR and / or Michal Forer and David Forer will not transfer means of control in Bezeq without the prior written approval of the 
Ministers, if such a transfer is sufficient to reduce their holdings, as the case may be, in means of control of any kind in Bezeq to a rate lower 
than  the  minimum  rate  according  to  the  Communications  Order.  It  was  also  determined  that  any  change  in  the  Israeli  citizenship  and 
residency  of  Michal  Forer  and  David  Forer  would  constitute  a  ground  for  revoking  the  control  permit.  In  July  2020,  after  a  hearing,  the 
Ministry of Communications changed the requirement for the holding of a minimum percentage of means of control in a general licensee by 
an  Israeli  entity  and  expanded  the  discretion  of  the  Ministers  to  approve  holdings  by  non-Israeli  entities.  Following  this,  the  Ministry  of 
Communications amended the licenses of Cellcom and Partner, but the intended amendment proposed at the hearing in the Communications 
Order applicable to Bezeq has not yet been implemented. 

3 

 
 
 
Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

provisions regarding the rights of the Israeli entity, as defined in 
the  Communications  Order,  for  the  appointment  of  directors 
in  accordance  with  Article  4(a)(2)(b)(2)  of  the 
therein, 
Communications Order;" 

In  accordance  with  the  above,  the  Company  amended  its  Articles  of  Association  as 
required. 

On  April  2,  2020,  Bezeq’s  Board  of  Directors  convened  a  general  meeting  of  Bezeq 
shareholders  for  May  14,  2020,  on  the  agenda  of  which  is  the  amendment  of  Bezeq’s 
Articles of Association in the wording requested by the Company, as follows: 

"After Regulation 95 of the Articles of Association, Regulation 95A shall 
be added as follows: 

The  method  of  appointing  the  directors  set  forth  in  the 
95 a. 
Company's  Articles  of  Association  will  not  be  changed  without  prior 
written approval from the Minister of Communications; 

After  Regulation  42,  Regulations  42A  and  42B  shall  be  added  to  the 
Articles of Association as follows: 

42 a. 
The  Company  shall  report  to  the  Ministers  as  defined  in  the 
Communications  Order,  on  a  holder  of  a  means  of  control  therein 
holding excess holdings therein as defined in the Communications Order, 
as soon as it becomes aware of the existence of such excess holdings; 

The  Company  shall 

the 
report 
42 b. 
transformation  of  a  shareholder  therein  into  a  stakeholder  in  Bezeq 
within  48  hours  from  the  date  the  Company  became  aware  of  the 
change." 

the  Ministers  on 

to 

Bezeq's Board of Directors attached to the above summons a recommendation according 
to  which  "it  was  found  that  the  requested  changes  in  the  Company's  Articles  of 
Association are in favor of the Company and all its shareholders”. Of Bezeq that took place 
on  14.5.2020  did  not  approve  the  company's  request  to amend  Bezeq's  regulations  as 
required by the control permit. 

Regarding  the  manner  of  amending  each  of  the  Articles  of  Association  of  each  of  the 
subsidiaries (in order to include in each Articles of Association the provisions of Article 
4(a)(2)(b)(2) of the Communications Order, regarding the rights of the Israeli entity, as 
defined in the Communications Order, to appoint directors in subsidiaries) - it was agreed 
that  the  amendment  of  the  subsidiaries’  Articles  of  Association  will  be  made  after  the 
amendment of Bezeq’s Articles of Association. 

The lien permit 

On  November  11,  2019,  Reznik  Paz  Nevo  Trust  Ltd.  was  granted,  as  a  trustee  for 
bondholders issued by the Company (“the Trustee") by the Ministers, a permit to hold 
means  of  control  in  Bezeq  by  way  of  encumbrance  on  the  entire  shares  held  by  the 
Company, directly or indirectly, pursuant to Article 4d of the Communications Law and 
Article 3 of the Communications Order ("the Lien Permit"). 

The Lien Permit stipulates that it constitutes a permit for holding or operating means of 
control in Bezeq by way of lien only, and it does not constitute a permit for control or 
transfer of control in Bezeq. In addition, it was determined that the rights granted to the 
Trustee  and  anyone  holding  debentures  in  the  framework  of  which  debentures  were 
pledged to the Trustee for Bezeq should not be considered a transfer of ownership of the 
means of control of Bezeq, but only a lien as collateral. 

In addition, the Lien Permit includes restrictions on the procedures for exercising the lien 
by  virtue  thereof,  taking  into  account,  among  other  things,  the  provisions  of  the 
Communications Order, including provisions according to which the lien will be carried 

4 

 
 
Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

out only by appointing a receiver and trustee whose identity has been approved by the 
Ministers according to various parameters specified in the permit. In addition, similar to 
the  control  permits  as  detailed  above  and  the  reuiqred  changes,  the  Lien  Permit  also 
includes  provisions  allowing  the  Ministry  of  Communications  to  revoke  it,  including  in 
circumstances of concern of harming State security or vital public needs and other cases4 
in which, If the Ministers see that there is a real concern of harm to the provision of the 
essential service by Bezeq or the ground for determining it as an essential service, the 
Ministers will be entitled to act as stated in the Communications Order, including the issue 
of provisions and revocation of the permit. 

It  should  be  noted  that  on June  19,  2022,  approval  was  received  from  the  Ministry  of 
Communications to amend the pledge permit in such a way that Bezeq shares pledged by 
the  Company  will  also  be  processed  for  the  benefit  of  the  holders  of  the  Company's 
debentures (series F). For details, see the Company's report of June 20, 2022 [reference: 
2022-01-075823]. 

Amendment to the Communication Order 

On  September  4,  2022,  the  draft  Communications  Order  (Bezeq  and  Broadcasting) 
(Determining Essential Service Provided by Bezeq, the Israel Telecommunications Corp. 
Ltd.),  (Amendment),  5782-2022  (the  “Draft  Amendment”)  was  published  on  the 
government  legislation  website  for  public  comments  until  September  25,  2022.  In 
accordance with what is detailed in the introduction and in the explanatory notes to the 
Draft Amendment, BCOM has applied to the Ministry of Communications with a request, 
among other things, to amend the Communications Order in a way that will allow it to 
gradually sell its holdings in the Company to the public in the future, so that at the end of 
the process it will no longer have control over the Company. Further to this, it is proposed, 
among other things, to amend the Communications Order in a way that would allow the 
controlling shareholder, subject to obtaining the approval of the Prime Minister and the 
Minister  of  Communications after  consulting  with  the  Minister  of  Defense,  to  transfer 
means  of  control  to  another  party  if,  as  a  result  of  the  transfer,  he  ceases  to  be  a 
controlling owner. The draft amendment includes proposals for additional amendments 
to the Communications Order, including, among others: 

A.  Adding  an  option  for  the  controlling  shareholder  to  replace  the  Israeliness 
requirement with instructions from the General Security Service by virtue of Article 
13 of the Communications Law. 

B.  Allowing an (Israeli) institutional investor to increase to a holding of up to 7.5% in a 

certain type of control without the need for ministerial approval. 

C.  Repeal  of  Article  7(g)  of  the  Communications  Order  which  establishes  reporting 
obligations, conditions and limitations for any entity that owns 2.5% or more of some 
type of control in a Company in a situation where over 75% of the Company's shares 
will be held by the public. 

In accordance with the announcement of the Secretary of the Government of Israel dated 
March 5, 2023, the Government approved amendments to the media order on that day. 
Amending the Communictions Order requires approval by a Knesset committee. 

1.1.5. 

In  accordance  with  Article  50(a)  of  the  Companies  Law  and  in  accordance  with 
Regulations 119 and 121 (1) of Bezeq’s Articles of Association - the powers of the CEO in 
all  matters  related  to  the  corporations  held,  directly  or  indirectly,  by  Bezeq  (Including 
Pelephone, Bezeq International, DBS And Bezeq Online) were transferred to the Board.  

1.1.6. 

Mergers, acquisitions and structural changes 

Structural change in the subsidiaries 

Following on from previous resolutions adopted by Bezeq as well as Bezeq's subsidiaries 
- Bezeq International and DBS (in this Section: “the subsidiaries") regarding a structural 

4  Including - inaccuracies in the data submitted in the permit application, failure on the part of the Trustee to provide a report as required or a 
material change in  the details provided by the Trustee, and  failure on  the part of the Trustee  on behalf of the bondholders to apply  for  the 
appointment of a receiver and trustee on the dates determined in the permit. 

5 

 
 
 
 
Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

change plan in which Bezeq International's private activities were to merge with and into 
DBS, and the spin-off of Bezeq International’s ICT activities into a new company wholly 
owned  by  Bezeq  (“the  merger  /  spin-off  plan").  On  March  16,  2022,  the  Boards  of 
Directors of Bezeq and the subsidiaries decided to cancel the merger / spin-off plan, and 
to approve an alternative plan, according to which Bezeq International's ISP activity in the 
private  segment  will  be  reduced  following  the  abolition  of  the  separation  between 
broadband infrastructure service and Internet access service (ISP) (as described in Note 
12.3 below), and ISP activity will be established in DBS for the purpose of selling "triple" 
packages  to  customers  (“the  alternative  outline"),  while  striving  to  achieve,  as  far  as 
possible,  the  strategic,  business  and  economic  purposes  that  formed  the  basis  for  the 
resolution to promote structural change, inter alia, adapting the activity to the structure 
of the industry and the changing regulation, focusing on increasing revenues and growth, 
and increasing the operational synergy and streamlining. 

According to this alternative outline, the business purposes that were at the basis of the 
spin-off / merger plan will be achieved, as DBS is expected to become a "triple" sales arm 
that combines fiber and television, and at the end of the move Bezeq International will 
become  a  growth-focused  ICT  company.  In  addition,  this  alternative  outline  has  the 
potential for a significant reduction in Bezeq International's expenses and investments in 
the ISP field in parallel with an accelerated reduction in this activity. 

In June 2022, following its request to the Ministry of Communications, DBS received a 
special license for Internet access services (ISP) and began to provide such services while 
focusing  on  the  sale  of  combined  packages  of  Internet  and  television  to  customers. 
Further  to  what  was  stated  in  Section  1.7.4  regarding  the  change  in  the  regulatory 
structure  in  the  field  of  Bezeq,  as  of  October  2,  2022,  the  provisions  of  the 
Communications Regulations (Bezeq and Broadcasting) (General Permit for the Provision 
of Bezeq Services), 5782-2022, instead of the provisions of the said license. 

On August 28, 2022, Mr. Ilan Siegel began to serve as CEO of the subsidiaries Pelephone, 
DBS and  Bezeq International, replacing Mr. Ran Guron who was appointed CEO of the 
company (see Section 2.9.5). On January 1, 2023, Mr. Ron Galab began serving as CEO of 
Bezeq International in place of Mr. Ilan Segal, in accordance with the strategy formulated 
to transform Bezeq International into a company focused on integration, communication 
and IT solutions for the business sector. Mr. Ilan Segal continues to serve as CEO of the 
subsidiaries Pelephone and DBS. 

Plan to self-purchase the Company's shares 

For details about the Company's share repurchase plans, which were approved by the 
Company's Board of Directors on March 23, 2022, May 24, 2022, June 8, 2022, August 9, 
2022,  and  November  15,  2022,  see  Regulation  29(a)  of  chapter  D  (additional  details 
report) to this periodic report. 

1.1.7. 

Charges  in  connection  with  the  transactions  of  the  former  controlling  shareholder  of 
Bezeq and former officers of Bezeq and the "Case 4000" 

Following  the  investigations  of  the  Securities  Authority  from  June  2017  and  of  the 
Securities Authority and the Israel Police from February 2018 on suspicion of committing 
offenses  under  the  Securities  Law  and  the  Penal  Code,  5737-1977  ("Penal  Code"),  in 
respect of transactions related to the previous controlling shareholder in the Company 
and former Chairman of Bezeq's Board of Directors, Shaul Elovich ("Elovich") regarding 
the purchase of DBS shares5 and the provision of satellite communication services to DBS, 
the  Ministry  of  Communications'  dealings  with  Bezeq  ("the  DBS  Case")  as  well  as 
suspicions of the exercise of powers by former Prime Minister Binyamin Netanyahu, to 

5  As of June 24, 2015, Bezeq owns all DBS shares after completing on that date the purchase of Eurocom DBS' entire holdings in DBS (the "Purchase 
Transaction"). Since the final amount of the second conditional consideration in the Purchase Transaction was lower than the sum of the advances 
paid by the Company to Eurocom DBS for said consideration, Eurocom  DBS had to  return the  difference to  Bezeq. In this  framework, Bezeq 
submitted to the Tel Aviv District Court a motion for the liquidation of Eurocom DBS due to its inability to return the aforementioned difference, 
and on April 22, 2018, the Tel Aviv District Court issued an order for the liquidation of Eurocom DBS, while a proxy was appointed as a liquidator 
to Eurocom DBS. Also, Bezeq joined as a creditor in the liquidation procedure of Eurocom Communications, the parent company of Eurocom DBS, 
and on December 12, 2022 the debt claim filed by Bezeq was dismissed. Bezeq filed an appeal against the decision. It should be noted that in 
Bezeq's 2018 statements, the write-off of the aforementioned debt balance was completed, so that the postponement of the debt claim is not 
expected to affect Bezeq's results. 

6 

 
 
 
Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

advance issues concerning the business of Elovich and the economic interests of him and 
the Bezeq Group ("Case 4000") - 

1.1.7.1 

1.1.7.2 

On  January  28,  2020,  an  indictment  was  filed  with  the  Jerusalem  District 
Court in Case 4000, inter alia, against Elovich for various offenses, including 
bribery and deliberate misstatement in an immediate report in connection 
with suspicions of exercise of  powers by former  Prime Minister  Binyamin 
Netanyahu  to  advance  issues  concerning  the  business  of  Elovich  and  the 
economic interests of him and the Bezeq Group. 

On December 23, 2020, Bezeq received a notice from the Tel Aviv District 
Attorney's  Office  (Taxation  and  Economy)  regarding  the  consideration  of 
Bezeq's  prosecution  and  its  summons  to  a  hearing  on  Case  4000  ("the 
Notice")6 According to which: 

a)  After  examining  the  evidence  before  him,  the  Attorney  General  is 
considering filing an indictment against Bezeq on suspicion of bribery 
(an offense under Article 291 of the Penal Code and Article 23 of the 
Penal  Code),  and  a  reporting  offense  with  the  aim  of  misleading  a 
reasonable investor (offense under Article 53(a)(4) of the Securities Act 
and Article 23 of the Penal Code). 

b)  According  to  the  Notice,  according  to  the  suspicion,  Bezeq's  criminal 
responsibility  for  the  offense  of  bribery  stems  from  the  actions  and 
criminal thought of Elovich, who was its organ in the period relevant to 
the suspicions.  

c)  Also,  according  to  the  Notice,  according  to  the  suspicion,  Bezeq's 
criminal responsibility for the reporting offense stems from the actions 
and criminal thought of Elovich who was its organ in the period relevant 
to the suspicions, and the actions and criminal thought of Stella Handler 
(former Bezeq CEO), who was Bezeq's organ in the relevant period (see 
Section  1.1.6.3b).  According  to  allegations  in  this  context,  Bezeq 
reported  on  a  letter  from  the  Director  General  of  the  Ministry  of 
Communications  that  allegedly  included  a  misstatement  (of  which 
Elovich and Stella Handler were aware), and only after the intervention 
of  senior  officials  in  the  State’s  legal  advice  system,  the  letter  was 
amended and the amendment was reported by Bezeq to the public. 

d)  According  to  the  Notice,  before  the  Attorney  General  makes  a  final 
decision  regarding  the  criminal  prosecution  of  Bezeq,  and  insofar  as 
Bezeq wishes to argue against the possibility of criminal prosecution, it 
must coordinate a hearing within 30 days from the date of the Notice, 
and submit written arguments two weeks before the  date scheduled 
for the hearing.  

It should be noted that Walla (a former subsidiary of Bezeq) also received a 
similar notice according to which, after examining the evidence presented 
thereto, the Attorney General is also considering filing an indictment against 
it as well, on suspicion of bribery (an offense under Article 291 of the Penal 
Code  and  Article  23  of  the  Penal  Code)  when,  according  to  the  suspicion, 
Walla's criminal liability for the offense of bribery stems from the criminal 
acts and thought of Elovich who was its organ in the period relevant to the 
suspicions. 

Subsequently,  on  July  8,  2021,  Bezeq  and  Walla  submitted  a  written 
argument  for  the  hearing.  On  August  12,  2021,  a  hearing  was  held  for 
companies with the Deputy State Attorney (Criminal Enforcement) and with 
the team of attorneys handling the case. As of the date of publication of the 
report, a decision has not yet been made by the State Attorney's Office and 
the  Attorney  General  regarding  the  filing  of  an  indictment  following  the 

6It should be noted that on November 20, 2017, Bezeq received a "letter of suspect notification" according to which the investigation file in the 
framework of which it was questioned as a suspect was transferred to the State Attorney's Office for review. Since then, no further notice has 
been received by Bezeq on this matter. 

7 

 
 
 
Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

1.1.7.3 

1.1.7.3 

allegations raised at the hearing, and the companies have not been given an 
expected date for the decision. 

On  December  23,  2020,  to  the  best  of  Bezeq’s  knowledge,  an 
announcement by the State Attorney's Office was published, according to 
which,  among  other  things,  the  State  Attorney's  Office  (Taxation  and 
Economics) filed on the same day an indictment against Elovich with the Tel 
Aviv District Court, as well as against former senior officials in Bezeq Group 
and  BBS,  Or  Elovich,  Amikam  Shorer,  Linor  Yochelman  ,  Ron  Eilon  and 
Mickey Neiman in the DBS Case. According to the publication: 

a)  The indictment attributes to the defendants the offenses of aggravated 
obtainment by fraud, fraud and breach of trust in a corporation, and 
reporting offenses under the Securities Law, in relation to two cases: 
Fraud in relation to the payment of the consideration for the purchase 
of  DBS  shares  by  Bezeq,  and  fraud  in  relation  to  the  conduct  of  the 
independent  committees  established  by  Bezeq  for  the  purpose  of 
examining Bezeq transactions in which Elovich had a personal interest. 

b)  The  State  Attorney's  Office  (Taxation  and  Economics)  entered  into  a 
conditional settlement agreement under the Securities Law with Stella 
Handler, in which Stella Handler admitted the facts according to which 
she was involved in intentional misstatement in Bezeq's statements. In 
accordance with what is stated in the arrangement, the DBS case was 
closed in the case of Stella Handler. 

c)  The investigation files in respect of other suspects investigated in the 
cases mentioned above were closed, including against the former VP of 
regulation at Bezeq, as well as against Or Elovich and Amikam Shorer 
(in relation to both - except with regard to the DBS Case as indicated in 
the preamble of this section).  

On July 20, 2022, the decision of the Economic Department of the Tel-Aviv-
Yafo District Court was published on the request of some of the defendants 
to drop charges in the case, according to which the second and third charges 
in  the  indictment  were  dropped  (fraud  in  relation  to  the  conduct  of  the 
independent  committees  in  the  "Bezeq-Yes"  transaction  and  the  "Yes-
Space"  transaction)  against  all  the  defendants  in  these  charges:  Elovich, 
former officers of Bezeq - Mr. Or Elovich, Mr. Amikam Shurer and Mrs. Linor 
Yochelman, as well as against the companies accused in the same charges - 
companies  from  the  "Eurocom"  group.  The  decision  also  stated,  among 
other  things,  that  it  is  not  possible  to  accept  Elovich's  claim  that  the 
indictment  does  not  reveal  guilt  in  connection  with  the  first  charge 
(fraudulent  receipt  of  advances  at  the  expense  of  the  second  contingent 
consideration  in  the  Bezeq-Yes  transaction).  It  was  emphasized  in  the 
decision  that  it  does  not  in  any  way  impinge  on  the  civil  aspect,  and  the 
pending  proceedings  in  this  regard  (for  civil  proceedings  against  Bezeq 
and/or former Bezeq officials, see Section 1.1.7.5). On September 6, 2022, 
the  Ministry  of  Justice  published  an  announcement  that  the  criminal 
department  of  the  State  Attorney's  Office  filed  an  appeal  against  the 
decision on the same day. 

Bezeq does not yet have complete information regarding the investigations, 
their  content,  materials  and  evidence  in  the  possession  of  the  law 
authorities in the matter (although in January 2021, Bezeq received the core 
of  the  investigation  material  in  connection  with  Case  4000,  following 
Bezeq's summons to a hearing on this matter as detailed in Section  1.1.6.2). 
Accordingly, Bezeq is still unable to assess the effects of the investigations, 
their  findings  and  results  on  Bezeq  and  its  financial  statements.  For  this 
matter see Note 1.3 to the 2022 statements.  

1.1.7.4 

It should be noted that following the opening of the said investigations, a 
number of civil legal proceedings were opened against Bezeq, DBS, Bezeq's 
officers  in  the  relevant  period  and  companies  from  Bezeq’s  former 
controlling  group,  including  motions  for  approval  of  class  actions  and 

8 

 
 
Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

1.1.7.5 

motions for disclosure of documents before filing a motion for approval of 
a derivative claim. For details regarding these procedures see Section 2.18. 

Regarding DBS, which, on November 20, 2017, received a "letter of suspect 
notification"  according  to  which  the  investigation  case  in  which  it  was 
questioned as a suspect was forwarded to the State Attorney's Office - in 
accordance with the State Attorney's Office's notice received by DBS, after 
the Securities Authority case (Ref. No. 03/2017), in which it was questioned 
as a suspect, was examined by the Attorney General’s Office, it was decided 
on January 11, 2021 to shelf the case against it, without filing an indictment 
therein. 

1.2. 

Areas of activity 

The  Group  has  four  main  areas  of  activity  that  correspond  to  the  corporate  division  among  the 
Group's  companies  and  are  reported  as  business  segments  in  Bezeq’s  consolidated  financial 
statements (see also Note 28 to the 2022 statements):  

1.2.2. 

Bezeq – Landline interior communications 

This area mainly includes the activities carried out by Bezeq as an NIO (National Interior 
Operator), including telephony services, Internet services (including service over fibers 
and  wholesale  BSA  service),  transmission  and  data  communication  services  and 
wholesale services of using Bezeq's physical infrastructure. Bezeq’s activity in the field of 
landline interior communications is described in Section 2 of this report.  

1.2.3. 

Pelephone - Cellular communication ("Mobile Radio Telehpone") 

This  field 
includes  the  provision  of  cellular  radio-telephone  services  (cellular 
communications), marketing of end equipment, installation, operation and maintenance 
of equipment and systems in the field of cellular communications. Pelephone activity is 
described in Section 3 of this report.  

1.2.4. 

Bezeq International - Internet, international communications and ICT solutions (“Bezeq 
International services”) 

As of the date of the report, this area includes the provision of Internet services to existing 
subscribers  in  a  private  service  and  does  not  include  the  marketing  of  this  service  to 
new/renewing subscribers. As of the date of the report, Bezeq International focuses on 
business  services,  including  integration  services,  internet  for  businesses  and  more  (for 
international 
structural  change,  see  Section  1.1.6).  Also, 
communication  services,  hosting  and  cloud  services  and  ICT  solutions  ("Bezeq 
International  Services").  Bezeq  International's  activity  is  described  in  Section  4  of  this 
report..  

includes 

field 

this 

1.2.5. 

DBS - Multi-channel TV 

This  field  includes  the  provision  of  digital  multi-channel  TV  broadcasting  services  to 
subscriptions over satellite (DBS) as well as over the Internet (OTT) and the provision of 
value-added  services  to  subscribers  and  Internet  services  (infrastructure  component 
through a wholesale market). DBS activity is described in Section 5 of this report.  

It should be noted that in addition, Bezeq's consolidated financial statements include the 
"other"  segment,  which  includes  mainly  call  center  services  for  customers  (via  Bezeq 
Online) and is immaterial in group terms. 

1.3. 

Investments in the corporation's equity and transactions in its shares 

On December 29, 2020, the Company announced the purchase of 2,530,000 ordinary Bezeq shares 
in exchange for a total amount of approximately NIS 15 million and an average price of NIS 5.95 per 
share. Following the said acquisition, the Company holds 26.81% of the issued and paid-up share 
equity and of the voting rights in Bezeq. 

Except for the above, no investments were made in the Company's equity in the reporting year, and 
the Company is not aware of any other material transactions made in Bezeq shares by a related party 
outside the Stock Exchange.  

9 

 
 
 
 
Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

1.4. 

Dividend distribution 

1.4.1. 

Dividend distribution policy in the Company 

The  Company  has  not  distributed  dividends  to  its  shareholders  in  the  last  three  years 
(2020-2022) and as of the date of this report, the Company does not have a valid dividend 
distribution policy. 

1.4.2. 

Dividend policy at Bezeq 

On  March  13,  2023,  the  Bezeq  Board  of  Directors  decided  to  update  Bezeq's  dividend 
distribution policy, so that Bezeq will distribute every six months 60% of the semi-annual 
profit  (after  tax)  according  to  Bezeq's  consolidated  statements,  starting  with  the  next 
distribution (for the second half of 2022), this is In view of the trend of improvement in 
the  business  results  and  the  continued  decrease  in  the  extent  of  Bezeq's  debt  and  in 
accordance with Bezeq's forecasts regarding the business results for the following years. 

Also, Bezeq will strive to update its dividend policy to the distribution of 70% of the semi-
annual  profit  (after  tax)  according  to  Bezeq's  consolidated  statements,  subject  to 
maintaining the Company's credit rating in the AA group. 

The implementation of the dividend distribution policy is subject to the provisions of any 
law, including the distribution tests set forth in the Companies Law, all in consideration 
of the expected cash flow, Bezeq's needs and obligations, Bezeq's cash balances, its plans 
and condition as they will be from time to time, and subject to the approval of the general 
assembly of Bezeq's shareholders regarding any specific distribution, all as stipulated in 
Bezeq’s Articles of Association. 

The approval of Bezeq's dividend policy does not obligate Bezeq to distribute a dividend 
to Bezeq's shareholders, and any specific distribution will be examined in accordance with 
the  terms  of  implementation  of  the  dividend  distribution  policy  as  stated  above.  In 
addition, the approval of the aforesaid policy does not prevent Bezeq's Board of Directors 
from  periodically  reviewing  the  policy  of  distributing dividends  to  Bezeq  shareholders, 
taking into account, inter alia, the provisions of the law, Bezeq's business situation and its 
equity  structure  and  balance,  its  level  of  debt  and  credit  rating,  and  the  ongoing 
maximization  of  value  to  Bezeq's  shareholders  through  the  regular  distribution  of 
dividends. 

Bezeq's  Board  of  Directors  considers  it  important  to  maintain  the  balance  between 
ensuring Bezeq's financial strength and stability, while maintaining Bezeq's rating in the 
current rating group [AA] over time, and continuing to unlock value for its shareholders 
through  regular  dividend  distribution.  Bezeq's  Board  of  Directors  was  presented  with, 
among  other  things,  analysis  and  results  of  professional  work,  Bezeq's  and  the  Bezeq 
Group's forecasts, as well as sensitivity analyzes for unforeseen deterioration in Bezeq's 
and Bezeq Group businesses. After Bezeq's Board of Directors examined all of the above, 
the Board of Directors determined that this decision reflects the correct balance between 
the abovementioned needs. 

1.4.2.1 

Dividend distribution in Bezeq - Bezeq did not distribute a dividend in 2020-
2021.  For  details  regarding  the  dividend  distribution  carried  out  by  the 
Company in May and October 2022, see Note 20 to the 2022 statements. 
The remaining distributable profits as of the date of the report are about 
NIS 1,648 million (the said balance consists of surpluses accumulated in the 
last  two  years  after  deducting  the  dividend  amounts  paid  in  May  and 
October 2022). 

Regarding  the  recommendation  of  the  Bezeq  Board  of  Directors  dated 
March 13, 2023 to the general assembly of Bezeq’s shareholders regarding 
the distribution of a dividend in respect of the profits of the second half of 
the year 2022, see Note 20 to the 2022 statements. 

10 

 
 
 
 
 
Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

1.5. 

Financial information regarding the areas of activity of Bezeq Group 

All data in sections 1.5.1 to 1.5.4 are stated in NIS millions.  

1.5.1. 

2022 

Landline interior 
communication 

Cellular 
communication 
(mobile radio 
telephone) 

Bezeq 
International 
services 

Multi-channel 
TV (3) 

Other 

Consolidation 
adjustments (2) 

Consolidated 

Total revenue: 
External 

From other areas of activity in the 
corporation 

Total revenue 
Total attributable costs: 

Variable costs attributed to the area 
of activity (1) 

Fixed costs attributed to the area of 
activity (1) 
Total costs  

Costs that do not constitute 
revenue in another area of activity 
(3) 
Costs that constitute revenue of 
other areas of activity 

Total costs  
Profit from ordinary activities 
attributed to the owner of the 
Cmpany 

Total assets attributed to activity as 
of December 31, 2022 
Total liabilities attributed to the 
area of activity as of December 31, 
2022 

3,980 

2,359 

1,183 

1,277 

187 

- 

8,986 

326 

4,306 

40 

2,399 

56 

- 

1,239 

1,277 

6 

193 

(

)428

(

)428

- 

8,986 

606 

852 

759 

382 

159 

2,240 

1,354 

510 

943 

28 

2,846 

2,805 

2,206 

2,114 

1,269 

1,009 

1,325 

1,305 

187 

183 

(

)484

)67(

7,349 

7,349 

41 

92 

260 

20 

4 

(

)417

- 

2,846 

2,206 

1,269 

1,325 

187 

(

)484

7,349 

1,460 

193 

)30(

)48(

6 

56 

1,637 

9,023 

4,080 

760 

1,249 

87 

 (

1,787
)

13,412 

10,468 

1,563 

570 

469 

32 

 (

1,314
)

11,788 

(1) The Group companies, which are companies that provide services (as opposed to manufacturing companies), do not maintain a dedicated 
pricing system that distinguishes between fixed and variable costs. The above division was made for the purposes of this report only. Variable 
costs are costs that companies have flexibility in managing and controlling in the short term,a s well as their effect on direct output, compared 
to fixed costs that are not flexible in the short term and do not directly affect output (in this regard, up to one year). The variable costs included 
non-recurring expenses (revenue) that were included in the item of other expenses (revenue) of each company. 

(2) Details of the adjustments to consolidated - transactions between areas of activity. 

(3) See Notes 10 and 28 to the 2022 statements regarding the neutralization of the impairment loss in the multi-channel television segment. The 
impairment loss in this segment is shown in the adjustments. 

11 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

1.5.2. 

2021 

Landline interior 
communication 

Cellular 
communication 
(mobile radio 
telephone) 

Bezeq 
International 
services 

Multi-channel 
TV (3) 

Other 

Consolidation 
adjustments (2) 

Consolidated 

Total revenue: 
External 

From other areas of activity in the 
corporation 

Total revenue 
Total attributable costs: 

Variable costs attributed to the area 
of activity (1) 
Fixed costs attributed to the area of 
activity (1) 
Total costs  

Costs that do not constitute 
revenue in another area of activity 
(3) 

Costs that constitute revenue of 
other areas of activity 

Total costs  
Profit from ordinary activities 
attributed to the owner of the 
Company 
Total assets attributed to activity as 
of December 31, 2021 
Total liabilities attributed to the 
area of activity as of December 31, 
2021 

3,845 

2,249 

1,186 

1,270 

271 

- 

8,821 

337 

4,182 

40 

2,289 

51 

- 

1,237 

1,270 

6 

277 

(

)434

(

)434

- 

8,821 

369 

982 

723 

369 

215 

2,065 

1,265 

492 

942 

35 

2,434 

2,389 

2,247 

2,153 

1,215 

944 

1,311 

1,291 

250 

246 

(

)506

)72(

6,951 

6,951 

45 

94 

271 

20 

4 

(

)434

- 

2,434 

2,247 

1,215 

1,311 

250 

(

)506

6,951 

1,748 

42 

22 

)41(

27 

72 

1,870 

9,245 

4,452 

783 

1,293 

100 

 (

1,939
)

13,934 

11,415 

1,753 

566 

474 

37 

 (

1,407
)

12,838 

(1) The Group companies, which are companies that provide services (as opposed to manufacturing companies), do not maintain a dedicated 
pricing system that distinguishes between fixed and variable costs. The above division was made for the purposes of this report only. Variable 
costs are costs that companies have flexibility in managing and controlling in the short term,a s well as their effect on direct output, compared 
to fixed costs that are not flexible in the short term and do not directly affect output (in this regard, up to one year). The variable costs included 
non-recurring expenses (revenue) that were included in the item of other expenses (revenue) of each company. 

(2) Details of the adjustments to consolidated - transactions between areas of activity. 

(3) See Notes 10 and 28 in the 2022 statements regarding the neutralization of the impairment loss in the multi-channel television segment. The 
impairment loss in this segment is shown in the adjustments. 

12 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

1.5.3. 

2020 

Landline interior 
communication 

Cellular 
communication 
(mobile radio 
telephone) 

Bezeq 
International 
services 

Multi-channel 
TV (3) 

Other 

Consolidation 
adjustments (2) 

Consolidated 

Total revenue: 

External 
From other areas of activity in the 
corporation 
Total revenue 

Total attributable costs: 
Variable costs attributed to the area 
of activity (1) 
Fixed costs attributed to the area of 
activity (1) 

Total costs  
Costs that do not constitute 
revenue in another area of activity 
(3) 

Costs that constitute revenue of 
other areas of activity 
Total costs  

Profit (loss) from ordinary activities 
attributed to the owner of the 
Company 
Total assets attributed to activity as 
of December 31, 2020 

Total liabilities attributed to the 
area of activity as of December 31, 
2020 

3,813 

2,127 

1,217 

1,286 

280 

- 

8,723 

346 
4,159 

59 
2,186 

54 
1,271 

1 
1,287 

6 
286 

(
(

)466
)466

- 
8,723 

850 

799 

1,021 

532 

186 

1,604 

1,471 

491 

797 

56 

2,454 
2,405 

2,270 
2,162 

1,512 
1,246 

1,329 
1,296 

242 
236 

)539
(
)77(

7,268 
7,268 

  49 

108 

266 

33 

6 

(

)462

- 

2,454 

2,270 

1,512 

1,329 

242 

(

)539

7,268 

1,705 

)84(

(

)241

)42(

8,471 

4,371 

785 

1,365 

44 

96 

73 

1,455 

 (

1,847
)

13,241 

11,764 

1,742 

580 

505 

42 

 (

1,242
)

13,391 

(1) The Group companies, which are companies that provide services (as opposed to manufacturing companies), do not maintain a dedicated 
pricing system that distinguishes between fixed and variable costs. The above division was made for the purposes of this report only. Variable 
costs are costs that companies have flexibility in managing and controlling in the short term,a s well as their effect on direct output, compared 
to fixed costs that are not flexible in the short term and do not directly affect output (in this regard, up to one year). The variable costs included 
non-recurring expenses (revenue) that were included in the item of other expenses (revenue) of each company. 

(2) Details of the adjustments to consolidated - transactions between areas of activity. 

(3) See Notes 10 and 28 in the 2022 statements regarding the neutralization of the impairment loss in the multi-channel television segment. The 
impairment loss in this segment is shown in the adjustments. 

For explanations about the developments in the financial data presented In sections  1.5.1 to 1.5.3 aee Section 1 of 
the Board of Directors’ report on the state of the corporation's affairs ("Board of Directors' Report").  

1.5.4. 

Main results and operational data  

The following is a summary of data on the results of each of the Company's main 
areas of activity in 2021 and 2022.  

13 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

1.5.4.1 

Bezeq Fixed Lines  

2022 

2021 

Q4/ 
2022 

Q3/ 
2022 

Q2/ 
2022 

Q1/ 
2022 

Q4/ 
2021 

Q3/ 
2021 

Q2/ 
2021 

Q1/ 
2021 

Revenue (NIS millions) 

4,306 

4,182 

1,057 

1,086 

1,067 

1,096 

1,052 

1,037 

1,039 

1,054 

1,460 

1,748 

293 

388 

393 

386 

358 

390

407 

593 

Operating profit (NIS millions) 

Depreciation and amortization (NIS millions) 

1,005 

938 

Operating profit before depreciation and 
amortization (EBITDA) (NIS millions) (1) 

2,465 

2,686 

Net profit (NIS millions) 

849 

1,063 

Cash flow from operating activities (NIS millions) 

2,230 

2,024 

1,135 

1,155 

Payments for investments in property, plant and 
equipment and intangible assets and other 
investments (NIS millions) 

Receipts from the sale of  property, plant and 
equipment and intangible assets (NIS millions) 

266 

559 

153 

628 

277 

252 

640 

235 

427 

294 

248 

641 

243 

541 

279 

239 

625 

218 

634 

285 

245 

603 

206 

593 

244 

239 

629 

219 

567 

314 

231 

638 

238 

354 

285 

223 

816 

400 

510 

312 

36 

273 

9 

8 

5 

14 

87 

4 

- 

182 

Lease payments 

Free cash flow (NIS millions) (2) 

138 

993 

116 

35 

34 

33 

36 

32 

31 

1,026 

325 

107 

234 

327 

404 

226 

24 

45 

29 

351 

Number of active telephone subscriber lines at the 
end of the period (thousands) (3) 

Average monthly revenue per telephony subscriber 
(NIS) (ARPL) (4) 

1,503 

1,583 

1,503 

1,522 

1,542 

1,563 

1,583 

1,602 

1,615 

1,630 

42 

47 

40 

41 

41 

47 

46 

46 

47 

49 

Outgoing usage minutes (millions)  

Incoming usage minutes (millions) 

2,979 

3,385 

3,939 

4,627 

698 

922 

754 

986 

726 

951 

801 

811 

782 

827 

965 

1,080 

1,096 

1,152 

1,095 

1,284 

Telephony subscriber churn rate (6) 

10.9% 

10.6% 

2.5% 

2.8% 

2.6% 

3.0% 

2.8% 

2.4% 

2.6% 

2.8% 

Total number of Internet subscribers at the end of 
the period (thousands) (7) 

Of which are subscribers connected to the fiber 
network at the end of the period - wholesale 
(thousands) (7) 

Of which are Internet lines at the end of the period - 
in retail (thousands) (7) 

Of which are subscribers connected to the fiber 
network at the end of the period - in retail 
(thousands) (7) 

Internet lines at the end of the period – in wholesale 
(thousands) (7) 

Of which are subscribers connected to the fiber 
network at the end of the period - in wholesale 
(thousands) (7) 

Average monthly revenue per Internet subscriber 
(NIS) - retail (ARPU)(8) 

Fiber optic network deployment at the end of the 
period (thousands, households available for 
connection) (9) 

1,504 

1,524 

1,504 

1,505 

1,512 

1,519 

1,524 

1,524 

1,529 

1,540 

267 

501 

267 

212 

161 

124 

501 

510 

520 

539 

1,032 

1,023 

1,032 

1,024 

1,022 

1,024 

1,023 

1,014 

1,009 

1,001 

198 

65 

198 

157 

118 

93 

65 

36 

16 

1 

472 

501 

472 

481 

490 

495 

501 

510 

520 

539 

69 

19 

69 

55 

42 

31 

19 

8 

0 

0 

114 

106 

117 

116 

113 

110 

109 

107 

106 

103 

1,526 

1,064 

1,526 

1,442 

1,308 

1,193 

1,064 

848 

597 

310 

Churn rate of telephony subscribers (6) 

220 

130 

220 

192 

164 

151 

130 

104 

88 

78 

(1)  Operating profit before depreciation and amortization (EBITDA) is a financial index that is not based on generally accepted 
accounting principles. Bezeq presents this index as another index for evaluating its business results since it is an accepted 
index in the Bezeq area of activity which neutralizes aspects resulting from variability in capital structure, various taxation 
aspects and manner and period of amortization of property, plant and equipment and intangible assets. This index is not a 
substitute for indices based on generally accepted accounting principles, and does not serve as a single index for assessing the 

14 

 
 
 
 
 
Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

Company’s results of operations or cash flow. Also, the index presented in this report may not be calculated in the same way 
as other indices in other companies. Bezeq‘s EBITDA is calculated as operating profit before depreciation, amortization and 
ongoing  losses  from  impairment  of  property,  plant  and  equipment  and  intangible  assets.  For  the  purpose  of  adequate 
presentation of economic activity, Bezeq presents ongoing losses from impairment of property,  plant and equipment and 
intangible assets in DBS and Bezeq International under the depreciation and amortization item, as well as ongoing losses from 
impairment of broadcasting rights under the operating and general expenses item (in the statement of income). For this matter 
see Note 10 to the financial statements and Section 8 of the chapter on the description of the corporation's business in the 
2022 periodic report. 

(2)  Free cash flow is a financial measure that is not based on generally accepted accounting principles. Free cash flow is defined 
as cash arising from current operations minus cash for the purchase / sale of property, plant and equipment. Bezeq presents 
free cash flow as an additional index to evaluate business results and cash flows, since Bezeq is of the opinion that cash flow 
is  an  important  liquidity  index  that  reflects  the  cash  derived  by  Bezeq  from  its  current  operations  after  investing  cash  in 
infrastructure and property, plant and equipment and other intangible assets. For this matter see Section 8 of the chapter on 
the description of the corporation's business in the 2022 periodic report. 

(3)  Inactive subscribers are subscribers whose Bezeq lines have been physically disconnected (excluding a subscriber who has not 

paid his debt to Bezeq on time in the first three months (approximately) of collection proceedings). 

(4)  Calculated according to the average of subscribers for the period. For this matter see also Section 8 of the chapter on the 

description of the corporation's business in the 2022 periodic report. 

(5)  In plans where there is a range of speeds, the maximum speed in the plan is taken into account. 
(6)  Number (gross) of telephony subscribers who abandoned Bezeq Fixed Lines during the period divided by the average number 
of telephony subscribers registered in the period. See also Section 8 of the chapter on the description of the corporation's 
business in the 2022 periodic report. 

(7)  Total  number  of  Internet  subscribers  including  retail  and  wholesale  subscribers.  Retail  –  the  Company’s  direct  Internet 

subscribers. Wholesale - Internet subscribers through wholesale service to other communication providers. 

(8)  Revenue from retail Internet services divided by the average number of retail customers in the period. For this matter, see 

also Section 8 of the chapter on the description of the corporation's business in the 2021 periodic report. 

(9)  As of the publication date of the report, fiber optic network deployment - about 1.654 million households are 
available for connection, of which about 332k subscribers are connected to the fiber network (of which 235k retail 
and 97k wholesale). 

15 

 
 
 
 
 
Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

1.5.4.2 

Pelephone 

2022 

2021 

Q4/ 
2022 

Q3/ 
2022 

Q2/ 
2022 

Q1/ 
2022 

Q4/ 
2021 

Q3/ 
2021 

Q2/ 
2021 

Q1/ 
2021 

Revenue from services (NIS millions) 

1,791 

1,642 

441 

467 

446 

437 

424 

417 

409 

392 

Revenue from the sale of end equipment (NIS 
millions) 

608 

647 

151 

141 

153 

163 

178 

124 

167 

178 

Total revenue (NIS millions) 

2,399 

2,289 

592 

608 

599 

600 

602 

541 

576 

570 

Operating profit (loss) (NIS millions) 

Depreciation and amortization (NIS millions) 

Operating profit before depreciation and 
amortization (EBITDA) (NIS millions) (1) 

Net profit (loss) (NIS millions) 

Cash flow from operating activities (NIS millions) 

Payments for investments in property, plant and 
equipment, intangible assets and other investments, 
net (NIS millions) 

Lease payments (NIS millions) 

Free cash flow (NIS millions) (1) 

Number of postpaid subscribers for the end of the 
period (thousands) (2) 

Number of prepaid subscribers for the end of the 
period (thousands) (2) 

Number of subscribers for the end of the period 
(thousands) (2) 

193 

532 

725 

165 

874 

295 

228 

351 

42 

577 

619 

64 

425 

253 

219 

)47(

17 

135 

152 

13 

149 

0 

60 

139 

199 

50 

203 

157 

52 

136 

188 

64 

122 

186 

46 

56 

244 

278 

66 

72 

8 

147 

155 

13 

19 

54 

22 

144 

166 

15 

144 

159 

23 

20 

185 

149 

68 

60 

)3(

142 

139 

8 

72 

71 

62 

87 

58 

)12(

47 

61 

131 

145 

54 

)89(

52 

65 

53 

36 

60 

)59(

2,149 

2,096 

2,149 

2,137 

2,122 

2,093 

2,096 

2,074 

2,050 

2,030 

431 

480 

431 

538 

514 

490 

480 

473 

471 

462 

2,580 

2,576 

2,580 

2,675 

2,636 

2,583 

2,576 

2,547 

2,521 

2,492 

Average monthly income per subscriber (NIS) (ARPU) 
(3) 

Average monthly income per subscriber net of 
interconnect (NIS) (ARPU) (6) 

57 

43 

54 

40 

57 

58 

57 

57 

55 

55 

54 

53 

43 

45 

43 

42 

41 

41 

40 

38 

Subscriber churn rate (Churn Rate) (4) 

24.1% 

22.9% 

6.1% 

5.7% 

5.5% 

6.8% 

5.8% 

5.5% 

5.8% 

5.8% 

(1)  For the definition of operating profit before depreciation and amortization (EBITDA) and free cash flow, see notes (1) and (2) 

in the Bezeq Fixed Lines table.  

(2)  The subscriber data include Pelephone subscribers (net of other operators’ subscribers hosted on Pelephone’s network, and 
net of IoT subscribers) and do not include subscribers connected to Pelephone’s service for six months or more but are inactive. 
Inactive subscribers are subscribers who in the last six months have not received at least one call, did not make at least one 
call  /  message  or  did  not  perform  a  browsing  operation  or  did  not  pay  for  Pelephone’s  services.  Prepaid  subscribers  are 
included in the active subscriber base from the date of performing a charge and are deducted from the active subscriber base 
when no making outbound use for six months or more. It should be noted that a customer may have more than one subscriber 
("line").  The  number  of  subscribers  includes  subscribers  who  consume  various  services  (such  as  data  for  in-vehicle  media 
systems),  the  average  income  from  which  is  significantly  lower  than  the  rest  of  the  subscribers.  It  should  be  noted  that 
Pelephone markets packages with an increased volume of use that are also adapted to the needs of 5G when as of Decembr 
31, 2022 Pelephone has about 813k subscribers in this type of packages. 

(3)  The average monthly income per subscriber (postpaid and prepaid). The index is calculated by dividing the average monthly 
revenue from all cellular services from both Pelephone’s subscribers and other communication operators, including revenue 
received from cellular operators using Pelephone’s network, repair service and extended warranty in the period by the average 
active subscriber base in that same period. See also section 8 of the chapter on the description of the corporation's business 
in the 2022 periodic report. 

(4)  The subscriber churn rate is calculated according to the ratio of the subscribers who disconnected from Pelephone services 
and the subscribers who became inactive during the period to the average of active subscribers during the period. See also 
section 8 of the chapter on the description of the corporation's business in the 2022 periodic report. 

(5)  In the examination carried out by Pelephone of the register of prepaid subscribers during the Q4/2022, it was found that about 
96k  subscribers  were  included  in  the  register  of  subscribers  even  though  they  did  not  meet  the  definition  of  an  active 
subscriber.  Accordingly,  Bezeq  deducted  these  subscriptions  in  a  one-time  manner.  The  subtraction  of  subscribers  as 
mentioned led to an increase of about NIS 2 in ARPU for Q4 and no change in the subscriber churn rate in this quarter. 
(6)  Average monthly revenue per subscriber (ARPU) excluding revenue from interconnect - the reform to change the interconnect 
rates regime that will gradually apply from June 2023 until June 2025 is expected to lead to a decrease in interconnect revenues 
and a decrease in ARPU, which is why Pelephone chose to present the average monthly revenue per subscriber (ARPU) minus 
the component of revenue from interconnect, all in addition to the full ARPU. 

16 

 
 
 
 
 
 
 
 
Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

1.5.4.3 

Bezeq International  

Revenue (NIS millions) 

Operating profit (loss) (NIS millions) 

Depreciation and amortization (NIS 
millions) 

Operating profit (loss) before depreciation 
and amortization (EBITDA) (NIS millions) 
(1) 

Net profit (loss) (NIS millions) 

Cash flow from operating activities (NIS 
millions) 

Payments for investments in property, 
plant and equipment and intangible assets 
and other investments, net (NIS millions) 
(2) 

Lease payments 

Free cash flow (NIS millions) (1) 

Subscriber churn rate (3) 

2022 

2021 

Q4/ 
2022 

Q3/ 
2022 

Q2/ 
2022 

Q1/ 
2022 

Q4/ 
2021 

Q3/ 
2021 

Q2/ 
2021 

Q1/ 
2021 

1,239 

1,237 

)30(

134 

22 

173 

319 

)60(

35 

311 

302 

307 

328 

287 

310 

312 

17 

32 

17 

29 

)4(

38 

1 

40 

13 

38 

16 

46 

)8(

49 

104 

195 

)25(

49 

46 

34 

41 

51 

62 

41 

)32(

210 

8 

)58(

131 

56 

16 

5 

15 

37 

)5(

)5(

112 

)52(

10 

96 

11 

26 

)8(

61 

93 

98 

17 

23 

27 

26 

14 

27 

27 

30 

36 

81 

33 

0 

9 

30 

9 

)27(

9 

1 

9 

77 

7 

)73(

9 

60 

9 

)10(

8 

23 

46.5% 

25.3% 

15.0% 

12.4% 

12.9% 

7.3% 

5.9% 

5.5% 

6.0% 

7.9% 

(1)  For the definition of operating profit before depreciation and amortization (EBITDA) and free cash flow, see notes (1) and 

(2) in the Bezeq Fixed Lines table. 

(2)  The section also includes investments in long-term assets. 
(3)  Number  of  Internet  subscribers  who  left  Bezeq  International  during  the  period  is  an  average  of  the  average 
Internet subscribers registered during the period. See also Section 8 of the chapter on the description of the 
corporation's business in the periodic report for 2022. 

17 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

1.5.4.4 

DBS  

2022 

2021 

Q4/ 
2022 

Q3/ 
2022 

Q2/ 
2022 

Q1/ 
2022 

Q4/ 
2021 

Q3/ 
2021 

Q2/ 
2021 

Q1/ 
2021 

Revenue (NIS millions) 

1,277 

1,270 

330 

315 

316 

316 

8 

199 

32 

203 

0 

57 

0 

46 

)2(

46 

10 

50 

322 

)14(

52 

318 

315 

315 

30 

45 

22 

45 

)6(

61 

Operating profit (loss) (NIS millions) 

Depreciation, amortization and ongoing 
impairment (NIS millions) 

Operating profit before depreciation, 
amortization and ongoing impairment 
(EBITDA) (NIS millions) (1) 

Net profit (loss) (NIS millions) 

Cash flow from operating activities (NIS 
millions) 

Payments for investments in property, plant 
and equipment and intangible assets and 
other investments, net (in NIS millions) 

Lease payments 

Free cash flow (NIS millions) (1) 

Number of subscribers (at the end of the 
period, thousands) (2) 

207 

235 

57 

46 

44 

60 

38 

75 

67 

55 

13 

186 

30 

233 

1 

56 

0 

9 

2 

43 

10 

78 

)17(

42 

29 

73 

18 

56 

0 

62 

178 

178 

44 

39 

49 

46 

55 

38 

42 

43 

25 

)17(

579 

26 

29 

7 

5 

563 

579 

6 

)36(

575 

6 

)12(

567 

6 

26 

564 

7 

)20(

563 

6 

29 

7 

7 

6 

13 

560 

560 

559 

Of which are IP subscribers (3) 

329 

226 

329 

307 

280 

253 

226 

198 

173 

147 

Of which are StingTV subscribers 

104 

84 

104 

101 

94 

89 

84 

79 

74 

70 

Average monthly income per subscriber 
(ARPU) (NIS) (3) 

183 

188 

181 

182 

184 

186 

190 

188 

186 

187 

Subscriber churn rate (4) 

12.8% 

15.1% 

3.0% 

3.2% 

2.9% 

3.7% 

3.4% 

3.7% 

3.7% 

4.3% 

(1)  For the definition of operating profit before depreciation and amortization (EBITDA) and free cash flow, see notes (1) and 

(2) in the Bezeq Fixed Lines table. 

(2)  Subscriber - one household or a small business customer. In the case of a business customer who owns more than a certain 
number of decoders (such as a  hotel, kibbutz or gym), the number of subscribers is adjusted. The  number of non-small 
business  customers  is  calculated  by  dividing  the  total  payment  received  from  all  non-small  business  customers  by  the 
average income per small business customer, which is determined once per period.  

(3)  The number of DBS subscribers using Yes+ and STINGTV services transmitted via the Internet (as stated in Sections 5.2.2.1 
and 5.2.2.2 of the chapter describing the corporation's business in the periodic report for 2022). As of the date of publication 
of  the  report,  is  about  344k  subscribers  (of  which,  107k  are  STINGTV  subscribers),  whioch  constitute  60%  of  all  DBS 
subscribers. This rate also includes subscribers who also use satellite services at the same time. 

(4)  The average monthly revenue per subscriber is calculated by dividing the total DBS revenue (excluding revenue from the 
sale of content to external broadcasters) by the average number of customers in the period. See also Section 8 of the chapter 
on the description of the corporation's business in the 2022 periodic report. 

(5)  The  number  of  DBS  subscribers  who  abandoned  DBS  during  the  period  divided  by  the  average  number  of  subscribers 
registered  in  the  period.  See  also  Section 8  of  the  chapter  on  the  description  of  the  corporation's  business  in  the  2022 
periodic report. 

18 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

1.6. 

Forecast and short-term ambitions in relation to the Bezeq Group 

1.6.1. 

The following is the Group's forecast for 2023 based on the information currently known 
to the Bezeq Group:  

a.  Adjusted net profit7 for shareholders is expected to be NIS 1.2 billion. 

b.  Adjusted EBITDA8 It is expected to be NIS 3.8 billion. 

c.  CAPEX9 It is expected to be NIS 1.75 billion. 

Bezeq will report, as required, deviations of ±10% or more from the ranges specified in 
the forecasts above. 

d.  The  scope  of  the  Company's fiber  network  deployment  -  reaching  about  2  million 

households. 

e.  Financial stability - maintaining high credit rating in the AA group. 

1.6.2. 

Medium-term ambitions 

a.  Adjusted  EBITDA  -  Average  annual  growth  in  terms  of  CAGR  of  about  1%  with  an 

adjusted EBITDA rate in revenue in the range of 41%-43%. 

b.  CAPEX – until 2025, stability in CAPEX and in relation to CAPEX's revenues; Gradual 

decline thereafter 

c.  Free cash flow10 - average annual growth (in CAGR terms) at a medium single-digit 

rate 

d.  The scope of the Company's fiber network deployment - reaching about 2.7 million 

households 

e.  Dividend  policy  -  aspiration  to  distribute  70%  of  the  semi-annual  profit  (after  tax) 
according  to  the  Company's  consolidated  statements,  subject  to  maintaining  the 
Company's credit rating in the AA group. 

f. 

Financial stability - maintaining high credit rating in the AA group 

The Company does not undertake to update on a regular basis or otherwise its ambitions 
or  any  changes  that  will  apply  to  the  ambitions  or  actual  results  in  relation  to  the 
ambitions. 

1.6.3. 

Forward-looking information 

The  Company’s  forecasts  and  ambitions  detailed  in  this  section  are  forward-looking 
information, as defined in the Securities Law. The forecasts and ambitions are based on 
Bezeq's  assessments,  assumptions  and  expectation,  and  among  other  things,  on  the 
Group's  assessments  regarding  the  structure  of  competition  in  the  communications 
market  and  the  regulation  of  the  segment,  on  the  current  economic  situation  in  the 
economy, and accordingly, the on Group's ability to implement its plans for 2023 and in 
the medium-term, as applicable, taking into account the changes in business conditions, 
regulatory  decisions,  technological  changes,  developments  in  the  structure  of  the 
communications market, etc. or insofar as one or more of the risk factors listed in the 
2022. 

Also, with respect to Bezeq aspirations, given that it is a reference to the medium term 
and  the  difficulty  of  predicting  Bezeq  results  and  actual  market  performance  in  the 
medium term, there is no certainty that Bezeq ambitions will fully or partially materialize, 
and  deviation  between  Bezeq  results  and  actual  performance  may  be  significant. 
Moreover, ambitions, by nature, do not purport to be predictions and should not be read 

7 Adjusted net profit and adjusted EBITDA – net of the other operating expenses / revenue, net item, non-recurring losses / gains 
from  impairment  /  increase  in  value,  and  expenses  of  the  capital  remuneration  plan.  It  should  be  noted  that  the  adjusted 
EBITDA  and  the  adjusted  net  profit  for  2021  were  approximately  NIS  3.659  billion  and  approximately  NIS  1.154  million, 
respectively. 
8 See Footnote 10. 
9 CAPEX - Payments (gross) for investment in property, plant and equipment and intangible assets. It should be noted that the 

CAPEX for 2021 was approximately NIS 1.713 billion. 
10 For a definition of free cash flow, see Section 7.2.2. 

19 

 
 
 
Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

as such. 

1.7. 

General environment and the influence of external factors on the Group's activities 

The communications industry in the world and in the Israeli economy is characterized by a rapid pace 
of development, and frequent changes in terms of technology, in terms of the business structure of 
the industry and in terms of the regulation applied to it. The main trends and main characteristics of 
the  communications  market  in  recent  years,  which  have  a  significant  impact  on  the  Group's 
operations as a whole, will be described below. 

In view of the diversity in the areas of the Group's communications activities, regulatory and other 
developments may sometimes have a different effect (and even in opposite directions) on various 
areas of activity in the Group and on its risk factors (see Sections 2.20, 3.19, 4.14 and 5.19), that is - 
changes in regulation and other factors that adversely affect one area may have a positive effect on 
another area. In some cases, adverse effects on areas of activity may be partially offset against each 
other at the group level. 

1.7.1. 

Competition in the communications market 

In the communications market there is lively competition in most areas of the Group's 
activity: 

In the field of Internet services, there is lively competition against companies that own 
infrastructure, including fiber infrastructure for households, as well as against companies 
that offer services through the wholesale market (see Section 1.7.5 and Section 2.16.4). 
In  addition,  the  expansion  of  regional  competition  is  evident  in  the  light  of  giving  the 
possibility to those who do not have a general license to provide fiber Internet services 
through a broadband infrastructure that they laid down themselves or through the use 
of Bezeq's passive infrastructures. 

In the field of cellular telephony, the multitude of competitors results in lively competition 
that  results  in  low  prices  and  increased  customer  mobility.  In  the  field  of  landline 
telephony, competition, including from the cellular companies, leads to a decrease in the 
consumption of landline telephony minutes as well as to the churn in landline telephony 
services  (including  an  increasing  number  of  customers  without  a  landline  home  line). 
These phenomena damage the results of the Group. 

In  the  field  of  television  services,  the  increase  in  competition  is  evident  through  the 
transmission of television content (VOD services and linear channels) over the Internet 
(OTT), including by foreign providers such as Netflix, which are not subject to regulatory 
oversight  and  the  same  obligations  as  those  of  multi-channel  public  broadcasting 
providers, as well as reception of "Idan+" channels. 

In  order  to  reduce  the  damage  resulting  from  the  aforementioned,  Bezeq  Group 
companies  take  streamlining  measures  as  well  as  steps  to  improve  the  services  they 
provide and differentiate them from the competition. 

1.7.2. 

Communication groups in the Israeli market 

The  market  is  characterized  by  competition  between  communications  groups  (Bezeq 
Group, Hot Group, Cellcom  Group (which in 2020 also acquired Golan Telecom, which 
operates in the cellular segment), and Partner Group ,operating simultaneously in several 
segments of the communications market (landline and mobile telephony, landline and 
mobile Internet services, multi-channel television and international calls)11. 

Cellcom and Hot own together with the Israel Infrastructure Fund (23% each) and the 
Electric  Company  (30%)  in  IBC,  which  deploys  optical  fiber  infrastructure  and  mainly 
provides services to communication providers (CARRIER'S CARRIER). The communication 
groups market various communication service packages of each group's corporations, so 
that it is possible to offer the customer a comprehensive solution that eliminates the need 
to  contract  simultaneously  with  several  different  suppliers,  as  well  as  to  offer  the 
customer attractive rates for the purchase of each service separately (in some cases with 
a  "cross  subsidy"  between  the  components  included  in  the  basket).  Additionally,  BSA 

11 

In this regard, a "group" is characterized by a close relationship that results from the identicality of shareholders, although 
in some groups there is a corporate, accounting or marketing separation between the entities belonging to the group.  
20 

 
 
 
 
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wholesale  service  (See  Section  2.16.4.2)  also  allows  operators  who  do  not  own 
infrastructure, including operators who are not part of a telecommunications group, to 
offer a package of unified Internet services to their customers (including infrastructure). 
As of April 3, 2022, companies that own infrastructure - Bezeq and Hot, are allowed to 
provide  private  customers  themselves  Internet  access  service,  together  with  their 
infrastructure service, after the obligation to separate infrastructure service and Internet 
access service was lifted. 

Competitors that are not part of a telecommunications group also operate in the market 
(such as XFONE and MVNO operators in the cellular segment, including Internet providers 
that  provide  service  within  the  wholesale  market.  Also,  as  mentioned,  the  number  of 
small service providers (that are not part of a group) that provide broadband Internet 
services, including infrastructure, has expanded (See Section 1.7.6). 

As  of  the  date  of  the  report,  Bezeq  Group  is  subject  to  stricter  restrictions  on  the 
marketing of service packages than the other communication groups. 

1.7.3. 

Bezeq Group's activity as a communications group 

As  of  the  date  of  the  report,  the  Group  is  subject  to  regulatory  restrictions  related  to 
creating  collaborations  between  the  Group's  companies,  which  include  a  structural 
separation obligation between Bezeq and its subsidiaries, as well as restrictions on shared 
marketing and marketing shared service baskets which include the services of Bezeq and 
its subsidiaries. 

Against  the  background  of  the  challenges  the  Group  faces  and  the  needs  in  the 
communication market environment, in parallel with Bezeq’s activity for the elimination 
of  structural  separation,  a  comprehensive  strategic  plan  for  the  Group  as  a 
communication group is implemented within the complex regulatory constraints imposed 
on the Group (see Section 1.8).  

1.7.3.1 

Regulatory oversight - structural separation obligation 

In accordance with the Communication Law, the Minister is authorized to 
order  accounting  separation  between  different  services  provided  by  the 
same  group  /  company,  as  well  as  the  power  to  require  the  existence  of 
separate  corporations  for  the  purpose  of  providing  different  services, 
including separation between licensing services and subscriber services, and 
provisions on the implementation of the separation.  

Bezeq's  NIO 
license  stipulates  that  Bezeq  must  maintain  structural 
separation  between  itself  and  its  subsidiaries12.  In  this  context,  full 
separation  between  Bezeq's  management  and  the  managements  of  the 
subsidiaries is required, including everything related to the business system, 
the financial system and the marketing system, and Bezeq is prohibited from 
transferring commercial information to a subsidiary (subject to exceptions). 

The  limitations  of  structural  separation  place  the  Group  in  a  position  of 
competitive disadvantage which exacerbates over time vis-à-vis the other 
communication  groups  which  are  not  subject  to  restrictions  of  a  similar 
extent.  In  addition,  the  limitations  of  structural  separation  cause  high 
overheads. 

1.7.3.2 

Elimination of structural separation 

structural 

separation 

in  accordance  with 

In the Company’s opinion, all the conditions that require the cancellation of 
the 
the  Ministry  of 
Communications  policy  document  dated  May  2,  2012  regarding  the 
expansion of competition in the landline communications field - wholesale 
market have been met. As part of an appeal filed by Bezeq with the Hight 
Court  of  Justice  in  2021  and  withdrawn  thereby,  the  State  submitted  an 
interdepartmental  report  for  examining  the  update  of  the  structural 
separation obligations in the Bezeq and Hot groups, in which the Minister 
was advised not to cancel the structural separation obligation in the Bezeq 
and Hot groups at this time. However, the team found that certain changes 

12   Pelephone, Bezeq International, DBS and Bezeq Online. 

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can be made to the overall regulation, including examining the elimination 
of the separation used in Israel between the infrastructure service and the 
ISP service, which was in fact eliminated (for the abolition of separation, see 
Section 1.7.5.1). 

1.7.3.3 

Marketing  a  shared  basket  of  services  with  a  subsidiary  and  between 
subsidiaries 

Bezeq was allowed to offer subscribers shared services ("Bundles") with the 
subsidiaries,  subject  to  approval  by  the  Ministry  of  Communications  and 
subject to a number of conditions set forth in the NIO license, including: 

 

The baskets will be "detachable", that is - each service included in them 
will be offered separately outside the framework of a basket of services, 
under the same conditions. 

  At  the  time  of  submitting  the  application  for  approval  of  the  basket, 
there  is  a  group  of  services  in  a  similar  format  that  is  marketed  to  a 
subscriber as a package by a licensee who is not a Bezeq subsidiary, or 
there is a group that includes licensees who provide a private subscriber 
with all services included in the shared basket of services. 

 

The  marketing  of  shared  service  baskets  by  the  subsidiaries,  which 
include  Bezeq  Services,  is  also  subject,  according  to their  licenses,  to 
similar  restrictions, 
including  the  requirement  of  "detachability" 
(except for a basket marketed by a subsidiary that includes only Bezeq's 
broadband access service for Internet providers). 

These  restrictions,  and  in  particular  the  "detachability"  obligation,  which 
severely 
limits  the  Group's  ability  to  provide  discounts  on  various 
components  in  the  basket  of  services,  place  the  Group  in  an  inferior 
competitive position relative to competing communications groups that are 
not subject to similar restrictions on the marketing of bundles (except, to 
the best of the Company's knowledge, Hot Group's diminishing limitations). 

Following the amendment of the terms of the merger of the Company and 
DBS in accordance with the decision of April 12, 2021 of the Commissioner 
of  Competition,  DBS  was  allowed  to  sell  communication  packages  that 
include internet services and television services without the obligation to 
sell  the  television  services  at  a  detachable  price  that  will  be  uniform  for 
package buyers and those who are not Purchasers of packages - see Section 
2.16.9.3. 

The  Company’s  baskets  with  DBS  -  in  recent  years,  the  Ministry  rejected 
various requests from Bezeq to provide its Internet services together with 
the television services of the subsidiary - DBS (including over the Internet). 

1.7.3.4 

Additional  restrictions  on  collaboration  and  preference  between  group 
companies  

There  are  additional  restrictions  on  cooperation  between  Bezeq  and  the 
Group companies both by virtue of competition law and conditions set by 
the  Competition  Commissioner  for  mergers  between  Bezeq  and  Group 
companies, which prohibit discrimination in favor of the Group companies 
in the provision of certain services (see Section 9.2.16), and by virtue of the 
provisions of Bezeq's license, which require it to provide its services equally. 
For additional restrictions see also Section 5.14.3.  

Removal of the restrictions on structural separation and other restrictions 
that  apply  to  collaborations  between  the  Group  companies  as  detailed 
above, insofar as they are removed, may create different opportunities for 
the  Group  to  exploit  such  synergies  or  facilitate  the  exploitation  of  such 
synergies.. 

1.7.4. 

Changing the regulatory structure - Amendment 76 to the Communications Law 

On July 4, 2022, Amendment 76 to the Communications Law ("Amendment to the Law") 
was published. In accordance with the amendment to the law, which largely entered into 

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force on October 2, 2022, the structure of the existing regulation in the field of Bezeq was 
changed, among other things, in such a way that the obligation to obtain a specific license 
in advance as a condition for the provision of Bezeq service, which was the main tool for 
regulating the provision of communication services in Israel, was abolished, and instead 
the default for the said regulation is through registration in the registry. In this way, the 
Amendment to the Law allows any entity interested in providing a Bezeq service to know 
in  advance  what  the  conditions  are  for  its  activity  and  to  start  operating  without 
requesting  and  without  obtaining  a  license.  The  registry  is  managed  by  the  Director 
General of the Ministry of Communications. The Amendment to the Law established cases 
in which the obligation to obtain a license will still apply when it comes to (a) a Bezeq 
service  provided  through  the  mobile  radio-telephone  system;  (b)  a  Bezeq  service 
provided  through  the  Bezeq  network  whose  number  of  users  or  subscribers  or  the 
number of network terminal points or end points exceeds the number determined by the 
Minister,  with  the  exception  of  Bezeq  service  provided  through  the  aforementioned 
Bezeq network by another licensed provider (the regulations for this matter stipulate that 
a license will be required from those who provide Bezeq service through a landline access 
network13 with at least 100,000 users or through a fixed access network whose number 
of  subscribers  who  receive  Internet  access  service  at  least  500,000);  (c)  Bezeq  service 
provided through a Bezeq network in which one of the following occurs: (1) It includes a 
landline  or  mobile  ground  station  in  Israel  for  communication  with  a  satellite;  (2)  It 
includes a satellite located at the location or using the registered route In the name of the 
State of Israel in the International Telecom Union (ITU); (d) Carrying out a Bezeq operation 
in a landline lightning facility connecting a point in Israel and a point outside Israel (with 
the  exception  of  Judea  and  Samaria).  Also,  a  local  authority  (including  a  municipal 
company  or  a  municipal  subsidiary)  will  not  provide  Bezeq  service  whether  it  requires 
registration in the registry or a license, unless it holds a license and in accordance with 
the terms of the license; The Minister has the authority to determine, with the approval 
of  the  Knesset's  Economic  Committee,  additional  Bezeq  services  that  will  require  a 
license,  as  well  as  additional  service  providers  that  will  be  subject  to  the  licensing 
obligation  (for  certain  services  or  for  all  of  the services  provided),  if  he  considers  that 
under the circumstances of the case it is not sufficient to regulate through registration in 
the  registry  to  comply  One  or  more  of  the  following  considerations:  maintaining  state 
security  or  public  peace,  efficient  utilization  of  a  scarce  resource,  promotion  of 
competition.  Also,  the  Minister  may,  due  to  one  or  more  of  the  considerations  listed 
above, order a Bezeq service provider registered in the registry, that the provision of a 
Bezeq service thereby will be subject to obtaining a license for every lightning service it 
provides or for a Bezeq service of a type it decides. 

In addition, the law changed the definition of "Bezeq service" subject to regulation, in 
order to reduce the services subject to regulation. "Bezeq service" is defined as a service 
provided to the general public or a part of it through the Bezeq network, which is one of 
the following: data transmission service, Internet access service, telephony service, other 
service listed in the first supplement to the law (as of the date of the report, there is no 
detail in the supplement to the law). 

Further  to  this,  on  October  2,  2022,  regulations  were  published  implementing  the 
regulation format according to which many of the entities that provide Bezeq services 
today  will  be  transferred  from  regulation  through  a  license  to  regulation  through 
registration in a dedicated registry and in accordance with the regulations. In accordance 
with the provisions of the regulations, they will not apply to certain licensees, including 
the  Company  and  its  subsidiaries  Pelephone,  Bezeq  International,  and  DBS,  except  in 
relation to the ISP service provided by DBS. In parallel, as it appears from the explanation 
of  the  regulations,  the  Ministry  of  Communications  intends  to  map  the  licenses  and 
actively cancel the instructions in the licenses that are regulated in the regulations, as 
well  as  in  the  near  future  to  examine  the  justifications  for  determining  different 
arrangements  within  the  licenses.  Regarding  the  obligation  to  disconnect  dormant 
subscribers stipulated in the regulations, see Section 1.7.7.10. 

Also, on December 8, 2022, the Ministry published a "Hearing to Update the Wholesale 

13  Access network for this matter - Bezeq devices used to link between a switchboard and a network END point, using a wired 

infrastructure, a wireless infrastructure or a combination of both. 

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Market Regulations and the Service Files - Adaptation to the New Regulation", according 
to which the Ministry is considering amending the service files of the wholesale services 
(BSA+Telephony;  Mutual  use  of  passive  infrastructures;  Physical  infrastructure  service 
and  Appendix  No.  2  "Documentation  of  Passive  Infrastructure  Works")  so  that  they 
conform to the language of the law after Amendment 76 enters into force, and to the 
language of the new communications regulations that were established pursuant to it. 
According  to  the  hearing,  the  changes  being  considered  are,  among  other  things,  a 
derivative  of  the  wholesale  market  regulations  and  the  elimination  of  distinctions 
according to different types of licenses as well as a change of terms. In its response, Bezeq 
stated that the relevant distinctions must be maintained in relation to the provision of 
the various wholesale services to various licensed providers. As of the date of the report 
- a decision has not yet been made in the hearing and the service files have not yet been 
corrected or replaced by the instructions of a manager. 

A draft amendment to the usage regulations was also published in December 2022, which 
also  included  adjustments  following  Amendment  76  to  the  law.  As  of  the  date  of  the 
report, the regulations have not yet been amended. 

The effect of the amendment of the Communications Law and regulations on the Group 
companies depends, among other things, on the manner in which they are implemented 
by the Ministry of Communications, including the amendment of the licenses of existing 
license holders. 

1.7.5. 

Key developments during the report period (including years preceding the report period) 

1.7.5.1 

Unified Internet service 

includes  an 

As  of  April  3,  2022,  Bezeq  markets  and  provides  a  unified  Internet, 
infrastructure,  and  Internet  access  service,  both  on  a  traditional  network 
(copper) and on an advanced network (fiber). From this date, Bezeq is not 
Internet 
allowed  to  market  a  basket  ("bundle")  that 
infrastructure  service  with  Bezeq  International's  or  another  licensee's 
access  service.  This  development  is  a  follow-up  to  the  decision  of  the 
Minister of Communications dated June 20, 2021 regarding the cancellation 
of the separation between the infrastructure service and the internet access 
service, and the granting of permission to Bezeq, and later Hot, to provide a 
unified internet service to subscribers in a private service. According to the 
decision,  it  is  required,  among  other  things,  to  regulate  through  a  shelf 
agreement, key performance indicators (KPI  - Key Performance Indicator) 
for  the  level  of  service  and  liquidated  damages  arrangements  of  the 
infrastructure owner (the Company and Hot) with an access applicant who 
has  an  ISP  license  and  at  least  10,000  active  customers  in  a  wholesale 
market. On September 19, 2021, the General Directorate of the Ministry of 
Communications decided that the agreement governing key performance 
indicators (KPIs) submitted by Bezeq, will be a "shelf offer" according to the 
Minister's  decision  and  will  apply  to  all  access  applicants  and  without 
discrimination. 

The  implementation  of  the  move  and  Bezeq's  ability  to  offer  a  unified 
service have a positive effect on its business. Regarding Bezeq International, 
the  move  resulted  in  a  significant  reduction  in  the  status  of  its  Internet 
customers  and  the  structural  change  described  in  Section  1.1.6,  so  that 
Bezeq  International  does  not  market  Internet  services  to  customers  in  a 
private service, and starting in the second half of 2022, DBS is an authorized 
provider for providing access services to the Internet, and provides Internet 
services  over  fiber  (an  infrastructure  component  through  a  wholesale 
service). The total impact on the Group in the coming years is expected to 
be positive. 

1.7.5.2 

Many small operators 

Following changes in regulation, the number of small service providers that 
provide broadband Internet services including infrastructure has expanded, 
in  practice  and  potentially,  first  through  the  granting  of  special  licenses 
instead  of  a  unified/general  license  (subject  to  a  limit  on  the  number  of 
subscribers  and  time),  in  accordance  with  the  decision  of  the  Minister  of 

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Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

Communications of October 13, 2022, and later by eliminating the need for 
licenses  (except  for  exceptions)  and  moving  to  the  provision  of 
communication  services 
limited  to  broadband 
(including  but  not 
infrastructure) through registration in the registry only and subject to the 
permit regulations by virtue of Amendment 76 to the Communications Law 
(see Section 1.7.4). Authorized providers as mentioned are not required to 
go through a license issuance procedure in order to provide Bezeq service. 
Also, the conditions that licensed providers are subject to according to the 
permit regulations, in the provision of the services and in general, do not 
necessarily  include  all  the  conditions  stipulated  in  the  licenses,  so  for 
example,  instructions  regarding  maintaining  functional  continuity  in  an 
emergency  and  certain  consumer  instructions  apply  only  to  a  licensed 
provider that provides service on an advanced network to at least 50,000 
end  users  and  to  an  authorized  provider  providing  mobile  telephony 
services to at least 200,000 end subscribers. 

1.7.6. 

Wholesale market  

Starting from 2015, a model of "wholesale market" has been implemented in Israel, in 
which the owners of the nationwide landline access infrastructures in Israel (Bezeq and 
Hot)  have  been  required  to  allow  other  communications  operators  to  use  their 
infrastructures, at prices not to exceed the maximum rates set in the regulations.  

In this context, the Ministry of Communications established "service portfolios" for the 
various services, in which the format of the provision of services by the infrastructure 
companies was determined:  

1.7.6.1 

Wholesale BSA service  

This  service  allows  Internet  service  providers  who  do  not  own  an 
infrastructure to offer their customers a full Internet service that includes 
both an Internet connection service (of the service provider) and an Internet 
infrastructure  service  (based  on  the  Bezeq  or  Hot  network  -  both  on  the 
traditional  network  and  on  the  fiber  network).  Since  the  launch  of  the 
service, hundreds of thousands of customers in Israel have moved to receive 
service through the aforementioned service providers. 

1.7.6.2 

Wholesale passive infrastructure use service 

This service allows providers to use Bezeq's passive infrastructure for the 
passage  of  communication  cables  (for  some  providers  only  in  incentive 
areas)  and  for  certain  providers  to  use  dark  fiber  at  the  rates  set  in  the 
regulations. For more, see Section 2.16.4. 

Bezeq  was  also  given  the  right  to  use  passive  infrastructures  of  other 
companies,  except  that  their  rates  (except  Hot)  are  not  set  in  the 
regulations. 

1.7.6.3 

Wholesale telephony service 

This service allows service providers who do not own infrastructure to offer 
their  customers  telephony  service  at  wholesale  rates  through  the  Bezeq 
network. Currently there are no customers in the service. For this matter, 
see Section 2.16.4.4.  

The regulatory determinations in relation to the wholesale market as well 
as its implementation and development during the reporting period have an 
impact on a significant part of the Group's activities. For more details about 
the wholesale market services and their regulation, see section 2.16.4. 

1.7.7. 

Additional  regulatory  aspects  that are  relevant  to  the  whole  Group  or  to  a  number  of 
companies in it 

1.7.7.1 

Interconnectivity rates 

The  Group's  communications  companies  (Bezeq,  Pelephone  and  Bezeq 
International)  pay 
fees  to  other  communications 
operators for calls that end in the networks of those operators and some 
(Bezeq and Pelephone) receive interconnectivity fee payments for calls that 

interconnectivity 

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Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

ended in their networks and from international communication operators 
for  outgoing  and  incoming  calls  to  their  networks.  Interconnectivity  rates 
are  set  as  maximum  rates  by  the  regulator  in  the  interconnectivity 
regulations. Changes in interconnectivity rates have a offsetting effect at the 
Group level in light of their effect on Bezeq's expenses and income and the 
subsidiaries in this matter. 

On  June  28,  2022,  an  amendment  to  the  interconnect  regulations  was 
published so that the transfer of interconnection payments for telephone 
calls that end on the networks of mobile radio-telephone and NIO operators 
will be stopped, with a gradual reduction plan over three years as follows: 

(1)  On  June  15,  2023:  for  a  call  ending  on  the  mobile  radio-telephone 
network, a maximum rate of 4 Agorot per minute, and for a call ending 
on  the  NIO  network  0.7  Agorot  per  minute,  and  for  an  outgoing 
international call - depending on the network from which it originated 
(NIO or mobile radio-telephone). 

(2)  On June 15, 2024: for a call that ends on the mobile radio-telephone 
network, a maximum rate of 2 Agorot per minute, and for a call that 
ends on the Mapa network - 0.4 Agorot per minute, and for an outgoing 
international call - depending on the network from which it originated 
(NIO or mobile radio-telephone). 

(3)  On June 15, 2025, an accompanying arrangement will enter into force 
according  to  which  each  communication  operator  will  bear  its  own 
costs and there will no longer be a transfer of payments between NIO 
and mobile radio-telephone licensees for a mutual connection service 
with regard to call minutes, regarding calls ending in the networks of 
mobile radio-telephone operators, and on Bill and Keep networks, and 
an  international  operator  will  not  pay  for  the  transmission  of  an 
outgoing international call. 

For  incoming  international  calls  to  the  NIO  or  mobile  radio-telephone 
network,  the  payment  to  be  paid  by  an  international  operator  will  be  as 
required by NIO  or mobile radio-telephone respectively (effective from July 
28, 2022). At this point, it is not different from the interconnect rate regime 
in the SMS service 

1.7.7.2 

Limiting the exit fee that a licensee may charge from a subscriber 

In  accordance  with  the  provisions  of  the  Communications  Law,  NIO, 
international operator and broadcasting licensees (including  Bezeq, Bezeq 
International and DBS) are not allowed to charge an exit fee for cancellation 
of contract by a subscriber whose average monthly bill is less than NIS 5,000, 
or deny him a benefit he would have received if he had not terminated the 
14.  Cellular  operators  (including  Pelephone)  -  are  not  allowed  to 
contract1
charge exit fees from customers who hold up to 100 telephone lines or link 
a contract for the receipt of cellular services to a contract for the purchase, 
rent or borrowing of end equipment ("disconnection"). 

3F

1.7.7.3 

License amendments and related legislation 

a.  Response times at call centers 

The  amendment  to  the  licenses  of  Bezeq,  Pelephone  and  Bezeq 
International  have  established,  among  other  things,  provisions 
regarding the obligation to route calls in certain matters to professional 
human response, response times, as well as provisions regarding call 
center  hours,  recording  and  documentation  of  calls  and  reporting 
obligations. The amendment entered into force on the date of its entry 
into force of the amendment to the Consumer Protection Law (July 25, 
2019), which deals, among other things, with the waiting period for a 

14   With regard to the operators' claim in the hearing held by the Ministry in connection with this directive, according to which discounts or 
benefits stipulated by conditions that the subscriber is required to comply with do not constitute a violation of the directive, the Ministry 
stated that it will examine whether the condition is true and relevant also when the subscriber remains a subscriber with the operator. 

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human  response.  The  DBS’s  broadcasting  license  has  been  similarly 
amended. 

On June 30, 2021, the licenses of Bezeq, Pelephone, Bezeq International 
and  the  licenses  of  other  communications  operators  were  amended. 
The amendment stipulates that the call center for handling subscriber 
inquiries (which are not inquiries regarding a malfunction in receiving 
Bezeq  services  and  loss  of  cellular  equipment)  will  be  staffed  for  45 
hours a week. It is also stipulated that the licensee will operate a digital 
means  of  communication  such  as  texting  or  chat,  in  order  to  receive 
inquiries  regarding  the  licensee's  services,  which  are  not  inquiries 
regarding  malfunctions  and  loss  of  cellular  end  equipment.  This 
amendment does not apply to 24/7 call centers (fault handling centers, 
etc.) the activity of which continues unchanged. On September 2, 2021 
the DBS license was similarly amended. 

b.  Amendment of the IPv6 protocol (Internet addresses) 

On July 3, 2019, the Ministry of Communications issued a decision by 
way of hearing and amendment to the license according to which the 
transition  to  the  IPv6  protocol  will  be  executed  according  to  the 
milestones determined. For Bezeq (as a holder of a landline NIO license) 
and  for  holders  of  Internet  access  licenses,  it  has  been  determined, 
among  other  things,  that  the  network  and  its  components  will  be 
adapted in a way that allows access to Internet service subscribers via 
IPv6  protocol  from  any  end equipment  supporting  the  IPv6  protocol, 
and that the licensee must proactively transfer to addresses in the IPv6 
protocol  existing  and  new  subscribers  with  end  equipment  that 
supports  the  IPv6  protocol.  The  transfer  of  subscribers  will  be  done 
according to milestones, so that up to 24 months from the date of the 
amendment, 50% of the subscribers will move, up to 36 months - 75% 
and  up  to  48  months  –  100%  of  subscribers  (except  subscribers  who 
hold private end equipment which does not support the IPv6 protocol 
and decided not to replace it, provided that the licensee, among other 
things, will sign a waiver). Bezeq is in the process of transitioning to the 
IPv6 protocol in accordance with the established milestones, and it does 
not anticipate a material expense in respect thereof. Regarding holders 
of  mobile  radio  telephone  licenses  (such  as  Pelephone),  it  was 
determined  that  the  proactive  transfer  will  reach  100%  within  24 
months.  Pelephone  has  completed  the  process  of  transferring 
subscribers  in  its systems  in support  of  the  new  protocol  (except  for 
business subscribers who are receiving enterprise network services, for 
which a dedicated solution will be implemented). 

1.7.7.4 

Consumer legislation and privacy protection laws 

Changes in consumer legislation affect the activities of the Group companies 
on an ongoing basis. In recent years, various amendments to the Consumer 
Protection  Law  and  its  regulations  have  been  approved.  In  addition,  a 
variety of bills for additional amendments to the Consumer Protection Law 
have been brought before the Knesset, which may have an impact, among 
other things, on the terms of the Group's contracting and conduct with their 
subscribers. 

On January 1, 2023, the provisions of the Consumer Protection Law entered 
into force, which prohibit a trader or anyone on his behalf from making a 
marketing appeal to a consumer whose telephone number is registered in 
the database established by the Consumer Protection Authority in order to 
enter  into  a  transaction  (subject  to  exceptions  established  by  law).  In 
accordance  with  the  amendment,  telephone  numbers  of  consumers  who 
wish  to  limit  such  marketing  inquiries  to  them  will  be  recorded  in  the 
database.  The  provisions  of  the  law  may  create  a  limit  on  marketing 
activities and the degree of their effect will depend on the scope of joining 
the database. 

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In addition, the activity of the Group companies is affected by the provisions 
of the Privacy Protection Law and its regulations regarding the management 
and  maintenance  of  databases  and  the  security  of  the  information 
contained therein. 

1.7.7.5 

Enforcement and financial sanctions 

The  Communications  Law,  the  Economic  Competition  Law,  the  Securities 
Law, the Consumer Protection Law, the Law for Increasing the Enforcement 
of Labor Law, 5772-2011 and the Telegraph Order entitle the regulators to 
powers of enforcement, supervision and the imposition of significant tiered 
financial  sanctions  for  violations  of  the  said  laws  or  regulations  and 
provisions thereunder. 

In Amendment 76 to the Communications Law, the Director General of the 
Ministry of Communications was given the authority to impose a financial 
sanction  at  a  rate  of  up  to  10  times  the  basic  amount  stipulated  in  the 
Communications  Law  for  violating  a  license  provision  regarding  the 
obligation to deploy an advanced network or provide a service over it. 

In recent years, the Ministry of Communications has made extensive use of 
the supervisory authority. For financial sanctions imposed by the Ministry of 
Communications  regarding  wholesale  services,  see  Section  2.16.4.2 
(Footnote 40) for sanctions imposed. 

The Consumer Protection and Fair Trade Authority also makes use of the 
enforcement powers conferred on it by the Consumer Protection Act, and 
from time to time data demands are issued, investigations are conducted 
against the Group companies on suspicion of violating this law and fines are 
imposed. In April 2022, a financial sanction of NIS 6.9 million was imposed 
on Bezeq, for alleged violation of Article 2(a)(1) of the Consumer Protection 
Law,  claiming  that  Bezeq  did  not  supply  thousands  of  consumers  who 
purchased a browsing package of the type TOP 100 with this speed. Bezeq 
filed an appeal Bezeq filed an appeal to the Magistrate's Court and asked, 
among other things, to cancel the Authority's decision. 

1.7.7.6 

The Centralization Law 

The Centralization Law enacted in 2013 establishes limitations in relation to 
extending  credit  to  business  groups,  separation  between  significant  real 
corporations  and  significant  financial  entities  (Bezeq  and  the  Group 
companies  are  defined  as  significant  real  corporations  according  to  the 
Centralization  Law)  and  consideration  of  economy-wide  centralization 
considerations in the allocation of rights - limitations on the allocation of 
rights in essential infrastructure to "centralizing factor". For this matter, a 
list of areas that will be considered "essential infrastructure areas" has been 
defined,  including  activities  in  the  area  for  which  certain  communication 
licenses are required. Bezeq and the group companies are included in the 
list  published  by  the  Competition  Authority  and  are  considered  a 
"concentrated  entity".  The  law  may  have  negative  effects  on  the  group's 
ability  to  operate  in  new  areas  of  activity  and  even  on  its  activities  in  its 
existing areas of activity. 

1.7.7.7 

Millimeter waves 

Millimeter-wave  technology  makes  it  possible  to  wirelessly  transmit 
significantly  larger  bandwidth  than  previously  available  technologies.  The 
technology can be used both from point to point and from point to multiple 
points, and is a solution for the last segment, that is, the connection to the 
subscriber's end point. Through the use of this technology, it is possible to 
connect large areas relatively quickly and at lower costs compared to the 
deployment of a wired infrastructure. 

In January 2022, the Ministry wrote to Bezeq that the approval to provide a 
service not through wired deployment is given only in certain localities, that 
the approval given by the Spectrum Division is for frequency use and not 
approval  to  provide service  by  wireless  means,  and  that  insofar  as  Bezeq 

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intends  to  provide  service  through  non-wired  infrastructure  to  other 
localities, the advisory committee should be contacted . Bezeq responded 
that its license allows service to be provided via wireless infrastructure, such 
as millimeter waves. According to the Company's position, it is possible to 
provide a proper service to subscribers, as required by its license, using this 
technology. On July 11, 2022, the Ministry contacted the Company with a 
request for data regarding the deployment and provision of Bezeq services 
using wireless technology and reiterated its position. The Company handed 
over  the  data  on  August  4,  2022,  explained  its  position  again  and  even 
offered a discussion on the matter. 

1.7.7.8 

Data demand hearing - Consumption of communication services 

On  January  17,  2021,  the  Ministry  of  Communications  issued  a  hearing 
according to which it intends to demand a very large monthly transfer of 
data on the characteristics of the consumption of communication services 
by  subscribers  (including  identifying  details  about  the  subscriber,  the 
package  consumed  thereby,  and  details  regarding  each  of  the  services 
consumed by the subscriber). The data demand will be sent to all operators 
in  the  communications  market  that  provide  services  to  end  customers 
(private  and  business)  as  well  as  to  various  licensees  and  it  applies  to  all 
types  of  customers  who  receive  service  from  the  licensee  (private  and 
business),  both  wholesale  and  retail.  According  to  the  hearing,  cross-
referencing  the  information  will  allow  the  Ministry  to  obtain  a  complete 
picture of the activities of communications providers on the one hand, as 
well as the characteristics of the communications consumer on the other, 
and it is expected to allow the Ministry to monitor the level of competition 
in the various sub-markets. On March 9, 2021, Bezeq submitted its response 
to the hearing, according to which the hearing is fundamentally flawed by 
many  problems  and  failures,  including  a  breach  of  privacy  and  business 
secrecy; Information that is high in volume without defining a purpose on 
the basis of which an adapted data demand has been clearly formulated, 
when  this  is  not  intended  by  authority  in  law;  Creating  a  very  tangible 
danger  due  to  the  construction  of  a  huge  database,  which  centralizes 
detailed  information,  at  the  personal,  financial  and  business  level,  of  all 
citizens  of  Israel  and  the  business  companies  active  in  it,  while  creating 
endless  opportunity  for  cross-referencing  information;  The  individual 
resolution  of  the  requested  data  creates  an  opening  for  a  jungle  of  legal 
issues. The reporting format  is often irrelevant and / or inapplicable; The 
scope of resources required by Bezeq for the benefit of the matter is very 
significant and requires a diversion of manpower in the field of information 
systems from critical business activities. Bezeq believes that the solution to 
these  problems  is  to  shelf  the  intention  presented  at  the  hearing  for  the 
comprehensive  transfer  of  all  Bezeq's  customer  data,  or  alternatively  a 
specific definition of targets and objectives on the basis of which the data 
relevant for their achievement will be clearly and accurately defined, and 
which complies with the Ministry's powers in receiving information and is 
supported  by  the  structure  of  Bezeq's  information  systems.  A  similar 
reference  was  also  submitted  by  the  subsidiaries  Pelephone,  Bezeq 
International and DBS. 

1.7.7.9 

Inactive subscribers 

On  September  10,  2020,  the  Ministry  of  Communications  contacted  the 
telecommunications  operators  (including  Bezeq,  Pelephone  and  Bezeq 
International)  in  a  letter  in  which  it  raised  concerns  that  some  of  the 
subscribers to the operators' services are not using them and are not even 
aware of it. The Ministry recommended in its appeal to operators to act to 
notify and stop charging subscribers who do not use these services, and also 
requested  periodic  reports  on  the  matter.  It  was  also  stated  that  the 
Ministry will consider in the future whether to set binding provisions in the 
matter,  in  case  proactive  actions  will  not  lead  to  a  significant  reduction 
therein.  Regarding  the  handling  and  consequences  of  the  Ministry  of 
Communications' request to Bezeq International, see Section 4.4 and Note 

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10.6 to the  2021 statements. On January 14, 2021, a preliminary request 
was  also  sent  to  DBS  by  the  Cable  and  Satellite  Broadcasting  Council 
regarding "Demand for information about "dormant" subscribers as well as 
about services that subscribers pay for and do not use". In March 2021, DBS 
replied that due notice was given to its subscribers, and that it could not 
provide  the  requested  information  due  in  part  to  the  lack  of  established 
information  in  its hands, due  to  the  Council's  lack  of  authority  in at  least 
some  of  its  requests,  and  due  to  additional  difficulties  inherent  in  the 
Council's application. It should be noted that in the permit regulations that 
apply  to  the  Internet  access services  of  DBS  (and  not  to  the  other  Group 
companies), there is an obligation to disconnect "dormant subscribers" from 
Internet access services (a subscriber who has not used an Internet access 
service for at least six consecutive months), except in relation to the service 
for a medium-large business subscriber as defined in the regulations. 

1.7.8. 

Restrictions on creating liens on the assets of the Group companies 

For the sake of convenience, the following are references to sections in the 2022 periodic 
report that relate to the restrictions that apply to the Group companies in the lien on their 
assets and the main restrictions:  

1.7.8.1 

1.7.8.2 

Regulatory  restrictions  -  The  Communications  Law,  the  Communications 
Order (applicable to Bezeq) and some of the communications licenses of the 
Group  companies  include  restrictions  on  the  granting  of  rights  to  third 
parties in the assets used to provide the essential service or in the license 
assets.15,  as  the  case  may  be,  including  the  need  to  obtain  regulatory 
approvals  to  create  liens  on  these  assets.  In  some  cases,  for  example 
Pelephone's  mobile  radio  telephone  license  and  Bezeq  International's 
unified license, there are exceptions that allow the creation of liens in favor 
of a banking corporation without the need for advance regulatory approval, 
provided  that  the  lien  agreement  includes  provisions  ensuring  that  the 
exercise of the lien by the banking corporation will not impair the provision 
of the services under the license. In addition, according to the provisions of 
the law and the media licenses, the license and the rights under it are not 
transferable,  and  cannot  be  encumbered  or  foreclosed  (subject  to 
exceptions). See also sections 2.16.3.7,  3.14.2 and 5.15.1.7.  

Restrictions under agreements- Bezeq undertook to certain financiers in an 
undertaking not to encumber its assets unless, at the same time, it creates 
in favor of those financing bodies a lien of the same type, rank and amount 
(negative lien), subject to certain exceptions. see also Note 13.3 to the 2022 
statements.  

1.7.9. 

Pandemic - Outbreak of COVID-19 

At the beginning of 2020, a global outbreak of the Coronavirus (COVID-19) began, ("the 
Incident"). Following the Incident, many countries, including Israel, have taken various 
steps and imposed restrictions in an attempt to prevent the spread of the virus. During 
the year 2022, there was a significant decrease in the outbreak of the virus and the effects 
of the Incident, while the consequences of the Incident on the Group's activities in 2022 
were mainly manifested in the damage to Pelephone's revenues from roaming services 
(an injury that gradually decreased throughout the year until the date of publication of 
this report) and without significant negative effects in other areas of activity. As of the 
date of publication of the report, there are no special effects of the event on the Group's 
areas of activity. 

Regarding epidemic as a general risk factor in the Group's areas of activity, see Sections 
2.20.13, 3.19.1.2, 4.14.5 and 5.18.1.3. 

1.7.10. 

Cyber defense management 

1.7.10.1 

The  Group  companies  implement  a  cyber  protection  policy  that  includes 
security  systems  to  protect  their  infrastructures  and  systems  which  are 
designed to prevent and reduce the possibility of the companies' data being 

15 

 The assets needed to ensure the provision of services by the licensee.  
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exploited by an outside party or an internal party maliciously or inadvertently, 
as well as the possibility of an outside party taking over and managing network 
components  or  abusing  information  on  the  company's  infrastructure  and 
systems. For more details regarding each field of activity and cyber risks see 
Sections 2.20.11, 3.19.2.8, 4.14.7 and 5.18.3.9. 

1.7.10.2  Also, on May 12, 2022, the Bezeq, Pelephone and Bezeq International licenses 
were  amended  with  an  amendment  regulating  the  issue  of  preparation  for 
cyber defense management. This amendment was replaced on December 26, 
2022  by  a  director's  order  essentially  identical  to  it.  The  principals  of  the 
amendment to the Directorate deal, among other things, with the protection 
of the communication network, maintaining the relevance and up-to-dateness 
of systems, the licensee's dealing with cyber incidents and situations in which 
the licensee is required to report and share information. 

1.7.11. 

Additional regulatory developments during the reporting period and the main 
restrictions that apply to the Group's areas of activit – for a description on such matters, 
see Sections 2.16, 3.14, 4.11 and 5.15.  

For a description of these matters see Sections 2.16, 3.14, 4.11 and 5.14. 

1.8. 

Bezeq Group business strategy 

Group vision  

Bezeq Group – the largest, leading telecommunications group in Israel, will lead and promote the 
digital revolution in Israel, through advanced infrastructure and services for the private and business 
segments, and strive for continuous improvement in its business results. 

Group strategy 

1.8.1. 

Strategic focus - focus on building infrastructure and growth engines 

A.  Accelerated  deployment  of  fiber  optics  and  the  transition  to  a  unified  Internet 

package will constitute a growth engine in Bezeq Fixed Lines. 

B.  Bezeq  International's  private  segment  Internet  activity  will  be  reduced,  and  ISP 
activity  will  be  established  in  DBS,  which  will  become  the  "triple"  sales  arm  that 
combines fiber and television. 

C.  Pelephone will leverage the transition to 5G to increase revenue and ARPU. 

D.  Bezeq International will become a growth-focused ICT company. 

1.8.2. 

Focusing growth strategy by theaters 

A.  Communication,  information  and  content  services  for  households  -  investing  and 
focusing  efforts  on  growing  and  strengthening  the  competitive  position  in  the 
theater,  by  offering  as  wide  a  basket  of  services  as  possible  and  deepening  the 
penetration of households. 

B.  Business  communication  services  -  maintaining  and  strengthening  the  leading 
position in the theater through offering value-added to customers, based on quality 
service and advanced products. 

C.  Cellular  services  -  maintaining  and  strengthening  the  competitive  status,  while 

striving to increase revenues and improve profits. 

D. 

ICT  services  for  businesses  -  investment  in  building  capabilities  that  will  enable 
significant growth. 

1.8.3. 

Additional strategic moves 

The Group will work to locate investments in areas that are tangent and complementary 
to  the  Group's  activities  and  its  competitive  capabilities.  Initiated  investment  and 
acquisition activity will enable shareholders to increase their return by entering areas of 
higher  growth  than  that  of  the  activity  in  the  Group's  traditional  core  areas.  The 
diversification of the portfolio will allow for the diversification of risk, and the reduction 
of dependence on regulatory risks. 

Beyond the strategic  moves, the  Group strives to strengthen the foundations that will 
enable  continued  growth  in  the  medium  term  -  striving  for  operational  excellence 

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through  expanding  the  digital  transformation,  streamlining  the  cost  base,  improving 
market  response  times  and  flexibility  for  changes,  and  striving  to  eliminate  structural 
separation. 

Optimal cash flow management – maximizing value to shareholders, while maintaining 
an AA Group credit rating - the Group aims to maintain high credit rating in the AA group 
while adjusting the debt repayment burden to self-generating cash flow and maintaining 
significant liquidity, while distributing dividends to shareholders. 

In addition, the Bezeq Group strives to be one of the leading companies in the field of 
ESG. 

This section includes forward-looking information, within the meaning thereof under the 
Securities Law, including forecasts, targets, business strategy, assessments, aspirations 
and estimates, both regarding the activities of Bezeq and the companies held by it and 
the markets in which they operate, as well as regarding any other information relating to 
future events or matters whose materialization is uncertain and not under the control of 
the Company ("forward-looking information"). Although the Company believes that the 
information  is  forward-looking  based  on  reasonable  estimates,  the  said  information  is 
subject  to  certain  risks  and  uncertainties.  Forward-looking  information  is  inherently 
subject to risks of non- materialization and is uncertain, and the Company does not in any 
way guarantee that its assessments, expectations, aspirations, plans and objectives will 
be  materialize  in  practice.  Accordingly,  forward-looking  information  should  not  be 
construed as a promise that it will actually materialize. Implementation and / or other 
changes in forward-looking information depend on factors that are not necessarily known 
in advance, and are not necessarily under the Company's control, including risk factors 
and the nature of its operations, developments in the general environment and external 
factors  and  regulation  affecting  its  activities  and  other  factors.  The  results  and 
achievements  of  the  Bezeq  Group  in  the  future  may  differ  materially  from  those 
presented in the forward-looking information presented in this section. 

1.8.4. 

Streamlining moves and promoting the assimilation of synergies between subsidiaries 

Bezeq’s subsidiaries Pelephone, Bezeq International and  DBS (the "Subsidiaries") have 
implemented  and  are  implementing  significant  moves  to  promote  and  assimilate  the 
synergy  between  them,  including  the  signing  of  collective  agreements  which  include 
streamlining  and  synergy  procedures;  Maintaining  managements 
in  a  similar 
composition,  while  streamlining  decision-making  processes,  along  with  savings  in 
expenses;  Implementing  streamlining  measures  and  saving  on  operating  expenses; 
Service sales through the distribution channels of the companies; Implementing a shared 
customer  management  system  (CRM)  over  an  advanced  Cloud  platform;  deepening 
shared procurement and using shared resources. In this matter, see also Section 1.1.4. 

Bezeq  International,  which  is  in  the  process  of  transitioning  to  a  growth-focused  ICT 
company,  is  also  taking  streamlining  measures,  including  the  signing  of  a  collective 
agreement that includes streamlining, as well as streamlining and cost-saving measures. 
Also, reducing the ISP activity at Bezeq International fits in with the synergy in the Group. 

For details on additional strategic objectives in relation to each of the Group companies, 
see Sections 2.19,  3.17,  4.13 and 5.17.  

In  respect  of  decisions  by  Bezeq’s  Board  of  Directors  and  DBS’s  Board  of  Directors 
regarding an outline for a gradual transition from satellite broadcasts to transmission via 
the Internet (OTT) see Section 5.17.1. 

The assessments described in this section are forward-looking information, as defined in 
the Securities Law, that may be affected by various factors, including future changes in 
the Israeli market in general and in the communications market in particular, strategic 
and other moves to be made in Bezeq and its subsidiaries, regulatory changes, Bezeq's 
competitive position, etc. The above may be affected by the materialization of some of 
the risk factors listed in the Sections 2.20, 3.19, 4.14 and 5.18.  

1.9. 

Corporate accountability (ESG) 

On February 24, 2022, Bezeq's Board of Directors approved the expansion of its activity in the field 
of corporate accountability (ESG - Environment, Social and Governance), following Bezeq's existing 
activity in the field. In this context, the Board of Directors approved a sustainability vision for Bezeq 

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- "Bezeq connects Israel to a sustainable future", as well as setting ESG targets, including long-term 
targets  in  the  field  of  environmental  responsibility  that  include  reducing  net  greenhouse  gas 
emissions to zero by 2050 (Net zero 2050); and in the field of environmental responsibility, increasing 
the rate of representation of women in the management ranks of Bezeq employees to 50% by 2030 
(in Bezeq's Board of Directors - at least 40%); Increasing the rate of diversified populations to 20% 
by 2030. The Company is working to apply the aforementioned ESG targets also in its subsidiaries 
Pelephone, Bezeq International and DBS. Bezeq's Board of Directors also approved Bezeq's corporate 
accountability policy documents on various topics at the same time and in February 2023.. 

In addition, during 2022, Bezeq continued to cooperate with civil society organizations to reduce the 
digital divide and encourage the volunteering of its employees for the benefit of a wide range of 
social goals, as well as investing resources in the continuous improvement of corporate governance 
in the group, which includes the adoption of management norms and the management of advanced 
compliance programs. 

Bezeq publishes corporate responsibility reports in accordance with the reporting standard of the 
Global Reporting Initiative (GRI). 

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2. 

Bezeq – Landline interior communications 

2.1. 

General information about the field of activity 

2.1.1. 

The field of activity and changes that apply to it 

Bezeq  owns  a  general  license  for  the  provision  of  landline  interior  communications 
services and provides a variety of communication services as specified in Section 2.2, the 
main ones being: Internet access and infrastructure services, landline interior telephony, 
transmission and data communication services, Cloud and digital services and wholesale 
services (for wholesale services, see Section 2.16.4). 

2.1.2. 

Legislative and regulatory constraints and special constraints 

2.1.2.1 

Communications Law and Bezeq's NIO license 

subject 

to  governmental 

Bezeq's  activities  are 
regulation  and 
comprehensive  supervision  arising  from  its  status  as  a  general  licensee 
under  the  Communications  Law,  subject  to  the  provisions  of  the 
Communications Law, the provisions, regulations, orders and rules enacted 
thereunder  and  the  provisions  of  the  NIO  license  and  other  laws.  In  this 
regard  and  for  the  restrictions  on  Bezeq's  activities  and  changes  in  this 
inter  alia,  regarding  the  determination  of  rates,  structural 
context, 
separation,  approvals  for  new  services  and  service  baskets  as  well  as 
wholesale market see section  1.7.2 and section 2.16. 

Additionally, Bezeq has been declared an essential Bezeq service provider 
under  the  Communications  Order.  By  virtue  of  this  declaration,  Bezeq  is 
obligated to provide a number of basic services under the NIO license and 
may not discontinue or reduce them  without approval. The order further 
stipulates restrictions on the transfer and purchase of means of control of 
Bezeq and certain restrictions on Bezeq’s activity. For details, see section  
2.16.8.  

2.1.2.2 

Laws of Economic Competition 

Bezeq has been declared a monopoly in the main areas of its operations, 
and  it  is  also  subject  to  supervision  and  restrictions  under  the  Economic 
Competition Law (see section  2.16.9). 

2.1.2.3 

Environmental law and planning and construction law 

Some of Bezeq's activities involve the use of wireless frequencies and the 
operation of facilities that emit electromagnetic radiation, which are subject 
to the Telegraph Order (see Section 2.16.10), to the Non-Ionizing Radiation 
Law  (see  Section  2.15.2),  and  to  National  Outline  Plan  36  and  National 
Outline Plan 56 (see Section 2.16.11). 

2.1.3. 

Changes in the scope of activity in this field and its profitability and developments in the 
market and in the characteristics of customers 

For key data on the scope of activity in the field of landline interior communications and 
its profitability in 2021 and 2022, See Section 1.5.4.1. The following is a description of the 
main changes in the scope of activity in this field during the reported period16:  

2.1.3.1 

Wholesale  market  -  At  the  beginning  of  2015,  Bezeq  began  providing  a 
wholesale BSA service for service providers, when as of the end of 2021, the 
number of wholesale Internet subscribers on the Company’s network was 
approximately  473k  subscribers,  constituting  approximately  33%  of  all 
Bezeq's Internet subscribers. In this context, it should be noted that within 
these subscribers there are also subscribers that were not on the Company’s 
network in the first place (new or from a competing network). There is no 
demand for wholesale telephony services (zero subscriptions as of the date 
of publication of the report). 

Bezeq  also  provides  a  wholesale  service  that  allows  competitors  to  use 

16  

For details of the data as well as subscrber definitions and average revenue, see the notes to the table in Section 0. 

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Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

2.1.3.2 

Bezeq's passive infrastructure. 

Regarding the wholesale services, see Section 2.16.4. 

The  field  of  landline  telephony  -  in  recent  years,  the  field  of  landline 
telephony  has  been  characterized  by  a  decrease  in  demand,  which  is 
reflected in a decrease in the rate of landline telephone subscribers and a 
gradual erosion in the number of calls originating in landline networks. In 
Bezeq's  estimation,  this  trend  is  mainly  due  to the  increase  in  the  use  of 
personal,  cellular,  smart  phones  in  light  of  large-scale  call  packages  that 
cellular companies have marketed extensively in recent years and  from a 
decrease in prices in the field (Bezeq estimates that 87% of all calls originate 
in the cellular network), as well as an increase in the number of calls over 
the Internet (See Section 2.1.4). In 2022, there was a decrease of about 3% 
in the number of Bezeq subscribers compared to 2021. 

Diagram - Rate of households without a landline telephone line17  

63.7%

59.9%

56.1%

52.3%

45.3%

37.9%

35.0%

30.8%

27.1%

23.6%

11.4% 13.2% 14.9% 14.9% 15.7% 16.4% 17.6% 17.8% 19.1% 20.4%

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020
*

2021
*

2022
*

2.1.3.3 

The field of Internet access - the Internet market saw a significant increase 
in bandwidths and browsing speeds, mainly with the deployment of fiber 
infrastructure  and  the  adoption  of  advanced  services  and  value-added 
applications.  Also,  in  recent  years,  the  trend  of  growth  in  terms  of  the 
number of customers continues. During the year 2022, Bezeq estimates that 
the  following  changes  compared  to  2021  will  apply:  an  increase  of 
approximately 2% in the number of landline Internet subscribers in Israel 
and a decrease of approximately 1% in the total number of the Company's 
Internet subscribers (increase in retail and decrease in wholesale). In terms 
of browsing rates, Bezeq provides fiber service at rates of up to 300 Mbs, 
600 Mbs, 1 Gb, 2.5 Gb in the areas where it deploys the fibers (for Beze’qs 
choice areas see Section 2.7.2.2). The Company also provides speed at a rate 
of up to 200 megabytes on its copper network 

17   The data were taken from the publications of the Central Bureau of Statistics (Household expenditure survey for 2019 and 
preliminary findings from the Household Expenditure Survey 2018) dated November 26, 2019 and July 31, 2022. In relation 
to the data for the years 2020-2022 - in accordance with the Company’s assessment based on surveys by the Central Bureau 
of Statistics from previous years. 

35 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

Diagram - Distribution of Internet subscribers on Bezeq infrastructure (quarterly, in thousands):  

2.1.3.4 

Data transmission and communication services 

The areas of transmission and communication data for business customers 
and communication providers are characterized, on the one hand, by a rapid 
increase in customers' bandwidth needs, and on the other hand, a decrease 
in the price of a given volume of traffic, which stems from the development 
of  technology  to  increase  bandwidth  at  lower  costs  than in  the  past  (see 
is  a  shift  to  the  use  of  the 
Section  2.6.4). 
telecommunications  providers'  own  infrastructure.  For  this  matter  see 
Section. 

In  addition,  there 

2.1.3.5 

Service packages 

For  an  increase  in  the  rate  of  consumption  of  packages  and  baskets  of 
services,  see  section  1.7.1.  Regarding  Bezeq's  shared  service  baskets, see 
Section 1.7.3. 

2.1.4. 

Technological changes that have a significant impact on this field of activity 

2.1.4.1 

In  the  communications  market,  a  trend  has  been  established  towards  IP-
based  technologies,  which  promote  the  phenomenon  of  "technological 
convergence"  between  the  various  communication  systems  (such  as 
telephony and DATA). There has also been an increase in the penetration of 
integrated  end  devices  that  enable  the  consumption  of  various 
communication  solutions  on  the  same  device  (such  as  cellular  and  Wi-Fi 
services).  These  two,  together  with  the  increase  in  the  availability  of  IP 
protocol-based  technologies  and  the  continuing  trend  of 
increasing 
bandwidth, enable the customer, including the business customer, a wide 
range  of  applications  and  services  on  IP  based  infrastructures,  such  as 
telephony services, including private exchange services, video transmission 
services 
,  TV,  private  networks,  network  services  with  enterprise 
applications on the Internet infrastructure (ERP, CRM, etc.), cloud services 
and services on the cloud. These developments are leading to an increase in 
bandwidth  demand  by  Bezeq's  Internet  infrastructure,  transmission  and 
data  communications  customers.  Technological  developments  and 
declining  equipment  prices  may  even  allow  other  operators  to  provide 
services similar to those provided by Bezeq at lower costs. 

Technological changes can also lead to the cannibalization of services. An 
example of this is a decrease in the consumption of the Group's traditional 
landline  telephony  services  (for  competition  in  the  field  of  telephony 
through the provision of services on Bezeq's Internet infrastructure (VoB), 
see  Section  2.6.3.1).  The  increase  in  the  speedds  of  the  cellular  service 
enables  the  cellular  operators  to  compete  with  Bezeq's  telephony  and 
Internet services, and to market greater bandwidths to their customers at 
lower prices than in the past. In the Bezeq’s opinion, as of the date of the 
report,  the  increase  in  the  number  of  customers  browsing  the  cellular 
Internet  did  not  materially  affect  the  scope  of  Bezeq's  Internet  activity. 

36 

 
 
 
Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

However, the potential for increase in the use of cellular networks at the 
expense of the use of the Bezeq network exists and may increase with the 
establishment of 5G (see section  3.1.5), since it will also be able to provide 
ultra-fast internet at the customer's home. 

Bezeq also develops and provides services based on wireless technologies 
for IoT (Internet of Things) solutions, including for smart homes, businesses 
and complexes. See Section 2.2.5. 

2.1.5. 

The critical success factors in the field of activity and the changes that apply to them  

2.1.5.1 

2.1.5.2 

2.1.5.3 

2.1.5.4 

2.1.5.5 

2.1.5.6 

The ability to offer reliable communication systems at a competitive price 
based  on  a  cost  structure  adapted  to  the  frequent  changes  in  Bezeq's 
business environment.  

Regulatory decisions and the ability to deal with them. 

The  ability  to  maintain  innovation  and  technological  leadership  and 
translate  it  into  advanced,  reliable  and  valuable  applications  for  the 
customer in short response times, as well as marketing primacy. 

Preservation of brand values and their adaptation to the conditions of the 
changing competitive environment. 

Effectiveness of sales and service systems. 

Informed pricing policy management, subject to regulatory restrictions. 

2.1.6. 

The main barriers to entry and exit of this field of activity and changes that apply to them 

Activities  in  the  field  of  landline  interior  communications  require  the  receipt  of 
appropriate licenses. For a memorandum of understanding of the bill regarding a change 
in the format of the regulation and transfer to the issuance of communication services 
through registration in the registry only, see Section 1.7.4. 

Traditionally,  the  main  barrier  to  entry  into  this  field  has  stemmed  from  the  need  for 
heavy investments in technological infrastructure and enveloping systems to achieve size 
advantages,  and  high  costs  associated  with  setting  up  marketing,  sales,  collection  and 
customer support systems and brand building. Over the years, the traditional barriers to 
entry into Bezeq's areas of activity have significantly decreased as a result of the following 
factors: technological improvements, declining prices of infrastructure and equipment, 
changes in the rules of regulation (see sections  2.7.2 and 2.16.5), regulatory relief granted 
to new competitors, the obligation to allow the use of Bezeq (and Hot) infrastructure and 
services  -  including  within  the  wholesale  market  and  the  use  of  VoB  technology  that 
enables  telephony  services  over  another  operator's  broadband  infrastructure,  without 
the need for an independent landline telephony infrastructure. 

The  main  barriers  to  exit  stem  from  the  following:  Bezeq's  obligation,  set  forth  in  its 
license, to provide its services on a universal basis (to the general public in Israel, except 
in relation to fiber as specified in section 2.16.5); Its subordination to the provisions of 
the  Communications  Order,  regulations  under  the  Communications  Law,  as  well  as 
provisions under Article 13a of the Communications Law regarding emergency activities; 
Its commitment to some of its employees employed under collective agreements; Large 
investments that require a long return on investment; And a commitment to repay long-
term debentures and loans taken to finance investments. Some of these exit barriers are 
unique to Bezeq and are not relevant to other operators operating in this field of activity. 

2.1.7. 

Substitutes for products in this field of activity and changes that apply thereto 

Cellular communication services are a substitute product for Bezeq services, both in the 
field of telephony, Including through apps and in IP technologies such as VoB (see Section  
2.6.3.1),  and  in  the  field  of  the  Internet  (see  Section  2.6.2),  transmission  and  data 
communication. Technological developments (such as 4G and 5G in cellular, fiber-optic-
based infrastructure, millimeter waves and advanced cable Internet protocols) enable the 
provision of new services at high speeds and at competitive prices. 

2.1.8. 

The structure of competition in this field of activity and changes that apply thereto 

The field of interior landline communications is regulated and supervised by the Ministry 
of Communications, among other things, by allowing communication service providers to 

37 

 
 
Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

register as authorized providers operating in accordance with the permit regulations as 
well  as  by  granting  licenses,  in  circumstances  where  a  license  is  required,  to  bodies 
operating in the field.  

In  the  communications  market  there  are  two  licensees  for  the  provision  of  landline 
interior communications services obligated to provide service to everyone, nationwide 
deployment  and  universal  service  (except  in  relation  to  the  fiber  network,  where  the 
Company  is  obliged  to  provide  service  according  to  the  constituencies  -  see  Section 
2.7.2.3): Bezeq, and Hot Telecom. IBC is also indebted for deployment, so that at the end 
of 5 years from March 7, 211, 1.7 million households in Israel will be accessible to the 
network18. The three companies compete with each other. At the same time, they were 
allowed  to  make  mutual  use  of  each  other’s  physical  infrastructure  (except  for 
infrastructure owned by the IEC needed to provide essential service) and other authorized 
provider’s  infrastructure,  so  that  in  fact  the  competition  could  be  through  physical 
infrastructure of another authorized provider, and in practice, today, mainly on Bezeq's 
infrastructure (see Section 2.16.4.4 in this regard). 

Cellcom  and  Partner,  which  have  unique  NIO  licenses  (which  do  not  require  universal 
deployment), are deploying an independent fiber network. 

