B. Communications Ltd.
2024 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 Q4 2024 (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 SECURITIES
AUTHORITY AND IS NOT REVIEWED BY ANY REGULATORY AUTHORITY.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
ב
Chapter A
Description of the Corporation's Business
2024 Periodic Report
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
ג
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.
Entry into the field of electricity supply ............................................................. 34
1.10. Corporate responsibility (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 income segmentation ..................................................... 44
2.4.
Customers ........................................................................................................... 44
2.5.
Marketing, distribution and service.................................................................... 44
2.6.
Competition ........................................................................................................ 45
2.7.
PP&E 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 telephone (cellular telephony)
99
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
ד
3.1.
General information about the field of activity .................................................. 99
3.2.
Services and products ....................................................................................... 102
3.3.
Products and services income segmentation ................................................... 103
3.4.
Customers ......................................................................................................... 104
3.5.
Marketing, distribution, and service................................................................. 104
3.6.
Competition ...................................................................................................... 104
3.7.
PP&E 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 and international communications services and ICT
solutions
128
4.1.
General .............................................................................................................. 128
4.2.
Products and services ....................................................................................... 129
4.3.
Income .............................................................................................................. 130
4.4.
Customers ......................................................................................................... 124
4.5.
Marketing, distribution, and service................................................................. 124
4.6.
Competition ...................................................................................................... 124
4.7.
PP&E 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 .................................. 131
4.14. Discussion of risk factors .................................................................................. 140
5.
Yes - Multi-channel TV
145
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
ה
5.1.
General information about the field of activity ................................................ 136
5.2.
Products and services ....................................................................................... 139
5.3.
Customers ......................................................................................................... 150
5.4.
Marketing and distribution ............................................................................... 151
5.5.
Competition ...................................................................................................... 151
5.6.
Production capacity .......................................................................................... 153
5.7.
PP&E, real estate and facilities ......................................................................... 153
5.8.
Intangible assets ............................................................................................... 154
5.9.
Broadcasting rights ........................................................................................... 155
5.10. Human capital ................................................................................................... 156
5.11. Suppliers ........................................................................................................... 157
5.12. Financing ........................................................................................................... 158
5.13. Taxation ............................................................................................................ 158
5.14. Restrictions and supervision of Yes .................................................................. 158
5.15. Material agreements ........................................................................................ 161
5.16. Legal proceedings ............................................................................................. 162
5.17. Targets and strategy ......................................................................................... 164
5.18. Discussion of risk factors .................................................................................. 165
6.
Appendix A - The Company
172
6.1.
Financing ........................................................................................................... 172
6.2.
Legal proceedings ............................................................................................. 172
7.
Appendix A - Definitions
175
8.
Appendix B - Financial Indices and Key Performance Indicators
180
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
1.1.1.
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.
1.1.2.
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 27.19% 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.
1.1.3.
Bezeq Group - General
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 provides a wide range of
Bezeq services and other services, including landline interior communication services,
internet infrastructure and access services, mobile radio telephone services (cellular
telephony), international communication services, and multi-channel television services
over satellite and over the Internet (OTT), call center services, maintenance and
development of communication infrastructure, providing communication services to
other communication providers, including wholesale market services, distribution of
television and radio broadcasts, and the supply and maintenance of equipment and
services in customer premises (network endpoint services). For the Company's entry into
the electricity supply sector, see Section 1.9 below.
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 (11.3.2025):
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
2
(*)
Regarding the Company and the control of Bezeq - see Sections 1.1.1, 1.1.2 and 1.1.4 of this Chapter A.
On November 7, 2024, Bezeq entered into an agreement with One Technologies Software
Ltd. to sell all of Bezeq's holdings in Bezeq Online, for a total amount of approximately
NIS 50 million (“the Agreement"), subject to adjustments in the agreement, in favor of
focusing on the Group's core activities and in accordance with its strategy. Bezeq Online's
activity is not synergistic and is immaterial to Bezeq Group and its financial statements.
[The completion of the transaction is subject to the fulfillment of various conditions
precedent. The Company recorded an accounting capital loss in its statements in an
immaterial amount as a result of the sale of Bezeq Online. For this matter, see also Note
12.5 to the 2024 reports.
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 79.92% 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 assemblies 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
50%
100%
100%
100%
100%
(*)
ompany
C
The
Bezeq Israel Telecommunications Corporation Ltd.
Pelephone
Bezeq
International
Bezeq Gen
27.78%
Bezeq Online
Yes
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
3
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
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 of Bezeq2. 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
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 validity of the control permits is subject to control over Bezeq; compliance with the provisions of the Communications Law and the
Communications Order, as they may be from time to time; and the holding of means of control over Bezeq at a rate not less than the minimum
rate (the minimum rate is defined as 25% of any type of means of control over Bezeq, or a lower rate as approved by the Ministers pursuant
to Article 3(a2) of the Communications Order), unless it has been proven to the satisfaction of the Minister of Communications that the
conditions set forth in Article 3(a3) of the Communications Order are met. As detailed in Section 1.1.4 below in relation to the amendment
to the Communications Order, Article 3(a3) has been repealed, while Article 3(a2) has been amended and modified.
3
The Control Permits were granted subject to the fact that Mr. David and Mrs. Michal Forer are citizens and residents of Israel, and they
stipulated that as long as the Communications Order requires the holding of means of control in Bezeq by an Israeli entity, as defined in the
Communications Order, T.N.R. and/or Mrs. Michal Forer and Mr. David Forer will not transfer means of control in Bezeq without the prior
written approval of the ministers, if such transfer would reduce their holdings, as the case may be, in means of control of any type 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 will constitute grounds for the cancellation of the control permit. In July 2020, the
Ministry of Communications, after a hearing, changed the requirement for a minimum percentage of the means of control in a general license
holder to be held by an Israeli entity and expanded the ministers' discretion to approve holdings by non-Israeli entities. As a result, the
Ministry of Communications amended the Cellcom and Partner licenses. The amendment intended in the Communications Order applicable
to Bezeq was approved by the Government on March 5, 2023.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
4
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 to the Ministers on the
transformation of a shareholder therein into a stakeholder in
Bezeq within 48 hours from the date the Company became
aware of the change.
3.2.
The Articles of Association of the subsidiaries must include
provisions regarding the rights of the Israeli entity, as defined in
the Communications Order, for the appointment of directors
therein, in accordance with Article 4(a)(2)(b)(2) of the
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 assembly 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:
95 a.
The method of appointing the directors set forth in the
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;
42 b.
The Company shall report to the Ministers on the
transformation of a shareholder therein into a stakeholder in Bezeq
within 48 hours from the date the Company became aware of the
change."
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").
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
5
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
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
No.: 2022-01-075823). Also, on [*] 2024, the Company applied to the Ministry of
Communications to receive additional approval to amend the pledge permit in such a way
that Bezeq shares would also be pledged for the benefit of the holders of debentures
(Series G), and as of the date of this report, the said approval had not yet been obtained.
Amendment to the Communication Order
On September 19, 2023, an amendment to the Communications Order (Bezeq and
Broadcasting) (Determining an essential service provided by "Bezeq", the Israel
Telecommunications Corporation Ltd.), (Amendment), 5783-2023 ("Amendment to the
Order") was published in the records and entered into force, which allows a 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 have control. The
Amendment to the Order includes 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. Following the Amendment to the Order regarding
the addition of an option for a controlling shareholder to replace the Israeliness
requirement with instructions from the General Security Service pursuant to Article
13 of the Communications Law – in May 2024, Bezeq was given the aforementioned
instructions replacing the Israeliness requirement as detailed in Section 2.16.1.6
below.
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.
D. Repeal of Article 3(a) of the Communications Order, so that there is no longer a
provision in the Communications Order requiring the Ministers to determine a
minimum holding rate in a control permit.
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.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
6
E. Amendment of Article 3(a1) of the Communications Order, so that the
Communications Order removes the obligation to obtain ministerial approval for a
decrease below the minimum holding rate.
F.
Amendment of Article 3(a2) of the Communications Order, so that there is no longer
a provision in the Communications Order requiring ministerial approval for an
allocation of shares by Bezeq that would result in the controlling shareholder holding
a type of means of control in Bezeq at a rate lower than the minimum rate
determined in the control permit.
G. Cancellation of Article 3(a3) of the Order, which states that the transfer or allocation
of means of control as a result of which the controlling shareholder will hold a type
of means of control in Bezeq at a rate lower than the minimum rate determined in
the control permit, does not require approval if the controlling shareholder has not
ceased to be a controlling shareholder and if it was done in one of the ways specified
in the article.
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, Yes, and Bezeq Online) were transferred to the Board of
Directors.
1.1.6.
Mergers, acquisitions and structural changes
Structural change in the subsidiaries
On March 16, 2022, the Boards of Directors of Bezeq and the Boards of Directors of Bezeq
International and Yes decided to approve an outline according to which Bezeq
International's ISP activity in the private segment will be reduced following the
cancellation of the unbundling between broadband infrastructure service and Internet
access service (ISP) (as described in Note 12.3 below), and ISP activity will be established
in Yes for the purpose of selling "triple" packages to customers, while striving to achieve,
as far as possible, the strategic, business and economic purposes, including adapting the
activity to the structure of the industry and the changing regulation, focusing on
increasing income and growth, and increasing the operational synergy and streamlining.
According to the outline, the business purposes will be achieved by as Yes being 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
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, Yes 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, instead of the provisions of the said
license, the provisions of a general permit apply on Yes’s ISP activity.
Buyback plan of the Company's shares
For details about the buyback plan of the Company's shares, which was approved by the
Company's Board of Directors on March 12, 2024, see Regulation 29(a) of the additional
details report chapter in 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 Law, 5737-1977 ("Penal Law"), in respect
of transactions related to the previous controlling shareholder in the Company and
former Chairman of Bezeq's Board of Directors, Shaul Elovitch ("Elovtich") regarding the
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
7
purchase of Yes shares5 and the provision of satellite communication services to Yes (“the
Yes Case”), the Ministry of Communications' dealings with Bezeq, as well as the suspicions
of the exercise of powers by former Prime Minister Binyamin Netanyahu, to advance
issues concerning the business of Elovitch and the economic interests of him and the
Bezeq Group ("Case 4000") -
1.1.7.1
On January 28, 2020, an indictment was filed with the Jerusalem District
Court in Case 4000, inter alia, against Elovitch 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 Elovitch and the
economic interests of him and the Bezeq Group. This trial is still ongoing.
Further to Bezeq’s summons to a hearing in Case 4000 regarding suspicions
of the offense of bribery (an offense under Article 291 of the Penal Law,
along 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) along with Article 23 of the Penal Law, on
February 1, 2024, an agreement was signed between the State of Israel and
Bezeq for a conditional termination of proceedings under the conditions in
accordance with Point B of Chapter 91 of the Securities Law ("the
Settlement"), in accordance with which the State of Israel will not file an
indictment in Bezeq's case in connection with any of the suspicions
investigated in the investigation file subject Bezeq paying an amount in the
amount of NIS 800 thousand (an amount paid by the Company, and Bezeq’s
refraining from any statement that is knowingly inconsistent with or
contradicts the Settlement and the facts that Bezeq admitted as part of the
Settlement.
As part of the Settlement, the State of Israel also informed Bezeq that it had
decided to close the investigation file regarding the Walla.
As part of the Settlement, Bezeq admitted the facts detailed in the
settlement and these are:
A. In the relevant period, between the years 2012 and 2016, Elovitch was
the controlling shareholder of the Bezeq Group. Walla, which during the
relevant period was a wholly owned subsidiary of Bezeq, operated the
"Walla NEWS!" website.
B. Elovitch and other Bezeq representatives worked with the Director
General of the Ministry of Communications Shlomo Filber to promote
the issue of cancelling the structural separation in the Bezeq Group.
C. On December 22, 2016, Filber sent Bezeq a letter titled "Cancellation of
the structural separation obligation in the Bezeq Group", which was
drafted by him in coordination with Bezeq representatives, with the
knowledge of Elovitch and the CEO of Bezeq at that time, Stella Handler
("Handler")6. The letter included a misleading detail, according to which
the fact regarding the obligation to hold a hearing prior to the
cancellation of the corporate separation in Bezeq was omitted, and a
misleading representation was made, according to which both the
cancellation of the corporate separation and the cancellation of the
5 As of June 24, 2015, Bezeq holds all of the shares of Yes after completing on that date the acquisition of Eurocom DBS's entire holdings in Yes
(“the Purchase Transaction"). Since the final amount of the second contingent consideration in the Purchase Transaction was lower than the
amount of the advances that Bezeq paid to Eurocom DBS for that consideration, Eurocom DBS was required to return the difference to Bezeq.
Bezeq's attempts to collect the difference were unsuccessful in light of the companies Eurocom DBS and Eurocom Communications entering
liquidation and the rejection of proof of debt submitted by Bezeq to the liquidator of Eurocom Communications. The Eurocom DBS liquidation
process is still ongoing.
6 It should be noted that, as part of the Settlement, the Company stated that it currently has no knowledge of Elovitch's and Handler's real-time awareness
of any specific detail.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
8
structural separation are in an advanced stage and have a higher
feasibility than in actuality.
D. On December 23, 2016, Bezeq reported in an immediate report to the
public about the transmission of the letter and its contents. This report
included the misleading detail contained in the Ministry of
Communications letter. Elovitch and Handler knew that the letter from
the Ministry of Communications contained the misleading detail and
that it would be reported to the public. The next day, the Ministry of
Communications published a clarification according to which the
cancellation of the corporate separation will be done after a hearing
procedure and subsequently Bezeq published a report clarifying this
part of the previous report.
It should be noted that, as appears from the settlement, the suspicions against
Bezeq stem from the actions and/or omissions of Elovitch and Handler, who
were involved in the execution of the acts described in the settlement and who
no longer serve at Bezeq.
For this matter, see also the company's immediate report from February 1, 2024,
which is included in this report by way of reference.
1.1.7.2
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 Elovitch with the
Tel Aviv District Court, as well as against former senior officials in Bezeq
Group and Yes, Or Elovitch, Amikam Shorer, Linor Yochelman, and Ron Eilon
in the Yes Case. According to the publication:
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 Yes
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 Elovitch had a personal interest.
1.1.7.3
Bezeq does not yet have complete information regarding the investigations
(mainly regarding the Yes Case), their content, materials and evidence in the
possession of the law authorities in the matter, and accordingly, it is still
unable to assess all the effects of the investigations, their findings and
results on Bezeq and its financial statements. For this matter see Note 1.3
to the 2024 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, Yes, Bezeq's
officers in the relevant period, and companies from Bezeq’s former
controlling group, including motions for approval of class actions/derivative
claims and motions for disclosure of documents before filing a motion for
approval of a derivative claim. For details regarding these procedures see
Section2.18 2.18.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
9
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 the Company’s consolidated financial
statements (see also Note 28 to the 2023 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 Section3 of this report.
1.2.4.
Bezeq International - Internet, international communications and ICT solutions for
businesses
This field includes integration and Internet services for businesses, as well sa hosting
services and ICT solutions. This sector also includes international communication services
and Internet services to existing subscribers in a private service and does not include the
marketing of this service to new/renewing subscribers (for structural change, see Section
1.1.6). Bezeq International's activity is described in Section 4 of this report..
1.2.5.
Yes - 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). Yes’s 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 Bezeq’s equity and transactions in its shares
The following is a breakdown of purchases of Bezeq shares in the last two years by the Company:
Date
Shares
Total consideration
(NIS millions)
Average price
per share (NIS)
3.4.2023
2,100,000
Approx. 10
4.75
28.5.2023
1,417,995
Approx. 6.8
4.77
30.5.2023
2,090,000
Approx. 10
4.79
28.6.2023
1,100,000
Approx. 5
4.54
29.6.2023
1,100,000
Approx. 5
4.57
31.1.2024
3,120,000
Approx. 15
4.82
30.5.2024
990,947
Approx. 4.4
4.47
5.6.2024
680,000
Approx. 3
4.43
6.6.2024
687,502
Approx. 3
4.34
20.6.2024
715,000
Approx. 3
4.20
8.8.2024
700,000
Approx. 3
4.27
12.8.2024
720,000
Approx. 3
4.17
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
10
Date
Shares
Total consideration
(NIS millions)
Average price
per share (NIS)
22.8.2024
720,000
Approx. 3
4.16
23.9.2024
720,000
Approx. 3
4.22
7.10.2024
700,000
Approx. 3
4.26
8.10.2024
700,000
Approx. 3
4.29
9.10.2024
475,000
Approx. 2
4.34
10.10.2024
915,000
Approx. 4
4.39
The Company's current holdings in Bezeq shares after these acquisitions and as of the date of
publication of this report are approximately 27.01% (approximately 26.98% fully diluted).
Further to the amendment to the Communications Order (as specified in Section 1.1.4), which
allows, among other things, an Israeli institutional investor to increase his holding to up to 7.5%
by means of a certain type of control in the Company without the need for the approval of the
Ministers, in the months of September-October 2023, the entities include Clal Holdings Insurance
Business Ltd., Harel Investments in Insurance and Financial Services and Ltd., and Migdal Holdings
Insurance and Finances Ltd. reported to Bezeq that they became related parties after their
holdings increased beyond 5% of Bezeq's shares.
With the exception of the above, in the reporting year no investments were made in Bezeq’s
equity, and the Group is not aware of any other material transactions made by a related party in
Bezeq shares off the stock exchange.
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 two years (2023-
2024), 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, 2024, the Bezeq Board of Directors decided to update Bezeq's dividend
distribution policy, so that Bezeq will distribute every six months 80% of the semi-annual
profit (after tax) according to Bezeq's consolidated statements, starting with the
distribution for the second half of 2024, which is in view of the continued decrease in the
extent of Bezeq's net debt and in accordance with Bezeq's forecasts regarding the
business results for the following years.
Also, Bezeq will strive to increase the dividend in the future, subject to maintaining the
Company's credit rating in the AA group.
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, among
other things, with 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.
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
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
11
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.
1.4.2.1
Dividend distribution in Bezeq - For details regarding the dividends
distribution carried out by Bezeq in 2023-2024, see Note 20 to the 2024
statements. Bezeq’s balance of distributable profits as of the date of the
report are about NIS 1,089 million (the said balance consists of surpluses
accumulated in the last two years in Bezeq after deducting the dividend
amounts paid in respect of that period).
Regarding the recommendation of the Bezeq Board of Directors dated
March 11, 2025 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 2024, see Note 12.7 to the consolidated statements for 2024.
1.5.
Financial information regarding the areas of activity of Bezeq Group
All data in sections .שגיאה! מקור ההפניה לא נמצא to 1.5.4 are in NIS millions, unless stated
otherwise.
1.5.1.
2024
(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 (income) that were included in the item of other expenses (income) of each company.
(2)
Details of the adjustments to consolidated - transactions between areas of activity.
(3)
See Notes 10 and 28 to the 2024 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.
Lnadline
interior
communicati
on
Cellular
communicati
on (mobile
radio
telephone)
Bezeq
International
services
Multi-
channel TV
(3)
Other
Consolidation
adjustments
(2)
Consolidated
Total income:
External
4,129
2,231
1,053
1,264
207
-
8,884
From other areas of activity in the
corporation
213
23
52
1
-
(
289
)
-
Total income
4,342
2,254
1,105
1,265
207
(
289
)
8,884
Total attributable costs:
Variable costs attributed to the area of
activity (1)
620
614
744
429
179
Fixed costs attributed to the area of
activity (1)
2,284
1,451
377
928
28
Total costs
2,904
2,065
1,121
1,357
207
(
422
)
7,232
Costs that do not constitute income in
another area of activity (3)
2,871
1,992
985
1,323
204
(
143
)
7,232
Costs that constitute income of other
areas of activity
33
73
136
34
3
(
279
)
-
Total costs
2,904
2,065
1,121
1,357
207
(
422
)
7,232
Profit from ordinary activities
attributed to the owner of the Cmpany
1,438
189
(
16
)
(
92
)
2
131
1,652
Total assets attributed to activity as of
December 31, 2024
10,660
2,880
932
1,163
83
(
557
)
15,161
Total liabilities attributed to the area
of activity as of December 31, 2022
10,206
1,493
728
457
34
(
261
)
12,657
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
12
1.5.2.
2023
(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 (income) that were included in the item of other expenses (income) of each company.
(2) Details of the adjustments to consolidated - transactions between areas of activity.
(3) See Notes 10 and 28 to the 2024 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.
Lnadline
interior
communica
tion
Cellular
communicat
ion (mobile
radio
telephone)
Bezeq
Internatio
nal
services
Multi-
channel TV
(3)
Other
Consolidati
on
adjustment
s (2)
Consolidate
d
Total income:
External
4,157
2,309
1,139
1,308
190
-
9,103
From other areas of activity in the
corporation
255
39
73
1
2
(370)
-
Total income
4,412
2,348
1,212
1,309
192
(370)
9,103
Total attributable costs:
Variable costs attributed to the area
of activity (1)
656
734
744
385
165
Fixed costs attributed to the area of
activity (1)
2,305
1,418
429
928
28
Total costs
2,961
2,152
1,173
1,313
193
(468)
7,324
Costs that do not constitute income
in another area of activity (3)
2,913
2,053
984
1,293
190
(109)
7,324
Costs that constitute income of
other areas of activity
48
99
189
20
3
(359)
-
Total costs
2,961
2,152
1,173
1,313
193
(468)
7,324
Profit from ordinary activities
attributed to the owner of the
Cmpany
1,451
196
39
(4)
(1)
98
1,779
Total assets attributed to activity as
of December 31, 2022
9,311
2,832
1,000
1,231
88
(584)
13,878
Total liabilities attributed to the
area of activity as of December 31,
2022
9,189
1,448
779
445
30
(211)
11,681
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
13
1.5.3.
2022
(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 (income) that were included in the item of other expenses (income) 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.
For explanations about the developments in the financial data presented In sections 1.5.1 to 1.5.3, see Section 1 of
the Board of Directors’ report on the state of the corporation's affairs ("Board of Directors' Report").
Lnadline
interior
communica
tion
Cellular
communicat
ion (mobile
radio
telephone)
Bezeq
Internatio
nal
services
Multi-
channel TV
(3)
Other
Consolidati
on
adjustment
s (2)
Consolidate
d
Total income:
External
3,980
2,359
1,183
1,277
187
-
8,986
From other areas of activity in the
corporation
326
40
56
-
6
(
428
)
-
Total income
4,306
2,399
1,239
1,277
193
(
428
)
8,986
Total attributable costs:
Variable costs attributed to the area
of activity (1)
606
852
759
382
159
Fixed costs attributed to the area of
activity (1)
2,240
1,354
510
943
28
Total costs
2,846
2,206
1,269
1,325
187
(
484
)
7,349
Costs that do not constitute income
in another area of activity (3)
2,805
2,114
1,009
1,305
183
(
67
)
7,349
Costs that constitute income of
other areas of activity
41
92
260
20
4
(
417
)
-
Total costs
2,846
2,206
1,269
1,325
187
(
484
)
7,349
Profit from ordinary activities
attributed to the owner of the
Cmpany
1,460
193
(
30
)
(
48
)
6
56
1,637
Total assets attributed to activity as
of December 31, 2022
9,023
4,080
760
1,249
87
(
1,787
)
13,412
Total liabilities attributed to the
area of activity as of December 31,
2022
10,468
1,563
570
469
32
(
1,314
)
11,788
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
14
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 2023 and 2024.
1.5.4.1
Bezeq Fixed Lines (Bezeq’s activity as NIO)
Financial data ( NIS millions)
2024
2023
Q4/
2024
Q3/
2024
Q2/
2024
Q1/
2024
Q4/
2023
Q3/
2023
Q2/
2023
Q1/
2023
Income
4,342
4,412
1,071
1,105
1,075
1,091
1,087
1,084
1,130
1,111
Operating profit
1,438
1,451
303
355
383
397
320
310
418
403
Depreciation and amortization
1,023
1,019
260
256
255
252
260
258
256
245
Operating profit before depreciation and
amortization (EBITDA) (1)
2,461
2,470
563
611
638
649
580
568
674
648
Share in losses of equity-held investee
8
-
2
3
3
-
-
-
-
-
Net profit
6
90
901
3
19
217
238
258
199
192
261
249
Cash flow from operating activities
2,454
2,380
626
589
491
748
584
586
602
608
Payments for investments in property, plant and
equipment and intangible assets and other
investments
1,139
1,122
303
300
266
270
290
239
281
312
Receipts from the sale of property, plant and
equipment and intangible assets
13
33
-
7
4
2
3
-
1
29
Lease payments
144
158
38
38
37
31
46
37
35
40
Free cash flow (2)
1,184
1,133
285
258
192
449
251
310
287
285
Operating data
Total number of Internet lines at the end of the
period (thousands) (3)
1,479
1,495
1,479
1,486
1,486
1,489
1,495
1,500
1,505
1,505
Of which are subscribers connected to the fiber
network at the end of the period (thousands) (7)
810
565
810
759
694
635
565
506
424
351
Internet lines at the end of the period (thousands)
(3)
1,008
1,028
1,008
1,012
1,014
1,019
1,028
1,029
1,028
1,031
Of which are subscribers connected to the fiber
network at the end of the period - retail
(thousands) (3)(4)
521
367
521
483
442
407
367
335
289
246
Internet lines at the end of the period –wholesale
(thousands) (3)
471
467
471
474
472
470
467
471
477
474
Of which are subscribers connected to the fiber
network at the end of the period - wholesale
(thousands) (3)(4)
289
198
289
276
252
228
198
171
135
105
Average monthly income per Internet subscriber
(NIS) - retail (ARPU) (6)
130
123
133
131
129
127
125
124
122
120
Fiber optic network deployment at the end of the
period (thousands, households available for
connection) (7)
2,571
2,070
2,571
2,448
2,312
2,191
2,070
1,970
1,835
1,689
Average plan speed per Internet subscriber - retail
(Mbps) (5)
526
341
526
483
430
382
341
315
278
250
Number of Be routers used by the Company's
customers (thousands)
862
831
862
858
846
837
831
819
801
786
Number of home internet network range
enhancers of the Be Spot and Be Mesh types
(thousands)
462
442
462
457
449
445
442
438
430
425
Number of active telephony subscriber lines at the
end of the period (thousands) (8)
1,383
1,442
1,383
1,397
1,409
1,419
1,442
1,454
1,473
1,488
Average monthly income per telephony line (NIS)
(ARPL) (9)
32
37
31
32
33
33
33
34
39
41
Churn rate of telephony subscribers (10)
10.0%
10.2%
2.3%
2.5%
2.1%
3.1%
2.3%
2.8%
2.6%
2.5%
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
15
(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
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 Yes 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
2023 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 PP&E, and starting in 2018, with the
implementation of IFRS 16, payments for leases are also deducted. Bezeq presents free cash flow as an additional measure to
evaluate the business results and cash flows since, in Bezeq's opinion, free cash flow is an important liquidity measure that
reflects the cash that the Company derives from its current operations after investing cash in infrastructure and PP&E and
other intangible assets. For this matter, see Section 8 of the chapter describing the corporation's business in the periodic
report for 2024.
(3) 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.
(4) In the fourth quarter of 2023, there was a certain decrease in the rate of connecting retail subscribers to the Company's fiber
network due to a slowdown in contractor activity due to a temporary dispute with the Employee Representative Council and
due to the Iron Swords War (see Section 1.7.9).
(5) In plans where there is a range of speeds, the maximum speed in the plan is taken into account.
(6) Income 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 2024 periodic report.
(7) As of the publication date of the report, fiber optic network deployment - about 2.64 million households are available for
connection, of which about 849K subscribers are connected to the fiber network (of which 546K retail and 303K wholesale).
(8) 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).
(9) 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 2023 periodic report.
(10) 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 2024 periodic report.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
16
1.5.4.2
Pelephone
(1) Average monthly income per subscriber (ARPU) excluding income 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 income
and a decrease in ARPU, which is why Pelephone chose to present the average monthly income per subscriber (ARPU) minus
the component of income from interconnect.
(2) 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.
(3) 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
Financial data ( NIS millions)
2024
2023
Q4/
2024
Q3/
2024
Q2/
2024
Q1/
2024
Q4/
2023
Q3/
2023
Q2/
2023
Q1/
2023
Income from services
2,254
2,348
563
547
561
583
562
585
585
616
Of which is income from
interconnect (1)
233
371
39
41
72
81
79
79
102
111
Income from service net of
interconnect interconnectivity (1)
2,021
1,977
524
506
489
502
483
506
483
505
Income from the sale of end
equipment
1,636
1,756
394
406
420
416
409
450
452
445
Total income
1,403
1,385
355
365
348
335
330
371
350
334
Total income net of interconnect (1)
618
592
169
141
141
167
153
135
133
171
Operating profit
189
196
42
52
55
40
37
59
49
51
Depreciation and amortization
552
549
145
135
134
138
138
143
135
133
Operating profit before
depreciation and amortization
(EBITDA) (2)
741
745
187
187
189
178
175
202
184
184
Net profit
138
159
31
38
39
30
26
48
41
44
Cash flow from operating activities
648
713
153
212
161
122
240
242
98
133
Payments for investments in
property, plant and equipment,
intangible assets and other
investments, net
305
310
76
65
82
82
90
81
82
57
Lease payments
244
270
55
58
52
79
94
57
49
70
Free cash flow (2)
99
133
22
89
27
(
39
)
56
104
(
33
)
6
Operating data
Number of postpaid subscribers for
the end of the period (thousands)
(3)
2,257
2,202
2,257
2,251
2,228
2,213
2,202
2,187
2,166
2,159
Of which are 5G subscribers
(thousands) (3)
1,237
1,029
1,237
1,195
1,144
1,086
1,029
957
893
829
Number of prepaid subscribers for
the end of the period (thousands)
(3)
376
416
376
388
387
398
416
431
427
426
Number of subscribers for the end
of the period (thousands) (3)
2,633
2,618
2,633
2,639
2,615
2,611
2,618
2,618
2,593
2,585
Average monthly income per
subscriber net of interconnect (NIS)
(ARPU) (1)
45
44
45
46
44
43
42
47
45
43
Subscriber churn rate (Churn Rate)
(5)
23.9%
24.5%
6.0%
5.8%
5.6%
6.5%
5.9%
6.0%
5.9%
6.7%
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
17
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 increased usage volume that are also adapted to the needs of 5G, when near the publication
date of the report, Pelephone has approximately 1.262 million subscribers to such plans out of all postpaid subscribers.
(4) The average monthly income per subscriber (postpaid and prepaid). The index is calculated by dividing the average monthly
consolidated total income including cellular services, from both Pelephone’s subscribers and other communication operators,
including income 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 2023 periodic report.
(5) 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 2023 periodic report.
1.5.4.3
Bezeq International
(1) Starting in 2023, small customers (SOHO) are included in private customer income.
(2) 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.
(3) The section also includes investments in long-term assets.
(4) 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 2023.
Financial data ( NIS millions)
2024
2023
Q4/
2024
Q3/
2024
Q2/
2024
Q1/
2024
Q4/
2023
Q3/
2023
Q2/
2023
Q1/
2023
Income
1,105
1,212
285
270
261
289
304
303
293
312
Of which: Income from private customers
(1)
7
16
253
6
3
39
44
48
55
60
66
72
Operating profit (loss)
(
16
)
39
(
67
)
13
18
20
(
11
)
20
16
14
Depreciation and amortization
118
137
42
23
26
27
45
29
33
30
Operating profit (loss) before depreciation
and amortization (EBITDA) (2)
102
176
(
25
)
36
44
47
34
49
49
44
Net profit (loss)
(
22
)
29
(
69
)
11
18
18
(
14
)
17
13
13
Cash flow from operating activities
174
157
55
51
19
49
45
36
57
19
Payments for investments in PP&E and
intangible assets and other investments,
net (3)
81
93
27
21
19
14
37
26
20
10
Lease payments
42
38
10
10
10
12
10
9
9
10
Free cash flow (2)
51
26
18
20
(
10
)
23
(
2
)
1
28
(
1
)
Operating data
Subscriber churn rate (4)
35.3
%
45.6%
6.6%
9.8%
10.7%
8.0%
9.0%
11.0%
10.0%
14.7%
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
18
1.5.4.4
Yes
(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) TV 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 or a gym), the number of subscribers is adjusted. The number of non-small
business customers is usually 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 subscribers who have joined the international streaming services as part of Yes's collaborations with these
services (see Section 5.1.1.1) amounts to approximately 151k as of the date of publication of the report.
(4) The number of Yes subscribers using Yes+ and STING services transmitted via the Internet. As of the date of publication of
the report, is about 473k customers, which constitute approximately 84% of all the TV subscribers of Yes. The number of IP
subscirbers and aforementioned rate also include subscribers who use satellite services in parallel.
(5) The average monthly income per TV subscriber is calculated by dividing the total Yes income (excluding income from the
sale of content to external broadcasters) by the average number of customers in the period. The average monthly income
from customers is calculated by dividing Yes total income (excluding income from the sale of content to external
broadcasters and income from end equipment) by the average of the relevant customers in the period. See also Section 8
of the chapter on the description of the corporation's business in the 2024 periodic report.
(6) The number of DBS subscribers who churned from Yes 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 2024
periodic report.
(7) The number of subscribers connected to the fiber network as of the date of publication of the report is about 81k.
Financial data ( NIS millions)
2024
2023
Q4/
2024
Q3/
2024
Q2/
2024
Q1/
2024
Q4/
2023
Q3/
2023
Q2/
2023
Q1/
2023
Income
1,265
1,309
317
317
316
315
316
328
336
329
Operating profit (loss)
40
94
57
13
(
12
)
(
18
)
33
35
26
0
Depreciation, amortization, and
ongoing impairment
155
166
19
30
48
58
29
41
46
50
Operating profit before depreciation,
amortization and ongoing impairment
(EBITDA) (1)
195
260
76
43
36
40
62
76
72
50
Net profit (loss)
49
102
55
12
(
5
)
(
13
)
27
40
30
5
Cash flow from current activities
176
215
(
18
)
55
46
93
26
66
31
92
Payments for investments in PP&E
and intangible assets and other
investments, net
221
179
63
42
67
49
30
59
60
30
Lease payments
25
25
6
7
6
6
6
7
6
6
Free cash flow (1)
(
70
)
11
(
87
)
6
(
27
)
38
(
10
)
0
(
35
)
56
Operating data
Number of TV subscribers (thousands)
(2)(3)
562
574
562
563
567
571
574
576
579
580
Of which are IP subscribers (4)
467
392
467
452
431
412
392
377
364
348
Of which are STING+ subscribers
139
120
139
132
129
124
120
116
111
108
Average monthly income per
subscriber (ARPU) (NIS) (5)
174
182
172
175
174
173
175
182
185
185
Average monthly income from
subscribers (ARPU) (Retail) (NIS) (5)
185
186
186
187
184
182
182
187
188
187
Subscriber churn rate (6)
15.9%
13.8%
3.8%
4.3%
3.9%
3.9%
3.1%
3.9%
3.3%
3.5%
Number of subscribers connected to
the fiber network (thousands) (7)
73
37
73
64
55
46
37
29
21
14
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
19
1.6.
Forecast and short-term targets in relation to the Bezeq Group
1.6.1.
The following is the Group's forecast for 2025 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 3.7 billion.
c.
CAPEX9 It is expected to be NIS 1.75 billion.
Bezeq will report, as required, deviations of ±10% or more from the data specified in the
forecasts above.
d. The scope of the Company's fiber network deployment - reaching approximately 2.9
million households.
e. Financial stability - maintaining high credit rating in the AA group.
1.6.2.
Medium-term targets
a. Core income - Growth of 2%-3% per year (in CAGR terms).
b. Adjusted EBITDA - Average growth per year in terms of CAGR of about 2%, with an
adjusted EBITDA rate from income in the range of 43%-45%.
c.
CAPEX - decrease to the range of 16%-18% in relation to CAPEX/Sales.
d. Adj. EBITDA minus CAPEX - Improvement of approximately NIS 400-500 million.
e. Free cash flow10 – Average annual growth (in CAGR terms) of approximately 7%-9%.
f.
Use of the Company's fiber network - Reaching infrastructure take-up of about 40%.
g.
ARPU - retail internet subscriber - Over NIS 140, cellular subscriber - NIS 45-50
(excluding interconnect), and Yes subscriber - NIS 190-195.11
h. Financial stability - Maintaining high credit rating in the AA group
i.
Dividend - aspiration to increase the dividend in the future, subject to maintaining
Bezeq's credit rating in the AA group.
The Company does not undertake to update on a regular basis or otherwise its targets or
any changes that will apply to the targets or actual results in relation to the targets.
1.6.3.
Forward-looking information
The Company’s forecasts and targets detailed in this section are forward-looking
information, as defined in the Securities Law. The forecasts and targets 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 2025 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
2024. Also, the forecast can change depending on the duration, intensity, and scope of
the Iron Swords War.
With respect to Bezeq targets, 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,
7 Adjusted net profit and adjusted EBITDA – net of the other operating expenses / income, net item, non-recurring losses /
gains from impairment / appreciation, and expenses of the equity compensation plan. It should be noted that the adjusted
EBITDA and the adjusted net profit for 2024 were approximately NIS 3.716 billion and approximately NIS 1.266 billion,
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 2024 was approximately NIS 1.266 billion.
10 For a definition of free cash flow, see Section 7.2.2.
11 TV ARPU - 155-160 NIS (unchanged from 2023 statements).
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
20
there is no certainty that Bezeq targets will fully or partially materialize, and deviation
between Bezeq results and actual performance may be significant. Moreover, targets, by
nature, do not purport to be predictions and should not be read 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 0, 3.19, 4.14 and 5.18), 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
There is fierce competition in the communications market:
In the field of Internet services, there is fierce competition both with companies that have
passive infrastructure and fiber infrastructure, and with companies that use the
Company's passive infrastructure (within the wholesale market) for the purpose of
transferring independent fiber infrastructure. Regarding the companies that offer
services through the wholesale market, see Section 1.7.5 and Section 2.16.4. Competition
exists both with companies that provide service at the national level and with companies
that provide service to customers at the regional level, among other things, in light of
regulatory relief that has encouraged regional players.
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, mainly 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 the continuation of the trend of increase in the number of households
without a landline home line).
In the field of television services, there is competition with free Idan+ channels, and the
increase in competition versus television content (VOD services and linear channels)
broadcast over the Internet (OTT) is evident, including by foreign providers such as Netflix
and Disney, which are not subject to regulatory oversight and the same obligations as
those of multi-channel public broadcasting providers.
In the field of ICT services, the market is characterized by low barriers to entry and a large
number of competitors. Competition in the field leads to low profit margins.
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 includes 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)12.
To the best of Bezeq’s knowledge, 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).
12 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.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
21
The communication groups market various communication service packages of each
group's corporations in a manner that allows 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). In addition, the wholesale market has opened up additional options and allows
groups to offer a comprehensive offer, even if part of it is based on service segments from
other companies. As of April 3, 2022, Bezeq, as an infrastructure owner, and later also
Hot, is allowed to provide private service subscribers Internet access service themselves,
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 1.7.4).
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.
1.7.3.1
Structural unbundling duty
Bezeq's NIO license stipulates that Bezeq must maintain structural
unbundling between itself and its subsidiaries13. In this context, full
unbundling 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 origin of this unbundling is in the authority granted by the
Communications Law to the Minister of Communications to order
accounting separation between different services provided by the same
group/company, as well as the authority to require the existence of separate
corporations for the purpose of providing different services, including
separation between providing services to a licensee and providing services
to a subscriber, and instructions regarding the implementation of the
separation.
The limitations of structural unbundling place the Group in a position of
competitive disadvantage 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 operating costs and overheads.
1.7.3.2
Cancellation of structural separation
Bezeq’s position is that it should be cancelled. It should be noted that
following the report of an interdepartmental team for the examination of
the updating of the structural separation obligations in the Bezeq and Hot
groups, which was established by the State and submitted its
recommendations to the Minister of Communications in 2020, the
separation that existed between the infrastructure service and the ISP
service was cancelled (for the aforementioned elimination of separation,
see Section 2.1.8).
On 15.5.2024, the Ministry of Communications published a statement on
the subject of work plans, stating that examining the need for structural
13 Pelephone, Bezeq International, DBS and Bezeq Online.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
22
unbundling at Bezeq is part of the additional emphases in the Ministry of
Communications' work plan for 2024. To the best of Bezeq's knowledge, the
Ministry of Communications continues to examine the issue.
Bezeq continues to work with the Ministry of Communications for the
complete cancellation of the structural separation obligation applied to it.
In tha matter of the Employee Representative Council regarding the
promotion of the treatment of the cancellation of structural unbundling, see
Section 2.9.6.
1.7.3.3
Marketing a shared basket of services with a subsidiary and between
subsidiaries
Bezeq was allowed, in its NIO license, 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 the 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 Hot
Group, which is subject to fewer restrictions than Bezeq).
Selling packages that include television service – Following the amendment
of the terms of the merger of the Company and Yes set forth in the
resolution of the Commissioner of Competition dated 12.4.2021, Yes is
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.
Conversely, in recent years, the Ministry of Communications rejected
various requests from Bezeq to provide its Internet services together with
the television services of the subsidiary Yes (including using OTT
technology).
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 Section5.14.2.
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
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
23
the Group to exploit such synergies or facilitate the exploitation of such
synergies.
1.7.4.
Regulatory structure in the Communications Law
The provision of communication services in Israel14 is carried out since October 2022,
registration in the registry is managed by the Director General of the Ministry of
Communications and is subject to general permit regulations, so that an entity interested
in providing a Bezeq service can know in advance what the conditions for its activity are
and begin operating without requesting or receiving a license. According to the law, there
are cases in which it is still mandatory to obtain a license or continue operating under a
license, in the following cases: (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; (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, the obligation to receive a license also applies to a local
authority (including a municipal company or a municipal subsidiary), 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, and to 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 service it provides or for a certain service.
In accordance with the general permit regulations, many of the entities that provided
Bezeq services prior to the amendment of the Communications Law in this regard
transitioned 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 do not apply to certain licensees, including the
Company and its subsidiaries Pelephone, Bezeq International, and Yes, except in relation
to the ISP service provided by Yes. In parallel, as it appeared 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 to
examine the justifications for determining different arrangements within the licenses.
On March 29, 2023, a decision was made by the Ministry of Communications (following
the hearing on November 22, 2022) allowing all authorized providers to use the passive
infrastructure reciprocally, including the Company's physical infrastructure not only in the
incentive areas, and this subject to compliance with security instructions, in accordance
with the instructions as amended in the appendix relevant to the case the service and the
instruction of the General Manager.
Regarding the use of passive infrastructures in a wholesale service, see Section 2.16.4.
1.7.5.
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 have been
required to allow other communications operators to use their infrastructures, at prices
not to exceed the maximum rates set in the regulations.
The format for providing wholesale services was determined by the Ministry of
Communications within the framework of "service portfolios" for the various services:
1.7.5.1
Wholesale BSA service
14 "Bezeq service" is defined in the Law as a service provided to the general public or a portion thereof via the Bezeq network,
which is one of the following: data transmission service, Internet access service, telephony service, other service listed in
Schedule 1 of the Law (as of the date of the report, there is no detail in the Schedule of the Law).
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
24
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 network, the Hot network, and
the IBC network - both on the traditional network and on the fiber network).
1.7.5.2
Wholesale passive infrastructure use service
This service allows providers to use Bezeq's passive infrastructure for the
passage of communication cables and for certain providers to use dark fiber
at the rates set in the regulations.
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.
1.7.5.3
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.
The regulatory determinations in relation to the wholesale market as well
as its implementation and development during the reporting period and
thereafter 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 2.16.5.
1.7.6.
Additional regulatory aspects that are relevant to the whole Group or to a number of
companies in it
1.7.6.1
Interconnectivity rates
The Group's communications companies (Bezeq, Pelephone and Bezeq
International) pay interconnectivity 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
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, so that
starting on 15.6.2025, each communications operator will bear its own costs
and there will no longer be any transfer of payments between
interconnection service licensees with regard to call minutes, and an
international operator will not pay for the transmission of an outgoing
international call.
For incoming international calls, the payment to be paid by an international
operator will be as required by NIO or mobile radio-telephone respectively.
At this point, it is not different from the interconnect rate regime in the SMS
service
1.7.6.2
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 Yes) 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
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
25
contract15. Cellular operators (including Pelephone) - are not allowed to
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.
1.7.6.3
Call centers
In the licenses of Bezeq, Pelephone, Bezeq International, and Yes,
instructions were set regarding the obligation to route calls in certain
matters to a professional human answer, response times, as well as
instructions regarding call center manning hours, recording and
documentation of calls, and reporting obligations, and this is further to the
amendment to the Consumer Protection Law that deals, among other
things, with the time of waiting for a human answer.
1.7.6.4
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.
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 create a certain limitation on marketing
activities (depending on the scope of joining the database).
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.
1.7.6.5
Enforcement and financial sanctions
The Communications Law, the Economic Competition Law, the Securities
Law, the Consumer Protection Law, The Privacy Proteciton 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 a fiber network or provide a service over it.
For financial sanctions imposed by the Ministry of Communications
regarding wholesale services, see Section 2.16.5.1 (Footnote 30) 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.
1.7.6.6
The Centralization Law
The Centralization Law enacted in 2013 establishes limitations in relation to
extending credit to business groups, separation between significant real
15
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.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
26
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.
Restrictions on creating liens on the assets of the Group companies
For the sake of convenience, the following are references to sections in the 2024 periodic
report that relate to the restrictions that apply to the Group companies in the lien on their
assets and the main restrictions:
1.7.7.1
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
assets16, 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 2.16.1.7, 3.14.2, 5.14.1.7.
1.7.7.2
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 2024
statements.
1.7.8.
State of War - "Iron Swords
Since October 7, 2023, the State of Israel has been in a state of war, with varying intensity,
mainly in the Gaza Strip and in the northern border area, while as of the date of
publication of the report, a ceasefire exists in the two aforementioned sectors. The state
of war created various effects on the Group companies, which are reflected in a decrease
in roaming activity at Pelephone and in the removal/freezing of business lines in areas
that were affected by the war, and conversely, especially in the early stages of the war,
in the increase in demand for some services. Also, with the outbreak of the war, due to
the recruitment of employees to reserve service and a decrease in contractor activity,
there was a slowdown in deployment and installation activity in the Bezeq network, which
subsequently returned to its normal level. Also, a number of regulatory moves were made
as part of the State of Israel's handling of the state of war, including a law to postpone
payment dates for those entitled and to ease phone call charges, including calls related
to distance learning. It should be noted that the Group companies took their own
initiative to ease the charges towards customers in localities in the Gaza Envelope and on
the northern border.
The Group companies, which provide, among other things, essential communication
services to private, business, and institutional customers, including the state institutions,
16 The assets needed to ensure the provision of services by the licensee.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
27
the security forces, and the health system, prepared accordingly, and responded to the
various needs, including fault solving, increasing vigilance and preparedness in cyber
systems, and assisting the community in various ways. Also, the Group companies
regularly examine and follow closely the developments related to the war.
Until now, the effects of the war and its consequences as described above did not have a
material impact on the activities of the Group and its business results. Also, the liquidity
and financial situation of the Group allows it to function well during this period. The
consequences of the war, as well as its possible indirect effects on the state of the Israeli
economy and the market, as well as on the Group companies, are unobservable and
difficult to predict, and they depend, among other things, on the manner and scope of
the development of the war, considering its duration (ceasefire), and the possibility of the
economy slipping into recession as a result. In this context, attention is also drawn to the
relevant risk factors detailed in Chapter A (Description of the Corporation's Business) of
the periodic report for the year 2024 (Sections 2.20.11, 2.20.15, 3.19.2.9, 4.14.8, 5.18.1.2,
and 5.18.1.4).
Some of the information contained in this section is forward-looking information, as
defined in the Securities Law, based on estimates, assumptions, and expectations of the
Company and Bezeq Group which may not materialize, or materialize in a materially
different way than anticipated, depending, among other things, on the manner and scope
of the development of the war and the state of the economy as a whole.
1.7.9.
Cyber defense management
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 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 2.20.12, 3.19.2.8, 4.14.7 and 5.18.3.9.
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.
1.7.10.
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 5.14.
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, including upgrading browsing speeds using
fiber, and the transition to a unified Internet package will constitute a growth engine
in Bezeq Fixed Lines.
B. Reduction of Bezeq International's private segment Internet activity, and
transforming Yes into a "triple" sales arm that combines fiber and television.
C. Pelephone will leverage the transition to 5G to increase income and ARPU.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
28
D. Bezeq International will focus on the field of ICT.
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 income 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 (such as entering the field of
electricity supply as detailed in Section 1.9). 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
through expanding the digital transformation, streamlining the cost base, improving
market response times and flexibility for changes, and striving to cancel structural
separation. For this purpose, concrete multiyear plans have been determined for
implementation in the group companies, which include, among other things, targets for
reducing expenses and investments.
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.
1.8.4.
ESG
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.
1.8.5.
Streamlining moves and promoting the assimilation of synergies between subsidiaries
Bezeq’s subsidiaries Pelephone, Bezeq International and Yes (the "Subsidiaries") have
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
29
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 focused on growth in the ICT worlds, is also taking
streamlining measures, including the signing of a collective agreement that includes a
retirement plan, 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 Yes’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 0,3.19, 4.14 and 5.18.
1.9.
Entry into the field of electricity supply
1.9.1.
Bezeq's entry into the field of electricity supply
On 15.5.2024, A detailed shareholders' agreement ("the Agreement") was signed
between Bezeq and the company Powergen Ltd. ("Powergen")17, a company wholly
owned by Generation Capital Ltd., which coordinates the fund's energy activities. The
Agreement was signed based on principles previously agreed upon between the parties
and established the principles of cooperation between Bezeq and Powergen in the field
of electricity supply to household customers and small and medium-sized business
customers.
1.9.1.1
For the purpose of the cooperation, a company jointly owned by Bezeq (50%)
and Powergen (50%) (“the Venture") will be established, which will hold a
supply license to suppliers who do not possess production means, by virtue of
the regulation published by IEC.
1.9.1.2
Bezeq, through the services it will provide to the Venture, will be responsible
for marketing, sales, acquisition, and customer retention, as well as for
providing account management services to customers, including collection
services and contact with the customer. Powergen will be responsible for
providing voltage for the benefit of the Venture, both through electricity
production and storage facilities that belong to the corporations held by it,
and through continuing to initiate, operate, and finance projects for the
establishment and operation of electricity production and storage facilities, by
itself or through corporations under its control. It is hereby clarified that the
investments in these projects will be made, directly or indirectly, by Powergen
Group only, and Bezeq Group or the Venture are not expected to make
substantial investments in connection with the Venture’s activities. In the first
period of the Venture’s activity, Powergen will also provide electricity trade
and optimization services to the Venture, under certain conditions as reflected
in the memorandum of understanding.
1.9.1.3
Powergen will offer the Venture the electricity it produces, directly and
indirectly, and the Venture will purchase the electricity from it (under certain
17 Powergen Ltd. (formerly Generation Energy Ltd.) coordinates the energy activities of Generation Capital Ltd., corporations under its control
possess electricity production facilities on a significant scale, and it also engages directly and through corporations under its control in
initiating projects for the establishment and operation of electricity production and storage facilities.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
30
conditions), as long as it is required, within the framework of long-term
engagements with commitments to purchase the electricity through various
price-setting mechanisms. As part of contracts with Powergen renewable
energy facilities, the eligibility for "green" electricity production, including the
eligibility for issuing green certificates, will belong to the Venture.
1.9.1.4
Upon the establishment of the Venture, the parties will provide it, in equal
parts, the amount required to finance its activities in the first year (it will be
clarified that this is an immaterial amount in relation to the Bezeq Group).
1.9.1.5
Each party between Bezeq and Powergen will appoint half of the members of
the Venture’s Board of Directors. The Chairman of the Venture’s Board of
Directors will be the CEO of Bezeq. All decisions of the Venture’s Board of
Directors will be made jointly, but the directors appointed by Bezeq will have
an excess vote in the Venture’s Board of Directors, mainly on issues such as
decisions concerning transactions with Powergen Group, the marketing
strategy and its implementation.
Bezeq's entry into the electricity supply sector is in accordance with Bezeq's strategy,
which includes identifying opportunities for expansion in areas that are tangential and
complementary to the Group's activities, and entering areas of activity with high growth
beyond Bezeq's core areas, while diversifying the portfolio and reducing dependence on
regulatory risks (on this matter, see Section 1.8.2.3).
In accordance with the business plan of the Venture, the Venture aims to reach a market
share of approximately 400,000 household electricity customers and tens of thousands
of business customers by the end of 2030.
1.9.2.
The Venture’s activity
The Venture, which allows consumers to transfer their electricity supply from IEC through
several discount channels, is being carried out through Bezeq-Gen under the brand
"Bezeq Energy", which is a company jointly owned by Bezeq (50%) and Powergen. On
27.6.2024, the Electricity Authority announced the approval of the transfer of a license
for the supply of electricity without means of production from Bezeq to Bezeq-Gen.
Bezeq-Gen began purchasing electricity for its operations, and Bezeq began marketing
Bezeq-Gen's operations.
It should be noted that an amendment to the objectives section of Bezeq's memorandum
of association, which was a condition for Bezeq's entry into the electricity supply sector,
has been completed and entered into force.
1.9.3.
Background regarding the reform of the electricity sector in Israel
As part of the reform of the electricity sector in Israel, it was determined in 2018 that the
supply segment relating to the purchase of electricity and its sale to consumers, including
determining the price for the consumer, generating bills, etc., would be gradually opened
to competition. While the distribution activity, at least at the regional level, is almost
entirely controlled by the Israel Electric Corporation Ltd. ("IEC") and can in any case be
carried out by only one distributor (a natural monopoly), the supply activity can be open
to competition. The supply segment was open to competition for large consumers and
starting in 2021 it was gradually opened to competition for household consumers as well.
Competition in the supply segment allows consumers to contract with a private supplier
instead of continuing to purchase electricity from IEC. According to the Electricity
Authority's decisions, customers who have a smart meter installed (a continuous meter
that allows remote data reading) and (from July 2024) also household consumers without
a smart meter, can be transferred from IEC to suppliers that do not have production
facilities, thus opening up a market competition on a very significant scale, with the IEC
prevented from offering discounts to customers until it loses 40% of the low-voltage
market share. According to the consulting firm BDO Consulting, the market share that
may pass to IEC’S competitors by 2030 Estimated at approximately NIS 10 billion.
Some of the information contained in this section includes forward-looking information,
within its meaning in the Securities Law and is based, among other things, on estimates
regarding future developments regarding the electricity sector, the behavior and needs
of electricity customers, regulatory policy, competitors' marketing strategy, etc. These
estimates may not materialize, or materialize in a materially different way than projected,
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
31
among other things, depending on the variables mentioned above, which are not
necessarily under Bezeq's control
1.10.
Corporate responsibility (ESG)
On February 24, 2022, Bezeq's Board of Directors approved the expansion of its activity in the field
of corporate responsibility (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
- "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.
The Board of Directors also approved, on and around the same date, corporate responsibility policy
documents on various topics. In February 2023, the application of the aforementioned ESG targets
was also approved in the subsidiaries Pelephone, Bezeq International and Yes. In March 2023, Bezeq
joined the gender equality initiative of the UN Women's Organization (WEPs).
In addition, during 2024, 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. The Company also supports projects to rehabilitate IDF soldiers who were
injured in the Iron Sword War.
Bezeq publishes corporate responsibility reports in accordance with the reporting standard of the
Global Reporting Initiative (GRI, and starting in 2022, Bezeq submits a report to the international
organization CDP, which is engaged in managing a professional system for reporting, documenting,
and rating the nature of the environmental impact management of various entities.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
32
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 2.16.5).
2.1.2.
Legislative and regulatory constraints and special constraints
2.1.2.1
Communications Law and Bezeq's NIO license
Bezeq's
activities
are
subject
to
governmental
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
context, inter alia, regarding the determination of rates, structural
separation, approvals for new services and service baskets as well as
wholesale market see Section 1.7.3 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
section2.16.4 2.16.
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 section2.16.9).
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 2023 and 2024, See Section 1.5.4.1.
Development in the wholesale BSA fiber service in recent years – beyond providing the
service in the format of an IRU – that is, through long-term agreements for the provision
of an indefeasible right-of-use service in the BSA fiber service. Bezeq signed such
agreements with Partner and Gilat (see section 2.6.2.2).
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
33
2.1.4.
Technological changes that could have a significant impact on the field of activity
2.1.4.1
In the communications market, the trend of increasing demand by the
Company’s Internet, data transmission, and communication customers for
ever-increasing bandwidths that enable a wide range of applications and
services on IP-based infrastructures continues. In the business segment, the
entry of large global cloud service providers into the Israeli market, such as
AWS, MICROSOFT, GOOGLE, may threaten some of Bezeq’s services, such
as VCLOUD, DR. On the other hand, cooperation with them constitutes an
opportunity for Bezeq's growth and entry into new areas.
The development of SD WAN technology18 and its increasing use in the
business segment, including the integration of the technology into Bezeq's
communication networks, constitutes an opportunity to enrich the business
services offered by Bezeq.
Technological changes can also lead to the cannibalization of existing
services.
Technological developments and dropping equipment prices may allow
other operators to provide services similar to those provided by Bezeq, even
at lower costs.
The increase in the speedds of the cellular service enables the cellular
operators to compete with Bezeq's 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. 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 Section3.1.5 3.1.5),
since they will also be able to provide ultra-fast internet at the customer's
home.
2.1.5.
The critical success factors in the field of activity and the changes that apply to them.
2.1.5.1
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.
2.1.5.2
Regulatory decisions and the ability to deal with them.
2.1.5.3
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.
2.1.5.4
Preservation of brand values and their adaptation to the conditions of the
changing competitive environment.
2.1.5.5
Effectiveness of sales and service systems.
2.1.5.6
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 registration in the
registry and operation in accordance with general permit regulations, or the receipt of
appropriate licenses in certain circumstances. For rgulaiton easements, 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 sections2.7.2 and 2.16.5), regulatory relief granted
18
SD-WAN is a solution from the software defined networking family - implementing a network on smart software over uniform hardware.
In SD-WAN, intelligent central software manages endpoint routers at customer sites and enables uniform communication and information
security for the organization with easy and convenient central management.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
34
to new competitors, the obligation to allow the use of Bezeq, Hot, and IBC infrastructure
and services - including within the wholesale market.
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
Section2.6.3 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
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.
Competition is both in the provision of various services to end customers and in the
provision of services to licensed providers and in infrastructures. Some providers are
active competitors in some markets and some providers compete in all. For more
information on the subject, see Section 2.6.
Infrastructure – Deployment
In the communications market, there is competition between infrastructures and
communications networks over which services are provided to both private and business
end customers, and licensed providers who use them to provide services to their end
customers. In recent years, the market has been characterized by the accelerated
deployment of fiber networks, both in independent infrastructures and in Bezeq's passive
infrastructure. As of the date of the report, Bezeq's fiber network reaches approximately
2.64 million households that are available for connection in the statistical areas in which
Bezeq has chosen to deploy ("Service Areas"), and the IBC network reaches, to the best
of Bezeq's knowledge, approximately 2 million households.
In relation to a traditional network (non-fiber, copper) – Bezeq has a fully nationwide
network, and is obligated to provide service to all who request it (“Universal Service
Duty”). This duty is also imposed on HOT (which received relief in implementing the duty),
and it also has a nationwide network (almost completely).
Internet Service
Internet service for end customers – the service is characterized by a significant increase
in bandwidth and browsing speeds, mainly upon the deployment of fiber networks.
Starting in April 2022, Bezeq will market its own unified private Internet service
(infrastructure and access service). In this service, Bezeq’s main competitors are HOT,
Partner, and Cellcom, as well as other licensed providers that provide service via landline
infrastructure that they have been authorized to deploy, or licensed providers that lack
infrastructure (via the wholesale service).
