Bezeq Reports Fourth Quarter and Full Year 2008 Financial Results

Full Year 2008 net Profit Attributable to Shareholders Increased 22.3%
Year-Over-Year to a Record NIS 1.63 Billion, on Record Revenues of NIS 12.41
Billion

TEL AVIV, Israel, March 24 /PRNewswire-FirstCall/ -- Bezeq The Israel
Telecommunication Corp., Limited (TASE: BEZQ), Israel's leading
telecommunications provider, announced today its financial results for the
fourth quarter and full year 2008. Details regarding today's investor
conference call and web cast are included later in this press release.
Bezeq's Full Year 2008 Financial Highlights:

- Revenues of NIS 12.41 billion, up 0.1% compared to the prior year
period.

- Operating profit totaled NIS 2.82 billion, up 18.6% compared to the
prior year period.

- Net profit attributable to shareholders totaled NIS 1.63 billion, up
22.3% compared to the prior year period.

- Earnings per basic and diluted shares amounted to NIS 0.62 and NIS
0.61, respectively, compared to NIS 0.51 and NIS 0.50, respectively,
for the prior year period.

- EBITDA totaled NIS 4.52 billion, up 9.0% compared to the prior year
period; EBITDA margin was 36.4% compared to 33.4% in prior year period.

- Gross capital expenditures totaled NIS 1.77 billion, up 42.0%
year-over-year, primarily due to the roll-out of Pelephone's new HSPA
network.

- Free cash flow totaled NIS 1.81 billion, a decrease of only 4.0%
year-over-year, despite significantly higher levels of capital
expenditures related to Pelephone's HSPA and Bezeq's NGN network

- Dividends paid to shareholders in 2008 totaled NIS 1.51 billion
reflecting an effective full year yield of approximately 9.3%.

The Company's Board of Directors recommended the distribution of a cash
dividend to shareholders of NIS 792 million, or approximately NIS 0.30 per
share. The dividend is payable on May 24th, 2009 to shareholders of record as
of May 11th, 2009. Divisional Highlights:

- Bezeq Fixed-Line: Fixed-Line full year 2008 segment results
were highlighted by an 11.8% year-over-year increase in operating
profit to NIS 1.48 billion, and a 3.0% increase in EBITDA to NIS 2.33
billion. Full year 2008 segment EBITDA margin totaled 42.3%. ADSL lines
surpassed the one million subscriber milestone during the fourth
quarter and full year 2008 ADSL ARPU rose 4.7% to NIS 67. Improved
profitability continued to be driven by the positive impact of
streamlining and efficiency efforts that are yielding significant
benefits to the segment and the Company's key financial performance
measures. In addition, Bezeq Fixed-line is continuing to deploy its
Next Generation Network (NGN) project which will offer NGN services to
a significant number of customers by 2010.

- Pelephone: Pelephone's mobile operations delivered double-digit
full year growth in operating profit and net profit, as revenues rose
0.6% to NIS 4.71 billion. Full year 2008 segment EBITDA increased 13.5%
to a record NIS 1.46 billion, yielding an EBITDA margin of 30.9%.
Pelephone continued its market leadership in 3G subscribers with 1.15
million total 3G subscribers as of December 31, 2008, and over 1.25
million currently, including 100,000 subscribers on its new HSPA
network, successfully launched in January 2009. The HSPA network is
central to Pelephone's commitment to access higher value segments of
the mobile communications market.

- Bezeq International: Full year operating profit, net profit and
EBITDA all posted double-digit year-over-year percentage performance
gains. Full year revenues totaled NIS 1.31 billion driven by higher
sales of core services including broadband Internet, outgoing
international calls, as well as the continued strength in demand for
enterprise integration solutions. Bezeq International's full year 2008
free cash flow improved to a positive NIS 55.6 million compared to a
negative NIS 6.9 million for the full year 2007. Bezeq International
is the market leader in both of its core businesses, Internet services
and International direct dialing (IDD).

- yes: Multi-channel pay-TV full year revenue increased 6.9%
year-over-year to a record NIS 1.51 billion, driven by a 5.1%
improvement in ARPU to NIS 228 and a 2.0% increase in subscribers to
560,000. Full year 2008 EBITDA totaled a record NIS 427 million, up
29.8% year-over-year, reflecting an EBITDA margin of 28.2%; and full
year 2008 free cash flow increased to NIS 109 million as compared to
a negative NIS 5 million in the full year 2007.