The Internet field is characterized by high penetration rates attributed to the deployment 
of national access infrastructure. In this field, there have been substantial changes in the 
last  two  years:  starting  from  March  2021,  Bezeq  provides  an  Internet  infrastructure 
service on an advanced network - the fiber network deployed by it; As of April 2022, Bezeq 
is also a player in the unified Internet service, which includes both infrastructure (fiber or 
copper) and an access service, and it is not allowed to market bundles with other access 
providers; Providers with a special broadband infrastructure NIO license were allowed to 
deploy  landline  infrastructure  to  provide  Internet  services  and  to  use  the  Company's 
passive infrastructure in the incentive areas for this purpose. After Amendment 76 came 
into  force,  these  and  new  providers  became  authorized  providers  registered  in  the 
registry. 

Bezeq's  main  competitor  in  the  field  of  services  provided  over  a  traditional  (copper) 
network is Hot. Hot was handed over to provide a unified service in August 2022. Bezeq's 
main competitor in service to communication providers on an advanced fiber network is 
IBC (also owned by Hot and Cellcom), and in fiber Internet services for subscribers Bezeq's 
main  competitors  are  Partner  and  Cellcom.  In  addition,  Bezeq  is  also  exposed  to 
competition from the cellular networks (see Section 2.1.4). 

Access  service  providers  (ISP)  became  competitors  of  the  Company  upon  the 
implementation of the wholesale market in 2015, as they provide a package of services 
that includes a broadband Internet access infrastructure through Bezeq infrastructures 
that they use as part of the wholesale services. Starting in the middle of 2021, they can 
also do so on the Company's fiber network. 

The field of landline telephony is in competition, and Bezeq's competitors, some of them 
within communication groups (see Section 1.7.1), are the cellular companies (see Section 
2.6.3.2), Hot Telecom, as well as VoB service providers operating under licenses without 
universal  service  obligation  For  several  years  now,  without  their  own  self-access 
infrastructure. For details about wholesale telephony services see Section 2.16.4. 

In the field of wholesale services, Bezeq Hot and IBC compete as infrastructure owners 
committed to providing wholesale services. In practice, wholesale BSA services on the Hot 
network began in the second half of 2018 (see also Section 2.16.4). Anyone who deploys 
in  the  incentive  area  (whose  license  or  an  administrative  order  issued  to  an  NIO 
determines the obligation to deploy in the region it won in the tender) is also obligated 
to provide a BSA wholesale service to other authorized suppliers in the same incentive 
area. 

In the field of data transmission and communication, Bezeq’s main competitors are Hot 
Telecom, Cellcom and Partner, operating within the framework of communication groups 

18   The duty of nationwide service for all also applies to holders of general licenses for the provision of mobile radio telephone 
services such as Pelephone, Cellcom and Partner, as well as in the field of internaiotnal operator services - such as Bezeq 
International. 

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Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

and offering a complete communication solution to the customer. 

Competition  in  the  industry  depends  on  various  factors  such  as:  regulatory  decisions, 
possible changes in the terms of the licenses of Bezeq and its subsidiaries and the terms 
of  the  licenses  of  their  competitors;  mergers  and  collaborations  between  companies 
competing  with the Group companies; Possible implications of the Centralization  Law; 
Continued development of the wholesale market and the asymmetry between Bezeq's 
ability and the ability of competitors to sell a comprehensive service; The new services 
that  Bezeq  will  be  allowed  to  provide;  The  rates  policy,  elimination  of  the  structural 
separation  and  the  degree  of  flexibility  that  will  be  given  to  Bezeq  in  offering 
undetachable  service  packages, 
technological 
developments. 

including  with  subsidiaries  and 

For a description of the development of competition, see Sections 1.7 and 2.6. 

2.2. 

Products and services 

2.2.1. 

General 

Bezeq  provides  a  wide  range  of  communication  services  to  its  business  and  private 
customers as detailed below. 

2.2.2. 

Telephony 

Bezeq's  telephony  services  mainly  include  the  basic  telephone  services  via  the  home 
telephone line, and ancillary services such as: voicemail and caller ID.  

Bezeq also provides its customers with national numbering services for businesses ("1-
800", "1-700"), the calls in which are paid in full or in part by the business.  

Bezeq operates a unified call center19, under the code (1344) established by the Ministry 
of  Communications  also  for  operators  of  landline  and  cellular  telephony,  as  well  as  a 
unified website free of charge, in addition to Bezeq's 144 service.  

For  the  provision  of  a  resale service  and  for  wholesale  telephony  service,  see  section  
2.16.4.4.  

2.2.3. 

Internet access infrastructure services and ISP 

Bezeq  provides  broadband  internet  services  over  the  copper  infrastructure  using  xDSL 
technology, wirelessly using VBAND technology and over the fiber network in statistical 
areas subject to milestones in its license. Bezeq's fiber infrastructure allows for higher 
speed, and accordingly, there will be an increase in the average package rate. Also, as of 
April 3, 2022, Bezeq markets and provides a unified internet service, infrastructure and 
internet access (for this matter, see Section 1.7.5.1). 

For details regarding changes in the number of Bezeq Internet subscribers, the average 
monthly  income  per  Internet  subscriber,  and  the  average  package  speed,  see  Section 
1.5.4. For details regarding Bezeq's market share in this field, see Section 2.6.2.  

The  Internet  service  is  one  of  Bezeq's  main  occupations  and  a  major  route  in  its 
investments  in  technologies,  marketing,  advertising  and  customer  acquisition  and 
upgrade. The average package speed of Bezeq's Internet subscribers.20 

Broadband Internet service is also provided on a subscriber line without telephony at no 
extra charge for the access line. 

Bezeq  is  obligated  to  provide  a  broadband  Internet  access  service  (including  on  an 
advanced fiber network) in a BSA wholesale format to authorized providers, who in this 
way provide their customers with a uniform Internet service, including infrastructure. For 
this service see Section 2.16.4. For the agreement for the provision of the indefeasible 
right-of-use (IRU) service in the BSA fiber service (wholesale market) by Bezeq to Partner, 

19   "Unified" information service is an information service that contains data regarding the subscribers of all operators. Landline 
and cellular telephony operators are required to provide  unified  intelligence services by virtue of their communications 
licenses. The activity is exempt from receiving a restrictive arrangement approval, valid until November 11, 2023.  

20   

Including revenue from service providers in wholesale service 

39 

 
 
 
 
 
Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

see Section 2.6.2.1. 

Diagram  -  Changes  in  the  package  speeds  of  Bezeq  Internet  subscribers  in  the  years  2013-2022 
(Mbps, as of the end of each year)*:  

100%

50%

0%

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

Up 
 דע
to 5 

15

16-40

41-100

101-200

201-2500

* In packages where there is a range of speeds, the maximum speed in the package is taken into 
account 

2.2.4. 

Data transmission and communication services 

Data  communication  services  are  network  services  for  transferring  data  from  point  to 
point, data transfer between computers and various communication networks, services 
for  connecting  communication  networks  to  the  Internet  and  remote  business  access 
services. 

Bezeq  offers  transmission  services,  including  at  high  speeds,  to  communications 
operators, international parites and its business customers in a variety of interfaces (see 
Section 2.6.4). 

2.2.5. 

Cloud and digital services 

This  category  includes,  among  others,  virtual  server  services,  cyber  services,  "smart 
home", "smart business" and smart complexes services, virtual private hub services (IP 
Centrex),  as  well  as  the  B144  service  which  is  Bezeq's  advertising  platform  for  digital 
advertising and marketing for small businesses, BCAM, SMS, WiFi and remote backup. 

2.2.6. 

Other services 

2.2.6.1 

Additional services for communications operators  

Bezeq  provides  services  to  other  communications  operators,  including: 
cellular  operators; 
International  operators;  Hot;  Network  endpoint 
operators; Internet Service Providers (ISPs); Interior operators; Palestinian 
communications providers. 

The services that Bezeq provides, as stated, include infrastructure services, 
linking to the Bezeq network, billing and collection services, renting areas 
and providing services in rented properties. 

For the provision of wholesale services to communications operators and 
infrastructure  also  for 
for  the  possibility  of  using  Bezeq's  physical 
infrastructure owners, see section  1.7.4. In this regard, it should be noted 
that as of 2019, there has been a certain deterioration in the payment ethics 
of communications operators, deferral of payments and an increase in the 
volume of dispute claims. This state of affairs, in parallel with the erosion in 
the financial strength of various operators, increases the risk of having to 
recognize 
loan-loss  and  bad  debt.  However,  as  of  this  date,  this 
deterioration does not have a material effect on Bezeq. On April 27, 2020, 
Bezeq, through its attorney, contacted the Ministry of Communications and 

40 

 
 
 
Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

announced  that  it  does  not  intend  to  allow  the  continued  provision  of 
wholesale services to service providers who do not pay for these services. 

Following an investigation by the Ministry of Communications and a hearing 
it  published  on  the  subject,  on  March  25,  2021,  the  Ministry  decided  to 
establish a procedure for dealing with the issue, stating, among other things, 
that the staff handling complaints in the Ministry of Communications can 
recommend to the authorized factor within the Ministry that the Ministry 
will not prevent the affected licensees from taking steps such as stopping 
the  provision  of  service,  not  connecting  new  subscribers  and  more, 
depending on the circumstances and the severity of the case. Despite this, 
there are still operator debts to Bezeq. Upon the expansion of the obligation 
to also provide wholesale services to authorized providers, including use of 
the Company's infrastructure (see Section 1.7.4, also regarding the hearing), 
there may be a deterioration in this matter. 

2.2.6.2 

Broadcast services 

Bezeq  operates  and  maintains  radio  transmitters,  among  others,  for  the 
broadcasting  corporation,  Galei  Tzahal  and  a  number  of  regional  radio 
stations.  Bezeq  also  operates  the  DTT  broadcasters  for  the  Second 
Authority.  Bezeq  is  responsible  solely  for  operating  and  maintaining  the 
transmitters for the purpose of distributing the broadcast of the radio and 
television  programs,  and  not  for  the  content  of  the  broadcasts.  For  this 
matter, see also section 2.15. 

2.2.6.3 

Contractor work 

Bezeq  performs  construction  and  operation  of  networks  or  sub-networks 
for various customers (such as the Ministry of Defense, radio and television 
broadcasting companies, cellular operators, international communications 
operators, local authorities, municipalities and government bodies). 

2.2.6.4 

Electricity supply license 

On  September  1,  2021,  Bezeq  received  a  license  from  the  Electricity 
Authority to supply electricity without means of production. The Company 
provides services to a small number of customers in accordance with the 
terms of the license. 

2.2.7. 

Sale of end equipment and devices 

As of 2019, Bezeq has been selling smartphones (in addition to other end equipment sold 
thereby). Bezeq has expanded its offering to additional equipment and devices. 

41 

 
 
 
 
 
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2.3. 

Revenue segmentation of products and services 

The following is data about the distribution of Bezeq’s revenues according to the main products and 
services in its field of activity in the years 2020-2022 (in NIS million):  

 Revenue from Internet infrastructure services 
Rate out of the total Company revenue in the field of 
activity 
Revenue from landline telephony 
Rate out of the total Company revenue in the field of 
activity 
Revenue from transmission and data communication 
services 
Rate out of the total Company revenue in the field of 
activity 
Revenue from Cloud and digital services 
Rate out of the total Company revenue in the field of 
activity 
Revenue from other services and sale of end 
equipment 
Rate out of the total Company revenue in the field of 
activity 
Total revenues from the field of landline interior 
communications 

2022 
1,789 
41.55% 

2021 
1,624 
38.83% 

2020 
1,622 
39.0% 

780 
18.11% 

913 
21.83% 

1,008 
24.24% 

1,132 

1,087 

1,011 

26.29% 

26.0% 

24.31% 

331 
7.69% 

318 
7.6% 

288 
6.92% 

274 

240 

230 

6.36% 

5.74% 

5.53% 

4,306 

4,182 

4,159 

2.4. 

Customers 

Bezeq is not dependent on a single customer, and there is no customer Bezeq's revenues from whom 
constitute 10% or more of its total revenues. Bezeq's revenues are divided into two main types of 
customers: private customers (approximately 50%) and business customers (approximately 50%).21. 
The aforesaid distribution is according to revenue, as detailed in the table below (in NIS millions):  

Revenue from private customers 
Revenue from business customers  
Total revenue 

2.5.  Marketing, distribution and service 

2022 
2,099 
2,207 
4,306 

2021 
2,071 
2,111 
4,182 

2020 
2,033 
2,126 
4,159 

Bezeq  has  marketing,  sales  and  service  systems  for  businesses  and  private  customers,  including 
customer managers for the business segment, integrated sales and service centers throughout Israel, 
technical support centers for private customers and business customers, several points of sale and 
service (Bezeq Store chain of stores) throughout Israel, as well as an online virtual store. 

Bezeq markets its services mainly through advertising in the mass media, telephone sales centers, 
customer  managers  and  through  a  system  of  marketers  that  includes  outsourced  sales  centers. 
Bezeq  has  independent service  and  sales  channels  on  its website,  in  a  dedicated  application  (My 
Bezeq), and through a computerized voice answering service. 

Also, the internet providers (ISPs) provide a unified internet service based on Bezeq's BSA wholesale 
service and as of April 3, 2022, they can no longer market Bezeq's internet infrastructure to private 
customers in a bundle outside of the wholesale market. 

21  

Including revenue from wholesale service providers. 

42 

 
 
 
 
 
 
 
 
 
Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

2.6. 

Competition 

The  following  is  a  description  of  the  development  of  competition  in  the  field  of  landline  interior 
communications:  

2.6.1. 

Wholesale market (see also section 2.16.4) 

The wholesale market allows telecommunications providers to compete with Bezeq using 
its services and physical infrastructure, at regulated maximum prices not determined by 
Bezeq.  The  wholesale  market  allows  telecommunications  providers  to  offer  their 
subscribers, among other things, broadband services. 

To  the  best  of  Bezeq's  knowledge,  the  volume  of  wholesale  subscribers  on  the  Hot 
network is not large (see in this regard section 2.16.4). 

2.6.2. 

The field of Internet 

Bezeq estimates that as of the end of 2022 its market share in the Internet infrastructure 
market (retail and wholesale customers) was about 55% (compared to about 57% at the 
end of 2021). Also, according to Bezeq, its market share in terms of retail customers as of 
the end of 2022 is about 38%22. Also, the proportion of the Company's unified internet 
customers out of its retail customers by the end of 2022 is about 47%. 

Beginning in March 2021, Bezeq marketed an Internet infrastructure service to customers 
over an advanced network -  the fiber network deployed by it, and competes with this 
service  against  Partner,  which  deployed  its  own  fiber  network,  Cellcom  and  Hot. 
Authorized  providers  are  also  allowed  to  deploy  a  broadband  Internet  infrastructure, 
including through the use of the Company's passive infrastructure, and provide services 
through it. 

As of April 2022, Bezeq is also a player in the unified Internet service, which includes both 
infrastructure  (fiber  or  copper)  and  an  access  service.  Bezeq  may  continue  to  provide 
infrastructure service only (without access service) to existing customers of this service, 
but it cannot market the infrastructure service in a bundle with other access providers. In 
this area, the competition is against service license holders and authorized suppliers. 

2.6.3. 

The field of Internet access 

There is lively competition in the field, as detailed below: 

Competition from Hot Group: 

Hot  has  a  traditional  nationwide  internet  infrastructure  through  which  a  variety  of 
communication  services  can  be  provided.  On  July  28,  2019,  the  Minister  of 
Communications  adopted  the  recommendations  of  the  advisory  committee  and 
approved for Hot to provide its services in areas lacking infrastructure in a technologically 
neutral format, i.e. without being obligated to deploy a landline infrastructure, but rather 
be allowed to use any cellular network to provide its services with download rates of up 
to 12/30 Mbps, as well as to provide television service through the Company's services. 
The  adopted  recommendations  set,  among  other  things, milestones  for  upgrading  the 
network  for  the  cellular  network  alternative,  minimum  service  quality  and  reporting 
obligations. 

Hot’s  network  is  currently  a  main  alternative  to  competition  with  the  Company's 
infrastructure in the private segment in regards to traditional networks. An obligation was 
imposed on Hot to provide wholesale services, including the BSA service, and to the best 
of  the  Company's  knowledge,  a  BSA  wholesale  service  over  Hot’s  network  has  been 
marketed simce the middle of 2018. 

During 2021 Hot announced that it launched its new fiber network. Hot and Celcom have 
holdings in IBC (see this section below). 

22  The Company's assessment of its market share in the field of Internet infrastructure services for the end of 2022 is based on 
the number of customers consuming services over the Company's infrastructure (retail and wholesale) and publications 
regarding the number of Partner and Cellcom subscribers. It should be noted that Hot and smaller companies operating in 
the market are not reporting corporations and their data is not public, accordingly there is difficulty in giving accurate data 
regarding market shares and these are only estimates. 

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Competition from IBC 

IBC's  license  enables  the  provision  of  services  mainly  to  license  holders.  IBC  is  also 
committed  to  the  deployment  so  that  at  the  end  of  5  years  from  March  7,  2021,  1.7 
million households in Israel will have access to the network. IBC is owned by the Electric 
Company (30%) and by Hot, Cellcom and the Israel Infrastructure Fund 23.3% each. In this 
framework, to the best of Bezeq's knowledge, Cellcom sold its optical fiber infrastructure 
to IBC, Hot's investment agreement in IBC and the IRU agreement according to which Hot 
will acquire the right to use the infrastructure that IBC will build were signed. In addition, 
the  Ministry  of  Communications  made  an  amendment  to  Hot's  license,  which,  among 
other things, permits the marketing of a shared basket of services on the IBC network as 
well as an amendment to the IBC license, which requires it to submit for the Ministry's 
approval  a  shelf  proposal  for  the  purchase  of  the  fiber  infrastructure  service  (in  IRU 
format) at a reduced rate, as was done in fact. IBC is a main competitor in providing the 
fiber infrastructure service to service providers. 

As far as Cellcom is concerned - in March 2023, Cellcom reported the formation of an 
agreement with IBC (which has not yet been signed) in which it undertakes to increase its 
commitment to purchase infrastructure lines from IBC in the IRU agreement to 12.5% and 
later  to  15%  of  connected  customer  homes.  Cellcom  also  stated  that  against  IBC's 
obligation to act to expand the scope of infrastructure deployment beyond its obligations 
according to its license, Cellcom undertakes to purchase IRU services only from IBC for a 
period not less than 3 years, under certain conditions. 

Competition from Partner 

Communications group Partner provides Internet services on its own fiber infrastructure, 
while also using the company's infrastructure within the wholesale market, and within 
the  framework  of  the  IRU  agreement  signed  between  the  Company  and  Partner  as 
detailed below. 

Competition from small providers 

licenses  were  allowed, 

Holders  of  special 
in  the  decision  of  the  Minister  of 
Communications  dated  October  13,  2020,  to  deploy  broadband  infrastructure  and 
provide services over it (a step that significantly reduced the threshold requirements for 
obtaining a license enabling the provision of broadband infrastructure services). These 
special  licenses  were  limited  to  up  to  8,000  private  subscribers  or  up  to  800  network 
endpoints  of  business  subscribers,  or  up  to  3  years  from  the  date  of  the  decision, 
whichever  is  earlier. 23  As  part  of  Amendment  76  to  the  Communications  Law,  which 
changed the format of the regulation, authorized providers without a license were also 
allowed to deploy a broadband infrastructure and provide services over it without the 
need for a license, but by registering in the registry and operating in accordance with the 
permit regulations. As part of the regulations by virtue of Amendment 76, a threshold is 
set  above  which  a  license  will  be  required  (see  Section  1.7.4).  The  providers  are  also 
authorized  to  use  the  Company's  passive  infrastructure  in  the  incentive  areas  after 
complying with security instructions. 

Agreement of indefeasible right-of-use (IRU) of the BSA service between the Company 
and Partner 

On December 21, 2022, a long-term agreement was signed between Bezeq and Partner 
for  the  provision  of  the  indefeasible  right-of-use  (IRU)  service  in  the  BSA  fiber  service 
(wholesale market) by Bezeq to Partner. In accordance with the agreement, Partner was 
granted a non-transferable and irrevocable right of self-use for providing service to its 
customers on 120,000 unspecified Bezeq fiber optic lines at a rate of 1 gigabyte download 
per line, for a period of 15 years starting on January 1, 2023 (beginning of the right to use 
the lines will be in pulses, in a graded manner, over a period of up to five years). The 
consideration  for  the  provision  of  the  service,  which  includes  one-time  payments  and 
annual payments, is expected to reach a total amount of approximately NIS one billion 
(approximately NIS 574 million for one-time payments, annual maintenance fees at the 
rate of 4% of the one-time payments for the lines for which the right of use will be granted 

23  These restrictions were actually abolished in accordance with Amendment 76 to the Communications Law, and the holders of 

the special licenses became licensed providers operating subject to the permit regulations. 

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until that year, and with the addition of interest and/or linkage differences according to 
the terms of the agreement), with most of the consideration amount expected to be paid 
during the first 9 years of the agreement. The agreement includes the option to increase 
the number of lines by up to 48k additional lines under the same conditions, to upgrade 
rates as well as to extend the agreement period  for two five-year option periods each 
with  less  lines  than  in  the  first  agreement  period.  Increasing  the  content  of  the 
aforementioned agreement will result in a corresponding increase in the total financial 
scope of the agreement. The agreement also includes a price protection mechanism for 
Partner in a way that weighs the price of the regulatory line, starting from the sixth year 
of the agreement. The agreement is expected to increase the usability and utilization of 
the Company's fiber network, its revenues and profits, as well as its free cash flow (mainly 
during  the  first  9  years  of  the  agreement),  and  will  create  certainty  regarding  future 
revenues from the wholesale market from the lines included therein. At the same time, 
the agreement embodies a discount for a commitment to quantity and period in relation 
to the wholesale market rates. 

On  December  27,  2022,  Bezeq  received  a  letter  from  the  Ministry  of  Communications 
according to which, from a preliminary point of view, it was found that the agreement 
raises  competitive  concerns,  noting  that  it  is  tailored  to  the  characteristics  of  a  single 
authorized provider (Partner) and therefore cannot be used as a relevant off-the-shelf 
offer for other authorized providers in the wholesale market. Following this, Bezeq held 
talks  with  the  Ministry  of  Communications  for  the  purpose  of  making  adjustments 
following which the Company will reduce the prices of individual lines in the BSA fiber 
service (at an aggregate rate of up to 1.1 gigabit/second) to a price of NIS 7224 per month 
(indexed in accordance with  the current customary price update mechanism) with the 
addition of VAT, so that after this price reduction the Ministry will see the agreement as 
a shelf offer for anyone interested in it. On January 16, 2023, the Ministry informed Bezeq 
that, after taking into account the aforementioned price reduction, Bezeq's obligation to 
act  in  an  equitable  manner  and  without  discrimination,  as  well  as  the  Company's 
presentation of the agreement as an alternative available to anyone who requires it, it is 
of  the  opinion  that  the  agreement  does  not  create  a  concern  of  significant  harm  to 
competition. Accordingly, the Ministry does not object to the agreement. 

It  should  be  noted  that  in  light  of  the  number  of  lines  in  the  BSA  fiber  service,  which 
currently  stands  at  tens  of  thousands,  the  aforementioned  reduction  in  the  prices  of 
individual lines does not have material consequences for Bezeq's business results, and it 
does not change its assessment regarding the benefits of the agreement for it as detailed 
above. 

Some  of  the  information  contained  in  this  section  is  forward-looking  information  as 
defined  in  the  Securities  Law  based  on  Bezeq's  assessments,  among  other  things,  in 
relation to the structure of competition and regulation in the field of communication, the 
behavior  of  communication  operators  and  the  behavior  of  consumers,  as  well  as  in 
relation to how a partner will choose to take advantage of the right to use lines in the 
various regions (distinguishing between areas where only the Company's fiber network is 
deployed  and  areas  where  additional  fiber  infrastructure  to  that  of  the  Company  is 
deployed).  Estimates  and  actual  results  may  vary  depending  on  changes  in  the 
aforementioned variables. 

2.6.4. 

Internet service area 

Multiple unified service operators 

The competition in the field of providing a unified Internet service has increased in the 
last  year,  after  Bezeq,  and  later  Hot,  were  also  allowed  to  provide  a  unified  Internet 
service  (see  Section  1.7.5.1);  Holders  of  special  licenses  were  allowed  to  deploy 
broadband infrastructure and provide services on it, licensed providers without a license 
were also allowed to do so, and some were allowed to use Bezeq infrastructure and its 
wholesale  services  for  that  purpose.  Also,  in  the  incentive  areas,  the  winners  of  the 
tenders  and  other  providers  are  allowed  to  provide  service  on  an  advanced  network, 

24  It should be noted that as of the date of the report, the price in the regulations for an individual line with an aggregate rate of 
up to 550 Mbps and the price for an individual line with an aggregate rate of over 550 Mbps and up to 1,100 Mbps is NIS 
76.5 and NIS 85.2, respectively, plus VAT . 

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while  the  Group  is  prohibited  from  doing  so  for  five  years  from  the  date  of  the 
determination  of  the  obligation  to  deploy  in  the  winner's  license  or  by  administrative 
order. For this matter see also see Sections 2.16.4 and 2.16.5. 

Partner and Cellcom launched and began marketing the internet service over fiber several 
years before the Company, which gave them an advantage over Bezeq. Bezeq markets 
the service over fiber from March 2021 (and the unified service from April 2022). 

As  of  2015,  the  wholesale  market  allows  Internet  providers  and  related  companies  to 
offer customers service packages that also include Internet infrastructure based on Bezeq 
infrastructure  and  services  in  return  for  payment  (the  Company's  maximum  rates  are 
regulated). 

The  service  providers  are  allowed  to  provide  BSA  service  also  on  the  Company's  fiber 
infrastructure in return for payment (the Company's maximum rates in this segment are 
also regulated). It should be noted that the provider that deploys infrastructure in the 
incentive area (whose license or an administrative order issued to an NIO determines the 
obligation  to  deploy  an  advanced  network  according  to  Article  14d(f)  of  the 
Telecommunications Law) is also obligated to provide BSA service via fiber in the incnetive 
areas. 

The cellular companies have deepened their activities in the internet field on the cellular 
medium both in the private segment and in the business segment. Browsing services are 
provided both from the cellular device and through a cellular modem that connects to 
mobile and stationary computers. 

2.6.5. 

The field of telephony 

The field of private landline telephony is characterized by a decrease in the number of 
owners  of  a  landline  telephone  line  and  a  gradual  erosion  in  the  number  of  calls 
originating from landline networks (see section  2.1.3.2). Bezeq estimates that in 2022 the 
entire telephony market continued to erode at a similar rate to 2021 and at a higher rate 
compared to previous years. For this matter, see also Section  2.3. In Bezeq's estimation, 
as of the end of 2022, its market share in the landline telephony market was about 53% 
in the private market and about 69% in the business market, a decrease of about 1% in 
both markets compared to 2021.25 

2.6.5.1 

Competition from additional NIO licensees  

Bezeq and Hot Group have a fixed telephony infrastructure nationwide, and 
there is competition between them, which is reflected, among other things, 
in  the  fact  that  Hot  Group  markets  a  "Triple"  (which  combines  Internet 
infrastructure,  telephony  and  cable  television),  and  possibly  also  cellular 
services,  especially  for  households.  In  addition,  Hot  Group  markets 
telephony services for business customers. 

In addition, there is competition with licensees for the provision of landline 
interior communications services, including VoB (see Section 2.1.8), which 
provide  the  service  (including  via  "Triple"),  inter  alia,  over  Bezeq's 
broadband access service, including the wholesale BSA service. 

As of July 2017, Bezeq allows holders of unified licenses who are authorized 
to provide NIO services, reselleing telephony service over Bezeq’s network. 
As  of  the  date  of  the  report,  there  is  no  demand  for  service.  For  the 
wholesale telephony service, see Section 2.16.4. 

2.6.5.2 

Telephony competition from cellular companies  

Bezeq is of the opinion that the high penetration rate of  cellular phones, 
combined  with  low  airtime  rates  compared  to  the  rest  of  the  world, 
packages that include call minutes with no effective limit on a fixed monthly 
fee,  and  diminishing  interconnect  rates  have  made  cellular  telephony  a 
substitute for landline telephony. In Bezeq's estimation, the deepening of 
the interchangeability between a  landline and a mobile line is one of the 

25   These market shares are in terms of lines and are based on Bezeq’s estimates.It should be noted that Hot is not a reporting 
corporation, and its data is not public, and accordingly, there is difficulty in obtaining accurate data regarding the market 
shares, and these are only estimates. 

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main reasons for the decrease in the average traffic per line, and the high 
rate of removal of telephone lines (see section 2.1.3).  

In the field of cellular telephony, there is a trend of moving to the use of 
applications  allowing  you  to  make  calls  and  send  text  messages  over  the 
Internet.  

Partner and Cellcom also provide landline NIO services through corporations 
owned  by  them  and  also  sell  service  baskets  that  combine  landline 
telephony, cellular telephony and Internet services.  

2.6.6. 

The field of transmission and data communication 

In this field there is increasing competition, when, mainly Cellcom , Partner and Hot, as 
well as ISP companies operate in this field in addition to Bezeq. 

To the best of Bezeq's knowledge, Cellcom has established a transmission network, which 
is  used  both  for  its  own  needs  and  for  competition  with  Bezeq’s  services  in  the 
transmission  and  data  communications  market.  Partner  also  operates  in  the  field  of 
providing transmission and data communication services, combined with telephony and 
Internet,  to  business  customers  (Regarding  the  sale  of  Cellcom's  network  to  IBC,  see 
Section 2.6.2.1). 

Cellcom and Partner use Bezeq's physical infrastructure as part of the wholesale service 
(see Section 2.16.4.3)26, inter alia, in order to compete with Bezeq in this field.  

Operating in this field are also infrastructure owners IBC and Hot (in a national but not 
infrastructure  owners  may  use  Bezeq's  physical 
complete  deployment).  These 
infrastructure. In this matter see Sections 2.16.4.3 and 2.6.5. 

IBC’s is allowed to provide IPVPN services and broadband data communication lines. 

2.6.7. 

Additional competing infrastructures27 

In  addition,  there  are  currently  a  number  of  infrastructures  in  Israel  that  have  the 
potential to serve as communications infrastructures, which are based on fiber optics and 
mostly owned by companies and government bodies, such as: Israel Railways, Mekorot, 
Oil  Infrastructure  Company  and  Trans-Israel  Highway.  Some  local  authorities  are  also 
trying  to  create  an  alternative  for  laying  pipes  or  fibers  using  their  infrastructures. 
Amendment  76  to  the  Communications  Law  states  that a  service  requested  by  a  local 
authority,  including  a  municipal  company  and  a  municipal  subsidiary  company,  will 
require a license in any case (and not just registration in the registry). It should be noted 
that the amendment of the Communications Law regarding the deployment of fibers and 
the  decision  of  the  Ministry  regarding  the  granting  of  special  licenses  that  allow  for  a 
limited deployment may accelerate the deployment by such bodies. 

2.6.8. 

Bezeq's preparations and ways of dealing with the growing competition  

Bezeq faces competition in the landline interior Bezeq services in a number of ways: 

2.6.8.1 

Bezeq launches communication services and new value-added applications 
(such  as  a  smart  home,  smart  business,  smart  complexes,  integration 
services  and  more)  as  well  as  product  and  service  packages  and  shared 
baskets  (equivalent  to  certain  baskets  marketed  by  its  competitors, 
although under a detachability limit, see Section 1.7.3), in order to expand 
the scope of use of subscriber lines, to meet customer needs and strengthen 
its image of technological innovation. Bezeq is investing in the improvement 
and  modernization  of  Bezeq's  infrastructure,  in  order  to  enable  the 
provision of advanced services and products to its subscribers. 

Bezeq is working to introduce the high-speed Internet infrastructure service 
and to increase the number of its customers in this field (see also Sections 
2.2.3 and  2.7.2). In March 2021, the Company launched the fiber service on 
an advanced network deployed in the statistical areas (see Sections 2.7.2.2 
and 2.16.5). Bezeq also has broadband wireless service VBAND technology. 

26 Unified license owners eligible to provide NIO services are also eligible to receive wholesale service for the use Bezeq’s physical infrastructure.  
27 Beyond Hot and IBC infrastructure. 

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2.6.8.2 

2.6.8.3 

2.6.8.4 

2.6.8.5 

Bezeq is constantly working to improve the quality of its services and retain 
its customers, simplify processes and automate and adapt its operations to 
the structure of competition in its areas of activity. 

Bezeq offers to telephony customers packages, consumption-adjusted plans 
and promotions. 

Bezeq is working to reduce its operating expenses and to focus investments 
on  growth  activities  and  as  a  means  of  reducing  maintenance  expenses. 
However, Bezeq's ability to make short- and medium-term adjustments to 
its expenses is limited due to its cost structure, which is mainly rigid short- 
and medium-term costs (mainly depreciation and payroll-related expenses, 
as  well  as  operating  costs, such  as  infrastructure  maintenance  and  rental 
and maintenance of buildings). 

As  of  2018,  Bezeq  has  been  marketing  its  Be  router.  This  is  an  advanced 
router  with  an  innovative  design  and  advanced  capabilities  that  include, 
among  other  things,  Smart  Wi-Fi  that  enables  quality  and  continuous 
browsing  over  the  home  Internet  and  Cyber  protection.  The  router  and 
services are managed by a dedicated app. As of the end of 2022, Bezeq's 
customer  base  using  the  Be  router  is  approximately  764k  customers 
(approximately  74%  of  Bezeq's  retail  Internet  customers).  Bezeq  also 
markets  products  to  improve  the  reception  range  of  the  Be  spot  and  Be 
mesh home Internet networks, while as of the end of 2022, about 146k units 
of  these  products  were  marketed  by  Bezeq.  With  the  advent  of  Internet 
services  on  the  fiber,  a  router  was  launched  that  improves  the  reception 
range that is compatible with the fiber network at ultra-fast speeds. 

2.6.9. 

Main positive and negative factors affecting Bezeq's competitive position 

2.6.9.1 

Positive factors  

a.  Quality nationwide infrastructure, through which a variety of services 

are provided. 

b.  Presence in most businesses and households. 

c.  A well-known and strong brand. 

d.  Technological innovation. 

e.  High  positive  cash  flow,  financial  resilience  and  access  to  financing 

sources 

f.  Extensive service infrastructure and diverse customer interfaces. 

g.  Professional, experienced and skilled personnel. 

2.6.9.2 

Negative factors  

a.  Bezeq believes that various restrictions that apply to it make it difficult 
for  it  to  compete  in  its  areas  of  activity.  The  following  are  the  main 
limitations in this regard: 

Wholesale market (see section  2.16.4) - operating a wholesale market 
at  regulated  prices,  arrangements  prone  to  intervention  by  the 
regulator,  implementation  of  a  mechanism  for  supervising  Bezeq's 
retail  marketing  offers,  Expanding  uses  and  those  authorized  to  use 
Bezeq infrastructure.  

b.  Limited rate flexibility  

Bezeq is limited in its ability to provide discounts on its main services 
and offer differential rates. 

For  the  hearing  on  the  prevention  of  "margins  reduction"  in  the 
wholesale market, see Section 2.16.4.2. 

c.  Structural separation obligation 

Regarding the obligation of structural separation applicable to Bezeq, 
see section 1.7.3. 

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d.  The universal service and fiber deployment obligation 

Bezeq has an obligation to provide service to the general public in Israel 
at  a  uniform  price  (universal  service),  except  in  relation  to  advanced 
network (fiber) for private customers. By virtue of this obligation, Bezeq 
is  required  to  provide  services  even  in  non-economic  circumstances 
(subject  to  the  possibility  of  obtaining  an  exemption  in  exceptional 
circumstances). Regarding the scope of the obligation in relation to the 
provision  of  services  on  an  ultra-broadband  fiber  infrastructure,  see 
Section  2.16.5.  This  obligation  does  not  apply  to  other  authorized 
providers for the provision of stationary services (except Hot. Regarding 
Hot  and  IBC,  see  Section  2.6.2.1),  who  may  offer  their  services  to 
profitable  customers  only,  who  constitute  a  substantial  source  of 
income for Bezeq. These companies has carried out and are carrying out 
an  accelerated  deployment  of  fibers  in  economically  viable  areas.  In 
addition, Hot, which has a universal service obligation, received various 
reliefs in the implementation of full deployment obligation, significant 
exemptions and reliefs were granted to IBC, and Bezeq is committed to 
allowing Hot and IBC to use Bezeq's passive infrastructure. (see section  
2.16.4). 

e.  Restrictions on the marketing of shared service packages by Bezeq and 

Group companies 

See Section 1.7.3.2.  

f. 

The nature of end equipment in landline telephony 

End equipment in the field of landline telephony does not have personal 
characteristics.  It  is  also  less  technologically  advanced  compared  to 
cellular end equipment, and the range of advanced services that can be 
consumed through it is limited. 

2.7. 

Property, plant and equipment and facilities 

2.7.1. 

General 

Bezeq's property, plant and equipment include, mainly: infrastructure and equipment for 
interior  communications,  real  estate  assets  (land  and  buildings),  computer  systems, 
vehicles and office equipment. 

2.7.2. 

Infrastructure and stationary interior communications equipment  

2.7.2.1 

Telephony network 

The  infrastructure  of  Bezeq's  telephony  network  consists  of  exchanges 
(used  to  switch  the  calls  and  transfer  them  from  the  origin  to  the 
destination),  a  transmission  network  (through  which  the  connection 
between  the  exchanges  takes  place),  data  communication  networks,  an 
access network (connecting the subscriber's endpoint to the switchboard). 
The  infrastructure  connects  to  the  end  equipment  installed  with  the 
subscriber. The connection from the end equipment to the access network 
is based on copper cables, and this copper network forms Bezeq's access 
infrastructure for telephony services (it should be noted that those copper 
cables  also  form  part  of  Bezeq's  Internet  network  as  detailed  below). 
Subscriber  management  is  performed  using  a  Class  5  telephony  switch. 
During 2020, Bezeq completed the replacement of its telephony switch with 
a  new  switch  and  the  conversion  of  all  telephony  customers  to  the  new 
switch. 

2.7.2.2 

Internet 

Bezeq  has  an  NGN  network  based  on  the  core  of  an  IP  network  and  the 
deployment  of  fiber  optic  infrastructure  to  street  cabinets  (a  network 
topology known as FTTC-Fiber To The Curb), as well as an access network (a 
system that connects the network endpoint with the network subscriber) 
and  engineering  systems.  The  connection  from  the  home  to  the  access 
network is based on the copper cables (mentioned in the description of the 

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telephony network above) and the connection from the access systems to 
the transmission network (Backbone) is based mainly on optical cables. In 
addition,  some  of  the  end  equipment  (equipment  installed  by  the 
subscriber,  such  as  routers)  is  owned  by  Bezeq  and  is  rented  by  the 
customer. The NNG network can now provide, through VDSL2 technology, 
bandwidths of up to 100Mbps in the downloading channel, and through the 
use of 35B technology, through which download rates of up to 200Mbps can 
be provided in part of the Bezeq network, depending on the quality of the 
copper infrastructure, as well as innovative value-added services. Additional 
benefits  of  this  network  are  simplification  of  network  structure  and 
improved management capability. 

2.7.2.3 

Ultra-broadband fiber infrastructure 

The  Company  works  according  to  a  plan  for  the  deployment  of  ultra-
broadband landline infrastructure (“the Fiber Project"). The Fiber Project is 
involves  significant 
a  complex  and  resource-intensive  project  that 
investments of billions of NIS by Bezeq over the years of the project. 

As  part  of  this,  Bezeq  began  deploying  fiber  to  buildings,  including  the 
deployment  of  vertical  GPON  equipment  in  buildings,  and  on  March  14, 
2021, Bezeq announced the launch of services to its customers over its fiber 
optic network. 

For  the  amendment  to  Bezeq's  license  and  the  selection  of  areas  for  the 
deployment of the fiber network by Bezeq, see Section 2.16.12. 

As of the date of publication of the report, Bezeq has completed the physical 
deployment of the fiber network to approximately 1.654 million households 
throughout Israel that are available for commercial connection, of  which 
about 332k subscribers were connected to Bezeq’s fiber network (of which 
235k retail and 97k wholesale). 

2.7.2.4 

Public appeal – closure of the copper networks 

On September 19, 2022, Bezeq accepted a public appeal published by the 
Ministry  of  Communications  regarding  policy  principles  for  closing  the 
copper networks, in which the Ministry reviews the main issues, challenges 
and principles for closing the copper networks and transitioning to networks 
based  on  fiber  infrastructure.  According  to  the  public  appeal,  there  are 
several possible regulatory actions that the Ministry of Communications can 
take  regarding  the  closure  of  the  copper  networks,  among  other  things, 
establishing an outline and milestones for the implementation of the closure 
of the copper networks, and it asked the public and all license holders to 
submit references and positions to the public appeal (until November 24, 
2022). Bezeq submitted its comments, according to which, in view of the 
complexity  of  the  issue,  the  handling  and  phases  must  be  separated 
between existing customers on copper infrastructure and customers in new 
neighborhoods and service areas, in a process that begins with stopping the 
deployment  of  a  new  copper  network  and  providing  solutions  for 
connecting new lines. 

2.7.3. 

Computing  

Bezeq's  computing  system  supports  four  main  areas:  marketing  and  customer 
management,  Bezeq's  engineering  infrastructure,  Bezeq's  resource  management  and 
lateral systems. 

Bezeq's computer system is large and complex,  it supports critical work processes and 
handles very large volumes of data. This system consists of a large number of systems, 
some are information systems whose development began many years ago, and some of 
which are modern systems developed and implemented in recent years. Most systems 
operate in open computing environments. 

2.7.4. 

Real estate 

2.7.4.1 

General 

50 

 
 
Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

Bezeq has real estate assets from four sources: assets transferred to Bezeq 
by the State  in 1984 as part of the asset transfer agreement (see  Section 
2.17.2.1), assets the rights in which were acquired by Bezeq after this date, 
assets  that  it  leases  from  third  parties,  and  assets  in  which  Bezeq  has 
received a right-of-use, according to the provisions of the Communications 
Law  and  the  regulations  established  pursuant  to  it,  for  the  purpose  of 
providing Bezeq services and/or performing Bezeq operations, whether or 
not there is a written arrangement of rights. In addition, the Company has 
easements (rights of passage, etc.) in other real estate for the purpose of 
providing Bezeq services (such as for laying cables).. 

The following is a list of Bezeq assets in accordance with the nature of the 
rights in the asset. In addition, Bezeq has easements (passage rights, etc.) in 
other  real  estate  (such  as  for  the  purpose  of  setting  up  transmitters  and 
laying cables): 

The essence 
of the right 

Number 
of assets 

Lot area 
(sqm. 
thousands) 
Approx. 
825 

Built-up 
area (sqm. 
thousands) 
Approx. 181 

Approx. 
298 

Ownership, 
lease or 
right to 
lease 

Possession 
(authorized 
by right / 
right of 
possession 
according to 
law) 
rent 

Various 
rights in 
"concentrat
ion rooms" 

Approx.  
40 

Approx.  
1.5 

Approx. 0.8  

Approx. 
332 

Approx. 31 

Approx. 64 

Approx. 
2,600 

Irrelevant 

Approx. 27 
(based on 
an estimate) 

Notes 

From  this,  approx..  295  field  assets  in  the  area 
approx. 805k thousand  sqm. of plots, approx. 71k 
sqm. built-up are assets for communication needs 
and the rest are for administrative needs. 

Properties in Israeli localities in Judea and Samaria, 
all  for  communication  purposes.  There 
is  no 
written series of contractual rights, but in Bezeq's 
opinion this does not create material exposure. 

rooms  and 

Approx.  313  assets,  of  which  a  built-up  area  of 
about 17k sqm. are for communication needs and 
the rest for administrative needs. Approx. 2k sqm. 
built-up of which are sublet. 
These  are  cable 
neighborhood communication needs. 
As for most of the properties, this is a right-of-use 
granted 
the 
Communications  Law  and  regulations  thereunder, 
and there is no written rights arrangement with the 
asset owners. In Bezeq’s opinion and based on past 
experience, this does not create material exposure. 

in  accordance  with 

to  Bezeq 

facilities 

for 

2.7.4.2 

Registration 

As of the date of the periodic report, Bezeq's rights in a significant portion 
of  its  real  estate  assets  are  not  registered  with  the  Land  Registry,  and 
therefore  are  contractual  rights.  Bezeq  is  in  the  ongoing  process  of 
registering in its name the real estate assets that can be registered with the 
Land Registry. 

2.7.4.3 

Settlement agreement regarding the real estate 

On March 10, 2004, an agreement signed on May 15, 2003 between Bezeq 
and  the  Israel  Land  Administration  (now  ILA)  and  the  State  ("Settlement 
Agreement")  regarding  most  of  the  real  estate  assets  which  were 
transferred to Bezeq as part of the transfer agreement signed prior to the 
beginning of Bezeq's business operations was given the validitiy of a ruling. 
The Settlement Agreement stipulated that the assets remaining with Bezeq 
are  in  the  status  of  a  discounted  lease,  and  subject  to  the  signing  of 
individual lease contracts, Bezeq will be entitled to carry out any transaction 
in the assets, as well as improvement operations. The agreement stipulates 
a mechanism for payment to ILA for improvement actions to be performed 

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Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

on  the  assets  (if  any)  beyond  rights  under  plans  approved  until  1993  as 
stipulated in the agreement, at a rate of 51% of the increase in value of the 
asset  following  the  improvement  actions  (when  in  the  event  that  the 
Company also pays an improvement levy for that improvement operation, 
it will be entitled to receive from ILA a refund of half of the payment paid to 
RAMI due to the increase in value or from the improvement levy, whichever 
is the lower). The Settlement Agreement also stipulates that 17 assets will 
be  returned  to  the  State,  through  ILA,  on  various  dates  (until  2010)  and 
under the conditions set forth in the Settlement Agreement. 

As  of  the  publication  date  of  this  periodic  report,  Bezeq  has  returned  15 
assets to ILA. Another asset will be returned in about a year and a half, after 
Bezeq is currently receiving a replacement asset in its place. The remaining 
asset will be returned to ILA after Bezeq receives a replacement property in 
its place in accordance with the settlement agreement.  

2.7.4.4 

Real estate exercise 

General 

Subject to the approval of Bezeq’s Board of Directors, Bezeq continues to 
act  for  the  sale  of  assets  that  are  inactive  and  /  or  that  can  be  vacated 
relatively easily and without significant expenses, or that the consideration 
for  them  justifies  the  presentation  of  another  suitable  alternative,  and 
during the last few years Bezeq has sold such assets while registering equity 
gains for these sales, which in some years were substantial. 

Bezeq has completed the sale of most of the assets (in terms of value) that 
met the aforesaid definition and intends to complete the sale of the balance 
of such assets in the coming years. The sale of the balance of such assets 
may yield Bezeq additional capital gains in substantial amounts (although in 
a  significantly  lower  amount  than  the  cumulative  amount  of  equity  gains 
that Bezeq has recorded in recent years for the sale of said assets). 

It should be emphasized that the aforesaid also applies to real estate assets 
for the sale of which a concrete decision has not yet been made and there 
is no certainty as to the timing of their sale, if it is decided to sell them. Also, 
the sale of some assets may involve difficulties, including circumstances of 
lack of demand or various planning constraints. 

In light of the aforesaid, it should be emphasized that Bezeq's assessments 
as  aforesaid  are  forward-looking  information  as  defined  in  the  Securities 
Law,  which  may  not  materialize  or  materialize  in  a  materially  different 
manner  than  anticipated.  These  assessments  are  based,  among  other 
things, on Bezeq's assessments of the value of the real estate assets it owns 
in  relation  to  their  book  value,  since  Bezeq  does  not  have  appraisals  in 
relation  to  some  of  the  assets,  or  Bezeq's  appraisals  are  not  up-to-date, 
therefore,  the  assessments  are  also  based  on  Bezeq's  internal  estimates, 
Bezeq  cannot  anticipate  the  amount  of  consideration  actually  paid  in 
respect of the assets to be sold (if and to the extent that they are sold). 

The asset in Sakia 

On January 21, 2018, Bezeq entered into an agreement for sale of an near 
the  Mesubim  junction  where  Bezeq  had  a  discounted  lease  right  (“the 
Assets”). On May 5, 2019, the transaction was completed, when the total 
consideration received by Bezeq for the asset (including linkage differences 
and interest in accordance with the provisions of the agreement) amounted 
to NIS 511 million, plus VAT. 

On May 21, 2018, Bezeq received a demand from ILA for the payment of a 
permit fee in the amount of NIS 148 million plus VAT, in respect of a property 
improvement plan that was approved prior to the signing of the agreement 
(“the Improvement Plan"). Bezeq filed an appeal on legal grounds to this 
demand  January  20,  2019,  ILA  rejected  all  of  Bezeq's  claims  in  the  legal 
attainment, however, the parties conducted contacts within the framework 
of the dispute resolution mechanism set forth in the Settlement Agreement. 

52 

 
 
Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

At the same time, Bezeq submitted an appraisal contention on the Demand. 
On  August  5,  2018,  Bezeq  received  a  demand  from  the  Or  Yehuda  Local 
Planning and Construction Committee to pay an improvements levy in the 
amount of NIS 143.5 million due to the sale of the asset by way of a sale 
("the Improvements Levy Demand”). On September 17, 2018, Bezeq filed 
an appeal against the Improvements Levy Demand, and sent ILA a demand 
for  payment  of  the  full  improvements  levy  in  accordance  with  the 
Authority's  obligation  under  the  Settlement  Agreement.  On  January  20, 
2019, ILA rejected Bezeq's demand for payment of the said improvement 
levy. Upon completion of the sale transaction as stated above and receipt 
of the full consideration, Bezeq paid half of the improvements levy in the 
amount of NIS 75 million and provided a bank guarantee for the other half 
of the levy, without detracting from or harming the proceedings that Bezeq 
has taken or will take in order to cause the cancellation or reduction of this 
levy. 

On June 27, 2021, Bezeq filed a lawsuit against ILA with the District Court in 
Tel  Aviv  to  recover  all  of  the  funds  it  paid  as  permit  fees  and  the 
improvement  levy  in  a  total amount  of  approximately  NIS  217  million,  as 
well as to receive declaratory relief according to which ILA must pay Bezeq 
any amount that is forfeited, if any, out of the bank guarantee in the amount 
of NIS 75 million that Bezeq provided to the Or Yehuda Local Planning and 
Construction Committee to guarantee the balance of the improvement levy. 
As  part  of  the  lawsuit,  Bezeq  claimed  that  it  is  not  obligated  to  pay  the 
permit  fee  and  the  improvement  levy  since,  in  accordance  with  the 
provisions of the settlement agreement signed between itself, ILA, and the 
State of Israel, it was entitled to receive the lease contract relating to the 
asset  when  it  is  improved  according  to  the  plan  and  without  paying  the 
permit fee to ILA, and that the liability The payment of the improvement 
levy applies in accordance with the provisions of the settlement agreement, 
to ILA. 

On January 17 ,2022, the Israel Land Authority filed a letter of defense in 
which  it  argued  that  the  lawsuit  should  be  dismissed  for  the  following 
reasons: (1)  The payment of  the permit fee,  which Bezeq  demands to be 
returned,  was  lawfully  imposed  on  Bezeq,  since  the  Improvement  Plan 
deviated  from  the  limited  rights  granted  to  Bezeq  in  the  settlement 
agreement; (2) With regard to Bezeq's claim to receive from the Authority 
the  improvement  levy  that  Bezeq  paid  to  the  Local  Committee,  the 
Authority's obligation in the settlement agreement to pay the improvement 
levy, on which Bezeq bases its claim, was in relation to the above limited 
rights, and today it is not possible to calculate the share of the improvement 
levy that applies to Bezeq for the deviation from the restricted rights in the 
Improvement Plan. 

It should be noted that the amount of the permit fee that will be imposed 
on the Company at the end of the procedures can also affect the amount of 
the improvement levy that the Company will have to bear. In the Company's 
estimation, the amount of the permit fee and the improvement levy it will 
be  required  to  pay  is  expected  to  be  substantially  lower  than  the  total 
amount of the requirements. therefore, Bezeq recorded an equity gain of 
NIS  403  million.  The  equity  gain  recorded  as  aforesaid  is  on  the  basis  of 
Bezeq's  assessment  regarding  the  amount  of  the  permit  fee  and  the 
improvements levy that it will be required to pay as aforesaid. To the extent 
that Bezeq’s aforesaid estimates do not materialize, the final capital gain will 
range from approximately NIS 250 million to approximately NIS 450 million. 
For this matter see also Note 6.6 to the 2021 statements. 

On January 1, 2023, in an interim decision, the appeals committee dismissed 
Bezeq's claim that at the time the improvement plan was approved, it did 
not own rights for which it could be charged the improvement levy. Bezeq 
appealed this decision to the District Court. Following the aforementioned 
interim decision, Bezeq's claims regarding the amount of the improvement 
will  be  discussed  in  the  appeals  committee.  It  will  be  clarified  that  the 

53 

 
 
Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

aforementioned  interim  decision  does  not  lead  to  a  change  in  the 
Company's  estimates  regarding  the  amount  of  equity  gain  recorded  as 
mentioned, since Bezeq's estimates were also based on the legal situation 
in the lawsuit against Rami , which as mentioned also includes an obligation 
on the part of ILA in the settlement agreement to bear the improvement 
levy for the asset. 

The information contained in this section regarding Bezeq valuations and 
capital  gains  as  a  result  of  the  sale  of  the  asset  is  forward-looking 
information as defined in this term in the Securities Law, and is based, inter 
alia,  on  the  above  as  well  as  on  Bezeq's  assessments  of  the  Company’s 
claims regarding the payment of the requirements. The information may not 
fully  materialize  as  long  as  the  said  Bezeq  assessments  take  place  in  a 
manner different than expected. 

2.8. 

Intangible assets  

2.8.1. 

Bezeq's licenses 

Bezeq operates under an NIO license, which, among other things, forms the basis for its 
activity  in  the  field  of  landline  interior  communications  (for  a  description  of  the  main 
points of the NIO license, see section  2.16.2). Also, the Company has a general NIO license 
for the Judea and Samaria region (see Section 2.16.2.9). 

2.8.2. 

Trademarks 

Bezeq  uses  trademarks  that  characterize  its  services  and  products.  As  of  the  date  of 
publication  of  the  periodic  report,  approximately  160  trademarks  are  registered  in 
Bezeq's name, or are in the process of being registered with the Registrar of Trademarks 
as  well  as  three  samples.  The  main  trademarks  are  Bezeq  –  Bezeq’s  name,  and  "B"  – 
Bezeq’s logo.  

2.9. 

Human capital 

2.9.1. 

Organizational structure and employee base according to organizational structure 

The following is a diagram of Bezeq's general organizational structure as of December 31, 
2022: 

Board of 
Directors

CEO

Group 
Secretary and 
Internal 
Compliance 
Office 

Internal 
Auditor*

Corporate 
Communication

Legal 
Advisor

Management 
(without 
directors) 
)33( 

The 
board 
of 

Finance 
Division 

Marketing 
and 
Innovation 
Division 

Operation
s and 
Logistics 
Division

Human 
Resources 
Division 

Technolog
y and 
Network 
Division

Business 
Division

Private 
Division

( 

1631

)

( 

761

)

( 

2634

)

Staff divisions) 
539

( 

)

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Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

2.9.2. 

Number of Bezeq employees and employment frameworks 

The  number  of  employees  at  Bezeq  as  of  December  31,  2022  was  5,598  employees 
(compared to 5,475 employees at the end of 2021). About 93% of Bezeq employees are 
employed  under  collective  agreements  (of  which  approximately  56%  are  permanent 
employees and the rest are non-permanent employees). The rest of Bezeq’s employees 
(approximately 7%) are employed under individual agreements not within the framework 
of the collective agreements. 

For  details  regarding  the  special  collective  agreement  from  December  2006  and  its 
amendments, see Section 2.9.4. 

2.9.3. 

Early retirement plans for employees 

During 2022, 74 permanent Bezeq employees retired in accordance with the retirement 
plan in Bezeq. 

On December 28, 2022, as part of the implementation of a streamlining plan and under 
the collective agreement in Bezeq, Bezeq’s Board of Directors approved the retirement 
of approximately 80 veteran permanent employees during 2023 in the early retirement 
track  at  a  total  cost  of  approximately  NIS  95  million.  In  light  of  the  aforesaid,  Bezeq 
recorded an expense accordingly in its statements for the fourth quarter of 2022. 

For this matter see also Note 16.5 to the 2022 statements.  

2.9.4. 

The nature of the employment agreements with Bezeq  

The  employment  relationship  with  Bezeq  is  regulated  in  collective  agreements  signed 
between Bezeq and the representatives of Bezeq employees and the Histadrut, and in 
individual agreements. Bezeq employees are also subject to extension orders for certain 
general collective agreements, such as cost of living increase agreements. 

The following are the main points of the special collective agreement between Bezeq, the 
employees’ organization and the Histadrut from December 2006 and the amendments to 
it that have been signed over the years (all together will be referred to in this section as 
"the Agreement"), which regulates labor relations in the Company: 

According  to  the  Agreement,  all  existing  agreements,  arrangements  and  practices  at 
Bezeq on the eve of the signing of the Agreement, including the wage linkage mechanism 
for  the  public  sector,  will  continue  to  apply  only  to  Bezeq's  veteran  permanent 
employees, to whom the Agreement applies, subject to changes explicitly included in the 
Agreement. The employment of existing and new temporary employees will be carried 
out on the basis of monthly / hourly wage agreements based on a market wage model by 
occupation, with high managerial flexibility. The Agreement set limits on certain types of 
future  organizational  changes,  as  well  as  a  mechanism  for  notification,  dialogue  and 
arbitration with the employees’ organization in the event of organizational changes. 

According to the Agreement, during the period of validity of the Agreement, two directors 
from  among  the  employees  will  serve  on  Bezeq's  Board  of  Directors28  which  will  be 
proposed by the employees' organization (subject to the approval of their identity by the 
Chairman  of  the  Board  and  their  election  to  the  general  meeting).  The  directors  from 
among the employees are not entitled to payment for their office as directors and do not 
participate  in  Board  of  Directors  discussions dealing  with  the  terms  of  employment  of 
senior executives. 

The  Agreement  defined  the  status  of  "new  permanent  employee",  whose  terms  of 
employment are different from Bezeq's veteran permanent employee (according to the 
collective  agreement):  his  salary  model  is  in  accordance  with  Bezeq's  salary  policy  in 
accordance with market wages. Upon termination of his employment with Bezeq, he will 
be entitled to an increased severance track only (in accordance with seniority). 

28   At the beginning of 2016, the employees' representation announced that it agrees that as long as up to 15 directors serve 
on Bezeq’s Board of Directors, one representative from among the employees will serve on the Board, and as the number 
of directors exceeds 15, another representative from among the employees will serve on the Board. 

55 

 
 
 
 
 
Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

The period of the agreement is until December 31, 2025 and the period of the retirement 
arrangement in the collective agreement is until December 31, 2026. 

As part of the retirement arrangements (as they are in effect as of the date of publication 
of the report and as arranged as part of the last amendment, dated December 16, 2020, 
to the collective agreement) Bezeq may, at its discretion, terminate the work of up to 80 
permanent  employees  (including  employees  with  the  status  of  "new  permanent 
employee")  in  any  year  (and  this  is  in  addition  to  the  retirement  quota  of  about  300 
permanent  employees  that  was  not  realized  according  to  the  agreement,  whose 
employment Bezeq could terminate at the end of the agreement period).. 

For a list of other material agreements in the field of labor relations, see section 2.17.3. 

2.9.5. 

Officers and employees of Bezeq's senior management 

As of the date of publication of the periodic report, Bezeq has 9 directors (according to a 
composition  of  9  directors  decided  by  Bezeq’s  Board  of  Directors),  of  which  three  are 
external  directors,  one  independent  director  (who  is  not  an  external  director)  and  5 
directors  who  are  not  independent  directors  (including  one  director  from  among  the 
employees). In addition, Bezeq has 11 senior management members.  

As of June 19, 2022, Mr. Ran Guron serves as CEO of Bezeq in place of Mr. Dudu Mizrahi, 
who ended his term (before his appointment as CEO of Bezeq, Mr. Guron served as CEO 
of the subsidiaries Pelephone, Bezeq International and DBS). On September 14, 2022, the 
general assembly of Bezeq's shareholders approved the terms of office and employment 
of Mr. Guron as CEO of Bezeq. 

Senior  management  members  are  employed  under  personal  agreements  that  include, 
but  are  not  limited  to,  pension  coverage,  payment  of  target-based  bonuses  and  early 
notice period upon retirement.  

For details regarding remuneration for office holders, see Section 7 of Chapter D of this 
periodic report and Note 29 of the 2021 statements. 

On December 10, 2020, Bezeq’s Board of Directors approved a capital remuneration plan 
(“the Plan") by virtue of which options may be assigned which, as of the date of the Board 
of Directors' approval, represented approximately 2.94% of Bezeq's fuully diluted, issued 
and paid-up equity after exercise. On December 12, 2020 an outline based on the plan (as 
amended  on  January  1,  2021  and  May  9,  2022)  was  published  (“the  Outline").  The 
Company makes assignments from time to time by virtue of the Outline to office holders 
and/or employees in the company and its subsidiaries. 

On April 18, 2022, the general assembly of the Company's shareholders approved, among 
other things, an updated remuneration policy for a period of three (3) years, effective as 
of January 1, 2022, which includes, among other things, clarifications regarding the return 
of  remuneration  given  on  the  basis  of  erroneous  financial  information,  an  adjustment 
that  allows  the  awarding  of  performance-dependent  variable  remuneration  to  the 
Chairman of the Company's Board of Directors, as well as wording corrections and other 
technical  corrections.  For  more  details  on  the  updated  remuneration  policy,  see  the 
immediate report on assembly convening dated March 23, 2022, which is included in this 
report by way of reference. 

Also, on March 13, 2023, Bezeq's Board of Directors approved the convening of a special 
general  assembly  of  Bezeq's  shareholders,  concerned,  among  other  things,  with  the 
approval  of  various  amendments  to  Bezeq's  remuneration  policy,  so  that  the 
remuneration policy  which includes such amendments  will be in effect  for a period of 
three  years  from  the  date  of  its  approval  by  the  general  assembly.  The  amendments 
include, among other things, the application of the remuneration policy to the Chairman 
of the Board of Directors, as well as the possibility of linking wages to the consumer price 
index,  reflecting  expenses  and  related  conditions,  adjustment  period  grant  and  a 
signature grant to officers. For this matter, see Bezeq's immediate report of March 14, 
2023  regarding  the  convening  of  a  general  assembly  included  in  this  report  by  way  of 
reference. 

For the capital remuneration plan - see Note 26 to the 2021 statements. 

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Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

2.10.  Equipment and suppliers 

2.10.2. 

Equipment 

Most of the equipment used by Bezeq is: swithcboards, communication cabinets (MSAG), 
copper cables, optical cables, transmission equipment, data communication systems and 
equipment,  servers,  routers  and  Internet  modems.  Bezeq  purchases  most  of  the 
equipment  needed  for  its  communications  infrastructure  from  Israeli  companies 
associated  with  manufacturers  of  communications  equipment  around  the  world.  In 
addition, Bezeq purchases hardware and software from a number of suppliers. 

2.10.3. 

Rate of purchase from major suppliers and the form of contact therewith 

Bezeq sees as a "major supplier", for the purposes of Article 23 of the First Schedule to 
the Prospectus Details Regulations, a supplier whose scope of Bezeq's annual purchases 
exceeds  5%  of  the  Group's  total  annual  purchases  and  the  volume  of  purchases  from 
which out of the total volume of purchases in the field of activity exceeded 10%. 

During 2022, Bezeq had no major supplier as defined above. 

2.10.4. 

Dependence on suppliers 

Most  of  the  equipment  purchased  in  the  fields  of  data  communications,  switching, 
transmission  and  radio  systems  is  unique  equipment  and  the  possibility  of  receiving 
support for it throughout all its years of operation other than from the manufacturer is 
limited. In view of the importance of the manufacturer's support in certain systems used 
by Bezeq, Bezeq believes that it may be dependent on the following suppliers: 

Supplier name 
Nokia  Solutions  and  Networks 
Israel Ltd. 
Juniper Networks 
Cisco / BroadSoft 
Dialogic Networks (Israel) Ltd. 

Adtran Holdings Ltd. 
IBM 

VMware 

Hits Telecom Ltd. 
F5 Networks, Inc 

Field 
Metro transmission and NGN network access systems 
GPON equipment for the fiber project. 
Metro transmission 
Subscriber switches 
Transition  switchboards  for  linking  operators  to  the 
Bezeq switching network 
Network access systems - NGN 
Hardware and solutions for backups, restorations and 
infrastructure  survivability,  storage 
system  and 
equipment 
Infrastructure  for  most  of  the  server  virtualization 
system 
Be Router 
ISP service (Carrier-grade NAT router) 

Agreements  with  suppliers  on  which  Bezeq  may  have  a  dependency  as  stated  in  this 
section usually include a warranty period for a period of time and under the conditions 
set forth in the agreements, followed by another period of maintenance or support. If 
necessary,  Bezeq  may  enter  into  an  agreement  with  the  supplier  for  the  provision  of 
support  and  maintenance  services  for  an  additional  period  of  time.  As  a  rule,  these 
agreements  will  include  various  remedies  to  Bezeq  in  the  event  of  a  breach  of  the 
agreement by the supplier. Usually, at the time of contracting with these providers, the 
contract is long term. 

2.11.  Working equity 

For details regarding Bezeq's working equity, see Section 1.4 of the Board of Directors' Report.  

2.12. 

Investments 

For information on investments in investee companies, see Note 12 to the 2022 statements, and 
also see Sections 3 and 4 of Chapter D of this periodic report.  

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Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

2.13. 

Funding 

2.13.1. 

The average and effective interest rate on loans 

As of December 31, 2022, Bezeq is not financed by short-term credit (less than a year). 
The following is the distribution of long-term loans (including current liabilities):  

Loan 
period 

Source of 
funding 

Long-
term 
loans 

Banks 

Banks 

Non-
banking 
sources 
Non-
banking 
sources 

The 
principal 
amount 
(NIS 
millions) 

705 

700 

3,449 

2,416 

Currency or 
linkage 
type 

NIS 
unlinked 

NIS 
unlinked 

NIS 
unlinked 

CPI-linked 
NIS 

Average 
interest 
rate 

3.43% 

5.21% 

Type of interest 
rate and 
change 
mechanism  

Fixed 

Variable on 
the basis of 
the short-
term loan 
interest rate 
per year * 

Fixed 

3.07% 

3.17% 

Fixed 

1.54% 

1.58% 

Effective 
interest rate 

Interest rate 
range in 
2021 

3.36% 

5.30% 

3.20%
-
.30%4
2.13%-
.21%5

2.79%
-
.00%4

0.58%
-
.20%2

* Prime interest rate – 5.75% (as of February 2023) 
For more details about Bezeq loans, see Note 13 to the 2022 statements. 

2.13.2. 

Credti receipt limitations 

2.13.2.1 

Limitations included in Bezeq loans 

See Note 14 to the 2022 statements. As of the date of  publication of  the 
statements and as of the date publication of of this periodic report, Bezeq 
meets all the restrictions that apply to it.  

2.13.2.2 

Restrictions of the Bank of Israel related to a single borrower and a group of 
borrowers 

The directives of the Supervisor of Banks in Israel include restrictions on the 
liability  of  a  borrower  and  a  group  of  borrowers  towards  the  banks.  The 
Supervisor of Banks’ instructions may from time to time influence the ability 
of banking corporations to grant additional credit to Bezeq. Regarding the 
authorization  to  set  restrictions  on  the  provision  of  credit  to  a  business 
group in the Centralization Law, see section 1.7.7.6.  

2.13.3. 

Reportable credit  

As  of  December  31,  2022,  Bezeq's  reportable  credit,  in  accordance  with  legal  position 
104-15 of the Securities Authority (reportable credit incident) is Bezeq's debentures from 
series 6, 9, 10, 11 and 12, all as specified Note 13 to the 2022 statements and in Section 
4 of the Board of Directors’ report. 

Further  to  the  update  to  the  Securities  Authority  staff  legal  position  No.  104-15: 
Reportable Credit Event, it should be noted that all of Bezeq's loan agreements (public 
debentures and private loan agreements) include a cross breach clause in which a right 
to immediate repayment is established in the case of a third party lender made Bezeq's 
debts  to  him  due  for  immediate  payment  as  a  result  of  a  breach  event  (default)  in 
amounts that exceed the amounts stipulated in the various loan agreements. As of the 
date of the report, Bezeq loans do not include financial benchmarks, so the cross breach 
clause is not relevant to financial benchmarks. 

2.13.4. 

Amounts of credit received during the reporting period 

On April 7, 2020, Bezeq published a prospectus of registration for trading and unblocking 
of Bezeq debentures (Series 11 and 12) and a shelf prospectus (dated April 8, 2020) (“the 
Prospectus"). In April 2022, the Securities Authority approved to extend the period for 
offering securities according to a prospectus until April 7, 2023. In accordance with the 
authority's approval, in light of the existence of enforcement procedures in Bezeq's case, 

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to the extent that Bezeq wishes to publish a shelf offer report by virtue of a prospectus 
during  the  aforementioned  period  and  as  long  as  the  procedures  continue,  each  such 
shelf offer report will be subject to obtaining a permit from the Securities Authority, in 
accordance with Rule 2(8) ) to the Securities Rules (cases in which the publication of a 
shelf offer report will require a permit from the Securities Authority), 5776-2016 

For the purposes of this section, see also Section 4 of the Board of Directors' Report and 
Note 13 to the 2021 statements. 

2.13.5. 

Bezeq's debentures 

For details regarding the debentures issued by the Company and by Bezeq see Note 13 to 
the 2022 statements and Section 4 of the Board of Directors' Report. Also, see Section 
2.13.4. 

On  January  23,  2021,  Bezeq  made  a  partial  early  repayment,  on  its  own  intiative,  of 
Bezeq’s debentures (Series 9) in the amount of approx. NIS 370 million par value. Also, on 
December 1, 2022, the Company's debentures from series 6 and 7 were paid off. 

2.13.6. 

Credit rating 

Bezeq's debentures are rated by Standard & Force Maalot Ltd. as il/AA-/Stable and by 
Midroog Ltd. as Aa3.il rating with a stable rating horizon. 

For  details  regarding  the  history  of  Bezeq  ratings  in  the  last  two  years,  see  Bezeq's 
immediate reports dated May 12, 2021, November 30, 2021 and May 10, 2022 (Standard 
& Poors Maalot Ltd.), as well as dated May 2, 2021, December 1, 2021 and May 15, 2022 
(Midroog Ltd.) included in this report by way of reference.  

For this matter see also Section 4 of the Board of Directors' Report.  

2.13.7. 

Bezeq's assessment in relation to debt raising in the coming year (2023) and the sources 
of borrowing 

During 2023, Bezeq is expected to repay a total of NIS 1.2 billion for the principal and the 
interest on its loans, including debentures. 

Bezeq  raises  funds  from  time  to  time  for  the  purpose  of  managing  its  cash  flow.  The 
financing  options  available  to  Bezeq  are:  Raising  debt  through  loans  from  banking 
corporations and institutional bodies and by issuing securities (private or marketable).  

2.13.8. 

Liens and collateral 

For  information  regarding  Bezeq's  liens  and  collateral,  see  Note  19  to  the  2022 
statements.  

2.14.  Taxation 

For information on taxation, including losses carried forward for tax purposes in DBS, see Note 7 to 
the 2022 statements. 

On December 11, 2022, Bezeq received a letter from the Tax Authority extending, at Bezeq's request, 
the validity of the taxation decision in the agreement that includes the prior approval of the  Tax 
Authority  for  tax  purposes  for  the  merger  of  DBS  with  and  into  Bezeq  in  accordance  with  the 
provisions of Article 103b of the Income Tax Ordinance ("the Taxation Decision") for one year, i.e., 
until December 31, 2023. It should be noted that the letter included a similar statement to the one 
included in the extension letter from the previous year, according to which, in light of the fact that 
there were no material developments regarding the abolition of the structural separation between 
Bezeq and DBS from the date of the Taxation Decision until the date of this extension, and in light of 
the long time elapsed from the taxation on the subject, the Tax Authority will consider not extending 
the validity of the taxation decision beyond December 31, 2023, as long as there are no significant 
developments in 2023 regarding the abolition of the structural separation between Bezeq and DBS. 
According  to  Bezeq's  position,  it  is  entitled  to  an  extension  of  the  Tax  Authority's  approval  in 
accordance with the terms of the Taxation Decision, and anyway, even if the validity of the Taxation 
Decision is not extended, this does not prevent Bezeq from requesting from the Tax Authority at any 
relevant time in the future a new taxation decision instead of the said taxation decision. It should 
also  be  noted  that  Bezeq  continues  to  work  with  the  various  regulatory  bodies  to  abolish  the 
structural separation. 

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2.15.  Environmental risks and their ways of management 

2.15.2. 

General 

Some  Bezeq  facilities,  such  as  broadcasting  facilities,  wireless  communication 
facilities, or high-voltage facilities29 are sources of electromagnetic radiation which 
are included in the definition of "radiation source" in the Non-Ionizing Radiation Law.  

2.15.3. 

Non-Ionizing Radiation Law 

The law regulates the practice of radiation sources, their establishment and operation, as 
well as their supervision. Among other things, the law stipulates that the construction and 
operation of a radiation source is subject to a permit; Provides for punitive provisions, 
and strict liability for a company that has violated the provisions of the law, its employees 
and its officers; Imposes registration and reporting obligations on the permit holder and 
confers supervisory powers mainly to the Commissioner for Non-Ionizing Radiation in the 
Ministry  of  Environmental  Protection  (in  this  section  -  "the  Commissioner"),  including 
regarding  conditions  in  the  permit,  revocation  of  the  permit  and  disposal  of  radiation 
source. 

Bezeq has operating permits from the Commissioner for the communication facilities and 
broadcasting sites operated by it. In addition, Bezeq performed the necessary actions for 
issuing radiation permits for high-voltage facilities located on its assets, and as of the date 
of the report, the Company has radiation permits for 13 high-voltage facilities, all of which 
have a construction and operating permit or a valid type approval.  

It should be noted that the Commissioner requires building permits as a condition for the 
continued  validity  of  operating  permits  for  communication  facilities  (including 
broadcasting facilities) issued by him, as well as the existence of additional conditions, 
inter alia, in relation to "wireless access facilities" that have a "type certificate" issued by 
the Commissioner . See also section 2.16.11.  

The law includes a penalty chapter which stipulates, inter alia, that the construction or 
operation  of  a  radiation  source  in  violation  of  the  terms  of  the  permit  and  the 
construction or operation of a radiation source without a permit after receiving written 
notice from the Commissioner, are a criminal offense.  

2.15.4. 

Permits 

For permits for broadcasting facilities required by the Planning and Construction Law, see 
Section 2.16.10.  

2.15.5. 

Bezeq policy regarding radiation risk management 

Bezeq  implements  a  work  procedure  regarding  the  establishment,  operation  and 
measurement  of  non-ionizing  radiation  sources,  and  an  appropriate  enforcement 
procedure  approved  by  Bezeq's  Board  of  Directors.  Bezeq  has  been  appointed  an 
enforcement  procedure  implementation  officer.  Periodic  reports  on  the  status  of 
radiation sources are forwarded to Bezeq's CEO and the Board of Directors. 

2.16.  Restrictions and supervision of Bezeq operations  

Bezeq is subject to various legal systems that regulate and limit its business activities. The main body 
that supervises Bezeq's activities as a communications company and may give instructions on various 
subjects is the Ministry of Communications. 

2.16.1. 

Supervision of Bezeq rates 

Arrangements under Sections 5 and 15 to 17 of the Communications Act and under the 
NIO license apply to Bezeq’s rates, as detailed later in this section. 

Bezeq rates are subject to regulatory intervention (even if not provided for in regulations), 
and from time to time, Bezeq is exposed to significant changes in its rate structure and 
rate  level.  Rate  control  creates  or  may  create  difficulties  for  Bezeq  in  providing  an 
appropriate  timely  competitive  response  to  changes  in  the  market  and  competitors' 
offers.  In  addition,  the  restrictions  on  the  granting  of  discounts  in  rates  limit  Bezeq’s 

29The  construction  and  operation  of  these  facilities  requires  an  establishment  permit  as  well  as  an  operating  permit  in 
accordance with the Non-Ionizing Radiation Law. The construction of high-voltage facilities (transformers) at Bezeq sites is 
intended for the supply of energy for the use of Bezeq facilities. 

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participation in certain tenders. The transition to maximum prices instead of FIX prices in 
relation  to  Bezeq  services  stipulated  in  the  regulations  (mainly  telephony)  and  the 
exclusion of certain marginal services from the scope of the regulations as of April 1, 2022 
gives Bezeq greater flexibility in relation to these services. 

The following are the main principles of the control arrangements on Bezeq rates:  

2.16.1.1 

the  Communications  Law, 

In  accordance  with 
the  Minister  of 
Communications,  with  the  consent  of  the  Minister  of  Finance,  may 
determine  payments  (including  maximum  or  minimum  payments)  for 
licensee services. Determination of payments can be made, inter alia, based 
on (1) cost according to a calculation method ordered by the Minister plus 
a  reasonable  profit;  Or  (2)  by  reference  points  derived  from  one  of  the 
following:  payment  for  services  provided  by  the  licensee,  payment  for 
comparable services, payments in other countries for such services. Bezeq's 
regulated  service  rates  (telephony  and  other  services)  were  set  in  the 
regulations  as  fixed  rates,  which  were  updated  according  to  the  linkage 
formula  minus  a  reduction  coefficient  as  stipulated  in  the  regulations,  so 
that on average Bezeq's supervised rates were eroded in real terms 

As of April 1, 2022, amendments to the payment regulations and the Bezeq 
license entered into  force, the FIX rates were canceled and in their place 
maximum rates were set, so that the maximum payments for telephone line 
usage fees and outgoing call rates (applicable to a subscriber who owns 3 
lines or less) were gradually reduced on two dates – April 1,  2022 and July 
1, 2023, the regulations determining the update mechanism were canceled. 

a.  The  following  is  a  breakdown  of  the  rates  in  accordance  with  the 

aforementioned dates (in NIS): 

Two 
stages 

April 1, 
2022 
until 
July 1, 
2023 

Starting 
from July 
1, 2023 

Service 

Monthly usage fee per 
telephone line 
Rate for call minutes to 
landline networks30 

Rate for call minutes to 
mobile networks  31 

Monthly usage fee per 
telephone line 
Rate for call minutes to 
landline networks  32 

Rate for call minutes to 
mobile networks  33 

Maximum rate 

Net of VAT 

VAT included 

29.91 

Peak 
Low 

0.035  
0.0857  

35 

Peak 
Low 

0.041  
0.100  

1139 until June 14, 2023; 
From 6/15/2023 to 
6/30/2023: 0.088 

20.82 

0.0142 

1327 until June 14, 2023; 
From 6/15/2023 to 
6/30/2023: 0.103 

0.128 

24.36 

0.017 

0.086 

b.  Upon  the  transition  to  a  mechanism  of  maximum  payments,  the 
existing alternative payment baskets that Bezeq has been marketing in 
accordance  with  the  provision  of  Article  15A  of  the  Communications 
Law  were  eliminated.  In  parallel,  until  July  1,  2023,  with  regard  to 
existing subscribers in these baskets, the maximum payment will be the 
maximum payment for subscribers who, on the eve of the entry into 
force of the amendment, paid for a cluster of services according to an 

30  

Including interconnectivity rate to landline destinations. 

31  

Including interconnectivity rate to mobile networks. 

32 Including interconnectivity rate to landline destinations . 

33 Including interconnectivity rate to mobile networks . 

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alternative payment basket, according to the conditions established in 
that  alternative  payment  basket  or  according  to  the  payment 
regulations as drafted after the Amendment, whichever is lower. Also, 
Bezeq may market telephony service packages that include a telephone 
line  and  call  minutes,  at  rates  that  will  be  determined  by  it  in 
accordance with Section 17 of the Communications Law, provided that 
the payments in these packages are lower than the payments derived 
from the maximum rates that will be determined 

The Ministry of Communications estimates (as indicated in the decision 
of the Minister of Communications dated December 30, 2021) that such 
a  change  in  rates  is  expected  to  reduce  telephony  expenses  of  the 
Company’s discrete line subscribers and reduce the Company’s landline 
telephony consumers' expenses by NIS 370 million per year from July 1, 
2023 onwards (including VAT). 

The Minister of Communications' decision also states that in view of the 
expected  technological  changes, 
in  particular  the  transition  to 
advanced networks, the decrease in the number of subscribers to the 
landline  telephony  service  and  changes  in  the  competitive  situation, 
whatever  the  situation,  the  Minister  of  Communications  intends  to 
Bezeq's landline telephony service. 

Bezeq  estimates  that  the  reduction  of  rates  in  accordance  with  the 
decision  is  expected  to  have  a  material  adverse  effect  on  Bezeq's 
financial results. At the same time, Bezeq estimates that the decrease 
in its revenues is expected to be lower than that stated in the Ministry 
of Communications' estimates. 

According to Bezeq estimates, if the number of telephony lines and call 
minutes in the Bezeq network had remained at their level as of the date 
of this report, the reduction in rates would have led to a decrease in 
Bezeq’s  revenues  in  2022  of  NIS  70  million;  a  decrease  in  Bezeq's 
revenues in 2023 in the amount of approximately NIS 150 million; and 
from 2024 onwards, to a decrease in Bezeq's revenues in the amount 
of  approximately  NIS  200  million  per  year.  However,  in  light  of  the 
continuing declining trend in both the number of Bezeq telephony lines 
and  the  number  of  call  minutes,  which  led  to  an  erosion  in  Bezeq's 
revenues from telephony services34, the impact of the decision alone 
on Bezeq's revenues is expected to be smaller compared to this section. 

Some  of  the  information  contained  in  this  section  is  forward-looking 
information  as  defined  in  the  Securities  Law  based  on  assessments, 
assumptions  and  expectations,  including  the  demands  for  Bezeq 
services and the behavior of various communications operators and any 
other 
information  relating  to  future  events  or  matters  whose 
materialization  is  uncertain  and  out  of  the  control  of  the  Company. 
Forward-looking information is inherently uncertain, and accordingly, 
the  information  may  not  materialize  or  materialize  differently,  even 
materially, from what is stated depending on the materialization of the 
above assessments. 

2.16.1.2 

Rates  stipulated 
in  the  regulations  according  to  Article  5  of  the 
Communications Law - the Minister of Communications and Finance has the 
authority (according to Article 5 of the Communications Law) to determine 
payments for interconnection or for the use of a license holder in the Bezeq 
facilities of another license holder and to issue instructions on the matter 
(including in relation to ancillary arrangements) , among other things, based 
on  the  parameters  listed  in  Section  2.16.1.1.  For  the  the  outline  of  the 
reduction  of  interconnection  rates  as  stipulated  in  the  interconnection 
regulations, see Section 1.7.7.1. 

2.16.1.3 

Determining rates according to  Article 15 of the Communications Law - a 

34 Except in 2020 which was affected by the consequences of the COVID crisis. 

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2.16.1.4 

service  for  which  no  payment  has  been  set  or  for  which  a  maximum  or 
minimum  payment  has  been  set  according  to  Articles  5  or  15  of  the 
Communications Law, Bezeq may demand a reasonable payment for it. In 
accordance with the Bezeq license, it will offer rates as stated, to anyone 
who  requires  it  throughout  Israel,  and  for  an  advanced  network  in  the 
service  area  specified  in  Appendix  11-1,  without  discrimination,  and  at  a 
uniform rate according to the types of services. 

The  Minister  of  Communications  may  order  Bezeq  to  report  to  him  the 
payment that it intends to demand as stated and any change in payment 
prior to the provision of the service or the implementation of the change. If 
the  Minister  of  Communications  deems  that  Bezeq  intends  to  demand  a 
payment  that  is  unreasonable,  or  a  payment  that  raises  concerns  about 
harming competition, he will be entitled to order Bezeq (for a period not to 
exceed one year) on the amount of payment that it is entitled to demand 
for the service, or to order the separation of payment for service from the 
payment for the services cluster. 

The Minister's examination of whether a payment is unreasonable can be 
done,  among  other  things,  in  accordance  with  the  parameters  stated  in 
Section 2.16.1.1(1), and the Minister may examine the payment based on 
what is stated in Section 2.16.1.1(2). According to the license, Bezeq must 
notify the Ministry of Communications of the rate it sets 14 days in advance. 

On December 20, 2022, a hearing was published on behalf of the Ministry 
of Communications regarding the determination of a format for examining 
the  reduction  of  margins  by  owners  of 
landline  communications 
infrastructure.35  Among  other  things,  it  is  proposed  that  the  margin 
reduction  test  will  take  place  on  a  retail  product  based  on  an  advanced 
network  of  authorized  suppliers  who  have  significant  market  power 
(including  the  Company).  The  recommendation  details  the  method  of 
calculating the prices underlying the test and suggests that the retail margin 
component  be  calculated  as  a  25%  addition  to  the  wholesale  costs,  or 
alternatively - as a 20% reduction from the retail price to the end customer. 
It is suggested that the test be used as part of a self-examination, and this 
goes beyond establishing a rigid framework that includes reports and pre-
approvals of every marketing proposal. Failure to comply with the margin 
reduction test will lead, among other things, to the exercise of the authority 
of  the  Minister  of  Communications  according  to  Article  17(c)  of  the 
Communications Law and to a reduction of the wholesale payment for the 
BSA service in a way that will bring it within the limits of the proposed test 
for  a  period  of  one  year.  It  should  be  noted  that  the  Company  is  still 
conducting a self-examination for not reducing margins in the BSA service, 
so that insofar as the hearing is applied to the Company in the published 
format, it does not expect it to have a material impact on its business.36 

Some  of  the  information  contained  in  this  paragraph  is  forward-looking 
information  as  defined  in  the  Securities  Law  based  on  the  Company's 
assessments regarding the final decisions that will be made following the 
hearing  and  their  effects.  Actual  estimates  may  vary  depending  on  the 
aforementioned variables. 

2.16.1.5 

For  wholesale  rates  and  new  pricing  for  all  wholesale  rates  see  Section 

35 According to what was said in the hearing, it replaces two previous hearings (from the years 2014 and 2017) in which no final 
decision was made due to implementation difficulties. "Margin Squeeze" takes place when an infrastructure owner who holds 
market power and provides wholesale services to his competitors, reduces the margin between his retail rate to the consumer 
and his wholesale rate to the competitors, in a way that harms the economic viability of the competitors to purchase wholesale 
inputs from him and market retail services to the consumer based on them. 

36  In this context, it should be noted that according to the test applied by the Ministry of Communications to check the reduction 
of margins between Hot's retail rates and wholesale rates (including on a traditional network - Co-ax), the retail rate is required 
to be 25% above the wholesale rate and the wholesale rate is required to be 20% below the retail rate. The retail rate included 
infrastructure and provider and did not include the component of international gigas. 

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2.16.4, and regarding margin reduction see Section 2.16.4.2. 

2.16.2. 

Bezeq's NIO license 

Bezeq operates, among other things, under the NIO license37. The NIO license contains 
provisions that mainly concern: 

2.16.2.1 

The  scope  of  the  license,  the  services  that  Bezeq  must  provide  and  the 
universal service obligation 

Bezeq must provide its services to everyone on equal terms for each type of 
service, regardless of location or unique cost. The license is not limited in 
time; The Minister may change, revoke, and suspend the license; The license 
and  any  part  thereof  may  not  be  transferred,  encumbered  or  foreclosed. 
Regarding  the  addition  of  wholesale  services  to  the  Bezeq  license,  see 
section 1.7.6. Regarding the deployment and universal service obligation in 
connection with advanced infrastructure (fibers), see Section 2.7.2. 

2.16.2.2 

Rules of structural separation 

For a description of the structural separation rules applicable to Bezeq, see 
Section 1.7.3. 

2.16.2.3 

Rates 

For a description of the main provisions regarding rates, see Section 2.16.1. 

2.16.2.4 

Marketing shared service baskets 

For the provisions in the NIO license that allow Bezeq to apply to market 
baskets of shared services subject to restrictions, see Section 1.7.3.2. 

2.16.2.5 

Operation of Bezeq’s networks and the level of its services 

Bezeq must maintain and operate the network, and maintain its services at 
all times, including in times of emergency, in a proper and regular manner, 
in  accordance  with  the  technical  requirements  and  the  quality  of  service 
requirements,  and  act  to  improve  its  services.  The  license  includes  an 
appendix regarding the "level of service to the subscriber". Bezeq forwarded 
proposals to the Ministry to amend the appendix while adapting it to the 
customary reality and licenses of other operators, but as of the publication 
of the report, the amendment has not yet been made. For the amendment 
to the license regarding answering at the call centers, see Section 1.7.7.3.a. 

2.16.2.6 

Interconnectivity and use 

Provisions have been made regarding the obligation of interconnectivity to 
another public network and allowing the use of another licensee (including 
wholesale  service);  There  is  also  an  obligation  to  provide  infrastructure 
services  to  the  another  licensee  on  reasonable  and  equal  terms,  and  to 
refrain from preferring a licensee who is an affiliated company.  

2.16.2.7 

Arrangements in the field of security 

Provisions have been made regarding the operation of Bezeq’s network in 
time of emergency, including an obligation to operate in a manner that will 
prevent it from collapsing in an emergency.  

Bezeq  must  perform  Bezeq  services  and  construction  and  maintenance 
services for infrastructure and end equipment for defense forces in Israel 
and abroad, as stipulated in its agreements with the defense forces. Bezeq 
will also provide special services to the defense forces. Bezeq will work to 
ensure that all purchases and installation of hardware in its Bezeq facilities, 
with the exception of terminal equipment, will be made in full compliance 
with the instructions given to Bezeq under Article 13 of the Communications 
Law.  

37   A copy of the NIO license is published on the Ministry of Communications' website at - www.moc.gov.il.  

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Bezeq must appoint a security officer and strictly comply with the security 
provisions in the appendix to the license. For the provisions of the license 
regarding preparation for cyber defense management, see Section 1.7.10. 

2.16.2.8 

Supervision and reporting 

Bezeq  has  extensive 
the  Ministry  of 
reporting  obligations 
Communications.  In  addition,  the  Director  General  of  the  Ministry  of 
Communications (as defined in Bezeq’s license) was granted access rights to 
the facilities and offices used by Bezeq and the seizure of documents. On 
August 1, 2019, Bezeq's general license was amended so that the reporting 
obligations were consolidated and reduced. 

to 

2.16.2.9 

Miscellaneous matters 

a.  The NIO license includes restrictions on the acquisition, possession and 
transfer of means of control in accordance with the provisions of the 
Communications Order (see section 2.16.3), as well as restrictions on 
"cross-ownership",  the  main  principle  of  which  is  the  prohibition  on 
cross-holding by entities that have an affiliation with another material 
NIO38  as  stated  in  the  license,  and  restrictions  on  cross-holding  by 
entities with NIO licenses or general licenses in the same  segment of 
activity. 

b.  Bezeq provided the Director General of the Ministry of Communications 
with a bank guarantee in the total amount of NIS 15 million to ensure 
compliance with the terms of the license and to indemnify the State for 
any damage caused to it due to their violation by Bezeq. 

c.  The Director General of the Ministry of Communications is authorized 
to impose a financial sanction for violating the terms of the license (for 
this matter, see also Section 1.7.7.5). 

d.  Bezeq may invest during a calendar year up to 25% of its annual income 
in activities not intended for the provision of Bezeq services (when the 
income  of  subsidiaries  is  not  considered  Bezeq's  revenue  for  this 
purpose). 

e.  License  to  provide  services  in  the  Judea  and  Samaria  region  -  On 
October 26, 2020, Bezeq received a general license for the provision of 
landline interior Bezeq services in the Judea and Samaria area (before 
that,  the  provision  of  the  service  was  included  in  the  provision  of 
Bezeq's  general  license).  In  accordance  with  what  is  stated  in  the 
preamble to the license, this is a license in the form of a reference to 
Bezeq's  general  license  granted  to  it  by  the  competent  bodies  in  the 
Ministry of Communications, while making the necessary adjustments 
in  the  area,  and  it  is  nothing  but  an  existing  snapshot  in  the  field  of 
infrastructure that is under the responsibility and ownership of Bezeq. 
Accordingly, no material change is expected in Bezeq's conduct in Judea 
and Samaria in relation to the existing situation prior to the granting of 
the  license  (at  the  same  time,  it  should  be  noted  that  the  license  in 
principle allows Bezeq to streamline the service in the area through the 
use of technicians from the entire Group, subject to the approval of an 
appropriate  procedure  to  be  formulated  by  Bezeq  and  brought  for 
approval by the Communications Officer). 

f.  On  May  16,  2022,  Bezeq  received  a  public  appeal  published  by  the 
Ministry of Communications regarding the provision of communication 
services to the business segment, within the framework of which the 
Ministry calls on companies in the communication market that provide 
communication  services  to  the  medium-large  business  segment,  to 
detail their activities in the field and the barriers agaist expanding this 
activity.  This  is  in  order  to  promote  regulation  that  will  increase 
competition in the field. In accordance with what was said in the voice 

38   NIO with a market share of 25% or more.  

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of  the  reader,  the  market  of  medium-large  business  customers  is 
characterized by a significant advantage for size, and significant barriers 
to entry and expansion that limit even players who have been operating 
in it for many years. Also, Bezeq's market shares in the segment and the 
rate of change in them are an indication of a low level of competition in 
the segment, which affects the prices and the level of services received 
by businesses in Israel, and therefore, the Ministry is starting a process 
of examining the state of competition and the barriers in the segment, 
and  is  turning  to  receive  the  references  of  the  players.  On  June  20, 
2022, Bezeq submitted its response to the public appeal, according to 
which  the  field  of  communications  for  large  and  medium-sized 
businesses is a competitive market where there are no barriers to entry 
and expansion and no market failures, and in these circumstances no 
regulatory intervention is required. 

For the wholesale market and wholesale service portfolios see Section 
2.16.4. 

the  amendment  of  Bezeq’s 

Regarding 
the 
determination  of  advanced  network  deployment  obligations  -  see 
Section 2.16.5 

license  regarding 

2.16.3. 

The Communication Order 

Bezeq has been declared a provider of essential Bezeq services in accordance with the 
Communication Order. By virtue of this declaration, Bezeq is obligated to provide certain 
types of services and may not stop or reduce them, including basic telephone service, 
infrastructure  service,  transmission  service  and  data  communication  service,  including 
interconnectivity, and other services listed in the addendum to the Order. 

in  the  Communication  Order  (regarding  proposed 
Main  additional  provisions 
amendments  to  the  Communication  Order  regarding  the  control  of  the  Company,  see 
Section 1.1.4): 

2.16.3.1 

2.16.3.2 

2.16.3.3 

2.16.3.4 

2.16.3.5 

Restrictions  on  the  transfer  and  purchase  of  means  of  control  in  Bezeq, 
including  a  restriction  on  the  possession  of  means  of  control  of  a  certain 
type at a rate of 5% or more without the prior written approval of the Prime 
Minister and the Minister of Communications (“the Ministers"). 

The transfer or acquisition of control of Bezeq requires the approval of the 
Ministers ("Control Permit"). The Control Permit will determine a minimum 
holding  rate  in  each  of  Bezeq's  means  of  control  by  the  Control  Permit 
holder, with the transfer of shares or the issuance of shares by a company, 
as  a  result  of  which  the  controlling  shareholder's  holdings  fall  below  the 
minimum rate – is prohibited without the Minsiters’ prior approval, subject 
to permissible exceptions (including public offering under a prospectus or 
sale  or  private  allotment  to  institutional  investors)39.  Regarding  the 
amendment to the Communication Order regarding the control permit, see 
Section 1.1.4. 

Holdings  that  have  not  been  approved  as  aforesaid  will  be  considered 
"excess holdings". The Order stipulated that there would be no validity to 
the  exercise  of  a  right  by  virtue  of  excess  holdings,  and  also  stipulated 
provisions authorizing the Ministers and Bezeq to apply to the court for a 
forced sale of excess holdings. 

Bezeq was required to report to Ministers, upon request, on all information 
on matters related to the provision of an essential service.  

At least 75% of the members of Bezeq's Board of Directors will be citizens 
of  Israel  and  its  residents  with  a  security  classification  and  security 
suitability, as determined by the General Security Service. The Chairman of 
the Board of Directors, the external directors, the CEO of Bezeq and other 
Bezeq  officials  as  specified  in  the  Order  will  be  citizens  of  Israel  and  its 

39  

For the minimum holding rate in Bezeq Group's control permit, see Section 8 of Chapter D of this periodic report.. 

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2.16.3.6 

2.16.3.7 

2.16.3.8 

residents and have a security classification according to the classification of 
the position. 

"Israeliness" requirements for the controlling shareholder in Bezeq: in the 
case of an individual - he is an Israeli entity (as defined in the Order), in the 
case of a corporation - it is incorporated in Israel, its business center in Israel 
and an Israeli entity (as defined in the Order) holds at least 19% of any of 
the means of control in it, or holds at least 19% of the voting rights at the 
general  meeting  and  the  right  to  appoint  directors  in  the  controlling 
shareholder and it has the right to appoint at least one-fifth of the number 
of directors in Bezeq and Bezeq's subsidiaries, and no less than one director, 
in each them, to be appointed by it, provided that the rate of his holdings in 
Bezeq, both directly and indirectly, will not at any time be less than 3% of 
any type of means of control in Bezeq.  

On July 8, 2020, an amendment was published in the records to part of the 
media regulations that stipulate the requirement of Israeliness so that it was 
added  the  option  to  convert  the  Israeliness  requirement  into  a  provision 
under  Article  13  of  the  Communications  Law,  which  will  apply  to  the 
relevant licensee alternative provisions to the Israeliness requirement.  

The approval of the Ministers is required for the granting of rights in certain 
Bezeq assets (switches, cable network, transmission network and databases 
and information). In addition, the granting of rights by means of control of 
Bezeq's subsidiaries, including the allotment of shares in excess of 25% by 
the subsidiary, requires the approval of the ministers. 

Certain  Bezeq  operations  require  the  approval  of  the  Minister  of 
Communications, 
including  voluntary  dissolution,  compromise  or 
settlement  between  Bezeq  and  its  creditors,  change  or  reorganization  of 
Bezeq's structure, merger and splitting of Bezeq. 

2.16.4.  Wholesale market  

In recent years, Bezeq has been providing services under the "wholesale market" model, 
in  which  it  has  imposed  obligations  on  the  owners  of  the  lanlinde  interior  access 
infrastructure 
Israel  (Bezeq  and  Hot)  to  sell  wholesale  services  to  other 
communications operators.  

in 

The  regulatory  determinations  in  relation  to  the  wholesale  market  as  well  as  its 
implementation  and  development  during  the  reported  period  have  an  impact  on  a 
significant part of the Group’s activity.  

2.16.4.1 

Policy document 

Following  the  policy  document,  at  the  end  of  2014,  the  Ministry  of 
Communications  established  service  portfolios  for  the  various  services, 
which  determine  the  format  of  the  provision  of  services  by  the 
infrastructure owners. The maximum rates that Bezeq may charge for these 
services were set by the Minister of Communications with the consent of 
the Minister of Finance in the regulations for the use of that year. On June 
26, 2017, the rates for Hot’s wholesale services were announced. 

2.16.4.2 

BSA service  

Bezeq  began  providing  the  service  on  February  17,  2015.  This  service 
enables  infrastructure-less  service  providers  to  offer  their  customers  a 
unified Internet service which includes both an Internet connection service 
and  Bezeq's  infrastructure  service40.  The  service  is  provided  both  on  the 

40  It should be noted that in the first days of the service, the Ministry conducted a supervisory procedure at Bezeq that led to 
the  imposition  of  sanctions  in  the  amount  of  NIS  8.5  million  paid  by  Bezeq.  After  Bezeq's  Board  of  Directors  rejected  the 
applicant's motion to file a derivative claim in the matter against Bezeq's officers, and ruled that in the circumstances of the 
case, Bezeq does not have a good cause of action against officers and other officials who served during the relevant periods, 
and that conducting legal proceedings will not promote Bezeq's benefit. In February 2022, the applicant submitted a motion 
for approval of a derivative claim against Bezeq's officers (all but one are former executives) in the amount of the financial 
sanction plus interest and linkage differences. 

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Company's traditional network (copper) and on the fiber network. Since the 
launch of the service, hundreds of thousands of customers have moved to 
receive service through such service providers, in this regard, see Sections 
1.5.4.1 and- 2.1.3. 

The service portfolio, to which in February 2022 a "Fiber BSA service" 
chapter was also added, imposes on the owners of the infrastructure, 
including Bezeq, obligations of periodic publication in the automated 
interface (API) and on their website about the deployment of an advanced 
network (this obligation applies to the Company and IBC). In addition, the 
owners of the infrastructure, including in the incentive areas, must publish 
detailed statistical information in an internal interface between the 
operators, which refers to a wide range of parameters. On June 20, 2021, 
the Ministry added to the reporting obligations a detailed periodic 
information requirement regarding access to and connection to optical 
fibers, in accordance with uniform parameters and about the number of 
subscribers to the service over optical fibers divided into statistical areas. 
This obligation applies to providers who deploy fiber. 

BSA service rates over the copper network 

The usage regulations set the maximum rates for the service and they 
were updated between 2017 and 2022 in accordance with the demand 
forecast index according to formulas established by the Minister in his 
notices to the usage regulations. For the years 2017 and 2018, the update 
according to the demand forecast index was applied retroactively and also 
included a graduated offset mechanism. 

In the usage regulations, in an amendment dated February 15, 2022, it was 
established the duty of a deployer in the incentive area (whose license an 
or administrative order issued to an NIO established the obligation to 
deploy an advanced network according to Article 14d(f) of the law) to 
provide BSA service via fiber in the incentive areas. The maximum payment 
deployed in the area Timretz may demand from another licensed provider 
in favor of a managed broadband access service at a nationwide 
connection level identical to that which Bezeq may demand, and does not 
include installation and fault repair in the subscriber's home, for which a 
deployer in the incentive area may charge a reasonable rate to be 
determined and he will also be required to meet a margin reduction test. 

The update for the 2022 report year increased the weighted BSA rates on 
copper compared to the rate in 2021. The impact on the Company's 
revenues as a result is immaterial. On December 21, 2022, the Ministry of 
Communications announced that in 2023 the same methodology that was 
used in the past regarding the demand forecast indicators for updating 
Bezeq's BSA service rates on the copper network will be applied. This, as 
was explained in the hearing that preceded the decision, among other 
things because the Ministry of Communications is in the midst of work to 
determine updated payments for wholesale use in accordance with the 
regulations (for this matter, see Section 2.16.4.5). On December 26, 2022, 
a notice was published on updating the demand forecast indicators 
accordingly. 

Rates for the BSA service on fiber infrastructure ("Fiber BSA") 

In the usage regulations, the rates for the service were determined as 
maximum rates for an accessibility service and data transmission at an 
aggregate rate of up to 550 Mbps and above 550 Mbps and up to 1,100 
Mbps. The rates are updated once a year, on January 1 starting in 2021, in 
accordance with changes in the consumer price index. According to the 
recommendation of the professional staff at the Ministry, which was the 
basis for the decision regarding the rates, the aforementioned rates will be 
valid for a period of three years and will then be replaced by a non-
temporary rate. Bezeq is entitled to demand a reasonable payment for the 

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service of initial installation of internal wiring41 to the subscriber's 
premises. In accordance with the Telecommunications Law, internal wiring 
installed for the provision of Bezeq service on an advanced network will be 
owned by the person whose premises the internal wiring is intended to 
serve only. 

For the agreement for the provision of the non-residential right of use 
(IRU) service in the BSA fiber service (wholesale market) by the Company 
to Partner and the subsequent reduction of the prices of individual lines in 
the BSA fiber service, see Section 2.6.3. 

2.16.4.3 

Wholesale service - use of passive infrastructure 

The "Use of Physical Infrastructure" service portfolio came into force on the 
July 31, 2015 and accordingly allows Bezeq for infrastructure-less suppliers 
to  use  Bezeq's  available  physical 
infrastructure  for  the  passage  of 
communication cables, as well as to use available dark fiber from Bezeq's 
available  optical  cable,  Maximum  rates  for  this  in  the  regulations  of  use. 
Subsequently, the obligation to provide use of Bezeq's passive infrastructure 
(with  the  exception  of  dark  fiber  and  optical  wavelength  service)  was 
extended  in  relation  to  infrastructure  owners  -  IBC  and  Hot.  At  the  same 
time, NIO licensees were required to allow other NIO licensees to use their 
passive  infrastructure42,  and  then  a  service  portfolio  was  established  for 
"mutual use" of passive infrastructure, in which the obligation imposed in 
infrastructure 
the  original  service  portfolio  on  an  operator  using 
infrastructure  to  establish  a  passive  infrastructure  facility  near  Bezeq's 
passive infrastructure facility was abolished.  

The mutual service portfolio does not include provisions for the dark fiber 
rental service and optical wavelength service, which remain in the original 
service portfolio used only by holders of a unique general national interior 
operator license. 

Also,  in  accordance  with  the  decision  of  the  Minister  of  Communications 
dated February 2022, holders of special broadband infrastructure licenses 
were allowed to use Bezeq's passive infrastructure in the incentive areas. 

Expanding the possibility to make use of Bezeq's passive infrastructures as 
increase  the  extent  of  damage  caused  to  Bezeq 
mentioned  may 
infrastructures by operators and the difficulty of monitoring what is done to 
them.  On  the  other  hand,  use  of  Bezeq's  passive  infrastructure  by 
authorized providers will involve a payment to Bezeq (even if reduced, as 
described in this section below). 

For  the  determination  of  the  Competition  Authority  in  the  matter  of 
infrastructure and for the appeal by Bezeq, see Section 2.16.8.5, and for the 
motion for approval of a class action and two demands for the exercise of 
rights before filing a derivative claim in this matter, see Section 2.18.1(h). 

Service rates 

The usage rates for Bezeq's passive infrastructure and dark fiber are also set 
in the usage regulations. In accordance with the provision of Article 14 d(9) 
of the Communications Law, the Minister, in the regulations published on 
July 21, 2022, established a reduced rate for using the Company's passive 
infrastructure (including dark fiber) in the incentive areas, and in the area 
beyond  the  incentive  area43,  which  is  about  a  quarter  of  the  rate  in  the 

41  Internal cable is part of a Bezeq network that is installed on a person's premises and on shared premises and is intended to be 

used by that person's premises only. 

42  Except for the passive NIO infrastructure, which is held by the IEC and is required for its activities as a holder of an essential 

service provider license. 

43  An area that is not an incentive area and that is not one of the Company's deployment areas. The reduced payments for the 
services in these areas will come into effect after establishing a regulation regarding the identification of use in these areas. 

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Company's connection areas in the case of access service for infrastructure 
and over a third for dark fiber service. As indicated in the Minister's decision 
attached to the amendment of the regulations (together with an economic 
expert) as part of a new pricing process for all wholesale rates planned for 
2022,  among  other  things,  the  determination  of  the  abovementioend 
regulated  rates  will  also  be  examined.  It  was  also  determined  that  the 
reduced  rates  will  also  apply  in  the  deployment  areas  that  the  Company 
chose at a later stage, for a year. 

2.16.4.4 

Wholesale telephony service 

This service enables service providers who do not have the infrastructure to 
offer  their  customers  telephony  service  at  wholesale  rates  through  the 
Bezeq network. Until August 2018, a temporary arrangement was in effect 
which allowed Bezeq to provide the service in a resale format, i.e. - a format 
in which the service provider purchases a line and call minutes from Bezeq 
and receives a package of services (including technician services) from the 
Company.  This  is  in  accordance  with  the  decision  of  the  Minister  of 
Communications'  dated  November  14,  2014  regarding  the  provision  of  a 
wholesale telephony service in the format of the service file as of May 17, 
2015.  The  petition  included,  among  other  things,  allegations  of  lack  of 
applicability of the service in the format of the service portfolio and lack of 
authority. 

Starting from August 2018, Bezeq was obligated, according to the Ministry 
of Communications' announcement, to provide the service in a "wholesale" 
format,  i.e.,  a  service  format  in  which  the  service  is  provided  via  Bezeq's 
switch, but the call also passes through the service provider's switch, both 
as a discrete service and as an additional service to the BSA service. As of 
August  2018,  Bezeq  has  been  prepared  to  provide  resale  services  at 
wholesale rates (excluding technician services) - although in this service the 
call  does  not  pass  through  the  service  provider  switch,  and  from  the 
beginning  of  2019  Bezeq  is  prepared  to  provide  a  wholesale  telephony 
service solution through the service provider switch, and is based on both 
Bezeq's previous subscription switch and an additional component external 
to  the  switch,  and  from  2020  on  the  new  switch  that  complies  with  the 
requirements of the Ministry of Communications for the service format (for 
more details see also Sections 2.1.8, 2.7.2 and 2.16.4). As it became clear 
after  discussions  that  took  place,  among  other  places,  in  the  Ministry  of 
Communications, the service providers were not prepared to act according 
to the format of the service portfolio. On May 27, 2020, Bezeq received a 
letter  from  the  Ministry  of  Communications  according  to  which  Bezeq's 
position was accepted regarding the interpretation of the service package, 
and  determining  that  the  services  accompanying  the  telephony  service 
according  to  the  service  package  will  be  provided  through  the  service 
provider’s  switch,  and  the  Company  will  not  be  obligated  to  offer  the 
accompanying services through the switch it operates  (except in the case 
that there is no possibility to provide them through the service provider's 
switch.44 

The wholesale telephony service with all the features described above had 
no actual demand, and there were no customers, except for a few and for 
tests. 

2.16.4.5 

Wholesale market services pricing procedure 

On September 6, 2022, Bezeq received a letter from the Director General of 
the Ministry of Communications, which includes a notice of the launch of a 
pricing process for wholesale market services - an update and a request for 
information (“the Notice"). The notice was accompanied by a request for 

44  In  the  Ministry's  letter,  it  was  stated  that  the  Ministry's  decision  does  not  express  a  position  regarding  the  Company's 
compliance with the provisions of the service file regarding the telephony service, and it does not prevent the Ministry from 
taking regulatory and enforcement procedures on this issue. 

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data  from  Axon  Partners  Group,  which  the  Ministry  chose  to  provide 
consulting  services  for  assistance  in  building  a  cost  model  from  which 
updated rates for the wholesale market will be derived. According to the 
Notice, the work process will progress according to the following steps: (1) 
Gathering  information  from  licensees;  (2)  Building  the  economic  model 
based on a pricing methodology, formulating an up-to-date list of wholesale 
services,  and  deriving  maximum  payments  for  wholesale  services  on  the 
basis of the model that will be published for the hearing (the hearing on the 
cost model is expected, according to the notice, to be published in the first 
quarter of 2023); (3) Decision at the hearing and amendment to the usage 
regulations. Bezeq transmits data and information in accordance with the 
requirement,  and  at  this  stage  it  is  unable  to  evaluate  the  results  of  the 
hearing The future and its consequences. 

2.16.5. 

Advanced network - fiber 

2.16.5.1 

On  December  24,  2020,  an  amendment  to  the  Communications  Law  was 
published  that  regulates  the  deployment  of  an  "advanced  network".  In 
accordance with the amendment to the law, Bezeq may select, from all of 
Israel,  the  statistical  areas45  in  which  it  wishes  to  deploy  an  advanced 
network  (not  based  on  its  metallic  network)  and  provide  Internet  access 
service thereon. 

The Company does not have to deploy the advanced network throughout 
all of Israel, but in all the statistical areas it has chosen, and this until no later 
than March 14, 2027 (which is six years from the deadline set in the Bezeq 
license). 

After  the  obligation  has  been  established  in  the  Bezeq  license  to  provide 
service in its choice areas (the service areas) as stated, the Company may 
deploy an advanced network that is not based on its metallic access network 
and provide Bezeq service over it even not to the general public throughout 
Israel, and landline Bezeq service provider other than the Company (such as 
Hot) may deploy an advanced network (which is not based on his metallic 
access network) and provide Bezeq service over it, even not to the general 
public throughout Israel, and not even at least in a service area. The Minister 
may  set  conditions  for  the  deployment  and  provision  of  the  service  with 
licenses or a general permit. The Minister may permit Bezeq licenses or the 
license of another stationary Bezeq service provider to provide service over 
their  metallic  access  network  that  has  been  upgraded  to  an  advanced 
network, not to the general public throughout IIsrael and not at least in a 
service  area,  if  he  sees  that  this  contributes  to  competition  and  level  of 
service. 

In the amendment to the law, incentives were established for deployment 
in statistical areas that are not from the deployment areas chosen by the 
Company  ("Incentive  Areas"),  the  main  ones  of  which  are  a  reduced 
payment for the use of the Company's passive infrastructure in the Incentive 
Areas,  the  opening  of  an  incentive  fund,  managed  by  the  Accountant 
General  at  the  Ministry  of  Finance  in  order  to  encourage  deployment,  to 
which mandatory annual payments will be deposited by the liable entities, 
including Bezeq, at a rate of 0.5% of the liable entities' annual revenue. The 
Minister of Communications with the consent of the Minister of Finance and 
the approval of the Economic Committee may change this rate. 

The  allocation  of  the  incentive  funds  will  be  through  tenders.  In  the 
conditions of the tenders, the tenders committee may establish threshold 
conditions for participating in the tender, including a condition according to 
which a bidder must have a license. 

45  "Statistical area" - a continuous area unit created from a geographic-statistical division, as ordered by the Minister according 

to Article 14f of the Communications Law; the division into statistical areas is based on the CBS. 

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The only benchmark for selecting tender winners will be the ratio between 
the  number  of  households  in  the  Incentive  Areas  in  the  bids  of  the 
contestants and between the amounts from the incentive fund that will be 
allocated as part of the tenders. No weight will be given to the geographical 
location  of  the  Incentive  Areas  in  the  bids  of  the  contestants  or  to  the 
characteristics of the households in the Incentive Areas. 

In  the  license  of  a  winner  of  a  tender  or  by  administrative  order,  an 
obligation will be established to deploy an advanced network in a service 
area that includes the Incentive Areas which it won, including an obligation 
to provide an internet access service over the network to anyone in the area 
license.  Regarding  the 
within  the  time  periods  specified 
determination of such an obligation in the Judea and Samaria region, the 
provisions  of  the  law  in  this  matter  applicable  in  the  Judea  and  Samaria 
region will apply. 

in  the 

Bezeq and a corporation related to it are prohibited from participating in 
the  tender  for  the  allocation  of  the  incentive  funds,  or  deploying  an 
advanced  network  and  providing  services  over  it  in  the  Incentive  Areas, 
except after five years have passed from the date of the establishment of 
the deployment obligation in the license of the winner of the tender. 

The  Minister  may  permit  Bezeq,  at  its  request,  to  deploy  an  advanced 
network and provide services on top of it in Incentive Areas for which the 
incentive funds have not yet been allocated, provided that the proportion 
of  households  in  the  areas  to  be  included  in  their  application  does  not 
exceed 10% of the households in the areas included in the statistical areas 
chosen by the Company. The Company made use of this option and selected 
151 additional statistical areas. For details, see Section 2.16.5.2. 

The above limitations do not detract from the ability of the Company or a 
related corporation to deploy an advanced network in the Timruts area in 
order to provide Bezeq service to a business subscriber, or to provide service 
to a business subscriber on an advanced network that has been deployed. 

The amended law also stipulates that the ownership of the internal wiring 
in an advanced network will belong to the subscriber whose premises are 
used by the routing only. An authorized supplier may demand a reasonable 
payment for its installation. 

On June 15, 2021, Bezeq's license was amended and, among other things, 
an appendix was added to it that includes the list of statistical areas selected 
by  Bezeq,  which  cover  about  76%  of  Israel’s  population  and,  in  the 
Company's estimation, about 80% of households. Milestones for completing 
the  deployment  of  the  advanced  network  were  also  established  in  the 
license  as  follows:  Completion  of  deployment  to  buildings  where  the 
cumulative  proportion  of  households  is  60%  of  the  total  number  of 
households in the service area (all statistical areas selected by the Company) 
- no later than the end of two years from the determining date (March 14, 
2021)46; 80% - no later than three years from the determining date; 95% - 
no later than the end of five years from the determining date; Completion 
of layout for all the buildings in the service area no later than the end of six 
years from the determining date. 

On  October  3,  2022,  the  Minister  of  Communications  approved  Bezeq's 
request  to  allow  it  to  deploy  an  advanced  network  and  provide  Bezeq 
service  over  in  statistical  areas  additional  to  the  areas  specified  in  the 
Company's license and to amend the Company's license accordingly. This is 
a deployment in 151 additional areas, including about 60,000 households. 
As detailed in the decision of the Minister of Communications, the rate of 
households  in  the  Company's  deployment  areas  is  82.5%  and  this  is  an 

2.16.5.2 

46 The date when the Company began to provide a fee-based Internet access service on the advanced network . 

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2.16.5.3 

2.16.5.4 

addition of about 2.3% to this rate, so that the updated rate of households 
in the Company's deployment areas will be about 84.7%. 

On October 13, 2021, the Ministry of Communications published a tender 
"for  extending  a  license  to  deploy  an  advanced  network  and  to  receive 
financial  grants  to  encourage  the  deployment  of  advanced  landline 
networks  in  areas  lacking  economic  viability",  i.e.  in  the  Incentive  Areas. 
Further  to  this,  on  March  7,  2022,  an  announcement  by  the  Ministry  of 
Communications  was  published  on  the  website  of  the  Ministry,  which 
includes the names of the areas in which telecommunications companies 
that  won  a  tender  for  an  advanced  network  based  on  optical  fibers  will 
deploy. According to the announcement, the winning areas make up about 
60% of the Incentive Areas, and the companies that win the tender will be 
given a period of one year and three months from the day their license is 
amended to complete the deployment obligations and provide the services 
in  these  areas.  On  February  1,  2023,  the  Ministry  of 
to  anyone 
Communications published a notice according to which the Inter-ministerial 
Tenders  Committee  published  the  results  of  the  second  tender  for  the 
deployment  of  the  remaining  Incentive  Areas  (published  on  October  26, 
2022) in an outline that results in an obligation to fully deploy optical fibers. 
It should be noted that the provision of service by winners in the incentive 
areas  may  exacerbate  the  competition  against  the  Company's  services 
provided in these areas over the traditional (copper) infrastructure. 

In  providing  Internet  access  services  provided  via  fiber  optics  to  the 
residential  building  (Fiber  To  The  Home  -  FTTH)  to  private  subscribers, 
providers  are  not  allowed  to  offer  subscribers  offers  under  different 
conditions or at a different rate, depending on the proposed infrastructure 
(self or wholesale). The type of infrastructure offered will be a reasonable 
characteristic  that  justifies  distinguishing  one  group  of  subscribers  from 
another  in  relation  to  Internet  access  services  that  are  not  provided  via 
optical fibers to the residential building. The type of infrastructure (own or 
wholesale)  will  not  be  used  as  a  feature  that  allows  different  rates  to  be 
offered when it comes to internet service over fiber. 

