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Internet Gold Reports Fourth Quarter 2011 Financial Results

Internet Gold Fourth Quarter Consolidated Financial Results

Internet Gold's revenues for the fourth quarter totaled NIS 2,650 million (US$ 694 million), a decrease of 13.8% compared with NIS 3,074 million (US$ 805 million) reported in the fourth quarter of 2010. For both the current and the prior-year periods, Internet Gold's revenues consisted almost entirely of Bezeq’s revenues.

Internet Gold’s net loss attributable to the shareholders of the company for the fourth quarter totaled NIS 98 million (US$ 26 million), a decrease of 30% compared with NIS 140 million (US$ 37 million) reported in the fourth quarter of 2010. This net loss reflects the impact of three significant expenses:

  • Amortization of tangible and identifiable intangible assets resulting from the Bezeq acquisition: According to the rules of business combination accounting, the total purchase price of Bezeq was allocated to Bezeq’s tangible and identifiable intangible assets based on their estimated fair values as determined by an analysis performed by an independent valuation firm. BCOM is amortizing certain of the acquired identifiable intangible assets in accordance with the economic benefit expected from such assets using an accelerated method of amortization.During the fourth quarter of 2011, BCOM recorded NIS 86 million (US$ 23 million) net, in amortization expenses related to the Bezeq purchase price allocation (“Bezeq PPA”). Internet Gold has recorded its share of these amortization expenses. During 2010 and 2011 BCOM amortized approximately 38% of the total Bezeq PPA, and expects to amortize an additional 15% in 2012. BCOM Bezeq PPA amortization expense is a non-cash expense which is subject to adjustment. If, for any reason, the Company finds it necessary or appropriate to make adjustments to amounts already expensed, it may result in significant changes to future financial statements.
  • Financial expenses: Internet Gold's unconsolidated financial expenses for the fourth quarter of 2011 totaled NIS 10 million (US$ 3 million) primarily attributable to interest paid on its outstanding series of debentures. In addition Internet Gold recorded its share of BCOM's financial expenses that totaled NIS 84 million (US$ 22 million) for the period (including NIS 70 million interest paid on the long-term loans incurred to finance the Bezeq acquisition and NIS 10 million in expenses related to BCOM's debentures).
  • One-time tax adjustment related to the Bezeq PPA: During the fourth quarter of 2011, Internet Gold recognized its share of BCOM’s one-time adjustment that totaled NIS 92 million (US$ 24 million) relating to the deferred taxes that it allocated with respect to the Bezeq PPA. This adjustment was required because of changes in the Israeli tax rate enacted on December 5, 2011, including the cancellation of tax reductions that had been provided in the Economic Efficiency Law, resulting in the increase in the company tax rate in Israel to 25% beginning in 2012. Current taxes for the periods reported in these financial statements are calculated according to the tax rates specified in the Economic Efficiency Law, but deferred taxes were recalculated based on the higher future tax rate.

Internet Gold Unconsolidated Financial Results

To provide investors with transparent insight into its business, the Company has also provided its results on an unconsolidated basis. Internet Gold’s interest in BCOM's net income is presented as a single line item in the unconsolidated table below:

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