Wholesale Internet Service (BSA) for Licensed Providers
Bezeq’s main competitor in providing services to licensed providers on the fiber network
is IBC. IBC provides services to telecommunications providers and is generally not
permitted to market directly to end customers. For the provision of services in the form
of IRU agreements, see Section 2.6.2.2. On the copper network, the main competitor is
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
35
HOT.
For wholesale services using passive infrastructures and dark fiber - see Section 2.16.5.
Transmission
In the field of transmission and data communications, Bezeq's competitors are mainly Hot
Telecom, Cellcom, and Partner, which operate within the framework of communication
groups and offer a comprehensive communication solution to the customer.
Telephony
In the field of fixed-line telephony, Bezeq's competitors are Hot Telecom, as well as VoB
service providers operating under licenses without a Universal Service Duty, as well as
cellular companies (see Section 2.6.3.2). For details about wholesale telephony services,
see Section 2.16.5.
Competition in the communications market depends on various factors such as:
technological developments, regulatory resolutions, 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; 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, cancellation of the structural unbundling and
the degree of flexibility that will be given to Bezeq in offering undetachable service
packages, including with subsidiarie.
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. Following the
hearings published by the Ministry of Communications regarding the closure of the
copper network (see Section 2.7.2.3), Bezeq is preparing to provide telephony service
over the fiber network.
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 center also for operators of landline and cellular telephony,
as well as a unified website free of charge.
In recent years, the landline telephony segment has been characterized by a decline in
demand, which is reflected in a decline in the rate of ownership of a landline telephone
line and a gradual erosion in the number of calls to and from landline networks. According
to Bezeq, this trend stems mainly from the increase in the use of mobile phones and
smartphones, from large-scale call minute packages that mobile companies market, from
prices in the segment, as well as from an increase in the number of calls over the Internet
(see Section 2.1.4). In 2024, a decrease of approximately 4% was recorded in the number
of Bezeq lines compared to 2023.
Chart - Rate of households without a fixed home telephone line19
19 The data was taken from the publications of the Central Bureau of Statistics (Household Expenditure Survey for the years 2019-
2022, dated 9.6.2024). Regarding the data for the years 2023-2024 - in accordance with the Company's assessment based on
the Central Bureau of Statistics surveys from previous years.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
36
For wholesale telephony service, see Section 2.16.5.3.
2.2.3.
Internet access infrastructure services and ISP
Bezeq provides broadband Internet services nationwide over the copper infrastructure
using xDSL technology and over the fiber network in statistical areas subject to milestones
in its license (for Bezeq's service areas, see Section 2.16.4). There are also a limited
number of areas where the Company uses wireless technologies such as VBAND. As of
April 3, 2022, Bezeq markets and provides a unified Internet service, infrastructure and
Internet access in a private service (for this matter, see Section 2.1.8).
The Internet market has seen a significant increase in bandwidth and browsing speeds in
recent years, mainly with the deployment of the fiber network, which allows for
significantly higher speeds than the traditional copper network, and customers joining it
increase the average package speed. In addition to customers migrating to Bezeq's fiber
network, Bezeq is also working to upgrade customers' browsing speeds on the fiber
network. Bezeq provides service via fiber at speeds of up to 300Mbs, 600Mbs, 1Gb, 2.5Gb
and 5Gb. Bezeq also provides speeds of up to 200Mb on its copper network.
Distribution of Internet speeds among the Company's retail subscribers
(in Mbs as of the end of each year)
* In packages where there is a range of rates, the maximum rate in the package is taken into
account.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
37
In recent years, the growth trend in terms of the number of customers has continued.
During 2024, Bezeq estimates the following changes will occur compared to 2023: an
increase of approximately 1.8% in the number of landline Internet subscribers in Israel
and a decrease of approximately 1% in the total number of Bezeq Internet subscribers
(decrease in both retail and wholesale).
For details regarding changes in the number of Bezeq Internet subscribers in the average
monthly income per Internet subscriber and in the average package speed, see Section
1.5.4.1. 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.
Bezeq is obligated to provide a broadband Internet access in a BSA wholesale format to
authorized providers, who in this way provide their customers with a uniform Internet
service. For this service see Section 2.16.5. 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 and Gilat, see Section 2.6.2.1.
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 to communications operators, international parites
and its business customers in a variety of interfaces.
The field is characterized, on the one hand, by a rapid increase in customers' bandwidth
needs and, on the other hand, by a decrease in the price for a given volume of traffic,
which stems both from the development of technology (see Section 2.1.4), which allows
for increased bandwidth at lower costs than in the past, and from increased competition
in the field (see Section 2.6.4). In addition, there is a noticeable shift away from the use
of the communications providers' own infrastructure (on this matter, see Section 2.1.8).
2.2.5.
Cloud and digital services
This category includes, among others, virtual server services, cyber services, 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.
2.2.6.
Wholesale services
Bezeq provides a wholesale BSA Internet service to service providers - as of the end of
2024, the number of wholesale Internet lines on the Bezeq network was approximately
471k, constituting approximately 32% of Bezeq's total Internet subscribers. In this
context, it should be noted that these lines also include lines that were not originally on
the Bezeq network (new or from a competing network).
Bezeq also provides a wholesale service that allows competitors to use Bezeq's passive
infrastructure.
Regarding wholesale services, see Sections 2.1.8 and 2.16.5.
2.2.7.
Other services
2.2.7.1
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.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
38
For the provision of wholesale services to communications operators and
for the possibility of using Bezeq's physical infrastructure also for
infrastructure owners, see section1.7.4.
2.2.7.2
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 section2.15.
2.2.7.3
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).
2.2.8.
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 (including
products not in the field of communications).
2.3.
Income segmentation of products and services
The following is data about the distribution of Bezeq’s income according to the main products and
services in its field of activity in the years 2021-2023 (NIS millions):
2024
2023
2022
Income from Internet infrastructure services
1,999
1,947
1,789
Rate out of the total Company income in the field of
activity
46.04%
44.13%
41.55%
Income from landline telephony
544
650
780
Rate out of the total Company income in the field of
activity
12.53%
14.73%
18.11%
Income from transmission and data communication
services
1,179
1,163
1,132
Rate out of the total Company income in the field of
activity
27.15%
26.36%
26.29%
Income from Cloud and digital services
348
349
331
Rate out of the total Company income in the field of
activity
8.01%
7.91%
7.69%
Income from other services and sale of end
equipment
272
303
274
Rate out of the total Company income in the field of
activity
6.26%
6.87%
6.36%
Total income from the field of landline interior
communications
4,342
4,412
4,306
2.4.
Customers
Bezeq is not dependent on a single customer, and there is no customer Bezeq's income from whom
constitute 10% or more of its total income. Bezeq's income are divided into two main types of
customers: private customers (approximately 48%) and business customers (approximately 52%)20.
The aforesaid distribution is according to income, as detailed in the table below (in NIS millions):
2024
2023
2022
Income from private customers
2,098
2,114
2,099
Income from business customers
2,244
2,298
2,207
Total income
4,342
4,412
4,306
20
Including income from wholesale service providers.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
39
2.5.
Marketing, distribution and service
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) market the Company’s Internet infrastructure as part of a unified
Internet service based on Bezeq's BSA wholesale service. Note that 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.
2.6.
Competition
The following is a description of the development of competition in the field of landline interior
communications:
2.6.1.
Infrastructure - Deployment
In the communications market, two licensees for the provision of landline interior
communications services are obligated to deploy nationwide and provide service to all
who require it ("universal service") on the traditional (copper) network: Bezeq and Hot
Telecom.
As of the date of publication of the report, Bezeq's fiber network was deployed to
approximately 2.64 million households nationwide that are available for commercial
connection, of which approximately 849k subscribers were connected (546k retail and
303k wholesale). With respect to the fiber network, the Company is obligated to provide
service according to its service areas - see Section 2.16.4).
Hot and IBC also have a fiber network in extensive deployment. IBC is obligated to deploy
so that after 5 years from 7.3.2021, 1.7 million households in Israel will have access to its
network21. According to a report on the IBC website, as of the end of 2024, approximately
2 million households have access to its network. IBC is held by IEC (30%) and by HOT,
Cellcom and the Israel Infrastrcutre Fund, 23.3% each. In this framework, to the best of
Bezeq's knowledge, Cellcom sold its fiber optic infrastructure to IBC; an investment
agreement was signed by HOT in IBC, as well as an IRU agreement, under which HOT will
acquire the right to use the infrastructure that IBC will build. HOT deploys fibers, among
other things, in Bezeq's physical infrastructure. Partner (whose license does not have any
deployment obligation) owns its own fiber network using P2P technology. Cellcom
deployed a transmission network for its own use.
2.6.2.
The field of Internet
2.6.2.1
Internet service (retail) for end customers
The Internet sector is characterized by high penetration rates and a large
number of licensed providers, and in recent years there have been
significant changes: (1) Internet service over fiber - Starting in March 2021,
Bezeq provides Internet service over its fiber network, according to
milestones in its service areas; in incentive areas, Bezeq Group is prohibited
from doing so for five years from the date of determination of the duty to
deploy in the winner's license or by administrative directive. The companies
Cellcom and Partner began providing fiber service several years before the
Company; (2) Unified service - Until April 2022, the Internet service Bezeq
was permitted to provide to customers was only an Internet infrastructure
service, with the customer required to purchase the access service (ISP)
21
The duty to provide service to everyone who requests it nationwide also applies to holders of general licenses to provide mobile radio
telephone services, such as Pelephone, Cellcom, and Partner, as well as in the field of international carrier services - such as Bezeq
International.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
40
separately from a service provider or in a Bezeq bundle. The
aforementioned also applies to HOT, while other providers were permitted
to sell a unified service, either on their own or through a wholesale market.
Starting in April 2022, Bezeq provides customers with a private Internet
service (fiber and copper) as a unified service, which includes both
infrastructure and access service (ISP), and Bezeq is not permitted to market
bundles with other access providers; later, Hot was also permitted to
provide a unified Internet service to customers.
In providing Internet services to end customers, Bezeq competes with Hot
(which is also permitted to market a shared service basket on the IBC
network), Partner (on its own network and through the wholesale market),
Cellcom, and licensed providers22 that provide service via landline
infrastructure that have been permitted to be deployed (including through
the use of the Company's passive infrastructure after meeting security
requirements), and licensed providers without infrastructure (through the
wholesale service).
Cellular companies have deepened their activity in the field of Internet over
the cellular medium in both the private and business segments. Browsing
services are provided both from the cellular device and via a cellular modem
that connects to mobile and desktop computers.
Bezeq estimates that its market share in terms of retail customers as of the
end of 2024 is approximately 36%.23 In addition, the proportion of Bezeq's
unified Internet customers among its retail customers as of the end of 2024
is approximately 87%.
2.6.2.2.
Wholesale Internet service
Bezeq's wholesale Internet service (BSA) allows licensed providers, including
Cellcom and Partner (excluding Hot and IBC), to provide end-to-end Internet
service also via Bezeq's Internet infrastructure (fiber and copper), at
maximum controlled prices not set by Bezeq.
Fiber – In providing wholesale Internet service to licensed providers over
fiber, Bezeq's main competitor is IBC, which provides the service mainly in
the format of IRU agreements. The IBC license allows the provision of
services mainly to licensees and requires it to submit for approval by the
Ministry a shelf offer to purchase the fiber infrastructure service (in the IRU
format) at a reduced rate, as it has indeed done. In March 2023, Cellcom
reported signing an agreement with IBC in which it undertakes to increase
its commitment to purchase infrastructure lines from IBC under an IRU
agreement to 12.5% ,and later to 15% of connected customer homes.
Cellcom also stated that in return for IBC's commitment to expand the scope
of infrastructure deployment beyond its obligations under its license,
Cellcom undertakes to purchase IRU services from IBC only, for a period of
no less than 3 years under certain conditions. Regarding Partner – in
accordance with its announcement, it began offering its customers Internet
services on IBC's fiber optic network as part of the wholesale market,
starting in the fourth quarter of 2023.
Signing of IRU Agreements for the Provision of BSA Service Between Bezeq,
Partner, and Gilat
On 21.12.2022, a long-term agreement was signed between Bezeq and
Partner for the provision of an indefeasible right-of-use (IRU) service in the
BSA fiber service (wholesale market) by Bezeq to Partner, and on 12.9.2024,
an amendment to the agreement was signed. In accordance with the
22 Including those who do not have licenses but are only registered in the Ministry of Communications registry and operate according to
general permit regulations.
23 Bezeq's assessment of its market share in the field of Internet infrastructure services for the end of 2024 is based on the number of
customers consuming services on the Company's infrastructure (retail and wholesale) and on 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, it is difficult to provide accurate data regarding market shares and these are estimates only.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
41
agreement, Partner was granted an indefeasible right-of-use for providing
service to its customers on 120,000 unspecified Bezeq fiber optic lines at a
rate of 1 gigabit download per line, for a period of 15 years starting on
1.1.2023 (the right-of-use of the lines will begin in phases over a period of
up to five years. It should be noted that as of the date of the report, Partner
has activated all its lines quota included in the agreement. The options (as
detailed below) have not yet been exercised. The consideration for
providing the service, which includes one-off payments and annual
payments, is expected to reach a total amount of approximately NIS 1 billion
(approximately NIS 574 million for one-off payments, annual maintenance
fees at a rate of 4% of the one-time payments for the lines for which the
right-of-use will be granted until that year, plus interest and/or linkage
differences according to the terms of the agreement), with most of the
consideration expected to be paid during the The first 6 years of the
agreement. The agreement includes the option to increase the number of
lines by up to 48,000 additional lines under the same conditions, to upgrade
rates, and to extend the agreement period by two five-year option periods,
each with a lower line cost than in the first agreement period. Increasing the
content of the agreement as stated will result in a corresponding increase
in the overall financial scope of the agreement. The agreement also includes
a price protection mechanism for Partner in a manner that weighs down the
price of the regulatory line, starting from the sixth year of the agreement.
The agreement increases the usability and utilization of Bezeq's fiber
network, its income and profits, as well as its free cash flow (mainly during
the first 6 years of the agreement) and creates certainty regarding future
income from the wholesale market from the lines included in it. However,
the agreement embodies a discount for a commitment to quantity and
period in relation to wholesale market rates (for an amendment to the
agreement between the Company and Partner dated 12.9.2024, see
"Immediate Supplementary Report - IRU Agreement between the Company
and Partner"" dated 12.9.2024, Reference No.: 2024-01-602992,
incorporated in this report by way of reference).
Further to the above agreement and contacts with the Ministry of
Communications, Bezeq agreed to reduce the prices of discrete lines in the
BSA Fiber service (at an aggregate rate of up to 1.1 gigabits/second) for all
providers to a price of NIS 72 per month (linked to the index in accordance
with the currently used price update mechanism) plus VAT, so that after this
price reduction, the Ministry will view the agreement as a shelf offer for
anyone who wishes to do so. On 25.12.2023, Bezeq informed the Ministry
of its decision not to link the said price to the index in 2024 and to leave it
at the aforementioned amount of NIS 72. Approval of the non-linkage was
also given for 2025. For the hearing on the wholesale prices and the petition
submitted to the High Court of Justice by certain authorized suppliers, see
Section 2.16.5.3.
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, regarding the structure of competition and regulation
in the communications sector, the behavior of communications operators
and consumer behavior, as well as regarding the manner in which Partner
will choose to utilize the right to use the lines in the various areas
(distinguishing between areas where only Bezeq's fiber network is deployed
and areas where fiber infrastructure is deployed in addition to the
Company's). The assessments and actual results may change accordingly
depending on changes in the aforementioned variables.
On 15.12.2024, an IRU agreement was signed between Bezeq and Gilat that
is essentially similar to the agreement signed with Partner, for 18,000 lines,
for the period of 15 years. The right to use the lines will begin in phases over
a period of up to three years.
For the provision of BSA service by licensed providers in incentive areas -
see Section 2.16.5.1.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
42
Copper - In providing BSA wholesale Internet service over a traditional
(copper) network, Bezeq's main competitor is HOT. HOT has a traditional
communications infrastructure with an almost nationwide deployment
through which a variety of communications services can be provided. On
28.7.2019, 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 manner, meaning
that it will not be required to deploy wired infrastructure, but will be
allowed to use any cellular network to provide its services at download
speeds of up to 12/30 ms, as well as to provide television service through
Bezeq services. The adopted recommendations set, among other things,
milestones for upgrading the network for the cellular network alternative,
minimum service quality, and reporting obligations.
According to Bezeq, as of the end of 2024, its market share in the Internet
infrastructure market (retail and wholesale customers) was approximately
53%.
2.6.3.
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 an ongoing erosion in the number of calls to and
from landline networks (see Section.שגיאה! מקור ההפניה לא נמצא 1.5.4.1). Bezeq
estimates that in 2024 the entire landline telephony market continued to erode at a
similar rate to 2023. For this matter, see also Section2.4. Since not all competitors in the
field are reporting corporations and their data is not public, it is not possible to detail the
market shares of the competitors in the field. For Bezeq's fiber telephony service
following the hearing to close the copper networks, see Section 2.7.2.3.
2.6.3.1
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 Internet infrastructure, telephony and
cable television), and possibly also cellular services, especially for
households, including through packages. 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, which provide the service,
including 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, Wholesale telephony service on the Bezeq network
(initially in the resale format and then in the service portfolio format). There
is no demand for the aforementioned wholesale telephony service. For the
matter of wholesale telephony service, see Section 2.16.5.
2.6.3.2
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
main reasons for the decrease in the average traffic per line, and the high
rate of removal of telephone lines (see section2.1.3 2.1.3). Partner and
Cellcom also sell service packages that combine landline, cellular, and
Internet services.
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.
2.6.4.
The field of transmission and data communication
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
43
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, Partner, HOT, and IBC use Bezeq's physical infrastructure as part of the
wholesale service (see Section 2.46.5.2), inter alia, in order to compete with Bezeq in this
field.
IBC’s is allowed to provide IPVPN services and broadband data communication lines.
2.6.5.
Additional competing infrastructures24
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).
2.6.6.
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:
Bezeq is working to introduce the high-speed Internet service and to increase the number
of its customers in this field (see also Sections 2.2.3 and2.7.2). In March 2021, the
Company launched the fiber service on a fiber network deployed in the statistical areas
(see Sections 2.7.2.2 and 2.6.5).
2.6.6.1
As of 2018, Bezeq has been marketing its Be router (in version upgrades over
the years). 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. Bezeq
also markets products to improve the reception range of the Be spot
(including a fiber-optimized version) and Be mesh home Internet networks.
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.
In May 2023, Bezeq, together with the global company "Nokia", conducted
an experiment in which the ability to provide rates of up to 25 gigabytes
with advanced technologies was demonstrated, and in parallel, it
announced a future road map for the development of rates and services that
includes the launch of multi-gig rates of up to 10 gigabytes and WiFi7 in 2024
and up to 25 gigabytes in 2027, advanced WiFi standards and upgrading
Bezeq's Be Router. Following this, in 2024 Bezeq launched a 5G multi-gigabit
speed as well as WiFi7.
2.6.6.2
Bezeq is constantly working to improve the quality of its services and retain
its customers (including by upgrading browsing speed and providing value
to the customer), simplify processes and automate, and adapt its operations
to the structure of competition in its areas of activity.
2.6.6.3
Bezeq offers to telephony customers packages, consumption-adjusted plans
and promotions.
2.6.6.4
Bezeq is working to reduce its operating expenses and to focus investments
on growth activities and as a means of reducing maintenance expenses.
24 Beyond Hot and IBC infrastructure.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
44
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).
Bezeq is launching new communication services and value-added
applications (such as Cyber+, BIZFIBER, integration services, etc.), as well as
product and service packages and shared baskets (similar to certain baskets
marketed by its competitors, although subject to a detachability limit - see
Section 1.7.3.1), in order to expand the scope of the use of subscriber lines,
to respond to customer needs, and to strengthen the image of technological
innovation. Bezeq invests in the improvement of its infrastructure, to enable
the provision of advanced services and products to its subscribers.
2.6.6.5
Bezeq has launched a number of business services under a branding called
"Bezeq Business Pro" which includes security services, business networking,
integration, and expansion of the Metro service into a comprehensive
package called Metro PRO and a HYPER CONNECT service that enables a
stable and secure connection to global and local public cloud providers.
Also, Bezeq is working to upgrade the transmission lines to high rates.
2.6.7.
Main positive and negative factors affecting Bezeq's competitive position
2.6.7.1
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.
2.6.7.2
Negative factors
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:
a. Limited rate flexibility
Bezeq is limited in its ability to offer differential rates on its main
services.
For the hearing on the prevention of "margins reduction" in the
wholesale market, see Section 2.16.5.1.
b. Structural separation obligation and limitations in the marketing of joint
service packages of Bezeq and Group companies;
For this matter, see Section1.7.3.
c.
The universal service and fiber deployment obligation
Bezeq has an obligation to provide service at a uniform price to the
general public in Israel (universal service), except in relation to fiber
network. 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
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
45
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 Section2.16.5
2.16.5).
d. 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.
PP&E 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.
During the coming year, Bezeq intends to begin a phased process to move its server farm
in Tel Aviv to a new facility in the Ramla area ("Bezeq Ayalon"). Pelephone is also
expected to move its core facility to this facility.
2.7.2.
Infrastructure and stationary interior communications equipment
2.7.2.1
Data transfer and transmission network
Bezeq's fiber infrastructure for private customers (in the access segment)
began to be deployed in 2020 and allows for ultra-broadband speeds (for
the scope of the network deployment, see Section 2.6.1). This infrastructure
is based on GPON technology and currently allows bandwidths of up to
10Gbs in the downstream channel (as of the date of publication of the
report, Bezeq markets bandwidths of up to 5Gbs in the downstream
channel).
For the amendment of Bezeq's license and the selection of areas for the
fiber network deployment by Bezeq, see Section 2.16.4.
In parallel with this infrastructure, the NGN network is also operating, which
is based on fiber-optic infrastructures to street cabinets (FTTC) and on an
access network based on copper cables from street cabinets to the
subscriber's network termination point (mentioned in the description of the
telephony network, see Section 2.7.2.2). On this network, it is currently
possible to provide bandwidths of up to 200 Mbps on the downstream
channel, depending on the quality of the copper infrastructure.
This data transmission network is used by Internet providers in Israel as a
dual access network in a wholesale model based on both xDSL technology
on a copper infrastructure and GPON technology on a fiber infrastructure to
customers' homes. All access infrastructures are interconnected at a
national level through an advanced MPLS network for all providers in Israel,
and for Bezeq's own uses. The MPLS network enables the implementation
of reliable and efficient national connectivity for various uses, at a national
level.
Bezeq has two parallel MPLS networks from different equipment
manufacturers for backup and survivability in various implementations. In
addition to the Internet service, these networks provide IP Layer 3
transmission services, cellular backhaul services as a service for cellular
traffic, as well as broadband metro transmission services (Ethernet Layer 2
connectivity), with a high level of performance and great flexibility. The
services are provided on Bezeq's infrastructures through New and advanced
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
46
communication systems that enable the transfer of large volumes of traffic
between sites for a variety of applications. In addition, the services include
advanced options for full management by Bezeq or independent
management, which allow the business customer better control over the
management of the corporate communication network.
Since receiving the license to operate as an ISP (see Section 2.2.3), Bezeq
has added an ISP Internet Service Provider infrastructure, backed up and
survivable at two sites. This infrastructure includes an IP network, a
customer connection system, a system for sharing valid IPv4 addresses in
the CGNAT model (address translation and sharing) with full support for
IPv6. Connections were also deployed and equipment was installed at two
sites in Europe (a third site in Europe will be connected in the coming
months) to enable the use of content from the global Internet in a flexible
and efficient manner. In addition, during 2024, international links were
added to the network to support survivability and traffic growth.
Most of the end equipment (equipment installed at the subscriber, such as
routers) is owned by the Company and is rented to the customer.
The following is a description of the development of the number of
households available for commercial connection to Bezeq's fiber network,
the total number of subscribers in Bezeq's fiber network, and the
distribution between copper infrastructure versus fiber:
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
47
2.7.2.2
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 and 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 and
operator relationship management using a Class 4 switch. All switches are
backed up and survivable in different farms, as well as all telephony
components. For fiber telephony service, see Section 2.7.2.3.
2.7.2.3
Closure of the copper networks
On July 22, 2024, the Ministry of Communications published a hearing on
policy principles for the gradual closure of copper networks (following a
public appeal on the matter from 2022).
According to the hearing, following the work of a ministerial team of the
Ministry of Communications that recommended the process of closing the
copper networks of Bezeq and Hot Telecom Limited Partnership ("Hot"), the
Ministry of Communications is considering a plan for the gradual closure of
copper networks and the cancellation of the universality duty in the copper
network in three stages:
1.
Stage A – 2024
1.1.
An infrastructure owner will not be required to deploy a copper
network in new construction, provided that it has deployed
advanced network infrastructure (a network based on fiber optic
infrastructure (hereinafter: “the fiber network”)) and through
which it is able to provide Bezeq services in new construction.
1.2.
An exemption from deploying copper will be granted to Bezeq
only with respect to new construction in Bezeq's fiber
deployment areas as determined in its license. In all other areas,
Bezeq will be required to continue to provide service everywhere
on the copper network. To the extent and in the future that
Bezeq deploys a fiber network in these areas, Bezeq will be able
to provide service through it instead of through the copper
network.
1.3.
In new construction areas, Bezeq will provide the service over its
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
48
own fiber network and not through another, bearing in mind that
Bezeq's obligations to complete the deployment of a fiber
network are until 14.3.2027. In light of the above, in the incentive
areas, Bezeq will be required to continue to deploy and operate
the copper until the gradual shutdown of the copper network.
1.4.
Bezeq and Hot will be required to provide all types of services
provided over the copper network (including telephony services
and Internet access, even if at different speeds) over a fiber
network.
1.5.
The removal of the copper infrastructure in the underground
pipeline will be carried out in accordance with the request of a
licensed provider, to the extent required, in order to free up
space in the pipeline for the deployment of infrastructure by the
licensed provider. The removal will be carried out by the owner
of the infrastructure and at the latest within 3 months from the
date of the request.
1.6.
The Ministry is not considering intervening at this time in the
Internet prices of the fiber packages, but for the prices of Bezeq's
telephony service over the fiber infrastructure, the Ministry finds
that there is justification for intervention and that the rate will
be as currently set in the regulations.
1.7.
Bezeq and Hot will be required to offer subscribers who are
interested in this a solution of energy backup at a reasonable fee
in cases of power outages for the benefit of the telephony
service and the Internet service.
1.8.
In new construction - Bezeq and Hot will be required to deploy
underground rather than surface fiber to all customers, including
businesses, except in urban renewal construction (new
construction in an existing neighborhood), where it will be
possible to deploy the fiber infrastructure in surface
infrastructure as well.
1.9.
As a condition for closing the copper network in a certain area,
Bezeq and Hot will be required to remove all surface copper
infrastructure and all passive and active components that are
used by the copper network and that are not required for
providing fiber service. The removal of the surface infrastructure
will be carried out within one year of the copper closure in the
statistical area. Furthermore, Bezeq and Hot will be required to
bury the fiber network in coordination with the local authority.
2.
Stage B – 2025
During 2025, Bezeq and Hot’s duty to connect new retail and wholesale
subscribers over copper infrastructure, where a fiber network through
which they provide their services is deployed, will be cancelled. Also,
during 2025, the duty to provide universal service over copper
infrastructure will be cancelled in such a way that the infrastructure
owner will be allowed to turn off the copper network in a certain
statistical area after the number of subscribers (wholesale and retail)
connected to its fiber network is at least 85% of all its subscribers
(wholesale and retail) in that statistical area. At that time, the
infrastructure owner will be allowed to proactively transfer customers
from the copper infrastructure to the fiber infrastructure at the
expense of the subscribers, or to disconnect them after giving advance
notice (3 months in advance for customers and six months in advance
for service providers).
3.
Stage C – 2030
2030 is a planned target date for the possibility of Bezeq and Hot to
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
49
close what remains of the copper networks even if they do not reach
85% of subscribers receiving service over the fiber infrastructure in
certain statistical areas, provided that fiber infrastructure exists in
those areas and while giving advance notice. Customers.
4. The proposed amendments will be anchored in the Communications
Law or in the regulations thereunder, and in licenses, as applicable,
after publishing hearing procedures or conducting a public participation
procedure as is customary. Until such amendment is made, the Ministry
intends to move forward with granting an exemption from deploying
copper in new neighborhoods through the Advisory Committee for
Universal Deployment under the Communications Regulations (Bezeq
and Broadcasting), 5771-2011 (a hearing on the matter was published
on 27.8.2024).
5. Bezeq supports in principle the closure of the networks in light of the
development of fiber networks, which enable the provision of advanced
services and effectively eliminate the need for inferior copper
networks, as well as in light of the duplication of costs for network
operators resulting from the existence of two parallel networks. In
Bezeq's assessment, the closure of its copper network is expected to
result in certain savings in Bezeq's ongoing costs and investments,
alongside one-time investments that may be required at a rate that
cannot be estimated at this stage. In response to the hearing, Bezeq
clarified that the proposed conditions as described in Section 1.9 in
Stage A above are unreasonable and not feasible.
Some of the information contained in this section is forward-looking information as
defined in the Securities Law based on Bezeq's assessments regarding the closure of the
copper networks and its implications. Accordingly, Bezeq's assessments may not
materialize or may materialize partially or otherwise depending on the decisions made
regarding the closure of the copper networks and the schedules in this regard.
5.1.2.1
Millimeter waves
Millimeter wave technology makes it possible to transfer wirelessly a
significantly larger bandwidth than the technologies that were available in
the past. The technology can be used both point-to-point and point-to-
multipoint and is a solution for the final segment, that is, the connection to
the subscriber's endpoint. Through the use of this technology, it is possible
to connect (to the access of the Ministry of Communications after approval)
extensive areas relatively quickly and at lower costs compared to the
deployment of a wired infrastructure.
5.1.3.
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.
5.1.4.
Real estate
5.1.4.1
General
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
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
50
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)
Built-up
area (sqm.
thousands)
Notes
Ownership,
lease or
right to
lease
Approx.
303
Approx.
827
Approx. 82
From this, approx.. 299 field assets in the area
approx. 808k sqm. of plots, approx. 71k sqm. built-
up are assets for communication needs and the rest
are for administrative needs.
Possession
(authorized
by right /
right of
possession
according to
law)
Approx.
64
Approx. 2
Approx. 0.7
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.
rent
Approx.
330
Approx. 31
Approx. 65
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.
Various
rights in
"concentrat
ion rooms"
Approx.
802
Irrelevant
Approx. 28
(based on
an estimate)
These are cable rooms and facilities for
neighborhood communication needs.
As for most of the properties, this is a right-of-use
granted to Bezeq in accordance with 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.
5.1.4.2
Registration
As of the date of publication of the periodic report, Bezeq's rights in some
of its real estate assets are not registered in the Land Registry (some of the
assets are in the process of being registered and other assets are not eligible
for registration).
5.1.4.3
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
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
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
51
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 16
properties to ILA.
5.1.4.4
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 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.
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
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
52
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 2024 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. An
appeal filed by Bezeq with the District Court was dismissed on 17.10.2023.
On 28.3.2024, Bezeq received an advisory assessment according to which
the total improvement levy as of the date of receipt of the demand from the
committee (2.8.2018) would amount to approximately NIS 117 million.
Subsequently, a payment demand was sent to Bezeq including arrears
payments in the amount of approximately NIS 22.8 million, which were
reduced following a request by Bezeq to a total of NIS 13.3 million. Bezeq
paid the entire improvement levy and the arrears payments in accordance
with the decision of the Appeals Committee and intends to amend the
statement of claim against the Land Registry so that it reflects the amount
of the improvement levy that Bezeq actually paid (by increasing the amount
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
53
of the claim by approximately NIS 55 million and deleting the declaratory
relief).
It is clarified that the final improvement levy amount as approved by the
Appeals Committee is insufficient 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 ILA, 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 2.16.3). 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 five samples/designs. The main trademarks are Bezeq – Bezeq’s name, and "B"
– Bezeq’s logo.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
54
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,
2024:
2.9.2.
Number of Bezeq employees and employment frameworks
The number of employees at Bezeq as of December 31, 2024 was 5,425 employees
(compared to 5,432 employees at the end of 2023). About 93% of Bezeq employees are
employed under collective agreements (of which approximately 57% 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 Section2.9.4.
2.9.3.
Early retirement plans for employees
During 2024, 72 permanent Bezeq employees retired in accordance with the retirement
plan in Bezeq.
On November 18, 2024, 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 85 veteran permanent employees during 2025 through the early
retirement track at a total cost of approximately NIS 90 million. In light of the aforesaid,
in its statements for the fourth quarter of 2024, Bezeq recorded an expense in the
abovementioned amount accordingly.
For this matter see also Note 16.5 to the 2024 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.
The following are the main points of the special collective agreement between Bezeq, the
Management
(without directors)
)
34
(
)
2475
(
)
9
8
161
(
Board of
Directors
Business
Division
Technolog
y and
Network
Division
Marketing
and
Innovation
Division
Finance
Division
Human
Resources
Division
Operation
s and
Logistics
Division
Private
Division
Corporate
Communication,
Responsibility,
Governmnet
Relations
Legal
Advisor
CEO
Economu and
regulation
Division
Internal
Auditor
Group Secretary and
Internal Compliance
Office
Staff divisions)
)
9
53
(
)
(759
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
55
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 Directors 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 Assembly). On this matter, see
also Paragraph 5 below. 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).
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 in effect as of the date of publication of the
report and as arranged as part of the 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.
Further to the move to amend the Communications Order regarding the possession of
means of control in Bezeq (see Section 2.1.2) and to the negotiations conducted between
Bezeq and the employees’ organization to amend the Bezeq collective bargaining
agreement following that, on September 18, 2023, an amendment (No. 7) (“the
Amendment") to the agreement was signed, and this after Its approval by Bezeq's
authorized institutions, including the approval of the general assembly of Bezeq's
shareholders on September 14, 2023.
The following are the main points of the amendment:
1. Maintaining Bezeq's financial resilience, including, maintaining the status of a public
company, Bezeq's current credit/debt rating, and a percentage of holdings in
Pelephone that will not be less than 50.01%.
2. Making a dividend distribution to Bezeq's shareholders subject to the law and while
maintaining Bezeq's current credit/debt rating, while regarding a distribution that
does not meet the profit test only - the consent of the employees’ organization will
also be required.
3. Payment of a special bonus to Bezeq employees in the amount of NIS 75 million,
most of which is conditional on the dates and conditions set forth in the amendment
depending on the change in the percentage of holdings of the current control permit
holders in Bezeq (or the expiration/cancellation/transfer of the control permit) ("the
Conditions").
4. If the Conditions are met, Bezeq will pay a monthly supplement of NIS 2,400 linked
to the Consumer Price Index, and the Company will pay management fees to the
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
56
pension fund for veteran permanent retirees who have retired or will retire from the
Company as of July 1, 2023.
5. If the Conditions are met and in the absence of a controlling interest in Bezeq, the
employees’ organization has the right to appoint an additional (second)
representative from among the employees, if the number of Board of Directors
members exceeds eleven (11) (including external directors and a director from
among the employees).25
6. The validity of the amendment is from July 1, 2023 until December 31, 2025, when
in relation to some of the arrangements a later validity is determined as detailed in
the Amendment. The Amendment exhausts all the claims of the parties and the
parties will maintain industrial peace in the matters regulated therein during its
period of validity, and in any matter related to changes in the holdings of the present
control permit holders even after the expiration of its period of validity.
Nothing in this section and in the fact of signing of the Amendment is sufficient to testify
that Bezeq has any information regarding a possible change of control.
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, 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.
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 compensation for officers according to Regulation 21 of the
Securities Regulations (Periodic and Immediate Reports), 5730-1970, see Section 7 of
Chapter D of this periodic report and Note 29 of the 2024 statements.
On December 10, 2020, Bezeq’s Board of Directors approved an equity compensation
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, May 9, 2022 and December 27, 2023) 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 20, 2023, the general assembly of Bezeq's shareholders approved, among other
things, various amendments to Bezeq's compensation policy, so that the compensation
policy which includes such amendments will be in effect for a period of three years from
the date of the approval. The amendments include, among other things, the application
of the compensation 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 more details on
the Company’s updated compensation policy, see Bezeq's immediate report
(amendment) on the convening of the meeting dated April 4, 2023 included in this report
by way of reference.
For the capital compensation plan - see Note 26 to the 2024 financial statements.
On February 25, 2024, the CEO of Bezeq, Mr. Guron, announced his desire to end his
tenure, and he has ended his term of office on March 31, 2024. In March 2024, the
Company's Board of Directors decided to appoint Mr. Nir David, who has served as the VP
of the Company's Business Division, as the Company's CEO, and he is expected to begin
his term on April 1, 2024. On May 20, 2024, the General Assembly of Bezeq’s shareholders
approved the terms of office and employment of the Company's CEO. On this matter, see
Bezeq's immediate report dated 20.5.2024, which is incorporated into this report by way
25 At the beginning of 2016, the Employee Representative Council announced that it agreed that as long as there are up to 15 directors on the
Bezeq Board of Directors, one employee representative would serve on the Board of Directors, and as the number of directors exceeds 15,
an additional employee representative would serve on the Board of Directors.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
57
of reference.
2.9.6.
Treatment for the cancellation of structural unbundling vis-à-vis the Employee
Representative Council
As part of Bezeq's activity to cancel the obligation of structural separation between it and
its subsidiaries (see Section 1.7.3) and in order to promote its activity on an issue that is
of utmost importance to Bezeq Group, Bezeq has turned to its Employee Representative
Council office ("Employee Representative Council") with a request for its commitment to
assisting and promoting the successful completion of the move, at this stage in regards to
the activity to cancel the structural separation between Bezeq and "Yes". Following this,
on March 3, 2024, the Employee Representative Council, in coordination with the Yes
Employee Representative Council, announced its agreement to Bezeq's request
(agreement later withdrawn by the Employee Representative Council as detailed below)
to agree to the move while reaching agreements between the parties that include sharing
and updating the Employee Representative Council about Bezeq's activities on the
subject, including:
2.9.6.1.
Notification and consultation with the Employee Representative Council
before any step that constitutes a structural change within the process.
2.9.6.2.
Regulating the consequences of the steps in the process on Bezeq and Yes
employees in a collective agreement (or another agreed upon way), while
any step with such consequences will not be carried out unilaterally before
it is settled in a reasonable and fair manner between the parties, while such
negotiations will also include requirements for settling economic exchanges
in favor of the employees.
2.9.6.3.
Applying the arrangement with the required changes to any similar move
that Bezeq will take in the future in relation to other subsidiaries.
Bezeq believes that the involvement of the Employee Representative Council of the
Company and Yes will add to and contribute to its efforts to cancel the structural
unbundling between the two companies.
On 9.10.2024, Bezeq received a message from the Chairman of the Employee
Representative Council stating that he is not bound by the agreements and requests that
Bezeq stop all activity on the subject. It should be noted that the Chairman of the
Employee Representative Council's message came against the backdrop of prior economic
demands from the Employee Representative Council on the subject. Bezeq intends to
continue to be committed to its employees and Yes employees in accordance with the
agreements reached between the parties, and it continues to act on the issue of structural
unbundling with the relevant parties.
On 26.12.2024, Bezeq and Yes offices received notices of a labor dispute in accordance
with the Labor Disputes Settlement Law 5717-1957 (“the Notices"), which were declared
and approved by the New General Histadrut (with respect to Bezeq) and by the National
Histadrut (with respect to Yes), effective 12.1.2025 (with respect to Bezeq) and 10.1.2025
(with respect to Yes). The matters in dispute, as stated in the notices, are a demand to
regulate the implications for the employees of the planned merger of the Company's and
Yes' activities, as part of a gradual process of cancelling the structural unbundling in Bezeq
Group, as well as an impasse/lack of agreements in negotiations to regulate the
aforementioned implications. Bezeq's position has no legal basis for declaring the labor
disputes as stated, and therefore, in the Company's position, the reasons for the dispute
are not justified, and it will continue to promote the removal of structural unbundling with
the relevant parties.
Following this, on 26.2.2025, Bezeq received a statement from the Chairman of the Bezeq
Employee Representative Council, stating that the Bezeq Employee Representative
Council, together with the Yes Employee Representative Council, will work in full
cooperation on the matter. Bezeq believes that the cooperation and involvement of the
employee representations at both Bezeq and Yes will further contribute to its efforts to
eliminate the structural separation between the companies. At this stage, the
aforementioned labor dispute has not yet been resolved.
2.10.
Equipment and suppliers
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
58
2.10.1.
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.
2.10.2.
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 10% of the Bezeq’s total annual purchases.
During 2024, Bezeq had no major supplier as defined above.
2.10.3.
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
Field
Nokia Solutions and Networks
Israel Ltd.
Metro transmission and NGN network access systems
GPON equipment for the deployment of fiber by the
Company.
Juniper Networks
Metro transmission
Cisco / BroadSoft
Subscriber switches
Dialogic Networks (Israel) Ltd.
Transition switchboards for linking operators to the
Bezeq switching network
Adtran Holdings Ltd.
Network access systems - NGN
DELL
Hardware and solutions for backups, restorations and
system and infrastructure survivability, storage
equipment
VMware
Infrastructure for most of the server virtualization
system
Hits Telecom Ltd.
Be Router
F5 Networks, Inc
ISP service (Carrier-grade NAT router)
Microsoft
Software
solutions
for
Bezeq's
computing
infrastructure
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 capital
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 2023 statements, and also
see Sections 3 and 4 of Chapter D of the periodic report.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
59
2.13. Funding
5.1.1.
The average and effective interest rate on Bezeq’s loans
As of December 31, 2024, 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
The
principal
amount
(NIS
millions)
Currency or
linkage
type
Type of interest
rate and
change
mechanism
Average
interest
rate
Effective
interest rate
Interest rate
range in
2024
Long-
term
loans
Banks
813
NIS
unlinked
Fixed
4.03%
4.07%
3.20%
-
.33%
5
Banks
700
NIS
unlinked
Variable on
the basis of
the short-
term loan
interest rate
per year
6.46%
6.59%
6.11%
-
.53%
6
Non-
banking
sources *
4,033
NIS
unlinked
Fixed
3.92%
4.14%
2.79%
-
3.65
Non-
banking
sources
2,432
CPI-linked
NIS
Fixed
1.67%
1.72%
0.58%
-
.20%
2
* Prime interest rate – 6% (as of March 2025)
For more details about Bezeq loans, see Note 13 to the 2024 statements.
2.13.1.
Credti receipt limitations
2.13.1.1.
Limitations included in Bezeq loans
See Note 14 to the 2024 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.
2.13.1.2.
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 1.7.6.6.
2.13.2.
Reportable credit
As of December 31, 2023, Bezeq's reportable credit, in accordance with legal position
104-15 of the Securities Authority (reportable credit incident) is Bezeq's debentures
series 11, 12, and 13, all as specified Note 13 to the 2024 statements and in Section 4 of
the Board of Directors’ Report.
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.
2.13.3.
Amounts of credit received during the reporting period and thereafter
On May 9, 2023, Bezeq published a new shelf prospectus (dated May 10, 2023) (“the
Prospectus").
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
60
On January 11, 2024, Bezeq completed a public offering of debentures (series 11 and 13)
by way of expanding series traded on the stock exchange, according to a shelf offer report
dated January 10, 2024, which was published according to a shelf prospectus published
on May 9, 2023. In this framework, NIS 567,877,000 par value debentures (series 11) were
issued to the public for a total of NIS 539 million, and NIS 432,123,000 par value
debentures (series 13) for a total of NIS 353 million. For more details on the subject, see
Bezeq's shelf offer report dated January 10, 2024 and Bezeq's immediate report dated
January 11, 2024 regarding the results of the offering included in this report by way of
reference.
On 5.12.2024, Bezeq completed a public offering of debentures (Series 13 and 14) by way
of expanding the series traded on the Stock Exchange, according to a shelf offering report
dated 4.12.2024, which was published according to a shelf prospectus published on
9.5.2023. In this framework, NIS 540,837,000 par value debentures (Series 13) were
issued to the public in nexchange for a total amount of approximately NIS 446 million,
and NIS 131,430,000 par value debentures (Series 14) i in nexchange for a total amount
approximately NIS 123 million. For additional details on the subject, see Bezeq's Shelf
Offering Report dated 4.12.2024 and Bezeq's immediate report dated 5.12.2024
regarding the results of the offering, which are included in this report by way of reference.
Regarding the matter stated in this section, see also Section 4 of the Board of Directors'
Report and Note 13 to the 2024 Reports.
2.13.4.
Bezeq's debentures
For details regarding the debentures issued by the Company and by Bezeq see Note 13 to
the 2024 statements and Section 4 of the Board of Directors' Report. Also, see Section
2.13.3.
2.13.5.
Credit rating
Bezeq's debentures are rated by Standard & Poor's Maalot Ltd. ("Maalot") at ilAA/Stable,
after Maalot upgraded Bezeq, Pelephone, and Yes to ilAA with a stable outlook on
2.5.2024, in light of the improvement in Bezeq's financial conditions. Bezeq's debentures
are also rated by Midroog Ltd. ("Midroog") at Aa2.il with a stable outlook, after Midroog
upgraded Bezeq's debentures to Aa2.il with a stable outlook on 19.5.2024, in light of the
continued improvement in Bezeq's financial position, along with the improvement in the
debt-to-EBITDA ratio to levels that support this rating.
For details regarding the Company's rating history over the past two years, see the
Company's immediate reports from 3.5.2023, 9.1.2024, 2.5.2024, and 4.12.2024
(Maalot), as well as from 15.5.2023, 9.1.2024, 19.5.2024, and 4.12.2024 (Midroog), which
are incorporated into this report by way of reference.
For this matter see also Section 4 of the Board of Directors' Report.
2.13.6.
Bezeq's assessment in relation to debt raising in the coming year (2025) and the sources
of borrowing
During 2025, Bezeq is expected to repay a total of NIS 1.35 billion for the principal and
the interest on its loans, including debentures. Most of Bezeq's borrowing needs for 2025
have already been realized as detailed in Section 2.13.4.
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).
2.13.7.
Liens and collateral
For information regarding Bezeq's liens and collateral, see Note 19 to the 2024
statements.
2.14. Taxation
For information on taxation, including losses carried forward for tax purposes in Yes, see Note 7 to
the 2024 statements.
On December 3, 2024, 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
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
61
Authority for tax purposes for the merger of Yes 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, 2025. It should be noted that the letter included a similar statement to the one
included in the extension letter from previous years, according to which, in light of the fact that there
were no material developments regarding the abolition of the structural separation between Bezeq
and Yes 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, 2025, as long as there are no significant
developments in 2025 regarding the abolition of the structural separation between Bezeq and Yes.
According to Bezeq's position, which was transferred to the Yax Authority, 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 (on this matter, see Section 1.7.3.1).
2.15. Environmental risks and their ways of management
2.15.1.
General
Some Bezeq facilities, such as broadcasting facilities, wireless communication facilities, or
high-voltage facilities26 are sources of electromagnetic radiation which are included in the
definition of "radiation source" in the Non-Ionizing Radiation Law.
2.15.2.
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 section2.16.11.
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.
2.15.3.
Permits
For permits for broadcasting facilities required by the Planning and Construction Law, see
Section 2.16.11.
2.15.4.
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
26The 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.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
62
enforcement procedure implementation officer. Periodic reports on the status of
radiation sources are forwarded to Bezeq's CEO and the Board of Directors. On this
matter, see also Section 2.20.9.
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.
Communications Order
The Company was declared a provider of essential telecommunications services under
the Communications Order. By virtue of this declaration, the Company is obligated to
provide certain types of services and is not permitted to discontinue or reduce them,
including - basic telephone service, infrastructure service, transmission service, and data
communication service including interconnection, as well as additional services listed in
the Schedule to the Order.
Key additional provisions in the Communications Order:
Additional main provisions of the Communications Order:
2.16.1.1.
Restrictions on the transfer and acquisition of means of control in Bezeq,
including a prohibition on holding means of control of a certain type at a
rate of 5% or more (7.5% or more with respect to an Israeli institutional
investor) without the prior written approval of the Prime Minister and the
Minister of Communications ("the Ministers").
2.16.1.2.
The transfer or acquisition of control in Bezeq requires the approval of the
Ministers after consulting with the Minister of Defense ("Control Permit").
Regarding the amendment to the Communications Order on the subject of
the Control Permit, see also Section 1.1.4.
2.16.1.3.
Holdings for which no such approvals have been granted will be considered
"excessive holdings". The Order stipulates that there will be no validity for
exercising a right by virtue of excess holdings, and also stipulates provisions
authorizing the Ministers and Bezeq to apply to the court for a forced sale
of excess holdings.
2.16.1.4.
Bezeq is required to report to Ministers, upon request, any information
related to the provision of essential services.
2.16.1.5.
At least 75% of the members of the Board of Directors at Bezeq will be Israeli
citizens and residents with security clearance 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 officers
as specified in the Order will be Israeli citizens and residents and have
security clearance according to the job classification.
2.16.1.6.
An "Israeliness" requirement has been established regarding the controlling
shareholder in Bezeq: for an individual - he is an Israeli entity (as defined in
the Order), for a corporation - it is incorporated in Israel, its business center
is in Israel, and an Israeli entity (as defined in the order) holds at least 19%
of each of the means of control in it, or it holds at least 19% of the voting
rights in the general meeting and the rights to appoint directors in the
controlling shareholder, and it also has the right to appoint at least one-fifth
of the number of directors in the Company and in the Company's
subsidiaries, and no less than one director in each of them, who will be
appointed by it, provided that the percentage of its holdings in Bezeq,
whether directly or indirectly, will not be less than 3% of each type of means
of control in the Company at any time.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
63
The amendment to the Communications Order (see Section 1.1.4) added the
possibility for a controlling shareholder to replace the Israeliness
requirement if Bezeq was given an instruction by the Prime Minister under
Article 13 of the Law, at the request of the General Security Service, and the
General Security Service confirmed that it includes alternative requirements
to the Israeliness requirement. In May 2024, Bezeq was given such
instructions replacing the Israeli requirement.
2.16.1.7.
The Ministers’ approval is required for granting rights in certain Bezeq assets
(switches, cable network, transmission network, and databases and
information). In addition, granting rights in means of control in Bezeq
subsidiaries, including the allocation of shares in excess of 25% by the
subsidiary, requires the Ministers’ approval.
Certain actions by Bezeq require the approval of the Minister of Communications,
including voluntary liquidation, compromise or arrangement between Bezeq and its
creditors, change or reorganization of Bezeq's structure, merger and split of Bezeq.
2.16.2.
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
participation in certain tenders.
The following are the main principles of the control arrangements on Bezeq rates:
2.16.2.1.
A service for which a rate is set in regulations – in accordance with Article
15 of the Communications Law, the Minister of Communications may, with
the consent of the Minister of Finance, 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.
Starting April 1, 2022, amendments to the payment regulations and the
Bezeq license entered into force, the FIX rates that were set in regulation
until then were canceled, and in their place maximum rates were set, so that
the maximum payments for telephone line usage fees were reduced in
stages on April 1, 2022 and July 1, 2023, and outgoing call rates (applicable
to a subscriber who owns 3 lines or less) were reduced effective starting July
1, 2023.
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
eliminated27. 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 Article 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.
2.16.2.2.
Interconnect rates - Are stipulated in the regulations according to Article 5
of the Communications Law - the Minister of Communications and Finance
27 At the same time, until July 1, 2023, with regard to existing subscribers in these baskets, the maximum payment will be the
maximum payment of subscribers who, on the eve of the entry into force of the amendment, paid for a cluster of services
according to an alternative payment basket, according to the conditions established in that alternative payment basket or
according to the payment regulations as drafted after the amendment, whgichever is lower.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
64
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 2.16.2.1. For the reduction
of interconnection rates as stipulated in the interconnection regulations,
see Section 1.7.6.1.
2.16.2.3.
Determining rates outside the scope of regulation - a 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 a fiber 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 2.16.2.1(1), and the Minister may examine the payment based on
what is stated in Section 2.16.2.1(2). According to the license, Bezeq must
notify the Ministry of Communications of the rate it sets 14 days in advance.
2.16.2.4.
Non-reduction of margins - On March 27, 2023, a decision was published on
a hearing 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.28 According to the decision, the
margin reduction test will take place on a retail product based on Bezeq's
fiber network in the deployment areas, and may be extended by the
Ministry to additional companies. Licensed providers who will deploy
advanced networks in the incentive areas will be subject to the margin
reduction format established in the decision of the Minister of
Communications on the subject of ‘Determining an obligation and maximum
payment for managed ultra-broadband access service over the fiber
network of the winners of the incentive fund tenders’. The decision details
the method of calculating the prices underlying the test and states that the
retail margin component will be calculated as an addition of 25% to the
wholesale costs and with the addition of a G component (representing the
cost of international transmission), or alternatively - as a reduction of 20%
from the effective retail price to the end customer plus a reduction of
component G. The test will 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
28 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.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
65
for a period of one year. During this year the Minister may consider a
permanent update of the reduced rate in the regulations.
2.16.2.5.
It should be noted that Bezeq also operated, prior to the decision in the
hearing, a self-examination for not reducing margins in the BSA service. For
wholesale rates and new pricing for all wholesale rates see Section 2.16.4.
2.16.3.
Bezeq's NIO license
Bezeq operates, among other things, under the NIO license29. The NIO license contains
provisions that mainly concern:
2.16.3.1.
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
section1.7.4. Regarding the deployment and universal service obligation in
connection with fiber infrastructure, see Section 2.7.2 and Section 2.16.5.
The license also includes the wholesale services that Bezeq must provide
according to the relevant service portfolios.
2.16.3.2.
Rules of structural separation
For a description of the structural separation rules applicable to Bezeq, see
Section1.7.3.
2.16.3.3.
Rates
For a description of the main provisions regarding rates, see Section 2.16.2.
2.16.3.4.
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 1.7.3.3.
2.16.3.5.
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 provisions in
the license regarding response at the call centers, see Section 1.7.7.3.
2.16.3.6.
Interconnectivity and use
Provisions have been established regarding the duty to interconnect with
another public network and to provide the possibility of using Bezeq’s
network by another licensee or a broadcasting licensee, including by way of
providing a transmission service, for the purpose of performing Bezeq
operations or for the purpose of providing Bezeq services, including
wholesale service, under reasonable and equitable conditions, while
avoiding preference for amn affiliated company.
2.16.3.7.
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, as well as detailed instructions
29 A copy of the NIO license is published on the Ministry of Communications' website at - www.moc.gov.il.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
66
regarding preparations for maintaining functional continuity 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.
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 1.7.9.
2.16.3.8.
Supervision and reporting
Bezeq has extensive reporting obligations to the Ministry of
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.
2.16.3.9.
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 2.16.1), 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
NIO30 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 1.7.6.5).
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 income 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.
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
30
NIO with a market share of 25% or more.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
67
activity. This is in order to promote regulation that will increase
competition in the field. In accordance with what was said in the voice
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
5.
Regarding the amendment of Bezeq’s license regarding the
determination of fiber network deployment duties - see Section 2.16.4.
2.16.4.
Advanced network – Fiber
2.16.4.1.
On 24.12.2020, an amendment to the Communications Law was
published regulating the deployment of an "advanced network" (the
fiber network). In accordance with the amendment to the Law, Bezeq
is entitled to select from the entire country the statistical areas in which
it wishes to deploy a fiber network (a network that is not based on the
metallic network) and provide Internet access service over it.
Bezeq must deploy its fiber network in all statistical areas it has selected
("service areas") by no later than 14.3.2027 (which is six years from the
effective date set forth in the Bezeq license), and it is prohibited from
deploying a fiber network in service areas it has not selected, as
detailed below.
Bezeq's position is that a non-Bezeq landline telecommunications
service provider (such as HOT) is not obligated to deploy a fiber network
and provide telecommunications service over it in any area, but it is
permitted to do so throughout the country and even in incentive areas
(for winners of incentive tenders, see below).
The amendment to the Law incentivizes licensed providers to deploy a
network in statistical areas that Bezeq has not selected as service areas
("incentive areas"). The main incentives include a reduced fee for the
use of Bezeq's passive infrastructure in the incentive areas, and
receiving funding from an incentive fund managed by the Accountant
General at the Ministry of Finance and financed by annual mandatory
deposits from obligated entities,31 including Bezeq, at a rate of 0.5% of
their annual income. The Minister of Communications, with the consent
of the Minister of Finance and with the approval of the Economic
31 "Obligated entity" - an infrastructure affiliate or a marketing affiliate whose most recent annual income exceeds ten million new shekels;
"Infrastructure affiliate" - an authorized supplier whose source of at least 50% of its most recent annual income is from one of the following
or a combination of the two: (1) the provision of infrastructure-related services; (2) the sale of a bundle of services or services and goods
that also includes an infrastructure-related service provided by the authorized supplier;
"Marketing affiliate" - a person who, in the most recent fiscal year for which he was required to submit a financial report or provide
information under this Law, in whole or in part, has met the following: (1) Was a corporation controlled by an infrastructure affiliate, a
corporation that is a controlling shareholder of an infrastructure affiliate, or a corporation whose controlling shareholder is a controlling
shareholder of an infrastructure affiliate;
(2) Provided one or more of the services as detailed below, as part of a bundle of services that also included an infrastructure-related
service provided by the infrastructure-related owner to which it is linked as stated in paragraph (1): (a) Bezeq service; (b) provision of visual
and audio content to subscribers, including over the Internet; (c) sale or supply of end equipment;
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
68
Committee, may change this rate. In 2023 and 2024, the deposit rate
was 0% in accordance with orders published under this authority (on
31.7.2023 and 31.12.2024, respectively). Following the aforementioned
orders, the Group's expenses decreased by approximately NIS 40
million in each of the years 2023 and 2024 compared to 2022.
The allocation of incentive fund money is done through tenders. In the
tender conditions, the tender committee is authorized to set threshold
conditions for participation in the tender, including a condition
according to which a tender bidder must hold a license. The only
criterion for selecting winners in the tenders is the ratio between the
number of households in the incentive areas in the bidders' bids and
the amounts from the incentive fund that will be allocated as part of
the tenders.
The license of a tender winner or an administrative order establishes an
obligation to deploy a fiber network in a service area that includes the
incentive areas that he has won, including an obligation to provide
Internet access service over the network to anyone who requests it in
the area within the time periods specified in the license. With regard to
the determination of such an obligation in the Judea and Samaria area,
the provisions of the Law in this regard applicable in the Judea and
Samaria area will apply.
Bezeq and a corporation affiliated with it are prohibited from
participating In a tender for the allocation of incentive fund money, or
to deploy a fiber network and provide services over it in the incentive
areas, except after five years from the date of determining the
deployment duty in the license of the winner of the tender.
The Minister may permit Bezeq, at its request, to deploy a fiber network
and provide services over it in incentive areas for which the fund money
have not yet been allocated, provided that the proportion of
households in the areas included in their application does not exceed
10% of the households in the areas included in the statistical areas
selected by Bezeq.
The above restrictions do not detract from the ability of Bezeq or an
affiliated corporation to deploy a fiber network in an incentive area for
the purpose of providing Bezeq service to a business subscriber, or to
provide service to a business subscriber over a deployed fiber network.
The amended law further stipulates that ownership of the internal fiber
network wiring shall belong solely to the subscriber whose premises the
fiber serves. An authorized provider may demand a reasonable
payment for its installation.
2.16.4.2. On 15.6.2021, the Bezeq license was amended and, among other
things, an appendix was added that includes the list of statistical areas
selected by Bezeq, which cover approximately 76% of the Country's
population and, according to Bezeq's estimate, approximately 80% of
households. The license also set milestones for completing the
deployment of the fiber network as follows: Completion of deployment
to buildings in which the cumulative household rate is 60% of the total
households in the service area (all statistical areas selected by Bezeq) -
no later than two years from the end of the effective date (14.3.2021)32;
80% - no later than three years from the end of the effective date; 95%
- no later than five years from the end of the effective date; Completion
of deployment to all buildings in the service area no later than six years
from the end of the effective date.