2.16.5.5 

Fiber deployment in residential buildings 

Regarding the deployment of fibers in new residential buildings, on June 8, 
2021, an amendment to the Panning and Constuction Regulations (Permit 
Application, Conditions and Fees) was published regarding the obligation to 
lay optical fibers in new buildings. In addition, within the framework of the 
Economic Plan Law (Amendments to Legislation for the Implementation of 
the  Economic  Policy  for  the  Budget  Years  2021  and  2022)  (5781-2021) 
approved on November 4, 2021 (the "Arrangements Law"), the provisions 
of the Communications Law regarding the conditions for laying an advanced 
network in a shared residential building in the absence of the consent of the 
majority of the apartment owners were also amended. 

2.16.6. 

Powers in respect of real estate 

Pursuant to the provisions of Article  4 (f) of the Communications Law, the Minister of 
Communications  granted  Bezeq  real  estate-related  powers  in  accordance  with  the 
provisions of Chapter F of the Law. 

The law distinguishes between state-owned land, the Development Authority, the Jewish 
National Fund, a local authority or a corporation established by law and held by one of 
them, as well as a road ("public land") and other land ("private land"). With regard to 
public  land,  Bezeq,  and  any  person  authorized  thereby,  may  enter  for  the  purpose  of 
performing  works  for  laying  and  maintaining  a  network  and  providing  Bezeq  services, 
provided that the laying of the network was done in accordance with the provisions of 
the Planning and Construction Law. The amendment to the Communications Law and the 
Planning and Construction Law abolished the obligation to obtain approval from the local 
planning and construction committee, so that certain actions are not subject to a building 
permit if they are carried out by a licensee who has been granted powers under Chapter 
F of the Communications Law if they are made according to an approved plan.  

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Laying ofnetwork on private land will be done in accordance with the provisions of the 
Planning and Construction Law, and requires the consent of the landowner, the tenant 
for generations or the protected tenant, as the case may be. 

Pursuant  to  the  provisions  of  the  Bezeq  Regulations  (Installation,  Operation  and 
Maintenance), 5745-1985, if Bezeq believes that the provision of a Bezeq service to the 
applicant requires the installation of a Bezeq facility, in the applicant's premises (or in 
common premises), Bezeq may require the applicant as a precondition for providing the 
requested  Bezeq  service  to  assign  a  suitable  place  to  Bezeq  in  the  premises  for  the 
installation  of  the  facility,  for  Bezeq  use  only,  and  it  may  provide  service  through  the 
facility to other applicants as well. 

According  to  the  Planning  and  Construction  Regulations  (Application  for  a  Permit,  its 
Terms and Fees), 5730-1970, an applicant for a permit for the construction of a residential 
building,  it  is  mandatory  to  install  infrastructure  for  telephone,  radio,  television  and 
Internet services so that the customer can choose a provider of his choice. At the same 
time, Bezeq’s license (as well as the Hot Telecom and DBS licenses) was amended so that 
as long as Bezeq uses the internal threading (the part of the access network, installed in 
a person's premises and common premises, and intended to serve that person's premises 
only), it is obligated to provide a maintenance service for the internal threading installed 
by said person, without giving it any property rights in the internal threading. Regarding 
the draft amendment of these regulations for the purpose of imposing an obligation on 
the laying of infrastructure in favor of fiber, see Section 2.16.5. 

2.16.7. 

Immunities and limitations of liability 

The  Minister  of  Communications  granted  Bezeq  certain  immunities  from  liability  for 
damages, listed in Chapter I of the Communications Law, in accordance with his authority 
to grant immunities to a general licensee. 

In addition, Article 13 of the Communications Law stipulates restrictions on criminal and 
civil  liability  in  fact  made  in  the  framework  of  the  fulfillment  of  a  provision  for  the 
provision of services to the security forces by virtue of the article. 

2.16.8. 

Regulations and rules under the Communications Law 

As of the date of publication of the periodic report, Bezeq is subject to regulations in two 
other  main  areas:  (1)  cessation,  delay  or  limitation  of  Bezeq  operations  and  Bezeq 
services; (2) Installation, operation and maintenance. 

2.16.9. 

Laws of Economic Competition 

2.16.9.1 

The  Competition  Commissioner  (in  this  section  -  "the  Commissioner") 
declared Bezeq as having a monopoly in these areas:  

a.  Basic  telephone  services,  provision  of  communication  infrastructure 
services,  and  transmission  and  transmission  services  of  public 
broadcasts47. 

b.  Providing fast-access services through subscriber access network48. 

c.  Providing  fast  access  services  to  Internet  providers  through  a  central 

Bezeq public network. 

The  declaration  by  the  Commissioner  of  Bezeq  as  having  a  monopoly 
constitutes prima facie evidence to all that is determined in it, in any legal 
proceeding, including in criminal proceedings.  

2.16.9.2 

Bezeq  has  adopted  an 
internal  enforcement  procedure  with  rules, 
guidelines  and  an  internal  reporting  and  control  system,  the  purpose  of 
which is to ensure that Bezeq and its employees' activities are carried out in 
accordance with the provisions of the Economic Competition Law. 

2.16.9.3 

In  accordance  with  the  conditions  set  forth  in  the  approval  of  the 
Competition Authority dated March 26, 2014 for the merger (as defined in 

47   Announcement dated 30.7.1995. 
48   On November 10, 2004, the Commissioner split his announcement of December 11, 2000 in the field of Internet access 

infrastructure into two separate Announcements (Announcements B and C). 

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the  Economic  Competition  Law)  between  Bezeq  and  DBS,  the  following 
restrictions apply in relation to Bezeq and DBS: 

a.  Bezeq and any person related to it (in this section - "Bezeq") will not 
impose  any  restriction  on  the  consumption  of  landline  Internet 
infrastructure  services  resulting  from  the  customer's  cumulative 
browsing  volume,  nor  will  they  cause  a  restriction  or  block  of  the 
customer's ability to use any service or application the Internet. 

b.  Bezeq  will  deduct  from  the  payments  of  an  Internet  provider  for  its 
connection  to  the  Bezeq  network  sums  for  the  provision  of  multi-
channel television services. 

c.  Bezeq  will  sell  and  provide  Internet  infrastructure  services  and 
television  services  on  equal  terms  to  all  Bezeq  customers  (sale  of 
Internet infrastructure services as part of a basket of services will not in 
itself be considered for sale on unequal terms). 

d.  Bezeq and DBS will cancel all exclusivity arrangements regarding non-
original  productions  and  will  not  be  a  party  to  such  exclusivity 
arrangements (except in relation to a third party who has a license to 
broadcast at the time of the decision). In addition, for two years from 
the date of approval of the merger (which have since passed), Bezeq 
will  not  prevent  any  party  (except  those  who  have  a  broadcasting 
license  at  the  time  of  the  decision)  from  acquiring  rights  in  original 
productions (does not apply to new productions). 

For the full text of the decision of the Competition Authority, see Bezeq's 
immediate report dated March 26, 2014. 

On  April  12,  2021,  the  Competition  Authority  published  a  decision  of  the 
Competition Commissioner regarding the amendment of the terms of the 
merger. According to the amendment, the Commissioner decided to allow 
Bezeq's  subsidiaries:  Pelephone,  Bezeq  International  and  DBS  (and  not 
Bezeq), to sell communication packages that include Internet infrastructure, 
Internet  provider  and  TV  services  without  the  obligation  to  sell  the  TV 
services, at a separate price that will be uniform for package buyers and for 
those who are  not package buyers. In addition, the Commissioner decided 
to allow greater flexibility with regard to the purchase of foreign content, so 
that the condition stipulating the cancellation of exclusivity arrangements 
between  Bezeq  and  DBS  regarding  non-original  TV  content,  and  the 
prohibition on being parties to such exclusivity arrangements will not apply 
to foreign content purchase, excluding sports content, and thus allow for 
greater flexibility when it comes to purchasing foreign content. 

As part of the approval of the merger of Bezeq and Pelephone dated August 
26,  2004  (as  amended  below),  restrictive  conditions  were  imposed,  the 
main of which is the prohibition of discrimination in favor of Pelephone in 
the supply of a product in which Bezeq is a  monopoly, prohibition of the 
conditioning of the supply of certain products by one of the companies with 
the  purchase  of  products  or  services  from  the  other  and  restrictions  on 
certain joint activities. 

On March 7, 2018, Bezeq received a notice from the Competition Authority, 
according  to  which  the  Competition  Commissioner 
is  considering 
determining in accordance with its authority under Article 43 (a) (5) of the 
Economic  Competition  Law  that  Bezeq  abused  its  position  in  violation  of 
Article 29A (a) and Article 29A (b) ( 3) of the Economic Competition Law, and 
to  impose  financial  sanctions  on  Bezeq  and  the  former  CEO  of  Bezeq  for 
alleged  violation  of  the  provisions  of  Article  29  of  the  law  and  of  the 
the 
provisions  of 
announcement, the evidence in its possession indicates that Bezeq allegedly 
used  the  market  power  it  has  as  a  result  of  its  control  of  the  passive 
infrastructure  and  has  placed  barriers  before  new  players  seeking  to  use 
Bezeq's passive infrastructure that will be used to compete with Bezeq in 
providing communication services to consumers, in a way that could have 

the  aforementioned 

sections.  According 

to 

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deterred  and  even  prevented  them  from  setting  up  an  self-landline 
communications network or at least delayed them and limited the scope of 
the network. According to the notice, Bezeq's actions raise concerns about 
harm  to  the  final  consumer.  The  violations  alleged  against  Bezeq  are  the 
blocking of access to private areas and placing a demand for fiber cutting. 

received  a  determination 

Following a hearing held in the matter, in which Bezeq and the former CEO 
of  Bezeq  presented  arguments  and  evidence  that  there  was  no  defect  in 
their moves and that they did not violate the Economic Competition Law, 
on  September  4,  2019,  Bezeq 
("the 
Determination") from the Competition Commissioner regarding the abuse 
of  Bezeq's  position  in  violation  of  the  provisions  of  Article  29A  of  the 
Economic  Competition  Law  and  the  demand  for  payment  under  the 
provisions of Article 50H of the law of NIS 30 million from Bezeq and NIS 0.5 
million from the former Bezeq CEO. On May 7, 2020, Bezeq filed an appeal 
on  the  Determination.  The  Competition  Commissioner  submitted  a 
response  to  the  appeal,  which  was  submitted  to  Bezeq  on  December  23, 
2020. Bezeq's response to the Commissioner's response was submitted on 
February 1, 2022. Regarding the motion for approval of a class action and 
requirements for exhaustion of rights before filing a derivative claim, further 
to this determination, see Section 2.18.1h. 

2.16.10. 

Telegraph Order 

The government is addressing the existing shortage of radio frequencies for 
public use in Israel (due in part to the allocation of many frequencies for 
security  uses),  by  limiting  the  number  of  licenses  that  can  be  used  for 
frequencies, and by providing incentives for the efficient use of frequencies.  

The  Telegraph  Order  regulates  the  use  of  the  electromagnetic  spectrum, 
and applies, among other things, to Bezeq's use of radio frequencies, as part 
of its infrastructure. Establishment and operation of a system that uses radio 
frequencies is subject, under the Telegraph Order, to licensing, and the use 
of  radio  frequencies  is  subject  to  the  Commission  and  allocation  of  an 
appropriate frequency. According to the Telegraph Order, license fees and 
fees are imposed for the Frequencies Committee and their allocation. 

2.16.11. 

Establishment of communication facilities 

The  National  Communications  Outline  Plans,  National  Outline  Plan  36 
(within the Green Line) and National Outline Plan 56 (in the Territories) are 
intended  to  regulate  the  deployment  and  manner  of  construction  of 
communications  facilities  in  such  a  way  as  to  enable  transmission  and 
reception  of  radio,  television  and  wireless  communications,  while 
preventing radiation and minimizing environmental and landscape damage, 
and with a view to simplifying and streamlining the construction processes 
of the facilities. 

Bezeq has established and is setting up transmission facilities and wireless 
communication facilities for the transmission services of its customers, and 
also  uses  wireless  communication  facilities  mainly  for  the  purpose  of 
providing  services  to  areas  that  are  not  connected  to  the  fixed 
communication infrastructure (remote areas or new localities). 

2.16.11.1 

National Outline Plan 36 - Communication facilities within the Green Line 

NOP  36  was  divided  into  two  parts  according  to  the  classification  of  the 
transmission facilities, made in accordance with the technical variables and 
physical  dimensions  of  the  facilities,  which  ultimately  affect  the 
determination of safety ranges for protection against radiation effects and 
the degree of prominence of the facilities in the landscape.  Part A of the 
NPA,  which  has  been  approved  by  the  Government  and  is  in  force,  deals 
with  guidelines  for  the  construction  of  small  and  micro  broadcasting 
facilities, while Part B, which was not approved by the Government and is 
not in force, deals with guidelines for the construction of large broadcasting 
facilities.  As  a  result,  there  are  currently  no  special  guidelines  regarding 

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Bezeq's large transmission facilities, most of which were established by the 
state before Bezeq was established. 

Bezeq  has  issued  building  permits  for  most  of  the  small  transmission 
facilities in accordance with National Outline Plan 36A. From time to time, 
there  is  a  need  to  add  transmission  facilities  that  require  the  issuance  of 
building  permits  in  accordance  with  National  Outline  Plan  36A.  Bezeq 
believes  that  it  is  not  obliged  to  obtain  building  permits  for  miniature 
broadcasting facilities, due to the exemption granted in this matter in the 
Planning and Construction Law and in the Communications Law with respect 
to  "wireless  access  facilities"  (which  include  the  miniature  broadcasting 
facilities). 

2.16.11.2 

National Outline Plan 56 - Communication facilities in the Territories 

National Outline Plan 56 regulates the manner of construction and licensing 
of communications facilities in the Territories. The plan includes transitional 
provisions to facilities established in the permit and to existing facilities. 

The plan includes a requirement to obtain a communications license and to 
obtain the consent of the Commissioner of Government Property in the Civil 
Administration.  

Bezeq has regulated the licensing of vast majority of the facilities located in 
the Territories and which are owned by Bezeq (there are a few additional 
sites that have not been regulated). In addition, Bezeq also arranged with 
the Communications Officer in the Civil Administration the licensing of the 
facilities  located  in  the  premises  of  the  customer  in  accordance  with  the 
requirement that the Communications Officer sent to Bezeq in November 
2016. 

2.16.11.3 

Radiation permits 

Regarding radiation permits for communication and transmission facilities, 
see Section 0. 

Exemption from the permit to add antennas to legally existing transmission 
facilities 

Addition of an antenna to a legally existing transmission facility is exempt 
from obtaining a permit subject to the existence of cumulative conditions 
and  exceptions  specified  in  the  Planning  and  Construction  Regulations 
(exemption from the permit). 

2.16.12.  Consumer legislation 

Regarding consumer legislation applicable to Bezeq, see Section 1.7.7.4. 

2.17.  Material agreements 

The following is a concise description of material agreements, not in the ordinary course of Bezeq's 
business, that were signed during the period of the periodic report and / or that were in force during 
the said period:  

2.17.1. 

The trust deeds in respect of debentures (Series 9, 10, 11, 12, 13, 14) issued by Bezeq. 

For  this  matter,  see  details  in  Note  13  to  the  2021  statements  and  in  Section  4  of  the  Board  of 

Directors' Report. 

2.17.2. 

Real estate 

2.17.2.1 

Agreement  on  the  transfer  of  assets  between  Bezeq  and  the  state  dated 
January 31, 1984 

An agreement between the state and Bezeq, according to which Bezeq was 
granted  the  State’s  rights 
in  assets  available  to  the  Ministry  of 
Communications for the provision of Bezeq services, and Bezeq replaced the 
state  with  respect  to  the  rights  in  the  said  assets  and  regarding  the 
obligations and duties relating to those rights on the eve of the agreement. 

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In  addition,  according  to  the  said  agreement,  Bezeq  was  transferred  the 
rights, powers, obligations and duties of the State under the agreements, as 
well as the agreements and transactions that were valid in the field of Bezeq 
services on the eve of the beginning of the agreement. 

2.17.2.2 

Settlement agreement dated May 15, 2003 between Bezeq and the State 
and the Israel Land Administration regarding the rights relating to the land. 
See section 2.7.4.3. 

2.17.2.3 

Agreement between Bezeq and the Postal Authority (now the Israel Postal 
Company) dated June 30, 2004  

An agreement between Bezeq and the Postal Authority for the definition 
and regulation of Bezeq and the Postal Authority in their joint assets. The 
agreement specified the common assets and defined the share of each party 
in them. It is stipulated that each of the parties will have exclusive rights in 
part, except in the matter of rights in common property, building rights or 
rights in respect of which it is expressly stated otherwise. The agreement 
stipulates, among other things, a mechanism of the right of refusal if a party 
wishes to make a sale transaction and a right of way in the matter of a lease 
transaction.  With  respect  to  a  number  of  additional  assets  it  has  been 
determined that the sole rights holder in them, in its entirety, will be one 
determined party. 

2.17.3. 

Labor agreements 

2.17.3.1 

Special collective agreement from December 2006 

For this agreement and amendments thereto, see Section 2.9.4. 

2.17.3.2 

Early retirement agreements. 

On  April  24,  2014,  Bezeq  entered  into  an  agreement  with  Menora 
Mivtachim  Insurance  Ltd.  ("Menora")  to  regulate  pension  payments  for 
early retirement of Bezeq employees, as well as the differences in old-age 
and  survivors'  pension  payments,  to  employees  who  retire  from  Bezeq 
under  a  special  collective  agreement  for  retirement  which  was  signed 
between  Bezeq,  the  employees’  representation  and  the  Histadrut  on 
February 12, 2014. The insurance policy was approved by the Supervisor of 
Insurance and it entered into force on March 31, 2016. Accordingly, as of 
May 1, 2016, Menora is issuing policies to retiring employees, and benefit 
payments and related payments are paid on the basis of these policies. The 
term of the agreement (after being extended three times) is until the end of 
2024. 

2.17.3.3 

IRU agreement between Bezeq and the partner 

For the agreement for the provision of the indefeasible right-of-use (IRU) 
service in the BSA fiber service (wholesale market) by Bezeq to Partner, see 
Section 2.6.3. 

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2.18. 

Legal Proceedings 

Bezeq's  reporting  policy  is  based  on  qualitative  considerations  and  quantitative  considerations. 
Bezeq decided that the quantitative materiality threshold in relation to events affecting the net profit 
would  be  an  effect  of  about  5%  and  more  on  Bezeq's  average  adjusted  net  profit  (as  defined  in 
Section 1.6) according to Bezeq's consolidated annual statements from the past three years (2020-
2022). Therefore, in the absence of relevant qualitative considerations, this section describes legal 
proceedings to the extent of NIS 75 million or more49, before tax, as well as legal proceedings in 
which the amount claimed is not specified in the statement of claim, unless it is a claim that does not 
reach the aforementioned quantitative threshold (and all - unless Bezeq assesses additional aspects 
or  consequences  of  the  procedure  beyond  its  financial  scope)50.  With  regard  to  class  actions, 
attention is drawn to the fact that the filing of class actions in Israel does not involve the payment of 
a fee  as a derivative of the amount of the claim. Thus, the claim amounts in such claims may be 
significantly higher than the actual exposure volume in respect of those claims. 

2.18.1. 

Procedures are pending 

Date 

Sides 

Court 

a. 

  January 
2015 

Shareholder 
vs. Bezeq and 
former Bezeq 
executives 

District 
(Tel Aviv 
- 
Economic
s 
Departm
ent) 

Type of 
procedure 

Motion for 
approval of 
a class 
action 

Claim 
amount 
(NIS 
millions) 
687 

Details 

Claim for compensation of shareholders for losses alleged to have been 
caused by "Bezeq's failure to report to the Tel Aviv Stock Exchange and 
concealment of material information from the investing public" regarding 
two  significant  and  material  moves:  "Reduction  of  reciprocal  link  fees" 
and "Wholesale market reform". 
On August 27, 2018, the decision of the Economic Department of the Tel 
Aviv  District  Court  was  approved,  approving  the  claim  as  a  class  action 
("the Approval Decision"). 
On  October  28,  2018,  Bezeq  and  the  defendants  submitted  to  the 
Economic  Department  of  the  Tel  Aviv  District  Court  a  request  for  a 
reconsideration  of  the  approval  decision  in  which  the  Court  was 
requested to revoke the approval decision and reject the application for 
approval of a class action.  
On  December  1,  2019,  a  verdict  was  given  at  a  rehearing  held  at  the 
Company's request regarding the decision to approve the claim as a class 
action, and it was determined as follows: 
1.  In the matter of reducing the interconnectivity fee - the Court granted 
the  motion  as  far  as  claims  concerning  reports  of  reduction  of  the 
interconnectivity  fee  were  concerned,  after  concluding  that  the 
plaintiff  had not even ostensibly proved the existence of damage in 
respect of the reduction of the interconnect fee, and therefore there 
was no need to approve the class action on this ground. 

2.  In  the  matter  of  wholesale  market  reform  -  the  Court  denied  the 
motion  in  relation  to  the  defendants'  claims  regarding  the  reports 
about  the  wholesale  market  reform.  In  parallel,  it  reduced  the 
definition of the class of plaintiffs in relation to this cause. 

On  July  12,  2020,  an  amended  statement  of  claim  was  filed,  including 
corrections, in accordance with the judgment in the rehearing. As part of 
it,  the  total  amount  of  the  claim  was  also  revised  to  a  total  of  NIS  687 
million.  On  November  14,  2022,  following  the  mediation  process 
conducted in the case, the parties submitted for the Court's approval a 
settlement  agreement  under  which  the  plaintiffs  will  be  paid  by  the 
officers' insurance company and at no cost to Bezeq and the defendant 
officers, a total amount of NIS 75 million (including attorney's fees). On 
February 8, 2023, the Court issued a judgment approving the settlement 
agreement. In view of the provisions of accounting standards, a provision 
in the amount of the settlement amount was recorded in the Company's 
financial statements for the first quarter of 2022 (during the negotiations 
for  a  settlement  in  the  case),    and  on  the  other  hand,  in  view  of  the 
existence of full insurance coverage, an indemnity asset in the amount of 

49  

In order to examine the compliance of the claim amounts with the said threshold, the amounts were linked to the consumer 
price index. The amounts specified in this section are the original amounts (excluding linkage differences). With regard to 
the aforesaid threshold, in the case of similar proceedings against several companies in the Group, the amount of the claim 
may be examined cumulatively in respect of all the proceedings together. It is also clarified that if certain proceedings largely 
concern common legal or factual issues, or it is known that such issues are examined or considered together, then for the 
purpose  of  meeting  the  quantitative  materiality  threshold  as  stated  in  these  sections,  the  amount  involved  in  all  those 
proceedings together.  

50  In view of the update of the materiality threshold, as of the date of approval of this periodic report, no legal proceedings are 
described in the periodic report for 2020 that do not reach the current materiality threshold as follows: Section 2.18.1 (12) 
(section number in the Periodic Report for 2020). 

79 

 
 
 
 
 
Claim 
amount 
(NIS 
millions) 

502 

556 in the 
motion 
from 
November 
2015  
and 258 in 
the motion 
from March 
2018 

Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

Date 

Sides 

Court 

Type of 
procedure 

Details 

b. 

  March 
2015 

Shareholder 
vs. Bezeq 
and former 
Bezeq 
executives 

District 
(Tel Aviv 
- 
Economic
s 
Departm
ent) 

Motion for 
approval of 
a claim as a 
derivative 
claim 
together 
with a 
derivative 
claim 
statement 

c. 

November 
2015 
And March 
2018 

Customer 
against 
Bezeq 

Central 
District 
Court 

Two claims 
together 
with 
motions 
for 
approval as 
class 
actions 

the provision was recognized in the same report, with no effect on the 
Company's results. With the issuance of the aforementioned judgment, 
the recording of the provision and the aforementioned indemnity asset 
will be canceled in the first quarter 2023 statements. 

Motion  against  Bezeq,  as  well  as  against  Mr.  Shaul  Elovich,  former 
controlling  shareholder  and  chairman  of  the  board  of  Bezeq  against 
directors  of  Bezeq  at  the  relevant  times  who  voted  in  favor  of  Bezeq's 
engagement  in  the  transaction  that  is  the  subject  of  the  motion  as 
detailed below (“the Respondents"). 
The matter of the application, according to what is alleged in it, IS Bezeq's 
decision,  through  the  respondents,  to  enter  into  a  transaction  for  the 
purchase  of  full  holdings  and  shareholder  loans  of  Eurocom  DBS  (a 
company under the indirect control of Bezeq's controlling shareholder) in 
DBS for NIS 680 million in Cash and contingent consideration of up to an 
additional NIS 370 million.  
According  to  the  applicant,  the  consideration  was  excessive,  and  the 
Respondents' decisions to enter into the transaction caused Bezeq a great 
deal of damage after they violated their duties of care and reliability to 
Bezeq,  and  were  negligent  in  their  role.  It  was  also  alleged  by  the 
applicant  that Bezeq's controlling shareholder had breached its duty  of 
fairness,  and  that  Bezeq  had  breached  the  duty  of  disclosure  and 
reporting regarding the trustee's commitment to Eurocom DBS's holdings 
in DBS to sell the holdings beginning at the end of March 2015. 
In light of the aforesaid, the petitioner requests that the Court approve 
the filing of a derivative claim on behalf of Bezeq against the Respondents 
for  the  claim  for  damage  caused  to  us  by  Bezeq  as  a  result  of  the 
Respondents'  decisions  regarding  the  transaction  in  the  amount  of  NIS 
502 million. 
on July 3, 2017, the Court approved the filing of an amended motion by 
the applicant, which includes additional allegations relating, inter alia, to 
the independence of the entities that advised Bezeq, alleged defects in 
the work of the Audit Committee, the Board of Directors and the general 
meeting, and alleged defects resulting from Eurocom being represented 
by Bezeq directors. 
In light of the Securities Authority's investigation, inter alia, regarding the 
engagement  that  is  the  subject  of  this  lawsuit  and  the  position  of  the 
Securities Authority  that it was improper to delay the proceedings, the 
Court decided to delay the proceedings in this case. On January 17, 2021, 
the  Attorney  General  announced  his  appearance  in  the  proceedings 
(regarding  the  delay  of  the  proceedings  and  not  the  body  of  the 
proceedings). Following the Attorney General's request, the procedure is 
delayed  at  this  stage  until  July  10,  2022,  in  light  of  the  Securities 
Authority's  investigation  and  indictments  filed  later  in  it  (see  Section  
1.1.7). 
The  motion  from  November  2015  -  It  is  alleged  that  Bezeq  abused  its 
monopolistic  position,  inter  alia,  by  "preventing  and  blocking  the 
existence  of  competition  in  general  and  the  existence  of  effective 
competition in the communications market in Israel" and acted to delay 
and  thwart  the  wholesale  market  reform,  thereby  harming  the  Israeli 
public and earning unreasonable profits as a result of the abuse of power 
as a monopoly. According to the plaintiffs, the damage caused by Bezeq 
to the communications market in Israel is reflected in Bezeq's excess and 
unreasonable profitability, and they seek to claim damage in the amount 
of NIS 800 million, which they claim  is based on 10% of Bezeq's excess 
operating profit due to abuse of monopolistic power. The plaintiffs set the 
amount of the claim at NIS 556 million, after a reduction of the amount 
claimed  in  another  proceeding  (which  in  the  meantime  ended  in 
departure). 
In December 2017, the Court approved the attachment as evidence in the 
case of an immediate report published by Bezeq on October 22, 2017, in 
which  Bezeq  reported  on  a  final  inspection  report  by  the  Ministry  of 
Communications regarding the implementation of a wholesale telephony 
service  and  an  announcement  of  an  intention  to  impose  a  financial 
sanction. In December 2018, the Ministry of Communications imposed a 
financial sanction in the amount of NIS 11 million on Bezeq.  
On March 3, 2019, Bezeq informed the Court that in light of the expected 
change of case in the case as soon as the request for approval is received, 
it agrees to the Court's proposal to approve the motion to conduct the 
class action without a reasoned decision by the Court and preserving all 
its  claims.  It  should  be  noted  that  in  the  same  announcement,  Bezeq 
informed the Court that on February 25, 2019, it filed an administrative 
petition  against  the  decision  of  the  Director  General  of  the  Ministry  of 

80 

 
 
 
 
 
 
Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

Date 

Sides 

Court 

Type of 
procedure 

Details 

Claim 
amount 
(NIS 
millions) 

Communications  from  December  2018  described  above.  Subsequently, 
on March 5, 2019, the Court approved the motion to conduct the class 
action  lawsuit  and  clarified  that  all  the  parties'  claims  are  reserved  for 
them to discuss the lawsuit itself and that all evidence and investigations 
heard in the motion for approval will form part of the evidence in the class 
action lawsuit. 
In view of conducting a criminal proceeding ("Case 4000") related to this 
proceeding, on November 1, 2021, the Attorney General announced his 
appearance  in  this  proceeding.  In  the  latest  motion  submitted  by  the 
Attorney General, it was requested that the procedure be delayed until 
July 20, 2023. 

The motion from March 2018- a motion similar to the November 2015 
motion submitted by the same applicants in relation to the period from 
the date of filing the application from November 2015 to the end of 2017, 
in view of the plaintiffs' claim In addition to the abuse of power by Bezeq, 
there  were  also  "acts  of  corruption  and  unlawful  acts  and  foreign  and 
improper  purposes  of  the  Director  General  of  the  Ministry  of 
Communications".  According  to  the  plaintiffs,  the  damage  caused  by 
Bezeq  to  the  communications  market  in  Israel  is  reflected  in  Bezeq's 
excess and unreasonable profitability. On May 31, 2018, Bezeq submitted 
a  request  to  delay  the  procedure  in  light  of  the  Securities  Authority's 
investigation  and  indictments  filed  subsequently,  the  Court  approved  a 
motion  on  behalf  of  the  Attorney  General  to  continue  the  stay  in  the 
proceedings in the case, at this stage, until July 20, 2023. 
In September 2019, the applicants submitted a request for the submission 
of  a  new  motion  for  approval  of  a  class  action  (a  request  filed  against 
Bezeq in September 2019 following the determination dated Septemebr 
4, 2019 of the Competition Commissioner regarding the abuse of Bezeq's 
status  -  see  description  below  subsection  H)  to  the  Court  where  this 
proceeding is conducted and to the deletion of that motion on the ground 
that it was a similar late motion. In addition, on October 23, 2019, Bezeq 
was submitted a request from the applicants for the motion for approval 
to  order  the  amendment  of  the  motion  for  approval  by  adding 
respondents  (directors  and  officers  from  the  relevant  period,  some  of 
whom  still  serve  at  Bezeq)  and  to  attach  additional  evidence  to  the 
motion for approval. On October 30, 2019, the Court announced that in 
view  of  its  decision  to  delay  the  proceedings  in  the  case,  it  does  not 
consider it appropriate at this time to order the transfer of the request to 
amend  the  motion  for  approval  for  Bezeq's  response,  and  that  upon 
termination of the proceedings in the case, the applicants must petition 
for appropriate instructions. 

The  interest  in  the  requests  in  the  2015  transaction  in  which  Bezeq 
acquired from Eurocom DBS (a company controlled by Bezeq's controlling 
shareholders  at  the  time)  the  balance  of  DBS  shares  held  by  it  (in  this 
section: "the Transaction"): 

The first motion was submitted on behalf of everyone who purchased the 
Bezeq shares from February 11, 2015 until June 19, 2017 (except for the 
respondents and / or those on their behalf and / or related to them). The 
motion alleges misleading and / or missing reporting in connection with 
the Transaction, and that following an open investigation by the Securities 
Authority regarding the Transaction, the public became aware of details 
regarding the transaction and its implementation, which led to a decline 
in Bezeq's share price. According to the applicant, the respondents acted 
in violation of the provisions of the Securities Law and in violation of other 
legal  provisions,  causing  Bezeq's  securities  holders  heavy  financial 
damages, amounting to hundreds of millions of NIS, if not more than that. 

to 

The second motion was submitted on behalf of three sub-groups - anyone 
who purchased on the Tel Aviv Stock Exchange from May 21, 2015 to June 
19,  2017  (1)  the  Bezeq  shares,  (2)  the  Company's  shares  and  (3)  the 
Internet  Gold  shares.  According 
the  applicant,  a  serious 
misrepresentation  of  the  investors  who  invested  in  the  shares  of  the 
aforementioned companies was made, which was revealed following the 
opening of an open investigation into the Securities Authority on June 20, 
2017,  by  increasing  the  increase  in  DBS'  cash  flow  reported  in  Bezeq 
According to the claim, artificially misleading the reasonable investor who 
relied  on  DBS'  cash  flow  data  to  estimate  its  value,  which  led  to 
overpricing of the above companies. The applicant also claims additional 
damages caused to groups of Company and Internet Gold shareholders. 

81 

About 1,240 
in the first 
application 
and-568 in 
the second 
application 

d. 

  June 2017 

Two 
motions 
for 
approval of 
class 
actions 

In the 
District 
Court 
(Economi
c 
Departm
ent) in 
Tel Aviv 

Bezeq 
shareholders 
Against 
Bezeq, 
Chairman of 
the Board of 
Bezeq and 
former 
members of 
the Board of 
Bezeq, as 
well as 
members of 
the Eurocom 
Group (the 
first 
application 
also against 
the former 
CEO of 
Bezeq and 
the former 
CEO and 
CFO of DBS) 

 
 
 
 
 
 
 
  
Claim 
amount 
(NIS 
millions) 

65 
Minimum 
threshold 
219 
Maximum 
threshold 

Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

Date 

Sides 

Court 

Type of 
procedure 

Details 

e. 

  June - 
August 
2017 and 
June 2018 

Tel Aviv 
District 
Court 

Bezeq 
shareholders 
against 
Bezeq and 
DBS  

f. 

  February 
2018 

Tel Aviv 
District 
Court - 
Economic 
Departm
ent 

Bezeq 
shareholders 
against  Bezeq 
as  a 
formal 
respondent, 
as  well  as 
against  Bezeq 
directors 
at 
times 
relevant 
to 
the  motion 
and 
against 
Bezeq's 
controlling 
shareholders 
at  the  times 
to 
relevant 
the  motion, 
Shaul 
Mr. 
and 
Elovich 
Yosef 
Mr. 
(the 
Elovich 
"Respondent
s"). 

Various 
motions 
for 
disclosure 
of 
documents 
before 
submitting 
a motion 
for 
approval of 
a 
derivative 
claim in 
accordance 
with Article 
198A of 
the 
Companies 
Law 
Motion for 
approval of 
a 
derivative 
claim 

Pursuant  to  a  hearing  arrangement  approved  earlier  by  the  Court,  the 
petitioners have agreed in the above petitions on their joint management 
and they are to file a consolidated petition on their behalf.  

Following the request of the Attorney General (who announced in 2017 
his appearance in the proceedings regarding the delay of the proceedings 
and not the body of the proceedings), the proceedings are delayed at this 
stage until July 20, 2022 in light of the Securities Authority investigation 
and indictments filed further thereto (see section 1.1.7) 

An  amended  and  consolidated  motion  submitted  following  the  Court's 
decision of April 15, 2018 regarding the consolidation of four applications 
filed in the same matter. The Court is requested to order Bezeq (and DBS, 
as the case may be) to provide the applicants with certain documents in 
connection with a stakeholder transaction between DBS and Space from 
2013 as amended at the beginning of 2017 (in this section: "DBS-Space 
Transaction")51. On January 17, 2021, the Attorney General announced 
his appearance in the proceedings (regarding the delay of the proceedings 
and not the body of the proceedings). Following the Attorney General's 
request, the procedure is delayed at this stage until July 20, 2022, in light 
of the Securities Authority's investigation and indictments filed later in it 
(see section 1.1.6).  

The matter of the motion, according to what is claimed in it, is Bezeq's 
conclusion in an assessment agreement with the Tax Authority which was 
signed  on  September  15,  2016  (“the  Assessment  Agreement")  and 
according  to  which  Bezeq  paid  tax  to  the  Tax  Authority  on  financing 
income from loans to DBS in the amount of NIS 462 million, while on the 
other hand, it was agreed, among other things, that DBS' losses in respect 
of  financing  expenses  in  respect  of  Bezeq's  owner  loans  to  DBS  will  be 
fully recognized to Bezeq after the merger between Bezeq and DBS.  
According to the applicants, as a result of the signing of the assessment 
agreement, Bezeq paid a total of NIS 660 million. Of this total, NIS 462 
million was paid to the Tax Authority and approximately NIS 198 million 
was  paid  to  Bezeq's  controlling  shareholders  as  a  conditional 
consideration  stipulated  in  the  agreement  for  the  acquisition  of  full 
holdings  and  shareholder  loans  of  Eurocom  DBS,  a  company  under  the 
indirect  control  of  the  controlling  owner  of  Bezeq,  in  DBS  ("DBS 
Transaction"). 
According  to  the  petitioners,  Bezeq's  engagement  in  the  assessment 
agreement constituted an exceptional transaction of a public company in 
which Bezeq's controlling shareholders have a personal interest, and was 
carried out illegally because it was contrary to the Company’s benefit and 
because the required legal approvals were not obtained. 
According  to  the  plaintiffs,  the  damage  caused  to  Bezeq  following  the 
conclusion  of  the  Assessment  Agreement  ranges  from  a  minimum 
threshold of NIS 65 million (as long as all DBS losses in respect of financing 
expenses are allowed to be offset by Bezeq). 
According to the plaintiffs, the  respondents who are directors violated, 
inter alia, the duties of care and trust (and with regard to the respondents 
controlling Bezeq, also the duty of fairness), and accordingly the plaintiffs 
motion that the Court approve the filing of a derivative claim on behalf of 
Bezeq and Yes, because it will oblige them to compensate Bezeq for the 
said damages caused to it, according to them, as a result of the breach of 
their obligations to Bezeq. 
On January 17, 2021, the Attorney General announced his appearance in 
the proceedings (regarding the delay of the proceedings and not the body 
of  the  proceedings).  Following  the  Attorney  General's  motion,  the 
procedure  is  delayed  at  this  stage  until  July  20,  2023,  in  light  of  the 
Securities Authority's investigation and indictments filed later there (see 

51  

It should be noted that on July 23, 2017, a motion was submitted to the District Court (Economic Department) in Tel Aviv 
for approval of a class action in the amount of approx. NIS 37 million against Space, controlling shareholders and officers in 
it as well as against Bezeq CEO and Bezeq Secretary at the relevant times to the claim in connection with the DBS-Space 
Transaction. The proceedings in this motion are also delayed, at this stage, until July 20, 2022. 

82 

 
 
 
 
 
 
 
 
 
 
Claim 
amount 
(NIS 
millions) 

400 

Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

Date 

Sides 

Court 

Type of 
procedure 

Details 

g. 

  June 2018 

Shareholder 
against 
Bezeq,  DBS, 
Shaul 
Mr. 
Elovich,  and 
Mr. Or Elovich 

Tel Aviv 
District 
Court 
(Economi
c 
Departm
ent) 

Motion for 
disclosure 
and review 
of 
documents 
under 
Article 
198A of 
the 
Companies 
Law 

h. 

  (1) 
September 
2019  

Customers 
against Bezeq 

Tel Aviv 
District 
Court 

Application 
for 
approval of 
a class 
action 

(2) March 
2020 

Shareholders 
against Bezeq 

Haifa 
District 
Court 

Consolidate
d request 
for 
disclosure 
of 
documents 
prior to 
request for 
approval of 
a derivative 
claim 

Section 1.1.6). 

It  is  requested  that  the  Court  order  Bezeq,  DBS,  the  former  controlling 
shareholder  in  Bezeq,  Mr.  Shaul  Elovich,  and  his  son,  Mr.  Or  Elovich 
(hereinafter  collectively  "Elovich"),  to  submit  to  the  applicant,  as  a 
shareholder  in  Bezeq,  various  documents  for  examination  Filing  an 
application  for  approval  of  a  derivative  claim  in  the  name  of  Bezeq. 
According  to  the  applicant,  the  controlling  shareholder  of  Bezeq,  the 
Company, and Elovich violated their fairness and fiduciary obligations to 
Bezeq  by  selling  115  million  Bezeq  shares  on  February  2,  2016  by  the 
Company using Bezeq's company and Elovich’s insider information, and 
at a value significantly higher than the true value of the shares. According 
to the applicant, this sale provided the Company with illegitimate profits 
in the amount of approximately NIS 313 million.. The insider information 
that was allegedly used in the application is, among other things, that the 
financial  statements  of  DBS  and  Bezeq  do  not  reflect  Bezeq's  de  facto 
financial position, but rather a "free cash flow" inflated for the purpose of 
increasing  the  consideration  as  part  of  the  transaction  in  which  Bezeq 
acquired  the  shares  of  Eurocom  Communications  in  DBS  (“the  Yes 
Transaction"). It should be noted that Bezeq is pending another motion 
for approval of a derivative claim in the matter of the Yes Transaction (see 
Section  2.18.1b).  According  to  the  applicant  in  the  motion  that  is  the 
subject of this report, although his motion is based in part on the same 
factual background, its matter is different from the existing procedures in 
the matter. At the request of the Securities Authority, the procedure is 
delayed,  at  this  stage  until  July  20,  2022,  in  light  of  the  Securities 
Authority's investigation and the indictments filed thereafter (see Section 
1.1.6).  On  January  17,  2021,  the  Attorney  General  announced  his 
appearance in  the proceedings (regarding the delay of  the proceedings 
and  not  the  body  of  the  proceedings).  At  the  request  of  the  Securities 
Authority, the procedure is suspended, at this stage until July 20, 2023, in 
view of the investigation by the Securities Authority and the indictments 
filed subsequently (see Section 1.1.7). 
Motion submitted following the determination dated September 4, 2019 
of the Competition Commissioner regarding the abuse of Bezeq's status 
("the Determination") (for this matter, see Section 2.16.9.5) in which it 
was  alleged  that  Bezeq's  acts  and  omissions  as  described  in  the 
Determination (blocking the transition of Bezeq competitors from Bezeq's 
infrastructure to the building access section, as well as refusing to thread 
cables in the continuous method and conditioning the deployment in an 
threading  method)  caused 
inferior,  expensive  and  problematic 
substantial damage to consumers. The definition of the group in whose 
name the class action will be conducted is anyone who purchased landline 
communication  services  in  Israel,  in  the  period  between  July  2015  and 
March 2018, whether or not he purchased these communication services 
from Bezeq. Damage is claimed due to the loss from the decrease in the 
rate for communications packages, which was prevented from the group 
members due to Bezeq's alleged acts or omissions. Regarding a request 
for the transfer of this motion and its cancellation due to the fact that it 
is a similar late motion that was submitted by the applicants in another 
motion for approval of a class action in March 2018 - see subsection C. On 
June  25,  2020,  the  Court  ruled  that  the  parties  will  petition  for  the 
provision of appropriate instructions in the proceedings upon termination 
of  the  stay  of  proceedings  in  the  same  motion  for  approval  of  a  class 
action  from  March  2018.  The  parties  will  petition  for  appropriate 
instructions. 

Two motions (unified) for the disclosure of documents under Article 198A 
of the Companies Law for the purpose of examining the submission of a 
motion for approval of a derivative claim regarding the exercise of Bezeq's 
rights against officers in connection with the Determination. It is alleged 
that the findings and violations included in the Determination give Bezeq 
cause  of  action  against  Bezeq's  officers  and  that  Bezeq  is  entitled  to 
compensation from the officers for the damages that were caused and 
that will be caused to it. On June 23, 2020, Bezeq submitted a request to 
delay the proceedings in the motions for disclosure, until the work of the 
Claims Committee established for the purpose and the submission of its 
recommendations to Bezeq's Board of Directors. On July 19, 2020, Bezeq 
submitted its response to the motions. The Attorney General submitted a 
notice  of  his  appearance  in  the  proceedings,  and  at  the  same  time 
submitted  his  position,  according  to  which  a  decision  to  appeal  the 
deterrmination that the petitioners claim constitutes the damage caused 
to Bezeq, may be a derivative proceeding as long as the above decision is 

83 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

Date 

Sides 

Court 

Type of 
procedure 

Details 

not final. 
On April 4, 2021, the plaintiffs accepted the Court's proposal to delay the 
proceedings  until  after  the  completion  of  the  work  of  the  Claims 
Committee  established  by  Bezeq  and  a  decision  on  Bezeq's  request  to 
delay the proceedings. Subsequently, on October 13, 2021, Bezeq's Board 
of Directors decided to adopt the Claims Committee's recommendation 
of October 7, 2021, according to which in the circumstances Bezeq does 
not have a good cause of action against officers and other officials who 
served during the relevant periods, and that conducting legal proceedings 
will not promote Bezeq benefit. The Committee came to this conclusion 
after  examining  the  implications,  benefits,  damages,  costs  and  gains 
involved  in  conducting  such  legal  proceedings,  and  came  to  the 
conclusion  that  their  conduct  would  harm  Bezeq.  Bezeq  submitted  a 
notice to the Court. 
A consolidated motion (filed in lieu  of two  similar motions in the same 
matter  that  was  deleted)  against  Bezeq,  the  Company,  and  90  other 
respondents, including past and present officers at Bezeq, the Company 
and Bezeq International, as well as the auditor firm (the "Respondents"). 
The motion deals, as alleged in it, with damages caused to the applicants 
and members of the represented groups (as detailed below) as a result of 
acts and omissions of the respondents who violated the provisions of the 
law, including that Bezeq and the Company included misleading details in 
their reports. In accordance with the provisions of the law, in connection 
with  Bezeq’s  and  the  Company’s  report  dated  November  9,  2020, 
according to which Bezeq International's books contain discrepancies in 
the amounts of hundreds of millions of NIS.52 The definition of the groups 
according to the application is: (a) Everyone who purchased Bezeq shares 
as of March 9, 2003 (date of publication of the annual report for the year 
2002)  until  November  9,  2020,  and  held  them  on  November  9,  2020, 
except for the respondents or those on their behalf and (b) anyone who 
purchased  the  Company’s  shares  on  the  Tel  Aviv  Stock  Exchange  from 
October 25, 2009 until November 9, 2020, and held them on November 
9,  2020,  except  for  the  respondents  or  those  on  their  behalf.  In 
accordance  with  the  economic  opinion  attached  to  the  motion,  it  was 
alleged  that  following  the  publication  of  the  immediate  report  dated 
November 9, 2020 published by Bezeq and BCOM, the Company’s share 
price decreased by 5.26%-5.40% (it should be noted that the motion also 
claims, in accordance with another opinion attached to it, that compared 
to  Bezeq's  benchmark  indices,  the  damage  to  Bezeq's  shareholders  is 
higher than the decrease in the value of the shares, and is about 7%), and 
the  Company’s  share  price  decreased  in  the  range  of  9.07%-9.36%. 
Accordingly, it was argued that the damage caused to the applicants is in 
the  amount  obtained  from  doubling  the  amount  of  shares  held  by  the 
members of the groups as aforesaid at the rate of the aforesaid decrease 
in  the  shares  of  Bezeq  and  the  Company.  The  case  is  in  mediation 
proceedings. 

It was alleged that Bezeq caused pecuniary and non-pecuniary damages 
to the class members who paid an increased amount for a higher level of 
browsing speed than they could actually use, for upgrading the modem 
so  that  they  could  browse  at  this  rate,  as  well  as  for  harassment, 
inconvenience, mental distress and impaired autonomy. According to the 
motion,  the  class  of  plaintiffs  must  include  anyone  who  used  Bezeq's 
Internet infrastructure in the seven years prior to the date of submission 
of the motion for approval until the date of its approval of the class action, 
and paid for a certain speed level, while the infrastructure in his home is 
capable of providing speed that matches a lower speed level. 

i. 

  January 
2021 

Bezeq 
shareholders 
v Bezeq et al.  

Motion for 
approval of 
a class 
action 

Tel Aviv 
District 
Court - 
Economic 
Departm
ent 

l 

April 2021 

Customer  VS 
Bezeq 

Central 
District 
Court 

Motion  for 
approval  of 
a 
class 
action 

Claim 
amount 
(NIS 
millions) 

"Over NIS 
2.5 million 
(for the 
purposes of 
substantive 
authority)" 

* 
The  amount 
of  the  class 
action 
be 
cannot 
estimated. It 
was  stated 
that 
these 
are 
damages 
amounting 
to 
million, 
which 
within 
jurisdiction 
of the Court. 

fall 
the 

NIS 

2.18.2. 

Legal  proceedings  completed  during  the  period  of  the  report  or  until  the  date  of 

52 As part of the preparation of the Company and Bezeq International Ltd. for the publication of their statements for the period 
ending on September 30, 2020, it was found by Bezeq International that there are unexplained net asset balances in its 
books (debtors minus creditors). Subsequently, the statements were restated. 

84 

 
 
 
 
 
 
 
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publication of the report 

Date 

Sides 

Court 

Type 
procedure 

of 

Details 

a. 

 November 
2020  

Jerusale
m District 
Court 

the 

Shareholder 
in 
Company 
against 
the 
Company  and 
Bezeq 
International 

b. 

  May 2021 

Customers  VS 
Bezeq 

Tel  Aviv 
District 
Court 

Motion  for 
discovery 
and  review 
of 
documents 
before 
filing 
derivative 
claim 
Motion  for 
approval  of 
class 
a 
action 

a 

c. 

  August 
2021 

Customer  VS 
Bezeq 

Tel  Aviv 
District 
Court 

Motion  for 
approval  of 
class 
a 
action 

Motion for discovery and review of documents prior to filing a derivative 
claim  in  which  an  order  is  requested  directed  to  the  respondents  for 
discovery and review of  various  documents regarding asset balances in 
Bezeq International's books following the immediate report published by 
the  Company  on  November  9,  2020  -  on  March  25,  2022  the  Court 
approved  an  agreed  motion  by  the  applicants  to  withdraw  from  the 
motion for discovery and review of documents by way of dismissing it. 

A motion for approval of a class action lawsuit replacing a similar motion 
from May 2020 was filed and ended (see section 2.18.2). It was alleged 
that Bezeq misled customers who joined an online business advertising 
service  through  B144  ("the  Service")  into  thinking  that  the  cost  of  the 
service depends on actual use, up to a billing ceiling, while in fact Bezeq 
charged its customers the amount of the billing ceiling even if in practice 
a  lower  amount  was  used.  On  March  23,  2022,  a  judgment  was  issued 
dismissing  the  motion  for  approval,  while  it  was  determined  that  the 
applicants did not establish an evidentiary or factual foundation, even the 
minimal one, that would show a cause of action in the case. 
It was alleged that during the COVID crisis Bezeq charged its telephony 
customers  in  excess  of  the  amounts  determined  and  approved  by  the 
Ministry of Communications under arrangements established in view of 
the increase in landline telephone use during the COVID crisis, which were 
valid for two periods (March 1, 2020 to June 14, 2020 and September 21, 
2020  to  June  30,  2021)  -  On  June  21,  2022,  a  judgment  was  issued 
approving an agreed motion to withdraw from the motion for approval of 
a class action lawsuit after it was clarified that Bezeq had fully credited its 
overcharged  customers  to  the  extent  of  approximately  NIS  2.5  million. 
The judgment also includes payment of damages, fees and expenses in a 
total amount of approximately NIS half million. 

Claim 
amount (NIS 
millions) 

* 
Claim for an 
unknown 
amount 

* 
Total claim 
amount not 
specified 

* 
The 
aggregate 
amount of 
damage was 
estimated 
at more 
than NIS 2.5 
million. 

2.19.  Targets and business strategy 

2.19.1. 

Forward-looking information 

Bezeq's strategy review below includes forward-looking information within the meaning 
thereof in the Securities Law, and involves assessments of future developments in the 
economy in general regarding customer behavior and needs, the pace of adoption of new 
services, technological changes, regulatory policy, competitors' marketing strategy, and 
the effectiveness of strategic marketing. . 

Bezeq's  strategy  and  the  business  objectives  derived  from  it  are  based  on  internal 
research  and  analysis,  secondary  sources  of  information,  especially  research  company 
statements,  publications  regarding  activities  undertaken  by  similar  communications 
operators in Israel and around the world, and consulting work by which Bezeq is assisted.  

However there is no assurance that the main strategy and activities described below will 
be implemented in practice or in the manner described below. The circumstances that 
may lead to the non-implementation of the strategy or even to its failure are due to the 
general situation in the economy, frequent technological changes, regulatory constraints, 
formulation  of  a  sustainable  business  model  for  new  services  that  Bezeq  intends  to 
provide  and  adopting  a  superior  marketing  strategy  from  competitors.  In  addition, 
changes in the composition of Bezeq's Board of Directors or ownership of Bezeq, which 
will lead to a change in the composition of the Board of Directors, may lead to a change 
in its strategy and business objectives. 

2.19.2. 

The essence of the strategy and intentions for the future  

2.19.2.1 

Vision and purpose 

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Bezeq  has  set  itself  the  target  of  being  the  leading  communications 
company in Israel, providing a wide range of communications services and 
solutions, to private and business customers. 

Bezeq  works  to  maintain  its  competitive  position  and  continue  to  be  the 
customer's first choice in telephony, Internet and IT, and for this purpose it 
has set itself a number of targets: 

a.  Preservation of leadership in the aggravating competitive environment 
(service  leadership  and  strengthening  perceived  values  -  product 
innovation,  reliability,  price  perception),  and  within  this  framework, 
leading the optical fiber market; 

b.  Encouraging  the  recruitment  of  new  customers  and  strengthening  a 

sense of loyalty and closeness among existing customers; 

c.  Creating  new  sources  of  income  through  the  launch  of  new  and 

innovative services and products; 

d.  Ongoing  adaptation  of 

the  organization 

to 

the  competitive, 

technological and operational excellence environment. 

2.19.2.2 

Means 

To implement the said strategy and objectives, Bezeq operates a wide range 
of advanced communication networks, which operate on a wide range of 
infrastructures nationwide, and enable the provision of the most advanced 
communication  services  in  the  world.  Bezeq  is  working  to  upgrade  and 
develop  the  communications  networks  it  operates,  including  the  fiber 
infrastructure  through  a  wide  fiber  deployment.  The  Company  strives  to 
constantly expand and improve the basket of products and services, and it 
also  offers  and  operates  a  service  network,  including  technical  and 
commercial centers, and a wide range of service and installation technicians. 

2.19.3.  Major projects in planning or execution 

Regarding the deployment of a fiber optic network by Bezeq, see section 2.7.2.  

2.20.  Discussion of risk factors 

There  are  risk  factors  that  arise  from  the  macroeconomic  environment,  from  the  unique 
characteristics of the industry in which Bezeq operates, and risk factors that tare unique to Bezeq, 
which may have significant consequences for Bezeq and affect, among other things, Bezeq's status, 
its results, its credit rating and its ability to repay its debt, all as specified below: 

2.20.1. 

Competition 

Competition in the field of landline interior communications increasing in recent years, 
both in the field of deploying independent networks (see Section 2.6), and in the field of 
providing services using the wholesale market, through which telecommunication groups 
and other telecommunications operators (those with a special or unified license and even 
licensed providers) compete with Bezeq in the sale of unified Internet service packages 
based  on  Bezeq  infrastructure,  at  prices  set  by  the  regulator  (see  Section  1.7.4  and 
Section 2.16.4). A large number of customers receive wholesale Internet services, which 
are  provided  on  the  Bezeq  network,  when  Bezeq  does  not  have  contact  with  those 
customers.  Increased  competition  in  the  field  of  interior  communications  causes  the 
abandonment of some of Bezeq's customers and leads to lower prices of some of Bezeq's 
services and an increase in the costs of recruiting new customers and retaining existing 
customers. The entities that compete with Bezeq at present, or may compete with it in 
the future, enjoy greater business flexibility than Bezeq, including the ability to cooperate 
with  subsidiaries  and  affiliates  and  market  shared  service  packages  with  them  (see 
Section  1.7.3 and Section 1.7.4). The ability of competitors to market service packages 
with  rate  flexibility,  in  the  face  of  Bezeq's  limitations  to  do  so  as  of  this  date,  impairs 
Bezeq's competitive ability. 

2.20.2. 

Governmental supervision and regulation 

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Bezeq  is  subject  to  governmental  supervision  and  regulation  relating,  inter  alia,  to 
licensing  activities,  determining  permitted  areas  of  activity,  determining  rates, 
operations, competition, payment of royalties and depositing funds to the incentive fund, 
universal service obligation, the possibility of holding its shares, the relationship between 
Bezeq and its subsidiaries and prohibiting cessation or restriction of its services (which 
may oblige Bezeq to provide services even in non-economic circumstances) - for details, 
see Section 2.16. The aforesaid supervision and regulation sometimes causes government 
intervention,  which  in  Bezeq's  opinion  burdens  its  business  activities.  In  this  context, 
Bezeq is exposed to various sanctions by the Ministry of Communications, including the 
imposition of financial sanctions (for this matter, see Section 1.7.7.5).  

In  addition,  the  Minister  of  Communications  may  revoke  Bezeq's  license,  restrict  it  or 
suspend  it  as  appropriate,  in  accordance  with  the  conditions  set  forth  in  the 
Communications Law, and is authorized to change the terms of Bezeq's license, interfere 
with existing rates and marketing proposals and issue instructions. Substantial changes in 
the rules of regulation that apply in the field of communications in general, and to Bezeq 
in particular, may oblige Bezeq to make changes to its strategic plans and impair its ability 
to carry out long-term planning of its business activities. For possible changes following 
the  wholesale  market  reform,  see  section  2.16.4.  For  possible  restrictions  under  the 
Centralization  Law  on  the  renewal  of  licenses  and  the  allocation  of  new  licenses,  see 
Section 1.7.7.6. 

2.20.3. 

Rates supervision 

Bezeq rates for a key part of its services (including rates for reciprocal linking and use of 
Bezeq  infrastructure  and  its  network)  are  subject  to  government  supervision  and 
intervention. The Minister of Communications has the authority to intervene in existing 
rates and marketing proposals and to give it instructions (see Section 2.16.1). On average, 
supervised Bezeq rates are eroding in real terms. Substantial changes in Bezeq's regulated 
rates, if implemented, could have a material adverse effect on its business and its results. 
Regarding the supervision of the supervised Bezeq rates and their updating, see sections 
2.16.1 (Including regarding a hearing on the determination of maximum rates for Bezeq's 
retail telephony services) and 2.16.4. In addition, the restrictions that apply to Bezeq in 
marketing alternative payment baskets may make it difficult to provide an appropriate 
competitive  response  to  changes  in  the  market,  and  they  are  significantly  reflected  in 
Bezeq's competitors on the basis of its infrastructure in selling  unified Internet service 
packages  through  Bezeq's  wholesale  service.  As  part  of  the  application  of  a  wholesale 
market,  the  Ministry  of  Communications  updates  the  rates  and  terms  for  wholesale 
services according to which Bezeq will sell its services to licensees. The update of the rates 
leads to lower prices in a way that could adversely affect Bezeq's level of revenue and its 
profitability (for the wholesale market, see section 2.16.4). 

2.20.4. 

Streamlining procedures and labor relations 

Implementation of personnel and organization programs (including retirement plans and 
organizational  changes)  involves  coordination  with  employees  and  significant  costs, 
including  early  retirement  compensation  costs.  Processes  of  implementing  such  plans 
may  cause  unrest  in  the  employment  relationship  and  harm  Bezeq's  day-to-day 
operations - see also Sections 2.9.3 and 2.17.2.  

Also, as described in section 1.8, according to the report, Bezeq, like the other companies 
in the Group, implements streamlining procedures, which include, among other things, 
moving  to  new  offices,  organizational  changes  and  reducing  the  workforce,  while 
managing  significant  infrastructure  and  other  projects.  Streamlining  procedures,  by 
nature, carry with them the risks of loss of knowledge, turnover of employees, shift of 
managerial focus, and so on. 

2.20.5. 

Restrictions regarding the relationship between Bezeq and companies in the Bezeq Group 

Structural separation - Bezeq's NIO license prohibits preferring the main companies in the 
Group  over  their  competitors.  A  separation  is  required  between  the  managements  of 
Bezeq and the said companies, as well as a separation in the business systems, finances 
and marketing, assets and employees, which causes duplication, high overheads and also 
makes it difficult to manage strategy at the Group level. Also, at this stage, Bezeq's ability 
to offer shared service packages of Bezeq and the said companies is limited (see Section 
1.7.3). 

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Regarding the possibility that in the future the Group will  be granted a permit  for the 
provision of non-detachable service packages and the elimination of structural separation 
and for further possible changes following the wholesale market, see Sections 1.7.3 and 
2.16.4. 

2.20.6. 

Legal Proceedings 

Bezeq is a party to legal proceedings, including class actions, which may result in charges 
in substantial amounts, most of which cannot be estimated, and therefore no provision 
was made for most of them in Bezeq's financial statements. In addition, Bezeq's insurance 
policies are limited to defined coverage limits and for certain reasons, and may not cover 
claims for certain types of damages. In recent years, there has been a multiplicity of class 
action lawsuits against large commercial companies. By their very nature, class actions 
can reach large sums. In addition, since Bezeq provides communications infrastructure as 
well as billing and collection services to other licensees, other class action lawsuits against 
the  said  licensees  may  also  involve  Bezeq  as  a  party  in  these  proceedings.  For  a 
description of the legal proceedings, see Section 2.18.  

2.20.7. 

Exposure to exchange rate fluctuations, inflation and interest rates 

Bezeq measures exposure to changes in currency and inflation according to surplus or 
lack of assets versus liabilities, as well as according to cash flow forecasts, according to 
the type of linkage. Bezeq's exposure to changes in inflation is high and Bezeq's exposure 
to changes in the exchange rate against the shekel is low. Bezeq is hedging some of its 
exposure to inflation and foreign exchange. In addition, Bezeq has exposure to changes 
in interest rates in relation to the credit it receives. For this matter, see also Note 30 to 
the 2022 statements and Section 1.6 of the Board of Directors’ report. In view of the trend 
of the increase in the inflation rate in 2022, Bezeq has updated the extent of the impact 
of this risk factor. 

2.20.8. 

Electromagnetic radiation and licensing of transmission facilities  

The issue of electromagnetic radiation emitted from transmission facilities is regulated 
mainly in the Non-Ionizing Radiation Law (see Sections 2.15 and 2.16.11). Bezeq works 
for  the  existence  of  construction  and  operation  permits  for  its  various  transmission 
facilities, but the difficulties encountered by Bezeq in this activity, including difficulties 
arising  from  changing  the  policy  of  the  relevant  parties  and  changes  in  legislation  and 
regulations, may adversely affect the infrastructure of the said facilities, the regularity of 
the provision of the services through them, and consequently also the Bezeq revenues 
from  these  services.  Bezeq's  third  party  insurance  policy  does  not  currently  cover 
warranty for electromagnetic radiation. 

2.20.9. 

Frequent technological changes 

The field of communications is characterized by frequent technological changes and the 
shortening  of  the  economic  life  of  new  technologies  -  see  section  2.1.4.  These  trends 
require investing a lot of resources in upgrading Bezeq's existing technologies, lowering 
the barriers to entry for new competitors, increasing depreciation rates and in some cases 
there may be a redundancy of Bezeq-owned technologies and networks. The introduction 
of innovative technology that is not used by Bezeq or that Bezeq has refrained from using 
may harm Bezeq's competitive position. 

2.20.10.  Dependence on macro factors and on levels of business activity in the economy  

The stability of the financial markets and the resilience of the economies of the countries 
of the world have been in recent years subject to high volatility. Bezeq estimates that as 
the local economy slides into a period of recession and deterioration in business activity 
due  to  external  or  internal  events,  including  shocks  in  the  global  economy,  political-
security uncertainty, etc., then its business results may be harmed, among other things, 
as a result of Bezeq revenues (including investee revenues) or as a result of increased 
Group financing costs. 

2.20.11. 

Failure of Bezeq systems and cyber risks  

Bezeq provides its services through various systems, including, among others, exchanges, 
data transmission and access transmission networks, cables, computer systems, physical 
infrastructure and more ("the systems").  The systems are of critical importance in the 
operation of Bezeq's business and they play a vital role in its ability to successfully carry 

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out its activities. Hacking, disruption, damage or collapse of systems can adversely affect 
Bezeq's business. Some Bezeq systems have backup, but at the same time, in the event 
of  damage  to  some  or  all  of  the  above  systems,  either  due  to  various  technical  faults 
(including in the event of termination of contact  with a supplier who is dependent on 
system support), or due to natural disasters (earthquakes, fire), whether due to damage 
to physical infrastructure by communications providers using them or due to malicious 
damage  (including  through  Cyber  attacks  as  detailed  below),  there  may  be  significant 
difficulties, and more than significant, in providing Bezeq services, including in the event 
that Bezeq is unable to return the systems to capacity quickly. 

Bezeq carries a risk of activity occurring that is intended to harm the use of a computer 
or  computer  material  stored  on  it  ("cyber  attack").  Such  attacks  can  disrupt  business, 
theft of information / money, damage to reputation, and damage to systems, and from 
there, also to material damage to the Company's activity.. As a leading communications 
company that provides diverse communications services in various fields, it is a target for 
cyber attacks and experiences cyber attacks, which are handled by it. 

Bezeq is a body guided by the State Authority for Information Security and is committed 
to meeting strict information security standards. The Company is subject to rules in this 
matter even by virtue of its licenses. In this context, Bezeq implements a defense policy 
that includes the most advanced security systems in the world operated in a configuration 
that combines effective security with Bezeq's operational needs and security circuits to 
protect Bezeq's infrastructure and systems designed to prevent and reduce the possibility 
of  Bezeq  data  being  exploited  by  an  external  or  an  internal  party  maliciously  or 
inadvertently, as well as the possibility of an outsider taking over and managing network 
components  or  abusing  information  about  Bezeq's  infrastructure  and  networks  in  any 
way. In this framework, adequate resources are invested, including, among other things, 
technological resources for the purchase of information security solutions and products 
and  resources  for  information  security  standards,  and  various  actions  are  performed, 
including checking alerts and logs in the systems, periodic risk survey, practice according 
to an annual plan, as well as ongoing work in accordance with appropriate procedures. 
Bezeq is certified for three ISO standards (ISO 27001, ISO 27017, ISO 27018) related to 
information  security  (standards  that  define  and  test  the  principles  of  establishing, 
managing  and  maintaining  information  security  in  the  organization),  and  as  part  of 
implementing  the  requirements  of  Bezeq  standards  ensures  the  availability,  integrity, 
reliability and confidentiality of the databases for which it is responsible. 

The  cyber  risk  management  policy  is  approved  by  the  Company's  information  security 
steering committee with the participation of the Company's CEO and the Company's VP 
of Technologies and Network. The person responsible for implementing the policy in the 
company is the director of the Information and Cyber Security Department. 

Bezeq monitors the implementation of its defense policy, which includes an examination 
of Bezeq's level of effectiveness and readiness. In this context, Bezeq conducts tests and 
assault drills with different frequency for different scenarios (including through external 
companies that specialize in the field). Also, the Company's Board of Directors is involved 
in and supervises the management of cyber risk in the Company within the framework of 
handling the Company's overall risk management policy. In Bezeq's estimation, the risk 
management policy in dealing with and reducing the cyber risk is effective. 

Despite  Bezeq's  investments  in  measures  to  reduce  such  risks,  Bezeq  is  unable  to 
guarantee that these measures will succeed in preventing damage and / or disruption 
which may also be significant to systems and related information. 

2.20.12. 

Impairment of subsidiaries 

In accordance with the accounting standards, Bezeq performs valuations for subsidiaries 
for the purpose of examining the periodic impairment of goodwill and of assets in respect 
of which signs of impairment have been identified. Considering the business situation of 
the  subsidiaries  and  the  difference  between  the  book  value  of  Bezeq  and  their 
recoverable amount as a cash-generating unit, a decrease in the value of the subsidiaries' 
activity may lead to impairment loss (write-off) in Bezeq books. Also, a significant change 
in  circumstances  that  leads  to  a  change  in  estimates  can  occur  as  a  result  of  a  high-
intensity discrete event and / or as a result of a sequence of small changes occurring over 
time  that  have  a  significant  cumulative  effect  in  the  long  run  and  /  or  a  change  in 

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estimates (even at low rates). Valuations are based on assumptions as of the date of the 
statements that may not materialize or materialize partially and different aspects have 
different 
long-term 
intensities  affecting  the  value  of  the  unit  measured  when 
assumptions may have a relatively large weight compared to short-term assumptions.For 
this  matter,  see  also  Note  11  to  the  2022  statements  and  Section  3.1  of  the  Board  of 
Directors' Report.  

2.20.13.  Pandemic 

Disease outbreaks and epidemic events in general (such as the outbreak of COVID-19 in 
2020) may have consequences for the Company's business activities, depending on the 
extent of the spread and its severity and on the national and global measures that will be 
taken as a result. These consequences may be manifested, among other things, in damage 
to the Company's activities and its customer service system, as well as damage to the 
supply  chain.  Events  of  this  type  are  changing  events  that  are  out  of  the  Company's 
control,  and  their  consequences  are  subject,  among  other  things,  to  the  decisions  of 
countries and authorities in Israel and around the world that may affect the Company 
accordingly. For this matter see also Section 2.20.10. 

2.20.14.  Damage caused by nature, war, disaster 

Damage  to  the  Company's  infrastructure  and  services  as  a  result  of  natural  disasters, 
including earthquakes, as well as as a result of war or disaster, may adversely affect the 
Company's business and results. 

It should be noted that a significant part of Bezeq's operations (in a consolidated manner) is carried 
out in its subsidiaries. The risk factors of these companies and the assessments of their managements 
in relation to the risk factors are described in Sections 3.18, 4.14 and 5.18, and they are also relevant 
to the Group's activities and results. 

The following is a rating of the impact of the risk factors described above on Bezeq's operations, in 
Bezeq's Management's assessment. It should be noted that Bezeq’s assessments below regarding 
the degree of influence of the risk factor reflect the degree of influence of the risk factor in assuming 
the  materialization  of  the  risk  factor,  and  the  aforesaid  does  not  express  an  assessment  or  give 
weight to the chances of such materialization. The order in which the risk factors appear above and 
below is not necessarily according to the degree of risk: 

Risk Factors Summary Table – Landline Interior Communications53  

The extent of the impact of the risk factor 
on Bezeq's operations 
Medium 
effect 

High 
effect 

Low effect 

Macro risks 
Exposure to exchange rate fluctuations, inflation and interest 
rates 
Dependence on macro factors and levels of business activity 
in the economy 
Pandemic 
Damage caused by nature, war, disaster 

Industry risks 

Growing competition 
Governmental supervision and regulation 
Rate supervision 
Electromagnetic radiation / licensing of transmission facilities 
Frequent technological changes 

X 

X 
X 
X 

X 

X 

X 

X54 

X 

53  

It will be clarified that in the assessments of the Group companies regarding the effect of the risk factors in the summary 
tables (in this section and in Sections 3.19 , 4.14 and 5.19), the probability of the risk factor materialization was not estimated, 
but  the  effect  of  the  risk  factor  on  the  relevant  company  if  it  materialized.  It  should  be  noted  that  some  of  the  Group 
companies  make  estimates  regarding  the  probability  of  the  occurrence  of  some  of  the  risk  factors  mentioned  in  these 
sections for their specific internal needs, but no orderly estimate was made at the Group level of all the risks listed in the 
summary tables in these  sections. Also, in general, the degree of influence of a risk factor on the Company's operations 
depends in some cases also on the extent and duration of the materialization of the risk, so that it may differ from what is 
indicated. 

54   The extent of the impact of this risk factor on Bezeq's activity was classified as moderate, assuming that the event would be 

limited in scope and time. Otherwise, the degree of impact may be great. 

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The extent of the impact of the risk factor 
on Bezeq's operations 
Medium 
effect 

High 
effect 

Low effect 

Special risks for Bezeq 

X 
X 

Exposure to legal proceedings 
Streamlining processes and labor relations 
Restrictions  regarding  the  relationship  between  Bezeq  and 
companies in the Bezeq Group 
Failure of Company systems and cyber risks 
Impairment of subsidiaries 
The information contained in this section 2.20 and Bezeq's assessments regarding the impact of risk factors 
on Bezeq's activities and business are forward-looking information as defined in the Securities Law. The 
information  and  assessments  are  based  on  data  published  by  the  Ministry  of  Communications,  Bezeq 
assessments  of  the  market  situation  and  the  structure  of  competition  in  it  and  regarding  possible 
developments in this market and in the Israeli economy. The actual results may differ materially from the 
estimates given above if there is a change in one of the factors taken into account in these estimates. 

X 

X 

X 

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3. 

Pelephone - Mobile radio telephone (cellular telephony) 

3.1. 

General information about the field of activity 

3.1.1. 

Pelephone's field of activity 

Pelephone  provides  cellular  communication  services  and  the  sale  and  repair  of  end 
equipment. Pelephone services are detailed in the section 3.2. Pelephone is a company 
wholly owned by Bezeq.  

3.1.2. 

Legislative and regulatory restrictions unique to the field of activity 

3.1.2.1 

Communications Law and mobile radio telephone license 

Pelephone's activities are subject to regulation and supervision by virtue of 
the  Communications  Law  and  its  regulations,  by  virtue  of  the  Telegraph 
Order,  and  by  virtue  of  mobile  radio  telephone  license  owned  by  it.  The 
mobile  radio  telephone  license  sets  conditions  and  rules  that  apply  to 
Pelephone's operations (for details, see section 3.14.2).  

3.1.2.2 

Rate supervision 

Interconnectivity  fees  (rates  for  completing  a  call  and  completing  short 
message messages (SMS) charged by Pelephone from other communication 
operators are fixed in interconnectivity regulations. The rest of the rates are 
under  a  certain  supervisory  regime  as  regulated  under  the  mobile  radio 
telephone  license  and  the  Communications  Law  (see  sections  3.14.1  and 
3.14.2).  

3.1.2.3 

Environmental law and planning and construction law 

Establishment  and  operation  of  wireless  communication  infrastructure, 
including cellular communications, is subject to the provisions of the Non-
Ionizing Radiation Law and the permits required thereunder by the Ministry 
of  Environmental  Protection,  as  well  as  the  provisions  of  planning  and 
construction law (see section 3.13.1). 

3.1.3. 

Changes in the scope of activity in the field 

For financial data on the scope of Pelephone's activity, see sections 1.5.4.2 and 3.3. 

Revenue from services 

The cellular industry is characterized by fierce competition. Competition in the industry 
led to a high transfer of subscriptions between the cellular operators while continuously 
eroding  the  prices  of  the  base  packages  along  with  a  further  increase  in  the  browsing 
volumes included in the packages, which in recent years have caused another significant 
erosion of the average revenue per subscriber (see Section 3.6). The growth in the number 
of postpaid subscribers (subscribers who receive service for a monthly payment) in the 
past few years has partially compensated for the erosion of prices. In 2022, the downward 
trend  continued  (similarly  to  the  year  2021)  in  the  volume  of  mobilizations  between 
companies has decreased compared to recent years. Also, a certain recovery was recorded 
in  revenue  from  roaming  services,  which  returned  to  their  normal  volume,  after  the 
decline that applied in 2020 due to the effects of the COVID-19 crisis on travel and stay 
abroad (see Section 3.19.1.2). In addition, starting from the end of 2020, companies in the 
market began to offer packages with a higher browsing volume that allow subscribers to 
browse with 5G technology, and whose prices are higher than 4G packages. 

Revenue from the sale of end equipment and electronics 

The  end  equipment  market  is  also  characterized  by  fierce  competition  among  cellular 
operators and vis-à-vis many stores that sell end equipment in parallel imports. In 2022, 
fierce competition continued in this field. In order to reduce the damage to revenue, which 
was caused, among other things, due to the changes in the exchange rate, Pelephone is 
increasing  the  range  of  equipment  sold  by  it  and  also  sells  electronic  equipment  and 
appliances other than cellular devices. 

A signifant part of all end equipment is sold in installments. The decline in end equipment 
sales over the years has led to a decrease in the balance of customers in parallel with a 
decrease in the volume of payments to end equipment suppliers. 

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3.1.4. 

Market developments and changes in customer characteristics 

The  cellular  market  is  characterized  by  low  growth  rates  due  to  saturation  in  the 
penetration  rate55.  The  estimated  penetration  rate  as  of  September  30,  2022  is 
approximately 120%. 

3.1.5. 

Technological changes that have a material impact on the field of activity 

The  cellular  communications  market  is  dynamic,  and  is  characterized  by  frequent 
technological  developments  in  all  areas  of  activity  in  it  (communications  network 
technology, end equipment and value-added services). 

Technological developments, as well as the desire to expand the range of services offered 
to the customer and their quality, require cellular operators to upgrade the technology 
of cellular networks from time to time. The cellular networks in Israel currently operate 
mainly in GSM technology, UMTS / and LTE technology, and during 2020 the use of NEW 
RADIO technology in the NONSTAND ALONE architecture (5G) began. Also, Pelephone is 
preparing to upgrade the 5G network core to the STAND ALONE architecture. 

As of the date of the report, Pelephone's LTE network is deployed in most parts of Israel, 
and Pelephone continues to expand its network to improve coverage through the use of 
700  MHz  frequencies  and  to  improve  performance  through  2600  MHz  frequencies,  in 
addition to launching 5G technology using 3500 MHz frequencies, which is carried out 
according to a regular deployment plan. 

In  addition,  Pelephone  operates  additional  network  features  that  include  CARRIER 
AGGREGATION and MASSIVE MIMO in 5G. 

Pelephone  offers  technology-based  services  IMS56:  Voice  over  WiFi  as  an  improved 
response to coverage inside buildings (without the need to use the cellular frequency), as 
well as Voice over LTE which allows making voice calls on a 4G basis (using a data range). 
These two capabilities improve the quality of the voice call and enable the freeing of 3G 
frequency resources (traditionally used for calls) for the purpose of increasing additional 
capacity  used  for  the  data  services  that  are  gaining  momentum  over  the  years.  In 
addition, the Voice over LTE service enables the continuation of a call with Voice over 
WiFi, that is, a transparent transition of the call (without disconnection) from a Voice over 
WiFi call (performed without using the cellular range), to a Voice over LTE call (performed 
on the cellular network) , and vice versa. 

Pelephone is constantly following and examining the new technologies in the market and 
the need to upgrade the technology of its existing networks, in accordance with the state 
of competition in the market and the economic viability of investing in such technologies. 

Expanding the capacities and speeds of technologies from the LTE (4G) and NEW RADIO 
(5G)  as  well  as  the  development  of  future  cellular  generations  are  conditional  on 
frequency allocation. For details, see Section 3.8.2. 

Using Embedded SIM (eSIM) technology - this is a technology that allows a mobile device 
to  be  connected  to  the  network  using  a  non-removable  built-in  SIM  card,  unlike 
traditional SIM cards that can be removed and exchanged between devices. The  eSIM 
technology allows greater flexibility and ease of use in the activation and management of 
several lines on the device, a simpler and faster transition between operators without the 
need for a new physical card, and higher accessibility to roaming packages of different 
operators  ("main  line"  solutions).  In  addition,  the  technology  also  allows  coupling  of 
additional  devices  to  the  cellular  line  (secondary  solution)  such  as  watches  and  smart 
bracelets. In light of market trends, it is assumed that eSIM solutions as part of the main 
line offer will become more and more common. 

Following the winning of the frequency tender, Pelephone began operating frequencies 

55 Penetration rate - the ratio between the number of subscribers in the market and the total population in Israel (excluding 
foreign and Palestinian employees, although they are included in the number of subscribers). 
56  IMS - IP Multimedia Sub System - A system at the core of the network that is used, among other things, for switching calls 
made over IP networks (for example: Voice over LTE, Voice over Wifi). These two services are provided in combination to provide 
coverage within homes and to reduce traffic over the 3G network. The infrastructure will be used for additional services, such as 
One Number, Rich Call Services and more. 

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in  the  field  of  700  MHz  and  2600  MHz  in  4G  technology,  and  in  addition operates  5G 
technology at a frequency of 3500 MHz in some sites (see Section 3.8.2.4). 

3.1.6. 

Critical success factors  

3.1.6.1 

3.1.6.2 

3.1.6.3 

3.1.6.4 

3.1.6.5 

3.1.6.6 

3.1.6.7 

3.1.6.8 

3.1.6.9 

Nationwide  deployment  of  a  high-quality  and  advanced  cellular  network, 
ongoing  maintenance  of  the  network  at  a  high  level  and  significant 
investments  on  an  ongoing  basis  in  the  cellular  infrastructure,  both  for 
quality coverage throughout Israel and to provide customers with advanced 
services  through  advanced  technological  infrastructure  (see  also  section 
3.7.1).  

Growth in the subscriber base. 

Growth in the number of subscribers to 5G routes, with a larger browsing 
volume. 

Ability ot offer a competitive price level. 

Wide and varied distribution channels. 

A  variety  of  service  channels,  including  digital  channels,  that  provide 
efficient and quality support and service to a large variety of customers.  

Adjusting  the  cost  structure  and  implementing  operational  streamlining 
that make it possible to cope with increased competition. 

A brand that represents a quality, reliable and advanced network. 

High quality and skilled personnel. 

3.1.7. 

The main barriers to entry and exit57 

3.1.7.1 

The main barriers to entry into the field of activity are: 

a.  Saturation in the penetration rate in the field (see section 3.1.4).  

b.  The  need  for  a  mobile  radio  telephone  license  for  operators  with 
frequencies  (MVNO  operators  may  operate  on  the  basis  of  a  permit 
only),  the  allocation  of  frequencies  involved  in  high  costs  resulting, 
among  other  things,  from  the  fact  that  these  resources  are  in  short 
supply  (see  section  3.8.2.1)  and  the  subordination  of  the  activity  to 
regulatory supervision (see section 3.14.2). 

c.  The  need  for  significant  financial  means  for  making  heavy  and 
continuous  investments  in  infrastructure,  which  are  affected  by 
frequent technological changes (see also section 3.7.1.3). 

d.  The difficulty in setting up radio sites due to regulatory restrictions and 

public opposition. 

3.1.7.2 

The main barriers to exit from the field are: 

a.  Large investments that require a long return on investment.  

b.  The  commitment  to  provide  service  to  customers  derives  from  the 
terms  of  the  radio  telephone  license  license  and  the  agreements  in 
accordance with the terms set forth in the license. 

3.1.8. 

The structure of competition in the field and changes that apply in it  

3.1.8.1 

General 

The  cellular  communications  market  in  Israel  is  characterized  by  fierce 
competition, which is reflected in high subscriber turnover among operators 
in the past few years, rates erosion and profitability erosion. 

As of the date of this report, five operators with a radio telephone license 
license  are  operating  in  the  cellular  communications  market  in  Israel. 
Cellcom,  Partner,  Hot  Mobile  and  XFONE),  and  a  number  of  MVNO 

57 Some of the above entry and exit barriers apply in a partial and limited manner to virtual operators. 

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operators  with  an  radio  telephone  license  in  another  network  (virtual 
operators).  

3.1.8.2 

Infrastructure sharing 

Infrastructure sharing enables the consolidation of cellular operator sites in 
a way that significantly reduces the cost of operating and maintaining radio 
sites for each operator. To the best of Pelephone's knowledge, as of the date 
of the report, infrastructure is shared in the market as described below: 

a.  Partner and Hot Mobile operate as part of an infrastructure sharing in 

the radio segment within a shared corporation. 

b.  Cellcom  (who  holds  Golan  Telecom)  and  XFONE  operate  as  part  of 
infrastructure sharing in the radio segment of the 4G network as part 
of  a  joint  corporation  and  the  acquisition  of  other  interior  roaming 
services.  

3.1.8.3 

Virtual operators MVNO 

A number of MVNO licenses have been issued so far for vrtual operators. 
Only a few MVNO license holders are active in the market. 

For more details on the structure of competition in the field, see section 3.6. 

3.1.8.4 

Hearing on private networks 

Further to the public appeal published by the Ministry of Communications 
regarding  private  networks,  on  August  14,  2022,  the  Ministry  of 
Communications  published  a  hearing  in  which  the  public's  opinion  was 
requested on the Ministry's intention to allocate a frequency band in the 26 
GHz  range  (as  well  as  a  narrow  band  in  the  2100  MHz  range),  for  use  by 
parties that are not cellular operators or general landline telephony service 
operators, for the purpose of providing private network service (on a project 
or  local  basis).  Pelephone  submitted  its  position  to  the  hearing.  The 
implications of the issue will be clarified with the decision of the Ministry of 
Communications at the hearing. 

3.2. 

Services and products 

3.2.1. 

Services 

Below is a description of the services that Pelephone provides to the subscriber: 

3.2.1.1 

Package services that include: 

a.  Basic telephone services (VOICE) - basic call services, call completion 
services as well as ancillary services such as - waiting call, "follow me", 
voicemail, voice conference call, caller ID, and more. 

b.  Browsing  and  data  communication  services  -  Internet  browsing 
services using end equipment that is compatible with the use of 3G, 4G 
and 5G technologies. 

c.  SMS delivery and receipt service and multimedia messages MMS -SMS 
receiving and sending service (text messaging - SMS) and multimedia 
messaging (video / voice / text). 

Value Added Services - Pelephone offers its customers value-added services 
and  related  services,  such  as  data  storage  backup  services  (Pelephone 
Coud), antivirus services, cyber protection services, and more. 

Roaming  services  -  Pelephone  Provides  its  customers  with  roaming 
coverage in about 190 countries around the world. In addition, Pelephone 
also  provides  inbound  roaming  services  to  the  customers  of  foreign 
operators who stay in Israel. 

Private cellular networks with LTE (Long Term Evolution) or 5G technology 
- Pelephone offers business customers the installation and maintenance of 
a  private  cellular  network  in  the  business  customer's  complex.  A  private 
network  provides  the  business  customer  with  various  benefits,  including: 

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3.2.1.2 

3.2.1.3 

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business continuity, bandwidth management between the customer's end 
users, low latency, connection to IoT devices, contribution to securing the 
customer's networks and systems, and more. 

3.2.1.5 

Maintenance  and  repair  services  for  end  equipment  -  Pelephone  offers 
repair service and extended  warranty, for a monthly fee that entitles the 
customer to repair service and extended warranty for the cellular device, or 
for a one-time payment at the time of repair. 

Pelephone provides some of these services also in the framework of hosting 
agreements,  to  holders  of  an  mobile  radio  telephone  license  in  another 
network that use the Pelephone network in order to provide service to their 
customers. 

3.2.1.6 

Additional services 

a. 

IoT  (Internet  of  Things)  services  -  Pelephone  offers  its  customers 
advanced IoT solutions such as smart building networks with command 
and control systems, and more. 

b.  PTT (Push to Talk) services  -  Pelephone offers its business customers 
some of the most advanced PTT services in the world, which enable fast 
and secure corporate communication at the push of a button. 

3.2.2. 

Products 

Peripheral  devices  -  Pelephone  offers  various  types  of  mobile  phones,  PTT  devices, 
tablets,  laptops,  modems,  smart  watches,  electrical  products  as  well  as  supporting 
accessories such as speakers, headphones and more. 

3.3. 

Segmentation of revenues from products and services 

The following is data regarding Pelephone's revenues from products and services (in NIS millions): 

Products and services 
Revenue from services 
Rate of Pelephon’s total revenue 
Revenue from products (end equipment) 
Rate of Pelephon’s total revenue 
Total revenue 

2202  
1,791 
74.7% 
608 
25.3% 
2,399 

1202  
1,642 
71.7% 
647 
28.3% 
2,289 

2020  
1,591 
72.8% 
595 
27.2% 
2,186 

3.4. 

Customers 

The following is data on the distribution of revenue from customers (in NIS millions): 

Products and services 
Revenue from private customers 
Revenue from business customers (*) 
Total revenue 
(*) Revenue from customers in business tracks includes revenue from hosting agreements (agreements that allow 
the provision of mobile telephony service through the Bezeq network of another authorized provider), which were 
received mainly from Rami Levy. 

2020 
1,194 
992 
2,186 

2021 
1,361 
928 
2,289 

2022 
1,416 
983 
2,399 

At  the  end  of  2022,  the  number  of  Pelephone  subscribers  was  approximately  2.7  million,  including 
approximately 2.2 million postpaid subscribers (subscribers who receive service for a monthly payment), 
and approximately 0.3 million prepaid subscribers (advance payment for consumption of services).  

Pelephone markets packages with an increased volume of use that are also adapted to the needs of 5G, 
and as of the date of publication of the report, Pelephone has about 813k subscribers in such packages. 

3.5.  Marketing, distribution and service 

Pelephone's  distribution  system  includes  about  250  points  of  sale  where  you  can  join Pelephone 
services. The set of points of sale is diverse and includes stores and stalls operated by Pelephone, 
retail  chains  that  market  Pelephone  products  and  about  20  Service  and  sales  centers  located 
throughout  Israel  that  handle  service,  sales,  device  repair  and  customer  retention.  In  addition, 
Pelephone  operates  an  internal  and  external  network  of  telephone  marketers.  As  a  rule,  the 
remuneration to the marketers is paid as commissions from the sales. 

Pelephone's service system for subscribers includes diverse digital channels including the Pelephone 

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website hone, self-service app and call centers. 

3.6. 

Competition 

3.6.1. 

General  

In recent years, the Ministry of Communications has taken regulatory moves designed to 
increase competition in the cellular communications market. The large number of cellular 
operators  in  the  market  led  to  a  high  level  of  competition  in  recent  years,  which  is 
reflected in the transition of subscribers between operators and in a reduction in cellular 
package prices, which led to erosion in rates and profitability in both private and business 
customers. 

In order to compensate for the erosion of package prices, Pelephone employs a strategy 
for  growth  in  the  number  of  subscribers  alongside  streamlining  and  costs  structure 
adjustment (see section 3.17). 

The  following  is  data,  to  the  best  of  Pelephone's  assessment,  about  the  number  of 
subscribers of Pelephone and its competitors over the years 2021 and 2022 (thousands 
of subscribers, approximately): 

Pelephone 

2,576 

Cellcom 
(including 
Golan 
Telecom)  
(3) 
3,246 

Partner (3) 

Hot Mobile 
(2) 

MVNO And 
other 
operators (1) 

Total 
subscribers in 
the market 

3,019 

1,674  

 791  

22.6% 

28.8%  

26.8% 

14.8%  

7.0%  

2,675 

3,455 

3,048 

1,763 

826 

22.8% 

29.3% 

25.9% 

15% 

7.0% 

11,306 

11,

 767

As of 
December 
31, 2021  

As of 
September 
30,  2022 

Number of 
subscribers  
Market 
Share 
Number of 
subscribers  
Market 
Share 

(1)  Most  of  the  MVNOs  and  the  other  operators  (which  include,  among  others,  XFONE)  are  private 
companies that do not publish  data regarding  the  number of their subscribers, and the said data is 
based on an estimate of data on mobility between companies. 

(2)  Hot Mobile's Q3/2022 data is based on an estimate, according to data published in the reports of Altice, 

the controlling shareholder of Hot, to the best of Pelephone's knowledge. 

(3)  The number of subscribers is correct as of September 30, 2022, based on Cellcom and Partner reports 

to the public. 

3.6.2. 

Infrastructure sharing and granting network use right agreements 

For details regarding the existing infrastructure sharing agreements in the market as of 
the date of the report, see Section 3.1.8.2. As mentioned, infrastructure sharing enables 
the consolidation of cellular operator sites in a way that significantly reduces the cost of 
operating and maintaining radio sites for each operator.  

Pelephone is not a party to the radio network sharing agreement, in accordance with the 
implementation of the Ministry of Communications policy on network sharing dated April 
17,  2014,  so  it  does  not  enjoy  the  savings  resulting  from  the  shared  use  of  the  radio 
network,  but  on  the  other  hand  it  exclusively  controls  its  cellular  network,  the 
maintenance of its technological route and the volume of investments in it. 

3.6.3. 

Positive and negative factors that affect Pelephone's competitive position 

3.6.3.1 

Positive factors: 

a.  A cellular network with a broad and high-quality deployment. 

b. 

Its position as a fast and advanced cellular network, especially against 
the background of the progress of the deployment of the 5G network. 

c.  A  diverse  and  wide  distribution  system  that  operates  through  call 
centers  and  through  a  large  number  of  fromtal  points  of  sale  and  is 
operated by Pelephone, external marketers and through leading retail 
chains. 

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d.  A wide range of services and a variety of customer service interfaces, 
including digital channels, which enable the provision of a high level of 
service to customers. 

e.  A solid capital structure and a positive cash flow. 

3.6.3.2 

Adverse factors: 

a.  As a subsidiary of Bezeq, Pelephone is subject to regulatory restrictions 
on  entering  additional  areas  of  activity  and  expanding  the  basket  of 
services to customers who do not apply to its competitors.  

b.  There  are  restrictions  on  joint  activities  with  Bezeq,  including  the 

marketing of joint service packages (see Section 1.7.3). 

c.  The costs of setting up, operating and maintaining cellular networks in 
Pelephone  are  expected  to  be  higher  compared  to  competitors 
operating through the sharing of radio segment infrastructure. 

Regarding negative factors, see also Section 1.7.2. 

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3.7. 

Property, plant and equipment, real estate and facilities 

Pelephone's property, plant and equipment include infrastructure equipment of the network core, 
radio  sites,  electronic  equipment,  computers,  vehicles,  end  equipment,  office  furniture  and 
equipment, and leased improvements.  

3.7.2. 

Infrastructure 

3.7.2.1 

 Pelephone  currently  operates  communication  networks  in  three  main 
technologies, as follows: 

a.  5G - the NEW RADIO technology that uses a very broadband spectrum 
(100  MHz  at  Pelephone)  and  enables  higher  capacity  and  higher 
browsing rates for the user. In the future, the technology will enable IoT 
applications  at  significantly  higher  volumes  than  today  and  at  a  very 
high level of performance. 

b.  4G - LTE technology from the GSM standards family. The advantages of 
the  technology  are  high  capacity  for  data  communication  and  faster 
download and upload rates than those that exist in 3G. All end devices 
that support this technology also support 3G technology and there is a 
smooth transition between the technologies. 

c.  3G  -  technology  in  the  UMTS  method  based  on  GSM  standard.  This 
technology  is  very  common  in  the  world  and  enables  subscriber 
identification and service through a subscriber identification card (SIM) 
 As  part 
that can be transferred from one end device to another. 
of a hearing held by the Ministry regarding the future closure of mobile 
radio-telephone networks operating with old technologies, (2G and 3G 
networks) an outline was established for the closure of these networks, 
which is expected to lead to their closure on December 31, 2025 (or at 
an earlier date at the request of each operator in relation to his network 
and  provided  that  it  meets  the  established  conditions).  The  outline 
includes,  among  other  things,  milestones  of  stopping  the  import  of 
devices that do not support modern technologies, informing the public, 
and stopping the connection of these devices to the network. It should 
be  noted  that  Pelephone's  2G  network  was  closed  by  it  in  the  past. 
Pelephone is prepared in accordance with the above decision to close 
its 3G network, according to the timetables established in the decision 

As of the date of the report, Pelephone's network infrastructure is mainly 
based on two switching farms connected to more than 2,500 sites. 

3.7.2.2 

Network investments 

In recent years, Pelephone has invested in the deployment of a 4G and 5G 
network, including the implementation of innovative technologies such as 
Beam Forming, MASSIVE MIMO, QAM 256 and Carrier Aggregation in the 
access network, and in IMS in the network core (see Section 3.1.5). 

In  this  framework,  starting  in  2020,  Pelephone  is  expanding  the  access 
network (by operating additional frequencies in the 700, 2600 MHz range at 
over a thousand sites, as well as in the 3500 MHz range at approximately 
500 sites, by installing and operating antennas and reception transmission 
equipment in the areas These frequencies on the various sites. It should be 
noted that among these, in the 700 MHz range, the target for deployment 
is nationwide. 

Pelephone's  activity  outline  for  the  deployment  and  implementation  of 
advanced data communication services in the 5G, is high in investment and 
currently  integrates  with  existing  infrastructures  and  systems,  when  the 
operation of these advanced services will be based on the 5G technology 
which  Pelephone  will  continue  to  deploy  as  mentioned,  and  later  will  be 
based on a new network core dedicated to 5G ( See Section 3.8.2.4). 

In  addition,  as  part  of  its  ongoing  investments,  in  the  next  ten  years 
Pelephone  will  be  required  to  invest  in  the  establishment  of  new 

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broadcasting  sites,  among  other  things,  in  order  to  comply  with  the 
conditions of the mobile radio-telephone license. 

Pelephone's estimates as aforesaid regarding the required investments are 
forward-looking information within its meaning of the Securities Law, based 
on  Pelephone's  forecasts  and  estimates,  inter  alia,  regarding  the  rate  of 
network  expansion  and  upgrade  of  the  network.  Accordingly,  the 
information  may  not  fully  or  partially  materialize  or  may  materialize  in  a 
different format than that which was assessed, insofar as the said forecasts 
and assessments are not fulfilled or will be fulfilled in a different way than 
expected. 

3.7.3. 

Areas used by Pelephone 

Pelephone does not own real estate and it leases from others, including Bezeq, the areas 
it  uses  for  its  activities.  The  following  is  a  description  of  most  of  the  areas  used  by 
Pelephone: 

3.7.3.1 

3.7.3.2 

3.7.3.3 

3.7.3.4 

3.7.3.5 

The  areas  used  by  Pelephone  to  place  communication  sites  and  network 
centers  as  stated  in  the  section  3.7.1  are  spread  throughout  Israel  and 
leased for different periods (in many cases for 5 years plus the option to 
extend the agreement for another 5 years). For site licensing, see section 
3.14.3. 

Until  December  31,  2019,  a  license  agreement  was  in  force  between 
Pelephone and ILA for the use of  ILA real estate for the construction and 
operation of communication sites, which regulated, among other things, the 
license fee for such use for the period until December 31, 2019. On January 
19,  2022,  the  decision  of  the  Israel  Lands  Administration  to  extend  the 
period  of  the  roof  agreement  from  December  31,  2019  to  December  30, 
2024 was amended, with various changes. 

Pelephone's headquarters are in Petah Tikva. 

For  service  and  sales  activities,  Pelephone  rents  about  50 service  centers 
and sales points spread throughout Israel. 

Pelephone  has  additional  lease  agreements  for  warehouses  (including  a 
central  logistics  center  with  a  central  laboratory  for  repairing  customer 
devices),  offices,  call  centers  and  2  switching  farms  used  by  it  for  its 
operations. 

3.8. 

Intangible assets 

3.8.1. 

Licenses 

For details regarding Pelephone's mobile radio telephone license and operating license in 
Judea and Samaria, see section 3.14.2. 

3.8.2. 

Right to use frequencies 

3.8.2.1 

Shortage IN Radio frequencies 

In Israel, there is a shortage of radio frequencies for public use (among other 
things,  due  to  the  allocation  of  many  frequencies  for  security  uses).  As  a 
result,  the  government  limits  the  number  of  licenses  that  can  be  used  in 
frequencies.  

3.8.2.2 

Pelephone’s frequency inventory 

Pelephone  has  the  right  to  use  frequencies  by  virtue  of  the  mobile  radio 
telephone license and the Telegraph Order in the ranges of 850 MHz58 and 
2100 MHz for operating the network in UMTS / HSPA technology, and in the 
1800 MHz, 700 MHz and 2600 MHz range for network operation in the LTE 
technology (see also section  3.1.5) and in the range of 3500 MHz for the 
purpose  of  operating  a  network  with  5G  technology.  During  2017, 
Pelephone returned to the National Frequency Database 2 frequency bands 

58 Pelephone has the option of requesting a 5-mega allocation in the 800 MHz range following the 850 MHz frequency evacuation project.  

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with a width of 1 Mega each in the range of 850 MHz, and towards the end 
of April 2017, it received a temporary allocation of a band in the range of 
1800 MHz with a width of 5 Mega. This allocation is limited in use and is for 
a fixed period. 

The  Ministry  of  Communications  has  temporarily  reassigned  this  band  to 
Pelephone  until  December  31,  2024,  under  conditions  and  limitations,  in 
order to allow Pelephone to prepare for the expected change in changing 
frequencies in the first Ghz range (see Section 3.8.2.3). 

Pelephone  intends  to  deploy  the  frequencies  in  the  800  MHz  range  that 
were  allocated  to  Pelephone  instead  of  the  850  MHz  frequencies  (see 
Section 3.8.2.3). Pelephone intends to use for the purpose of deepening the 
deployment of the LTE technology network towards the end of 2023, and to 
activate these frequencies during the year 2024. 

3.8.2.3 

Switching freqencies in the first Giga range 

In July 2018, the Ministry of Communications informed Pelephone that it 
intends to adjust cellular frequencies in Israel to European standards and 
the  area  in  which  the  State  of  Israel  is  located,  so  that  Pelephone  and 
another  cellular  operator  will  be  required  to  replace  the  850  MHz 
frequencies with other frequencies in the first GHz. In 2020, the Ministry of 
Communications announced to Pelephone that it intended to implement an 
outline for the replacement of 850 MHz frequencies in the use of Pelephone, 
interference  caused  to 
against  the  background  of  electromagnetic 
neighboring  countries  due  to  non-compliance  of  cellular  frequencies  in 
Israel with European standards and the stadards of the region. According to 
the  outline,  Pelephone  will  receive  frequencies  in  the  range  of  800  MHz 
instead of 850 MHz, when in the first stage and for the purpose of treating 
such interruptions, the amount of 850 MHz frequencies used by Pelephone 
will be reduced to 5 MHz (instead of 10 MHz today) and this as of May 31, 
2020. Pelephone forwarded to the Ministry of Communications, following 
his request, its reference to a number of issues and on March 17.    

On June 1, 2020, Pelephone  returned to the Ministry of  Communications 
frequencies in the range of  850 MHz, with a width of 5 MHz, so that the 
amount of 850 MHz frequencies owned by Pelephone decreased from 10 
MHz  to  5  MHz.  On  November  26,  2020,  the  Ministry  of  Communications 
allowed Pelephone to reuse full 2X10 MHZs in the 850 range until March 31, 
2021. On December 31, 2021, Pelephone stopped using one of the two 5 
MHz-wide 850 channels and continued using a single 5 MHz channel On June 
27, 2021, a decision was made by the Ministry of Communications regarding 
an  extension  of  the  allocation  of  frequencies  in  850  MHz  and  2100  MHz 
ranges that Pelephone holds, until December 31, 2030 (it is clarified that the 
extension  of  the  850  MHz  frequency  is  subject  to  description  above, 
regarding the exchange of frequencies in the first giga field). 

3.8.2.4 

Tender for advanced broadband services ("the Tender") 

On August 12, 2020 Pelephone won the allocation of frequencies as a result 
of  its  participation  in  the  tender  for  mobile  radio  telephone  services  in 
advanced 5G bandwidths. The following are the main points of the tender: 

The  Tender 
includes  provisions  regarding  the  coverage  and  quality 
requirements  of  the  network  that  will  be  anchored  as  part  of  the 
amendment of the mobile radio telephone licenses of the existing operators 
(see amendment to Pelephone’s license below). 

The Tender including the possibility of receiveing the following incentives: 

a.  Discounts in the frequency fees for the first four years, subject to the 
approval  of  the  Ministry  of  Communications  and  the  Ministry  of 
Finance. 

b.  Receipt of a conditional grant for the deployment of 5G sites according 
to the conditions specified in the Tender (such as meeting the scope of 
deployment, schedules, deployment period and timing of deployment 

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in relation to others and additional conditions set in the Tender). This 
grant was received in 2022. 

For  details,  see  also  Section  3.19.2.1.  For  details  regarding  exposure  to 
interference in the frequency ranges of Pelephone, see section 3.19.3.10.  

The following are the conditions under which Pelephone won the allocation 
of such frequencies: 

a.  Winning at 10 Mega in the 700 MHz range (for a period of 15 years); at 
20 Mega in the 2600 MHz range (for a period of 10 years); And at 100 
Mega in the field of 3500 MHz (for a period of 10 years). The license 
period does not change as a result of the Tender and can be renewed 
in  accordance  with  the  license  provisions  (hereinafter:  "Frequency 
Allocation"). It should be noted that the frequencies won by Pelephone 
are used exclusively by Pelephone network, which gives it a competitive 
advantage.  It  should  also  be  noted  that  companies  that  do  not  own 
existing networks did not win the Tender. 

b.  Pelephone winning the frequency allocation involved a total payment 
of  approximately  NIS  88  million,  which  was  made  by  Pelephone  in 
September  2022.  In  this  context,  it  should  be  noted  that  the  Tender 
further  stipulates  that  incentives  may  be  obtained,  as  specified  in 
above, including receiving a conditional grant for the deployment of 5G 
sites according to the conditions specified in the Tender, the amount of 
which, for all the winners, can reach a total amount of NIS 200 million. 
On  October  27,  2021,  a  notice  was  received  from  the  Ministry  of 
Communications that Pelephone is entitled to this grant in the amount 
of NIS 74 million, and the grant was actually received in 2022. As part 
of  the  update  of the  regulations  under  which  the  frequency  fees  are 
paid, a reduction in the amounts of the fees for 2600 and 3500 MHz 
frequencies was determined, as well as a conditional annual discount 
from the total amount of the frequency fees to be paid by Pelephone in 
the  next  four  years  (the  discount  depends  on  the  Company's 
compliance  with  graded  annual  engineering  targets,  which  will  be 
examined by the Ministry of Communications every year). 

On October 1, 2020, Pelephone's license was amended in accordance 
with the winning results (shortly before, Pelephone was allocated the 
frequencies  at  which  it  won  as  stated).  With  the  amendment  of  the 
license, Pelephone began operating the frequencies which it won in the 
Tender at the broadcast sites upgraded by it. 

Said  Frequency  Allocation  enables  supporting  the  increase  in  the 
volume of browsing in the 4G and in the future offer services in the 5G 
at significantly higher browsing rates than those existing today, and will 
allow,  among  other  things,  expanding  a  variety  of  advanced  cellular 
uses, such as smart cities, IoT services, mission critical services with low 
latency,  private  networks  and  more  and  all  in  order  to  provide  a 
competitive solution in the market. It will involve ongoing investments. 

In this regard, see also Note 11 to the 2022 statements. 

Further  to  the  non-binding  document  of  principles  published  by  the 
Ministry  of  Communications  on  August  14,  2022  regarding  the 
continuation of the tender for 5G mobile radio-telephone services for 
the  purpose  of  improving  and  consolidating  the  5G  capabilities  and 
solutions that exist in the cellular networks today, on December 7, 2022 
the Ministry published the 5G tender documents in the area of the 26th 
frequencies GHz, in which 25 bandwidths of 100 MHz are offered each 
(a  total  of  2,500  MHz),  for  congestion  between  the  existing  cellular 
operators (existing cellular networks), where each network is entitled 
to win up to 1,200 MHz (out of the 2,500 ). The tender  consists of a 
stage of meeting the threshold conditions and a dynamic competition 
stage (the date of which has not yet been determined). The minimum 

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price per band will also be determined later. Pelephone is studying the 
tender  documents  and  its  conditions  and  it  and/or  Bezeq  is  not  in  a 
position to assess, at this stage, its consequences. 

3.8.3. 

Trademarks 

Pelephone  has  a  number  of  registered  trademarks.  The  main  one  is  the  "Pelephone" 
brand. 

3.8.4. 

Computer software, systems and databases 

Pelephone uses software and computer systems, some based on licenses it has acquired 
and some developed by Pelephone's information systems division. Many of these licenses 
are  limited  in  time  and  are  renewed  from  time  to  time.  The  main  systems  used  by 
Pelephone  are  an  ERP  system  by  Oracle  Applications  and  a  customer  billing  and 
management system by Amdocs. 

Pelephone is also working to upgrade the CRM (customer management) to an advanced 
Salesforce  cloud  platform  together  with  Bezeq  International  and  DBS.  Pelephone  is 
dependent  on  the  Salesforce  system  and  services,  due  to  their  importance  for  the 
purpose of managing relationships with its customers. System failures or the cessation of 
services by this provider are likely to cause operational difficulty until the fault is rectified 
or the system / provider is replaced, which may take a long time 

3.9. 

Human capital 

3.9.2. 

Organizational structure 

The following is a diagram of Pelephone's organizational structure, as of the date of the 
report: 

Board of 
Directors 

CEO 

HR and 
Administratio
n Division 

Finance 
Division 

Private 
Customers 
Division *  

Information 
Systems 
Division 

Engineering 
Division 

Business 
Division 

Marketing 
Division 

Legal 
advice and 
Regulation 

Public 
Relations 

Internal 
Auditor 

As part of the implementation of the synergy processes with the Group's subsidiaries, 
Pelephone's CEO, Mr. Ilan Siegel, also serves as CEO of DBS. In addition, some of the VPs 
who serve on Pelephone also serve as VPs at DBS. 

3.9.3. 

Employee base and number of jobs 

The following is a breakdown of the number of employees in Pelephone according to its 

organizational structure:  

Division 

and 

and 

business 

administration 

Management 
divisions 
Private 
divisions 
Engineering  and  Information  Systems 
Divisions 
Total 

customer 

103

Number of employees 

31.12.202  
2
194 

31.12.202  
1
192 

1,128 

382 

1,704 

1,190 

386 

1,768 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

The number of employees included in the table above includes employees employed part-
time. The total number of jobs59 at Pelephone as of December 31, 2021, was 1,529. 

3.9.4. 

Terms of employment  

Most  Pelephone  employees  are  employed  under  a  monthly  agreement  or  an  hourly 
agreement, according to the professions and positions in which they are engaged. Most 
of the service and sales staff are part-time shift workers and are employed on an hourly 
basis.  The  other  Pelephone  employees  are  employed  on  a  global  basis.  The  main 
difference between the monthly and hourly agreements and the global agreements lies 
in the salary structure. 

3.9.5. 

Collective agreement 

The labor relations at Pelephone are regulated in a collective agreement signed between 
Pelephone and the new Histadrut - the Cellular, Internet and High-Tech Workers' Union 
("the Histadrut") and the Pelephone Employees’ Committee. The agreement applies to 
all Pelephone employees, with the exception of senior executives and certain employees 
in pre-defined positions who are employed by personal agreements. 

On  November  13,  2019,  a  renewal  of  the  existing  collective  agreement  was  signed 
between the parties, which includes streamlining and synergy procedures, for a period of 
up to June 30, 2022 (“the Agreement"). 

Under the Agreement, Pelephone may, among other things, terminate the employment 
of 210 permanent employees during the term of the Agreement, some of them as part of 
a voluntary retirement. Moreover, the Agreement allowed Pelephone to terminate the 
employment of 190 additional non-permanent employees, in addition to not recruiting 
employees  instead  of  employees  the  employment  oh  whom  will  be  terminated.  The 
Agreement  also  includes  providing  a  one-time  bonus  to  employees  who  will  not  be 
included in the retirement plan. 

On December 6, 2022, Pelephone signed the renewal of the existing collective agreement 
between itself and the General Workers' Histadrut and its employee representative for 
the period from December 6, 2022 to December 31, 2025 ("the Agreement" and "the 
Agreement  Period",  respectively)  under  new  conditions.  According  to  the  Agreement, 
salary increases and bonuses will be given, ancillary conditions will be improved and the 
labor  disputes  announced  by  the  General  Workers'  Histadrut  and  the  employees’ 
representatives will be settled (with the exception of one issue detailed in Section 3.9.5) 
while  maintaining  industrial  peace  during  the  validity  period  of  the  agreement  in  the 
matters  regulated  therein.  The  total  estimated  cost  of  the  Pelephone  agreement, 
including the voluntary retirement of employees whose retirement has been approved, 
is about NIS 71 million. 

Pelephone's  estimates  regarding  the  cost  of  the  Agreement  are  forward-looking 
information,  as  defined  in  the  Securities  Law,  based,  among  other  things,  on  its 
assumptions regarding the manner and scope of the retirement plan implementation and 
additional conditions stipulated in the agreement. These estimates may not materialize, 
or materialize in a different way than expected, depending, among other things, on the 
manner and scope of the actual implementation of the agreement and the retirement 
plan, taking into account Pelephone's needs and its ability to implement its plans and the 
fulfillment of additional conditions stipulated in the Agreement. 

For this matter see also Note 16 to the 2022 statements. 

3.9.6. 

Labor disputes 

On January 31, 2018, Pelephone was notified by the Histadrut ("the Histadrut Notice") of 
the declaration of a labor dispute in accordance with the Labor Disputes Settlement Law, 
5717-1957.  According  to  the  Histadrut  Notice,  the  issues  in  the  dispute  are  the 
employees’ requirements for consultation and negotiations regarding the sale of Bezeq's 
controlling shares to the new owners and the regulation of their rights as a result. 

59The calculation of the number of "jobs" in Pelephone is: the total monthly working hours divided by the monthly working hours 
quota. 

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On December 6, 2022, a collective agreement was signed that includes renewal of the 
agreement  period  from  the  date  of  signing  until  December  31,  2025.  As  part  of  the 
agreement,  all  open  labor  disputes  were  removed,  with  the  exception  of  the  issue  of 
appointing  a  representative  to  Pelephone’s  Board  of  Directors  on  behalf  of  the 
employees, which was stipulated in the agreement to be discussed later. 

3.10.  Suppliers 

3.10.2. 

End equipment suppliers 

Pelephone  purchases  some  of  the  end  equipment  and  accessories  from  different 
providers in Israel, and imports some independently. In addition, Pelephone purchases 
end equipment and accessories by way of purchase consignation with the right to return 
to the end equipment suppliers. Contracts with some suppliers are based on framework 
agreements  that  regulate,  inter  alia,  the  supplier's  technical  support  for  the  end 
equipment provided thereby, the availability of spare parts and repairs and the supplier's 
warranty for the products. In most cases, these agreements do not include an obligation 
on  Pelephone's  part  to  make  purchases,  and  they  are  executed  on  an  ongoing  basis 
through a purchase order according to Pelephone's needs. 

In  the  event  of  a  termination  of  contract  with  a  particular  end  equipment  supplier, 
Pelephone may increase the quantity purchased from other end equipment suppliers, or 
purchase end equipment from a new end equipment supplier. 

Pelephone’s essential suppliers are Apple, with whom there is an agreement that requires 
defined  procurement  targets  and  is  valid  until  March  2024,  and  Samsung,  with  which 
Pelephone does not have an agreement that requires the purchase of a minimum annual 
quantity and the purchases are made on the basis of orders made by Pelephone from 
time to time. 

Pelephone purchases rate from each of the suppliers Apple and Samsung in 2022 was 
approx.13.3% and approx. 11.6% (respectively) of Pelephone’s total purchases from all of 
Pelephone’s  suppliers60.  The  distribution  of  peripheral  equipment  purchases  among 
suppliers is such that it does not create a material dependence on the supplier or model 
of equipment. 

It should be noted that a global chip shortage caused, among other things, a shortage and 
difficulties in the supply of end equipment from Bezeq's main suppliers. 

3.10.3. 

Infrastructure providers 

Cellular infrastructure equipment in the UMTS, LTE and the 5G networks are provided by 
LM Ericcson Israel Ltd. ("Ericcson"). Ericcson is also a significant supplier of Pelephone in 
the  field  of  microwave  transmission.  Pelephone  has  multi-year  agreements  for 
maintenance,  support  and  software  upgrades  for  the  UMTS  network,  as  well  as  an 
agreement  for  the  purchase  of  4G  (LTE)  and  5G  equipment  with  Ericsson,  and  in  its 
opinion it may be dependent on it in connection with network support and expansion. In 
addition,  the  cellular  network  uses  transmission,  and  Bezeq  is  a  significant  supplier  of 
Pelephone in this field. 

Pelephone  has  a  multi-year  transmission  agreement  with  Bezeq  that  includes  use  and 
maintenance.  

3.11.  Working equity 

Credit policy  

Credit in device sales transactions - Pelephone gives  most of its customers  who purchase mobile 
phones the option to spread the payments up to 36 equal payments. In order to reduce exposure 
that may arise as a result of providing credit to its customers, Pelephone operates in accordance with 
a credit policy that is reviewed from time to time. Pelephone also checks the financial strength of its 
customers (in accordance with the parameters set by it). 

60  All suppliers - All of Pelephone’s suppliers, including suppliers who are not suppliers of end equipment and electronic devices. 
The rate of purchases from suppliers Apple and Samsung out of the total purchases of the Bezeq Group from all its suppliers is 
approximately 7.2% and 5.8% (respectively). 

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Monthly billing credit for cellular services - Pelephone customers are charged once a month with 
billing  cycles,  performed  on  different  dates  throughout  the  month,  for  the  consumption  of  last 
month's cellular services.  

Pelephone receives credit from most of its providers for a period ranging from 30 days to end of 
month + 92 days. 

The following are data regarding average suppliers' and customers' credit in 2022:  

Credit volume 
in NIS millions 

Average credit 
days 

Customers for the sale of end equipment (*) 
Customers for services (*) 
Suppliers 
(*) Net of loan-loss 

505 
200 
245 

259 
35 
44 

3.12.  Taxation 

See Note 7 to the 2022 statements.  

3.13. 

Environmental risks and ways of managing them 

3.13.2. 

The  provisions  of  the  law  concerning  the  environment  and  apply  to  the 
activities of Pelephone 

in 
The  broadcast  sites  used  by  Pelephone  are  "radiation  sources" 
accordance  with  the  Non-Ionizing  Radiation  Law.  The  establishment  and 
operation of these sites, with the exception of sites listed in the appendix to 
the law, requires the receipt of a radiation permit. 

The law establishes a two-stage licensing mechanism for obtaining a permit 
to operate a radiation source, according to which the applicant for a permit 
must first obtain a permit to establish the radiation source ("Establishment 
Permit"),  valid  for  a  period  not  exceeding  three  months,  which  can  be 
extended by the Commissioner by up to 9 months, followed by a permit to 
operate  a  source  of  radiation  ("Operating  Permit"),  which  is  valid  for  a 
period  of  five  years  or  as  otherwise  determined  by  the  Minister  of 
Environmental Protection.  

With regard to the Establishment Permit, the law stipulates the granting of 
the permit by performing an assessment of the maximum levels of exposure 
of people and the environment to the radiation expected from the radiation 
source  when  it  is  activated,  including  in  the  event  of  a  malfunction;  And 
taking the necessary measures to limit the levels of exposure of humans and 
the environment to the radiation expected from the radiation source when 
it is activated, including the use of technological means in use ("Limitation 
Means"). 

With regard to the Operating Permit, the law stipulates the granting of the 
permit by the  taking of measures to limit and make measurements of the 
levels  of  exposure  of  humans  and  the  environment  to  the  radiation 
generated  during  the  activation  of  the  radiation  source.  The  law  also 
conditions the granting of an Operating Permit by presenting a license in 
accordance  with  the  Communications  Law,  and  in  some  cases,  also  by 
presenting a permit under the Planning and Construction Law. 