Shlomo Rodav, Chairman of the Board of Bezeq, stated, "Bezeq's excellent
performance across all key financial metrics in the full year 2008 reflects
the balance provided by Bezeq's strategic market position as Israel's leading
communications solutions provider to consumer and business customers. This
included record revenues, as well as healthy year-over-year growth in Bezeq's
operating profit, net profit and EBITDA profitability measures, all of which
turned in record levels for 2008.
"Our ability to deliver the most comprehensive portfolio of
communications offerings was clear as Bezeq extended its market leadership in
key growth areas across our business segments. In order to enhance our
position in the cellular market, in January 2009 Pelephone successfully
launched its new HSPA cellular network with full nationwide coverage, and
already has 100,000 customers on its new network. The new HSPA network
provides a stronger competitive offering for upgrading the existing customer
base and acquiring new consumer as well as business customers while providing
new value added mobile services revenues streams, multi-language support and
roaming coverage in over 200 countries around the world. We are also
continuing with the modular deployment of the Company's Next Generation
Network (NGN) which is expected to serve a significant number of customers in
2010. Overall, we continue to work within the current, and evolving,
regulatory environment to deliver our customers high value, cost effective
solutions to meet their diverse personal and business needs.
"Our strategic and financial achievements in 2008 supported our ability
to continue to return value to our shareholders in the form of cash
dividends. With NIS 1.51 billion in dividends paid to shareholders in 2008,
and our announcement today of the Board of Directors' recommendation of a NIS
792 million cash dividend, we are continuing to deliver shareholder value
within a challenging global economic environment, which stands as a testament
to the strength of our business," concluded Mr. Rodav.
Alan Gelman, Chief Financial Officer and Deputy CEO of Bezeq, commented,
"Bezeq's impressive 22.3% increase in full year 2008 net profit attributed to
Bezeq shareholders reflects improved profitability across all our business
segments as well as the success of our efficiency measures. Stable revenues
and our success on the cost efficiency front was clear as Bezeq's full year
2008 operating and general expenses declined 6.9% year-over-year to NIS 5.44
billion primarily as a result of a decline in expenses across all of our
principal business segments.
"It is important to note that during the fourth quarter of 2008 the
Company recorded a previously announced charge of NIS 177 million associated
with the early retirement of 245 Bezeq Fixed-Line employees. This provision,
which had the effect of lowering the Company's net profit in the fourth
quarter and full year 2008 periods, covers Fixed-Line headcount reductions
planned for 2009, under the second phase of our current labor agreement.
"Bezeq's financial performance in 2008 is even more impressive when
taking into account the substantial capital investments Bezeq made during
2008 in terms of the advanced development of communications infrastructures,
including establishing Pelephone's new HSPA mobile network," concluded Mr.
Gelman.
Bezeq Consolidated Results

Bezeq (Consolidated) 2008* 2007* Change Q4 2008* Q4 2007* Change
(NIS millions) (NIS millions)

Revenues 12,407 12,400 0.1% 3,062 3,119 -1.8%
Operating profit 2,817 2,376 18.6% 531 552 -3.8%
EBITDA 4,520 4,145 9.0% 960 999 -3.9%
EBITDA margin 36.4% 33.4% 31.4% 32.0%
Net profit attributable to
shareholders of the
company 1,627 1,330 22.3% 298 315 -5.4%
Diluted EPS (NIS) 0.61 0.50 22.0% 0.12 0.12 0.0%
Cash flow from operating
activities 3,415 2,947 15.9% 826 674 22.6%
Capex, net 1,622 1,069 51.7% 376 356 5.6%
Free cash flow 1,806 1,881 -4.0% 451 318 41.8%
Net debt/EBITDA (end of
period) 1.16 1.25
Net debt/shareholders'
equity (end of period) 1.11 1.14

* In Q4-08 a provision for early retirement in the net amount of NIS
165 million was made in relation to the December 2006 labor
agreement. In Q4-07 a provision in the net amount of NIS 51 million
was recorded in relation to the same labor agreement.