The Tenders Committee established under Article 14D of the
Communications Law published two tenders for the incentive areas, on
32 The date on which Bezeq began providing paid Internet access service over the fiber network.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
69
31.10.2021
and
1.2.2023.
According
to
the
Ministry
of
Communications, the winners of these tenders won an overwhelming
majority of the incentive areas and, as of July 2023, the duty to deploy
and provide Internet access service over a fiber network applies to
approximately 99.5% of households. Bezeq's applications to add service
areas in which Bezeq will deploy a fiber network and provide services
over it were approved by the Ministry of Communications on 3.10.2022,
14.8.2023, 7.7.2024 and 13.2.2025. The approved areas include
"returned areas" in which the Interministerial Tenders Committee
approved certain winners of incentive tenders to revoke their right to
deploy a fiber network for various reasons). The proportion of updated
households in Bezeq's deployment areas will be approximately 88.42%.
2.16.4.3. In the provision of fiber Internet services provided by licensed
providers, the Ministry of Communications has determined that the
type of infrastructure (independent or wholesale) will not be used as a
characteristic that allows providers to offer different terms and rates.
2.16.4.4. Fiber deployment in residential buildings
Regarding the deployment of fiber in new residential buildings,
8.6.2021, an amendment was published to the Planning and Building
Regulations (Permit Application, Conditions, and Fees), 5730-1970,
regarding the duty to lay optical fibers in new buildings.
In addition, the Communications Law sets conditions regarding the
laying of a fiber network in a shared residential building even in the
absence of the consent of the majority of apartment owners.
2.16.5.
Wholesale market
Bezeq provides services under the "wholesale market" model, in which it has imposed
obligations on the owners of the lanlinde interior access infrastructure in Israel (Bezeq
and Hot) to sell wholesale services to other communications operators and on IBC in
relation to wholesale Internet service.
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.
2.16.5.1.
BSA service
This service enables infrastructure-less service providers to offer their
customers a unified Internet service which includes their ISP service
(Internet access), sa well sa Bezeq's infrastructure service33, without laying
a fiber network other than their own, or in addition to providing service on
their network, in places where they wish to provide service to end
customers. The service is provided both on the 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.
To the BSA service portfolio, to which the Bezeq license refers and is
considered part of, in February 2022, a "Fiber BSA service" chapter was
also added, which 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 a fiber network (this
obligation applies to the Company and IBC). In addition, the owners of the
33 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. The case is in mediation proceedings.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
70
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.
The service portfolio requires Bezeq and Hot to provide BSA service, and
certain provisions thereof apply to IBC. It was also noted in the service
portfolio that it constitutes a detailed regulation of wholesale provisions,
that it will serve as a source of interpretation for wholesale arrangements
that apply to IBC, and that the Ministry may apply to IBC additional
sections of the service portfolio as it deems appropriate. With respect to
the BSA service on fiber, an infrastructure owner obligated to provide the
aforementioned service is also one who has received a license pursuant to
which it establishes a landline Bezeq network, according to an obligation
determined for it, whether in Bezeq's deployment areas, in an incentive
area, or in accordance with another obligation determined by law.
BSA service rates over the copper network
The Usage Regulations set the maximum rates for the service and they
were updated between 2017 and 2023 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. On December 31, 2023, an
amendment to the Usage Regulations was published within which the
aforementioned update mechanism was canceled, and it was determined
that the rates for 2024 will be updated in accordance with the change in
the index published in November 2023 compared to the index published in
November 2022. On 1.1.2025, a temporary order was published stating
that the maximum payments for the service will not be updated on
1.1.2025.
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. According to the regulations, the rates are updated once a year, on
January 1, starting in 2021, in accordance with changes in the consumer
price index. Following the IRU agreement with Partner on the BSA fiber
service (wholesale market), Bezeq reduced the prices of the discrete lines
on the BSA fiber service. As part of the IRU agreements that the Company
signed with Partner and Gilat, these companies acquired an indefeasible
right-of-use of the lines on the BSA service for a period of at least 15 years,
with an advance payment based on instalments and packets at a price that
takes this obligation into account (see Section 2.6.2.2). For the pricing
procedure for the BSA fiber service and the petition of several companies
to the High Court of Justice, see Section 2.16.5.12.16.5.3. 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
service of initial installation of internal wiring34 to the subscriber's
premises. In accordance with the Telecommunications Law, internal wiring
installed for the provision of Bezeq service on a fiber network will be
34 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.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
71
owned by the person whose premises the internal wiring is intended to
serve only.
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 a fiber 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 incentive zones may demand from another licensed
provider for a managed broadband access service at a nationwide
connection level is 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.
2.16.5.2.
Wholesale service - use of passive infrastructure
In accordance with the "Mutual Use of Passive Infrastructures" portfolio and
after expansion by an executive order in the matter35, Bezeq must allow the
use of its passive infrastructures to licensed providers, in statistical areas
and incentive areas, subject to their compliance with security instructions.
The service is also provided by obligation to owners of IBC and HOT
infrastructure36. At the same time, licensed providers as mentioned are
obliged to allow "mutual" use of their infrastructure. Also, according to the
"Use of Physical Infrastructures" service portfolio, Bezeq is obliged to allow
holders of a unique general interior operator license to use an available dark
fiber from an available Bezeq optical cable or a virtual wavelength from
existing wavelengths in the optical fiber.
The expansion of the possibility of making such use of Bezeq's passive
infrastructures has increased the scope of damage caused to Bezeq's
infrastructures by operators and the difficulty of monitoring what is being
done in them.
For the Competition Authority's determination regarding passive
infrastructures and the ruling in Bezeq's appeal of the determination, see
Section 2.16.9.5. For the application to certify a class action and two
requirements for the exhaustion of rights prior to filing a derivative claim in
this matter, see Section 2.18.1.
Service Rates
The rates for the use of Bezeq's passive infrastructure and dark fiber are also
set in the Usage Regulations. In accordance with the provisions of Article 14
D(t) of the Communications Law, the Minister determined in regulations
published on 21.7.2022 a reduced rate for the use of the Company's passive
infrastructure (including dark fiber) in incentive areas, and in areas beyond
an incentive area37, which is about a quarter of the rate in the Company's
service areas in the case of infrastructure access service, and more than a
third for dark fiber service. For significant reduction in the prices of usage
services in all areas, see Section 2.16.5.3.
2.16.5.3.
Wholesale market services pricing procedure
On 28.3.2024, the Ministry of Communications published a hearing
35 However, as of the date of publication of the report, a decision had not yet been made in the hearing "Update the Wholesale Market
Regulations and Service Portfolios - Compliance with the New Regulation" published by the Ministry on 8.12.2022, according to which the
Ministry is considering amending the service portfolios of the wholesale services (BSA + Telephony; Mutual use of passive infrastructures;
Physical infrastructure service, and Appendix No. 2 "Documentation of Work on Passive Infrastructures") so that they comply with the
language of the Communications Law and the General Permit Regulations after the entry into force of the change in the regulation.
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 in terms. A draft amendment to the Usage Regulations
was also published in December 2022, which also included adjustments following the change in the regulation as stated in the amendment
to the Law. As of the date of the report, the regulations have not yet been amended.
36 With the exception of passive infrastructure of an NIO held by IEC and is required for its activities as an essential service provider licensee.
37 An area that is not an incentive area and is not one of the Company's deployment areas. The reduced payments for services in these areas
will come into effect after a regulation is established regarding the identification of the use of these areas.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
72
regarding "Determining Maximum Payments for the Use of Passive
Infrastructure in the Bezeq Network" ("the Hearing")38. The hearing does
not deal with updating rates for the BSA service, in relation to which the
Ministry announced that it intends to conduct an economic examination of
the service and its impact on the landline communications market, including
examining the scope of the obligation to supply this service, since, unlike the
case of passive access infrastructures, their significant and immediate
reduction also entails competitive disadvantages (on this matter, see further
in this section).
Further to what was said in the hearing and further to the agreement given
by Bezeq, an amendment to the Usage Regulations was published on
1.1.2025, in such a way that four rates that Bezeq is entitled to demand were
reduced, applicable from 1.4.2024 to 30.6.2025, as follows (NIS per month
excluding VAT).
Existing
Rate in the
Regulations
Proposed
Rate
Unit of
Measurement
Monthly payment for access service to passive
infrastructure not in incentive areas and not in
infrastructure in an area beyond an incentive area
0.446
0.250
Meter
Monthly payment for access service to the passive
infrastructure in the incentive areas or in the
infrastructure in an area beyond an incentive area
0.113
0.107
Meter
Monthly payment for a non-incentive and non-
infrastructure dark fiber service in an area beyond an
incentive area
0.546
0.300
Meter
Monthly payment for Apple fiber service that is in a
promotion area or is on infrastructure in an area
beyond an incentive area
0.208
0.197
Meter
The rates were not indexed at the beginning of 2025.
According to the hearing, after completing the process of reviewing the
update of the wholesale rates based on the Axon model, rates will be
determined, after the hearing, that will enter into force after 30.6.2025. It
should be noted that in July 2024, the Ministry of Communications sent
some of the licensees (including the Company) a demand to transfer
information (similar to the information required about two years earlier) for
the purpose of building an economic model based on a pricing methodology,
formulating an up-to-date list of wholesale services, and determining
maximum payments for wholesale services based on the model.
The Company accepted the outline detailed in the hearing and on 11.5.2024,
it submitted its comments accordingly.
The Company estimates that the reduction in passive infrastructure and
dark fiber service rates as stated above is not expected to have a material
impact on its business results.
38 This was after the Company received a notice from the Ministry of Communications on 6.9.2022, about starting a pricing process for
wholesale market services and a request for information from the company Axon Partners Group, which the Ministry selected to provide
consulting services to assist 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 determining maximum payments for
wholesale services based on the model, which will be published for the hearing; (3) Making a decision at the hearing and introcuding an
amendment to the Usage Regulations. The Company submitted data and information in accordance with the request. In accordance with
the hearing published on 21.12.2023 regarding the amendment to the Usage Regulations (replacing the BSA price update mechanism on
the company's copper network), it was stated that the Ministry of Communications is in the process of updating all wholesale rates on the
landline network. As a result of the long time that has passed since the construction of the Frontier model and the significant changes that
have occurred in the market, including the entry of additional players into the communications infrastructure market and the large-scale
deployment of fiber-optic infrastructure to the customer's home, the Ministry decided that an update was required to the manner in which
maximum payments are determined in the wholesale market. It was also stated that the publication of a model for the hearing in
preparation for amending the regulations was delayed for various reasons.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
73
Some of the information contained in this section is forward-looking
information as defined in the Securities Law based on the Company's
estimates, among other things, with respect to the Ministry's timetables for
publishing a hearing on the BSA service rates and completing its handling.
Accordingly, the Company's estimates may not materialize or may
materialize partially or otherwise depending on the Ministry's timetables
and decisions.
On 19.9.2024, three communications operators, including Gilat, filed a
petition with the High Court of Justice for a conditional order against the
Minister of Communications, the Ministry of Communications, the
Company, and other formal respondents, requesting that the Ministry of
Communications advance the date of publication of the hearing and apply
the rates that will be determined within it retroactively from September
2023.
According to the position of the respondents (the Minister of
Communications and the Ministry of Communications) in their preliminary
response to the petition, the petition should be dismissed, in the absence of
grounds for the Court to intervene in the work of the staff currently being
conducted on the matter at the Ministry of Communications, within the
framework of which the issue of maximum rates for the provision of BSA
service over fiber is being examined, and the examination of the need for
additional regulation of the market has not yet been completed. The
respondents recalled the responses they gave to the providers’ letters,
including the fact that an economic examination should be conducted
regarding the subject of BSA service and its impact on the landline
communications market. The respondents explained why this task, which
requires a thorough and complete examination by the professional bodies,
takes time, and clarified that there is no reason at this time to extend the
additional remedies requested by the petitioners, in the form of taking
immediate regulatory steps pending completion of the staff work.
Regarding the IRU agreement with Partner, it is noted that the Ministry
views positively a situation in which market players negotiate in accordance
with the business interests of each party, and reach agreements on
wholesale supplies in accordance with the characteristics of their unique
activities.
On 15.12.2024, Gilat notified the Court of its request to be removed from
the proceedings, after it signed the IRU agreement with the Company on
12.12.2024 (see Section 2.6.2.2), while the other petitioners requested to
continue the petition investigation proceedings.
Following the Court's decision of 29.12.2024, according to which the
Ministry of Communications would update on its progress in the hearing, on
27.2.2025, an update was submitted to the Court by the State, according to
which it was decided that in order to make an informed decision regarding
the hearing process, it is appropriate to examine, in parallel with the work
on the cost model, the scope and format of the intervention in setting the
BSA rates, and subsequently a public appeal for proposals was published on
the matter (see details later in this section), and that at the same time, the
headquarters' work continues in order to complete the work on the cost
model of the wholesale services provided by Bezeq, so that after the
references to the public appeal for proposals are received, a hearing is
planned to be published on this matter, and this is - according to estimate -
by the end of April 2025.
On 23.2.2025, the Ministry of Communications published a public appeal for
proposals in which the Ministry announced that it was interested in
receiving opinions from the public to examine the method of prior
regulatory supervision (ex ante) of BSA (wholesale Internet) rates, which is
currently carried out by setting maximum rates for the BSA service (“the
Public Appeal"). As indicated in the Public Appeal, following developments
in the market, inter alia, in light of the existence of three wholesale
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
74
networks with wide coverage, in light of the voluntary agreements signed in
the market, and in light of the European Commission's recommendations
regarding minimizing ex ante price controls on network operators in areas
where there is infrastructure-based competition or joint investment
agreements, the Ministry is examining the scope of its intervention in BSA
rates and is seeking public comment in order to assist the Ministry in
examining appropriate regulatory and supervisory measures with the aim of
expanding the level of competition and reducing the regulatory burden. The
response to the Public Appeal must be submitted to the Ministry by
16.3.2025.
2.16.5.4.
Wholesale telephony service
This service allows service providers who do not own infrastructure to offer
their customers telephony service at wholesale rates over the Company's
network.
The wholesale telephony service in all configurations over the years had no
actual demand, and there were no customers, except for a few and for tests.
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.
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 Communications Regulations (Bezeq and Broadcasting),
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 Yes 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 2.16.4.4.
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.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
75
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 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:
2.16.9.1.1.
Basic telephone services, provision of communication infrastructure
services, and transmission and transmission services of public
broadcasts39.
2.16.9.1.2.
Providing fast-access services through subscriber access network40.
2.16.9.1.3.
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
the Economic Competition Law) between Bezeq and Yes, the following
restrictions apply in relation to Bezeq and Yes:
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 Yes 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).
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
39 Announcement dated 30.7.1995.
40 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).
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
76
Bezeq's subsidiaries: Pelephone, Bezeq International and Yes (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 Yes 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.
2.16.9.4.
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 September 4, 2019, Bezeq received the Competition Commissioner’s
determination ("the Determination") 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 in the amount of NIS 30 million from Bezeq and NIS
0.5 million from the former Bezeq CEO. This Determination was made
following a hearing scheduled for Bezeq after the Competition
Commissioner announced in 2018 that she intended to determine that
Bezeq had abused its position as stated, based on the evidence in the
Authority's possession, which indicates that Bezeq used the market power
it had as a result of its control over the passive infrastructure and placed
barriers to new players who sought to use this infrastructure. An appeal filed
by Bezeq against the claim was rejected on October 24, 2023 by the
Competition Court. It should be noted that the full amount of the sanctions
was paid by Bezeq in 2019. Regarding the request for approval of a class
action and requirements for exhausting rights before submitting a
derivative action further to this Determination, see Section 2.18.1f.
2.16.10.
Telegraph Order
The Government is dealing with the existing shortage of radio frequencies
to provide a variety of advanced communication services to the Israeli public
(among other things, due to the allocation of many frequencies for security
and other public uses), by allocating them in tenders and limiting the
number of licenses that can be used, as well as by establishing conditions
and criteria to ensure 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 allocation of an appropriate frequency
in accordance with the Committee’s policy. 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
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
77
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
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 settled 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.
2.16.11.3.
Radiation permits
Regarding radiation permits for communication and transmission facilities,
see Section2.15 2.15.
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
(Works and Buildings Exempted from the Permit), 5774-2014.
2.16.12.
Consumer legislation
Regarding consumer legislation applicable to Bezeq, see Section 1.7.7.4.
2.17.
Material agreements
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
78
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 2024 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.
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 section5.1.4.3.
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 Employee Representative Council 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 four times) is until the end of
2025.
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.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
79
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
80
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 (2022-
2024). Therefore, in the absence of relevant qualitative considerations, this section describes legal
proceedings to the extent of NIS 80 million or more41, 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)42. 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 Pending Procedures
Date
Sides
Court
Type of
procedure
Details
Claim
amount
(NIS
millions)
a.
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
Motion against Bezeq, as well as against Mr. Shaul Elovitch, 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 motion deals with, according to what is alleged in it, Bezeq's decision,
through the respondents, to enter into a transaction for the purchase of
full holdings and shareholder loans of Eurocom Yes (a company under the
indirect control of then Bezeq's controlling shareholder) in Yes 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 Yes 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
assembly, 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 31.3.2025, in light of the Securities Authority's
investigation and indictments filed later in it (see Section 1.1.7).
502
41
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.
42 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).
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
81
Date
Sides
Court
Type of
procedure
Details
Claim
amount
(NIS
millions)
b.
November
2015
And March
2018
Customer
against
Bezeq
Central
District
Court
Two claims
together
with
motions
for
approval as
class
actions
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. 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 1.11.2021, the Attorney General announced his
appearance in this proceeding. Subsequently, in accordance with update
notices submitted on 19.5.2024 on behalf of the Attorney General, in light
of the progress in the criminal proceedings in Case 4000, is there any need
at this stage to continue the stay of proceedings.
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 until 15.2.2024. Subsequently, in accordance with
the update notices submitted on May 19, 2024 by the Attorney General,
in light of the progress in the criminal proceedings in Case 4000, there is
no need at this stage to continue the stay of proceedings. Subsequently,
the parties agreed to refer the November 2015 request to mediation and
to suspend the proceedings in the March 2018 motion until the
conclusion of that mediation..
It should be noted that, in September 2019, the applicants submitted a
request for the filing 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 Paragraph G(1) to the court in which this proceeding is being
conducted and to strike out that application on the grounds that it is a
similar late application.
556 in the
motion
from
November
2015
and 258 in
the motion
from March
2018
c.
June 2017
Bezeq
shareholders
Against
Bezeq,
Chairman of
the Board of
Bezeq and
In the
District
Court
(Economi
c
Departm
ent) in
Two
motions
for
approval of
class
actions
The requests deal with the 2015 transaction in which Bezeq acquired from
Eurocom DBS (a company controlled by Bezeq's controlling shareholders
at the time) the balance of Yes 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
About 1,240
in the first
application
and-568 in
the second
application
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
82
Date
Sides
Court
Type of
procedure
Details
Claim
amount
(NIS
millions)
former
members of
the Board of
Bezeq, as
well as
members of
the Eurocom
Group (the
first
application
also against
the former
CEO of Yes)
Tel Aviv
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.
The second motion was submitted on behalf of three sub-classes - 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 to 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 Yes’s cash flow reported in Bezeq
According to the claim, artificially misleading the reasonable investor who
relied on Yes’s 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.
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 31.3.2025 in light of the Securities Authority investigation and
indictments filed further thereto (see Section 1.1.7).
On May 23, 2023, the applicants in the consolidated procedure, together
with the Company and Shaul and Or Elovitch ("Elovitch") submitted a
motion for the approval of a compromise settlement in the consolidated
procedure, where the Company agreed to pay a sum equal to USD 4.35
million (USD 5.5 million dollars including attorney’s fee, compensation,
and other expenses) as compensation for exhausting the claims against
itself and against Elovitch (in their capacity as officers/controlling
shareholders of the Company). In the motion, it was emphasized that the
waiver made does not detract from the claims regarding Elovitch
regarding Bezeq. Subsequently to the submission of an amended motion
for an amended partial settlement agreement in accordance with the
Court's decision (to which a draft consolidated motion for approval was
also attached), on 28.8.2024, a partial judgment was issued which
approved the amended partial settlement agreement.
d.
June -
August
2017, June
2018, and
February
2025
Shareholder
s of Bezeq
against the
former
controlling
shareholder,
former
officers,
Eurocom
Holdings
(1979) Ltd.,
Eurocom
Communicat
ions Ltd.,
and the
Company
(the
"Responden
ts"), as well
as against
Bezeq and
Yes as
formal
respondents
Tel Aviv
District
Court
Motion for
approval of
a
derivative
claim
It is alleged, inter alia, that the approval process for a 2017 related party
transaction between Yes and Space for the lease of space segments for
Yes' satellite broadcasts ("Yes-Space Transaction") was flawed, that the
conditions of the full fairness test should be applied to the transaction
and its approval, which are not met, and that the transaction was not
lawfully approved, while it is alleged that the consideration paid by Yes to
Space as part of the Yes-Space Transaction is USD 67 million higher than
the market price at the time. Accordingly, the Court is requested in the
motion for approval to require the Respondents, jointly and severally, to
compensate Bezeq for the damages it suffered as a result of their breach
of their obligations to it, which were estimated at no less than USD 67
million.
According to the motion for approval, the motion was filed in connection
with a motion for disclosure of documents prior to filing a derivative claim
regarding the yes-space transaction (“the Disclosure Motion") (which is
being delayed in light of a criminal proceeding being conducted regarding,
among other things, the Yes-Space transaction), after the motion to
suspend the statute of limitations filed by the applicants in the Disclosure
Motion was denied by the Court, which determined that a claim was
required to be filed for the purpose of discussing the statute of
limitations.
It should be noted that the Disclosure Motion was filed in 2018, and in
which the Court was requested to order Bezeq (and Yes, as the case may
be) to provide the applicants with certain documents in connection with
Over NIS 2.5
million (the
approval
motion
states that
the damage
is estimated
at no less
than USD 67
million).
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
83
Date
Sides
Court
Type of
procedure
Details
Claim
amount
(NIS
millions)
the Yes-Space transaction43. In 2021, the Attorney General announced
his appearance in the proceedings (regarding the stay of proceedings and
not the substance of the proceedings), and further to his motion, the
proceedings were stayed at this stage until 31.3.2025 in light of the
Securities Authority investigation and indictments filed subsequently (see
Section 1.1.5).
e.
February
2018
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
relevant
to
the
motion,
Mr.
Shaul
Elovitch and
Mr.
Yosef
Elovitch (the
"Respondent
s").
Tel Aviv
District
Court -
Economic
Departm
ent
Motion for
approval of
a
derivative
claim
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 Yes 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 Yes will be fully
recognized to Bezeq after the merger between Bezeq and Yes.
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 Yes ("Yes
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 Yes 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
Section 1.1.6).
65
Minimum
threshold
219
Maximum
threshold
f.
June 2018
Shareholder
against
Bezeq,
Yes,
Mr.
Shaul
Elovitch, and
Mr.
Or
Elovitch
Tel Aviv
District
Court
(Economi
c
Departm
ent)
Motion for
approval of
a
derivative
claim
This proceeding was initiated in June 2018 with a motion for discovery
and perusal of documents pursuant to Article 198A of the Companies Law,
in which it was requested that the Court order Bezeq, Yes, as well as the
former controlling shareholder of Bezeq, Mr. Shaul Elovitch, and his son,
Mr. Or Elovitch (hereinafter collectively "Elovitch"), to submit to the
perusal of the applicant, as a shareholder of Bezeq, various documents
for the purpose of examining the filing of a motion for approval of a
derivative claim on behalf of Bezeq. According to the applicant, B
Communications and Elovitch violated their duties of loyalty, fairness, and
trust towards Bezeq in that the sale of 115 million Bezeq shares on
2.22016 by the Company was carried out while the Company and Elovitch
used inside information about Bezeq, and at a value significantly higher
than the true value of the shares. According to the applicant, this sale
resulted in undue profits for the Company in the amount of
approximately NIS 313 million. The inside information that the motion
alleges was used as aforesaid is, inter alia, that the statements of Yes and
Bezeq do not reflect the de facto financial situation of Bezeq, but rather
"free cash flow" that was inflated in order to increase the consideration
in the transaction in which Bezeq acquired Eurocom Communications'
shares in Yes ("the Yes Transaction").
June 2018
and April
2024
43 It should be noted that in July 2017, a motion was filed with the Tel Aviv District Court (Economic Department) to approve a class action
lawsuit in the amount of approximately NIS 37 million against Space, its controlling shareholders and officers, as well as against Bezeq's
CEO and Bezeq's Secretary at the dates relevant to the lawsuit in connection with the Yes-Space transaction. The proceedings in this motion
are also stayed, at this stage, until 31.3.2025.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
84
Date
Sides
Court
Type of
procedure
Details
Claim
amount
(NIS
millions)
On 19.9.2023, a ruling was issued striking out the motion on the grounds
that it was filed more than five years ago and that no hearing was held
due to the stay in the proceedings in the case. The ruling further stated
that the striking out does not cause the grounds underlying it to become
statute-barred and that no argument in this matter will be heard
regarding the period from the date of the ruling until it is filed as a new
claim, if filed.
In April 2024, the applicant in the aforementioned proceeding filed a
motion to approve a derivative claim in the name of Bezeq and/or a
"double derivative" claim in the name of Yes against Mr. Shaul Elovitch
and the Company. The claims included in the motion to approve a
derivative claim are similar to the claims included in the aforementioned
motion for discovery of documents. The Court approved the State's
motion to stay the proceeding until 31.3.2025.
g.
(1)
September
2019
(2) March
2020
Customers
against Bezeq
Shareholders
against Bezeq
Tel Aviv
District
Court
Haifa
District
Court
Motion for
approval of
a class
action
Consolidate
d request
for
disclosure
of
documents
prior to
request for
approval of
a derivative
claim
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 שגיאה! מקור ההפניה
.לא נמצא) 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 inferior, expensive and problematic
threading method) caused 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 motion submitted to transfer this motion for
approval to another Court and to strike it out due to it being similar late
motion to the motion for approval of a class action – see Section 2.18.1b.
On 25.6.2020, 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
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.
On June 4, 2023, the judgment of the Haifa District Court was issued, in
which it partially granted the motions, and ordered the disclosure and
review of the Claims Committee's report appendices only, and not the
transcripts of the Committee's hearing minutes. The case is in mediation
proceedings.
400
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
85
Date
Sides
Court
Type of
procedure
Details
Claim
amount
(NIS
millions)
h.
November
2020
Shareholder
against
Bezeq,
the
Company,
Bezeq's CEO,
and members
of
Bezeq's
Board
of
Directors
at
the
times
relevant
to
the motion
At the Tel
Aviv
District
Court
(Economi
c
Departm
ent)
Class
action
lawsuit
Damages were claimed due to alleged reporting and disclosure failures by
Bezeq in connection with a public report on the phenomenon of duplicate
subscriptions in the ISP internet services segment - on 3.6.2024, the Court
decided to partially approve the claim as a class action. In accordance with
the Court's decision, the class of plaintiffs was defined as including all
those who purchased Bezeq shares from 5.10.2020 (instead of from
17.8.2020 as defined in the approval request) until 30.10.2020 and held
the aforementioned shares or part of them on 30.10.2020, with the
exception of the respondents and/or anyone on their behalf and/or
entities related to them. In addition, the Court decided not to approve the
class action lawsuit against the Company, and the lawsuit against it was
dismissed. On 12.9.2024, a notice of appeal was filed by the plaintiff
regarding only partial approval of the lawsuit as a class action and
regarding the non-approval of the lawsuit as a class action against the
Company, and on 16.9.2024, Bezeq and the officers in the proceeding
filed a motion for a rehearing of the decision to partially approve the
motion for approval of a class action, in which the Court was asked to
annul the decision regarding the approval of the action as a class action,
and to order the dismissal of the motion for approval, in all its parts. In
October 2024, a motion was filed with the High Court of Justice for a
consolidated hearing in the High Court of Justice on the notice of appeal
and the motion for a rehearing. In addition, on 29.10.2024, the plaintiff
filed an amended statement of claim in which the amount of the class
action was reduced to NIS 23.6 million. The case is in mediation
proceedings.44
24
i.
January
2021
Bezeq
shareholders
v Bezeq et al.
Tel Aviv
District
Court -
Economic
Departm
ent
Motion for
approval of
a class
action
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.45 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.
"Over NIS
2.5 million
(for the
purposes of
substantive
authority)"
44
It should be noted that, as of the date of publication of the 2022 periodic report, this procedure is no longer classified by Bezeq as a
material procedure, since the amount of damage claimed in its framework is below the materiality threshold. However, for the sake of
caution and since when the motion for approval was filed, Bezeq published an immediate report on its receipt and since at that date the
procedure was classified as a material procedure, Bezeq found it appropriate to address this procedure.
45
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 (receivables vs.
payables). Subsequently, the statements were restated.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
86
Date
Sides
Court
Type of
procedure
Details
Claim
amount
(NIS
millions)
l
April 2021
Customer VS
Bezeq
Central
District
Court
Motion for
approval of
a
class
action
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.
*
The amount
of the class
action
cannot be
estimated.
It was
stated that
these are
damages
amounting
to NIS
million,
which fall
within the
jurisdiction
of the
Court.
J
June 2023
Customers VS
the Company
Tel
Aviv
District
Court
Motion for
approval of
a
class
action
It is claimed that Bezeq does not act in accordance with the law when
giving notice of the end of fixed-term transactions, in that it does not send
a separate notice of the expected end of the benefit period within the
fixed-term transaction, and only notifies the customer through the
monthly invoice and a text message. These are two motions where the
Court approved the motion of the applicants to consolidate them into one
motion that will be heard in the Tel Aviv District Court. Similar requests
were also submitted against Pelephone (see update to Section 3.16.1) and
Yes (see update to Section 5.16.1).
The amount
of the class
action is
over NIS 2.5
million, but
it cannot be
accurately
estimated.
K
September
2023
Customers VS
the Company
Lod
(Central)
District
Court
Motion for
approval of
a
class
action
It is claimed that (1) Bezeq made a misleading representation regarding
the price of the Internet package, since it did not present, in addition to
the cost of the Internet package, the monthly charge of NIS 19.90 for the
router. The claim refers to those who were subscribers to a package that
included the Company's infrastructure and another Internet provider and
then purchased a new package, where the Company provides the
provider and infrastructure services (starting in April 2022) and continued
to be charged for the router they rented from Bezeq, without the
Company making it clear to them that the price displayed does not include
the router; (2) Bezeq provides customers with an antivirus service for a
monthly fee of NIS 14.90 by default and without receiving express
consent, in violation of commitments approved in a settlement
agreement as part of a previous class action against the Company.
The amount
of the class
action
cannot be
accurately
estimated
and is
estimated
at over NIS
2.5 million
L.
January
2025
Customers VS
Bezeq
Lod
(Central)
District
Court
Motion for
approval of
a
class
action
It is alleged that Bezeq requires Internet service customers who have
disconnected from the service and who have rented a router or other
equipment from it to return the equipment to it in a manner that imposes
expenses, hassle, and loss of time on them, in a manner that is illegal,
unreasonably disadvantageous and discriminatory, and contrary to the
position of the regulator. It is also alleged against the amount charged to
customers who did not return the equipment and against the manner in
which it was charged, as well as against the payment of a refund of only
nominal value to those customers who were charged the aforementioned
payment and subsequently returned the equipment.
The motion
stated that
the amount
of the class
action
lawsuit is
over 2.5
million NIS
and is based
on an
estimate.
1.18.2.
Legal proceedings completed during the period of the report or until the date of
publication of the report
None.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
87
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
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 competitive environment (service
leadership and strengthening perceived values - product innovation,
reliability, price perception), and within this framework, leading the
optical fiber market;
Being the leading Internet company in the number of connected retail
lines in the Israeli communications 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 and entry into fields that are
tangential and complementary to the Company's activity, such as the
field of electricity supply (see Section 1.9);
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
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
88
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 Section1.7.4 1.7.5 and
Section 2.16.5). 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. 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
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 Section2.16. 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 1.7.6.5).
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 2.16.5. For possible restrictions under the
Centralization Law on the renewal of licenses and the allocation of new licenses, see
Section 1.7.6.6.
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 Section2.16.2 2.16.2). 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 sections2.16.2 2.16.2 and 2.16.5. In addition, the restrictions that apply to Bezeq in
marketing alternative payment baskets may make it difficult to provide an appropriate
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
89
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 income and its
profitability (for the wholesale market, see section 2.16.5).
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 2.17.3.
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,
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).
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
2.16.5.
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 2024 statements and Section 1.6 of the Board of Directors’ Report.
2.20.8.
Bezeq’s debt and debt repayment capability
Bezeq is required to maintain a sufficient cash flow in order to meet its obligations and
its long-term business plans. The lack of sufficient cash flow may have a negative impact
on Bezeq's business, including the inability to meet its obligations, damage to its ability
to repay debt, make investments and deal with competitive threats. For more details on
the financing of Bezeq’s activity, see Section 2.13.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
90
2.20.9.
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 income from
these services. Bezeq's third party insurance policy does not currently cover warranty for
electromagnetic radiation.
2.20.10.
Frequent technological changes
The field of communications is characterized by frequent technological changes and the
shortening of the economic life of new technologies - see section2.1.4. 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.
2.20.11.
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 income (including investee income) or as a result of increased Group
financing costs.
2.20.12.
Failure in Bezeq’s 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, server farms, 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 out its activities. Hacking, disruption, damage or collapse of the
Systems, including as a result of power outages, 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, information
retrieval (including not as a result of a cyber incident), and from there, also to material
damage to Bezeq’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
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
91
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 Bezeq’s VP of Technologies and
Network. The person responsible for implementing the policy in Bezeq 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, Bezeq’s Board of Directors is involved in and
supervises the management of cyber risk in Bezeq within the framework of handling
Bezeq’s overall risk management policy and receiving ongoing updates. 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.
2.20.13.
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
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 intensities affecting the value of the unit measured when long-term
assumptions may have a relatively large weight compared to short-term assumptions.For
this matter, see also Note 10 to the 2023 statements and Section 3.1 of the Board of
Directors' Report.
2.20.14.
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.
2.20.15.
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, as well as damage to the
supply chain, may adversely affect the Company's business and results.
2.20.16.
Damage to electricity supply
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
92
Damage to the supply of electricity to the Company's facilities for various reasons (some
of which are described in Section 2.20.15) may adversely affect the Company's business
and damage the Company's ability to provide services. Some of the Company's systems
have power backup, but at the same time, in the event of a prolonged damage to some
or all of the systems, significant and even more difficulties may be caused in the provision
of the Company's services, including in the event that the Company will not be able to
return the systems to service quickly.
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 3.19, 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 Communications46
The extent of the impact of the risk factor
on Bezeq's operations
High
effect
Medium
effect
Low effect
Macro risks
Exposure to exchange rate fluctuations, inflation and interest
rates
X
Debt and debt repayment capability
X
Dependence on macro factors and levels of business activity
in the economy
X
Pandemic
X47
Damage caused by nature, war, disaster
X
Damage to electricity supply
X
Industry risks
Growing competition
X
Governmental supervision and regulation
X
Rate supervision
X
Electromagnetic radiation / licensing of transmission facilities
X
Frequent technological changes
X
Special risks for Bezeq
Exposure to legal proceedings
X
Streamlining processes and labor relations
X
Restrictions regarding the relationship between Bezeq and
companies in the Bezeq Group
X
Failure of Company systems and cyber risks
X
Impairment of subsidiaries
X
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.
46 It is hereby 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 fully, 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. 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.
47
The extent of the impact of this risk factor on Bezeq's activity was classified as low, assuming that the event would be limited in scope and
time. Otherwise, the degree of impact may be greater.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
93
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 section3.2. 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 1.7.6.1,
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.
Income 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 have caused erosion of the average income per
subscriber (see Section0). 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, and starting at the end of 2020, companies in the
market are offering 5G packages that are priced higher than 4G packages, which
contribute to an increase in average income per subscriber. The market continues to be
characterized by a high level of competition and low prices for non-5G packages, and in
2024, the volume of migrations between companies in the market increased after 6 years
in which the market experienced a decline. In addition, in 2024, there was a decline due
to the consequences of the Iron Swords War. The decline in income from roaming services
began during the fourth quarter of 2023 upon the beginning of the war. As a result of the
ceasefire, a recovery is evident in the fourth quarter of 2024 in income from roaming
services, upon the return of some foreign airlines to Israel. Despite the positive trend
currently taking place, the current situation still involves significant uncertainty and
depends on the continued improvement in the security situation.
Income 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 2024,
fierce competition continued in this field. In order to reduce the damage to income, 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
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
94
appliances other than cellular devices.
A signifant part of all end equipment is sold in installments.
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 rate48. The estimated penetration rate as of September 30, 2024 is
approximately 117%.
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 non-standalone architecture (5G) began. Also, Pelephone is in
the process of upgrading the 5G network core to the standalone architecture. The process
is being carried out in a phased manner, with some of the central network components
having been upgraded to the new core and are operational.
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 IMS49: 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 Section3.8.2.
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
48 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).
49 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.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
95
additional devices to the cellular line (secondary solution) such as watches and smart
bracelets. On 11.2.2024, Pelephone launched the option for postpaid subscribers to
connect to its services using an eSIM as a main line (later in 2024, the option also opened
to prepaid subscribers). Shortly after, other cellular operators launched eSIM in their
networks as well. Regarding Pelephone's acquisition of the company "Roamability", which
specializes in providing solutions in the global roaming services market, see Section
3.2.1.2.
3.1.6.
Critical success factors
3.1.6.1.
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).
3.1.6.2.
Growth in the subscriber base.
3.1.6.3.
Growth in the number of subscribers to 5G routes, with a larger browsing
volume.
3.1.6.4.
Ability ot offer a competitive price level.
3.1.6.5.
Wide and varied distribution channels.
3.1.6.6.
A variety of service channels, including digital channels, that provide
efficient and quality support and service to a large variety of customers.
3.1.6.7.
Adjusting the cost structure and implementing operational streamlining
that make it possible to cope with increased competition.
3.1.6.8.
A brand that represents a quality, reliable and advanced network.
3.1.6.9.
High quality and skilled personnel.
3.1.7.
The main barriers to entry and exit50
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 Section3.7.1.2 3.7.1.2).
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.
3.1.7.2.1.
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
50 Some of the above entry and exit barriers apply in a partial and limited manner to virtual operators.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
96
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
operators with an radio telephone license/permit 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:
3.1.8.2.1.
Partner and Hot Mobile operate as part of an infrastructure sharing in
the radio segment within a shared corporation.
3.1.8.2.2.
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 0.
3.1.8.4.
Hearing on private networks
On July 16, 2023, following a hearing on the subject, the Ministry published
a policy document outlining the rules for the allocation of a frequency band
in the 26 GHz range (as well as a narrow band in the 2100 MHz range) for
use by parties other than cellular operators or interior operators, for the
purpose of operating private networks on a local basis (area polygon) for
each project. The implementation of the policy will require regulatory
adjustments in the relevant legislation and is not expected to significantly
affect Bezeq or Pelephone business.
3.2.
Services and products
5.1.1.
Services
Below is a description of the services that Pelephone provides to the subscriber:
3.2.1.1.
Package services that include:
3.2.1.1.1.
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.
3.2.1.1.2.
Browsing and data communication services - Internet browsing
services using end equipment that is compatible with the use of 3G, 4G
and 5G technologies.
3.2.1.1.3.
SMS delivery and receipt service and multimedia messages MMS -SMS
receiving and sending service (text messaging - SMS) and multimedia
messaging (video / voice / text).
3.2.1.2.
Value Added Services - Pelephone offers its customers value-added services
and related services, such as antivirus services, cyber protection services,
and more.
3.2.1.3.
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. Regarding roaming services, as well as
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
97
regarding the development of the use of eSIM technology in these services
- as part of Pelephone's activity and its preparation for global trends in the
roaming services market, which include, among other things, a more
extensive use of eSIM technology in these services, on October 18, 2023,
Pelephone’s Board of Directors approved the acquisition of full ownership
in the company "Roamability", which specializes in the supply of solutions
in the global roaming services market, including wholesale, and including
providing a platform for the management and sale of these services.
Accordingly, Pelephone acquired 100% of the control and ownership rights
in the company (an American company and an Israeli company) in exchange
for an amount that is immaterial at the group level.
3.2.1.4.
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:
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
3.2.1.6.1.
IoT (Internet of Things) services - Pelephone offers its customers
advanced IoT solutions such as smart building networks with command
and control systems, and more.
3.2.1.6.2.
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 income from products and services
The following is data regarding Pelephone's income from products and services (in NIS millions):
Products and services
2024
2023
2022
Income from services
1,403
1,385
1,364
Rate of total income
62.2%
59.0%
56.9%
Income from interconnect
233
371
427
Rate of Pelephone’s total income
10.4%
15.8%
17.8%
Income from products (end equipment)
618
592
608
Rate of Pelephon’s total income
27.4%
25.2%
25.3%
Total income
2,254
2,348
2,399
3.4.
Customers
The following is data on the distribution of income from customers (in NIS millions):
Products and services
2024
2023
2022
Income from private customers net of interconnect
1,210
1,180
1,193
Income from private customers
1,333
1,375
1,416
Income from business customers (*)net of interconnect
811
797
779
Income from business customers (*)
921
973
983
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
98
Total income net of interconnect
2,021
1,977
1,972
Total income
2,254
2,348
2,399
(*) Income from customers in business tracks includes income 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.
At the end of 2024, the number of Pelephone subscribers was approximately 2.633 million, including
approximately 2.2257 million postpaid subscribers (subscribers who receive service for a monthly
payment), and approximately 367k 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 1.263 million postpaid subscribers
in such packages.
The following is a breakdown of Pelephone's subscribers with 5G packages:
3.5.
Marketing, distribution and service
Pelephone's distribution system includes about 180 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
compensation to the marketers is paid as commissions from the sales.
Pelephone's service system for subscribers includes diverse digital channels including the Pelephone
website hone, self-service app and call centers.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
99
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 section0).
The following are data, to the best of Pelephone's assessment, about the number of
subscribers of Pelephone and its competitors over the years 2023 and 2024 (thousands
of subscribers, approximately):
Pelephone
Cellcom
(including
Golan
Telecom)
(3)
Partner
(3)
Hot
Mobile
(2)
MVNO
And other
operators
(1)
Total
subscribers
in the
market
As of
31.12.2023
Number of
subscribers
2,618
3,555
2,644
1,518
873
11,208
Market
Share
23.4%
31.7%
23.6%
13.5%
7.8%
As of
30.09.2024
Number of
subscribers
2,639
3,571
2,635
1,540
932
11,317
Market
Share
23.3%
31.6%
23.3%
13.6%
8.2%
(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 Q3/2024 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, 2024, 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.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
100
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.
3.7.
PP&E, 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.
3.7.1.
Infrastructure
3.7.1.1.
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. All end devices that support this technology
also support 3G and 4G technologies, and there is a seamless transition
between the technologies. 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)
that can be transferred from one end device to another.
As part
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
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
101
its 3G network, according to the timetables established in the
decision.51
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. During
the years 2025-2026, the core components of the network will be
transferred from one of the farms to a renovated facility.
3.7.1.2.
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).
Within this framework, starting in 2020, Pelephone is expanding the use of
spectrum in the access network in the 700 MHz band throughout the
network, in the 2600 MHz band in over 1,600 sites, and in the 3500 MHz 5G
band in approximately 1,000 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, throughout the period of the
license, Pelephone will be required to invest in the establishment of new
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.
3.7.2.
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:
3.7.2.1.
The areas used by Pelephone to place communication sites and network
centers as stated in the section 3.7.11 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.
During the year 2023, an agreement was signed according to which Bezeq will carry out a
significant renovation in a facility called "Bezeq Ayalon" to which Pelephone's core facility
in Ramla will be transferred. With the completion of the expected renovation in the first
half of 2025, Pelephone will begin a phased process of vacating the core facility in Ramla
that will last until the end of 2026. The agreement also regulates the lease relationship
51 On June 6, 2023, an updated decision was made by the Minister stating that a license holder will be allowed to continue providing service
over the 2G network for the purpose of M2M (machine to machine communication) only until December 31, 2028, subject to receiving the
Manager's approval. Also, the licensee will be entitled to contact the Manager with another request to extend the service period with 2G
technology for M2M purposes only, until December 31, 2030.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
102
between Bezeq and Pelephone.
3.7.2.2.
Pelephone's headquarters are in Petah Tikva.
3.7.2.3.
For service and sales activities, Pelephone rents about 40 service centers
and sales points spread throughout Israel.
3.7.2.4.
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 MHz52 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 section3.1.5) 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
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 31.12.2025, 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 0).
The deployment of 800 MHz frequencies that was planned for 2023 was
postponed to 2024 and the activation of these frequencies is delayed
pending final allocation by the Ministry of Communications.
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,
against the background of electromagnetic interference caused to
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,
52 Pelephone has the option of requesting a 5-mega allocation in the 800 MHz range following the 850 MHz frequency evacuation project.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
103
2020. Pelephone forwarded to the Ministry of Communications, following
his request, its reference to a number of issues, and on March 17, 2020, the
Ministry announced its final decision regarding the implementation of the
outline in accordance with its announcement of February 5, 2020. At the
end of 2025, the allocation of the 850 MHz band will end, while there is still
no certainty regarding the date of the 800 MHz frequency allocation.
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
in relation to others and additional conditions set in the Tender). This
grant was received in 2022.
c.
Pelephone met the above conditions in full and accordingly the
discounts and grants were received.
For details, see also Section 3.19.2.13.19.2.1. For details regarding exposure
to interference in the frequency ranges of Pelephone, see Section3.19.3.9
3.19.3.9.
In this regard, see also Note 10 to the 2024 statements.
On July 17, 2023, Pelephone received a winning notice in the ongoing tender
for 5G mobile mobile radio telephone services in the 26 GHz frequency range
for the purpose of improving and consolidating the 5G capabilities and
solutions existing in the cellular networks (“the Tender"). As part of the
Tender, 25 competition bands of 100 MHz each (a total of 2,500 MHz), for
competition between the existing cellular operators (existing cellular
networks), where each network was entitled to win up to 1,200 MH (out of
the 2,500).
Pelephone won a cluster of frequencies in this area as follows:
A. Winning 800 MHz in the 26 GHz section (for a period of 10 years), when
the license period as a cellular operator does not change as a result of
the Tender and can be renewed in accordance with the license
instructions ("frequency allocation").
B. The frequency allocation will be carried out after the extension of the
license and against the payment of license fees in the amount of NIS
4.16 million which was carried out by Pelephone.
The aforementioned frequency allocation will allow Pelephone, among
other things, to expand the range of advanced uses of the cellular network
with 5G technology, with an emphasis on private networks and advanced
services that require a particularly high browsing speed, such as hospital
complexes. The cost of integrating this frequency range into 5G technology
will be ongoing, and is not expected to be substantial.
3.8.3.
Trademarks
Pelephone has a number of registered trademarks. The main one is the "Pelephone"
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
104
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 Yes. 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
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
105
3.9.
Human capital
3.9.1.
Organizational structure
The following is a diagram of Pelephone's organizational structure, as of the date of the
report:
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 Yes. In addition, some of the VPs
who serve on Pelephone also serve as VPs at Yes.
3.9.2.
Employee base and number of jobs
The following is a breakdown of the number of employees in Pelephone according to its
organizational structure:
Division
Number of employees
31.12.2024
31.12.2023
Management and administration divisions
196
197
Private and business customer divisions
1,106
1,113
Engineering and Information Systems Divisions
370
374
Total
1,672
1,684
The number of employees included in the table above includes employees employed part-
time. The total number of jobs53 at Pelephone as of December 31, 2024 amounted to
1,474, and as of 31.12.2023, it amounted to at 1,486.
3.9.3.
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.
53The calculation of the number of "jobs" in Pelephone is: the total monthly working hours divided by the monthly working hours
quota.
Board of
Directors
CEO
Busines
s
Division
Engineer
ing
Division
HR and
Administr
ation
Division
Informati
on
Systems
Division
Private
Custome
rs
Division
Finance
Division
Legal
advice
and
Regulati
on
Marketin
g
Division
Public
Relation
s
Internal
Auditor
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
106
3.9.4.
Collective agreement
The labor relations at Pelephone are regulated in a collective agreement signed between
Pelephone and the New General 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 December 6, 2022, a renewal of the existing collective agreement was signed between
the parties, which includes salary increases and bonuses, improved ancillary conditions,
voluntary retirement, and the resolution of the labor disputes announced by the General
Histadrut and the Employee Representative Council will be settled while maintaining
industrial peace during the validity period of the agreement in the matters regulated
therein, for the period from 6.12.2022 to 31.12.2025 (hereinafter: "the Agreement" and
"the Agreement Period", respectively). The total estimated cost of the Pelephone
agreement, including the voluntary retirement of employees whose retirement has been
approved, is about NIS 71 million. As part of the Agreement, all open labor disputes were
resolved, except for the Employee Representative Council’s demand to appoint a
representative on its behalf to the Pelephone Board of Directors, which the Agreement
stipulated would be discussed later (with the exception of one issue detailed in Section
3.9.5).
For this matter see also Note 16 to the 2024 statements.
3.9.5.
Labor disputes
As part of the collective agreement signed on 6.12.2022 between Pelephone and the New
General Histadrut - the Cellular, Internet, and High-Tech Workers' Union ("the HIstadrut")
and the Employees Representative Council, all labor disputes that were open at
Pelephone were settled, with the exception of the Employees Representative Council’s
demand for the appointment of a representative on their behalf on Pelephone's Board of
Directors, a demand that was not exhausted and in relation to which it was agreed
between the parties that it would be discussed later.
3.10. Suppliers
3.10.1.
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 material suppliers are Apple, with whom there is an agreement that requires
defined procurement targets and is valid until March 2025, 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 2024
amounted to approximately 14.5% and approximately 10.5% (respectively) of
Pelephone’s total purchases from all of Pelephone’s suppliers54. 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.
54 All suppliers - All of Pelephone’s suppliers, including suppliers who are not suppliers of end equipment and electronic devices.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
107
3.10.2.
Infrastructure providers
The infrastructure equipment for the cellular networks (5G, LTE, UMTS, as well as the
equipment for the microwave transmission field) is provided by the company LM Ericsson
Israel Ltd. ("Ericsson"). Pelephone has multiyear agreements for supply, maintenance,
support, and software upgrades for the entire network, and also for the 5G network core
with Ericsson, and in its opinion it may depend on it in connection with network support
and expansion. In addition, the cellular network uses transmission, and Bezeq is a material
supplier to Pelephone in this field.
Pelephone has a multi-year transmission agreement with Bezeq that includes use and
maintenance.
3.11. Working capital
Credit policy
Credit in device sales transactions - Pelephone gives most of its customers who purchase end
equipment 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).
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 2024:
Credit volume
in NIS millions
Average credit
days
Customers for the sale of end equipment (*)
477
241
Customers for services (*)
138
26
Suppliers
235
46
(*) Net of loan-loss
3.12. Taxation
See Note 7 to the 2024 statements.
3.13. Environmental risks and ways of managing them
3.13.1.
The provisions of the law concerning the environment and apply to the activities of
Pelephone
The broadcast sites used by Pelephone are "radiation sources" in 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
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
108
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.
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 section3.19.2.5.
3.13.2.
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.
3.13.3.
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 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
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
109
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
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
1.7.6.1.
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, 202255.
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.
55 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)).
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
110
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.
I.
The license requires Pelephone to a minimum standard of service.
J.
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 Pelephone’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.
In this regard, it should be noted that a tender published by the Ministry of Finance -
thePublic Housing Administration in January 2025, intended to allow in the future the
establishment of sites on government housing buildings for the payment of fixed and
reduced rents, may bring some relief in locating suitable locations for the establishment
of new sites.
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 an umbrella contract for five years, for the period from
January 1, 2020 to December 31, 2024. It should be noted that Pelephone, as well as the
other cellular operators, and the Israel Land Authority are negotiating a contract
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
111
extension.
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
660 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
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 400 wireless access facilities.
Pelephone is converting dozens of these sites to self-licensed sites according to the
legislative amendments from 2022.
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
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
112
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.
As a result of the amendments, Pelephone significantly expanded its activity of
establishing new sites and, as stated, is also converting access facilities to self-
licensed sites according to the aforementioned amendment to the Arrangements
Law of 2022. 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 helps Pelephone by enabling the establishment of new shared sites at a
lower rental cost than before.
3.14.4.
Establishment of sites by parties other than cellular operators
On July 17, 2023, the Ministry of Communications published a decision (and an
amendment to the cellular operator's license), regarding allowing entities that do not
have a cellular license to establish and lease cellular radio centers (communication sites)
and lease them to cellular operators. The sites will be operated and maintained by the
cellular operators (operation and maintenance will be allowed by said parties as
subcontractors of the cellular operators). The implementation of the decision requires
legislative changes and the establishment of regulatory rules regarding the manner of
implementation and its limitations.
On 24.9.2024, the Ministry of Communications published a supplementary hearing to the
above decision, in which it updated that it is considering expanding the scope of the
decision - emphasizing that (1) the ownership and maintenance of the equipment to be
installed at the sites could be the responsibility of the developers; (2) the sites could be
used to meet the coverage requirements imposed on the cellular operators; (3) the
sharing could, under certain conditions, include active sharing and frequency sharing
between the cellular operators hosted at the sites; and (4) the possibility for developers
to use the sites to provide local/project cellular service (not as a public network) based
on frequencies that they will be allowed to purchase in the future. It is impossible to
assess at this stage the expected impact of the hearing and the decision that will be made
following it, including due to the need to formulate supplementary regulatory procedures
for some of the issues.
3.14.5.
In conclusion: For a few sites that were established years ago in security facilities, for
reasons unique to these facilities, it is required to complete the necessary procedures to
obtain a construction permit. 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.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
113
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.
3.14.6.
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 02.16.9).
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 that was estimated at 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 extende, as of the date of the report, until 30.6.2025. On February 21,
2024, the Accountant General published a new tender for the supply of cellular
communication services and end equipment.
3.15.3.
Regarding a collective agreement between Pelephone and the Histadrut and Pelephone’s
Employees’ Committee, see section 3.9.4.
3.16. Legal Proceedings56
During the day-to-day business, lawsuits were filed against Pelephone, including motions for
approval of class actions.
3.16.1.
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:
Date
Parties
Instanc
e
Proceeding
type
Details
Amount of the
claim
(NIS millions)
a. May
2012
Customer
vs.
Pelephon
e
District
(Tel
Aviv)
Class action
lawsuit
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). On
15.1.2025, a ruling was issued approving the settlement
between
the
parties,
which
includes
providing
compensation in the form of products to Pelephone
customers who come to selected service centers, as well
as donating products to non-profit organizations, with a
total value of NIS 12.5 million including VAT (customer
About 124
56 For reporting policy and materiality thresholds, see Section 2.18.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
114
Date
Parties
Instanc
e
Proceeding
type
Details
Amount of the
claim
(NIS millions)
value), payment of compensation and attorney fees in a
total amount of approximately NIS 1.75 million plus VAT,
and payment to the class action funding fund in the
amount of NIS 1,137,500 plus VAT.
b. July 2014
Customer
vs.
Pelephon
e, three
other
cellular
companie
s, and
additional
responde
nts
District
(Tel
Aviv)
Monetary
claim and a
motion to
recognize it
as a class
action
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.
About 100 in
relation to the
cellular
companies and
about 300
against all the
defendants
c. October
2017
Customer
vs.
Pelephon
e, and
another
cellular
company
Central
Distric
ut
Court
Monetary
claim and a
motion to be
recognized
as a class
action
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.
It should be noted that in December 2023, another claim
was filed that includes the same grounds as this claim and
by the same representatives, according to them for
precautionary reasons.
Section 3.16.1 (c) regarding a claim accompanied by a
motion for approval as a class action, which was filed
against Pelephone and against another cellular company
with the Central District Court, alleging that the
respondents are unlawfully using their customers'
location data and thereby violating the contractual
agreements with them, the operating licenses, and
various laws, including the Privacy Protection Law, 5741-
1981 - on 30.10.2024, a decision was issued approving
the motion against Pelephone after the Court
determined that there was a reasonable possibility that
the questions underlying the claim would be decided in
favor of the class of plaintiffs. At this stage, the amount
of the claim cannot be estimated, inter alia, since the
amount of damages was not determined within the
framework of the certification decision, as well as the
Court's order to replace the plaintiff with another
plaintiff.
About 850
d. April 2019 Customer
vs.
Pelephon
e, Bezeq
Internatio
nal and, 6
other
companie
s
Central
District
Monetary
claim and a
motion to be
recognized
as a class
action
Two similar motions for the approval of a class action in
which it is claimed that Pelephone does not act in
accordance with the law with regard to providing notices
of the termination of fixed-period transactions. On
September 11, 2023, a consolidated motion was
subsequently filed for approval by the Court.
In the consolidated motion, it was stated that similar
motions for approval of class actions were also submitted
against the Company (see Section 2.18.1) and Yes (see
update to Section 5.16.1).
The amount of
the claim is not
stated, but in
the motion it is
estimated at
tens of millions
of NIS
e. June 2023
Customer
vs.
Pelephone
Central
District
Consolidated
motion
motion
to
approve
a
class action
Two similar motions for the approval of a class action in
which it is claimed that Pelephone does not act in
accordance with the law with regard to providing notices
of the termination of transactions for a fixed period. On
September 11, 2023, a consolidated motion was
subsequently submitted for approval by the Court.
In the consolidated motion, it was stated that similar
motions for approval of class actions were also
Over NIS 2.5
million.
Impossible to
accurately
estimate.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
115
Date
Parties
Instanc
e
Proceeding
type
Details
Amount of the
claim
(NIS millions)
submitted against Bezeq (see Section 2.18.1) and Yes
(see update to Section 5.16.1).
f. December
2023
Haifa
District
Court
Monetary
claim and a
motion to be
recognized
as
a
class
action
In the motion, it is claimed that within the framework of
the numbers blocked for dialing by the subscribers of the
Kosher Floor (as part of the characteristics of the Kosher
route), Pelephone and the other respondents illegally
blocked numbers
Over NIS 3
million.
Impossible to
accurately
estimate
until all data
is received
g. November
2024
Pelephone
and other
telecommun
ications
companies
Haifa
District
Claim
and
motion
for
approval as a
class action
Two motions to approve class actions in the same matter:
One motion alleged that Pelephone and other
telecommunications companies charge their customers
fees for paying their cellular bills via direct debit at rates
that are not reasonable and fair. In January 2025,
following a court decision that the motion should be split
and refiled separately against each respondent, the
motion was resubmitted individually against Pelephone.
The second motion filed by the Israeli Consumer Council
against Pelephone alleged that Pelephone charges its
customers fees for paying their cellular bills via direct
debit, without providing the required disclosure.
The amount
of the class
action
lawsuit is
over NIS 2.5
million, but it
cannot be
accurately
estimated.
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 as a basis
for increasing income and ARPU, 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 2025, a number of factors are expected to affect Pelephone's activity, the main ones being:
3.18.1.
Continuing competition and increasing the value to the customer
Pelephone expects that in 2025, the competition will focus on increasing the value and
volume of browsing to the customer.
3.18.2.
Cellular network innovation and products
In 2025, Pelephone is expected to continue to promote services and products that will
enable increased income or an image advantage over competitors: eSIM, private
networks, cyber and IoT services and continued focus on large device launches, in parallel
with the continued implementation of the deployment plan of the 5G network.
3.18.3.
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.
3.18.4.
Digital transformation
In 2025, Pelephone is expected to continue to develop and expand its digital service and
sales channels.
3.18.5.
5G network
In 2025, Pelephone is expected to continue the deployment of the 5G network, the
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
116
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.
3.18.6.
Pelephone is expected to expand the range of products it markets by increasing the
number of manufacturers and focusing on categories that are launching in the cellular
segment. In addition, Pelephone is expected to expand its shelf space by opening new
stores and points of sale.
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.
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 the costs of site rental and frequency fee.
3.19.1.2.
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
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.
3.19.1.4.