The  law  includes  a  penalty  chapter  which  stipulates,  inter  alia,  that  the 
construction or operation of a radiation source in violation of the terms of 
the permit and the construction or operation of a radiation source without 
a  permit  after  receiving  written  notice  from  the  Commissioner,  are  a 
criminal offense.  

It will be noted that regulating the maximum permissible levels of exposure 
of human beings to radiation from a radiation source and the safety ranges 
from transmission facilities to communications, including the restriction on 
placing a radiation source on roof terraces, is still in the process of legislation 
with  the  Knesset's  Interior  Committee  on  the  Environment,  as  part  of  an 

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amendment proposed to the regulations under the Non-Ionizing Radiation 
Law,  which  was  accompanied  with  disagreements  between  government 
ministries. 

In  January  2009,  the  Commissioner  for  Radiation  at  the  Ministry  of 
Environmental  Protection  issued  guidelines  regarding  safety  ranges  and 
maximum  permitted  levels  of  exposure  regarding  radiation  from  radio 
frequencies, including cellular antennas. 

It  should  also  be  noted  that  the  Ministry  of  Environmental  Protection 
operates  a  system  of  continuous  supervision  and  monitoring  of  the 
broadcasting  centers  to  check  their  compliance  with  the  requirements  of 
the law. 

Cellular  services  are  provided  through  a  mobile  phone  that  emits  non-
ionizing radiation (also known as electromagnetic radiation). The Consumer 
Protection  Regulations  (Information  on  Non-Ionizing  Radiation  from  a 
Mobile  Phone)  5762-2002  stipulate  the  maximum  permissible  level  of 
radiation of a cellphone measured by units SAR (Specific Absorption Rate) 
and  informing  Pelephone's  customers  in  this  context.  To  the  best  of 
Pelephone's knowledge, all the cellular devices it markets meet the required 
SAR standards. See also section 3.19.2.5.  

3.13.3. 

Pelephone policy in environmental risk management 

Pelephone  conducts  periodic  radiation  tests  to  ensure  compliance  with 
permitted operating standards and international standards. These tests are 
outsourced  to  companies  licensed  by  the  Ministry  of  Environmental 
Protection.  Pelephone  has  an 
internal  enforcement  procedure  for 
supervising  the  implementation  of  the  provisions  of  the  Non-Ionizing 
Radiation Law, according to  which a senior administrative body has been 
appointed  as  responsible  for  its  implementation.  The  purpose  of  the 
procedure  is  to  implement  the  provisions  of  the  law  and  to  reduce  the 
possibility of violating it. 

3.13.4. 

Transparency to consumers 

Pelephone  is  subject  to  relevant  laws  that  stipulate  advertising  obligations  and 
information  about  the  sources  of  radiation  that  it  operates  and  about  the  radiation 
emanating from the devices it provides. Pelephone publishes information on its website 
regarding  the  level  of  SAR  emitted  from  cell  phones  and  the  Ministry  of  Health's 
recommendations for precautionary measures in the use of cell phones. 

3.14.  Restrictions and supervision of Pelephone’s operations 

3.14.1. 

Legislative restrictions 

3.14.1.1 

 Communications Law  

The provision of cellular services by Pelephone is subject to the provisions 
of  the  Communications  Law  and  its  regulations.  For  details  regarding  the 
mobile  radio  telephone 
license  granted  to  Pelephone  under  the 
Communications Law, see section 3.14.2.  

The law authorizes the Director General of the Ministry of Communications 
to impose financial sanctions due to various violations of the provisions of 
the  law  and  of  orders  and  provisions  issued  under  it,  as  well  as  due  to 
violation of conditions in the license.  

3.14.1.2 

Wireless Telegraph Order  

The  Telegraph  Order  regulates  the  use  of  the  electromagnetic  spectrum, 
and applies, among other things, to the use of radio frequencies made by 
cell phones, as part of its infrastructure. Establishment of a system that uses 
and  operates  radio  frequencies  is  subject,  under  the  Telegraph  Order,  to 
licensing, and the use of radio frequencies is subject to the designation and 
allocation of an appropriate frequency. According to the Telegraph Order, 
license  fees  and  fees  are  imposed  for  the  designation  of  frequencies  and 

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their  allocation.  The  Order  authorizes  the  Ministry  of  Communications  to 
impose financial sanctions due to various violations of its provisions. 

For radio frequencies assigned to cell phones, see section 3.8.2. 

3.14.1.3 

The Non-Ionizing Radiation Law 

With  respect  to  facilities  that  emit  electromagnetic  radiation  see  section 
3.13. 

3.14.1.4 

Consumer legislation and privacy protection and information security laws 

As  part  of  its  activities,  Pelephone  is  subject  to  the  Consumer  Protection 
Law, which regulates a dealer's obligations to consumers, as well as the laws 
of privacy protection and information security (see Section 1.7.7.4).  

3.14.1.5 

Change in interconnectivity fee rates (Call Completion Fee) 

 Interconnectivity  rates  are  set  by  the  regulator.  For  details  see  Section 
1.7.7.1. 

3.14.2. 

Pelephone's mobile radio telephone license  

3.14.2.1 

General 

Pelephone's mobile radio telephone license as well as the general license to 
provide  cellular  services  in  the  Judea  and  Samaria  area  are  valid  until 
September 9, 2022 61. 

The  following  are  the  main  instructions  from  Pelephone's  mobile  radio 
telephone license:  

a. 

In  certain  circumstances,  the  Minister  may  change  the  terms  of  the 
license, restrict it or suspend it and, and in some cases even cancel it. 

b.  The license is not transferable and includes restrictions on the purchase 
or transfer (including by way of lien) directly or indirectly of control or 
of 10% or more of any means of control in Pelephone, including the lien 
of such means of control, unless the Minister's prior consent is given.  

c.  Pelephone is obligated to provide an interconnectivity service on equal 
terms  to  any  other  operator  and  must  avoid  any  discrimination  in 
interconnectivity.  

d.  Pelephone  must  refrain  from  preference  of  providing  infrastructure 
services to a licensee who is an affiliated company (as defined in the 
license) over another licensee.  

e.  The 

license  specifies  the  mobile  radio  telephone  services  that 
Pelephone  may  provide  and  states  that  it  is  not  allowed  to  provide 
additional mobile radio telephone services that are not specified in the 
license. 

f.  Pelephone may not sell, rent, or mortgage property from the properties 
used  to  carry  out  the  license  without  the  consent  of  the  Minister  of 
Communications, except for certain exceptions set forth in the license. 

g. 

In times of emergency, the person authorized by law has the authority 
to  give  Pelephone  various  instructions  regarding  the  manner  of  its 
operation and / or the manner of providing the services (see section 
3.19.2.9). 

h.  The license specifies the types of payments that Pelephone may charge 
its subscribers for cellular services, and the reports it must give to the 
Ministry of Communications. The license also stipulates the authority 
of the Minister to intervene in rates, in some cases. 

61 The wording of Pelephone’s mobile radio telephone license is published on the website of the Ministry of Communications at 
www.moc.gov.il. The provisions of the mobile radio telephone license applies on the license in the Judea and Samaria area (with 
certain changes)). 

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i. 

j. 

The license requires Pelephone to a minimum standard of service.  

In order to secure Pelephone's obligations and in order to compensate 
and compensate the State of Israel in the event that Pelephone's action 
causes  it  damage,  Pelephone  provided  a  bank  guarantees  to  the 
Ministry of Communications, in the amount of NIS 69 million.  

3.14.2.2 

Ministry of Communications guidelines regarding license changes 

The Ministry periodically updates Bezeq’s license on various issues, as part 
of hearings held by it. 

3.14.3. 

Site construction licensing 

Pelephone's cellular services are provided, among other things, through cellular sites that 
are deployed throughout Israel in accordance with engineering needs. The constant need 
to  upgrade  and  improve  the  quality  of  cellular  services  requires  the  establishment  of 
cellular sites, configuration changes, and changes to existing antenna arrays. 

Pelephone uses transmission sites of two main types and in two tracks: macro sites that 
require a building permit from the Planning and Construction Committees (see reference 
to National Outline Plan 36A below) and facilities exempt from a building permit under 
the  Communications  Law  and  the  planning  and  Construction  Law  ("Exemption 
Provision"):  Wireless  access  facilities  ("Access  Facilities")  for  which  regulations  were 
published  in  2018  regulating  the  self-licensing  route  based  on  compliance  with  the 
provisions of National Outline Plan 36 and allowing self-licensing for the establishment of 
certain  transmission  facilities.  On  January  1,  2022,  a  series  of  legislative  amendments 
entered into force within the Arrangements Law, which Define the cellular infrastructure 
as a national infrastructure and create a self-licensing route for certain cellular antennas 
and for making adjustments to the various transmission facilities, instead of establishing 
new access facilities, as detailed below. 

Pelephone's ability to maintain and preserve the quality of its cellular services, as well as 
its  coverage,  is  based  in  part  on  its  ability  to  establish  cellular  sites  and  install 
infrastructure  equipment,  including  broadcasting sites.  The  difficulties  encountered  by 
Pelephone  in  obtaining  the  necessary  permits  and  approvals  can  adversely  affect  the 
existing  infrastructure,  the  network's  performance  as  well  as  the  establishment  of 
additional cellular sites required by the network. Difficulties in deployment also exist in 
the Judea and Samaria area, for which a special legal system applies. 

The  inability  to  resolve  these  issues  in  a  timely  manner  may  even  prevent  the 
achievement of service quality targets set forth in the mobile radio telephone license.  

Pelephone, like the other cellular operators in Israel, established some of the cellular sites 
throughout  Israel  on  properties  managed  by  the  Israel  Land  Authority.  This  is,  among 
other  things,  in  accordance  with  the  roof  contract  from  June  2013  that  ended  on 
December  31,  2019.  After  lengthy  negotiations  on  November  23,  2022  a  new  roof 
contract was signed which will be valid until 31.12.2024 with various changes compared 
to the roof agreement. 

a.  Building  permits  for  the  construction  of  a  transmission  facility  for  cellular 

communications by virtue of National Outline Plan 36A: 

Licensing of the construction of cellular transmission sites subject to building permits, 
regulated by National Outline Plan 36A, which came into force in 2002.  

The  licensing  procedure  according  to  NPA  36A  requires,  inter  alia,  the  receipt  of 
approvals as follows: A. Approval of establishment and operation by the Ministry of 
Environmental  Protection,  as  specified  in  section  3.13.1;  B.  Approval  of  the  Civil 
Aviation Administration, in some cases; C. IDF approval. 

In  addition,  according  to  the  law,  a  condition  for  granting  a  permit  for  the 
establishment of a transmission facility for cellular communications is the submission 
of a letter of indemnity to the local committee in respect of claims for compensation 
for impairment. As of the date of this report, Pelephone has deposited approximately 
650 indemnity letters with various local committees. 

Despite NPA 36A in its existing format, Pelephone (and to the best of its knowledge, 
also from its competitors) encounters difficulties in obtaining some of the necessary 

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approvals, especially the approvals of the planning and construction authorities.  

b.  Facilities exempt from building permits: 

The  second  route  in  which  Pelephone  has  deployed  broadcast  sites  so  far  is  the 
Access Facilities route. The Access Facilities were subject to the receipt of individual 
radiation permits but are exempt from obtaining a building permit provided that they 
are  established  under  the  conditions  set  forth  in  the  exemption  directive  (Article 
266C (a) of the Planning and Construction Law (installation of a wireless access facility 
for  cellular  method),  5778-2018  and  the  regulations.  However,  in  view  of  the 
amendment to the Planning and Construction Law set forth in the Arrangements Law 
and the new self-licensing route according to it (see below), the route of the Access 
Facilities became redundant. 

As of the date of the report, Pelephone operates about 451 wireless access sites. 

It should be noted that in spot enforcement proceedings, which are taken from time 
to time, additional allegations arise regarding the manner in which the exemption is 
used, including compliance with regulations. To the extent that there are Pelephone 
facilities  that  do  not  meet  the  conditions  set  forth  in  the  regulations,  there  is 
exposure in respect thereof if the dismantling or adjusting of those facilities becomes 
necessary. 

As part of the Arrangements Law, which entered into force on January 1, 2022, an 
amendment was received to the Planning and Construction Law, which includes the 
removal  of  regulatory  barriers  regarding  the  establishment  of  sites.  The  main 
amendment is the granting of an exemption from licensing procedures for placing 
and using facilities up to 6m on the roof of a building, an exemption for replacing a 
transmission facility, an exemption for adding an antenna to a transmission facility 
established  under  the  Planning  and  Building  Law  and  an  exemption  for  replacing 
masts up to 18m high. The amendment to the Planning and Construction Law also 
includes a new classification of "transmission facilities for communications using the 
Thai method", as defined in Article 202B of the Planning and Construction Law, as 
"national infrastructure", and a new classification of NAP 36A as "a detailed national 
master  plan  for  national  infrastructure".  The  amendment  to  the  Planning  and 
Building Law facilitates the replacement of antennas, the addition of an antenna to 
existing sites, and the strengthening of masts. All, under the technical and practical 
conditions set out in the amendment. These facilities will continue to meet all the 
conditions of NAP 36 and spatial guidelines of the local committees, with the actual 
meaning of the amendment being the possibility of a "self-licensing" route - that is, 
performing a self-licensing and control procedure in the above cases, and submitting 
documents to the Planning and Construction Committee retrospectively (after the 
completion of the construction of the sites). Simultaneously with this amendment, 
an amendment was also established to the definition of "wireless access facility" in 
Article  27A  of  the  Communications  Law.  As  part  of  the  aforesaid  amendment,  a 
"transmission facility for communication in the cellular method as defined in Article 
266C2  of  the  Planning  and  Building  Law"  was  removed  from  the  definition  of  a 
"wireless access facility". This means that the wireless access facilities that were set 
up with an exemption from a permit continue to exist, but it is no longer possible to 
set up new mobile sites in the "access facilities" route, which is listed above). 

As  part  of  the  report  of  the  inter-ministerial  committee  that  served  as  the 
infrastructure for amendments to the Arrangements Law, it was also recommended 
to update NPA 36A, which came into force about twenty years ago. 

At this stage it is not possible to estimate the future consequences as a result of the 
amendments. 

On November 14,  2021, Pelephone signed a framework agreement to expand the 
local collaboration in the establishment of passive infrastructure on joint mobile sites 
together with Cellcom and PHI Networks (2015) Limited Partnership. In August 2022, 
the Ministry of Communications approved the agreement. This agreement may help 
establish joint mobile sites. 

In conclusion: A few sites that were established years ago still lack the approvals of 
the Civil Aviation Administration and the IDF, although the applications for approvals 

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have  already  been  submitted.  Also,  some  planning  and  construction  committees 
have administrative or other delays in issuing building permits to sites. Therefore, 
Pelephone operates a number of broadcasting sites that have not yet been issued 
building permits.  

The  establishment  of  a  broadcasting  site  without  obtaining  a  building  permit  is  a 
violation  of  the  law  and  in  some  cases  this  has  led  to  the  issuance  of  demolition 
orders or the filing of indictments or the filing of civil proceedings against Pelephone 
and some of its officers.  

As  of  the  date  of  the  report,  Pelephone  has  in  most  cases  been  able  to  avoid 
demolition  or  delay  the  execution  of  demolition  orders  within  the  framework  of 
arrangements reached with the planning and construction authorities, in order to try 
to settle the missing license. These arrangements did not require a confession of guilt 
and / or a conviction on the part of Pelephone officials. However, there is no certainty 
that this situation will continue in the future, or that there will be no further cases in 
which  demolition  orders  will  be  issued  and  indictments  will  be  filed  for  building 
permits, including against officers. 

Pelephone, like the other cellular operators in Israel, may be required to dismantle 
transmission sites for which the necessary approvals and permits have not yet been 
obtained in accordance with the deadlines set by law. Pelephone uses the license-
exempt  facilities  to  provide  coverage  and  capacity  in  crowded  areas.  If  a  legal 
constraint  is  created  for  the  simultaneous  dismantling  of  the  sites  in  a  given 
geographical area, there may be a deterioration in the service in that area, until the 
establishment of alternative broadcasting sites. 

3.14.4. 

Economic Competition Law 

In  the  terms  of  the  merger  of  Pelephone  and  the  Company,  various  restrictions  are 
anchored regarding cooperation between the companies (see Section 2.16.9.4). 

3.15.  Material agreements 

3.15.1. 

For agreements with Ericsson, see section  3.10.2. 

3.15.2. 

In July 2016, an agreement was signed between Pelephone and the Accountant General 
of the Ministry of Finance, according to which Pelephone will provide cellular services to 
state  employees  in  an  estimated  100,000  subscribers  over  three  years.  Under  the 
agreement, Pelephone provides devices to some Accountant General subscribers. 

The State chose to exercise the extension options granted to it in the agreement, and the 
agreement was extended until May 2, 2023. 

3.15.3. 

3.15.4. 

Regarding  an  agreement  with  ILA  (which  expired  and  has  not  yet  been  renewed)  see 
section 3.7.2.2.  

Regarding a collective agreement between Pelephone and the Histadrut and Pelephone’s 
Employees’ Committee, see section 3.9.4. 

3.16. 

Legal Proceedings62   

During  the  day-to-day  business,  lawsuits  were  filed  against  Pelephone,  including  motions  for 
approval of class actions.  

3.16.2. 

Pending legal proceedings  

The following is a list of the claims in which the amount claimed is material and claims 
that may have material consequences for Pelephone's operations: 

62 For reporting policy and materiality thresholds, see section 2.18. 

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Date 

Parties 

Instance 

Proceeding 
type 

Details 

a. 

May 
2012 

Customer 
vs. 
Pelephon
e 

District 
(Tel Aviv) 

Class action 
lawsuit 

b. 

 July 
2014 

c. 

 April 
2017 

d. 

 October 
2017 

e. 

 April 2019 

Customer 
vs. 
Pelephon
e, three 
other 
cellular 
compani
es and 
additiona
l 
responde
nts 
Customer 
vs. 
Pelephon
e 

Customer 
vs. 
Pelephon
e and 
Partner 

Customer 
vs. 
Pelephone
, Bezeq 
Internatio
nal and 6 
other 
companies 

District 
(Tel Aviv) 

Monetary 
claim and a 
motion to 
recognize it 
as a class 
action 

District 
(Tel Aviv) 

Central 
District 

Central 
District 

Monetary 
claim and a 
motion to be 
recognized 
as a class 
action 

Monetary 
claim and a 
motion to be 
recognized 
as a class 
action 
Monetary 
claim  and  a 
motion to be 
recognized 
as  a 
action 

class 

It is claimed that Pelephone does not inform customers 
who wish to join its services with a device that was not 
purchased  from  Pelephone,  that  as  long  as  the  device 
does not support the 850 MHz frequency, they will enjoy 
partial reception of one frequency and not two. In March 
2014,  the  Court  approved  the  lawsuit  as  a  class  action, 
following  Pelephone's  announcement  regarding 
its 
consent (for reasons of efficiency) to the management of 
the lawsuit as a class action, while maintaining its claims. 
The  procedure  is  split  into  two  stages  (the  stage  of 
clarifying liability and the stage of quantifying damages, 
as  necessary  in  stage  two).    On  January  20,  2019,  a 
decision  was  given  in  the  sale  case  under  Pelephone's 
responsibility for the claim in the lawsuit, on the grounds 
of deception under the Consumer Protection Law and on 
the  grounds  of  lack  of  good  faith  in  negotiations,  in 
relation to the period  up to the  date of the decision to 
approve  the  claim  as  a  class  action  (March  2014). 
Depending on the decision and previous decision in the 
case the next step in the hearing of the case will be on the 
question of the alleged damage. 
It  was  alleged  that  Pelephone,  along  with  three  other 
cellular  companies,  signed  up  subscribers  to  content 
services  without  their  consent  and  illegally,  thereby 
creating  a  "platform"  that  led  the  Accutech  Group  to 
charge  tens  of  thousands  of  people  for  illegal  content 
services. 

Amount of the 

claim 

(NIS millions) 

About 124  

About 100 in 
relation to the 
cellular 
companies and 
about 300 
against all the 
defendants 

It is alleged that the defendant unilaterally and without 
consent  changed  the  terms  of  the  agreement  between 
itself  and  the  applicant,  and  others  like  it,  by  allowing 
browsing  to  continue  after  exhausting  the  browsing 
volume  included  in  the  package  instead  of  stopping  it, 
contrary to Pelephone’s notice on the issue  

It  is  alleged  that  the  defendants  are  illegally  using  the 
location  data  of  their  clients  and  thus  violating  the 
contract  agreements  with  them,  the  operating  licenses 
and  various  laws,  including  the  Privacy  Protection  Law, 
5741-1981. 

About 80  

About 850 

the  Communications  Law. 

It  is  claimed  that  the  respondents  do  not  inform  their 
customers  as  required  about  the  possible  dangers  of 
using the Internet and about the possibility of joining a 
free content filtering service, contrary to the provisions 
the 
of 
respondents  provide  a  website  and  offensive  content 
filtering service that they claim is not effective enough. 
According  to  the  petitioners,  the  aforesaid  constitutes, 
inter alia, a violation of the provisions of the Consumer 
Protection  Law,  a  violation  of  debts  under  the  Torts 
Order, a breach of contract and unjust enrichment. 

In  addition, 

The amount of 
the lawsuit is 
not specified, 
but in the 
motion it is 
estimated at 
tens of millions 
of NIS  

f. 

 January 
2023 

Haifa 
District 
Court 

Monetary 
claim  and  a 
motion to be 
recognized 
as  a 
action 

class 

It  is  alleged  that  there  is  no  price  marking  on  products 
sold  by  Pelephone,  contrary  to  the  provisions  of  the 
Consumer  Protection  Law  and  the  provisions  of  the 
Consumer  Protection  Regulations  (various  rules  for 
publishing prices of properties and services), 5751-1991. 

Over NIS 2.5 
million. 
Impossible to 
accurately 
estimate. 

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3.16.3. 

Legal proceedings concluded during the reporting period 

Claim filed 

Parties 

Instance 

a. 

 November 
2013 

Customer vs. 
Pelephone 

Tel Aviv 
District 
Court 

b. 

 May 2015 

Customer vs. 
Pelephone 

Tel Aviv 
District 
Court 

c. 

 October 
2016 

Customer vs. 
Pelephone 
and Cellcom 

Lod District 
Court 

d. 

 April 2018 

Customer vs. 
Pelephone 

Tel Aviv 
District 
Court 

e. 

 January 
2020 

Customer vs. 
Pelephone 

Tel Aviv 
District 
Court 

Proceeding 
type 

A monetary 
claim with a 
motion for 
approval as a 
class action 

A monetary 
claim with a 
motion for 
approval as a 
class action 

A monetary 
claim with a 
motion for 
approval as a 
class action 

A monetary 
claim with a 
motion for 
approval as a 
class action 

A monetary 
claim with a 
motion for 
approval as a 
class action 

Details 

judgment  was 

It is claimed that Pelephone does not grant benefits 
in  the  same  way  to  all  of  its  customers  and  thus 
discriminates  between  customers  that  Pelephone 
"prefers"  according  to  the  plaintiff,  and  other 
customers, and this, according to him, is contrary to 
Pelephone's license and the law. In December 2019, 
a 
issued  dismissing  the  motion 
without  an  order  for  expenses.  An  appeal  filed 
against  the  judgment  (consolidated  together  with 
the motion in Paragraph B) was dismissed on July 7, 
2022. 
It  is  claimed  that  Pelephone  does  not  offer  the 
"Walla  Mobile"  plans  to  all  of  its  existing  and  new 
customers who apply to switch to another route, and 
this  in  a  way  that  violates  the  license  provisions 
requiring  equal  treatment,  thus  misleading 
its 
in  the  case  were 
customers.  The  proceedings 
consolidated  with  another  case  in  view  of  the 
similarity  between  the  proceedings.  In  December 
2019,  a  judgment  was  issued  dismissin  the  motion 
without  an  order  for  expenses.  An  appeal  filed 
against the judgment was dismissed on July 7, 2022. 
It is claimed that the defendants do not allow their 
customers to use the full package abroad, through a 
restrictive condition according to which the package 
can be redeemed for a very short period (week to a 
month  only)  when  at  the  end  of  that  period,  the 
balance  of  the  unused  package  expires  and  no 
refund is given for it. On April 5, 2020. A judgment 
was  issued  dismissing  the  motion.  The  applicants' 
appeal  against  the  dismissal  of  the  motion  for 
approval was dismissed on April 26, 2022. 
It is claimed that Pelephone markets and sells to its 
customers  a  repair  service  with  a  commitment  for 
unreasonable periods of time, without the possibility 
in  the  agreement  to  cancel  the  transaction  during 
the commitment period and/or transfer the service 
to  another  mobile  device.  On  July  21,  2020,  a 
judgment  was  issued  confirming  the  settlement 
arrangement, the main of which are certain changes 
in  the  repair  service  under  the  obligation  and  the 
provision  of  benefits  to  its  relevant  customers  in  a 
total amount of approximately NIS 640k. 
It is claimed that Pelephone forces every customer 
who purchases from it, through the website or in the 
application  on  the  cell  phone,  a  communication 
package abroad - which includes calls and/or surfing 
the  Internet,  to  give  their  consent  to  receive 
advertisement messages from it. On November 27, 
2022 a decision was issued striking out the motion. 

Original claim 
amount (NIS 
millions) 
Approx. 300 

The amount of 
the claim is not 
specified, but 
in the 
application it is 
estimated in 
millions of NIS. 

 * Claim in 
unknown 
amount 

The amount of 
the claim is not 
specified. 

The amount of 
the claim is not 
specified. 

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3.17.  Targets and business strategy 

Pelephone's strategic targets are continued growth in its customer base while promoting a variety 
of packages and solutions to customers and promoting services based on the 5G network, continuing 
to develop innovation and network technologies and providing excellent service and improvement 
in the cost structure. 

3.18.  Expected development in the coming year 

In 2023, a number of factors are expected to affect Pelephone's activity, the main ones being: 

3.18.2. 

Continuing competition and increasing the value to the customer  

Pelephone expects that in 2023, the competition will focus on increasing the value and 
volume of browsing to the customer. 

3.18.3. 

Cellular network innovation and products 

In 2023, Pelephone is expected to continue to promote services and products that will 
enable  increased  revenue  and  image  advantage  over  competitors:  private  networks, 
cyber and IoT services and continued focus on large device launches, at the same time as 
the implementation of the deployment plan of the 5G network. 

3.18.4. 

Increasing service consumption by Pelephone subscribers  

Pelephone expects that as a result of an increase in the volume of browsing offered to 
the customer, and increasing the marketing of service packages based on the 5G network, 
the trend of increasing the consumption of data communication volume on the network 
will continue. 

3.18.5. 

Digital transformation 

In 2023, Pelephone is expected to continue to develop and expand its digital service and 
sales channels. 

3.18.6. 

5G network 

In  2023,  Pelephone  is  expected  to  continue  the  deployment  of  the  5G  network,  the 
construction  of  an  independent  network  core,  and  the  marketing  and  sale  of  services 
based on this technology. 

Pelephone's assessments and expectations regarding developments in the coming year 
presented in this section above are forward-looking information within its meaning in the 
Securities Law. These assessments and expectations are based, among other things, on 
the  state  of  competition  in  the  cellular  field,  the  existing  regulatory  situation  and  the 
manner in which the new regulatory changes are implemented. These assessments may 
not  materialize,  or  materialize  in  a  materially  different  way  than  described  above, 
depending,  inter  alia,  on  the  structure  of  competition  in  the  market,  changes  in  the 
consumption  habits  of  cellular  customers,  technological  developments  and  regulation 
begun in the field. 

3.19.  Discussion of risk factors 

The  following  are  risk  factors  arising  from  the  macroeconomic  environment,  the  unique 
characteristics of the industry in which Pelephone operates, and risk factors unique to Pelephone. 

3.19.1.  Macroeconomic risk factors  

3.19.1.1 

3.19.1.2 

Exposure to changes in exchange rates and inflation - Pelephone is exposed 
to  risks  due  to  changes  in  exchange  rates  as  most  purchases  of  end 
equipment,  accessories,  spare  parts  and  infrastructure  are  made  in  US 
dollars, while Pelephone's income is in shekels. Erosion of the shekel against 
the dollar could hurt Pelephone's profitability if it is not possible to adjust 
selling prices (mainly of end equipment) in the short term. Also, changes in 
price indices may affect site rental costs. 

Epidemic and supply chain - outbreaks of diseases and epidemic events in 
general (such as the outbreak of COVID-19 in 2020) may have consequences 
for Pelephone's business activities depending on the extent of the spread 
and  its  severity,  as  well  as  the  national  and  global  measures  that  will  be 
taken  as  a  result.  These  consequences  may  be  reflected,  among  other 

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things,  in  damage  to  Pelephone's  operations  and  its  customer  service 
system,  as  well  as  in damage  to the  supply  chain.  Events of  this type  are 
changing  events  that  are  not  under  Pelephone's  control,  and  their 
consequences  are  subject,  among  other  things,  to  the  decisions  of  states 
and authorities in Israel and around the world that may affect the Company 
accordingly.  

3.19.1.3 

Damage caused by nature, war, disaster  - damage to the switching farms 
and / or servers (including damage to a large number of sites, for example 
from an earthquake) on which Pelephone concentrates its core activity, may 
adversely affect Pelephone's business and its results. 

3.19.2. 

Industry risk factors  

3.19.2.1 

3.19.2.2 

3.19.2.3 

3.19.2.4 

3.19.2.5 

Infrastructure investments and technological changes - the cellular market 
in  Israel  and  around  the  world  is  characterized  by  significant  capital 
investments  in  the  deployment  of  infrastructure.  Frequent  technological 
changes  in  the  field  of  infrastructure  and  end  equipment,  as  well  as  the 
difficult struggle over various market segments, impose high costs on the 
companies  operating  in  the  market,  which  are  forced  to  update  their 
infrastructure technologies from time to time. 

Competition - the cellular market in Israel is characterized by saturation in 
the penetration rate, fierce competition and a high number of operators, 
and  is  also  exposed  to  effects  as  a  result  of  technological  and  regulatory 
developments.  The  costs  of  setting  up,  maintaining  and  operating  the 
cellular network in relation to the number of subscribers are expected to be 
higher  in  Pelephone  in  light  of  the  fact  that  it  does  not  operate  in  the 
network sharing model. The end equipment market is also characterized by 
fierce competition between cellular operators and in front of stores that sell 
end equipment in parallel imports. 

Customer credit – a significant portion of the sales of end equipment is done 
by  granting  credit.  The  vast  majority  of  this  credit  that  is  not  covered  by 
collateral is at risk. It should be noted, however, that the credit is spread 
among  a  large  number  of  customers  and  Pelephone  has  efficient  and 
experienced collection mechanisms. 

Regulatory developments - in the field of Pelephone's activities, there is a 
trend  of  legislation  and  standards  in  connection  with  issues  such  as 
increasing  competition,  setting  rates,  the  environment,  product  warranty 
and ways of repair thereof, regulating interconnectivity rates and more. The 
regulatory  intervention  in  the  field  of  activity  may  materially  affect  the 
structure of competition and the operating costs of Pelephone. 

Electromagnetic radiation - Pelephone operates thousands of transmission 
facilities and sells end equipment that emits electromagnetic radiation (see 
section  3.13).  Pelephone  works  to  ensure  that  the  levels  of  radiation 
emitted from the transmission facilities and end equipment sold by it do not 
exceed the permissible radiation levels according to the guidelines of the 
Ministry  of  Environmental  Protection  (determined  in  accordance  with 
international standards). Although Pelephone operates in accordance with 
the  guidelines  of  the  Ministry  of  Environmental  Protection,  if  it  turns  out 
that  there  are  health  risks  or  if  there  are  deviations  from  the  radiation 
facilities at the transmission sites or end equipment, which has a health risk, 
this may have an adverse effect due to reduced use of Pelephone services, 
difficulty in renting sites, claims for compensation for bodily and property 
damages  to  a  considerable  extent  and  attempts  to  implement  indemnity 
deeds deposited by planning institutions in connection with Article 197 of 
the  Planning  and  Construction  Law.  Pelephone's  third  party  insurance 
policies do not currently cover insurance for electromagnetic radiation. 

3.19.2.6 

Website licensing - construction and operation of cellular antennas, requires 
building permits from the various planning and construction committees, a 
procedure  that  requires,  among  other  things,  obtaining  approvals  from 
government  bodies  and  series  bodies.  For  a  list  of  the  difficulties 

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3.19.2.7 

3.19.2.8 

encountered by Pelephone in setting up and licensing websites, see Section 
3.14.3. These difficulties can impair the quality of the existing network and 
even more so the deployment of a new network. 

Serious  faults  in  the  information  systems  and  engineering  systems  - 
Pelephone  provides  its  services  through  various  infrastructure  systems, 
including,  among  others,  switches,  data  transmission  and  access 
transmission  networks,  cables,  computer  systems,  physical  infrastructure 
and more (“the systems"). Pelephone businesses have a high dependence 
on these systems. Some Pelephone systems have backup, but at the same 
time, in the event of damage to some or all of the above systems, either due 
to a large-scale technical malfunction, due to a natural disaster (such as an 
earthquake, fire, etc.), or due to damage to physical infrastructure and due 
to malicious damage (such as the introduction of viruses and cyber attacks 
as detailed below), there may be significant difficulties in providing services, 
including  in  the  event  that  Pelephone  is  unable  to  return  the  systems  to 
service quickly. 

Information security, customer data protection and cyber risks - as a leading 
cellular company that provides service to millions of customers, Pelephone 
is  a  target  for  cyber  attacks,  which  aim  to  harm  the  use  of  information 
systems  or  the  information  itself  (“Cyber  Attacks”).  This  type  of  assault 
activity  or  intrusion  event  may  cause  business  disruption,  information  / 
money  theft,  damage  to  databases  and  subscribers'  privacy,  damage  to 
reputation, damage to systems and information leakage which may also be 
caused by an internal party, maliciously or inadvertently 

Pelephone is a body guided by the State Information Security Authority of 
the Prime Minister's Office as well as by the Ministry of Communications, 
and it is committed to complying with strict information security standards. 
In this framework, Pelephone implements a protection policy that includes 
the most advanced security systems in the world, which are installed using 
the method of layers of protection and are operated in a configuration that 
combines  effective  security  with  Pelephone's  operational  needs  and 
security circuits to protect Pelephone's infrastructure and systems, which 
are designed to prevent and reduce the possibility of exploiting Pelephone’s 
data  by  an  external  party  or  maliciously  or  inadvertently  by  an  internal 
entity,  as  well  as  the  possibility  of  an  external  party  taking  over  and 
managing network components or abusing information about Pelephone's 
infrastructure and networks in some way. In this framework, various actions 
are  performed, 
in  the  systems, 
implementing various information security products according to the threat 
outline, periodic risk surveys and practice according to an annual plan. 

including  checking  alerts  and 

logs 

Pelephone complies with the standard of the Prime Minister's Office which 
defines a level of protection against an attack by a hostile country related to 
information  security  (standards  that  define  a  level  of  protection  of  the 
Company's  systems  against  information  security  threats)  and  within  the 
framework of implementing the requirements of the standards, Pelephone 
ensures  the  availability,  integrity,  reliability  and  confidentiality  of  the 
databases under its responsibility. 

Pelephone  supervises  the  implementation  of  its  protection  policy,  which 
includes testing its level of effectiveness and the Company's readiness. In 
this  framework,  the  company  carries  out  tests  and  attack  exercises  with 
different  frequency  for  different  scenarios  (including  through  external 
companies specializing in the field). Also, Pelephone's Board of Directors is 
involved in and supervises the management of cyber risk at Pelephone, and 
this  is  within  the  framework  of  dealing  with  Pelephone's  overall  risk 
management  policy.  In  the  Company's  estimation,  its  risk  management 
policy in dealing with and reducing the cyber risk is effective. 

The  cyber  risk  management  policy  and 
responsibility of the Information Systems Division, Infrastructure Division. 

implementation 

is  the 

its 

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investments 

Despite  Pelephone's 
the 
aforementioned risks, it cannot guarantee that these measures will succeed 
in preventing damage and/or interference that may also be significant in the 
systems and information related to them. 

in  measures 

reduce 

to 

3.19.2.9 

3.19.2.10 

Economic  emergency  -  in  times  of  emergency,  certain  provisions  of  the 
legislation  and  provisions  of  the  mobile  radio  telephone  license  allow 
persons  authorized  under  the  law  to  take  steps  required  to  ensure  state 
security and / or public safety, including: charging Pelephone (as a mobile 
radio  telephone  license  holder)  to  give  service  to  the  security  forces, 
comandeering  of  engineering  equipment  and  facilities  of  Pelephone,  and 
even taking control of Pelephone’s system. 

Lack  of  frequencies  -  for  details  on  the  lack  of  frequencies,  see  section 
3.8.2.1. In many cases, frequency allocation is carried out through tender 
procedures,  in  a  manner  that  may  increase  the  costs  of  purchasing  the 
frequencies  and  place  the  cellular  companies  that  do  not  receive  the 
allocation as part of the tender at risk of competitive inferiority.  

3.19.3. 

Risk factors unique to Pelephone 

3.19.3.1 

3.19.3.2 

3.19.3.3 

3.19.3.4 

3.19.3.5 

3.19.3.6 

Property risks and liabilities - Pelephone is exposed to various property risks 
and  liabilities.  Pelephone  is  assisted  by  an  external  insurance  consultant 
who is an expert in the field. Pelephone has insurance policies that cover 
the risks that are acceptable to them, Pelephone is subject to the limitations 
of  the  terms  of  the  policies,  such  as:  various  property  insurance,  various 
liability insurance, loss of profits, third-party liability insurance and officers' 
insurance.  However,  Pelephone's  insurance  policies  do  not  cover  certain 
types of risks, including certain malfunctions caused by negligence or human 
error, radiation risks, terrorism and more. 

Serious  faults  in  the  cellular  network  -  Pelephone's  cellular  network  is 
spread throughout Israel through the network's core sites, antenna sites and 
other  systems.  Pelephone’s  sytems  are  completely  dependent  on  these 
systems,  which  are  sometimes,  temporarily,  in  a  state  of  partial  survival. 
Malicious  damage  or  malfunction  on  a  large  scale  can  adversely  affect 
Pelephone’s business and its results. 

Epidemic  malfunctions  in  devices  -  various  exposures  resulting  from 
Pelephone's  liability  as  an  importer  due  to  manufacturer  malfunctions  in 
devices that will not be supported by the manufacturers. 

Legal proceedings - Pelephone is a party to legal proceedings, including class 
actions, which may result in a charge of substantial amounts, which cannot 
be  estimated,  and  no  provision  has  been  made  for  some  of  them  in 
Pelephone’s financial statements. These class actions can reach large sums, 
as a substantial portion of the state's residents are consumers of Pelephone, 
and a claim relating to a small damage to a single consumer may become a 
material claim to Pelephone if it is recognized as a class action applicable to 
all or a significant portion of consumers. 

Significant  suppliers  and  customers  -  for  agreements  with  significant 
suppliers and customers, see sections 3.10 and 3.15. Some of Pelephone's 
agreements,  including  with  its  key  customers,  are  timed.  There  is  no 
certainty that these agreements will be renewed at the end of their term or 
that options granted to customers to extend them will be exercised. 

Labor relations - Pelephone has a collective agreement with the Histadrut 
and  the  Employees’  committee,  which  effects  most  of  its  workers.  The 
collective  agreement  may  reduce  administrative  flexibility  and  impose 
additional  costs  on  Pelephone  (see  section  3.9.4).  In  addition,  the 
implementation  of  personnel-related  plans  may  cause  unrest  in  labor 
relations  and  harm  to  Pelephone's  ongoing  operations.  Regarding  labor 
disputes at Pelephone, see Section 3.9.5. 

3.19.3.7 

Loss of knowledge and information - the changes that are taking place in the 
labor  market  in  Israel  and  around  the  world,  along  with  organizational 

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3.19.3.8 

3.19.3.9 

changes, entail a risk of losing key employees, loss of knowledge as a result 
of employee turnover, difficulty in recruiting employees, etc. 

Impairment  of  Pelephone  properties-  in  accordance  with  accounting 
standards, Pelephone conducts a periodic examination of the impairment of 
assets in respect of which indications of impairment have been identified. 
For details on the risk factor relating to the recognition of impairment losses, 
see Section 2.20.12.  

Frequency ranges – Pelephone operates fequencies in the 700, 850, 1800, 
2100,  2600  and  3500  MHz  ranges.  The  frequencies  are  exposed  to 
interruptions that may affect the quality of service of the networks operated 
by  Pelephone.  Among  the  other  reasons  that  may  cause  interruptions,  it 
should  be  noted  that  the  850  range  is  also  used  for  terrestrial  television 
broadcasts, so that television stations broadcasting in the Middle East in the 
same range of frequencies cause interference on Pelephon’s UMTS / HSPA 
network on 850 MHz. In addition, the Jordanian networks also use the same 
frequency range of 2100 MHz that Pelephone uses and in light of the limited 
cooperation between the operators in Jordan and Pelephone, this may have 
a negative effect on Pelphone. In addition, Pelephone must avoid interfering 
with  satellite  broadcasts  made  at  several  points  in  Israel  at  3500MHz 
frequencies, which limits the operation of 5G services around these points. 

For details on the implications of switching frequencies in the first giga field, 
see Section 3.8.2.3. 

3.19.3.10  Maintaining  a sufficient  cash flow  -  Pelephone  must  maintain  a sufficient 
cash flow in order to meet its long-term business plan. The lack of sufficient 
cash flow may adversely affect Pelephone's business and its ability to make 
large-scale online investments, and may make it difficult for it to cope with 
competitive threats in the field. 

Below  is  a  ranking  of  the  impact  of  the  risk  factors  described  above  on 
Pelephone's activities as estimated by Pelephone's Management. It should 
be  noted  that  Pelephone's  assessments  below  regarding  the  degree  of 
influence of the risk factor reflect the degree of influence of the risk factor 
in assuming the materialization of the risk factor, and the aforesaid does not 
express  an  assessment  or  give  weight  to  such  chances  of materialization. 
The order in which the risk factors appear above and below is not necessarily 
according to the degree of risk. 

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Risk factors summary table - cellular telephony  

The extent of the impact of the 
risk factor on Pelephone's 
operations as a whole 
Medium 
effect 

High 
effect 

Small 
effect 

X 

X 

X 

X 

X 

X 

in 

X 
X 

X 
X 

information  systems  and 

Macro risks 
Exposure to changes in exchange rates  
Epidemic and supply chain 
Damage due to force majeure, war, disaster 
Industry risks 
Infrastructure investments and technological changes 
Competition 
Customer credit 
Regulatory developments  
Electromagnetic radiation 
Website licensing 
Serious  malfunctions 
engineering systems 
Information  security,  customer  data  protection  and 
cyber risks 
Economic emergency 
Lack of frequencies 
Risk factors of Pelephone 
Property risks and liabilities 
Serious malfunctions in the cellular network 
Epidemic malfunctions in devices 
Legal proceedings 
Substantial suppliers and customers 
Labor relations  
Loss of knowledge and information 
Impairment of Pelephone's assets  
Frequency ranges  
Maintaining sufficient cash flow 
The information contained in section 3.19 and Pelephone's assessments regarding the effect of the 
risk factors on Pelephone's activities and business, are forward-looking information as defined in 
the Securities Law. The information and assessments are based on data published by the Ministry 
of  Communications,  Pelephone's  assessments  of  the  market  situation  and  the  structure  of 
competition  in  it  and  regarding  possible  developments  in  the  Israeli  market  and  economy.  The 
actual results may differ materially from the estimates given above if there is a change in one of 
the factors taken into account in these estimates.  

X 
X 
X 
X 

X 
X 

X 

X 

X 

X 

X 

X 

X 

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4. 

Bezeq International - Internet, international communications and ICT solutions 

4.1. 

General 

4.1.1. 

The structure of the field of activity and changes that apply to it 

Bezeq International operates in several key areas: Internet access services, international 
data  communication,  international  telephony;  Communication  and  computing services 
for  businesses  that  include  hosting  in  server  farms  and  cloud  services;  and  supply  of 
equipment, licensing and service contracts for businesses. 

Regarding  regulatory  changes  in  the  Internet  services  market  for  private  customers, 
which are expected to materially affect Bezeq International's activity in this market, see 
Section 4.11.5.3. 

4.1.2. 

Legislative and regulatory restrictions that apply to Bezeq International 

A significant part of Bezeq International's areas of activity are regulated mainly by the 
Communications Law and regulations thereunder, and the terms of the license granted 
to Bezeq International (see Section 4.11).  

Regarding major developments in the regulation applicable to Bezeq International, see 
section 4.11.5. 

4.1.3. 

Changes in the scope of activity in the field and its profitability 

For data on changes in the scope of Bezeq International's operations and its profitability, 
see Sections 1.5.4.3 and-4.3. 

4.1.4. 

Developments in the market and in customer characteristics 

In the field of Internet services, the market is characterized by the transition of customers 
from the retail market services (where the customer purchases the access service and the 
infrastructure  service  from  different  providers)  to  unified  packages  (where  the  access 
service  and  the  infrastructure  service  are  purchased  from  one  provider)  following 
regulatory  changes  (see  Section  4.11.5.3).  In  the  international  data  communication 
market, there has been an increase in demand for data communication services in Israel 
and around the world. The increased use of information technologies requires an increase 
in capacity. The positioning of the State of Israel as a communication and technology hub 
increases the demand from global companies for data communication services to Israel. 
Following the establishment of diplomatic relations with other countries in the Middle 
East, a further increase in demand for communication services between the Middle East 
and Europe is expected, some of which will go through Israel. 

In the field of communication and computing services for businesses, in 2022 there was 
an increase in demand for hosting services in server farms and public cloud services, as a 
result of the trend of organizations to transfer their computing rooms and infrastructure 
to  server  farms  where  there  are  24/7  maintenance  monitoring  services  and  the  high 
power  supplies  required  for  the  computing  equipment,  as  well  as  as  a  result  of  the 
transition to managed services (as a Service). The reasons for the increase in demand for 
cloud  services  are,  among  others,  the  digital  transformation,  the  entry  of  cloud 
companies such as Microsoft, Google, Oracle, AWS into the Israeli market, as well as the 
transition of government services to the cloud as part of the "Nimbus" project. 

The field of equipment, licensing and service contracts for businesses is affected by the 
economic  situation  in  Israel  and  the  world,  as  well  as  technological  changes.  In  the 
market, there is a trend of moving from the purchase of equipment to software products 
and  cloud-based  services  (such  as  SaaS,  IaaS,  PaaS,  as  well  as  reliance  on  public  cloud 
resources such as AWS, Azure, GCP), but it is expected that customers will adopt a model 
that combines the purchase of equipment and cloud services ("Hybrid” model). 

4.1.5. 

Main entry and exit barriers 

4.1.5.1 

The  main  entry  barriers  to  the  markets  in  which  Bezeq  International 
operates are making investments, among other things, in infrastructure, in 
establishing service and support systems, etc. (also, some of the activities 
require a license according to the Communications Law. 

4.1.5.2 

The main exit barriers from these markets arise from long-term and binding 

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agreements  with  infrastructure  providers  and  investments  that  require  a 
long time to return. In addition, some require providing service to customers 
during the contract period, which is not short. 

4.1.6. 

Substitutes for Bezeq International products and the changes that apply thereto 

In  the  international  call  market  -  The  main  alternative  product  is  the  use  of  VoIP 
technology, which enables the transfer of international calls over the Internet to other 
users of this technology, as well as to the users of the TDM networks, through the use of 
software  products  (such  as  Skype,  WhatsApp  or  Zoom)  and  in  the  services  of 
telecommunications  providers  abroad.  These  services  have  attractive  rates  of  use 
(including  the  absence  of  usage  fees)  and  together  with  their  availability,  lead  to  a 
continuous  increase  in  the  number  of  users,  and  as  a  result  -  to  harm  to  Bezeq 
International's  revenues.  At  the  same  time,  there  are  currently  more  than  ten 
international operators in Israel licensed by the Ministry of Communications to provide 
international Bezeq services. 

4.1.7. 

The structure of competition in the Internet market and the changes that apply to it  

In the field of Internet access services (ISP), diverse licenses have been provided so far to 
provide access services to many companies. Following regulatory changes, the market is 
moving to the provision of services in a unified format (packages that include access and 
infrastructure services from one provider). This resulted in a significant reduction in the 
number of Internet customers of Bezeq International and the structural change described 
in Section 1.1.4, so that Bezeq International does not currently market Internet services 
to customers in a private service..  

For more details regarding competition in the field of activity, see Section 4.6.1. 

4.1.8. 

Critical success factors 

4.1.8.1 

4.1.8.2 

4.1.8.3 

4.1.8.4 

4.1.8.5 

4.1.8.6 

Recruitment and employment of skilled personnel; 

Streamlining and savings in expenses and personnel; 

Ability to maintain a high level of service and customer satisfaction; 

Technological innovation, identifying needs and trends in the market and 
launching solutions to meet these needs; 

Investments in the infrastructures required for the provision of services; 

Maintaining normal working relationships with leading manufacturers and 
suppliers. 

4.2. 

Products and services 

The following is a list of Bezeq International's main products and services:  

4.2.1. 

Internet and data communication services 

4.2.1.1 

Internet services 

In  the  field  of  Internet  services,  Bezeq  International  provides:  Internet 
access  services  (ISP)  for  private  and  business  customers,  including  the 
provision  of  required  end  equipment  and  support  based  on  DSL, 
transmissions or cables infrastructure, Internet access services are provided 
by Bezeq International in the following configurations: (a) "Retail market" 
services:  Internet  access  service,  without  infrastructure  services;  (B) 
"Wholesale  Market"  services:  an  integrated  package  that  includes  an 
Internet access service together with the Internet infrastructure service of 
the infrastructure companies included in the wholesale market reform; (C) 
"Bundle" or "Reverse Bundle" packages: a combined package that includes 
an  Internet  access  service  together  with  Bezeq's  Internet  infrastructure 
service,  provided  by  Bezeq  International  (in  the  case  of  a  bundle)  or  by 
Bezeq (in the case of a reverse bundle); And (d) packages that include Bezeq 
International's Internet access services, Bezeq's infrastructure services and 
DBS’s STING TV brand - a television services platform based on the Internet 
(along with Internet access services; (e) symmetrical internet lines, intended 
for  the  business  segment;  (f)  Interior  telephony  services  on  broadband 

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(Voice over Boardband). 

Bezeq International provides the above-mentioned Internet services mainly 
through a fully and exclusively owned underwater cable between Israel and 
Italy (JONAH) launched in December 2011, and through underwater cables 
owned  by  other  companies,  from  which  Bezeq  International  acquires 
capacities  (see  details  in  Section  4.9).  Among  the  largest  ISP  providers 
operating  in  Israel,  Bezeq  International  is  the  only  one  that  owns  an 
underwater  cable.  The  ownership  of  the  underwater  cable  frees  Bezeq 
International  from  its  dependence  on  infrastructure  providers,  and  also 
enables it to offer its customers better quality browsing performance. 

It should be noted that due to the fact that Bezeq International is gradually 
decreasing its activity in the private customer market (see Section 4.13) its 
revenue from Internet services is expected to be substantially affected. Also, 
some of the above services are not marketed to private customers (but are 
provided to existing private customers). 

4.2.1.2 

International data communication services 

Providing 
customers, including global deployment, according to customer needs.  

international  data  communication  solutions  for  business 

The services are provided through Bezeq International's underwater cable 
and  underwater  cables  of  other  companies,  in  which  Bezeq  International 
has  long-term  use  rights,  as  well  as  through  business  partnerships  with 
telecommunications  providers  which  provide  its  customers  with  global 
network services.  

In  addition  to  the  abovementioned  services,  Bezeq  International  offers 
holders  of  licenses  to  provide  international  Bezeq  services  and  Internet 
access licenses, international capacity (in the form of rent, or purchase of 
indefeasible use rights), based on Bezeq International's underwater cable 
and rights-of-use in continental Europe and other international networks.  

4.2.2. 

International telephony services 

In the field of international telephony services, Bezeq International provides international 
direct  dialing  services  (IDD)  for  business  and  private  customers,  free  dialing  service 
abroad  for  business  customers,  routing  and  terminal  services  for  international  calls 
(hubbing)  -  transfer  of  international  calls  between  foreign  communication  providers 
(world- Olam and dialing card service that allows dialing from Israel to abroad and from 
abroad to Israel. 

4.2.3. 

Communication and computing services for businesses 

4.2.3.1 

Hosting services 

Bezeq International operates several server farm facilities, where server and 
equipment  hosting  services  (colocation)  are  offered,  as  well  as  ancillary 
services  such  as  backup  and  disaster  recovery  services,  virtual  servers, 
protection services against DDoS attacks, and more. 

4.2.3.2 

Public cloud services 

Bezeq International serves as a distributor of Microsoft, and by virtue of this, 
it  distributes  the  cloud  products  of  this  company,  such  as  Office  365 
products and Azure public cloud services. This activity includes both direct 
sales to end customers (direct) and sales to sub-distributors (indirect). Part 
of the activity is carried out through the subsidiary CloudEdge Ltd., which 
offers implementation solutions and professional services in this field. 

4.2.4. 

Equipment, licensing and service contracts for businesses 

Bezeq International serves as a non-exclusive marketer of global manufacturers, and by 
virtue  of  this  it  provides  integration  services  that  include  the  sale,  installation, 
implementation  and  maintenance  of  hardware  and  software 
in  the  field  of 
communication  and  telephony  (such  as  physical  telephone  switchboards  or  cloud 
exchanges, wireless Internet networks, communication networks for server rooms and 

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user environments, and systems networking), computing infrastructures (such as servers, 
licensing of various types of software, and more, among others in the areas of system, 
storage,  and  more),  and  information  security  (such  as  firewalls,  endpoint  protection 
solutions,  application  protection  (WAF),  file  laundering,  identification  and  monitoring 
online events and more). In general, Bezeq International provides project management 
services in the field of integration. 

4.3. 

Products and services evenue segmentation 

The following are data regarding Bezeq International's revenues (in NIS million):  

Internet services  

Rate of total Bezeq International revenues 

International communication 

Rate of total Bezeq International revenues 

VOICE and Business Communication services 
(PBX, ICT, DATA) 

Rate of total Bezeq International revenues 

Equipment, licensing and service contracts for 
businesses 

Rate of total Bezeq International revenues 

Total revenue  

2022 

637 

51% 

183 

15% 

185 

15% 

234 

19% 

1,239 

2021 

683 

55% 

177 

14% 

142 

11% 

235 

19% 

1,237 

2020 

710 

57% 

181 

14% 

131 

10% 

249 

20% 

1,271 

4.4. 

Customers 

Bezeq International has no dependence on a single customer, and has no customer whose revenues 
constitute 10% or more of its total revenues. 

Below  are  data  about  the  distributioin  of  revenue  from  private  and  business  customers  (NIS 
millions)63: 

Revenue from private customers 
Revenue from business customers 
Total revenue 

2022 
312 
927 
1,239 

2021 
372 
865 
1,237 

2020 
401 
870 
1,271 

Regarding  Bezeq  International  customers  and  their  characteristics,  the  diverse  consumption 
characteristics for purchasing Internet packages among the public have led to a certain percentage 
of customers purchasing as redundant ISP service from more than one ISP when in practice they use 
the services of only one ISP. On September 10, 2020, the Ministry of Communications wrote a letter 
to the carriers in which it raised concerns that some subscribers to Internet services or other services 
such as email box, do not use them and are not even aware of it. The Ministry recommended in its 
application to act to notify and stop charging subscribers who do not use these services, and also 
requested  periodic  reports  on  the  matter,  over  the  next  6  months.  It  was  also  written  that  the 
Ministry  will  consider  in  the  future  whether  to  set  binding  provisions  in  the  matter,  should  and 
initiated actions will not lead to a significant reduction in this matter. On November 8, 2020, another 
letter was received from the Ministry of Communications, according to which the Ministry expects 
that the next reporting point (set for December 17, 2020), the reported data will reflect the reduction 
of the phenomenon in a significant manner, that a date should be provided at this time on how the 
licensee acts to prevent the recurrence of the phenomenon, and, like its previous letter, that as long 
as  the  phenomenon  is  not  significantly  reduced,  the  Ministry  will  take  various  actions,  including 
establishing binding provisions in this regard. In Bezeq International's assessment, the abolition of 
the  separation  of  infrastructure  provider  will  lead  to  a  significant  reduction  in  the  scope  of  the 
phenomenon. Bezeq International makes proactive inquiries to customers who are found not to be 
using the ISP service, in order to get their approval to disconnect or keep the subscription. 

63 The data are after changing the classification of small customers (SOHO) from private customers to business customers carried 
out in 2019. 

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On motions for approval of class actions in this matter that were filed against Bezeq International, 
see Section 4.12. 

4.5.  Marketing, distribution and service 

Bezeq International operates sales channels for the business market that include a sales center and 
business  customer  managers.  Service  centers  and  technical  support  are  available  to  customers. 
Bezeq International operates service and technical support centers for the private market. Bezeq 
International maintains an array of field technicians for the purpose of responding to malfunctions 
at customer sites that cannot be solved remotely. 

4.6. 

Competition 

4.6.1. 

ISP Services  

4.6.1.1 

The  market  is  saturated  with  competitors,  the  main  ones  being  Cellcom, 
Partner, and Hot Net.  

4.6.1.2 

Bezeq  International  estimates  its  market  share  in  the  field  of  Internet 
services as of December 31, 2022 at about 22%64.  

The competition in 2022 is characterized by the transition of customers from 
the  retail  market  services  (in  which  the  access  services  and  the 
infrastructure  services  are  purchased  separately)  to  unified  packages  (in 
which  the  access  services  and  the  infrastructure  services are  provided  by 
one provider). 

4.6.1.3 

The following are developments in 2022:  

a.  Continued  trend  of  selling  service  baskets,  especially  against  the 
backgroundThe  activity  of  a  wholesale  sales  model  (supplier  + 
infrastructure) in 2021. 

b.  Competitors'  focus  on  promoting  browsing  services  at  high  browsing 
rates. Some of the competitors have launched browsing packages at a 
particularly high browsing rate, among other things through fiber-optic 
infrastructure deployed thereby. 

c.  a decrease in customers joining the retail market services was recorded, 
and on the other hand there was an increase in joining "reverse bundle" 
packages.  

d.  The trend of selling "Triple" packages by competitors, which include, in 
Internet 

addition  to  the  television  services,  a  provider  and 
infrastructure in a non-detachable basket of services continues. 

4.6.2. 

International telephony services 

4.6.2.1 

As  of  the  end  of  2022,  about  ten  companies  are  operating  in  the  market 
(among them Bezeq International, Cellcom, Partner, Golan Telecom and Hot 
Mobile).  

Bezeq International estimates that its market share in the field of outgoing 
calls from customers as of December 31, 2022 is approximately 21%65. 

4.6.2.2 

General characteristics of the competition in 2022: 

In 2022, the number of call minutes made through international telephony 
continued to decline, among other things, as a result of an increase in the 
use  of  various  applications  for  making  calls,  as  well  as  due  to  the  service 
packages  offered  by  cellular  companies,  which  include  international  call 
minutes. Business work habits that began following the COVID crisis are still 
evident,  including  an  increase  in  the  use  of  services  that  allow  calls  and 

64 Bezeq International's assessment of its market share in the field of Internet access services is based on an external telephone 
survey conducted for Bezeq, and is not based on significant data held by Bezeq to date. 
65 Based on publications from the Ministry of Communications regarding the number of minutes spent in the second quarter of 
2021. 

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meetings to be carried out online, while reducing the use of international 
telephony services.. 

4.6.3. 

International data communication services 

In  the  field  of  international  data  communication  services,  the  various  communication 
providers compete, such as Partner, Cellcom, Hot, as well as underwater cable owners 
such as Tamares Telecom. Bezeq International, which owns the underwater cable, has a 
competitive  advantage  over  telecommunications  providers  that  do  not  own  an 
international infrastructure. In the absence of public data on the market shares of the 
competitors  in  this  market,  it  is  not  possible  to  estimate  the  market  share  of  Bezeq 
International in this area. 

4.6.4. 

Communication and computing services for businesses 

4.6.4.1 

Hosting services 

The field of hosting services is characterized by many competitors, including 
Bynet, Partner, Med-1, GDC, and more. In 2022, there will be an increase in 
the demand for hosting services in server farms, among other things as a 
result of the trend in the business market to move to managed services (as 
a  service)  and  services  in  cloud  environments,  as  well  as  in  view  of  the 
intention of huge companies operating in the field of public cloud services 
to establish Points of Presence in Israel. In the absence of public data on the 
market shares of competitors in this market, Bezeq International's market 
share in this area cannot be estimated. 

4.6.4.2 

Public cloud services 

In the field of cloud services, many companies compete in marketing and 
implementing the services of different cloud companies. In recent years, the 
demand  for  public  cloud  services  offered  by  cloud  companies  such  as 
Amazon,  Microsoft,  Google  and  Oracle  has  been 
increasing.  Bezeq 
International acts both as a marketer (sold directly to customers) and as a 
distributor  (sold  through  sub-marketers)  of  licensing  Microsoft's  cloud 
services to customers in Israel, and implementing these service solutions for 
customers.  Following  the  purchase  of  Cloudedge  Ltd.  by  Bezeq 
International,  Bezeq  International  acquired  additional  capabilities  in  this 
field, 
in  providing  professional  services  and 
implementing cloud solutions in large business customers, which gives it a 
competitive  advantage  in  this  field.  In  the  absence  of  public  data  on  the 
market shares of competitors in this market, Bezeq International's market 
share in this area cannot be estimated. 

including  knowledge 

4.6.5. 

Equipment, licensing and service contracts for businesses 

The field of providing hardware and software solutions for businesses is characterized by 
multiple competitors and fierce competition. Bezeq International faces many competitors 
such as Bynet, One-Taldor Group, Malam Group, Cellcom, Partner, Matrix and more. Most 
manufacturers  are  not  marketed  by  Bezeq  International  exclusively.  The  fierce 
competition in the field leads to price erosion. In the absence of public data on the market 
shares  of  competitors  in  this  market,  Bezeq  International's  market  share  in  this  area 
cannot be estimated. 

4.6.6. 

Unique characteristics 

4.6.6.1 

Positive factors affecting Bezeq International's competitive position: 

A.  A well-known and strong brand. 

B.  Technological innovation. 

C.  Professional, experienced and skilled personnel. 

D.  Presence in many businesses. 

E.  Ownership of an underwater cable that enables Bezeq International to 
provide  high-quality  international  Internet  and  data  communication 
services. 

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F.  Engaging  in  various  fields  that  enable  the  provision  of  a  service 
envelope  to  business  customers,  such  as  communication  services, 
hosting and cloud services, and the supply of equipment and licensing 
in the field of computing and communication. 

4.6.6.2 

Negative factors affecting Bezeq International's competitive position 

International  does  not  own 

The  fact  that  Bezeq 
interior  access 
infrastructures  is  a  competitive  disadvantage  in  the  market  of  internet 
services and data communication for businesses compared to competitors 
that control such infrastructures. 

4.7. 

Property, plant and equipment, real estate and facilities 

Bezeq  International's  property,  plant  and  equipment  include  switching  and  Internet  equipment, 
underwater cable, central equipment and routers for rent, office equipment, computers, software 
licensing, and leased improvements. 

Bezeq International has SoftSwitch switches from the Dialogic company. These switches are used to 
route  Bezeq  International's  VOICE  movement.  Value-added  services,  including  calling  cards,  are 
based on a smart (IN) system. 

The  CRM  system  (customer  management)  is  based  on  Peoplesoft  software.  The  software  is  not 
supported  by  the  manufacturer,  but  is  maintained  by  Bezeq  International.  Bezeq  International  is 
considering an upgrade to new CRM and ERP systems. 

Bezeq International's technological infrastructures that support the voice, data and the Internet is 
deployed on a number of sites, in Israel and abroad, among others, to ensure, when necessary, high 
survivability for the provision of services. 

Bezeq International has long-term lease agreements for the two main buildings where its offices are 
located.  Regarding  one  of  the  buildings,  the  lease  period  is  until  March  2029,  with  an  option  to 
extend the lease period by five years. The lease period in the other building is until December 2023 
(with two equal options for extension until 2027). 

Bezeq International has a lease agreement for a building with a server farm. The lease period is until 
August 2026, followed by two additional options for extension until 2036. 

Bezeq International has additional lease agreements in connection with warehouses (including the 
logistics center), and buildings in which call centers are used for its operations. 

4.8. 

Human capital 

The  following  are  details  about  the  number  of  Bezeq  employees  International  in  years  2020  and 
2021: 

Administrative employees 
Service and sales representatives 
Total 

31.12.202  
2

31.12.202  
1

676 
273 
949 

758 
363 
1,121 

The number of employees included in the table includes employees employed part-time. Total jobs66 
Bezeq International as of December 31, 2022 was 927 compared to 1,047 as of December 31, 2021.  

66 Total monthly working hours divided by the monthly working hours quota.  

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Organizational structure 

The  following  is  a  diagram  of  Bezeq  International's  organizational  structure  as  of  the  date  of  the 
report:  

Board of Driectors

CEO

HR and 
Administ
ration 
Division 

Finance 
Division
** 

Strategic 
Customer 
Sales 
Division

Managed 
Sales 
Sales 
Division

Technology 
Division

Legal 
Departme
nt

Internal 
Audit*

voice 
Division

DATA and 
International 
Infrastructure 
Sales Division

Delivery and 
Service 
Division

Marketing 
Division

Customer
s Division

(*) Internal Auditor is a Pelephone employee. 

(**) CFO is a Pelephone employee. 

As part of the implementation of the synergy processes with the subsidiary companies in the Group, 
the CEO of Bezeq International will also serve as CEO of Pelephone and DBS until the end of 2022. 
Also, most of the VPs serving at Pelephone also served as VPs at DBS and Bezeq International. On 
January 1, 2023, Mr. Ron Galab began serving as CEO of Bezeq International. 

Regarding  streamlining  processes  and 
Pelephone and DBS, see Section 1.8. 

intra-organizational  changes  at  Bezeq  International, 

On  October  3,  2022,  Bezeq  International's  Board  of  Directors  approved  the  implementation  of 
agreements  reached  with  the  new  general  union  and  the  employee  representation  of  Bezeq 
International (as part of conducting negotiations to regulate employee rights) regarding a plan for 
the voluntary retirement of Bezeq International employees during the years 2022-2024 ("Voluntary 
Retirement  Plan").The  estimated  cost  of  the  Voluntary  Retirement  Plan  is  approximately  NIS  70 
million, assuming full implementation of the Voluntary Retirement Plan. The implementation of the 
Voluntary  Retirement  Plan  is  expected  to  allow  Bezeq  International  to  adjust  its  organizational 
structure, the scope of manpower and costs to the changes taking place in the market following the 
regulatory  change  in  the  field  of  Internet  services  (elimination  of  the  separation  between  an 
infrastructure  provider  and  an  ISP  that  allows  Bezeq  to  provide  a  unified  Internet  service)  which 
causes the reduction of ISP activity at Bezeq International , this is in accordance with the alternative 
outline  as  specified  in  Section  1.1.6.  Following  this,  starting  on  November  13,  2022,  Bezeq 
International approves voluntary retirement for Bezeq International employees to the extent of the 
estimated cost of the program (about NIS 70 million). 

On December 6, 2022, Bezeq International signed the renewal of the existing collective agreement 
between itself and the General Workers' Union and its workers' representation for the period from 
December 6, 2022 to December 31, 2025 ("the Agreement" and "Agreement period", respectively). 
According to the Agreement, salary increases and bonuses will be given, ancillary conditions will be 

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improved, and the labor disputes announced by the General Workers' Histadrut and the employees’ 
representatives will be settled, while maintaining industrial peace during the validity period of the 
agreements on the issues regulated therein, with the exception of the labor dispute regarding the 
sale of control of the Company, for which the employees’ representation’s requirement remains to 
appoint a director on its behalf, which will be discussed between the parties. The total estimated 
additional cost of the agreement over the period of the Agreement, beyond the estimated voluntary 
retirement  cost  of  approximately  NIS  70  million  (as  mentioned  above),  is  approximately  NIS  28 
million. 

Bezeq International's estimates in relation to the estimate of the cost of the Agreement are forward-
looking information, as defined in the Securities Law, based, among other things, on its assumptions 
regarding the manner and scope of the retirement plan implementation and additional conditions 
stipulated in the Agreement. These estimates may not materialize, or may materialize in a different 
way  than  expected,  depending,  among  other  things,  on  the  manner  and  scope  of  the  actual 
implementation of the agreement and the retirement plan, taking into account the needs of Bezeq 
International and its ability to realize its plans and the fulfillment of additional conditions stipulated 
in the Agreement. 

For this matter see also Note 16 to the 2022 statements. 

4.9. 

Suppliers 

4.9.1. 

Foreign operators 

Bezeq International has collaborations with about 200 foreign operators, as part of which 
Bezeq  International  forwards  and  receives  international  telephone  calls  from  these 
operators  (including  calls  leaving  Israel,  entering  Israel,  and  calls  between  various 
destinations outside Israel) to about 240 destinations worldwide.  

4.9.2. 

Capacity providers 

Most  of  the  interior  capacity  used  by  it  for  the  purpose  of  providing  its  services  is 
purchased by Bezeq International from Bezeq. 

Most of the international capacity that Bezeq International uses is transmitted through 
the  underwater  cable  it  owns.  As  a  backup,  Bezeq  International  uses  the  capacity 
purchased from Med Nautilus and Cyprus Telecommunications Authority (CYTA). 

in  an 

As  part  of  its  engagement  with  Med  Nautilus,  Bezeq  International  acquired  the 
indefeasible  right  of  use, 
in  the 
communication capacity transmitted through the underwater cable system operated by 
Med  Nautilus  between  Israel  and  Europe,  and  continued capacity  over  the  Company's 
ground infrastructure to a number of communication nodes in Europe. The use periods 
were extended until July 2030. For the said use rights, Bezeq International paid one-time 
payments, close to the date of commencement of the use of the capacity. 

indefinite  and  non-specific  attribution, 

As part of its engagement with CYTA, Bezeq International has acquired indefeasible right-
of-use, in an undefined part and with a non-specific attribution, in the communication 
capacity transmitted through the underwater cable system operated by CYTA between 
Cyprus  and  Europe.  The  period  of  use  is  at  least  until  May  2022,  with  an  option  of 
extending the period. 

In addition, Bezeq International acquired indefeasible right-of-use of the non-residential 
parts  in  an  unspecified  part  and  no  specific  attribution  can  be  attributed  to  the 
communication  capacity  transmitted  through  terrestrial  infrastructure  in  Europe  from 
EXA  Infrastructure  (GTT  Communications  Inc.),  for  the  purpose  of  bridging  Bezeq 
International's submarine cable to communications nodes in Europe. The period of use of 
these infrastructures is at least until 2026, with the possibility of extending the period. 

4.9.3. 

Hosting service providers 

Bezeq International acquires hosting services in long-term agreements with a number of 
server  farm  facility  operators,  mainly  for  the  purpose  of  providing  hosting  services  to 
business customers: 

As part of an agreement signed in 2011, Bezeq International purchases Bezeq’s hosting 
services at Bezeq's server farm facility. These services are mostly used to provide hosting 

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services  to  business  clients.  The  agreement  is  valid  until  2024  for  certain  parts  of  the 
facility, and for other parts until 2033. 

As part of an agreement signed in 2019 with Edgar Investments and Development Ltd., 
Bezeq  International  acquires  hosting  services  at  this  Bezeq  server  farm  facility.  The 
agreement is valid until 2041, with an option to terminate early in 2034. These services 
are used to provide hosting services to business customers. 

As part of an agreement signed in 2021 with ServerPharm Israel Infrastructure Fund Bnei 
Zion Limited Partnership, Bezeq International will purchase hosting services at a server 
farm facility under construction by this partnership starting from 2023. The agreement is 
valid until 2039, with options for extension until 2047. These services are expected to be 
used to provide hosting services. For business customers. 

4.9.4. 

Microsoft 

Bezeq International has an agreement with Microsoft by virtue of which it is entitled to 
sell  Microsoft's  cloud  products  both  to  end  customers  and  to  indirect  resellers.  The 
agreement  is  automatically  extended,  and  each  party  may  terminate  it.  Bezeq 
International's  activity  in  the  field  of  the  public  cloud  relies  exclusively  on  Microsoft 
products, therefore the termination of the agreement with Microsoft may significantly 
harm this activity and even lead to its termination. 

4.10.  Taxation 

See Note 7 to the 2022 statements. 

4.11.  Restrictions and supervision of Bezeq International's activities 

4.11.1. 

Restrictions by virtue of laws 

According to the Communications Law, performing Bezeq operations and providing Bezeq 
services,  including  international  Bezeq  services  and  Internet  access  services,  require  a 
license  from  the  Minister  of  Communications.  The  Minister  is  authorized  to  change 
license  terms,  add  to  them  or  derogate  from  them,  while  considering,  among  other 
things,  government  policy  in  the  field  of  Bezeq,  considerations  in  the  public  interest, 
adjusting the licensee to provide services, the license contribution to competition in the 
field of Bezeq and its level of service. 

The law authorizes the Director General of the Ministry of Communications to impose 
financial sanctions due to various violations of the provisions of the law and of orders and 
provisions issued under it, as well as due to violation of conditions in the license. 

4.11.2. 

Licenses 

Bezeq International has a unified general license for the provision of Bezeq services (the 
"Unified License"), which is valid until February 4, 2036. 

The following are the main instructions from the unified license: 

a. 

In certain circumstances, the Minister may change the terms of the license, add to 
them or detract from them, and in some cases even revoke it. 

b.  The license is not transferable and includes restrictions on the purchase or transfer 
(including  by  way  of  lien)  directly  or  indirectly  of  control  of  10%  or  more  of  any 
means of control in Bezeq International, including the lien of such means of control, 
unless prior consent of the Minister.  

c.  Bezeq International must provide an interconnectivity service on equal terms to any 
other operator and must avoid any discrimination in performing interconnectivity.  

d.  Bezeq  International  must  refrain  from  preferring  the  provision  of  infrastructure 
services to a licensee who is an affiliated company (as defined in the license) over 
another licensee.  

e.  Bezeq International may not sell, rent, or mortgage property from the properties 
license  without  the  consent  of  the  Minister  of 

used  to  carry  out  the 
Communications, except for certain exceptions set forth in the license. 

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f. 

In times of emergency, a person authorized to do so by law has the authority to give 
Bezeq International various instructions regarding the manner in which it operates 
and / or the manner in which the services are provided. 

g.  The license specifies the types of payments that Bezeq International may charge its 
subscribers for Bezeq services, and the reports it must provide to the Ministry of 
Communications.  The  license  also  stipulates  the  authority  of  the  Minister  to 
intervene in rates, in some cases. 

h.  The license requires Bezeq International to have a minimum level of service. 

In  accordance  with  the  requirement  of  the  Ministry  of  Communications,  Bezeq 
International provided a bank guarantee, in the amount of NIS 2 million, to fulfill 
the conditions of the unified license. 

4.11.3. 

Real estate authority - On July 9, 2014, the Minister of Communications granted Bezeq 
International  the  powers  related  to  real  estate,  which  are  listed  in  Chapter  F  of  the 
Communications Law, including entering the land for the purpose of laying a network and 
maintaining it (see Section 2.16.5).  

4.11.4. 

Payments for interconnectivity 

In  the  matter  of  interconnectivity  fees  paid  to  the  NIO  and  the  cellular  operator,  see 
Section 1.7.4.1.  

4.11.5.  Major regulatory developments 

4.11.5.1 

4.11.5.2 

4.11.5.3 

For possible changes in the communications market that also affect Bezeq 
International  following  the  Competition  Expansion  Policy  document,  see 
Section 2.16.4.2. 

For decisions made in connection with the "wholesale market" which also 
have implications for the field of activity, see Section 2.16.4.  

Regarding  the  decision  of  the  Ministry  of  Communications  at  the  hearing 
dated  June  20,  2021  on  the  cancellation  of  the  separation  between  the 
broadband infrastructure service and the Internet access service (ISP), see 
Section 1.7.3.3. The changes in the telecommunications market, caused as 
a result of this decision, resulted in a substantial damage to its subscriber 
base, and to the revenues of Bezeq International in the Internet segment. 
The damage is expected to continue and deepen in 2023. 

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4.12. 

Legal proceedings67  

During the day-to-day business, lawsuits were filed against Bezeq International, including motions 
for approval of class actions.  

4.12.1. 

Pending and current legal proceedings  

Date 

Sides 

Court 

District 
(Central) 

Type of 
procedure 

Monetary 
claim 
together with 
a motion to 
recognize it as 
a class action 

Details 

 It is alleged, among other things, that Bezeq International 
sells its customers Internet browsing speeds, even though 
the infrastructure at their place of residence does not allow 
them to reach this speed. In January 2021, the Court upheld 
the claim as a class action. 

Claim 
amount 
(NIS 
millions) 
Unspecifie
d 

a. 

 March 
2016 

b. 

 April 2019 

c. 

 October 
2020 

e.  November 
2020 

Client 
against 
Bezeq 
Internatio
nal and 
other 
communic
ations 
companie
s 

Client 
against 
Bezeq 
Internatio
nal and 
other 
communic
ations 
companie
s 
Client 
against 
Bezeq 
Internatio
nal 

Client 
against 
Bezeq 
Internatio
nal 

District 
(Central) 

Monetary 
claim 
together with 
a motion to 
recognize it as 
a class action 

It  is  alleged  that  Bezeq  International  does  not  inform  its 
customers as required about the possible dangers of using 
the  Internet  and  about  the  possibility  of  joining  a  free 
content filtering service, in violation of the provisions of the 
Communications  Law.  In  addition,  Bezeq  International 
provides  a  website  filtering  service  and  offensive  content 
that the applicants claim is not sufficiently effective. 

Unspecifie
d 

District 
(Central) 

District 
(Central) 

Monetary 
claim 
together with 
a motion to 
recognize it as 
a class action 

Monetary 
claim 
together with 
a motion to 
recognize it as 
a class action 

It is alleged, among other things, that Bezeq International 
charges its customers payments for services that it does not 
provide to them, ostensibly knowing that the customer has 
replaced  the  Internet  provider  and  disconnected  from 
Bezeq 
International.  On  November  5,  2020,  Bezeq 
International  received  another  motion  for  approval  of  a 
class action in the same matter. 

It is alleged, among other things, that Bezeq International 
charges  fees  for  the  provision  of  'antivirus  service'  and 
'backup  service'  without  actually  being  provided,  when 
according  to  the  claim  it  does  not  disclose  to  customers 
when concluding the contract that they must initiate special 
operations including installation of special software at the 
time of the conclusion of the contract and not at the time 
of the actual provision of the service.  

Unspecifie
d  

Unspecifie
d 

4.12.2. 

Legal proceedings completed during the reporting period 

Regarding the withdrawal request for discovery and review of the documents before filing 
a  derivative  claim  filed  against  the  Company  and  Bezeq  International  regarding  asset 
balances in Bezeq International's books - see Section 2.18.2a. 

67   For reporting policy and materiality thresholds, see Section 0.  

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4.13.  Targets, business strategy and development prospects 

In  light  of  the  elimination  of  the  separation  between  infrastructure  provider  and  Internet  access 
provider (ISP), Bezeq International intends to cease ISP activity in the private segment in a graded 
manner,  and  focus  on  developing  integration  activities  and  services  for  the  business  segment,  in 
order  to  become  a  growth-focused  ICT  company.  This  is  expected  to  allow  managerial  focus  and 
dedication of resources to integration activities and cloud services, which is growing due to the trend 
of the business segment moving to a model of cloud services. Bezeq International will continue to 
acquire  capabilities  and  knowledge,  both  through  the  training  of  personnel  and  through  the 
acquisition of companies in complementary fields. Bezeq International will maintain collaborations 
with partners in Israel and abroad in order to provide a full service envelope to its customers. Bezeq 
International  will  offer  its  services  to  all  business  segments,  including  small,  medium  and  large 
businesses, the public and government segments and more. Bezeq International anticipates that the 
main growth engines will be in the areas of hosting services, cloud services and information security 
services. For further details see Sections 1.1.5 and 1.8. On this side, Bezeq International will work 
towards streamlining and cost savings, with an emphasis on reducing manpower, by separating from 
labor-intensive areas of activity and moving to efficient operating methods. These processes depend 
in part on the cooperation of employee representatives. 

The  above  is  forward-looking  information  as  defined  in  the  Securities  Law,  based  on  Bezeq 
International's  estimates  and  assumptions.  Bezeq  International  cannot  assess  whether  the  above 
objectives may materialize or partially materialize and when. In addition, the targets may be affected 
by changes and developments in the relevant markets, due to regulatory changes that may impair 
Bezeq International's ability to meet existing or changing market requirements, as well as due to all 
other risk factors listed below. 

4.14.  Discussion of risk factors 

The following is a description of the risk factors arising from the macroeconomic environment, the 
unique characteristics of the industry in which Bezeq International operates, and risk factors unique 
to Bezeq International:  

4.14.1. 

Competition  

For  the  effect  of  competition  on  Bezeq  International's  business,  see  Section  4.6  and 
Section 4.13. 

4.14.2. 

Frequent technological changes and investments in infrastructure  

Bezeq  International's  areas  of  activity  are  characterized  by  frequent  technological 
changes. The development of technologies that constitute attractive alternatives to some 
of  Bezeq  International's  products  (such  as  Skype,  WhatsApp  or  Zoom)  may  materially 
impair  Bezeq  International's  operations.  Also,  technological  developments  require 
frequent investments in infrastructure. See Sections 4.1.5.2 and 4.1.6. 

4.14.3. 

Exposure to changes in exchange rates 

Bezeq International is exposed to risks due to changes in exchange rates, especially in the 
field of equipment sales and integration, as well as in international data services, since 
most purchases of equipment and services in these areas are made in US dollars, while 
Bezeq International's revenue is shekels. Erosion of the shekel against the dollar could 
harm Bezeq International's profitability if it is not possible to adjust selling prices in the 
short term.. 

4.14.4. 

Governmental supervision and regulation  

Regarding the applicability of the provisions of the law and the licensing policy and their 
effect on Bezeq International, see Section 4.11. Certain changes in the regulations applied 
to Bezeq International may have an adverse effect on its results and operations. 

4.14.5. 

Epidemic 

Disease outbreaks and epidemic events in general (such as the outbreak of COVID-19 in 
2020) may have consequences for Bezeq International's business activities depending on 
the scope and severity of the spread as well as the national and global measures that will 
be  taken  as  a  result.  These  consequences  may  be  manifested,  among  other  things,  in 
damage to Bezeq International's operations and its customer service system, as well as in 
damage to the supply chain. Events of this type are changing events that are not under 

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the  control  of  Bezeq  International,  and  their  consequences  are  subject,  among  other 
things, to the decisions of countries and authorities in Israel and around the world that 
may affect Bezeq International accordingly. 

4.14.6. 

Serious malfunctions in information systems and engineering systems 

Bezeq  International  provides  its  services  through  various  infrastructure  systems, 
including, among others, switches, data transmission and access transmission networks, 
cables,  computer  systems,  physical  infrastructure  and  more  (“the  Systems").  Bezeq 
International's  business  has  a  high  dependence  on  these  Systems.  Some  Bezeq 
International Systems have backup, but at the same time, in the event of damage to some 
or all of the above Systems, either due to a large-scale technical malfunction, due to a 
natural  disaster  (such  as  an  earthquake,  fire,  etc.),  or  due  to  physical  damage  to 
infrastructure and due to malicious damage (such as the introduction of viruses and cyber 
attacks  as  detailed  below),  significant  difficulties  may  be  caused  in  the  provision  of 
services, including in the event that Bezeq International is unable to quickly return the 
Systems to normal. 

4.14.7. 

Information security, protection of customer data and cyber risks 

Bezeq International is the target of cyber-attacks, the purpose of which is to harm the use 
of  the  information  systems  or  the  information  itself.  This  type  of  assault  activity  or 
intrusion incident can cause business disruption, information / money theft, damage to 
reputation,  damage  to  systems  and  information  leakage.  Another  risk  is  posed  by  the 
leakage of information from within the organization by Bezeq International employees, 
inadvertently or maliciously. 

Bezeq  International's  cyber  protection  management  strategy  is  built  on  three  pillars: 
information  confidentiality,  information  integrity  and  information  availability.  Bezeq 
International  employs  many  measures,  both  technological  and  organizational,  to  deal 
with the aforementioned risks. 

Bezeq International allocates many resources to deal with cyber risks. Bezeq International 
has an information security department that deals with information security and cyber 
risk  management.  Bezeq  International  devotes  significant  budgets  to  the  purchase  of 
systems and technological means to protect information. Detailed procedures have been 
established that refer both to the routine handling of information and to the methods of 
operation  and  the  management  of  information  security  incidents.  Bezeq  International 
information  security  training.  Every  month  Bezeq 
employees  undergo  periodic 
International  employees  are  sent  messages,  instructions  and  updates  aimed  at  raising 
awareness of cyber risks and proper handling of information. 

Bezeq International supervises the implementation of its defense policy, which includes 
testing its level of effectiveness and readiness. In this framework, it performs risk surveys, 
penetration  tests  and  periodic  controls,  both  by  the  internal  audit  and  by  external 
auditors hired by Bezeq International for this purpose. In addition, Bezeq International 
periodically performs tests and attack exercises for various scenarios (including through 
external  companies  specializing  in  the  field).  In  Bezeq  International's  estimation,  the 
information security protection policy is effective. 

Bezeq International is a body guided by the Information Security Authority. Also, Bezeq 
International is obliged to implement information security requirements stipulated in the 
unified  general  license  granted  to  it  by  the  Ministry  of  Communications.  In  addition, 
Bezeq International is ISO27001 certified, which deals with information security. 

The information security protection policy, protective measures, security incidents and 
lessons learned are discussed by Bezeq International’s Management on a monthly basis, 
and brought to the Bezeq International Board of Directors for review and approval. The 
person  responsible  for  the  implementation  of  the  policy  at  Bezeq  International  is  the 
director of the Information Security Department in the Technology Division. 

Despite  Bezeq  International's  investments  in  measures  to  reduce  such  risks,  it  cannot 
guarantee that these measures will succeed in preventing damage and / or disruption to 
the systems and information related to them. 

4.14.8. 

Damage caused by nature, war, disaster 

Damage to the server farms on which Bezeq International concentrates its core activity 

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may adversely affect Bezeq International's business and its results. 

4.14.9. 

Legal Proceedings 

4.14.10.  Bezeq  International  is  a  party  to  legal  proceedings,  including  class  actions,  which  may 
result in charges in substantial amounts, which cannot be estimated, and no provision 
was  made  for  some  of  them  in  Bezeq  International's  financial  statements.  These  class 
actions  can  reach  large  sums,  since  a  substantial  part  of  Israel’s  residents  are  Bezeq 
International’s  customers,  and  a  claim  relating  to  a  small  damage  to  an  individual 
consumer may become a material claim for Bezeq International if it is recognized as a 
class  action  lawsuit  against  all  consumers  or  a  substantial  part  thereof.  In  addition,  in 
certain  contracts,  mainly  in  the  government  and  public  sector  contracts,  Bezeq 
International sometimes enters into contracts for the provision of services subject to a 
partial liability limit, or no liability limit at all. Given the sensitivity of the services provided 
by Bezeq International to these customers, in the event that the customer is harmed in 
such a contract, this may lead to legal proceedings in large amounts. For legal proceedings 
to which Bezeq International is a party, see Section 4.12.  

4.14.11. 

Labor relations and streamlining procedures 

Bezeq International has a collective agreement with the Histadrut and the Employees’ 
Committee  in  respect  of  most  of  its  employees.  The  implementation  of  the  collective 
agreement  may  affect  Bezeq  International's  day-to-day  operations.  In  addition,  the 
implementation of  manpower  plans may cause unrest in labor relations and harm the 
day-to-day  operations  of  Bezeq  International.  As  described  in  Section  1.8,  Bezeq 
International implements streamlining plans that involve, among other things, the sharing 
of management resources, organizational changes and the reduction of the workforce, in 
parallel  with  the  management  of  significant 
infrastructure  and  other  projects. 
Streamlining procedures, by their nature, involve the risks of loss of knowledge, turnover 
of employees, shifting of managerial focus, etc. Bezeq International has a number of open 
labor disputes. Regarding labor disputes at Bezeq International, see Section 4.8. 

4.14.12. 

Loss of knowledge and information 

The changes that are taking place in the labor market in Israel and around the world, along 
with organizational changes, entail a risk of losing key employees, loss of knowledge as a 
result of employee turnover, difficulty in recruiting employees, etc. 

4.14.13. 

Impairment of Bezeq International's assets 

Bezeq  International  conducts  a  periodic  impairment  test  of  assets  in  respect  of  which 
identification signs of impairment have been identified in accordance with the accounting 
standards. For details regarding the risk factor relating to the recording of impairment 
losses, see Section 2.20.12. Changes in regulations in the Internet services market (see 
Section 1.7.2.3) may lead to damage to Bezeq International's results and / or a decrease 
in the value of its assets. Regarding the effect of the treatment of Bezeq International 
customers who do not use ISP services on the value of Bezeq International's assets, see 
Section 4.4. 

4.14.14. 

Impairment of Bezeq International's assets 

Bezeq International conducts, in accordance with the accounting standards, a periodic 
examination  of  the  impairment  of  assets  in  respect  of  which  indicators  of  impairment 
have  been  identified.  For  details  regarding  the  risk  factor regarding  the  recognition  of 
impairment losses, see Section 2.20.12. Changes in the regulation of the Internet services 
market (see section 1.7.2.4) may lead to damage to Bezeq International's results and / or 
a  decrease  in  the  value  of  its  assets.  Regarding  the  effect  of  the  treatment  of  Bezeq 
International customers who do not use ISP services on the value of Bezeq International's 
assets, see Section 4.4. 

4.14.15.  Cash flow 

Bezeq  International  must  maintain  sufficient  cash  flow  for  it  to  meet  its  long-term 
business plan. Cash flow may be affected in cases of planning gaps, change in the business 
model  and  difficulties  in  collecting  payments  from  customers  or  telecommunications 
operators.  The  lack  of  sufficient  cash  flow  may  adversely  affect  Bezeq  International's 
business, and may make it difficult for it to deal with competitive threats in the field. 

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The  following  is  a  rating  of  the  impact  of  the  risk  factors  described  above  on  Bezeq 
International's  operations,  in  accordance  with  the  assessment  of  Bezeq  International's 
Management. It should be noted that Bezeq International's assessments below regarding 
the degree of influence of the risk factor reflect the degree of influence of the risk factor 
in assuming the materialization of the risk factor, and the aforesaid does not express an 
assessment or give weight to such chances of materialization. The order in which the risk 
factors appear above and below is not necessarily according to the degree of risk68: 

Risk factors summary table - international communications, Internet and network 
endpoint services 

The extent of the impact of the 
risk factor on Bezeq 
International's operations 
Low 
Medium 
High 
effect 
effect 
effect 

X 

X 

X 

X 
X 

X 
X69 

Macro risks 
Exposure to changes in exchange rates 
Epidemic 
Damage caused by nature, war, disaster 
Industry risks 
Growing competition 
Investments in infrastructure and technological 
changes 
Governmental supervision and regulation 
Serious malfunctions in information systems and 
engineering systems 
Information security, customer data protection and 
cyber risks 
Special risks for Bezeq International 
Legal proceedings 
Labor relations and streamlining procedures 
Loss of knowledge and information 
Impairment of Bezeq International's assets 
Cash flow 
The information contained in this section 4.14 and Bezeq International's assessments regarding the impact 
of risk factors on Bezeq International's activities and business, are forward-looking information as defined in 
the  Securities  Law.  The  information  and  assessments  are  based  on  data  published  by  the  Ministry  of 
Communications, Bezeq International's assessments of the market situation and the structure of competition 
in it and regarding possible developments in the Israeli market and economy. The actual results may differ 
materially from the estimates given above if there is a change in one of the factors taken into account in 
these estimates. 

X 
X 

X 
X 

X 

X 

68 See Footnote 50.  

69  The extent of the impact of this risk factor on Bezeq International's activities was classified as medium, assuming that the 
incident would be limited in scope and time. Otherwise, the degree of impact may be large. 

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5.  DBS - multi-channel TV 

DBS, also known by the trade name "Yes", is a subsidiary, wholly owned by Bezeq, which provides a service 
of  multi-channel  television  broadcasts  via  satellite  and  on  the  Internet  (OTT),  as  well  as  Internet  access 
services. 

5.1. 

General information about the field of activity 

5.1.1. 

The structure of the field of activity and the changes that took place in it 

5.1.1.1 

In the field of subscriber television broadcasts, there are a number of factors 
in a number of main categories: 

a.  Holders of a license to broadcast under the Communications Law, which 
provides multi-channel television services - DBS, as well as Hot, which 
provides  cable  television  services,  which  has  a  monopoly  declared 
under  the  Economic  Competition  Law  in  the  field  of  multi-channel 
television  ("the  field  of  satellite  and  cable  broadcasting").  For  details 
regarding the regulation applicable to the owners of such broadcasting 
licenses,  see  Section  5.14.  DBS  and  Hot  provide  both  linear  channel 
broadcasts  (also  referred  to  in  this  chapter  as  "channels")  and  VOD 
services (on regulation in the field of DBS’s VOD services, see Section 
5.14.2). 

b. 

Internet  content  providers  (in  format  OTT)  -  in  Israel,  there  are  a 
number of local and international providers of audio-visual content via 
the Internet, which can be viewed using various types of end devices 
(including mobile devices). The main local providers operate in a format 
that  includes  linear  channels  and  on-demand  content  (including  DTT 
array  content  transmitted  via  the  array  or  via  the  Internet),  and  the 
main ones are DBS (through Yes+ and Sting TV services, for details, see 
Sections 5.2.2.1, 5.2.2.2  and 5.2.2.1), Cellcom, Partner (Partner TV) and 
Hot (Next and Play service). The main international providers operating 
in Israel are Disney, Netflix, Apple and Amazon, which provide options 
for  watching  VOD  content  (as  of  the date  of  the  report, most  of  this 
content is translated into Hebrew) without linear channels. To the best 
of DBS' knowledge, most subscribers of international providers in Israel 
also subscribe to the services of some of the local providers or holders 
of broadcasting licenses. Most of the content providers via the Internet 
market services at a lower scope and price level than those used in the 
field of satellite and cable broadcasting. 

There  are  collaborations  between  some  of  the  local  licensees  and 
suppliers  and  some  of  the  international  suppliers.  DBS  has  several 
collaborations  as  mentioned  which 
include,  among  others, 
collaborations  with  Disney+  and  Netflix,  which  include,  among  other 
things,  distribution  of  their  services  for  a  fee.  For  details  about  the 
contract with Disney+, see the Company's immediate report dated May 
22, 2022 included in this report by way of reference. 

In accordance with the Broadcasting Distribution Law, a broadcasting 
body, whose broadcasts are part of the "open broadcasts" (namely, TV 
channels  distributed  through  the  digital  stations),  will  give  each 
"registered  content  provider"70  consent  to  broadcast 
linear 
broadcasts on the Internet free of charge, but without detracting from 
the  copyrights  of  the  authors  and  performers  By  law  and  subject  to 
certain conditions established by law, including obtaining a license from 
the  copyright  holders  and  performers  (including  through  the 
broadcasting body). In February 2023, a transitional order that applied 

its 

70 "Registered content provider" is defined in the Broadcasting Distribution Law as a content provider registered in the registry; 
"Content provider" is defined in the Broadcasting Distribution Law as one whose main activity is the transmission of a variety of 
content to the public in Israel, provided that the content is broadcast on its own initiative, through an interface under its control, 
and both that the content can be viewed in real time, simultaneously by the public, and that the content can be viewed at a time 
and place of the viewer’s choice. DBS is a registered content provider. 

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the  commercial  channels71  ended,  which  applied  special 
to 
arrangements in relation to them, including granting a license for their 
broadcasts  on  the  Internet  to  any  content  provider  registered  in  the 
registry that requests it, at the best price and conditions given by the 
relevant commercial channel to another content provider according to 
a  license  that  was  in  effect  at  the  time  the  license  was  granted. 
Everything is as detailed in the transition order. As of the date of this 
report,  DBS  has  agreements  with  the  aforementioned  commercial 
channels, which also include on-demand services. 

c.  Entities  offering  content  without  the  permission  of  the  copyright 

holders (pirated)

72
. 

d.  The DTT array 

A  digital  distribution  system  for  digital  television  (DTT),  known  as 
"Idan+", through which certain channels are distributed to the public, 
73. The system is operated as of the date of the report by 

free of charge
the Second Authority. 

The distribution of the channels is done in exchange for the payment of 
a  distribution  fee,  where  the  Minister  of  Communications  and  the 
Minister  of  Finance  may  determine  that  the  State  will  subsidize  the 
distribution fee that will apply to thematic channel broadcasters and a 
dedicated channel. 

As of the date of this report, the DTT constitutes a replacement product, 
in part, for multi-channel TV broadcasts. 

5.1.1.2 

The multi-channel TV providers, including DBS, offer their services alongside 
other  communication  services  provided  by  them,  including  as  part  of 
baskets that are “non-detachable" (such as a "bundle" package that includes 
Internet  and  television  services).  For  additional  communication  services 
provided  by  communication  groups,  see  Section  1.7.2.  For  the  offer  of 
baskets of communication services by DBS and the restrictions thereon, see 
Section 1.7.3.3. 

In the year of the report, the high level of competition continued to prevail, mainly due 
to  the  entry  and  establishment  of  local  and  international  content  providers  via  the 
Internet,  as  mentioned,  operating  at  a  relatively  low  price  level.  The  activity  of  these 
factors  via  the  Internet,  is  carried  out  without  the  need  to  establish  a  dedicated 
infrastructure system as of the date of this report, even without regulatory supervision. 
For more details about the competition in the field and changes that took place in it in 
the year of the report, including the manner in which DBS operates - see Section 5.5. For 
the  question  of  arranging  broadcasts  with  new  broadcast  technologies,  see  Section 
5.14.2. 

For changes in the number of DBS subscribers, see Section 5.6.1. 

5.1.2. 

Restrictions, legislation and special constraints in the field of activity 

Activities of broadcasting license holders are subject to extensive legislation in the field 
of communications, and in particular to the Communications Law, the licensing regime, 
as well as supervision and policy decisions on behalf of the Ministry of Communications. 

71  To the best of DBS's knowledge, commercial channels as mentioned are channels 12 (owned by Keshet Broadcasting Ltd.) and 
13 (owned by Reshet Media Ltd.). For this matter see also Section 5.14.1.4 

72 DBS is one of the shareholders of Zira Ltd., which works to prevent copyright infringement in video content on the Internet. 

73 As of the date of this report, the television channels of the Broadcasting Corporation (Kan 11, Kan Educational and Channel 
33), the commercial television channels ("Keshet" and "Reshet"), Channel 14, and the Knesset channel (Channel 99) and a number 
of radio stations. The DTT operator must also distribute thematic channels (most of whose broadcasting hours are devoted to 
the subject of the Broadcasting through Digital Broadcasting Stations Law, 5772-2012 (“the Broadcasting Law"), as well as the 
broadcasts of a minor licensee and a designated minor licensee (as defined by the Second Authority Law) - if requested. The 
Minister of Communications and the Minister of Finance may appoint a private operator for its operation, for whom the Council 
may also grant a general license for broadcasts financed by subscription fees or commercials. 

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The said activity is also under the constant supervision of the council, which sets policy, 
establishes rules and supervises many areas of activity, including broadcast content, local 
production  obligations,  broadcast  ethics,  consumer  protection  and  the  approval  of 
broadcast channels. 

The provision of television services other than via satellite or cable within the meaning of 
the Communications Law is not subject to supervision as stated above. 

regarding 

the  adoption 

Further to the report of the recommendations of the committee for the examination of 
the overarching regulation in the field of broadcasting, headed by former MK Roi Folkman 
("Folkman  Committee")  and  the  decision  of  the  Minister  of  Communications  from 
September  2021 
the  committee's 
recommendations subject to changes and adjustments, the Ministry of Communications 
published in August 2022 a hearing for public comments on the matter draft bill on the 
principles of regulation of the provision of audio-visual content to the public, 2022-2022 
("Regulatory Hearing" and "Draft Bill" respectively). According to the Regulatory Hearing 
and the explanatory notes to the Draft Bill, the Bill is intended to amend the legislation 
based  on  the  recommendations  of  the  Folkman  Committee  and  update  the  set  of 
obligations  and  rights  applicable  to  all  players  operating  in  the  audio-visual  content 
market in a number of ways, including: 

in  principle  of 

A.  A new authority will be established in place of the Second Authority Council, whose 
role will be to regulate the entire field of audio-visual content supply and which will 
be authorized to issue instructions to prevent actions that may harm competition in 
the field ("the Authority"). 

B.  A  limited  and  focused  set  of  obligations  will  be  applied  to  the  significant  players 
operating  in  this  market,  including  registration  obligations,  investment  in  local 
productions, distribution of the contents of the Israel Broadcasting Corporation and 
the Knesset channel, instructions in the fields of ethics and consumerism, where the 
scope  of  the  obligations  will  change  according  to  the  income  level  of  the  content 
provider. 

C.  The existing restrictions on the economic models in the audio-visual content market 
will be removed (while allowing some of the provisions regarding cross-costs). As far 
as the traditional platforms are concerned, the obligations applicable to them for the 
transfer of broadcast channels and the allocation of transmission channels will be 
eliminated, as well as the prohibitions applicable to them regarding the transmission 
of  advertisements  and  maintenance  of  a  news  company  will  be  eliminated.  In 
addition, the obligation to supply the broadcast channels to the traditional platforms 
free  of  charge  will  be  eliminated.  For  this  matter,  a  transitional  provision  was 
established according to which these changes will enter into force after three years 
from the publication of the law (where after two years from the publication of the 
law, the Authority Council may shorten this period). 

D. 

Individual arrangements will be established regarding the provision of news content 
to the public. 

E.  Arrangements  will  be  established  regarding  the  supply  of  sports  content  to  the 
public, so that the supply of significant sports enterprises through a single content 
provider  will  be  avoided,  and  sports  enterprises  of  high  demand  or  of  special 
importance will be accessible to the public. 

F.  Obligations to invest in local productions will be established, which will apply, mutatis 
mutandis, to all content providers, local and international, with a significant scope of 
activity  in  Israel,  as  well  as  to  Israeli  channels  that  independently  provide 
advertisements to the public. 

DBS submitted its reference to the Regulatory Hearing document. Since this is a hearing 
that is uncertain whether it will mature into binding legislation and what its contents and 
regulations will be, it is difficult at this stage to assess the extent of the impact of the 
legislation  and  regulation  that  will  be  determined  following  the  regulatory  hearing  (as 
soon as it is adopted), on DBS's business. 

5.1.3. 

Changes in the scope of activity in the field and its profitability 

For data on changes in the scope of DBS' activity and profitability, see Section 1.5.4.4. 

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5.1.4. 

The critical success factors in the field of activity and the changes that apply to them 

5.1.4.1 

5.1.4.2 

5.1.4.3 

5.1.4.4 

5.1.4.5 

5.1.4.6 

5.1.4.7 

5.1.4.8 

5.1.4.9 

5.1.4.10 

Quality, differentiation and originality in the content of the broadcasts, in 
their variety, branding and packaging. 

Providing relevant value propositions to various target audiences. 

Providing  advanced  on-demand  services  using  advanced  technologies  (in 
relation to broadcast technologies, in relation to end devices and in relation 
to the user interface). 

Providing TV services via the Internet. 

Offering  a  "basket"  of  communication  services  that  includes  television 
services and other services, such as Internet browsing services (see Section 
5.15.2). 

Collaborations with international content providers. 

Accessibility of applications operated by international content providers. 

 Accessibility and connection to international content applications. 

High level of customer service tailored to the type of service. 

The strength of the brand and its identification with quality, innovation and 
leadership, content and services for subscribers. 

5.1.4.11 

Attractiveness of the price. 

5.1.5. 

The main barriers to entry and exit in relation to the field of activity 

5.1.5.1 

5.1.5.2 

The  main  barriers  to  entry  into  the  field  of  activity  are  (a)  for  cable  and 
satellite  broadcasts  -  the  need  to  obtain  licenses  for  cable  and  satellite 
broadcasts  and  to  comply  with  the  relevant  regulatory  requirements;  (B) 
investments required from operators in the field, including the purchase and 
production  of  content,  as  well  as  for  cable  and  satellite  broadcasts  -  the 
establishment  of  a  dedicated  infrastructure;  (C)  The  limited  scope  of  the 
Israeli market and its characteristics. The scope and level of barriers to entry 
into  Internet  TV  services  are  very  low,  especially  for  the  international 
providers for which Israel is another market for existing activity, and this is 
reflected in an increase in the quantity and variety of services offered in this 
format. 

The  main  exit  barriers  are:  (a)  For  broadcast  license  holders  there  is  a 
regulatory  barrier  -  termination  of  activity  under  the  broadcast  license 
entails  the  Minister  of  Communications'  decision  to  cancel  the  license 
before  the  end  of  the  license  period,  including  conditions  (including  the 
licensee)  to  ensure  broadcast  continuity  and  services  and  to  reduce  the 
harm to subscribers; (B) Long-term engagements with material suppliers. 

5.1.6. 

Substitutes for products in the field of activity and changes that apply to them 

DBS  sees  the  possibility  of  receiving  many  foreign  channels  using  relatively  cheap  end 
equipment as a substitute for its services in relation to certain segments. For additional 
substitutes, see Section 5.15. 

5.1.7. 

The structure of competition in the field of activity and changes that apply to it 

Competition  in  the  field  of  television  is  characterized  by  a  relatively  large  number  of 
players, most of whom operate at relatively low price levels (see section 5.1), and through 
advanced web client interfaces in a way that has led to the intensification of competition 
in the field. An increase in the number of subscribers in the current competitive situation 
can be achieved mainly through the recruitment of subscribers from competitors, which 
requires the investment of considerable resources in retaining existing subscribers and 
recruiting new subscribers. 

DBS  does  not  have  data  on  the  number  of  subscribers  of  the  international  companies 
operating in the field and on the number of viewers of the DTT system, and according to 
DBS, most of them are, in addition, subscribers of the local television providers operating 
in the field. According to DBS, the trend of increasing the total market share of all players 

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(out  of  all  households  in  Israel)  is  weakened  due  to  the  fact  that  the  majority  of  the 
remaining households are not potential audiences. 

For more details on the competition in the field see Section 5.5. 

5.2. 

Products and services 

DBS services through satellite include lienar channel broadcasts, in a variety of value propositions 
that differ from each other in the scope of the content, the scope of the services included in them, 
the interface through which they are offered and the price. The offer of OTT services is part of a 
gradual  trend  of  migration  of  DBS  services  from  satellite  TV  services  to  OTT  services.  For  the 
migration process see Section 5.17.1. 

In  recent  years,  there  has  been  a  trend  of  increasing  demand  for  'discount'  services,  which  are 
characterized  by  a  range  of  services  and  a  lower  price  level  than  those  customary  in  the  field  of 
satellite and cable broadcasting. Accordingly, an increase in the proportion of customers subscribing 
to  STING  TV  services  out  of  all  DBS  customers  results  in  a  decrease  in  the  average  revenue  per 
customer. 

5.2.1. 

DBS’s television services 

5.2.1.1 

Satellite broadcasts 

Satellite DBS broadcasts include linear channel broadcasts, as well as radio, 
music and interactive channels. 

For the purpose of receiving DBS services via satellite, reception plates are 
installed  in  the  buildings,  and  decoders  of  different  types  with  different 
features  are  installed  in  the  subscribers’ houses,  which  allow  a  variety  of 
services to be received depending on the converter's features. 

In accordance with DBS’s broadcasting license and the council's decisions, 
the broadcasting of the DBS via satellite includes a basic package of linear 
channels  that  each  subscriber  is  required  to  purchase  (along  with  other 
basic  packages  that  DBS  may  offer),  as  well  as  other  channels  that  the 
subscriber  can  choose  to  purchase,  either  as  packages  or  as  discrete 
channels. 

DBS  provides  satellite  subscriber  services  to  its  subscribers  ("satellite 
subscribers")  VOD via the Internet (in the OTT format). The vast majority of 
satellite subscribers subscribe to a content package that includes VOD and 
the rest may purchase these services, when some of the content included in 
the VOD service is provided in exchange for a separate payment. 

Connecting  satellite  subscribers  to  VOD  services  requires,  among  other 
things,  the  use  of  certain  types  of  decoders.  To  the  question  of  the 
regulation of the field of DBS’s VOD services see Section 5.14.2. 

Satellite TV services are offered in a wide package, which includes the vast 
majority of linear channels and VOD services, which is purchased by most 
satellite subscribers, and in packages with a smaller content scope (when 
subscribers can purchase additional channels that are not included in any of 
the packages they purchased). 

5.2.2. 

OTT Services  

DBS offers a number of OTT services: 

5.2.2.1 

Yes+ services 

DBS offers the Yes+ service, which includes linear TV channels, as well as on-
demand services, including VOD content in a number of offered packages, 
the most common of which is similar to that offered in the broad package 
offered  to  the  satellite  subscriber.  The  service  also  includes  advanced 
technological  interface  that  includes  advanced  features  that  are  not 
available  in  the  satellite  interface.  The  service  is  provided  via  compatible 
streamers,  TV  displays  and  additional  end  devices  including  mobile.  The 
service can be used on its own or in parallel with the satellite service. 

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5.2.2.2 

Sting TV services 

DBS operates the "Sting TV” service, which includes linear TV channels as 
well  as  on-demand  services,  including  VOD  content,  and  is  intended  for 
customers  who  are  not  satellite  subscribers.  The  service  is  offered  in  a 
number of viewing packages that do not include the full range of content 
offered as part of DBS' other services, and are characterized by relatively 
low  price  levels.  The  service  is  provided  via  compatible  streamers,  TV 
displays and additional end devices including mobile. 

5.2.3. 

Internet access services 

In June 2022, DBS began providing Internet access services, focusing on selling combined 
Internet and television packages to customers.74 

5.3. 

Customers 

The vast majority of DBS subscribers are private customers. In general, DBS enters into a subscription 
agreement with its subscribers, which regulates the subscribers' set of rights and obligations in their 
relationship with DBS. With respect to the subscription agreement with the satellite subscribers, the 
approval of the council is required, which was received.75 

5.4.  Marketing and distribution 

5.4.1. 

The marketing of DBS services is done through advertising in the various media. DBS' sales 
activity  to  existing  and  new  customers  is  carried  out  through  the  following  main 
distribution  channels  (some  of  which  are  operated  by  DBS  employees  and  some  by 
external marketers): 

5.4.1.1 

Call centers. 

5.4.1.2 

Digital channels. 

5.4.1.3 

Field sales people, working to recruit new subscribers. 

5.5. 

Competition 

5.5.1. 

Competitors in the field 

The field is characterized as of the date of the report by a number of competing groups 
(see Section 5.1). 

DBS's main competitors are Hot, which is a declared monopoly in the field of supply Multi-
channel TV broadcasting services76 and holds, to the bet of DBS’s knowledge, the largest 
market share, as well as Cellcom, Partner and Netflix. 

To the best of DBS's knowledge, during the year 2023, a cooperation venture between 
Keshet Broadcasting Ltd., which operates, among other things, a commercial TV channel 
transmitted  as  part  of  DBS  Broadcasting  ("Keshet"),  and  RGE  Group  Ltd.  ("RGE")  is 
expected to establish and operate a multi-channel broadcasting platform, while acquiring 
minority  holdings  in  RGE  from  Keshet,  and  this  after  receiving  an  exemption  from  the 
restrictive arrangement of the Competition Authority for the activity of the said venture, 
as  well  as  the  approval  of  the  Second  Authority  to  Keshet,  both  for  a  period  until 
September 2025. According to DBS, the start of the project activity is expected to intensify 

74 Initially, the services were provided according to a special license to access the Internet, and as of October 2022, the services 
are provided according to a general permit in accordance with the provisions of the Telecommunications Regulations (Bezeq and 
Broadcasting) (General Permit for the Provision of Bezeq Services), 5782-2022. 

75  According  to  the  broadcasting  license,  the  approval  of  the  Uniform  Contracts  Court  is  also  required  for  the  subscription 
agreement  (approval  previously  granted  and  expired).  DBS  has  applied  to  the  Council  for  amendments  to  the  subscription 
agreement and for the amendment of the license, as part of which DBS requested, inter alia, to revoke the license provision 
requiring the approval of the Uniform Contracts Tribunal, in view of an amendment to legislation made in this regard. As of the 
date of this report, the Council's position regarding DBS's requests has not yet been received. 

76  To  the  best  of  DBS's  knowledge,  in  2021,  Hot  appealed  to  the  Competition  Commissioner  to  cancel  its  declaration  as  a 
monopoly as stated. 

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the competition in the field, in particular in view of the identity of the companies of the 
project  (for  details  about  the  Sports  Channel  Ltd.  which  is  part  of  the  RGE  Group  and 
about Keshet, see Section 5.9.2). 

Below is data on subscription numbers and market shares77 of DBS, to the best of its 
knowledge, as of December 31, 2021 and 202278: 

The year 2022 

2021 

Subscriptions 
(thousands) 

579 

Market 
Share 
33% 

Subscriptions 
(thousands) 

563 

Market 
Share 
32% 

5.5.2. 

Competitive characteristics today 

The competition in the field focuses on the variety and content of the broadcasts, the 
price of the services, the quality of the service, and the offer of advanced end equipment 
and  advanced  user  interfaces,  as  well  as  the  offer  of  additional  services,  including 
broadcasts. HD, 4K and on-demand services, including VOD. 

The competition is also characterized by the offer of additional communication services 
alongside the offer of video content (for the offer of "service baskets" of the Hot, Cellcom 
and Partner groups, see also Section 1.7.1, and for the offer of service baskets by DBS, 
see also Section 1.7.2.3), in access and connection to international content providers and 
by the increase in the number of competitors and their establishment (see Section 5.1). 

5.5.3. 

Positive and Negative Factors Affecting the Competitive Status of DBS 

5.5.3.1 

In the opinion of DBS’s Management, the main competitive advantages of 
the DBS are: 

a.  The  quality  and  variety  of  content  that  DBS  broadcasts  to  its 

subscribers. 

b.  Level, quality and availability of DBS' customer service system 

c.  Use of advanced technologies to provide advanced services and a good 

user experience. 

d.  Cultivating  and  promoting  the  "Yes"  brand  as  a  preferred,  well-liked 

brand with a high level of loyalty. 

e.  Marketing several call formats, characterized by different price levels, 
different  content  offerings,  different  broadcast  methods,  different 
technological interfaces and different types of customer service format. 

f.  Collaborations with international content providers. 

g.  Selling integrated packages of TV and Internet services 

5.5.3.2 

DBS's  competitive  activity  in  the  field  of  broadcasting  suffers  from 
disadvantages or factors that adversely affect it, in a number of areas, the 
main ones being: 

a. 

Infrastructure inferiority  - DBS' satellite infrastructure does not allow 
two-way communication, does not allow the provision of VOD services 
and does not allow the transfer of telephony and Internet services, in 

77 The market shares were calculated from all DBS, Hot, Partner and Cellcom subscribers as detailed below (and not from all 
viewers and subscribers in the field in the absence of actual data about them). The assessment of DBS’ market shares in 2021 
and  2022  is  based  on  the  number  of  DBS  subscribers,  of  Cellcom  and  Partner  (according  to  their  reports  on  the  number  of 
subscribers as of the end of the third quarter of 2022), as well as of Hot, which did not publish the number of subscribers for 
several years, so the data in relation to Hot is according to DBS’s estimate, taking into account past trends and the existing data 
in relation to the other  players). However, there is  no certainty  that the data presented in relation to Hot are accurate, and 
therefore it is possible, respectively, that the actual market shares are different from those estimated. 
78 The number of subscribers is approximate, and the market share is in a circle. Subscriber - one household or a small business 
customer. In the case of a business customer who owns more than a certain number of decoders (such as a hotel, kibbutz or 
gym), the number of subscribers is adjusted. The number of non-small business customers is calculated as the total payment 
received  from  all  non-small  business  customers  divided  by  the  average  income  from  a  small  business  customer,  which  is 
determined once per period. 

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contrast to the infrastructures used by HOT, Cellcom and Partner, which 
enable  the  provision  of  these  services.  In  addition,  the  satellite 
infrastructure is limited in relation to the Internet infrastructure in the 
offer of advanced technological interfaces. For details about migration 
to OTT services and OTT services see Sections 5.2.2 and 5.17.1. 

b.  Regulatory restrictions - 

For restrictions regarding the marketing of a shared basket of services, 
see Section 5.15.3. 

For restrictions by virtue of the terms of the Commissioner for a merger 
with Bezeq, see Section 2.16.9.3. These restrictions also apply to DBS 
activities in the field of OTT. 

For  competitive  inferiority  resulting  from  the  lack  of  regulatory 
oversight of players who do not have broadcasting licenses, see Section 
5.18.2.2. 

c.  Space  segments  -  the  use  of  space  segments  involves  heavy  fixed 
expenses, depending on the receipt of the services by a third party (see 
section  5.16),  and  involves  a  limitation  with  respect  to  the  ability  to 
expand the supply of broadcasts (see Section 5.6). 

5.5.4. 

Main methods of dealing with competition 

The following are the main methods of DBS to deal with the competition:  

5.5.4.1 

5.5.4.2 

5.5.4.3 

5.5.4.4 

5.5.4.5 

5.5.4.6 

5.5.4.7 

Content - DBS works to purchase, produce and broadcast quality, innovative 
and  diverse  content,  while  creating  differentiation,  emphasizing  branding 
and achieving originality in relation to the content broadcast by it. 

Pricing policy - offering a variety of services at different price levels. 

Offering OTT services (see Section 5.2.2). 

Service - DBS places emphasis on the customer service system. 

Technology - DBS is investing in expanding its technological capabilities, with 
an emphasis on providing innovative and advanced services. 

Branding - DBS cultivates, promotes and differentiates the brand "Yes". 

Collaborations  with  international  content  providers  and  accessibility  of 
content applications. 

5.6. 

Production capacity 

The number of channels that DBS can transmit to satellite subscribers depends on the number of 
space segments at its disposal, the content compression capabilities and the bandwidth required to 
transmit  each  type  of  channel.  As  of  the  date  of  the  report,  DBS  almost  fully  utilizes  the  space 
segments  it  uses.  The  space  segments  are  provided  to  DBS  by  Space  (see  Section  15.5).  These 
restrictions do not apply in relation to the OTT and VOD services whose transmission depends on 
web browsing volumes. 