Bezeq's revenues for the full year 2008 were a record NIS 12.41 billion,
up 0.1% from NIS 12.40 billion reported for the full year 2007. Revenue
growth within the Pelephone cellular and yes multi-channel television
segments offset an anticipated decrease in the domestic fixed-line
communications segment, while continued growth in high speed Internet and
data communications services in this segment mitigated the expected decline
in revenue associated with fixed-line telephony. Bezeq's revenues for the
fourth quarter of 2008 were NIS 3.06 billion, down 1.8% from NIS 3.12 billion
reported for the fourth quarter of 2007, primarily related to the reduction
in voice revenues due to the timing of the Jewish holidays, lower cellular
airtime collected by Bezeq Fixed-Line and paid to the cellular companies as
well as increased competition in the fixed-line segment.
Operating profit for the Company increased 18.6% in 2008 to NIS 2.82
billion, up from NIS 2.38 billion in the full year 2007, driven primarily as
a result of ongoing cost reduction activities, lower cellular subscriber
acquisition cost, and streamlining initiatives in our major operating
segments. Fourth quarter 2008 operating profit for the Company decreased 3.8%
year-over-year to NIS 531 million, compared to NIS 552 million in the year
ago period.
Net profit attributed to Bezeq shareholders for the full year 2008
amounted to NIS 1.63 billion, up 22.3% from a net profit of NIS 1.33 billion
for the full year 2007. Net profit attributed to Bezeq shareholders for the
fourth quarter of 2008 amounted to NIS 298 million, down 5.4% compared to a
net profit of NIS 315 million reported in the fourth quarter of 2007.
The Company's earnings before interest, taxes, depreciation and
amortization (EBITDA) for the full year 2008 totaled a record NIS 4.52
billion (36.4% EBITDA margin), up 9.0% as compared to the full year 2007 of
NIS 4.15 billion (33.4% EBITDA margin). Fourth quarter 2008 EBITDA for the
Company totaled NIS 960 million (31.4% EBITDA margin), a decline of 3.9%
compared with the fourth quarter of 2007 (32.0% EBITDA margin).
Fourth quarter 2008 operating profit, net profit and EBITDA were all
influenced by the higher provision for early retirement recorded in the
fourth quarter of 2008 as compared to the fourth quarter of 2007.
Net capital expenditures for the full year 2008 amounted to NIS 1.62
billion, an increase of 51.7%, primarily related to the deployment of
Pelephone's HSPA network, as compared to the NIS 1.07 billion in the full
year 2007.
Free cash flow for the Company totaled NIS 1.81 billion for the full year
2008, a decrease of 4.0% compared to the prior year period, mainly as a
result of the anticipated increase in net capital expenditures. Free cash
flow for the fourth quarter of 2008 totaled NIS 451 million, an increase of
41.8% compared to the fourth quarter of 2007. The increase in free cash flow
was primarily the result of significantly higher cash flows from operations,
which were partially offset by the increase in net capital expenditures. The
increase in operating cash flow was mainly driven by working capital
improvements.
As of December 31, 2008, the Company's net financial debt was NIS 5.23
billion, compared with NIS 5.18 billion as of December 31, 2007.
Bezeq Fixed-Line Results

Bezeq Fixed-Line 2008* 2007* Change Q4 2008* Q4 2007* Change
(NIS millions) (NIS millions)

Revenues 5,498 5,713 -3.8% 1,348 1,453 -7.2%
Operating profit 1,475 1,319 11.8% 257 380 -32.4%
EBITDA 2,327 2,260 3.0% 466 612 -23.9%
EBITDA margin 42.3% 39.6% 34.6% 42.1%
Capex, net 499 351 42.2% 150 118 27.1%
Number of active
subscriber lines at end
of period (thousands) 2,615 2,761 -5.3% 2,615 2,761 -5.3%
Average monthly revenue
per line (NIS) ** 83 87 -4.6% 82 86 -4.7%
Number of outgoing usage
minutes (millions) 13,439 14,869 -9.6% 3,154 3,653 -13.7%
Number of incoming usage
minutes (millions) *** 6,691 6,411 4.4% 1,648 1,661 -0.8%
Number of ADSL
subscribers at end of
period (thousands) 1,005 963 4.4% 1,005 963 4.4%
Average monthly revenue
per ADSL subscriber (NIS) 67 64 4.7% 67 69 -2.9%

* In Q4-08 a provision for early retirement in the net amount of NIS
165 million was made in relation to the December 2006 labor
agreement. In Q4-07 a provision in the net amount of NIS 51 million
was recorded in relation to the same labor agreement.

** Not including revenues from data communications and transmission
services, internet sevices, services to communications providers,
and contract and other work.

*** The increase in incoming minutes compared to the corresponding
period in 2007 stems from an increase in traffic minutes from
domestic carriers in competition with Bezeq.