Damage to electricity supply - Damage to the electricity supply to Pelephone
facilities for various reasons (some of which are described in Section Error!
The source of the reference was not found.) may have a negative effect on
Pelephone's business and damage Pelephone's ability to provide services.
Some of Pelephone's systems have power backup, but at the same time, in
the event of prolonged damage to some or all of the systems, there may be
significant difficulties and beyond that in the provision of Pelephone
services, including in the event that Pelephone cannot return the systems
to service quickly.
3.19.2.
Industry risk factors
3.19.2.1.
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
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
117
companies operating in the market, which are forced to update their
infrastructure technologies from time to time.
3.19.2.2.
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.
3.19.2.3.
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.
3.19.2.4.
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.
3.19.2.5.
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
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.
3.19.2.7.
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.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
118
3.19.2.8.
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, including checking alerts and logs in the systems,
implementing various information security products according to the threat
outline, periodic risk surveys and practice according to an annual plan.
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, Pelephone 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 Pelephone’s estimation, its risk management policy
in dealing with and reducing the cyber risk is effective.
The cyber risk management policy and its implementation is the
responsibility of the Information Systems Division, Infrastructure Division.
Despite
Pelephone's
investments
in
measures
to
reduce
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.
3.19.2.9.
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.
3.19.2.10.
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.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
119
3.19.3.
Risk factors unique to Pelephone
3.19.3.1.
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.
3.19.3.2.
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.
3.19.3.3.
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.
3.19.3.4.
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.
3.19.3.5.
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.
3.19.3.6.
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
changes, entail a risk of losing key employees, loss of knowledge as a result
of employee turnover, difficulty in recruiting employees, etc.
3.19.3.8.
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 2.2013.
3.19.3.9.
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. In particular, Pelephone’s network suffers from significant
radio interference in the 2600 MHz range. The sources of the interference
are outside the Country's borders. Orderly inquiries on the subject have
been made to the Ministry of Communications, whose job it is to deal with
this issue, but to no avail. There is currently no prospect of a solution to the
problem. In addition, the Jordanian networks also use the same frequency
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
120
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.
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.
Risk factors summary table - cellular telephony
The extent of the impact of the
risk factor on Pelephone's
operations as a whole
High
effect
Medium
effect
Small
effect
Macro risks
Exposure to changes in exchange rates
X
Epidemic and supply chain
X
Damage due to force majeure, war, disaster
X
Damage to electricity supply
X
Industry risks
Infrastructure investments and technological changes
X
Competition
X
Customer credit
X
Regulatory developments
X
Electromagnetic radiation
X
Website licensing
X
Serious malfunctions in information systems and
engineering systems
X
Information security, customer data protection and
cyber risks
X
Economic emergency
X
Lack of frequencies
X
Risk factors of Pelephone
Property risks and liabilities
X
Serious malfunctions in the cellular network
X
Epidemic malfunctions in devices
X
Legal proceedings
X
Substantial suppliers and customers
X
Labor relations
X
Loss of knowledge and information
X
Impairment of Pelephone's assets
X
Frequency ranges
X
Maintaining sufficient cash flow
X
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.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
121
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, cloud services, cyber protection; and
supply of equipment, licensing and service contracts for businesses.
Regarding regulatory changes in the Internet services market for private customers,
which materially affect Bezeq International's activity in this market, see Section 4.11.5.
4.1.2.
Special legislative and regulatory restrictions in the field of activity
Bezeq International's activity in the field of the Internet and international
communications are regulated mainly by the Communications Law and regulations
thereunder, and the terms of the unified general 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 Sections1.5.4.3 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 is a persistent increase in the
demand for data communication services in Israel and around the world. The increased
use of information technologies, which is expected to increase in the coming years due
to the development of artificial intelligence technology, requires an increase in capacity.
The positioning of the State of Israel as a communication and technology hub leads to
demand from global companies for data communication services to Israel. Following the
establishment of diplomatic relations with other countries in the Middle East, a gradual
increase in demand for communication services between the Middle East and Europe is
expected, some of which will go through Israel. Conversely, during the "Iron Swords" War,
projects regarding investments and activities of international companies in Israel and the
Middle East in general were frozen.
In the international calling market in Israel, the downward trend in the volume of call
minutes (incoming and outgoing) continues, partly due to the shift to using applications
that allow calls to be made over the Internet for free or at a low cost.
In the field of cloud, hosting, and computing services for businesses, in 2024, the increase
in demand for hosting services in server farms and public cloud services continued, 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). There are various factors that affect demand
for cloud services, such as 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 integration solutions 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).
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
122
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
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 OTT
technology, which enables the transfer of international calls over the Internet network
between users through the use of software products (such as Teams, 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 income. 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, and in addition, there are many licensed
providers who provide Internet access services by virtue of a general permit. 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.
Recruitment and employment of skilled personnel;
4.1.8.2.
Streamlining and savings in expenses and personnel;
4.1.8.3.
Ability to maintain a high level of service and customer satisfaction;
4.1.8.4.
Technological innovation, identifying needs and trends in the market and
launching solutions to meet these needs;
4.1.8.5.
Investments in the infrastructures required for the provision of services;
4.1.8.6.
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
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, the Internet
access services provided by Bezeq International to businesses include high-speed
symmetrical Internet lines. The Internet access services provided to private customers
mainly include access service only or a combined package that includes access service
alongside infrastructure service (as part of the "wholesale market" reform or "bundle"
packages). It should be noted that Bezeq International does not work to add new private
customers to its services, but rather provides service to its existing private customers
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
123
only.
It should be noted that due to Bezeq International ceasing to market Internet access
services to private customers as mentioned, its income from Internet services have been
affected and are expected to continue to decrease substantially.
4.2.2
International data communication services
Providing international data communication solutions for business customers, including
global deployment, according to customer needs.
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.
4.2.3.
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. In addition, Bezeq International has partnerships with the companies
Microsoft and Cisco, within which Bezeq International provides NIO and international
operator services to the customers of the aforementioned companies.
4.2.4.
Cloud, hosting, and computing services for businesses
4.2.4.1.
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.
4.2.4.2.
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. In
addition, Bezeq International operates through its subsidiary Cloudedge Ltd.
as a partner of Amazon (AWS), and sells licensing for this Company's cloud
products, as well as related professional services.
4.2.5.
Cyber protection services
Bezeq International provides the business sector with various services for protection
against cyber threats and information security. The services offered by Bezeq
International include, among others: a SIEM-SOC service that monitors events and
indications of cyber attacks on the customer's systems; protection services against
distributed denial of service (DDoS) attacks; and protection of end positions. The services
are provided through cloud-based cyber protection solutions from various manufacturers
such as Trend Micro and Cisco.
4.2.6.
Integration solutions
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
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
124
exchanges, wireless Internet networks, communication networks for server rooms and
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 income (in NIS million):
2024
2023
2022
Internet services
435
538
637
Rate of total Bezeq International income
39%
44%
51%
International telephony services
153
185
183
Rate of total Bezeq International income
14%
15%
15%
Cloud, hosting, and computing services for
businesses
254
224
185
Rate of total Bezeq International income
23%
19%
15%
Integration solutions
263
265
234
Rate of total Bezeq International income
24%
22%
19%
Total income
1,105
1,212
1,239
4.4.
Customers
Bezeq International has no dependence on a single customer, and has no customer whose income
constitute 10% or more of its total income.
Below are data about the distributioin of income from private and business customers (NIS
millions)57:
2024
2023
2022
Income from private customers
167
253
368
Income from business customers
938
959
871
Total income
1,105
1,212
1,239
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 a redundant ISP service from more than one ISP when in practice they use
the services of only one ISP.
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.
Bezeq International competes in providing ISP services to customers from
the business segment, and does not conduct competitive or marketing
activities in connection with the provision of ISP services to the private
customers segment.
4.6.1.2.
The market is saturated with competitors, the main ones being Cellcom,
57 The data are after changing the classification of small customers (SOHO) from business customers to private customers carried out in 2023.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
125
Partner, and Hot Net. There are also dozens of licensed providers operating
under a general permit, some of which focus on the business sector, such as
Telecom and ITC. In the absence of public data on the market shares of the
competitors in the business Internet market, it is impossible to assess Bezeq
International in this area.
4.6.1.3.
The competition in 2024 is mainly characterized as competition on prices.
The ISP service for the business segment is seen as an off-the-shelf product
in which the identity of the provider is not important, and many customers
attach decisive weight to the price. This naturally leads to price erosion
4.6.2.
International telephony services
4.6.2.1.
As of the end of 2024, about ten companies are operating in the market
(among them Bezeq International, Cellcom, Partner, Golan Telecom and Hot
Mobile).
4.6.2.2.
General characteristics of the competition in 2024:
In 2024, 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. In many organizations, the increase in the use of services that allow
calls and meetings to be carried out online continues, 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.
Cloud, hosting, and computing services for businesses
4.6.4.1.
Hosting services
The field of hosting services is characterized by many competitors, including
Bynet, Edgeconnex, Med-1, and more. In 2023, there is 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 the purchase of solutions that will ensure
recovery from a disaster. 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 the marketing
and embedding of services from various cloud companies. In recent years,
demand has been increasing for public cloud services offered by companies
that provide cloud services such as Amazon, Microsoft, Google, and Oracle.
Bezeq International is a partner of Microsoft (both itself and through its
subsidiary CloudEdge Ltd.) and Amazon (through its subsidiary CloudDojo
Ltd.) and, by virtue of these partnerships, provides its customers with
licensing for these companies' cloud services, as well as embedding,
support, and related professional services. Some of the activity is carried out
through resellers who purchase the services from Bezeq International for
their customers. In the absence of public data on the market shares of
competitors in this market, it is impossible to estimate Bezeq International's
market share in this field.
4.6.4.3.
Cyber protection services
The field of cyber protection is characterized by many competitors and
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
126
different and varied solutions. The demand for cyber protection services is
on the rise due to the increased risk of cyber threats. In the absence of public
data on the market shares of the competitors in this market, it is impossible
to estimate the market share of Bezeq International in this field.
4.6.5.
Integration solutions
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.
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
The fact that Bezeq International does not own 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.
PP&E, real estate and facilities
Bezeq International's PP&E include Internet and domestic and international calls switching
equipment, submarine cable, office equipment, computers, software licensing, leasehold
improvements, and inventory of equipment intended for sale.
The switches used to route Internet traffic and domestic and international calls are deployed at
several sites in Israel and abroad for survivability purposes.
The submarine cable is laid between Israel and Italy, and includes communication equipment
installed at the submarine cable landing stations.
The CRM (customer management) system is based on Peoplesoft software. The software is not
supported by the manufacturer, but is maintained by Bezeq International. Bezeq International is in
the process of migrating to Oracle's cloud-based CRM and ERP systems to replace the old systems.
The new ERP system went live in January 2025. The CRM system is expected to go live at the end of
2025.
Bezeq International has a lease agreement for the building where its offices are located. The lease
term is until March 2029, with an option to extend the lease term until 2034.
Bezeq International has a lease agreement for a building that houses a server farm. The lease term
is until August 2026, followed by two additional extension options until 2036.
Bezeq International has additional lease agreements for warehouses (including a logistics center).
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
127
4.8.
Human capital
The following are details about the number of Bezeq employees International in years 2023 and
202458:
31.12.2024
31.12.2023
Administrative employees
543
597
Service and sales representatives
54
105
Total
597
702
The number of employees included in the table includes employees employed part-time. Total jobs59
Bezeq International as of December 31, 2024 amounted to 599 compared to 679 as of December 31,
2023.
Organizational structure
The following is a diagram of Bezeq International's organizational structure as of the date of the
report:
On December 26, 2024, Bezeq International signed a collective agreement between itself and the General
Histadrut and its Employee Representative Council for the period from 31.12.2025 to 31.12.2027 (“the
Agreement" and the "Agreement Period", respectively). The Agreement stipulated, among other things, a
retirement plan for up to 140 Bezeq International employees during the years 2025-2027, and voluntary
retirement of up to 10 Bezeq International employees in 2027. The total estimated cost of employee
retirement is approximately NIS 71 million, plus approximately NIS 5 million for one-off grants, including a
grant conditional on a certain change in the holdings of the current controlling shareholders in Bezeq.
In this regard, see also Note 16 to the 2024 statements.
It is clarified that the estimates regarding the cost of the retirement plan are forward-looking information as
defined in the Securities Law, based, among other things, on assumptions and estimates regarding the
implementation of the retirement plan. These estimates may not materialize or may materialize differently
than anticipated, depending, among other things, on the manner and extent of the actual implementation of
the agreements and the retirement plan, taking into account the needs of the Bezeq International and its
ability to realize its plans and subject to the fulfillment of additional conditions stipulated in the agreements.
There is an open labor dispute at Bezeq International regarding the Employee Representative Council’s
demand for the appointment of an employee representative director.
58 In addition, approximately 120 employees are employed at Bezeq International subsidiaries.
59 Total monthly working hours divided by the monthly working hours quota.
Technologi
es
Legal
Advice and
Regulation
Global
Businesses
Solutions
for
Businesses
Finance
Human
Respurces
Technical
Service and
Delivedy
Internal Audit
Board of
Directors
CEO
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
128
4.9.
Suppliers
5.1.1.
Foreign operators
Bezeq International has collaborations with about 150 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 260 destinations worldwide.
4.9.1.
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 Telecom Italia Sparkel (formerly Med Nautilus) and Cypriot
communications company Cyprus Telecommunications Authority (CYTA).
As part of its engagement with Telecom Italia Sparkel, Bezeq International acquired the
indefeasible right of use, in an indefinite and non-specific attribution, in the
communication capacity transmitted through the underwater cable system operated by
Telecom Italia Sparkel between Israel and Europe, and continued capacity over the
Company's ground infrastructure to a number of communication nodes in Europe. Some
of the use periods were extended until July 2030, and some until May 2032. For the said
use rights, Bezeq International paid one-time payments, close to the date of
commencement of the use of the capacity.
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 was extended until May 2030.
In addition, Bezeq International acquired indefeasible right-of-use in an unspecified and
unattributable part in the communication capacity transmitted through terrestrial
infrastructure in Europe from EXA Infrastructure, 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.
4.9.2.
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
services to business clients. The agreement is valid until 2030.
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 ServerFarm Israel Infrastructure Fund Bnei
Zion Limited Partnership, Bezeq International purchases hosting services at a server farm
owned by this partnership starting from 2023. The agreement is valid until 2039, with
options for extension until 2047. These services are used to provide hosting services. For
business customers.
4.9.3.
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.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
129
4.9.4.
Main supplier
Bezeq is a main supplier of Bezeq International and provides it with services as detailed
in this section above. The rate of purchases of Bezeq International from Bezeq in 2024
was about 10%.
4.10. Taxation
See Note 7 to the 2024 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
used to carry out the license without the consent of the Minister of Communications,
except for certain exceptions set forth in the license.
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 2.16.6).
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
130
4.11.4.
Payments for interconnectivity
In the matter of interconnectivity fees paid to the NIO and the cellular operator, see
Section 1.7.6.1.
4.11.5.
Major regulatory developments
4.11.5.1.
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 income of Bezeq International in the Internet segment. The
damage is expected to continue and deepen in 2025.
4.12. Legal proceedings60
During the day-to-day business, lawsuits were filed against Bezeq International, including motions
for approval of class actions.
5.1.1.
Pending and current legal proceedings
Date
Sides
Court
Type of
procedure
Details
Claim
amount
(NIS
millions)
a. March
2016
Client
against
Bezeq
Internatio
nal and
other
communic
ations
companie
s
District
(Central)
Monetary
claim
together with
a motion to
recognize it as
a class action
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.
Unspecifie
d
b. April 2019
Client
against
Bezeq
Internatio
nal and
other
communic
ations
companie
s
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
c. October
2020
Client
against
Bezeq
Internatio
nal
District
(Central)
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.
Unspecifie
d
e.
November
2020
Client
against
Bezeq
Internatio
nal
District
(Central)
Monetary
claim
together with
a motion to
recognize it as
a class action
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
60 For reporting policy and materiality thresholds, see Section 2.18.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
131
5.1.2.
Legal proceedings completed during the reporting period
None.
4.13. Targets, business strategy, and development prospects
Bezeq International has set itself the goal of continuing to be among the leading companies in Israel
in the fields of ICT, international communication services, public cloud, and cyber for businesses.
Bezeq International focuses on growth in the content worlds that it has defined for itself as its main
growth engines: integration, international data communication, cyber, public cloud, and data center.
Bezeq International will develop these growth engines, among other things, by launching new
products and solutions, including artificial intelligence applications in these content worlds. Part of
the growth is planned to be achieved through the development of the companies controlled by Bezeq
International and the acquisition of new companies in fields related or tangential to its areas of
activity. Bezeq International strives to make its services accessible to a wide range of business
customers, from small and micro businesses to enterprise customers, government, and international
customers. At the same time, Bezeq International is working to streamline the sales and service
system, with an emphasis on establishing a platform that will enable self-purchasing and self-service,
online and digitally, and with full or partial automation.
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
The ICT and business communications market is characterized by rapid and constant
technological developments. Bezeq International's long-term success depends largely on
its ability to adapt the arsenal of solutions it offers to the changing and evolving needs of
its customers. There is no assurance that Bezeq International will be able to adapt,
improve, and launch solutions that keep pace with technological changes. If Bezeq
International fails to anticipate and prepare in advance for the directions of market
development, to know how to adapt its services to these developments and to maintain
technological up-to-dateness, its income may be harmed.
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 income 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
In Bezeq International's field of activity, there is legislation and regulations regarding
various issues such as competition, consumer protection, privacy protection, etc. In
addition, communications services are subject to special regulation in this field. Changes
or additions in regulation 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
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
132
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
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. Regarding information systems, it should be noted that the
information systems currently used by Bezeq International are outdated and not
supported by the manufacturer (see Section 4.7), which poses a risk of faults in these
systems. The transition to cloud-based information systems (as stated in Section 4.7)
carries a risk of Bezeq International's information, including personal information about
its customers, being held by a third party.
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
employees undergo periodic information security training. Every month Bezeq
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 certified under various information security standards such as
ISO27001, SOC2.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
133
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 once a year 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,
or damage to the submarine cable, which is used to provide international communication
services, may adversely affect Bezeq International's business and its results.
4.14.9.
Damage to electricity supply - Damage to the electricity supply to Bezeq International
facilities for various reasons (some of which are described in Section Error! The source of
the reference was not found.) may have a negative effect on Bezeq International’s
business and damage Pelephone's ability to provide services. Some of Bezeq
International’s systems have power backup, but at the same time, in the event of
prolonged damage to some or all of the systems, there may be significant difficulties and
beyond that in the provision of Bezeq International services, including in the event that
Bezeq International cannot return the systems to service quickly. A prolonged disruption
to the electricity supply may have a particularly negative impact on Bezeq International's
activities in the field of hosting services.
4.14.10.
Legal Proceedings
4.14.11.
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. 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
Section4.12.
4.14.12.
Labor relations and streamlining procedures
Bezeq International has a collective agreement with the Histadrut and the Employee
Representative Council 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 Section1.7.10, 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 an open labor
dispute. Regarding labor disputes at Bezeq International, see Section 4.8.
4.14.13.
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.
4.14.14.
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 4.11.5) have lead and may continue to lead to damage to Bezeq International's
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
134
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.
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.
4.14.16.
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.
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 risk61:
Risk factors summary table - international communications, Internet services, and ICT
solutions
The extent of the impact of
the risk factor on Bezeq
International's operations
High
effect
Medium
effect
Low
effect
Macro risks
Exposure to changes in exchange rates
X
Epidemic
X62
Damage caused by nature, war, disaster
X
Damage to electricity supply
X
Industry risks
Growing competition
X
Investments in infrastructure and technological changes
X
Governmental supervision and regulation
X
Serious malfunctions in information systems and engineering systems
X
Information security, customer data protection and cyber risks
X
Special risks for Bezeq International
Legal proceedings
X
Labor relations and streamlining procedures
X
Loss of knowledge and information
X
Impairment of Bezeq International's assets
X
Cash flow
X
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
61 See Footnote 47.
62 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.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
135
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.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
136
5.
Yes - multi-channel TV
Yes is a subsidiary wholly owned by Bezeq, which provides a service of multi-channel television broadcasts
over the Internet (OTT) and via satellite, 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 occured 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. 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 who operate in a
format that includes linear channels and on-demand content are Yes
(through Yes+ and STING services, for details, see Sections 5.2.2.1a,
5.2.2.2 and 5.2.2.1b), Cellcom, Partner, Hot, and freeTV (regarding the
commencement of operations of freeTV, see Section 5.5.1). In addition,
various channel operators, including the commercial broadcast
channels operating under the Second Authority Law and the
broadcasting corporation, allow viewing of their content through
dedicated applications. The main international providers operating in
Israel are Disney, Netflix, Apple, and Amazon, which provide options for
watching VOD content without linear channels. To the best of Yes’s
knowledge, most subscribers of international providers in Israel also
subscribe to the services of some of the local providers. 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 (see Subsection B).
In accordance with the Broadcasting Distribution Law, a broadcasting
body, whose broadcasts are part of the "open broadcasts" (namely, TV
channels distributed through The DTT system referred to in Subsectoin
C below, but excluding micro and dedicated micro channels) will give
each "registered content provider"63 consent to broadcast its linear
broadcasts on the Internet free of charge, in accordance with and
subject to the provisions of the law64. As of the date of this report, Yes
has agreements with the aforementioned broadcasters, which also
include on-demand viewing services.
B. Broadcasting license holders under the Communications Law who
provide multichannel television services (both linear channel
broadcasting and on-demand viewing services65) via satellite and cable
- Yes and HOT66 ("the satellite and cable broadcasting sector"). This,
alongside the provision of multichannel television services via the
Internet (see Subparagraph A). For details regarding the regulation
applicable to such broadcasting license holders, see Section 5.14.
There are collaborations between some of the local license holders and
providers and some of the international providers. Yes has a number of
63 "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.
64 In February 2023, a provisional order that applied to the commercial channels ended, which applied special arrangements in relation to
them, including granting a license for their broadcasts on the Internet to any registered content provider 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. All is as detailed in the provisional order.
65 For the question of regulation in the field of Yes's VOD services, see Section 5.14.2.
66 Which provides cable television services, which has a declared monopoly under the Economic Competition Law in the field of multichannel
television broadcasting.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
137
collaborations as mentioned, among others, with Disney and Netflix,
which include, among others, the distribution of their services for a fee.
C. The DTT array
A digital distribution system for digital television (DTT), known as
"Idan+", through which certain channels are distributed to the public,
free of charge
67. The system is operated as of the date of the report by
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.68
As of the date of this report, the DTT constitutes a replacement product,
in part, for multi-channel TV broadcasts.
D. Parties that offer content without the permission of the rights holders
(piracy)69
5.1.1.2.
The multi-channel TV providers, including Yes, 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 Yes and the restrictions thereon, see
Section 1.7.3.3.
In the year of the report, the fierce competition continued to prevail, mainly due to the
activity of freeTV and the activity of local and international content providers via the
Internet, as mentioned, operating at a relatively low price level. The activity 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 Yes operates - see Section 5.5. For the question of
regulation of over the Internet (OTT), see Section 5.14.2.
For changes in the number of Yes subscribers, see Section 5.5.1.
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.
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.
In 2023, the Ministry of Communications published a memorandum of the
Communications (Broadcasting) Law, 2023-2023, which includes the text of a bill ("the
Memorandum" and "the Bill", respectively). According to what is stated in the Bill and
the explanatory notes to the Bill, the Bill was based on the recommendations of various
67 As of the date of this report, To the best of Yes's knowledge, the television channels of the Broadcasting Corporation (Kan 11, Kan
Educational and Channel 33), holders of television broadcasting licenses under the Second Authority Law, 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"). 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.
68 In accordance with a temporary order in the Broadcast Distribution Law, from 7.10.2023 until 31.1.2025, holders of a television
broadcasting license (using SD technology) and holders of a radio broadcasting franchise are exempt from paying distribution fees. The
Economics Committee discussed a government bill to extend the temporary order.
69
Yes is one of the shareholders of Zira Ltd., which works to prevent copyright infringement in video content on the Internet.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
138
committees over the years (the most recent of which was the Folkman Committee) and
to update the set of duties and rights applicable to all players operating in the visual and
audio content market in a number of ways, including the following:
A. A new authority will be established in place of the Cable and Satellite Broadcasting
Council and the Council of the Second Authority for Television and Radio, whose role
will be to regulate the entire field of viewing and audio content provision in a way
that will be indifferent to the manner and technology in which the content is
distributed, it Will be responsable for the competition in the field of cisual and audio
content provision, and it will be authorized to issue provisions that prevent actions
that may harm competition in the field.
B. A limited and focused set of duties will be applied to the significant players operating
in this market, including registration duties (and for this purpose it was proposed to
establish three different registries - for content providers, Israeli channels, and news
providers), investment in local productions (see paragraph 6 below), distribution of
content from the Israeli Broadcasting Corporation and the Knesset Channel,
obligations in the fields of sports and consumerism, where the extent of the
obligations will change according to the income level of the content provider.
C. The existing restrictions on the economic models in the content market for visual and
audio content will be removed (while allowing some of the provisions regarding
cross-costs). As far as the holders of broadcasting licenses (including Yes) are
concerned - the prohibitions applicable to them regarding the broadcasting of
advertisements and the production of news content will be lifted. In addition, a
transitional provision was established according to which TV broadcasting licensees
as defined in the Second Authority Law, to whom the transfer arrangements set forth
in the Communications Law and the Broadcasting Distribution Law apply, will be
required to allow the continued transfer of the channels to registered licensed
providers in accordance with what is stated in the said laws and the mandated
changes, and this for the period stipulated in the Memorandum.
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.
Yes submitted its response to the Memorandum. As of the date of this report, to the best
of Yes's knowledge, no legislative procedures have been promoted in connection with the
Memorandum. Since this is a legislative memorandum, at this stage it is not known which
of the provisions of the Memorandum, if any, will be enshrined as binding legislation, and
what the content and regulations of such legislation will be, and therefore, it is difficult
at this stage to assess the extent of the impact of the legislation and regulations that will
be established following the Memorandum on Yes's business (if any).
5.1.3.
Changes in the scope of activity in the field and its profitability
For data on changes in the scope of Yes’s activity and profitability, see Section 1.5.4.4.
5.1.4.
The critical success factors in the field of activity and the changes that apply to them
5.1.4.1.
Quality, differentiation and originality in the content of the broadcasts, in
their variety, branding and packaging.
5.1.4.2.
Providing relevant value propositions to various target audiences.
5.1.4.3.
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).
5.1.4.4.
Providing TV services via the Internet.
5.1.4.5.
Offering a "basket" of communication services that includes television
services and other services, such as Internet browsing services (see Section
5.14.2).
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
139
5.1.4.6.
Collaborations with international content providers and providing access to
applications operated thereby.
5.1.4.7.
High level of customer service tailored to the type of service.
5.1.4.8.
The strength of the brand and its identification with quality, innovation and
leadership, content and services for subscribers.
5.1.4.9.
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.
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 as well
as the establishment of dedicated infrastructure; (B) investments required
from operators in the field, including the purchase and production of
content; (C) The limited scope of the Israeli market and its characteristics.
The scope and level of barriers to entry into Internet TV services are 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.
5.1.5.2.
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
Yes sees the possibility of receiving many foreign channels using relatively cheap end
equipment as a substitute for its services in relation to certain segments.
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.
Yes does not have data on the number of subscribers of the international content
providers operating in the field and on the number of viewers of the DTT system. Yes
estimates that most of them are also subscribers of the local television providers
operating in the field. Yes estimates that the change in the overall market share is
immaterial.
For more details on the competition in the field see Section 5.5.
5.2.
Products and services
Yes offers television services through OTT services and via satellite, with a variety of value
propositions that differ from each other in terms of the scope of content, the scope of services
included in them, the interface through which they are offered, and price. The offer of OTT services
is part of a gradual trend of migration of Yes’s services from satellite TV services to OTT services. For
the migration process see Section5.17.3.
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 income per
customer.
5.2.1.
Yes’s television services
OTT Services
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
140
Yes offers several OTT services:
A. Yes+ services
Yes offers the Yes+ service, which includes linear TV channels, as well as delayed
viewing services, including VOD content, in several packages offered. The service is
provided via suitable streamer devices, TV screens and additional end devices,
including mobile devices. The service can be used on its own or in parallel with the
satellite service.
B. STING+ services
Yes offers the "STING+" service, which includes linear TV channels, as well as delayed
viewing services, including VOD content. The service is offered in several viewing
packages that do not include all the content offered as part of Yes's other services,
and are characterized by relatively low price levels. The service is provided via
suitable streamer devices, TV screens, and additional end devices, including mobile
devices.
Satellite broadcasts
Yes broadcasts via satellite include linear television channels, as well as, depending on
the end equipment, on-demand viewing services, including VOD content.
For the purpose of receiving Yes 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 Yes’s broadcasting license and the council's decisions, the
broadcasting of the Yes via satellite includes a basic package of linear channels that each
subscriber is required to purchase (along with other basic packages that Yes 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.
For the question of the regulation of the field of Yes’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.
The following is the Yes’s susbscriebr balance distributed by satellite subscribers and IP
subscribers70
70 The number of IP subscribers also includes subscribers who also use the satellite services in parallel (see also Section 1.5.4.4).
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
141
5.2.2.
Internet access services
Yes provides Internet access services, focusing on selling combined Internet and
television packages to customers.71 These services are provided through services received
by Yes from Gilat.
The following is a breakdown of Yes’s fiber subscriber base:
5.3.
Customers
The vast majority of Yes’s subscribers are private customers. Yes enters into agreement with its
subscribers, which regulate the subscribers' set of rights and obligations in their relationship with
Yes. With respect to the subscription agreement with the satellite subscribers, the approval of the
council is required, which was received.72
71 The services are provided according to a general permit in accordance with the provisions of a general permit, and in Judea and Samaria -
according to a permit granted by virtue of the rules regarding a general permit for the provision of telecommunications services (Judea and
Samaria), 5774 - 2024.
72 According to the broadcasting license, the approval of the Uniform Contracts Court is also required for the subscription agreement
(approval previously granted and expired). Yes has applied to the Council for amendments to the subscription agreement and for the
amendment of the license, as part of which Yes 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.
Subscriber base (thousands)
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
142
5.4.
Marketing and distribution
5.4.1.
The marketing of Yes’s services is done through advertising in the various media. Yes’s
sales activity to existing and new customers is carried out through the following main
distribution channels (some of which are operated by Yes 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).
Yes' main competitors are Hot, Cellcom, Partner, freeTV73, and Netflix.
The following is data on subscription numbers and market shares74 of Yes, to the best of
its knowledge, as of December 31, 2022 and 202375:
2024
2023
Subscriptions
(thousands)
Market Share
Subscriptions
(thousands)
Market Share
562
32%
574
33%
5.5.2.
Current competition characteristics
Competition in the field focuses on the variety and content of broadcasts, the price of
services, the quality of service, the quality of broadcast applications, and advanced user
interfaces.
The competition is also characterized by the offer of additional communication services
alongside the offer of TV 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 Yes, see
also Section 1.7.3.3), 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 yes
5.5.3.1.
In the opinion of Yes’s Management, the main competitive advantages of
the Yes are:
A. The quality and variety of content that Yes broadcasts to its subscribers.
B. Level, quality and availability of Yes’s customer service system
C. Use of advanced technologies to provide advanced services and a good
user experience.
73 freeTV is a multi-channel broadcasting platform via the Internet, owned by Keshet Broadcasting Ltd., which operates, among other things,
a commercial television channel transmitted as part of Yes Broadcasting ("Keshet"), as well as RGE Group Ltd. ("RGE"). For details about the
Sports Channel Ltd., which is part of the RGE Group, see Section 5.9.2.
74 The market shares were calculated from all Yes, Hot, Partner, Cellcom, and freeTV 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 Yes’s market shares in 2023 and 2024 is based on
the number of Yes, Cellcom, and Partner subscribers (according to their reports on the number of subscribers as of the end of the third
quarter of 2024), as well as of Hot and freeTV, which do not publish the number of their subscribers, so the data in relation to them is
according to Yes’s estimate. However, there is no certainty that the data presented in relation to Hot and freeTV are accurate, and therefore
it is possible, respectively, that the actual market shares are different from those estimated.
75 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 per small business customer, which is determined once per period.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
143
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.
Yes’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. Regulatory restrictions -
For restrictions regarding the marketing of a shared basket of services,
see Section 5.14.2.
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 Yes
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.
B. Space segments - the use of space segments involves heavy fixed
expenses, depending on the receipt of the services by a third party (see
section 5.15), 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 Yes to deal with the competition:
5.5.4.1.
Content - Yes 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.
5.5.4.2.
Pricing policy - offering a variety of services at different price levels.
5.5.4.3.
Offering OTT services and migration (see Sections שגיאה! מקור ההפניה
.לא נמצא 5.2.1.1 and 5.17.1).
5.5.4.4.
Service - Yes places emphasis on the customer service system.
5.5.4.5.
Technology - Yes is investing in expanding its technological capabilities, with
an emphasis on providing innovative and advanced services.
5.5.4.6.
Branding - Yes cultivates, promotes and differentiates the brand "Yes".
5.5.4.7.
Collaborations with international content providers and accessibility of
content applications.
5.6.
Production capacity
The number of channels that Yes 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, Yes utilizes most of the space segments
available to it. The space segments are provided to Yes 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.
PP&E, real estate, and facilities
The following are the main components of Yes’s PP&E:
5.7.1.
Real estate
Yes leases a number of real estate properties for its operations. Yes’s headquarters, as
well as its main broadcasting center, are located in leased real estate in Kfar Saba, whose
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
144
lease period ends in 2029 (with an option available to Yes 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 Yes leases (including additional offices in Kfar Saba) ranges between
about one year to four years (these periods are based on the exercise of options to extend
lease periods granted to Yes).
5.7.2.
Satellite end equipment
Yes 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. Yes purchases streamers and leases them to its
subscribers.
5.7.4.
Broadcasting equipment and computer and communication systems
Yes 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 OTT systems and satellite. 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 2029.
5.7.5.
Operating and encryption systems
Yes purchases from Synamedia Group ("Synamedia") development, embedding,
encryption, maintenance and warranty services related to the operating systems of its
OTT and satellite systems, in accordance with the framework agreements between Yes
and Synamedia from January 2020. These services are provided in relation to various Yes
systems, end equipment, and viewing cards and other hardware components required to
receive these services, and Yes has also been granted relevant licenses for the use of
systems and end equipment.
The engagement period with Synamedia in relation to the satellite system is until
February 2026, with extension rights for Yes until December 2028, subject to the terms
of the agreement, while Yes is entitled to an early termination in the event of the
cessation of satellite broadcasts.
The engagement period regarding the OTT system is until December 2029 (with the right
to extend for an additional 24 months).
For the services and products provided under these agreement, Yes 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 Yes, the extent of their
use, including development services that Yes may order under the agreements.
Yes 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
Yes 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 Yes also uses
Salesforce software together with Pelephone and Bezeq International, according to
Pelephone's contract with Salesforce (for details, see Section 3.8.4).
Yes is dependent on the NetCracker system and services and-Salesforce, due to their
importance for Yes's management and monitoring of purchase of services and content by
its subscribers, as well as for the purpose of charging and collecting from its subscribers.
System failures or discontinuation of services to Yes (Including depending on Pelephone’s
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
145
engagement 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, ome are valid until the end of 2027, and some are valid until the September
2029. The contracting with Salesforce is until the end of 2027.
5.8.
Intangible assets
5.1.1.
Licenses
DBS has the following main licenses:
5.8.1.1.
Broadcasting license valid until February 2026 - this license is material to
Yes’s satellite activity and constitutes the main regulatory permit for this
activity (for the terms of this license, see Section 5.1476).
5.8.1.2.
License for satellite television broadcasts in the Judea and Samaria area
valid until February 2026, the provisions of which are similar to Yes’s
broadcasting license specified in Section 5.8.1.1.77
5.8.1.3.
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 2022.78 This license is
essential for Yes’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
Yes has registered trademarks, the main ones of which are intended to protect its trade
name (Yes) and the key brands it uses (Yes, Yes+, STING+).
5.9.
Broadcasting rights
5.1.1.
Yes has broadcasting rights in content of two types:
Content whose rights to broadcast are acquired from third parties, including discrete
content and channels. Yes 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 Yes invests in its production (in full or in part), and in addition to the right to
broadcast the content as part of its broadcasts, Yes usually has rights in the same content,
at the rates specified in the agreements with the producers. In most cases, Yes is also
entitled to grant rights to the use of rights and to participate in income arising from
additional uses of the content beyond their broadcasting by Yes.
Broadcasting and distribution of content by Yes, 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 Yes is a forward-looking assessment, as defined in the Securities Law,
based on, among other things, Yes estimates, including in relation to the extent of the use
76 This license gives Yes the right to notify the Ministry of the extension of the license in two periods of one year each time,
under the conditions stipulated in the license.
77 In July 2021, an application was made to the Head of the Judea and Samaria Administration for the renewal of this license.
78 After an extension made in January 2022.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
146
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.
5.9.1.
Dependence on content provider
In view of the large number of content providers from whom Yes acquires broadcasting
rights, Yes 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 Yes customers. Compensation under
these agreements is based on a fixed monthly payment in accordance with the number
of subscribers to Yes 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 Yes customers, it is important to broadcast them as part of its
broadcasts.
5.10. Human capital
5.10.1.
Organizational structure
Yes’s Management consists of divisions, with each division headed by a VP, who serves as
a member of Yes’s Management.
The CEO of Yes also serves as the CEO of Pelephone. In addition, most of the VPs who
serve at Yes also serve as VPs at Pelephone, so does the Internal Auditor (who also serves
in Bezeq International).
5.10.2.
Yes employee balance:
Number of employees
31.12.2024
31.12.2023
Administration
374
366
Customer Division
669
726
Total
1,043
1,092
The number of employees included in the table above includes employees employed part-
time. The total number of jobs79 in Yes as of 31.12.2024 amounted to 1,994 (compared
to 1,018 as of 31.12.2023).
5.10.3.
Benefits and nature of employment agreements
The terms of employment in the Yes are regulated, among other things, in collective
79 Calculated as the total monthly working hours divided by the standard monthly working hours.
Interna
l Audit
Board of
Directors
CEO
Legal
advice
and
regulation
HR
Engin
eering
Marke
ting
Public
Relati
ons
Business
Custome
rs
Division
Conte
nt
Finan
ce
IT
Private
Custom
ers
Division
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
147
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 Yes’s
employees is the National Histadrut.
In addition, Yes 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, Yes engaged in a collective agreement with the National Histadrut and
the Employees’ Committee, which included, among other things, amendments to
previous collective agreements and collective arrangement. The new collective
agreement was valid until December 31, 2024. According to it, 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 Yes employees (as amended above) regulate, inter
alia, the periods after which a Yes 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 Yes to
employees, during the term of the agreement.
On 27.2.2025, Yes signed a document of principles between itself, the Histadrut, and Yes’s
Employees Representative Council, according to which, subject to the approval of the Yes
Board of Directors, which was given on 6.3.2025, the parties will sign an extension of the
collective agreement they entered into on 11.8.2021, until 31.12.2025, with certain
changes. Among other things, it was agreed in the document of principles that, regarding
the Company's activity to eliminate structural unbundling, Yes’s Employees
Representative Council will act in full cooperation on the matter as detailed:
Yes’s Employees Representative Council agrees to Yes's request to join the process while
reaching agreements between the parties, which include participation and updating of
Yes’s Employees Representative Council on the Company's activity on the matter,
including:
(1) Informing and consulting with Yes’s Employees Representative Council before any
step that constitutes a structural change within the process.
(2) Regulating the implications of the steps in the process on Yes employees in a
collective agreement (or other agreed-upon way) when any step with such
implications is not implemented unilaterally before being regulated reasonably and
fairly between the parties, while such negotiations will also include requirements for
regulating economic changes in favor of the employees.
It was further agreed in the principles document regarding the holdings of a controlling
shareholder in the Company and the possibility of a future change of control in the
company, that Yes employees will receive a grant on terms and at times to be specified
in the agreement depending on the change in the holdings of the current holders of the
control permit in the Company (or the expiration/cancellation/transfer of the control
permit).
yes estimates the additional cost according to the principles document at an amount that
is negligible for the Company (including the amount of the grant for the change in control
described above and not including possible economic changes for the cancellation of the
structural unbundling).
Insofar as the collective agreement is extended as stated above, after ending on
December 31, 2025, 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.
For the labor dispute declared at Yes and Bezeq in December 2024 in connection with
Bezeq's activity to cancel the structural separation obligation between Yes and its
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
148
subsidiaries, see Section 2.9.6.
5.10.4.
Employee compensation plans
Yes 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 equity compensation from Bezeq in relation to some of Yes’s executives,
see Section 2.9.5.
5.11. Suppliers
5.1.1.
Rate of purchases from main suppliers and the form of engagement with them
Yes considers as a "main supplier", for the purposes of Section 23 of the First Schedule to
the Prospectus Details Regulations, a supplier from whom Yes’s annual volume of
purchases exceeded 10% of the total annual volume of purchases of the Group. During
the year 2024, Yes did not have a main supplier as defined above.
5.11.1.
Dependence on suppliers
Yes believes that it may be dependent on the following suppliers:
Gilat Telecom, for details on the engagement, see Section 5.2.2.
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 Yes is carried out from its own sources, but it may need investments or
credit from the Company according to Yes’s needs.
Yes’s estimate as mentioned above is forward-looking information, as defined in the Securities Law.
There is no certainty that in the future Yes will require financing from Bezeq or that Bezeq will provide
financing for Yes’s activities in excess of the above, and on what dates, and this depends, among
other things, on the situation of Yes, on developments in its areas of activity and on the state of
competition in these areas and on Yes’s future financing needs.
In March 2025, Bezeq approved a credit facility or investment in Yes’s equity in a total amount of up
to NIS 100 million, for a period of 15 months starting on 1.1.2025. This approval is instead of a similar
approval given in November 2023 (and not in addition to it).
5.13. Taxation
For more details, see Note 7 to the 2024 statements.
5.14. Restrictions and supervision of Yes
5.1.1.
Regulation of satellite broadcasts
Yes’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
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
149
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 Law80 and in newspapers with daily circulation, as well as
"Israeliness" requirements regarding officers in the Yes 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 Yes’s Council-approved
price list. The vast majority of satellite subscribers subscribe to promotions,
offering Yes services, including various composition of content packages,
ancillary services as well as receiving and installing end equipment, at prices
lower than the list price.
Yes 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 Yes, 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 2024 and 2025, Yes must invest
an amount of not less than 8% of its income from the subscription fees of
satellite subscribers81 in local productions, when according to the rules of
the media and the decisions of the council, Yes must invest different rates
out of these investment amounts in different categories of local
productions.
In January 2024, the Council decided to postpone for 2025 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%.
Regarding the obligation to invest in local productions - see also Section
5.16.10.
5.14.1.4.
Duty to transfer channels
Yes is obligated to transmit the "mandatory channels" in satellite broadcasts
and everything as determined by the Minister and in the broadcasting
license.82
In addition, Yes 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-
80 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.
81 Based on its income in the past year from satellite subscribers, including Yes’s income from end equipment and its installation. According
to the position of the Council, according to which the actual investments are made, even though Yes disagrees with it, these income also
include income from VOD service to satellite subscribers.
82 According to the provisions of the Communications Law, Yes is exempt from payment to the commercial channels included in
the mandatory channels due to the transmission of their broadcasts over its satellite broadcasts. For the transmission of the
commercial channels as part of the OTT services, see Section 5.1.1.1.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
150
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 Yes. According to the Second Authority Law, 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
Yes, for a transition period, after being extended as part of amendments to
the Second Authority Law will end in February 2023.
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 Yes. 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 Yes’s broadcasting license, Yes 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.
5.14.1.6.
Ownership of broadcast channels
According to the rules of communication, Yes, 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 Yes broadcasts (compared to a limit
of 20% applicable to HOT). Yes is also restricted according to the
Communications Law, in owning a news broadcast producer.
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 Yes 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 Yes’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 48 million).
5.14.2.
Regulation of OTT services
OTT services (such as those offered by Yes 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. Yes also believes that the VOD services it provides via the Internet
to satellite subscribers (see Section5.2.1) 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 Yes 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 Yes, but this
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
151
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 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 legislative
procedures.
5.14.3.
Offer of baskets of services
Yes markets integrated packages of TV and Internet services provided by it. Regarding
combined packages of satellite television and internet services, according to the
broadcasting license, Yes may offer a shared basket of services, including Bezeq service
and Yes 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 Yes, 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 Yes and the amendment under consideration, see Section 2.16.9.3.
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 Yes, which were signed or are
valid during the reporting period:
5.15.1.
Agreement for the lease of space segments83
According to an agreement with Space, since 2013, as amended (including amendment
from January 2023), Yes has leased space segments in satellites from the "Amos" series
("the Space Agreement").
In accordance with the provisions of the Space Agreement, Yes leases space segments on
"Amos 3" satellite, and also leased until February 2025 space segments on the "Amos 7"
satellite.84
Period of the agreement - until the end of the life of the "Amos 3" satellite85, expected in
February 2026, (subject to the exceptions set forth in the agreement. However, in certain
cases, Yes may announce continued use of the "Amos 3" satellite even after its end of life,
in return for a reduced fee. Yes estimates, based on the information provided to it by
Space, continued use of the "Amos 3" satellite as described above will be possible
(possibly on a more limited scale) even after its end of life, for a period of several months.
Leased space segments - According to the Yes-Space Agreement, Yes leased 12 space
segments from Space, in accordance with the division between the relevant satellites
determined in the agreement according to the various periods, and starting in February
2025, Yes leases 10 space segments in Amos 3. The agreement includes backup
83 The estimates 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 Yes 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 Yes, 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.
84 See Bezeq's immediate report dated February 27, 2023.
85 End of life is defined as the date on which the last correction of the satellite's position on the north-south axis is made. After this date, the
satellite can continue to be used for a limited period, until the date when the satellite's deviation from its position no longer allows its use.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
152
arrangements in the event of the unavailability of any of the space segments.86
Cost - the average annual cost until the end of the lease in Amos 7 was approximately
USD 25 million, subject to the discount and reimbursement mechanisms set forth in the
Space Agreement, and starting in February 2025, approximately USD 18 million.
Yes has a substantial dependence on Space, as the sole owner and sole supplier of the
space segments used by Yes, 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 the “Amos 3”
satellite, unavailability of the space segments used by Yes, and the lack of redundancy for
the Amos 3 satellite, see Section5.18.3.4 5.18.3.5.
5.15.2.
Agreement with Partner Communications Ltd.
In July 2024, Yes entered into an agreement with Partner Communications Ltd.
("Partner"), under which Partner will be entitled to market to its subscribers an
application for viewing audiovisual content, which will be made available to it by Yes and
supported by it, based on the Sting+ service operated by Yes ("the Service" and "the
Agreement", respectively), with certain changes stipulated in the Agreement. According
to the Agreement, Yes will be entitled to a monthly payment, based on the number of
Partner subscribers in the Service, which will not be less than a total of approximately NIS
5.3 million (including VAT as applicable) plus linkage differences according to the terms
set out in the Agreement.
In accordance with the provisions of the Agreement, yes and Partner will work to meet
the commercial launch date of the Service as early as possible and in any case within nine
months from the date of signing the Agreement or six months from the date of approval
by the Competition Authority to enter into the Agreement, whichever is later
(“Commercial Launch Date").
The term of the agreement is 5 years from the Commercial Launch Date, with Partner
being entitled to extend the term of the Agreement for an additional year. In addition,
Partner WILL be entitled to terminate the Agreement early, for any reason, with a 6-
month prior notice not to be given before 36 months have elapsed from the Commercial
Launch Date. At the end of the Agreement period (including to the extent that the
additional period has been fulfilled), Partner will be entitled to continue to provide the
Service in accordance with the terms of the Agreement for a transition period not
exceeding 18 months. In the estaimte of the Company and Yes, the contribution of the
Agreement to the business activity of the Bezeq Group is not expected to be material.
The entering into and execution of the Agreement are subject to the fulfillment of
conditions precedent, including the approval of the Competition Authority as stated and
approval in connection with the receipt of the approvals required for Yes to comply with
its obligations under the Agreement. As of the date of publication of the report, there is
no certainty that the Agreement will enter into force, taking into account the need for the
conditions precedent to be met.
The information stated in this section regarding the entry into force of the Agreement
and the date of commercial launch is forward-looking information, as this term is defined
in the Securities Law, which may not materialize or may materialize in a materially
different manner than anticipated, depending, among other things, on the variables
noted above, among other things due to factors beyond the control of Yes, including the
need for approval from the Competition Authority and other approvals and the manner
in which the Agreement will be implemented by the parties.
5.16.
Legal Proceedings87
5.1.1.
Pending and contingent legal proceedings
86 According to the agreement, in a case of unavailability, Space 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.
87 For reporting policy and materiaityl threshold, see Section 2.18.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
153
Date
Sides
Court
Type of
procedure
Details
Amount of
claim /
remedies
a.
Decem
ber
2020
Tel Aviv
District
Court
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 Yes (Ron Ayalon) see Section
1.1.6.
b.
June
2017
Bezeq
shareholders
vs. Bezeq,
Chairman of
the Board of
Bezeq,
members of
the Board of
Bezeq, as well
as members
of the
Eurocom
Group and vs.
the (former)
CEO of Bezeq
and CEO
(former) and
CFO of Yes
Tel Aviv
District
Court
(Economic
Departme
nt)
Motion for
approval of
class actions
For details regarding a motion for approval
of a class action lawsuit filed against,
among other things, the former CEO of Yes
and its former CFO, in connection with a
2015 transaction in which Bezeq acquired
the remaining shares of the Yes shares held
thereby from Eurocom DBS, see Section
2.18.1c.
c.
July -
August
2017
Bezeq
shareholders
against Bezeq
shareholders,
former
controlling
shareholder
of Bezeq,
former
officers of
Bezeq,
Eurocom
Holdings
(1979) Ltd.,
Eurocom
Communicati
ons Ltd., and
the Company,
as well as
against Bezeq
and Yes as
formal
respondents
Tel Aviv
District
Court
Motion for
approval of a
derivative
claim
For details regarding motion to approve a
derivative action filed in connection with
the motions 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 Yes, for disclosures of certain
documents in connection with a 2013 Yes
and Space stakeholder transaction as
amended in 2017 (Space Agreement) See
Section 2.18.1 Paragraph D.
d.
June
2023
Customers vs.
Yes
Central
District
Court-Lod
Motion for
approval of
a class
action
The point of the claim is that Yes does not
act in accordance with the law with regard
to giving notice of the end of fixed-period
transactions in that it does not send a
separate and independent notice of the end
date of the benefit period, beyond
informing the customer through the
monthly invoice and by sending a text
message.
It should be noted that similar motions on
the same subject (failure to provide notice
as required on the termination of a fixed-
period transaction) were filed against the
Company
(see
Section
2.18.1)
and
Pelephone (see Section 3.16.1).
Over
NIS
2.5 million
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
154
Date
Sides
Court
Type of
procedure
Details
Amount of
claim /
remedies
e.
Augus
t 2023
Customers vs.
Yes
Central
District
Court-Lod
Motion for
approval of
a class
action
The claim alleges that Yes breaches its
obligations
to
customers
who
have
contracted with it for the Yes Unlimited
plan, in a manner that does not allow them
the guaranteed free and full viewing
without additional payment of all channels
broadcast by it, both those existing at the
time of the contract and those that were
added and will be added over the years to
its broadcasts. In addition, the motion
alleges that Yes charges an additional fee for
converters that support HD or 4K quality
broadcasts, despite its obligation to provide
subscribers to the plan up to seven (7)
converters at no additional charge, when
the terms of the plan do not limit the type
of converters. In February 2025, the parties
reached agreements – which were granted
the validity of a resolution, according to
which, inter alia, and without admitting
mutual claims: the applicant and his
attorney will withdraw from the motion for
approval; Yes will provide subscribers in the
Unlimited route with a notice in the agreed-
upon form, and will also cease collecting
payments from subscribers in this route for
converters of the agreed-upon type. It was
further agreed that during March 2025, the
parties will submit pleadings regarding
compensation and fees as part of a
compensated withdrawal arrangement. Yes
estimates
that
the
amounts
of
compensation and fees determined by the
Court will not be material to Bezeq.
107
f.
June
2018
Organizations
of creators,
performers,
producers,
screenwriters,
and editors
vs. the
Council, the
Chairman of
the council,
Yes and Hot
Tel Aviv
District
Court
(Economic
Departme
nt)
Motion for
approval of
a derivative
claim
Regarding motion to approve a derivative
claim in the name of Bezeq and/or a "double
derivative" claim in the name of Yes against
Mr. Shaul Elovitch and the Company filed in
April 2024, in continuation of a motion for
discovery and perusal of documents
pursuant to Article 198 of the Companies
Law (which struck out) regarding the sale of
Bezeq shares in 2016 by the Company – see
Section 2.18.1f.
5.1.2.
Legal proceedings that ended during the reporting period
Date
of
filing
claim
Sides
Court
Type of
procedure
Details
Original
claim
amount
(NIS millions)
a.
August
2023
Customers
against Yes
Central
District
Court-Lod
Motion for
approval of
a class
action
Regarding motion to approve a class action
lawsuit filed against Yes, the main issue of
which is the claim that Yes violates the
provisions of the law and the provisions of
its license regarding the waiting time
required to receive a response from a
representative from the beginning of the
call – in June 2024, a ruling was issued
striking out the motion, while reserving
rights. In June 2024, the Court received the
parties'
notice
that,
subject
to
the
applicants' undertaking not to file a new
Over
NIS
2.5 million
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
155
Date
of
filing
claim
Sides
Court
Type of
procedure
Details
Original
claim
amount
(NIS millions)
motion to approve the lawsuit as a class
action, Yes will waive its claim to charge the
applicants for legal costs and will pay the
applicants an immaterial amount.
b.
Januar
y 2024
Organizations
of creators,
performers,
producers,
screenwriters
, and editors
against the
Council, the
Council
Chairman,
Yes, and Hot
High
Court of
Justice
Appeal to
High Court
of Justice
In February 2025, a ruling was issued
dismissing the petition that sought to order
the Council and the Council Chairman to
require Hot and Yes to include their income
from additional services provided by them,
including multi-channel television services
over the Internet (OTT), for the purpose of
calculating
their
annual
investment
obligations in local productions according to
the Communications Law.
5.17.
Targets and strategy
5.17.1.
Yes's targets are to maintain its television market share while maintaining average ncome
per customer and growth in the volume of television and Internet package subscribers,
while identifying growth engines and preserving Yes's business and competitive position
in the field and the status of the Yes brand as a leading communications and television
brand.
As of 2019, Yes has been implementing a migration plan from satellite broadcasts to the
Internet (OTT) in a long-term gradual procedure.
In February 2026, Yes is expected to end satellite broadcasts in its current format, with
Yes examining a reduced and focused broadcast format for relevant audiences, including
institutional clients, even after this date.
The continuation of satellite broadcasts in a limited format and for a defined period as
determined, will, in the estimate of Yes, allow for optimization between alternatives so
that, on the one hand, it will be possible to achieve savings in Yes costs for broadcasts via
satellite in the amount of tens of millions of shekels per year (relative to the current
period), and on the other hand, it will be possible to spread the migration investments
over a longer period, while retaining customers by adapting a dedicated solution to
relevant audiences.
Yes's preparations regarding the possibility of continuing satellite broadcasts in a reduced
format as stated is forward-looking information, as defined in the Securities Law, based,
among other things, on assumptions, estimates, and forecasts of Yes's Management
regarding the current trend in the broadcast market, competition, business
developments, consumer habits, the technological environment, the regulatory
environment, and the manner of regulation, as well as regarding the resources and inputs
that will be required for this purpose, including space segments. However, it is possible
that Yes Management’s forecasts, estimates, objectives, and the aforementioned format
will not materialize, or will materialize in a materially different manner, in light of changes
in light of limitations related to the inputs required for its implementation, regulatory
limitations imposed or to be imposed on yes, changes in demand for this format and other
or additional changes in the field.
As of the date of approval of the statements, the proportion of Yes subscribers who use
Yes+ and STING+ services transmitted via the Internet (as stated in Sections 5.2.1.1(a),
5.2.1.1(b), and 5.2.2.2) is approximately 84%88 of all Yes subscribers. In this regard, see
also Section 1.5.4.4 (Note 3).
5.17.2.
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
88 This rate also includes subscribers who also use satellite services in parallel.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
156
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 Yes; 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 Yes to implement the outline of the
transition to OTT services.
5.17.3.
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 Yes’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 Yes 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
apply and will apply to Bezeq, which affect Yes. However, the predictions of the Yes
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 Yes (“the Risks") arising from its
general environment, from the industry and from the unique characteristics of its activities.
5.1.1.
Macro risks
5.18.1.1.
Financial risks - Yes 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,
satellite segments, purchase of end equipment and other logistics
equipment). Therefore, sharp exchange rate changes have an effect on
DBS's business results.
5.18.1.2.
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 Yes
subscribers, a decrease in Yes’s income 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 Yes.
5.18.1.3.
Epidemic - Disease outbreaks and epidemic events in general (such as the
outbreak of COVID-19 in 2020) may have consequences for Yes’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 Yes’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 Yes, and their consequences are subject, among other things, to the
decisions of countries and authorities in Israel and around the world that
may affect Yes accordingly. For this matter see also Section 5.18.1.2 and the
Company's reference in Sections 2.20.11 and 2.20.14.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
157
5.18.1.4.
Damage caused by nature, war, disaster - damage to Yes 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.
5.18.1.5.
Damage to electricity supply - Damage to the electricity supply to Yes’s
facilities for various reasons (some of which are described in Section Error!
The source of the reference was not found.) may have a negative effect on
Yes’s business and damage Yes’s ability to provide services. Some of Yes’s
systems have power backup, but at the same time, in the event of prolonged
damage to some or all of the systems, there may be significant difficulties
and beyond that in the provision of Yes services, including in the event that
Yes cannot return the systems to service quickly.
5.18.2.
Industry risks
5.18.2.1.
Dependence on licenses – Yes’s 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 Yes’s
ability to continue operating in the field.
5.18.2.2.
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 Yes’s activity and may materially impair its financial
results. The OTT services including those of Yes 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 Section5.1.1 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 Yes. In
addition, Yes’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 Section1.7.6.4 1.7.7.4).
5.18.2.3.
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 Yes 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 Yes’s business model . For the
characteristics of competition, see Section5.5.
Yes’s estimate, as stated in this paragraph above in relation to the possibility
of the entry of local and additional 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.
5.18.2.4.
Technological
developments
and
improvements
-
technological
improvements and the development of new technologies that will make
existing technology inferior, may require Yes to make large financial
investments in order to maintain its competitive position (see Section5.1.1).
5.18.2.5.
Alternative infrastructure for multichannel broadcasts - the activity of the
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
158
DTT system, and in particular its expansion or transfer to the Internet
infrastructure, as well as the deepening of the intrusion of OTT operators,
may harm the financial results of Yes (see Section5.1.1 5.1.1).
5.18.2.6.
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.
5.18.2.7.
Exposure to legal proceedings - Yes 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 Yes subscribers, and a claim
relating to a small damage to a single subscriber may become a material
claim to Yes, if recognized as a class action applicable to all subscribers or to
a substantial portion thereof.
5.18.3.
Special risks to DBS
5.18.3.1.
Limitations as a result of the ownership structure - Yes is limited in its
cooperation with Bezeq in relation to the offer of a basket of
communications services in a manner that materially affects Yes’s business
situation and its competitive capabilities (see Section 5.15.3).
5.18.3.2.
Restrictions as a result of the eligibility conditions - "cross" holdings of
holders, directly or indirectly, in Yes, as well as a decrease in the holding rate
of Israeli citizens or residents in Yes, 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).
5.18.3.3.
Maintaining a sufficient cash flow - Yes 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 Yes’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 Yes, 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 Yes activity for the coming year.
5.18.3.4.