5.7. 

Property, plant and equipment, real estate and facilities 

The following are the main components of DBS's property, plant and equipment: 

5.7.1. 

Real estate 

DBS leases a number of real estate properties for its operations. DBS' headquarters, as 
well as its main broadcasting center, are located in leased real estate in Kfar Saba, whose 
lease period ends in 2024 (with options granted to DBS for the extension of the lease, 
subject to the terms of the agreement, until 2034). The balance of the lease period of the 
other  properties  that  DBS  leases  ranges  between  about  six  months  to  about  six  years 
(these periods are based on the exercise of options to extend lease periods granted to 
DBS). 

5.7.2. 

Satellite end equipment 

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DBS  installs  reception  dishes  and  other  end  infrastructures  in  its  subscription  houses, 
including decoders that enable the reception of the broadcasts, as well as smart cards 
used to decode them. The decoders are rented to subscribers in exchange for fixed fees, 
paid during the period of receipt of the services, or lent to subscribers. 

5.7.3. 

End equipment for OTT services  

Yes+ and Sting TV services can be viewed via a variety of end devices, including streamers 
and  smart  TVs  of  various  models.  DBS  purchases  streamers  and  leases  them  to  its 
subscribers. 

5.7.4. 

Broadcasting equipment and computer and communication systems 

DBS  has  a  main  broadcasting  center  located  in  Kfar  Saba,  as  well  as  a  secondary 
broadcasting  center  located  in  the  Ella  Valley,  through  which  its  broadcasts  are 
transmitted via satellite and OTT. The broadcast centers have reception and transmission 
equipment,  as  well  as  computer  and  communication  systems.  The  secondary 
broadcasting center is partly operated on third-party premises, which provides DBS with 
the  services  of  operating  the  secondary  broadcasting  center  and  maintaining  it  in 
accordance with the framework agreement valid until the end of 2023 (with the right to 
extend for additional 5 years each time granted to DBS, which can be realized six months 
before the end of the agreement period). 

5.7.5. 

Operating and encryption systems 

DBS  purchases  from  Cinemedia  Group  ("Cinemedia")  development,  implementation, 
encryption, maintenance and warranty services related to the operating systems of the 
satellite  broadcasting  system  and  also  purchases  similar  services  from  Cinemedia  in 
relation to the OTT system, in accordance with the framework agreements between DBs. 
SS and Cinemedia from January 2020. These services are provided in relation to various 
DBS  systems,  end  equipment,  and  viewing  cards  and  other  hardware  components 
required to receive these services, and DBS has also been granted relevant licenses for 
the use of systems and end equipment. 

The contract period with Cinmedia in relation to the satellite system is until February 2026 
subject to the terms of the agreement, with the possibility of early termination by DBS in 
the event  of the cessation of satellite broadcasts as part of the migration. See Section 
5.18.1. 

For  the  services  and  products  provided  under  this  agreement,  DBS  pays  monthly 
payments,  where  the  agreement  stipulates  a  minimum  monthly  consideration  for  the 
provision of services to the extent specified, and an additional consideration is possible, 
the  amount  of  which  depends  on  the  types  of  services  provided  to  DBS,  and  on 
development services that DBS may order under the agreement. 

The  engagement  period  in  relation  to  OTT  is  until  December  2024  (after  which  an 
automatic renewal mechanism applies for periods of two years unless one of the parties 
notifies otherwise in accordance with the dates set for this matter in the agreement). DBS 
is granted the right to exit the agreement in relation to the OTT system, subject to prior 
notice and payment of an "exit fee" (at a decreasing rate depending on the duration of 
the agreement period). 

DBS depends on the continuous supply of these services, both in relation to the satellite 
system and in relation to OTT. 

5.7.6. 

Computerized customer management system 

DBS uses software and computer systems to manage the contracts with its subscribers, 
including  its  billing  and  collection  system.  In  this  context,  DBS  contracts  for  licenses, 
development services and technical support with NetCracker Technology Solutions Ltd 
and  NetCracker  Technology  EMEA  Limited  (jointly:  "NetCracker"),  and  DBS  also  uses 
Salesforce  software  together  with  Pelephone  and  Bezeq  International,,  according  to 
Pelephone's contract with Salesforce (for details, see Section 3.8.4). 

DBS  is  dependent  on  the  NetCracker  system  and  services  and-Salesforce,  due  to  their 
importance  for  the  management  and  monitoring  of  DBS  'acquisition  of  services  and 
content  by  its  subscriber  as  well  as  for  the  purpose  of  charging  and  collecting  from  a 
subscriber. System failures or discontinuation of services to DBS(Including depending on 

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cell phone connection with Salesforce) Are expected to cause operational difficulty until 
the matter is repaired or the system / supplier replaced, which may take a long time. As 
of the date of this report, some of the components of the engagementWith NetCracker 
is  renewed  annually  and  some  are  valid  until  the  end  of  2024.  The  contracting  with 
Salesforce is until the end of 2027. 

5.8. 

Intangible assets 

5.8.1. 

Licenses 

DBS has the following main licenses: 

5.8.1.1 

5.8.1.2 

5.8.1.3 

Broadcasting  license  valid  until  February  2026  -  this  license  is  material  to 
DBS'  satellite  activity  and  constitutes  the  main  regulatory  permit  for  this 
activity (for the terms of this license, see Section 5.1479). 

License  for  satellite  television  broadcasts  in  the  Judea  and  Samaria  area 
valid  until  February  2026,  the  provisions  of  which  are  similar  to  DBS’s 
broadcasting license specified in Section 5.8.1.1. 80 

License  to  perform  uplink  operations  (transfer  of  broadcast-focused 
broadcasts to the broadcast satellite and to carry out ancillary set-up and 
operation operations), which are valid until January 2022.81 This license is 
essential  for  DBS’s  activity  and  constitutes  the  regulatory  permit  for  the 
transmission of transmission messages from the transmission center to the 
transmission satellites and from them to the satellite subscribers' homes. 

5.8.2. 

Trademarks 

DBS has registered trademarks, the main ones of which are intended to protect its trade 
name (Yes) and the key brands it uses (Yes, Yes+, StingTV). 

5.9. 

Broadcasting rights 

5.9.1. 

DBS has broadcasting rights in video content of two types: 

Content  whose  rights  to  broadcast  are  acquired  from  third  parties,  including  discrete 
content  and  channels.  DBS  works  to  adapt  as  much  as  possible  broadcasting  rights 
acquired by it in a way that will allow broadcasting in the various media and formats in 
which it operates. 

Content that DBS invests in its production (in full or in part), and in addition to the right 
to  broadcast  the  content  as  part  of  its  broadcasts,  DBS  usually  has  rights  in  the  same 
content, at the rates specified in the agreements with the producers. In most cases, DBS 
is also entitled to grant rights to the use of rights and to participate in revenues arising 
from additional uses of the content beyond their transmission on DBS. 

Broadcasting  and  distribution  of  content  by  DBS,  in  the  various  media,  involves  the 
payment  of  royalties  to  copyright  holders  and  performers  in  musical  works,  sound 
records, scripts and content directing, as well as in respect of sub-broadcasting, including 
under  the  Copyright  Law,  5768-2007  ("Copyright  Law")  and  the  Performers  and 
Broadcasters'  Rights  Law,  5744-1984.  Such  royalties  are  paid  to  a  number  of 
organizations,  which  collect  the  royalties  to  which  they  are  entitled  through 
comprehensive licenses (blanket licenses) for the intellectual property rights holders. The 
payments under these licenses are sometimes based on a fixed payment and sometimes 
on different pricing methods, with some organizations being required to pay additional 
fees for the transfer of content in certain media or in certain formats, in amounts that 
DBS estimates are not expected to be substantial. 

This assessment of DBS is a forward-looking assessment, as defined in the Securities Law, 
based on, among other things, DBS estimates, including in relation to the extent of the 

79 In July 2021, DBS submitted an application for renewal of the broadcasting license, which is being examined. 

80 In July 2021, an application was made to the Head of the Judea and Samaria Administration for the renewal of this license. 

81 After an extension made in January 2022. 

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use of the said content, and the positions of the various organizations, and in the event 
of changes in any of them, this assessment may materialize differently. 

5.9.2. 

Dependence on content provider 

In view of the large number of content providers from whom DBS acquires broadcasting 
rights, DBS does not have a primary content provider and is not dependent on a single 
content provider. However, in the field of Israeli sports broadcasting, as of the date of 
this report, there is a dependence on the acquisition of the broadcasting rights of local 
sports channels from Sports Channel Ltd. and Charlton Ltd., with whom there is a contract 
for  several  years.  This  dependence  stems  from  the  fact  that  they  are  the  exclusive 
providers of Israeli sports broadcasts and in light of the existence of a high demand for 
such services,  from  among  a significant  group  of  DBS  customers.  Remuneration  under 
these agreements is based on a fixed monthly payment in accordance with the number 
of subscribers to DBS broadcasts (except for exceptions set forth in these agreements). 
Also,  in  view  of  the  high  demand  for  the  contents  of  the  commercial  channels  (see 
Footnote  71)  among  DBS  customers,  it  is  important  to  broadcast  them  as  part  of  its 
broadcasts. 

5.10.  Human capital 

5.10.1. 

Organizational structure 

DBS’s Management consists of divisions, with each division headed by a VP, who serves 
as a member of the DBS management. 

Board of 
Directors

CEO

Internal 
Audit

Finance

Content

Business 
Customers 
Division

Private 
Customers 
Division

Public 
Relations

Marketing

IT 

Engineering

HR 

Legal 
advice 
and 
regulation

The CEO of DBS also serves as the CEO of Pelephone. In addition, most of the VPs who 
serve at DBS also serve as VPs at Pelephone, so does the Internal Auditor, and a few in 
Bezeq International. 

5.10.2. 

DBS employee base by divisions:  

Administration 
Customer Division 
Total 

Number of employees 

31.12.2021 
347 
747 
1,094 

31.12.2022 
351 
714 
1,065 

The number of employees included in the table above includes employees employed part-
time. The total number of jobs in DBS as of December 31, 2021 was 999. 

5.10.3. 

Benefits and nature of employment agreements 

The  terms  of  employment  in  the  DBS  are  regulated,  among  other  things,  in  collective 
agreements and in a collective arrangement, as detailed below, and apply to the majority 
of the employee population (does not apply to some of the management levels and also 
employees  in  special  positions  of  trust).  The  representative  organization  of  DBS’s 

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employees is the Histadrut. 

In  addition,  DBS  employees  are  employed  in  accordance  with  personal  employment 
agreements on a monthly or hourly wage basis, with some employees also being entitled 
to  performance-based  compensation.  The  employment  agreements  are  usually  for  an 
indefinite  period  and  each  party  may  terminate  the  contract  with  prior  notice  in 
accordance with the personal agreement and the law, subject to the provisions of the 
collective agreement, as applicable. 

In  August  2021,  DBS  engaged  in  a  collective  agreement  with  the  Histadrut  and  the 
Employees’ Committee, which included, among other things, amendments to  previous 
collective agreements and collective arrangement. The new collective agreement is valid 
from  January  1,  2022  until  December  31,  2024.  According  to  the  new  collective 
agreement,  among  other  things,  salary  increases  and  grants  were  provided,  ancillary 
conditions were improved, a retirement plan was agreed o, and it was agreed that the 
parties would maintain industrial silence during the period of validity of the agreement in 
all matters regulated therein.. The collective agreements applicable to DBS employees (as 
amended  above)  regulate,  inter  alia,  the  periods  after  which  a  DBS  employee  will  be 
considered a permanent employee, mechanisms that involve the Employees’ Committee 
in  decision-making  regarding  employment  and  the  termination  of  employment  of 
permanent employees, as well as annual wage increases and additional financial benefits 
to be provided by DBS to employees, during the term of the agreement. 

After  ending  on  December  31,  2024,  the  collective  agreement  will  be  automatically 
extended for a period of 12 months each time, if one of the parties does not notify, at 
least 90 days before the end of the validity, of its desire to make changes. 

5.10.4. 

Employee remuneration plans 

DBS usually provides its officers, as well as managers and some of its employees, with 
bonuses on an annual basis based on meeting targets and evaluating performance, for 
components of capital remuneration from Bezeq in relation to some of DBS's executives, 
see Section 2.9.5.  

5.11.  Suppliers 

5.11.1. 

Rate of purchases from and form of engagement with main suppliers 

DBS considers as a "main supplier", for the purposes of Section 23 of the First Schedule 
to  the  Prospectus  Details  Regulations,  a  supplier  from  whom  DBS's  annual  volume  of 
purchases exceeded 5% of the total annual volume of purchases of the Group, and the 
volume  of  purchases  from  it  of  the  total  volume  of  purchases  of  the  field  of  activity 
exceeded 10%. During the year 2022, DBS did not have a main supplier as defined above. 

5.11.2. 

Dependence on suppliers 

DBS believes that it may be dependent on the following suppliers: 

Space, for details on the contract, see Section 5.15. 

Cinmedia, for details on the contract, see Section 5.7.5. 

NetCracker and Salesforce, for details on the connection see Section 5.7.6. 

To purchase broadcasting rights from local sports channels, see Section 5.9.2. 

5.12. 

Financing 

Most of the financing of DBS is carried out from its own sources, but it may need investments or 
credit from the Company according to the needs of DBS. 

DBS’s estimate as mentioned above is forward-looking information, as defined in the Securities Law. 
There is no certainty that DBS will be required in the future for financing by Bezeq or that Bezeq will 
provide financing for DBS's activities and on what dates, and this depends, among other things, on 
the situation of DBS, on developments in its areas of activity and on the state of competition in these 
areas and on the future financing needs of DBS. 

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In March 2023, Bezeq approved a credit facility or investment in DBS capital in a total amount of up 
to NIS 40 million, for a period of 15 months starting on January 1, 2023. This approval is instead of a 
similar approval given in November 2022 (and not in addition to it). 

5.13.  Taxation 

 For more details, see Note 7 to the 2022 statements. 

5.14.  Restrictions and supervision of DBS 

5.14.1. 

Regulation of satellite broadcasts 

DBS's activity as a holder of a regulated satellite broadcasting license in an extensive legal 
system has applied to the field of satellite and cable broadcasting, which includes primary 
legislation  (and 
in  particular  the  Communications  Law  and  regulations  enacted 
thereunder), secondary legislation (including communications rules), as well as, inter alia, 
Council directives. 

In addition, DBS's satellite activity is subject to the provisions of its licenses, primarily the 
broadcasting license. 

The law authorizes the Director General of the Ministry of Communications as well as the 
Chairman  of  the  Council  to  impose  financial  sanctions  for  various  violations  of  the 
provisions of the law and of orders and provisions issued under it, as well as for violation 
of conditions in the broadcasting license. 

5.14.1.1 

Terms of service for a satellite broadcasting license holder, restrictions on 
cross-ownerships 

Satellite  broadcasting  license  regulations  set  various  restrictions  on  the 
licensee, including, among other things, eligibility conditions in relation to 
the  holdings  of  the  licensee  and  stakeholders,  directly  and  indirectly,  in 
holders  of  cable  broadcasting  licenses,  in  holders  of  franchises  under  the 
Second Authority Law82 and in newspapers with daily circulation, as well as 
"Israeliness" requirements regarding officers in the DBS and "Israeli" holding 
at a minimum rate of 26%, in accordance with the provisions set forth in the 
regulations. 

5.14.1.2 

Rates supervision 

The  broadcasting  license  sets  forth  provisions  regarding  the  types  of 
payments that the licensee may charge its subscribers for services provided 
by virtue of the license, and these are determined in DBS’s Council-approved 
price list. The vast majority of satellite subscribers subscribe to promotions, 
offering DBS services, including various composition of content packages, 
ancillary services as well as receiving and installing end equipment, at prices 
lower than the list price. 

DBS has a duty to notify the chairman of the Council of any change in the 
price list immediately upon its publication and the chairman may in certain 
cases prohibit the change of the price list. The chairman of the Council may 
also interfere with promotions or discounts offered by DBS, if he finds that 
they  have  the  effect  of  misleading  the  public  or  discriminating  between 
subscribers. 

By virtue of the Communications Law, the license can set maximum prices 
at which a subscription can be charged. As of the date of this report, no such 
prices have been set. 

5.14.1.3 

Obligation to invest in local productions 

In  accordance  with  the  requirements  of  the  broadcasting license  and  the 
decisions of the Council, in each of the years 2022 and 2023, DBS must invest 
an amount of not less than 8% of its revenues from the subscription fees of 

82 As of the date of the report, the activities of these entities (both in the field of cable broadcasting and under the Second 
Authority Law) are regulated through licenses and not franchises. 
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satellite subscribers83 in local productions, when according to the rules of 
the media and the decisions of the council, DBS must invest different rates 
local 
out  of  these 
productions. 

in  different  categories  of 

investment  amounts 

In December 2022, the Council decided to postpone for 2024 the entry into 
force  of  its  previous  decision,  according  to  which  the  rate  of  investment 
obligation in local productions will exceed and stand at 9%. The Council also 
determined that during 2023 and in accordance with developments, it will 
hold another discussion to examine the current legislative situation and the 
economic situation of licensees, including a hedging formula set out in the 
council's previous decision and give instructions as it sees fit. 

5.14.1.4 

Duty to transfer channels 

DBS  is  obligated  to  transmit  the  "mandatory  channels"  in  satellite 
broadcasts  and  everything  as  determined  by  the  Minister  and  in  the 
broadcasting license.84 

In addition, DBS is required to allow channel producers provided by law to 
use  its  infrastructure  to  distribute  broadcasts  to  its  subscribers,  for  a  fee 
("transfer fee") to be determined in the agreement, and in the absence of 
consent - for a fee to be determined by the Minister, after consulting the 
Council.  In  addition,  the  Minister  may  require  the  transmission  of  small-
license  broadcasts  under  the  Second  Authority  Law  (which  did  not  have 
dedicated licenses prior to the amendment to the law), taking into account 
the  satellite  capacity  of  DBS.  According  to  an  amendment  to  the  Second 
Authority Law of 2018, holders of small and small designated licenses, who 
had a dedicated license under the Communications Law, are exempt from 
paying  transfer  fees  to  Hot  to  DBS,  for  a  transition  period,  after  being 
extended  as  part  of  an  amendment  to  the  Second  Authority  Law  from 
February 2023, will end in August 2024. 

5.14.1.5 

Contents of the broadcasts and obligations in relation to the subscriber 

The broadcasting license sets forth provisions relating to the content of DBS 
broadcasts,  including  supervision  by  the  Council  in  relation  to  channels 
broadcast by DBS. The Communications Law prohibits broadcast licensees 
from broadcasting commercials, subject to a number of exceptions. 

In addition, the broadcasting license includes conditions regarding the terms 
of  service  for  subscribers,  including  the  prohibition  of  discrimination 
between them. 

According to an amendment to the license from November 2022, DBS will 
be entitled, as of February 28, 2025, not to connect new subscribers to the 
satellite services according to the license, and accordingly to refuse requests 
to enter into the subscription agreement, without discriminating between 
those seeking to become subscribers. 

For  a  preliminary  data  demand  Council  in  connection  with  inactive 
subscribers see Section 1.7.7.10. 

5.14.1.6 

Ownership of broadcast channels 

According to the rules of communication, DBS, including entities affiliated 
with it (as defined in the rules of communication), may own up to 30% of 
the local channels broadcast as part of DBS broadcasts (compared to a limit 
of  20%  applicable  to  HOT).  DBS  is  also  restricted  according  to  the 
Communications Law, in owning a news broadcast producer. 

83  Based  on  its  revenues  in  the  past  year  from  satellite  subscribers,  including  DBS's  revenues  from  end  equipment  and  its 
installation. According to the  position of the Council, according  to which the actual investments  are made, even though DBS 
disagrees with it, these revenues also include revenues from VOD service to satellite subscribers. 
84  According to the provisions of the Communications Law, DBS is exempt from payment to the commercial channels included 
in the mandatory channels due to the transmission of their broadcasts with it. 

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5.14.1.7 

General provisions regarding the broadcasting license 

The  Minister  and  the  Council  have  parallel  authority  to  amend  the 
Broadcasting License. The Minister is authorized to revoke or suspend the 
Broadcasting License on the grounds set forth in the Communications Law 
and  the  Broadcasting  License.  The  Communications  and  Broadcasting 
License Law sets limits on the transfer, foreclosure and encumbrance of the 
Broadcasting License and of assets from the license assets. The Broadcasting 
License requires the approval of the Minister in relation to certain changes 
in the maintenance of means of control in the DBS and imposes reporting 
obligations regarding the holders of the means of control; Infringement of 
competition  is  prohibited  by  way  of  an  agreement,  arrangement  or 
understanding with a third party regarding the provision of broadcasts and 
services  unless  approved  in  advance  and  in  writing  by  the  Council;  The 
obligation to submit reports to the Ministry of Communications, as well as 
conditions  related  to  the  supervision  of  the  licensee's  activities,  were 
established; The obligation to provide bank guarantees to the Ministry of 
Communications  to  secure  DBS's  liabilities  under  the  license  has  been 
determined, in the amount (principal) of NIS 30 million (a total as of the date 
of the report of approximately NIS 40 million). 

5.14.2. 

Regulation of OTT services  

OTT  services  (such  as  those  offered  by  DBS  as  well  as  other  local  providers  and 
international  providers  operating  in  Israel)  are  not  subject  to  the  current  standard  in 
relation to multi-channel satellite television broadcasts or other arrangements under the 
Communications Law. DBS also believes that the VOD services it provides via the Internet 
to satellite subscribers (see Section 5.2.1) are not subject to such regulation. However, 
from various decisions of the Council (see also Section 5.2.1), it seems that the Council 
considers itself authorized to arrange the VOD services for DBS satellite subscribers. 

For the processes of examining the regulation of OTT services, see Section 5.1.2. 

To the extent that a regulation of content transfer via the Internet is implemented, it is 
expected  to  impose  restrictions  on  the  provision  of  the  said  services  by  DBS,  but  this 
regulation may reduce the existing gap in the regulation regimes between licensees and 
broadcasters between other entities active in the OTT field. 

The  estimates  concerning  the  results  of  the  regulation  of  OTT  services  in  this  section 
above are forward-looking information, as defined in the Securities Law, based, inter alia, 
on the Regulatory Hearing document and the wording of the legislative initiatives. There 
is no certainty that this issue will be regulated in legislation and regulation in general, and 
in  the  manner  proposed  in  particular.  These  assessments  may  not  materialize,  or 
materialize in a materially different way than would be expected, inter alia, depending on 
the  results  of  the  Regulatory  Hearing  and  the  actual  implementation  of  the  Minister's 
decisions and in legislative amendments, if further regulation is formulated as a result 
thereof. 

5.14.3. 

Offer of baskets of services 

According  to  the  broadcasting  license,  DBS  may  offer  a  shared  basket  of  services, 
including Bezeq service and DBS service, subject to obtaining approval from the Ministry 
of Communications (in the absence of objection within the period specified in the license 
will  be  considered  as  possible)  and  subject  to  conditions,  the  main  ones  are  the 
“detachability” obligation and the existence of a parallel basket marketed by a licensee 
who  is  not  affiliated  with  Bezeq  (see  Section  1.7.2.3).  A  shared  basket  of  services 
marketed by DBS, which includes Bezeq's Internet infrastructure service only, does not 
require the approval of the Ministry of Communications and does not have detachability 
obligation.. 

Regarding conditions published by the Commissioner in connection with the merger of 
Bezeq and DBS and the amendment under consideration, see Section 2.16.9.3. 

In  the  opinion  of  DBS,  in  view  of  the  development  of  competition  between  the 
communication  groups  and  the  growing  importance  of  providing  comprehensive 
communication services (see Section 1.7.1), in particular in the competition between it 
and HOT, Cellcom and Partner, which are not subject to these restrictions, insofar as the 

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restrictions remain in relation to Bezeq's collaborations with it (see Section 1.7.3.3), may 
increase the adverse effect of these restrictions on DBS results.  

5.15.  Material agreements 

The following is a concise description of the main points of the agreements that may be considered 
material agreements that are not in the ordinary course of business of DBS, which were signed or 
are valid during the reporting period: 

Agreement for the lease of space segments85  

According to an agreement with Space, since 2013, as amended (including amendment from January 
2023), DBS has leased space segments in satellites from the "Amos" series ("the Space Agreement").  

Comply  with  the  provisions  of  the  Space  Agreement,  DBS  leases  space  segments  on  "Amos  3" 
satellite (whose estimated end of useful life is at the beginning of 2026), as well as the "Amos 7" 
satellite, in which Space has the right to lease space segments under an agreement between it and 
the owner of the rights in this satellite, and in which space segments are leased to DBS until February 
2025 (or until the end of his life, whichever is earlier).86 

Period of the agreement - until the end of the life of the "Amos 3" satellite (subject to the exceptions 
set forth in the agreement), but in any case the agreement will expire no later than February 202687. 

The leased space segments - according to the Space Agreement (and subject to unavailability events), 
until  the  end  of  the  Amos  7  DBS  lease  period,  DBS  will  lease  12  space  segments  from  Space,  in 
accordance with the division between the relevant satellites stipulated in the Agreement according 
to the different periods, and then DBS will lease 10 space segments in Amos 3. The Agreement also 
regulates the provision of backup segments to space segments leased by Space during the term of 
the Agreement, so that in the event of space segments not available on one of the satellites, Space 
will place alternate segments on the other satellite so that the total number of segments is not less 
than 10 segments, subject to the terms and conditions set forth in the Space Agreement.88 

Cost - the average annual cost until the end of the lease in Amos 7 is approximately USD 25 million, 
and  thereafter  approximately  USD  18  million,  subject  to  the  discount  and  reimbursement 
mechanisms set forth in the Space Agreement. 

Early termination of the agreement - according to the Space Agreement, DBS may announce an early 
termination without cause, of a Space Agreement subject to 12 months' prior notice and payment 
of the lease in "Amos 7" plus payment of parts of the lease balance in the space segments in "Amos 
3". 

DBS  has  a  substantial  dependence  on  Space,  as  the  sole  owner  and  sole  supplier  of  the  space 
segments used by DBS, which is also responsible for the operation of the space segments. Regarding 
exposure to risks in the event of a failure in the activity of one of the satellites, the unavailability of 
the space segments used by DBS and the lack of redundancy for the Amos 3 satellite from the end of 
the Amos 7 lease, see Section 5.19.3.4. 

5.16. 

Legal Proceedings89 

5.16.2. 

Legal proceedings are pending 

85 The assessments in this section regarding the activity and end of the useful lives of the satellites, the amount of segments 
leased and those intended to be made available to DBS for various event controls (such as backup cases), and all implications are 
forward-looking information, as defined in the Securities Law, which is based, among other things, on the information provided 
by Space to DBS, and which in part is not even controlled by Space and depends on its engagements with third parties. Therefore, 
these assessments may not materialize, or materialize in a materially different manner than expected, inter alia, depending on 
the conditions associated with the start of satellite operation, the conditions required for their proper operation and availability, 
the end of the existing satellite’s useful life, and external factors (including third parties and the rights in Amos Satellite 7) that 
affect their activity and the activity of Space as well as the business position of Space. 
86 See Bezeq's immediate report dated February 27, 2023. 
87 In some cases, DBS may announce the continued use of the "Amos 3" satellite even after the end of its life. 
88  In addition, according to the space agreement, it holds spare tubes on the "Amos 7" satellite, and must make every reasonable 
effort  to  locate  alternative  satellite  segments  in  other  satellites  under  the  terms  and  conditions  set  forth  in  the  Agreement, 
including maximum amounts and rates of Space’s participation in additional expenses. 
89 For reporting policy and materiaityl threshold, see Section 0.  

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Date 

Sides 

Court 

Type of procedure 

Details 

Amount of 
claim / 
remedies 

a. 

 Decem
ber 
2020 

b. 

 June 
2017 

c. 

 July - 
August 
2017 

d. 

 June 
2018 

Bezeq 
sharehol
ders vs. 
Bezeq, 
Chairma
n of the 
Board of 
Bezeq, 
member
s of the 
Board of 
Bezeq, as 
well as 
member
s of the 
Eurocom 
Group 
and vs. 
the 
(former) 
CEO of 
Bezeq 
and CEO 
(former) 
and CFO 
of DBS 

Bezeq 
shareh
olders 
against 
Bezeq 
and 
DBS  

Bezeq 
sharehol
ders 
against 
The 
Compan
y, DBS 
and the 
former 
controlli
ng 
sharehol
ders of 

Tel Aviv 
District 
Court 

Tel Aviv 
District 
Court 
(Econom
ic 
Departm
ent) 

Motion for 
approval of class 
actions 

For details regarding an indictment filed in 
December  2020  by  the  State  Attorney's 
Office  (following  an  open 
investigation 
opened in June 2017), inter alia, against the 
former CEO of DBS and its former CFO see 
Section 1.1.6. 

For details regarding a motion for approval 
of  a  class  action  lawsuit  filed  against, 
among other things, the former CEO of DBS 
and  its  former  CFO,  in  connection  with  a 
2015 transaction in which Bezeq acquired 
the  remaining  shares  of  the  DBS  shares 
held  thereby  from  Eurocom  DBS,  see 
Section 2.18.1D. 

Tel Aviv 
District 
Court 

Motion for 
disclosure of 
documents before 
submitting a motion 
for approval of a 
derivative claim in 
accordance with 
Article 198A of the 
Companies Law  

regarding  a  motion 

For  details 
for 
disclosure of documents before submitting 
a motion for approval of a derivative claim 
in  accordance  with  Article  198A  of  the 
Companies Law against Bezeq and DBS, for 
disclosures  of  certain  documents 
in 
connection  with  a  2013  DBS  and  Space 
stakeholder  transaction  as  amended  in 
2017 (Space Agreement) See Section 2.18.1 
Subsection E. 

Tel Aviv 
District 
Court 
(Econo
mic 
Depart
ment) 

Request for 
disclosure and 
review of 
documents under 
section 198A of the 
Companies Law 

152

the 

For details regarding a motion for disclosure 
of  documents  prior  to  filing  a  motion  for 
approval of a derivative claim in accordance 
with  Article  198A  of  the  Companies  Law, 
which  were  filed  by  shareholders  against 
Bezeq,  DBS, 
controlling 
shareholder in Bezeq, Mr. Shaul Elovich, and 
his  son,  Mr.  Or  Elovich  for  the  delivery  of 
documents  and  information  in  connection 
with  the  breach  of  the  fiduciary,  fairness 
and 
in 
trust  obligations  of  Elovich 
connection with the sale of Bezeq shares on 
February  2,  2016  by  the  Company,  see 

former 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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Date 

Sides 

Court 

Type of procedure 

Details 

Bezeq 

section 2.18.1, subsection i. 

Amount of 
claim / 
remedies 

5.17.  Targets and strategy 

5.17.2. 

DBS's  targets  are  to  maintain  market  share,  while  maintaining  DBS's  business  and 
competitive position in the field and Yes’s brand status as a leading communications and 
television brand. 

As of 2019, DBS has been implementing a migration plan from satellite broadcasts to the 
Internet (OTT) in a long-term gradual procedure that is expected to be spread up to early 
2026, in accordance with the decision of the Boards of Directors of DBS and Bezeq. The 
said decisions were made in light of the trends in the television content market, which 
include  lowering  entry  barriers,  entry  of  new  players  and  establishing  OTT  broadcast 
technologies, changing the value chain and changing consumption habits, along with the 
differences between old satellite broadcast technology and OTT broadcast technology, 
changing the value chain and changing consumption habits, along with the differences 
between the old satellite transmission technology and the OTT transmission technology 
on  the  benefits  inherent  in  it  (also  paying  attention  to  the  aspects  of  equipment, 
obligations and content rights). In accordance with the decision, DBS regularly monitors 
market  conditions,  competition  and  the  technological  environment,  and  frequently 
examines the applicability of the outline and the need, if any, to make changes to it, the 
pace of implementation or the manner in which it is implemented, taking into account its 
customer needs as well as regulatory amd other obligations of DBS. 

Since this is the implementation of an outline for the transition in a multi-year gradual 
procedure, with ongoing monitoring, there is no certainty, at this stage, regarding the 
actual duration of the process and / or that the move as stated will be completed. As the 
transition is completed, it is expected to lead to savings in DBS expenses and a better 
adaptation to changing market conditions. 

As  of  the  date  of  approval  of  the  statements,  the  rate  of  DBS  subscribers  using  the 
Services Yes+ and StingTV transmitted via the Internet (as stated in the Sections 5.2.2.1 
and  5.2.2.2 above) is about 60%90 of all DBS subscribers. For this matter see also Section 
1.5.4.4 (Note 3). 

In order to achieve the aforementioned targets, along with actions to reduce expenses, 
DBS invests considerable efforts in the areas of marketing and sales and in an appropriate 
marketing  strategy  designed  to  further  recruit  existing  subscribers  and  retain  existing 
subscribers;  Continuous  improvement  in  the  subscriber  service  system;  Upgrading 
customer value propositions, creating differentiation and originality in the content of its 
broadcasts; Offering a variety of products (both low cost and premium), increasing the 
volume of content purchased by each subscriber and expanding the added value services 
of DBS; Marketing of Internet access services, focusing on selling combined Internet and 
TV  packages  to  customers;  Having  collaborations  with  international  content  providers 
and  making  content  apps  accessible,  As  well  as  investment  in  the  development  and 
implementation  of  advanced  technologies,  advanced  customer  interfaces  and  new 
services;  These  efforts  include  the  pursuit  of  DBS  to  implement  the  outline  of  the 
transition to OTT services. 

DBS's  objectives  as  stated  above,  including  with  respect  to  the  transition  outline 
described  above,  are  forward-looking  information,  as  defined  in  the  Securities  Law, 
based, inter alia, on DBS's Management's assumptions, estimates and forecasts regarding 
the  current  trend 
in  the  broadcasting  market,  regarding  competition,  business 
developments,  consumption  habits,  the  technological  environment,  the  regulatory 
environment and the manner of regulation (both on DBS and other parties) both in the 
satellite  broadcasting  market  and  in the  Internet  television  broadcasting  market  (OTT) 
and in the Internet access services market, also paying attention to the restrictions that 

5.17.3. 

5.17.4. 

90 This rate also includes subscribers who also use satellite services. 

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apply  and  will  apply  to  Bezeq,  which  affect  DBS.  However,  the  predictions  of  the  DBS 
Management, its preparations, objectives and the above outline may not materialize, or 
materialize  in  a  materially  different  manner,  in  view  of  changes  in  demand  in  the 
aforementioned markets, in view of the intensification of competition in these fields, in 
view  of  the  entry  of  additional  factors  into  them  or  into  alternative  fields,  in  view  of 
change in technologies and in consumption habits, in view of the pace of development of 
the Internet browsing rates, in view of regulatory restrictions imposed or to be imposed 
on DBS, or its collaborations with Bezeq and other parties in the fields, and in view of how 
the fields will be regulated. 

5.18.  Discussion of risk factors 

The following are the threats, weaknesses and other risk factors of DBS (“the Risks") arising from its 
general environment, from the industry and from the unique characteristics of its activities. 

5.18.1.  Macro risks 

5.18.1.1 

5.18.1.2 

5.18.1.3 

5.18.1.4 

Financial risks - DBS is exposed to various market risks such as; Exchange 
rate,  index  and  interest  rate  risks.  The  main  market  risk  is  the  shekel-US 
dollar  exchange  rate,  in  light  of  the  fact  that  some  significant  portion  of 
DBS's  expenses  and  investments  are  made  in  US  dollars  (mainly  content, 
logistics 
satellite  segments,  purchase  of  end  equipment  and  other 
equipment).  Therefore,  sharp  exchange  rate  changes  have  an  effect  on 
DBS's business results. 

Recession  /  economic  slowdown  /  security  situation  -  an  economic 
slowdown  in  the  economy,  an  increase  in  unemployment  rates  and  a 
decrease in disposable income may lead to a decrease in the number of DBS 
subscribers, a decrease in DBS revenues and damage to its business results. 

Also,  an  ongoing  deteriorating  security  situation  in  large  areas  of  Israel, 
which disrupts the daily lives of the residents, could lead to a deterioration 
in the business results of DBS. 

Epidemic - Disease outbreaks and epidemic events in general (such as the 
outbreak of COVID-19 in 2020) may have consequences for DBS's business 
activities depending on the extent of the spread and its severity as well as 
the  national  and  global  measures  that  will  be  taken  as  a  result.  These 
consequences may be manifested, among other things, in damage to DBS's 
activities and its customer service system as well as in damage to the supply 
chain. Events of this type are changing events that are not under the control 
of  DBS,  and  their  consequences  are  subject,  among  other  things,  to  the 
decisions of countries and authorities in Israel and around the world that 
may affect DBS accordingly. For this matter see also Section 5.18.1.2 and the 
Company's reference in Sections 2.20.10 and 2.20.13. 

5.18.1.5 

Damage caused by nature, war, disaster - damage to DBS infrastructure and 
services as a result of natural disasters, including earthquakes, as well as as 
a result of war or disaster, may adversely affect its business and results. 

5.18.2. 

Industry risks 

5.18.2.1 

5.18.2.2 

Dependence  on  licenses  -  DBS  satellite  TV  broadcasts  are  provided  in 
accordance with the broadcasting license and through additional licenses, 
and therefore depend on the existence of these licenses and their extension 
from time to time. Violation of the provisions of the licenses, as well as the 
provisions  of  the  law  by  virtue  of  which  the  licenses  were  granted,  may 
result, subject to the conditions set forth in the licenses, to revoke, change, 
suspend  or  not  extend  the  licenses  and  consequently  materially  impair 
DBS's ability to continue operating in the field. 

Regulation - the provision of satellite television broadcasts is subject to the 
obligations  and  limitations  set  forth  in  the  legislation  as  well  as  to  the 
licensing  regime,  supervision  and  approvals  by  various  regulatory  bodies, 
and may therefore be affected and limited in light of policy considerations 
dictated by these bodies and their decisions (see Section 5.14). Regulatory 
changes  may  affect  DBS  activity  and  may  materially  impair  its  financial 

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results. The OTT services including those of DBS are not monitored, as of the 
date of the report (for the possibility of arranging these services, see Section 
5.14.2). Continued activity of content providers (and the entry of additional 
providers)  via  the  Internet  as  stated  in  the  Section  5.1.1  without  the 
application  of  regulatory  rules  to  their  activities  and  /  or  without 
appropriate  amendment  of  the  regulatory  rules  applicable  to  broadcast 
license  holders,  may  materially  impair  the  financial  results  of  DBS.  In 
addition, DBS's activity, as a company that provides services to the public, is 
subject,  among  other  things,  to  legislation  in  the  field  of  consumer 
protection as well as to the laws of protection of privacy and information 
security (see Section 1.7.7.4). 

Fierce competition - the field is characterized by fierce competition with a 
variety of different competitors (see Section 5.1.7), which are also expected 
to  increase  in  the  future  in  the  face  of  the  entry  of  additional  local  and 
international  factors,  as  well  as  a  change  in  consumer  preferences,  that 
requires  DBS  to  constantly  and  continuously  invest  in  recruiting  and 
retaining  customers  and  dealing  with  high  transfer  rates  of  subscribers 
between  companies,  and  may  even  require  a  change  in  DBS’s  business 
model . For the characteristics of competition, see Section 5.5. 

DBS’s  estimate,  as  stated  in  this  paragraph  above  in  relation  to  the 
possibility of the entry of local and international factors, is forward-looking 
information. This assessment is based on DBS's assessments of the state of 
the industry and possible changes in it. This assessment may not materialize 
or partially or otherwise materialize in view of the materialization or non-
materialization  of  plans  by  various  factors  to  enter  into  the  industry,  the 
manner  in  which  they  are  actually  implemented  and  the  conditions  of 
competition that will prevail. 

Technological  developments 
technological 
improvements  and  the  development  of  new  technologies  that  will  make 
existing  technology  inferior,  may  require  DBS  to  make  large  financial 
investments in order to maintain its competitive position (see Section 5.1.1). 

improvements 

and 

- 

Alternative infrastructure for multi-channel broadcasts - the activity of the 
DTT system, and in particular its expansion, as well as the deepening of the 
intrusion  of  OTT  operators,  may  harm  the  financial  results  of  DBS  (see 
Section 5.1.1). 

Unauthorized viewing - the field of broadcasts is exposed to the "pirated" 
connection of viewers to the reception of the broadcasts, without paying a 
subscription  fee,  and  is  also  exposed  to  the  public's  access  to  content  in 
which the broadcaster has rights. 

Exposure to legal proceedings - DBS is a party to legal proceedings, including 
requests  for  approval  of  class  actions,  which  may  result  in  a  charge  of 
material amounts which cannot be assessed, and for which no provision has 
been made in its statements. These class actions can amount to large sums, 
as a substantial portion of Israel’s residents are DBS subscribers, and a claim 
relating  to  a  small  damage  to  a  single  subscriber  may become  a  material 
claim to DBS, if recognized as a class action applicable to all subscribers or 
to a substantial portion thereof. 

5.18.2.3 

5.18.2.4 

5.18.2.5 

5.18.2.6 

5.18.2.7 

5.18.3. 

Special risks to DBS 

5.18.3.1 

5.18.3.2 

Limitations  as  a  result  of  the  ownership  structure  -  DBS  is  limited  in  its 
cooperation  with  Bezeq 
in  relation  to  the  offer  of  a  basket  of 
communications services in a manner that materially affects DBS's business 
situation and its competitive capabilities (see Section 5.15.3). 

Restrictions  as  a  result  of  the  eligibility  conditions  -  "cross"  holdings  of 
holders, directly or indirectly, in DBS, as well as a decrease in the holding 
rate of Israeli citizens or residents in DBS, may lead to non-compliance with 
the eligibility conditions of its broadcasting license (including in light of the 
Israeliness requirement (see Section 5.14.1.1). 

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5.18.3.3 

5.18.3.4 

5.18.3.5 

Maintaining a sufficient cash flow - DBS must maintain a sufficient cash flow 
for the purpose of meeting its business plan. The lack of sufficient cash flow, 
including through investment or financing from Bezeq, may adversely affect 
DBS's  business,  as  well  as  make  it  more  difficult  for  it  to  deal  with 
competitive threats in view of technological developments and changes in 
consumption habits in the field. 

According  to  DBS’s  estimate,  it  is  expected  to  continue  to  accumulate 
operating losses in the coming years and therefore without Bezeq’s support 
it will not be able to meet its obligations and continue to operate as a going 
concern. According to DBS, the sources of financing available to it, which 
include,  inter  alia,  the  working  equity  deficit  and  the  credit  and  Bezeq’s 
investment  framework  in  equity  as  stated  in  Section  5.12,  will  meet  the 
needs of DBS activity for the coming year. 

DBS  satellite  transmissions  are  made  using  space  segments  of  satellites 
located at the same point in space. In the operation of one of the satellites, 
damage to one of them or unavailability of space segments in any of the 
satellites, including unavailability of a satellite intended to replace a satellite 
that  has  ceased  to  transmit  or  provide  services  to  DBS  or  termination  of 
segment leasing in any of the satellites may significantly disrupt and reduce 
the volume of satellite broadcasts via satellite, unless an alternative is found 
to the segments of space that are not available as aforesaid and also in view 
of  the  lapse  of  time  until  the  implementation  of  such  an  alternative. 
However,  the  duplication  of  satellites  through  which  transmissions  are 
made to subscribers as of the date of this report, also taking into account 
the  partial  backup  mechanisms  set  forth  in  the  Space  Agreements  (the 
quality and scope of which depend on the identity of the backed satellite), 
significantly  reduces  the  risk  of  damage,  failure  or  unavailability,  and 
improve the survivability of the bulk of the broadcast. In the event of the 
availability  of  such  satellite,  it  will  be  possible,  through  space  segments 
available to DBS on the other satellite, to broadcast the channels broadcast 
by  DBS  (all  or  almost  all)  (for  the  Space  Agreement,  including  backup 
mechanisms determined under it, see Section 5.15.1). However, according 
to DBS, the said duplication of satellites is expected to end in the beginning 
of 2025, and from that period onwards, DBS will operate with one satellite 
- see Section 5.15.1. DBS does not have insurance for loss of revenue caused 
by satellite failure. 

Termination of the receipt of the satellite services, for any reason (including 
due to the end of the agreement period),  while a substantial part of DBS 
subscribers are still satellite subscribers may result in substantial damage to 
DBS revenues. 

The progress of the process of switching to or accelerating transmission via 
the Internet may reduce the vulnerabilities mentioned above involving the 
failure, damage, unavailability or termination of satellite services. 

DBS’s  estimates  as  stated  in  this  paragraph  above  is  forward-looking 
information. This assessment is based on the provision of space segments 
implementation  of  space  backup  mechanisms  and  space 
and  the 
assessments in relation to the useful life of satellites, the beginning of the 
activity of new satellites, the end of the activity of existing satellites and the 
exercise of contracts in relation to them, and possible termination of lease 
of segments of space. This assessment may not materialize or be partially or 
otherwise materialized if there is a change in the useful life of the satellites 
and the exercise of their lease option or if space does not provide the BBC 
with  alternative  segments  in  the  event  of  unavailability  or  failure  of  the 
space segments or satellites. 

Dependence on the owner of the rights in the space segments - DBS has a 
substantial  dependence  on  Space,  as  the  sole  rights  holder  and  the  sole 
supplier of the space segments used by DBS, which is also responsible for 
the operation of the space segments. In relation to Amos 7, the supply of 
the  segments  of  space  also  depends  on  the  third  party  who  owns  the 

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5.18.3.6 

5.18.3.7 

5.18.3.8 

5.18.3.9 

satellite and the body responsible for its operation, with whom Space has 
contracted (see Section 5.15 and on the realization of its engagement with 
Space in relation to this satellite until the end of the period determined in a 
manner that will allow the continued leasing of the segments of space on 
this satellite. 

Dependence on software suppliers, equipment, content, infrastructure and 
services - DBS has dependence on software vendors and equipment, as well 
as on certain content vendors (see Sections 5.7.2 and 5.9.5) and receipt of 
certain services, including broadcast encryption services (see Section 5.7.5). 
Failure to receive the products and services provided by them may impair 
the  functioning  of  DBS  and  its  results.  In  addition,  inability  to  purchase 
streamers or receiving support services from current provider, is expected 
to  involve  a  period  of  preparation  that  will  be  required  to  make  the 
alternative engagement and change their supply and support system. 

limitation 

Impairment  of  the  activity  of  the  broadcasting  centers  and  the  logistics 
center - Impairment of the activity of the broadcasting center may cause a 
significant 
in  the  continuation  of  the  broadcasts,  but 
decentralization of broadcasts to two broadcasting centers (in Kfar Saba and 
the Ella Valley) partially reduces the risk of damaging one of them. In the 
event  of  damage  to  one  of  the  broadcasting  centers,  DBS  will  be  able  to 
continue to broadcast from the other broadcasting center only part of its 
channels as part of the satellite broadcasts, as well as all VOD broadcasts. 
Each  transmission  center  has  the  same  satellite  encryption  system,  and 
therefore there is full backup for the encryption system in case of damage 
to one of the transmission centers. In the event of a cessation of activity of 
the Kfar Saba site, OTT services will not be possible at all, and in the event 
of a cessation of activity of the secondary site only, the main activity of the 
OTT  services  will  be  possible  through  the  Kfar  Saba  site,  including 
broadcasting some channels and VOD service. Damage to the DBS logistics 
center may also disrupt its operations, and in particular the installation and 
maintenance of end equipment. 

The  assessment  of  DBS  as  stated  in  this  paragraph  is  forward-looking 
information.  This  assessment  is  based  on  the  provision  of  the  provider 
services  that  operate  the  secondary  broadcasting  site  in  the  event  of  an 
injury  to  the  broadcasting  center  in  Kfar  Saba.  This  assessment  may  not 
materialize  or  partially  or  otherwise  materialize  if  DBS  is  not  allowed  to 
receive the services of the said provider in full and properly. 

Failure  of  DBS’s  computer  systems  -  significant  failure  of  DBS's  major 
computer  systems  could  significantly  impair  DBS's  operational  capacity. 
However,  DBS  has  a  remote  backup  site  designed  primarily  for  storing 
information and providing an internal computing service limited to failures 
in  such  a  way  that  in  the  event  of  a  failure  of  the  DBS  site's  computer 
systems  in  Kfar  Saba,  it  will  be  possible  to  reactivate  the  central  systems 
through the backup site. 

DBS's  assessment  in  relation  to  the  backup  capability  as  stated  in  this 
paragraph  is  forward-looking  information.  This  estimate  is  based  on  the 
functionality  of  the  remote  backup  site.  This  assessment  may  not 
materialize or partially or otherwise materialize if such functionality is not 
possible. 

Cyber  risks  -  DBS  is  exposed  to  the  risk  of  the  occurrence  of  an  activity 
intended to harm the use of a computer or computer material stored on it 
("cyber  attack").  Such  attacks  can  disrupt  business,  cause  theft  of 
information / money, damage databases and subscriber privacy, damage to 
reputation, damage to systems and information leakage, which may also be 
caused  by  an  intentional  or  inadvertent  internal  factor.  As  a  leading 
company in the field of subscriber television broadcasting, DBS is a target 
for cyber attacks and experiences cyber attacks, which are handled by its 
information security and cyber protection teams. 

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DBS has defined a policy for cyber risk management that establishes guiding 
principles  for  cyber  protection,  which  refer,  among  other  things,  to  the 
confidentiality  of  information,  the  reliability  of  information  and  the 
availability of information in connection with the implementation of cyber 
protection  in  the  following  aspects:  organizational  framework,  cloud 
computing,  human  resources  and  security,  physical  and  logical  cyber 
protection  in  processes  ,  in  systems  and  infrastructures.  The  person 
responsible for implementing the policy in DBS is the information security 
manager. 

DBS also implements standards for managing cyber risks and information 
security,  as  well  as  a  protection  policy  that  includes  layers  of  protection, 
starting  with  managers  and  policies,  and  ending  with  physical  layers  of 
defense  systems  against  cyber  attacks,  which  are  operated 
in  a 
configuration that combines effective security with the operational needs 
of  DBS,  with  the  aim  of  protecting  its  infrastructure  and  systems  and 
reducing the possibility of illegal exploitation of its resources. In addition, 
there are tools for attacking and detecting information security weaknesses 
that operate automatically and help discover information security loopholes 
and weaknesses. DBS has an annual work plan in connection with reducing 
the exposure resulting  from the cyber risk  while  carrying  out control and 
monitoring of actual implementation. 

DBS  also  periodically  performs  information  security  surveys,  risk  surveys, 
penetration tests, attack drills, as well as other actions for the purpose of 
examining the effectiveness of the risk management policy in dealing with 
and  reducing  cyber  risk,  as  well  as  control  over  examining  the  way  cyber 
risks  are  managed  through  internal  audits.  In  addition,  DBS  allocated 
resources  to  manage  cyber  risks  through  the  establishment  of  an 
information  security  system  consisting  of  professional  employees  in  the 
field. 

DBS’s Board of Directors is involved in and supervises the management of 
cyber  risk  at  DBS  within  the  framework  of  handling  the  overall  risk 
management policy of DBS.. 

Despite DBS's actions investments in measures to reduce such risks, DBS is 
unable  to  guarantee  that  these  measures  will  in  practice  succeed  in 
preventing a cyber attack and/or damage and / or disruption to the systems 
and information related to them. 

Technical limitation that prevents the offering of integrated services – DBS’s 
satellite infrastructure suffers from technical limitations compared to Hot 
infrastructure.  The  technical  limitation  prevents  DBS  from  providing 
telephony, Internet and various interactive services, including VOD, on its 
satellite infrastructure, and therefore their supply depends on third parties. 

Defects  in  the  encryption  system  or  its  bypass  –  DBS’s  broadcasts  via 
satellite and via the Internet, are based on the encryption of the broadcasts 
transmitted by it, including the encoding of its satellite broadcasts using the 
"smart cards" installed in the decoders in the satellite subscribers’ houses. 
Defects in its encryption system or hacking or bypassing it may allow free 
viewing of DBS broadcasts, thereby leading to a decrease in revenue, as well 
as a breach of agreements between DBS and its content providers. 

Lack of exclusivity in the field of frequencies - the field of frequencies used 
by DBS to transfer satellite transmission from the transmission satellites to 
the reception dishes installed in the subscribers' homes, and which has been 
allocated under a license by the Ministry of Communications, is defined as 
a frequency range that an Israeli entity that may make authorized use of in 
the field of frequencies. If the holder of the main allotment uses the above-
mentioned frequencies, disruptions in the quality of the DBS broadcasts and 
/ or the availability of the broadcasts to the subscriber may result in damage 
to the financial results of DBS. As of the date of this report, to the best of 
DBS's knowledge, no holder of the main allotment used the said frequencies 

158

5.18.3.10 

5.18.3.11 

5.18.3.12 

 
 
 
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5.18.3.13 

5.18.3.14 

5.18.3.15 

5.18.3.16 

in  a  manner  that  caused  actual  and  /  or  persistent  interruptions  in  DBS’s 
broadcasts. 

Interference  for  transmissions  -  since  DBS  transmissions  via  satellite  are 
transmitted  wirelessly  from  the  transmission  centers  to  the  transmission 
satellites and from there to the reception dishes in the subscribers' houses, 
transmission  of  wireless  signals,  in  the  same  frequency  range,  whether 
originating in Israel and abroad, and extreme weather conditions of heavy 
rain, hail or snow may cause disruptions in the quality and / or availability 
of  the  broadcasts  via  the  satellite  provided  by  DBS  to  the  subscriber  and 
material  damage  to  its  financial  results.  In  relation  to  broadcasts  via  the 
Internet, there may be disruptions in the quality and / or availability of the 
broadcasts  as  a  result  of  disruptions  or  unavailability  of  the  Internet 
infrastructure. 

Labor relations - DBS is a party to a collective agreement with the Histadrut 
and  the  Employees’  Committee,  which  may  reduce  its  administrative 
flexibility (see Section 5.10.3). In addition, In addition, disruptions in labor 
relations at DBS, and possibly also at other Bezeq subsidiaries, could cause 
damage to DBS's day-to-day operations. 

Loss of knowledge and information - The changes that are taking place in 
the labor market in Israel and around the world, along with organizational 
changes, entail risks for the loss of key employees, loss of knowledge as a 
result of employee turnover and difficulty in recruiting employees, etc. 

Delay  in  improving  internet  browsing  speeds  -  as  BDS’s  outline  for  the 
transition  to  OTT  broadcasting  (see  Section  5.17.1)  is  also  based  on  an 
improvement in Internet browsing speeds, nationwide, failure to improve 
browsing  speeds  through  the  deployment  of  fiber  optics  or  through  the 
implementation of another technological solution, by the Company or other 
communications operators, can delay the implementation of the layout or 
impair its implementation. 

DBS  assessments  as  to  the  browsing  speeds  required  to  enable  OTT 
broadcasts as designed in an outline in a way that enables the operation of 
several  converters  in  a  customer's  home  is  forward-looking  information. 
These  estimates  are  based  on  the  expected  development  in  browsing 
speeds,  taking  into  account,  among  other  things,  the  expected  needs  of 
customers' homes and the expected mix of broadcasts. These assessments 
may not materialize or materialize differently if there is a delay in improving 
Internet browsing rates or a change in customer needs or DBS. 

Below is a presentation of the risk factors according to their influence in the 
opinion of the DBS’s Management. It should be noted that the following DBS 
assessments regarding the extent of the risk factor's impact on DBS reflect 
the extent of the risk factors’ impact in assuming the materialization of the 
risk factor, and the aforesaid does not express any assessment or give any 
weight  to  such  prospects.  In  addition,  the  order  in  which  the  risk  factors 
appear above and below is not necessarily according to the risk inherent in 
each risk factor or the probability of its occurrence.91: 

91 See Footnote 51. 

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Risk Factors Summary Table - Multi-Channel TV  

Macro risk 
Financial risks 
Recession / economic slowdown / security situation 
Pandemic 
Damage caused by nature, war, disaster 
Industry risk 
Dependence on licenses 
Changes in regulation 
Fierce competition 
Technological developments and changes 
Alternative infrastructures  
Unauthorized viewing  
Exposure to legal proceedings 
Unique risk 
Limitations as a result of the ownership structure 
Restrictions due to eligibility conditions 
The need to maintain a sufficient cash flow 
Satellite failure and damage 
Dependence on the supplier of space segments 
Dependence  on  software,  content,  equipment  and 
infrastructure vendors 
Impairment of the activity of the broadcast centers  
Failure of computer systems 
Cyber failures 
Technical limitation that prevents the offer of integrated 
services 
Encryption system failure 
Lack of exclusivity in frequencies 
Interference with transmissions 
Work relations 
Loss og knowledge and information 
Delay in improving internet browsing rates  

The degree of influence 
Small 
Medium 
High 

X 

X92 

X 

X 

X 
X 
X 

X 
X 
X 
X 
X 

X 
X 
X 

X 

X 

X 

X 
X 
X 
X 

X 

X 

X 

X 

X 

The information contained in this section 5.18 and DBS's assessments regarding the impact of risk 
factors  on  DBS's  activities  and  business,  are  forward-looking  information  as  defined  in  the 
Securities Law. The information and assessments are based on data published by the regulatory 
bodies, on DBS’s assessments of the market situation and its competitive structure, on possible 
developments  in  the  Israeli  market  and  economy,  and  on  the  factors  specified  in  this  section 
above. The actual results may differ materially from the estimates given above if there is a change 
in one of the factors taken into account in these estimates. 

92 The extent of the effect of this risk factor on DBS activity was classified as moderate, assuming that the event would be limited 
in scope and time. Otherwise, the degree of impact may be large. 
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6. 

The Company 

6.1. 

Financing 

6.1.2. 

The Company's debentures 

For  details  about  the  debentures  issued  by  the  Company  See  Note  13  to  the  2022 
Consolidated Statements and Section 4 of the Board of Directors' Report.  

6.1.3. 

Credit rating  

As of August 13, 2020, the Company's debentures are not rated in any rating. On the eve 
of the termination of the rating, the rating of the Company's  debentures  (Series C) by 
Midroog was Caa2.il, with a stable rating horizon. 

6.2. 

Legal proceedings 

6.2.1. 

6.2.2. 

In June 2017, two motions for approval of a class action lawsuit, in the total amount of 
NIS  1.8  billion,  were  filed  against  the  Company,  Bezeq,  officers  in  the  Group  and 
companies from the then controlling group in Bezeq regarding the purchase of DBS shares 
by Bezeq from Eurocom. According to the decision of the Court, a consolidated motion is 
expected to be filed in lieu of these two motions.The said procedure has been delayed at 
the request of the Attorney General several times, when as of this date, the procedure 
has been delayed till July 2023. 

In  November  2020,  a  claim  was  filed  with  the  Tel  Aviv  District  Court  (Economic 
Department) accompanied by a motion for approval as a class action by a private person 
who claims to be a shareholder of Bezeq ("the Applicant") against the Company, Bezeq 
and  members  of  Bezeq’s  Board  of  Directors  ("the  Respondents").  The  matter  of  the 
motion  is  the  approval  of  a  class  action  for  compensation  of  the  Applicant  and  the 
members of the represented group for damages caused to them, according to the motion, 
"due to Bezeq's failure to report and disclose to the Tel Aviv Stock Exchange (hereinafter: 
"TASE") and the concealment of material information from investors, in connection with 
a public report on "the Ministry of Communications' moves to eradicate the phenomenon 
of dual subscribers in the field of ISP Internet services, on the extensive and substantial 
scope  of  the  phenomenon  of  dual  subscribers  in  the  Bezeq  International  subsidiary 
(hereinafter: "Bezeq International") and their material negative impact on the business 
of  the  subsidiary  and  Bezeq".  The  definition  of  the  group  according  to  the  motion  is 
anyone who purchased the Bezeq shares from August 17, 2020 until October 30, 2020 
and  held  the  above  shares  or  some  of  them  on  October  30,  2020,  except  for  the 
respondents  and  /  or  those  on  their  behalf  and  /  or  entities  related  to  them.  In  the 
application, the damage caused to the group members as a result of the incidents that 
are the subject of the lawsuit amounts to approximately NIS 55 million to NIS 65 million, 
based on an expert opinion attached to the motion. In December 2021, the Company filed 
a motion for in limine dismissal of the motion for approval against it, inter alia, because 
the motion for approval does not specify claims against the Company and because for 
most of the relevant period the Company was a dual company so the law applied to it is 
US law, and because the motion is not supported by the opinion of an expert on foreign 
law. In July 2021, the respondents filed a response claiming that the motion for approval 
was unbased, inter alia, due to the fact that the information alleged in the motion for 
approval that was required for publication did not meet the standards set by law for the 
purpose  of  establishing  a  reporting  obligation,  accompanied  by  an  arrangement 
procedure and in combination with professional consultants and under the supervision 
of  the  Board  of  Directors,  and  hence,  the  appropriate  means  to  comply  with  the 
provisions  of  the  law  were  performed,  and  these  findings  contradict  the  applicant's 
contention.  After  several  hearings  for  responses  and  a  pre-trial  hearing  in  February,  a 
decision was made in which the parties were asked to update whether they wished to 
hold  a  mediation,  an  additional  preliminary  hearing  or  to  coordinate  a  hearing.  The 
parties  have  announced  that  they  are  working  to  coordinate  deadlines  for  evidentiary 
hearings. On July 19, 2022, the evidence hearing took place as aforementioned, and the 
procedures for submitting summaries on behalf of the parties were determined, while 
the  applicant's  summaries  were  submitted  on  November  30,  2022,  and  in  accordance 
with the Court's decision, the date for submitting the respondents' summaries was set for 
March 30, 2023 

In  November  2020,  a  lawsuit  was  filed  in  the  Tel  Aviv  District  Court  (Economic 

161

 
 
 
Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

Department)  with  motion  for  approval  as  a  class  action  by  a  private  individual  ("the 
Applicant")  who  claims  is  a  shareholder  of  the  Company  who  claims  to  hold  the 
Company's  shares  and  Bezeq  shares,  against  the  Company,  Bezeq  and  72  other 
respondents,  which  include  past  and  present  officers  in  the  two  companies  ("the 
Respondents").  The  matter  of  the  application  is  the  approval  of  a  class  action  for 
compensation of the Applicant and the members of the represented groups for damages 
caused  to  them,  as alleged  in  the  motion,  as  a  result  of  the  Respondents'  actions  and 
omissions when they refrained from disclosing to the investing public seemingly material 
information  that  they  had  to  disclose  in  accordance  with  the  provisions  of  the  law,  in 
connection with the two companies' report dated November 9, 2020 according to which 
Bezeq International books have unexplained net asset balances (deductible) of tens of 
millions of NIS, whin a significant portion of them otiginate, apparently, in past periods of 
more than 15 years. The definition of the groups according to the motion is: (a) Anyone 
who purchased Bezeq shares from November 8, 2005 to November 9, 2020, except the 
Respondents or those on their behalf and (b) Everyone who purchased the Company's 
shares  on  the  Tel  Aviv  Stock  Exchange  from  November  8,  2007  to  November  9,  2020, 
except the Respondents or those on their behalf. The amount of the class action specified 
in the statement of claim is "over NIS 2.5 million (for matters of substantive authority)" 
when in accordance with the economic opinion that was attached to the motion, "the 
estimate for the drop in the price of the security" in respect of the information included 
in the immediate report dated November 9, 2020 is 5.26%-5.40% in relation to Bezeq and 
9.07% - 9.36% in relation to the Company. 

In  July  2022,  the  applicant,  Bezeq  and  the  Company  submitted  a  notice  regarding  a 
motion  for  a  mediation  procedure  and  a  motion  for  the  approval  of  a  negotiated 
settlement, in which they announced that in the conversation that took place between 
them, they agreed on holding a mediation process ("the Negotiated Settlement"). The 
court  approved  the  aforementioned  settlement.  As  of  the  date  of  the  report,  the  first 
mediation meeting was scheduled for April 2023 and the parties will submit an updated 
notice by May 2023 

__________________________________ 
B Communications Ltd. 

March 14, 2023 
Date 

Names and roles of the signatories: 
Darren Glatt, Chairman of the Board of Directors 
Tomer Raved, CEO 

162

 
 
 
 
 
 
Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

7.  Appendix A - Glossary 

A.  Names are abbreviated according to the legislation that appear in the report  

Consumer Protection 
Law 

Economic 
Competition Law 

-  Consumer Protection Law, 5741-1981 

-  Economic Competition Law, 5748-1988 

Companies Law 

-  Companies Act, 5769-1999 

Non-Ionizing 
Radiation Law 

-  The Non-Ionizing Radiation Law, 5776-2006 

Centralization Law 

-  Law for the Promotion of Competition and the Reduction of Centralization, 5774-

2013 

Second Authority Law 

-  Second Television and Radio Authority Law, 5755-1990 

Planning and 
Construction Law 

-  Planning and Construction Law, 5725-1965 

Communications Law 

-  The Communications (Bezeq and Broadcasting) Law, 5742-1982 

Securities Law 

-  Securities Law, 5728-1968 

Rules of 
communication 

Rules of Communication (Holder of a Broadcasting License), 5747-1987 

Telegraph Order 

 Wireless Telegraph Order [New Version], 5732-1972 

Usage regulations 

The media order 

The Planning and 
Construction 
Regulations 
(Exemption from the 
Permit) 

Prospectus Details 
Regulations 

Communications  (Bezeq  and  Broadcasting)  Regulations  (Use  of  an  NIO’s  Public 
Network), 5775-2014 

Communications  Order  (Bezeq  and  Broadcasting)  (determination  of  an  essential 
service  provided  by  Bezeq,  The  Israel  Telecommunications  Company  Ltd.),  5777-
1997 

-  Planning  and  Construction  (works  and  buildings  exempt  from  the  permit),  5774-

2014 

-  Securities Regulations (Prospectus Details, Draft Prospectus Structure and Form), 

5729-1969 

Reciprocal linking 

-  Communications  Regulations  (Bezeq  and  Broadcasting)  (Payments  for  Reciprocal 

regulations 

Satellite Broadcasting 
License Regulations 

Linking), 5764-2000 

-  Communications Regulations (Bezeq and Broadcasting) (Procedures and Conditions 

for Licensing Satellite Broadcasting), 5758-1998 

163

 
 
 
 
 
 
 
 
 
Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

B.  Technological terms and other key terms appearing in the report93 

Internet Gold  

Bezeq Online  

Bezeq International 

BAP 

Golan telecom 

2021 statements 

Interconnectivity fee  

DBS 

Hot  

Hot Telecom 

Hot Mobile 

Hot-Net 

The Stock Exchange  

The Histadrut 

Council 

The Second Authority 

Walla 

Space 

Eurocom DBS 

Eurocom 

Communications 

Switching  

Mbps 

NIO 

Roaming 

Network endpoint 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Internet Gold Gold Lines  

Bezeq online Ltd. 

Bezeq International Ltd 

BAP Communications Solutions (Limited Partnership) which is controlled by 
Bezeq International 

Golan Telecom Ltd. 

The  Company's  consolidated  financial  statements  for  the  year  ended 
December 31, 2021  

The interconnectivity fee (also called the call completion fee) is a payment 
that  one  operator  pays  to  another  operator  for  a  reciprocal  link  (see 
definition below)  

DBS Satellite Services (1998) Ltd. 

Hot Communications Systems Ltd., and corporations under its control that 
operate in the field of broadcasting (multi-channel television) 

Hot Telecom Limited Partnership 

Hot  Mobile  Ltd.  (formerly  MIRS  Communications  Ltd.)  and  corporations 
under its control 
Hot-Net Internet Services Ltd. 

The Tel Aviv Stock Exchange Ltd. 

The New General Workers' Union  

Cable and Satellite Broadcasting Council 

The Second Television and Radio Authority  

Walla! Communications Ltd. and corporations under its control 

Space Communications Ltd. 

Eurocom DBS Ltd. 

Eurocom Communications Ltd. 

In  the  context  of  a  communications  network  -  a  telephony  system  that 
supports the connection of devices for transferring calls between different 
end units  

Megabits per second; Measurement unit for data transfer speed 

National interior operator; A body that provides landline interior telephony 
services under a general or unique NIO license 

Roaming  services  allow  a  customer  of  one  communication  network  to 
receive  services  from  another  communication  network  other  than  his 
"home network" (the network with the license he subscribes to), based on 
roaming agreements between the home network and the host network 

Network  endpoint  -  an  interface  to  which  one  is  connected,  on  the  one 
hand a public Bezeq network and on the other hand end equipment or a 
private  network.  Network  endpoint  services  include  the  supply  and 

93 It should be noted that the definitions of the terms are provided for the convenience of the reader, and are not necessarily 
identical to the definitions in the Communications Law or its regulations.  

164

 
 
 
 
Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

maintenance of equipment and services in the customer's premises 

Cellcom 

Pelephone 

Fiber project 

Partner 

Interconnectivity 

Mobile phone radio 

Unified general 
license / unified 
license 

NIO license 

Mobile Radio license 

Broadcasting license 

ILA 

Rami Levy 

Bezeq services 

Transmission services 

Data communication 
services 

Reporting period 

Bitstream Access 
(BSA) 

xDSL 

DTT 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Cellcom Israel Ltd. and corporations under its control 

Pelephone Communications Ltd. 

The  Company's  plan  for  the  deployment  of  ultra-broadband  landline 
infrastructure that includes a massive deployment of fiber optics across the 
country  on  a  large  scale  that  will  enable  the  offer  of  ultra-fast  Internet 
services. 

Partner Communications Ltd. and corporations under its control 

Interconnectivity  enables  the  transmission  of  instant  messages  between 
subscribers  of  different  licensees,  or  the  provision  of  services  by  one 
licensee to the subscribers of another licensee; Interconnectivity is possible 
through a connection between a public Bezeq network of one licensee (for 
example - Bezeq) and a public network of another licensee (for example - a 
cellular operator); See also " Interconnectivity Fee" Definition 

Mobile radio telephone phone; Cellular telephony 

A general license that is one of the following or a license that unites several 
thereof: 

(1) a unique general license; 

(2) a general mobile radio telephone license in another network; 

(3) a general license for the provision of Bezeq International services; 

(4) a special license for the provision of network endpoint services; 

(5) Special license for the provision of Internet services. 

Unique  general  or  general  license  for  the  provision  of  landline  interior 
Bezeq services 

General license for the provision of mobile radio telephone services - in the 
cellular method 

License for satellite television broadcasts 

Israel Lands Authority 

Rami Levy Cellular Communications Ltd. 

Performing Bezeq operations (transmission, transfer or reception of signs, 
signals, writing, visual forms, sounds or information, using wire, wireless, 
optical system or other electromagnetic systems) for others 

Electromagnetic signal transmission or bit sequence  

Network  services  for  data  transfer  from  point  to  point,  data  transfer 
between  computers  and  various  communication  networks  and  remote 
business access services 

Twelve months ended December 31, 2021 

Managed broadband access that allows provider services to connect to the 
infrastructure owner network and offer broadband services to subscribers 

Digital Subscriber Line - technology that uses the copper wires of telephone 
lines to transmit data at high rates by using frequencies higher than the 
audible frequency and therefore allows simultaneous use of call and data 
transmission 

Digital Terrestrial Television- Wireless digital broadcasting of TV channels 
via terrestrial relay stations 

165

 
 
 
 
 
 
 
 
Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

GSM 

HD 

HSPA 

IBC 

IP 

IPVPN  

ISP 

LTE 

MVNO 

NGN 

UMTS 

VoB 

VoC 

VOD 

VoIP 

Wi-Fi 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Global  System  for  Mobile  Communications  -  International  Standard  for 
Cellular Communication Networks ("2G") 

High Definition TV - High definition (broadcast) TV broadcasts 

High Speed Packet Access - Cellular technology that is a continuation of the 
UMTS standard that enables data transfer at high speeds ("3.5G") 

ABC Israel Broadband Company (2013) Ltd.  

Internet Protocol. The use of this protocol enables convergence between 
voice (data) and contractual (video) services over the same network 

A virtual private network (Virtual Private Network) based  on an Internet 
Protocol (IP) which is established on the public network, and through which 
it is possible to: (a) allow end users to connect to the corporate network 
and  perform  remote  access;  And  -  (b)  make  a  connection  between  the 
branches of the organization (intranet) 

Internet Service Provider - has a special license to provide Internet access 
services  (Internet  Service  Provider).  The  Internet  access  provider  is  the 
body  that  allows  the  end  user  to  connect  to  the  IP  /  TCP  protocol  that 
connects it to the global Internet network 

Long  Term  Evolution  -  Fast  WIFI  mobile  standard  devices  such  as  cell 
phones 

Mobile Virtual Network Operator - a virtual cellular operator, which uses 
the existing communication infrastructure of the cellular operators without 
the need for its own infrastructure 

Next Generation Network - Bezeq's communications network based on IP 
architecture 

Universal Mobile Telecommunications System - an international standard 
for  cellular  communications  that  is  a  development  of  the  GSM  standard 
("3G")  

Voice  Over  Broadband  -  Telephony  services  and  related  services  in  IP 
technology using landline broadband access services 

Voice  over  Cellular  Broadband  -  Telephony  services  over  a  cellular  data 
communication channel ("Mobile VoB Services") 

Video on Demand - TV services on demand by the subscriber 

Voice over Internet Protocol - technology that enables the transmission of 
voice messages (telephony service delivery) via IP protocol 

Wireless Fidelity - Wireless access to the Internet in the local area 

166

 
 
 
 
 
Chapter A (Description of the Corporation's Business) for the 2022 Periodic Report 

8. 

Appendix  B  -  Financial  Indices  and Operational Performance  Indices  (Key  Performance 
Indicators) 

General  

The indices below, which are specified in the chapters of Bezeq’s periodic report, are financial indices that 
are not defined or detailed in generally accepted accounting principles included in the financial statements. 
The definition of the indices and / or how they are calculated may change from time to time, they do not 
constitute a substitute for indices based on accepted accounting rules and they may not even be calculated 
in the same way as parallel indices in other companies. 

Details will be provided below in relation to the aforesaid indices, including in accordance with the update of 
the  decision  of  the  Securities  Authority  99-6  regarding  the  use  of  financial  indices  that  are  not  based  on 
generally accepted accounting rules. 

Financial indices 

EBITDA 

(Earnings Before Interest, Taxes, Depreciation and Amortization) EBITDA is defined as profit before financing 
expenses (revenue), taxes, depreciation and amortization. The EBITDA index is an accepted index in the field 
of the Company's activity which neutralizes aspects due to differences in the capital structure, various aspects 
of taxation and the manner and period of the reduction of property, plant and equipment and intangible 
assets.  The  Company's  EBITDA  is  calculated  as  operating  profit  before  depreciation,  amortization  and 
impairment (ongoing losses from impairment of property, plant and equipment and intangible assets). As of 
January  1,  2019,  and  for  the  purpose  of  adequately  presenting  economic  activity,  the  Company  presents 
ongoing losses from impairment of property, plant and equipment and intangible assets in the DB and Walla 
under depreciation and amortization, as well as ongoing losses from impairment of broadcasting rights under 
operating expenses and general expenses (in the statement of income). 

Free flow (Free Cash Flow - FCF) 

The Company's free cash flow is calculated as cash arising from current activities less cash for the purchase / 
sale of property, plant and equipment and intangible assets (net) and as of 2018, with the application of a 
IFRS16 standard, payments for leases are also deducted. The free cash flow index is an accepted index in the 
field of the company's activity in general and it represents the cash that the Company is able to produce after 
the investment needed to maintain or expand its asset base. 

Operational performance indices (Key Performance Indicators) 

ARPU (Average Revenue Per User) 

The ARPU reflects the average monthly income per line / subscriber / parent house and is calculated as the 
monthly average distribution of the total relevant income for the period in the average number of active lines 
/ subscribers / households in that period, as applicable. It will be clarified that the Group has four main areas 
of activity that correspond to the corporate division between the Group companies and the definition of a 
different active subscription between the areas of activity. 

Churn rate 

The churn rate reflects the Company's ability to retain its customer base and is calculated as the distribution 
of the number of lines / subscribers / households that disconnected from the Company's services during the 
period in the average number of active lines / subscribers / households in that period, as applicable. It will be 
clarified that the Group has four main areas of activity that correspond to the corporate division between the 
Group companies and the definition of a different active subscription between the areas of activity. 

167

 
 
 
 
 
Chapter B 
Report of the Board of Directors  
on the State of Affairs of the Corporation 
for the Year Ended December 31, 2022

 
 
 
 
 
 
 
 
 
 
 
Report of the Board of Directors on the State of Affairs of the Corporation for the Year 
ended December 31, 2022 

The Board of Directors of B Communications Ltd. (“the Company") is honored to submit the Board of Directors' 
report  on  the  State  of  the  Company  and  consolidated  for  all  Group  Companies  (the  Company  and  the 
Subsidiaries will be collectively referred to hereinafter as: "the Group"), for a period of a year ended December 
31, 2022 (“the Report Date") in accordance with the Securities Regulations (Periodic and Immediate Reports), 
5730-1970 ("the Reporting Regulations").  

For  the  investigation  by  the  Securities  Authority  and  the  Israel  Police,  see  Note  1.3  to  the  Company’s 
statements. 

The auditors drew attention to this in their opinion on the statements. 

The Group reports on four main operating segments in its statements, as follows: 

1.  Landline interior communication 
2.  Cellular communication 
3. 

Internet, international communications and network endpoint services and ICT solutions (hereinafter: 
"Bezeq International Services") 

4.  Multichannel TV 

For more information, see Note 28 to the Statements. 

The following are the Group's consolidated results: 

2022 

2021 

Increase/decrease 

NIS millions 

NIS millions 

NIS millions 

% 

 Net profit 

EBITDA* 

Adjusted EBITDA* 

891 

3,493 

3,724 

996 

3,745 

3,695 

(105) 

(252) 

29 

(10.5) 

(6.7) 

(0.8) 

* Financial indices that are not based on generally accepted accounting principles, see below 

The decrease in net profit mainly stemmed from a decrease in equity gains from the sale of real estate assets 
and an increase in provision expenses for claims in the landline domestic communications sector as well as an 
increase  in  expenses  for  the  termination  of  employer-employee  relations  in  early  retirement  voluntary 
retirement and collective agreements in the Group. The decrease is conditioned by an increase in the profit of 
the cellular communication sector as well as by a decrease in the Company's financing expenses. 

For more information, see Chapter 1.2 below. 

1 

 
 
 
 
 
 
 
 
Report of the Board of Directors on the State of Affairs of the Corporation for the Year 
ended December 31, 2022 

* Financial indices that are not based on generally accepted accounting principles 

As of the Report Date, the Group's Management is assisted by financial performance indices that are 
not based on the generally accepted accounting rules for examining and presenting the Group's financial 
performance.  These  indices  do  not  constitute  a  substitute  for  the  information  contained  in  Bezeq’s 
statements. 

The following is a breakdown of the indices: 

Index 

Details of the method of calculation and the purposes of the index 

EBITDA 
(Earnings Before 
Interest, Taxes, 
Depreciation and 
Amortization) 

Adjusted EBITDA 

Defined as profit before financing revenue (expenses), financing, taxes, 
depreciation and amortization. 
The  EBITDA  index  is  an  accepted  index  in  the  Group’s  field  of  activity 
which  neutralizes  aspects  due  to  differences  in  the  capital  structure, 
various  aspects  of  taxation  and  the  manner  and  period  of  the 
amortization  of  property,  plant  and  equipment  and  intangible  assets. 
is  calculated  as  operating  profit  before 
The  Group's  EBITDA 
depreciation,  amortization  and  impairment  (including  ongoing  losses 
from impairment of property, plant and equipment and intangible assets 
as described in Notes 3.10.2, 10.5, and 10.6 to the Statements). 
Calculated  as  an  EBITDA  index  net  of  the  other  operating  expenses  / 
revenue  item,  net  and  one-off  losses  /  profits  from  impairment  / 
increase in value and expenses in respect of the capital remuneration 
plan. 
The  index  allows  comparisons  of  operational  performance  between 
different  periods  while  neutralizing  one-off  effects  of  exceptional 
expenses / revenue. 
It  should  be  noted  that  the  adjusted  EBITDA  index  should  not  be 
compared to indices with a similar name reported by other companies 
due to a possible difference in the way the index is calculated. 

2022 

2021 

NIS millions 

Operating profit 

Depreciation, amortization and impairment 

EBITDA 

Other operating expenses (revenue), net 

Capital compensation expenses 

Adjusted EBITDA 

1,625 

1,868 

3,493 

220 

11 

3,724 

1,856 

1,889 

3,745 

(77) 

27 

3,695 

2 

 
 
 
 
 
 
 
 
 
 
Report of the Board of Directors on the state of affairs of the corporation for the Year ended December 31, 2022 

1. 

Explanations by the Board of Directors on the state of the corporation's business, the results of its operations, shareholders' equity, cash 
flows and other matters 

1.1 

Financial position - Assets 

December 
31, 2022 

December 
31, 2021 

NIS millions 

% 

Increase (decrease) 
NIS 
millions 

% 

1,727 

2,132 

 (405) 

 (19.0) 

2,189 

2,572 

 (383) 

 (14.9) 

85 

57 

74 

60 

11 

 (3) 

14.9 

 (5.0) 

1,746 

1,828 

 (82) 

 (4.5) 

Explanation 

For more information, see Chapter 1.4 below. 
The decrease was mainly due to the moving forward of credit dates with the credit card companies, as 
well as receipts postponed from 2021 due to the labor strikes in the cellular communications sector and 
in the Bezeq International services sector. 

6,542 

6,312 

230 

3.6 

The increase was mainly due to the landline interior communications segment, partly due to the progress 
of the fiber network deployment project, see Note 9.4 to the Statements. 

3,251 

3,251 

 - 

 - 

258 

306 

 (48) 

 (15.7) 

The decrease was mainly due to classification of long-term deposits in the Company as current. 

 - 

24 

 (24) 

 (100) 

See Note 7.5 to the Financial Statements 

Cash and 
current 
investments 
Current and 
non-current 
trade 
receivables 
Inventory 
Broadcasting 
rights 
Right-of-use 
assets 
Property, 
plant and 
equipment 
Intangible 
assets 
Deferred 
expenses 
and non-
current 
investments 
Deferred tax 
assets 

Total assets  15,855 

16,559 

 (704) 

 (4.3) 

3 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Report of the Board of Directors on the state of affairs of the corporation for the Year ended December 31, 2022 

1.1. 

Financial position – Liabilities and equity 

December 
31, 2022 

December 
31, 2021 

NIS millions 
9,178 

% 
10,048 

Increase (decrease) 

NIS 
millions 

% 

(870) 

(8.7) 

Debt to financial institutions and 
debentures 

Liabilities in respect of leases 

1,908 

1,977 

(69) 

(3.5) 

Trade payables 

1,598 

1,755 

(157) 

(9.0) 

Employee benefits 

600 

753 

(153) 

(20.3) 

Provisions 

Deferred tax liabilities 
Other liabilities 

Total liabilities 
Non-controlling interests 
Shareholders’ equity  

Total equity 

205 

319 
151 

13,959 
1,842 
54 

1,896 

118 

296 
142 

15,089 
1,454 
16 

1,470 

87 

23 
9 

(1,130) 
395 
31 

426 

73.7 

7.8 
6.3 

(7.5) 
27.3 
134.8 

29.0 

Total liabilities and equity 

15,855 

16,559 

(704) 

(4.3) 

Explanation 

The  decrease  in  debt  was  due  to  repayment  (including  early  repayment)  of 
debentures  and  repayment  of  loans  in  Bezeq  and  the  Company,  offsetting  the 
receipt  of  loans  in  the  landline  interior  communications  sector.  For  more 
information, see Note 13 to the Statements. 

The decrease was mainly due to payment for 5G frequencies in the cellular 
communication segment in the current quarter. For more information, see Note 14 
to the Statements 
The  decrease  was  mainly  due  to  payments  for  employee  retirement  and  an 
increase  in  the  discount  rate  of  liabilities  to  employees  in  the  landline  interior 
communications sector, offset by an increase in the provision for termination of 
employee-employer relationship in  early  retirement and voluntary retirement in 
the Group, see Note 16.5 to the Statements. 
The increase was mainly due to an increase in provisions for claims in the landline 
interior communications segment, see Notes 15 and 17 to the statements. 

Equity as of December 31, 2022 constitutes approximately 11.9% of the total balance 
sheet, compared to approximately 8.9% of the total balance sheet as of December 31, 
2021. The increase was due to net profit offset  by distribution of dividends to non-
controlling interests and the repurchase of shares in the Company. 

4 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Report of the Board of Directors on the state of affairs of the corporation for the Year ended December 31, 2022 

1.2. 

Enterprise results 

1.2.1. 

Key results 

2022 

2021 

Increase (decrease) 

NIS millions 

NIS millions 

% 

Explanation 

Revenue 

8,986 

8,821 

165 

Operating and 
general expenses 

3,396 

3,265 

131 

1.9 

4.0 

The increase in revenue was mainly due to the landline interior communications segment and the 

cellular communications segment, offset by a decrease in revenue of the "Other" segment. 

The increase was due to all the Group's main segments, except for the cellular communication segment. 

Salary 

1,877 

1,888 

(11) 

(0.6) 

communications segment and the multichannel TV segment. For more information see Note 23 to the 

Decrease in salary expenses in the "Other" segment, offset by an increase in the landline interior 

Statements. 

Depreciation, 
amortization and 
impairment 

Other operating 
expenses (income), 
net 

1,868 

1,889 

(21) 

(1.1) 

The decrease in Bezeq Group's expenses was offset by an increase in expenses in the landline interior 

communications segment. 

220 

(77) 

297 

- 

compared to a decrease in the said expenses in the corresponding year, as well as from an increase in 

The change was due to a decrease in equity gains from the sale of real estate assets in the landline 

interior communications segment as a result of an increase in expenses on provisions for legal claims 

expenses due to termination of employee-employer relations in early retirement, voluntary retirement 

and collective agreements in the Group, see Note 24 to the Statements. 

Operating Profit 

1,625 

1,856 

(231) 

(12.5) 

Financing expenses, 
net 

398 

478 

(80) 

(16.7) 

Company's debt which arose during the year 2021, for more information see Note 25 to the 

The decrease in financing expenses was mainly due to a decrease in the costs of refinancing the 

Statements. 

Income tax 

336 

Profit in the year  

891 

382 

996 

(46) 

(12.0) 

(105) 

(10.5) 

The decrease in tax expenses on the income resulted from a decrease in the Group's profit before tax in 

2022 relative to 2021. 

5 

 
 
 
 
Report of the Board of Directors on the state of affairs of the corporation for the Year ended 
December 31, 2022 

1.2.2. 

Operating segments 

a.  The  following  are  data  regarding  revenues  and  operating profit  in  accordance  with  the 

Group's operating segments: 

2022

2022

 NIS 

millions

 of %

segment

revenue

 NIS 

millions

 of %

segment

revenue

Revenue by operating segments 

Interior landline communication 

Cellular communication 

Bezeq International services 

Multi-channel TV 

Others and adjustments 

Total 

4,306

2,399

1,239

1,277

(235)

8,986

47.9

26.7

13.8

14.2

(2.6)

100.00

4,182

2,289

1,237

1,270

(157)

821

8,

47.5

25.9

14 

14.4

(1.8)

100.00

2022 

2022 

NIS millions 

% of segment 
revenue 

NIS millions 

% of segment 
revenue 

Profit (loss) by operating segments: 

Interior landline communication 

Cellular communication 

Bezeq International services 

Multi-channel TV * 

Others and adjustments 

Consolidated operating profit / percentage of Group 
revenue 

1,460 

193 

(30) 

(48) 

50 

1,625 

33.9 

8.0 

(2.4) 

(3.8) 

- 

18.1 

1,748 

42 

22 

(41) 

85 

1,856 

41.8 

1.8 

1.8 

(3.2) 

- 

21.0 

* The results of the multi-channel television segment are presented net of the overall impact of impairment recognized 
starting from 2018, is in accordance with the way the Group's chief operating decision maker evaluates the segment's 
performance and makes decisions regarding the allocation of resources to the segment. In addition, see Note 31.4 to the 
Consolidated Financial Statements for a summary of selected data from the DBS’ statements.

6 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Report of the Board of Directors on the state of affairs of the corporation for the Year ended December 31, 2022 

1.2.2. 

Activity segments (Cont.) 

a. 

Interior landline communications segment 

2022 

2021 

Increase 
(decrease) 

NIS millions 

% 

Explanation 

Internet - infrastructure 

1,789 

1,624  165 

10.1 

The increase is due to growth in the average revenue per retail subscription, mainly from services and installations for 
customers on the fiber network and auxiliary end equipment and from the provision of Internet access services (ISP) starting 
in April 2022, as well as an increase in wholesale Internet service rates and in the wholesale market activity scope. 

Landline telephony 

780 

913 

(133) 

(14.5) 

The decrease was due to a decrease in the average revenue per telephone line, mainly due to the reduction of telephony 
rates by the Ministry of Communication starting from April 2022, and due to a decrease in the number of lines. 

Transmission, data 
communication and other 

1,406 

1,327  79 

Cloud and digital services 

331 

318 

13 

Total revenue 

4,306 

4,182  124 

5.9 

4.1 

3.0 

The increase was mainly due to an increase in revenue from paid jobs and transmission services to businesses. 

The increase was due, among other things, to virtual switchboard services and cloud services. 

Operating and general 
expenses 

759 

667 

92 

13.8 

The increase was mainly due to an increase in the costs of subcontractors and materials due to the deployment of the fiber 
network. 

Salary 

970 

934 

36 

3.9 

The increase was mainly due to the onboarding of employees mainly due to the fiber network deployment project and salary 
updates, offsetting employee retirement. 

Depreciation and 
amortization 

1,005 

938 

67 

7.1 

The increase was mainly due to an increase in subscriber equipment depreciation expenses and an increase in the balance of 
investments in the fiber network deployment project. 

Other operating expenses 
(revenue), net 

112 

(105)  217 

- 

The change was due to the recording of high equity gains from the sale of real estate in the corresponding year as well as an 
increase in provision expenses for claims compared to a decrease in said expenses in the corresponding year, see Note 8 to 
the separate financial information. 

Operating profit 

1,460 

1,748 

(288) 

(16.5) 

Financing expenses, net 

332 

342 

(10) 

(2.9) 

Taxes on revenue 

Segment profit 

279 

849 

343 

(64) 

(18.7) 

1,063 

(214) 

(20.1) 

The decrease in financing expenses, net, was mainly due to financing revenue in respect of employee benefits that were 
recognized as a result of the increase in the discount rate, a decrease in interest expenses due to a decrease in debt, revenue 
from hedging transactions on the dollar exchange rate, and in the quarter also due to early repayment costs that were 
included in the corresponding year. 

7 

 
 
 
 
 
 
Report of the Board of Directors on the state of affairs of the corporation for the Year ended December 31, 2022 

1.2.2. 

Activity segments (Cont.) 

b.  Cellular communications segment 

2022 

2021 

Increase (decrease) 

NIS millions 

% 

Explanation 

Services 

1,791 

1,642 

149 

9.1 

The increase was mainly due to the recovery from the effects of the COVID crisis, which was reflected in the 
increase  in  roaming  revenues  and  from  the  continued  growth  in  the  number  of  subscribers,  including 
subscribers in 5G packages. 

Sale of end equipment to 
customers 

608 

647 

(39) 

(6.0) 

The decrease in the period was mainly due to a decrease in wholesale sales. 

Total revenue 

2,399 

2,289 

110 

4.8 

Operating and general 
expenses 

1,327 

1,346 

(19) 

(1.4) 

Salary 

Depreciation and 
amortization 

Other operating 
expenses, net 

Operating profit 

314 

532 

33 

193 

Financing income, net 

26 

Income tax expenses 

Segment profit 

54 

165 

315 

(1) 

(0.3) 

577 

(45) 

(7.8) 

9 

42 

42 

20 

64 

24 

266.7 

151 

359.5 

(16) 

(38.1) 

34 

101 

170.0 

157.8 

The decrease was mainly due to a decrease in the cost of selling end equipment in parallel with a decrease in 
revenues, from the registration of the implementation of  a cloud computing system in the corresponding 
year, from a decrease in call completion fees, as well as a decrease in repair service costs. The decrease was 
partially offset by an increase in roaming costs at the same time as an increase in revenue, as well as due to 
an increase in loan-loss expenses. 

The decrease was mainly due to a decrease in the ownership of cellular site right-of-use assets and assets 
whose amortization period has ended, as well as an update of the estimate of site dismantling and disposal 
assets. 

The  increase  was  due  to  the  effects  of  the  collective  agreement  regarding  a  bonus  for  employees  and 
expenses for employee retirement. 

The decrease in net financing revenue was mainly due to an increase in exchange rate differential expenses 
in  light  of  the  increase  in  the  exchange  rate,  as  well  as  financing  expenses  due  to  interest  and  linkage 
differences, offsetting an increase in revenue from interest on loans given to the parent company. 

8 

 
 
 
 
 
 
 
 
 
 
Report of the Board of Directors on the state of affairs of the corporation for the Year ended December 31, 2022 

1.2.2. 

Activity segments (Cont.) 

c.  Bezeq International services 

2022 

2021 

Increase 
(decrease) 

Explanation 

NIS millions 

% 

Revenue 

1,239 

1,237 

2 

0.2 

Operating, general and 
impairment expenses 

827 

799 

28 

3.5 

Salary 

237 

237 

- 

- 

Increase in revenues from business services due to an increase in activity and the initial consolidation of CloudEdge’s 
activity, as well as an increase in revenues from licensing equipment and service contracts, offset by a decrease in 
revenue  from  Internet  services  due  to  a  decrease  in  the  number  of  subscribers  following  the  reform  in  unified 
Internet. 

The increase was due to business services expenses, mainly due to the consolidation of CloudEdge’s activity and an 
increase in cloud licensing expenses, as well as an increase in payments to mobile radio telephone operators due to 
an increase in the volume of calls and rates. On the other hand, there was a decrease in local capacity expenses mainly 
due to a decrease in Internet activity in the retail segment in parallel with a decrease in revenues. 

Decrease in salary expenses resulting from a continuous decrease in the number of Company employees, was offset 
by salary expenses due to the initial consolidation of CloudEdge, salary updates and the cessation of discount of sales 
incentives. 

Depreciation, amortization 
and impairment 

134 

173 

(39) 

(22.5) 

The decrease was due to a decrease in depreciation of assets (see Note 10.6 in the Statements) as well as a decrease 
in depreciation expenses of a subscription acquisition asset due, among other things, to the cessation of discount as 
aforementioned and a decrease in depreciation of other long-term assets. 

Other operating expenses  71 

6 

65 

1083.3 

The increase was mainly due to the registration of a provision for voluntary retirement. 

Operating profit (loss) 

(30) 

22 

(52) 

- 

Financing expenses, net 

1 

Taxes on revenue expenses  1 

Segment profit (loss) 

(32) 

2 

12 

8 

(1) 

(50.0) 

The decrease was due to the fact that tax expenses for previous years were recorded in the corresponding year. 

(11) 

(91.7) 

(40) 

- 

9 

 
 
 
 
 
 
 
 
 
Report of the Board of Directors on the state of affairs of the corporation for the Year ended December 31, 2022 

1.2.2. 

Activity segments (Cont.) 

d.  Multi-channel TV * 

2022 

2021 

Increase (decrease) 

NIS millions 

% 

Explanation 

Revenue 

1,277 

1,270 

7 

Operating and 
general expenses 

855 

825 

Salary 

193 

182 

30 

11 

0.6 

3.6 

6.0 

Depreciation and 
amortization 

274 

292 

(18) 

(6.2) 

The increase was mainly due to an increase in revenues from the sale of content to external 
entities, offsetting the effect of the change in the mix of subscribers from premium to discount. 

The increase was mainly due to an increase in the scope of content costs as well as an increase due 
to internet activity (ISP). 

The increase was mainly due to an increase in employment costs and the effects of the collective 
agreement. 

The decrease was mainly due to fully depreciated assets (mainly satellite decoders). 

Other operating 
expenses 

3 

Operating loss 

(48) 

Financing expenses 
(income), net 

Income tax 

(6) 

1 

12 

)41 (

1 

1 

Segment loss 

(43) 

)43 (

(9) 

(7) 

(7) 

- 

- 

(75.0) 

The decrease was mainly due to recording expenses for a new collective agreement in 2021. 

The change was mainly due to the effect of dollar exchange rate hedging transactions. 

(17.1) 

- 

- 

- 

* The results of the multi-channel television segment are presented net of the overall impact of impairment recognized starting from 2018, see “pro forma” income below. This is in 

accordance with the way the Group's chief operating decision maker evaluates the segment's performance and makes decisions regarding the allocation of resources to the segment. For 
more information, see Notes 10.5 and 28 to the Statements. In addition, see Note 31.4 to the Statements for a summary of selected data from the DBS’ statements.

10 

 
 
 
 
 
 
 
 
Report of the Board of Directors on the State of Affairs of the Corporation for the Year ended December 31, 2022 

1.2.2. 

Activity segments (Cont.) 

e.  Multi-channel TV (Cont.) - Comparison between accounting profit and proforma profit 

2022 

2021 

Accounting profit 

Proforma profit 

Accounting profit 

Proforma profit 

NIS millions 

Revenue 

1,277 

1,277 

1,270 

1,270 

General and operating expenses 

867 

Salary 

Depreciation and amortization 

Other operating expenses 

Operating profit (loss) 

Financing income, net 

Income tax 

Profit (loss) for the year 

200 

199 

3 

8 

(6) 

1 

13 

855 

193 

274 

3 

(48) 

(6) 

1 

(43) 

835 

188 

203 

12 

32 

1 

1 

30 

825 

182 

292 

12 

)41 (

1 

1 

)43 (

11 

 
 
  
 
 
 
 
 
 
 
Report of the Board of Directors on the State of Affairs of the Corporation for the Year ended December 31, 2022 

1.3.  Main data from the Group's consolidated quarterly income statements (NIS millions) 

Q1/2022 

Q2/2022 

Q3/2022 

Q4/2022 

2022 

Explanation 

Revenue 

2,255 

2,225 

2,262 

2,244 

8,986 

General and operating 
expenses 

Operating profit 

Financing expenses, net 

Profit after financing 
expenses, net 

1,798 

1,764 

1,798 

2,001 

7,361 

457 

104 

353 

461 

99 

362 

464 

97 

367 

243 

98 

1,625 

398 

145 

1,227 

Income tax 

93 

89 

91 

Profit for the period 

260 

273 

276 

63 

82 

336 

891 

The increase in Q4 was mainly due to expenses for termination of employee-
employer relations in early retirement, voluntary retirement and collective 
agreements in the Group, see Note 16.5 to the Statements. 

Q1 includes early repayment costs for Bezeq debentures (series 9) amounting to NIS 
26 million. 

The decrease in the fourth quarter is due to a low profit before taxes as a result of 
expenses for the termination of employee-employer relations in early retirement and 
collective agreements in the Group. 

12 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Report of the Board of Directors on the State of Affairs of the Corporation for the Year ended December 31, 2022 

1.4. 

Cash flow 

2022 

2021 

Change 

Explanation 

NIS millions 

% 

Net cash flow from 
operating activities 

3,491 

2,826 

665 

123.5 

Net cash flow used for 
Investing operations 

Net cash flow used for 
financing operations 

(1,420) 

(1,578) 

158 

90.0 

(2,315) 

(1,144) 

(1,171) 

(202.4) 

Net increase (decrease) 
in cash and cash 
equivalents 

(244) 

104 

(348) 

- 

The increase in net cash flow from current activities was due to changes in working equity, mainly due to 
the moving forward of credit dates with the credit card companies, and due to the transition in collection 
from customers from the fourth quarter of 2021 until the first quarter of 2022 due to employees’ sanctions 
in the cellular communications segment and the Bezeq international services segment, as well as from a 
decrease in Income Tax paid in the interior landline communication segment. 

The decrease in the net cash flow used for investment activity was mainly due to an increase in the net 
proceeds from the repayment of deposits in banks, offsetting a decrease in the proceeds from the sale of 
property, plant and equipment in the landline interior communications segment. 

The increase in the net cash flow used for financing activities was mainly due to the payment of a dividend 
from Bezeq to non-controlling interests, from an increase in the repayment of debentures (inducing early 
redemption), offsetting a decrease in the repayment of loans, from the self-purchase of the Company's 
shares during 2022, and since the corresponding year included the issuance of Bezeq’s debentures (series 
13 and 14). 

Average volume in the reported year  
Long-term liabilities (including current liabilities) to financial institutions and bondholders: approx. NIS 9,765 million. 
Supplier credit: approx. NIS 961 million. 
Short-term customer credit: approx. NIS 1,951 million. 
Long-term customer credit: approx. NIS 278 million. 
Working equity 
The Group's consolidated working equity as of December 31, 2022 amounted to approximately NIS 1 million, compared with working equity of approximately NIS 565 million as of 
December 31, 2021. 
The Company's working equity (according to the "Solo” Statements) as of December 31, 2022 amounted to approximately NIS 69 million, compared with working equity of approximately 
NIS 212 million as of December 31, 2021. 
Bezeq (according to the "Solo" Statements) as of December 31, 2022, has a working equity in the amount of approx. NIS 62 million, compared with a working equity of NIS 161 million 
as of December 31, 2021.

13 

 
 
 
  
Report of the Board of Directors on the State of Affairs of the Corporation for the Year ended 
December 31, 2022 

1.5. 

Disclosure regarding the Company's projected cash flow 

The Company's Board of Directors reviewed the Company's consolidated financial statements and separate 
(Solo) financial statements as of December 31, 2022, including sources for repayment of the Company's 
liabilities,  including  the  Company's  debentures  (Series  C  and  F).  In  addition,  the  Company's  Board  of 
Directors  examined  the  warning  signs  set  forth  in  Regulation  10(b)(14)(a)  of  the  Securities  Regulations 
(Periodic and Immediate Reports), 5730-1970 and determined that despite the existence of a continuing 
negative cash flow from current operations in the separate (Solo) financial statements of the Company, in 
the  opinion  of  the  Company's  Board  of  Directors,  after  receiving  explanations  for  its  opinion  from  the 
Company's  Management,  the  continuing  negative  cash  flow  from  current  activities  in  the  Company's 
separate (Solo) statements does not indicate a liquidity problem in the Company, and the Company has 
sufficient  financial  resources  to  continue  its  operations  and  meet  its  obligations,  inter  alia,  taking  into 
account the Corporation's cash balances in the solo statement. 

1.6. 

Exchange and early repayment of the Company's debentures 

On January 10, 2022, the Company made an exchange of approximately 417 million of series C debentures 
in exchange for approximately 432 million of series 6 debentures. 

On June 30, 2022, the Company made a partial early repayment of approximately NIS 100 million on Series 
C debentures (plus interest accrued until the repayment date). 

1.7. 

Self-purchase of the Company's shares 

During the year 2022, the Company repurchased 7,603,514 of its shares for approximately NIS 121 million. 

1.8. 

Effects of the COVID19 outbreak 

At the beginning of 2020, the "Corona" virus (COVID-19) broke out in the world and in Israel (the "Event"). 
Following the Event, many countries, including Israel, took various measures and restrictions in an 
attempt to prevent the spread of the virus. During the year 2022, there was a significant decrease in the 
outbreak of the virus and the effects of the Event, when the consequences of the Event on the Group's 
activities in 2022 were manifested mainly in damage to Pelephone's revenues from roaming services 
(damage that gradually decreased throughout the year until the date of publication of this report), 
without significant negative effects in other areas of activity. As of the date of publication of the report, 
there are no special effects of the event on all areas of the Group's activity. 

For further information, see the analysis of the results of the activity of the cellular communications 
segment in Chapter 1.2.2, Section C. 

1.9. 

Update on the effects of inflation and the increase in interest rates on the results of 
the Group's activities 

As stated in Note 30.5.1 to the Statements, changes in the inflation rate affect the Group's profitability 
and future cash flows, mainly due to Bezeq’s index-linked liabilities. Bezeq implements a policy to reduce 
and partially hedge the exposure to the price index and the dollar-shekel exchange rate through the 
execution of forward transactions. See details regarding hedging transactions in Note 30.6 to the 
Statements. 

In 2022, the increase in the consumer price index increased Bezeq’s financing expenses to the extent of 
approximately NIS 95 million (approximately NIS 72 million after hedging) compared to the corresponding 
year. It should be noted that the net effect of the increase in interest rates in the economy on the Bezeq 
Group's operating results was not material during the reporting period. 

14 

 
 
 
 
 
 
Report of the Board of Directors on the State of Affairs of the Corporation for the Year ended 
December 31, 2022 

In accordance with the scope of Bezeq’s index-linked debt as of December 31, 2022, every 1% increase in 
the Consumer Price Index is expected to result in an increase in its financing expenses to the extent of 
approximately NIS 25 million, this is before considering the effect of hedging transactions. In addition, a 
1% change in the Bank of Israel interest rate is expected to cause an increase in Bezeq's financing 
expenses to the extent of approximately NIS 7 million per year, and accordingly, is not expected to have a 
material effect on Bezeq’s operating results. 

The Company's debentures are in shekels and are therefore not affected by changes in the inflation rate 
or interest rate increases. 

2. 

Corporate governance aspects 

2.1. 

Involvement of the Group members in the community and donations 

The Company supports Bezeq's corporate responsibility policy and will continue to promote this policy in 
all Group companies, and in addition, the Company discusses the Company's donation policy every year, 
with a focus on health, education and community issues. In the year of the report, the Company donated 
to the Ichilov Hospital, the Reut Rehabilitation Hospital and other non-profit organizations in amounts that 
are not material to the Company. 

According to the community contribution policy approved by Bezeq's Board of Directors, Bezeq 
contributes to the community out of its deep commitment to the issue of social responsibility, through 
financial donations, donations of services and communication infrastructure, and support for employee 
volunteering in the community. 

Bezeq focuses the main contribution on reducing the digital gap in Israel by donating communication 
services to non-profit organizations and disadvantaged populations, supporting programs that promote 
digital equality through training, providing skills and assistance, and harnessing additional partners. At the 
same time, Bezeq works to create a social impact while providing a framework for initiative, meaningful 
action and volunteering in the community. 

In 2022, the Bezeq Group donated a total of approximately NIS 6.4 million, which includes a financial 
donation of approximately NIS 1.8 million, donation of services and communication infrastructure to 
associations and disadvantaged populations in the amount of approximately NIS 3 million, and a salary 
donation in the amount of approximately NIS 1.6 million. 

15 

 
 
 
 
 
Report of the Board of Directors on the State of Affairs of the Corporation for the Year ended 
December 31, 2022 

2.2. 

Disclosure regarding auditor's salary 

The following are the fee expenses for the auditors of the main consolidated companies in the Group for 
audit and audit-related services (NIS thousands): 

Company 

Auditor 

B Communications 
Ltd. 

Somekh 
Chaikin 

Bezeq – the Israeli 
Telecommunications 
Corp. Ltd. 

Pelephone 
Communications 
Ltd. 

Bezeq International 
Ltd. 

Somekh 
Chaikin 

Somekh 
Chaikin 

Somekh 
Chaikin 

DBS Satellite Services 
(1998) Ltd. 

Somekh 
Chaikin 

Total 

Details 
Audit and audit-
related, including audit-
related tax services 
Other services1 
Audit and audit-
related, including audit-
related tax services 
Other services1 
Audit and audit-
related, including audit-
related tax services 
Other services1 
Audit and audit-
related, including audit-
related tax services 
Other services1 
Audit and audit-
related, including audit-
related tax services 
Other services1 

2022 

2021 

400 
151 

1,530 
485 

603 
434 

379 
403 

612 
283 
5,280 

380 
130 

1,530 
684 

642 
366 

1,483 
519 

671 
83 
6,488 

The accountants’ fees were discussed by the Boards of Directors’ committees for examining the 
statements and approved by the Boards of Directors of the Company and of each of the Group companies. 
The fees are determined with reference to the hours and the hourly rate of the previous year while 
adjusting them to changes and events that occurred in the reporting year. 

2.3. 

Directors with accounting and financial expertise and independent directors 

As of the date of the report, all seven directors serving in the Company have accounting and financial 
expertise; For details about the directors with accounting and financial expertise serving in the Company 
as of the date of the report, see Regulation 26 in the report of additional details on the Company (part D 
of this periodic report) and also in Sections 2 and 9 of the corporate governance questionnaire. 

2.4. 

Additional corporate governance issues 

The Company established a gatekeepers’ forum, with the participation of the Internal Auditor, the 
auditing accountants and the external legal advisors, led by the Company's CFO. This forum convenes as 
needed, in order to discuss general control and enforcement issues in the Company. 

1     "Other services" provided to main companies in the Group in 2022 and 2021 included, among other things, consulting services on 

tax and accounting issues that are not related to auditing and special approvals. 

16 

 
 
 
 
 
 
 
 
Report of the Board of Directors on the State of Affairs of the Corporation for the Year ended 
December 31, 2022 

2.5. 

Disclosure regarding the internal auditor in a reporting corporation 

Details 

concentration 

Name of 
internal auditor 

Ilan Chaikin 

Date of 
appointment 

Compliance 
with the 
provisions of 
the law 

Employment 
format 

Method of 
appointment 

Organizational 
supervisor of 
the Internal 
Auditor 

Work plan 

2008 

The internal auditor complies with the conditions set forth in Article 3(a) and 8 of the Internal 
Audit Law and the provisions of Article 146(b) of the Companies Law. 

Hourly fee, according to the number of hours determined at the beginning of each year by the 
Audit Committee. 

The method of appointment and summary of the reasons for approving the appointment: 
The appointment was approved by the Board of Directors in 2008, following the recommendation 
of the Audit Committee. 
Duties, powers and roles assigned to the auditor: 
The authority and responsibility of the Company's Internal Auditor are fixed in the Company's 
internal audit procedure approved by the Audit Committee. According to the procedure, the 
Auditor's duties and powers are: 
Checking the correctness of the Company's operations and the actions of its officers, checking the 
reliability and integrity of the financial and operational information, examining the management of 
funds and liabilities and examining the Company's computerized information systems and the 
Company's information security system. The Internal Auditor is also responsible for examining 
employee complaints in accordance with the arrangements established by an audit committee in 
accordance with Article 117(6) of the Companies Law, 5759-1999. 
His powers are to receive any information, explanation and document necessary to fulfill his duties, 
right  of  access  to  any  regular  or  computerized  database  of  the  Company,  any  database  and  any 
automatic or non-automatic data processing work plan of the Company and its units, and receive 
permission to enter any property of the Company. The Internal Auditor is also entitled to be invited 
to all meetings of Management, the Board of Directors and its committees. 

The organizational supervisor of the internal auditor is the CEO of the Company. 

The work plan in 2022 was derived from the Company's multi-year work plan established for the 
years 2021-2024. 
The considerations in determining the internal audit work plan 
The guiding principle in building the internal audit work plan is the inherent risk in the Company's 
processes and activities. In order to assess these risks, the internal audit referred to the risk survey 
conducted by it, as well as to other sources that influenced the risk assessment in these processes, 
such as conversations with Management, findings of previous audits and other relevant activities. 
The main considerations taken into account in building the work plan are: 
Reasonable coverage of most areas of the Company's activity in accordance with the exposure to 
material  risks,  taking  into  account  existing  controls  in  the  Company's  areas  of  activity  and  the 
findings of previous audits. 

17 

 
 
 
 
Report of the Board of Directors on the State of Affairs of the Corporation for the Year ended 
December 31, 2022 

Parties involved in determining the work plan 
The Internal Auditor, Management and the Audit Committee of the Board of Directors. 
The party that receives the work plan and approves it 
The  Audit  Committee  of  the  Board  of  Directors,  after  the  issue  has  been  discussed  with  the 
Company's CEO. 
The Auditor's discretion to deviate from the work plan 
The CEO of the Company or the Chairman of the Audit Committee may propose issues in matters 
where the need arises to conduct an urgent inspection as well as recommend reducing or stopping 
an inspection on a subject approved in the work plan. The Internal Auditor has the discretion to 
deviate from the work plan. 
Examination of material transactions 
The Internal Auditor is present at the Board of Directors' discussions where material transactions 
are approved and reviews the relevant material sent as part of these discussions. 

The work plan of the Company’s Internal Auditor does not include an audit of material equity-held 
investee corporations. 
The  internal  auditor  conducts  meetings  with  the  internal  auditor  and  other  control  factors  of 
materially held corporations for the purpose of receiving periodic updates. 

In accordance with the Internal Auditor’s notice, the audit work is conducted in accordance with the 
internal audit standards accepted in Israel and around the world and in accordance with professional 
guidelines in the field of internal audit, including international internal audit standards as well as in 
accordance with the Internal Audit Law and the Companies Law. 
The Internal Auditor was presented with documents and information as stated in Article 9 of the 
Internal Audit Law and was given constant and unmediated access to the corporation's information 
systems, including financial data. 
The  Internal  Auditor  submits  written  audit  reports  regularly  during  the  reporting  year  to  the 
chairman  of  the  Board  of  Directors,  the  CEO,  the  Chairman  of  the  Audit  Committee  and  the 
members of the committee. The reports are submitted before the date of the committee hearing 
(usually about three days before this date). 
The Company's Audit Committee convened to discuss internal audit reports on the 
implementation of the inspection procedure report by the Internal Auditor for Q4/2021 on March 
22, 2022. In addition, an audit report on the implementation of the inspection procedure by the 
Internal Auditor for Q2/2022 was presented on September 15, 2022, and an internal audit report 
on debt management was presented on November 29, 2022. 

The Board of Directors believes that the scope of the audit, the nature and continuity of the 
Internal Auditor's activity, as well as the work plan, are reasonable under the circumstances of the 
case and are capable of achieving the goals of the audit. 

The Internal Auditor’s remuneration is determined each year according to the scope of the audit 
hours, according to an hourly fee. In 2022, the number of hours invested in the audit by the Internal 
Auditor  was  approximately  200  hours,  noting  that  the  said  number  of  hours  is  sufficient  for  the 
Internal Auditor to complete the audit work properly. 

In 2022, the Internal Auditor was paid a remuneration in the amount of NIS 60,840 including VAT. 
In the opinion of the Board of Directors, the scope of the Internal Auditor’s remuneration had no 
effect on his professional judgment. 

Reference of 
the audit to 
material equity-
held investee 
corporations 

Performing the 
audit 

Access to 
information 

Internal 
Auditor’s report 

Board of 
Directors’ 
evaluation of 
the Internal 
Auditor's 
activity 

Remuneration 

18 

 
 
 
 
 
Report of the Board of Directors on the State of Affairs of the Corporation for the Year ended December 31, 2022 

2.  Disclosure in connection with the Corporation's financial reporting 

3.1. 

Disclosure regarding valuations 

The following are details of highly material valuations and a substantial and a material valuation in accordance with Regulation 8B(i) of the Securities Regulations 
(Periodic and Immediate Reports), 5730-1970. 

A highly material valuation of Bezeq Fixed Lines as of December 31, 2022 is not attached to the report since it was the Company's opinion that under any reasonably 
possible change in the key assumptions used to determine the recoverable value of the cash-generating unit, no highly matyerial impairment would have been 
recognized. 

Pelephone 

Bezeq Fixed Line 

DBS 

Bezeq International 

Material valuation as of December 
31, 2022 

Highly material valuation as of 
December 31, 2022 

See Section 3.1.3 below 

Highly material valuation as of 
December 31, 2022 – attached to 
Bezeq’s Financial Statements as of 
December 31, 2022 

Highly material valuation as of 
December 31, 2022 – attached to 
Bezeq’s Financial Statements as of 
December 31, 2022 

See Sections 3.1.1 and 3.1.3 below 

See Section 3.1.3 below 

Identification of subject of 
valuation 

Pelephone’s value in use for the 
purpose of testing goodwill in 
accordance with International 
Accounting Standard 36. 

Bezeq’s value in use for the purpose 
of testing goodwill impairment 
attributed thereto in the Company's 
statements in accordance with 
International Accounting Standard 36. 

Impairment examination of DBS 
Satellite Services (1998) Ltd. 

Impairment examination of Bezeq 
International Ltd. 

Timing of the valuation 

December 31, 2022; 

December 31, 2022; 

December 31, 2022; 

December 31, 2022; 

The valuation was signed on March 5, 
2023 

The valuation was signed on March 6, 
2023 

The valuation was signed on March 9, 
2023 

The valuation was signed on March 9, 
2023 

Value of the subject of the 
valuation close to the 
date of the valuation 

NIS 1,395 million book value of the 
net operating assets of Pelephone 
plus the balance of excess costs 
created when Bezeq shares were 
purchased by the Company. 

NIS 10,550 million book value of the 
net operating assets of Bezeq plus the 
balance of excess costs created when 
Bezeq shares were purchased by the 
Company. 

Book value before impairment as of 
December 31, 2022 is negative in the 
amount of approx. NIS 18 million. 

Book value before impairment as of 
December 31, 2022 is approximately 
NIS 2 million. 

19 

 
 
 
 
Report of the Board of Directors on the State of Affairs of the Corporation for the Year ended December 31, 2022 

Pelephone 

Bezeq Fixed Line 

DBS 

Bezeq International 

Material valuation as of December 
31, 2022 

Highly material valuation as of 
December 31, 2022 

See Section 3.1.3 below 

Valuation model 

Approx. NIS 2,533 million. 

Approx. NIS 17,819 million. 

The Company came to the conclusion 
that there is no impairment that 
requires a reduction in the unit’s 
book value amount recorded in the 
Company's books. 

The Company came to the conclusion 
that there is no impairment that 
requires a reduction in the amount of 
goodwill recorded in the Company's 
books. 

Highly material valuation as of 
December 31, 2022 – attached to 
Bezeq’s Financial Statements as of 
December 31, 2022 

Highly material valuation as of 
December 31, 2022 – attached to 
Bezeq’s Financial Statements as of 
December 31, 2022 

See Sections 3.1.1 and 3.1.3 below 

See Section 3.1.3 below 

DBS's total enterprise value is 
negative in the amount of 
approximately NIS 103 million. In light 
of the negative enterprise value, the 
net value of the assets and liabilities 
of DBS was determined as the fair 
value and zero, whichever is higher. 
Accordingly, DBS’s recoverable 
amount was determined, obtained as 
a result of the position according to 
the fair value, net of costs of sale, of 
the balance sheet items according to 
the requirements of IAS 36, is 
negative in the amount of 
approximately NIS 88 million. 

DBS's total enterprise value is 
negative in the amount of 
approximately NIS 166 million. In light 
of the negative enterprise value, the 
net value of the assets and liabilities 
of DBS was determined as the fair 
value and zero, whichever is higher. 
Accordingly, Bezeq International’s 
recoverable amount was determined, 
obtained as a result of the position 
according to the fair value, net of 
costs of sale, of the balance sheet 
items according to the requirements 
of IAS 36, is negative in the amount of 
approximately NIS 22 million. 