Like most other regulated incumbents in the world, Bezeq Fixed-Line faces
declining market share and revenues from traditional telephony. Against this
background, 2008 results highlight Fixed-Line's successful focus on
controlling the decrease in voice revenues, increasing other revenue sources,
reducing operating costs, and progressing with the NGN infrastructure
deployment, which enhances Bezeq's technological preparedness to compete in
increasingly converged communications markets, and its ability to improve
profitability in the future.
While full year 2008 revenues posted a modest 3.8% decline
year-over-year, the Fixed-Line posted significant improvements in operating
profit and EBITDA. In 2008, operating costs declined by NIS 371 million (and
by NIS 282 million when excluding depreciation and amortization), mainly
driven by 11.7% and 7.0% reductions in operating and general expenses and in
salaries, respectively, as compared to 2007.
When adjusted for revenues from cellular airtime collected by Bezeq
Fixed-Line and paid to the cellular companies, Fixed-Line's revenues reached
NIS 4.6 billion and declined only 1.7% as compared with 2007. This continues
to demonstrate the fixed-line business' ability to compensate for the decline
in legacy telephony revenues through growing advanced services and solutions
offered to the consumer and business markets.
In the fourth quarter of 2008, revenue from fixed-line domestic
communications declined 7.2% to NIS 1.35 billion compared to NIS 1.45 billion
in the fourth quarter of 2007. The decrease in Fixed-Line revenue was
primarily related to a decrease in interconnect fees to the cellular networks
and a decrease in the number of telephony access lines, as well as a
reduction in call traffic stemming mainly from the timing of the Jewish New
Year holidays. Revenues adjusted for cellular airtime collected by the
fixed-line business and paid to the cellular companies declined 4.6% and
totaled NIS 1.14 billion in the fourth quarter of 2008. The decrease in
revenue was moderated mainly by higher levels of revenues generated from
subscriber growth in high-speed Internet access services (ADSL) caused by an
increase in subscriber numbers and in sales of home networks.
The number of customers subscribing to Bezeq's high-speed Internet
service (ADSL) rose 4.4% year-over-year to over 1 million subscribers as of
December 31, 2008. Bezeq continued to upgrade its ADSL subscriber base, with
41% of its customers enjoying bandwidths of at least 2.5 MB, as compared to
22% in the prior year period.
The growth in Bezeq's ADSL customer base helped offset a 5.3% decline in
total telephony access lines during the same period which totaled 2.62
million as of December 31, 2008. The pace of decline in telephony access
lines slowed for the second consecutive quarter to just 30,000 lines during
the fourth quarter of 2008, down from a quarterly average of 39,000 lines
lost during the first nine months of 2008.
ADSL ARPU increased 4.7% to NIS 67 in 2008 as compared to NIS 64 in 2007.
Fixed-line telephony ARPL declined 4.6% in 2008 to NIS 83 as compared to NIS
87 in 2007.
The Fixed-Line segment posted full year 2008 EBITDA of NIS 2.33 billion
(42.3% EBITDA margin), up 3.0% from EBITDA of NIS 2.26 billion (39.6% EBITDA
margin) in the full year 2007 period. Fourth quarter 2008 Fixed-Line segment
EBITDA totaled NIS 466 million (34.6% EBITDA margin), down 23.9% compared to
EBITDA of NIS 612 million (42.1% EBITDA margin) in the fourth quarter of
2007. This decline resulted primarily from the higher provision for early
retirement recorded in the fourth quarter of 2008 as compared to the fourth
quarter of 2007.
During the fourth quarter of 2008 the fixed-line business continued its
phased development of its Next Generation Network (NGN) project. The NGN will
provide broadband download speeds of up to 50 MB and innovative value-added
services, and will allow for a more efficient operating structure.
Pelephone Results

Pelephone 2008 2007 Change Q4 2008 Q4 2007 Change
(NIS millions) (NIS millions)

Revenues 4,713 4,684 0.6% 1,138 1,182 -3.7%
Operating profit 933 805 15.9% 159 133 19.5%
EBITDA 1,456 1,283 13.5% 294 258 14.0%
EBITDA margin 30.9% 27.4% 25.8% 21.8%
Net profit 682 585 16.6% 128 104 23.1%
Cash flows from operating
activities 1,277 1,228 4.0% 298 245 21.6%
Capex, net 795 376 111.4% 162 117 38.5%
Free cash flow 482 852 -43.4% 136 128 6.3%
Number of subscribers at
end of period (millions) 2.649 2.622 1.0% 2.649 2.622 1.0%
Average revenue per user
(ARPU, NIS) 126 131 -3.8% 122 130 -6.2%
Average monthly minutes of
use per subscriber (MOU) 352 354 -0.6% 335 358 -6.4%

