The size of Israeli telecommunications services revenues in 2005 was approximately NIS 24 billion and telecommunications spending was approximately 4.4% of GDP, higher than in other developed economies such as the European Union and the United States.

Israel has high penetration rates across all telecommunications services that are in line with or higher than other developed economies such as the European Union and the United States. These levels of penetration can be attributed to the rapid adoption rate of new technologies, high expenditures on telecommunications services by consumers and businesses and a relatively young population.

Cellular telephone services were first introduced in Israel in 1986. For the first nine years of cellular operations there was only one operator, Pelephone, a subsidiary of Bezeq, and growth of cellular telephone services, as well as penetration rates, was limited.

The Israeli cellular market is highly penetrated. The market reached an estimated penetration rate (the ratio of cellular subscribers to the Israeli population) at September 30, 2006 of approximately 116%, representing approximately 8.2 million cellular subscribers.

The estimated penetration rate in Israel as of September 30, 2006 was 116%. Penetration rate is calculated by dividing the total number of subscribers by the Israeli population.

The Israeli population does not include foreign workers and Palestinian subscribers who are included in the number of subscribers. The number of subscribers may also include subscribers to more than one network including those in the process of switching networks. As a result, the effective penetration rate after adjustment for these factors is likely to be somewhat lower than 116%.

The Company offers its cellular subscribers a variety of calling plans, designed to adapt to their particular characteristics and changing needs. The Company adapts its calling plans for the different types of usage — personal or business — and the number of users associated with the subscriber.

The Company’s principal service is basic cellular telephony. In addition the Company offers many other services with enhancements and additional features to its basic cellular telephony service. These services include voice mail, cellular fax, call waiting, call forwarding, caller identification, conference calling, “Push-and-Talk” service, “Talk 2”, additional number service and collect call service.

The Company also offers both an outbound roaming service to its subscribers when traveling outside of Israel and an inbound roaming to visitors to Israel who can “roam” into its network.

The Company sells a wide selection of handsets designed to meet individual preferences. Prices of handsets vary based on handset features, calling plans and special promotions. The Company offers a variety of handsets from world-leading brands such as Motorola, Nokia, Samsung and Sony-Ericsson.

In addition to its cellular services, the Company provides landline telephony, transmission and data services, using its 1,300 kilometers of inland fiber-optic infrastructure and complementary microwave links.

Net income was NIS390 million for the nine months ended September 30, 2006 and NIS418 billion for the nine months ended September 30, 2005.

Operating income was NIS762 million for the nine months ended September 30, 2006 and NIS616 million for the nine months ended September 30, 2005.

Depreciation and amortization expenses were NIS667 million for the nine months ended September 30, 2006 and NIS704 million for the nine months ended September 30, 2005.