Based on the valuation, in 2022, the 
Group recognized an impairment loss 
of approximately NIS 275 million. 

Based on the valuation, in 2022, the 
Group recognized an impairment loss 
of approximately NIS 104 million. 

Identification and 
characterization of the 
valuator 

The valuation was performed by Prof. Hadas Gelander, Partner, Director of Valuations and Economic Models in the Economic Department of Ernest Young 
(Israel)  Ltd.  Prof.  Gelander  holds  a  bachelor's  degree  in  accounting  from  the  College  of  Management,  Rishon  LeZion;  A  master's  degree  in  business 
administration from the Hebrew University of Jerusalem; And a doctorate cum laude from Ben-Gurion University, Beer-Sheva, and is also a certified public 
accountant in Israel. As part of her role, Prof. Gelander accompanies projects with leading companies in Israel and around the world, in various fields of 
activity  and  industries  such  as  technology,  finance,  pharmaceuticals,  energy,  infrastructure,  real  estate  and  industry.  In  addition,  as  part  of  her  role 
accompanying and advising companies in the areas of valuations for business (valuations and fair opinions) and accounting (allocation of acquisition costs, 
valuation of intangible assets, valuation of options for employees, etc.) needs, she provided economic opinions as a court-appointed expert witness. 
The valuator has no dependence on Bezeq or the Company. 
Bezeq undertook to indemnify the valuator for damages in excess of three times her fee, unless she acted maliciously or through gross negligence. 

20 

 
 
 
 
 
Report of the Board of Directors on the State of Affairs of the Corporation for the Year ended December 31, 2022 

Pelephone 

Bezeq Fixed Line 

DBS 

Bezeq International 

Material valuation as of December 
31, 2022 

Highly material valuation as of 
December 31, 2022 

See Section 3.1.3 below 

Valuation model 

The  discounted  cash  flow  (DCF) 
method. 

The  discounted  cash  flow  (DCF) 
method. 

Highly material valuation as of 
December 31, 2022 – attached to 
Bezeq’s Financial Statements as of 
December 31, 2022 

Highly material valuation as of 
December 31, 2022 – attached to 
Bezeq’s Financial Statements as of 
December 31, 2022 

See Sections 3.1.1 and 3.1.3 below 

See Section 3.1.3 below 

In the first stage - the value in use 
was  calculated  using  the  DCF 
method. 

In the first stage - the value in use 
was  calculated  using  the  DCF 
method. 

In the second stage - the fair value 
of  the  net  assets  and  liabilities  of 
DBS,  minus  sales  costs,  as  of 
December 
2022,  was 
determined. 

31, 

In the second stage - the fair value 
of Bezeq International’s net assets 
and liabilities, minus sales costs, as 
of  December  31,  2022,  was 
determined. 

Assumptions under which 
the valuator made the 
valuation 

Discount rate - 10% (after tax). 
Permanent growth rate - 1.5% 

Discount rate - 8% (after tax). 
Permanent growth rate - 1% 

Discount rate - 10% (after tax). 
Permanent growth rate - 1% 

Discount rate – 10.3% (after tax). 
Permanent growth rate - 3% 

Percentage  of  the  scrap  value  of 
the total value which is estimated 
to be 73.7%. 

Percentage of the scrap value of the 
total value which is estimated to be 
74.8%. 

The percentage of the scrap value 
of the total value determined in 
the valuation is not relevant. 

The percentage of the scrap value 
of the total value determined in the 
valuation is not relevant. 

In addition, assumptions were 
made regarding the fair value 
minus cost of sale of DBS’s assets. 

In addition, assumptions were 
made regarding the fair value 
minus cost of sale of Bezeq 
International’s assets. 

(*) Pelephone's net operating assets do not include customer debt balances for the sale of end equipment in installments shown at current value. 

21 

 
 
 
 
 
 
 
 
 
 
Report of the Board of Directors on the State of Affairs of the Corporation for the Year ended 
December 31, 2022 

3.1. 

Disclosure regarding valuations (Cont.) 

3.1.1 

3.1.2 

Despite the negative operating value of DBS, Bezeq supports DBS by approving credit facilities 
or investing in DBS capital (see Note 412.2.2 to the Statements). Bezeq's support as mentioned 
in  DBS  stems,  among  other  things,  from  the  current  and  expected  contribution  of  the  multi-
channel TV activity to the overall activity of Bezeq Group. 

In the consolidated financial statements of the Company as of December 31, 2022, the value of 
the  activity  segment  "Bezeq"  the  Israel  Telecommunications  Corp.  Ltd.,  the  activity  segment 
Pelephone Communications Ltd., the activity segment DBS Satellite Services (1998) Ltd. and the 
activity segment Bezeq International Ltd. amounted to over 25% of its total assets. Accordingly, 
the valuator is considered a highly substantial valuator according to Legal Staff Position 105-30 
of the Securities Authority ("Staff Position"). For details about the valuator as required by the 
Staff Position, see the valuations attached to Bezeq's Statements. 

3.1.3 

Information  according  to  Regulation  10(b)(8)  of  the  Securities  Regulations  (Periodic  and 
Immediate Reports), 5730-1970 

A.  Regarding Pelephone's valuation as of December 31, 2020, which was attached to Bezeq's 
2020statements, the Group examined the actual data in 2022 regarding Pelephone's free 
cash  flows  compared  to  the  2022  forecast  that  was  included  in  the  aforementioned 
valuation and found that Pelephone's free cash flows, according to its 2022 statements, are 
significantly higher than the forecast in the aforementioned valuation. The main difference 
stems  from  the  collection  from  customers  in  2022  for  the  year  2021  as  a  result  of 
organizational  sanctions  in  2021,  which  caused  a  delay  in  the  amounts  and  dates  of 
collection from customers and, in addition, from revenues from services that are higher than 
the forecast and timing gaps in the flow of investments. 

B.  Regarding the valuation of DBS as of December 31, 2021, which was attached to Bezeq's 
2021 statements, the Group examined the actual data in 2022 regarding the free cash flows 
compared  to  the  2022  forecast  that  was  included  in  the  aforementioned  valuation  and 
found  that  DBS's  free  cash  flows,  according  to  its  2022  statements,  are  lower  than  the 
forecast in the aforementioned valuation. The gap is due to the timing of content payments, 
higher  than  forecast  operating  expenses  (salary  and  content)  offsetting  higher  revenues 
compared  to  forecast  (number  of  subscribers,  and  higher  than  forecast  mix  of  premium 
subscribers). For more information, see Appendix H in the DBS valuation as of December 31, 
2022 attached to Bezeq's statements. 

C.  Regarding  the  valuation  of  Bezeq  International  as  of  December  31,  2021,  which  was 
attached to Bezeq's 2021 statements, the Group examined the actual data in 2022 regarding 
the free cash flows of Bezeq International compared to the 2022 forecast that was included 
in the aforementioned valuation and found that the free cash flows of Bezeq International, 
according  to  its  2022  statements,  are  higher  than  the  forecast  in  the  aforementioned 
valuation. The gap is due to a decrease in investments and a decrease in revenue-dependent 
operating and general expenses. For more information, see Appendix G in the valuation of 
Bezeq International as of December 31, 2022 attached to Bezeq's statements). 

3.1.4 

For more information, see Note 10 to the Statements. 

22 

 
 
 
 
 
 
 
 
 
 
Report of the Board of Directors on the State of Affairs of the Corporation for the Year ended 
December 31, 2022 

3.2. 

Due to the materiality of the lawsuits filed against the Group, which cannot be estimated or for which the 
exposure  cannot  yet  be  calculated,  the  auditor  CPAs  drew  attention  to  this  in  their  opinion  on  the 
Statements. 

3.3.  Material events during and after the reporting period 

Regarding  material  events  during  and  after  the  reporting  period  -  see  Note  32  to  the  Condensed 
Consolidated Financial Statements.

23 

 
 
Report of the Board of Directors on the State of Affairs of the Corporation for the Year ended 
December 31, 2022 

4. 

Details related to a series of liability certificates 

The following are data about the Company's debentures in circulation, as of December 31, 2022: 

Series C debentures 

Series F debentures 

A 

B 

Issue date (without extensions) 

September 15, 2016 

July 6, 2021 

Total nominal value at the date of 
issuance (par value) 

NIS  1,882,265,000  

NIS  393,973,000  

C  The nominal value (par value) as of the 

NIS  496,746,480  

NIS  1,471,766,642  

date of the report 

D  The amount of interest accrued as of 

NIS 4,562,477 

NIS  1,624,293  

the date of the report 

E  Fair value as included in the Statements  NIS 481,021,775   

NIS  1,429,896,334  

F  Stock market value 

G 

Interest type 

NIS  490,288,776  

Fixed at 3.85% 

NIS  1,354,466,841  

Fixed at 3.65% 

H  Principal payment dates 

On November 30, 2024 

On November 30, 2026 

I 

Interest payment dates 

J 

Linkage 

On May 31 and November 30 of 
each year, starting on May 31, 
2020 until November 30, 2024. 
Non-linked 

On May 31 and November 30 of 
each year, starting on November 
30, 2021 until November 30, 2026. 
Non-linked 

K  Total liability in relation to total 

Material 

Material 

Company liabilities 

L  Trustee details 

Trust company - Reznik Paz Nevo Trusts Ltd. 
Name of person in charge at the trust company - CPA Michal Avtalion 
E-mail michal@rpn.co.il, Tel.: 03-6389200, fax: 03-6389222 
Address - 14 Yad Harutzim St., Tel Aviv. 

M  Rating 

The debentures are not rated 

N 

Compliance with the terms of the trust 
deeds 

O  Liens 

P 

Q 

Financial clauses/restrictions applicable 
to the Company for the purpose of 
securing the value of the guaranty and 
the rights of the holders to act to 
exercise the lien granted in their favor 

Restriction that applies to the Company 
in connection with the creation of 
additional liens on its assets or in 
connection with its authority to issue 
additional debentures 

The Company issued to the trustees of the debentures of series C, F 
certificates regarding its compliance with the terms of the trust bonds 
for the year 2022. 
First degree unlimited amount lien pari passu on 728,373,713 ordinary 
Bezeq shares of NIS 1 each held directly by the Company and on the 
rights attached to these shares. 

The Company has committed that during two consecutive quarters the 
LTV will not exceed (1) a rate of 80% until November 30, 2023 and (2) 
75% starting from December 2023 until the final repayment date of the 
debentures. 

For  details  about  the  restrictions  that  apply  to  the  Company  in 
connection with the expansion of the series, see Section 3.2.2 of the 
trust deeds (series C, F) of the Company. 
For details about the limitations that apply to the Company in 
connection with the creation of additional liens, see Section 6.1.3 (c) 
of the trust deed (series C) of the Company. 

24 

 
 
     
 
 
 
 
Report of the Board of Directors on the State of Affairs of the Corporation for the Year ended 
December 31, 2022 

Financial clauses of the Company's debentures 

In accordance with the Company's commitment in debenture series C and F to comply with the LTV clause, the LTV 
ratio as of December 31, 2022 was 41.4%. 

The Company's net debt balance as of December 31, 2022 is approximately NIS 1,812 million and consists of a debt 
balance principal and accrued interest as of the balance sheet date in respect of its debentures in the amount of NIS 
1,975 million, net of cash balances in the amount of NIS 103 million. 

5.  Miscellaneous 

For information regarding the balance of liabilities of the reporting corporation in its financial statements as 
of December 31, 2022, see the form to be reported by the Company on the MAGNA system on March 14, 
2023. 

Darren Glatt 
Chairman of the Board of Directors 

Tomer Raved 
CEO 

Date of signing: March 14, 2023. 

25 

 
 
 
 
 
 
 
 
 
Consolidated Statements as of December 31, 2022 

Chapter C 

Consolidated Financial Statements 
for Year Ended December 31, 2022 

 
 
 
 
 
 
 
  
 
 
 
 
 
 
Page 

4 

8 
10 
10 
11 
12 
14 

Table of contents 

Auditors' reports 

Statements 

Consolidated Statements of Financial Position 

Consolidated Statements of Income 
Consolidated Statements of Comprehensive Income 

Consolidated Statements of Changes in Equity 

Consolidated Cash Flows Statements 

Notes to the Consolidated Statements 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

General 

Basis of preparation of the statements 

Main points of the accounting policy 

Cash and cash equivalents 

Investments 

Trade receivables 

Income taxes 

Leases 

PP&E 

Intangible assets 

Deferred expenses and non-current investments 

Investees 

Debentures, loans and credit 

Trade payables 

Provisions 

Employee benefits 

Contingent liabilities 

Contracts 

Collateral, liens and guaranties 

Equity 

Income 

General and operating expenses 

Salaries 

Other operating expenses (income), net 

Financing expenses (income), net 

Share-based compensation 

Profit per share 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
28 

29 

30 

31 

32 

Segmental reporting 

Transactions with interested parties and related parties 

Financial instruments 

Summary of selected data from the statements of Bezeq the Israel Telecommunications Corp. 
Ltd., Pelephone Communications Ltd., Bezeq International Ltd. and DBS Satellite Services (1998) 
Ltd. 

Material events during and after the reporting period 

 
 
 
 
 
Somekh Chaikin 
KPMG Millennium Tower 
17 HaArbaa Street P.O.B. 609 
Tel Aviv 6100601 
03 684 8000 

Auditors' report to the shareholders of B Communications Ltd. 

We  reviewed  the  attached  consolidated  statements  of  the  financial  position  of  B  Communications  Ltd. 
(hereinafter – “the Company") as of December 31, 2022 and 2021 and the consolidated statements of income, 
comprehensive income, changes in equity and cash flows for each of the three years in the period ended on 
December  31,  2022.  These  statements  are  the  responsibility  of  the  Company's  Board  of  Directors  and 
Management. Our responsibility is to express an opinion on these statements based on our audit. 

We conducted our audit in accordance with auditing standards accepted in Israel, including standards set forth 
in the Accountants Regulations (Accountant’s Mode of Operation), 5733-1973. According to these standards, we 
are required to plan and perform the audit in order to obtain a reasonable degree of assurance that the separate 
financial  information  is  not  materially  misrepresented.  An  audit  includes  a  sample  examination  of  evidence 
supporting the amounts and details included in the statements. An audit also includes an examination of the 
accounting rules applied in preparing the statements and of the significant estimates made by the Company's 
Board  of  Directors  and  Management,  as  well  as  an  assessment  of  the  adequacy  of  the  presentation  of  the 
statements. We believe that our audit provides an adequate basis for our opinion. 

In  our  opinion,  the  above  consolidated  financial  statements  adequately  reflect,  in  all  material  respects,  the 
financial position of the Company and its consolidated companies as of December 31, 2022 and 2021, as well as 
the results of their operations, their changes in equity and their cash flows for each of the three years in the 
period ending on December 31, 2022, in accordance with International Financial Reporting Standards (IFRS) and 
the provisions of the Securities Regulations (Annual Financial Statements), 5770-2010. 

Without limiting our above opinion, we draw attention to what is stated in Note 1 which refers to Note 1.3 to 
the consolidated statements, regarding the investigation by the Securities Authority and the Israel Police of a 
suspicion of committing offenses under the Securities Law and the Penal Code concerning, inter alia, transactions 
related to the former controlling shareholder and the notice of the Tel Aviv District Attorney's Office (Taxation 
and Economy) regarding the consideration of prosecuting the Company and holding a hearing for suspicions of 
the offense of bribery and the offense of reporting with the aim of misleading a reasonable investor, and what 
is  stated  in  this  note  regarding  the  filing  of  indictments  against  the  former  controlling  shareholder  in  the 
Company  in  various  offenses,  among  other  things,  for  offenses  of  bribery  and  causing  misleading  detail  in 
immediate reporting, and regarding the filing of an indictment against the former controlling shareholder of the 
Company and former senior officers of Bezeq Group, which attributes to the defendants fraudulent receipt and 
reporting offenses under the Securities Law. Also, following the opening of the aforementioned investigation, a 
number of civil legal proceedings were opened against the Company, former officers of the Company as well as 
companies from the group that previously controlled the Company, including motions for the approval of class 
actions.  As  stated  in  the  above  note,  at  this  stage  the  Company  is  unable  to  assess  the  effects  of  the 
investigations, their findings and results on the Company as well as on the statements and estimates used in the 
preparation of these reports, if any. 

In addition, without limiting our above opinion, we draw attention to what is stated in Note 17 to the Company’s 
consolidated statements regarding claims filed against Group companies, which cannot be estimated or for which 
the exposure cannot yet be calculated. 

Key audit matters  
Key  matters  in  the  audit  listed  below  are  the  matters  that  were  communicated,  or  were  required  to  be 
communicated, to the Company's Board of Directors and which, according to our professional judgment, were 
most significant in the audit of the consolidated statements for the current period. These matters include, among 
others, any matter which: (1) Relates, or may relate, to material sections or disclosures in the statements, and 
(2) Our judgment regarding it was particularly challenging, subjective or complex. These matters are answered 
4 

 
 
 
 
 
 
 
 
 
 
Somekh Chaikin 
KPMG Millennium Tower 
17 HaArbaa Street P.O.B. 609 
Tel Aviv 6100601 
03 684 8000 

as part of our audit and formation of our opinion on the consolidated statements as a whole. The communication 
of these matters below does not change our opinion on the consolidated statements as a whole, and we do not 
use it to give a separate opinion on these matters or on the sections or disclosures to which they refer. 

Measuring the impairment of cash-generating units of DBS Ltd. and Bezeq International Ltd. 

Why was the matter determined as a key matter in the audit 

As described in Notes 3.10.2, 10.2, 10.5 and 10.6 to the consolidated statements, as of December 31, 2022, the 
recoverable amount of the cash generating units DBS Ltd. and Bezeq International Ltd. (hereinafter: the "Units") 
is negative in the amount of NIS (88) and (22) million, respectively, and the total loss from the impairment of 
these  units  for  the  year  that  ended  on  December  31,  2022  amounts  to  NIS  378  million.  In  accordance  with 
International Accounting Standard 36 ("IAS36"), the recoverable amount is the higher of the value in use of a 
cash-generating  unit,  which  is  measured  by  the  Company's  future  cash  flow  forecast  measurement  method 
(DCF), and the fair value minus selling costs. Allocation of the impairment of the Company's assets is carried out 
in accordance with the fair value minus sales costs of each of the unit's assets. The impairment audit of the units 
required us to exercise discretion, when examining the reasonableness of the assumptions and estimates used 
by Management and external experts on its behalf, for the purpose of measuring the recoverable amount and 
allocating the impairment. Accordingly, we identified the measurement of the impairment of the units as a key 
matter in the audit. 

Audit procedures carried out in response to the key matter in the audit 

The main procedures we carried out in connection with this key matter as part of our audit included, among 
others:  checking  the  completeness  and  accuracy  of  the  databases  used  to  calculate  the  fair  value  minus  the 
exercise costs of the Company's assets, checking the reasonableness of the significant assumptions and estimates 
used in building the forecasted cash flows by comparing them to historical results, multi-year plans and updated 
market data. We also checked the adequacy of the information presented in Notes 3.10.2, 10.2, 10.5 and 10.6 
to the consolidated statements, made inquiries of the relevant parties in the Company involved in the process 
and checked the planning, implementation and operational effectiveness of certain internal controls related to 
the assessment of the recoverable amount of the units. 

For the purpose of carrying out the procedures, we used experts with skill and knowledge in fair value valuations 
in  order  to  assist  in  assessing  the  adequacy  of  the  evaluation  method,  assessing  the  reasonableness  of  the 
discount rate and the growth rate, as well as in performing arithmetic tests for calculating the use value of the 
units and fair value minus sales costs of the units' assets. 

We also audited, in accordance with Audit Standard (Israel) 911 of the Institute of Certified Public Accountants 
in Israel "Audit of Components of Internal Control over Financial Reporting", components of internal control over 
the financial reporting of the Company as of December 31, 2022, and our report dated March 14, 2023 included 
an unreserved opinion on the effective existence of those components. 

Somekh Chaikin 
Certified Public Accountants 

March 14, 2023 

Somekh Chaikin, Israeli partnership and a member of the KPMG network of independent firms 
incorporated  u n d e r   t h e   Swiss entity K P M G   I n t e r n a t i o n a l   C o o p e r a t i v e   ( " K P M G   I n t e r n a t i o n a l " )  

 
 
 
 
 
 
 
 
 
 
 
  
Somekh Chaikin 
KPMG Millennium Tower 
17 HaArbaa Street P.O.B. 609 
Tel Aviv 6100601 
03 684 8000 

The  auditors'  report  to  the  shareholders  of  B  Communications  Ltd.  regarding  an  audit  of  components  of 
internal control over financial reporting in accordance with Article 9b (c) of the Securities Regulations (Periodic 
and Immediate Reporting), 5730-1970 

We audited components of internal control over financial reporting of B Communications Ltd. and subsidiaries 
(hereafter collectively - "the Company") as of December 31, 2022. These control components were determined 
as  explained  in  the  next  paragraph.  The  Company's  Board  of  Directors  and  Management  are  responsible  for 
maintaining effective internal control over financial reporting and evaluating the effectiveness of components of 
internal  control  over  financial  reporting  attached  to  the  periodic  report  as  of  the  aforementioned  date.  Our 
responsibility is to express an opinion on components of internal control over the Company's financial reporting 
based on our audit. 

Components of internal control over financial reporting that were audited were determined in accordance with 
Audit  Standard  (Israel)  911  of  the  Institute  of  Certified  Public  Accountants  in  Israel  "Audit  of  Components  of 
Internal Control Over Financial Reporting" (hereinafter - "Audit Standard (Israel) 911"). These components are: 
(1)  Controls  at  the  organization  level,  including  controls  on  the  process  of  preparing  and  closing  financial 

reporting; 

(2)  Controls over cash process and debt management; 

We conducted our audit in accordance with Auditing Standard (Israel) 911. According to this standard, we are 
required to plan and perform the audit with the aim of identifying the audited control elements and obtaining a 
reasonable degree of assurance as to whether these control elements have been effectively implemented in all 
material  respects.  Our  audit  included  gaining  an  understanding  of  internal  control  over  financial  reporting, 
identifying  the  audited  control  components,  assessing  the  risk  of  a  material  weakness in  the  audited  control 
components, as well as examining and evaluating the effectiveness of the planning and operation of those control 
components  based  on  the  assessed  risk.  Our  audit,  regarding  those  control  elements,  also  included  the 
performance  of  such  other  procedures  as  we  deemed  necessary  according  to  the  circumstances.  Our  audit 
referred only to the audited control components, as opposed to internal control over all the essential processes 
in connection with the financial reporting, and therefore our opinion refers to the audited control components 
only. Also, our audit did not refer to mutual effects between the audited and non-audited control components 
and therefore, our opinion does not take into account such possible effects. We believe that our audit provides 
an adequate basis for our opinion in the context described above. 

Due  to  inherent  limitations,  internal  control  over  financial  reporting  in  general,  as  well  as  its  components  in 
particular, may not prevent or detect a misstatement. Also, drawing conclusions about the future based on any 
current assessment of effectiveness is exposed to the risk that controls will become inappropriate due to changes 
in circumstances or that the extent to which the policies or procedures exist will change for the worse. 

In our opinion, the Company effectively maintained, in all material respects, the audited control components as 
of December 31, 2022. 

As described in the report regarding the effectiveness of the internal control over the financial reporting and 
disclosure, as of December 31, 2022, of B Communications Ltd. (hereinafter – “the Corporation"), regarding the 
investigations  of  the  Securities  Authority  and  the  Israel  Police,  as  specified  in  Section  1.1.7  of  the  chapter 
describing  the  corporation's  business  in  this  report,  to  the  Corporation  does  not  have  complete  information 
regarding these investigations, their design, the materials and evidence available to the law authorities in the 
matter. Accordingly, the Corporation is unable to assess the effects, findings and results of the investigations on 
the Company, as well as on the statements and the estimates used in their preparation, if any. 

 
 
 
 
 
 
 
 
 
 
Somekh Chaikin 
KPMG Millennium Tower 
17 HaArbaa Street P.O.B. 609 
Tel Aviv 6100601 
03 684 8000 

We also audited, in accordance with generally accepted auditing standards in Israel, the consolidated financial 
statements of the company for December 31, 2022 and 2021 and for each of the three years in the period ending 
on  December  31,  2022  and  our  report,  dated  March  14,  2023,  included  an  unlimited  opinion  on  those 
statements, based on our audit and the reports of the other auditors, as well as references to what is stated in 
Note 1.3 regarding the investigation of the Securities Authority and the Israel Police into suspicions of committing 
offenses under the Securities Law and the Penal Code concerning, among other things, transactions related to 
the  former  controlling  shareholder  and  the  notice  of  the  Tel  Aviv  District  Attorney's  Office  (Taxation  and 
Economy) regarding the consideration of prosecuting the Company and holding a hearing for suspicions of the 
offense of bribery and the offense of reporting with the aim of misleading a reasonable investor, as well as what 
is  stated  in  this  note  regarding  the  filing  of  an  indictment  against  the  former  controlling  shareholder  of  the 
Company,  for  various  offenses,  among  others  the  offenses  of  bribery  and  causing  a  misleading  detail  in  an 
immediate report, and regarding the filing of an indictment against the former controlling shareholder of the 
Company and former senior officers of Bezeq Group, which attributes to the defendants fraudulent receipt and 
reporting offenses under the Securities Law. Also, following the opening of the aforementioned investigation, a 
number of civil legal proceedings were opened against the Company, former officers of the Company as well as 
companies from the group that previously controlled the Company, including motions for the approval of class 
actions.  As  stated  in  the  above  note,  at  this  stage  the  Company  is  unable  to  assess  the  effects  of  the 
investigations, their findings and results on the Company as well as on the statements and estimates used in the 
preparation of these statements, if any, and drawing attention to what is stated in Note 17 regarding claims filed 
against the Group and for which it is not possible to estimate or calculate the exposure at this stage. 

Somekh Chaikin 
Certified Public Accountants 

March 14, 2023 

Somekh Chaikin, Israeli partnership and a member of the KPMG network of independent firms 
incorporated  u n d e r   t h e   Swiss entity K P M G   I n t e r n a t i o n a l   C o o p e r a t i v e   ( " K P M G   I n t e r n a t i o n a l " )  

 
 
 
 
 
  
 
 
Consolidated Statements as of December 31, 2022 

Consolidated statements of financial position as of  December 31 

Assets 

Note 

NIS millions 

NIS millions 

2022 

2021 

Cash and cash equivalents  

Investments 

Trade receivables 

Other receivables 

Inventory  

Total current assets 

Trade and other receivables 

Broadcasting rights – net of rights exercised 

Right-of-use assets 

PP&E 

Intangible assets 

Deferred expenses and investments * 

Deferred tax assets 

Total non-current assets  

4,3.3 

5,3.3 

 ,6

3.3

 ,6

3.3

3.9 

 ,6

3.3

3.4 

 ,8

3.7

 ,9

3.5

754 

973 

1,440 

289 

85 

3,541 

460 

57 

1,746 

6,542 

 ,10

3.6

3,251 

11 

258 

 ,7

3.16

- 

998 

1,134 

1,859 

280 

74 

4,345 

433 

60 

1,828 

6,312 

3,251 

306 

24 

12,314 

12,214 

Total assets 

15,855 

16,559 

* Including investment in long term bank deposits. 

8 

 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Statements as of December 31, 2022 

Consolidated statements of financial position as of December 31 (Cont.) 

Liabilities and assets 

Note 

NIS millions 

NIS millions 

2022 

2021 

Debentures, loans and credit 

Current maturities of lease liabilities 

Trade payables  

Employee benefits 

Provisions  

 Total current liabilities 

Loans and debentures 

Lease liabilities 

Employee benefits 

Derivatives and other liabilities 

Deferred tax liabilities 

Provisions 

Total non-current liabilities 

Total liabilities 

Equity attributed to: 

Shareholders of the Company 

Non-controlling interests 

Total equity  

 ,13

3.3

 ,8

3.7

14 

 ,16

3.11

 ,15

3.12

 ,13

3.3

 ,8

3.7

 ,16

3.11

 ,7

3.16

 ,15

3.12

20 

921 

456 

1,598 

399 

168 

3,542 

8,257 

1,452 

201 

151 

319 

37 

980 

466 

1,755 

510 

69 

3,780 

9,068 

1,511 

243 

142 

296 

49 

10,417 

11,309 

13,959 

15,089 

54 

1,842 

1,896 

16 

1,454 

1,470 

Total liabilities and equity 

15,855 

16,559 

Darren Glatt 
Chairman of the Board of Directors 

Tomer Raved 
CEO 

Itzik Tadmor 
CFO 

Date of approval of the financial statements: March 14, 2023 

The notes attached to the consolidated statements form an integral part thereof. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Statements as of December 31, 2022 

Consolidated income statements for the year ended December 31 

Income 

Operating expenses: 

2022 

2021 

2020 

Note 

NIS millions 

NIS millions 

NIS millions 

 ,21

3.13

8,986 

8,821 

8,723 

General and operating expenses 

Salaries 

22 

23 

Depreciation, amortization and impairment  

8,9,10,11 

Impairment losses 

Other operating expenses (income), net 

10 

24 

Total operating expenses 

Operating profit 

Financing expenses (income)  

 ,25

3.15

Financing expenses 

Financing income 

Financing expenses, net 

Profit before income tax 

Income tax expenses 

Net profit for the year 

Net profit attributable to:  

Shareholders of the Company 

Non-controlling interests 

Net profit for the year 

Profit per share (NIS) 

Basic 

Diluted  

 ,7

3.16

27 

3,396 

1,877 

1,868 

- 

220 

7,361 

1,625 

530 

 (
)132

398 

1,227 

336 

891 

158 

733 

891 

1.42 
1.41 

3,265 

1,888 

1,889 

- 

)77(

6,965 

1,856 

533 

)55(

478 

1,378 

382 

996 

129 

867 

996 

1.11 

1.11 

3,182 

1,894 

1,858 

8 

73 

7,015 

1,708 

525 

)51(

474 

1,234 

334 

900 

157 

743 

900 

1.35 

1.35 

Consolidated statements of comprehensive income 

2022 

2021 

2020 

NIS millions 

NIS millions 

NIS millions 

Net profit for the year 

Reassessment of defined benefit plan, net of tax 

Additional other comprehensive income (loss) from hedging, 
net of tax  

Total comprehensive income for the period 

Attributable to: 

Shareholders of the company 

Non-controlling interests 

Total comprehensive income for the period 

891 

56 

)6 (

941 

171 

770 

941 

996 

)1(

37 

1,032 

139 

893 

1,032 

900 

)9(

)5(

886 

154 

732 

886 

The notes attached to the consolidated statements form an integral part thereof. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Statements as of December 31, 2022 

Consolidated statements of changes in equity  

Share 
capital 

Shares 
premium  

Treasury 
shares 

Other 
funds 

NIS 
millions 

NIS 
millions 

NIS 
millions 

NIS 
millions 

Deficit 
balance 

NIS 
millions 

Non-
controlling 
interests 

Total 

NIS millions 

NIS millions 

Total 

NIS 
millions 

 Balance as of January 1, 2020 

12 

1,495 

 (*) 

(38) 

 (1,710) 

(241) 

(197) 

(438) 

Profit for the year 2020 

Other  comprehensive  loss  for  the 
year, net of tax 

Total comprehensive income for the 
year 2020 

Transactions  imputed  directly  to 
equity 

Transaction  with  non-controlling 
interests 

Net compensation in respect of the 
Horev claim 

 - 

 - 

 - 

 - 

 - 

 - 

 - 

 - 

 - 

 - 

 - 

 - 

 - 

 - 

 - 

 Balance as of December 31, 2020 

12 

1,495 

 (*) 

Profit for the year 2021 

Other comprehensive income for the 
year, net of tax 

Total comprehensive  income for the 
year 2021 

Transactions  imputed  directly  to 
equity 

Share-based 
Note 26) 

compensation 

(See 

Buyback of shares (see Note 20) 

 - 

 - 

 - 

 - 

 - 

 - 

 - 

 - 

 - 

 - 

 Balance as of December 31, 2021 

12 

1,495 

Profit for the year 2022 

Other comprehensive  income (loss) 
for the year, net of tax 

Total  comprehensive    income  (loss) 
for the year 2022 

Transactions  imputed  directly  to 
equity 

Share-based 
Note 26) 

compensation 

(See 

Business consolidation 

Dividend 
non-
distributed 
controlling interests (see Note 12.6) 

to 

Transaction  with  non-controlling 
interests 

Buyback of shares (see Note 20) 

 - 

 - 

 - 

 - 

 - 

 - 

 - 

 - 

 - 

 - 

 - 

 - 

 - 

 - 

 - 

 - 

 Balance as of December 31, 2022 

12 

1,495 

(*) Represents an amount of less than NIS 1 million. 

 - 

 - 

 - 

 - 

)16(

)16(

 - 

 - 

 - 

 - 

 - 

 - 

 - 

 (

121

)

 (

137

)

 - 

)1(

)1(

 - 

 - 

)39(

 - 

10 

10 

 - 

 - 

)29(

 - 

)2 (

)2 (

1 

 - 

 - 

 - 

 - 

157 

)2(

157 

)3(

155 

154 

)39(

)39(

19 

19 

 (
1,575

)

107(

)

129 

 - 

129 

10 

129 

139 

743 

)11(

732 

)1(

 - 

534 

867 

26 

893 

 - 

 - 

 (
1,446

)

158 

 - 

)16(

16 

159 

27 

 - 

1,454 

733 

900 

)14(

886 

)40(

19 

427 

996 

36 

1,032 

27 

)16(

1,470 

891 

15 

13 

37 

50 

173 

171 

770 

941 

 - 

 - 

 - 

)13 (

 - 

 - 

 - 

 - 

11 

1 

12 

1 

 (

392

)

 (

392

)

)13 (

 (

121

)

)2 (

 - 

)15 (

 (

121

)

)30 (

 (

1,286

)

54 

1,842 

1,896 

The notes attached to the consolidated statements form an integral part thereof. 

11 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Statements as of December 31, 2022 

Consolidated cash flow statements for the year ended December 31 

2022 

2021 

2020 

Note 

NIS millions 

NIS millions 

NIS millions 

Cash flows from current operations 

Profit for the year 

Adjustments: 

891 

996 

Depreciation, amortization and impairment 

8,9,10,11 

1,868 

1,889 

Loss from impairment of assets 

Cancellation of loss from impairment of assets 

Capital gains, net 

Financing expenses, net 

Share-based compensation 

Income tax expenses 

Change in trade and other receivables 

Change in inventory 

Change in trade and other payables 

Change in provisions 

Change in employee benefits 

Change in other liabilities 

Income Tax paid, net 

10 

10 

24 

25 

26 

7 

6 

14 

15 

16 

 Net cash derived from operating activities 

Cash flows for investing activities 

Purchase of PP&E 

Investment in intangible assets and deferred expenses 

9 

10,11 

Payment in respect of frequencies 

Government grant in respect of frequencies 

Investment transactions, net 

Proceeds from the sale of PP&E  

Proceeds from the sale of “Walla”, net  

Miscellaneous 

Net cash used for investing activities 

Cash flows for financing activities 

Issuance of debentures and receipt of loans 

Purchase of non-controlling interests 

Repayment of debentures and loans 

Lease principal and interest payments 

Buyback of Company shares 

Interest paid 

Dividend distributed to non-controlling interests 

Early repayment fees 

Payment for completed hedging transactions 

Miscellaneous 

Net cash used for financing operations  

Net increase in cash and cash equivalents 

Cash and cash equivalents as of January 1 

Cash and cash equivalents at the end of the year 

 - 

 - 

)8 (

445 

12 

336 

342 

)21 (

)54 (

24 

)91 (

18 

 (

271

)

3,491 

 (

1,353

)

 (

346

)

)88 (

74 

223 

40 

 - 

30 

 - 

 - 

175(

)

498 

27 

382 

229(

)

)19(

)41(

)47(

)65(

)5(

385(

)

2,826 

 (
1,328

)

363(

)

 - 

 - 

164(

)

278 

 - 

)1(

900 

1,858 

266 

258(

)

)40(

507 

 - 

334 

56 

13 

17 

)8(

192(

)

)1(

243(

)

3,209 

 (
1,133

)

366(

)

 - 

 - 

222 

148 

44 

18 

 (

1,420

)

 (
1,578

)

 (
1,067

)

13 

12 

13 

8 

20 

13 

12 

13 

400 

)15 (

 (

1,416

)

 (

420

)

 (

121

)

 (

307

)

 (

392

)

)26 (

)18 (

 - 

 (

2,315

)

(244) 

998 

754 

1,730 

 - 

 (
2,072

)

387(

)

)16(

333(

)

 - 

)34(

)30(

)2(

718 

)40(

 (
1,828

)

391(

)

 - 

392(

)

 - 

)65(

(57) 

(7) 

 (
1,144

)

 (
2,062

)

104 

894 

998 

80 

814 

894 

The notes attached to the consolidated statements form an integral part thereof.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the Consolidated Statements as of December 31, 2022 

1.  General 

1.1. 

The reporting entity 

1.1.1. 

B  Communications  Ltd.  (hereinafter  -  “the  Company")  is  a  company 
incorporated in Israel and its registered office is at 144 Menachem Begin Rd., 
Tel  Aviv.  The  Company  is  a  public  company  traded  on  the  Tel  Aviv  Stock 
Exchange. The consolidated statements of the Company as of December 31, 
2022  include  those  of  the  Company  and  its  subsidiaries  (hereinafter  -  "the 
Group"). 

On April 14, 2010, the Company acquired 30.44% of the shares of Bezeq, the 
largest  telecommunications  group  in  Israel,  and  became  the  controlling 
shareholder  of  Bezeq.  Bezeq's  shares  are  listed  for  trading  on  the  Tel  Aviv 
Stock Exchange. 

As  of  December  31,  2022,  the  Company  owns  approximately  26.81%  of 
Bezeq’s issued share capital. 

1.2. 

Control of the Company 

On December 2, 2019, Searchlight Capital Partners, through its subsidiary, Searchlight II 
BZQ (hereinafter - "Searchlight"), and the Forer family which controls TNR Investments 
Ltd.  (hereinafter  -  "the  Forer  Family"),  completed  the  purchase  of  the  control  of  the 
Company, so that Searchlight owned 60.18% and the Forer Family owned 11.39% of the 
Company's ordinary and issued shares. 

As  of  December  31,  2022,  Searchlight  and  the  Forer  Family  own  65.26%  and  12.35%, 
respectively,  of  the  Company's  net  ordinary  and  issued shares.  The  proportion  of  the 
holdings  of  Searchlight  and  the  Forer  Family  increased  following  a  buyback  of  the 
Company's shares carried out during the years 2021 and 2022 (see Note 20). 

1.3. 

Investigations by the Israel Securities Authority and the Israel Police 

1.3.1. 

During the years 2017 and 2018, the Israel Securities Authority and the Israel 
Police conducted investigations into suspicions of committing offenses under 
the Securities Law and the Penal Law, 5733-1977 ("Penal Law"), concerning 
transactions  related  to  the  former  controlling  shareholder  of  Bezeq  and 
former  Chairman  of  the  Bezeq  Board  of  directors,  Mr.  Shaul  Elovich 
("Elovich") regarding the purchase of shares in DBS Satellite Services 1998 Ltd. 
("DBS")  and  the  provision  of  satellite  communication  services  to  DBS,  the 
conduct of the Ministry of Communications with Bezeq (the "DBS Case") as 
well  as  suspicions  of  the  exercise  of  powers  by  the  Prime  Minister,  Mr. 
Binyamin  Netanyahu,  to  promote  issues  concerning  the  business  and 
economic interests of Elovich and Bezeq Group. ("Case 4000"). Following the 
investigations, indictments were filed and notices were received as follows: 

1.3.1.1.  On January 28, 2020, an indictment was filed with the Jerusalem 
District Court against  Elovich for various offenses, among  others, 
the  offenses  of  bribery  and  causing  a  misleading  detail  in  an 
immediate report in connection with suspicions of the exercise of 
powers  by  the  Prime  Minister,  Mr.  Binyamin  Netanyahu,  to 
promote issues concerning the business and economic interests of 
Elovich and Bezeq Group. 

13 

 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

1.3.1.2.  On December 23, 2020, Bezeq received a notice from the Tel Aviv 
District Attorney's Office (Taxation and Economics) regarding the 
consideration to prosecute Bezeq and a summons to a hearing in 
Case 4000 ("the Notice"), according to which: 

A. 

B. 

C. 

D. 

E. 

After  examining  the  evidence  presented  to  him,  the  Attorney 
General  is  considering  filing  an  indictment  against  Bezeq  for 
suspected  bribery  offenses  (an  offense  under  Article  291  of  the 
Penal  Law  together  with  Article  23  of  the  Penal  Law),  and  the 
offense  of  reporting  with  the  aim  of  misleading  a  reasonable 
investor  (an  offense  under  Article  53(a)(4)  of  the  Securities  Law 
together with Article 23 of the Penal Law). 

Per the announcement, according to the suspicion, Bezeq's criminal 
responsibility for the bribery offense stems from the actions and 
criminal thinking of Elovich, who was its organ during the period 
relevant to the suspicions. 

Also,  per  the  announcement,  according  to  the  suspicion, Bezeq's 
criminal  responsibility  for  the  reporting  offense  stems  from  the 
actions and criminal thinking of Elovich, who was its organ during 
the  period  relevant  to  the  suspicions,  and  from  the  actions  and 
criminal thinking of Stella Handler (the former CEO of Bezeq), who 
was  an  organ  of  Bezeq  during  the  relevant  period  (see  Note 
1.3.1.3b). According to the claim in this context, Bezeq reported on 
the  Ministry  of 
the  Director  General  of 
a 
Communications which allegedly included a misrepresentation (of 
which Elovich and Stella Handler were aware), and only after the 
intervention  of  senior  officials  in  the  State  Attorney’s  Office,  the 
letter was corrected and the correction was reported by Bezeq to 
the public. 

letter 

from 

It should be noted that Walla (a former subsidiary of Bezeq) also 
received a similar notification according to which, after examining 
the evidence presented to him, the Attorney General is considering 
filing  an  indictment  against  Walla  for  suspicions  of  bribery  (an 
offense under Article 291 of the Penal Code together with Article 
23  of  the  Penal  Code)  when,  according  to  the  suspicion,  Walla's 
criminal  responsibility  for  the  offense  of  bribery  stems  from  the 
actions and criminal thinking of Elovich, who was its organ during 
the period relevant to the suspicions. 

Following this, on July 8, 2021, Bezeq and Walla submitted a written 
claim  to  the  hearing.  On  August  12,  2021,  the  companies will  be 
heard  before  the  Deputy  State  Attorney  (Criminal  Enforcement) 
and before the team of attorneys handling the case. As of the date 
of publication of the report, the Attorney General's Office and the 
Attorney General has not yet decided on the filing of an indictment 
following the claims raised in the hearing, and the companies have 
not been given an expected date for receiving the decision. 

1.3.1.3.  On December 23, 2020, to the best of Bezeq's knowledge, a notice 
was published by the Attorney General's Office, according to which, 
among other things, the Taxation and Economic Attorney's Office 
filed with the economic department of the Tel Aviv District Court, 
on the same day, an indictment against Elovich, as well as against 
former senior officials of Bezeq Group and DBS, Or Elovich, Amikam 

 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

A. 

B. 

C. 

Shurer,  Linor  Yochelman,  Ron  Ayalon  and  Mickey  Neiman  in  the 
DBS Case. According to the notice: 

The  indictment  attributes  to  the  defendants  the  offenses  of 
obtaining  by  fraud  under  aggravated  circumstances,  fraud  and 
breach of trust in a corporation, and reporting offenses according 
to the Securities Law, and refers to two cases: fraud in relation to 
the  payment  of  consideration  for  the  purchase  of  DBS  shares  by 
Bezeq,  and  fraud  in  relation  to  the  conduct  of  the  independent 
committees  that  were  established  in  Bezeq  for  the  purpose  of 
examining  Bezeq  transactions  in  which  Elovich  was  personally 
interested. 

The  Taxation  and  Economic  Attorney's  Office  entered  into  an 
arrangement  for  a  conditional  termination  of  proceedings  under 
the  terms  of  the  Securities  Law  with  Stella  Handler,  in  the 
framework of which Stella Handler admitted the facts according to 
which  she  was  involved  in  the  inclusion  of  a  misleading  detail  in 
Bezeq’s  reports.  In  accordance  with  what  is  specified  in  the 
settlement, the DBS case was closed in the case of Stella Handler. 

The investigation files of other suspects investigated in the cases 
mentioned  above  were  closed,  including  against  the  Bezeq’s 
former VP of Regulation, as well as against Or Elovich and Amikam 
Shurer (in relation to both of them - except in regards to the DBS 
case as indicated at the beginning of this section). 

1.3.1.4.  On July 20, 2022, the decision of the Economic Department of the 
Tel Aviv-Yafo District Court was published on the request of some 
of the defendants to drop charges in the case ("the Decision"). In 
accordance with the Decision, the second and third charges in the 
indictment  (fraud  in  relation  to  the  conduct  of  the  independent 
committees  in  the  "Bezeq-Yes"  transaction  and  the  "Yes-Space" 
transaction)  were  dropped  against  all  the  defendants  in  the 
following charges: the former controlling shareholder of Bezeq, Mr. 
Shaul Elovich, former officers in Bezeq - Mr. Or Elovich, Mr. Amikam 
Shurer and Mrs. Linor Yochelman, as well as against the companies 
accused  of  the  same  charges  -  companies  from  the  "Eurocom" 
group. It was also determined in the Decision, among other things, 
that it is not possible to accept the claim put forward by Mr. Shaul 
Elovich, that the indictment does not reveal guilt in connection with 
the first charge (fraudulent obtainment of advances at the expense 
of  the  second  contingent  consideration 
in  the  "Bezeq-Yes" 
transaction). It was also emphasized in the Decision, that it does 
not in any way affect the civil aspect, and the pending proceedings 
in this context. Bezeq is studying the decision and its consequences. 
On  September  6,  2022,  an  announcement  was  published  by  the 
Ministry of Justice according to which the Criminal Department of 
the Attorney General's Office filed an appeal against the Decision 
on the same day. 

1.3.1.5.  As far as DBS is concerned, which on November 20, 2017 received 
a "suspect notification letter" according to which the investigation 
case in which it was questioned as a suspect was forwarded to the 
Attorney General's Office for consideration - in accordance with the 
notice of the Attorney General's Office received at DBS, after the 
Securities Authority case, in which it was questioned as a suspect, 

 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

1.3.2. 

1.3.3. 

was examined by the Attorney General's Office, it was decided on 
January  11,  2021  to  dismiss  the  case  against  it,  without  filing  an 
indictment. 

It  should  be  noted  that  following  the  opening  of  the  aforementioned 
investigations, a number of civil legal proceedings were opened against Bezeq 
and DBS, Bezeq officers during the relevant period, as well as companies from 
the Group that formerly controlled Bezeq, including motions for approval of 
class  actions  and  motions  for  discovery  of  documents  before  submitting  a 
motion  for  approval  of  a  derivative  claim.  For  details  regarding  these 
procedures, see Note 17. 

Bezeq does not yet have complete information regarding the investigations, 
their  content,  the  materials  and  evidence  in  the  possession  of  the  law 
authorities in the matter (although in January 2021 Bezeq received the core 
of the investigation material in connection with Case 4000 and this as part of 
the hearing on this matter as detailed in section 1.3.1.2 above). Accordingly, 
Bezeq is still unable to assess the effects of the investigations, their findings, 
and their results on Bezeq, as well as on the statements and the estimates 
used in the preparation of these reports, if any. 

1.4. 

Epidemic - outbreak of COVID-19 

At the beginning of 2020, the "Corona" virus (COVID-19) broke out in the world and in 
Israel (the "Event"). Following the Event, many countries, including Israel, took various 
measures and restrictions in an attempt to prevent the spread of the virus. During the 
year 2022, there was a significant decrease in the outbreak of the virus and the effects 
of the Event, when the consequences of the Event on the Group's activities in 2022 were 
manifested mainly in damage to Pelephone's incomes from roaming services (damage 
that gradually decreased throughout the year until the date of publication of this report), 
without significant negative effects in other areas of activity. As of the date of publication 
of the report, there are no special effects of the event on all areas of the Group's activity. 

1.5. 

Definitions 

In these statements: 

The Company 
The Group 
Bezeq 
Consolidated 
companies 
Included 
companies 
Investees 
Related party 

Interested party 

B Communications Ltd 
the Company and its consolidated companies 
"Bezeq" The Israel Telecommunications Corp. Ltd 
Companies  whose  reports  are  fully  consolidated,  directly  or 
indirectly, with the Company's reports as specified in Note 12. 
Companies, the Group's investment in which is included, directly 
or indirectly, in the statements based on the balance sheet value. 
Consolidated companies or included companies. 
As  defined  in  International  Accounting  Standard  24  regarding 
related parties. 
As defined in Paragraph (1) of the definition of "interested party" 
in a corporation in Article 1 of the Securities Law, 5748-1968. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

2. 

Basis of preparation of the statements 

2.1. 

Declaration of compliance with international financial reporting standards 

The consolidated financial statements were prepared by the group in accordance with 
international financial reporting standards (hereinafter: "IFRS") and in accordance with 
the securities regulations (annual financial statements), 2010. 

The consolidated financial statements were approved by the board of directors on March 
14, 2023. 

2.2. 

Activity currency and presentation currency 

The  consolidated  financial  statements  are  presented  in  new  shekels,  which  are  the 
group's operating currency, and are rounded to the nearest million. The shekel is the 
currency that represents the main economic environment in which the group operates. 

2.3. 

Basis of measurement 

The  consolidated  statements  were  prepared  on  the  historical  cost  basis  with  the 
exception of the following items: 
* Derivative financial instruments, measured at fair value through income 
* Inventory measured as the lower of cost or net exercise value 
* Deferred tax assets and liabilities 
* Provisions 
* Assets and liabilities in respect of employee benefits 

For more information regarding the measurement method of these assets and liabilities, 
see Note 3 regarding the key points of the accounting policy. 

2.4. 

Operating cycle period 

The operating cycle of the Group does not exceed one year. Therefore, current assets 
and current liabilities include items that are intended and expected to be realized within 
a year from the date of the financial statements. 

2.5. 

Format for analyzing expenses recognized in the profit and loss statement 

Costs and expenses in the income statement are presented and analyzed according to a 
classification  method  based  on  the  nature  of  the  expenses.  The  aforementioned 
classification is suitable for understanding the business of the Group, which deals in a 
wide variety of services provided through a shared infrastructure. All costs and expenses 
are used to provide the services. 

2.6. 

Use of estimates and discretion 

When  preparing  the  consolidated  statements 
international 
accounting  standards  (IFRS),  Management  is  required  to  exercise  discretion  and  be 
assisted  by  estimates,  estimates  and  assumptions  that  affect  the  implementation  of 
accounting  policies  and  the  reported  amounts  of  assets  and  liabilities,  income  and 
expenses. Actual results may differ from estimates. 

in  accordance  with 

The estimates and assumptions are reviewed on an ongoing basis. Changes in accounting 
estimates are recognized in the period in which the estimates were updated and in any 
future period affected. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

The following is information regarding significant estimates and judgments, for which a 
change in estimates and assumptions has the potential to have a material impact on the 
statements of the next fiscal year: 

Key assumptions 
Assuming  the  expected  cash  flows 
from the cash generating units 

Possible implications 
Recognition of an impairment 
loss  or  cancellation  of  an 
impairment loss 

Reference 
Note 10 

the 

Subject 
Measuring 
recoverable 
amounts  of  cash 
generating units 
Duration of PP&E, 
intangible  assets, 
and  other 
long-
term assets 

Determining 
lease period 

the 

Uncertain 
positions 

tax 

and 

Provisions 
contingent 
liabilities, 
including levies 

the  useful 
Assumptions  regarding 
duration of groups of PP&E, intangible 
assets and other assets 

of 

options 

exercise 

For  the  purpose  of  determining  the 
lease  period,  the  Group  takes  into 
account  the  period  during  which  the 
lease  cannot  be  canceled,  including 
extension  options  with  reasonable 
and/or 
likelihood 
cancellation 
without 
reasonable likelihood of exercise 
The  degree  of  uncertainty  regarding 
the  acceptance  of  the  Group's  tax 
positions (uncertain tax positions) and 
the  risk  that  the  tax  and  interest 
expenses will be higher or lower than 
the 
the 
statements. This, based on an analysis 
of 
including 
interpretations  of  tax  laws  and  the 
Group's past experience 
Assessing the chances of claims against 
the  Group  companies  and  measuring 
the  potential  liabilities  related  to  the 
claims 

expenses 

included 

factors, 

several 

in 

Bezeq estimates of the payment to the 
authorities for levies on real estate in 
the "Sakia" complex 

Employee benefits  Actuarial assumptions such as discount 
rate,  future  wage  increase  rate  and 
departure rate 

Deferred taxes 

Effective 
over Bezeq 

control 

Assumption regarding the expectation 
of  exercising  the  tax  benefit  in  the 
future, including an assumption that it 
is more likely than not that transferred 
losses  accumulated  in  DBS  for  tax 
purposes will not be used 
The  possibility  of  appointing  most  of 
the members of the Board of Directors 
of Bezeq, as a result of the Company's 
permit  to  control  Bezeq,  the  control 
over the composition and distribution 
of the other shareholders in Bezeq and 
the  restrictions  applicable  to  these 
the 
shareholders 
Communications Law 

under 

Notes 
9,10,11 

Note 8 

assets, 

Change in the value of PP&E, 
intangible 
and 
additional  assets,  as  well  as 
depreciation 
and 
amortization expenses 
Increase  or  decrease  in  the 
measurement  of  a  right-of-
use  asset  and  lease  liability 
in  depreciation  and 
and 
in 
expenses 
financing 
subsequent periods 

Recognition or cancellation of 
income tax expenses  

Note 7 

a 

Cancellation  or  creation  of  a 
claim, 
provision 
for 
of 
recognition 
income/expenses 
and 
recognition of income for said 
change, respectively 

Change in share capital gains 
gain  from  the  sale  of  real 
estate in the "Sakia" complex 
Increase  or  decrease 
in 
liabilities 
employee 
for 
benefits  and  commitment  to 
early retirement 
Recognition of a deferred tax 
asset  and  impact  on  income 
tax expenses 

Note 6.6 

Note 16 

Note 7 

Consolidation  of  Bezeq's 
statements  or  treatment  of 
investment in Bezeq using the 
equity method 

Notes  12.4, 
12.5 

 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

2.7. 

Fair value determination 

In order to prepare the statements, the Group is required to determine the fair value of 
certain assets and liabilities. Additional information regarding the assumptions used in 
determining the fair values is provided in Note 30.7 on fair value. 

3.  Main points of the accounting policy 

The accounting policy rules detailed below have been consistently applied to all periods presented 
in these consolidated reports by the Group entities. 

In this note, where the Group chose accounting alternatives, which were allowed by accounting 
standards  and/or  accounting  policies  on  a  subject  where  there  is  no  explicit  instruction  in 
accounting standards, the said disclosure is presented in  bold. There  is no reason to attribute 
excessive importance to the aforementioned emphasis compared to the rest of the accounting 
policies that have not been emphasized. 

3.1. 

Consolidation of the statements 

3.1.1. 

Subsidiaries 

Subsidiaries  are  entities  controlled  by  the  Company.  The  statements  of 
subsidiaries are included in the consolidated statements from the day control 
is obtained until the day control is lost. 

Control exists when the group is exposed, or has rights, to variable returns 
from its involvement in the acquiree and has the ability to influence these 
returns  through  its  power  of  influence  in  the  acquiree.  When  examining 
control, actual rights held by the group and by others are taken into account. 

3.1.2. 

Non-controlling interests 

Non-controlling  interests  are  the  equity  in  a  subsidiary  that  cannot  be 
attributed,  directly  or  indirectly,  to  the  parent  company  and  include 
additional elements such as: a share-based compensation that will be settled 
in equity instruments of subsidiaries. 

3.1.3. 

3.1.4. 

income  and  other  comprehensive 

Allocation  of 
shareholders 
Income and any other component of comprehensive income is attributed to 
the Company's owners and non-controlling interests. The total income and 
other comprehensive income is attributed to the owners of the Company and 
the  non-controlling  interests  even  if  as  a  result  the  balance  of  the  non-
controlling rights will be negative. 

income  among  the 

Transactions with non-controlling interests while retaining control 
Transactions  with  non-controlling  interests  while  retaining  control  are 
treated  as  equity  transactions.  Any  difference  between  the  consideration 
paid or received and the change in non-controlling interests is credited to the 
Company's owner's share of equity directly to surplus. The amount by which 
the  non-controlling  interests  are  adjusted  is  calculated  as  follows:  by  the 
increase in the holding rate, according to the relative portion purchased from 
the balance of the non-controlling interests in the consolidated statements 
on the eve of the transaction. Also, when there are changes in the holding 
rate  in  a  subsidiary,  while  retaining  control,  the  Company  reallocates  the 
cumulative amounts recognized in other comprehensive income between the 
owners of the Company and the non-controlling interests. 

 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

3.1.5. 

Transactions cancelled as part of consolidation 

Mutual balances in the Group and income and expenses arising from inter-
company  transactions  were  canceled  within  the  framework  of  the 
consolidated statements. 

3.1.6. 

Contingent consideration for business consolidations 

After the date of purchase, the Group recognizes the changes in the fair value 
of  contingent  consideration  recognized  as  part  of  business  consolidations, 
classified  as  a  financial  liability,  in  the  income  statement  as  part  of  the 
Financing Expenses section. 

3.2. 

Foreign currency transactions 

Foreign  currency  transactions  are  translated  into  the  Group's  functional  currency 
according to the exchange rate in effect on the dates of the transactions. Financial assets 
and liabilities denominated in a foreign currency at the reporting date are translated into 
the activity currency according to the exchange rate in effect at that time. 

3.3. 

Financial Instruments 

3.3.1. 

Non-derivative financial assets 

Non-derivative  financial  assets  mainly  include  investments  in  deposits, 
marketable securities, customers and other receivables, and cash and cash 
equivalents. 

The  Group  initially  recognizes  financial  assets  at  the  time  when  the  Group 
becomes a party to the contractual provisions of the instrument, meaning the 
time when the Group committed to buy or sell the asset. 

A financial asset is first measured at fair value plus transaction costs that can 
be  directly  attributed  to  the  purchase  or  issuance  of  the  financial  asset. 
Customers  that  do  not  include  a  significant  financing  component  are 
measured for the first time according to the transaction price. 

Financial assets are deducted when the Group's contractual rights to the cash 
flows arising from the financial asset expire, or when the Group transfers the 
rights to receive the cash flows arising from the financial asset in a transaction 
in which all the risks and benefits from ownership of the financial asset are 
effectively transferred. 

Classification of financial assets into groups and the accounting treatment of 
each group 

At the time of initial recognition, financial assets are classified into one of the 
following  measurement  categories:  amortized  cost;  or  fair  value  through 
income. 
A financial asset is measured at amortized cost if it meets the two cumulative 
conditions below and is not intended to be measured at fair value through 
income: 
A.  Held  as  part  of  a  business  model  that  aims  to  hold  assets  to  back  the 

contractual cash flows; also 

B.  The  contractual  terms  of  the  financial  asset  provide  entitlement  at 
specified  times  to  cash  flows  that  are  only  principal  and  interest 
payments for the principal amount that has not yet been repaid. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

All  financial  assets  in  the  Group  that  are  not  classified  for  amortized  cost 
measurement are measured at fair value through income. 

The Group classifies financial assets as follows: 

Cash and cash equivalents 

Cash  includes  immediately  usable  cash  balances  and  deposits  on  demand. 
The cash value includes short-term investments (where the duration between 
the original deposit date and the redemption date is up to 3 months), with a 
high level of liquidity, which can be easily converted into known amounts of 
cash and which are exposed to an insignificant risk of changes in value. 

Customers, debtors and deposits 

The Group has customer balances, other receivables and deposits held as part 
of  a  business  model  aimed  at  collecting  the  contractual  cash  flows.  The 
contractual  cash  flows  for  these  financial  assets  include  only  principal  and 
interest  payments  which  reflect  a  return  for  the  time  value  of  money  and 
credit risk. Accordingly, these financial assets are measured at amortized cost. 

Subsequent measurement and profits and losses 

Financial assets at a amortized cost are measured using the effective interest 
method  and  deducting  impairment  losses.  Interest  income,  gains  or  losses 
from exchange rate differences and depreciation are recognized in income. 
Any profit or loss resulting from a deduction is also recognized in income. 

Financial  assets  at  fair  value  through  profit  and  loss  are  measured  in 
subsequent  periods  at  fair  value.  Net  gains  and  losses,  including  interest 
income or dividends, are recognized in profit and loss. 

3.3.2. 

Non-derivative financial liabilities 

Non-derivative financial obligations include: debentures issued by the Group, 
loans and credit from banks and other credit providers, suppliers and other 
beneficiaries. 

The  Group  initially  recognizes  debt  instruments  issued  at the  time  of  their 
formation.  The  other  financial  obligations  are  recognized  at  the  time  the 
transaction  is  concluded.  Financial  liabilities  are  initially  recognized  at  fair 
value less any attributable transaction costs. After initial recognition, financial 
liabilities  are  measured  at  amortized  cost  in  accordance  with  the  effective 
interest method. 

Financial obligations are deducted when the Group's liability, as specified in 
the agreement, expires or when it has been settled or cancelled. 

Changing the terms of debt instruments 

The  exchange  of  debt  instruments,  with  substantially  different  terms, 
between  existing  borrower  and  lender,  is  treated  as  the  settlement  of  the 
original financial liability and the recognition of a new financial liability at fair 
value.  The  difference  between  the  reduced  cost  of  the  original  financial 
liability and the fair value of the new financial liability is recognized in profit 
and loss in the financing income or expenses section. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

The terms are materially different if the discounted present value of the cash 
flows under the new terms, including any fees paid, minus any fees received 
and discounted using the original effective interest rate, differs by at least ten 
percent from the discounted present value of the remaining cash flows of the 
original financial liability. 

In  addition  to  the  aforementioned  quantitative  test,  the  Group  examines, 
among other things, whether there have been changes in various economic 
parameters inherent in the exchanged debt instruments. 

In the event of a change in the terms (or exchange) of a non-material fixed 
interest debt instrument, the new cash flows are discounted at the original 
effective interest rate, with the difference between the current value of the 
financial  liability  with  the  new  terms  and  the  current  value  of  the  original 
financial liability recognized in income in the "Financing expenses (income)" 
section. 

The  Group  has  chosen  an  accounting  policy,  according  to  which  when  a 
is 
portfolio  of 
repaid/exchanged, 
from 
deduction/exchange will be carried out using the FIFO method. 

identical  characteristics 
or 

liabilities  with 
calculation 

financial 

profit 

loss 

the 

of 

3.3.3. 

Index-linked assets and liabilities that are not measured according to fair 
value 

The  value  of  index-linked  financial  assets  and  liabilities,  which  are  not 
measured according to fair value, is estimated each period according to the 
actual increase/decrease rate of the index. 

3.3.4. 

Offsetting financial instruments 

A  financial  asset  and  a  financial  liability  are  offset  and  the  amounts  are 
presented  on  a  net  basis  in  the  statement  of  financial  position  when  the 
Group  currently  has  an  enforceable  legal  right  to  offset  the  recognized 
amounts as well as an intention to dispose of the asset and liability on a net 
basis or exercise the asset and settle the liability at the same time. 

3.3.5. 

Hedging 

A.  Accounting hedging 

The  Group  holds  derivative  financial  instruments  for  cash  flow  hedging 
purposes in respect of risks of future changes in the consumer price index in 
connection with the debentures issued by the Group. 

At the time of creating the hedging relationship, the Group documents its risk 
management objective and strategy for performing the hedging. The group 
also documents the economic relationship between the hedged item and the 
hedging instrument, including whether the changes in the cash flows of the 
hedged item and the hedging instrument are expected to offset each other. 

Derivatives are initially recognized at fair value. Attributable transaction costs 
are  charged  to  profit  and  loss  as  incurred.  After  initial  recognition,  the 
derivatives are measured at fair value, with the effective part of the changes 
in the fair value of the derivative being credited to a hedge fund as part of 
other  comprehensive  income.  The  effective  part  of  the  changes  in  the  fair 
value  of  a  derivative,  which  is  credited  to  other  comprehensive  income,  is 

 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

limited  to  the  cumulative  change  in  the  fair  value  of  the  hedged  item 
(according to current value) from the date the hedge was created. The part 
that  is  not  effective,  the  change  in  fair  value  is  credited  to  income 
immediately. 

B.  Financial hedging 

In  addition,  the  group  owns  derivative  financial  instruments  for  cash  flow 
hedging purposes for foreign currency risks. Hedge accounting is not applied 
in  respect  of  these  instruments.  Derivative  instruments  as  mentioned  are 
recognized  at  fair  value;  The  changes  in  the  fair  value  are  immediately 
credited to the profit and loss statement, as income or financing expenses. 

3.4. 

Broadcasting rights 

The  broadcast  rights  are  presented  according  to  cost,  minus  rights  exercised  and 
impairment losses. 

Costs of broadcast rights purchased to broadcast content include the amounts paid to 
the rights providers plus direct costs incurred for the purposes of adjusting the broadcast 
rights, as well as costs of original productions. The broadcasting rights are amortized on 
a  straight  line  according  to  the  term  of  the  rights  agreement  or  the  economic  life, 
whichever is shorter. 

Examining the impairment of broadcast rights is done as part of the cash-generating unit 
to which the broadcast rights are associated (see also Note 10). 

The net change in broadcast rights is presented as adjustments to profit as part of current 
activities within the statement of cash flows. 

3.5. 

PP&E 

3.5.1. 

Recognition and measurement 

The  Group  chose  to  measure  PP&E  items  at  cost  minus  accumulated 
depreciation and impairment losses. 

Cost includes costs directly attributable to the purchase of the property. The 
cost of self-constructed assets includes the cost of materials, direct labor and 
financing costs, any additional cost that can be directly attributed to bringing 
the asset to the location and condition necessary for it to be able to operate 
in the manner intended by Management, as well as an estimate of the costs 
of dismantling and removing the items and restoring the site where the item 
is located in cases where the Group is obligated to clear and restore the site. 
The cost of purchased software, which is an integral part of the operation of 
the related equipment, is recognized as part of the cost of this equipment. 

Spare parts, auxiliary equipment and backup equipment are classified as fixed 
assets  when  they  meet  the  definition  of  PP&E  in  accordance  with  IAS  16, 
otherwise they are classified as inventory. 

When  significant  PP&E  parts  have  different  durations,  they  are  treated  as 
separate items (significant components) of the PP&E. 

Profit or loss from deducting a PP&E item is determined by comparing the 
proceeds from deducting the asset with its book value. Profit or loss from the 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

sale of PP&E is included in the other income or other expenses, as the case 
may be, in the income statement. 

3.5.2. 

Subsequent costs 

The cost of replacing part of a PP&E item and subsequent costs are recognized 
as  part  of  the  book  value  of  that  item,  if  it  is  expected  that  the  future 
economic benefit inherent in the new part will flow to the Group and if its 
cost  can  be  reliably  measured.  Current  maintenance  costs  of  PP&E  are 
imputed to income as incurred. 

3.5.3. 

Depreciation 

Depreciation is imputed to the income statement according to the straight-
line method over the estimated useful life of each part of the PP&E items, 
since this method reflects the predicted consumption pattern of the future 
economic benefits inherent in the asset in the best way. 

An asset is amortized when it is available for use, that is, when it has reached 
the location and condition necessary for it to be able to operate in the manner 
intended by Management. 

Improvements in leased buildings are generally amortized over the lease term 
(which includes the period of the extension options held by the Group which 
in  its  assessment  are  reasonably  certain  to  be  exercised)  or  the  useful 
duration of the leasehold improvements, whichever is shorter. 

The estimated useful duration for the current period is as follows: 

international  network  equipment 

Landline  and 
(switching, transmission and power) 
Landline network 
Multi-channel TV equipment and infrastructure 
Subscriber equipment and installations 
Vehicles 
Office and general equipment 
Electronic  equipment,  computers  and 
communication systems 
Cellular network 
Passive radio equipment at cellular network sites 
Structures 
Underwater cable 

internal 

Years 
2-10 

9-33 
1-7 
3-8 
6-7 
5-14 
3-7 

4-10 
Until December 31, 2042 
25 
10-25 

The  estimates  regarding  the  depreciation  method,  the  useful  life  and  the 
residual  value  are  re-examined  at  least  every  reporting  year  and  adjusted 
when necessary. 

3.6. 

Intangible assets 

3.6.1. 

Goodwill 

Goodwill created as a result of the acquisition of subsidiaries is included in 
the intangible assets section. After initial recognition, goodwill is measured at 
cost  minus  accumulated  impairment  losses.  Goodwill  is  examined  for 
impairment at least once a year. See also note 10. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

3.6.2. 

Software development costs 

Software development costs are recognized as an intangible asset only if: the 
development costs can be reliably measured; the software is technically and 
commercially  applicable;  A  future  economic  benefit  is  expected  from  the 
development,  and  the  Group  has  the  intention  and  sufficient  resources  to 
complete the development and use the software. The costs recognized as an 
intangible  asset  include  the  cost  of  materials,  direct  labor  and  overhead 
expenses that can be attributed directly to prepare the asset for its intended 
use. Other development costs are imputed to income as incurred. 

Discounted  development  costs  are  measured  at  cost  minus  accumulated 
depreciation and impairment losses. 

3.6.3. 

Software 

Software that is an integral part of hardware which cannot operate without 
the software installed on it, is classified as PP&E. On the other hand, licenses 
to standalone software that add additional functionality to the hardware are 
classified as intangible assets. 

3.6.4. 

Rights in frequencies 

Frequency rights refer to the frequencies assigned to Pelephone for cellular 
activity,  following  its  winning  in  dedicated  tenders  held  by  the  Ministry  of 
Communications.  Depreciation  for  the  property  is  imputed  to  income 
according to the "straight line" method and is reduced over the frequency 
allocation  period,  which  begins  at  the  time  of  their  use.  3G  frequencies 
(UMTS/HSEA) are amortized until the end of 2030, 4G frequencies (LTE) and 
5g frequencies will be amortized until September 2032. 

Reduction  of  frequency  rights 
amortization section of the income statement. 

is 

imputed  to  the  depreciation  and 

3.6.5. 

Other intangible assets 

Other intangible assets purchased by the Group, with a defined duration, are 
measured at cost minus accumulated depreciation and impairment losses. 

3.6.6. 

Subsequent costs 

Subsequent  costs  are  recognized  as  an  intangible  asset  only  when  they 
increase  the  future  economic  benefit  inherent  in  the  asset  for  which  they 
were incurred. The other costs, including those related to reputation or self-
developed brands, are imputed to income as incurred. 

3.6.7. 

Amortization 

Depreciation  of  intangible  assets  is  credited  to  the  income  statement 
according to the straight-line method, over the estimated useful duration of 
the intangible assets from the date the assets are available for use. Goodwill 
is  not  systematically  amortized,  but  is  examined  at  least  once  a  year  for 
impairment. 

The estimated useful duration for the current period is: 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

Property type 

Amortization period 

Frequency usage rights 

3G frequencies - until December 2030 
4G and 5G frequencies - until August 2032 

Computer  software  and  licenses  to 
use the software 

1-7  years,  depending  on  the  license  period  or 
over  the  estimated  duration  of  use  of  the 
software 

The estimates regarding the depreciation and useful duration method are re-
examined at least every reporting year and adjusted when necessary. 

3.7. 

Leases 

3.7.1. 

Determining whether the arrangement contains a lease 

At  the  time  the  lease  is  entered  into,  the  Group  determines  whether  the 
arrangement  is  a  lease  or  contains  a  lease,  while  examining  whether  the 
arrangement transfers a right to control the use of an identified asset for a 
period  of  time  in  exchange  for  payment.  When  assessing  whether  the 
arrangement transfers the right to control the use of an identified asset, the 
Group assesses throughout the lease term whether it has the following two 
rights: 

(a)  The right to in-fact obtain all the economic benefits from the use of the 

identified asset; also 

(b)  The right to direct the use of the identified property. 

For lease contracts that include non-lease components, such as services or 
maintenance related to a lease component, the Group has chosen to treat 
the  contract  as  a  single  lease  component,  without  separating  the 
components. 

3.7.2. 

Leased assets and lease liabilities 

Contracts that give the Group control over the use of an identified asset for a 
period of time for consideration are treated as leases. At the time of initial 
recognition,  the  Group  recognizes  a  liability  in  the  amount  of  the  present 
value of the future minimum lease payments (these payments do not include 
variable lease payments that do not depend on the index, a change in any 
interest rate, or a change in  the exchange rate), and at the same time the 
Group  recognizes  the  right-of-use  asset  in  the  amount  of  the  liability, 
adjusted for lease payments that were paid in advance or accrued, plus direct 
costs incurred in the lease. 

Since the interest rate inherent in the lease cannot be easily determined, the 
Group's  additional  interest  rate  is  used  (the  interest  rate  that  the  Group 
would have been required to pay in order to borrow for a similar period and 
with  similar  collateral  the  amounts  necessary  to  obtain  an  asset  of  similar 
value to a right-of-use asset in a similar economic environment). 

After initial recognition, the asset is treated according to the cost model, and 
is amortized over the lease term or the asset's useful duration (whichever is 
earlier). 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

3.7.3. 

Lease period 

The  lease  period  is  defined  as  a  period  during  which  the  lease  cannot  be 
canceled, and includes the periods for which there is an option to extend or 
cancel  the  lease  if  it  is  reasonably  certain  that  the  group  will  exercise  the 
options to extend the lease and not exercise the option to cancel the lease. 

3.7.4. 

Variable lease payments 

Lease  payments  that  are  linked  to  the  Consumer  Price  Index  are  initially 
measured  by  using  the  existing  index  at  the  start  of  the  lease,  and  are 
included in the measurement of the lease liability. When there is a change in 
the cash flow of future lease payments resulting from the change in the index, 
the balance of the obligation is updated against the right-of-use asset. 

3.7.5. 

Depreciation of a right-of-use asset 

After the start date of the lease, the right-of-use asset is measured using the 
cost method, minus accumulated depreciation and minus accumulated losses 
from impairments and is adjusted for remeasurements of the liability for the 
lease.  Depreciation  is  calculated  on  a  straight-line  basis  over  the  useful 
duration or the contractual lease period, whichever is earlier, as follows: 

Property type 

Weighted average of the period of the agreements as 

of December 31, 2022 (years) 

Cellular communication sites 

Structures 

Vehicles 

6.1 

14.4 

1.8 

3.7.6. 

Subleases 

In  leases  where  Bezeq  Group  subleases  the  base  asset,  the  Bezeq  Group 
examines the classification of the sublease as a financing or operating lease 
in  relation  to  the  right  of  use  received  in  the  main  lease.  Bezeq  Group 
examined  subleases  that  existed  at  the  time  of  the  first  application  in 
accordance with the balance of their contractual terms as of that date. 

3.8. 

Capacity usage rights 

Transactions for the purchase of the indefeasible right of use (“IRU”) in underwater cable 
capacities were treated as service receipt transactions. The amount of the expense paid 
in advance is amortized as part of depreciation expenses, on a straight line according to 
the period specified in the agreement, including the extension option that the Company 
expects to exercise, and no more than the estimated useful duration of such capacities. 
The payment for the right to use the capacities is presented in cash flow from investing 
activities. 

Capacities that can be identified and are used exclusively by the group, were presented 
in the PP&E section. The asset is  amortized on a straight line according to the period 
specified  in  the  agreement  and  no  more  than  the  estimated  useful  duration  of  such 
capacities. Capacity usage rights are presented net of accumulated impairment losses. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

3.9. 

Inventory 

The inventory cost includes the costs of purchasing the inventory and bringing it to its 
current location and condition. 

Inventory is measured as the lower of cost and net realizable value. The group chose to 
determine the inventory cost according to the weighted moving average method. 

Inventory includes end equipment and related accessories intended for sale and service 
as well as spare parts used for repairs as part of the repair service provided to customers. 

Inventories of end equipment, accessories, and spare parts whose consumption is slow 
are presented minus provision for impairment. 

3.10. 

Impairment 

3.10.1. 

Non-derivative financial assets 

The  Group  chose  to  measure  the  provision  for  predicted  credit  losses  for 
trade  receivables  in  an  amount  equal  to  the  contractual  credit  losses 
throughout the duration of the instrument. 

Predicted  credit  losses  throughout  the  duration  of  the  instrument  are 
predicted credit losses resulting from all possible fault events throughout the 
duration of the financial instrument. 

Predicted credit losses are a probability-weighted estimate of credit losses. 
Credit losses are measured according to the present value of the difference 
between the cash flows that the Group is entitled to according to the contract 
and  the  cash  flows  that  the  Group  expects  to  receive  and  are  discounted 
according to the effective interest rate of the financial asset. 

Examination  of  expected  credit  losses  for  trade  receivable  balances  in 
substantial amounts is done on the basis of each individual asset. For the rest 
of  the  financial  assets,  expected  credit  losses  are  examined  collectively, 
according to groups with similar credit risk characteristics, also considering 
past experience. 

The provision for expected credit losses is presented as a deduction from the 
customers’ gross book value. 

Regarding the deposits in banks for which the credit risk has not increased 
significantly  since  the  date  of  initial  recognition,  the  Group  measures  the 
provision  for  predicted  credit  losses  in  an  amount  equal  to  the  predicted 
credit losses due to a fault event in a 12-month period. 

When  assessing  whether  the  credit  risk  of  a  financial  asset  has  increased 
significantly  since  the  date  of  initial  recognition  and  the  assessment  of 
forecasted  credit  losses,  the  Group  takes  into  account  reasonable  and 
is  relevant  and  obtainable  without 
substantiated 
excessive cost or effort. Said information includes quantitative and qualitative 
information, as well as analysis based on the Group's past experience, and it 
includes forward-looking information. 

information,  which 

3.10.2. 

Non-financial assets (see also Note 10) 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

Impairment Timing Examination 

The book value of the Group's non-financial assets, other than inventory and 
deferred tax assets, is reviewed at each reporting date to determine whether 
there are any indicators of impairment. If there are indicators as mentioned, 
an estimate of the recoverable amount of the property is calculated. 

The  Group  performs  once  a  year,  on  a  fixed  date,  an  assessment  of  the 
recoverable  amount  of  cash-generating  units  that  include  balance  of 
goodwill, or more frequently, if there are indicators of impairment. 

Determination of cash generating units 

For the purpose of examining impairment, the assets are grouped together 
into the smallest group of assets that generates cash flows from ongoing use, 
which  are  essentially  independent  of  other  assets  and  groups  ("cash 
generating unit"). 

Recoverable amount measurement 

The recoverable amount of an asset or of a cash generating unit is the value 
in use or the fair value less selling costs, whichever is higher. In determining 
the  value  in  use,  the  Group  discounts  the  predicted  future  cash  flows 
according  to  the  discount  rate  which  reflects  the  market's  assessments 
regarding the time value of money and the specific risks related to the asset 
or cash generating unit (for which the future cash flows were not adjusted). 

Allocation of goodwill to cash generating units 

For the purpose of examining the impairment of goodwill, cash-generating 
units to which goodwill has been allocated are grouped so that the level at 
which  the  impairment  is  examined  reflects  the  lowest  level  at  which  the 
goodwill is subject to monitoring for the purpose of internal reporting, but in 
any case is not greater than the activity segment. Goodwill acquired as part 
of  business  combinations  is  allocated  for  the  purpose  of  examining 
impairment to cash-generating units that are expected to yield benefits from 
the synergy of the combination. 

Recognition of an impairment loss 

An impairment loss of a cash-generating unit is recognized when the cash-
generating unit's book value, including goodwill, as far as relevant, exceeds 
its  recoverable  amount  and  is  imputed  to  income.  An  impairment  loss 
recognized for a cash-generating unit is allocated first to amortize the book 
value of goodwill attributed to the unit, and then to amortize the book value 
of the other assets in the cash-generating unit. For the purpose of allocating 
the loss from impairment, the value of the assets is not reduced below their 
fair value minus realization costs, their value in use (if determinable), or zero, 
whichever is higher. 

Loss  from  impairment  of  assets  that  is  created  as  a  result  of  a  one-time 
update  of  forecasts  for  the  coming  years  is  classified  in  the  income 
statement  under  the  section  "Impairment  loss".  On  the  other  hand,  loss 
from impairment of assets resulting from the ongoing adjustment of non-
current  assets  of  the  group  companies  to  their  fair  value  minus  exercise 
costs (created in light of the prospect of continued negative cash flow and 
negative  operating  value  of  those  companies)  is  classified  in  the  income 

 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

statement  under  the  same  sections  in  which  the  current  expenses  were 
classified for these assets. The aforementioned classification is more in line 
with the presentation method based on the essence of the expense and is 
also more suitable for understanding the Group's business. 

Accordingly, in the income statement, the continuous decrease in the value 
of broadcasting rights is shown as part of "General and operating expenses" 
while the continuous decrease in the value of items of PP&E, intangible assets 
and  capacity  usage  rights  is  presented  as  part  of  the  "Depreciation, 
amortization and impairment" expenses. 

Cancellation of impairment loss 

Loss from goodwill impairment cannot be cancelled. As for other assets for 
which impairment losses were recognized in previous periods, it is checked 
on each reporting date whether there are indicators that these losses have 
decreased  or  no  longer  exist.  An  impairment  loss  is  canceled  if  there  is  a 
change in the estimates used to determine the recoverable amount, only to 
the  extent  that  the  book  value  of  the  asset,  after  the  cancellation  of  the 
impairment  loss,  does  not  exceed  the  book  value  minus  depreciation  or 
amortization, which would have been determined if no impairment loss had 
been recognized. 

3.11. 

Employee benefits 

3.11.1. 

Post-employment benefits 

The Group has several post-employment benefit plans. The plans are usually 
funded  by  deposits  to  insurance  companies  and  are  classified  as  defined 
deposit plans as well as defined benefit plans. 

Defined deposit plans 

A defined deposit plan is a post-employment plan whereby the Group pays 
fixed  payments  to  a  separate  entity  without  having  any  legal  or  implied 
obligation to pay additional payments. 

The Group's obligations to deposit in a defined deposit plan are imputed as 
an expense to income in the periods during which the employees provided 
the services. 

Defined benefit plans 

The  Group's  net  liability,  which  refers  to  a  defined  benefit  plan  for  post-
employment benefits, is calculated for each plan separately by estimating the 
future amount of the benefit that the employee will receive in exchange for 
his  services  in  the  current  period  and  in  previous  periods.  This  benefit  is 
presented according to current value minus the fair value of the plan's assets. 
The calculations are made every year by a qualified actuary. The discount rate 
is determined according to the yield at the time of reporting on high-quality 
corporate debentures, whose currency is the same as the currency in which 
the benefit is paid or linked thereto, and whose maturity date is similar to the 
terms of the Group's liability. 

The net interest costs for a defined benefit plan are calculated by multiplying 
the net liability by the discount rate used to measure the liability for a defined 
benefit, as determined at the beginning of the annual reporting period. 

 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

The Group chose to present the interest costs that were credited to profit 
and loss, as part of the Financing expenses section. 

losses  and 

Remeasurement of the net defined benefit liability includes actuarial profits 
interest). 
return  on  plan  assets 
and 
Remeasurements  are  imputed  immediately,  through  other  comprehensive 
income, directly to surplus. 

(excluding 

the 

When there is an improvement or reduction in the benefits that the Group 
provides to employees, part of the increased or reduced benefits that refers 
to the past services of the employees is immediately recognized as income 
when the amendment or reduction of the plan occurs. 

3.11.2. 

Other long-term employee benefits 

The Group's liability for long-term employee benefits (such as an obligation 
for accrued vacation and sick days), which do not refer to post-employment 
benefit plans, is for the amount of the future benefit due to employees for 
services granted in the current period and in previous periods. The amount of 
these  benefits  is  presented  at  its  current  value.  The  discount  rate  is 
determined  according  to  the  yield  at  the  time  of  reporting  on  high-quality 
linked  corporate  debentures  whose  currency  is  the  shekel,  and  whose 
repayment date is similar to the terms of the Group's commitment. Actuarial 
changes are  imputed to the income statement in the period in which they 
were created. The actuarial changes resulting from a change in the discount 
rate are imputed to the Financing expenses/income section, while the other 
differences are imputed to Salaries expenses. 

3.11.3. 

Early retirement and severance benefits 

Severance benefits are recognized as an expense when the Group has made 
a  clear  commitment,  with  no  actual  possibility  of  cancellation,  to  dismiss 
employees  before  they  reach  the  accepted  retirement  date  according  to  a 
detailed formal plan. Benefits given to employees in voluntary retirement are 
imputed  as  an  expense  when  the  Group  offered  the  employees  a  plan 
encouraging voluntary retirement and the employees accepted the offer, or 
when the Company can no longer go back on its offer. 

The  expenses  for  early  retirement  and  dismissal  that  were  imputed  to 
income are presented in the Other operating expenses (income) Section. The 
actuarial changes resulting from a change in the discount rate of long-term 
benefits  for  early  retirement  and  dismissal  are  credited  to  the  financing 
expenses section, while the other actuarial changes are imputed to Other 
operating expenses (income). 

3.11.4. 

Short-term benefits 

Liabilities  for  short-term  employee  benefits  are  measured  on  a  non-
discounted  basis,  and  the  expense  is  imputed  when  the  related  service  is 
provided.  A  liability  for  short-term  employee  benefits  for  a  cash  bonus  is 
recognized at the amount expected to be paid, when the Group has a current 
legal or implied obligation to pay the said amount for service provided by the 
employee in the past, and the obligation can be reliably estimated. 

The classification of employee benefits, for measurement purposes, as short-
term benefits or as other long-term benefits is determined according to the 
forecast of when the benefits will be fully settled. 

 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

Classification of employee benefits as current or non-current benefits for the 
purpose of presenting them in the statement of financial position is carried 
out according to the date on which the liability is due. 

3.11.5. 

Share-based compensation transactions 

The  fair  value  at  the  time  the  employees  were  granted  warrants  for  the 
purchase of the company's shares was credited as a salaries expense at the 
same time as the increase in capital over the period in which the employees 
became  entitled  to  the  warrants.  The  company  presents  the  increase  in 
capital as part of the rights that do not confer control. 

For  share-based  compensation  grants  conditioned  on  performance 
conditions  that  constitute  market  conditions,  the  group  takes  these 
conditions into account in estimating the fair value of the equity instruments 
granted,  and  therefore  the  group  recognizes  the  expense  for  these  grants 
regardless of the existence of these conditions. 

The amount imputed as an expense is adjusted to reflect the number of share 
options that are expected to become vested. 

3.12. 

Provisions 

A provision is recognized when the Group has a current, legal or implied obligation, as a 
result of an event that occurred in the past, which can be reliably measured, and when 
it is expected that an inflow of economic benefits will be required to settle the obligation. 

3.12.1. 

Lawsuits 

The  handling  of  pending  lawsuits  is  in  accordance  with  IAS37  and  its 
accompanying  provisions.  According  to  the  provisions,  the  claims  are 
classified  according  to  groups  with  similar  characteristics,  according  to  the 
areas of probability of the realization of the risk exposures as detailed below: 

A.  Expected - probability above 50%. 
B.  Possible - probability more than unlikely and less than or equal to 50%. 
C.  Unlikely - probability less than or equal to 5%. 

With respect to claims for which the Group has aa legal or implied obligation 
as a result of an event that occurred in the past and whose realization is likely 
to  be  expected,  provisions  are  included  in  the  statements  which,  in  the 
opinion of the Group Management that is based, among other things, on its 
legal advisors handling those claims, are adequate under the circumstances 
of each case and this despite the fact that the said claims are denied by the 
Group  companies.  In  addition,  there  are  a  limited  number  of  legal 
proceedings,  most  of  which  were  received  recently,  the  chances  of  which 
cannot be assessed at this stage, and for that reason no provision was made 
for them. 

In  Note  17,  details  were  given  regarding  the  amount  of  the  additional 
exposure due to pending claims which are likely to be realized. 

3.12.2. 

Costs of dismantling and removing sites 

The provision for the obligation to dismantle and remove sites is recognized 
for  lease  agreements  in  which  Pelephone  has  an  obligation  to  return  the 
leased property to its original condition at the end of the lease period, after 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

dismantling and removing the site, as well as restoring the premises when 
necessary. The provision is measured by discounting the future cash flows at 
a risk-free discount rate that reflects the duration until the expected end of 
the contract by virtue of which Pelephone was required to dismantle the site. 
The book value of the provision is adjusted each period to reflect the passage 
of time that is recognized as financing expenses. 

3.12.3. 

Onerous contracts 

When  the  Group  anticipates  that  the  unavoidable  costs  of  a  contract  will 
exceed the economic benefits expected to be received from the contract, a 
provision  for  onerous  contracts  is  recognized.  The  provision  is  measured 
according to the present value of the projected cost of canceling the contract 
or the present value of the unavoidable costs (net of incomes) to maintain 
the contract, whichever is lower. Unavoidable costs are costs that the Group 
cannot avoid because it is bound by the contract. 

3.13. 

Incomes 

3.13.1. 

The Group recognizes  income when the customer obtains control over the 
promised goods or service. The income is measured according to the amount 
of consideration to which the Group expects to be entitled in return for the 
transfer of goods or services promised to the customer, apart from amounts 
collected for the benefit of third parties. 

The  model  for  recognizing  income  from  contracts  with  customers  includes 
five  steps  for  analyzing  transactions  in  order  to  determine  the  timing  and 
amount of income recognition: 

Identification of the contract with the customer 
Identification of separate performance obligations in the contract 

A. 
B. 
C.  Determining the transaction price 
D.  Allocation of transaction price to separate performance obligations 
E.  Recognition of income upon fulfillment of performance obligations 

3.13.2. 

Contract identification 

The Group handles a contract with a customer only when all of the following 
conditions are met: 

1.  The parties to the contract have approved the contract (in writing, orally, 
or  in  accordance  with  other  customary  business  practices)  and  are 
obligated to fulfill the obligations attributed to them 

2.  The Group can identify the rights of each party regarding the products or 

services that will be transferred 

3.  The Group can identify the terms of payment for the goods or services 

that will be transferred 

4.  The contract has a commercial nature (i.e., the risk, timing, and amount 
of the entity's future cash flows are expected to change as a result of the 
contract), and 
It is expected that the Group will collect the consideration to which it is 
entitled for the goods or services that will be transferred to the customer 

5. 

3.13.3. 

Performance obligation identification 

The Group evaluates the goods or services promised under a contract with a 
customer  at  the  time  of  entering  into  the  contract,  and  recognizes  as  an 

 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

obligation  to  fulfill  any  promise  to  deliver  to  the  customer  one  of  the 
following two: 

(1)  Goods or a service (or package of goods or services) that are separate; or 
(2)  A series of separate goods or services that are essentially the same and 

have the same pattern of transfer to the customer. 

3.13.4. 

Option to purchase additional goods or services 

An option that gives the customer the right to purchase additional goods or 
services constitutes a separate performance obligation in the contract only if 
the  option  provides  a  substantial  right  to  the  customer  that  he  would  not 
have received had he not entered into the original contract. 

3.13.5. 

Transaction price determination 

The  transaction  price  is  the  amount  of  consideration  to  which  the  Group 
expects  to  be  entitled  in  exchange  for  the  transfer  of  goods  or  services 
promised  to  the  customer,  apart  from  amounts  collected  in  favor  of  third 
parties.  When  determining  the  transaction  price,  the  Group  takes  into 
account  the  effects  of  all  of  the  following:  variable  consideration,  the 
existence  of  a  significant  financing  component  in  the  contract,  non-cash 
consideration and consideration payable to the customer. 

3.13.6. 

Existence of a significant financing component 

For the purpose of measuring the transaction price, Bezeq Group adjusts the 
amount of the promised return due to the effects of the time value of money 
if  the  timing  of  the  payments  agreed  between  the  parties  provides  the 
customer or the Group with a significant financing benefit. In these cases the 
contract contains a significant financing component. In assessing whether a 
contract contains a significant financing component, Bezeq Group examines, 
among other things, the expected duration between the time when the Bezeq 
Group delivers the promised goods or services to the customer and the time 
when the customer pays for these goods or services, as well as the difference, 
if any, between the amount of the promised consideration and the cash sale 
price of the promised goods or services. 

When there is a significant financing component in the contract, Bezeq Group 
recognizes  the  consideration  amount  using  the  discount rate  that  will  be 
reflected  in  a  separate  financing  transaction  between  itself  and  the 
customer at the time of engagement. The financing component is recognized 
as interest income or expenses during the period calculated according to the 
effective interest method. 

In cases where the gap between the date of receipt of payment and the date 
of delivery of the goods or service to the customer is a year or less, Bezeq 
Group  applies  the  practical  relief  stipulated  in  the  standard  and  does  not 
separate a significant financing component. 

3.13.7. 

Performance obligation fulfilment 

Income  is  recognized  when  the  Group  fulfills  a  performance  obligation  by 
transferring control of goods or a service promised to a customer. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

Measuring progress of performance obligation fulfilment 

The  Group  recognizes  income  over  time  by  measuring  progress  toward 
fulfillment in full of the performance obligation in a manner that reflects the 
Group's  performance  in  transferring  control  of  the  promised  goods  or 
services to the customer. 

3.13.8. 

Contract costs 

Additional  costs  of  obtaining  a  contract  with  a  customer,  such  as  sales 
commissions  paid  to  resellers  and  salespeople  employed  by  the  Group  for 
sales and upgrades, are recognized as an asset when it is expected that the 
Group will recover these costs. Costs to obtain a contract that would have 
been  incurred  regardless  of  whether  the  contract  was  obtained  are 
recognized as an expense when incurred, unless the customer can be charged 
for these costs. 

Costs  discounted  as  an  asset  are  amortized  to  the  income  statement  on  a 
systematic basis according to the expected duration of the subscribers and 
according  to  their  expected  average  churn  rate  according  to  the  type  of 
subscriber and the service received thereby (mainly in the range between 1 
and 4 years). 

In each reporting period, the Group examines whether the book value of the 
asset recognized as mentioned above exceeds the remaining amount of the 
consideration that the Bezeq Group expects to receive in exchange for the 
goods or services to which the asset refers, minus the costs directly related 
to  the  provision  of  such  goods  or  services  that  were  not  recognized  as 
expenses, and, if necessary, recognizes a loss from impairment in income. 

3.13.9. 

Principal supplier or agent 

When another party is involved in the provision of goods or services to the 
customer,  the  Group  examines  whether  the  essence  of  its  promise  is  a 
performance  obligation  to  provide  the  goods  or  services  defined  by  itself, 
meaning  that  the  Group  is  a  principal  supplier  and  therefore  recognizes 
income in the gross amount of the consideration, or acts for another party to 
provide these goods or services, meaning the Group is an agent and therefore 
recognizes income in the amount of the net commission. 

The  Group  is  a  primary  supplier  when  it  controls  the  promised  goods  or 
service before transferring them to the customer. Indicators that the Group 
controls the goods or services before they are transferred to the customer 
include, among others, the following: the Group is primarily responsible for 
fulfilling the promises in the contract; The Group has inventory risk before the 
goods or service have been delivered to the customer; And, the Group has 
discretion in setting prices for the goods or services. 

3.14. 

Government grants 

A government grant in respect of a frequency tender is initially recognized at fair value 
when there is reasonable assurance that it will be accepted and that the Group will meet 
the conditions that entitle their receipt. Government grants received for the purpose of 
purchasing  an  asset  are  presented  as  deferred  income  in  the  statement  of  financial 
position unfrozen to the income statement throughout the useful duration of the asset. 
The  income  unfreezing  is  recognized  in  the  Other  operating  income  section  of  the 
income statement. 

 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

3.15. 

Financing income and expenses 

Financing income mainly includes interest income accrued using the effective interest 
method for the sale of terminal equipment in installments, interest income from capital 
and changes in the fair value of financial assets presented at fair value through profit and 
loss. 

Financing expenses mainly include interest expenses and linkage on loans received and 
bonds issued, expenses for early repayment of the debt as well as financing expenses for 
employee benefits. 

In cash flow statements, interest received is presented under cash flows from investing 
activities. The Group chose to present the interest and linkage differences paid for loans 
and debentures as part of cash flows used for financing activities. 

3.16. 

Income tax expenses 

Income  tax  expenses  include  current  and  deferred  taxes.  Income  tax  expenses  are 
imputed to the income statement or to other comprehensive income if they arise from 
items that are recognized in other comprehensive income. 

Current taxes 

The current tax is the amount of tax expected to be paid on the taxable income for the 
year, when it is calculated according to the applicable tax rates according to the laws 
enacted or enacted de-facto at the time of the report. Current taxes also include changes 
in tax payments referring to previous years. 

Offsetting current tax assets and liabilities 

The Group offsets current tax assets and liabilities if there is an enforceable legal right to 
offset  current  tax  assets  and  liabilities,  and  there  is  an  intention  to  settle  current  tax 
assets and liabilities on a net basis, or if the current tax assets and liabilities are settled 
at the same time. 

Uncertain tax positions 

The provision for uncertain tax positions, including additional tax and interest expenses, 
is  recognized  when  it  is  more  likely  than  not  that  the  group  will  require  its  financial 
resources to settle the obligation. 

Deferred taxes 

The  recognition  of  deferred  taxes  refers  to  temporary  differences  between  the  book 
value  of  assets  and  liabilities  for  financial  reporting  purposes  and  their  value  for  tax 
purposes.  The  Group  does  not  recognize  deferred  taxes  for  the  following  temporary 
differences: 

Initial recognition of goodwill  

1. 
2.  Differences arising from investment in subsidiaries and affiliated companies, if it is 
not expected that they will be reversed in the foreseeable future and if the Group 
controls the date of reversal of the difference. 

Deferred  taxes  are  measured  according  to  the  tax  rates  expected  to  apply  to  the 
temporary differences at the time they will materialize, based on the laws that have been 
enacted or whose legislation has been completed de-facto as of the reporting date. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

A deferred tax asset is recognized in the books for transferred losses, tax benefits and 
deductible temporary differences, when it is expected that in the future there will be 
taxable income against which they can be utilized. The deferred tax assets are reviewed 
at  each  reporting  date,  and  if  it  is  not  expected  that  the  related  tax  benefits  will 
materialize, they are amortized (see also Note 7). 

Deferred tax assets that have not been recognized are revalued at each reporting date 
and recognized if the expectation has changed so that it is expected that in the future 
there will be taxable income against which it will be possible to utilize them. 

Offsetting deferred tax assets and liabilities 

The Group offsets deferred tax assets and liabilities if there is an enforceable legal right 
to offset current tax assets and liabilities, and they are attributed to the same taxable 
income taxed by the same tax authority in the same taxable company, which intends to 
settle  current  tax  assets  and liabilities  on  a  net basis,  or  if  the  current  tax  assets  and 
liabilities are settled at the same time. 

Presentation of tax expenses as part of a cash flow statement 

Cash flows arising from income taxes are classified in the cash flow statement as cash 
flows from operating activities, unless they can be specifically identified with investing 
activities and financing activities. 

3.17. 

Profit per share 

The Group presents basic and diluted profit per share data regarding its ordinary share 
capital. Basic profit per share is calculated by dividing the profit or loss attributable to 
the  Company's  ordinary  shareholders  by  the  weighted  average  number  of  ordinary 
shares outstanding during the year. 

Diluted profit per share is determined by adjusting the profit or loss attributable to the 
Company's ordinary shareholders and adjusting the weighted average of the ordinary 
shares  in  circulation  for  the  effects  of  all  potential  dilutive  ordinary  shares,  including 
warrants granted to employees. 

3.18. 

Dividend 

A liability relating to a dividend proposed or announced after the date of the statements 
is recognized only in the period in which the announcement was made (approval of the 
general meeting). In cash flow statements, a dividend paid is presented as a financing 
activity. 

3.19.  New standards implemented during the reported period: 

Amendment  to  IAS  37  "Provisions,  Contingent  Liabilities  and  Contingent  Assets" 
regarding onerous contracts (hereinafter: "the Amendment") 

As  of  January  1,  2022,  the  Group  implemented  the  amendment  to  IAS  37  regarding 
onerous  contracts.  According  to  the  amendment,  in  examining  whether  a  contract  is 
onerous, the costs for maintaining a contract that must be taken into account are costs 
that relate directly to the contract, which include the following costs: 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

A.  Additional costs; And 

B.  Allocation of other costs directly related to the performance of a contract (such as 
depreciation expenses of PP&E used both for the fulfillment of the contract under 
consideration and for other additional contracts). 

The implementation of the amendment had no effect on the Group's statements. 

3.20.  New standards not yet adopted: 

3.20.1. 

Amendment to IAS 1 "Presentation of Financial Statements: Classification of 
Liabilities  as  Current  or  Non-Current"  and  subsequent  amendment:  Non-
current liabilities with financial benchmarks 

The  amendment,  together  with  the  subsequent  amendment  to  IAS  1, 
replaces  certain  classification  requirements  of  liabilities  as  current  or  non-
current. The amendment will enter into force in reporting periods starting on 
January  1,  2024.  Early  application  is  possible.  The  amendment  and  the 
including  the 
subsequent  amendment  will  be  applied  retroactively, 
amendment  of  comparison  numbers.  The  Group 
is  examining  the 
consequences of implementing the amendment. 

3.20.2. 

Amendment  to  the  IAS  1  standard  -  Presentation  of  Financial  Statements: 
"Disclosure of Accounting Policies" 

In accordance with the amendment, companies are required to disclose their 
material accounting policies after the requirement to present their material 
accounting  policies  has  passed.  According  to  the  amendment,  information 
about the accounting policy is material if, when taken into account together 
with other information provided in the financial statements, it can reasonably 
be expected that it will influence decisions that the users of the statements 
make based on those statements. 
The amendment to IAS 1 also clarifies that information about the accounting 
policy may be material if, without it, the users of the statements would be 
prevented from understanding other material information in the statements. 
In  addition,  the  amendment  clarifies  that  there  is  no  need  to  disclose 
information about accounting policies that are not material. The amendment 
will be implemented for reporting periods beginning on January 1, 2023, with 
the  possibility  of  early  implementation.  The  Group  is  examining  the 
consequences of the amendment on the statements without the intention of 
early implementation. 

4. 

Cash and cash equivalents 

Cash and cash equivalents balance as of December 31, 2022 mainly includes deposits in banks for 
a period of up to 90 days as well as balances in current accounts. 

 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

5. 

Investments 

Shekel deposits in banks (1) 
Investment in securities 
Derivatives 
Foreign currency deposits in banks (2) 

(1) Deposits in shekels in banks, due until December 2023. 
(2) Deposits in US dollars in banks, due until March 2023. 

6. 

Trade and other receivables 

6.1. 

Composition of trade and other receivables: 

Customers* 

Open debts and checks regarding it 

Credit cards 

Income receivable 

Long-term customer current maturities 

Relate parties and interested parties 

Other receivables and current tax assets* 

Current tax assets 

Other receivables 

Expenses in advance 

Frequency grant to receive (see note 10.1) 

Long-term customers and other receivables* 

Customers – open debts 
Long-term  receivables  and  authorities  (mainly  for  real  estate 
sales)** 

December 
2022 

31, 

December 
2022 

31, 

NIS millions 
787 
159 
15 
12 

973 

NIS millions 
1,015 
99 
0 
20 

1,134 

December 
2022 

31, 

December 
2022 

31, 

NIS millions 

NIS millions 

673 

191 

242 

333 

1 

849 

473 

238 

297 

2 

1,440 

1,859 

28 

224 

37 

- 

289 

305 

155 

460 

56 

114 

36 
74 
280 

256 

177 

433 

* Customer balances are presented net of the provision for predicted credit losses. 
** See Note 6.6. 

2,189 

2,572 

6.2. 

The discount interest rates for long-term customers are in accordance with the credit 
risk estimate of the customers. The interest rates used by the Group for discount in 2022 
are 4.93%-2.36% (in 2021: 4.38%-2.49%). 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

6.3. 

Expected exercise dates of long-term customers and receivables: 

Expected repayment dates 

2024 

2025 

2026

 onwards 

December 31, 2022 

NIS millions 

242 

84 

134 

460 

6.4. 

Aging of customer debts as of the reporting date: 

December 31, 2022 

December 31, 2022 

Gross  customer 
balance 

Provision 
for 
predicted  credit 
losses 

Gross  customer 
balance 

Provision 
for 
predicted  credit 
losses 

NIS millions 

NIS millions 

NIS millions 

NIS millions 

1,621 

141 

15 

32 
1,809 

)7 (

 (24) 

 (7) 

 (26) 

 (64) 

1,922 

175 

56 

30 

2,183 

(4) 

(21) 

(20) 

(23) 

(68) 

Not in arrears 

Arrears up to 1 year 

Arrears 1-2 years 

Arears over 2 years 

6.5. 

The transactions in the provision for predicted credit losses during the year is as follows: 

Balance as of January 1 

Loss recognized from impairment 

Loan-loss 

Balance as of December 31 

2022 

2021 

NIS millions 

NIS millions 

68 

29 

)33 (

64 

80 

6 

(18) 

68 

6.6. 

The balance of long-term receivables and authorities include a balance of receivables in 
the amount of NIS 106 million for the permit fees and the improvement levy that Bezeq 
paid to the Israel Land Authority and the Or Yehuda Local Authority for the sale of the 
Sakia  complex  in  2019.  In  addition,  Bezeq  provided  guarantees  in  the  amount  of 
approximately NIS 126 million in accordance with the requirements of the Israel Lands 
Authority and the Or Yehuda local authority to pay the balance of the permit fees and 
the improvement levy. 

In its 2019 statements, Bezeq recognized share capital gains from the sale of the Sakia 
complex in the amount of NIS 403 million before tax. The recognition of the share capital 
gains is based on Bezeq's estimates of the final amount to be paid to the authorities. It 
should  be  noted  that  to  the  extent  that  Bezeq's  Management  estimates  do  not 
materialize, the final  share capital gains before tax will range from approximately NIS 
250 million to approximately NIS 450 million. 

A legal proceeding is underway between the parties from 2021. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

7. 

Income tax 

7.1. 

Corporate tax rate 

The current taxes for the reporting periods and deferred tax balances as of December 
31, 2022 are calculated in accordance with the tax rate relevant to the Group, which is 
23%. 

7.2. 

Final tax assessments 

7.2.1. 

The Company has final tax assessments up to and including 2018. 

7.2.2.  Bezeq has final tax assessments up to and including 2018. 

On September 15, 2016, at the same time as the signing of an assessment agreement 
that ended the dispute between Bezeq and the assessor regarding financing income in 
respect of the owner's loans to DBS, the Tax Authority gave permission for tax purposes 
to perform a merger of DBS with and into Bezeq, in accordance with the provisions of 
Article 103b to the Income Tax Ordinance. According to the approval, DBS losses at the 
time of the merger were offset against the profits of Bezeq (the absorbing Company), an 
amount will not be allowed to be offset if it exceeds approximately 12.5% (spread over 
8 years) of the total losses of the transferring company and the absorbing company or 
50% of the absorbing company's taxable income in that tax year before offsetting the 
loss from previous years, whichever is lower. 

The approval is given in accordance with the applicable tax laws at the time it is given. 
Without deducting from the amount of losses stipulated in the assessment agreement, 
if  there  is  a  change  in  the  applicable  tax  laws,  the  Tax  Authority  will  re-examine  the 
taxation  decision  according  to  the  tax  laws  that  will  apply  at  the  time  of  the  merger. 
However,  it  was  clarified  that  the  approval  is  valid  until  December  31,  2019.  The  Tax 
Authority  will  extend  the  validity  of  the  approval  by  an  additional  year,  every  year, 
subject to a declaration by Bezeq and DBS that there has been no material change in 
their  business  and  in  the  conditions  of  the  taxation  decision,  and  subject  to  the 
interpretation given to the tax laws, provided that said interpretation has been published 
in writing. A change in the tax laws that does not require a change in the approval will 
not cause a change in it. The validity of the taxation decision has been extended several 
times since then. 

On December 11, 2022, Bezeq received a letter from the Tax Authority extending, at the 
request  of  Bezeq,  the  validity  of  the  taxation  decision  for  one  more  year,  i.e.  until 
December  31,  2023.  It  should  be  noted  that  the  Tax  Authority's  letter  included  a 
statement similar to the one included in its letter from the previous year according to 
the  fact  that  in  light  of  the  fact  that  there  have  been  no  substantial  developments 
regarding the cancellation of the structural separation between Bezeq and DBS from the 
date of the taxation decision to the date of this extension, and in light of the long time 
that has passed since the date of the taxation decision, and after examining all Bezeq’s 
claims on the subject, the Tax Authority will consider not extending the validity of the 
taxation  decision  beyond  December  31,  2023,  as  long  as  there  are  no  material 
developments in 2023 in regards to the cancellation of the structural separation between 
Bezeq and DBS. 

The  balance  of  DBS  losses  for  tax  purposes,  as  of  December  31,  2022,  amounts  to 
approximately NIS 5.3 billion. See Note 7.6 below regarding deferred taxes that were not 
recognized for transferrable losses. 

 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

7.2.3. 

Pelephone has final tax assessments up to and including the year 2018. 

7.2.4. 

Bezeq  International  has  final tax  assessments  up  to  and  including  the  year 
2019. 

7.2.5. 

DBS has final tax assessments up to and including the year 2016. 

7.2.6. 

Bezeq Online has final tax assessments up to and including the year 2017. 

7.3. 

Income tax expenses 

Current tax expenses 

Expenses for the current year 

Adjustments for previous years 

Total current tax expenses 
Deferred tax expenses 

Creating and reversing other temporary differences 
Exercise  (creation)  of  deferred  taxes  for  losses  for  tax 
purposes from the sale of a subsidiary 

Total deferred tax expenses 

Income tax expenses 

Year ended December 31 

2022 

2021 

2020 

NIS millions 

NIS millions 

NIS millions 

293 

- 

293 

43 

- 

43 

336 

289 

14 

303 

42 

37 

79 

382 

273 

50 

323 

48 

(37) 

11 

334 

7.4. 

Adjustment between the theoretical tax on the profit before income taxes and the tax 
expenses 

Year ended December 31 

2022 

2022 

2022 

NIS millions 

NIS millions 

NIS millions 

Profit (loss) before income taxes 

Statutory tax rate 

Income taxes according to the statutory tax rate 
Impairment of assets for which no deferred tax assets were 
created 
Expenses  that  are  not  recognized  for  tax  and  other 
purposes, as well as losses for which deferred taxes were 
not incurred, net 
Creation of deferred taxes for losses for tax purposes from 
the sale of a subsidiary 

Write-off of tax provision for previous years 
Write-off  of  a  tax  asset  due  to  failure  to  observe  future 
profits 
Income tax expenses 

1,

227

23% 

282 

- 

54 

- 

- 

- 
336 

1,378 

23% 

317 

- 

65 

- 

- 

- 
382 

1,234 

23% 

284 

47 

16 

)37(

)7(

31 
334 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

7.5. 

Recognized deferred tax assets and liabilities and the changes therein 

Deferred  tax 
for 
assets 
employee 
benefit plans   
NIS millions 

Deferred  tax 
liabilities  for 
and 
PP&E 
intangible 
assets 
NIS millions 

Tax  asset  for 
a  loss  for  tax 
purposes 
from  the  sale 
of 
a 
subsidiary 
NIS millions 

Other 
deferred 
taxes 
NIS millions 

Total 
NIS millions 

261 

(

)538

37 

58 

(

)182

)11(

1 

251 

)23 (

)6 (

222 

)9(

- 

(

)547

11 

- 

 (
)536

)37(

- 

- 

- 

- 

- 

)22(

)12(

24 

)31 (

2 

)5 (

)79(

)11(

(

)272

)43 (

)4 (

 (
)319

to 

imputed 

Balance  as  of  January  1, 
2021 
Changes 
income: 
Creation  and  reversal  of 
temporary differences 
Changes  imputed  to  other 
comprehensive income 
Balance as of December 31, 
2021 
Changes 
income: 
Creation  and  reversal  of 
temporary differences 
Changes  imputed  to  other 
comprehensive income 
Balance as of December 31, 
2022 

imputed 

to 

Book value 

Deferred tax assets 
Deferred tax liabilities 
Balance as of 

December 31 
2022 
NIS millions 
- 
)319
 (
 (
)319

December 31 
2021 
NIS millions 
24 
(
)296
(
)272

7.6. 

Unrecognized deferred tax assets and liabilities 

Bezeq received approval from the Tax Authority to utilize losses carried forward for tax 
purposes when merging with DBS. The approval is conditioned, among other things, on 
receiving  approval  from  the  Ministry  of  Communications  to  cancel  the  structural 
separation between the two companies. The validity of the approval requires that it be 
extended by the Tax Authority for an additional year every year until the actual merger, 
as described in Note 7.2.1 above. 

As of the date of the statements, no deferred taxes were recognized in respect of the 
losses of DBS transferred for tax purposes in the amount of approximately NIS 5.2 billion, 
and no deferred taxes were recognized in respect of a loss from the impairment of assets 
in  DBS  and  Bezeq  International  (see  Note  10),  since  their  exercise  is  not  expected 
according to the Group's estimate as of the date of the statements. 

In addition, in the calculation of the deferred taxes, the taxes that would apply in the 
event of the exercise of the investment in subsidiaries were not recognized, since the 
Group  intends  and  has  the  ability  to  hold  these  investments.  Also,  no  deferred  taxes 
were  recognized  for  the  distribution  of  profits  in  these  subsidiaries  since  the  inter-
company dividends are not subject to tax. Also, the Company does not create deferred 
taxes for its transferred losses. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

8. 

Leases 

As part of the lease agreements, the Group mainly leases cellular communication sites, buildings 
(including offices, warehouses, communication rooms and sales points), and vehicles. 

8.1. 

Right-of-use assets 

Cost 
Balance as of January 1, 2021 
Additions* 
Subtractions 
canceled agreements 

for 

terminated  or 

terminated  or 

Balance as of December 31, 2021 
Additions* 
Subtractions 
for 
Balance as of December 31, 2022 
Amortizations and impairment losses 
Balance as of January 1, 2021 
Amortization for the year 
Subtractions 
canceled agreements 

terminated  or 

for 

for 

Changes in agreements and others 
Impairment loss 
Balance as of December 31, 2021 
Amortization for the year 
Subtractions 
canceled agreements 
Changes in agreements and others 
Impairment loss 
Balance as of December 31, 2021 
Book value 
As of January 1, 2021 

terminated  or 

As of December 31, 2021 

As of December 31, 2022 

Communicat
ion sites 

Structures  

Vehicles 

Total 

NIS millions 

NIS millions 

NIS millions 

NIS millions 

1,190 
155 

(83) 
1,262 
111 
)85 (
1,288 

415 
168 

(68) 
(5) 
- 
510 
156 

)73 (
)8 (
- 
585 

775 

752 

703 

1,095 
149 

(50) 
1,194 
90 
)17 (
1,267 

218 
106 

(27) 
1 
- 
298 
111 

)15 (
)1 (
- 
393 

877 

896 

874 

325 
126 

(120) 
331 
107 
)46 (
392 

173 
118 

(118) 
(23) 
1 
151 
129 

)44 (
)11 (
)2 (
223 

152 

180 

169 

2,610 
430 

(253) 
2,787 
308 
)148
 (
2,947 

806 
392 

(213) 
(27) 
1 
959 
396 

 (
)132
)20 (
)2 (
1,201 

1,804 

1,828 

1,746 

* Additions for new agreements and changes to existing agreements. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

8.2. 

Lease liabilities 

Communication 
sites 

Structures  

Vehicles 

Total 

NIS millions 

NIS millions 

NIS millions 

NIS millions 

Balance as of January 1, 2021 
Additions* 

833 
162 

Subtractions   
Financing expenses for lease obligations  17 

(14) 

Lease payments 

Balance as of December 31, 2021 
Additions* 
Subtractions   
Financing expenses for lease obligations  17 
Lease payments 
Balance as of December 31, 2022 

118 
 (16) 

784 

 (169) 

(164) 
834 

Book value as of December 31, 2021 
Current maturities of lease liabilities 

Long-term lease liabilities 

Balance as of December 31, 2021 

Book value as of December 31, 2022 
Current maturities of lease liabilities 
Long-term lease liabilities 

250 

584 
834 

225 
559 

895 
145 

(24) 
21 

(102) 
935 

93 
 (2) 

24 
 (124) 

926 

113 

822 
935 

110 
816 

Total balance as of December 31, 2021 
* Additions for new agreements and changes to existing agreements. 

784 

926 

179 
150 

(2) 
2 

(121) 
208 

115 
- 

2 
 (127) 

198 

103 

105 
208 

121 
77 

198 

1,907 
457 

(40) 
40 

(387) 
1,977 

326 
 (18) 

43 
 (420) 

1,908 

466 

1,511 
1,977 

456 
1,452 

1,908 

8.3. 

Analysis of due dates for the Group's lease obligations (including principal and interest 
to be paid) 

Expected repayment dates 

Up to 1 year 

1-5 years 

Over 5 years 

Total 

December 31, 2021 

NIS millions 

496 

880 

785 

2,161 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

8.4. 

Options for ending or extending a lease 

In most of its leases, the Group assumed that it was reasonably certain that the extension 
option  contained  in  the  agreements  would  be  used,  and  therefore  there  were  no 
material obligations for leases that were not presented in the statements. Most lease 
agreements  include  an  option  to  cancel  the  agreement  with  advance  notice  and/or 
payment  of  a  fine  as  stipulated  in  the  agreements.  The  Group  assumed  that  it  was 
reasonably certain that the cancellation options would not be exercised. 

8.5. 

Information regarding material lease agreements that have not yet been included in 
the measurement of the lease assets and liabilities 

IIF  Bnei  Zion  Limited  Partnership 

On  October  7,  2021,  a  hosting  services  agreement  was  signed  between  Bezeq 
International  and  ServerFarm 
(hereinafter: 
"ServerFarm"),  according  to  which  ServerFarm  will  provide  Bezeq  International  with 
hosting services in a server farm facility established by it. The server farm is expected to 
be used to provide hosting services to business customers. The delivery date is divided 
into  two  phases,  the  first  phase  is  expected  to  be  delivered  in  March  2023,  and  the 
second phase is expected to be delivered in March 2024. The term of the agreement is 
15  years,  and  there  are  options  for  extension  until  2047.  The  nominal  cost  of  the 
agreement (without the option period) is approximately NIS 227 million. 

 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

9. 