Pelephone generated double-digit percentage improvements in full year and
fourth quarter 2008 operating profit, net profit and EBITDA performance,
driven primarily by increased margins on handset sales.
Pelephone's active subscribers totaled 2.65 million as of December 31,
2008, an increase of 1.0% year-over-year. As of December 31, 2008 Pelephone
amended its policy for determining active subscribers. As a result,
subscribers that only receive SMS would not be included in the active
subscriber base. This resulted in a one-time removal of 92,000 subscribers
from the subscriber base as of year-end.
Pelephone remains the market leader in Israeli 3G subscribers with a
record 1.15 million 3G subscribers as of December 31, 2008, representing
43.5% of all Pelephone subscribers. Currently, Pelephone has over 1.25
million 3G subscribers, of which 100,000 on its new HSPA network launched in
January. Revenues from data, value added and content services constituted
16.3% of Pelephone segment revenues for the full year 2008 and a record 18.4%
of revenues in the fourth quarter of 2008, compared to 12.7% in the full year
2007 and 13.6% in the fourth quarter of 2007.
Pelephone's revenues for the full year 2008 were a record NIS 4.71
billion, rising 0.6% from revenues of NIS 4.68 billion for the full year
2007. Revenues were driven by an increase in the number of subscribers and
data services, which were partially offset by an erosion of tariffs for
outgoing calls, and a decrease in interconnect fees. In the fourth quarter of
2008, revenues totaled NIS 1.14 billion, a 3.7% decline from revenues of NIS
1.18 billion in the prior year period, mainly as a result of lower sales of
CDMA handsets in advance of the January, 2009 HSPA network launch.
2008 net profit for Pelephone totaled NIS 682 million, an increase of
16.6% compared to NIS 585 million in the full year 2007. Fourth quarter 2008
net profit totaled NIS 128 million, an increase of 23.1% from the NIS 104
million in the fourth quarter of 2007. Net profit benefited from lower
handset costs related to the weaker dollar as well as lower marketing
expenses before the launch of the HSPA network.
Pelephone posted full year 2008 EBITDA of NIS 1.46 billion (30.9% EBITDA
margin), an increase of 13.5% compared to NIS 1.28 billion (27.4% EBITDA
margin) for the full year 2007. For the fourth quarter of 2008 Pelephone
posted EBITDA of NIS 294 million (25.8% EBITDA margin), up 14.0% compared to
NIS 258 million (21.8% EBITDA margin) in the fourth quarter of 2007.
During the fourth quarter of 2008 Pelephone completed a significant
portion of the development and deployment activities for its new HSPA network
infrastructure which was successfully launched as scheduled in January of
2009. During 2008, Pelephone invested NIS 616 million relating to the rollout
of this network. The HSPA network initiative is central to Pelephone's
commitment to access higher value segments of the mobile communications
market.
Bezeq International Results

Bezeq International 2008 2007 Change Q4 2008 Q4 2007 Change
(NIS millions) (NIS millions)

Revenues 1,306 1,304 0.2% 337 334 0.9%
Operating profit 242 204 18.6% 65 45 44.4%
EBITDA 322 291 10.7% 85 66 28.8%
EBITDA margin 24.7% 22.3% 25.2% 19.8%
Net profit 178 153 16.3% 46 38 21.1%
Cash flows from operating
activities 163 93 75.3% 72 30 140.0%
Capex, net 117 100 17.0% 25 34 -26.5%
Free cash flow 56 (7) n.m. 47 (4) n.m.

