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~~ITEM 7.~~ Table of Contents~~MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS~~

A.ITEM 7.

MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. MAJOR SHAREHOLDERS

The following table sets forth information regarding beneficial ownership of our shares as of December 31, ~~2010,~~2011, by each person, or group of affiliated persons, known to us to be the beneficial owner of 5% or more of our outstanding shares.

In accordance with the rules of the SEC, beneficial ownership includes voting or investment power with respect to securities and includes any shares issuable pursuant to options that are exercisable within 60 days of December 31, ~~2010.~~2011. Any shares issuable pursuant to options are deemed outstanding for computing the percentage of the person holding such options but are not outstanding for computing the percentage of any other person. The percentage of beneficial ownership for the following table is based on ~~99,464,750~~99,481,487 ordinary shares outstanding as of December 31, ~~2010.~~2011. To our knowledge, except as indicated in the footnotes to this table and pursuant to applicable community property laws, our major shareholders do not have different voting rights and the persons named in the table have sole voting and investment power with respect to all ordinary shares held by them.

	Shares Beneficially Owned					Shares Beneficially Owned
Name of Beneficial Owner	Number		Percent			Number		Percent

Discount Investment Corporation Ltd.*		51,450,000		51.73	%		46,793,635		47.04	%
Massachusetts Financial Services Company**		5,997,888		6.03	%
Directors and executive officers as a group (25 persons)***		51,628,641		51.91	%
Directors and executive officers as a group (29 persons)**							47,005,465		47.25	%

DIC, a public Israeli company traded on the Tel Aviv Stock Exchange, is a majority-owned subsidiary of IDB Development Corporation Ltd., or IDB Development. Includes ~~23,661,645~~31,192,780 ordinary shares held by DIC directly, ~~24,375,855~~12,188,355 ordinary shares held by ~~two~~a wholly-owned ~~subsidiaries~~subsidiary of DIC (namely, ~~PEC Israel Economic Corporation, a Maine corporation, and~~ DIC Communication and Technology Ltd., an Israeli company) and 3,412,500 ordinary shares, representing approximately 3.43% of our issued and outstanding shares, held by two shareholders whose voting rights are vested in DIC. Does not include 59,347 ordinary shares (representing approximately 0.06% of our issued and outstanding shares) held as of December 31, ~~2010~~2011 by indirect subsidiaries of IDB Development for their own account and ~~1,913,793~~584,226 ordinary shares (representing approximately ~~1.92%~~0.59% of our issued and outstanding shares) held as of that date for members of the public through, among others, provident funds, mutual funds, pension funds, exchange traded funds, insurance policies and unaffiliated third-party client accounts, which are managed by such subsidiaries.

IDB Development, an Israeli company, is a wholly-owned subsidiary of IDB Holding Corporation Ltd., or IDB, a public Israeli company traded on the Tel Aviv Stock Exchange.

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~~IDB is controlled as follows:~~

IDB is controlled as follows:

Ganden Holdings Ltd., or Ganden, a private Israeli company controlled by Nochi Dankner (who is also the Chairman of the boards of directors of IDB, IDB Development and DIC and one of our directors) and his sister Shelly Bergman, held as of December 31, ~~2010,~~2011, directly and through a wholly-owned subsidiary, approximately ~~54.72%~~54.78% of the outstanding shares of IDB;

Shelly Bergman, through a wholly-owned company, held as of December 31, ~~2010~~2011 approximately 4.17% of the outstanding shares of IDB;

Avraham Livnat Ltd., or Livnat, a private Israeli company controlled by Avraham Livnat (one of whose sons, Zvi Livnat, is a director and Executive Vice President of IDB, a director and Deputy Chairman of the board of directors of IDB Development and a director ~~of DIC, and another son, Shay Livnat, is one of our directors and a director of IDB Development) held as of December 31, 2010, directly and through a wholly-owned subsidiary, approximately 13.31%~~