PP&E 

Cost 
Balance as of January 1, 
2021 
Additions 
Subtractions 
Transfer from assets held 
for sale 
Balance as of December 
31, 2021 
Additions 
Subtractions 
Balance as of December 
31, 2022 
Depreciation and 
impairment losses 
Balance as of January 1, 
2021 
Depreciation for the year 
Subtractions 
Impairment (cancellation 
of impairment) 
Transfer from assets held 
for sale 
Balance as of December 
31, 2021 
Depreciation for the year 
Subtractions 
Impairment (cancellation 
of impairment) (see Note 
10) 
Balance as of December 
31, 2022 
Book value 

Cables and landline 

Landline and 

and international 

international network 

network 

Equipment and 

infrastructure 

for multi-

Office equipment, 

Land and 

equipment (switching, 

communication 

Cellular 

channel 

Subscriber 

computers and 

structures 

transmission, power) 

infrastructure 

network 

television 

equipment 

vehicles 

Total 

NIS millions 

1,311 
76 
(126) 

2,876 
248 
(185) 

11,945 
426 
(29) 

3,275 
136 
(2) 

1,593 
115 
(301) 

1,868 
332 
(336) 

21 

- 

- 

- 

- 

- 

1,282 
43 
 (11) 

2,939 
229 
 (429) 

12,342 
433 
 (22) 

3,409 
145 
 (2) 

1,407 
126 
 (200) 

1,864 
327 
 (380) 

813 
71 
(66) 

- 

818 
79 
 (316) 

23,681 
1,404 
(1,045) 

21 

24,061 
1,382 
 (1,360) 

1,314 

2,739 

12,753 

3,552 

1,333 

1,811 

581 

24,083 

1,007 
22 
(39) 

13 

20 

1,023 
26 
 (3) 

1,611 
229 
(185) 

9 

- 

1,664 
222 
 (429) 

13 

5 

1,059 

1,462 

9,145 
182 
(29) 

(1) 

- 

9,297 
200 
 (22) 

 (5) 

9,470 

2,800 

3,045 

3,283 

2,594 
177 
(1) 

- 

- 

2,770 
162 
 (1) 

1,490 
45 
(301) 

77 

- 

1,311 
50 
 (
192

)

1,086 
278 
(317) 

8 

- 

1,055 
307 
 (373) 

 - 

60 

19 

2,931 

1,229 

1,008 

681 

639 

621 

103 

96 

104 

782 

809 

803 

617 
60 
(65) 

17 

- 

629 
60 
 (320) 

13 

382 

196 

189 

199 

17,550 
993 
(937) 

123 

20 

17,749 
1,027 
 (1,340) 

105 

17,541 

6,131 

6,312 

6,542 

As of January 1, 2021 

304 

As of December 31, 2021 

259 

As of December 31, 2022 

255 

1,265 

1,275 

1,277 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

9.1. 

9.2. 

9.3. 

9.4. 

The residual value of the Group's copper cables is determined based on a valuation at 
the end of each quarter. The value of the remainder stands at a total of approximately 
NIS  234  million  as  of  December  31,  2022  and  approximately  NIS  237  million  as  of 
December 31, 2021. 

The  Group  companies  examined  the  duration  of  the  PP&E  within  the  framework  of 
depreciation  committees  in  order  to  determine  the  estimated  duration  of  their 
equipment. Following the findings of the depreciation committees, immaterial changes 
were made to the estimated duration of certain assets. The aforementioned change had 
no material effect on the Group's depreciation expenses. 

Most of the real estate assets used by Bezeq are under a discounted lease from the Israel 
Lands Authority starting in 1993 for a period of 49 years, with an option to extend for 
another 49 years. The lease rights are amortized over the lease term. 

On September 14, 2020, Bezeq's  Board of Directors approved the launch of a plan to 
deploy the fiber network. Following the decision of the Board of Directors, Bezeq began 
deploying fiber to buildings, including the deployment of vertical equipment in buildings, 
and on March 14, 2021 announced the launch of services to its customers over the fiber 
network. It should be noted that the connection of customers will be done gradually. 

On May 25, 2021, Bezeq's Board of Directors approved Bezeq's fiber deployment plan 
and  its  submission  to  the  Ministry  of  Communications  in  accordance  with  the 
Communications Law. As part of the plan, Bezeq is expected to deploy and operate an 
ultra-fast  fiber  network  that  will  cover  approximately  76%  of  the  Israel’s  population 
(according to Bezeq, approximately 80% of households). 

On  May  31,  2021,  Bezeq  submitted  to  the  Ministry  of  Communications  the  list  of 
statistical  areas  in  which  it  chose  to  deploy  as  stated,  and  on  June  15,  2021,  Bezeq 
received an amendment to the Bezeq license regarding the determination of advanced 
network deployment obligations ("the amendment to the license"). 

On October 3, 2022, the Minister of Communications approved Bezeq's request to allow 
it to deploy an advanced network and provide Bezeq service over it in statistical areas 
additional to the areas specified in the Bezeq license, and to amend the Bezeq license 
accordingly. This is a deployment in 151 additional areas, which include about 60,000 
households. As detailed in the decision of the Minister of Communications, the rate of 
households  in  Bezeq's  deployment  areas  is  82.5%,  and  this  is  an  addition  of 
approximately  2.3%  to  this  rate,  so  that  the  updated  rate  of  households  in  Bezeq's 
deployment areas will be approximately 84.7%. 

The  amendment  to  the  license  includes,  among  other  things,  the  milestones  for 
completing the network deployment within six years from the determined date (March 
14, 2021). For this matter, see also Note 18.7 regarding the Group companies’ obligation 
to pay to the incentive fund. 

9.5. 

In accordance with the Communications (Bezeq and Broadcasting) Decree (establishing 
an  essential  service  provided  by  "Bezeq"  the  Israel  Communications  Company  Ltd.), 
1997-1997, the approval of the Prime Minister and the Minister of Communications is 
required for the transfer of rights in certain assets of Bezeq (among others, switches, 
cable network, transmission network and databases and information). 

9.6. 

Regarding liens in connection with loans and credit, see Note 13. Regarding additional 
liens, see Note 19. 

9.7. 

For contracts for the purchase of PP&E, see Note 18. 

 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

10. 

Intangible assets 

Right 

to 

use 

Computer 

cellular 

software 

and 

communication 

Customer 

and 

Goodwill 

licenses 

frequencies 

brand relations 

Others 

Total 

NIS millions 

NIS millions 

NIS millions 

NIS millions 

NIS millions 

NIS millions 

and 

Cost 
Balance  as  of  January  1, 
2021 
Purchases  or  additions 
from self-development 
Subtractions 
Balance as of December 31, 
2021 
Purchases  or  additions 
from self-development 
Subtractions 
Balance as of December 31, 
2022 
Amortizations 
impairment losses 
Balance  as  of  January  1, 
2021 
Depreciation for the year 
Subtractions 
Impairment 
(see  Notes 
10.2, 10.4 and 10.5 below) 
Balance as of December 31, 
2021 
Depreciation for the year 
Subtractions 
Impairment 
(see  Notes 
10.2, 10.4 and 10.5 below) 
Balance as of December 31, 
2022 
Carrying amount 

3,069 

2,582 

566 

7,479 

 - 
 - 

237 
)40(

 - 
 - 

 - 
 - 

3,069 

2,779 

566 

7,479 

9* 
 - 

229 
 (
152

)

 - 
 - 

 - 
 - 

3,078 

2,856 

566 

7,479 

1,510 
 - 
 - 

 - 

1,510 
 - 
 - 

 - 

2,229 
141 
)40(

91 

2,421 
137 
 (
152

)

87 

1,510 

2,493 

331 
22 
 - 

 - 

353 
21 
 - 

 - 

374 

235 

213 

192 

6,358 
 - 
 - 

 - 

6,358 
 - 
 - 

 - 

6,358 

1,121 

1,121 

1,121 

As of January 1, 2021 

1,559 

As of December 31, 2021 

1,559 

As of December 31, 2022 

1,568 

353 

358 

363 

* See Note 12.3.3. 

81 

 - 
 - 

81 

7 
 - 

88 

81 
 - 
 - 

 - 

81 
 - 
 - 

 - 

81 

 - 

 - 

7 

13,777 

237 
)40(

13,974 

245 
 (
152

)

14,067 

10,509 
163 
)40(

91 

10,723 
158 
 (
152

)

87 

10,816 

3,268 

3,251 

3,251 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

10.1. 

Right to use cellular communication frequencies 

In 2020, Pelephone won a cluster of frequencies as part of the tender for mobile radio 
telephone services with advanced bandwidths, at a total cost of NIS 88.2 million. The 
payment  was  made  in  September  2022.  In  September  2020,  upon  receiving  the 
frequencies, Pelephone began to operate the frequencies. In addition, according to the 
tender rules, Pelephone won a 5G network deployment grant in the amount of NIS 74 
million. The aforementioned grant was received in November 2022. 

10.2. 

Impairment examination of cash generating units 

10.2.1. 

For the purpose of testing for impairment, the goodwill was attributed to the 
Group's activity segments as follows: 

Landline interior communication (Bezeq) (see Note 10.4) 
Bezeq international services (see Note 12.3.3) 

December 
2022 

31, 

December 
2021 

31, 

NIS millions 
1,559 
9 

1,568 

NIS millions 
1,559 
- 

1,559 

10.2.2. 

The composition of the impairment loss recognized by the Group during the 
years 2020-2022: 

In  2020,  a  loss  (loss  cancellation)  recognized  from  the  impairment  of 
Pelephone’s  and  Bezeq  International's  assets  resulting  from  a  one-time 
update  of  forecasts  for  the  coming  years  was  classified  in  the  income 
statement under the "Impairment loss" section. A loss from impairment of 
assets that resulted from the continuous adjustment of non-current assets 
(of  DBS  in  2020-2022  and  Bezeq  International  in  2021-2022),  to  their  fair 
value minus selling costs, was classified in the income statement under the 
same  sections  in  which  the  current  expenses  were  classified  in  respect  of 
these assets, as detailed in Notes 10.5 and 10.6 below. 

2022 

2021 

2020 

NIS millions 

NIS millions 

NIS millions 

Impairment  loss  in  the  Bezeq  International 
services sector (see Note 10.6 below) 

Cancellation of an impairment loss in respect 
of Walla  

Cancellation of impairment loss in the cellular 
communications segment (see Note 10.3) 

- 

- 

- 

- 

- 

- 

- 

- 

279 

(14) 

(257) 

8 

10.3. 

Impairment examination of the cellular communications segment (Pelephone) 

Due  to  the  existence  of  an  asset  with  an  indefinite  duration  (a  brand),  the  Company 
examined the recoverable amount of the cellular communication cash-generating unit 
as of December 31, 2021. 

The value in use of a cellular communication cash-generating unit as of December 31, 
2022 was calculated using the method of discounting future cash flows (DCF), based on 
the forecast of cash flows from the activity for a period of five years from the end of the 
current period, and with the addition of scrap value (representative year). The cash flow 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

forecast is based, among other things, on Pelephone's performance in recent years and 
estimates regarding the expected trends in the cellular market in the coming years (level 
of competition, level of prices, regulation and technological developments). 

A central assumption underlying the forecast is that the prevailing competition in the 
market will continue with high intensity in the short term, and that a stabilization and a 
certain  increase  in  the  price  level  will  occur  in  the  medium-long  term.  The  income 
forecast  is  based  on  assumptions  regarding  the  status  of  Pelephone  subscribers,  the 
average income per subscriber and the volume of end equipment sales. The forecast of 
expenses and investments is based, among other things, on assumptions regarding the 
status of Pelephone employees and the salaries expenses derived from them, while the 
rest of the operating expenses and the level of investments have been adjusted to the 
projected scope of Pelephone's activities. 

The nominal cost of equity used in the valuation is 10% after tax (before tax 12.4%). In 
2021 the discount rate is 9% after tax (before tax 11.1%). Also, a permanent growth rate 
of 1.5% was assumed (in 2021 - 1.5%). 

The valuation is sensitive to changes in the permanent growth rate and the discount rate. 
Also, the valuation is sensitive to the net flow in the representative year in general, and 
to the assessment of the ARPU (average income per subscriber) level and the status of 
the subscribers at the end of the forecast range (and in the terminal year) in particular 
(a change of NIS 1 in ARPU throughout the forecast years results in a change in enterprise 
value in the amount of about NIS 318 million, a change of 100k subscribers throughout 
the years of the forecast (and in the terminal year) results in a change in the enterprise 
value in the amount of about NIS 498 million). 

The  valuation  was  conducted  by  an  external  valuator.  Based  on  the  valuation  as 
explained  above,  Pelephone's  recoverable  amount  amounted  to  approximately  NIS 
2,533 million, compared to the book value in the Company's books of approximately NIS 
1,395 million. Therefore, the Company was not required to perform amortization for the 
impairment of the cellular communication cash-generating unit. 

10.4. 

Impairment examination of landline interior communication goodwill (Bezeq) 

The  balance  of  goodwill  attributed  to  the  landline  interior  communication  cash-
generating unit is NIS 1,559 million. Therefore, the Company examined the recoverable 
amount of the landline interior communication cash-generating unit as of December 31, 
2022. 

The  value  in  use  for  the  Bezeq  Group  of  the  landline  interior  communication  cash-
generating unit is calculated using the discounting future cash flows (DCF) method, based 
on the forecast of cash flows from the activity for a period of five years from the end of 
the current period, and with the addition of scrap value (representative year). 

The cash flow forecast is based, among other things, on the Company's performance in 
recent years and assessments regarding the expected trends in the landline market in 
the  coming  years  (level  of  competition,  retail  and  wholesale  price  levels,  regulatory 
aspects and technological developments). 

The  main  assumptions  underlying  the  forecast  are:  a  decrease  in  incomes  from 
telephony (a result of a decrease in the number of lines, erosion in the consumption of 
call  minutes  per  line,  as  well  as  the  effect  of  the  decision  of  the  Ministry  of 
Communications  regarding  the  determination  of  maximum  rates  for  the  Company's 
retail telephony services), growth in incomes from Internet (supported by the growth of 
the market, the establishment of Internet services through the fiber network, and the 
elimination  of  the  separation  between  broadband  infrastructure  service  and  Internet 

 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

access service), erosion in incomes from data communication and transmission (due to 
an  expected  decrease  in  transmission  incomes  from  ISP  companies  and  despite  an 
expected  consistent  growth  in  incomes  from  data  communication  services),  and 
moderate  growth  in  cloud  and  digital  incomes.  The  operating,  sales,  marketing  and 
investment expenses were adjusted to the scope of the sector's activity and included 
assumptions  regarding  the  status  of  the  company's  employees  and  the  wage  and 
retirement  expenses  derived  from  them  and  assumptions  regarding  the  rate  of 
deployment of the fiber infrastructure. 

The nominal cost of equity used in the valuation is 8% after tax (before tax 10.5%). In 
2021 the discount rate is 7% after tax (before tax 8.3%). Also, a permanent growth rate 
of 1% was assumed (in 2021 - 1%). 

The valuation was conducted by an external valuer. Based on the valuation as explained 
above,  Bezeq's  enterprise  value  amounted  to  approximately  NIS  17,819  million, 
compared  to  the  value  in  the  company's  books  in  the  amount  of  NIS  10,550  million. 
therefore the Group was not required to make a reduction for the decrease in value of a 
cash-generating unit of the landline interior communications segment. 

10.5. 

Impairment of the multi-channel TV segment (DBS) 

At the end of 2022, DBS updated its forecasts for the following years, paying attention 
to the trends and changes in its operation environment. The value in use for Bezeq Group 
of the multi-channel TV cash-generating unit as of December 31, 2022 was calculated 
using the method of discounting future cash flows (DCF), based on the DBS cash flow 
forecast  up  to  and  including  the  year  2027,  and  with  the  addition  of  scrap  value 
(representative year). The nominal capital cost used in the valuation is 10% (after and 
before tax) (in 2021 - 8.5%). Also, a permanent growth rate of 1% was assumed (in 2021 
- 1%). 

The cash flow forecast was based, among other things, on DBS's performance in recent 
years and assessments regarding the expected trends in the television market for the 
coming  years,  including  the  development  of  technology,  consumer  preferences, 
competitors and the level of competition, the level of prices and regulatory obligations. 

A central assumption underlying the forecast is that the relevant future technology will 
be  interactive  and  two-way,  and  that  the  satellite  product  will  be  replaced  by  an  IP 
product (television broadcasts via the Internet) over time due to the technological gap 
between  satellite  and  IP  and  the  customer  experience  and  the  lower  operating  and 
maintenance costs of IP. As a result, the multi-year forecast reflects a planned outline of 
a  gradual  migration  process  (from  satellite  transmission  to  distribution  of  broadcasts 
based on the Internet network) and accordingly, a gradual replacement of the satellite 
converters  with  IP  converters,  the  upgrading  of  the  transmission  infrastructure,  the 
construction  of  a  support  system  for  customer  service,  and  the  adjustment  of  the 
content contracts for OTT (Over The Top) transmissions. As stated above, the forecast 
period reflects the period of transition from satellite transmission to the distribution of 
broadcasts  based  on  the  Internet  until  the  satellite  is  completely  removed.  These 
circumstances, along with an expectation of a high level of competition throughout the 
entire forecast period and a relatively rigid expense structure, led to an expectation of 
operating losses and negative cash flows in some of the forecast years. 

On  June  30,  2022,  DBS  launched  the  ISP  activity,  an  activity  focused  on  offering 
integrated TV and fiber internet packages to its customers. Accordingly, throughout the 
years of the forecast, a positive contribution to incomes from the sale of combined TV 
and Internet packages is expected. 

 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

Based on the valuation, which was performed by an external valuator, as of December 
31, 2022, the value of DBS's activities is negative and lower than the book value as well 
as the fair value of its assets and liabilities, net. 

In  light  of  the  negative  value  of  the  activity  as  determined  in  the  valuation  as  of 
12.31.2022, DBS has reduced its assets up to the net fair value of these assets. 

Therefore,  in  2022,  the  group  recognized  an  impairment  loss  in  the  amount  of 
approximately NIS 275 million. The impairment loss was attributed to PP&E, broadcast 
rights, intangible assets, advance expenses and rights-of-use of leased assets, as detailed 
below, and is included in the Depreciation, amortization and impairment expenses item, 
as well as in the General and operating expenses section of the income statement. 

The following are details regarding the value of DBS activities and the fair value of the 
assets  and  liabilities,  net,  as  determined  by  an  external  valuator  and  recognized 
impairment losses: 

DBS 
enterprise 
value  (according  to 
the DCF method) 

Fair  value  of  DBS 
assets 
and 
liabilities, net 

Book  value  of  DBS 
and 
assets 
liabilities, 
net 
before  recognition 
of impairment 

Impairment 
loss 

NIS millions 

NIS millions 

NIS millions 

NIS millions 

 (103) 

 (88) 

 (18) 

 (70) 

149(

)

)81(

(20) 

152(

)

115(

)

(36) 

282(

)

125(

)

(60) 

(271) 

(109) 

)61(

)79(

)65(

 (

275

)

(288) 

As of December 31, 2022 
and for the period of 
three months that ended 
on that date 

As of September 30, 
2022 and for the period 
of three months that 
ended on that date 
(unaudited) 

As of June 30, 2022 and 
for the period of three 
months that ended on 
that date (unaudited) 

As of March 31, 2022 
and for the period of 
three months that ended 
on that date (unaudited) 

Total impairment 
recognized in 2022 

As of December 31, 2021 
and for the year that 
ended on that date 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

The following is a breakdown of the allocation of impairment loss to DBS assets: 

2022 

2021 

2020 

NIS millions 

NIS millions 

NIS millions 

Broadcast rights - minus used rights * 

149 

PP&E ** 

Intangible assets ** 

Other receivables (advance expenses) * 

Rights-of-use of leased properties ** 

76 

45 

3 

2 

Total impairment recognized in the year 

275 

146 

91 

48 

4 

)1(

288 

170 

112 

29 

13 

- 

324 

* The expense was presented as part of General and operating expenses 
**  The  expense  was  presented  as  part  of  depreciation,  amortization  and  impairment 
expenses 

It should be noted that the valuation of DBS's value in use is sensitive to the net cash 
flow  in  the  representative  year  in  general,  and  to  the  assessment  of  the  ARPU  level 
(average income per subscriber) and the status of subscribers at the end of the forecast 
range in particular. A change of NIS 1 in ARPU throughout the years of the forecast (and 
the  terminal  year)  results  in  a  change  in  the  enterprise  value  in  the  amount  of 
approximately NIS 79 million, and a change of 5k subscribers throughout the years of the 
forecast  (and  in  the  terminal  year)  results  in  a  change  in  the  enterprise  value  in  the 
amount of approximately NIS 115 million. 

The following is information regarding the manner in which the Group determined the 
fair value (at level 3) of DBS’s assets in which the impairment occurred as detailed above: 

Broadcast rights - the fair value of the broadcast rights is calculated taking into account 
legal restrictions on their sale and based on the stage of their production, probability of 
sale, and expected rate of return on investment. 

PP&E - the fair value of the PP&E items that can be sold to a market participant (mainly 
converters) was based on the estimate of the amount for which they can be sold on the 
day of the valuation and after deducting the costs that will be required to carry out the 
sale. 

Intangible assets - No substantial fair value was assigned to DBS’s intangible assets, since 
most of the software and licenses of DBS were uniquely adapted to DBS and therefore 
have no substantial value in a transaction between a willing buyer and a willing seller. 

Rights of use in leased assets - the fair value of right-of-use assets is affected by the ability 
to lease the asset subject to the lease to a third party, the lease fees for the asset in the 
market and the exit fines in the lease contract. 

Other receivables (advance expenses) - no substantial fair value was attributed to the 
advance  expenses  of  DBS  for  the  maintenance  of  its  systems,  since  most  of  the 
maintenance  agreements  were  uniquely  adapted  to  DBS  and  therefore  have  no 
substantial value in a transaction between a willing buyer and a willing seller. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

10.6. 

Impairment  of  the  Bezeq  International  services  segment  (Internet,  international 
communication, network endpoint, and ICT solutions) 

At the end of 2022, Bezeq International updated its forecasts for the following years, 
paying attention to the trends and changes in its operating environment. The value-in-
use for Bezeq Group of the Bezeq international services cash-generating unit, calculated 
as of December 31, 2022 using the method of discounting future cash flows (DCF), based 
on the forecast of cash flows from operations for a period of five years from the end of 
2021, and with the addition of scrap value (representative year). The nominal cost of 
equity  used  in  the  valuation  is  10.3%  (after  and  before  tax)  (8.5%  in  2021).  Also,  a 
permanent growth rate of 3% was assumed (1% in 2021). 

The  cash  flow  forecast  was  based,  among  other  things,  on  Bezeq  International's 
performance  in  recent  years  and  assessments  regarding  the  expected  trends  in  the 
markets in which it operates in the coming years (the level of competition, the level of 
prices, regulation and technological developments). 

The income forecast is based on assumptions according to which Bezeq International's 
Internet  subscriber  base,  as  well  as  its  incomes  from  these  subscribers,  will  be 
significantly  affected  as  a  result  of  the  impact  of  the  Ministry  of  Communications' 
decision on the cancellation of the separation between broadband infrastructure service 
and Internet access service (ISP), as detailed in Note 12.3 below, including assumptions 
regarding  subscribers  who  do  not  use  ISP  services,  assumptions  regarding  Bezeq 
international  activity  in  the  international  communication  market  and  assessments 
regarding its development in the field of communication services for businesses which 
includes  public  cloud  activity,  and  assumptions  regarding  the  field  of  international 
communication activity. 

Operating, sales, marketing and investment expenses were adjusted to the scope of the 
segment’s  activity,  including assumptions  regarding  the  extent  of  the  decrease  in  the 
number of Bezeq International employees and the salaries expenses derived from them, 
as  well  as  assumptions  regarding  the  development  of  traffic  costs  in  the  Internet 
segment  (retail  and  wholesale  rates  and  the  development  of  the  field  of  Internet 
television  broadcasting  in  general,  and  the  expected  migration  of  DBS  from  TV 
broadcasts via satellite to TV broadcasts via the Internet in particular). 

These  assumptions,  and  especially  the  expected  significant  changes 
in  Bezeq 
International's Internet activity, were expressed in the expectation of operating losses 
and  negative  cash  flows  in  the  coming  years.  The  nominal  cost  of  capital  used  in  the 
valuation is 10.3% (after tax) (in 2021 - 8.5%). Also, a permanent growth rate of 3% was 
assumed (in 2021 - 1%). 

Below are details regarding the value of Bezeq International's activities and the fair value 
of the assets and liabilities, net, as determined by an external valuator and recognized 
impairment losses: 

 
 
 
 
 
 
 
  
Notes to Consolidated Statements as of December 31, 2022 

Bezeq  International 
enterprise 
value 
(according  to  the 
DCF method) 

Fair  value  of  Bezeq 
International  assets 
and liabilities, net 

Book value of Bezeq 
International  assets 
and  liabilities,  net 
before  recognition 
of impairment 

Impairment 
loss 

NIS millions 

NIS millions 

NIS millions 

NIS millions 

As of December 31, 
2022 and for the period 
of three months that 
ended on that date 

As of September 30, 
2022 and for the period 
of three months that 
ended on that date 
(unaudited) 

As of June 30, 2022 and 
for the period of three 
months that ended on 
that date (unaudited) 

As of March 31, 2022 
and for the period of 
three months that 
ended on that date 
(unaudited) 

Total impairment 
recognized in 2022 

As of December 31, 
2021 and for the year 
that ended on that date 

 (166) 

 (22) 

(684) 

(692) 

44 

(2) 

2 

69 

19 

(174) 

(15) 

19 

(196) 

(70) 

 (24) 

(25) 

(21) 

(34) 

 (104) 

(122) 

The valuation is sensitive to the net flow in the representative year in general, and to the 
intensity of changes in the field of internet activity in particular (subscribers, ARPU, and 
traffic costs). 

The  valuation  was  conducted  by  an  external  valuator.  Based  on  the  valuation  as 
explained above, Bezeq International's activity value as of December 31, 2022 amounted 
to a negative amount of approximately NIS 166 million (as of December 31, 2021 a total 
negative activity value of NIS 196 million). In light of the negative enterprise value, the 
value  of  Bezeq  International's  non-current  assets  as  of  December  31,  2022  was 
determined to be the fair values minus exercise costs or zero, whichever is higher. The 
fair value of Bezeq International's assets minus exercise costs as of December 31, 2022 
is  negative  in  the  amount  of  approximately  NIS  22  million.  Accordingly,  the  Group 
recognized in 2022 an impairment loss in the amount of approximately NIS 104 million. 

Below is a breakdown of the allocation of the total loss from the impairment in Bezeq 
International's assets: 

PP&E and intangible assets 
Short- and long-term advance expenses 
Long-term 
capacities 
Rights-of-use of leased vehicle assets 
Total impairment recognized in the year 

expenses 

advance 

for 

2022 

NIS millions 
 **71 
*21 

 **12 
 **- 
104 

2021 

NIS millions 
 **75 
*28 

 **17 
 **2 
122 

2020 

NIS millions 
148 
18 

110 
3 
 ***279 

* The expense was presented as part of General and operating expenses 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

** The expense was presented as part of depreciation, amortization and impairment expenses 
*** Presented as part of the "Impairment loss" item of the 2020 income statement 

The following is information regarding the manner in which the group determined the 
fair value (at level 3) of the assets minus realization costs: 

PP&E - the fair value of the  PP&E items that can be sold to a market participant was 
based on the cost approach in which the cost of replacing with new equipment is taken 
into account, minus the costs of physical wear and tear and technological obsolescence, 
minus the costs that will be required to carry out the sale. 

Intangible assets - no substantial fair value was attributed to intangible assets, since most 
of  Bezeq  International's  software  and  licenses  were  uniquely  adapted  to  Bezeq 
International, and therefore have no substantial value in a transaction between a willing 
buyer and a willing seller. 

International capacity - in light of the nature of the signed agreements, which do not 
allow these rights to be assigned except to a subsidiary or a sister company of Bezeq 
International, which are not considered a market participant (third party) for the purpose 
of calculating fair value according to international accounting standard IFRS 13, these 
rights have no fair value. 

Short-term and long-term advance expenses - no substantial fair value was attributed to 
the upfront expenses for the maintenance of Bezeq International's systems, since most 
of  the  maintenance  agreements  were  uniquely  adapted  to  Bezeq  International,  and 
therefore have no substantial value in a transaction between a willing buyer and a willing 
seller. 

Rights-of-use  of  leased  assets  -  the  fair  value  of  right-of-use  assets  is  affected  by  the 
ability to lease the asset subject to the lease to a third party, the lease fees for the asset 
in the market and the exit fines in the lease contract. 

 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

11.  Deferred expenses and non-current investments 

December  31, 
2022 

December  31, 
2021 

NIS millions 

NIS millions 

Subscriber acquisition asset, net (see Note 11.1 below) 

Investment in long-term bank deposits 

Deferred expenses (see Note 11.2 below) 
Bank deposit used to provide loans to Bezeq employees (see Note 
11.3 below) 

Derivative instruments 
Investments in investees treated according to the balance sheet 
value method 

156 

27 

13 

33 

29 

- 

258 

151 

80 

18 

36 

16 

5 

306 

11.1. 

The following is a breakdown of subscriber acquisition assets: 

Subscriber  acquisition 
assets 
NIS millions 

Cost 
Balance as of January 1, 2021 

Additions   
Subtractions   

Balance as of December 31, 2021 
Additions   

Subtractions   

Balance as of December 31, 2022 

Depreciation and impairment losses 
Balance as of January 1, 2021 

Depreciation  
Subtractions   
Balance as of December 31, 2021 
Depreciation  

Subtractions   

Balance as of December 31, 2022 

Book value 

As of January 1, 2021 

As of December 31, 2021 

As of December 31, 2022 

477 
131 
(129) 

479 

127 
 (234) 
372 

312 

145 
(129) 

328 

122 
 (234) 
216 

165 

151 

156 

11.2. 

The  balance  of  deferred  expenses  as  of  December  31,  2022  is  presented  minus  an 
impairment  loss.  See  Note  10.6  regarding  the  impairment  of  assets  in  Bezeq 
International. 

11.3. 

Bank deposit for providing loans to Bezeq employees without a repayment date. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

12. 

Investees 

12.1. 

Consolidated companies 

12.1.1. 

The place of incorporation of the companies directly held by the Company is 
Israel. The  following is a breakdown of the companies consolidated by the 
company and the company's rights in the share capital of the consolidated 
companies as of December 31, 2022: 

Bezeq the Israel Telecommunications Corp. Ltd. 

26.81% 

Companies consolidated by Bezeq: 

Pelephone Communications Ltd 

Bezeq International Ltd. (see Note 12.3 below) 

DBS Satellite Services (1998) Ltd. (see Note 12.2 below) 

Bezeq Online Ltd. 

100% 

100% 

100% 

100% 

12.1.2. 

As of October 11, 2021, all Bezeq shares held by the Company are directly 
held  by  the  Company,  after  on  that  day  all  Bezeq  shares  held  by  B 
Communications  (SP2)  Ltd.  (a  company  fully  owned  and  controlled  by  B 
Communications) were transferred to the direct holding of the company (SP1) 
Ltd. which is fully owned and controlled by the Company). After the transfer 
of Bezeq shares to the Company, the companies B Communications (SP2) Ltd. 
and B Communications (SP1) Ltd. were closed. 

12.1.3. 

Structural change in Bezeq's subsidiaries 

Following  on  from  previous  decisions  made  by  Bezeq  and  its  subsidiaries, 
Bezeq International and DBS ("Bezeq's subsidiaries"), regarding a plan for a 
structural  change  in  the  framework  of  which  the  private  activity  of  Bezeq 
International was supposed to merge with and into DBS, and the ICT activity 
of Bezeq International to spin off into a new company wholly owned by Bezeq 
("the merger/spin-off plan"), on March 16, 2022, the Bezeq Board of Directors 
decided,  following  the  decisions  made  that  day  by  the  boards  of  Bezeq's 
subsidiaries, to cancel the merger/spin-off plan and to approve an alternative 
outline, according to which activity will be reduced Bezeq International's ISP 
in the private segment following the cancellation of the separation between 
broadband  infrastructure  service  and  Internet  access  service  (ISP),  and  ISP 
activity will be established in DBS for the purpose of selling "triple" packages 
to customers ("the Alternative Outline"), while aiming to achieve, as much as 
possible,  the  strategic,  business  and  economic  purposes  that  underpinned 
the  decision  to  promote  the  structural  change,  which  were,  among  other 
things, adapting the activity to the structure of the industry and the changing 
regulation,  focusing  on  increasing  incomes  and  growth,  and  increasing 
operational synergy and efficiency. 

According  to  this  alternative  outline,  Bezeq  expects  that  the  business 
objectives that were the basis of the spin-off/merger plan will be achieved, as 
DBS  is  expected  to  become  a  "triple"  sales  arm  that  combines  fiber  and 
television,  and  at  the  end  of  the  move,  Bezeq  International  will  become  a 
growth-oriented  ICT  company.  Also,  in  this  Alternative  Outline  lies  the 
potential  for  a  significant  reduction  in  Bezeq  International's  expenses  and 
investments in the ISP field at the same time as an accelerated reduction in 
this activity. 

 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

The  subsidiary  Bezeq  International  started  implementing  the  Alternative 
Outline, and the subsidiary DBS started selling integrated ("triple") packages 
that include Bezeq fiber and television. In addition, an agreement was formed 
regarding  the  voluntary  retirement  of  employees,  which  would  allow  a 
reduction in expenses. 

12.2. 

DBS Satellite Services (1998) Ltd 

12.2.1. 

DBS is a  wholly owned (100%) subsidiary of Bezeq. Bezeq consolidates the 
statements of DBS as of March 23, 2015. 

Bezeq  has  an  assessment  agreement  and  taxation  decision  with  the  Tax 
Authority regarding financing income, owner loans, DBS losses and merger 
(see also Note 7.2).. 

12.2.2. 

As of December 31, 2022, DBS has accumulated a loss balance of NIS 8,237 
million  since  its  establishment,  a  deficit  in  equity  of  NIS  32  million,  and  a 
working equity deficit of NIS 199 million. Also, as of December 31 2022, DBS 
has  off-balance  sheet  commitments 
in  the  cumulative  amount  of 
approximately NIS 834 million for the purchase of space segments, content, 
fixed assets and other assets up to and including the year 2026 (see Note 18). 

Based on the valuation conducted as of December 31, 2022, the total value 
of DBS's activity is a negative value in the amount of approximately NIS 103 
million  (compared  to  a  negative  activity  value  of  NIS  271  million  as  of 
December 31, 2021) (see Note 10.5), which results, among other things, from 
DBS forecasts to continue accumulating operating losses in 2023 and beyond. 

In  March  2023,  Bezeq’s  Board  of  Directors  approved  a  credit  facility  or 
investment in DBS equity in the amount of NIS 40 million, for a period of 15 
months, starting on January 1, 2023 and ending on March 31, 2024, instead 
of previous commitments, the last of which was given in November 2022. It 
should be noted that during the year 2022, DBS did not make any use of the 
credit facilities provided by Bezeq. 

DBS’s Management estimates that the funding sources at its disposal, which 
include,  among  other  things,  the  continuation  of  the  existing  policy  of  a 
working equity  deficit and the credit framework and investments in  equity 
from Bezeq will satisfy the needs of DBS operations until December 31, 2023. 

12.2.3. 

See Note 10.5 regarding the impairment of assets recognized by DBS as part 
of the statements as of December 31, 2022. 

12.3. 

Bezeq International Ltd. 

12.3.1. 

Eliminating the separation between a broadband infrastructure service and 
an Internet access service (ISP): 

On June 20, 2021, a decision was made by the Minister of Communications 
regarding  the  cancellation  of  the  separation  between  a  broadband 
infrastructure service and an Internet access service (ISP), including in relation 
to private customers. According to the decision, starting from the determined 
date, the restriction on infrastructure owners offering Internet access service 
to private customers will be lifted. Also, it is no longer possible to sell services 
in  a  split  format,  but  customers  who  receive  service  in  a  split/semi-split 
configuration  will  be  able  to  continue  to  consume  Internet  services  in  this 
way.  It  should  be  noted  that  the  cancellation  of  the  aforementioned 

 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

separation is expected to reduce the phenomenon of subscribers who do not 
use  ISP  services,  as  was  also  stated  in  the  publication  of  the  Ministry  of 
Communications. 

The  move,  which  is  expected  to  damage  Bezeq  International's  results,  was 
taken into account in the cash flow forecast which was used to examine the 
impairment as described in Note 10.6 above. 

12.3.2. 

See Note 10.6 below regarding the impairment of assets recognized by Bezeq 
International within the statements for December 31, 2022. 

12.3.3. 

In  February  2022,  Bezeq  International  acquired  77%  of  the  shares  of 
CloudEdge  Ltd.,  which  specializes  in  providing  public  cloud  computing 
solutions for Microsoft products. The goodwill created by the purchase was 
fully allocated to CloudEdge operations. 

12.3.4. 

See  Note  16.5.4  regarding  the  voluntary  retirement  plan  at  Bezeq 
International  which  was  approved  by  Bezeq  International's  Board  of 
Directors. 

12.4. 

The Company's control over Bezeq 

The Company holds the control permit in Bezeq and controls Bezeq based on two facts: 
1) The Company holds significantly more voting rights than any other shareholder while 
the  rest  of  Bezeq's  holdings  are  very  dispersed.  2)  Israeli  law  and  regulation  require 
obtaining government approval for any entity that wishes to increase its holding to over 
5% in Bezeq or wishes to take actions together with another shareholder for the purpose 
of  appointing  a  director  in  Bezeq  or  in  order  to  influence  the  making  of  current 
operational decisions in Bezeq. Through these limitations and through the Company's 
representatives on Bezeq's Board of Directors, the regulatory regime guarantees that no 
individual or entity will interfere in the control of Bezeq, except for the holder of the 
control permit. 

12.5. 

Purchase of additional Bezeq shares by the Company 

On December 28, 2022, the Company purchased 2,530,000 ordinary shares of the Bezeq 
subsidiary. The Company purchased shares as mentioned in exchange for payment of a 
total amount of approximately NIS 15 million and at an average price of NIS  5.95 per 
share.  After  the  aforementioned  purchase,  the  Company  owns  26.81%  of  the  issued 
share capital and voting rights in the subsidiary. 

12.6. 

Dividend distribution by Bezeq 

12.6.1. 

Bezeq’s dividend distribution policy 

On  March  13,  2023,  Bezeq’s  Board  of  Directors  decided  to  update  Bezeq's 
dividend policy so that Bezeq will distribute every six months 60% of the semi-
annual profit (after tax) according to its consolidated statements starting with 
the  next  distribution  (for  the  second  half  of  2022),  this  in  view  of  the 
improvement trend in the business results, and the continued decrease in the 
scope of its debt, and in accordance with its forecasts regarding its business 
results for the coming years. 

Also, Bezeq will strive to update its dividend policy to the distribution of 70% 
of  the  semi-annual  profit  (after  tax)  according  to  its  consolidated  financial 
statements, subject to maintaining its credit rating in the AA group. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

its  own  merits 

The approval of Bezeq's dividend policy does not oblige Bezeq to distribute a 
dividend  to  Bezeq's  shareholders,  and  each  specific  distribution  will  be 
examined  on 
in  accordance  with  the  conditions  of 
implementation  of  the  dividend  distribution  policy  as  stated  above.  In 
addition, the approval of the aforementioned policy does not prevent Bezeq’s 
Board of Directors from periodically reviewing the dividend distribution policy 
for  Bezeq  shareholders,  taking  into  account,  among  other  things,  the 
provisions  of  the  law,  Bezeq's  business  situation,  its  plans,  and  its  equity 
structure,  and  while  maintaining  a  balance  between  ensuring  Bezeq's 
financial strength and stability, including its debt level and credit rating, and 
continuing to unlock value to Bezeq's shareholders through regular dividend 
distribution. 

Bezeq's  Board  of  Directors  considers  it  important  to  maintain  the  balance 
between ensuring Bezeq's financial strength and stability, while maintaining 
a  rating  in  Bezeq's  current  rating  group  [AA]  over  time,  and  continuing  to 
unlock value to its shareholders through regular dividend distribution. 

Bezeq's Board of Directors was presented, among other things, with analysis 
and results of professional work, Bezeq's and Bezeq Group's forecasts, as well 
as sensitivity analyzes for unexpected adverse events in Bezeq's and Bezeq 
Group's  business.  After  the  Bezeq  Board  of  Directors  examined  all  of  the 
above,  the  Board  of  Directors  determined  that  this  decision  reflects  the 
correct balance between these needs as described above. 

12.6.2. 

Dividends distribution 

A.  On  April  28,  2022,  the  general  assembly  of  Bezeq's  shareholders 
approved (following the recommendation of Bezeq’s Board of Directors 
of  March  22,  2022)  the  distribution  of  a  cash  dividend  to  Bezeq's 
shareholders in the total amount of NIS 240 million (which, as of the day 
determining the distribution, is NIS 0.0867823 per share). The dividend 
was paid on May 16, 2022. The Company's share of the aforementioned 
dividend is approximately NIS 64 million. 

B.  On September 14, 2022, the general assembly of Bezeq's shareholders 
(following the recommendation of Bezeq’s Board of Directors of August 
9,  2022)  approved  the  distribution  of  a  cash  dividend  to  Bezeq's 
shareholders in a total amount of NIS 294 million (which, as of the day 
determining the distribution, is 0. NIS 1063081 per share). The dividend 
was  paid  on  October  3,  2022.  The  Company's  share  of  the 
aforementioned dividend is approximately NIS 78 million. 

C.  On March 13, 2023, Bezeq's Board of Directors decided to recommend 
to  the  general  assembly  of  Bezeq  shareholders  to  distribute  a  cash 
dividend to Bezeq shareholders in a total basket of NIS 246 million. As of 
the  date  of  approval  of  the  financial  statements,  the  aforementioned 
dividend has not yet been approved by the Bezeq general assembly. The 
Company’s  share  in  the  aforementioned  dividend  (subject  to  the 
is 
approval  of  the  general  assembly  of  Bezeq's  shareholders) 
approximately NIS 66 million 

 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

12.7.  Non-controlling interests 

The  following  table  shows  data  regarding  the  investees  in  the  Group,  including 
adjustments to fair value made on the day of purchase with the exception of goodwill, 
the non-controlling interests are material to the Group: 

December 31 

Percentage 
of 
ownership 
held  by  the 
non-
controlling 
interests 
% 

Non-
current 
assets 

Current 
liabilities 

Non-
current 
liabilities 

Net assets 

Current 
assets 
NIS millions 

Book 
value 
of 
the  non-
controlling 
interests 

2022 

2021 

73.19 

73.28 

3,464 

4,138 

10,988 

10,837 

3,534 

3,773 

8,512 

9,323 

2,406 

1,878 

1,842 

1,454 

Year ended December 31 

Income   
NIS millions 

Net profit 

Other  profit 
(loss) 

Comprehen
sive income 

Profit 
attributed 
to 
non-
controlling 
interests 

Comprehen
sive  income 
attributed 
to 
non-
controlling 
interests 

2022 

2021 

2020 

8,

986

8,821 

8,723 

1,000 

1,182 

1,008 

50 

36 

)12(

1,050 

1,218 

996 

733 

867 

742 

770 

893 

734 

Year

ended

December

31 

Cash
rom

flow
financing
activities
(without
 to
-non
ontrolling
c
interests)

dividend

Dividend

 to
-non
ontrolling
c
interests

Total
decrease)
cash

increase
in 
cash
equivalent
millions

 NIS 

and

Cash
rom

flow
current
operations

Cash
rom

flow
investing
activities

2022

2021

2020

3,503

2,839

3,220

 ( 

1,585
)

 ( 

1,646
)

( 

)839

 ( 

1,758
)

 ( 

1,060
)

 ( 

1,941
)

392

 ( 

)232

- 

- 

133

440

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

13.  Debentures, loans and credit 

13.1. 

Composition 

Current liabilities 
Current debenture liabilities 
Current loan liabilities 

Non-current liabilities 
Debentures 
Loans  

Total debentures, loans and credit 

13.2. 

Terms of Debentures and loans 

December 
2022 

31, 

December 
2021 

31, 

NIS millions 

NIS millions 

835 
86 
921 

6,121 
2,136 
8,257 

9,178 

897 
83 
980 

7,245 
1,823 
9,068 

10,048 

December 31, 2022 
Book balance 
NIS millions 

Par value 
NIS millions 

December 31, 2021 
Book balance 
NIS millions 

Par value 
NIS millions 

Bank loans at Bezeq: 
Unlinked loans, bearing fixed interest 

Unlinked loans, bearing variable interest 
Total banks loans at Bezeq 
Loans from financial institutions at Bezeq: 
Unlinked loans, bearing fixed interest 
Total financial institutions loans of Bezeq 

707 

698 
1,405 

817 
817 

706 

700 
1,406 

817 
817 

712 

300 
1,012 

894 
894 

711 

300 
1,011 

894 
894 

Total loans in Bezeq 

2,222 

2,223 

1,906 

1,905 

Public debentures of the Company: 
Series C – unlinked, bearing fixed interest 
Series F – unlinked, bearing fixed interest 
Total public debentures of the Company 
Public debentures of Bezeq: 
Series  6  -  linked  to  the  consumer  price 
index, bearing fixed interest * 

Series 7 - unlinked, bearing variable interest 
Series 9 - unlinked, bearing fixed interest 
Series  10  -  linked  to  the  consumer  price 
index, bearing fixed interest 
Series 11 - unlinked, bearing fixed interest 
Series  12  -  linked  to  the  consumer  price 
index, bearing fixed interest 
Series 13 - unlinked, bearing fixed interest 
Series  14  -  linked  to  the  consumer  price 
index, bearing fixed interest 
Total public debentures of Bezeq 

Total debentures 

Total loans and debentures 

480 
1,425 
1,905 

- 

- 
1,616 

861 
838 

1,330 
198 

208 
5,051 

6,956 

9,178 

497 
1,472 
1,969 

- 

- 
1,597 

794 
835 

1,269 
200 

200 
4,895 

6,864 

9,087 

951 
1,035 
1,986 

540 

36 
2,176 

912 
839 

1,257 
198 

198 
6,156 

1,010 
1,040 
2,050 

500 

36 
2,145 

882 
835 

1,269 
200 

200 
6,067 

8,142 

8,117 

10,048 

10,022 

Interest rate range 

3.2%
4.3% - 
Prime+  0.11%  - 
Prime+0.53% 

3.22%

4%-

3.85% 
3.65% 

3.7% 
Short-term 
loan 
for 1 year + 1.4% 
3.65% 

2.2% 
3.2% 

1.7% 
2.79% 

0.58% 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

*  On  January  23,  2022,  Bezeq  Series  9  debentures  were  partially  redeemed  in  the  amount  of 
approximately  NIS  370  million  par  value.  Also,  on  December  1,  2022,  Bezeq  Series  6  and  Series  7 
debentures were paid in final redemption. 

13.3. 

Debentures issued by the Company 

On July 6, 2021, the Company held a tender for the purchase of Series F debentures, in 
which approximately NIS 394 million were issued to institutional entities and the public 
for approximately NIS 394 million from Series F. The annual interest rate (unlinked) set 
in the tender is 3.65%. The interest for the series F debentures will be paid in two semi-
annual payments, on May 31 and November 30 of each year, starting from November 
2021 until November 2026. The debenture principal will be repaid in one payment on 
November 30, 2026. The proceeds of the net issuance of the series F debentures were 
used by the Company to make early repayments of its existing debentures as of that date 
as detailed below. 

On July 19, 2021, the Company made a full early repayment of the Series D Debentures 
principal (plus accrued interest up to the maturity date) and a full early repayment of the 
Series E debenture principal (plus accrued interest up to the maturity date and an early 
repayment penalty as defined in the trust deed of the series E  debentures). In addition, 
the Company made a partial early repayment of approximately NIS 226 million on the 
series C  debentures (plus accrued interest up to the maturity date). After making the 
early repayments, series D and E were repaid in full and delisted from trading  on the 
Securities Exchange in Tel Aviv. 

On  December  7,  2021,  the  Company  issued  to  institutional  entities  and  the  public 
approximately NIS 485 million in series F debentures for approximately NIS 488 million 
in series F debentures. The proceeds of the net issuance of the F debentures were used 
by the Company to make a partial early repayment of approx. NIS 471 million in respect 
of its existing Series C debentures as of that date (in addition to accrued interest up to 
the maturity date and an early repayment penalty as defined in the trust deed of the 
Series C debentures). 

On December 9, 2021, the Company held a private offering of approximately 161 million 
series F debentures for approximately NIS 161 million. The proceeds of the net issuance 
of the series F debentures were used by the Company to make a partial early repayment 
of approximately NIS 157 million on its existing Series C debentures as of that date (in 
addition to accrued interest up to the maturity date and an early repayment penalty as 
defined in the trust deed of the Series C debentures). 

On  January  10,  2022,  the  Company  exchanged  about  417  million  par  value  Series  C 
debentures in exchange for about 432 million par value Series F debentures. 

On June 30, 2022, the Company made a partial early repayment of about 100 million par 
value Series C debentures plus accrued interest up to the vesting date (the payment to 
bondholders was paid on July 1, 2022). 

In accordance with the terms of debentures series C and F, the company undertook to 
deposit semi-annual interest for the various bond series in an escrow account for the 
benefit of the bondholders. As of December 31, 2022, approximately NIS 36 million are 
deposited  in  the  trust  accounts  for  the  benefit  of  the  holders  of  Series  3  and  6 
debentures. 

As of December 31, 2022, the remaining par value of the Series C debentures is NIS 497 
million and the remaining face value of the Series V debentures is NIS 1,472 million. 

 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

Below are the financial standards to which the Company committed in connection with 
the debenture series: 

A.  Debt-to-asset ratio (LTV): 

The debt-to-asset ratio will be calculated for the first time 24 months after the date 
of  the  Searchlight-Forer  transaction  (December  2,  2019)  and  will  not  exceed  the 
following thresholds for two consecutive quarters: 

The ratio will not cross the 80% threshold until November 30, 2023 and also 

The  ratio  will  not  cross  the  75%  threshold  from  December  1,  2023  until  the  last 
payment of the debenture principal. 

As of December 31, 2022, the Company meets the debt-to-asset ratio. 

B.  Restrictions on dividend distribution: 

The Company undertook not to distribute a dividend to its shareholders and/or to 
buy  back  its  shares  and/or  make  any  other  distribution  as  defined  in  the  Israeli 
Companies Law, 5759-1999, unless all the conditions detailed below are met: 

1.  The Company is not in violation of any of the financial standards. 

2.  There is no ground for immediate payment when the decision to carry out the 

distribution is made, and no such ground exists as a result of this distribution. 

3.  The debt-to-asset ratio after the distribution shall not exceed 65% for Series C 

debentures and will not exceed 70% for Series V debentures. 

C.  Lien on Bezeq shares: 

For Series C and F there is a Pari-Passu first-class lien on 728,373,713 Bezeq shares 
held by the Company. 

D.  Control of Bezeq: 

The Company has committed to directly and/or indirectly hold at least 25% of the 
issued and paid-up share capital of Bezeq, unless regulatory approval is received in 
the  form  of  a  permit/authorization  allowing  to  decrease  the  above-mentioned 
holdings. 

E.  Control of the Company 

Searchlight and the Forer Family have committed to refrain from transferring control 
of the Company (directly or indirectly) to another entity that has not received all the 
required regulatory approvals in advance, should such approvals be required, at the 
relevant time. 

13.4. 

Loans and debentures issued by Bezeq 

The following is a breakdown of the conditions that Bezeq has committed to in relation 
to the loans received and the debentures issued: 

13.4.1. 

In relation to Bezeq's total debt, accepted grounds for immediate repayment 
of  the  debentures  and  loans  were  included,  including  events  of  default, 
failure  to  pay,  liquidation  or  receivership  procedures,  etc.  A  right  to 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

13.4.2. 

13.4.3. 

13.4.4. 

13.4.5. 

13.4.6. 

immediate  repayment  was  also  established  in  the  event  that  a  third-party 
lender demanded the immediate repayment of Bezeq’s debts towards him as 
a result of a default in an amount that exceeds the stipulated amount. 

In addition, Bezeq has committed not to create additional liens on its assets 
unless  the  bondholders'  consent  is  obtained  in  advance,  in  a  special 
resolution,  allowing  Bezeq  to  create  the  lien  in  favor  of  the  third  party,  or 
Bezeq will simultaneously create liens in favor of all lenders (negative lien). 
The lien includes exceptions, among other things, regarding the lien of assets 
that will be purchased or expanded by Bezeq, if the obligations for which the 
lien is secured were created for the purpose of purchasing or expanding said 
assets and regarding symbolic liens. 

institutions  whose  balance  as  of  December  31,  2022 

In relation to Bezeq's public debentures, to loans from banks whose balance 
as of December 31, 2022 is approximately NIS 1.4 billion, and to loans from 
financial 
is 
approximately NIS 0.8 billion, Bezeq has committed that in the event that it 
commits  to  a  party  any  obligation  in  connection  with  compliance  with 
financial standards, Bezeq will also obligate the aforementioned lenders with 
the same obligation (subject to certain exceptions). 

In relation to Bezeq's public debentures, as well as in relation to loans from 
financial institutions in the amount of approximately NIS 0.8 billion, a reason 
for 
the 
telecommunications segment ceases to be the Group's main field of activity. 

repayment  was 

the  event 

immediate 

included 

that 

in 

In  relation  to  Bezeq's  public  debentures,  and  in  relation  to  loans  from 
financial institutions in the amount of approximately NIS 0.8 billion, Bezeq has 
committed to the lenders to act so that, as far as it is within its control, such 
debentures  will  be  monitored  by  Bezeq's  rating  from  level  one  at  least,  as 
long as there are debentures in circulation from such series or loan balance, 
respectively. 

In relation to debentures from Series 9-14, as well as in relation to loans from 
financial institutions in the amount of approximately NIS 0.8 billion, grounds 
for immediate repayment was included in the event of a change in control, as 
a result of which the controlling shareholders of Bezeq (as defined in the said 
agreements) would cease to have control over it and transfer control to party 
C  (“the  Transferee"),  with  the  exception  of:  (1)  transfer  of  control  to  the 
Transferee who received permission to control Bezeq in accordance with the 
provisions of the Communications Law and/or the Communications Order, or 
(2) transfer of control in which the Transferee holds control together with the 
controlling shareholders of Bezeq and on the condition that the proportion of 
the holdings of the controlling shareholders of Bezeq in Bezeq shares is not 
less  than  50.01%  of  the  total  Bezeq  shares  held  by  the  controlling 
shareholders  who  hold  together,  or  (3)  a  change  of  control  that  will  be 
approved by the meeting of bondholders / lenders. 

13.4.7. 

In addition to Series 9-14 debentures, and in relation to loans from financial 
institutions  amounting  to  approximately  NIS  0.8  billion,  grounds  for 
immediate repayment of the debentures were included in the event that a 
"going concern" note is recorded in Bezeq's statements for a period of two 
consecutive quarters, in the event of a deterioration substantial in Bezeq's 
business  compared  to  its  situation  at  the  time  of  issuance,  and  there  is  a 
tangible concern that Bezeq will not be able to repay the debentures/loans 
when due (as stated in Article 35T1(a)(1) of the Securities Law). 

 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

As of December 31, 2022 and the date of approval of the statements, Bezeq met all of 
its  obligations  as  stated,  there  were  no  grounds  for  setting  up  credit  for  immediate 
repayment and no financial benchmarks were established as detailed above. 

13.5. 

Transactions in liabilities arising from financing activities 

Debentures 
(including 
accrued 
interest) 
NIS millions 

Loans (including 
accrued 
interest) 
NIS millions 

Balance as of January 1, 2021 

8,185 

2,117 

Changes as a result of cash flows from financing activities 
Proceeds  from  issuing  debentures  and  receiving  loans,  minus 
transaction costs 

Repayment of debentures and loans 

Interests paid 

Total net cash used for financing activities 

Financing expenses imputed to the income statement 

Balance as of December 31, 2021 

Changes as a result of cash flows from financing activities 
Proceeds  from  issuing  debentures  and  receiving  loans,  minus 
transaction costs 

Repayment of debentures and loans 

Interests paid 

1,430 

 (

1,572
)

(

)265

(

)407

387 

8,165 

- 

 (
1,333
)

 (
)240

Total net cash generated from (used for) financing activities 

 (
1,573
)

Financing expenses imputed to the income statement 

Balance as of December 31, 2022 

384 

6,976 

300 

(

)500

)68(

(

)268

63 

1,912 

400 

)83 (

)67 (

250 

69 

2,231 

Total 
NIS millions 

10,302 

1,730 

 (

2,072
)

(

)333

(

)675

450 

10,077 

400 

 (
1,416
)

 (
)307

 (
1,323
)

453 

9,207 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

14.  Trade payables 

December 31 , 2022 

December 31 , 2021 

NIS millions 

NIS millions 

Suppliers 

Open debts and expenses payable* 
Total suppliers 

903 
903 

Liabilities to employees and other liabilities for wages and 
salaries 
Deferred income 
Liability to pay for frequencies** 
Institutions   
Derivate instruments 
Accrued interest 
Current tax liabilities 
Others 
Total current payables including derivatives 

367 

171 
- 
92 
1 
29 
12 
23 
695 

Total and current trade payables 

Deferred income due to a government grant** 
Deferred income 
Others 
Total non-current payables 

1,598 

53 
76 
22 
151 

Total current and non-current trade payables 

1,749 

955 
955 

352 

158 
87 
110 
35 
29 
5 
24 
800 

1,755 

65 
69 
8 
142 

1,897 

* Of which the balance of suppliers who are related parties and interested parties as of December 31, 2022 is NIS 
2 million (as of December 31, 2021 - NIS 4 million). 

** See Notes 10.1 and 3.14 regarding frequency tender and government grant. 

15.  Provisions 

Customer lawsuits 
NIS millions 

Additional lawsuits 
NIS millions 

Dismantling 
and 
removing  cellular 
sites and liability 
NIS millions 

Total 
NIS millions 

Balance as of January 1, 2022 

Provisions created 

Provisions exercised 

Provisions cancelled 

Balance as of December 31, 2022 

Presented  in  the  statement  on  the 
financial position as follows: 

Current provisions 

Non-current provisions 

64 

43 

)20 (

- 

87 

87 

- 

87 

For details regarding lawsuits, see Note 17. 

- 

82 

)7 (

- 

75 

75 

- 

75 

54 

3 

- 

)14 (

43 

6 

37 

43 

118 

128 

)27 (

)14 (

205 

168 

37 

205 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

16.  Employee benefits 

Employee  benefits  include  severance  benefits,  post-employment  benefits,  other  long-term 
benefits, and short-term benefits. See also Note 26 regarding share-based compensation. 

16.1. 

Composition of the liabilities for employee benefits 

2022 

2021 

Note 

NIS millions 

NIS millions 

Current liabilities for: 

Vacation   

Sickness 

for  early 

Provision for early retirement plan at Bezeq 
Provision 
transferred from working for the State at Bezeq 
Provision for streamlining and early retirement plan at 
Pelephone, Bezeq International, and DBS 

retirement  of  employees 

16.4 

16.5.1 

16.5.2 

108 

114 

93 

10 

16.5.3-16.5.5 

67 

Current maturity of benefits for retirees 

16.3.3 

Total current liabilities for employee benefits 

Non-current liabilities for: 

Liabilities for benefits to retirees 
Severance pay, net (see composition below) 
Early notice and pension 
Provision for streamlining and early retirement plan at 
Pelephone, Bezeq International, and DBS 

16.3.3 

16.3.1 

16.3.2 

16.5.3 

Total non-current liabilities for employee benefits 

Total liabilities for employee benefits 

The  following  is  the  composition  of  the  liability  for 
severance pay: 

Liability for severance pay 

Fair value of plan assets 

16.2. 

Defined deposit plans 

7 

399 

107 

52 

28 

14 

201 

600 

201 

 (149) 

52 

126 

150 

98 

100 

29 

7 

510 

139 

60 

33 

11 

243 

753 

223 

(163) 

60 

Lability for benefits for employees of retirement age for their period of service in the 
Company and the consolidated companies and for the employees to whom Article 14 of 
the Severance Compensation Law, 5723-1963 ("Severance Compensation Law") applies, 
fully covered by current payments to pension funds and insurance companies. 

Deposits recognized as an expense for a 
defined deposit plan 

211 

218 

221 

2022 

2021 

2020 

NIS millions 

NIS millions 

NIS millions 

For  some  of  the  employees,  the  Group  has  an  obligation  to  complete  severance 
compensation beyond the amount accumulated in the severance fund in the name of 
the employees (see Section 16.3.1 below). 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

16.3. 

Defined benefit plans 

Liabilities regarding defined benefit plans in the Group include the following liabilities: 

16.3.1. 

16.3.2. 

16.3.3. 

The  liability  for  severance  pay  for  the  balance  of  the  liability  that  is  not 
covered by deposits and/or insurance policies in accordance with the existing 
employment agreements and the Law on Severance Pay. In respect of this 
part of the liability, there is a reserve deposited in the name of Bezeq Group 
companies  in  pension  funds  and  insurance  companies.  The  reserves  in 
pension  funds  and  insurance  companies  include  linkage  differences  and 
accrued interest. Withdrawal of the reserves is conditional upon compliance 
with the provisions detailed in the Severance Compensation Law. 

A  liability  according  to  the  personal  employment  agreements  of  senior 
employees  in  the  Bezeq  Group  to  pay  a  benefit  for  early  notice  upon 
termination of the employee-employer relationship. In addition, Bezeq has a 
liability  towards  a  number  of  senior  employees  who  are  entitled  to  early 
retirement conditions (pension and retirement grants) that do not depend on 
the existing retirement agreements for all employees. 

Bezeq retirees receive benefits, apart from the pension payments, the main 
ones being a holiday present (adjacent to the exchange rate of the dollar), 
financing  the  maintenance  of  the  pensioners'  clubs  and  social  activities. 
Bezeq's  liability  for  these  costs  accrues  during  the  work  period.  Bezeq 
includes  in  its statements  the  liabilities  for  the  expected  costs  in  the  post-
employment period. 

16.4. 

Provision for sickness 

The statements included a provision for redemption and exercise of sick days. The right 
to accrue sick days was taken into account for all employees of the Group, and the right 
to  redeem  sick  days  only  for  eligible  employees  in  accordance  with  the  conditions 
stipulated in the employment agreements. The provision was calculated on the basis of 
an actuarial calculation that includes the assumption of a positive accumulation of days 
for most employees and exercise of days using the "last in first out" (LIFO) method. 

16.5. 

Benefits for early retirement and dismissal 

16.5.1. 

In accordance with the collective agreement between Bezeq and the workers' 
organization and the new General Workers' Union of December 2006 and in 
accordance with amendment number 6 to the agreement of December 2020, 
Bezeq  was  entitled,  at  its  discretion,  to  terminate  the  work  of  up  to  50 
permanent and veteran employees in each of the years 2026 - 2021. The right 
of Bezeq is cumulative over the years and this is in addition to the retirement 
quota  of  approximately  300  permanent  employees  remaining  from  the 
previous agreement, whose employment Bezeq can terminate at the end of 
the current agreement period. 

Bezeq recognizes the expense for early retirement when Bezeq has made a 
clear  commitment,  with  no  actual  possibility  of  cancellation,  to  dismiss 
employees before they reach the accepted retirement date, according to a 
defined  plan.  The  collective  agreement  gives  Bezeq  the  right  to  dismiss 
employees but does not create a clear commitment for Bezeq without a real 
possibility of cancellation. Therefore, the expenses for early retirement are 
recognized in Bezeq's books at the time the plan is approved. 

 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

On December 28, 2022, Bezeq's Board of Directors approved, as part of the 
implementation  of  Bezeq's 
retirement  of 
approximately 80 permanent and veteran employees on an early retirement 
track at a total cost of up to approximately NIS 95 million. In light of the above, 
Bezeq recorded in its statements for Q4/2022 an expense of approximately 
NIS 92 million. 

streamlining  plan, 

the 

16.5.2. 

16.5.3. 

On December 16, 2018, an early retirement plan was approved, until the end 
of 2021, for all Bezeq employees who were transferred to the company from 
the Ministry of Communications (94 employees). The balance of the provision 
for the liability to retire the aforementioned employees as of December 31, 
2022 is NIS 10 million and is due in 2023. 

Labor relations at Pelephone are regulated by a collective agreement signed 
between Pelephone and the New General Workers' Histadrut - the Union of 
Cellular, Internet and High-Tech Workers (“the Histadrut") and the Pelephone 
Employees’ Committee. The agreement applies to all Pelephone employees, 
with the exception of senior managers and certain employees in pre-defined 
positions 

On December 6, 2022, Pelephone signed a renewal of the existing collective 
agreement,  which  includes  the  provision  of  salary  increases  and  bonuses, 
improvement  of  ancillary  conditions,  voluntary  retirement  and  the 
settlement of labor disputes announced by the General Workers' Union and 
the  employees’  representatives,  while  maintaining  industrial  peace  during 
the period of validity of the agreement in the matters regulated therein, for 
the  period  starting  From  December  6,  2022  to  December  31,  2025  ("the 
Agreement"). 

As part of the agreement, all open labor disputes were removed, with the 
exception of the issue of appointing a representative on the Pelephone Board 
of Directors on behalf of the employees, regarding which it was stipulated in 
the agreement that it will be discussed later. 

In  December  2022,  the  Group  recognized  one-time  expenses  totaling 
approximately NIS 32 million, these expenses include expenses for employee 
retirement as well as one-time signing bonuses. 

16.5.4. 

On October 3, 2022, Bezeq International's Board of Directors approved the 
implementation  of  the  agreements  reached  with  the  Histadrut  and  Bezeq 
International's  employee  representatives  (in  the  framework  of  conducting 
negotiations  to  regulate  the  rights  of  employees)  regarding  a  plan  for  the 
voluntary  retirement  of  Bezeq  International  employees  during  the  years 
2022-2024 (hereinafter "Voluntary Retirement Plan"). 

Following  the  approval  of  the  Voluntary  Retirement  Plan,  on  December  6, 
2022, Bezeq International's Management, the Histadrut and the Employees’ 
Committee signed a new collective agreement for Bezeq International until 
the end of 2025. 

In the agreement signed, Bezeq International’s Management and Employees’ 
Committee  reached  an  understanding  regarding  the  voluntary  retirement 
processes  and  the  granting  of  appropriate  conditions  to  the  retiring 
employees,  including  a  180%  retirement  bonus.  In  addition,  it  was  agreed 
upon salary increases at a rate of 9% during the period of the agreement (3% 
each year), a commitment to conduct negotiations regarding the requirement 
of the employee representatives to appoint an employee representative on 

 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

the  Company's  Board  of  Directors,  increased  participation  in  meals,  the 
provision of a signing bonus and other rights. Estimated cost of the Voluntary 
Retirement  Plan  and  the  estimated  cost  of  the  agreement  with  the 
Employees’ Committee amount to approximately NIS 70 million and NIS 28 
million, respectively. Of these amounts, the Group recorded expenses in its 
2022 statements in the amount of approximately NIS 70 million. 

16.5.5. 

DBS  is  bound  by  a  collective  agreement  between  itself  and  the  National 
Workers' Histadrut and the employees’ committees at Bezeq. The balance of 
the provision for early retirement for this agreement as of December 31, 2022 
is approximately NIS 14 million. 

16.6. 

Actuarial assumptions 

The main actuarial assumptions regarding defined benefit plans as of the reporting date 
are: 

16.6.1. 

16.6.2. 

The mortality rates as well as future decreases in mortality rates are based on 
the rates published in the Pension Circular 2022-9-18 of the Capital Market 
Authority. 

The departure rates were determined based on the past experience of Bezeq 
and the consolidated companies while distinguishing between the different 
employee  populations  and  according  to  the  years  of  seniority.  Departure 
rates include a distinction between departures that grant entitlement to full 
severance pay and departures that do not grant full severance pay. 

16.6.3. 

The  (nominal)  discount  rate  is  based  on  the  yield  of  high-quality  linked 
corporate debentures with a duration similar to that of the gross liability. 

The following are the main discount rates: 

Severance pay 

Retiree benefits 

31, 

December 
2022 
Average 
discount rate 

31, 

December 
2021 
Average 
discount rate 

5.2% 

5.2% 

3% 

3.3% 

16.6.4. 

Assumptions  regarding  salary  updates  for  the  purpose  of  calculating  the 
liabilities  were  made  on  the  basis  of  Management's  estimates  while 
distinguishing between the groups of employees. The main assumptions (in 
nominal terms) regarding salary updates of main employee groups are: 

Veteran 
Bezeq employees 

permanent 

New  permanent  Bezeq 
employees 
Non-permanent  Bezeq 
employees 
Employees 
Pelephone, 
International and DBS 

of 
Bezeq 

Annual salary increase assumption 
The  calculation  was  based  on  individual  assumptions  regarding 
the expected salary increase for the years 2023 to 2026, resulting 
from  the  collective  agreement  signed  in  August  2015  and 
December 2020. 
Average update of 5.8% for young employees gradually decreases 
to 2.7% at age 66. 
6.4%  for  young    employees  gradually  decreases  to  0.1%,  2%  (in 
real terms) for senior workers. 
The  rates  of  salary  increases  were  determined  based  on  the 
collective agreements that were signed. The average annual salary 
increase rate is between 1% and 3%. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

16.6.5.  Detailed weighted average duration of liabilities for key post-employment benefits: 

Severance pay 

Retiree benefits 

16.7. 

Sensitivity analysis for main actuarial assumptions 

December 
2022 

31, 

December 
2021 

31, 

Years 

11 

14 

Years 

12 

16 

The  following  is  the  analysis  of  the  possible  impact  of  the  changes  in  main  actuarial 
assumptions on employee benefit liabilities. The calculation is made in relation to each 
discount separately, assuming that the other discounts remain unchanged. 

December 31, 2022  December 31, 2021 

NIS millions 

NIS millions 

Discount rate - 0.5% addition 

Future salary increase rate - 0.5% addition 

Employee turnover rate - 5% addition 

Mortality rate assumption - 5% increase 

 (20) 

22 

5 

 (2) 

(32) 

33 

(14) 

(3) 

17.  Contingent liabilities 

In the course of the current business, lawsuits have been filed against the Group companies or 
various lawsuits are pending against it (hereinafter in this section: "lawsuits"). 

In the opinion of the managements of the Group companies, which is based, among other things, 
on legal opinions regarding the possibility of legal claims, adequate provisions were included in 
the statements (as detailed in Note 15), where provisions were required, to cover the exposure 
as a result of the aforementioned lawsuits. 

In the opinion of the managements of the Group companies, the amount of additional exposure 
(beyond the aforementioned provisions), as of December 31, 2022, due to lawsuits filed against 
the  Group  companies  on  various  issues  and  the  probability  of  their  materialization  is  not 
expected, amounted to a total of about NIS 2.5 billion. In addition, there is additional exposure in 
the amount of approximately NIS 2.5 billion for claims whose chances cannot yet be assessed at 
this stage. 

Also,  motions  were  submitted  against  the  Group  companies  to  recognize  the  lawsuits as  class 
actions that did not specify an exact claim amount in the lawsuit, in respect of which the Group 
has additional exposure beyond the above. 

The additional exposure amounts in this note are nominal. 

For updates regarding changes after the date of the report, see Section 17.3 below. 

The following is a description of the contingent liabilities of the Group in effect as of December 
31, 2022, classified according to groups with similar characteristics: 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

The 
exposure 
amount 
for  claims 
whose 
chances 
cannot  yet 
be 
assessed 

Provision 
balance 

Additional 
exposure 
amount 

Lawsuits group 

Lawsuits essence 

NIS millions 

Customer lawsuits  Mainly motions for approval of class actions (and 
actions on their behalf) concerning allegations of 
unlawful  collection  of  funds  and  damage  to  the 
provision  of  services  provided  by  the  Group 
companies. 

87 

1,809 

671 

Enterprise 
company claims 

and 

Lawsuits  in  which  liability  of  the  Group 
companies  is  claimed  in  connection  with 
their operation and/or investments. 

75 (1) 

685 (1) 

1,808 (2)  

Miscellaneous 

Other  lawsuits,  including  tort  claims  (with 
the exception of claims for which there is no 
dispute regarding the existence of insurance 
coverage), real estate, infrastructure, etc. 

75 (1) 

685 (1) 

1,808 (2)  

Total lawsuits against the Company and the consolidated companies (3) 

162 

2,520 

2,483 

(1)  Against the balance of the provision, an indemnity asset was recognized in the full amount of 
the provision in view of the existence of insurance coverage. The asset was presented under 
the "other receivables" item in the statement of financial position as of December 31, 2022, 
in  accordance  with  the  provisions  of  accounting  standard  IAS  37  "Provisions,  Contingent 
Liabilities and Contingent Assets". The additional exposure was estimated at approximately 
NIS 612 million. After the date of the statements, the lawsuit ended as mentioned. 

(2)  The  total  includes  two  motions  for  approval  of  a  class  action  with  a  total  amount  of 
approximately NIS 1.8 billion filed in June 2017 against the Company, Bezeq, officers of the 
Bezeq Group, as well as companies from the group formerly controlling the Company and 
Bezeq, regarding the transaction for the purchase of DBS shares by Bezeq from Eurocom DBS 
Ltd.  According  to  the  Court's  decision,  it  is  expected  that  a  consolidated  motion  will  be 
submitted  to  replace  these  two  motions.  The  procedure  is  delayed  due  to  the  criminal 
procedure that is ongoing following the investigation by the Securities Authority (as described 
in Note 1.3) and at the request of the Attorney General at this stage, until July 20, 2023. 

(3)  In addition, see also Note 6.6. 

After the date of the statements, a motion was submitted against the Bezeq Group companies for 
the approval of a class action without a financial assessment, as well as claims totaling NIS 40 
million. As of the date of approval of the statements, it is not yet possible to assess the chances 
of the aforementioned claims. Also, see Note 17.1 (1) above. 

 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

18.  Contracts 

18.1. 

DBS is bound by agreements for the purchase of space segments (as detailed in Note 
18.2  below),  content  and  copyrights,  until  the  end  of  2026.  The  amounts  of  future 
contracts as of December 31, 2022 are as follows: 

Year ended December 31 
2023 
2024 
2025 
2026 

Space segments 

NIS millions 
88 
88 
67 
11 
254 

Content 
copyrights 

NIS millions 
223 
105 
21 
- 
349 

and 

Total 

NIS millions 
311 
193 
88 
11 
603 

18.2. 

According to an agreement with Space Communications Ltd. (hereafter - "Space") from 
2013,  as  amended  (including  an  amendment  from  January  2023),  DBS  leases  space 
segments in "Amos" series satellites (hereafter - "Space Agreement"). 

In accordance with the provisions of the Space Agreement, DBS leases space segments 
in the "Amos 3" satellites (the estimated end of its life is at the beginning of 2026), as 
well as in the "Amos 7" satellite, in which Space has the right to lease space segments 
according to an agreement between itself and the owner of the rights to this satellite, 
and which is leased to DBS until February 2025 (or until the end of its life, whichever 
comes first), when the lease in "Amos 7" starting in September 2024 is conditional on 
receiving the approval of the Ministry of Communications by Space. 

Leased space segments - according to the Space Agreement, and subject to unavailability 
events, until the end of the "Amos 7" lease period,  DBS will lease 12 space segments 
from  Space,  in  accordance  with  the  distribution  between  the  relevant  satellites 
established in the agreement according to the different periods, and then DBS will lease 
ten space segments from "Amos" 3". The agreement also regulates the provision of back-
up sections for the leased space segments during the period of the agreement, under 
the conditions and limitations stipulated therein. 

Early termination of the agreement - according to the Space Agreement, Bezeq is entitled 
to announce an early termination of the Space Agreement without cause, subject to a 
12-month advance notice and payment for the lease in "Amos 7" plus partial payment of 
the balance of the lease in the space segments in "Amos 3". 

18.3. 

The  cellular  infrastructure  equipment  in  the  UMTS/HSPA  and  LTE  and  5G  networks  is 
manufactured  by  LM  Ericsson  Israel  Ltd.  ("Ericsson"),  which  serves  as  Pelephone's 
supplier for the deployment of the 4G (LTE) and  5G radio network. Also, Ericsson is a 
substantial provider of Pelephone in the field of microwave transmission. Pelephone has 
multi-year  agreements  for  maintenance,  support  and  software  upgrades  for  the 
UMTS/HSPA  network,  as  well  as  an  agreement  for  the  purchase  of  4G  (LTE)  and  5G 
equipment  with  Ericsson,  and  in  its  opinion,  it  may  depend  on  it  in  connection  with 
network support and expansion. As of December 31, 2022, Bezeq has contracted with 
Ericsson for the purchase of end equipment and the receipt of aforementioned services 
for a total amount of approximately NIS 7 million. 

18.4. 

In April 2021, Pelephone's new engagement agreement with International Distribution 
Apple  ("Apple")  for  the  purchase  and  distribution  of  iPhones  entered  into  force, 
according  to  which  Pelephone  committed  to  purchase  a minimum  annual  quantity  of 
devices for three more years at the prices that will be in effect with the manufacturer at 
the time of the actual purchases. 

 
 
 
  
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

18.5. 

18.6. 

18.7. 

For the purpose of its activities, Bezeq International usually acquires unlimited capacity 
usage  rights  (IRU)  from  service  providers.  During  the  Q1/2021,  Bezeq  International 
signed  an  agreement  to  extend  the  capacity  usage  periods  until  July  2030  with  the 
provider.  In  respect  of  the  rights  of  use,  Bezeq  International  pays  payments  that  are 
spread  over  annual  payments  throughout  the  period  of  use  of  the  capacities.  The 
remaining engagement according to the agreement as of December 31, 2022 is USD 5.9 
million (in 2021 -  USD 10.1 million). 

The Bezeq Group companies have contracts for December 31, 2022 for the purchase of 
end equipment, PP&E, intangible assets and other assets in the amount of approximately 
NIS 403 million. 

Law,  with 

the  amendment  of 

Further to what was stated in Note 9.4 above regarding the deployment of an optical 
fiber  network  by  Bezeq,  in  accordance  with  the  provisions  of  Article  14C  of  the 
Communications 
the 
telecommunications companies including Bezeq and its subsidiaries Pelephone, DBS and 
Bezeq International are obligated to pay a rate of 0.5% of their annual income during the 
deployment  period  to  the  incentive  fund.  The  incentive  fund  is  managed  by  the 
Accountant  General  at  the  Ministry  of  Finance,  for  the  benefit  of  encouraging  the 
deployment of fiber while participating in the commission in statistical areas that are not 
included  in  the  deployment  areas  chosen  by  Bezeq.  The  Minister  of  Communications 
with the consent of the Minister of Finance and the approval of the Economic Committee 
can change this rate. 

the  Bezeq 

license, 

18.8. 

For information regarding contracts with related parties, see Note 29. 

19.  Collateral, liens and guaranties 

Bezeq Group's policy is to provide tender and performance guaranties and guarantees according 
to  law.  In  addition,  Bezeq  provides,  as  needed,  bank  guarantees  for  bank  obligations  of 
consolidated companies. 

19.1. 

Bezeq  Group  companies  provided  guaranties  to  the  Ministry  of  Communications  in 
connection  with  guaranteeing  the  terms  of  their  licenses  in  a  total  amount  of 
approximately NIS 131 million (of which approximately NIS 58 million are linked to the 
Consumer Price Index). 

19.2. 

Bezeq Group companies provided bank guarantees to third parties in the total amount 
of approximately 218 million NIS (including a guarantee in the amount of approximately 
120 million NIS for the Sakia complex. For details, see note 6.6). 

19.3. 

Limitations on the creation of liens on the assets of Bezeq Group companies: 

19.3.1. 

In accordance with the Bezeq’s license, the license and any part of it cannot 
be  transferred,  pledged  or  foreclosed.  Transfer,  pledge  or  foreclosure  of 
property  from  the  license  assets  that  were  not  expressly  permitted  in  the 
license require the approval of the Minister who may, in special cases, permit 
the transfer of a license due to structural changes, if he is convinced that all 
the conditions that were met by the transferor are met by the owner of the 
transferred license. Also, to the extent that a third party is granted rights in 
the  assets  used  for  the  purpose  of  providing  Bezeq’s  services,  Bezeq  must 
ensure that a situation does not arise in which the exercise of the rights in 
said asset may harm the performance of Bezeq’s obligations according to the 
license. 

 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

19.3.2. 

In accordance with Pelephone's mobile radio telephone license, Pelephone is 
not  allowed  to  sell,  lease,  or  mortgage  any  of  the  assets  used  for  the 
execution  of  the  license  ("the  license  assets"),  unless  the  consent  of  the 
Minister of Communications has been given, after he has assumed that the 
exercise of the rights by the third party will not cause harm to the provision 
of services according to the license, except: 

A.  A lien on any of the license's assets in favor of a bank operating legally in 
Israel,  in  order  to  obtain  bank  credit,  provided  that  it  has  notified  the 
Ministry of Communications of the lien it intends to register, according 
to which the lien agreement includes a clause guaranteeing that in any 
case the exercise of the rights by the bank will not cause any harm to the 
provision of services under the license. 

B.  Sale  of  equipment  items  when  performing  an  upgrade  procedure, 

including sale of equipment using the trade in method. 

C.  Sale,  lease,  encumbrance  or  transfer  of  the  license  assets  to  a  cellular 

radio infrastructure licensee of which Pelephone is a customer. 

In accordance with Bezeq International’s license, it is not allowed to sell, rent 
or mortgage any of the assets necessary to guarantee the licensee's services, 
unless the Minister of Communications has given his consent to this after he 
has assumed that the exercise of the rights by the third party will not cause 
damage  to  the  provision  of  the  services  according  to  the 
license. 
Notwithstanding  the  foregoing,  Bezeq  International  may  pledge  any  of  the 
license assets in favor of a bank operating legally in Israel, in order to obtain 
bank credit, provided that it gives advance notice of the pledge it intends to 
make,  and  the  pledge  agreement  includes  a  clause  guaranteeing  that  the 
exercise  of  the  rights  by  the  bank  will  not  cause  harm  to  the  provision  of 
services under the license. 

In relation to the DBS broadcasting license, the Communications Law and the 
license provisions establish limitations in relation to the transfer, foreclosure 
and pledge of the license and license assets. The broadcasting license requires 
obtaining the approval of the Minister in relation to certain changes in the 
maintenance of means of control in DBS and imposes reporting obligations 
regarding  the  holders  of  the  means  of  control;  There  are  also  certain 
limitations 
license  to  perform  uplink  operations 
(transmission  of  transmissions  from  the  DBS  transmission  center  to  the 
transmission  satellite  and  performing  related  setup  and  operation 
operations). 

in  relation  to  the 

19.3.3. 

19.3.4. 

19.4. 

As for the conditions the Group has committed to in connection with loans and credit, 
see Note 13. 

 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

20.  Equity 

20.1. 

Share capital 

Ordinary shares NIS 0.1  par value each 

Ordinary shares 

December 31, 2022  December 31, 2021 

Registered share capital 

300,000,000 

300,000,000 

Issued and paid up share capital 

116,335,793 

116,335,793 

Treasury shares 

 (
9,080,317

)

 (

1,476,803
)

Issued and paid up share capital, net 

107,255,476 

114,858,990 

20.1.1. 

20.1.2. 

20.1.3. 

On March 31, 2021, the Company's general assembly approved the increase 
in the Company's registered share capital, so that after the registered equity 
increases as stated, the Company's registered equity will be NIS 30,000,000, 
divided into 300,000 ordinary shares of NIS 0.1 each, and an amendment of 
the Company’s Bylaws was approved accordingly. 

On November 30, 2021, the Company's Board of Directors approved a self-
purchase of its shares up to NIS 30 million. As part of the said purchase plan, 
the Company acquired in 2021 a total of 1,457,573 of its shares and in 2022 
a total of 820,360 of its shares for NIS 30 million. 

On March 23, 2022, the Company's Board of Directors approved another self-
purchase of the Company's shares up to NIS 20 million. As part of the said 
purchase plan, the Company acquired a total of 1,349,829 of its shares for NIS 
20 million. 

20.1.4. 

On May 24, 2022, the Company's Board of Directors approved another self-
purchase of the Company's shares of NIS 30 million. 

20.1.5. 

On May 31, the Company purchased a total of 730,000 of its shares for about 
NIS 10 million in a transaction made off the stock exchange. 

20.1.6. 

On  August  9,  2022,  the  Company's  Board  of  Directors  approved  a  self-
purchase plan of the Company's shares up to NIS 25 million. 

20.1.7. 

On November 15, 2022, the Company's Board of Directors approved a self-
purchase plan of the Company's shares up to NIS 25 million. 

20.1.8. 

As of December 31, December 2022, Searchlight and the Forer family about 
65.26% and 12.35%, respectively, of the Company's issued and paid-up share 
capital. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

21. 

Incomes 

Year ended December 31 
2021 
2022 
NIS millions 
NIS millions 

2020 
NIS millions 

Landline domestic communication - Bezeq Fixed Lines 
Internet - infrastructure 
Landline telephony 
Data transmission and communication 
Cloud and digital services 
other services 

Cellular communication - Pelephone 
Cellular services and end equipment 
Sale of end equipment 

Multi-channel TV - DBS 

Internet  services  (ISP),  international  communication 
and  network  endpoint  and  ICT  services  -  Bezeq 
International 

Others 

1,729 
762 
897 
331 
261 
3,980 

1,755 
604 
2,359 

1,277 

1,183 

187 

8,986 

21.1. 

Contract with the seller's customer over time 

1,562 
891 
844 
318 
230 
3,845 

1,606 
643 
2,249 

1,270 

1,186 

271 

8,821 

1,537 
981 
785 
288 
222 
3,813 

1,550 
577 
2,127 

1,286 

1,217 

280 

8,723 

On  December  21,  2022,  Bezeq  signed  a 
long-term  agreement  with  Partner 
Communications Ltd. ("Partner") for the provision of non-permanent right of use (IRU) 
service in the BSA fiber service (wholesale market) by Bezeq to Partner. In accordance 
with  the  agreement,  Partner  was  granted  a  right  of  use  a  non-transferable  and 
irrevocable right to provide service to its customers on 120,000 unspecified Bezeq fiber 
optic lines at a rate of 1 gigabyte download per line, for a period of 15 years starting on 
January 1, 2023 (the beginning of the right to use the lines will be done in phases for a 
period of up to five years). 
The consideration for the provision of the service, which includes one-time payments 
and  annual  payments,  is  expected  to  reach  a  total  amount  of  approximately  NIS  one 
billion (approximately NIS 574 million for one-time payments, annual maintenance fees 
at the rate of 4% of the one-time payments for the lines for which the right of use will be 
granted  until  that  year,  and  with  the  addition  of  interest  and/or  linkage  differences 
according  to  the  terms  of  the  agreement),  with  most  of  the  consideration  amount 
expected to be paid during the first 9 years of the agreement. In light of these conditions, 
a material financing component was identified in the terms of the agreement. 

The agreement includes the option to increase the number of lines by up to 48 thousand 
additional lines under the same conditions, to upgrade rates as well as to extend the 
agreement period in two five-year option periods each with less lines than in the first 
agreement period. Increasing the content of the aforementioned agreement will result 
in a corresponding increase in the total financial scope of the agreement. The agreement 
also includes a price protection mechanism for Partner in a way that weighs the price of 
the  regulatory  line,  starting  from  the  sixth  year  of  the  agreement.  In  light  of  these 
conditions,  a  material  financing  component  was  identified  in  the  terms  of  the 
agreement. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

22.  General and operating expenses 

Year ended December 31 
2021 
2022 
NIS millions 
NIS millions 

2020 
NIS millions 

to 

communication 

Connectivity 
operators in Israel and abroad 

and  payments 

End equipment and materials 

Content costs 

Marketing and general 

Structure and site maintenance 

Services and maintenance by subcontractors 

Vehicle maintenance* 

743 

782 

567 

539 

247 

454 

64 

717 

803 

553 

546 

238 

348 

60 

776 

747 

589 

471 

246 

303 

50 

3,182 
* General and operating expenses are presented minus expenses charged in 2022 to investments in PP&E 
and  intangible  assets  in  the  amount  of  NIS  51  million  (approximately  NIS  49  million  in  2021  and 
approximately NIS 38 million in 2020). 

3,396 

3,265 

23.  Salaries 

Total salaries and related expenses 

Share-based compensation 

Minus salaries credited to investments in PP&E and intangible 
assets 

2,395 

21  

 (
)530

1,87  
7

24.  Other operating expenses (income), net 

Year ended December 31 
2022 
NIS millions 

2022 
NIS millions 
2,416 

27 

(

)555

1,888 

2020 
NIS millions 
2,442 

- 

(

)548

1,894 

Year ended December 31 

2022 

2022 

2020 

NIS millions 

NIS millions 

NIS millions 

Capital gain (mainly from the sale of real estate) 

Receipts from settlement agreement 
Expenses for termination of employee-employer relations in 
early retirement at Bezeq (see Note 16.5.1) 
Provision for the grant for signing a collective agreement at 
Bezeq (see Note 16.5.1) 
Expenses  due  to  the  termination  of  employer-employee 
relations with early retirement and a streamlining agreement 
at Pelephone, Bezeq International and DBS (see Notes 16.5.3 
and 16.5.4) 

Provision (cancellation of provision) for claims 

Other income 

Profit from the sale of an investee (see Note 12.4) 

Other operating expenses (income), net 

)8 (

- 

78 

- 

102 

55 

)7 (

- 

220 

(175) 

(5) 

95 

- 

37 

(23) 

(6) 

- 

(77) 

)18(

)9(

64 

40 

9 

11 

)2(

)22(

73 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

25.  Financing expenses (income), net 

Year ended December 31 

2022 

2022 

2020 

NIS millions 

NIS millions 

NIS millions 

Interest expenses for financial liabilities 

Financing expenses for employee benefits 
Costs due to early repayment of loans and debentures (see 
Note 13) 

Linkage and exchange rate differentials 

Financing expenses for lease obligations 

Other financing expenses 
Change in fair value of financial assets measured at fair value 
through income 

Total financing expenses 

Income due to credit grossing in sales 

Financing income for employee benefits * 

Total financing income 
Change in fair value of financial assets measured at fair value 
through income 

Total financing income 

309 

- 

26 

125 

43 

19 

8 

530 

20 

40 

49 

23 

132 

395 

7 

34 

49 

40 

8 

- 

533 

28 

- 

16 

11 

55 

382 

8 

65 

23 

30 

6 

11 

525 

30 

- 

15 

6 

51 

474 
Financing expenses, net 
* Financing incomes recognized as a result of updating the discount rate according to which the liabilities 
for employee benefits are calculated as of December 31, 2022. 

398 

478 

26.  Share-based compensation 

26.1. 

Terms of the Bezeq Group option plan 

During  the  year  2021,  Bezeq  allocated  64  million  options  to  officers,  executives  and 
senior employees in Bezeq and Bezeq's subsidiaries. The options were allocated to each 
offeree in three grants, each grant at the rate of one third of the total options allocated 
to the offeree. Each grant will become vested in four annual phases where a different 
exercise price is determined for each grant. The exercise of each option is subject to the 
fact that, after the vesting date of the option, the exercise price condition for the option 
has been met (the average of the closing prices of a Bezeq share in the period of at least 
30 consecutive trading days on the stock exchange preceding the test date is equal to or 
higher than the price that is a condition for exercise). 

During  the  year  2022,  Bezeq  allocated  approximately  7  million  additional  options  to 
officers, executives and senior employees at Bezeq and Bezeq's subsidiaries. The options 
were granted in 2 grants, each grant half of the total number of options for that offering. 
Each  grant  will  mature  in  four  annual  tranches  where  a  different  exercise  price  is 
determined for each grant. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

26.2. 

Transfers the in number of options in Bezeq Group 

Balance in circulation at the beginning of the period 

Options granted during the year 

Options forfeited during the year due to the departure of the bidders 

Balance in circulation at the end of the period 

Exercisable  at  the  end  of  the  period  (subject  to  compliance  with  the  share 
exercise price conditions) 

Options 
2022 
Millions 
60 

Options 
2021 
Millions 
- 

7 

)10 (

57 

28*

62 

(2) 

60 

15 

* As of the date of approval of the financial statements, approximately 15 million  
options met the share price conditions and are exercisable. 

26.3. 

Details regarding the measurement of the fair value of a share-based compensation 
plan in Bezeq Group 

The fair value of the options granted during 2021 in Bezeq Group, which was estimated 
by an external valuator while applying the Monte Carlo model, is about NIS 46 million, 
according to the vesting period and the conditions of exercise as detailed above. 

The fair value of the options granted during 2022 in Bezeq Group, which was estimated 
by an external valuator while applying the Monte Carlo model, is about NIS 13 million, 
according to the vesting period and the conditions of exercise as detailed above. 

26.4. 

Salaries expenses recognized by Bezeq Group for share-based compensation 

Salaries expenses 

Year ended December 31 

2022 

2022 

2020 

NIS millions 
11 

NIS millions 
27 

NIS millions 
- 

26.5.  Options granted to company officers 

During  the  year  2022,  the  Company  allocated  3,350,000  options  exercisable  into 
3,350,000 ordinary shares of the Company to Company officers. The vesting period of 
the options granted to the Company's officers is 3 years. 

Salaries expenses recognized by the Company for share-based compensation: 

Salaries expenses 

Year ended December 31 

2022 

2022 

2020 

NIS thousands 
520 

NIS thousands 
280 

NIS thousands 
280 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

27.  Profit per share 

The calculation of the basic and diluted profit per share was based on the profit attributed to the 
ordinary shareholders and according to the weighted average number of ordinary shares included 
in the calculation as follows: 

the 
Net  profit 
Company's shareholders (NIS millions) 

attributable 

to 

Weighted average of ordinary shares 

Balance as of January 1 (millions) 

Effect of buyback of shares 
Basic  weighted  average  of  ordinary 
shares as of December 31 (millions) 

Effect of share-based compensation 
Diluted  weighted  average  of  ordinary 
shares as of December 31 (millions) 

Basic profit per share (NIS) 

Diluted profit per share (NIS) 

2022 

2021 

2020 

158 

115 

)4 (

111 

1 

112 

1.42 

1.41 

129 

116 

- 

116 

- 

116 

1.11 

1.11 

157 

116 

- 

116 

- 

116 

1.35 

1.35 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

28.  Segmental reporting 

28.1. 

The Group operates in four different segments in the communications industry, in such 
a way that each company in the Group operates in a separate business segment. Each 
Company  provides  services  in  the  segment  in  which  it  operates  using  the  PP&E  and 
infrastructures it owns (see also Note 21). The infrastructure of each company is used to 
provide its services. Some of the Group companies use infrastructure owned by other 
Group companies. 

The  main  reporting  format,  according  to  business  segments,  is  based  on  the 
administrative and internal reporting structure of the Group. 

The business segments of Bezeq Group are as follows: 
1.  "Bezeq" 

Israel  Telecommunications  Corp.  Ltd.  – 

the 

landline 

interior 

communications; 

2.  Pelephone Communications Ltd. - cellular communications; 
3.  Bezeq  International  Ltd.  -  Internet,  international  communication  and  network 
endpoint  services,  and  ICT  solutions  (information  and  communication  systems) 
(hereinafter - "Bezeq International Services Sector"); 
4.  DBS Satellite Services (1998) Ltd. - multi-channel TV. 

The rest of the Group companies are presented in the "Others" section. Other activities 
include call center services for customers (Bezeq Online) and content services in the field 
of Internet (in 2020). These activities are not reported as reportable segments since they 
do not meet the quantitative thresholds in the reported years. 

Inter-segment pricing is determined according to the price established in transactions in 
the normal course of business. 

Results, assets and liabilities of a segment include items that can be directly allocated to 
the segment, as well as those that can be reasonably allocated. 

The results of the multi-channel TV segment are presented excluding the total effect of 
asset impairment described in Note 10.5. This is in accordance with the manner in which 
the  Group's  main  operational  decision-maker  evaluates  the  performance  of  the 
segments and makes decisions regarding the allocation of resources to said sectors. 

The capital expenditure of a segment is the total cost incurred during the period for the 
purchase of PP&E and intangible assets. 

 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

28.2. 

Activity segments 

Year ended December 31, 2022 
Landline 
interior 
communication 

Cellular 
communication 

Bezeq 
International 
services 

Multichannel 
TV 

Others 

Adjustments 

Consolidated 

NIS millions 

NIS millions 

NIS millions 

NIS millions 

NIS millions 

NIS millions 

NIS millions 

Income from externals 

Inter-segmental income 

Total income 

Depreciation, 
impairments 

reductions 

and 

3,980 

326 

4,306 

1,005 

Segment results - operating profit (loss). 

1,460 

Financial expenses 

Financial income 

Total financing expenses (income), net 

424 

)92 (

332 

Segment profit (loss) before income taxes 

1,128 

Income taxes 

Segment results - net profit (loss). 

Segment assets 

Goodwill 

Segment liabilities 
Investments  in  PP&E,  intangible  assets 
and deferred expenses 

279 

849 

9,02  
0

- 

10,465 

1,156 

2,359 

40 

2,399 

532 

193 

42 

)68 (

)26 (

219 

54 

165 

4,080 

- 

1,563 

289 

1,18  
3

56 

1,239 

134 

)30 (

9 

)8 (

1 

)31 (

1 

)32 (

751 

9 

570 

122 

1,277 

- 

1,277 

274 

)48 (

8 

)14 (

)6 (

)42 (

1 

)43 (

1,249 

- 

469 

189 

718  

6 

193 

4 

6 

- 

- 

- 

6 

1 

5 

90 

- 

32 

10 

- 

 (
)428

 (
)428

)81 (

44 

47 

50 

97 

)53 (

- 

)53 (

 (
)903

1,559 

860 

- 

8,986 

- 

8,986 

1,868 

1,625 

530 

 (
)132

398 

1,227 

336 

891 

14,287 

1,568 

13,959 

1,766 

*  The  results  of  the  multi-channel  TV  segment  are  presented  net  of  the  overall  impact  of  impairment 
recognized  as  of  2018.  This  is  in  accordance  with  how  the  Group's  chief  operating  decision  maker 
evaluates the segment's performance and makes decisions regarding the allocation of resources to the 
segment. In addition, see Note 31.4 regarding a summary of selected data from DBS's statements. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

28.2. 

Activity segments (Cont.) 

Year ended December 31, 2021 
Landline 
interior 
communication 

Cellular 
communication 

Bezeq 
International 
services 

Multichannel 
TV 

Others 

Adjustments 

Consolidated 

NIS millions 

NIS millions 

NIS millions 

NIS millions 

NIS millions 

NIS millions 

NIS millions 

Income from externals 

Inter-segmental income 

Total income 

Depreciation, 

reductions 

and 

impairments 

3,845 

337 

4,182 

938 

Segment results - operating profit (loss). 

1,748 

Financial expenses 

Financial income 

Total financing expenses (income), net 

Segment  profit  (loss)  after  financing 

expenses, net 

Share in profits (losses) of affiliates 

357 

)15 (

342 

1,406 

- 

Segment profit (loss) before income taxes 

1,406 

Income taxes 

Segment results - net profit (loss). 

343 

1,063 

2,249 

40 

2,289 

577 

42 

23 

)65 (

)42 (

84 

- 

84 

20 

64 

Investment in affiliates 

9,245 

4,452 

Segment assets 

Goodwill 

Segment liabilities 

- 

- 

- 

- 

11,415 

1,753 

Investments  in  PP&E,  intangible  assets 

and deferred expenses 

1,197 

289 

1,186 

51 

1,237 

173 

22 

5 

)3(

2 

20 

- 

20 

12 

8 

778 

5 

- 

566 

111 

1,270 

- 

1,270 

292 

)41 (

4 

)3(

1 

)42 (

- 

)42 (

1 

)43 (

271 

6 

277 

4 

27 

- 

- 

- 

27 

- 

27 

6 

21 

1,293 

100 

- 

- 

474 

188 

- 

- 

37 

5 

- 

 (

)434

 (

)434

)95 (

58 

144 

31 

175 

 (

)117

- 

 (

)117

- 

 (

)117

 (

)874

- 

1,560 

844 

8,821 

- 

8,821 

1,889 

1,856 

533 

)55 (

478 

1,378 

- 

1,378 

382 

996 

14,994 

5 

1,560 

15,089 

- 

1,790 

* The results of the multi-channel TV segment are presented net of the overall impact of impairment recognized 
as of 2018. This is in accordance with how the Group's chief operating decision maker evaluates the segment's 
performance and makes decisions regarding the allocation of resources to the segment. In addition, see Note 
31.4 regarding a summary of selected data from DBS's statements. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

28.2. 

Activity segments (Cont.) 

Year ended December 31, 2020 
Landline 
interior 
communication 

Cellular 
communication 

Bezeq 
International 
services 

Multichannel 
TV 

Others 

Adjustments 

Consolidated 

NIS millions 

NIS millions 

NIS millions 

NIS millions 

NIS millions 

NIS millions 

NIS millions 

Income from externals 

Inter-segmental income 

Total income 

Depreciation, 

reductions 

and 

impairments 

3,813 

346 

4,159 

877 

Segment results - operating profit (loss). 

1,705 

Financial expenses 

Financial income 

Total financing expenses (income), net 

Segment  profit  (loss)  after  financing 

expenses, net 

Share in profits (losses) of affiliates 

419 

)16 (

403 

1,302 

- 

Segment profit (loss) before income taxes 

1,302 

Income taxes 

Segment results - net profit (loss). 

262 

1,040 

2,127 

59 

2,186 

599 

)84 (

18 

)66 (

)48 (

)36 (

- 

)36 (

)11 (

)25 (

Investment in affiliates 

8,471 

4,371 

Segment assets 

Goodwill 

Segment liabilities 

- 

- 

- 

- 

11,764 

1,742 

Investments  in  PP&E,  intangible  assets 

and deferred expenses 

975 

437 

1,217 

54 

1,271 

149 

 (

)241

5 

)3(

2 

 (

)243

- 

 (

)243

32 

 (

)275

781 

4 

- 

580 

123 

1,286 

1 

1,287 

310 

)42 (

15 

)2(

13 

)55 (

- 

)55 (

2 

)57 (

1,365 

- 

- 

505 

165 

280 

6 

286 

14 

44 

1 

- 

1 

43 

- 

43 

4 

39 

96 

- 

- 

42 

12 

- 

 (

)466

 (

)466

)91 (

326 

67 

36 

103 

223 

- 

223 

45 

178 

 (

)694

- 

1,559 

893 

8,723 

- 

8,723 

1,858 

1,708 

525 

)51 (

474 

1,234 

- 

1,234 

334 

900 

14,390 

4 

1,559 

15,526 

- 

1,712 

* The results of the multi-channel TV segment are presented net of the overall impact of impairment recognized 
as of 2018. This is in accordance with how the Group's chief operating decision maker evaluates the segment's 
performance and makes decisions regarding the allocation of resources to the segment. In addition, see Note 
31.4 regarding a summary of selected data from DBS's statements. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

28.3. 

Adjustments for reporting segments of incomes, income, assets and liabilities 

Year ended December 31 

2022 

2022 

2020 

NIS millions 

NIS millions 

NIS millions 

Income 

Income from reporting segments 

Income from other segments 

Cancellation of incomes from inter-segmental sales 

Consolidated income 

Operating profit 

Operating profit for reporting segments 

Financing expenses, net 
Loss (loss write-off) from impairment of assets (see Note 
10.2) 

Adjustments for the multi-channel TV segment 

Reducing cost overruns 
Profit  (loss)  for  activities  classified  in  the  Other  and 
other adjustments category 

9,221 

193 

)842 (

8,

986

1,575 

 (
)398

- 

56 

- 

)6 (

8,978 

277 

(

)434

8,821 

1,771 

(

)478

- 

72 

- 

13 

8,903 

286 

(

)466

8,723 

1,338 

(

)475

286 

81 

)22(

26 

Consolidated operating profit 

1,227 

1,378 

1,234 

December 
2022 

31, 

December 
2021 

31, 

NIS millions 

NIS millions 

Assets 

Assets of reporting segments 

Assets associated with activities classified in the Other category 

Goodwill not attributable to an activity segment 
Minus loss from asset impairment (see note 10), inter-segment assets and 
other adjustments 

Assets and cost overruns that are not attributed to a reporting segment 

Consolidated assets 

Liabilities 

Liabilities of reporting segments 

Liabilities associated with activities classified in the Other category 

Minus inter-segmental liabilities 

Liabilities related to non-reporting segments 

Consolidated liabilities 

15,

109

90 

1,559 

 (
2,128
)

1,225 

15,855 

13,

067

32 

 (
1,

)311

2,171 

13,959 

15,773 

100 

1,559 

 (

2,280
)

1,407 

16,559 

14,208 

37 

 (

1,407
)

2,251 

15,089 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

29.  Transactions with interested parties and related parties 

29.1. 

Identity of interested parties and related parties 

The Company's interested parties and related parties as defined in the Securities Law 
and  International  Accounting  Standard  24  regarding  related  parties  are  mainly 
Searchlight  and  TNR,  their  related  parties  affiliates,  directors  and  key  management 
personnel from the Company or Searchlight and TNR. 

It  should  be  noted  that  the  transactions  described  below  with  interested  parties  and 
related  parties  do  not  include  reference  to  what  is  stated  in  Note  1.3  regarding 
investigations by the Israel Securities Authority and the Israel Police or to their possible 
consequences. 

29.2. 

Balances with interested parties and related parties 

Trade receivables - affiliate 

Related parties, net 

Right-of-use assets 

Current lease liability maturities 

Non-current lease liabilities 

As of December 31 

2022 

2021 

NIS millions 

NIS millions 

- 

)1 (

2 

)1 (

)2 (

1 

)2(

2 

)1(

)2(

29.3. 

Transactions with interested parties and related parties 

Income 
From related parties 
From affiliates 
Expenses 
To related parties 
To affiliates 
PP&E 
To related parties 

Year ended December 31 

2022 

2021 

2020 

NIS millions 

NIS millions 

NIS millions 

4 

- 

24 
- 

1 

10 

1 

33 
- 

- 

12 

2 

28 
2 

- 

29.3.1. 

Negligibility procedure of Bezeq Group 

Bezeq's Audit Committee decided to adopt guidelines, standards and rules for 
the classification of a transaction by Bezeq or its consolidated company with 
officers  in  Bezeq  or  in  which  an  officer  of  Bezeq  has  a  personal  interest 
(hereinafter  -  "transaction  with  an  officer")  and  a  transaction  with  a 
controlling shareholder of Bezeq or in which the controlling shareholder has 
a personal interest (hereinafter - "transaction with a controlling owner") as a 
negligible transaction. 

The standards established in the procedure, as updated from time to time in 
accordance with its instructions, may be used by Bezeq, among other things, 
to classify a transaction as a negligible transaction as stipulated in Regulation 
41(a3)  of  the  Securities  Regulations  (Annual  Financial  Statements),  5770-

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

2010, and as a tool for examining the negligible nature of additional business 
relationships,  such  as:  the  existence  of  business  relationships  with  a 
candidate  for  office  as  an  external  director  or  an  independent  director 
Negligible as stated in the Companies Regulations (matters not constituting 
an  affiliation),  5767-2006  and  as  stated  in  Article  240(f)  of  the  Companies 
Law, 5759-1999 (“the Companies Law"). 

Bezeq and its consolidated companies enter into transactions from time to 
time with Bezeq officers and those who control it, including transactions of 
the types and characteristics as detailed below: 

1.  Sale of communication services and products by Bezeq Group companies 
including:  various  basic  communication  services  (infrastructure, 
- 
telephony, transmission and PRI) and hosting in server farms; provision 
of  cellular  services  and  value-added  services  and  sale  and  upgrade  of 
cellular end equipment; Internet access services, international telephony 
services, hosting services and data communication services; TV services. 

2.  Real  estate  lease,  management  and  purchase  agreements,  including, 
among  others:  lease  of  areas  used  for  communication  facilities  and 
warehouses. 

3.  Receiving consulting and training services for Bezeq Group companies or 

their employees. 

4.  Purchase of goods and services used by Bezeq Group companies in their 
activities, such as purchase of fuel and energy products, repair services, 
financial/banking services and more. 

In  the  absence  of  special  qualitative  considerations  arising  from  all  the 
circumstances  of  the  matter,  a  transaction  will  be  considered  a  negligible 
transaction to the extent that all of the following parameters are met: 

A.  The transaction is not an unusual transaction (that is, a transaction made 
in  the  normal  course  of  business,  under  market  conditions  and  which 
may not materially affect Bezeq's profitability, its assets or liabilities, all 
in accordance with Bezeq's procedures). 

B.  The  scope  of  the  contract  specified  in  it  in  Bezeq  (solo,  and  not  on  a 
consolidated basis) (or in any of the subsidiaries) will not exceed NIS 10 
million. 

C.  Bezeq is not required to report the transaction in an immediate report in 
accordance with Regulation 36 or Regulation 37a of the periodic report 
regulations or according to any other law. 

D.  The transaction does not include tenure and employment conditions (as 
defined  in  the  Companies  Law)  of  an  interested  party  or  a  relative 
thereof,  or  does  not  constitute  a  contract  as  stated  in  the  last  part  of 
Article 270(4) of the Companies Law (contract of a public company with 
its  controlling  shareholder  or  a  relative  thereof,  directly  or  indirectly, 
including through a company under his control, regarding his receipt of 
services from  the Company, and also if he is its officer - regarding the 
conditions of his tenure and employment, and if he is a Bezeq employee 
and is not its officer - regarding his employment in Bezeq). 

 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

As a general rule, each transaction will be examined separately for the 
purpose of examining its compliance with the conditions for classification 
as a negligible transaction as detailed above. Notwithstanding the above, 
separate transactions that are part of the same contract or continuous 
transactions or very similar transactions that are carried out frequently 
and repeatedly or with the same entity and with corporations under its 
control  or  transactions  between  which  there  is  a  dependency  or 
condition, will be examined as one transaction on an annual basis for the 
purpose of their examination. 

The Audit Committee may, from time to time and at its discretion, change 
the above parameters for classifying a negligible transaction. 

In addition, the standards established by the Audit Committee and the 
Company's  Board  of  Directors  refer  to  the  conditions  under  which  a 
transaction  will  be  considered  an  unusual  transaction,  as  well  as 
conditions under which a contribution by the Company or a subsidiary 
will not be considered an unusual transaction. 

Transactions listed in Article 270 (4) of the Companies Law that are not 
considered negligible transactions 

In the years 2020-2022 there were no such transactions. 

For  the  transactions  listed  in  Article  270(4)  of  the  Companies  Law 
concerning insurance and obligation to indemnify directors and officers 
of the Company, see Note 29.6 below. 

29.4. 

Benefits for key managerial personnel in the Group 

Benefits for the employment of key management personnel in the Group in 2020-2022 
include: 

Year ended December 31 
2022 
NIS thousands 

2021 
NIS thousands 

2020 
NIS thousands 

Number of key management personnel * 

Salaries ** 

Grant *** 

Management fees for the former Chairman 
of the Bezeq Board of Directors 
Share-based compensation 

6 

9,872 

7,262 

- 

6,197 
23,331 

5 

8,163 

7,780 

- 

13,530 
30,713 

6 

8,246 

4,995 

1,919 

280 
15,440 

*  Key  management  personnel  in  the  Group  in  the  reporting  year  include  the  Chairman  of  the 
Company's Board of Directors, the Company's CEO, as well as the Chairman of Bezeq’s Board of 
Directors,  the  former  CEO  of  Bezeq,  the  current  CEO  of  Bezeq  as  well  as  the  current  CEO  of 
Pelephone, Bezeq International and DBS. 

** In 2022, the changes in other provisions (included in the total salaries) mainly include provisions for 
advance notice to the current CEO of Pelephone, Bezeq International and DBS in the amount of 
approximately NIS 0.7 million. 

In 2021, the changes in other provisions at Bezeq (included in the total salaries) mainly include 
provisions for vacation and sickness in the amount of approximately NIS 0.2 million. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

In  2020,  the  changes  in  other  allowances  at  Bezeq  (included  in  the  total  salaries)  mainly  include  an 
allowance  for  early  notice  and  for  a  non-competition  period  for  the  Chairman  of  Bezeq’s  Board  of 
Directors in the amount of approximately NIS 0.9 million. 

*** The amount includes an annual discretionary grant approved by Bezeq's general asembly on April 
28, 2022 for the year 2021. 

For information on share-based compensation, see Note 26. 

29.5. 

Benefits for directors of the company 

Year ended December 31 

2022 

2021 

2020 

NIS thousands 

NIS thousands 

NIS thousands 

Remuneration for the members of the Board of 
Directors * 
Number of directors receiving remuneration ** 

645 

6 

635 

6 

712 

6 

*  The  directors’  remuneration  of  the  Company's  CEO,  who  also  served  as  a  director  of  the  Company  until 
November  29,  2021,  as  well  as  the  remuneration  of  the  Chairman  of  the  Company's  Board  of  Directors,  are 
presented in Section 29.4 above due to their being key management personnel. 
** In 2021, a new director was appointed on behalf of the controlling shareholder of the Company, as well as a 
retired external director, a new external director was appointed by the general assembly on January 24, 2022. 

29.6.  Additional benefits for directors and officers in the Company 

Date  of  the  approval  of 
the  general  assembly 
the 
(after 
receiving 
approval 
the 
Company's  Board  of 
Directors), 
unless 
otherwise specified 

of 

April 30, 2020 

April 30, 2020 

November 29, 2022 

of 

the 
Approval 
Company's  Board 
of 
Directors  in  accordance 
with  Regulation  1b1  of 
the 
Facilitation 
Regulations 

Nature of transaction 

Transaction amount 

of 

the 

Certificate 
Company's 
engagement  in  a  run-off  insurance 
liability  of 
policy  to  cover  the 
directors  and  officers  of 
the 
Company. 

to 

the 

Amendment 
letter  of 
commitment to indemnification and 
exemption  for  the  directors  and 
officers  of  the  Company  regarding 
the  maximum 
of 
indemnification. 

amount 

of 

the 

Company's  
Certificate 
engagement  in  an  insurance  policy 
to cover the liability of directors and 
officers  in  the  Company  and  its 
subsidiaries, in accordance with the 
Company's  remuneration  policy  for 
the period until December 1, 2023. 

Liability limit of up to 10 million dollars 
per  claim  and  in  total  for  the  entire 
insurance  year,  plus  reasonable  legal 
expenses.  The  total  annual  premium  is 
about  USD  300k.  The  amount  of  the 
deductible for the Company is up to USD 
250k per case. 

Up  to  25%  of  the  Company's  equity 
latest 
according  to  the  Company's 
reports  published  before  the  actual 
indemnity was granted or a total of USD 
15 million, whichever is higher. 

in  total 

Liability limit of up to USD 20 million per 
claim  and 
for  the  entire 
insurance  year  plus  reasonable  legal 
expenses.  The  total  annual  premium  is 
approximately USD 494k. The amount of 
the deductible for the company is up to 
USD  150k  in  the  case  of  claims  outside 
the  US  and  Canada,  up  to  USD  250k  in 
the  case  of  claims  in  the  US  In  Canada 
and  up  to  USD  250k  per  case  for 
securities claims in Israel. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

30.  Financial instruments 

30.1. 

General 

The Group is exposed to the following risks arising from the use of financial instruments: 

A.  Credit risk 
B.  Liquidity risk 
C.  Market risk (including currency risk, interest rate risk and inflation / Consumer Price 

Index risks). 

In  this  note,  quantitative  and  qualitative  information  is  given  regarding  the  Group's 
exposure to each of the above risks, an explanation of how the risks are managed and 
the measurement processes. 

30.2. 

Framework for financial risk management 

The comprehensive responsibility for establishing the group's financial risk management 
framework and overseeing it rests with the board of directors. The purpose of financial 
risk management in the group is to define and monitor the various risks on an ongoing 
basis  and  to  determine  the  level  of  risk  exposure  that  must  be  met  and  the  possible 
effects  resulting  from  this  exposure 
in  accordance  with  the  assessments  and 
expectations of the board of directors. 

The Group's policy is to manage, according to rules established by the Board of Directors, 
the exposure resulting from fluctuations in foreign exchange rates, changes in interest 
rates and changes in the Consumer Price Index. 

30.3. 

Credit risk 

Management maintains ongoing monitoring of the Group's exposure to credit risks. Cash 
and investments in deposits and securities are deposited in highly rated b banks. 

Trade and other receivables 
The  Group's  Management  regularly  monitors  customer  debts  and  the  financial 
statements  include  provisions  for  loan-loss  that  adequately  reflect,  according  to 
Management's  assessment,  the  loss  grossing  in  debts  whose  collection  doubtful.  In 
addition, there is a wide spread of customer balances. 

Investments in financial assets 
To  the  extent  that  investments  are  made  in  securities,  they  are  made  in  liquid, 
marketable  and  low-risk  securities.  Transactions  involving  derivatives  are  conducted 
with entities with a high credit rating. 

As of the reporting date, there is no significant concentration of credit risks. 

30.4. 

Liquidity risk 

The Group's policy for managing its liquidity is to ensure, as far as possible, sufficient 
liquidity to fulfill its existing and expected obligations when they come due, in a normal 
business scenario and under extreme conditions, without causing it unwanted losses or 
damage  to  its  goodwill.  The  cash  balances  held  by  the  Group  are  mainly  managed  in 
liquid investment channels, subject to the needs of financing current activities and debt 
service.  The  Group  regularly  examines  the  existing  and  expected  cash  needs  in  the 
foreseeable range, even in the scenario of an unexpected deterioration in its business. 
These forecasts take into account, among other things, debt collection and circulation 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

from banking and non-banking sources. According to the conclusions, an active activity 
is carried out to minimize the risk. 

Regarding the terms of bonds issued by the group companies and loans received, see 
Note 13 above. 

The Group has contractual obligations for purchases, PP&E, end equipment, and other 
current  services.  For  more  information  regarding  the  contracts,  see  Note  18  on 
contracts. 