Bezeq International, Israel's leading supplier of Internet services and
direct-dial international calls, posted 2008 revenues of NIS 1.31 billion, up
0.2% compared to NIS 1.30 billion in 2007. Revenues were driven by increased
sales of higher margin services such as outbound international calls,
following an increase in the number of outbound minutes, as well as an
increase in revenues in the Internet sector caused by an increase in the
number of broadband customers as well as an increase in integration
operations and communications solutions for corporate customers. Gains in
these areas were partially offset by a decline in lower margin revenues from
call transfer activity between international communications providers
(hubbing) and lower PBX sales activity. Fourth quarter 2008 revenues totaled
NIS 337 million, up 0.9% from revenue of NIS 334 million in the fourth
quarter 2007.
Bezeq International generated a net profit of NIS 178 million in 2008, an
increase of 16.3% compared to a net profit of NIS 153 million in 2007. Fourth
quarter 2008 net profit totaled NIS 46 million, an increase of 21.1% compared
to NIS 38 million in the fourth quarter of 2007. The increase in
profitability came as a result of growth in core business areas, combined
with a decrease in general and operating expenses.
Bezeq International posted 2008 EBITDA of NIS 322 million (24.7% EBITDA
margin), an increase of 10.7% compared to EBITDA of NIS 291 million (22.3%
EBITDA margin) for 2007. EBITDA for the fourth quarter of 2008 totaled NIS 85
million (25.2% EBITDA margin), up 28.8% compared to NIS 66 million (19.8%
EBITDA margin) in the fourth quarter of 2007.
Bezeq International operating and free cash flow reflected significant
improvements year-over-year based on the positive impact of working capital
changes.

yes Results

yes 2008 2007 Change Q4 2008 Q4 2007 Change
(NIS millions) (NIS millions)

Revenues 1,513 1,415 6.9% 377 347 8.6%
Operating profit 177 56 216.1% 56 4 1300.0%
EBITDA 427 329 29.8% 122 74 64.9%
EBITDA margin 28.2% 23.3% 32.4% 21.3%
Net profit (265) (118) 124.6% (18) (75) -76.0%
Cash flows from operating
activities 347 250 38.8% 134 76 76.3%
Capex, net * 238 255 -6.7% 63 81 -22.2%
Free cash flow 109 (5) n.m. 71 (5) n.m.
Number of subscribers (end
of period, in thousands) 560 549 2.0% 560 549 2.0%
Average revenue per user
(ARPU, NIS) 228 217 5.1% 225 212 6.1%

* Including subscriber acquisition costs

Revenue from the yes multi-channel pay-TV segment for 2008 increased 6.9%
to NIS 1.51 billion in 2008. yes' revenue for the fourth quarter of 2008
increased 8.6% to a record NIS 377 million. The full year rise in revenue was
primarily related to a 2.0% net increase in subscribers as well as a 5.1%
increase in the average revenue per user (ARPU) to NIS 228 for the full year
period.
Net loss increased to NIS 265 million in 2008 versus a net loss of NIS
118 million in the year ago period. Net loss for the full year 2007 period
benefited from a NIS 213 million favorable, one-time impact related to
non-cash financing expenses resulting from the revaluation of shareholder
loans. Net loss in the fourth quarter of 2008 totaled just NIS 18 million
compared to a net loss of NIS 75 million in the fourth quarter of 2007.
Excluding the expenses derived from shareholder financing, yes was
essentially breakeven in the fourth quarter of 2008.
yes posted EBITDA of NIS 427 million (28.2% EBITDA margin) for 2008, an
increase of 29.8% over EBITDA of NIS 329 million (23.3% EBITDA margin) for
2007. yes' EBITDA for the fourth quarter of 2008 increased 64.9% to a record
NIS 122 million (32.4% EBITDA margin) as compared to EBITDA of NIS 74 million
(21.3% EBITDA margin) for the fourth quarter of 2007, which was negatively
influenced by a temporary disruption of broadcasting services.
yes grew its customer base by 2.0% in 2008 with 560,000 subscribers as of
December 31, 2008, up 10,400 subscribers from the year ago period and up from
556,000 as of September 30, 2008.
Outlook
As the challenges facing the global economic environment have translated
into a slowdown in the Israeli economy, Bezeq is monitoring the potential
impacts on its business on an ongoing basis. Despite this challenging
economic backdrop, in 2009 we aim to maintain EBITDA, operating cash flows
and gross capital expenditures close to those of full year 2008 performance
levels. This forecast is underpinned by the strength of Bezeq's comprehensive
consumer and business communications offerings, a strict focus on improving
operating efficiencies and strong operating cash flows.
With specific regards to gross capital expenditures, 2009 will reflect
continuing investment in Pelephone's HSPA network investment, which was
successfully launched with national coverage at the end of January 2009, and
the modular deployment of Bezeq's Next Generation Network (NGN), expanding
its coverage to reach a meaningful part of Israeli households during 2010.
Conference Call & Web Cast Information
Bezeq will conduct a conference call hosted by Mr. Shlomo Rodav, Bezeq
Chairman and Mr. Alan Gelman, Bezeq Chief Financial Officer and Deputy CEO,
on Tuesday, March 24, 2009, at 4:00 PM Israel Time / 10:00 AM Eastern Time.
Participants are invited to join the live conference call by dialing:
International Phone Number: + 972-3-918-0609

