012 Smile.Communications NASDAQ GM / TASE-100: SMLC

September 2008

Stella Handler, CEODoron Ilan, CFO

Forward-Looking Statement

2

This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are statements that are not historical facts and may include financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future operations and services, and statements regarding future performance. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. Those factors include the factors indicated in our filings with the Securities and Exchange Commission (SEC). We undertake no obligation to update forward-looking statements to reflect subsequent occurring events or circumstances, or to changes in our expectations, except as may be required by law.

Note: Translation of NIS amounts into US Dollars are made solely for the convenienceof the reader at the exchange rate of September 30, 2008 - NIS 3.421 =1$

13.11.2008 9:46SMLC investors Dec 2007 V01.ppt 3

Introducing 012 Smile

Introducing 012 Smile

4

• Internet broadband access• Data services (IPL, MPLS, IPVPN, etc.)• Voice over broadband (VoB)• Co-location and hosting centers• Hot-spot and Wi-Fi solutions• Value-added services

Broadband services

Traditional voice

• ILD services• Roaming & Signaling• Calling card services• Carrier services

Customer segments

• Residential• Business (Enterprise, SMB, SoHo)• Carrier

A leading growth-oriented communications services provider in Israel

Introducing 012 Smile

5

CAGR: +12.7%

• Revenues: NIS 1,103 million ($322 million) • EBITDA: NIS 237 million ($69 million)

• 33% of Israel’s broadband Internet access market• 33% of Israel’s international telephony market2

• Approx one million registered residential customers • Approx 100,000 registered business customers

• Dec ‘06: Acquired 012 Golden Lines • Oct-Nov ’07: IPO on NASDAQ and dual listing on TASE• Feb ’07: 1st to receive commercial VoB license • Mar ’07: 1st to be granted license for WiMAX trial • Jan ’08: Launched mobile WiMAX trial

Key Financials 1(2007)

Market Share

Customers

Major Developments

Revenue Growth

A leading growth-oriented communications services provider in Israel

8 6 9

1 0 3 91 1 0 3

2 0 0 5 2 0 0 6 2 0 0 7

NIS

(mill

ion

s)

1 1

1 Pro forma for the acquisition of 012 Golden Lines. Currency conversion based on the exchange rate of NIS 3.421 = USD 1.2 Based on the number of incoming and outgoing minutes in Israel, as of December 31, 2007.

Experienced Management Team

6

Stella HandlerChief Executive OfficerCEO of 012 Smile

since January 2007

Previously CEO of 012 Golden Lines

Shaul ElovitchChairman of the Board Co-founder andChairman of Internet Gold

Doron IlanChief Financial OfficerCFO of 012 Smile

since January 2007 Previously CFO of 012 Golden Lines

Succeeded in maintaining efficient operations while carrying out complex merger

Strong Israeli Economy Offers Opportunity

7

Population Growth (2006 – 2010 CAGR)

Population Growth 1

Real GDP Growth (2006 – 2010 CAGR)

Real GDP Growth 1

Telecom Spending as % of GDP (2005)

1.5%

0.9%

0.3%

Israel USA EU-15

4.7%

2.6% 2.4%

Israel USA EU-15

4.2%2.9% 2.9%

Israel USA EU-15

Telecom Spending 2

1 Source: Global Insight, Inc: Global Economic Data Report.2 Source: Global Insight, Inc: Global Economic Data Report; and Israel Ministry of Communications, November 2006 Report.

Telecommunication Market

8

Total Market - 2007 – NIS 28.1B

International Services, 6% Multi-Channel

TV, 12%

Cellular Services, 55%

Internet, 9%

Fixed Services, 16%

NTP, 2%

Competitive Environment

9

Local Telephony

Broadband

International

Channel TV

Cellular/Mobile(1)

(2)

• Our market is dominated by 3 controlling groups

012 Smile is a cornerstone of Eurocom’s communications strategy

1 Eurocom Group is a co-founder and minority shareholder of Partner Communications (Orange Israel).2 Eurocom Group has a 32% interest in YES.