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of DIC, and another son, Shay Livnat, is one of our directors and a director of IDB Development), held as of December 31, 2011, directly and through a wholly-owned subsidiary, approximately 13.33% of the outstanding shares of IDB; and

Manor Holdings BA Ltd., or Manor, a private Israeli company controlled by Ruth Manor (whose ~~husband, Isaac Manor,~~son in law Assaf Topaz, is one of our directors ~~a director~~ and ~~Deputy Chairman of the board of directors of IDB, and a director of IDB Development and DIC, and their~~her son Dori Manor is a director of IDB, IDB Development and DIC), held as of December 31, ~~2010,~~2011, directly and through a majority-owned subsidiary, approximately ~~13.30%~~13.32% of the outstanding shares of IDB.

Subsidiaries of Ganden, Livnat and Manor have entered into a shareholders agreement with respect to ~~shares~~a majority of ~~IDB held by these subsidiaries, constituting 31.02%, 10.34% and 10.34%, respectively, of the outstanding shares of~~their holdings in IDB for the purpose of maintaining and exercising control of IDB as a group. Their additional holdings in IDB are not subject to the shareholders agreement. The term of the shareholders agreement expires in May 2023. In February 2012, subsidiaries of Ganden, Livnat and Manor have entered into an additional agreement (which shall come into force upon the closing of a certain transaction) whereby such parties will act, among other things, to exclude Livnat from the existing control group of IDB, and Livnat will grant to Ganden and Manor an option to purchase from Livnat, and Ganden and Manor will grant to Livnat an option to sell to them, shares of IDB held by Livnat.

Part of the foregoing holdings in IDB have been pledged to financial institutions as collateral for loans taken to finance the purchase of IDB's shares. Upon certain events of default, these financial institutions may foreclose on the loans and assume ownership of or sell such holdings.

Based on the foregoing, IDB and IDB Development (by reason of their control of DIC), Ganden, Manor and Livnat (by reason of their control of IDB) and Nochi Dankner, Shelly Bergman, Ruth Manor, and Avraham Livnat (by reason of their control of Ganden, Manor and Livnat, respectively) may be deemed to share with DIC the power to vote and dispose of our shares beneficially owned by DIC. Each of these entities (other than DIC) and persons disclaims beneficial ownership of such shares , and all of these entities and persons disclaim beneficial ownership of our shares held under management of subsidiaries of IDB Development for others.

**	~~According to a schedule 13-G filed by the shareholder on February 1, 2011. In the schedule the shareholder claims to have sole voting power only over 5,551,368 shares.~~

~~***~~

Includes the ~~51,450,000~~46,793,635 ordinary shares held, directly or indirectly, by DIC and ~~59,347ordinary~~59,347 ordinary shares held by indirect subsidiaries of IDB Development, for their own account, which may be deemed to be beneficially owned by Nochi Dankner by virtue of his control of IDB. Does not include an aggregate of ~~1,913,793~~584,226 of our ordinary shares held, as of December 31, ~~2010,~~2011, by members of the public through, among others, provident funds, mutual funds, pension funds, exchange traded funds, insurance policies and unaffiliated third-party client accounts, which are managed by indirect subsidiaries of IDB Development. Each of our directors who is affiliated with IDB or DIC disclaims beneficial ownership of such shares. Also ~~includes10,000~~includes43,189 ordinary shares issuable upon the exercise of stock options that are exercisable on, or within 60 days following December 31, ~~2010,~~2011, and 54,647 ordinary shares held by each of Messrs. Ami Erel and Amos Shapira as of December ~~31,2010.~~31,2011.

As of December 31, ~~2010,~~2011, we had ~~seventeen~~twenty three holders of record of our equity securities who are, to our knowledge, located in the United States. The shares held by these ~~seventeen~~ holders of record represent ~~83.35%~~95.6% of our outstanding ordinary shares. However, this number is not representative of the number of beneficial holders nor is it representative of where such

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beneficial holders are located because approximately ~~71.08%~~95.58% of our ordinary shares were held of record by Cede & Co. for the account of the brokers or other nominees, including the Tel Aviv Stock Exchange; approximately ~~23.79~~43.61 % of our ordinary shares owned directly and indirectly by DIC is also held of record by Cede & ~~Co; and PEC Israel Economic Corporation, a Maine corporation that is the holder of record of approximately 12.25% of our outstanding shares, is wholly owned by DIC.~~Co.