Israel Phone Number: 03-918-0609

A live webcast of the conference call will be available on the investor
relations section of the Bezeq corporate website at www.bezeq.co.il. Please
visit the website at least 15 minutes early to register for the webcast and
download any necessary audio software.
A webcast replay will be made available on the investor relations section
of the Bezeq corporate website. An automated telephone replay will also be
available approximately three hours after the completion of the live call
through Tuesday, March 31, 2009. Participants are invited to listen to the
conference call replay by dialing:
International Phone Number: + 972-3-925-5928

Israel Phone Number: 03-925-5928

About Bezeq The Israel Telecommunication Corp.
Bezeq is Israel's leading telecommunications service provider.
Established in 1984, the Company has led Israel into the new era of
communications, based on the most advanced technologies and services. Bezeq
and its subsidiaries offer the full range of communications services
including domestic, international and cellular phone services; Internet,
ADSL, and other data communications; satellite based multi-channel TV; and
corporate networks.
For more information about Bezeq please visit the corporate website at
http://www.bezeq.co.il.
This press release contains general data and information as well as
forward looking statements about Bezeq. Such statements include expressions
of management's expectations about new and existing programs, opportunities,
technology and market conditions. Although Bezeq believes its expectations
are based on reasonable assumptions, these statements are subject to numerous
risks and uncertainties. These statements should not be regarded as a
representation that anticipated events will occur or that expected objectives
will be achieved. These forward-looking statements are made only as of the
date hereof and the company assumes no obligation to update any
forward-looking statement In addition, the realization and/or otherwise of
the forward-looking information will be affected by factors that cannot be
assessed in advance, and which are not within the control of the Corporation,
including the risk factors that are characteristic of its operations, and
developments in the general environment, and external factors and the
regulation that affects the Corporation's operations.
"Bezeq" The Israel Telecommunication Corp., Limited
Consolidated Income Statements For The Year Ended December 31

2008 2007 2006
NIS NIS NIS
millions millions millions

Revenue 12,407 12,400 12,232

Costs and expenses
Depreciation and amortisation 1,703 1,769 1,864
Salary 2,354 2,375 2,586
Operating and general expenses 5,437 5,841 5,967
Other operating expenses, net 96 39* 231*

9,590 10,024 10,648

Operating income 2,817 2,376 1,584

Financing expenses
Financing expenses 747 836* 713*
Financing income (166) (487) (356)

Financing expenses, net 581 349 357

Profit after financing expenses, net 2,236 2,027 1,227

Equity in profits of associates
accounted by the equity method 5 6 11

Profit before income tax 2,241 2,033 1,238

Income tax 720 672 488

Profit for the year 1,521 1,361 750

Attributable to:
The shareholders of the Company 1,627 1,330 809
Non-controlling interest (106) 31 (59)

Profit for the year 1,521 1,361 750

Earnings per share

Basic earnings per share (in NIS) 0.62 0.51 0.31

Diluted earnings per share (in NIS) 0.61 0.50 0.31

* Reclassified

"Bezeq" The Israel Telecommunication Corp., Limited
Consolidated Balance Sheets at December 31

2008 2007
NIS millions NIS millions

Assets

Cash and cash equivalents 786 1,203
Investments, including derivatives 33 389
Trade receivables 2,373 2,403
Other receivables 211 247
Inventory 158 203
Current tax assets - 11
Assets classified as held for sale 34 17

Total current assets 3,595 4,473

Trade receivables 576 535
Investments, including derivatives 187 233
Broadcasting rights, net of rights exercised 253 243
Property, plant and equipment 6,036 6,064
Intangible assets 2,674 2,526
Deferred and other expenses 411 367
Investments in associates accounted by the
equity method 32 37
Deferred tax assets 547 678

Total non-current assets 10,716 10,683

Total assets 14,311 15,156

"Bezeq" The Israel Telecommunication Corp., Limited
Consolidated Balance Sheets at December 31 (continued)

2008 2007
NIS millions NIS millions

Liabilities
Debentures, loans and borrowings 1,780 1,913
Trade payables 1,381 1,533
Other payables, including derivatives 850 745
Current tax liabilities 45 57
Deferred income 62 47
Provisions 355 392
Employee benefits 401 705