Attractive Israeli Communications Market

10

Open Access Policy

Structural Separation• Infrastructure• Service Provider

Limitations placed on the Bezeq Group

Bezeq no longer a

monopoly

High penetration

rates

Policies on MVNO / WiMAX

Number Portability implemented

1994 2007

Broadband 3 33% Market Share33

Mobile 4 WiMAX trials initiated

2

33% Market ShareLocal Telephony - VoB launched in 2007

Television IP infrastructure

International Telephony

1 Source: Israeli Ministry of Communications, November 2006 Report.

Ministry of Communications actively encourages competition

Services 012 Smile# of Competitors 1

Final VoB Policy Published

Unbundling(Grunau committee)

2008

MoC Adopting Grunau

Recommendations

11

Our Segments of Our Segments of OperationsOperations

Innovative Communication Solutions

12

IPTV

1997 1999 2001 2003 2005 2007 2009 2011

MVNO & Mobile WiMax

WiMax

VoB

Wi-Fi

Broadband VAS

Broadband Access

ILD and Internet Access

Platform for Future Opportunities

Future Growth Drivers /Pilot Services

High-Growth /High-ARPU

Growing Cash Flow

Cro

ss-s

ell O

ppor

tuni

ty

Increasing opportunities for bundling and cross-selling of services

Broadband Services – Growth Engine

13

Customers

• Over 500,000 active broadband customers

• Business customers include:- 75 of Israel’s 100 leading companies 1

Services

• Internet access• Value-added services (email, anti-virus)• Voice over Broadband• WiFi / WiMAX• Specialized data services

- SDH, ATM, MPLS, Frame Relay

Israeli Broadband Market 2

1,530 1,390

1,215

0

500

1,000

1,500

2005 2006 2007Bro

adba

nd c

usto

mer

s (th

ousa

nds)

CAGR: +12.2%

33% Market Share

33% market share in the broadband Internet access market1 As determined by Dun & Bradstreet.2 Source: Israel Ministry of Communications: November 2006 Report and Bezeq’s and Hot’s reports

VoB Services – High-Growth / High-Margin

14

Market Opportunity

• Leverage new technologies to enter new markets

• First to provide VoB in Israel- First commercial license- ~ 80,000 VoB lines

• Fully optimized IP-based network- Class 4, class 5 switches

• Versatile, feature-rich, low cost service • Replacement (using Number Portability)

or complementary to old fixed-line telephony services• Effective competitive pricing

18 25

35

50

63

74

15 13 110

10

20

30

40

50

60

70

80

Q306

Q406

Q107

Q207

Q307

Q407

Q108

Q208

Q308

VoB

Lin

es (t

hous

ands

)

012 smile VoB lines

Cross-sell opportunity to over one million registered 012 Smile customers

Traditional Voice – Cash Flow Generator

15

• Traditional Voice- Residential and business customers

• Over 800,000 registered customers- International and domestic telephony

• Pre- and post-paid calling cards• Call-back service

- Connections with over 100 carriers

• Carrier Services

- Roaming and signaling services for cellular operators

- Hubbing-traffic routing between approximately 100 network operators

Israeli Traditional Voice Market 1

CAGR: +8.3%

2,948 2,783

2,515

0

500

1,000

1,500

2,000

2,500

3,000

2005 2006 2007

Min

utes

(in

mill

ions

)

33% Market Share

33% share of the international telephony market

1 Source: Israel Ministry of Communications, Feb 2008

Seamless Mobility Concept – Future Growth

16

Comprehensive service provider delivering voice, broadband and data services with seamless mobility based on Fix to Mobile Convergence

Layer 1 - Full MVNO based on GSM network for nation wide coverage

Layer 2 – Mobile WiMAX coverage areas for broadband solutions

Layer 3 – Mobile VoIP Wi-Fi based or Voice over GSM solution

17

Seamless mobility will enable penetration of the mobile market

• Company is prepared for providing mobile services in a short notice• Mar ’08: Apply to the MOC for MVNO license• May ’08: Submitted a detailed engineering plan to the MOC• Aug ’08: MOC adopting Grunau recommendations – Planning to Grant MVNO license • Oct ’08: MOC declaring it’s plans for granting MVNO licenses by the end of 2008

Seamless Mobility Status – Future GrowthLayer 1 - Full MVNO

Layer 3 – Mobile VoIP

Layer 2 – Mobile WiMAX• Mar ’07 : 1st to receive WiMAX license on a trial basis• Aug ’07: Launched Fixed WiMAX trial (3.5 GHz spectrum)• Jan ’08: Launched Mobile WiMAX trial (2.5 GHz spectrum)• July ’08: Planning to expand the Mobile WiMAX trial to Tel Aviv area• Aug ’08: MOC declaring it’s plans for granting WiMAX licenses