Yes satellite transmissions are made using space segments of a single
satellite. Failure in the operation of the satellite, damage to it, or
unavailability of space segments therein, including unavailability of a
satellite intended to replace a satellite that has ceased to transmit or
provide services to Yes or termination of segment leasing in the satellite may
significantly disrupt and reduce the volume of Yes broadcasts via satellite,
and in the event of unavailability of any segments of "Amos 3" - completely
cease Yes 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. Yes does not
have insurance for loss of income 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 Yes
subscribers are still satellite subscribers may result in substantial damage to
Yes income.
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.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
159
Yes’s estimates as stated in this paragraph above is forward-looking
information. This assessment is based on the provision of space segments
and the implementation of space backup mechanisms and space
assessments in relation to the useful life of the satellite, the beginning of the
activity of new satellites, the end of the activity of the “Amos 3” and the
exercise of engagement in relation to it, and possible termination of lease
of space segments. This estimate may not materialize or be partially or
otherwise materialized in case of a change in the useful life of the satellite
and the exercise of its lease option, or if space does not provide Yes with
alternative segments in the event of unavailability or failure of the space
segments.
5.18.3.5.
Dependence on the owner of the rights in the space segments - Yes has a
substantial dependence on Space, as the sole rights holder and the sole
supplier of the space segments used by Yes, which is also responsible for the
operation of the space segments.
5.18.3.6.
Dependence on software suppliers, equipment, content, infrastructure and
services - Yes has dependence on software vendors and equipment, as well
as on certain content vendors (see Sections 5.7.2 and 5.7.5) 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 Yes 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.
5.18.3.7.
Impairment of the activity of the broadcasting centers and the logistics
center - Impairment of the activity of the broadcasting center may cause a
significant limitation 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, Yes will be able to
continue broadcasting some of its linear channels as well as the VOD service
from the other broadcasting center, with the exception of VOD services for
OTT subscribers, as long as the damage is to the main broadcasting center.
Each broadcasting 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 broadcasting centers. Damage to the Yes logistics center may
also disrupt its operations, and in particular the installation and
maintenance of end equipment.
The assessment of Yes 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 Yes is not allowed to
receive the services of the said provider in full and properly.
5.18.3.8.
Failure of DBS’s computer systems - significant failure of DBS's major
computer systems could significantly impair Yes’s operational capacity.
However, Yes 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 Yes site's computer systems
in Kfar Saba, it will be possible to reactivate the central systems through the
backup site.
Yes’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.
5.18.3.9.
Cyber risks - Yes 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
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
160
("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, Yes is a target for
cyber attacks and experiences cyber attacks, which are handled by its
information security and cyber protection teams.
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 Yes is the information security
manager.
Yes 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 Yes, 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. Yes 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.
Yes 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, Yes allocated
resources to manage cyber risks through the establishment of an
information security system consisting of professional employees in the
field.
Yes’s Board of Directors is involved in and supervises the management of
cyber risk at Yes within the framework of handling the overall risk
management policy of Yes.
Despite Yes’s actions investments in measures to reduce such risks, Yes 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.
5.18.3.10.
Technical limitation that prevents the offering of integrated services – Yes’s
satellite infrastructure suffers from technical limitations compared to Hot
infrastructure as well as to the Internet infrastructure. The technical
limitation prevents Yes from providing telephony, Internet and various
interactive services, including VOD, on its satellite infrastructure, and
therefore their supply depends on third parties.
5.18.3.11.
Defects in the encryption system or its bypass – Yes’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 Yes broadcasts, thereby leading to a decrease in income, as well
as a breach of agreements between DBS and its content providers.
5.18.3.12.
Lack of exclusivity in the field of frequencies - the field of frequencies used
by DBS to transfer satellite transmission from the transmission satellites to
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
161
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 Yes broadcasts and
/ or the availability of the broadcasts to the subscriber may result in damage
to the financial results of Yes. As of the date of this report, to the best of
Yes’s knowledge, no holder of the main allotment used the said frequencies
in a manner that caused actual and / or persistent interruptions in Yes’s
broadcasts.
5.18.3.13.
Interference for transmissions - since Yes 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 Yes 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.
5.18.3.14.
Labor relations - Yes is a party to a collective agreement with the Histadrut
and the Employee Representative Council, which may reduce its
administrative flexibility (see Section 5.10.3). In addition, In addition,
disruptions in labor relations at Yes, and possibly also at other Bezeq
subsidiaries, could cause damage to Yes’s day-to-day operations.
5.18.3.15.
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.
5.18.3.16.
Delay in improving internet browsing speeds - as Yes’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.
Yes’s estimates as to the browsing speeds required to enable OTT
broadcasts as designed in an outline in a way that enables the operation of
several streamers in the 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 Yes.
Below is a presentation of the risk factors according to their influence in the
opinion of the Yes’s Management. It should be noted that the following DBS
assessments regarding the extent of the risk factor's impact on Yes 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.89:
89 See Footnote 47.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
162
Risk Factors Summary Table - Multi-Channel TV
The degree of influence
High
Medium
Small
Macro risk
Financial risks
X
Recession / economic slowdown / security situation
X
Pandemic
X90
Damage caused by nature, war, disaster
X
Damage to electricity supply
X
Industry risk
Dependence on licenses
X
Changes in regulation
X
Fierce competition
X
Technological developments and changes
X
Alternative infrastructures
X
Unauthorized viewing
X
Exposure to legal proceedings
X
Unique risk
Limitations as a result of the ownership structure
X
Restrictions due to eligibility conditions
X
The need to maintain a sufficient cash flow
X
Satellite failure and damage
X
Dependence on the supplier of space segments
X
Dependence on software, content, equipment and
infrastructure vendors
X
Impairment of the activity of the broadcast centers
X
Failure of computer systems
X
Cyber failures
X
Technical limitation that prevents the offer of integrated
services
X
Encryption system failure
X
Lack of exclusivity in frequencies
X
Interference with transmissions
X
Work relations
X
Loss og knowledge and information
X
Delay in improving internet browsing rates
X
The information contained in this section 5.18 and Yes’s assessments regarding the impact of risk
factors on Yes’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 Yes’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.
90 The extent of the effect of this risk factor on Yes’s activity was classified as moderate, assuming that the event would be limited
in scope and time. Otherwise, the degree of impact may be large.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
163
6.
The Company
6.1.
Financing
6.1.1.
The Company's debentures
For details about the debentures issued by the Company, see Note 13 to the consolidated
statements and Section 4 to the Board of Directors' Report.
6.1.2.
Credit rating
On June 19, 2023, Midroog Ltd. established an A3.il rating with a stable horizon for the
Company's debentures (series C) and (series F) that were in circulation as of that date, as
well as a stable horizon for additional debentures (series F) to be issued by the Company
in the amount of up to NIS 550 million by way of series expansion. In addition, on June
16, 2024, Midroog Ltd. determined that it is maintaining the A3.il rating with a stable
outlook for the Company's debentures (Series F).
On September 15, 2024, Midroog determined an A3.il rating with a stable outlook for
debentures (Series F) in an amount of up to NIS 1,009 million par value issued by the
Company, as part of an exchange purchase offer to holders of the Company's debentures
(Series F).
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
164
6.2.
Legal proceedings
6.2.1.
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 Yes shares
by Bezeq from Eurocom. On May 23, 2023, the Company signed a settlement agreement
(“the Settlement Agreement") in connection with the 2 motions mentioned above, and
according to it, without admitting any of the claimed fraud, including the existence of
misleading details in the reports or statements of Bezeq and/or the Company, the
responsibility of any of the respondents to the alleged misleading details, the alleged
damages or the entitlement of the members of the classes to the claimed remedies, the
Company agreed to pay as follows: (a) to the members of Class A defined in the
settlement agreement as "everyone who purchased Bezeq shares in the period between
February 11, 2015 and June 19, 2017, with the exception of the respondents or anyone
on their behalf" - a total amount in shekels equal to 1,500,000 US dollars; (b) to members
of Class B defined in the settlement agreement as "everyone who purchased shares of
the Company on the Tel Aviv Stock Exchange Ltd. starting on May 21, 2015 at 13:00 until
June 19, 2017 (inclusive)" - a total amount in shekels equal to 2,850,000 US dollars.
In addition, as part of the Settlement Agreement, the parties recommended that the
Company pay compensation to the applicants, their attorney fees, and additional costs in
connection with the execution of the Settlement Agreement. The total amount that the
Company is expected to pay under the Settlement Agreement, including the
compensation amounts for the classes as detailed above, amounts to a total in NIS equal
to USD 5,500,000. The aforementioned settlement amount does not include the offset of
the insurance company's participation by virtue of officers' insurance.
On August 28, 2024, and after receiving the Attorney General's comment and making
several changes to the Settlement Agreement, without changing the settlement amount,
the Court approved the Settlement Agreement. Approval of the aforementioned
Settlement Agreement ends the involvement of the Company and Shaul Elovitch (in his
capacity as controlling shareholder and former Chairman of the Company's Board of
Directors only) and Or Elovitch (in his capacity as former director in the Company only) in
the motions for approval. On October 15, 2024, the Company paid the settlement amount
according to the Settlement Agreement.
6.2.2.
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.
On June 3, 2024, the Tel Aviv District Court (Economic Department) issued a decision,
according to which the claim against the Company was dismissed in full and accepted in
part with respect to Bezeq and the other respondents. It should be noted that on
September 12, 2024, the plaintiff in the procedure filed a notice of appeal against the
aforementioned Court's resolution, while the same time, Bezeq filed a motion for a
rehearing in connection with the resolution approving the class action against it. At the
hearing held on 7.10.2024, the parties agreed to resort to mediation and, if no agreement
is reached between the parties, the appeal will be heard jointly with the motion for a
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
165
rehearing. The parties must submit an update notice to the Court by March 31, 2025.
6.2.3.
In November 2020, a lawsuit was filed in the Tel Aviv District Court (Economic
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 Negotiated Settlement, and accordingly, the parties
began mediation proceedings and in accordance with the Court's decisions received from
time to time, as of the date of this report, the parties must submit an update by March
31, 2025.
6.2.4.
In February 2025, a motion was filed against the Company, the former controlling
shareholder of the Company and Bezeq (Mr. Shaul Elovitch), directors who served at
Bezeq at the relevant times for the approval of the Yes-Space transaction, the former
Bezeq Secretary, and against Eurocom Holdings (1979) Ltd. and Eurocom
Communications Ltd. for approval of a derivative claim in connection with the Yes-Space
transaction. For details, see 2.18.1(d) above.
__________________________________
11.03.2025
B Communications Ltd.
Date
Names and roles of the signatories:
Darren Glatt, Chairman of the Board of Directors
Tomer Raved, CEO
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
166
7.
Appendix A - Glossary
A. Abbreviated names for pieces of legislation that appear in the report
Consumer Protection
Law
-
Consumer Protection Law, 5741-1981
Economic
Competition Law
-
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
General Permit
Regulations
Communications Regulations (Bezeq and Broadcasting) (General Permit for the
Provision of Bezeq Services), 5782-2022
Usage Regulations
Communications (Bezeq and Broadcasting) Regulations (Use of an NIO’s Public
Network), 5775-2014
The Communications
Order
Communications Order (Bezeq and Broadcasting) (determination of an essential
service provided by Bezeq, The Israel Telecommunications Company Ltd.), 5777-
1997
Prospectus Details
Regulations
-
Securities Regulations (Prospectus Details, Draft Prospectus Structure and Form),
5729-1969
Reciprocal linking
regulations
-
Communications Regulations (Bezeq and Broadcasting) (Payments for Reciprocal
Linking), 5764-2000
Satellite Broadcasting
License Regulations
-
Communications Regulations (Bezeq and Broadcasting) (Procedures and Conditions
for Licensing Satellite Broadcasting), 5758-1998
B. Technological terms and other key terms appearing in the report91
Statistical area
-
A continuous area unit created from a geographic-statistical division, as
ordered by the Minister of Communications according to Aarticle 14f of the
Communications Law; The division into statistical areas is based on the CBS.
Internet Gold
-
Internet Gold Gold Lines
Bezeq Online
-
Bezeq online Ltd.
Bezeq International
-
Bezeq International Ltd
Beze-Gen
BezeqGenLtd
91 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.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
167
Golan telecom
-
Golan Telecom Ltd.
Gilat
Gilat Telecom Ltd.
2023 statements
-
The Company's consolidated financial statements for the year ended
December 31, 2023
Interconnectivity fee
-
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)
Hot
-
Hot Communications Systems Ltd., and corporations under its control that
operate in the field of broadcasting (multi-channel television)
Hot Telecom
-
Hot Telecom Limited Partnership
Hot Mobile
-
Hot Mobile Ltd. (formerly MIRS Communications Ltd.) and corporations
under its control
The Histadrut
-
The New General Workers' Union
The Subsidiaries
The
Company's
wholly-owned
subsidiaries
–
Pelephone,
Bezeq
International, and Yes
Council
-
Cable and Satellite Broadcasting Council
The Second Authority
-
The Second Television and Radio Authority
Walla
-
Walla! Communications Ltd. and corporations under its control
Space
-
Space Communications Ltd.
Eurocom DBS
-
Eurocom DBS Ltd.
Eurocom
Communications
-
Eurocom Communications Ltd.
Switching
-
In the context of a communications network - a telephony system that
supports the connection of devices for transferring calls between different
end units
Mbps
-
Megabits per second; Measurement unit for data transfer speed
NIO
-
National interior operator; A body that provides landline interior telephony
services under a general or unique NIO license
Roaming
-
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
-
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
maintenance of equipment and services in the customer's premises
Authorized provider
Bezeq license holder or registered in the registry maintained according to
Article 4A1 of the Communications Law
Cellcom
-
Cellcom Israel Ltd. and corporations under its control
Pelephone
-
Pelephone Communications Ltd.
Partner
-
Partner Communications Ltd. and corporations under its control
Interconnectivity
-
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
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
168
example - Bezeq) and a public network of another licensee (for example - a
cellular operator); See also " Interconnectivity Fee" Definition
Mobile radio
telephone
-
Mobile radio telephone phone; Cellular telephony
NIO license
-
Unique general or general license for the provision of landline interior
Bezeq services
Mobile Radio license
General license for the provision of mobile radio telephone services - in the
cellular method
Broadcasting license
-
License for satellite television broadcasts
ILA
-
Israel Lands Authority
Rami Levy
-
Rami Levy Cellular Communications Ltd.
Fiber network
-
A network based on optical fibers that reach a network endpoint in an end
user's apartment, or an equivalent network in terms of the level of service
that can be provided over it according to standards ordered by the Minister
and published on the website of the Ministry of Communications; For this
purpose, "apartment" - a room or cabin, or a set of rooms or cabins
intended to be used as a complete and separate unit for living, business, or
any other need, including a detached apartment
Traditional network
Non-fiber Bezeq network
Bezeq services
-
A service that is one of the following, provided to the general public or a
part of it through the Bezeq network:
(1) Telephony service;
(2) Internet access service;
(3) Data transfer service;
(4) Another service listed in the First Schedule
Internet access
service
A service that can be provided to subscribers for consideration, in money
or money equivalents, that allows them to link to the endpoints of the
Internet network that are accessible to the general public
Data transfer
services
-
Network services for data transfer from point to point, data transfer
between computers and various communication networks and remote
business access services
Telephone service
A service that allows the transfer or reception of a Bezeq message based
on a number according to the numbering plan
On-demand viewing
services
Services that allow viewing content when it is not broadcast, including
VOD, Catch Up (viewing content that has been broadcast, until a certain
period of time has passed since the time of its original broadcast), Start
Over (the possibility to go back and watch content from the beginning),
recording and saving content in the cloud
Reporting period
-
Twelve months ended December 31, 2023
Usage Regulations
Communications Regulations (Bezeq and Broadcasting) (Use of a Public
Network of an NIO), 5775-2014
Passive
infrastructure
The passive components of the public Bezeq network at all levels, including
rods, sub-rods, hubs, overhead niches, boxes, and masts.
Bitstream Access
(BSA)
-
Managed broadband access that allows provider services to connect to the
infrastructure owner network and offer broadband services to subscribers
xDSL
-
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
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
169
transmission
DTT
-
Digital Terrestrial Television- Wireless digital broadcasting of TV channels
via terrestrial relay stations
GSM
-
Global System for Mobile Communications - International Standard for
Cellular Communication Networks ("2G")
HD
-
High Definition TV - High definition (broadcast) TV broadcasts
HSPA
-
High Speed Packet Access - Cellular technology that is a continuation of the
UMTS standard that enables data transfer at high speeds ("3.5G")
IBC
-
ABC Israel Broadband Company (2013) Ltd.
ICT
Business integration service (Information and communications technology)
IP
-
Internet Protocol. The use of this protocol enables convergence between
voice (data) and contractual (video) services over the same network
IPVPN
-
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)
ISP
-
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
LTE
Long Term Evolution - Fast WIFI mobile standard devices such as cell
phones
MVNO
-
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
NGN
-
Next Generation Network - Bezeq's communications network based on IP
architecture
UMTS
-
Universal Mobile Telecommunications System - an international standard
for cellular communications that is a development of the GSM standard
("3G")
VoB
-
Voice Over Broadband - Telephony services and related services in IP
technology using landline broadband access services
VOD
-
Video on Demand - TV services on demand by the subscriber
VoIP
-
Voice over Internet Protocol - technology that enables the transmission of
voice messages (telephony service delivery) via IP protocol
Wi-Fi
-
Wireless Fidelity - Wireless access to the Internet in the local area
Yes
Yes TV and Communications Services Ltd.
Chapter A (Description of the Corporation's Business) to the 2024 Periodic Report
170
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 (income), 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 Income 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.
Chapter B
Board of Directors’ Report
On the State of Affairs of the Corporation
For the Year Ended December 31, 2024
Report of the Board of Directors on the State of Affairs of the Corporation for the Year
ended December 31, 2024
1
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, 2024 (“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 and international communications services and ICT solutions (hereinafter: "Bezeq International
Services")
4. Multichannel TV
The following are the Group's consolidated results:
2024
2023
Increase/decrease
NIS millions
NIS millions
NIS millions
%
Net profit
888
1,054
(166)
(15.7)
Adjusted net profit*
1,108
1,212
(104)
(8.6)
EBITDA*
3,485
3,616
(131)
(3.6)
Adjusted EBITDA*
3,705
3,806
(101)
(2.7)
Free cash flow**
1,235
1,289
)54(
)4.2(
* Financial indices that are not based on generally accepted accounting principles, see below.
The decrease in net profit was mainly due to a decrease in the Group's income, inter alia as a result of the effect
of war and the impact of the second wave of reductions in telephony rates by the Ministry of Communications,
as well as an increase in early retirement and voluntary retirement expenses in the Group. Conversely, in the
corresponding year, a one-time provision was recorded for the amount of the special bonus to be paid to Bezeq
employees as part of the amendment to the collective agreement.
For more information, see Chapter 1.2 below.
Report of the Board of Directors on the State of Affairs of the Corporation for the Year
ended December 31, 2024
2
* 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)
Defined as profit before financing income (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. The Group's EBITDA is calculated as
operating profit before depreciation, amortization, and impairment (including
ongoing losses from impairment of property, plant and equipment and
intangible assets as described in Notes 3.7, 10.5, and 10.6 to the Statements).
Adjusted EBITDA
Calculated as an EBITDA index net of the other operating expenses / income
item, net, and one-off losses / profits from impairment / increase in value and
expenses in respect of the equity compensation plan.
The index allows comparisons of operational performance between different
periods while neutralizing the effects of exceptional expenses / income of a
one-off nature.
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.
Adjusted
net
profit
Defined as net profit neutralizing other operating expenses/income, net after
tax and one-off losses/gains from depreciation/appreciation after tax, and
expenses for the equity compensation plan. The index allows performance
comparisons between different periods while neutralizing the effects of
unusual expenses/income of a one-off nature.
Free cash flow
Defined as cash from operating activities minus cash for the purchase/sale of
PP&E and intangible assets, net, and starting in 2018, upon the
implementation of IFRS 16, lease payments are also deducted. Free cash flow
is used as a measure for evaluating business results and cash flows since, in
the opinion of the Group, free cash flow is an important liquidity measure that
reflects the cash generated by the Group from its current activities after
investing cash in infrastructure and other PP&E and intangible assets.
Report of the Board of Directors on the State of Affairs of the Corporation for the Year
ended December 31, 2024
3
The following is a breakdown of the calculation of the indices:
2024
2023
NIS millions
Net profit
888
1,054
Other operating expenses, net after tax
199
148
Expenses on equity compensation plan
21
10
Adjusted net profit
1,108
1,212
2024
2023
NIS millions
Operating profit
1,641
1,749
Depreciation, amortization, and impairment
1,844
1,867
EBITDA
3,485
3,616
Other operating expenses, net
199
180
Equity compensation plan expenses
21
10
Adjusted EBITDA
3,705
3,806
2024
2023
NIS millions
Net cash derived from operating activities
3,410
3,442
Minus cash for the purchase/sale of PP&E and
intangible assets, net
726
1,
1,669
Minus lease payments
449
484
Free cash flow
5
1,23
1,289
Report of the Board of Directors on the state of affairs of the corporation for the Year ended December 31, 2024
4
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, 2024
December
31, 2023
Increase (decrease)
Explanation
NIS millions
%
NIS millions
%
Cash and
current
investments
2,891
1,892
999
52.8
The increase was due, among other things, to the issuance of debentures through the expansion of series 11, 13, and
14 in the landline interior communications segment. For additional information, see Chapters 1.4 and 4 below.
Current and
non-current
trade
receivables
1,979
2,089
)110(
)5.3(
The decrease was mainly due to the classification of customer and receivable balances under the item 'Assets of
disposal group held for sale' due to Bezeq entering into an agreement to sell all of its holdings in the subsidiary Bezeq
Online Ltd. (hereinafter "Bezeq Online") (which has not yet been completed) and a decrease in customer balances in
the landline interior communications segment.
Inventory
162
82
80
97.6
The increase was due to an increase in the stock of new devices in the cellular communications segment, mainly on
the occasion of the launch of the iPhone 16.
Assets of
disposal
group held
for sale
83
-
83
-
Classification of Bezeq Online assets due to Bezeq entering into an agreement to sell all of its holdings in the subsidiary,
see Note 12.5 to the Statements.
Right-of-use
assets
1,762
1,870
)108(
)5.8(
The decrease was due to the amendment of the server farm lease agreement (Bnei Zion) in the Bezeq International
Services segment and also from the cellular communications segment, mainly due to current depreciation expenses.
Property,
plant and
equipment
7,160
6,828
332
4.9
The increase was mainly due, among other things, to the progress of the fiber network deployment project in the
landline interior communications segment, as well as to the multi-channel television segment and the cellular
communications segment.
Intangible
assets
3,287
3,280
7
0.2
Deferred
expenses
and non-
current
investments
368
312
56
17.9
The increase was mainly due to an increase in the balance of broadcasting rights in the multi-channel television
segment as a result of a decrease in the impairment allowance (see Note 10.5 to the Statements) and an increase in
the scope of investments in content, as well as from Bezeq's investment in Bezeq-Gen Ltd. Regarding Bezeq's entry
into the electricity supply sector, see Note 12.6 to the Statements.
Total assets
17,692
16,353
1,339
8.2
Report of the Board of Directors on the state of affairs of the corporation for the Year ended December 31, 2024
5
1.1.
Financial position – Liabilities and equity
December
31, 2024
December
31, 2023
Increase (decrease)
Explanation
NIS millions
%
NIS millions
%
Debt to financial
institutions and
bondholders
9,694
8,903
791
8.9
The increase in debt was mainly due to the issuance of debentures through the expansion of Series 11, 13
and 14, as well as from receiving loans, offsetting the repayment of debentures (Series 9 and 10), and the
repayment of loans in the landline interior communications segment. For additional information, see Note
13 to the Statements.
Liabilities in respect of
leases
1,968
2,041
(73(
(3.6)
The decrease was due to the amendment of the server farm lease agreement (Bnei Zion) in the Bezeq
International Services segment, and also from the cellular communications segment, mainly due to
payments during the year.
Trade payables
1,955
1,758
197
11.2
The increase was mainly due to an increase in current tax liabilities and suppliers in the landline interior
communications segment and an increase in balances of end equipment suppliers in the cellular
communications segment. For additional information, see Note 14 to the Statements.
Employee benefits
700
583
117
20.1
The increase was mainly due to provisions for the termination of employee-employer relationships through
early retirement and voluntary retirement in the Group, offsetting payments for employee retirement, and
updating the provision for severance pay, vacation, and sick leave benefits in the landline interior
communications segment, see Note 16 to the Statements.
Provisions
114
140
(26)
(18.6)
The decrease is mainly due to a decrease in the company's provision for claims
Liabilities of disposal
group held for sale
34
-
34
-
Classification of Bezeq Online's liabilities due to Bezeq entering into an agreement to sell all of its holdings
in the subsidiary Bezeq Online.
Deferred tax liabilities
304
322
(18)
(5.6)
Other liabilities
214
160
54
33.8
The increase was due to an increase in long-term advance income in the landline interior communications
segment, mainly due to a long-term agreement for the provision of an IRU (Indefeasible Right of Use)
service in the BSA Fiber service (wholesale market) with Partner Communications Ltd.
Total liabilities
14,983
13,907
1,076
7.7
Non-controlling
interests
2,476
2,257
219
9.7
Total equity deficit
attributed to the
Company's
shareholders
233
189
44
23.3
Total equity
2,709
2,446
263
10.7
Capital constitutes approximately 15.3% of the total balance sheet, compared to approximately 14.9% of
the total balance sheet on December 31, 2023. The increase in capital resulted from accumulated profits,
offsetting the distribution of dividends from Bezeq to non-controlling interests.
Total liabilities and
equity
17,692
16,353
1,339
8.2
Report of the Board of Directors on the state of affairs of the corporation for the Year ended December 31, 2024
6
1.2.
Enterprise results
1.2.1.
Key results
2024
2023
Increase (decrease)
Explanation
NIS millions
NIS millions
%
Income
8,884
9,103
(219)
(2.4)
There was a decrease in income in all major segments of the Group. The decrease was due, among other
things, to a reduction in interconnection rates and telephony rates. For more information, see Chapter
1.2.2 below.
Operating and general
expenses
3,264
3,381
(117)
(3.5)
Expenses were affected by a decrease in interconnection payments to telecommunications operators
due to the reduction in rates in June 2023 and a further reduction in June 2024, mainly in the cellular
communications segment. For more information, see Chapter 1.2.2 below.
Salary
1,936
1,926
10
0.5
The increase was due to the landline interior communications segment and the others segment. For
additional information, see Chapter 1.2.2 below and Note 23 to the Statements.
Depreciation, amortization
and impairment
1,844
1,867
(23)
(1.2)
The decrease was mainly due to the Bezeq International services segment.
Other operating expenses,
net
199
180
19
10.6
The increase was mainly due to an increase in expenses for the termination of employee-employer
relationships through early retirement and voluntary retirement in the Group, see Note 16.5 to the
Statements, offset mainly by the recording of a one-off provision in the corresponding year in the
landline interior communications segment for the amount of the special grant to be paid to the
segment's employees as part of the amendment to the collective agreement. For additional information,
see Note 24 to the Statements.
Operating Profit
1,641
1,749
(108)
(6.2)
Financing expenses, net
424
349
75
21.5
The increase was mainly due to refinancing the company's debt, offsetting an increase in the company's
and Bezeq Group's income from short-term investments. For additional information, see Note 25 to the
Statements.
Share in loss of equity-held
investee, net
8
-
8
-
Starting in the second quarter of 2024, Bezeq will record its share of the net operating results of Bezeq-
Gen in its reports. Regarding Bezeq's entry into the electricity supply sector, see Note 12.6 to the
Statements.
Income taxes
321
346
(25)
(7.2)
Profit for the year
888
1,054
(166)
(15.7)
Report of the Board of Directors on the state of affairs of the corporation for the Year ended
December 31, 2024
7
1.2.2.
Operating segments
a. The following are data regarding income and operating profit in accordance with the
Group's operating segments:
* 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 Yes’ statements.
2024
2023
millions
NIS
segment
of
%
income
millions
NIS
segment
of
%
income
Income by operating segments
Interior landline communication
4,342
48.9
4,412
48.5
Cellular communication
2,254
25.4
2,348
25.8
Bezeq International services
1,105
12.4
1,212
13.3
Multi-channel TV
1,265
14.2
1,309
14.4
Others and adjustments
(82)
(0.9)
(178)
(2.0)
Total
8,884
100.0
9,103
100.0
2024
2023
NIS millions
% of segment
income
NIS millions
% of segment
income
Profit (loss) by operating segments
Interior landline communication
1,438
33.1
1,451
32.9
Cellular communication
189
8.4
196
8.3
Bezeq International services
(16)
(1.4)
39
3.2
Multi-channel TV (proforma) *
(92)
(7.3)
(4)
(0.3)
Others and adjustments
122
-
67
-
Consolidated operating profit / percentage of Group
income
1,641
18.5
1,749
19.2
Report of the Board of Directors on the state of affairs of the corporation for the Year ended December 31, 2024
8
1.2.2.
Activity segments (Cont.)
a. Landline interior communications segment
2024
2023
Increase
(decrease)
Explanation
NIS millions
%
Internet - infrastructure
1,999
1,947
52
2.7
The increase was due to an increase in average income per retail Internet subscriber, which mainly resulted from an increase in the number of subscribers
connected to the fiber network and from complementary end equipment, offsetting a decrease in wholesale market income, among other things due to a decrease
in access rates for antennas starting from 1.4.2024.
Landline telephony
544
650
(106) (16.3)
The decrease was due to a decrease in the average income per telephone line due to the reduction in telephony rates by the Ministry of Communications starting in
July 2023, a decrease in interconnection rates starting in June 2023, and a further decrease starting in 15.6.2024, as well as due to a decrease in the volume of
traffic. There was also a decrease in the lines balance.
Transmission, data
communication, and
others
1,451
1,466
(15)
(1.0)
The decrease was mainly due to a decrease in transmission income to Internet service providers (ISPs) due to subscribers switching to Bezeq due to the unified
Internet reform and a decrease in income from paid work, offset by an increase in transmission and data communication services for businesses.
Cloud and digital services
348
349
(1)
(0.3)
Decrease in income from the Business Guide (B144) offset by an increase in income from cloud services.
Total income
4,342
4,412
(70)
(1.6)
Operating and general
expenses
738
769
(31)
(4.0)
The decrease was mainly due to a decrease in subcontractor expenses and end equipment and materials, as well as a decrease in interconnection payments to
telecommunications operators, mainly due to the decrease in rates as stated above, offset mainly by an increase in expenses for provision for loan-loss and
marketing.
Salary
1,037
1,028
9
0.9
The increase was due to salary updates, employee onboarding, an increase in equity compensation plans, and actuarial provisions. The increase was offset by
employee retirements, the return of reserve benefits from National Insurance due to the effect of war, an increase in the discount of salary for investment, and a
one-off grant to permanent employees following the public sector wage agreement in the corresponding year.
Depreciation and
amortization
1,023
1,019
4
0.4
Other operating expenses,
net
106
145
(39)
(26.9)
The decrease was mainly due to the recording of a one-off provision in the corresponding year in the amount of NIS 75 million for the amount of the special bonus
to be paid to Bezeq employees as part of the amendment to the collective agreement, as well as an increase in capital gains from the sale of PP&E, offsetting an
increase in expenses for the termination of employee-employer relationships through early retirement, see Note 16.5.1 to the Statements, and a capital loss from
Bezeq's engagement in an agreement to sell all of its holdings in the subsidiary Bezeq Online Ltd., see Note 12.5 to the Statements.
Operating profit
1,438
1,451
(13)
(0.9)
Financing expenses, net
250
256
(6)
(2.3)
The decrease in net financing expenses was mainly due to an increase in financing income from investments, offset by an increase in interest expenses due to the
issuance of debentures in the beginning of 2024 (expansion of Series 11 and 13) and an increase in financing expenses for employee benefits.
Share in loss of equity-
held investee
8
-
8
-
Starting in the second quarter of 2024, Bezeq will record its share of the net operating results of Bezeq-Gen in its reports. Regarding Bezeq's entry into the
electricity supply sector, see Note 12.6 to the Statements.
Income taxes
274
294
(20)
(6.8)
Segment profit
906
901
5
0.6
Report of the Board of Directors on the state of affairs of the corporation for the Year ended December 31, 2024
9
1.2.2.
Activity segments (Cont.)
b. Cellular communications segment
2024
2023
Increase (decrease)
Explanation
NIS millions
%
Income from services net
of interconnect *
1,403
1,385
18
1.3
The increase was mainly due to an increase in postpaid income resulting from growth in the subscriber balance, including
subscribers to 5G packages. This increase was partially offset mainly by a decrease in income from roaming services of
approximately NIS 65 million in 2024 as a result of the effect of war.
Interconnect income *
233
371
(138)
(37.1)
The decrease was mainly due to the reduction in interconnect rates.
Sale of end equipment to
customers
618
592
26
4.4
The increase was mainly due to an increase in the number of units sold.
Total income
2,254
2,348
(94)
(4.0)
Operating and general
expenses
1,178
1,278
(100)
(7.8)
The decrease was mainly due to a decrease in expenses attributable to interconnect income (in parallel with a decrease
in income). The decrease was partially offset mainly by an increase in end equipment costs in parallel with an increase in
income from the sale of end equipment, an increase in frequency fee expenses following the cancellation of the discount
given in the corresponding year, and an increase in network expenses, due, among other things, to an increase in the
index and electricity rates.
Salary
321
323
(2)
(0.6)
The decrease was mainly due to an increase in salary for investment discounts and a decrease in the number of
employees. The decrease was partially offset by the effects of salary increases following the collective agreement.
Depreciation and
amortization
552
549
3
0.5
Other operating
expenses, net
14
2
12
600.0
The main increase was due to employee retirement expenses, see Note 16.5.2 to the Statements, and indemnity received
from an insurance company in the corresponding year.
Operating profit
189
196
(7)
(3.6)
Financing expenses
(income), net
7
(13)
20
-
The change was mainly due to a decrease in interest income from loans granted to the parent company and repaid during
2023.
Income taxes
44
50
(6)
(12.0)
Segment profit
138
159
(21)
(13.2)
* Income from interconnectivity (hereinafter: "interconnect") - as part of the reform to change the interconnect RAETS regime (hereafter: "the Reform"), which began gradually from June 2023 to
June 2025, interconnect income from mobile radio telephone operators and NIO operators to whom the reform applies are presented separately.\
Report of the Board of Directors on the state of affairs of the corporation for the Year ended December 31, 2024
10
1.2.2.
Activity segments (Cont.)
c.
Bezeq International services
2024
2023
Increase (decrease)
Explanation
NIS millions
%
Income
1,105
1,212
(107)
(8.8)
The decrease was mainly due to a decrease in Internet Service Provider (ISP) income, mainly due to a
decrease in the number of subscribers following the Unified Internet Reform, and a decrease in income from
business Internet services and international telephony services. This decrease was partially offset by an
increase in cloud services activity, including in the subsidiary CloudEdge, and in server farm activity.
Operating, general and
impairment expenses
722
800
(78)
(9.8)
The decrease was mainly due to a decrease in expenses for the use of Internet infrastructure in light of a
decrease in activity in this area, a decrease in expenses for international telephony activities, and a decrease
in management and general expenses. This decrease was partially offset mainly by an increase in expenses
for cloud activities, including in the subsidiary CloudEdge.
Salary
211
216
(5)
(2.3)
The decrease was mainly due to a continuous decrease in the Bezeq employee balance, which was partially
offset by an increase in salaries at the subsidiary CloudEdge.
Depreciation,
amortization, and
impairment
118
137
(19)
(13.9)
The decrease was due to a decrease in current depreciation, impairments of PP&E, and amortizations of
right-of-use assets. This decrease was partially offset by an increase in impairments of intangible assets due
to an increase in investment in Bezeq's information systems.
Other operating expenses
70
20
50
250.0
The increase was primarily due to the recording of expenses on voluntary retirement in the fourth quarter
of the year, see Note 16.5.3 to the Statements. This increase was partially offset by the recording of income
in the first quarter for the amendment of the lease agreement for the Server Farm (Bnei Zion) and a decrease
in expenses for pending and contingent liabilities.
Operating profit (loss)
(16)
39
(55)
-
Financing expenses, net
5
10
(5)
(50.0)
The decrease in net financing expenses was mainly due to an increase in income from interest and a decrease
in financing expenses on lease agreements.
Income taxes
1
-
1
-
Segment profit (loss)
(22)
29
(51)
-
Report of the Board of Directors on the state of affairs of the corporation for the Year ended December 31, 2024
11
1.2.2.
Activity segments (Cont.)
d. Multi-channel TV (proforma) *
* The results of the multi-channel television segment are presented net of the overall impact of impairment recognized starting from 2018, see “proforma” P&L 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 Yes’ statements.
2024
2023
Increase (decrease)
Explanation
NIS millions
%
Income
1,265
1,309
(44)
(3.4)
The decrease was mainly due to a decrease in the number of television subscribers and a decrease
in average income per subscriber due to competition in the industry, as well as the failure to bill
customers on the front line due to the war (totaling approximately NIS 20 million in 2024), which
were partially offset by an increase in income from combined television and fiber packages.
Operating and
general expenses
911
886
25
2.8
The increase was mainly due to an increase in costs for fiber operations, costs for collaborations
with international content providers, and an increase in engineering costs, mainly in light of the
increase in the number of IP customers. Conversely, there was a decrease in content costs.
Salary
184
186
(2)
(1.1)
Depreciation and
amortization
254
244
10
4.1
The increase was mainly due to additional investments in streamers and an increase in salary
income, which were partially offset by fully depreciated assets.
Other operating
(income) expenses
8
(3)
11
-
The increase was mainly due to the recording of expenses for employee retirement, see Note
16.5.4 to the Statements, as well as expenses for the provision for claims.
Operating loss
(92)
(4)
(88)
(2,200.0)
Financing income,
net
(10)
(9)
(1)
(11.1)
Income taxes
1
1
-
-
Segment profit
(loss)
(83)
4
(87)
-
Report of the Board of Directors on the State of Affairs of the Corporation for the Year ended December 31, 2024
12
1.2.2.
Activity segments (Cont.)
e. Multi-channel TV (Cont.) - Comparison between accounting income and proforma income
2024
2023
Accounting P&L
Pro Forma P&L
Accounting P&L
Pro Forma P&L
NIS millions
Income
1,265
1,265
1,309
1,309
Operating and general expenses
870
911
861
886
Salary
192
184
193
186
Depreciation and amortization
155
254
166
244
Other operating expenses (income),
net
8
8
(5)
(3)
Operating profit (loss)
40
(92)
94
(4)
Financing income, net
(10)
(10)
(9)
(9)
Income taxes
1
1
1
1
Profit (loss) for the year
49
(83)
102
4
Report of the Board of Directors on the State of Affairs of the Corporation for the Year ended December 31, 2024
13
1.3.
Main data from the Group's consolidated quarterly P&L statements (NIS millions)
Q1/2024
Q2/2024
Q3/2024
Q4/2024
2024
Explanation
Income
2,255
2,192
2,234
2,203
8,884
Operating expenses
1,819
1,749
1,801
1,874
7,243
The fourth quarter includes expenses for the termination of employee-employer
relationships through early retirement and voluntary retirement in the Group, see
Note 16.5 to the Statements.
Conversely, in the fourth quarter, expenses for the fiber deployment incentive
fund were canceled due to a temporary order, which determined that in 2024 the
payment rate of the entities liable to the incentive fund will be 0% instead of
0.5%.
Operating profit
436
443
433
329
1,641
Financing expenses, net
67
94
176
87
424
The third quarter includes a loss resulting from an exchange purchase offer for the
Company's debentures.
Profit after financing
expenses, net
369
349
257
242
1,217
Share in loss of equity-held
investee, net
-
3
3
2
8
Income taxes
98
84
82
57
321
Profit for the period
271
262
172
183
888
Total comprehensive income
for the period
274
262
169
177
882
Report of the Board of Directors on the State of Affairs of the Corporation for the Year ended December 31, 2024
14
1.4.
Cash flow
2024
2023
Change
Explanation
NIS millions NIS millions NIS millions
%
Net cash flow derived
from operating
activities
3,409
3,442
(33)
(1.0)
Decrease in profit offset by changes in working capital, including employee benefits.
Net cash flow used for
Investing operations
(2,320)
(1,835)
(485)
(26.4) The increase in net cash flow used for investing activities was mainly due to an increase in investment, net
in deposits with banks and other financial investments in the landline interior communications segment.
Net cash flow used for
financing operations
(809)
(1,715)
906
52.8
The decrease in net cash used for financing activities was due to the landline interior communications
segment due to an increase in debenture issuance due to the expansion of debentures (Series 11, 13, and
14) and in the receipt of loans, offset primarily by an increase in loan repayments and dividends paid.
Net increase (decrease)
in cash and cash
equivalents
280
(108)
360
-
Effect of changes in
foreign currency
exchange rate
-
(2)
2
-
Balance of cash held
for sale
)28(
-
)28(
-
Report of the Board of Directors on the State of Affairs of the Corporation for the Year ended December 31, 2024
15
Average volume in the reported year
Long-term liabilities (including current liabilities) to financial institutions and bondholders: approx. NIS 9,840 million.
Supplier credit: approx. NIS 955 million.
Short-term customer credit: approx. NIS 1,454 million.
Long-term customer credit: approx. NIS 261 million.
Working equity
The Group's consolidated working capital as of 31.12.2024 amounted to approximately NIS 669 million, compared with a working capital deficit of approximately NIS 91 million as of
31.12.2023.
The Company's working capital (according to the "Solo” Statements) as of 31.12.2024 amounted to approximately NIS 171 million, compared with working equity of approximately NIS
99 million as of 31.12.2023.
Bezeq (according to the "Solo" Statements) as of 31.12.2024, has a working capital in the amount of approx. NIS 499 million, compared with a working capital deficit of NIS 162 million
as of 31.12.2023.
The shift from a deficit to a surplus in working capital in the Group and Bezeq was mainly due to an increase in investment and cash and cash equivalents balances, offset by an increase
in current liabilities.
Report of the Board of Directors on the State of Affairs of the Corporation for the Year ended
December 31, 2024
16
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, 2024, including sources for repayment of the Company's
liabilities, including the Company's debentures Series F and G. 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 stated that despite the existence of a continuous negative cash flow
from current operations in the Company's separate (solo) statements, in the assessment of the Company's
Board of Directors, after receiving explanations for its opinion from the Company's Management, there is
no reasonable concern that the Company and the Group will not meet their existing and expected
obligations when they are due to be met. The Company and the Group have the ability to meet the existing
and expected cash needs in the foreseeable future, even in the scenario of an unexpected deterioration in
their business, through the cash balances in their possession, through the creation of cash from operations,
through sources of (net) liquidity from subsidiaries, and through the borrowing and refinancing of significant
amounts of debt from banking and non-banking sources.
The above information includes forward-looking information based on the Company's estimates regarding
liquidity. The actual data may differ substantially from the above estimate in case of a change in one of the
factors considered in these estimates.
1.6.
Buyback of the Company's shares
In accordance with the Company's share buyback plan, which was approved by the Company's Board of
Directors on March 12, 2024, the Company purchased, during the first half of 2024, 1,500,000 of the
Company's shares in exchange for a total amount of approximately NIS 20 million.
1.7.
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 the Group’s index-linked liabilities. Bezeq implements a policy to
reduce and partially hedge the exposure to the price index and the shekel-dollar exchange rate through
the execution of forward transactions. See details regarding hedging transactions in Note 30.6 to the
Statements.
In 2024, the increase in the consumer price index was reflected in the recording of financing expenses in
respect of the Group's financial debt amounting to approximately NIS 87 million (approximately NIS 74
million after hedging), a decrease of approximately NIS 1 million (approximately NIS 5 million after
hedging) compared to the corresponding year. It should be noted that the effect of the increase in the
consumer price index on the operating results of the Group's activities was immaterial. It should also be
noted that there was no change in the Bank of Israel interest rate in the aforementioned year.
In accordance with the scope of the Group’s index-linked debt as of 31.12.2024, 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 24 million, this is before considering the effect of hedging transactions.
In addition, depending on the scope of the Group’s existing variable interest rate debt, a change of 1% 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 the Group’s operating results.
The Company's debentures are in shekels and are therefore not affected by changes in the inflation rate
or an increase in interest rate.
Report of the Board of Directors on the State of Affairs of the Corporation for the Year ended
December 31, 2024
17
1.8.
State of War - "Iron Swords"
Since October 7, 2023, the State of Israel has been in a state of war, with varying intensity, mainly in the
Gaza Strip and in the northern border area, while as of the date of publication of the report, a ceasefire
exists in the two aforementioned sectors. The state of war created various effects on the Group
companies, which are reflected in a decrease in roaming activity at Pelephone and in the removal/freezing
of business lines in areas that were affected by the war, and conversely, especially in the early stages of
the war, in the increase in demand for some services. Also, with the outbreak of the war, due to the
recruitment of employees to reserve service and a decrease in contractor activity, there was a slowdown
in deployment and installation activity in the Bezeq network, which subsequently returned to its normal
level. Also, a number of regulatory moves were made as part of the State of Israel's handling of the state
of war, including a law to postpone payment dates for those entitled and to ease phone call charges,
including calls related to distance learning. It should be noted that some of the Group companies took
their own initiative to ease the charges towards customers in localities in the Gaza Envelope and on the
northern border.
The Group companies, which provide, among other things, essential communication services to private,
business, and institutional customers, including the state institutions, the security forces, and the health
system, prepared accordingly and responded to the various needs, including fault solving, increasing
vigilance and preparedness in cyber systems, and assisting the community in various ways. Also, the
Group companies regularly examine and follow closely the developments related to the war.
Until now, the effects of the war and its consequences as described above did not have a material impact
on the activities of the Group and its business results. Also, the liquidity and financial situation of the
Group allows it to function well during this period. The consequences of the war, as well as its possible
indirect effects on the state of the Israeli economy and the market, as well as on the Group companies,
are unobservable and difficult to predict, and they depend, among other things, on the manner and scope
of the development of the war, considering its duration (ceasefire), and the possibility of the economy
slipping into recession as a result. In this context, attention is also drawn to the relevant risk factors
detailed in Chapter A (Description of the Corporation's Business) of the periodic report for the year 2024
(Sections 2.20.11, 2.20.15, 3.19.2.9, 4.14.8, 5.18.1.2, and 5.18.1.4).
Some of the information contained in this section is forward-looking information, as defined in the
Securities Law, based on estimates, assumptions, and expectations of the Company and Bezeq Group
which may not materialize, or materialize in a materially different way than anticipated, depending,
among other things, on the manner and scope of the development of the war and the state of the
economy as a whole.
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. The Company's donation policy focuses on health, education, and community issues.
In the year of the report, the Company donated to the Sheba Hospital and other non-profit organizations
in amounts that are not material to the Company.
In 2024, Bezeq Group donated a total of about NIS 14.8 million, which includes a financial donation of
about NIS 4.2 million, donation of services and communication infrastructure to associations, evacuees,
and disadvantaged populations in the amount of about NIS 9 million, and a salary donation for the
volunteering of employees, the employment of at-risk youth, and the volunteering of the children of
employees in the community in the amount of approximately NIS 1.6 million.
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
Report of the Board of Directors on the State of Affairs of the Corporation for the Year ended
December 31, 2024
18
financial donations, donations of services and communication infrastructure, and support the employees’
and their children’s 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.
Against the backdrop of the "Iron Swords" war, Bezeq expanded its activities in providing a solution for
the rehabilitation of wounded IDF soldiers.
Donation Recipient
NIS value of the
Group's donation
The nature of the relationship between
the recipient of the donation and Bezeq, a
director, CEO, controlling shareholder,
or relative
Friends of Sheba Tel-HaShomer Medical
Center (Registered Association)
500,000
Corporations owned by Mr. David Forer and
Mrs. Michal Forer, holders of the
Company's control permit, donated to
Sheba-Tel HaShomer Medical Center.
Friends of Sourasky Tel Aviv Medical
Center (Registered Association)
400,000
Corporations owned by Mr. David Forer and
Mrs. Michal Forer, holders of the
Company's control permit, donated to
Sourasky Tel Aviv Medical Center.
ELEM - Association for Youth in
Distress (Registered Association)
100,000
Corporations owned by Mr. David Forer and
Mrs. Michal Forer, holders of the
Company's control permit, donated to Youth
in Distress.
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
Details
2024
2023
B Communications
Ltd.
Somekh
Chaikin
Audit and audit-
related, including audit-
related tax services
350
432
Other services1
208
66
Bezeq – the Israeli
Telecommunications
Corp. Ltd.
Somekh
Chaikin
Audit and audit-
related, including audit-
related tax services
1,815
1,607
Other services1
1,070
403
Pelephone
Communications
Ltd.
Somekh
Chaikin
Audit and audit-
related, including audit-
related tax services
715
674
Other services1
278
659
Bezeq International
Ltd.
Somekh
Chaikin
Audit and audit-
related, including audit-
related tax services
384
357
Other services1
348
112
1 "Other services" provided to main companies in the Group in 2023 and 2024 included, among other things, consulting services on
tax and accounting issues that are not related to auditing and special approvals.
Report of the Board of Directors on the State of Affairs of the Corporation for the Year ended
December 31, 2024
19
Company
Auditor
Details
2024
2023
Yes TV and
Communications
Services Ltd. (Yes)
Somekh
Chaikin
Audit and audit-
related, including audit-
related tax services
726
643
Other services1
107
283
Total
6,001
5,236
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 volume of hours and the derived hourly rate.
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
auditors, 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.
2.5.
Disclosure regarding the internal auditor in a reporting corporation
Details
concentration
Name of
internal auditor
Ilan Chaikin
Date of entry
into office
2008
Compliance
with the
provisions of
the law
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.
Employment
format
Hourly fee, according to the number of hours determined at the beginning of each year by the
Audit Committee.
Method of
appointment
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
Report of the Board of Directors on the State of Affairs of the Corporation for the Year ended
December 31, 2024
20
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.
Organizational
supervisor of
the Internal
Auditor
The organizational supervisor of the internal auditor is the CEO of the Company.
Work plan
The work plan in 2024 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 in building the work plan are:
Reasonable coverage of most areas of the Company's activity in accordance with the exposure to
material risks, considering existing controls in the Company's areas of activity and the findings of
previous audits.
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.
Report of the Board of Directors on the State of Affairs of the Corporation for the Year ended
December 31, 2024
21
2.5.
Disclosure regarding internal auditor in a reporting corporation (Cont.)
Details concentration
Reference of the audit
to material equity-
held investee
corporations
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.
Performing the audit
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.
Access to information
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.
Internal Auditor’s
report
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 audit procedure by the Internal Auditor for the second half of 2023
on May 21, 2024. In addition, an internal audit report on compliance and regulation was
presented on August 1, 2024, and an audit report on the implementation of the supervision
procedure by the Internal Auditor for the first half of 2024 was presented on January 20,
2025.
Board of Directors’
evaluation of the
Internal Auditor's
activity
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.
Compensation
The Internal Auditor’s compensation is determined each year according to the scope of the
audit hours, according to an hourly fee. In 2024, 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 2024, the Internal Auditor was paid compensation in the amount of NIS 56K including VAT.
In the opinion of the Board of Directors, the scope of the Internal Auditor’s compensation
had no effect on his professional judgment.
Report of the Board of Directors on the State of Affairs of the Corporation for the Year ended December 31, 2024
22
3.
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, 2024 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 material impairment would have been
recognized.
Bezeq
A very substantial valuation
as of December 31, 2024
Pelephone
Material valuation
as of December 31, 2024
Yes Television and Communication
Services Ltd. ("Yes")
A very substantial valuation as of
December 31, 2024
Attached to Bezeq's financial
statements for December 31, 2024.
See Sections 3.1.1 and 3.1.3 below
Bezeq International
A very substantial valuation as of
December 31, 2024 -
See Section 3.1.1 below
Attached to Bezeq's financial
statements for December 31, 2024.
Identification of subject of
valuation
Bezeq’s value-in-use for the
purpose of examining the
impairment of goodwill
recognized in the Company's
financial statements in
accordance with International
Accounting Standard 36.
Pelephone’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.
Examination of impairment of the
assets of Yes as of 31.12.2024.
Examination of impairment of the
assets of Bezeq International Ltd. as
of 31.12.2024.
Timing of the valuation
December 31, 2024;
The valuation was signed on
11.3.2025.
December 31, 2024;
The valuation was signed on 6.3.2025.
December 31, 2023;
The valuation was signed on 6.3.2025.
31.12.2024;
The valuation was signed on 5.3.2025.
Value of the subject of the
valuation close to the
date of the valuation, if
the accepted accounting
NIS 10,836 million book value of
the net operating assets of Bezeq
plus the balance of excess costs
NIS 1,441 million book value of the net
operating assets of Pelephone* plus
the balance of excess costs created
Book value before impairment as of
31.12.2024 is positive in the amount of
approx. NIS 84 million.
Book value before impairment as of
31.12.2024 is negative in the amount
of approximately NIS 19 million.
Report of the Board of Directors on the State of Affairs of the Corporation for the Year ended December 31, 2024
23
Bezeq
A very substantial valuation
as of December 31, 2024
Pelephone
Material valuation
as of December 31, 2024
Yes Television and Communication
Services Ltd. ("Yes")
A very substantial valuation as of
December 31, 2024
Attached to Bezeq's financial
statements for December 31, 2024.
See Sections 3.1.1 and 3.1.3 below
Bezeq International
A very substantial valuation as of
December 31, 2024 -
See Section 3.1.1 below
Attached to Bezeq's financial
statements for December 31, 2024.
rules, including
depreciation and
amortization, did not
require a change in its
value in accordance with
the valuation
created when Bezeq shares were
purchased by the Company.
when Bezeq shares were purchased by
the Company.
Value of the subject of the
valuation determined
according to the valuation
Approx. NIS 17,666 million.
The Company concluded that
there is no impairment that
requires a reduction in the unit’s
book value amount recorded in
the Company's books.
Approx. NIS 2,484 million.
The Company concluded that there is
no impairment that requires a
reduction in the amount of goodwill
recorded in the Company's books.
The value in use of Yes's assets, using
the income discount method (value-in-
use) is a positive value of
approximately NIS 86 million. Note that
the fair value minus sales costs of Yes's
assets for that date amounted to a
negative value of approximately NIS 34
million. Therefore, and in accordance
with the provisions of IAS36, the
recoverable amount of Yes’s assets was
determined as the value in use or the
fair value minus selling costs,
whichever is higher, i.e., a positive
value of approximately NIS 86 million.
Based on the valuation, in 2024, the
Group recognized an impairment loss
of approximately NIS 151 million.
Yes's total enterprise value under the
discounted cash flow approach is
negative in the amount of
approximately NIS 89 million. In light
of the negative enterprise value, the
net value of the assets and liabilities
of Yes was determined as the fair
value minus costs of sale or zero,
whichever is higher. Accordingly,
Bezeq International’s recoverable
amount was determined, obtained
according to fair value minus costs of
sale of balance sheet items according
to the requirements of IAS 36, in a
negative amount of approximately NIS
51 million.
Based on the valuation, in 2024, the
Group recognized an impairment loss
of approximately NIS 91 million.
Report of the Board of Directors on the State of Affairs of the Corporation for the Year ended December 31, 2024
24
Bezeq
A very substantial valuation
as of December 31, 2024
Pelephone
Material valuation
as of December 31, 2024
Yes Television and Communication
Services Ltd. ("Yes")
A very substantial valuation as of
December 31, 2024
Attached to Bezeq's financial
statements for December 31, 2024.
See Sections 3.1.1 and 3.1.3 below
Bezeq International
A very substantial valuation as of
December 31, 2024 -
See Section 3.1.1 below
Attached to Bezeq's financial
statements for December 31, 2024.
Identification and
characterization of the
valuator
The valuation was performed by CPA Guy Feibish, Partner, Valuations and Economic Models in the Economic Department of Ernest Young (Israel) Ltd.
CPA Feibish holds a bachelor's degree in economics specializing in accounting from Ben Gurion University, Be’er Sheva, and is also a certified public
accountant in Israel.
As part of his role, CPA Feibish leads projects with leading private and public companies in their field in Israel and around the world and accompanies
transactions in Israel and abroad, and leads complex valuations for a variety of purposes, including financial reporting, taxation, regulatory compliance,
and capital borrowing in a variety of sectors, including real estate, retail, industry, energy, and communications. In addition, as part of his role, he
accompanies companies in planning and implementing strategy and business processes. In addition, CPA Feibish has experience in providing economic
opinions for the purposes of legal proceedings and/or commercial disputes.
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.
Valuation model
The discounted cash flow (DCF)
method.
The discounted cash flow (DCF)
method.
The discounted cash flow (DCF)
method.
In the first stage – value in use was
calculated using the discounted
cash flow (DCF) method.
In the second stage - the fair value
of Bezeq International’s net assets
and liabilities, minus sales costs, as
of 31.12.2024, was determined.
Report of the Board of Directors on the State of Affairs of the Corporation for the Year ended December 31, 2024
25
* Pelephone's net operating assets do not include customer debt balances for the sale of end equipment in installments presented at current value.
Bezeq
A very substantial valuation
as of December 31, 2024
Pelephone
Material valuation
as of December 31, 2024
Yes Television and Communication
Services Ltd. ("Yes")
A very substantial valuation as of
December 31, 2024
Attached to Bezeq's financial
statements for December 31, 2024.
See Sections 3.1.1 and 3.1.3 below
Bezeq International
A very substantial valuation as of
December 31, 2024 -
See Section 3.1.1 below
Attached to Bezeq's financial
statements for December 31, 2024.
Assumptions under which
the valuator made the
valuation
Discount rate – 8.75% (after tax).
Permanent growth rate - 1%
Percentage of the scrap value of
the total value which is estimated
to be 74.1%.
Discount rate – 10.5% (after tax).
Permanent growth rate - 2%
Percentage of the scrap value of the
total value which is estimated to be
75.7%.
Discount rate - 11% (after tax).
Permanent growth rate - 1%
Percentage of the scrap value of the
total value which is estimated to be
151.2%.
Discount rate – 11.4% (after tax).
Permanent growth rate - 3%
The percentage of the scrap value
of the total value determined in the
valuation is irrelevant.
In addition, assumptions were
made regarding the fair value minus
cost of sale of Bezeq International’s
assets.
Report of the Board of Directors on the State of Affairs of the Corporation for the Year ended
December 31, 2024
26
3.1.
Disclosure regarding valuations (Cont.)
3.1.1
Bezeq supports YES by approving credit facilities or investing in Yes’ capital (see Note 12.2.2 to
the Statements). Bezeq's aforementioned support in Yes stems, among other things, from the
current and expected contribution of the multi-channel TV activity to the overall activity of Bezeq
Group.
3.1.2
In the consolidated financial statements of the Company as of 31.12.2024, the value of the
activity segment "Bezeq" the Israel Telecommunications Corp. Ltd., the activity segment
Pelephone Communications Ltd., the activity segment Yes TV and Communications Services Ltd.
and the Bezeq International Ltd. activity segment amounted to over 25% of its total assets.
Accordingly, the valuator is considered a highly material 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 the Statements.
3.1.3
Information according to Regulation 10(b)(8) of the Securities Regulations (Periodic and
Immediate Reports), 5730-1970
A. Regarding Yes’ valuation as of 31.12.2023, which was attached to Bezeq's 2022 statements,
the Company examined the actual data in 2024 regarding free cash flows compared to the
2024 forecast that was included in the aforementioned valuation and found that the free
cash flows of Yes, according to its 2024 statements, are significantly higher than the forecast
in the aforementioned valuation. The gap was due to timing differences in working capital
that positively impacted the 2024 cash flow, which was partially offset by a negative
deviation in EBITDA. For more information, see Appendix G in the attached valuation of Yes
as of 31.12.2024.