The  following  are  the  contractual  repayment  dates  of  financial  obligations  that  have 
actually been received up to December 31, 2022, including estimated interest payments 
(based on consumer price index data and interest known as of December 31, 2022): 

As of December 31, 2022 

Contractual 
cash flow 

Book value 
NIS millions 

H1/2023 

H2/2023 

2024 

2027 

2025

  to  

2028
onwards 

Non-derivative financial liabilities 

Trade payables 

Loans  

Debentures 

1,432 

2,222 

6,956 

1,432 

2,651 

7,755 

1,421 

89 

87 

11 

68 

921 

10,611 

11,838 

1,597 

1,000 

 - 

313 

1,496 

1,809 

 - 

1,196 

3,446 

4,642 

 - 

985 

1,805 

2,790 

As of December 31, 2021 

Contractual 

2024     to  

2027  

Book value 

cash flow 

H1/2022 

H2/2022 

2023 

2026 

onwards 

NIS millions 

Non-derivative financial liabilities 

Trade payables 

Loans  

Debentures 

1,566 

1,906 

8,142 

1,566 

2,194 

9,158 

1,542 

85 

105 

24 

50 

997 

11,614 

12,918 

1,732 

1,071 

 - 

141 

1,135 

1,276 

 - 

1,042 

4,705 

5,747 

 - 

876 

2,216 

3,092 

Financial 
respect 
of 
instruments 

liabilities 

in 
derivative 

35 

35 

6 

29 

 - 

 - 

 - 

30.5.  Market risks 

The  purpose  of  market  risk  management  is  to  manage  and  monitor  the  exposure  to 
market risks within acceptable parameters to prevent significant exposures to market 
risks that will affect the Group's results, its obligations and its cash flow. 

As part of the Group's exposure management policy, it was decided to determine a mix 
of  debt  exposure  to  interest  and  linkage  as  well  as  to  reduce  exposure  to  foreign 
exchange.  Accordingly,  during  its  normal  business,  the  Group  performs  full  or  partial 
hedging  operations  and  takes  into  account  the  effects  of  the  exposure  in  its 
considerations in determining the type of loans it takes and in managing its investment 
portfolio . 

 
 
 
 
 
 
 
   
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

30.5.1. 

Risk of exposure to Consumer Price Index (inflation) and foreign currency 

Consumer Price Index risk (inflation) 
Changes in the Consumer Price Index rate affect the Group's profitability and 
its future cash flows, mainly due to its index-linked obligations. As part of the 
implementation  of  a  policy  to  reduce  index  exposure,  the  Group  executes 
trades against the index. The hedging transactions are executed against the 
settlement  schedules  of  the  hedged  debt.  The  Company  applies  hedge 
accounting to these forward contracts. 

A significant portion of cash balances is invested in shekel deposits that are 
exposed to changes in real value as a result of changes in the Consumer Price 
Index. 

Foreign currency risk 
The Group is exposed to foreign currency risks mainly due to payments for 
the purchase of end equipment and PP&E denominated or linked in part to 
the dollar and the euro. In addition, the Group provides services to customers 
and  receives  services  from  suppliers  around  the  world  in  foreign  currency, 
mainly in dollars. The Group's policy is to reduce as much as possible purchase 
agreements  in  foreign  currency,  as  well  as  to  partially  hedge  the  dollar 
exposure through forward contracts against the dollar and management of 
dollar deposits. 

 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

The following is a statement on the financial situation according to linkage bases as of December 31, 
2022: 

As of December 31, 2022 

Linked  to 
price 
index 
NIS 
millions 

Unlinked 
NIS 
millions 

Foreign 
currency  
or 
linked 
to  foreign 
currency 
(mainly 
dollars) 
NIS 
millions 

Non-
monetary 
balances 
NIS 
millions 

Total 
balances 
NIS 
millions 

733 
911 
1,395 
174 
- 
3,213 

314 
- 
- 
- 
- 

60 
374 
3,587 

635 
17 
1,217 
396 
168 
2,433 

6,127 
87 
164 
- 
- 
37 
6,415 
8,848 

- 
40 
- 
75 
 -  
115 

140 
- 
- 
- 
- 

29 
169 
284 

286 
439 
16 
- 
- 
741 

2,130 
1,362 
- 
- 
- 
- 
3,492 
4,233 

21 
22 
45 
- 
- 
88 

6 
- 
- 
- 
- 

- 
6 
94 

- 
- 
193 
3 
- 
196 

- 
3 
37 
- 
- 
- 
40 
236 

- 
- 
- 
40 
85 
125 

- 
57 
1,746 
6,542 
3,251 

169 
11,765 
11,890 

- 
- 
172 
- 
- 
172 

- 
- 
- 
151 
319 
- 
470 
642 

754 
973 
1,440 
289 
85 
3,541 

460 
57 
1,746 
6,542 
3,251 

258 
12,314 
15,855 

921 
456 
1,598 
399 
168 
3,542 

8,257 
1,452 
201 
151 
319 
37 
10,417 
13,959 

 (
5,261
)

 (
3,949
)

 (
)142

11,248 

1,896 

 (
1,004
)

635 

369 

- 

- 

Current assets 
Cash and cash equivalents 
investments 
customers 
Other receivables 
Inventory 
Total current assets 
Non-current assets 
Trade receivables 
Broadcast rights - minus rights used 
Right-of-use assets 
PP&E 
Intangible assets 
Deferred  expenses  and  non-current 
investments 
Total non-current assets 
Total assets 
Current liabilities 
Debentures, loans and credit 
Current maturities of lease liabilities 
Trade payables 
Employee benefits 
Provisions 
Total current liabilities 
Non-current liabilities 
Loans and debentures 
Lease liabilities 
Employee benefits 
Derivatives and other liabilities 
Deferred tax liabilities 
Provisions 
Total non-current liabilities 
Total liabilities 

Total disclosure in the statement of 
financial position 
The  scope  of 
index  and  foreign 
currency risk hedging transactions is 
as follows: 
Forward contracts (see Note 30.6) 

 
 
         
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

The following is a statement on the financial situation according to linkage bases as of December 31, 
2021: 

As of December 31, 2021 

Linked  to 
price 
index 
NIS 
millions 

Unlinked 
NIS 
millions 

Foreign 
currency  
or 
linked 
to  foreign 
currency 
(mainly 
dollars) 
NIS 
millions 

Non-
monetary 
balances 
NIS 
millions 

Total 
balances 
NIS 
millions 

Current assets 

Cash and cash equivalents 

investments 

customers 

Other receivables 

Inventory 

Total current assets 

Non-current assets 

Trade receivables 

Broadcast rights - minus rights used 

Right-of-use assets 

PP&E 

Intangible assets 
Deferred 
investments 

expenses 

Deferred tax expenses 

Total non-current assets 

Total assets 

Current liabilities 

and 

non-current 

Debentures, loans and credit 

Current maturities of lease liabilities 

Trade payables 

Employee benefits 

Provisions 

Total current liabilities 

Non-current liabilities 

Loans and debentures 

Lease liabilities 

Employee benefits 

Derivatives and other liabilities 

Deferred tax liabilities 

Provisions 

Total non-current liabilities 

Total liabilities 

967 

1,078 

1,833 

131 

 - 

4,009 

254 

 - 

 - 

 - 

 - 

117 

 - 

371 

4,380 

359 

6 

1,317 

507 

69 

 - 

35 

15 

112 

 - 

162 

179 

 - 

 - 

 - 

 - 

16 

 - 

195 

357 

621 

460 

44 

 - 

 - 

31 

21 

11 

 - 

 - 

63 

 - 

 - 

 - 

 - 

 - 

 - 

 - 

 - 

63 

 - 

 - 

240 

3 

 - 

 - 

 - 

 - 

37 

74 

111 

 - 

60 

1,828 

6,312 

3,251 

173 

24 

11,648 

11,759 

 - 

 - 

154 

 - 

 - 

2,258 

1,125 

243 

154 

6,773 

23 

199 

 - 

 - 

49 

7,044 

9,302 

2,295 

1,488 

 - 

 - 

 - 

 - 

3,783 

4,908 

 - 

 - 

44 

 - 

 - 

 - 

44 

287 

 - 

 - 

 - 

142 

296 

 - 

438 

592 

998 

1,134 

1,859 

280 

74 

4,345 

433 

60 

1,828 

6,312 

3,251 

306 

24 

12,214 

16,559 

980 

466 

1,755 

510 

69 

3,780 

9,068 

1,511 

243 

142  

296 

49 

11,309 

15,089 

Total disclosure in the statement of financial 
position 
The scope of index and foreign currency risk 
hedging transactions is as follows: 
Forward contracts (see Note 30.6) 

 (
4,922

)

 (
4,551

)

224(

)

11,167 

1,470 

 (
1,096

)

880 

216 

 - 

 - 

 
 
         
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

30.5.2. 

Data regarding the Consumer Price Index: 

In  2022,  the  known  Consumer  Price  Index  increased  by  5.3%  (in  2021  an 
increase of 2.4% and in 2020 a decrease of 0.6%). 

30.5.3. 

Sensitivity analyzes in relation to the change in the Consumer Price Index to 
the change in the dollar exchange rate 

An increase/decrease of 1% in the Consumer Price Index at the time of the 
report would not have materially affected the net profit and equity. 

An increase/decrease of 10% in the dollar exchange rate at the time of the 
report would not have materially affected the profit and equity. 

30.5.4. 

Interest rate risk 

As  of  December  31,  2022,  the  exposure  to  interest  rate  risk  due  to  a 
commitment for debt instruments bearing variable interest is low. 

A. 

Interest type 
The  following  is  a  breakdown  of  the  type  of  interest  of  the  Group's 
interest-bearing financial instruments. 

Fixed interest instruments 
Financial 
customers) 
Financial liabilities (loans and debentures) 

deposits 

(mainly 

assets 

Variable interest instruments 
Financial assets (loans and debentures) 

Book value 

2022 

2021 

NIS millions 

NIS millions 

and 

1,6  
73

 (
8,544
)

 (
6,871
)

 (
)698

1,964 

 (

9,712
)

 (

7,748
)

(

)336

B.  Fair value sensitivity analysis regarding fixed interest instruments 

The Group’s fixed interest assets and liabilities are not measured at fair 
value  through  income.  Therefore,  a  change  in  interest  rates  on  the 
reporting date will not have any effect on income. 

C.  Cash flow sensitivity analysis regarding instruments with variable interest 

rates 

A  1%  increase/decrease  in  interest  rates  at  the  reporting  date  would 
have had a negligible effect on profit and equity. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

30.6. 

Hedging 

30.6.1. 

Cash flow hedge accounting 

Bezeq entered into forward contracts, as detailed in the table below, for the 
purpose  of  reducing  exposure  to  changes  in  the  Consumer  Price  Index  for 
index-linked debentures. These transactions hedge a specific cash flow of a 
part of the debentures and are recognized in accounting as a cash flow hedge. 
The  expiration  date  of  these  transactions  corresponds  to  the  disposal 
schedules of the bonds they were intended to protect. The fair value of the 
forward contracts is determined by using observable market data (level 2 in 
the fair value hierarchy). 

Nominal 
value 

Fair value 

Equity 
principal 
balance 

Hedged item 

Repayment dates 

Transactio
ns 

NIS millions  NIS millions  NIS millions 

As  of  December  31, 
2022 
Debentures Series 10  12.2023
Debentures Series 12  6.2026

 to 

12.2025  

 to 

6.2030  

As  of  December  31, 
2021 
Debentures Series 6  12.2022 
Debentures Series 10  12.2022

 to 

12.2025  

Debentures Series 12  6.2026

 to 

6.2030  

30.6.2. 

Economic hedging 

3 
6 
9 

1 
4 

5 

10 

225 
310 
535 

330 
300 

250 

880 

9 
22 
31 

)29(
3 

13 

)13(

6 
14 
20 

4 
9 

16 

29 

A.  Bezeq  is  engaged  in  forward  contracts  in  order  to  reduce  exposure  to 
changes  in  the  dollar  exchange  rate.  The  net  fair  value  of  these 
transactions as of December 31, 2022 is an asset of approximately NIS 8 
million (in 2021 - a liability of approximately NIS 4 million). 

B.  DBS  is  involved  in  forward  contracts  in  order  to  reduce  exposure  to 
changes  in  the  dollar  exchange  rate.  The  net  fair  value  of  these 
transactions as of December 31, 2022 is a liability of approximately NIS 4 
million  (as  of  December  31,  2022  -  a  liability  of  approximately  NIS  2 
million). 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

30.7. 

Financial instruments measured at fair value 

30.7.1. 

The table below presents an analysis of the financial instruments measured 
at fair value: 

December 
2022 

31, 

December 
2021 

31, 

NIS millions 

NIS millions 

Level  1  -  Investment  in  marketable  securities  measured  at 
fair value through income (see Note 30.7.2) 

Level 2 – Forward contracts (see Note 30.7.3) 

8 

42 

99 

)19(

30.7.2. 

30.7.3. 

The  fair  value  of  tradable  securities  is  determined  with  reference  to  their 
quoted suggested sale price at the close of trading, as of the reporting date 
(level 1). 

The fair value of forward contracts on the Consumer Price Index or foreign 
currency is based on discounting the difference between the price stated in 
the forward contract and the price of the current forward contract for the 
remaining  period  of  the  contract  until  redemption,  using  an  appropriate 
interest rate (level 2) .  The  evaluation is carried out under the assumption 
that a market participant takes into account the credit risks of the parties in 
the pricing of such contracts. 

30.8. 

Financial instruments measured at fair value for disclosure purposes only 

The table below details the differences between the book value and the fair value of 
financial liabilities. 

The fair value of  public debentures is determined according to their quoted purchase 
price at the close of trading, as of the reporting date (level 1). 

The  fair  value  of  non-traded  loans  and  debentures  is  measured  on  the  basis  of  the 
present  value  of  the  future  cash  flows  for  the  principal  and  interest  component, 
discounted according to the market interest rate appropriate for similar obligations plus 
the  required  adjustments  for  risk  premium  and  non-tradability  as  of  the  date  of  the 
statements (level 2). 

As of December 31, 2022 
Book  value 
(including 
accrued 
interest) 

Fair value 

Discount 
rate 
(weighted 
average) 

Book 
value 

Fair 
value 

As of December 31, 2021 

Discount 
rate 
(weighted 
average) 
% 

NIS millions 

% 

NIS millions 

from 

banks 

Loans 
institutional bodies (unlinked) 
Public 
(index-
debentures 
linked) 

and 

Public debentures (unlinked) 

1,530 

1,462 

5.14 

1,612 

1,713 

1.93 

2,402 

4,569 

8,501 

2,373 

4,386 

8,221 

1.82 

4.95 

2,913 

5,215 

9,740 

3,249 

5,543 

10,505 

 (

1.25
)

1.76 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

30.9.  Offsetting financial assets and financial liabilities 

The Group has agreements with various communication companies for the supply and 
receipt of communication services. According to some agreements, each party has the 
right to offset the amounts that each party owes. The table below shows the book value 
of offset balances as presented in the statement of financial position: 

Gross balance of trade and other receivables 

Offset amounts 
Balance of trade receivables presented in the statement of financial 
position 

Gross supplier balance 

Offset amounts 

Balance of suppliers presented in the statement of financial position 

December  31, 
2022 

December  31, 
2021 

NIS millions 

NIS millions 

96 

 (84) 

12 

98 

 (84) 

14 

97 

(87) 

10 

104 

(87) 

17 

 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

31.  Summary  of  selected  data  from  the  statements  of  Bezeq  the  Israel 
Telecommunications  Corp.  Ltd.,  Pelephone  Communications  Ltd.,  Bezeq 
International Ltd. and DBS Satellite Services (1998) Ltd. 

31.1. 

Bezeq the Israel Telecommunications Corp. Ltd. 

Data from the statement of financial position: 

December 

31, 

December 

31, 

2022 

2021 

NIS millions 

NIS millions 

2,086 

10,002 

12,088 

2,148 

8,317 

10,465 

1,623 

12,088 

2,554 

9,957 

12,511 

2,393 

9,022 

11,415 

1,096 

12,511 

Current property 

Non-current property 

Total property 

Current liabilities 

Non-current liabilities 

Total liabilities 

Equity   

Total liabilities and equity 

Data from the statement of income: 

Year ended December 31 

2022 

2021 

2020 

NIS millions 

NIS millions 

NIS millions 

Income 

Operating expenses 

Salaries 

Depreciation and amortization 

General and operating expenses 

Other operating expenses (income), net 

Total Operating expenses 

Operating profit 

Financing expenses (income) 

Financing expenses 

Financing income 

Financing expenses, net 

Profit after financing expenses, net 
Share  in  profits  (losses)  of  investees, 
net 

Profit before income taxes 

Income taxes 

Profit for the year 

4,306 

970 

1,005 

759 

112 

2,846 

1,460 

424 

)92 (

332 

1,128 

151 

1,279 

279 

1,000 

4,182 

4,159 

934 

938 

667 

(105) 

2,434 

1,748 

357 

)15(

342 

1,406 

120 

1,526 

343 

1,183 

919 

877 

590 

68 

2,454 

1,705 

419 

(16) 

403 

1,302 

(244) 

1,058 

262 

796 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

31.2. 

Pelephone Communications Ltd. 

Data from the statement of financial position: 

December 

31, 

December 

31, 

2022 

2021 

NIS millions 

NIS millions 

865 

3,215 

4,080 

684 

879 

1,563 

2,517 

4,080 

1,121 

3,331 

4,452 

837 

916 

1,753 

2,699 

4,452 

Current property 

Non-current property 

Total property 

Current liabilities 

Non-current liabilities 

Total liabilities 

Equity   

Total liabilities and equity 

Data from the statement of income: 

Year ended December 31 

2022 

2021 

2020 

NIS millions 

NIS millions 

NIS millions 

Income 
Income from services 
Income from sale of end equipment 

Total income from services and sales 

Operating expenses 

General and operating expenses 
Salaries 

Depreciation and amortization 

Total operating expenses 

Other operating expenses. net 

Operating profit (loss) 

Financing expenses (income) 

Financing expenses 

Financing income 

Financing income, net 

Profit (loss) before income taxes 

Income tax expenses (income) 

Profit (loss) for the year 

1,791 

608 

2,399 

1,327 

314 

532 

2,173 

33 

193 

42 

 (68) 

 (26) 

219 

54 

165 

1,642 

647 

2,289 

1,346 

315 

577 

2,238 

9 

42 

23 

(65) 

(42) 

84 

20 

64 

1,591 

595 

2,186 

1,329 

324 

599 

2,252 

18 

(84) 

18 

(66) 

(48) 

(36) 

(11) 

(25) 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

31.3. 

Bezeq International Ltd. 

Data from the statement of financial position: 

Current property 

Non-current property 

Total property 

Current liabilities 

Non-current liabilities 

Total liabilities 

Equity   

Total liabilities and equity 

December 

31, 

December 

31, 

2022 

2021 

NIS millions 

NIS millions 

396 

364 

760 

431 

139 

570 

190 

760 

472 

311 

783 

409 

157 

566 

217 

783 

Data from the statement of income: 

Income 
Operating expenses 

Operating, general and depreciation expenses 

Salaries 

Depreciation, amortization and impairments 

Other operating expenses, net 
Total operating expenses 

Operating profit (loss). 
Financing expenses (income) 
Financing expenses 

Financing income 

Financing expenses, net 

Profit (loss) before income taxes 

Income tax 

Profit (loss) for the year 

Year ended December 31 

2022 

2021 

2020 

NIS millions 

NIS millions 

NIS millions 

1,239 

1,237 

1,271 

827 

237 

134 

71 

799 

237 

173 

6 

1,269 

1,215 

(30) 

9 

 (8) 

1 

 (31) 

1 

(32) 

22 

5 

(3) 

2 

20 

12 

8 

802 

248 

149 

313 

1,512 

(241) 

5 

(3) 

2 

(243) 

32 

(275) 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

31.4. 

DBS Satellite Services (1998) Ltd. 

Data from the statement of financial position: 

December 

31, 

December 

31, 

2022 

2021 

NIS millions 

NIS millions 

196 

241 

437 

395 

74 

469 

)32 (

437 

196 

230 

426 

394 

80 

474 

(48) 

426 

Current property 

Non-current property 

Total property 

Current liabilities 

Non-current liabilities 

Total liabilities 

Equity   

Total liabilities and equity 

Data from the statement of income: 

Year ended December 31 

2022 

2021 

2020 

NIS millions 

NIS millions 

NIS millions 

Income 
Operating expenses 

1,277 

1,270 

Operating, general and depreciation expenses 

Salaries 

Depreciation, amortization and impairments 

Other operating expenses (income), net 
Total operating expenses 

867 

200 

199 

3 

835 

188 

203 

12 

1,269 

1,238 

Operating profit 
Financing expenses (income) 
Financing expenses 

Financing income 

Financing expenses, net 

Profit before income taxes 

Income tax  

Profit for the year 

8 

8 

 (14) 

 (6) 

14 

1 

13 

32 

4 

(3) 

1 

31 

1 

30 

1,287 

857 

203 

203 

(15) 

1,248 

39 

15 

(2) 

13 

26 

2 

24 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Statements as of December 31, 2022 

32.  Material events during and after the reporting period 

32.1. 

In December 2022, Bezeq signed an agreement to provide an indefeasible right of use 
service in the BSA fiber service to Partner. See Note 21.1 above. 

32.2. 

See Note 12.6 above regarding the decision of Bezeq’s Board of Directors dated March 
13, 2023 regarding the update of Bezeq's dividend distribution policy and the resolution 
of the Bezeq Board of Directors to recommend to the Bezeq general assembly on the 
distribution of a dividend. 

 
 
 
Separate Financial Information for the Year Ended 
December 31, 2022 

 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
Separate Financial Information as of December 31, 2022 

Table of Contents 

Auditors' report 

Separate Financial Information 

Statement of Financial Position 

Income Statement  

Cash Flow Statement 

Notes to Separate Financial Information 

Page 

2 

3 

4 

5 

6 

 
 
 
 
 
 
 
 
 
Somekh Chaikin 
KPMG Millennium Tower  
17 HaArbaa Street P.O.B. 609 
Tel Aviv 6100601 
03 684 8000 

To 
Shareholders of B Communications Ltd. 

Dear Sir / Madame, 
Re:  Special  report  of  the  auditors  on  separate  financial  information  under  Regulation  9C  of  the  Securities  Regulations 
(Periodic and Immediate Reports), 5730-1970 

We audited the separate financial information presented in accordance with Regulation 38D of the Securities Regulations 
(Periodic and Immediate Reports), 5730-1970 of B. Communications Ltd. (hereinafter – “the Company") as of December 31, 
2022  and  2021  and  for  each  of  the  three  years  the  last  of  which  ended  on  December  31,  2022.  The  separate  financial 
information  is  within  the  responsibility  of  the  Company's  Board  of  Directors  and  Management.  It  is  our  responsibility  to 
provide an opinion on the separate financial information for said based on our review. 

We  conducted  our  audit  in  accordance  with  auditing  standards  accepted  in  Israel.  According  to  these  standards,  we  are 
required  to  plan  and  perform  the  audit  in  order  to  obtain  a  reasonable  degree  of  assurance  that  the  separate  financial 
information is not materially misrepresented. An audit includes a sample examination of evidence supporting the amounts 
and  details  included  in  the  separate  financial  information.  An  audit  also  includes  an  examination  of  the  accounting  rules 
applied in preparing the separate financial information and of the significant estimates made by the Company's Board of 
Directors  and  Management,  as  well  as  an  assessment  of  the  adequacy  of  the  presentation  of  the  separate  financial 
information. We believe that our audit and the other auditors' reports provide an adequate basis for our opinion. 

In  our  opinion,  based  on  our  audit,  the  separate  financial  information  has  been  prepared,  in  all  material  respects,  in 
accordance with the provisions of Regulation 9C of the Securities Regulations (Periodic and Immediate Reports), 5730-1970. 

Without limiting our above opinion, we draw attention to what is stated in Note 1 which refers to Note 1.3 to the consolidated 
statements, regarding the investigation by the Securities Authority and the Israel Police of a suspicion of committing offenses 
under the Securities Law and the Penal Code concerning, inter alia, transactions related to the former controlling shareholder 
and the notice of the Tel Aviv District Attorney's Office (Taxation and Economy) regarding the consideration of prosecuting 
the Company and holding a hearing for suspicions of the offense of bribery and the offense of reporting with the aim of 
misleading  a  reasonable  investor,  and  what  is  stated  in  this  note  regarding  the  filing  of  indictments  against  the  former 
controlling  shareholder  in  the  Company  in  various  offenses,  among  other  things,  for  offenses  of  bribery  and  causing 
misleading detail in immediate reporting, and regarding the filing of an indictment against the former controlling shareholder 
of  the  Company  and  former  senior  officers  of  Bezeq  Group,  which  attributes  to  the  defendants  fraudulent  receipt  and 
reporting offenses under the Securities Law. Also, following the opening of the aforementioned investigation, a number of 
civil legal proceedings were opened against the Company, former officers of the Company as well as companies from the 
group that previously controlled the Company, including motions for the approval of class actions. As stated in the above 
note, at this stage the Company is unable to assess the effects of the investigations, their findings and results on the Company 
as well as on the statements and estimates used in the preparation of these reports, if any. 

In addition, without limiting our above opinion, we draw attention to what is stated in Note 17 to the Company’s consolidated 
statements  regarding  claims  filed  against  Group  companies, which  cannot  be  estimated  or  for  which  the  exposure 
cannot yet be calculated.  

Somekh Chaikin 
Certified Public Accountants 

March 14, 2023 

Somekh Chaikin, Israeli partnership and a member of the KPMG network of independent firms incorporated  u n d e r  
t h e   Swiss entity K P M G   I n t e r n a t i o n a l   C o o p e r a t i v e   ( " K P M G   I n t e r n a t i o n a l " )  

2 

 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
Separate Financial Information as of December 31, 2022 

Separate Statement of Financial Position as of December  31, 

Assets 

Cash and cash equivalents 

Short-term investments and deposits 

Other receivables 

Total current assets 

Long-term deposits 

Investment in equity-accounted investee 

Total non-current assets 

Total assets  

Liabilities 

Other payables 

 Total current liabilities 

Debentures  

Total non-current liabilities 

Total liabilities 

Shareholders' equity 

2022 

2021 

  Note 

NIS millions 

NIS millions 

3 

4 

5 

6 

8 

13 

63 

1 

77 

27 

1,864 

1,891 

25 

180 

14 

219 

79 

1,724 

1,803 

1,968 

2,022 

9 

9 

1,905 

1,905 

7 

7 

1,999 

1,999 

1,914 

2,006 

54 

16 

Total liabilities and shareholders' equity 

1,968 

2,022 

Darren Glatt 
Chairman of the Board of Directors 

Tomer Raved 
CEO 

Itzik Tadmor 
CFO 

Date of approval of the financial statements: March 14, 2023 

The notes attached to the financial information constitute an integral part thereof. 

3 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Separate Financial Information as of December 31, 2022 

Income Statement for the year ended December 31 

2022 

2021 

2020 

Note 

NIS millions 

NIS millions 

NIS millions 

Operating expenses 

Salaries 

General and operating expenses  

Total operating expenses 

Operating loss 

Financing expenses (income) 

9 

Financing expenses 

Financing income 

Financing expenses, net 

Loss after financing expenses, net 

Share in profit of equity-accounted investee 

Profit before tax 

Income tax  

Net profit for the year  

5 

7 

12 

)12 (

106 

)9 (

97 

 (
)109

267 

158 

- 

158 

Comprehensive income for the year ended December 31 

5 

8 

13 

)13(

184 

)10(

174 

(

)187

316 

129 

- 

129 

3 

8 

11 

)11(

110 

)6(

104 

(

)115

265 

150 

7 

157 

2022 

2021 

2020 

NIS millions 

NIS millions 

NIS millions 

Net profit for the year 

Other comprehensive income (loss), net of tax 

Total comprehensive income for the year 

158 

13 

171 

129 

10 

139 

157 

)3(

154 

The notes attached to the financial information constitute an integral part thereof. 

4 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Separate Financial Information as of December 31, 2022 

Cash Flows Statement 

2022 

2021 

2020 

NIS millions 

NIS millions 

NIS millions 

Cash flows from current activity 

Net profit for the year 

Adjustments to profit: 

Share in profit of equity-accounted investee 

Financing expenses, net 

Share-based compensation 

Change in trade payables 

Change in other receivables 

Net cash used for current activities 

Cash flows from investing activities 

Change in deposits and investments, net 

Investment in an affiliate 

Dividend received from subsidiary 

Interest and dividend received in cash 

Net  cash  generated  from  (used  for)  investing 
activities 

Cash flows from financing activities 

Issuance of debentures 

Repayment of debentures  

Buyback of shares 

Interest paid 

Early repayment fees 

Net compensation for the Horev claim 

Net cash used for financing activities 

Decrease in cash and cash equivalents 

Cash and cash equivalents at the beginning of the period 

Cash and cash equivalents at the end of the period 

158 

 (
)267

96 

1 

2 

3 

)9 (

163 

)15 (

143 

2 

293 

- 

 (
)100

 (
)121

)75 (

- 

- 

 (
)296

)12 (

25 

13 

129 

157 

(

)316

174 

- 

- 

10 

)3(

66 

- 

- 

1 

67 

1,035 

 (

1,015
)

)16(

)79(

)19(

- 

)94(

(30) 

55 

25 

(

)265

106 

- 

)7(

)1(

)10(

(

)229

)40(

- 

2 

(

)267

- 

- 

- 

)78(

- 

)3(

)81(

(

)358

413 

55 

The notes attached to the financial information constitute an integral part thereof

5 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Separate Financial Information as of December 31, 2022 

1.  General 

The  following  are  financial  data  from  the  Group's  consolidated  statements  as  of  December  31,  2022 
(hereinafter - "Consolidated Statements"), which are published as part of the periodic reports, attributed 
to  the  company  itself  (hereinafter  -  "Separate  Financial  Information"),  presented  in  accordance  with 
Regulation 9C (hereinafter - "the Regulation" ) and the tenth schedule (hereinafter – “the Tenth Schedule") 
to  the  Securities  Regulations  (Periodic  and  Immediate  Reporting),5730-1970  regarding  the  separate 
financial information of the corporation. 

The separate financial information should be read together with the Consolidated Statements. 
In this separate financial information - 

"The Company" - "B Communications Ltd." 

"Included Company", "consolidated company", "the Group", "Investee", "related party": as these terms 
are defined in the Group’s 2022 Consolidated Statements. 

Regarding the investigation by the Securities Authority and the Police, see Note 1.3 to the Consolidated 
Statements. 

2.  Explanation  of  the  main  accounting  policies  applied  in  the  separate 

financial information 

The  accounting  policy  rules  detailed  in  the  Consolidated  Statements  were  consistently  applied  to  all 
periods presented in the separate financial information by the Company, including the manner in which 
the financial data was classified within the  Consolidated Statements with the changes  required by the 
following: 

2.1.  Presentation of financial data 

The  data  on  the  financial  position,  income,  comprehensive  income,  and  cash  flows  include 
information contained in the Consolidated Statements and attributed to the Company itself. The 
investment balances and the results of the operations of investees are handled according to the 
balance sheet value method. Cash flows in respect of current activity, investment activity, and 
financing activity in respect of transactions with investees are shown separately on the net, within 
the relevant activity according to the essence of the transaction. 

2.2.  New standards not yet adopted 

Regarding new standards that have not yet been adopted, see Note 3.20 to the Consolidated 
Statements. 

6 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Separate Financial Information as of December 31, 2022 

3.  Short-term investments and deposits 

December 
2022 

31, 

December 
2021 

31, 

NIS millions 
8 
55 

63 

NIS millions 
99 
81 

180 

Investments in marketable securities 
Short-term deposits (1) 

(1) The deposits are due until May 2023. 

4.  Consolidated companies 

Consolidated companies directly held by the Company: 

Company rights in equity 

Investment 
consolidated 
in 
company  (according  to  balance 
sheet value method) as of 

December  31, 
2022 
% 

December  31, 
2022 

December  31, 
2022 

December  31, 
2021 

% 

NIS millions 

NIS millions 

Bezeq 

26.81% 

26.72% 

1,864 

1,864 

1,724 

1,724 

4.1. 

4.2. 

As of October 11, 2021, all Bezeq shares held by the Company are directly held by the Company, 
after on that day all Bezeq shares held by B Communications (SP2) Ltd. (a company fully owned 
and  controlled  by  B  Communications)  were  transferred  to  the  direct  holding  of  B 
Communications  (SP1)  Ltd.  which  is  fully  owned  and  controlled  by  the  Company).  After  the 
transfer  of  Bezeq  shares  to  the  Company,  the  companies  B  Communications  (SP2)  Ltd.  and  B 
Communications (SP1) Ltd. were closed. 

On  December  28,  2022,  the  Company  purchased  2,530,000  ordinary  shares  of  the  subsidiary 
Bezeq. The Company purchased shares as mentioned in exchange for payment of a total amount 
of  approximately  NIS  15  million  and  at  an  average  price  of  NIS  5.95  per  share.  After  the 
aforementioned purchase, the Company held 26.81% of the issued share capital and voting rights 
in the subsidiary (before the acquisition, the Company's holding rate was 26.72%). 

4.3. 

Bezeq’s dividend distribution policy 

On March 13, 2023, Bezeq’s Board of Directors decided to update Bezeq's dividend policy so that 
Bezeq will distribute every six months 60% of the semi-annual profit (after tax), according to its 
consolidated statements, starting with the next distribution (for the second half of 2022), this is 
in view of the improvement trend in the business results, and the continued decrease in the scope 
of its debt, and in accordance with its forecasts regarding its business results for the coming years. 

In addition, Bezeq will strive to update its dividend policy to the distribution of 70% of the semi-
annual profit (after tax) according to its consolidated financial statements, subject to maintaining 
its credit rating in the AA group. 

7 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Separate Financial Information as of December 31, 2022 

The approval of Bezeq's dividend policy does not oblige Bezeq to distribute a dividend to Bezeq's 
shareholders, and each specific distribution will be examined individually in accordance with the 
conditions of implementation of the dividend distribution policy as stated above. In addition, the 
approval  of  the  aforementioned  policy  does  not  prevent  Bezeq’s  Board  of  Directors  from 
periodically reviewing the dividend distribution policy to Bezeq shareholders, taking into account, 
among other things, the provisions of the law, Bezeq's business situation and its plans and its 
equity structure, and while maintaining a balance between ensuring Bezeq's financial strength 
and stability, including its debt level and credit rating, and continuing to bring value to Bezeq's 
shareholders through regular dividend distribution. 

Bezeq's  Board  of  Directors  considers  it  important  to  maintain  the  balance  between  ensuring 
Bezeq's financial strength and stability, while maintaining a rating in Bezeq's current rating group 
[AA]  over  time,  and  continuing  to  unlock  value  to  its  shareholders  through  regular  dividend 
distribution. 

Bezeq's  Board  of  Directors  was  presented,  among  other  things,  with  analysis  and  results  of 
professional  work,  Bezeq's  and  Bezeq  Group's  forecasts,  as  well  as  sensitivity  analyzes  for 
unexpected  adverse  events  in  Bezeq's  and  Bezeq  Group's  businesses.  After  Bezeq’s  Board  of 
Directors examined all of the above, the Board of Directors determined that this decision reflects 
the correct balance between these needs as described above. 

4.4. 

Dividend distribution by Bezeq 

A.  On  April  28,  2022,  the  general  assembly  of  Bezeq's  shareholders  approved  (following  the 
recommendation of the Bezeq’s Board of Directors of March 22, 2022) the distribution of a 
cash dividend to Bezeq's shareholders in the total amount of NIS 240 million (which, as of 
the day determining the distribution, constitutes NIS 0.0867823 per share). The dividend was 
paid  on  May  16,  2022.  The  Company's  share  of  the  aforementioned  dividend  is 
approximately NIS 64 million. 

B.  On  September  14,  2022,  the  general  assembly  of  Bezeq's  shareholders  (following  the 
recommendation  of  the  Bezeq  Board  of  Directors  of  August  9,  2022)  approved  the 
distribution of a cash dividend to Bezeq's shareholders in a total amount of 294 million NIS 
(which, as of the day determining the distribution, is 0.1063081 NIS per share). The dividend 
was  paid  on  October  3,  2022.  The  Company's  share  of  the  aforementioned  dividend  is 
approximately NIS 78 million. 

C.  On  March  13,  2023,  Bezeq's  Board  of  Directors  decided  to  recommend  to  the  general 
assembly of Bezeq shareholders to distribute a cash dividend to Bezeq shareholders in a total 
basket  of  NIS  246  million.  As  of  the  date  of  approval  of  the  financial  statements,  the 
aforementioned dividend has not yet been approved by the Bezeq general assembly. The 
Company’s  share  in  the  aforementioned  dividend  (subject  to  the  approval  of  the  general 
assembly of Bezeq's shareholders) is approximately NIS 66 million. 

5.  Trade payables 

Other payables 

Interest payable 

December 31, 2022 

December 31, 2021 

NIS millions 

NIS millions 

3 

6 

9 

1 

6 

7 

8 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Separate Financial Information as of December 31, 2022 

Debentures 

December 31, 2022 

December 31, 2021 

Carrying 
amount  
NIS millions 

Par value 
NIS millions 

Carrying 
amount 
NIS millions 

Par value 
NIS millions 

Debentures issued to the public: 
Series C 
Series F 

Total debentures 

479 
1,425 

1,905 

497 
1,472 

1,969 

951 
1,035 

1,986 

1,010 
1,040 

2,050 

5.1. 

5.2. 

5.3. 

5.4. 

5.5. 

5.6. 

5.7. 

5.8. 

On July 6, 2021, the Company held a tender for the purchase of Series F debentures, in which 
approximately NIS 394 million par value were issued to institutional entities and the public for 
approximately NIS 394 million in Series F. The annual interest rate (non-linked) set in the tender 
is 3.65%. The interest for the series F debentures will be paid in two semi-annual payments on 
May 31 and November 30 of each year, starting from November 2021 until November 2026. The 
debenture principal will be repaid in one payment on November 30, 2026. The proceeds of the 
net issuance of the series F debentures were used by the Company to make early repayments of 
its existing debentures as of that date as detailed below. 

On July 19, 2021, the Company made a full early repayment of the Series D debenture principal 
(plus  accrued  interest  up  to  the  maturity  date)  and  a  full  early  repayment  of  the  Series  E 
debenture  principal  (plus  accrued  interest  up  to  the  maturity  date  and  an  early  repayment 
penalty as defined in the trust deed of the series E debentures). In addition, the Company made 
a partial early repayment of approximately NIS 226 million par value on the series C debentures 
(plus accrued interest until the maturity date). After making the early repayments, series D and 
E were repaid in full and delisted from trading on the Tel Aviv securities exchange. 

On December 7, 2021, the Company issued to institutional entities and the public approximately 
NIS  485  million  in  series  F  debentures  for  approximately  NIS  488  million  par  value  in  series  F 
debentures.  The  proceeds  of  the  net  issuance  of  the  series  F  debentures  were  used  by  the 
Company to make a partial early repayment of approx. NIS 471 million par value in respect of its 
existing Series C debentures at that date (in addition to accrued interest up to the maturity date 
and an early repayment penalty as defined in the trust deed of the Series C debentures). 

On December 9, 2021, the Company held a private offering of approximately NIS 161 million par 
value in series F debentures for approximately NIS 161 million. The proceeds of the net issuance 
of  the  series  F  debentures  were  used  by  the  Company  to  make  a  partial  early  repayment  of 
approximately  NIS  157  million  par value  in  its  existing  Series  C  debentures  as  of that date  (in 
addition to accrued interest up to the maturity date and an early repayment penalty as defined 
in the trust deed of the Series C debentures). 

On January 10, 2022, the Company made an exchange of approximately NIS 417 million par value 
in  series  C  debentures  in  exchange  for  approximately  NIS  432  million  par  value  in  series  F 
debentures. 

On June 30, 2022, the Company made a partial early repayment of approximately NIS 100 million 
par value in Series C debentures (plus accrued interest up to the maturity date). 

During  the  third  quarter  of  2022,  B  Communications  2  Limited  Partnership  transferred  to  the 
Company the balance of the Company's Series C debentures, which were held by it in the amount 
of approximately NIS 10 million. After the debentures were transferred to the Company, the said 
debentures  were  withdrawn  from  the  Stock  Exchange  clearinghouse  and  delisted  from  the 
trading cycle. 
For more details, see Note 13 to the Consolidated Statements. 

9 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Separate Financial Information as of December 31, 2022 

6.  Contingent liabilities 

6.1. 

In June 2017, two motions for approval of a class action totaling NIS 1.8 billion were filed against 
the Company, Bezeq, Group officers, as well as companies from the former controlling group of 
the  Company  and  Bezeq  regarding  the  DBS  shares  transaction  by  Bezeq  from  Eurocom.  In 
accordance  with  a  Court  decision,  a  consolidated  motion  is  expected  to  replace  these  two 
motions. 17.2 In the company's united financial statements. According to the Company's legal 
adviser, at this preliminary stage, the chance of approval of the motion cannot be estimated. 

6.2. 

See also Note 17 to the Company's Consolidated Financial Statements. 

7.  Shareholders’ equity 

Ordinary shares of NIS 0.1 par value 

Ordinary shares 

December 31, 2022  December 31, 2021 

Registered share capital 

Issued and paid-up share capital 

Treasury shares 

Issued and paid-up share capital, net 

300,000,000 

116,335,793 
 (
9,080,317
)

107,255,476 

300,000,000 

116,335,793 
 (
1,476,803
)

114,858,990 

7.1. 

7.2. 

7.3. 

7.4. 

7.5. 

7.6. 

7.7. 

7.8. 

On March 31, 2021, the Company's general assembly approved the increase in the Company's 
registered share capital, so that after the registered equity increases as stated, the Company's 
registered equity will be NIS 30,000,000, divided into 300,000 ordinary shares of NIS 0.1 each, 
and an amendment of the Company’s Bylaws was approved accordingly. 

On November 30, 2021, the Company's Board of Directors approved a self-purchase of its shares 
up to NIS 30 million. As part of the said purchase plan, the Company acquired in 2021 a total of 
1,457,573 of its shares and in 2022 a total of 820,360 of its shares for NIS 30 million. 

On March 23, 2022, the Company's Board of Directors approved another self-purchase of the 
Company's shares up to NIS 20 million. As part of the said purchase plan, the Company acquired 
a total of 1,349,829 of its shares for NIS 20 million. 

On  May  24,  2022,  the  Company's  Board  of  Directors  approved  another  self-purchase  of  the 
Company's shares of NIS 30 million. 

On May 31, the Company purchased a total of 730,000 of its shares for about NIS 10 million in a 
transaction made off the stock exchange. 

On  August  9,  2022,  the  Company's  Board  of  Directors  approved  a  self-purchase  plan  of  the 
Company's shares up to NIS 25 million. 

On November 15, 2022, the Company's Board of Directors approved a self-purchase plan of the 
Company's shares up to NIS 25 million. 

As of December 31, 2022, Searchlight and the Forer family held 65.26% and 12.35%, respectively, 
of the Company's issued and paid-up share capital. 

10 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Separate Financial Information as of December 31, 2022 

8.  Financing expenses 

Year 

ended 

Year 

ended 

Year 

ended 

December 31 

December 31 

December 31 

2022 

2021 

2020 

NIS millions 

NIS millions 

NIS millions 

165 

- 
19 
184 

10 
- 
10 

174 

110 

- 
- 
110 

6 
- 
6 

104 

Interest expenses 
Change  in  fair  value  of  financial  assets 
measured at fair value through income 
Early repayment fees 
Total financing expenses 

98 

8 
- 
106 

Profits from investments in marketable 
securities and bank deposits 
Income from debenture exchange 
Total financing income 

Financing expenses. Net 

9. 

Income Tax 

2 
7 
9 

97 

The Company has final tax assessments until 2018. 

10.  Share-based compensation 

During  the  year  2022,  the  Company  allocated  3,350,000  options  exercisable  into  3,350,000  ordinary 
Company shares to Company officers. The vesting period of the options granted to the Company's officers 
is 3 years. 

Salaries expenses recognized by the Company for share-based compensation: 

Year ended December 31 

2022 

2021 

2020 

NIS thousands  NIS thousands  NIS thousands 

Salaries expenses 

520 

280 

280 

11 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Separate Financial Information as of December 31, 2022 

11.  Liquidity risk 

The  following  are  the  forecasted  repayment  dates  of  financial  liabilities,  including  interest  payment 
estimate (based on the interest data know as of December 31, 2022): 

December 31, 2022 
Carrying 
amount 

Contractual 
cash flow 

NIS millions 

Q1/2023 

Q2/2023 

2024 

2025-
2026 

financial 

Non-derivative 
commitments 
Trade and other payables 
Debentures 
Total 

9 
1,905 
1,914 

9 
2,216 
2,225 

9 
31 
40 

- 
36 
36 

- 
570 
570 

- 
1,579 
1,579 

12.  Events during and after the reporting period 

12.1. 

Regarding  the  investigation  by  the  Securities  Authority  and  the  police,  see  Note  1.3  to  the 
Consolidated Financial Statements. 

12.2. 

For information on the topic of the epidemic - the outbreak of COVID-19, see Note 1.4 to the 
Consolidated Financial Statements. 

12.3. 

Regarding  the  impairment  loss  in  respect  of  the  companies  Bezeq  International  and  DBS,  the 
goodwill impairment test at Bezeq Landline and the asset impairment test at Pelephone, see Note 
10 to the Consolidated Statements. 

12.4. 

See  Note  12.1.2  to  the  Consolidated  Financial  Statements  regarding  structural  change  in 
subsidiaries. 

12.5. 

For information regarding the retirement of employees in the Bezeq Group, see Note 16.5 to the 
Consolidated Financial Statements. 

12.6. 

For information regarding the decision of the Bezeq Board of Directors dated March 13, 2023 
regarding the update of Bezeq's dividend distribution policy and the decision of the Bezeq Board 
of Directors to recommend to the Bezeq General Meeting on the distribution of a dividend, see 
Note 12.6 to the Consolidated Financial Statements. 

12.7. 

For information regarding material events during and after the reporting period, see Note 32 to 
the Consolidated Financial Statements. 

12 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Chapter D (Additional details on the corporation) for the periodic report for 2022 

Chapter IV 

Additional Details about the Corporation 
and Corporate Governance Questionnaire 

for the Period ended December 31, 2022 

- 1-

  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Chapter D (Additional details on the corporation) for the periodic report for 2022 

Regulation 10a: Condensed statements of consolidated quarterly income for each of 
the quarters in the reported year  
See Section 1.3 of the Board of Directors’ report attached in the second part of this 
report.  

Regulation 10c: Use of proceeds from securities  
During the reporting period, security proceeds were not used. For details about the 
issuance of debentures (series 6) of the Company against debentures (series C) of the 
Company, as part of an exchange purchase offer, see Regulation 20 below. 

Regulation 11: List of investments in subsidiaries as of the date of the statement of 
the financial position 

Company 
Name 

Name of 
holder 

Share 
type 

Number of 
shares held 

Total par 
value 

Rate of 
holding 
of  the 
issued 
capital 
and 
voting 
rights 

Rate of 
holding of   
the right 
to appoint 
directors 

Value in the 
Company's 
separate 
financial 
statement 
(NIS 
millions) 

The 
Company 

Ordinary 
NIS 1 par 
value 

Bezeq the 
Israel 
Telecommunic
ation 
Corporation 
Ltd. ("Bezeq") 

741,483,713 

741,483,713  26.80% 

26.80% 

1,864 

Regulation 12: Changes in investments in subsidiaries during the reported period 
On December 28, 2022, the Company purchased 2,350,000 ordinary shares of Bezeq, 
in transactions during trading on the stock exchange, in exchange for payment of a 
total amount of approximately NIS 15 million and at an average price of NIS 5.95 per 
Bezeq share.. 

Regulation 13: Revenue of subsidiaries and revenue of the corporation therefrom as 
of the date of the statement of financial position (NIS millions)  

Company name 

Profit for the period  Comprehensive 

Dividend  Management 

Bezeq 

1,000 

profit for the 
period 
1,050 

534 

fee  

- 

Interest 
received  

- 

Regulation 20: Trading on the stock exchange  
To the best of the Company's knowledge, during the reporting period, there was no 
cessation of trading in the Company's securities listed for trading. 

- 2-

  
 
 
 
 
 
 
 
 
 
 
 
Chapter D (Additional details on the corporation) for the periodic report for 2022 

In  January  2022,  the  Company  published  a  shelf  offer  report  in  the  form  of  a  full 
exchange  purchase  offer,  in  which  the  Company  approached  the  holders  of  the 
Company's debentures (series C) with an offer to purchase up to NIS 1,023,652,972 
par value of the debentures (series C) (which constituted approx. - 100% of the total 
par value of the debentures (series C) in circulation as of the date of the shelf offer 
report), in exchange for the Company's debentures (series F). The exchange purchase 
offer  was  accepted  by  holders  of  NIS  417,016,080  par  value  debentures  (series  C), 
which  accounted  for  approximately  40.7%  of  the  total  debentures  (series  C)  in 
circulation as of the date of the shelf offer report. In accordance with the response of 
the holders of the debentures (series C) as stated, the Company allocated a total of 
NIS  431,611,642  par  value  debentures  (series  F).  The  exchange  of  the  debentures 
(series  C)  of  the  Company,  which  have  a  short  interest  rate  In  relation  to  the 
Company's debentures (series F), allows the Company greater flexibility in managing 
its free cash flow. For the avoidance of doubt, the exchange purchase offer did not 
result from a debt arrangement due to financial difficulties, as this term is defined in 
the Securities Regulations (Periodic and Immediate Reporting), 5730-1970 For more 
details,  see  immediate  reports  published  by  the  Company  on  January  5,  2022  and 
January 16, 2022 (Ref:: 2022-01-002824 and 2022-01-007119, respectively), which are 
included in this report by way of reference. 

Regulation 21: Remuneration for related parties and senior officers 
The following is a breakdown of the remuneration paid by the Company, or paid by 
the companies under its control (including commitments to provide remuneration), 
during  the  year  2022:  (1)  to  each  of  the  five  holders  of  the  highest  remunerations 
among the senior office holders in the Company or in the companies under its control, 
and which were given to them in connection with their office in the Company or in a 
company under its control , whether the payments were made by the Company or by 
a  company  under  its  control or  whether by  another;  and  (2)  rewards  for  the three 
senior officers with the highest remunerations in the Company itself, which were given 
to them in connection with their office in the Company. 

- 3-

  
 
 
 
 
 
 
 
 
Chapter D (Additional details on the corporation) for the periodic report for 2022 

Details of remunerated persons 

Remuneration (NIS thousands) 

Total 
(NIS 
thousands) 

Section 
below 

Name 

Position 

Sex 

Job 
volume 

Tomer Raved 
Itzik Tadmor 

Ilan Chaikin 

Gil Sharon 

Ran Guron 
Directors 

CEO 
CFO 
Internal 
auditor 
Bezeq 
Chariman 
Bezeq CEO 
Director 

Male 
Male 
Male 

Male 

Full-time 
Full-time 

Full-time 

Full-time 

Male 
- 

Full-time 
Full-time 

Holding 
rate in 
the 
corporati
on equity 
- 
- 

- 

- 

- 
- 

Salary1  Bonus2 

1,456 

695 
61 

1,172 
198 

 - 

2,712 

2,0414 

2,711 
720 

2,591 
- 

Share-
based 
payment 

510 

10 
 - 

2,427 

1,820 
- 

Other 

Total 

3433 
 - 

 - 

 - 

 - 
 - 

3,481 

903 
61 

7,180 

7,122 
720 

A 
B 

C 

D 

E 
F 

The group did not pay any of the office bearers listed in the table above payments for the year 2022 
which were not listed in the aforementioned table and which were not recognized in the statements 
for the reporting year. 

The following is a breakdown of the terms of engagement with the stakeholders and officers listed in 
the table above:  

a.  Tomer Raved 

Mr. Raved has served as the Company's CEO since January 2020, and also served as a director in 
the Company from January 2020 to November 2021, and as a director in Bezeq starting in May 
2020. According to the employment agreement with him, which was approved at the Company's 
general assembly on February 13, 2020, Mr. Raved is entitled to an annual salary according to the 
cost of an employee from an employer of NIS 1.4 million including social and related benefits as 
accepted by the company and in accordance with the company's compensation policy (recovery 

1 Regarding senior executives at Bezeq, wage amounts include the cost of wages (employer cost) and the ancillary 
wage components, including benefits and social conditions, such as coverage of telephone expenses, a personal 
vehicle  of  the  type  customary  in  the  Group  (cost  of  leasing  or  depreciation  expenses  and  reimbursement  of 
expenses instead of using a company vehicle), study fund (for some of the managers), deposit in a pension fund and 
deposits  due  to  termination  of  employee-employer  relationship  (for  employees  subject  to  Article  14  of  the 
Compensation  Law),  reimbursement  of  expenses  and  quota  of  vacation  days,  sick  and  annual  convalescence  as 
customary,  expenses  for  holiday  gift  to  employee  (grossing  amount),  fees  for  membership  in  professional 
organizations paid for the employee (outside the employee's occupation) and also, to the extent that a loan was 
made to the employee - the value of the grossing benefit in the interest that the loan bears.  
2   Regarding  senior  executives  at  Bezeq  ,  the  bonus  amounts  listed  in  the  table  are  as  recognized  in  the  2022 
statements and include a performance-dependant bonus as well as special bonuses (for details regarding each of 
the officers see details in sections D-E after the table below), all in accordance with Bezeq’s remuneration policy. 
The  performance-dependent  bonus  that  appears  in  the  table  is  for  the  year  2022  (but  not  yet  paid  to  senior 
executives  as  of  the  date  of  the  report)  and  includes  a  contingent  portion  that  will  be  paid  in  practice  to  the 
aforementioned  Bezeq  officers  according  to  the  distribution  described  in  the  notes  to  the  table.  During  2022, 
bonuses were paid to the above officers for 2021, the amount of which [including a contingent portion not paid in 
practice  in  2022,  but  paid  in  practice  in  2023  (if  any)  is  included  in  the  corresponding  table  in  Bezeq’s  annual 
statements for 2021 (as published on March 23, 2022). 
3 This amount reflects a grant given to Mr. Tomer Raved, the Company's CEO for the year 2020 and for the year 
2021. 
4 The amount of Mr. Sharon's grant component included in the table, includes an annual discretionary grant 
approved by Bezeq's general meeting on April 28, 2022 to the Chairman of the Board of Directors for the year 
2021. For more details, see the general meeting summons report dated March 23, 2022, as amended on April 14 
2022, which is hereby incorporated by reference. Since the grant was approved after the approval of the 2021 
statements, it is included in the 2022 statements, and accordingly, included in the table above. 

- 4-

  
 
 
 
 
 
 
Chapter D (Additional details on the corporation) for the periodic report for 2022 

fees, training fund, pension, sick pay, vacation days, mobile phone, business expenses and national 
insurance, excluding car expenses). 

In  addition,  in  respect  of  his  office  as  a  director  in  Bezeq,  Mr.  Raved  is  entitled  to  an  annual 
remuneration  and  a  participation  fee  in  the  amount  determined  by  an  external  expert  in 
accordance with the Remuneration Regulations, as they will be from time to time and in accordance 
with Bezeq’s classification at the relevant time.  

In addition, Mr. Raved is entitled to be included in the liability insurance for directors and officers 
and for indemnification as is customary in the Company, as are all other officers in the Company. 

As of the date of the report, Mr. Raved was granted 5,927,362 unlisted options, exercisable into 
the Company's shares, which as of the date of publication fo this report, amount to approximately 
2.23% of the issued and paid-up share equity of the Company, fully diluted. It should be noted that 
out of the total options held by Mr. Raved, a total of 2,677,362 unlisted options were allocated as 
part  of  a  previous  allocation  ("the  Previous  Allocation"),  and  Mr.  Raved  signed  an  irrevocable 
commitment according to which he undertakes not to exercise the options allocated to him as part 
of  the  Previous  Allocation.  For  more  details  about  the  terms  of  the  remaining  options,  see  the 
meeting  notice  published  by  the  Company  on  June  22,  2022  (Ref.:  2022-01-077395),  which  is 
included in this report by way of reference ("the Option Allocation Notice"). 

The  employment  agreement  with  Mr.  Raved  can  be  terminated  by  the  Company  with  up  to  6 
months notice. Mr. Raved may terminate his employment at any time with 30 days notice. 

b. 

Itzik Tadmor 

As of January 2019, Mr. Tadmor is employed as the  Company's CFO. Mr. Tadmor served as the 
Company's  Principal  Financial  Officer  from  May  2015  until  January  2019.  According  to  the 
employment  agreement  with  him,  Mr.  Tadmor  is  entitled  to  a  gross  monthly  salary  of  NIS  46 
thousand and social and ancillary benefits as customary (vacation days, executive insurance, study 
fund, etc.). In accordance with the employment agreement with him, if he continues to work for 
the Company until December 2023, he will be entitled to a retention bonus. Mr. Tadmor is also 
entitled to liability insurance for directors and officers and indemnification as is customary in the 
Company, as are all other officers in the Company. The employment agreement with Mr. Tadmor 
can  be  terminated  by  the  Company  with  3  months  notice.  Mr.  Tadmor  may  terminate  his 
employment at any time with 3 months notice. 

In  July  2022,  Mr.  Tadmor  was  granted  100,000  unlisted  options  exercisable  into  the  company's 
shares,  which,  as  of  the  publication  date  of  this  report,  constitute  approximately  0.09%  of  the 
company's fully diluted issued and paid-up share equity. For more details about the terms of the 
granted options, see the call for the allocation of options, as defined above. 

c. 

Ilan Chaikin  

Ilan Chaikin is employed as the internal auditor of the Company. Mr. Chaikin is entitled to a fee at 
a rate of NIS 240 per hour plus VAT. During 2022, Mr. Chaikin’s fee amounted to approximately NIS 
60k. For further details, see Section 2.5 of the Company's Board of Directors' report as of December 
31, 2022, in Chapter B of the periodic report. 

d.  Gil Sharon 

Employed as a director and Chairman of the Bezeq Board of Directors, as well as as the Chairman 
of the Bezeq Boards of Directors of all subsidiaries in Bezeq Group as of August 27, 2020, within the 
framework of a personal employment agreement dated December 10, 2020 as updated on May 17, 
2022 (in this section: "the Employment Agreement"), and as part of this, he provides the services 
as  follows:  (1)  Navigating  Bezeq  and  outlining  its  strategic  operation,  while  implementing  the 
strategy determined by Bezeq's Board of Directors; (2) Promoting Bezeq and its development and 

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Chapter D (Additional details on the corporation) for the periodic report for 2022 

(3) Performing, among other things, the duties assigned to him in accordance with the powers of 
the Chairman of the Board of Directors and his duties, in accordance with the provisions of any law, 
including Bezeq's Bylaws and procedures, as will be updated from time to time. His total monthly 
salary (gross) amounts to a total of about NIS 170k. The contract is for an unlimited period, with 
the right for each party to bring it to an end at any time and for any reason with a notice of 3 months 
in  advance  by  any  of  the  parties.  Also,  12,000,000  options  were  granted  to  Mr.  Gil  Sharon.  For 
additional details regarding the terms of office and employment of Mr. Gil Sharon as Chairman of 
the Bezeq Board of Directors, see the general assembly convening report as published on December 
12, 2020, which is hereby referenced, and for additional details regarding the terms of said options, 
see the corrective report regarding the outline for granting options to employees and the material 
private  offer  report  dated  May  9,  2022.  The  fair  value  of  the  options  at  the  time  of  their  grant 
(calculated according to the Monte Carlo model) is approximately NIS 9.3 million. 

Mr. Sharon's bonus targets for 20225 as Chairman of the Board of Directors were determined in 
advance by the Bezeq Board of Directors in December 2021 and included: Group-adjusted EBITDA6 
target weighing 50% in the bonus calculation; Group-adjusted net profit target weighing 25%; and 
a Group-adjusted free cash flow (FCF) target weighing 25%. The compliance rate of the Chairman 
of the Board of Directors in the set of bonus targets for 2022 was 120.25%. The threshold condition 
for receiving the bonus was that the Group-adjusted EBITDA results for 2022 (NIS 3,404.8 million) 
did  not  decrease  by  more  than  40%  of  the  Group-adjusted  EBITDA  results  In  2021  (NIS  3,319.1 
million)  -  this  condition  has  been  met.  The  ceiling  of  the  performance-dependent  grant  to  the 
Chairman  of  the  Board  of  Directors  is  limited  in  accordance  with  the  provisions  of  Bezeq's 
remuneration policy at up to 75% of the annual base salary (9 salaries). Accordingly, the bonus that 
will be awarded to the Chairman of the Board of Directors for the year 2022 is 75% of the annual 
salary. It should be noted that, for the purpose of calculating the achievement of the targets for 
the year 2022, the event of reducing the telephony rates that was not included in the Bezeq budget 
for the year 2022 was not taken into account, in accordance with the remuneration policy and in 
accordance with the approval of the Board of Directors from December 2021. Mr. Gil Sharon will 
be entitled to 40% of the remuneration for meeting the Group-adjusted EBITDA target in 2022 only 
in 2024 (after the date of approval of the financial statements for 2023) and only if the minimum 
Group-adjusted EBITDA target established in relation to the 2023 budget year is achieved . 

It should be noted that after the year of the report, Bezeq's Board of Directors approved on March 
13, 2023, after the approval of Bezeq's Remuneration Committee on March 1, 2023, payment of a 
special grant in the amount of 3 monthly salaries to Mr. Gil Sharon for the year 2022 (in this section: 
"the  Grant"),  And  this  is  subject  to  the  approval  of  the  annual  general  meeting  of  Bezeq's 
shareholders, which is to be held on April 20, 2023. For more details about the grant as well as 
about a proposed amendment to Bezeq's remuneration policy, see the general assembly convening 
report  which  is  published  together  with  this  report  and  is  hereby  incorporated  by  reference 
("Annual General Assembly Convening Report"). 

e.  Ran Guron 

Mr.  Guron  was  employed  as  the  CEO  of  the  three  material  subsidiaries  of  the  Bezeq  Group: 
Pelephone, Bezeq International and DBS (hereafter in this section, jointly: "the Subsidiaries") until 
June  18,  2022,  and  as  of  June  19,  2022  he  is  employed  as  CEO  Bezeq,  as  part  of  a  personal 

5 In accordance with the amendment of the remuneration policy and the terms of office and employment of the 
Chairman of the Board of Directors, as approved by the general assembly on April 28, 2022 (for more details, see 
the general assembly convening report of March 23, 2022, as amended on April 14, 2022, which is hereby 
incorporated by way of reference). 
6 See Footnote 6 above. 

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Chapter D (Additional details on the corporation) for the periodic report for 2022 

employment agreement dated May 8, 2022 (in this section: "the Employment Agreement"). As of 
January 1, 2019, the total (gross) monthly salary of Mr. Guron amounts to approximately NIS 153k 
, linked to the Consumer Price Index. The contract is for an unlimited period, with the right of either 
party to terminate it at any time with 6 months in advance by any of the parties. Also, 12,000,000 
options were granted to Mr. Gil Sharon. For additional details regarding the terms of office and 
employment  of  Mr.  Gil  Sharon  as  Chairman  of  the  Bezeq  Board  of  Directors,  see  the  general 
assembly convening report as published on December 12, 2020, which is hereby referenced, and 
for additional details regarding the terms of said options, see the corrective report regarding the 
outline for granting options to employees and the material private offer report dated May 9, 2022. 
The fair value of the options at the time of their grant (calculated according to the Monte Carlo 
model) is approximately NIS 9.3 million. 

Mr. Guron's bonus targets for 2022 in his position as CEO of the subsidiaries were determined in 
advance  by  the  Bezeq  Board  of  Directors  in  December  2021,  after  approval  by  the  Bezeq 
Remuneration Committee, and included: an aggregate adjusted EBITDA7 target for the subsidiaries 
that weighs 60% in the bonus calculation; Adjusted EBITDA target less aggregate CAPEX for the 
subsidiaries  (CAPEX  in  flow  terms)  which  weighs  10%;  Adjusted  EBITDA  target  by  company  -  a 
combined target 8 with a weight of 15%; The evaluation target for the Chairman of the Board of 
Directors  to  address  the  essential  weakness  in  Bezeq  International,  which  weighs  5%;  and  the 
manager evaluation target, which weighs 10%. The threshold condition for receiving the bonus was 
that the results of the aggregate adjusted EBITDA for the subsidiaries for the year 2022 (NIS 883 
million), did not fall by more than 40% of the aggregate adjusted EBITDA results for the subsidiaries 
in 2021 (NIS 799 million) - this condition has been met. 

Mr. Guron's bonus targets for 2022 in his role as Bezeq CEO were set in advance by the Bezeq Board 
of Directors, for the previous Bezeq CEO, in December 2021, and were applied to Mr. Guron at the 
time of approval of the terms of his office and employment by the Bezeq Board of Directors in May 
2022, and included: Adjusted EBITDA9 target for Bezeq (solo) whose weight is 50% in the bonus 
calculation; Bezeq's after-tax profit target (Solo) is coordinated with a weight of 20%; Adjusted free 
flow target (FCF) for Bezeq (Solo) that has a weight of 20%; and a manager evaluation goal that 
weighs 10%. The threshold condition for receiving the bonus was that the adjusted EBITDA results 
for 2022 (NIS 2,534.8 million) did not decrease by more than 40% of the adjusted EBITDA results 
for 2021 (NIS 2,512.1 million) - this condition was met. 

The Bezeq CEO's rate of compliance with the set of bonus targets for 2022 for his office as Bezeq 
CEO was approximately 109.5%, and his rate of compliance with the set of bonus targets for 2022 
for his office as CEO of the subsidiaries was approximately 121.4%. Accordingly, the bonus that will 
be awarded to the CEO To Bezeq both for meeting the targets as the CEO of the subsidiaries and 
as the CEO of Bezeq for the year 2022 is calculated in proportion to his term of office in 2022 in 
each of the subsidiaries and amounts to approximately 115% of the annual salary. It should be 
noted that, for the purpose of calculating the achievement of targets for the year 2022, the event 
of the reduction of telephony rates in Bezeq, which was not included in the Bezeq budget for 2022, 
was not taken into account, in accordance with the remuneration policy and in accordance with 
the  approval  of  the  Board  of  Directors  dated  December  2021,  as  well  as  the  thickening  of  the 
investment budget that was updated in accordance with the decision of the Board of  Directors 
adopted during the year 2022 to increase the Company's fiber deployment target for this year. Mr. 
Ran Guron will be entitled to 40% of the remuneration for meeting the adjusted EBITDA target for 
Bezeq (solo) in 2022 only in 2024 (after the date of approval of the 2023 statements) and only if 
the minimum adjusted EBITDA target for Bezeq (solo) determined in relation to for the budget year 

7 Adjusted EBITDA for the purposes of determining the remuneration - calculated as EBITDA minus other 
operating expenses/revenue (net), losses/gains from impairment/increase in value (including losses from 
continuous depreciation), the effects of the application of the international financial reporting standard IFRS16 
"Leases" and expenses for share-based payments. 
8 Pelephone 56%, DBS 29%, Bezeq International 15%. 
9 Adjusted free flow (FCF) - calculated as cash generated from current operations, minus cash for the 
purchase/sale of property, plant and equipment and intangible assets (net), and minus leasing payments 

- 7-

  
 
 
 
 
 
 
Chapter D (Additional details on the corporation) for the periodic report for 2022 

2023. It should be noted that Bezeq's Remuneration Committee, at its meeting on March 1, 2023, 
decided to release to Mr. Ran Guron, in accordance with the Company's remuneration policy, the 
conditional  remuneration  from  the  performance-contingent  grant  for  serving  as  CEO  of  the 
subsidiaries in 2022, together with the payment of the bonus for the entire year 2022. On March 
1, 2023, March  9, 2023 and March 13, 2023, the Remuneration Committee, the Boards of Directors 
of  Bezeq's  Subsidiaries  and  the  Bezeq  Board  of  Directors,  respectively,  approved  a  retirement 
bonus for the CEO of Bezeq, in the amount of 3 monthly salaries, for the end of his office in his 
position for approximately 6.5 years as CEO of the subsidiaries, while as part of his office, the CEO 
of Bezeq (in his capacity as CEO of the subsidiaries) brought the subsidiaries to good results despite 
increasing  competition  in  all  areas  of  activity  of  the  Subsidiaries,  onerous  regulation  and  the 
challenging period of the Corona crisis. In his capacity as CEO of the Subsidiaries, the Company’s 
CEO completed complex projects and led significant organizational changes and processes 

f.  Directors 

Each  director  (including  the  Chairman  of  the  Board  of  Directors)  is  entitled  to  an  annual 
remuneration  and  a  participation  remuneration  for  each  meeting,  in  the  maximum  amount,  in 
accordance with the Company’s classification under to the Remuneration Regulations. Directors 
with financial accounting expertise, as this term is defined in the Companies Regulations (Terms 
and Tests for a Director with Accounting and Financial Expertise and for a Director with Professional 
Competence), 5765-2005 are entitled to external expert director annual remuneration, as stated 
in  the  Remuneration  Regulations.  In  addition,  the  directors  are  entitled  to  be  included  in  the 
arrangement for liability insurance of directors and officers and indemnification as is customary in 
the Company, as are all other officers in the Company. In 2022,  remuneration was paid to the 
directors of the Company in accordance with the Remuneration Regulations in the amount of NIS 
720k. 

Regulation 21a: The controlling shareholder in the corporation 
On December 2, 2019, a debt settlement was completed between the Company and its bondholders, 
under which Searchlight II BZQ LP and a corporation controlled by the Forer family (TNR Investments 
Ltd.) acquired control of the Company (and consequently, Bezeq). The company owns Bezeq Directly. 
In this regard, see also Bezeq's immediate report dated December 2, 2019 regarding the Company's 
announcement of the completion of the said transaction, as well as Bezeq's immediate reports dated 
January  2,  2020  regarding  holdings  of  stakeholders  and  those  who  became  stakeholders  in  the 
corporation. 

As of the date of completion of the debt settlement as aforesaid, the controlling owners of the Company 
are Searchlight II BZQ L.P, a limited partnership incorporated in the Cayman Islands ("Searchlight") and 
TNR. Investments Ltd. ("TNR"), a private company incorporated in Israel. The final general partner of 
Searchlight is Searchlight Capital Partners II GP, LLC, a limited liability company incorporated in the State 
of Delaware, which is held by a number of individuals including Eric Zinterhofer, Erol Uzumeri and Oliver 
Harmaann, with the latter being among the only ones to receive the Company's control permit from 
the Ministry of Communications. TNR is fully owned and controlled by Mr. David Forer (50%) and Mrs. 
Michal Forer (50%). Searchlight and TNR are considered controlling shareholders in the Company by 
virtue of a control permit dated November 11, 2019 and by virtue of a voting agreement between them 
which confers on them a cumulative holding, as of the date of this report, of approximately 72% of the 
voting rights in the Company. 

To the best of the Company's knowledge, the shareholders' agreement between Searchlight and TNR 
includes, among other things, a provision according to which as long as the holdings of an "Israeli entity" 
in Bezeq's controlling shareholder are required, Searchlight will grant TNR power of attorney in respect 
of the amount of shares that will allow TNR to vote at the general meetings of the Company, an amount 
of shares equal to: (a) the amount of shares held by TNR on the effective date of the meeting, or (b) the 
amount of shares reflecting 19% of the issued capital and voting rights in the Company on the effective 
date of the meeting, whichever is highest. To the best of the Company's knowledge, the shareholders' 
agreement includes additional provisions, including a commitment by Searchlight to refrain from voting 
for the approval of certain issues without the consent of TNR. 

- 8-

  
 
 
 
 
 
Chapter D (Additional details on the corporation) for the periodic report for 2022 

For details regarding the control permit, see Section 1.1.4 in Chapter A of the periodic report. 

Regulation 22: Transactions with the controlling shareholder 
For details, to the best of the Company's knowledge, regarding any transaction with the controlling 
shareholder in the Company, or such that the controlling shareholder in the Company has a personal 
interest  in  the  approval  thereof,  which  the  Company,  the  companies  controlled  thereby  or  related 
thereto entered into in the reporting year or after to the end of the reporting year and until the date of 
submission of this report, or it is still valid at the date of the report, as well as for details regarding 
Bezeq’s neglibility procedure, see Note 29 to the statements. 

Regulation 24: Holdings of related parties and senior executives 
For details regarding the status of the holdings of interested parties in the Company, see an immediate 
report  dated  January  5,  2023  (Ref.:  2023-01-002602),  which  is  included  in  this  report  by  way  of 
reference. 

Regulation 24a: Registered capital, issued capital and convertible securities 
For  details  regarding  the  registered  equity,  the  issued  equity  and  the  convertible  securities  of  the 
Company, see immediate report dated July 11, 2022 (Ref.: 2022-01-087361) included in this report by 
way of reference. 

Regulation 24b: Register of shareholders 
For  the  Company's  shareholder  register,  see  immediate  report  dated  July  11,  2022  (Ref.:  2022-01-
087361), included in this report by way of reference. 

Regulation 25a: Registered address of the corporation 
Address: 144 Menachem Begin St., Tel Aviv 
Phone: 03-6796101 Fax: 03-6796111 
Email: tomer@bcomm.co.il 

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Chapter D (Additional details on the corporation) for the periodic report for 2022 

Regulation 26: The directors of the corporation 

Last  name  and 
first name  

ID number 

Date of birth 

Address 
for  the 
service  of  court 
documents 

Citizenship 

Education 

Darren Glatt, 

Phil Bacal 

Ran Forer 

Efrat Duvdevani 

Ajit V. Pai 

Efrat Makov 

Stephen Joseph 

Chairman 

549871770 

(foreign 

HP037044 

(foreign 

066522772 

23824873 

536841734

023044365 

551988678 

(foreign 

passport) 

passport) 

(Foreign passport) 

passport) 

November 18, 1975 

September 13, 1985 

September 2, 1984 

JUNE 10, 1968 

January 10, 1973 

June 17, 1968 

April 10, 1980 

144 Menachem Begin 

144 Menachem Begin 

2  Haysur  St.,  Ramat 

48  Hanasi  Ben  Zvi  St., 

144  Menachem  Begin 

118  HaTamar  Road, 

144  Menachem  Begin 

Road,  Tel  Aviv  (at  B. 

Road,  Tel  Aviv  (at  B. 

Hasharon  

Herzliya 

Road,  Tel  Aviv  (at  B. 

Moshav  Ben  Shemen, 

Road,  Tel  Aviv  (at  B. 

Communications) 

Communications) 

Communications) 

73115 

Communications) 

American 

Canadian 

Israeli 

Israeli 

American 

Israeli 

British 

BACCY, 

George 

MBA  Richard 

Ivey 

Degree 

in  Law, 

IDC 

Degree 

in 

BA, 

Social 

Studies, 

B.A.  In  Economics  and 

BSc 

in  Business  and 

Washington 

School  of  Business  at 

Herzliya, 

B.A. 

in 

International Relations 

Harvard University; 

Accounting  from  Tel 

Financial 

Economics 

University 

MBA, 

the  University  of 

Management, 

IDC 

and 

English, 

The 

Harvard 

Business 

Western Ontario. 

Herzliya,LL.M. 

Hebrew 

University; 

J.D 

Law 

Studies, 

University  of  Chicago 

School 

Commercial  Law  (cum 

Degree in Public Policy 

Law School 

Aviv University. 

from  Leeds  University, 

KPMG. 

laude), 

Tel 

Aviv 

-  Management  and 

University, 

M.Sc. 

Finance, 

Tel 

Aviv 

General  Management, 

University 

Stanford  University, 

Semester 

in  Law  at 

- 10-

  
 
 
 
 
 
 
 
  
 
Chapter D (Additional details on the corporation) for the periodic report for 2022 

Occupation 
for 
the past five years  

Partner 

in 

the 

Partner in Searchlight 

VP 

of 

Business 

CEO  of 

the  Peres 

Partner  in  Searchlight 

Jewelry 

Designer 

CFO 

and 

VP 

of 

Searchlight 

Capital 

Capital 

Partners. 

Development  at  the 

Center  for  Peace  and 

Capital Partners. 

(Independent 

Operations  at  Ocean 

Partners  and  head  of 

Director 

in  Roots, 

Neopharm 

Group, 

Innovation. 

Chairman of the FCC 

Business). 

Outdoor  Group 

(LSE: 

Berkeley University 

FCC Commissioner 

Director 

in 

the 

OOUT).  Outdoor  media 

following companies: 

and 

advertising 

company. 

  BioLight Life Sciences 

Ltd 

(2011-2020); 

Anchiano Therapeutics 

Ltd 

(2018-2020); 

Kamada  Ltd 

(2018-

2019); 

iSPAC  1  Ltd 

(2021-present);  Allot 

Ltd 

(2021-present); 

Ceragon  Ltd 

(2022-

present). 

investments 

in 

Care Advantage 

Business Development 

infrastructure, 

Deputy 

Director, 

Manager  at  Celgene 

communications, 

Bezeq 

Corporation. 

media 

and 

technology.  Director 

in  Bezeq,  All  Points 

Broadband 

(Chairman), 

MediaMath 

(Chairman),    Adams 

Outdoor Advertising.   

Previously,  he  was 

also a director at the 

following  companies: 

Rackspace,  Charter 

Communication, 

Ocean 

Outdoor, 

160over90, 

MediaMath,  Charter 

Communications, 

- 11-

  
 
 
Chapter D (Additional details on the corporation) for the periodic report for 2022 

as 

a 
Serves 
director  in  other 
corporations 

PatientPoint, 

Veritable Maritime 

Bezeq, All Points 
Broadband, 
MediaMath,Ada
ms Outdoor 
Advertising 

Roots Corporation, 
Care Advantage 

Bezeq, LessTests 

Future Initiatives, 

Special Olympics. 

- 12-

Outdoor 

Outdoor 

Scp  Acquisition  Topco 
Limited,  
Scp  Acquisition  Midco 
Limited,  
Scp  Acquisition  Bidco 
Limited,  
Ocean Topo Limited,  
Ocean Bidco Limited,  
Ocean  Outdoor  UK 
Limited,  
Signature 
Limited,  
Mediaco 
Limited,  
Forrest  Outdoor  Media 
Limited,  
Forrest 
(Holdings) Limited,  
Forrest Media Limited,  
DKTD Media B.V,  
Ngage Media B.V, 
Interbest B.v, 
Global 
Stockholm AB,  
Gudfar& son AB,  
Visual  Art  &  Global 
Agencies Sweden AB,  

Agencies 

Media 

  
 
 
 
 
Chapter D (Additional details on the corporation) for the periodic report for 2022 

accounting 
financial 

Has 
and 
expertise 

Is  the  director  an 
employee  of  the 
corporation, of its 
subsidiary,  of  its 
affiliated 
company  or  of  a 
stakeholder 
therein 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes, see details of 

Yes, see details of 

Yes, the director 

No 

Yes,  see  details  of 

No 

occupation in the last 

occupation in the last 

serves as VP of 

occupation  in  the  last 

five years. 

five years. 

Business Development 

five years. 

Visual  Art  International 
Holding AB,  
Visual Art Sweden AB,  
Visual 
Art 
Holding AB,  
Visual Art Denmark City 
Reklame A/S,  

Sweden 

Visual Art Norway AS. 

Yes 

No 

of the Neopharm 

Group, whose 

controlling 

shareholders, David 

and Michal Forer, are 

also controlling 

shareholders of TNR 

Investments Ltd., 

which owns the joint 

controlling interest in 

the Company. 

- 13-

  
 
 
Chapter D (Additional details on the corporation) for the periodic report for 2022 

Is  the  director  a 
family  member  of 
another 
stakeholder in the 
corporation 

Membership  in  a 
committee 
or 
committees of the 
Board of Directors 

Is  this  member  of 
of 
the 
Board 
Directors 
an 
outside director 

No 

No 

Yes, the director 

No 

No 

No 

No 

serves as VP of 

Business Development 

and officer in 

Neopharm Group, of 

which his parents, 

David and Michal 

Forer, are the 

controlling 

shareholders and TNR 

Investments Ltd., 

which owns the joint 

controlling interest in 

the Company. 

No 

No 

No 

The Committee for 

No 

The Committee for the 

The  Committee  for  the 

No 

No 

No 

the Examination of 

Financial Statements; 

The Audit Committee; 

Remuneration 

Committee; 

Yes 

Examination 

of 

Examination 

of 

Financial  Statements; 

Financial 

Statements; 

The  Audit  Committee; 

The  Audit  Committee; 

Remuneration 

Remuneration 

Committee; 

Committee; 

No 

Yes 

No 

- 14-

  
 
 
Chapter D (Additional details on the corporation) for the periodic report for 2022 

No 

No 

Yes 

No 

Yes 

Yes 

Does 

the 

No 

Company  see  the 

director 

as 

an 

independent 

director 

- 15-

  
 
 
 
 
Chapter D (Additional details on the corporation) for the periodic report for 2022 

Regulation 26 A: Senior officers 

Name of senior officer 

Itzik Tadmor 

Dudu Mizrahi 

Ilan Chaikin 

Chief Financial 
Officer 

CEO of the 
Company  

Internal Auditor 

February 14, 
1981 
BA in Accounting 
and Economics 
from Tel Aviv 
University. 

MBA in Business 
Administration 
from Tel Aviv 
University. 

CFO of B 
Communications 
Ltd. and Internet 
Gold Lines - Gold 
Ltd. 

November 21, 
1954 
Bachelor's degree 
in Economics and 
Accounting, Tel 
Aviv University. 

April 18, 1985 

Double major in 
Law and 
Economics from 
the Tel Aviv 
University; MBA - 
Stern School of 
Business 

The Company's 
CEO and director 
in Bezeq. 

Managing partner 
at CPA Chaikin 
Cohen Rubin & Co. 

Director and Vice 
President of the 
Telecom and 
Technology Group 
at RBC Investment 
Bank in New York. 

No 

No 

No 

Role in the Company, 
subsidiary, affiliate or 
related party 
Date of birth 

Education 

Main occupations in the last 
5 years and a list of the 
corporations in which he 
serves as a director 

Is he a related party in the 
Company or a family 
member of another senior 
official or of another related 
party in the Company 

Regulation 27: Independent authorized signatory 
The Company's CEO, Mr. Tomer Raved, is an independent signatory authorized by the Company, as this 
is term defined in the law. 
Without derogating from the above, for the purpose of making money transfers in any amount from 
the Company's accounts in banks, the signatures of Mr. Tomer Raved, the Company's CEO, and Mr. Itzik 
Tadmor, the Company's CFO, are required. 

Regulation 27: The accountant of the corporation  
Somekh Chaikin, CPA 
Address: 17 HaArbaa St.,, KPMG Millennium Tower, Tel Aviv 6473917 
Tel: 03-6848000 

Regulation 28: Amendment of the Company's Articles of Association 
In the reporting year, no changes were made to the company's Articles of Association. 

- 16-

  
 
 
 
 
 
 
 
 
 
 
Chapter D (Additional details on the corporation) for the periodic report for 2022 

Regulation 29 (a): The recommendations and decisions of the directors before the general meeting 
and their decisions that do not require the approval of a general meeting in matters specified in 
Regulation 29(a) 

A.  On  March  23,  2022,  the  Company's  Board  of  Directors  approved  a  self-purchase  plan  of  the 
Company's shares in the amount of up to NIS 20 million, which will begin on March 27, 2022 and 
end at: (1) purchase in the amount of 20 million NIS; or (2) the end of the trading day on May 12, 
2022, whichever is earlier. As of the date of the report, in accordance with the aforementioned 
purchase plan, the Company purchased shares in a total amount of approximately NIS 20 million. 
For more details, see the Company's report dated March 24, 2022 (Ref.: 2022-01-029175), included 
in this report by way of reference. 

B.  On  May  24,  2022,  the  Company's  Board  of  Directors  approved  a  self-purchase  plan  of  the 
Company's shares in the amount of up to NIS 30 million, which will begin on May 26, 2022 and end: 
(1) purchase in the amount NIS of 30 million; or (2) the end of the trading day on August 4, 2022, 
whichever is earlier. As of the date of the report, in accordance with the aforementioned purchase 
plan, the Company purchased shares in a total amount of approximately NIS 30 million. For more 
details,  see  the  Company's  report  dated  May  24,  2022  (Ref.:  2022-01-063631),  included  in  this 
report by way of reference. 

C.  On June 8, 2022, the  Company's Board of Directors approved a partial early redemption of the 
Company's deben tures (series C), as detailed in an immediate report dated June 12, 2022 (Ref.: 
2022-01-072097), which is included in this report by reference. 

D.  On  August  9,  2022,  the  Company's  Board  of  Directors  approved  a  self-purchase  plan  of  the 
Company's shares in the amount of up to NIS 25 million, which will begin on August 11, 2022 and 
end: (1) purchase in the amount of NIS 25 million; or (2) the end of the trading day on November 
1, 2022, whichever is earlier. As of the date of the report, in accordance with the aforementioned 
purchase plan, the Company purchased shares in a total amount of approximately NIS 25 million. 
For  more  details,  see  the  Company's  report  dated  August  10,  2022  (Ref.:  2022-01-101353), 
included in this report by way of reference. 

E.  On November 15, 2022, the Company's Board of Directors approved a self-purchase plan of the 
Company's shares in the amount of up to NIS 25 million, which will begin on November 17, 2022 
and end at: (1) purchase in the amount of NIS 25 million; or (2) the end of the trading day on March 
1, 2023, whichever is earlier. As of the date of the report, in accordance with the aforementioned 
purchase plan, the Company purchased shares in a total amount of approximately NIS 25 million. 
For  more  details,  see  the  Company's  report  dated  November  16,  2022  (Ref.:  2022-01-110256), 
which is included in this report by way of reference. 

Regulation 29 (b): Resolutions of the general assembly that were not adopted in accordance with the 
recommendations of the directors in the matters listed in Sub-regulation (a) above 
During the reporting year, resolutions were not adopted at the Company's general assembly that were 
not  in  accordance  with  the  recommendations  of  the  Board  of  Directors  in  the  matters  detailed  in 
Regulation 29(a). 

Regulation 29 (c): Resolutions of a special general assembly  
a.  Approval of the initial appointment of Mrs. Efrat Duvdevani, as an external director of the Company 
for a first term of three years, and provision of letters of commitment for indemnification and a 
letter  of  exemption  from  liability  for  Mrs.  Dovdevani  (January  24,  2022).  For  more  details,  see 
immediate reports published by the Company on December 22, 2021 and January 24, 2022 (Ref.: 
2021-01-112810 and 2022-01-010014, respectively), which are included in this report by way of 
reference; 

- 17-

  
 
 
 
 
Chapter D (Additional details on the corporation) for the periodic report for 2022 

b.  Approval of the adoption of a new remuneration policy for the Company (April 27, 2022). For more 
details, see immediate reports published by the Company on March 24, 2022 and April 27, 2022 
(Ref.: 2022-01-029214 and 2022-01-051748, respectively), which are included in this report by way 
of reference; 

c.  Approval of the allocation of 100,000 unregistered options to Mr. Itzik Tadmor, the Company's CFO, 
as  part  of  the  terms  of  his  office  and  employment  and  as  an  exception  to  the  Company's 
remuneration policy and disapproval of the allocation of 2,677,362 unregistered options to Mr. 
Tomer Raved, the company's CEO (June 29, 2022). , that on May 19, 2022 and May 24, 2022, the 
remuneration  committee  and  the  Company's  Board  of  Directors,  respectively,  approved  the 
allocation of the aforementioned options to Mr. Raved, in accordance with the provisions of Article 
272(c1)(1)(c)  of  the  Companies  Law.  For  more  details,  see  immediate  reports  published  by  the 
Company on June 22, 2022, June 29, 2022 and July 7, 2022 (Ref.: 2022-01-077395, 2022-01-081253 
and 2022-01-086419, respectively), which are included in the report It's on the way of reference; 
d.  Approval of the re-appointment of Mrs. Efrat Makov, as an external director of the Company for a 
second term of three years (October 18, 2022). For more details, see immediate reports published 
by the Company on September 13, 2022 and October 18, 2022 (Ref.: 2022-01-094674 and 2022-
01-103272, respectively), which are included in this report by way of reference. 

Regulation 29A (4): Exemption, insurance or obligation to indemnify officers  
For details regarding exemption, insurance or indemnification obligation for officers, See Note 29.6 to 
the statements.  

  March 14, 2023 
Date 

_______________________________ 

B Communications Ltd. 

Name and role of signatories: 

Tomer Raved, CEO 
Darren Glatt, Chairman of the Board of Directors 

- 18-

  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CORPORATE GOVERNANCE QUESTIONNAIRE  1 

BOARD OF DIRECTORS INDEPENDENCE 

1. 

In each reporting year, two or more external directors served in the corporation. 

This question can be answered "Correct" if the period of time in which two external directors did not 
serve does not exceed 90 days, as stated in Article 363A (b) (10) of the Companies Law, but any answer 
(Correct / Incorrect) must state the period of time (days) in which the corporation did not have two or 
more external directors in the reporting year (including a term of office approved retrospectively, while 
separating between the various external directors): 

Director A: 0. 

Director B: 0. 

The number of external directors serving in the corporation as of the date of publication of this 
questionnaire: 2. 

 Correct 
√ 

Incorrect 

1 Published as part of legislative proposals to improve the statements on March 16, 2014.  

1 

 
 
 
 
 
 
 
2. 

3. 

4. 

The rate2 of independent directors3 serving in the corporation as of the publication of this 
questionnaire: 3/7.  

The rate of independent directors determined In the Articles of Association4 of the corporation5: 
______. 

 Irrelevant (not provided for in the Articles of Association). 

In the reporting year, an examination was conducted with the external directors (and the independent 
directors) and it was found that in the reporting year they complied with the provision of Article 240 (b) 
and (f) of the Companies Law regarding the lack of affiliation of the external (and independent) 
directors serving in the corporation and they meet the conditions required for serving as an external (or 
independent) director. 

All directors who served in the corporation during the reporting year are not subordinated6 to the CEO, 
directly or indirectly (except for a director who is an employee representative, if the corporation has 
employee representation). 

If you answered "Incorrect" (namely, the director is subordinated to the CEO as mentioned) – indicate 
the rate of directors that do not meet the aforesaid limitation: _____. 

_____ 

_____ 

√ 

√ 

2In this questionnaire, "rate" - a certain number out of the total. For example 3/8. 
3 Including "external directors" as defined in the Companies Law. 
4 For the purposes of this question - "Articles of Association" including according to a specific legal provision applicable to the corporation (for example in a banking corporation - the 
directives of the Supervisor of Banks). 
5 A bond company is not required to answer this section. 
6 For the purposes of this question - the very office of a director of a holding corporation controlled by the corporation will not be considered "subordinate", on the other hand, the office of a 
director of a corporation serving as an officer (other than a director) and / or an employee of the corporation controlled by the corporation will be considered "subordinate".  

2 

 
 
 
 
 
 
5. 

6. 

√ 

√ 

All the directors who announced the existence of a personal interest in approving a transaction on the 
agenda of the meeting, did not attend the discussion and did not participate in such vote (except for 
discussion and / or voting in the circumstances under Article 278 (b) of the Companies Law): 

If Your answer is "Incorrect"-  

Was it for the purpose of presenting a particular subject thereby in accordance with the provisions of 
Article 278 (a): 

 Yes  No (mark x in the appropriate box). 

Indicate the rate of meetings at which such directors were present at the discussion and / or 
participated in the vote, except in the circumstances as stated in paragraph a: _____. 

The controlling shareholder (including his relative and / or someone on his behalf), who is not a director 
or other senior officer in the corporation, was not present at the board meetings held in the reporting 
year. 

If your answer is "incorrect" (i.e., a controlling shareholder and / or relative and / or someone on his 
behalf who is not a board member and / or a senior official in the corporation was present at such 
board meetings) - indicate the following details regarding the presence of any additional person at 
board meetings: 

Identity: _____. 

Position in the corporation (if any): _____. 

3 

 
 
 
 
 
Details of the affiliation to the controlling shareholder (if the person present is not the controlling 
shareholder himself): _____. 

Was it for the purpose of presenting a certain subject thereby: Yes No (mark x in the appropriate box) 

The rate of presence7 thereof in meetings of the Board of Directors that took place in the reporting year 
for the purpose of presenting a certain subject thereby: _____, Other presence: _____ 

Irrelevant (there is no controlling shareholder in the corporation). 

QUALIFICATIONS AND SKILLS OF  THE DIRECTORS 

7. 

There are no provisions in the corporation's articles of association that restrict the possibility of 
immediately terminating the office of all directors in the corporation, who are not external directors (in 
this matter - determination by a simple majority is not considered a restriction)8.  

If Your answer is "incorrect" (namely, there is a restriction as mentioned) indicate -   

Correct 
√ 

Incorrect 

7 While separating between the controlling shareholder, his relative and / or someone on his behalf. 

8 A bond company is not required to comply with this section. 

4 

 
 
 
 
 
 
 
 
 
A. 

The period of time stipulated in the articles of association for the term of office of a director: 

B. 

C. 

The required majority set forth in the articles of association for the termination of office of the 
directors: 

A statutory quorum set forth in the articles of association at the general meeting for the purpose 
for the termination of office of the directors: 

D. 

The majority required to amend these provisions in the articles of association: 

8. 

The corporation prepared a training program for new directors, in the field of the corporation's business 
and in the field of law applicable to the corporation and the directors, and also arranged a follow-up 
program for the training of incumbent directors, adapted, among other things, to the director's position 
in the corporation. 

√ 

If your answer is "correct" - indicate whether the program was implemented in the reporting year:  
Yes  No (there is to mark x In the box Appropriate)  

9. 

A. 

The corporation has a required minimum number of directors on the Board of Directors who must 
have accounting and financial expertise. 

√ 

If your answer is "correct" – indicate the minimum number determined: 

5 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
B. 

Number of directors who served in the corporation during the reporting year 

_________ 

_________ 

With accounting and financial expertise9: 7. 

With Professional qualifications10: 0. 

In the event of changes in the number of directors as stated in the reporting year, indicate the 
lowest number (except in a time period of 60 days of change) of directors of any type who served 
in the reporting year. 

10. 

A. 

Throughout the reporting year, the Board of Directors included members of both sexes. 

√ 

If your answer is "incorrect" – indicate the period of time (days) in which the aforesaid did not 
exist: _____. 

This question can be answered "correct" if the period of time in which directors of both sexes did 
not serve does not exceed 60 days, however in any answer (correct / incorrect), indicate the 
period of time (days) in which directors of both sexes did not serve: _____. 

9 After the evaluation of the Board of Directors, in accordance with the provisions of the Companies Regulations (conditions and tests for a director with accounting and financial expertise 
and for a director with professional Qualification), 5765-2005. 
10 See Footnote 9.  

6 

 
 
 
 
B. 

The number of directors of any sex serving on the corporation's Board of Directors as of the date 
of publication of this questionnaire:  

_____ 

_____ 

Men: 5, women: 2. 

BOARD MEETINGS (AND CONVENING A GENERAL MEETING) 

11. 

A. 

Number of board meetings held during each quarter of the reporting year: 

First quarter (2022): 4 

Second quarter: 4 

Third quarter: 4 

Fourth quarter: 3 

Correct 

Incorrect 

_____ 

_____ 

B. 

Next to each of the names of the directors who served in the corporation during the reporting year, 
indicate the rate11 of participation in the meetings of the Board of Directors (in this paragraph - including 
the meetings of the committees of the Board of Directors of which he is a member, and as indicated 

_____ 

_____ 

7 

See H.S. 2.

11

 
 
 
  
 
 
 
 
 
 
 
 
 
 
below) that took place during the reporting year (and with reference to term of office): See note at the 
end of the questionnaire. 

(Add lines according to the number of directors).  

Director’s name 

Rate of his 
participation in 
the meetings 
of the Board of 
Directors 

Rate of 
his 
participa
tion in 
meeting
s of the 
Audit 
Committ
ee 12 

Rate of his participation 
in meetings of the 
Committee for 
Examining the financial 
statements 13   

Rate of his 
participation in 
meetings of the 
Remuneration 
Committee14  

Rate of his 
participation in 
meetings of other  
Board of Directors 
committees in which 
he is a member 
(indicate the name of 
the committee) 

Darren Glatt 

100% 

Phil Bacal 

100% 

12 Regarding the company director in this committee. 

13 Regarding the company director in this committee. 

14 Regarding the company director in this committee. 

8 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ran Forer 

93% 

Stephen Joseph  

93% 

100% 

100% 

100% 

Michael Clare 

100% 

100% 

100% 

100% 

Efrat Makov 

100% 

100% 

100% 

100% 

Ajit Pai 

100% 

12. 

In the reporting year, the Board of Directors held at least one discussion regarding the management of 
the corporation's business by the CEO and his subordinates, without their presence, and they were given 
an opportunity to express their position. 

√ 

9 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
SEPARATION BETWEEN THE FUNCTIONS OF THE CEO AND THE CHAIRMAN OF THE BOARD 

13. 

Throughout the reporting year, a chairman of the board served in the corporation. 

This question can be answered "correct" if the period of time in which a chairman of the 
board did not serve in the corporation does not exceed 60 days as stated in Article 363A (2) 
of the Companies Law, but in any answer (correct / incorrect), indicate the period (days) in 
which a chairman of the board did not serve in the corporation as aforesaid: [__]. 

Correct 
√ 

Incorrect 

14. 

Throughout the reporting year, a CEO served in the corporation. 

√ 

This question can be answered "correct" if the period of time in which a CEO did not serve in 
the corporation does not exceed 60 days as stated in Article 363A (2) of the Companies Law, 
but in any answer (correct / incorrect), indicate the period (days) in which a CEO did not 
serve in the corporation as aforesaid: [__]. 

15. 

In a corporation in which the chairman of the board also serves as the CEO of the corporation 
and / or exercises his powers, the duplication of office is approved in accordance with the 
provisions of Article 121 (c) of the Companies Law15. 

 Irrelevant (if there is no such dual office in the corporation). 

15 In a bond company - approval in accordance with Article 121 (d) of the Companies Law. 

10 

 
 
 
 
 
 
 
 
 
 
 
 
 
16. 

The CEO Is not a relative of the chairman of the Board of Directors.  

If your answer is "incorrect" (i.e., the CEO is a relative of the chairman of the board)-  

A. 

B. 

Indicate the family relation between the parties: _____. 

The office was approved in accordance with Article 121 (c) of the Companies Law16: 

  Yes 

 No 

(mark x in the appropriate box) 

17. 

A controlling shareholder or his relative does not serve as CEO or senior executive officer in 

the corporation, except as a director.  

 Irrelevant (the corporation has no controlling shareholder). 

_____ 

_____ 

√ 

_____ 

_____ 

√ 

16 In a bond company - approval in accordance with Article 121 (d) of the Companies Law. 

11 

 
 
 
 
 
 
 
 
 
 AUDIT COMMITTEE 

18. 

In the reporting year, on the Audit Committee did not serve - 

Correct 
_____ 

Incorrect 
_____ 

A. 

A controlling shareholder or his relative. 

 Irrelevant (the corporation has no controlling shareholder). 

B. 

Chairman of the Board of Directors. 

C. 

A director employed by the corporation or by the controlling shareholder of the 

corporation or by a corporation under his control. 

D. 

A director who regularly provides services to the corporation or controlling 

shareholder of the corporation or corporation under its control. 

E. 

A director whose main livelihood depends on the controlling shareholder. 

 Irrelevant (the corporation has no controlling shareholder). 

√ 

√ 

√ 

√ 

√ 

√ 

19. 

A person who is not allowed to be a member of the Audit Committee, including a controlling 

shareholder or his relative, was not present at the reporting year at the meetings of the Audit 

Committee, except in accordance with the provisions of Article 115 (e) of the Companies Law. 

12 

 
 
 
 
 
 
 
 
 
 
 
 
20. 

A legal quorum for discussion and decision-making at all Audit Committee meetings held in 

the reporting year was a majority of committee members, with the majority present being 

independent directors and at least one of them being an external director. 

If your answer is "incorrect" - indicate the rate of meetings in which the said requirement was 

not met: _____.  

21. 

In the year of the report, the Audit Committee held at least one meeting in the presence of the 

internal auditor and the auditor and without the presence of officers of the corporation who are not 

members of the committee, regarding deficiencies in the business management of the corporation.  

22. 

All meetings of the Audit Committee attended by those who are not allowed to be members of the 

committee, were with the approval of the committee chairman and / or at the request of the 

committee (regarding the legal advisor and the corporation secretary who is not a controlling 

shareholder or his relative).  

23. 

In the reporting year, arrangements were established by the Audit Committee regarding the manner in 

which the corporation's employees' complaints were handled in connection with deficiencies in the 

conduct of its business and regarding the protection to be given to the employees who complained as 

aforesaid. 

√ 

√ 

√ 

√ 

13 

 
 
 
 
 
24. 

The Audit Committee (and / or the Committee for the Examination of the Financial Statements) was of 

the opinion that the scope of the auditor's work and his fees in relation to the financial statements in 

the reporting year were adequate for carrying out proper audit and review work. 

√ 

FUNCTIONS OF THE COMMITTEE FOR EXAMINING THE FINANCIAL STATEMENTS (HEREINAFTER -  THE COMMITTEE) IN ITS 
PRELIMINARY WORK FOR THE APPROVAL OF THE FINANCIAL STATEMENTS 

25. 

A. 

Indicate the period of time (in days) determined by the Board of Directors as a reasonable 

time to submit the Committee's recommendations prior to the discussion of the Board of 

Directors for approval of the financial statements: 3 days when approving the periodic 

statements and 2 days when approving the quarterly statements. 

Correct 
_____ 

Incorrect 
_____ 

The number of days that have actually elapsed between the date of the transfer of the 

_____ 

_____ 

B. 

recommendations to the Board of Directors and the date of the Board of Directors’ discussion: 

First quarter statements (year 2022): 5 days. 

Second quarter statements: 5 days. 

Third quarter statements: 2 days.  

14 

 
 
 
 
 
 
 
Annual statements: 1 days. 

C. 

The number of days that have elapsed between the date of submission of the draft financial 

statements to the directors and the date of the discussion of the Board of Directors of the 

approval of the financial statements: 

First quarter statements (year 2020): 5 days. 

Second quarter statement: 8 days.  

Third quarter statements: 8 days.  

Annual statements: 5 days.  

26. 

The corporation's auditor attended all meetings of the Committee and the Board of Directors, at which 

the corporation's financial statements relating to the periods included in the reporting year were 

√ 

discussed. 

If your answer is "incorrect", indicate the participation rate: ______  

27. 

In  the  Committee,  all  the  conditions  listed  below  were  met  throughout  the  reporting  year  until  the 
publication of the annual statements: 

_____ 

_____ 

A. 

The  number  of  its  members  was  not  less  than  three  (at  the  time  of  the  discussion  in  the 

√ 

Committee and the approval of the statements as aforesaid ). 

15 

 
 
 
 
 
 
B. 

C. 

D. 

E. 

F. 

G. 

It complied  with all the conditions set out in Article 115 (b) and (c) of the Companies  Law 
(regarding the office of members of the Audit Committee). 

The chairman of the Committee is an external director. 

All its members are directors and most of its members are independent directors.  

All its members have the ability to read and understand financial statements and at least one 
of the independent directors has accounting and financial expertise.  

Committee members gave a statement prior to their appointments. 

The legal quorum for discussion and decision-making in the Committee was the majority of its 
members, provided that the majority of those present were independent directors, including 
at least one external director. . 

√ 

√ 

√ 

√ 

√ 

√ 

If your answer is "incorrect" regarding one or more of the subsections of this question, indicate in relation 

to which statements (periodic / quarterly) the said condition was not met and the condition that was not 

_____ 

_____ 

met. 

16 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 REMUNERATION COMMITTEE  

Correct 

Incorrect 

28. 

The  committee  consisted  of,  in  the  reporting  year,  at  least  three  members  and  the  external 

directors constituted a majority (at the time of the committee's deliberations). 

 Irrelevant (No discussion took place). 

29. 

The  terms  of  office  and  employment  of  all  members  of  the  Remuneration  Committee  in  the 

reporting  year  are 

in  accordance  with  the  Companies  Regulations  (Rules  regarding 

Remuneration and Expenses for an External Director), 5769-2000. 

√ 

√ 

30. 

In the reporting year, on the Remuneration Committee did not serve - 

_____ 

_____ 

A. 

The controlling shareholder or his relative 

 Irrelevant (the corporation has no controlling shareholder). 

B. 

Chairman of the Board of Directors. 

√ 

√ 

17 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
C. 

A  director  employed  by  the  corporation  or  by  the  controlling  shareholder  of  the 

corporation or by a corporation under his control. 

D. 

A  director  who  regularly  provides  services  to  the  corporation  or  to  the  controlling 

shareholder of the corporation or to a corporation under his control. 

E. 

A director whose main livelihood depends on the controlling shareholder. 

 Irrelevant (the corporation has no controlling shareholder). 

The controlling shareholder or his relative were not present in the reporting year at the 
meetings of the Remuneration Committee, unless the chairman of the committee determined 
that either of them was required to present a particular subject. 

The Remuneration Committee and the Board of Directors did not exercise their authority under Articles 
267A (c), 272 (c) (3) and 272 (c1) (1) (c) to approve a transaction or remuneration policy, despite the 
opposition of the general meeting. 

If your answer is "incorrect" indicate - 

Type of transaction approved as stated: ______ 

The number of times their authority was used in the reporting year: ______  

√ 

√ 

√ 

√ 

√ 

31. 

32. 

18 

 
 
 
 
 
 
INTERNAL AUDITOR 

Correct 

Incorrect 

33. 

The Chairman of the Board of Directors or the CEO of the corporation is the organizational supervisor of 

the internal auditor of the corporation. 

34. 

The Chairman of the Board of Directors or the Audit Committee approved the work plan in the reporting 

year. 

In addition, indicate the audit topics that the Internal Auditor dealt with in the reporting year: 
Implementation of the supervision procedure by the internal auditor and debt management. 
(mark x in the appropriate box).  

√ 

√ 

35. 

Scope of employment of the internal auditor in the corporation in the reporting year (in hours17): 200 

_____ 

_____ 

hours. 

In the reporting year, a discussion took place (in the Audit Committee or on the Board of Directors) of 

√ 

the Internal Auditor's findings.  

17 Including working hours invested in investee corporations and audits outside Israel, and as appropriate, both by the Company's internal auditor and by the internal auditors of the 

Company's subsidiaries. 

19 

 
 
 
 
 
 
 
36. 

The internal auditor is not a stakeholder in the corporation, a relative of such, an auditor or anyone on 

his  behalf,  nor  does  he  maintain  material  business  relationships  with  the  corporation,  its  controlling 

shareholder, or a relative or corporations under their control.  

√ 

STAKEHOLDER TRANSACTIONS 

Correct 

Incorrect 

√ 

37. 

The controlling shareholder or his relative (including a company under his control) is not employed by 

the corporation or provides it with management services. 

If your answer is "incorrect" (namely, the controlling shareholder or his relative is employed by the 

corporation or provides it with management services) indicate - 

- Number of relatives (including the controlling shareholder) employed by the corporation (including 

companies under their control and / or through management companies): 

- Have the employment agreements and / or the management services as aforesaid been approved 

by the organs established by law:  

 Yes  

 No 

20 

 
 
 
 
 
(mark x in the appropriate box) 

 Irrelevant (In a corporation nothing husband control). _____. 

38. 

To the best of the corporation's knowledge, the controlling shareholder has no other business in the 

√ 

corporation's field of activity (in one or more fields). See note at the end of the questionnaire. 

If your answer is "incorrect" - indicate whether an arrangement has been established to delimit 

activities between the corporation and its controlling shareholder. 

 Yes  No 

(there is to mark x In the box Appropriate) 

 No relevant (the corporation has no controlling shareholder). 

21 

 
 
 
 
 
 
 
 
Closing notes to the questionnaire: 

1.  Meetings of the Board of Directors (and convening a general assembly) 

Section 11B - It should be noted that in the column on the participation rate in meetings of additional board committees, the reference 
is to permanent board committees only and does not include non-permanent committees established on an ad hoc basis for certain 
issues. It should be noted that in the number of meetings of the Board of Directors and its committees, the meetings held during the 
reporting year were taken into account, with reference to the term of office of each of the directors on the board and in each of the 
committees, as the case may be. 

2.  Stakeholder transactions 

Section 38 - Searchlight Group, which owns the company, has holdings in many communications companies around the world (mainly in 
the United States). As stated in section 1.8 of Chapter A of this report, Bezeq Group's strategy as of this date is to focus on the local 
market in Israel only. 

Chairman of the Board of Directors: ___________  

Chairman of the Audit Committee: ___________ 

Chairman of the Committee for Examining the Financial Statements: ___________ 

22 

 
 
 
 
 
 
Chapter E 

Report on the Effectiveness of Internal Control 

over Financial Reporting and Disclosure 

for the Year ended December 31, 2022 

- 1-

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)  Report on the internal control over financial reporting and disclosure: 

Annual report on the effectiveness of internal control over financial reporting 

and disclosure pursuant to Regulation 9b(a) a of the Securities Regulations 

(Periodic and Immediate Reports), 5730-1970: 

Management, under the supervision of the Board of Directors of B Communications 

Ltd.  (hereinafter  -  "the  Corporation"  or  "the  Company"),  is  responsible  for 

determining and maintaining adequate internal control over the financial reporting 

and disclosure in the Corporation. 

For this purpose, the members of Management are: 

1.  Tomer Raved, CEO; 

2. 

Itzik Tadmor, CFO;  

In addition to the said members of Management, serving in the Company are: 

1.  Ilan Chaikin, Internal Auditor; 

2.  Lital Aharoni, Controller; 

Internal  control  over  financial  reporting  and  disclosure  includes  controls  and 

procedures existing in the Corporation, designed by or under the supervision of the 

CFO and CEO in the field of finance, or by the person actually performing the said 

functions, supervised by the Corporation's Board of Directors, which are intended 

to provide a reasonable degree of assurance regarding the reliability of the financial 

reporting and the preparation of the reports in accordance with the provisions of the 

law, and to ensure that information that the Corporation is required to disclose in 

reports it publishes under the provisions is collected, processed, summarized and 

reported on the date and in the format as prescribed by law. 

- 2-

 
 
 
 
 
 
 
 
 
Internal control includes, inter alia, controls and procedures designed to ensure that 

information the disclosure of which by the Corporation is required, is accumulated 

and transmitted to the Corporation's Management, including the CEO and senior 

executives in the field of finance or to those actually performing the said functions, 

in order to enable decisions with regard to the disclosure requirement to be made 

at the appropriate time. 

Due  to  its  structural  limitations,  internal  control  over  financial  reporting  and 

disclosure is not intended to provide absolute assurance that misrepresentation or 

omission of information in the statements will be avoided or discovered. 

Management,  under  the  supervision  of  the  Board  of  Directors,  performed  an 

examination  and  evaluation  of  the  internal  control  over  financial  reporting  and 

disclosure in the corporation and its effectiveness; 

The  assessment  of  the  effectiveness  of  the  internal  control  over  the  financial 

reporting and disclosure carried out by Management under the supervision of the 

Board of Directors included: 

1.  Mapping  and  identifying the relevant  business  units,  accounts  and  processes 

that  the  Corporation  considers  very  essential  for  financial  reporting  and 

disclosure; 

2.  Examining and updating the reporting and disclosure risks; 

3.  Updating the documentation of the controls that respond to the risks that have 

been identified, as well as the documentation of new controls; 

4.  Testing and evaluating the effectiveness of the aforementioned controls; 

5.  Overall assessment of the effectiveness of internal control. 

- 3-

 
 
 
 
 
 
The model for assessing the effectiveness of internal control over financial reporting 

and disclosure was based on the following components: 

1.  Controls at the organization level (Entity Level Controls), including controls on 

the process of editing and closing the reports and general controls of information 

systems (ITGC); 

2.  Controls over cash and debt management process; 

3.  The process of editing and closing the reports; 

Based on the evaluation of the effectiveness performed by Management under the 

supervision of the board of directors as detailed above, the Board of Directors and 

the Corporation's Management came to the conclusion that the internal control over 

the financial reporting and disclosure in the Corporation as of December 31, 2022 

is effective. 

**** 

Regarding the investigations by the Israel Securities Authority and the Israel Police, 

as detailed in Section 1.1.7 of the chapter describing the Corporation's business in 

this periodic report, the Corporation does not have complete information regarding 

these  investigations,  plans,  materials  and  evidence  in  the  possession  of  the  law 

authorities in this case. (Although in January 2021, Bezeq received the core of the 

investigation material in connection with Case 4000 following Bezeq’s summons for 

a hearing on this matter, as detailed in Section 1.1.7.2 of the chapter describing the 

corporation's  business). Accordingly,  the  Corporation  is  still  unable to  assess  the 

effects of the investigations, findings and results on the Corporation, as well as the 

financial statements and estimates used in the preparation of these reports, if any. 

- 4-

 
 
 
(1)  Executive statements: 

(a)  Statement  of  the  CEO  pursuant  to  Regulation  9b(d)(1)  of  the  Securities 

Regulations (Periodic and Immediate Reports), 5730-1970: 

I, Tomer Raved, declare that: 

(1)  I  examined  the  annual  report  of  B  Communications  Ltd.  (hereinafter  –  the 

“Corporation”) for year 2022 (hereinafter - "the Statements"); 

(2)  To my knowledge, the Statements do not include any misrepresentation of a 

material fact and do not lack a presentation of a material fact necessary so that 

the presentations included in them, in light of the circumstances in which those 

representations  were  included,  will  not  be  misleading  with  respect  to  the 

reporting period; 

(3)  To  my  knowledge,  the  financial  statements  and  other  financial  information 

contained  in  the  Statements  adequately  reflect,  in  all  material  respects,  the 

financial position, results of operations and cash flows of the Corporation for 

the dates and periods to which the statements relate; 

(4)  I  revealed  to  the  Corporation's  Auditor,  the  Board  of  Directors,  the  Audit 

Committee  and  the  committee  for  examining  the  Corporation's  financial 

statements, based on my most recent assessment of the internal control over 

financial reporting and disclosure: 

(A)  Any  significant  deficiencies  and  material  vulnerabilities 

in 

the 

determination or exercise of internal control over the financial reporting 

and disclosure that are likely to adversely affect the Corporation's ability 

to collect, process, summarize or report financial information in a manner 

that  casts  doubt  on  the  financial  reporting  reliability  and  preparation  of 

financial statements; and- 

(B)  Any  fraud,  whether  material  or  immaterial,  involving  the  CEO  or  his 

subordinates directly or involving other employees who have a significant 

role in the internal control over financial reporting and disclosure; 

- 5-

 
 
(5)  I, alone or with others in the Corporation: 

(A)  Have  established  controls  and  procedures,  or  have  verified  the 

determination  and  existence  of  controls  and  procedures  under  my 

supervision, designed to ensure that material information relating to the 

Corporation,  including  its  subsidiaries  as  defined  in  the  Securities 

Regulations (Annual Financial Statements), 5770-2010, is brought to my 

attention  by  others  in  the  Corporation  and  its  subsidiaries,  in  particular 

during the preparation period of the Reports; - 

(B)  Have established controls and procedures, or verified the determination 

and  existence  of  controls  and  procedures  under  my  supervision, 

designed to reasonably ensure the reliability of the financial reporting and 

the  preparation  of  the  financial  statements  in  accordance  with  the 

provisions  of  the  law,  including  in  accordance  with  generally  accepted 

accounting principles; 

(C) 

I evaluated the effectiveness of the internal control over financial reporting 

and disclosure, and presented in this report the conclusions of the Board 

of  Directors  and  Management  regarding  the  effectiveness  of  the 

aforementioned internal control as of the date of the Statements. 

Nothing in the foregoing shall derogate from my liability or the liability of any other 

person, under any law. 

Date: March 14, 2023 

_______________________ 

Tomer Raved, CEO 

- 6-

 
 
   
 
   
 
 
 
 
 
 
(b) Statement  of  the  most  senior  officer  in  the  field  of  finance  pursuant  to 

Regulation  9b(d)(2)  of  the  Securities  Regulations  (Periodic  and  Immediate 

Reports), 5730-1970: 

I, Itzik Tadmor, declare that: 

(1)  I examined the statements and the other financial information contained in the 

statements of B Communications Ltd. (hereinafter – “the Corporation") for the 

year 2022 (hereinafter – “the Statements"); 

(2)  To the best of my knowledge, the Statements and the other financial information 

contained in the Statements do not include any misrepresentation of a material 

fact  and  do  not  lack  a  presentation  of  a  material  fact  necessary  so  that  the 

presentations  included  in  them,  in  light  of  the  circumstances  in  which  those 

representations  were  included,  will  not  be  misleading  with  respect  to  the 

reporting period; 

(3)  To the best of my knowledge, the Statements and the other financial information 

contained  in  the  Statements  adequately  reflect,  in  all  material  respects,  the 

financial position, results of operations and cash flows of the corporation for the 

dates and periods to which the Statements relate; 

(4)  I  revealed  to  the  Corporation's  Auditor,  the  Board  of  Directors,  the  Audit 

Committee  and  the  committee  for  examining  the  Corporation's  financial 

statements, based on my most recent assessment of the internal control over 

financial reporting and disclosure: 

(A)  Any  significant  deficiencies  and  material  vulnerabitlies 

in 

the 

determination or exercise of internal control over financial reporting and 

disclosure  as  it  relates  to  Statements  and  other  financial  information 

contained  in  the  Statements  that  are  likely  to  adversely  affect  a 

Corporation's  ability  to  collect,  process,  summarize  or  report  financial 

information In such a way as to cast doubt on the reliability of the financial 

reporting  and  the  preparation  of  the  financial  statements  in  accordance 

with the provisions of the law; And – 

- 7-

 
 
(B)  Any  fraud,  whether  material  or  immaterial,  involving  the  CEO  or  his 

subordinates directly or involving other employees who have a significant 

role in the internal control over financial reporting and disclosure; 

(5) 

I, alone or with others in the Corporation: 

(A)  Have  established  controls  and  procedures,  or  have  verified  the 

determination  and  existence  of  controls  and  procedures  under  my 

supervision, designed to ensure that material information relating to the 

Corporation,  including  its  subsidiaries  as  defined  in  the  Securities 

Regulations (Annual Financial Statements), 5770-2010, is brought to my 

attention  by  others  in  the  Corporation  and  its  subsidiaries,  in  particular 

during the preparation period of the Statements; And -  

(B)  Have established controls and procedures, or verified the determination 

and  existence  of  controls  and  procedures  under  my  supervision, 

designed to reasonably ensure the reliability of the financial reporting and 

the  preparation  of  the  financial  statements  in  accordance  with  the 

provisions  of  the  law,  including  in  accordance  with  generally  accepted 

accounting principles; And - 

(C) 

I evaluated the effectiveness of the internal control over financial reporting 

and  disclosure,  insofar  as  it  relates  to  the  Statements  and  the  other 

financial  information  contained  in  the  Statements  as  of  the  date  of  the 

Statements; My conclusions regarding my evaluation as mentioned were 

brought before the Board of Directors and Management and are included 

in this Report. 

Nothing in the foregoing shall derogate from my liability or the liability of any other 

person, under any law. 

Date: March 14, 2023 

_______________________ 

Itzik Tadmor, CFO 

- 8-