January 15, 2014

Immediate Report Regulation of Wholesale Services

1. On January 15, 2014, Bezeq - The Israel Telecommunication Corp., Ltd., "the Company", received the Ministry of Communications decision pertaining to the list of services, which the owners of infrastructures (thus including the Company) shall be obliged to offer as wholesale services to service providers. The list of services includes Bitstream Access on a nationwide, regional or local connectivity level; Sub- loop unbundling (at this stage - only in the Company's network and not in Hot Telecom's network); lease of dark fiber over the entire network; lease of Virtual dark fiber in the core network; access to the physical infrastructure of cables, sub-cables, manholes, boxes and posts over the entire network; as well as wholesale telephony service.
2. In addition, the Company received a document, under which the Minister of Communications announced its intention to determine, subject to a hearing, the framework for providing the wholesale services, as well as the maximum fees for providing the wholesale services in the Company's network, as shall be specified hereinafter:
2.1 The framework for the provision of the wholesale services shall be determined, as shall be required, under the service files that the Ministry shall determine in the licenses of infrastructure owners. Currently, the Ministry wishes to determine the service file as a service that provides managed broadband access (Bitstream Access) on a nationwide, local and regional level.
2.2 To amend the licenses of infrastructure owners (the Company and Hot Telecom) so that the definition of 'Infrastructure Service' shall include the wholesale services in their entirety.
2.3 To prescribe maximum prices under the regulations for the services, as shall be specified hereinafter (the prices for the year 2014 are stated in 2012 prices and they shall be linked to the consumer price index. Prices of data communication traffic significantly decrease over time, until 2018) (prices do not include VAT):
Accessibility (the subscriber's connection to the network until a first socket at the subscriber's residence) - NIS 28.40 per month
Data communication traffic in the network core at a P1 service level (Megabits per second
"Mbps" at peak hours) - NIS 57.10 per month
Data communication traffic in the network core at a P5 service level (Megabits per second
"Mbps" at peak hours) - NIS 64.80 per month
Voice telephony call - NIS 0.01 per minute

Dark fiber - NIS 18 per kilometer "Km" per month
Access to cables - NIS 695 per kilometer "Km" per month
Access to sub-cables - NIS 116 per kilometer "Km" per month
Technician visits (installation or fixing malfunctions at the customer's premises) -

NIS 158 per visit

The Company was requested to submit its stance regarding the hearing no later than
February 16, 2014.
The Company is reviewing the documents, which include various details that require a complex analysis of the overall effect on the Company due to the proposed regulation. At this stage, prima facie, the Company estimates that insofar as the regulation of the wholesale services shall be implemented, as above specified, the Company's results are expected to be adversely affected.
Nevertheless, alongside the aforementioned effect, the Company estimates that considering the possibility of the removal of the structural separation and the removal of the supervision over the Company's tariffs, which are expected to occur as a result of the regulation of the wholesale market, the Company may be positively affected as a consequence thereof.

The above information constitutes a translation of the Immediate Report published by the Company. The Hebrew version was submitted by the Company to the relevant authorities pursuant to Israeli law, and represents the binding version and the only one having legal effect. This translation was prepared for convenience purposes only.

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