B. Regarding the valuation of Bezeq International as of December 31, 2022, which was
attached to the 2022 statements, the Company examined the actual data in 2024 regarding
the free cash flows of Bezeq International compared to the 2024 forecast that was included
in the aforementioned valuation and found that the free cash flows of Bezeq International,
according to its 2024 statements, are higher than the forecast in the aforementioned
valuation. The gap was mainly due to an improvement in EBITDA - attributed mainly to a
slowdown in the rate of subscriber churn in private ISP operations, which contributed to an
increase in EBITDA of approximately NIS 78 million. For additional information, see Appendix
G.2 to the valuation of Bezeq International attached to Bezeq's statements as of 31.12.2024.
3.1.4
For more information, see Note 10 to the Statements.
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 after the reporting period
Regarding additional material events after the date of the Statements - see Notes 32 to the Statements.
Report of the Board of Directors on the State of Affairs of the Corporation for the Year ended
December 31, 2024
27
4.
Details related to a series of liability certificates
4.1.
The following are data about the Company's debentures in circulation, as of December 31, 2024:
Series F Debentures
Series G Debentures
A
Issue date (without extensions)
06.07.2021
16.09.2024
B
Total nominal value at the date of
issuance (par value)
NIS 393,973,000
NIS 1,009,177,103
C The nominal value (par value) as of
the date of the report
NIS 1,010,581,392
NIS 1,009,177,103
D The amount of interest accrued as of
the date of the report
NIS 3,132,802
NIS 16,119,1
E Fair value as included in the
Statements
NIS 965,664,968
NIS 1,082,635,308
F Stock market value
NIS 988,045,427
NIS 1,037,938,650
G Interest type
Fixed at 3.65%
Fixed at 5.50%
H Principal payment dates
On November 30, 2026
On November 30, 2029
I
Interest payment dates
May 31 and November 30 of each
year, starting on November 30, 2021
and until November 30, 2026.
May 31 and November 30 of each
year, starting 31.05.2025 and
until 30.11.2029.
J
Linkage
Non-linked
K Total liability in relation to total
Company liabilities
Material
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
A3.il rating by Midroog
N Compliance with the terms of the
trust deeds
The Company issued to the trustees
of the debentures of series F
certificates regarding its compliance
with the terms of the debentures for
the year 2024.
The Company issued to the
trustees of the debentures of
series G certificates regarding its
compliance with the terms of the
debentures for the year 2024.
O Liens
First footing 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.2
P
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
The Company has committed that during two consecutive quarters the LTV
will not exceed 75% starting from December 1, 2023 until the final
repayment date of the debentures.
Q
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
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 debentures
(series F) of the Company.
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
debentures (series G) of the
Company.
2 With respect to debentures (Series G), the Company submitted a request to amend the lien permit, which has not yet been obtained,
and therefore the lien has not yet been registered.
Report of the Board of Directors on the State of Affairs of the Corporation for the Year ended
December 31, 2024
28
4.2.
On 9.1.2024, Maalot announced an ilAA- minus rating with a positive rating outlook (see immediate report,
Ref. 2024-01-004668) and also announced an Aa3.il rating with a positive rating outlook (see Immediate
Report, Ref. 2024-01-004623), for the debentures to be issued by Bezeq through the expansion of Series 11
and 13.
On 2.5.2024, Maalot raised Bezeq's rating from ilAA minus to ilAA with a stable rating outlook in light of the
improvement in Bezeq's financial conditions (see Immediate Report, Ref. 2024-01-042343).
Additionally, on 19.5.2024, Midroog raised the rating of Bezeq's debentures to Aa2.il with a stable rating
outlook in light of the ongoing improvement in Bezeq's financial positioning in tandem with the
improvement in the debt coverage to EBITDA ratio to levels that support this rating (see Immediate Report,
Ref. 2024-01-048802).
4.3.
On June 16, 2024, Midroog Ltd. assigned an A3.il rating with a stable outlook to the Company's debentures
(Series F) that were outstanding as of that date (see Immediate Report Rf. 2024-01-060670).
On September 12, 2024, the Company published the results of the offering according to the Shelf Offering
Report and, in accordance with the results of the tender, the Company issued NIS 1,009,177,103 par value.
Bonds (Series 7), in exchange for NIS 999,185,250 par value of debentures (Series F) (see Immediate Report
Ref. 2024-15-603131).
On September 15, 2024, Midroog Ltd. assigned an A3.il rating with a stable outlook to debentures (Series
G) in the amount of up to NIS 1,009 million par value issued by the Company, as part of an exchange
purchase offer to holders of debentures (Series F) (see Immediate Report, Ref.: 2024-15-603316).
4.4.
Financial clauses of the Company's debentures
In accordance with the Company's commitment in debenture F and G to comply with the LTV clause, the
LTV ratio as of December 31, 2024 amounted to 48.8%.
The Company's net debt balance as of December 31, 2024 is approximately NIS 1,849 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 2,039 million, net of cash balances including restricted cash and investments in the
amount of NIS 190 million.
Furthermore, there has been no change with regard to the holding of the control permit as stated in Section
1.1.4 of Chapter A of this annual report of the Company.
5.
Miscellaneous
For information regarding the balance of liabilities of the reporting corporation in its financial statements as
of 31.12.2024, see the form to be reported by the Company on the MAGNA system on March 12, 2025.
Tomer Raved
CEO
Darren Glatt
Chairman of the Board of Directors
Date of signing: March 11, 2025.
Chapter C
Consolidated Financial Statements
for Year Ended December 31, 2024
Consolidated Statements as of December 31, 2024
Table of contents
Page
Auditors' reports
4
Statements
Consolidated Statements of Financial Position
8
Consolidated Statements of P&L
10
Consolidated Statements of Comprehensive Income
10
Consolidated Statements of Changes in Equity
11
Consolidated Cash Flows Statements
12
Notes to the Consolidated Statements
15
1
General
2
Basis of preparation of the statements
3
Material accounting policy
4
Cash and cash equivalents
5
Investments
6
Trade receivables
7
Income taxes
8
Leases
9
PP&E
10
Intangible assets
11
Deferred expenses and non-current investments
12
Investees
13
Debentures, loans and credit
14
Trade payables
15
Provisions
16
Employee benefits
17
Contingent liabilities
18
Contracts
19
Collateral, liens and guaranties
20
Equity
21
Income
22
General and operating expenses
23
Salaries
24
Other operating expenses, net
25
Financing expenses, net
26
Share-based compensation
27
Profit per share
Consolidated Statements as of December 31, 2024
28
Segmental reporting
29
Transactions with interested parties and related parties
30
Financial instruments
31
Summary of selected data from the statements of Bezeq the Israel Telecommunications Corp.
Ltd., Pelephone Communications Ltd., Bezeq International Ltd. and Yes TV and Communications
Services Ltd. (Yes)
32
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
4
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, 2024 and 2023 and the consolidated statements of P&L,
comprehensive income, changes in equity and cash flows for each of the three years in the period ended on
December 31, 2024. 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, 2024 and 2023, 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, 2024, 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 1.3 in the consolidated
statements, regarding the investigation by the Securities Authority and the Israel Police. 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
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.
Somekh Chaikin
KPMG Millennium Tower
17 HaArbaa Street P.O.B. 609
Tel Aviv 6100601
03 684 8000
Measuring the impairment of cash-generating units of Yes Television and Communications Services Ltd. (Yes)
and Bezeq International Ltd.
As described in Notes 3.7, 10.2, 10.5 and 10.6 to the consolidated statements, as of December 31, 2024, the
recoverable amount of the cash generating units Yes Television and Communications Services Ltd. (Yes) and
Bezeq International Ltd. (hereinafter: the "Units") is in the amount of NIS 86 and (51) million, respectively, and
the total loss from the impairment of these units for the year that ended on December 31, 2024 amounts to NIS
242 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.
Response given 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 3.7, 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, 2024, and our report dated March 11, 2025 included
an unreserved opinion on the effective existence of those components.
Somekh Chaikin
Certified Public Accountants
March 11, 2025
Somekh Chaikin, Israeli partnership and a member of the KPMG network of independent firms
incorporated under the Swiss entity KPMG International Cooperative ("KPMG International")
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, 2024. 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 over the process of preparing and closing statements;
(2) Controls over the cash and debt management process (all of which are collectively referred to hereinafter as
the "audited control components").
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, 2024.
As described in the report regarding the effectiveness of the internal control over the financial reporting and
disclosure, as of December 31, 2024, 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, 2024 and 2023 and for each of the three years in the period ending
on December 31, 2024 and our report, dated March 11, 2025, 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 to the Statements 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, as well as to 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 well as 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 11, 2025
Somekh Chaikin, Israeli partnership and a member of the KPMG network of independent firms
incorporated under the Swiss entity KPMG International Cooperative ("KPMG International")
Consolidated Statements as of December 31, 2024
Consolidated statements of financial position as of December 31
2024
2023
Assets
Note
NIS millions
NIS millions
Cash and cash equivalents
4,3.3
896
644
Restricted cash and cash equivalents
4,3.3
18
-
Investments *
5,3.3
1,977
1,248
Trade receivables
3.3
,
6
1,395
1,477
Other receivables
3.3
,
6
174
166
Inventory
162
82
Assets of disposal group held for sale
12.5
83
-
Total current assets
4,705
3,617
Trade and other receivables
3.3
,
6
410
446
Right-of-use assets
3.6
,
8
1,762
1,870
PP&E
3.4
,
9
7,160
6,828
Intangible assets
3.5
,
10
3,287
3,280
Deferred expenses and non-current investments
11
368
312
Total non-current assets
12,987
12,736
Total assets
17,692
16,353
* Including restricted deposits.
Consolidated Statements as of December 31, 2024
Consolidated statements of financial position as of December 31 (Cont.)
2024
2023
Liabilities and equity
Note
NIS millions
NIS millions
Debentures, loans, and credit
3.3
,
13
1,123
1,074
Current maturities of lease liabilities
3.6
,
8
438
433
Trade payables
14
1,955
1,758
Employee benefits
3.8
,
16
400
332
Provisions
3.9
,
15
84
111
Liabilities of disposal group held for sale
12.5
34
-
Total current liabilities
4,034
3,708
Loans and debentures
3.3
,
13
8,571
7,829
Lease liabilities
3.6
,
8
1,530
1,608
Employee benefits
3.8
,
16
300
251
Derivatives and other liabilities
14
214
160
Deferred tax liabilities
3.12
,
7
304
322
Provisions
3.9
,
15
30
29
Total non-current liabilities
10,949
10,199
Total liabilities
14,983
13,907
Equity attributed to:
Shareholders of the Company
20
233
189
Non-controlling interests
12.8
2,476
2,257
Total equity
2,709
2,446
Total liabilities and equity
17,692
16,353
Itzik Tadmor
Tomer Raved
Darren Glatt
CFO
CEO
Chairman of the Board of Directors
Date of approval of the financial statements: March 11, 2025
The notes attached to the consolidated statements form an integral part thereof.
Consolidated Statements as of December 31, 2024
Consolidated P&L statement for the year ended December 31
2024
2023
2022
Note
NIS millions
NIS millions
NIS millions
Income
3.10
,
21
8,884
9,103
8,986
Operating expenses
General and operating expenses
22
3,264
3,381
3,396
Salaries
23
1,936
1,926
1,877
Depreciation, amortization, and impairment
8,9,10,11
1,844
1,867
1,868
Other operating expenses, net
24
199
180
220
Total operating expenses
7,243
7,354
7,361
Operating profit
1,641
1,749
1,625
Financing expenses (income)
3.11
,
25
Financing expenses
627
518
530
Financing income
(
203
)
(
169
)
(
132
)
Financing expenses, net
424
349
398
Profit after financing expenses, net
1,217
1,400
1,227
Share in loss of equity-held investee, net
8
-
-
Profit before income taxes
1,209
1,400
1,227
Income taxes expenses
3.12
,
7
321
346
336
Net profit for the year
888
1,054
891
Net profit attributable to shareholders of the
Company
108
187
158
Net profit attributable to non-controlling
interests
780
867
733
Net profit for the year
888
1,054
891
Profit per share (NIS)
27
Basic
02
1.
1.75
1.42
Diluted
02
1.
1.74
1.41
Consolidated statements of comprehensive income for the year ended December 31
2024
2023
2022
NIS millions
NIS millions
NIS millions
Net profit for the year
888
1,054
891
Reassessment of defined benefit plan, net of tax – will not be
transferred to P&L
(
5
)
18
56
Additional other comprehensive loss from hedging, net of tax
– will be transferred to P&L
(
1
)
(
6
)
(
6
)
Total comprehensive income for the year
882
1,066
941
Attributable to:
Shareholders of the company
106
190
171
Non-controlling interests
776
876
770
Total comprehensive income for the year
882
1,066
941
The notes attached to the consolidated statements form an integral part thereof.
Consolidated Statements as of December 31, 2024
(*) Represents an amount lower than NIS 1 million.
The notes attached to the consolidated statements form an integral part thereof.
Consolidated statements of changes in equity for the year ended December 31
Share
capital
Shares
premium
Treasury
shares
Other
funds
Deficit
balance
Total
Non-
controlling
interests
Total
NIS
millions
NIS
millions
NIS
millions
NIS
millions
NIS
millions
NIS
millions
NIS millions
NIS
millions
Balance as of January 1, 2022
12
1,495
(
16
)
(
29
)
(
1,446
)
16
1,454
1,470
Profit for the year 2022
-
-
-
-
158
158
733
891
Other comprehensive income (loss) for
the year, net of tax
-
-
-
(
2
)
15
13
37
50
Total comprehensive income (loss) for
the year 2022
-
-
-
(
2
)
173
171
770
941
Transactions imputed directly to equity
Share-based compensation (See Note
26)
-
-
-
1
-
1
11
12
Business consolidation
-
-
-
-
-
-
1
1
Dividend distributed to non-controlling
interests (see Note 12.9)
-
-
-
-
-
-
(
392
)
(
392
)
Transaction
with
non-controlling
interests (See Note 12.8)
-
-
-
-
(
13
)
(
13
)
(
2
)
(
15
)
Buyback of shares (see Note 20)
-
-
(
121
)
-
-
(
121
)
-
(
121
)
Balance as of December 31, 2022
12
1,495
(
137
)
(
30
)
(
1,286
)
54
1,842
1,896
Profit for the year 2023
-
-
-
-
187
187
867
1,054
Other comprehensive income (loss) for
the year, net of tax
-
-
-
(
2
)
5
3
9
12
Total comprehensive income (loss) for
the year 2023
-
-
-
(
2
)
192
190
876
1,066
Transactions imputed directly to equity
Share-based compensation (See Note
26)
-
-
-
-
-
-
10
10
Dividend distributed to non-controlling
interests (see Note 12.9)
-
-
-
-
-
-
(
466
)
(
466
)
Transaction
with
non-controlling
interests (See Note 12.8)
-
-
-
-
(
32
)
(
32
)
(
5
)
(
37
)
Buyback of shares (see Note 20)
-
-
(
23
)
-
-
(
23
)
-
(
23
)
Balance as of December 31, 2023
12
1,495
(
160
)
(
32
)
(
1,126
)
189
2,257
2,446
Profit for the year 2024
-
-
-
-
108
108
780
888
Other comprehensive loss for the year,
net of tax
-
-
-
(
2
)
-
(
2
)
(
4
)
(
6
)
Total comprehensive income (loss) for
the year 2024
-
-
-
(
2
)
108
106
776
882
Transactions imputed directly to equity
Share-based compensation (See Note
26)
-
-
-
-
-
-
21
21
Dividend distributed to non-controlling
interests (see Note 12.9)
-
-
-
-
-
-
(
568
)
(
568
)
Transaction
with
non-controlling
interests (See Note 12.8)
-
-
-
-
(
42
)
(
42
)
(
10
)
(
52
)
Buyback of shares (see Note 20)
-
-
(
20
)
-
-
(
20
)
-
(
20
)
Balance as of December 31, 2024
12
1,495
(
180
)
(
34
)
(
1,060
)
233
2,476
2,709
Consolidated Statements as of December 31, 2024
Consolidated statements of cash flows for the year ended December 31
2024
2023
2022
Note
NIS millions
NIS millions
NIS millions
Cash flows from operating activities
Profit for the year
888
1,054
891
Adjustments:
Depreciation, amortization and impairment
8,9,10,11
1,844
1,867
1,868
Capital gains, net
24
(
17
)
(
2
)
(
8
)
Financing expenses, net
25
5
43
364
445
Share in loss of equity-held investee
8
-
-
Impairment loss on disposal group held for sale
12.5
9
-
-
Share-based compensation
26
21
10
12
Income taxes expenses
7
321
346
336
Change in trade and other receivables
6
69
(
10
)
342
Change in inventory
(
109
)
(
15
)
(
21
)
Change in trade and other payables
147
62
(
39
)
Change in provisions
(
25
)
18
24
Change in employee benefits
115
(
3
)
(
91
)
Change in other liabilities
(
53
)
20
3
Income taxes paid, net
(
244
)
(
269
)
(
271
)
Net cash derived from operating activities
3,409
3,442
3,491
Cash flows for investing activities
Purchase of PP&E
9
(
1,356
)
(
1,333
)
(
1,353
)
Investment in intangible assets and deferred expenses
10,11
(
390
)
(
375
)
(
346
)
Investment transactions, net
(
669
)
(
245
)
223
Payment in respect of frequencies
-
-
(
88
)
Government grant in respect of frequencies
4
-
74
Proceeds from the sale of PP&E
16
39
40
Purchase of a subsidiary minus cash purchased
-
(
14
)
(
9
)
Classification as restricted cash and cash equivalents
(
18
)
-
-
Investment in equity-held investee
(
10
)
-
-
Interest received from bank deposits
95
72
23
Miscellaneous
8
21
16
Net cash used for investing activities
(
2,320
)
(
1,835
)
(
1,420
)
Cash flows for financing activities
Issuance of debentures and receipt of loans
13
1,648
1,015
400
Repayment of debentures and loans
13
(
1,071
)
(
1,409
)
(
1,416
)
Purchase of non-controlling interests
12
(
52
)
(
37
)
(
15
)
Lease principal and interest payments
8
(
449
)
(
484
)
(
420
)
Buyback of Company shares
20
(
20
)
(
23
)
(
121
)
Interest paid
13
(
304
)
(
312
)
(
307
)
Dividend distributed to non-controlling interests
12
(
568
)
(
466
)
(
392
)
Early repayment fees
13
-
-
(
26
)
Payment for completed hedging transactions
7
4
(
18
)
Miscellaneous
-
(
3
)
-
Net cash used for financing activities
(
809
)
(
1,715
)
(
2,315
)
Net increase (decrease) in cash and cash equivalents
280
(
108
)
(
244
)
Effect of changes in foreign currency exchange rate
-
(
2
)
-
Cash and cash equivalents as of January 1
644
754
998
Balance of cash held for sale
(
28
)
-
-
Cash and cash equivalents at the end of the year
896
644
754
The notes attached to the consolidated statements form an integral part thereof.
Notes to the Consolidated Statements as of December 31, 2024
2024
1.
General
1.1.
The reporting entity
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, 2024 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 the date of publication of the Statements, the Company holds approximately
27.47% of the issued share capital of Bezeq (see Note 12.8).
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, 2024, Searchlight and the Forer Family own 67.20% and 12.72%,
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 2022-2024 (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 the
Company and former Chairman of the Bezeq Board of Directors, Mr. Shaul
Elovitch ("Elovitch") regarding the purchase of shares in Yes TV and
Communications Services Ltd. ("Yes") and the provision of satellite
communication services to Yes, 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 Elovitch
and Bezeq Group. ("Case 4000"). Following the investigations, indictments
were filed and notices were received as follows:
1.3.1.1.
On 28.1.2020, an indictment was filed with the Jerusalem
District Court in Case 4000, inter alia, against Elovitch for various
offenses, including 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 of
Elovitch and the economic interests of Elovitch and Bezeq
Group. This trial is still ongoing.
Notes to Consolidated Statements as of December 31, 2024
1.3.
Investigations by the Israel Securities Authority and the Israel Police
(Cont.)
Further to Bezeq’s summons to a hearing in Case 4000 regarding
suspected bribery offenses (an offense under Article 291 of the
Penal Law, along 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,
along with Article 23 of the Penal Law, on February 1, 2024, an
agreement was signed between the State of Israel and Bezeq for
a conditional termination of proceedings under the conditions
in accordance with Point B of Chapter 91 of the Securities Law
("the Settlement"), in accordance with which the State of Israel
will not file an indictment in Bezeq's case in connection with any
of the suspicions investigated in the investigation file, subject to
Bezeq paying an amount of NIS 800 thousand (an amount that
was paid by Bezeq), as well as Bezeq’s refraining from any
statement that is knowingly inconsistent with or contradicts the
Settlement and the facts that Bezeq admitted as part of the
Settlement.
As part of the Settlement, the State of Israel also informed
Bezeq that it had decided to close the investigation file
regarding the company Walla.
As part of the Settlement, Bezeq admitted the facts detailed in
the settlement and these are:
A. In the relevant period, between the years 2012 and 2016, Shaul
Elovitch was the controlling shareholder of the Bezeq Group.
Walla, which during the relevant period was a wholly owned
subsidiary of Bezeq, operated the "Walla NEWS!" website.
B. Elovitch and other Bezeq representatives worked with the
Director General of the Ministry of Communications Shlomo
Filber to promote the issue of cancelling the structural
separation in the Bezeq Group.
C. On December 22, 2016, Shlomo Filber sent Bezeq a letter titled
"Cancellation of the structural separation obligation in the
Bezeq Group", which was drafted by him in coordination with
Bezeq representatives, with the knowledge of Elovitch and the
CEO of Bezeq at that time, Stella Handler ("Handler"). The letter
included a misleading detail, according to which the fact
regarding the obligation to hold a hearing prior to the
cancellation of the corporate separation in Bezeq was omitted,
and a misleading representation was made, according to which
both the cancellation of the corporate separation and the
cancellation of the structural separation are in an advanced
stage and have a higher feasibility than in actuality.
D. On December 23, 2016, Bezeq reported in an immediate report
to the public about the transmission of the letter and its
contents. This report included the misleading detail contained
in the Ministry of Communications letter. Elovitch and Handler
knew that the letter from the Ministry of Communications
contained the misleading detail and that it would be reported
to the public. The next day, the Ministry of Communications
Notes to Consolidated Statements as of December 31, 2024
published a clarification according to which the cancellation of
the corporate separation will be done after a hearing procedure
and subsequently Bezeq published a report clarifying this part
of the previous report.
It should be noted that, as appears from the settlement, the
suspicions against Bezeq stem from the actions and/or
omissions of Elovitch and Handler, who were involved in the
execution of the acts described in the settlement and who no
longer serve at Bezeq.
1.3.1.2.
On 23.12.2020, 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 Elovitch,
as well as against former senior officials of Bezeq Group and Yes,
Or Elovitch, Amikam Shurer, Linor Yochelman, Ron Ayalon, and
Mickey Neiman in the Yes 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
Yes 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 Elovitch was
personally interested.
1.3.2.
It should be noted that following the launching of the aforementioned
investigations, a number of civil legal proceedings were opened against Bezeq
and Yes, 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.
1.3.3.
Bezeq does not yet have complete information regarding the investigations
(especially regarding the Yes case), their content, the materials and evidence
held by the legal authorities in the matter, and accordingly, it is not yet able
to assess all the effects of the investigations, their findings, and their results
on Bezeq and its statements.
1.3.
Definitions
In these statements:
The Company
B Communications Ltd
The Group
the Company and its consolidated companies
Bezeq
"Bezeq" The Israel Telecommunications Corp. Ltd
Consolidated
companies
Companies whose reports are fully consolidated, directly or
indirectly, with the Company's reports as specified in Note 12.
Included
companies
Companies, the Group's investment in which is included, directly
or indirectly, in the statements based on the balance sheet value.
Investees
Consolidated companies or included companies.
Related party
As defined in International Accounting Standard 24 regarding
related parties.
Notes to Consolidated Statements as of December 31, 2024
Interested party
As defined in Paragraph (1) of the definition of "interested party"
in a corporation in Article 1 of the Securities Law, 5748-1968.
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
the international financial reporting standards IFRS International Accounting Standards
(hereinafter: "IFRS") and in accordance with the securities regulations (annual financial
statements), 2010.
The consolidated financial statements were approved by the Company’s Board of
Directors on March 11, 2025.
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 and investments in securities measured at fair value
through P&L
* 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 – Material 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 P&L statement
Costs and expenses in the P&L 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 in accordance with 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.
Notes to Consolidated Statements as of December 31, 2024
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.
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:
Subject
Key assumptions
Possible implications
Reference
Measuring
the
recoverable
amounts of cash
generating units
Assuming the expected cash flows
from the cash generating units
Recognition of an impairment
loss
or
impairment
cancellation
Note 10
Provisions
and
contingent
liabilities,
including levies
Assessing the chances of claims against
the Group companies and measuring
the potential liabilities related to the
claims
Bezeq estimates of the payment to the
authorities for levies on real estate in
the "Sakia" complex
Cancellation or creation of a
provision
for
a
claim,
recognition
of
income/expenses
and
recognition of profit or loss
for said change, respectively
Change in share capital gains
gain from the sale of real
estate in the "Sakia" complex
Notes 15,17
Note 6.6
Employee benefits
Actuarial assumptions such as discount
rate, future wage increase rate and
departure rate
Increase
or
decrease
in
liabilities
for
employee
benefits and commitment to
early retirement
Note 16
Deferred taxes
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 Yes for tax
purposes will not be used
Recognition of a deferred tax
asset and impact on income
taxes expenses
Note 7
Effective
control
over Bezeq
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
shareholders
under
the
Communications Law
Consolidation
of
Bezeq's
statements or treatment of
investment in Bezeq using the
equity method
Notes 12.4,
12.6
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.
Material 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.
Notes to Consolidated Statements as of December 31, 2024
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.
Allocation of profit or loss and other comprehensive income among the
shareholders
Profit or loss and any other component of comprehensive income is
attributed to the Company's owners and non-controlling interests. The total
profit or loss 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.
3.1.4.
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.
3.2.
Foreign currency transactions
From time to time, the Group enters into transactions with suppliers abroad, mainly in
dollar and euro currencies. 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
Notes to Consolidated Statements as of December 31, 2024
Non-derivative financial assets in the Group mainly include investments in
shekel deposits in banks, investment in money market funds, customers and
other receivables, and cash and cash equivalents.
At the time of initial recognition, financial assets are classified into one of the
following measurement categories: amortized cost; or fair value through P&L.
The Group's debt instruments held as part of a business model aimed at
collecting contractual cash flows in accordance with IFRS 9 mainly include
cash and cash equivalents and short-term and long-term customers (see Note
6).
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.
Financial assets at amortized cost are measured using the effective interest
method and net of impairment losses. Interest income, gains or losses from
exchange rate differences and impairment are recognized in P&L. Any gain or
loss arising from derecognition is also recognized in P&L.
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.
In addition, the Company holds investments in money market funds that are
measured at fair value through P&L.
Financial assets at fair value through P&L are measured in subsequent periods
at fair value. Net gains and losses, including interest or dividends income, are
recognized in P&L.
3.3.2.
Derivative financial instruments including hedge accounting
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 income 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 limited to
the cumulative change in the fair value of the hedged item (according to
current value) from the date the hedge was created.
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. In cases as mentioned, the Group performs
economic hedging, and derivative instruments as mentioned are recognized
at fair value; The changes in the fair value are immediately credited to the
P&L statement, as financing income or expenses.
Notes to Consolidated Statements as of December 31, 2024
3.3.3.
Non-derivative financial instruments
The non-derivative financial liabilities in the Group include: debentures issued
by the Group, loans and credit from banking corporations and other credit
providers (see Note 13), suppliers and other beneficiaries (see Note 14).
After initial recognition, financial liabilities are measured at amortized cost in
accordance with the effective interest method.
Financial liabilities are deducted when the Group's liability, as specified in the
agreement, expires or when it is discharged or cancelled.
The value of index-linked financial liabilities, which are not measured
according to fair value, is estimated in each period according to the actual
increase/decrease rate of the index.
3.4.
PP&E
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, contactor costs, and
discounted 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.
Most spare parts, auxiliary equipment, and backup equipment are classified as fixed
assets when they meet the definition of PP&E, since their useful duration is over a year
in accordance with IAS 16.
When significant PP&E parts have different durations, they are treated as separate items
(significant components) of the PP&E.
Profit or loss from the sale of PP&E is included in the other income or other expenses,
as the case may be, in the P&L statement.
Depreciation is imputed to the P&L statement according to the straight-line method
over the estimated useful life of each part of the PP&E items.
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.
Asset
Years
Landline and international network equipment (switching, transmission and
power)
225
Landline network
10-40
Multi-channel TV equipment and infrastructure
-18
Subscriber equipment and installations
3-8
Vehicles
6-7
Office and general equipment
314-
Electronic equipment, computers and internal communication systems
3-7
Cellular network
4-10
Passive radio equipment at cellular network sites
Until December 31, 2042
Notes to Consolidated Statements as of December 31, 2024
Asset
Years
Structures
25
Underwater cable
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.
3.5.
Intangible assets and goodwill
3.5.1 The Group's intangible assets mainly include software and computer licenses
and rights to use cellular communication frequencies (see Note 10).
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 the
depreciation and amortization item in the P&L statement 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.
Amortization of intangible assets is credited to the P&L 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.
The estimated useful duration for the current period is:
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.
3.5.2 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 that is not currently amortized.
Goodwill is examined for impairment at least once a year. See also Note 10.
3.6.
Leases
The Group's lease agreements, the Group mainly leases cellular communication sites,
buildings, and vehicles.
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.
Since the interest rate inherent in the lease cannot be easily determined, the Group's
additional interest rate is used.
Notes to Consolidated Statements as of December 31, 2024
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).
3.6.1.
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.
3.6.2.
Variable lease payments
Most of the Group’s leasing agreements include lease payments that are
linked to the Consumer Price Index. These payments 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.
3.6.3.
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.
The following is a weighted average of the remaining duration of the lease
agreements as of 31.12.24:
Property type
Years
Cellular communication sites
6.3
Structures
15
Vehicles
2.2
3.7.
Impairment of non-financial assets
The Company performs an impairment test for its cash generating units once a year (see
Note 10), or if there are indicators of impairment.
3.7.1.
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).
3.7.2.
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
Notes to Consolidated Statements as of December 31, 2024
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.
3.7.3.
Recognition of an impairment loss
An impairment loss of a cash-generating unit is recognized when the cash-
generating unit's carrying amount, including goodwill, as far as relevant,
exceeds its recoverable amount and is imputed to P&L. An impairment loss
recognized for a cash-generating unit is allocated first to amortize the carrying
amount of goodwill attributed to the unit, and then to amortize the carrying
amount 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 P&L 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 P&L 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 P&L 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.
3.8.
Employee benefits
3.8.1.
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 P&L 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
Notes to Consolidated Statements as of December 31, 2024
the benefit is paid or linked thereto, and whose vesting 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.
The Group chose to present the interest costs that were credited to P&L, as
part of the Financing expenses section.
Remeasurement of the net defined benefit liability includes actuarial profits
and losses and the return on plan assets (excluding interest).
Remeasurements are imputed immediately, through other comprehensive
income, directly to surplus.
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.
3.8.2.
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 P&L 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.
3.8.3.
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 Bezeq can no longer go back on its offer.
The expenses for early retirement and dismissal that were imputed to P&L
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).
3.9.
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.
Notes to Consolidated Statements as of December 31, 2024
3.9.1.
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 a legal 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, 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.
The Group recognizes an indemnity asset only if it is practically certain that
the indemnity would be received if the Company eliminates the liability. The
amount recognized for the indemnity does not exceed the amount of the
provision.
3.10. Income
Income in the Group is divided according to the activity segments (Note 21) as follows:
•
Landline national interior communication - mainly internet services, telephony,
transmission and data communication, and others.
•
Cellular communication- cellular services and sale of end equipment.
•
Multi-channel television
•
Internet services (ISP, international communication, and ICT services)
3.10.1.
The Group recognizes income when the customer obtains control over the
promised goods or service. 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.
When there is a significant financing component in the contract, the Bezeq
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, the Group
applies the practical relief stipulated in the standard and does not separate
a significant financing component.
Notes to Consolidated Statements as of December 31, 2024
Measuring progress of performance obligation fulfilment
In most types of income, 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.
3.10.2.
Contract costs
There are agreements in the Group that include supplemental 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.
These costs are recognized as an asset when it is expected that the Group will
recover these costs.
Costs discounted as an asset are amortized to the P&L 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 carrying amount
of the asset recognized as mentioned above exceeds the remaining amount
of the consideration that the 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 P&L.
3.11. 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.
3.12. Income taxes expenses
Income taxes expenses include current and deferred taxes. Income taxes expenses are
imputed to the P&L statement or to other comprehensive income if they arise from items
that are recognized in other comprehensive income.
3.12.1. 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.
Notes to Consolidated Statements as of December 31, 2024
3.12.2. 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.
3.12.3. 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.
3.12.4. Deferred taxes
The recognition of deferred taxes refers to temporary differences between the
carrying amount 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:
1. Initial recognition of goodwill
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.
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.
3.12.5. 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.
3.12.6. 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.
Notes to Consolidated Statements as of December 31, 2024
3.12. 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 assembly). In cash flow statements, a dividend paid is presented as a financing
activity.
3.13. First-time application of new standards, amendments to standards, and
interpretations
3.13.1. International Financial Reporting Interpretations Committee (IFRIC) Resolution
on Disclosure of Income and Expenses of Reportable Segments
In July 2024, the IASB approved the IFRIC Resolution on Decision on Disclosure
of Income and Expenses of Reportable Segments (hereinafter: “the Resolution”)
in accordance with IFRS 8 Operating Segments (hereinafter: “the Standard”).
The Resolution discussed the application of the disclosure requirements set out
in Section 23 of IFRS 8 “Operating Segments” and clarified that disclosure is
required for “material items of income and expense” if they are included in the
measure of P&L reviewed by the chief operating decision maker (CODM), even
if they are not provided separately to him. It was also clarified that “material
items of income and expense” are not limited to exceptional or non-recurring
items.
In addition, the Resolution clarified that judgment is required in determining
the extent of disclosure to be included in segment reporting, taking into account
the entity's specific facts and circumstances, the core principle of IFRS 8, and
the materiality principles set out in IAS 1 "Presentation of Financial
Statements".
The Resolution was applied by the Company in these statements by way of
retrospective application. As a result, the Company added information
regarding salary expenses and operating and general expenses in the Segments
note, see Note 28.
3.14. New standards that were not yet adopted:
3.14.1. International Financial Reporting Standard 18 IFRS Presentation and Disclosure
in Financial Statements:
This standard replaces International Accounting Standard 1IAS “Presentation of
Financial Statements”. The objective of the standard is to provide improved
structure and content for financial statements, in particular in the P&L
statement. The standard includes new disclosure and presentation
requirements as well as requirements that were brought from International
Accounting Standard IAS 1 Presentation of Financial Statements. As part of the
new disclosure requirements, two interim totals are required to be presented
in the P&L statement: operating profit and profit before financing and tax. In
addition, the results in the P&L statement will be classified into three new
categories: operating category, investing category, and financing category. In
addition to changes in the structure of the P&L statement, the standard also
includes a requirement to provide separate disclosure in the financial
statements regarding the use of performance measures defined by
management (MPM indices).
Notes to Consolidated Statements as of December 31, 2024
In addition, within the framework of the standard, specific guidelines have been
added for the grouping and splitting of items in the financial statements and in
the notes. The date of initial application of the standard is for annual periods
beginning on January 1, 2027, with the possibility of early application. In
accordance with the decision of the Securities Authority, initial application of
the standard will only be possible starting on January 1, 2025. The
implementation of the amendment is expected to have an impact on the
presentation and disclosures in the Group's statements, mainly in the P&L
statement. The Group is examining the implications of implementing the
standard on the statements.
4.
Cash and cash equivalents
Cash and cash equivalents balance as of 31.12.2024 mainly includes deposits in banks for a period
of up to 90 days as well as balances in current accounts.
5.
Investments
December
31,
2024
December
31,
2023
NIS millions
NIS millions
Shekel deposits in banks (1)
901
484
Investment in securities at fair value through P&L
1,067
759
Derivatives
9
5
1,977
1,248
* Reclassified
(1) Deposits in shekels in banks, due until December 2025.
Notes to Consolidated Statements as of December 31, 2024
6.
Trade and other receivables
6.1.
Composition of trade and other receivables:
December
31,
2024
December
31,
2023
NIS millions
NIS millions
Customers*
Open debts and checks regarding it
1
69
744
Credit cards
177
178
Income receivable
211
225
Long-term customer current maturities
315
329
Relate parties and interested parties
1
1
1,395
1,477
Other receivables and current tax assets*
Current tax assets
18
16
Other receivables
0
9
83
Related and interested parties
8
-
Expenses in advance
58
67
174
166
Long-term customers and other receivables*
Customers – open debts
244
275
Long-term receivables and authorities (mainly for real estate
sales)**
166
171
410
446
1,979
2,089
* Customer balances are presented net of the provision for predicted credit losses.
** See Note 6.6 below.
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 2024
are 5.17%-5.68% (in 2023: 5.51%-6.29%).
6.3.
Expected exercise dates of long-term customers and receivables:
Expected repayment dates
December 31, 2024
NIS millions
2026
173
2027
66
2028 onwards
171
410
Notes to Consolidated Statements as of December 31, 2024
6.4.
Aging of customer debts as of the reporting date:
December 31, 2024
December 31, 2023
Gross customer
balance
Provision
for
predicted credit
losses
Gross customer
balance
Provision
for
predicted credit
losses
NIS millions
NIS millions
NIS millions
NIS millions
Not in arrears
1,459
(7)
1,560
(
4
)
Arrears up to 1 year
188
(29)
188
(
24
)
Arrears 1-2 years
38
(22)
35
(
18
)
Arears over 2 years
42
(30)
39
(
24
)
1,727
)88(
1,822
(
70
)
6.5.
The transactions in the provision for predicted credit losses during the year is as follows:
2024
2023
NIS millions
NIS millions
Balance as of January 1
70
64
Loss recognized from impairment
43
25
Loan-loss
(
25
)
(19)
Balance as of December 31
88
70
6.6.
Long-term receivables and authorities balance includes a receivable balance of NIS 106
million for permit fees and improvement levy that Bezeq paid to the Israel Lands
Authority and the Or Yehuda Local Authority for the sale of the Sakia complex in 2019.
In addition, Bezeq provided index-linked guarantees in the amount of approximately NIS
50 million in accordance with the Israel Lands Authority's requirements for payment of
the remaining permit fees. In accordance with the decision of a final appraiser, Bezeq
paid approximately NIS 56 million in 2024 for an additional payment required for the
improvement levy, and at the same time, Bezeq recognized an indemnity asset in the
same amount due to the Israel Lands Authority's commitment to indemnify Bezeq for
the full amount of the 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, 2024
7.
Income taxes
7.1.
Corporate tax rate
The current taxes for the reporting periods and deferred tax balances as of December
31, 2024 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.
On December 30, 2024, the Company received a judgment assessment for the
2019 tax year, according to which the Company is required to pay tax in the
amount of approximately NIS 40 million (excluding interest and linkage
differences) resulting from recording a revaluation of the Company's
debentures to market value as a result of a change in the terms of the
Company's debentures in the creditor arrangement that the Company made in
2019.
The Company disputes the Tax Authority's position and believes, inter alia,
based on an opinion it received from its professional advisors, that it has well-
founded claims to contradict the Tax Authority's position, and therefore intends
to file an objection to the assessment within the deadlines set for this by law.
According to the aforementioned opinion received from its professional
advisors, the chances of the Company's position being accepted by the Tax
Authority or the Court outweigh the chances of its rejection (More likely than
not), and therefore the Company did not record any provision in its books for
the aforementioned assessment.
7.2.2.
Bezeq has final tax assessments up to and including 2022.
On 15.9.2016, 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 Yes, the Tax Authority gave permission for tax purposes to perform
a merger of Yes with and into Bezeq, in accordance with the provisions of Article 103b
to the Income Tax Ordinance. According to the approval, Yes 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 Yes 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.
Notes to Consolidated Statements as of December 31, 2024
On 3.12.2024, 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 31.12.2025. It
should be noted that the Tax Authority's letter included a statement similar to the one
included in its letter from previous years 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 Yes 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
31.12.2025, as long as there are no material developments in 2025 in regards to the
cancellation of the structural separation between Bezeq and Yes.
Bezeq's position submitted to the Tax Authority is that it is entitled to an extension of
the Tax Authority's approval in accordance with the terms of the taxation decision, and
in any case, 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 in lieu of the aforementioned taxation decision. It should also be
noted that Bezeq continues to work with the various regulatory bodies to eliminate the
structural separation.
The balance of Yes losses for tax purposes, as of December 31, 2024, amounts to
approximately NIS 5.3 billion. See Note 7.6 below regarding deferred taxes that were not
recognized for transferrable losses.
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.
Yes has final tax assessments up to and including the year 2019.
7.2.6.
Bezeq Online has final tax assessments up to and including the year 2019.
7.3.
Income taxes expenses
Year ended December 31
2024
2023
2022
NIS millions
NIS millions
NIS millions
Current tax expenses
Expenses for the current year
316
337
293
Adjustments for previous years according to assessment
agreement
32
-
-
Adjustments for previous years
(
1
)
1
-
Total current tax expenses
347
338
293
Deferred tax expenses
Creating and reversing other temporary differences
(
3
)
8
43
Adjustments for previous years according to assessment
agreement
(
32
)
-
-
Reversal of temporary differences according to assessment
agreement
9
-
-
Total deferred tax expenses
(
26
)
8
43
Income taxes expenses
321
346
336
Notes to Consolidated Statements as of December 31, 2024
7.4.
Adjustment between the theoretical tax on the profit before income
taxes and the tax expenses
Year ended December 31
2024
2023
2022
NIS millions
NIS millions
NIS millions
Profit before income taxes
1,209
1,400
1,227
Statutory tax rate
23%
23%
23%
Income taxes according to the statutory tax rate
278
322
282
Expenses that are not recognized for tax and other
purposes, as well as losses for which deferred taxes were
not incurred, net
43
24
54
Income taxes expenses
321
346
336
7.5.
Recognized deferred tax assets and liabilities and the changes therein
Deferred
tax
assets
for
employee
benefit plans
Deferred
tax
liabilities for PP&E
and
intangible
assets
Other
deferred
taxes
Total
NIS millions
NIS millions
NIS millions
NIS millions
Balance as of January 1,
2023
222
(
536
)
(
5
)
(
319
)
Changes imputed to P&L:
Creation and reversal of
temporary differences
10
(
6
)
(
12
)
(
8
)
Changes imputed to other
comprehensive income
5
-
-
5
Balance as of December 31,
2023
237
(
542
)
(
17
)
(
322
)
Changes imputed to P&L:
Creation and reversal of
temporary differences
6
(
18
)
38
26
Changes imputed to other
comprehensive income
(
3
)
-
(
5
)
(
8
)
Balance as of December 31,
2024
240
(
560
)
6
1
(
304
)
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 Yes. 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 Yes transferred for tax purposes in the amount of approximately NIS 5.3 billion,
and no deferred taxes were recognized in respect of a loss from the impairment of assets
in Yes 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, 2024
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
Communicat
ion sites
Structures
Vehicles
Total
NIS millions
NIS millions
NIS millions
NIS millions
Cost
Balance as of January 1, 2023
1,288
1,267
392
2,947
Additions*
131
299
105
535
Subtractions
for
terminated
or
canceled agreements
(
91
)
(
16
)
(
107
)
(
214
)
Balance as of December 31, 2023
1,328
1,550
390
3,268
Additions*
169
166
153
488
Subtractions
for
terminated
or
canceled agreements
(101)
(218)
(109)
(428)
Balance as of December 31, 2024
1,396
1,498
434
3,328
Amortizations and impairment losses
Balance as of January 1, 2023
585
393
223
1,201
Amortization for the year
177
118
134
429
Subtractions
for
terminated
or
canceled agreements
(
81
)
(
8
)
(
104
)
(
193
)
Changes in agreements and others
(
8
)
(
9
)
(
23
)
(
40
)
Impairment loss
-
-
1
1
Balance as of December 31, 2023
673
494
231
1,398
Amortization for the year
170
111
137
418
Subtractions
for
terminated
or
canceled agreements
(89)
(18)
(104)
(211)
Changes in agreements
(6)
(1)
(32)
(39)
Balance as of December 31, 2024
748
586
232
1,566
Carrying amount
As of January 1, 2023
703
874
169
1,746
As of December 31, 2023
655
1,056
159
1,870
As of December 31, 2024
648
912
202
1,762
* Additions for new agreements, linkage differences, and changes to existing agreements.
Notes to Consolidated Statements as of December 31, 2024
8.2.
Lease liabilities
Communication
sites
Structures
Vehicles
Total
NIS millions
NIS millions
NIS millions
NIS millions
Balance as of January 1, 2023
784
926
198
1,908
Additions*
138
307
130
575
Subtractions
)10(
)8(
)3(
)21(
Financing expenses for lease obligations 21
36
6
63
Lease payments
)206(
)134(
)144(
)484(
Balance as of December 31, 2023
727
1,127
187
2,041
Additions*
176
173
184
533
Subtractions
(12)
(212)
(5)
(229)
Financing expenses for lease obligations 26
37
9
72
Lease payments
(177)
(130)
(142)
(449)
Balance as of December 31, 2024
740
995
233
1,968
Carrying amount as of December 31,
Current maturities of lease liabilities
209
115
109
433
Long-term lease liabilities
518
1,012
78
1,608
Balance as of December 31, 2023
727
1,127
187
2,041
Carrying amount as of December 31,
Current maturities of lease liabilities
214
113
111
438
Long-term lease liabilities
526
882
122
1,530
Total balance as of December 31, 2024 740
995
233
1,968
* Additions for new agreements and changes to existing agreements.
8.3.
Analysis of due dates for the Group's lease obligations (including
principal and interest to be paid)
Expected repayment dates
December 31, 2024
NIS millions
Up to 1 year
498
1-5 years
977
Over 5 years
872
Total
2,347
Notes to Consolidated Statements as of December 31, 2024
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.
Changes in existing agreements
On October 7, 2021, a hosting services agreement was signed between Bezeq
International and ServerFarm IIF Bnei Zion Limited Partnership (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 was delivered in Q2/2023, and the second phase was
expected to be delivered in March 2024. The term of the agreement is 15 years, and
there are options for extension until 2047.
Following the hosting services agreement with Serverfarm that Bezeq International
signed in October 2021, Bezeq International received during the second quarter as
mentioned its share of the Bnei Zion server farm property. Bezeq International handled
the hosting services agreement as a lease agreement for which Bezeq recorded in its
financial statements for 2023 an asset and a liability in the amount of NIS 197 million.
In January 2024, Bezeq International signed an amendment to the hosting services
agreement according to which, as of January 2024, the scope of the lease will be reduced
by half of the area and the scope of the electricity supply to which Bezeq International
committed in the original agreement. The effect of the amendment to the hosting
agreement, which was treated as a leasing amendment, is the amortization of an asset
and liability for a lease in the amount of NIS 97 and 104 million, respectively, and the
recording of a profit from a lease amendment in the amount of NIS 7 million.
Notes to Consolidated Statements as of December 31, 2024
9.
PP&E
Land
and
structures
Landline
and
international
network
equipment
(switching,
transmission,
power)
Cables
and
landline
and
international
network
communication
infrastructure
Cellular
network
Equipment
and
infrastruct
ure
for
multi-
channel
television
Subscriber
equipment
Office
equipment,
computers
and vehicles
Total
NIS millions
Cost
Balance as of January 1,
2023
1,314
2,739
12,753
3,552
1,333
1,811
581
24,083
Additions
49
212
422
186
121
318
92
1,400
Subtractions
)3(
)160(
)22(
)3(
)113(
)334(
)79(
)714(
Balance as of December
31, 2023
1,360
2,791
13,153
3,735
1,341
1,795
594
24,769
Additions
54
283
379
190
111
326
87
1,430
Subtractions
)137(
)119(
-
)5(
)113(
)399(
)46(
)819(
Classification as assets
intended for sale
)62(
-
-
-
-
-
)19(
)81(
Balance as of December
31, 2024
1,215
2,955
13,532
3,920
1,339
1,722
616
25,299
Depreciation
and
impairment losses
Balance as of January 1,
2023
1,059
1,462
9,470
2,931
1,229
1,008
382
17,541
Amortization for the
year
32
221
187
159
37
328
55
1,019
Subtractions
)2(
)160(
)22(
)7(
)110(
)320(
)77(
)698(
Impairment
(cancellation
of
impairment)
16
6
(
2
)
-
49
1
9
79
Balance as of December
31, 2023
1,105
1,529
9,633
3,083
1,205
1,017
369
17,941
Amortization for the
year
31
207
198
162
36
327
56
1,017
Subtractions
)135(
)119(
-
)3(
(
108
)
)392(
)45(
)802(
Impairment
(cancellation
of
impairment)
6
3
3
-
29
)1(
11
51
Classification as assets
intended for sale
)52(
-
-
-
-
-
)16(
)68(
Balance as of December
31, 2024
955
1,620
9,834
3,242
1,162
951
375
18,139
Carrying amount
As of January 1, 2023
255
1,277
3,283
621
104
803
199
6,542
As of December 31,
2023
255
1,262
3,520
652
136
778
225
6,828
As of December 31,
2024
260
1,335
3,698
678
177
771
241
7,160
9.1.
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 amounts to approximately NIS 255
million as of 31.12.2024 and approximately NIS 246 million as of 31.12.2023.
9.2.
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
Notes to Consolidated Statements as of December 31, 2024
were made to the estimated duration of certain assets. The aforementioned change had
no material effect on the Group's depreciation expenses.
9.3.
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.
9.4.
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 was 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). Bezeq's requests to add service
areas in which Bezeq will deploy a fiber network and provide services over it were
approved by the Ministry of Communications on: 3.10.2022, 14.8.2023, 7.7.2024, and
13.2.2025. The approved areas include "returned areas" in which the Interministerial
Tenders Committee approved certain winners of incentive tenders to revoke their right
to deploy a fiber network in them for various reasons. The updated percentage of
households in Bezeq's deployment areas will be approximately 88.42%. See also Note
18.7 regarding the obligation of Bezeq Group companies 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.
9.8.
In 2024, the Bezeq Group wrote off PP&E that were fully depreciated and are not used
by Bezeq Group in the amount of approximately NIS 725 million.
Notes to Consolidated Statements as of December 31, 2024
10. Intangible assets
Goodwill
Computer
software and
licenses
Right to use
cellular
communicati
on
frequencies
Customer
and
brand
relations
Others
Total
NIS millions
NIS millions
NIS millions
NIS millions
NIS millions
NIS millions
Cost
Balance as of January 1,
2023
3,078
2,856
566
6,689
88
13,277
Purchases
or
additions
from self-development
-
242
4
-
28
*
274
Subtractions
-
(
62
)
-
-
-
(
62
)
Balance as of December 31,
2023
3,078
3,036
570
6,689
116
13,489
Purchases
or
additions
from self-development
-
262
-
-
-
262
Allocation of cost overruns
and retroactive adjustment
23
3
-
-
(
22
)
4
Classification
as
assets
intended for sale
-
(
37
)
-
-
-
(
37
)
Subtractions
-
(
359
)
-
-
-
(
359
)
Balance as of December 31,
2024
3,101
2,905
570
6,689
94
13,359
Amortizations
and
impairment losses
Balance as of January 1,
2023
1,510
2,493
374
5,568
81
10,026
Amortization for the year
-
147
21
-
-
168
Subtractions
-
(
62
)
-
-
-
(
62
)
Impairment
-
77
-
-
-
77
Balance as of December 31,
2023
1,510
2,655
395
5,568
81
10,209
Amortization for the year
-
144
21
-
2
167
Subtractions
-
(
359
)
-
-
-
(
359
)
Impairment (see below)
-
86
-
-
-
86
Classification
as
assets
intended for sale
-
(
31
)
-
-
-
(
31
)
Balance as of December 31,
2024
1,510
2,495
416
5,568
83
10,072
Carrying amount
As of January 1, 2023
1,568
363
192
1,121
7
3,251
As of December 31, 2023
1,568
381
175
1,121
35
3,280
As of December 31, 2024
1,591
410
154
1,121
11
3,287
* See Note 12.4.1.
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.
Notes to Consolidated Statements as of December 31, 2024
10.2.
Examination of impairment of cash generating units
For the purpose of testing for impairment, the goodwill was attributed to the Group's
activity segments as follows:
December
31,
2024
December
31,
2023
NIS millions
NIS millions
Landline interior communication (Bezeq) (see Note 10.4)
1,559
1,559
Other (see Note 12.3.3 and Note 12.4.1)
32
9
1,591
1,568
10.3.
Examination of impairment of the cellular communications segment
(Pelephone)
Due to the existence of an asset with an indefinite duration (brand), which is attributed
to the cellular communication cash-generating unit, the Company examined the
recoverable amount of the cellular communication cash-generating unit as of
31.12.2024.
The value in use of the cellular communication cash-generating unit as of 31.12.2024 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
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 there is stabilization in the
competition in the market 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 operating expenses and the level of investments have been
adjusted to the projected scope of Pelephone's activities.
The nominal discount rate used in the valuation is 10.5% after tax (12.9% before tax). In
2023 the discount rate was 11.25% after tax (13.8% before tax). Also, a permanent
growth rate of 2% was assumed (in 2023 - 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 270 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 531 million).
The valuation was conducted by an external valuator. Based on the valuation as
explained above, Pelephone's enterprise value amounted to approximately NIS 2,484
million, compared to the carrying amount in the Company's books of NIS 1,441 million.
Therefore, the Company was not required to carry out an amortization in respect of the
impairment of the cellular communication cash-generating unit.
Notes to Consolidated Statements as of December 31, 2024
10.4.
Examination of impairment of landline interior communication goodwill
(Bezeq)
The balance of goodwill attributed to the landline interior communication cash-
generating unit in the Company’s books is NIS 1,559 million. Therefore, the Company
examined the recoverable amount of the landline interior communication cash-
generating unit as of 31.12.2024.
The value in use 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 Bezeq’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 income 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 Bezeq’s retail telephony services), growth in
income 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 access service), erosion in
income from data communication and transmission (due to an expected decrease in
transmission income from ISP companies and despite an expected consistent growth in
income from data communication services), and moderate growth in cloud and digital
income. The operating, sales, marketing and investment expenses were adjusted to the
scope of the sector's activity and included assumptions regarding the status of Bezeq’s
employees and the wage and retirement expenses derived from them and assumptions
regarding the rate of deployment of the fiber infrastructure.
The nominal discount rate used in the valuation is 8.75% after tax (before tax 10.13%).
In 2023 the discount rate was 9% after tax (before tax 11.4%). Also, a permanent growth
rate of 1% was assumed (in 2023 - 1%).
The valuation was conducted by an external valuer. Based on the valuation as explained
above, Bezeq's enterprise value amounted to approximately NIS 17,666 million,
compared to the carrying amount in the Company's books in the amount of NIS 10,836
million. therefore the Company 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 in the multi-channel TV segment (Yes)
At the end of 2024, Yes updated its forecasts for the following years, paying attention to
the trends and changes in its operation environment. The value in use of the multi-
channel TV cash-generating unit as of 31.12.2024 was calculated using the method of
discounting future cash flows (DCF), based on the Yes cash flow forecast up to and
including the year 2029, and with the addition of scrap value (representative year). The
nominal discount rate used in the valuation is 11% after tax (12.5% before tax) (in 2023
- 11% before tax and 12.5% after tax). Likewise, a permanent growth rate of 1% was
assumed (in 2023 - 1%).
Notes to Consolidated Statements as of December 31, 2024
The cash flow forecast was based, among other things, on Yes’s performance in recent
years and assessments regarding the expected trends in the television and fiber 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 key assumption underlying the forecast is that Yes will continue to make a transition
from satellite broadcasting to distributing broadcasts over the Internet, while at the
same time continuing to broadcast via satellite in a limited and focused format to
relevant audiences for a defined period. As a result of this move, the cost of satellite
broadcasts will decrease significantly.
The forecast also includes deepening Yes's activity in selling combined TV and Internet
packages and entering the world of TV advertising, along with discounts on fiber service
expenses, wholesale market prices, and streamlining gains in operating expenses.
In addition, the forecast assumes a continued high level of competition in the market
and a shift of customers from premium to discount channels.
The following are details regarding the value of Yes’s activities and the fair value of the
assets and liabilities, net as determined by an external valuator, and recognized
impairment losses:
Yes
enterprise
value (according
to
the
DCF
method)
Fair value of Yes
assets
and
liabilities, net
Carrying amount
of Yes assets and
liabilities,
net
before
recognition
of
impairment
Loss
cancellation
(loss) from
impairment
NIS millions
NIS millions
NIS millions
NIS millions
As of December 31,
2024 and for the
period
of
three
months that ended on
that date
86
)34(
84
2
As of September 30,
2024
and
for
the
period
of
three
months that ended on
that date (unaudited)
(
52
)
(
97
)
)25(
(
27
)
As of June 30, 2024
and for the period of
three
months
that
ended on that date
(unaudited)
(
58
)
(
76
)
-
(
58
)
As of March 31, 2024
and for the period of
three
months
that
ended on that date
(unaudited)
(
76
)
(
95
)
)8(
(
68
)
Total
impairment
recognized in 2024
(
151
)
As of December 31,
2023 and for the year
that ended on that
date
)24(
)60(
16
)204(
Notes to Consolidated Statements as of December 31, 2024
The recoverable amount of Yes’s operating assets in each period is determined as: the
value of the activity according to the discounted cash flow (DCF) approach or the fair
value of Yes’s assets and liabilities, net, whichever is higher.
It should be noted that the value-in-use assessment is sensitive to the net cash flow in
the representative year in general, and to the assessment of the level of ARPU (average
income per subscriber) and the subscriber balance at the end of the forecast range in
particular. An increase/decrease of NIS 1 in ARPU over the forecast years (and the
terminal year) results in a change in the enterprise value in the amount of approximately
NIS 58-(64) million, and an increase/decrease of 5k subscribers over the forecast years
(and the terminal year) results in a change in the enterprise value in the amount of
approximately NIS 74-(81) million.
The following is a breakdown of the allocation of impairment loss to Yes’s assets:
2024
2023
2022
NIS millions
NIS millions
NIS millions
Broadcast rights - minus used rights *
64
103
149
PP&E **
41
62
76
Intangible assets **
39
37
45
Rights-of-use of leased properties **
-
(
1
)
2
Other receivables (advance expenses) *
7
3
3
Total impairment recognized
151
204
275
* The expense was presented as part of General and operating expenses
** The expense was presented as part of depreciation, amortization, and impairment
expenses.
10.5.
Impairment of the multi-channel TV segment (Yes)
The impairment loss was allocated proportionally to assets within the scope of IAS 36
and without reducing the carrying amount of an asset below the highest of:
1. Fair value minus costs to sell (if measurable)
2. Value-in-use (if determinable)
3. Zero
The following is information regarding the manner in which the Group determined the
fair value (at level 3) of the 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
streamers and ancillary equipment) 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 YES’s intangible assets, since
most of the software and licenses of Yes were uniquely adapted to Yes 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, 2024
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 Yes for the maintenance of its systems, since most of the
maintenance agreements were uniquely adapted to Yes and therefore have no
substantial value in a transaction between a willing buyer and a willing seller.
10.6.
Impairment of the Internet and international communication services
and ICT services segment (Bezeq International)
At the end of 2024, 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 31.12.2024 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 2024,
and with the addition of scrap value (representative year). The nominal discount rate
used in the valuation is 11.4% (after and before tax) (11.5% in 2023). Also, a permanent
growth rate of 3% was assumed (3% in 2023).
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 income 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 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,
see Note 16.5.3 below.
These expected deep changes in Bezeq International's Internet activity mandated
operating losses and negative cash flows in the coming years, which are expected to be
reduced by growth in cloud services, hosting, and computing for businesses.