Total current liabilities 4,874 5,392

Debentures 3,943 4,420
Obligations to banks 214 307
Loans from institutions 109 105*
Loans provided by non-controlling interest
in a subsidiary 449 375
Employee benefits 265 261
Deferred income and others 76 67*
Provisions 64 57
Deferred tax liabilities 65 -

Total non-current liabilities 5,185 5,592

Total liabilities 10,059 10,984

Equity
Share capital 6,132 6,132
Reserves 748 681
Deficit balance (2,157) (2,268)

Total equity attributable to shareholders of
the Company 4,723 4,545

Non-controlling interest (471) (373)

Total equity 4,252 4,172

Total equity and liabilities 14,311 15,156

* Reclassified

"Bezeq" The Israel Telecommunication Corp., Limited
Consolidated Statements of Cash Flows For The Year Ended
December 31

2008 2007 2006
NIS NIS NIS
millions millions millions

Cash flows from operating activities
Net profit for the year 1,521 1,361 750
Adjustments:
Depreciation 1,394 1,482 1,591
Amortization of intangible assets 289 270 248
Amortization of deferred and other
charges 20 17 25
Loss (gain) from decrease in holdings
in associates accounted by the equity
method - 1 (1)
Share in profits of associates
accounted by the equity method (5) (6) (11)
Financing costs, net 561 372 512
Capital gain, net (68) (88) (159)
Share-based payment transactions 75 - 287
Payments to a former senior officer - 6 -
Income tax expenses 720 672 488
Payment for settlement of derivative
financial instruments, net (38) (9) (27)

Change in inventory 42 (6) 23
Change in trade receivables (10) (437) 109
Change in other receivables (44) 4 (108)
Change in other payables 15 (18) (14)
Change in trade payables (225) 36 (79)
Change in provisions (34) 105 27
Change in broadcasting rights net of
rights utilized (11) (74) (15)
Change in employee benefits (302) (300) 169
Change in deferred income and others 50 (11) 1

Income tax paid (535) (430) (277)

Net cash from operating activities 3,415 2,947* 3,539*

Cash flows from investment activities
Investment in intangible assets and in
deferred expenses (469) (273) (210)
Proceeds from sale of property, plant
and equipment and deferred expenses 147 177 48
Realization of current investments,
net 321 647 1,491
Purchase of property, plant and
equipment (1,300) (973) (953)
Proceeds from realization of
investments and long-term loans 19 66 63
Purchase of investments and long-term
loans (8) (8) (20)
Dividend received 13 3* 26*
Interest received 64 116* 220*

Net cash from (used for) investment
activities (1,213) (245) 665

* Reclassified

"Bezeq" The Israel Telecommunication Corp., Limited
Consolidated Statements of Cash Flows For The Year Ended
December 31 (cont'd)

2008 2007 2006
NIS NIS NIS
millions millions millions

Cash flows from financing activities
Issuance of debentures - 1,814 -
Receipt of loans from institutions - 50 50
Repayment of debentures (714) (1,927) (280)
Repayment of loans (148) (840) (1,269)
Short-term borrowing, net (50) (37) 43
Dividend paid (1,514) (2,860) (1,600)
Interest paid (243) (389) (602)
Receipt (payment) for settlement of
derivative financial instruments, net 52 77 (76)
Transfer of funds by non-controlling
interest less dividend distributed,
net 8 - -

Net cash used for financing activities (2,609) (4,112) (3,734)

Increase (decrease), net, in cash and
cash equivalents (407) (1,410) 470
Cash and cash equivalents at January 1 1,203 2,632 2,159
Effect of fluctuations in the rate of
exchange on cash balances (10) (19) 3

Cash and cash equivalents at the end
of the period 786 1,203 2,632

Investor Relations Contact:
Mr. Naftali Sternlicht
Bezeq
Phone: +972-2-539-5441
Email: ir@bezeq.co.il

Media Relations Contact:
Mr. Guy Hadass
Bezeq
Phone: +972-3-626-2600
Email: dover@bezeq.co.il

SOURCE Bezeq

Investor Relations Contact: Mr. Naftali Sternlicht, Bezeq, Phone:
+972-2-539-5441, Email: ir@bezeq.co.il, Media Relations Contact: Mr. Guy
Hadass, Bezeq, Phone: +972-3-626-2600, Email: dover@bezeq.co.il