• June ’08 : Beginning of a trial based on Nokia mobile devices (E65/ N95) with Wi-Fi connection

Growth Strategy

18

Maximize customer satisfaction, retention and growth

Utilize advanced technologies to expand our services and enter new markets

Increase penetration and up & cross selling of services

Expand penetration into the local telephony market

Selectively pursue growth opportunities

13.11.2008 9:46SMLC investors Dec 2007 V01.ppt 19

Financial Overview

012 Smile Financial Highlights

20

• Strong financial results for Q3 2008(1)

- 12% increase in core revenues(2)

- 9% increase in EBIT- 2% increase in EBITDA- Strong cash flow generation

• Key reporting principles- US GAAP- NIS Reporting Currency- Pro forma presentation assumptions

1 Compared to the Third quarter of 2007 2 Excluding hubbing and exchange rate effect

Strong Revenue Growth

21

Revenues

CAGR: +12.7%

505610

616

428 487364

NIS 1,103NIS 1,038

NIS 869

0

200

400

600

800

1,000

1,200

PF2005 PF2006 2007

NIS

Mill

ions

Broadband Traditional Voice

134 132 142

132 140130

NIS 282NIS 264NIS 263

0

50

100

150

200

250

300

Q1 08 Q2 08 Q3 08

NIS

Mill

ions

Broadband Traditional Voice

$254

$304$322

Continuous growth from both operating segments1 Currency conversion based on the exchange rate of NIS 3.421 = USD 1.2 PF 2005, PF 2006 results represent twelve-month period ending December 31, 2005 and December 31, 2006 respectively.

Revenues – Q3

22

Revenues

158 142

140122

NIS 282NIS 280

0

50

100

150

200

250

300

Q3 07 Q3 08

NIS

Mill

ions

Broadband Traditional Voice

56% 57% 50%

44% 50%43%

0%

20%

40%

60%

80%

100%

Q3 07 2007 Q3 08

Broadband Traditional Voice

Continuous growth from core services revenues1 Currency conversion based on the exchange rate of NIS 3.421 = USD 1.

Increasing Operating Leverage

23

EBITDA

$18.0$18.3

NIS 63NIS 61

10

12

14

16

18

20

22

Q3 07 Q3 08

US$

Mill

ions 21.4%

23.1%

18.5%

15%

20%

25%

2006 2007 1-9/08

Capitalizing on merger synergies and the high-margin broadband segment1 Currency conversion based on the exchange rate of NIS 3.421 = USD 1.2 PF 2006 results represent twelve-month period ending December 31, 2006.

Efficient Network Platform

24

Capex

$11.7$13.5

$19.3

$25.1

NIS 40

NIS 46

NIS 86NIS 66

0

5

10

15

20

25

30

PF2005 PF2006 2007 1-9/08

US$

Mill

ions

Current level of CAPEX for existing services < 5% of revenues and forecast D&A

1 Currency conversion based on the exchange rate of NIS 3.421 = USD 1.2 PF 2005, PF 2006 results represent twelve-month period ending December 31, 2005 and December 31, 2006 respectively,.3 2005 capex is a non-audited measure that is the sum of Smile Communications and 012 Golden Line’s respective 2005 audited capital expenditures.

Key Financial Data

25

(NIS in millions) Year Ended December 31, 2006

Year Ended December 31, 2007

9 Months Ended September 30, 2008

Long TermMargin Goals

1,038 100.0%

284 27.4%

5.0%

18.5%

1,103 100.0%

52

192

809 100.0%

455 32.3%

12.0%

23.1%

63

100%

187

34%

17%

31.0%

25%

10.6%

21.5%

342

116

237

Operating Income

Revenue

Gross Profit

Adjusted EBITDA

669654359Total Parent Company Investment

2.7

1,027

1,386

Sep 30, 2007

1.31.4Debt/EBITDA ratio

911

1,580

900

1,554

Dec 31,2007

Total Liabilities

Total Assets

Sep 30,2008 (NIS in millions)

26

SUMMARY

Investment Highlights

27

• Significant market share and high level of brand recognition

• Strong management team

• Solid financial performance and cash flow generation (Q3/08):• Revenues NIS 282 million• EBITDA NIS 63 million• Cash Flow from operations NIS 47 million

• Adopting and implementing new and innovative technologies

• Clear growth plan to increase share of the Israel’s dynamictelecom market

28

Thank You