The valuation is sensitive to the net cash flow in the year in general, and to the intensity
of changes in the field of communications services, including in the subsidiary CloudEdge,
and the Internet services for the private segment in particular (subscribers, ARPU, and
traffic costs).
The valuation as of December 31, 2024 was prepared by an external valuator based on
the valuation as explained above, the enterprise value of Bezeq International’s services
as of 31.12.2024, using the income discount approach, amounted to a negative amount
of approximately NIS 89 million (as of 31.12.2023, the total enterprise value was negative
NIS 194 million). In light of the negative enterprise value, the value of Bezeq
International's non-current assets as of 31.12.2024 was determined as the fair value
minus costs of disposal or zero, whichever is higher. The fair value of Bezeq
International's assets as of 31.12.2024, excluding disposal costs, is negative in the
amount of approximately NIS 51 million. Accordingly, the Group recognized an
impairment loss in 2024 in the amount of approximately NIS 91 million.
Notes to Consolidated Statements as of December 31, 2024
The following are details regarding Bezeq International's enterprise value and the fair
value of the assets and liabilities, net as determined by an external valuator, and
recognized impairment losses:
Bezeq
International
enterprise value
(according to the
DCF method)
Fair
value
of
Bezeq
International
assets
and
liabilities, net
Carrying amount
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,
2024 and for the
period
of
three
months that ended
on that date
)89(
)51(
)19(
)32(
As of September 30,
2024 and for the
period
of
three
months that ended
on
that
date
(unaudited)
)194(
)2(
15
)17(
As of June 30, 2024
and for the period of
three months that
ended on that date
(unaudited)
)194(
1
20
)19(
As of March 31, 2024
and for the period of
three months that
ended on that date
(unaudited)
)194(
)26(
)3(
)23(
Total
impairment
recognized in 2024
)91(
As of December 31,
2023 and for the year
that ended on that
date
)194(
)23(
)87(
The recoverable amount of Bezeq International's operating assets in each period was
determined as: the value of the activity according to the discounted cash flow (DCF)
approach or the fair value of Bezeq International's assets and liabilities, net, whichever
is higher.
Notes to Consolidated Statements as of December 31, 2024
The following is a breakdown of the allocation of the total impairment loss to Bezeq
International’s assets:
* The expense was presented as part of General and operating expenses.
** The expense was presented as part of depreciation, amortization and impairment expenses.
Starting in 2021, impairments are considered to be ongoing and are accordingly classified
in the depreciation, amortization, and impairment expenses item and in the Operating
and general expenses and impairments section, depending on the type of asset for which
the impairment was recorded.
Bezeq International allocated the impairment loss to its assets based on book value
ratios and limited the allocation to the fair value of each of its assets, as determined in
the framework of the valuation conducted based on the net asset value method, as
stated above.
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. The value of the PP&E was
assessed by an external equipment appraiser.
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 Bezeq International 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.
2024
2023
2022
NIS millions
NIS millions
NIS millions
PP&E and intangible assets **
57
57
71
Short- and long-term advance expenses *
21
17
21
Rights-of-use of leased vehicle assets **
-
1
-
Long-term advance expenses for capacities **
13
12
12
Total impairment recognized
91
87
104
Notes to Consolidated Statements as of December 31, 2024
10. Deferred expenses and non-current investments
December
31,
2024
December
31,
2023
NIS millions
NIS millions
Subscriber acquisition asset, net (see Note 11.1 below)
171
166
Deferred expenses (see Note 11.2 below)
17
15
Bank deposit used to provide loans to Bezeq employees (see Note
11.3 below)
29
32
Derivative instruments
27
31
Broadcasting rights
116
60
Investment in an equity-held investee (see Note 12.6 below)
8
-
368
304
11.1.
The following is a breakdown of subscriber acquisition assets:
Subscriber
acquisition assets
NIS millions
Cost
Balance as of January 1, 2023
372
Additions
132
Subtractions
)153(
Balance as of December 31, 2023
351
Additions
132
Subtractions
)85(
Balance as of December 31, 2024
398
Depreciation and impairment losses
Balance as of January 1, 2023
216
Depreciation
122
Subtractions
)153(
Balance as of December 31, 2023
185
Depreciation
127
Subtractions
)85(
Balance as of December 31, 2024
227
Carrying amount
As of January 1, 2023
156
As of December 31, 2023
166
As of December 31, 2024
171
11.2.
The balance of deferred expenses is presented minus an impairment loss. See Note 10.6
regarding the impairment of assets at Bezeq International.
11.3.
Bank deposit for providing loans to Bezeq employees without a repayment date.
Notes to Consolidated Statements as of December 31, 2024
12. Investees
12.1.
Consolidated companies / equity-held investees
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, 2024:
Bezeq the Israel Telecommunications Corp. Ltd.
Companies consolidated / equity-held by Bezeq:
Pelephone Communications Ltd (see Note 12.4 below)
Yes TV and Communications Services Ltd. (Yes) (see Note 12.2 below)
Bezeq International Ltd. (see Note 12.3 below)
Bezeq Online Ltd. (see Note 12.5 below)
Bezeq-Gen Ltd. (see Note 12.6 below) – Jointly controlled company
12.1.2.
Structural change in Bezeq's subsidiaries
On 16.3.2024, the Bezeq Board of Directors and the Boards of Directors of
Bezeq International and Yes decided, on March 16, 2022, to approve an
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 Yes for the purpose of selling "triple" packages
to customers, while aiming to achieve, as much as possible, the strategic,
business and economic purposes, including adapting the activity to the
structure of the industry and the changing regulation, focusing on increasing
income and growth, and increasing operational synergy and streamlining.
According to the outline, Bezeq expects that the business objectives will be
attained by Yes being 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 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.
In June 2022, Yes received, following its request from the Ministry of
Communications, a special license for Internet access services (ISP) and it
began providing such services while focusing on selling combined Internet
and TV plans to customers.
12.2.
Yes TV and Communications Services Ltd. (Yes)
12.2.1.
Yes is a wholly owned (100%) subsidiary of Bezeq. Bezeq consolidates the
statements of Yes as of March 23, 2015.
Bezeq has an assessment agreement and taxation decision with the Tax
Authority regarding financing income, owner loans, Yes losses and merger
(see also Note 7.2).
12.2.2.
As of 31.12.2024, Yes has accumulated a loss balance of NIS 8,085 million
since its establishment, shareholder’s equity balance of NIS 125 million, and
a working equity deficit of NIS 240 million. Also, as of 31.12.2024, Yes has off-
balance sheet commitments in the cumulative amount of approximately NIS
Notes to Consolidated Statements as of December 31, 2024
867 million for the purchase of space segments, content, PP&E, and other
assets up to the year 2028 and onwards (see Note 18).
Based on the valuation conducted as of 31.12.2024, Yes’s total enterprise
value is a positive value in the amount of approximately NIS 86 million
(compared to a negative enterprise value of NIS 24 million as of 31.12.2023)
(see Note 10.5), which results, among other things, from Yes’s forecasts to
continue accumulating operating losses in 2025 and beyond.
On 11.3.2025, Bezeq’s Board of Directors approved a credit facility or
investment in Yes’s equity in the amount of NIS 100 million, for a period of 15
months, starting on 1.1.2025, instead of previous commitments, the last of
which was given in November 2024. It should be noted that during the year
2024, Yes did not make any use of the credit facilities provided by Bezeq.
Yes’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 Yes’s operations until 31.12.2025.
12.2.3.
See Note 10.5 regarding the impairment of assets recognized by Yes as part
of the statements as of 31.12.2024.
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
separation has reduced the number of subscribers who do not use ISP
services, and it is expected to bring about further reduction in next years.
The move, which is expected to continue 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, 2024.
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 16.5.3 regarding the voluntary retirement plan at Bezeq
International which was approved by Bezeq International's Board of
Directors.
Notes to Consolidated Statements as of December 31, 2024
12.4.
Pelephone Ltd.
As part of Pelephone's activities and its preparation for global trends in the roaming
services market, which include, among other things, a wider use of eSIM technology in
these services, on October 18, 2023, it completed the acquisition of 100% of the control
and ownership rights in "Roamability" (an Israeli and an American company), which
specializes in providing solutions in the global roaming services market, including
wholesale, and which also provides a platform for the management and sale of these
services.
Pelephone's financial statements as of 31.12.2023 recorded amounts for the cost
surpluses in the acquisition of the subsidiary.
Upon completion of the cost overrun allocation (PPA) work during the fourth quarter of
2024, the amounts were adjusted retroactively as follows (NIS millions):
Intangible assets – goodwill
23
Deferred tax liabilities
(
2
)
Customer relations
6
Technologies
3
Total
30
See also Note 10 Intangible assets above.
12.5.
Bezeq Online Ltd.
On 7.11.2024, Bezeq entered into an agreement with One Technologies Software Ltd.
for the sale of all of Bezeq's holdings in its subsidiary, Bezeq Online Ltd., for a total
consideration of approximately NIS 50 million, subject to adjustments by agreement, in
order to focus on the Group's core activities and in accordance with its strategy.
Completion of the transaction is subject to the satisfaction of various conditions
precedent. In accordance with the above, Bezeq classified the assets and liabilities of
Bezeq Online in the consolidated statements as assets and liabilities of a disposal group
held for sale and as a result recognized a capital loss of approximately NIS 9 million in
2024.
The disposal group held for sale includes assets in the amount of NIS 83 million, of which
approximately NIS 20 million were presented prior to classification as non-current assets,
as well as liabilities in the amount of NIS 34 million, of which approximately NIS 2 million
were presented prior to classification as non-current liabilities.
12.6.
Bezeq-Gen Ltd.
On April 9, 2024, Bezeq's Board of Directors approved an engagement between the
Company and Powergen in a detailed shareholders' agreement based on the principles
set forth in the Memorandum of Understanding (“the Agreement"). The Agreement was
also approved by the Powergen board of directors and the agreement was signed on
15.5.2024. The project, which allows consumers to transfer their electricity supply from
IEC through several discount channels, is carried out through Bezeq-Gen Ltd. under the
brand "Bezeq Energy" ("Bezeq-Gen"), which is a company jointly owned by Bezeq (50%)
and Powergen (50%). On June 27, 2024, the Electricity Authority announced the approval
of the transfer of a license to supply electricity without means of production from Bezeq
to Bezeq-Gen. Bezeq-Gen began purchasing electricity for its operations, and Bezeq
began marketing Bezeq-Gen's operations.
Bezeq holds 50% of Bezeq-Gen Ltd. (Bezeq-Gen), a jointly controlled company that meets
the definition of a joint venture. Starting in the second quarter of 2024, Bezeq began
recording its share of Bezeq-Gen's net operating results in its reports.
Notes to Consolidated Statements as of December 31, 2024
12.7.
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 Israeli institutional entity that wishes to increase
its holding to over 7.5% 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.
12.8.
Purchase of additional Bezeq shares by the Company
12.8.1.
During 2023, the Company purchased 7,807,995 ordinary shares of the Bezeq
subsidiary in exchange for a total amount of approximately NIS 37 million and
at an average price of NIS 4.71 per share.
12.8.2.
During 2024, the Company purchased 11,843,449 ordinary shares of the
subsidiary Bezeq in exchange for a total amount of approximately NIS 52
million and at an average price of NIS 4.34 per share.
After the aforementioned purchase and as of the date of publication of the
Statements, the Company owns 27.47% of the issued share capital and voting
rights in Bezeq.
12.9.
Dividend distribution by Bezeq
12.9.1.
Bezeq’s dividend distribution policy
On 11.3.2025, Bezeq’s Board of Directors decided to update Bezeq's dividend
policy so that Bezeq will distribute every six months 80% of the semi-annual
profit (after tax) according to its consolidated statements starting with the
distribution for the second half of 2024, in view of the continued decrease in
the scope of Bezeq’s net debt, and in accordance with Bezeq’s forecasts
regarding business results for the coming years.
Also, Bezeq will strive to increase its dividend policy in the future, subject to
maintaining its credit rating in the AA group.
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 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.
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 its own merits 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
Notes to Consolidated Statements as of December 31, 2024
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.
12.9.2.
Dividends distribution BY Bezeq
A. On 17.4.2024, the general assembly of Bezeq's shareholders approved
(following the recommendation of Bezeq’s Board of Directors of
12.3.2024 2023) the distribution of a cash dividend to Bezeq's
shareholders in the total amount of NIS 374 million (which, as of the day
determining the distribution, is NIS 0.1351691 per share). The dividend
was paid on 9.5.2024. The Company's share of the aforementioned
dividend is approximately NIS 102 million.
B. On 11.9.2024, the general assembly of Bezeq's shareholders (following
the recommendation of Bezeq’s Board of Directors of 6.8.2024)
approved the distribution of a cash dividend to Bezeq's shareholders in a
total amount of NIS 407 million (which, as of the day determining the
distribution, is NIS 0.1470386 per share). The dividend was paid on
10.10.2024. The Company's share of the aforementioned dividend is
approximately NIS 111 million.
C. On 11.3.2025, Bezeq's Board of Directors decided to recommend to the
general assembly of Bezeq's shareholders to distribute a cash dividend
to Bezeq's shareholders in the total amount of NIS 392 million. As of the
date of approval of the statements, the aforementioned dividend had
not yet been approved by Bezeq's general assembly. The expected share
of the Company in the aforementioned dividend (if approved by Bezeq’s
general assembly) is about NIS 108 million.
Notes to Consolidated Statements as of December 31, 2024
12.10. 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
Current
assets
Non-
current
assets
Current
liabilities
Non-
current
liabilities
Net assets
Carrying
amount of
the
non-
controlling
interests
%
NIS millions
2024
51
72.
4,512
11,689
4,014
8,901
3,286
2,476
2023
72.92
3,489
11,429
3,678
8,260
2,980
2,257
Year ended December 31
Income
Net profit
Other
comprehen
sive income
(loss)
Comprehen
sive income
Profit
attributed
to
non-
controlling
interests
Comprehen
sive income
attributed
to
non-
controlling
interests
NIS millions
2024
8,884
1,073
(
6
)
1,067
780
776
2023
9,103
1,189
12
1,201
867
876
2022
8,986
1,000
50
1,050
733
770
Year ended December 31
Cash flow
from
current
operations
Cash flow
from
investing
activities
Cash flow from
financing
activities
(without
dividend to
non-controlling
interests)
Dividend
to non-
controlli
ng
interests
Total
increase
(decrease) in
cash and
cash
equivalent
NIS millions
2024
3,410
(
2,320
)
(
810
)
(
568
)
(
288
)
2023
3,440
(
1,835
)
(
1,715
)
(
466
)
(
576
)
2022
3,503
(
1,585
)
(
1,758
)
(
392
)
(
232
)
Notes to Consolidated Statements as of December 31, 2024
13. Debentures, loans and credit
13.1.
Composition
December
31,
2024
December
31,
2023
NIS millions
NIS millions
Current liabilities
Current debenture liabilities
847
842
Current loan liabilities
276
232
1,123
1,074
Non-current liabilities
Debentures
6,641
5,823
Loans
1,930
2,006
8,571
7,829
Total debentures, loans and credit
9,694
8,903
13.2.
Terms of Debentures and loans
December 31, 2024
December 31, 2023
Book balance
Par value
Book balance
Par value
Interest rate range
NIS millions
NIS millions
NIS millions
NIS millions
Bank loans at Bezeq:
Unlinked loans, bearing fixed interest
812
813
799
799
%
33
.5 -
3.2%
Unlinked loans, bearing variable interest
699
700
699
700
Prime+ 0.11% -
Prime+0.53%
Total banks loans at Bezeq
1,511
1,513
1,498
1,499
Loans from financial institutions at Bezeq:
Unlinked loans, bearing fixed interest
695
695
740
740
4%
-
3.22%
Total financial institutions loans of Bezeq
695
695
740
740
Total loans in Bezeq
2,206
2,208
2,238
2,239
Public debentures of the Company:
Series C – unlinked, bearing fixed interest
5
96
1,011
1,940
2,010
3.65%
Series F – unlinked, bearing fixed interest
1,083
1,009
-
-
5.50%
Total public debentures of the Company
2,048
2,020
1,940
2,010
Public debentures of Bezeq:
Series 9 - unlinked, bearing fixed interest
533
532
1,073
1,065
3.65%
Series 10 - linked to the consumer price
index, bearing fixed interest
307
265
593
529
2.2%
Series 11 - unlinked, bearing fixed interest
1,380
1,403
839
835
3.2%
Series 12 - linked to the consumer price
index, bearing fixed interest
1,428
1,269
1,378
1,269
1.7%
Series 13 - unlinked, bearing fixed interest
1,188
1,403
380
430
2.79%
Series 14 - linked to the consumer price
index, bearing fixed interest
604
610
462
478
0.58%
Total public debentures of Bezeq
5,440
5,482
4,725
4,606
Total debentures
7,488
7,502
6,665
6,616
Total loans and debentures
9,694
9,710
8,903
8,855
Notes to Consolidated Statements as of December 31, 2024
13.3.
Debentures issued by the Company
13.3.1. On June 22, 2023, the Company issued to institutional entities and the public
approximately NIS 538 million in series F debentures for approximately NIS 500
million net (after issuance expenses). The net proceeds of the issuance of the
series F debentures were used by the Company for early full and final
repayment of the balance of Series C debentures (plus accrued interest until
vesting) on July 20, 2023.
13.3.2. On September 12, 2024, the Company exchanged approximately NIS 999 million
of Series F debentures for approximately NIS 1,009 million of Series G
debentures (a new series of debentures issued for the first time) as part of an
exchange purchase offer.
The Series G debentures bear annual interest at a rate of 5.5% (principal and
interest are not index-linked) which is paid twice a year on May 31 and
November 30, the principal of the debentures will be repaid in a single payment
on November 30, 2029.
The Company examined whether the change in the terms between the
debentures series is material both quantitatively and qualitatively and
concluded that the change is not material and therefore recorded a loss from
the exchange of debentures in its books, which was classified as financing
expenses in the P&L statement in the amount of approximately NIS 84 million
in the third quarter of 2024.
In accordance with the terms of debentures series F and G, the Company undertook to
deposit semi-annual interest for the various debenture series in an escrow account for
the benefit of the bondholders. As of December 31, 2024, approximately NIS 46 million
are deposited in the trust accounts for the benefit of the holders of debentures Series F
and G.
As of December 31, 2024, the remaining par value of debentures series F and G is NIS
2,020 million.
The following 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 not exceed 75% for two consecutive quarters, starting
from December 1, 2023 and until the date of the last debenture principal payment.
As of December 31, 2024, 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 70%.
Notes to Consolidated Statements as of December 31, 2024
13.3.
Debentures issued by the Company (Cont.)
C. Lien on Bezeq shares:
Debentures Series F have a first-footing lien pari passu on 728,373,713 Bezeq shares
held by the Company. In addition, the Company applied to the Ministry of
Communications for approval to amend the pledge permit in such a way that Bezeq
shares would also be pledged for the benefit of the holders of debentures (Series
G), although as of the date of publication of this report, the said approval had not
yet been received.
D. Control of Bezeq:
The company has committed to continuing to hold the means of control over Bezeq.
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
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.
13.4.2.
In relation to Bezeq's public debentures, to loans from banks whose balance
as of December 31, 2024 is approximately NIS 1.5 billion, and to loans from
financial institutions whose balance as of December 31, 2023 is
approximately NIS 0.7 billion, as well as in relation to loans from banking
corporations in the amount of approximately NIS 0.1 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).
13.4.3.
In relation to Bezeq's public debentures, in relation to loans from financial
institutions in the amount of approximately NIS 0.7 billion, a reason for
immediate
repayment
was
included
in
the
event
that
the
telecommunications segment ceases to be the Group's main field of activity.
13.4.4.
In relation to Bezeq's public debentures, and in relation to loans from
financial institutions in the amount of approximately NIS 0.7 billion, Bezeq has
committed to the lenders to act so that, as far as it is within its control, such
Notes to Consolidated Statements as of December 31, 2024
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.
13.4.
Debentures issued by Bezeq (Cont.)
13.4.5.
In relation to debentures from Series 9-14, as well as in relation to loans from
financial institutions in the amount of approximately NIS 0.7 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.
13.4.6.
In addition to Series 9-14 debentures, and in relation to loans from financial
institutions amounting to approximately NIS 0.7 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).
As of December 31, 2024 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.
Notes to Consolidated Statements as of December 31, 2024
13.5.
Transactions in liabilities arising from financing activities
Debentures
(including
accrued
interest)
Loans (including
accrued
interest)
Total
NIS millions
NIS millions
NIS millions
Balance as of January 1, 2023
6,976
2,231
9,207
Changes as a result of cash flows from financing activities
Proceeds from issuing debentures and receiving loans, minus
transaction costs
915
100
1,015
Repayment of debentures and loans
(
1,326
)
(
83
)
(
1,409
)
Interests paid
(
219
)
(
93
)
(
312
)
Total net cash used for financing activities
(
630
)
(
76
)
(
706
)
Financing expenses imputed to the P&L statement
336
98
434
Balance as of December 31, 2023
6,682
2,253
8,935
Changes as a result of cash flows from financing activities
Proceeds from issuing debentures and receiving loans, minus
transaction costs
1,444
200
1,644
Repayment of debentures and loans
(
839
)
(
2
23
)
(
1
1,07
)
Interests paid
(
204
)
(
100
)
(
304
)
Total net cash derived from (used for) financing activities
401
(
2
13
)
269
Financing expenses imputed to the P&L statement
438
103
541
Balance as of December 31, 2024
7,521
4
2,22
5
9,74
Notes to Consolidated Statements as of December 31, 2024
14. Trade payables
December 31 , 2024 December 31 , 2023
NIS millions
NIS millions
Suppliers
Open debts and expenses payable *
966
894
Total suppliers
966
894
Liabilities to employees and other liabilities for wages and salaries
382
373
Deferred income
293
224
Institutions
77
95
Derivate instruments
3
4
Accrued interest
50
32
Current tax liabilities
171
72
Others
13
64
Total current payables including derivatives
989
864
Total and current trade payables
1,955
1,758
Deferred income due to a government grant **
45
47
Deferred income
150
92
Derivatives
-
3
Others
19
18
Total non-current payables
214
160
Total current and non-current trade payables
2,169
1,918
* Of which the balance of suppliers who are related parties and interested parties as of 31.12.2024 is NIS 10
million (as of 31.12.2023 - NIS 1 million).
** See Note 10.1 above.
15. Provisions
Customer lawsuits
Additional lawsuits
Dismantling
and
removing
cellular
sites and liability
Total
NIS millions
NIS millions
NIS millions
NIS millions
Balance as of January 1, 2024
84
21
35
140
Provisions created
19
4
2
25
Provisions exercised
(
22
)
(
24
)
-
(
46
)
Provisions cancelled
(
4
)
-
(
1
)
(
5
)
Balance as of December 31, 2024
77
1
36
114
Presented in the statement on the
financial position as follows:
Current provisions
77
1
6
84
Non-current provisions
-
-
30
30
Total
77
1
36
114
For details regarding claims, see Note 17 above.
Notes to Consolidated Statements as of December 31, 2024
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
2024
2023
Note
NIS millions
NIS millions
Current liabilities for:
Vacation
120
109
Sickness
16.4
115
112
Provision for early retirement plan at Bezeq
16.5.1
97
66
Provision for streamlining and early retirement plan
at Pelephone, Bezeq International, and Yes
16.5.2-16.5.4
61
38
Current maturity of benefits for retirees
16.3.3
7
7
Total current liabilities for employee benefits
400
332
Non-current liabilities for:
Provision for amendment of employee agreement
16.1.1
70
70
Liabilities for benefits to retirees
16.3.3
102
102
Severance pay, net (see composition below)
16.3.1
64
50
Early notice and pension
16.3.2
28
29
Provision for voluntary retirement plan at Bezeq
International
16.5.3
36
-
Total non-current liabilities for employee benefits
300
251
Total liabilities for employee benefits
700
583
The following is the composition of the liability for
severance pay:
Liability for severance pay
213
200
Fair value of plan assets
)149(
)105(
64
50
16.1.1.
On August 6, 2023 and on August 8, 2023, the Audit Committee of the Bezeq
Board of Directors and the Bezeq Board of Directors (respectively) approved
an amendment to the collective agreement between Bezeq and the
Employees Organization and the Histadrut (“the Amendment"). The
Amendment states, among other things, that a special bonus will be paid to
Bezeq employees in the amount of NIS 75 million, for past services, most of
which is conditional on the dates and conditions stipulated in the agreement
depending on the change in the percentage of holdings of the current control
permit holders in Bezeq (or the expiration/cancellation/transfer of the
control permit) ("the Conditions"). The Amendment to the agreement was
approved by the general assembly of Bezeq's shareholders on September 14,
2023. As a result of the signing and approval of the Amendment to the
agreement, Bezeq recorded in 2023a one-off provision of NIS 75 million for
the full amount of the special grant. During the month of December 2023,
Bezeq paid approximately NIS 5 million as part of the agreement.
Notes to Consolidated Statements as of December 31, 2024
16.2.
Defined deposit plans
Lability for benefits for employees of retirement age for their period of service in Bezeq
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.
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 Note 16.3.1 below).
16.3.
Defined benefit plans
Liabilities regarding defined benefit plans in the Group include the following liabilities:
16.3.1.
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.
16.3.2.
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.
16.3.3.
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 sick leave
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.
2024
2023
2022
NIS millions
NIS millions
NIS millions
Deposits recognized as an expense for a
defined deposit plan
223
220
211
Notes to Consolidated Statements as of December 31, 2024
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 is 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.
On 18.11.2024, Bezeq's Board of Directors approved, as part of the
implementation of Bezeq's streamlining plan, the
retirement of
approximately 85 permanent and veteran employees on an early retirement
track at a total cost of approximately NIS 90 million. In light of the above,
Bezeq recorded in its statements for Q4/2024 an expense of approximately
NIS 90 million.
16.5.2.
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 6.12.2022, 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 6.12.2022 to 31.12.2025 ("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.
In 2023, the Group recognized retirement expenses in the amount of
approximately NIS 7 million.
In 2024, the Group recognized retirement expenses in the amount of
approximately NIS 13 million.
Notes to Consolidated Statements as of December 31, 2024
16.5.3.
On 6.12.2024, 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
2025-2027 (hereinafter "Voluntary Retirement Plan"). On 6.12.2024, 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 2025-2027 (hereinafter "Voluntary
Retirement Plan").
Following the approval of the Voluntary Retirement Plan, on 26.12.2024,
Bezeq International's Management, the Histadrut and the Employees’
Committee signed a new collective agreement for Bezeq International until
the end of 2027.
In the agreement signed, the Company’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 one-off grant for ownership changes in the Group and additional
benefits. In 2024 and 2023, the Company recorded in its statements voluntary
retirement expenses of approximately NIS 71 million and approximately NIS
12 million, respectively.
16.5.4.
Yes 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 31.12.2024 is
approximately NIS 6 million. See Note 32.3 below regarding the document of
principles that Yes signed with the National Labor Federation and the Bezeq
Employees’ Committee.
Notes to Consolidated Statements as of December 31, 2024
16.6.
Actuarial assumptions
The main actuarial assumptions regarding defined benefit plans as of the reporting date
are:
16.6.1.
The mortality rates are based on published statistical data on acceptable
mortality tables, including a future decline in the mortality rate.
16.6.2.
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:
December
31,
2024
December
31,
2023
Average
discount rate
Average
discount rate
Severance pay
5.7%
5.9%
Retiree benefits
5.7%
5.6%
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:
16.6.5.
Detailed weighted average duration of liabilities for key post-employment
benefits:
Annual salary increase assumption
Veteran permanent
Bezeq employees
The calculation was based on the expected salary increase
resulting from the collective agreement signed in August 2015 and
December 2020.
New permanent Bezeq
employees
Average update of 6.6% for young employees gradually decreases
to 3.8% at age 66.
Non-permanent Bezeq
employees
4.6%-8% for young employees (according to different employee
groups) gradually decreases to 0.7%, 2% (in real terms) for senior
workers.
Employees of
Pelephone, Bezeq
International and Yes
The rates of salary increases were determined based on the
collective agreements that were signed. The average annual salary
increase rate is between 2% and 4%.
December
31,
2024
December
31,
2023
Years
Years
Severance pay
10
11
Retiree benefits
14
13
Notes to Consolidated Statements as of December 31, 2024
16.6
Sensitivity analysis for main actuarial assumptions
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, 2024 December 31, 2023
NIS millions
NIS millions
Discount rate - 0.5% addition
)19(
(18)
Future salary increase rate - 0.5% addition
21
20
Employee turnover rate - 5% addition
6
14
Mortality rate assumption - 5% increase
)2(
(2)
17. Pending and 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 31.12.2024, 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 1.8 billion. In addition, there is additional exposure in the
amount of approximately NIS 2.6 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 report date, see Section 17.2 below.
17.1.
The following is a description of the contingent liabilities of the Group in effect as of
31.12.2024, classified according to groups with similar characteristics:
Lawsuits group
Lawsuits essence
Provision
balance
Additional
exposure
amount
The
exposure
amount for
claims
whose
chances
cannot yet
be assessed
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.
77
1,747
658
Notes to Consolidated Statements as of December 31, 2024
Lawsuits group
Lawsuits essence
Provision
balance
Additional
exposure
amount
The
exposure
amount for
claims
whose
chances
cannot yet
be assessed
NIS millions
Enterprise and
company claims
Lawsuits in which liability of the Group
companies is claimed in connection with
their operation and/or investments.
-
26
)1( 1,808
Claims by
employees and
former employees
of the group
companies
Mainly individual claims filed by employees
and former employees of the Group
concerning various payments.
-
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,
suppliers, etc.
1
27
10
Total lawsuits against the Company and the consolidated companies )3(
78
1,802
2,476
(1) Including 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 Yes’s 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 31.3.2025.
(2) On May 23, 2023, the Company signed a settlement agreement in the amount of
approximately USD 5.5 million in respect of the two motions for the approval of class actions
filed in June 2017, as detailed in Section (1) above. The settlement agreement has been
approved by the District Court in Tel Aviv (Economic Department on August 28, 2024. The
settlement agreement ends the involvement of the Company and Shaul Elovitch (only in his
capacity as controlling shareholder and former Chairman of the Company's Board of
Directors) and Or Elovitch (in his capacity as a former director in the Company only) in the
motions for approval. The settlement amount was paid by the Company during October 2024.
(3) In addition, see Note 6.6 above.
17.2.
After the date of the statements, a motion was filed against the Group companies for
approval of a class action lawsuit without an exact monetary assessment. As of the date
of approval of the statements, it is not yet possible to assess the prospects of the said
motion. In addition, claims were concluded for which the scope of exposure was
approximately NIS 110 million.
18. Contracts
18.1.
Yes is bound by agreements for the purchase of space segments (as detailed in Note 18.2
below), content and copyrights, until the end of 2029. The amounts of future contracts
as of December 31, 2024 are as follows:
Notes to Consolidated Statements as of December 31, 2024
Year ended December 31
Space segments
Content and copyrights
Total
NIS millions
NIS millions
NIS millions
2025
70
236
306
2026
11
180
191
2027
-
99
99
2028
-
20
20
81
535
616
18.2.
According to an agreement with Space Communications Ltd. (hereafter - "Space") from
2013, as amended (including an amendment from January 2023), Yes leases space
segments in "Amos" series satellites (hereafter - "Space Agreement").
In accordance with the provisions of the Space Agreement, Yes leases space segments in
the "Amos 3" satellites (the estimated end of its life is at the beginning of 2026, (while it
is possible to continue using the satellite in a more limited manner for several months
afterwards), and leased until February 2025 space segments on the "Amos 7" satellite,
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 Yes until February 2025 (or until the end of its life, whichever is
earlier).
Leased space segments - According to the Space Agreement, Yes leased 12 space
segments from Space and, starting in February 2025, Yes leases ten 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 31.12.2024, Pelephone has contracted with
Ericsson for the purchase of end equipment and the receipt of aforementioned services
for a total amount of approximately NIS 29 million.
18.4.
In April 2021, Pelephone's new engagement agreement with Apple Distribution
International ("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. On 14.3.2024, Pelephone signed the extension of the
engagement agreement for another year until 31.3.2025.
18.5.
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. During the
first quarter of 2023, Bezeq International signed a new agreement for the purchase of
capacity usage rights service for a period of 10 years with the supplier. 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 31.12.2024 is USD 9.9 million (in 2023 - USD 11.7 million).
18.6.
The Bezeq Group companies have contracts for 31.12.2024 for the purchase of end
equipment, PP&E, intangible assets and other assets in the amount of approximately NIS
401 million.
Notes to Consolidated Statements as of December 31, 2024
18.7.
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
Law,
with
the
amendment
of
the
Bezeq
license,
the
telecommunications companies including Bezeq and its subsidiaries Pelephone, Yes, 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. In 2023 and 2024, the rate of deposits amounted to 0%, in
accordance with orders published by virtue of this authority (on 31.7.2023 and
31.12.2024, respectively). Further to the abovementioned orders, there was a decrease
of approximately NIS 40 million in the Group's expenses in each of the years 2023 and
2024.
18.8.
In July 2016, an agreement was signed between Pelephone and the Accountant General
of the Ministry of Finance under which Pelephone will provide cellular services to State
employees in a quantity estimated at approximately 100 thousand subscribers over a
period of three years. As part of the agreement, Pelephone provides devices to some of
the Accountant General subscribers in accordance with the provisions of the agreement.
The State chose to exercise the extension options granted to it in the agreement, and
the agreement was extended as of the date of publication of the report until 30.6.2025.
On 21.2.2024, the Accountant General published a new tender for the supply of cellular
communication services and end equipment.
18.9.
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 169 million (of which approximately NIS 96 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 NIS 120 million (including a guarantee in the amount of approximately
NIS 5 million for the Sakia complex. For details, see Note 6.6).
19.3.
Bezeq provided guarantees to an equity-held investee in the amount of approximately
NIS 54 million to third parties.
19.4.
Limitations on the creation of liens on the assets of Bezeq Group companies:
19.4.1.
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
Notes to Consolidated Statements as of December 31, 2024
said asset may harm the performance of Bezeq’s obligations according to the
license.
19.4.2.
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, unless the consent of the Minister of
Communications has been given under the terms determined by him, 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, as long as the
licensee is obligated to provide these services under the provisions of 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.
19.4.3.
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.
19.4.4.
In relation to Yes’s 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 Yes and imposes reporting obligations
regarding the holders of the means of control; There are also certain
limitations in relation to the license to perform uplink operations
(transmission of transmissions from the Yes transmission center to the
transmission satellite and performing related setup and operation
operations).
19.5.
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, 2024
20. Capital
20.1.
Shareholders’ equity
Ordinary shares NIS 0.1 par value each
Ordinary shares
December 31, 2024
December 31, 2023
Registered share capital
300,000,000
300,000,000
Issued and paid up share capital
116,335,793
116,335,793
Treasury shares
(
12,173,530
)
(
10,673,530
)
Issued and paid up share capital, net
104,162,263
105,662,263
20.1.1.
On August 8, 2023, the Company's Board of Directors approved a buyback
plan of the Company's shares up to NIS 30 million. As part of the
aforementioned buyback plan, the company purchased 1,593,213 of its
shares for approximately NIS 23 million.
20.1.2.
On March 12, 2024, the Company's Board of Directors approved an additional
purchase plan of the Company's shares in the amount of up to NIS 25 million.
As part of the aforementioned share repurchase program, the company
purchased a total of 1,500,000 of its shares for approximately NIS 20 million.
20.1.3.
As of December 31, 2024, Searchlight and the Forer family about 67.20% and
12.72%, respectively, of the Company's issued and paid-up share capital.
Notes to Consolidated Statements as of December 31, 2024
21. Income
Year ended December 31
2024
2023
2022
NIS millions
NIS millions
NIS millions
Landline national interior communication - Bezeq Fixed
Lines
Internet - infrastructure
1,961
1,907
1,729
Data transmission and communication
1,025
974
897
Landline telephony
531
632
762
Cloud and digital services
348
349
331
other services
264
295
261
4,129
4,157
3,980
Cellular communication - Pelephone
Cellular services and end equipment
1,615
1,724
1,755
Sale of end equipment
616
585
604
2,231
2,309
2,359
Multi-channel TV - Yes
1,264
1,308
1,277
Internet
services
(ISP)
and
international
communication services and ICT services - Bezeq
International
1,053
1,139
1,183
Others
207
190
187
8,884
9,103
8,986
21.1.
Engagement with customer recognized over time
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 practice, Partner has
already implemented the first 5 tranches in 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. These options do not
provide a substantive right to the customer.
Notes to Consolidated Statements as of December 31, 2024
22. General and operating expenses
Year ended December 31
2024
2023
2022
NIS millions
NIS millions
NIS millions
Connectivity
and
payments
to
communication
operators in Israel and abroad
613
762
743
End equipment and materials
828
825
782
Content costs
491
530
567
Marketing and general
490
439
539
Structure and site maintenance
264
257
247
Services and maintenance by subcontractors
511
504
454
Vehicle maintenance*
67
64
64
3,264
3,381
3,396
* General and operating expenses are presented minus expenses imputed in 2024 to investments in PP&E
and intangible assets in the amount of NIS 58 million (approximately NIS 51 million in 2023 and 2022).
23. Salaries
Year ended December 31
2024
2023
2022
NIS millions
NIS millions
NIS millions
Total salaries and related expenses
2,501
2,468
2,395
Share-based compensation
21
10
12
Minus salaries credited to investments in PP&E and intangible
assets
(
586
)
(
552
)
(
530
)
1,936
1,926
1,877
24. Other operating expenses, net
Year ended December 31
2024
2023
2022
NIS millions
NIS millions
NIS millions
Capital gains (mainly from the sale of real estate)
(
17
)
(
2
)
(
8
)
Impairment loss from disposal group held for sale (see Note
12.6)
9
-
-
Expenses for termination of employee-employer relations in
early retirement at Bezeq (see Note 16.5.1)
104
57
78
Expenses due to the termination of employer-employee
relations with early retirement and a streamlining agreement
at Pelephone, Bezeq International and YES (see Notes 16.5.2
and 16.5.4)
91
17
102
Provision for claims
20
44
55
One-off provision - amendment of collective agreement with
the employees (see Note 16.1.1)
-
75
-
Other income
(
8
)
(
11
)
(
7
)
Other operating expenses, net
199
180
220
Notes to Consolidated Statements as of December 31, 2024
25. Financing expenses, net
Year ended December 31
2023
2022
2021
NIS millions
NIS millions
NIS millions
Interest expenses for financial liabilities, net
371
344
309
Loss from debenture exchange
84
-
-
Financing expenses for employee benefits
21
10
-
Costs due to early repayment of loans and debentures (see
Note 13)
-
-
26
Linkage and exchange rate differentials
71
92
125
Financing expenses for lease obligations
2
7
63
43
Other financing expenses
8
9
19
Change in fair value of financial assets measured at fair value
through P&L
-
-
8
Total financing expenses
627
518
530
Income due to credit grossing in sales
26
22
20
Financing income for employee benefits *
-
-
40
Interest income from investments
85
93
33
Other financing income
31
28
16
Change in fair value of financial assets measured at fair value
through P&L
61
26
23
Total financing income
203
169
132
Financing expenses, net
424
349
398
* Financing income recognized as a result of updating the discount rate according to which the liabilities
for employee benefits were calculated as of December 31, 2022.
Notes to Consolidated Statements as of December 31, 2024
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 become vested in four annual tranches where a different exercise price
is determined for each grant.
During the year 2023, Bezeq allocated approximately 3 million additional options to
officers, managers, and senior employees in Bezeq and its subsidiaries. The options were
granted in 4 grants. Each grant will become vested in four annual tranches where a
different exercise price is determined for each grant.
During 2024, Bezeq allocated approximately 21 million additional options to officers,
managers, and senior employees at Bezeq and its subsidiaries. The options were granted
in 4 grants. Each grant will vest in four annual installments, with a different exercise price
determined for each grant.
26.2.
Transfers the in number of options in Bezeq Group
Options
Options
2024
2023
Millions
Millions
Balance in circulation at the beginning of the period
52
57
Options granted during the year
21
3
Options realized
(
11
)
(
5
)
Options forfeited during the year due to the departure of the bidders
(
9
)
(
3
)
Balance in circulation at the end of the period
53
52
Exercisable at the end of the period (subject to compliance with the share
exercise price conditions)
10
15
*
* As of the date of approval of the statements, approximately 13 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.
Notes to Consolidated Statements as of December 31, 2024
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.
The fair value of the options granted during the year 2023, which was estimated by an
external appraiser applying the Monte Carlo model, is approximately NIS 3 million,
according to the vesting period and the conditions of exercise as detailed above.
The fair value of the options granted during 2024, which was estimated by an external
valuator using the Monte Carlo model, is approximately NIS 9 million, in accordance with
the vesting period and exercise conditions as detailed above.
26.4.
Salary expenses recognized by Bezeq Group for share-based
compensation
Year ended December 31
2024
2023
2022
NIS millions
NIS millions
NIS millions
Salary expenses
21
10
11
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:
Year ended December 31
2024
2023
2022
NIS thousands
NIS thousands
NIS thousands
Salary expenses
400
400
520
Notes to Consolidated Statements as of December 31, 2024
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:
2024
2023
2022
Net
profit
attributable
to
the
Company's shareholders (NIS millions)
107
187
158
Weighted average of ordinary shares
Balance as of January 1 (millions)
106
107
115
Effect of buyback of shares
*
(
1
)
(
4
)
Basic weighted average of ordinary
shares as of December 31 (millions)
106
106
111
Effect of share-based compensation
*
*
1
Diluted weighted average of ordinary
shares as of December 31 (millions)
106
106
112
Basic profit per share (NIS)
1.02
1.75
1.42
Diluted profit per share (NIS)
1.02
1.74
1.41
* Amount lower than NIS 1 million.
Notes to Consolidated Statements as of December 31, 2024
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" the Israel Telecommunications Corp. Ltd. – landline interior
communications;
2. Pelephone Communications Ltd. - cellular communications;
3. Bezeq International Ltd. – Internet and international communication services and
ICT solutions (information and communication systems) (hereinafter - "Bezeq
International Services Sector");
4. Yes TV and Communications Services Ltd. (Yes) - 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). 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 (proforma). 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, intangible assets, and deferred expenses.
Notes to Consolidated Statements as of December 31, 2024
28.2.
Activity segments
Year ended December 31, 2024
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
4,129
2,231
1,053
1,264
207
-
8,884
Inter-segmental income
213
23
52
1
-
(
289
)
-
Total income
4,342
2,254
1,105
1,265
207
(
289
)
8,884
Operating and general
738
1,178
722
911
29
(
314
)
3,264
Salaries
1,037
321
211
184
171
12
1,936
Depreciation,
reductions
and
impairments
1,023
552
118
254
5
(
108
)
1,844
Segment results - operating profit
(loss)
1,438
189
(
16
)
(
92
)
2
120
1,641
Financing expenses
398
37
15
5
-
172
627
Financing income
(
148
)
(
30
)
(
10
)
(
15
)
-
-
(
203
)
Total financing expenses (income),
net
250
7
5
(
10
)
-
172
424
Segment profit (loss) before income
taxes
1,188
182
(
21
)
(
82
)
2
(
52
)
1,217
Share
in
loss
of
equity-held
investee, net **
8
-
-
-
-
-
8
Income taxes
274
44
1
1
1
-
321
Segment results - net profit (loss)
906
138
(
22
)
(
83
)
1
(
52
)
888
Segment assets
10,652
2,857
923
1,163
83
415
16,093
Goodwill
-
23
9
-
-
1,559
1,591
Investment in equity-held investee
8
-
-
-
-
-
8
Segment liabilities
10,206
1,493
728
457
34
2,065
14,983
Investments in PP&E, intangible
assets and deferred expenses
1,192
357
77
214
4
-
1,844
* 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 Yes’s statements.
** Starting in Q2/2024, Bezeq began recording its share of Bezeq-Gen's losses. See Note 12.6 above.
Notes to Consolidated Statements as of December 31, 2024
28.2. Activity segments (Cont.)
Year ended December 31, 2023
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
4,157
2,309
1,139
1,308
190
-
9,103
Inter-segmental income
255
39
73
1
2
(
370
)
-
Total income
4,412
2,348
1,212
1,309
192
(
370
)
9,103
Operating and general
769
1,278
800
886
28
(
380
)
3,381
Salaries
1,028
323
216
186
159
14
1,926
Depreciation,
reductions
and
impairments
1,019
549
137
244
6
(
88
)
1,867
Segment results - operating profit
(loss)
1,451
196
39
(
4
)
(
1
)
68
1,749
Financing expenses
370
35
17
8
-
88
518
Financing income
(114)
(48)
(7)
(17)
-
17
(
169
)
Total financing expenses (income),
net
256
(13)
10
(9)
-
105
349
Segment profit (loss) before income
taxes
1,195
209
29
5
(1)
(37)
1,400
Income taxes
294
50
-
1
1
-
346
Segment results - net profit (loss)
901
159
29
4
(2)
(37)
1,054
Segment assets
9,311
2,832
991
1,231
88
332
14,785
Goodwill
-
-
9
-
-
1,559
1,568
Segment liabilities
9,189
1,448
779
445
30
2,016
13,907
Investments in PP&E, intangible
assets and deferred expenses
1,155
365
100
192
5
-
1,817
* 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 Yes’s statements.
Notes to Consolidated Statements as of December 31, 2024
28.2. Activity segments (Cont.)
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
3,980
2,359
3
1,18
1,277
7
18
-
8,986
Inter-segmental income
6
32
40
56
-
6
(
428
)
-
Total income
6
4,30
2,399
1,239
1,277
193
(
428
)
8,986
Operating and general
759
1,327
827
855
33
(
405
)
3,396
Salaries
970
314
237
193
149
14
1,877
Depreciation,
reductions
and
impairments
1,005
532
134
274
4
(
81
)
1,868
Segment results - operating profit
(loss)
1,460
193
(
30
)
(
48
)
6
44
1,625
Financing expenses
424
42
9
8
-
47
530
Financing income
(
92
)
(
68
)
(
8
)
(
14
)
-
50
(
132
)
Total financing expenses (income),
net
332
(
26
)
1
(
6
)
-
97
398
Segment profit (loss) before income
taxes
1,128
219
(
31
)
(
42
)
6
(
53
)
1,227
Income taxes
279
54
1
1
1
-
336
Segment results - net profit (loss)
849
165
(
32
)
(
43
)
5
(
53
)
891
* 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 Yes’s statements.
Notes to Consolidated Statements as of December 31, 2024
28.3. Adjustments for reporting segments of income, P&L, assets and
liabilities
Year ended December 31
2024
2023
2022
NIS millions
NIS millions
NIS millions
Income
Income from reporting segments
8,966
9,281
9,221
Income from other segments
207
192
193
Cancellation of income from inter-segmental sales
(
289
)
(
370
)
(
428
)
Consolidated income
8,884
9,103
8,986
P&L
Operating profit for reporting segments
1,519
1,682
1,575
Financing expenses, net
(
424
)
(
349
)
(
398
)
Adjustments for the multi-channel TV segment
131
98
56
Loss from activities classified in the Other and other
adjustments category
(
9
)
(
31
)
(
6
)
Consolidated operating profit
1,217
1,400
1,227
December
31,
2024
December
31,
2023
NIS millions
NIS millions
Assets
Assets of reporting segments
27
15,6
14,374
Assets associated with activities classified in the Other category
83
88
Goodwill not attributable to an activity segment
1,559
1,559
Investment in equity-held investee
8
-
Minus loss from asset impairment (see note 10), inter-segment assets and
other adjustments
(
8
89
)
(
925
)
Assets and cost overruns that are not attributed to a reporting segment
1,313
1,257
Consolidated assets
17,692
16,353
Liabilities
Liabilities of reporting segments
12,884
11,861
Liabilities associated with activities classified in the Other category
34
30
Minus inter-segmental liabilities
(
261
)
(
210
)
Liabilities related to non-reporting segments
2,326
2,226
Consolidated liabilities
14,983
13,907
Notes to Consolidated Statements as of December 31, 2024
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
As of December 31
2024
2023
NIS millions
NIS millions
Related parties, net
(
7
)
-
Right-of-use assets
37
41
Current lease liability maturities
(
4
)
(
4
)
Non-current lease liabilities
(
35
)
(
38
)
29.3.
Transactions with interested parties and related parties
Year ended December 31
2024
2023
2022
NIS millions
NIS millions
NIS millions
Income
From related parties
5
8
4
Expenses
To related parties (excluding benefits to
directors specified in Section 29.5)
29
27
24
PP&E
To related parties
1
1
1
To equity-held investee
16
-
-
29.3.1.
Classification of transactions with officers and controlling shareholders in the
Bezeq Group
Bezeq's Audit Committee adopted guidelines, standards, and rules for the
classification of a transaction by Bezeq or by 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-
2010, and as a tool for examining the negligible nature of additional business
relationships, such as: the existence of business relationships with a
Notes to Consolidated Statements as of December 31, 2024
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 (or with another person
who has a personal interest in its approval), 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.
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 as defined in the
Companies Law (that is, the transaction is made in the normal course of
business, under market conditions and 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 Securities
Regulations (Periodic and Immediate Reporting), 5730-1970 regulations
(‘Periodic Reporting 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).
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
Notes to Consolidated Statements as of December 31, 2024
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 transaction as negligible.
In addition to the above, the Audit Committee and the Board of Directors of the
Company adopted criteria for determining whether a transaction is in the ordinary
course of business of the Company and under market conditions and a threshold
for examining the impact of a transaction on the Company's profitability, assets,
and liabilities, in order to determine whether it is exceptional in accordance with
the tests set forth in the Companies Law. In addition, the Audit Committee and the
Board of Directors of the Company adopted criteria for determining whether a
contribution by the Company or a subsidiary will not be considered an exceptional
transaction.
Transactions listed in Article 270 (4) of the Companies Law that are not considered
negligible transactions
There were no such transactions during the reporting period.
For the transactions listed in Article 270(4) of the Companies Law concerning
benefits, insurance, and undertaking 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 2022-2024
include:
* Key management personnel in the Group in the reporting year include the Chairman of the
Company's Board of Directors, the Company's CEO and Chairman of the Board of Directors of
Bezeq, the former CEO of Bezeq, the current CEO of Bezeq (entered office on 1.4.2024), the CEO of
Pelephone and Yes, as well as the CEO of Bezeq International.
** In 2024, changes in other provisions (included in total salary) include an increase in provisions in
the amount of approximately NIS 0.95 million, mainly a provision for advance notice to the
Chairman of the Board of Directors of Bezeq and the current CEO of Bezeq.
In 2023, the changes in other provisions (included in the total salaries) mainly include a decrease
in provisions for advance notice to the Bezeq CEO in the amount of approximately NIS 1.1 million,
offsetting an increase in the provision for advance notice to the former Chairman of the Bezeq
Board of Directors in the amount of approximately NIS 0.2 million.
Year ended December 31
2024
2023
2022
NIS thousands
NIS thousands
NIS thousands
Number of key management personnel *
6
6
6
Salaries **
11,943
10,147
9,872
Grant ***
6,322
6,910
7,262
***
Share-based compensation
12,059
5,619
6,197
30,324
22,676
23,331
Notes to Consolidated Statements as of December 31, 2024
In 2022, the changes in other provisions (included in the total salary) mainly include provisions for
advance notice to the CEO of Pelephone, Bezeq International, and Yes in the amount of
approximately NIS 0.7 million.
*** The amount includes an annual discretionary grant approved by Bezeq's general assembly on April
28, 2022 for the year 2021.
For information on share-based compensation, see Note 26 above.
29.5. Benefits for directors of the Company
* The directors’ compensation of the Chairman of the Company's Board of Directors is presented in Note 29.4
above due to his being key management personnel.
29.6. Additional benefits for directors and officers in the Company
Year ended December 31
2024
2023
2022
NIS thousands
NIS thousands
NIS thousands
Compensation for the members of the Board of
Directors *
805
645
635
Number of directors receiving compensation *
6
6
6
Date of the approval of
the general assembly
(after
receiving
the
approval
of
the
Company's
Board
of
Directors),
unless
otherwise specified
Nature of transaction
Transaction amount
30.4.2020
Certificate
of
the
Company's
engagement in a run-off insurance
policy to cover the liability of
directors
and
officers
of
the
Company.
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.
30.4.2020
Amendment
to
the
letter
of
commitment to indemnification and
exemption for the directors and
officers of the Company regarding
the
maximum
amount
of
indemnification.
Up to 25% of the Company's equity
according to the Company's latest
reports published before the actual
indemnity was granted or a total of USD
15 million, whichever is higher.
14.11.2024
Approval
of
the
Company's
Compensation
Committee in accordance
with Regulation 1b1 of
the
Facilitation
Regulations
Certificate
of
the
Company's
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 compensation policy for
the period until 30.11.2025.
Liability limit of up to USD 20 million per
claim and in total for the entire
insurance year plus reasonable legal
expenses. The total annual premium is
approximately
USD
354,376.
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, 2024
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 banking and
non-banking corporations, and there are also investments in short-term loans and
financial funds.
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.
Notes to Consolidated Statements as of December 31, 2024
These forecasts take into account, among other things, debt collection and circulation
from banking and non-banking sources. According to the conclusions, proactive activity
is carried out to minimize the risk.
Regarding the terms of debentures issued and loans received by the Group companies,
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 31.12.2024, including estimated interest payments (based
on consumer price index data and interest known as of 31.12.2024):
As of December 31, 2024
Carrying
amount
Predicted
cash flow
H1/2025
H2/2025
6
202
7
202
to
9
202
30
20
onwards
NIS millions
Non-derivative financial liabilities
Trade payables
1,687
1,687
1,684
3
-
-
-
Loans
2,206
2,585
236
119
503
1,296
431
Securities
7,488
8,796
116
953
1,776
3,116
2,835
11,381
13,068
2,036
1,075
2,279
4,412
3,266
Financial
liabilities
in
respect
of
derivative
instruments (index and
dollar)
1
1
-
1
-
-
-
* Regarding the repayment dates of lease liabilities, see Note 8.3 above.
Notes to Consolidated Statements as of December 31, 2024
30.5. Market risks
As of December 31, 2023
Carrying
amount
Predicted
cash flow
H1/2024
H2/2024
2025
2026
to
2028
2029
onwards
NIS millions
Non-derivative financial liabilities
Trade payables
1,540
1,540
1,529
11
-
-
-
Loans
2,238
2,680
254
58
366
1,271
731
Debentures
6,665
7,500
80
922
992
3,571
1,935
10,443
11,720
1,863
991
1,358
4,842
2,666
Financial
liabilities
in
respect
of
derivative
instruments
5
5
1
1
-
3
-
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 variable interest and indexation, 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.
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, 2024
The following is a statement on the financial situation according to linkage bases as of 31.12.2024:
As of December 31, 2024
Unlinked
Linked to
price
index
Foreign
currency
or
linked
to foreign
currency
(mainly
dollars)
Non-
monetary
balances
Total
balances
NIS
millions
NIS
millions
NIS
millions
NIS
millions
NIS
millions
Current assets
Cash and cash equivalents
864
-
32
-
896
Restricted cash and cash equivalents
18
-
-
-
18
investments
1,921
54
2
-
1,977
Trade receivables
1,351
-
44
-
1,395
Other receivables
58
46
10
60
174
Inventory
-
-
-
162
162
Assets of disposal group held for sale
-
-
-
83
83
Total current assets
4,212
100
88
305
4,705
Non-current assets
Trade receivables
244
166
-
-
410
Right-of-use assets
-
-
-
1,762
1,762
PP&E
-
-
-
7,160
7,160
Intangible assets
-
-
-
3,287
3,287
Deferred expenses and non-current
investments
-
28
-
340
368
Total non-current assets
244
194
-
12,549
12,987
Total assets
4,456
294
88
12,854
17,692
Current liabilities
Debentures, loans and credit
818
305
-
-
1,123
Current maturities of lease liabilities
31
407
-
-
438
Trade payables
1,235
176
275
269
1,955
Employee benefits
397
-
3
-
400
Provisions
80
4
-
-
84
Total current liabilities
-
-
-
34
34
Non-current liabilities
2,601
871
249
313
4,031
Loans and debentures
Lease liabilities
6,444
2,127
-
-
8,571
Employee benefits
34
1,494
2
-
1,530
Derivatives and other liabilities
263
-
37
-
300
Deferred tax liabilities
-
-
-
214
214
Provisions
-
-
-
304
304
Liabilities of disposal group held for
sale
30
-
-
-
30
Total non-current liabilities
6,771
3,621
39
518
10,949
Total liabilities
9,332
4,513
317
821
14,983
Total disclosure in the statement of
financial position
(
4,876
)
(
4,219
)
(
229
)
12,033
2,709
The scope of index and foreign
currency risk hedging transactions is
as follows:
Forward contracts (see Note 30.6)
(
1,404
)
845
559
-
-
The following is a statement on the financial situation according to linkage bases as of 31.12.2023:
Notes to Consolidated Statements as of December 31, 2024
As of December 31, 2023
Unlinked
Linked to
price
index
Foreign
currency
or
linked
to foreign
currency
(mainly
dollars)
Non-
monetary
balances
Total
balances
NIS
millions
NIS
millions
NIS
millions
NIS
millions
NIS
millions
Current assets
Cash and cash equivalents
593
-
51
-
644
investments
1,199
44
5
-
1,248
Trade receivables
1,430
-
47
-
1,477
Other receivables
53
39
9
65
6
16
Inventory
1
-
-
81
82
Total current assets
3,276
83
112
146
3,617
Non-current assets
Trade receivables
275
171
-
-
446
Right-of-use assets
-
-
-
1,870
1,870
PP&E
-
-
-
6,828
6,828
Intangible assets
-
-
-
3,280
3,280
Deferred expenses and non-current
investments
8
31
-
273
312
Total non-current assets
283
202
-
12,251
12,736
Total assets
3,559
285
112
12,397
16,353
Current liabilities
Debentures, loans and credit
779
295
-
-
1,074
Current maturities of lease liabilities
11
422
-
-
433
Trade payables
1,269
77
192
220
1,758
Employee benefits
329
-
3
-
332
Provisions
91
-
20
-
111
Total current liabilities
2,479
794
215
220
3,708
Non-current liabilities
Loans and debentures
5,620
2,209
-
-
7,829
Lease liabilities
30
1,575
3
-
1,608
Employee benefits
214
-
37
-
251
Derivatives and other liabilities
-
-
3
157
160
Deferred tax liabilities
-
-
-
322
322
Provisions
29
-
-
-
29
Total non-current liabilities
5,893
3,784
43
479
10,199
Total liabilities
8,372
4,578
258
699
13,907
Total disclosure in the statement of
financial position
(
4,813
)
(
4,293
)
(
146
)
11,698
2,446
The scope of index and foreign
currency risk hedging transactions is
as follows:
Forward contracts (see Note 30.6)
(
1,197
)
700
497
-
-
Notes to Consolidated Statements as of December 31, 2024
30.5.2.
Data regarding the Consumer Price Index:
In 2024, the known Consumer Price Index increased by 3.4% (an increase of
3.3% in 2023 and a decrease of 5.3% in 2022).
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 31.12.2024, 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.
Carrying amount
2024
2023
NIS millions
NIS millions
Fixed interest instruments
Financial
assets
(mainly
deposits
and
customers)
1,808
1,389
Financial liabilities (loans and debentures)
(
8,967
)
(
8,274
)
(
7,159
)
(
6,885
)
Variable interest instruments
Financial assets (loans and debentures)
(
699
)
(
699
)
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 P&L.
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 P&L.
Notes to Consolidated Statements as of December 31, 2024
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,
2024
Debentures Series 10 12.2025 to
12.20 6
1
75
6
1
Debentures Series 12 6.2026
to
6.2030
10
550
27
8
11
625
33
9
As of December 31,
2023
Debentures Series 10 12.2024 to
12.2025
2
150
8
3
Debentures Series 12 6.2026
to
6.2030
10
550
20
8
12
700
28
11
30.6.2.
Economic hedging
A. Bezeq is involved in forward transactions in order to reduce exposure to
changes in the dollar exchange rate. The net fair value of these
transactions as of 31.12.2024 is an asset of approximately NIS 1 million
(in 2023 - an asset of approximately NIS 1 million).
B. Yes is involved in forward transactions in order to reduce their exposure
to changes in the dollar exchange rate. The net fair value of these
transactions as of 31.12.2024 is a liability of approximately NIS 1 million
(as of 31.12.2023 - an asset of approximately NIS 1 million).
Notes to Consolidated Statements as of December 31, 2024
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
31,
2024
December
31,
2023
NIS millions
NIS millions
Level 1 - Investment in securities measured at fair value
through P&L
1,067
759
Level 2 – Forward contracts (see Note 30.7.3)
32
25
* Reclassified.
30.7.2.
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 carrying amount 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, 2024
As of December 31, 2023
Carrying
amount
(including
accrued
interest)
Fair value
Discount
rate
(weighted
average)
Carrying
amount
Fair
value
Discount
rate
(weighted
average)
NIS millions
%
NIS millions
%
Loans
from
banks
and
institutional bodies (unlinked)
1,517
1,479
4.76
1,546
1,500
4.31
Public
debentures
(index-
linked)
2,342
2,287
2.53
2,436
2,387
2.15
Public debentures (unlinked)
5,158
5,072
5.01
4,238
4,148
4.82
9,017
8,838
8,220
8,035
Notes to Consolidated Statements as of December 31, 2024
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 carrying
amount of offset balances as presented in the statement of financial position:
December
31,
2024
December
31,
2023
NIS millions
NIS millions
Gross balance of trade and other receivables
46
68
Offset amounts
)41(
(
65
)
Balance of trade receivables presented in the statement of financial
position
5
3
Gross supplier balance
46
73
Offset amounts
)41(
(
65
)
Balance of suppliers presented in the statement of financial position
5
8
Notes to Consolidated Statements as of December 31, 2024
31. Summary of selected data from the statements of Bezeq the Israel
Telecommunications Corp. Ltd., Pelephone Communications Ltd., Bezeq
International Ltd. and Yes TV and Communications Services Ltd.
31.1. Bezeq the Israel Telecommunications Corp. Ltd.
Data from the statement of financial position:
Data from the P&L statement:
Year ended December 31
2024
2023
2022
NIS millions
NIS millions
NIS millions
Income
4,342
4,412
4,306
Operating expenses
Salaries
1,037
1,028
970
Depreciation and amortization
1,023
1,019
1,005
General and operating expenses
738
769
759
Other operating expenses, net
106
145
112
Total Operating expenses
2,904
2,961
2,846
Operating profit
1,438
1,451
1,460
Financing expenses (income)
Financing expenses
398
370
424
Financing income
(
148
)
(
114
)
(
92
)
Financing expenses, net
250
256
332
Profit after financing expenses, net
1,188
1,195
1,128
Share in profits of investees, net
158
288
151
Profit before income taxes
1,346
1,483
1,279
Income taxes
274
294
279
Profit for the year
1,072
1,189
1,000
December
31,
2024
December
31,
2023
NIS millions
NIS millions
Current property
3,232
2,155
Non-current property
9,477
9,226
Total property
12,709
11,381
Current liabilities
2,555
2,317
Non-current liabilities
7,652
6,868
Total liabilities
10,207
9,185
Equity
2,502
2,196
Total liabilities and equity
12,709
11,381
Notes to Consolidated Statements as of December 31, 2024
31.2. Pelephone Communications Ltd.
Data from the statement of financial position:
Data from the P&L statement:
December
31,
2024
December
31,
2023
NIS millions
NIS millions
Current property
796
722
Non-current property
2,084
2,110
Total property
2,880
2,832
Current liabilities
733
659
Non-current liabilities
760
789
Total liabilities
1,493
1,448
Equity
1,387
1,384
Total liabilities and equity
2,880
2,832
Year ended December 31
2024
2023
2022
NIS millions
NIS millions
NIS millions
Income
Income from services
1,636
1,756
1,791
Income from sale of end equipment
618
592
608
Total income from services and sales
2,254
2,348
2,399
Operating expenses
General and operating expenses
1,178
1,278
1,327
Salaries
321
323
314
Depreciation and amortization
552
549
532
Total operating expenses
2,051
2,150
2,173
Other operating expenses, net
14
2
33
Operating profit
189
196
193
Financing expenses (income)
Financing expenses
37
35
42
Financing income
)30(
)48(
)68(
Financing expenses (income), net
7
)13(
)26(
Profit before income taxes
182
209
219
Income taxes
44
50
54
Profit for the year
138
159
165
Notes to Consolidated Statements as of December 31, 2024
31.3. Bezeq International Ltd.
Data from the statement of financial position:
Data from the P&L statement:
Year ended December 31
2024
2023
2022
NIS millions
NIS millions
NIS millions
Income
1,105
1,212
1,239
Operating expenses
Operating, general and depreciation expenses
722
800
827
Salaries
211
216
237
Depreciation, amortization and impairments
118
137
134
Other operating expenses, net
70
20
71
Total operating expenses
1,121
1,173
1,269
Operating profit (loss)
(16)
39
(30)
Financing expenses (income)
Financing expenses
15
17
9
Financing income
)10(
)7(
(8)
Financing expenses, net
5
10
1
Profit (loss) before income taxes
)21(
29
(31)
Income taxes
1
-
1
Profit (loss) for the year
(22)
29
(32)
December
31,
2024
December
31,
2023
NIS millions
NIS millions
Current property
390
406
Non-current property
542
594
Total property
932
1,000
Current liabilities
397
391
Non-current liabilities
331
388
Total liabilities
728
779
Equity
204
221
Total liabilities and equity
932
1,000
Notes to Consolidated Statements as of December 31, 2024
31.4. Yes TV and Communications Services Ltd. (Yes)
Data from the statement of financial position:
Data from the P&L statement:
Year ended December 31
2024
2023
2022
NIS millions
NIS millions
NIS millions
Income
1,265
1,309
1,277
Operating expenses
Operating, general and depreciation expenses
870
861
867
Salaries
192
193
200
Depreciation, amortization and impairments
155
166
199
Other operating expenses (income), net
8
(5)
3
Total operating expenses
1,225
1,215
1,269
Operating profit
40
94
8
Financing expenses (income)
Financing expenses
5
8
8
Financing income
)15(
)17(
)14(
Financing income, net
(10)
)9(
)6(
Profit before income taxes
50
103
14
Income taxes
1
1
1
Profit for the year
49
102
13
December
31,
2024
December
31,
2023
NIS millions
NIS millions
Current property
164
235
Non-current property
418
283
Total property
582
518
Current liabilities
404
385
Non-current liabilities
53
60
Total liabilities
457
445
Equity
125
73
Total liabilities and equity
582
518
Notes to Consolidated Statements as of December 31, 2024
32. Material events during and after the reporting period
32.1.
See Note 12.6 regarding Bezeq's entry into the electricity supply sector.
32.2.
See Note 12.9 above regarding the decision of Bezeq’s Board of Directors dated
11.3.2025 regarding 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.
32.3.
On February 27, 2025, Yes signed a document of principles between itself and the
National Labor Federation and the Yes Employees’ Committee, according to which,
subject to the approval of the Yes Board of Directors, the parties will sign an extension
of the collective agreement they entered into on 11.8.2021, until 31.12.2025, with
certain changes. Among other things, it was agreed in the document of principles that,
with regard to Bezeq's activity to cancel unbundling, the Yes Employees’ Committee will
act in full cooperation on the matter.
Separate Financial Information for the Year Ended
December 31, 2024
Separate Financial Information as of December 31, 2024
Table of Contents
Page
Auditors' report
2
Separate Financial Information
Statement of Financial Position
3
P&L Statement
4
Cash Flow Statement
5
Notes to Separate Financial Information
6
Somekh Chaikin
KPMG Millennium Tower
17 HaArbaa Street P.O.B. 609
Tel Aviv 6100601
03 684 8000
2
Somekh Chaikin, Israeli partnership and a member of the KPMG network of independent firms incorporated under
the Swiss entity KPMG International Cooperative ("KPMG International")
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,
2024 and 2023 and for each of the three years the last of which ended on December 31, 2024. 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 provides an adequate basis for our opinion.
In our opinion, 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. 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 11, 2025
Separate Financial Information as of December 31, 2024
3
Separate Statement of Financial Position as of December
2024
2023
Note
NIS millions
NIS millions
Assets
Cash and cash equivalents
112
81
Restricted cash and cash equivalents
18
-
Short-term investments and deposits*
3
60
43
Other receivables
2
3
Total current assets
192
127
Long-term deposits
-
8
Investment in equity-accounted investee
4
2,109
2,022
Total non-current assets
2,109
2,030
Total assets
2,301
2,157
Liabilities
Payables and credit balances
5
20
8
Provisions
6
-
20
Total current liabilities
20
28
Debentures
7
2,048
1,940
Total non-current liabilities
2,048
1,940
Total liabilities
2,068
1,968
Shareholders' equity
8
233
189
Total liabilities and shareholders' equity
2,301
2,157
* Including restricted deposits.
Itzik Tadmor
Tomer Raved
Darren Glatt
CFO
CEO
Chairman of the Board of Directors
Date of approval of the financial statements: March 11, 2025
The notes attached to the financial information constitute an integral part thereof.
Separate Financial Information as of December 31, 2024
4
P&L Statement for Year Ended December 31
2024
2023
2022
Note
NIS millions
NIS millions
NIS millions
Operating expenses
Salaries
4
4
5
General and operating expenses
7
7
7
Other expenses
6
-
19
-
Total operating expenses
11
30
12
Operating loss
(
11
)
(
30
)
(
12
)
Finance expenses (income)
9
Financing expenses
181
110
106
Financing income
(
7
)
(
5
)
(
9
)
Financing expenses (income), net
174
105
97
Loss after financing expenses, net
(
185
)
(
135
)
(
109
)
Share in net profit of equity-accounted
investee
293
322
267
Net profit for the year
108
187
158
Comprehensive income for the year ended December 31
2024
2023
2022
NIS millions
NIS millions
NIS millions
Net profit for the year
108
187
158
Other comprehensive income (loss), net of tax
(
2
)
3
13
Total comprehensive income for the year
6
10
190
171
The notes attached to the financial information constitute an integral part thereof.
Separate Financial Information as of December 31, 2024
5
Cash flow data for the year ended December 31
2024
2023
2022
NIS millions
NIS millions
NIS millions
Cash flows from current activity
Net profit for the year
108
187
158
Adjustments to profit:
Share in profits of equity-accounted investee, net
(
293
)
(
322
)
(
267
)
Financing expenses, net
167
106
94
Share-based compensation
*
*
1
Change in trade payables
*
(
1
)
2
Change in other receivables
2
(
3
)
3
Change in provisions
(
20
)
20
-
Net cash used for current activities
(
36
)
(
13
)
(
9
)
Cash flows from investing activities
Change in deposits and investments, net
(
5
)
40
163
Investment in an affiliate
(
53
)
(
37
)
(
15
)
Change in cash and restricted cash value
(
18
)
-
-
Dividend received from subsidiary
213
172
143
Interest and dividend received in cash
5
4
2
Net cash derived from investing activities
142
179
293
Cash flows from financing activities
Issuance of debentures
-
500
-
Repayment of debentures
-
(
497
)
(
100
)
Buyback of shares
(
20
)
(
23
)
(
121
)
Interest paid
(
55
)
(
76
)
(
75
)
Net cash used for financing activities
(
75
)
(
96
)
(
296
)
Increase (decrease) in cash and cash equivalents
31
70
(
12
)
Effect of changes in foreign currency exchange rate
-
(
2
)
-
Cash and cash equivalents for January 1
81
13
25
Cash and cash equivalents at the end of the period
112
81
13
The notes attached to the financial information constitute an integral part thereof
Notes to Separate Financial Information as of December 31, 2024
6
1.
General
The following are financial data from the Group's consolidated statements as of December 31, 2024
(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 2024 Consolidated Statements.
Regarding the investigation by the Securities Authority and the Police, see Note 1.3 to the Consolidated
Statements.
2.
Explanation of the material accounting policy 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, P&L, P&L including 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 3.14 to the Consolidated
Statements.
Notes to Separate Financial Information as of December 31, 2024
7
3.
Short-term investments and deposits
December 31, 2024
December 31, 2023
NIS millions
NIS millions
Investments in marketable securities
32
14
Short-term restricted deposits (1)
28
29
60
43
(1) The deposits are due until October 2025.
4.
Consolidated companies
Consolidated companies directly held by the Company:
4.1.
Investment in Bezeq
A. During 2023, the Company purchased 7,807,995 ordinary shares of the subsidiary Bezeq in
exchange for a total amount of approximately NIS 37 million.
B. During 2024, the Company purchased 11,843,449 ordinary shares of the subsidiary Bezeq in
exchange for payment of a total amount of approximately NIS 53 million and at an average
price of NIS 4.34 per share. After the aforementioned purchase and as of the date of
publication of the statements, the Company holds 27.47% of the issued share equity and
voting rights in Bezeq.
4.2.
Bezeq’s dividend distribution policy
On 11.3.2025, Bezeq's Board of Directors decided to update Bezeq's dividend policy so that Bezeq
will distribute every six months 80% of the semi-annual profit (after tax) according to its
Consolidated Statements, starting with the distribution for the second half of 2024, in light of the
continued decline in Bezeq's net debt, and in accordance with Bezeq's forecasts regarding
business results for the coming years.
Bezeq will also strive to increase its dividend policy in the future, subject to maintaining its credit
rating in the AA group.
Bezeq's Board of Directors sees importance in maintaining the balance between ensuring Bezeq's
financial resilience and stability, while maintaining Bezeq's current rating in the [AA] group over
time and continuing to add value to its shareholders through regular dividend distribution.
To Bezeq’s Board of Directors was presented, among other things, Bezeq’s and Bezeq Group's
forecasts, as well as sensitivity analyses for unexpected adverse events in Bezeq and the Bezeq
Group's business. After the Bezeq Board of Directors examined all of the above, the Board of
Directors determined that this resolution reflects the correct balance between these needs as
described above.
Company rights in equity
Investment
in
consolidated
company (according to balance
sheet value method) as of
December
31,
2024
December 31,
2023
December 31,
2024
December 31,
2023
%
%
NIS millions
NIS millions
Bezeq
27.49%
27.08%
2,109
2,022
2,109
2,022
Notes to Separate Financial Information as of December 31, 2024
8
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 taking into account Bezeq's
expected cash flow, Bezeq's needs and liabilities, Bezeq's cash balances, its plans and its status,
as they may be from time to time and subject to the approval of the general assembly of Bezeq's
shareholders with respect to each specific distribution, as set forth in the Bezeq Articles of
Association.
The approval of Bezeq's dividend policy as stated does not oblige Bezeq to distribute a dividend
to Bezeq's shareholders, and each specific distribution will be examined on its merits in
accordance with the terms of the implementation of the dividend distribution policy as stated
above. Furthermore, the approval of the policy as stated does not prevent Bezeq's Board of
Directors from periodically reviewing the dividend distribution policy to Bezeq's shareholders,
taking into account, among other things, the provisions of the law, Bezeq's business position and
plans, and its capital structure, and while maintaining a balance between ensuring Bezeq's
financial resilience and stability, including its debt level and credit rating, and continuing to
maximize value for Bezeq's shareholders through regular dividend distribution.
4.3. Dividend distribution by Bezeq
A. On 17.4.2024, the general assembly of Bezeq's shareholders (following the recommendation
of the Bezeq’s Board of Directors of 12.3.2024) approved the distribution of a cash dividend
to Bezeq's shareholders in the total amount of NIS 374 million (which, as of the day
determining the distribution, constitutes NIS 0.1351691 per share). The dividend was paid
on 9.5.2024. The Company's share of the aforementioned dividend is approximately NIS 102
million.
B. On 11.9.2024, the general assembly of Bezeq's shareholders (following the recommendation
of the Bezeq Board of Directors of 6.8.2024) approved the distribution of a cash dividend to
Bezeq's shareholders in a total amount of NIS 407 million (which, as of the day determining
the distribution, is 0.1470386 NIS per share). The dividend was paid on 10.10.2024. The
Company's share of the aforementioned dividend is approximately NIS 111 million.
C. On 11.3.2025, the general assembly of Bezeq's shareholders approved the distribution of a
cash dividend to Bezeq's shareholders in a total amount of NIS 392 million. As of the date of
approval of the statements, the said dividend has not yet been approved by Bezeq's general
assembly. The Company's expected share of the said dividend (if approved by Bezeq's
assembly meeting) is approximately NIS 108 million.
5.
Trade payables
December 31, 2024
December 31, 2023
NIS millions
NIS millions
Trade and other payables
1
2
Interest payable
19
6
20
8
Notes to Separate Financial Information as of December 31, 2024
9
6.
Contingent liabilities
On May 23, 2023, the Company signed a settlement agreement in the amount of approximately USD 5.5
million in respect of the two motions for approval of class actions filed in June 2017 as stated in (1) above.
The settlement agreement was approved by the Tel Aviv District Court (Economic Department) on August
28, 2024. The settlement agreement terminates the involvement of the Company and Shaul Elovitch (in
his capacity as controlling shareholder and former Chairman of the Company's Board of Directors only)
and Or Elovitch (in his capacity as former director of the Company only) in the motions for approval. The
settlement amount was paid by the Company during October 2024.
See also Note 17 in the Company's consolidated financial statements.
7.
Debentures
December 31, 2024
December 31, 2023
Carrying amount
Par value
Carrying amount
Par value
NIS millions
NIS millions
NIS millions
NIS millions
Debentures issued to the public:
Debentures Series F
5
96
1,011
1,940
2,010
Debentures Series G
1,083
1,009
-
-
Total debentures
2,048
2,020
1,940
2,010
7.1.
On June 22, 2023, the Company issued to institutional entities and the public approximately NIS
538 million in series F debentures for a net of approximately NIS 500 million (after issuance
expenses). The net proceeds of the issuance of the series F debentures were used by the
Company for early full and final repayment of the balance of series C debentures (plus accrued
interest up to the maturity date) on July 20, 2023.
7.2.
On September 12, 2024, the Company exchanged approximately 999 million par value of Series
F debentures for approximately 1,009 million par value of Series G debentures (a new series of
debentures issued for the first time) as part of an exchange purchase offer.
The Series G bonds bear annual interest at a rate of 5.5% (principal and interest are not index-
linked) which is paid twice a year on May 31 and November 30, the bond principal will be repaid
in a single payment on November 30, 2029.
The Company examined whether the change in terms between the debenture series is material
both quantitatively and qualitatively and concluded that the change is immaterial and therefore
recorded a loss from the exchange of debentures in its books, which was classified as financing
expenses in the P&L statement in the amount of approximately NIS 84 million in the third quarter
of 2024.
7.3.
For more details, see Note 13 to the Consolidated Statements.
Notes to Separate Financial Information as of December 31, 2024
10
8.
Shareholders’ equity
Ordinary shares of NIS 0.1 par value
Ordinary shares
December 31, 2024
December 31, 2023
Registered share capital
300,000,000
300,000,000
Issued and paid-up share capital
116,335,793
116,335,793
Treasury shares
(
12,173,530
)
(
10,673,530
)
Issued and paid-up share capital, net
104,162,263
105,662,263
8.1.
On August 8, 2023, the Company's Board of Directors approved a buyback plan for the Company's
shares up to NIS 30 million. As part of the aforementioned buyback plan, the Company purchased
1,593,213 of its shares for approximately NIS 23 million.
8.2.
On March 12, 2024, the Company's Board of Directors approved an additional buyback plan for
the Company's shares in the amount of up to NIS 25 million. as part of the aforementioned share
repurchase program, the Company purchased a total of 1,500,000 of its shares for approximately
NIS 20 million.
8.3.
As of December 31, 2024, Searchlight and the Forer family held 67.20% and 12.72%, respectively,
of the Company's issued and paid-up share capital.
9.
Financing expenses
Year ended December 31
2024
2023
2022
NIS millions
NIS millions
NIS millions
Interest expenses, net
97
108
98
Loss from debenture exchange
84
-
-
Exchange rate differences
-
2
-
Change in fair value of financial assets
measured at fair value through P&L
-
-
8
Total financing expenses
181
110
106
Profit from debenture exchange
-
-
7
Profits from investments in marketable
securities and bank deposits
5
4
2
Change in fair value of financial assets
measured at fair value through P&L
2
1
-
Total financing income
7
5
9
Financing expenses, net
174
105
97
Notes to Separate Financial Information as of December 31, 2024
11
10. Income Tax
The Company has final tax assessments until 2018.
On December 30, 2024, the Company received an assessment based on judgment for the 2019 tax year,
according to which the Company is required to pay tax in the amount of approximately NIS 40 million
(excluding interest and linkage differences) resulting from the recording of a revaluation of the Company's
debentures to market value as a result of a change in the terms of the Company's debentures in the
creditor arrangement that the Company made in 2019.
The Company disputes the Tax Authority's position and believes, inter alia, based on an opinion it received
from its professional advisors, that it has well-founded claims to contradict the Tax Authority's position,
and therefore intends to file an objection to the assessment within the deadlines set for this by law.
According to the aforementioned opinion received from its professional advisors, the chances of the
Company's position being accepted by the Tax Authority or the Court outweigh the chances of its rejection
(more likely than not), and therefore the Company did not record any provision in its books for the
aforementioned assessment.
11. 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
2024
2023
2022
NIS thousands
NIS thousands
NIS thousands
Salaries expenses
400
400
520
12. Liquidity risk
The following are the forecasted repayment dates of financial liabilities, including interest payment
estimate (based on the interest data known as of December 31, 2024):
December 31, 2024
Carrying
amount
Contractual
cash flow
H1/2025
H2/2025
2026
2027
onwards
NIS millions
Non-derivative financial commitments
Trade and other payables
20
20
20
-
-
-
Debentures
2,048
2,382
58
46
1,102
1,176
Total
2,068
2,402
78
46
1,102
1,176
Notes to Separate Financial Information as of December 31, 2024
12
13. Events during and after the reporting period
13.1.
Regarding the investigation by the Securities Authority and the police, see Note 1.3 to the
Consolidated Statements.
13.2.
For information regarding the decision of the Bezeq Board of Directors dated 11.3.2025 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
12.9 to the Consolidated Statements.
13.3.
For information regarding material events during and after the reporting period, see Note 32 to
the Consolidated Statements.
Chapter D (Additional Details on the Corporation) for the Periodic Report for the Year 2024
- 1-
Chapter IV
Additional Details about the Corporation
and Corporate Governance Questionnaire
for the Period ended December 31, 2024
Chapter D (Additional Details on the Corporation) for the Periodic Report for the Year 2024
- 2-
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 year, no use was made of the proceeds from securities offered by the Company
according to a prospectus.
Regulation 11: List of investments in subsidiaries as of the date of the statement of the financial
position
Regulation 12: Changes in investments in subsidiaries during the reported period
A. On January 31, 2024, the Company purchased 3,120,000 ordinary shares of Bezeq, each with a par
value of NIS 1, as part of stock exchange trading transactions, in exchange for payment of a total
amount of approximately NIS 15 million and at an average price of NIS 4.82 per Bezeq share.
B. On May 30, 2024, the Company purchased 990,947 ordinary shares of Bezeq, each with a par value
of NIS 1, as part of stock exchange trading transactions, in exchange for payment of a total amount
of approximately NIS 4.4 million and at an average price of NIS 4.47 per Bezeq share.
C. On June 5, 2024, the Company purchased 680,000 ordinary shares of Bezeq, each with a par value
of NIS 1, as part of stock exchange trading transactions, in exchange for payment of a total amount
of approximately NIS 3 million and at an average price of NIS 4.43 per Bezeq share.
D. On June 6, 2024, the Company purchased 687,502 ordinary shares of Bezeq, each with a par value
of NIS 1, as part of stock exchange trading transactions, in exchange for payment of a total amount
of approximately NIS 3 million and at an average price of NIS 4.34 per Bezeq share.
E. On June 20, 2024, the Company purchased 715,000 ordinary shares of Bezeq, each with a par value
of NIS 1, as part of stock exchange trading transactions, in exchange for payment of a total amount
of approximately NIS 3 million and at an average price of NIS 4.2 per Bezeq share.
F.
On August 8, 2024, the Company purchased 700,000 ordinary shares of Bezeq, each with a par
value of NIS 1, as part of stock exchange trading transactions, in exchange for payment of a total
amount of approximately NIS 3 million and at an average price of NIS 4.27 per Bezeq share.
G. On August 12, 2024, the Company purchased 720,000 ordinary shares of Bezeq, each with a par
value of NIS 1, as part of stock exchange trading transactions, in exchange for payment of a total
amount of approximately NIS 3 million and at an average price of NIS 4.2 per Bezeq share.
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)
Bezeq the Israel
Telecommunicat
ions Corporation
Ltd. ("Bezeq")
The Company
Ordinary
NIS 1 par
value
761,135,157
761,135,157
27.49%
27.49%
2,109
Chapter D (Additional Details on the Corporation) for the Periodic Report for the Year 2024
- 3-
H. On August 22, 2024, the Company purchased 720,000 ordinary shares of Bezeq, each with a par
value of NIS 1, as part of stock exchange trading transactions, in exchange for payment of a total
amount of approximately NIS 3 million and at an average price of NIS 4.158 per Bezeq share.
I.
On September 23, 2024, the Company purchased 720,000 ordinary shares of Bezeq, each with a
par value of NIS 1, as part of stock exchange trading transactions, in exchange for payment of a
total amount of approximately NIS 3 million and at an average price of NIS 4.219 per Bezeq share.
J.
On October 7, 2024, the Company purchased 700,000 ordinary shares of Bezeq, each with a par
value of NIS 1, as part of stock exchange trading transactions, in exchange for payment of a total
amount of approximately NIS 3 million and at an average price of NIS 4.259 per Bezeq share.
K. On October 8, 2024, the Company purchased 700,000 ordinary shares of Bezeq, each with a par
value of NIS 1, as part of stock exchange trading transactions, in exchange for payment of a total
amount of approximately NIS 3 million and at an average price of NIS 4.29 per Bezeq share.
L.
On October 9, 2024, the Company purchased 475,000 ordinary shares of Bezeq, each with a par
value of NIS 1, as part of stock exchange trading transactions, in exchange for payment of a total
amount of approximately NIS 2 million and at an average price of NIS 4.34 per Bezeq share.
M. On October 10, 2024, the Company purchased 915,000 ordinary shares of Bezeq, each with a par
value of NIS 1, as part of stock exchange trading transactions, in exchange for payment of a total
amount of approximately NIS 4 million and at an average price NIS of 4.39 per Bezeq share.
Regulation 13: Income of subsidiaries and income of the corporation therefrom as of the date of the
statement of financial position (NIS millions)
Regulation 20: Trading on the stock exchange
On September 17, 2024, 1,009,177,103 debentures (Series G) of the Company were listed for trading,
in exchange for 999,185,250 debentures (Series F) of the Company, according to a shelf offering report
by way of an exchange purchase offer. For additional details regarding the aforementioned exchange
purchase offer and the results of the offering, see the immediate reports published by the Company on
September 9, 2024 and September 12, 2024 (Reference Nos.: 2024-01-602172 and 2024-01-603134),
which are included in this report by way of reference.
Regulation 21: Compensation for related parties and senior officers
The following is a breakdown of the compensation paid by the Company, or paid by the companies
under its control (including commitments to provide compensation), during the year 2024: (1) to each
of the five holders of the highest compensation among the senior officers 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 compensation in the Company itself, which were given to them in connection with their
office in the Company.
Company name
Profit for the period
Comprehensive
income for the
period
Dividend
Management
fee
Interest
income
Bezeq
1,073
1,067
781
-
-
Chapter D (Additional Details on the Corporation) for the Periodic Report for the Year 2024
- 4-
The Group did not pay any of the office bearers listed in the table above payments for the year 2024
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, as a director in Bezeq starting in May 2020,
and as of January 1, 2024, Mr. Raved serves as Chairman of Bezeq’s Board of Directors. According
to the employment agreement with Mr. Raved, which was approved at the Company's general
assembly on February 13, 2020, Mr. Raved is entitled to a monthly salary as well as social and
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 grant amounts listed in the table are as recognized in the 2023
statements and include a performance-dependant grant as well as special grantes (for details regarding each of
the officers see details in sections D-E after the table below), all in accordance with Bezeq’s compensation policy.
The performance-dependent grant that appears in the table is for the year 2023 (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 2023,
grantes were paid to the above officers for 2022, the amount of which [including a contingent portion not paid
in practice in 2022, but paid in practice in 2024 (if any) is included in the corresponding table in Bezeq’s annual
statements for 2021 (as published on March 23, 2022).
3 The amounts detailed in the table refer to both Nir David's term of office as VP of the Business Customers Division
at Bezeq and his term of office as CEO of Bezeq.
Details of compensation persons
Compensation (NIS thousands)
Total
(NIS
thousands)
Section
below
Name
Position
Sex
Job
volume
Holding
rate in
the
corporati
on equity
Salary1
Grant2
Share-
based
payment
Other
Total
Tomer Raved
Company CEO
and Chairman
of the Bezeq
Board of
Directors
Male
Full-time
-
4,406
1,760
5,800
-
11,966
A
Itzik Tadmor
Company CFO
Male
Full-time
-
755
294
16
-
1,065
B
Ilan Chaikin
Company
Internal
auditor
Male
Full-time
-
56
-
-
-
56
C
Ilan Sigal
CEO of
Pelephone and
Yes
Male
Full-time
-
2,484
2,021
2,661
-
7,166
D
Nir David3
Bezeq CEO
Male
Full-time
-
2,321
1,270
2,807
-
6,398
E
Directors
Director
-
Full-time
-
1,121
-
-
-
1,121
F
Chapter D (Additional Details on the Corporation) for the Periodic Report for the Year 2024
- 5-
ancillary benefits as accepted by the Company and in accordance with the Company's
compensation policy (recovery fees, training fund, pension, sick pay, vacation days, mobile phone,
business expenses and national insurance, excluding vehicle expenses).
In addition, Mr. Raved is entitled to an annual grant of up to 12 salaries subject to meeting the
targets, where according to the Company's approved compensation policy, a rate of 65% of the
aforementioned annual grant will be paid subject to meeting the target of improving the debt-to-
asset ratio (LTV) of at least 5% compared to last year; rate of 10% of the annual grant will be paid
subject to meeting budget targets set by the Company's Board of Directors and 25% of the annual
grant will be paid at the discretion of the Company's Board of Directors. In this regard, it should be
noted that following Mr. Raved's appointment as Chairman of Bezeq’s Board of Directors, on March
12, 2024, Mr. Raved announced to the Company that he is waiving the grant rate conditional on
the debt-to-asset ratio improvement target for 2023 and as long as he also serves as Chairman of
the Bezeq Board of Directors.
In addition, in respect of his office as a director in Bezeq, Mr. Raved is entitled to an annual
compensation and a participation fee in the amount determined by an external expert in
accordance with the Compensation 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"). On January 20, 2025,
and February 3, 2025, the Compensation Committee and the Board of Directors of the Company,
respectively, approved changes to the restrictions applicable to Mr. Raved's options, such that the
existing restriction whereby the options may be exercised only after the occurrence of a change of
control event, has been replaced by a restriction whereby Mr. Raved will be permitted to exercise
options (and, for the avoidance of doubt, sell the exercise shares) in proportion (pro rata) to the
sale of Bezeq shares made by the Company, to the extent that it has made any4. In addition, the
restriction set forth in the Option Expiration Section relating to an increase in the average exercise
value per share of the Company (collectively: "Update on the Options Terms") has been eliminated.
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.
In addition, Mr. Raved serves as Chairman of the Board of Directors of Bezeq and as Chairman of
the Board of Directors of the Group's subsidiaries as of January 1, 2024. Except for Bezeq-Gen,
where he has been serving as a director since March 5, 2024. Mr. Raved's employment agreement
with Bezeq is for an indefinite period, with either party eligible to terminate the agreement at any
time and for any reason, with 3 months' prior notice.
As part of his office, Mr. Raved is employed under a personal contract, for an indefinite period that
can be terminated by either party with prior notice ranging between 3-6 months. The non-compete
period in the agreement is 3-6 months from the date of termination of employment at Bezeq,
unless otherwise agreed between the parties. The salary of the officers is linked to the consumer
4 For example, if the Company sold shares constituting 25% of its holding in Bezeq, then Mr. Raved would be
entitled to exercise and sell 25% of the options held by him.
Chapter D (Additional Details on the Corporation) for the Periodic Report for the Year 2024
- 6-
price index, and in the event of a decrease in the wage index, it does not change until the index
increases, offsetting the decrease in the index. The officers are entitled to customary accompanying
conditions, including provisions for a further education fund, a deposit in a pension fund, vacation
days, annual convalescence, sick days, reimbursement of expenses, liability insurance for officers
and executives, exemption and obligation to indemnify, and the possibility of entitlement to an
annual performance-based grant, in accordance with the provisions of the compensation policy;
entitled to a total monthly salary (gross) in the amount of approximately NIS 150 thousand for 85%
position (linked to the consumer price index) and an annual performance-based cash grant, as
detailed below.
Equity compensation: On February 5, 2024, Bezeq's General Assembly approved granting Mr.
Raved 5,381,064 options. The fair value of the options as of the date of their granting (calculated
in accordance with the Monte Carlo model) is approximately NIS 9.6 million. For further details
regarding the terms of the options, see the outline of the granting of options to employees as
published on December 28, 2023, which is hereby incorporated by way of reference (“the Current
Outline").
For further details regarding the terms of Mr. Raved's office and employment as Chairman of the
Board of Directors of Bezeq, see Bezeq's immediate report on the convening a general meeting of
shareholders dated February 1, 2024, which is hereby incorporated by way of reference.
Annual grant: Mr. Raved's annual performance-based grant targets for 2024 were predetermined
within the framework of the compensatoin policy and approved by the General Assembly and
include: a Group Adj. EBITDA5 target that weighs 50% in the calculation of the grant, a Group Adj.
Net Profit target that weighs 25%, and a Group Adj. Free Cash Flow (FCF) target that weighs 25%.
Mr. Raved's compliance rate with all of the grant targets for 2024 was approximately 113%. The
threshold condition for entitlement for the annual performance-based grant is that the Group Adj.
EBITDA results (excluding the impact of IFRS 16) for 2024 (NIS 3,275.9 million) will not be less than
40% of the Group Adj. EBITDA results (excluding the impact of IFRS 16) in 2023 (NIS 3,588.3 million)
- this condition has been met.
The compensation policy limits the annual performance-based grant for the Chairman of the Board
of Directors to up to 75% of the annual base salary (i.e., 9 salaries). Accordingly, the grant approved
for Mr. Raved for 2024 is 75% of his annual salary. For the purpose of calculating the achievement
of the targets for 2024 in accordance with the compensation policy, the Compensation Committee
and Bezeq's Board of Directors approved the neutralization of the following events from the
performance calculation for the purpose of the grant: The effects of the "Iron Swords" War, which
were not budgeted for in the 2024 budget, as well as the update of the minimum wage in the
economy beyond 3%.
b. Itzik Tadmor
As of January 2019, Mr. Tadmor is employed as the Company's CFO. According to the employment
agreement with him, in addition to his monthly salary, Mr. Tadmor is entitled to social and ancillary
benefits as customary (vacation days, executive insurance, study fund, etc.). In accordance with the
employment agreement with him, he is entitled to a retention grant for his work in the Company
until December 2023. Starting in 2024, Mr. Tadmor will be entitled to a grant of up to 6 salaries
5 Adjusted EBITDA for the purposes of determining compensation is calculated as EBITDA excluding Other
operating expenses/income (net), losses/gains from depreciation/apprceiation (including losses from
continuous depreciation), the effects of implementing International Financial Reporting Standard IFRS16
"Leases", and excluding expenses for payments in respect of equity compensation plan.
Chapter D (Additional Details on the Corporation) for the Periodic Report for the Year 2024
- 7-
conditional on meeting the targets to be set.
Also, Mr. Tadmor is entitled to be included in the directors' and officers' liability insurance
arrangement and indemnity as is customary in the company, like the other officers in the company.
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. It should also be noted
that on January 20, 2025 and February 3, 2025, the Compensation Committee and the Company's
Board of Directors, respectively, approved the update of the terms of the options (as defined
above) also with respect to Mr. Tadmor's options.
The employment agreement with Mr. Tadmor can be terminated at any time with 3 months notice
by either party.
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 2024, Mr. Chaikin’s fee amounted to approximately NIS
56K. For further details, see Section 2.5 of the Company's Board of Directors' report as of December
31, 2024, in Chapter B of the periodic report.
d. Ilan Sigal – CEO of Pelephone and Yes
Serves as CEO of Pelephone and Yes. Mr. Sigal's employment agreement, signed on May 23, 2022,
is for an unlimited period, with either party eligible to terminate it at any time with 6 months' prior
notice. In respect of his office, Mr. Sigal is employed under a personal contract, for an indefinite
period that can be terminated by either party with 3-6 months' prior notice. The non-compete
period in the agreement is between 3-6 months from the date of termination of employment at
Bezeq, unless otherwise agreed between the parties. The salary of the officers is linked to the
consumer price index, and in the event of a decrease in the wage index, it does not change until
the index increases, offsetting the decrease in the index. The officers are entitled to customary
accompanying conditions, including provisions for a further education fund, a deposit in a pension
fund, vacation days, annual convalescence, sick days, reimbursement of expenses, liability
insurance for officers and executives, exemption and obligation to indemnify, and the possibility of
entitlement to an annual performance-based grant, in accordance with the provisions of the
compensation policy ("Bezeq Compensation Policy").
Equity Compensation: In respect of his office, Mr. Sigal was granted (in two separate allocations) a
total of 5,331,000 options, the aggregate fair value of which, as of the date of their grant (calculated
in accordance with the Monte Carlo model), is approximately NIS 10 million. For details regarding
the terms of 4,131,000 of the options, see the Employee Option Grant Outline dated May 9, 2022
("2022 Outline") and the Private Offering Report dated September 1, 2022, which are hereby
incorporated by way of reference. For details regarding the terms of 1,200,000 of the options, see
the current outline and the private offering report dated March 13, 2024.
Annual grant: Mr. Sigal's annual performance-based grant targets for 2024 as CEO of Pelephone
and Yes were pre-determined by Bezeq's Compensation Committee in December 2023 and
included: an Adj. EBITDA6 target aggregated for Pelephone and Yes that weighs 50% in the
calculation of the grant; an Adj.EBITDA target aggregated for Pelephone and Yes minus CAPEX
aggregated for Pelephone and Yes (CAPEX in cash flow terms) that weighs 15%; an Adj. EBITDA
6 See Footnote 4 above.
Chapter D (Additional Details on the Corporation) for the Periodic Report for the Year 2024
- 8-
target by Company, Pelephone and Yes, a separate target that weighs 15%; an Adj. Net Profit target
aggregated for Pelephone and Yes that weighs 10%; and a management evaluation target that
weighs 10%. The threshold condition for receiving the grant was that the aggregated Adj. EBITDA
results for Pelephone and Yes for 2024 (approximately NIS 656 million) would not be less than 40%
of the aggregated Adj. EBITDA results for Pelephone and Yes in 2023 (approximately NIS 715
million) – this condition was met.
Mr. Sigal's compliance rate with all of the annual performance-based grant targets for 2024 was
approximately 115%. Accordingly, the grant rate for Mr. Sigal for 2024 is approximately 120% of his
annual salary. Mr. Sigal will be entitled to 40% of the compensation for meeting the weighted
aggregate adjusted EBITDA target in 2024 only in 2026 (after the date of approval of the financial
statements for 2025) and only if the minimum aggregate adjusted EBITDA target set in relation to
the 2025 budget year is achieved, in accordance with the compensation policy.
For the purpose of calculating the achievement of the targets for 2024, in accordance with the
compensation policy, the Compensation Committee and the Board of Directors of Bezeq approved
the neutralization of the effects of the "Iron Swords" war on the results of 2024, which were not
budgeted for in the 2024 budget, from the calculation of the performance for the purpose of the
grant.
e. Nir David
Has served as the CEO of Bezeq starting April 1, 2024. In addition, Mr. David serves as Chairman of
the Board of Directors of Bezeq Gen. Mr. David's employment agreement is for an unlimited period,
with either party eligible to terminate the agreement at any time with 6 months' prior notice.
In respect of his office, Mr. David is employed under a personal contract, for an indefinite period
that can be terminated by either party with 3-6 months' prior notice. The non-compete period in
the agreement is between 3-6 months from the date of termination of employment at Bezeq,
unless otherwise agreed between the parties. The salary of the officers is linked to the consumer
price index, and in the event of a decrease in the wage index, it does not change until the index
increases, offsetting the decrease in the index. The salary of the officers is linked to the consumer
price index, and in the event of a decrease in the wage index, it does not change until the index
increases, offsetting the decrease in the index. The officers are entitled to customary
accompanying conditions, including provisions for a further education fund, a deposit in a pension
fund, vacation days, annual convalescence, sick days, reimbursement of expenses, liability
insurance for officers and executives, exemption and obligation to indemnify, and the possibility of
entitlement to an annual performance-based grant, in accordance with the provisions of the
compensation policy, with his monthly salary being approximately NIS 147,000 (linked to the
consumer price index); for additional details regarding Mr. David's terms of office and employment,
see Bezeq's immediate report on a meeting dated April 11, 2024, which is hereby incorporated by
way of reference.
Equity compensation: Prior to his office as CEO, Mr. David served as VP of the Business Customers
Division at Bezeq. During his tenure as VP, he was allocated 1,500,000 options. The fair value of the
options as of the date of their granting (calculated in accordance with the Monte Carlo model) is
approximately NIS 1.3 million. For further details regarding the terms of the options as stated, see
the 2022 Outline and the Private Offering Report dated May 9, 2022, which are hereby
incorporated by way reference.
On May 20, 2024, the General Meeting approved the granting of 4,058,032 options to Mr. David.
The fair value of the options as of the date of their grant (calculated in accordance with the Monte
Carlo model) is approximately NIS 6.6 million. For further details regarding the terms of the options,
see the current Outline and the Immediate Meeting Report dated April 11, 2024, which are hereby
incorporated by way of reference.
Chapter D (Additional Details on the Corporation) for the Periodic Report for the Year 2024
- 9-
Annual grant: Mr. David's annual performance-based grant targets for 2024 as Bezeq CEO were
predetermined by the Bezeq Board of Directors in December 2023 and included:7 an Adj. EBITDA
target for Bezeq (solo) that weighs 50% in the calculation of the grant; an Adj. Profit after tax target
for Bezeq (solo) that weighs 20%; an Adjusted Free Cash Flow (FCF)8 target for Bezeq (solo) that
weighs 20%; and a management evaluation target that weighs 10%. The threshold condition for
receiving the grant was that the Adj. EBITDA results for 2024 (approximately NIS 2,452 million)
would not be less than 40% of the Adj. EBITDA results in 2023 (approximately NIS 2,502 million) –
this condition was met.
Mr. David's compliance rate as CEO of Bezeq with all annual performance-based bonus targets for
his actual tenure as CEO of Bezeq in 2024 amounted to 95%. Accordingly, Mr. David’s annual grant
rate for 2024 is approximately 83% of his annual salary as CEO of Bezeq starting from his entry into
office this year. For the purpose of calculating compliance with the targets for 2024, in accordance
with Bezeq's compensation policy, the Compensation Committee and Bezeq's Board of Directors
approved the neutralization of the following events from the calculation of performance for the
purpose of the bonus: the effects of the "Iron Swords" War and the update of the minimum wage
in the economy that were not budgeted for in the 2024 budget.
The targets for Mr. David's annual performance-based grant for 2024 as VP of the Business
Customers Division of Bezeq were determined in advance by the former CEO of Bezeq and
Chairman of the Board of Directors of Bezeq in December 2023 and included: an Adj. EBITDA target
for Bezeq (solo) that weighs 50% in the calculation of the grant; a business segment icome target
that weighs 15%; a net combined volume target that weighs 20%; a divisional expense, investment
and salary target that weighs 5%, and a management evaluation target that weighs 10%.
Mr. David's compliance rate as Bezeq's VP of the Business Customers Division in the overall bonus
targets for his actual tenure as VP in 2024 amounted to 93%. For the purpose of calculating the
achievement of the targets for 2024, in accordance with Bezeq's compensation policy, the
Compensation Committee and Bezeq's Board of Directors approved the neutralization of the
following events from the calculation of performance for the purpose of the bonus: the effects of
the "Iron Swords" war and the update of the minimum wage in the economy that were not
budgeted for in the 2024 budget.
f.
Directors
Each director (including the Chairman of the Board of Directors) is entitled to an annual
compensation and a participation compensation for each meeting, in the maximum amount, in
accordance with the Company’s classification under to the Compensation 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 compensation, as stated
in the Compensation 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 2024, compensation was paid to the
directors of the Company in accordance with the Compensation Regulations in the amount of NIS
1,121k.
Regulation 21a: The controlling shareholder in the corporation
7 The aforementioned grant targets were determined in advance for the outgoing CEO of Bezeq. In accordance
with the resolution of the Bezeq Board of Directors and the General Assembly of Bezeq shareholders dated
May 20, 2024, Mr. David is entitled to a partial grant for his office as CEO of Bezeq starting from the date of
commencement of his office, i.e., April 1, 2024, in accordance with meeting the compensation targets set for
the Company's outgoing CEO for this year.
8 Adjusted free cash flow (FCF) is calculated as cash from operating activities minus cash for the purchase/sale of
PP&E and intangible assets (net), and minus lease payments.
Chapter D (Additional Details on the Corporation) for the Periodic Report for the Year 2024
- 10-
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 79.92% 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.
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 July 7, 2024 (Ref.: 2024-01-069925), 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 January 15, 2025 (Ref.: 2025-01-004253) included in this report
by way of reference.
Regulation 24b: Register of shareholders
For the Company's shareholder register, see immediate report dated January 15, 2025 (Ref.: 2025-01-
004253) 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
Chapter D (Additional Details on the Corporation) for the Periodic Report for the Year 2024
- 11-
Regulation 26: The directors of the corporation
Last name and first
name
Darren Glatt, Chairman
Phil Bacal
Ran Forer
Efrat Duvdevani
Ajit V. Pai
Efrat Makov
Stephen Joseph
ID number
549871770
(foreign
passport)
HP037044
(foreign
passport)
066522772
238248730
536841734
(Foreign passport)
023044365
551988678 (foreign passport)
Date of birth
November 18, 1975
September 13, 1985
September 2, 1984
JUNE 10, 1968
January 10, 1973
June 17, 1968
April 10, 1980
Address for the service
of court documents
144
Menachem
Begin
Road, Tel Aviv (at B.
Communications)
144
Menachem
Begin
Road, Tel Aviv (at B.
Communications)
2
Haysur
St.,
Ramat
Hasharon, 4703006
48 Hanasi Ben Zvi St.,
Herzliya, 4639948
Arlington,
Old
Dominion
Drive, 4868, 22207
118 HaTamar Road, Moshav
Ben Shemen, 73115
144 Menachem Begin Road,
Tel
Aviv
(at
B.
Communications)
Citizenship
American
Canadian
Israeli
Israeli
American
Israeli
British
Education
BACCY,
George
Washington
University
MBA, Harvard Business
School
MBA Richard Ivey School of
Business (with honors) at
the University of Western
Ontario.
Bachelor of Arts in Business
Administration.
Degree in Law, IDC Herzliya,
B.A. in Management, IDC
Herzliya,LL.M. Commercial
Law (cum laude), Tel Aviv
University, M.Sc. General
Management,
Stanford
University, Semester in Law
at Berkeley University
Member of the Israel Bar
Association.
Course for Directors and
Other
Senior
Corporate
Bachelor’s
degree
in
International Relations and
English,
The
Hebrew
University; Degree in Public
Policy - Management and
Finance, Tel Aviv University
B.A., Social Studies, Harvard
University;
J.D Law Studies, University
of Chicago Law School
B.A.
In
Economics
and
Accounting from Tel Aviv
University.
Israeli
CPA
license (1993), American
CPA license (New York State)
(1995).
B.Sc. in Business and Financial
Economics
from
Leeds
University, KPMG.
Chartered Accountant, FCA of
the Institute of Chartered
Accountants in England and
Wales.
Chapter D (Additional Details on the Corporation) for the Periodic Report for the Year 2024
- 12-
Officers
-
Executive
Development Center, Tel
Aviv University.
Graduate and member of
the 8400 Health Technology
Leadership
Program
-
Harvard Business School.
Occupation
for
the
past five years
Partner in the Searchlight
Capital Partners and head
of
investments
in
infrastructure,
communications,
media
and technology. Director in
the following companies:
Bezeq, Mainstream Fiber
Network
(Chairman),
Wecom Fiber (Chairman),
All
Points
Broadband
(Chairman),
Adams
Outdoor
Advertising.
Formerly, also a director in
the following companies:
Rackspace,
MediaMath,
Ocean
Outdoor,
CEO
of
bullet
Trade
Services,
Partner
in
Searchlight
Capital
Partners.
VP of Business Development
at the Neopharm Group,
Business
Development
Manager
at
Celgene
Corporation.
CEO of the Peres Center for
Peace and Innovation.
Partner
in
Searchlight
Capital Partners.
Chairman of the FCC
Jewelry
Designer
and
independent brand owner.
Director in the following
companies:
BioLight Life Sciences Ltd
(2011-2020);
Anchiano
Therapeutics
Ltd
(2018-
2020); iSPAC 1 Ltd (2021-
present); Allot Ltd (2021-
present); Ceragon Ltd (2022-
present).
CEO,
CFO
and
VP
of
Operations at Ocean Outdoor
Group (LSE: OOUT).
Chapter D (Additional Details on the Corporation) for the Periodic Report for the Year 2024
- 13-
160over90,
Charter
Communications,
PatientPoint,
Veritable
Maritime, Core Media.
Serves as a director in
other corporations
Bezeq, Mainstream Fiber
Network, Webcom Fiber,
All
Points
Broadband,
Adams
Outdoor
Advertising
Roots Corporation, Care
Advantage, Bullet Trade
Services, TouchTunes
Bezeq, ADO Group, Advisory
Board
of
the
Tel-Aviv
University
Alumni
Organization
All Points Broadband,
Mainstream Fiber Networks,
Wecom Fiber,
Ziply Fiber,
America’s Public Television
Stations, EdgeQ
Atoll Holdco Ltd,
Scp
Acquisition
Topco
Limited,
Scp
Acquisition
Midco
Limited,
Scp Acquisition Bidco Limited,
Ocean Topo Limited,
Ocean Bidco Limited,
Ocean Outdoor UK Limited,
Signature Outdoor Limited,
Mediaco Outdoor Limited,
Forrest
Outdoor
Media
Limited,
Ocean
Brands
Limited
Forrest
Media
(Holdings)
Limited,
Forrest Media Limited,
DKTD Media B.V,
Ngage Media B.V,
Interbest B.v,
Global Agencies Stockholm
AB,
Gudfar& son AB,
Chapter D (Additional Details on the Corporation) for the Periodic Report for the Year 2024
- 14-
Visual Art & Global Agencies
Sweden AB,
Visual
Art
International
Holding AB,
Visual Art Sweden AB,
Visual Art Sweden Holding AB,
Visual
Art
Denmark
City
Reklame A/S,
Visual Art Norway AS. Visual
Art USA Inc, Visual Art
Germany GmbH, Visual Art
Finland Oy
Has accounting and
financial expertise
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Is
the
director
an
employee
of
the
corporation,
of
its
subsidiary,
of
its
affiliated company or
of
a
stakeholder
therein
Yes, see details of
occupation in the last five
years.
No
Yes, the director serves as
VP of Business
Development 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.
No
Yes,
see
details
of
occupation in the last five
years.
No
No
Chapter D (Additional Details on the Corporation) for the Periodic Report for the Year 2024
- 15-
Is the director a family
member of another
stakeholder
in
the
corporation
No
No
Yes, his parents, David and
Michal Forer, are the
controlling shareholders in
TNR Investments Ltd., which
owns the joint controlling
interest in the Company.
No
No
No
No
Membership
in
a
committee
or
committees
of
the
Board of Directors
No
No
No
The Committee for the
Examination of Financial
Statements; The Audit
Committee; Compensation
Committee;
No
The Committee for the
Examination
of
Financial
Statements;
The
Audit
Committee; Compensation
Committee;
The
Committee
for
the
Examination
of
Financial
Statements;
The
Audit
Committee;
Compensation
Committee;
Is this member of the
Board of Directors an
outside director
No
No
No
Yes
No
Yes
No
Does the Company see
the director as an
independent director
No
No
No
Yes
No
Yes
Yes
Chapter D (Additional Details on the Corporation) for the Periodic Report for the Year 2024
- 16-
Regulation 26A: Senior officers
Name of senior officer
Itzik Tadmor
Dudu Mizrahi
Ilan Chaikin
Role in the Company,
subsidiary, affiliate or
related party
Chief Financial
Officer
CEO of the
Company and
Chairman of the
Board of Directors
of Bezeq
Internal Auditor
Date of birth
February 14,
1981
April 18, 1985
November 21,
1954
Education
BA in Accounting
and Economics,
Tel Aviv
University.
MBA in Business
Administration,
Tel Aviv
University.
Double major in
Law and
Economics from
the Tel Aviv
University; MBA -
Stern School of
Business
Bachelor's degree
in Economics and
Accounting, Tel
Aviv University.
Main occupations in the last
5 years and a list of the
corporations in which he
serves as a director
CFO of B
Communications
Ltd.
The Company's
CEO and Chairman
of the Board of
Directors of Bezeq
Director and Vice
President of the
Telecom and
Technology Group
at RBC Investment
Bank in New York.
Managing partner
at CPA Chaikin
Cohen Rubin & Co.
Is he a related party in the
Company or a family
member of another senior
official or of another related
party in the Company
No
No
No
Regulation 26B: 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
Chapter D (Additional Details on the Corporation) for the Periodic Report for the Year 2024
- 17-
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.
Regulation 29 (a): The recommendations and resolutions of the directors before the general
meeting, and their resolutions that do not require the approval of a general meeting in matters
specified in Regulation 29(a)
A. On March 12, 2024, the Company's Board of Directors approved a buyback plan of the Company's
shares in the amount of up to NIS 25 million, which will begin on March 17, 2024 and end upon: (1)
purchase in the amount of NIS 30 million; or (2) the end of the trading day on June 30, 2024,
whichever is earlier. In accordance with the aforementioned buyback plan, the Company
purchased shares for a total amount of approximately NIS 20 million. For more details, see the
Company's report dated March 13 ,2024 (Ref.: 2024-01-021799) , 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
On January 26, 2025, the Company's shareholders' assembly approved the appointment of Mrs. Efrat
Duvdevani as an external director of the Company for an additional term of office (second term). For
further details, see the Company's immediate reports dated January 19, 2025 and January 26, 2025
(Reference Nos.: 2025-01-005311 and 2025-01-006725), which are incorporated into 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 11, 2025
_______________________________
Date
B Communications Ltd.
Name and role of signatories:
Tomer Raved, CEO
Darren Glatt, Chairman of the Board of Directors
1
CORPORATE GOVERNANCE QUESTIONNAIRE 1
BOARD OF DIRECTORS INDEPENDENCE
Correct
Incorrect
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.
√
1 Published as part of legislative proposals to improve the statements on March 16, 2014.
2
2.
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).
_____
_____
3.
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.
√
4.
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 debenture 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".
3
5.
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: _____.
√
6.
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 of Directors 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 of Directors meetings:
Identity: _____.
Position in the corporation (if any): _____.
√
4
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
Correct
Incorrect
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 -
√
7 While separating between the controlling shareholder, his relative and / or someone on his behalf.
8 A debenture company is not required to comply with this section.
5
A.
The period of time stipulated in the articles of association for the term of office of a director:
B.
The required majority set forth in the articles of association for the termination of office of the
directors:
C.
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 plan was implemented in the reporting year: Yes
No (Mark x in the appropriate box)
√
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:
√
6
B.
Number of directors who served in the corporation during the reporting year
With accounting and financial expertise9: 47.
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.
7
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.
_____
_____
11
See H.S. 2.
BOARD MEETINGS (AND CONVENING A GENERAL MEETING)
Correct
Incorrect
11.
A.
Number of board meetings held during each quarter of the reporting year:
First quarter (2024): 3
Second quarter: 1
Third quarter: 2
Fourth quarter: 1
_____
_____
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
_____
_____
8
12 Regarding the company director in this committee.
13 Regarding the company director in this committee.
14 Regarding the company director in this committee.
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
Compensation
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
93%
-
-
-
9
Ran Forer
100%
-
-
-
Stephen Joseph
93%
100%
100%
100%
Efrat Duvdevani
86%
100%
75%
100%
Efrat Makov
100%
100%
100%
100%
Ajit Pai
93%
-
-
-
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.
√
10
15 In a bond company - approval in accordance with Article 121 (d) of the Companies Law.
SEPARATION BETWEEN THE FUNCTIONS OF THE CEO AND THE CHAIRMAN OF THE BOARD
Correct
Incorrect
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: [__].
√
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).
11
16 In a debenture company - approval in accordance with Article 121 (d) of the Companies Law.
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.
Indicate the family relation between the parties: _____.
_____
_____
B.
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).
√
12
AUDIT COMMITTEE
Correct
Incorrect
18.
In the reporting year, on the Audit Committee did not serve -
_____
_____
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.
√
13
20.
The 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.
√
14
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
Correct
Incorrect
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.
_____
_____
B.
The number of days that have actually elapsed between the date of the transfer of the
recommendations to the Board of Directors and the date of the Board of Directors’ discussion:
First quarter statements (year 2024): 5 days.
Second quarter statements: 5 days.
Third quarter statements: 4 days.
_____
_____
15
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 2024): 2 days.
Second quarter statement: 3 days.
Third quarter statements: 3 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 ).
√
16
B.
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).
√
C.
The chairman of the Committee is an external director.
√
D.
All its members are directors and most of its members are independent directors.
√
E.
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.
√
F.
Committee members gave a statement prior to their appointments.
√
G.
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.
_____
_____
17
COMPENSATION 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 Compensation Committee in the
reporting year are in accordance with the Companies Regulations (Rules regarding
Compensation and Expenses for an External Director), 5769-2000.
√
30.
In the reporting year, on the Compensation 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.
√
18
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).
√
31.
The controlling shareholder or his relative were not present in the reporting year at the
meetings of the Compensation Committee unless the chairman of the Committee determined
that either of them was required to present a particular subject.
√
32.
The Compensation 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 compensation policy, despite the
opposition of the general assembly.
If your answer is "incorrect" indicate -
Type of transaction approved as stated: ______
The number of times their authority was used in the reporting year: ______
√
19
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 by the supervision procedure by the internal auditor and compliance and regulation.
(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.
20
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.
√
INTERESTED PARTY 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
√
21
(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).
√
22
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 considered, 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: ___________
- 1-
Chapter E
Report on the Effectiveness of Internal Control over
Financial Reporting and Disclosure
for the Year ended December 31, 2024
- 2-
(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, Comptroller.
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.
- 3-
Internal control includes, inter alia, controls and procedures designed to ensure that
information the disclosure of which by the Corporation is required, are 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.
- 4-
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);
2. The process of editing and closing the reports;
3. General controls of information systems (ITGC);
4. Controls over cash and debt management process;
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 concluded that the internal control over the financial reporting
and disclosure in the Corporation as of December 31, 2024 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 the
investigations (mainly regarding transactions related to the previous controlling
shareholder of the Company and Bezeq and the former chairman of the Bezeq Board of
Directors, Mr. Shaul Elovich, regarding the purchase of Yes shares and the provision of
satellite communication services to Yes), their content, materials, and the evidence in the
possession of the law authorities in this case. 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.
****
- 5-
(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 2024 (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;
- 6-
(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 11, 2025
_______________________
Tomer Raved, CEO
- 7-
(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
2024 (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 -
(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;
- 8-
(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 11, 2025
_______________________
Itzik Tadmor, Chief Financial Officer