~~Prior to September 2005, our initial principal shareholders were DIC, which indirectly held approximately 25% of our then share capital,~~In 2008 and BellSouth Corporation and the Safra brothers of Brazil, who indirectly held together approximately 69.5% of our then share capital and held the voting rights in additional 5.5% of our then share capital. DIC acquired the shares and voting rights of BellSouth and the Safra brothers in September 2005 and subsequently sold an aggregate of 16.0% of our then share capital to financial investors in four transactions during 2006 and an additional approximately 19.5% of our then share capital as part of our initial public offering in February 2007. Also as part of our initial public offering, Goldman Sachs International, then a 5% shareholder, sold 1% of our then issued and outstanding share capital. In 2007 and 2008,2011, DIC sold in several additional transactions approximately ~~11.62%~~16.47% of our then issued share capital to a financial institution which informed DIC at the time of its intention to place such shares for sale outside the United States to non-US investors. In 2009 DIC purchased minority stakes of approximately 1.97% of our then issued share capital from two shareholders (the voting rights of which were already held by DIC prior to the purchase). For additional details as to such shareholders' agreements, see below under "B. Related Party Transactions – Original 1997 shareholders agreements".

B.	140 Table of Contents B. RELATED PARTY TRANSACTIONS

Agreements among Our Shareholders

In September 2005, DIC acquired the shares and voting rights in our company held indirectly by BellSouth and the Safra brothers. In 2006, DIC sold a portion of these shares in four transactions to six financial investors based on the price of the Safra transaction, with adjustments for dividends paid and certain additions to such price accrued during the period from the closing of the Safra transaction to the applicable sale transaction. The following summaries of the agreements between DIC and certain other shareholders relate only to provisions that were in effect as of January 1, ~~2010~~2011 or thereafter.

Original 1997 shareholders agreements

Brian Greenspun, Daniel Steinmetz, Benjamin Steinmetz and Shlomo Piotrkowsky, who owned of record, directly or indirectly, an aggregate of approximately 5.5% of our then outstanding ordinary shares, granted the voting rights in these shares to BellSouth and the Safra brothers. These voting rights were assigned to DIC in connection with its acquisition of our control in September 2005. In 2009 DIC purchased the minority stakes held by Brian Greenspun and Benjamin Steinmetz (indirectly), representing approximately 1.97% of our then share capital. The remaining minority shareholders currently own approximately 3.43% of our outstanding ordinary shares. These minority shareholders are restricted from transferring these shares without the prior written consent of DIC and their transfer are subject to a right of first refusal in favor of DIC. Each of these minority shareholders ishas also committed not to compete, directly or indirectly, with our cellular communications business in Israel so long as he is a shareholder and for a period of one year thereafter.

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Migdal 2006 share purchase agreement

In 2006, DIC sold 4% of our then outstanding ordinary shares to Migdal Insurance Company Ltd. and two of its affiliates, or the Migdal shareholders. As part of this transaction, DIC granted the Migdal shareholders a tag along right, in the event it sells shares resulting in it no longer being a controlling shareholder. In return, DIC has the right to force the Migdal shareholders to sell their shares in a transaction in which DIC sells all of its shares to a purchaser outside the IDB group. To the best of our knowledge, no such right has materialized.

Relationship with IDB

As part of the issuance of Series C and Series D debentures in February 2008 we sold approximately NIS 48 million aggregate principal amount of Series C and Series D Debentures to investors who are members of the IDB group. The terms of participation of our affiliates in all of these transactions were the same as those of unaffiliated parties.

As part of the issuance of our debentures in April 2009, we sold approximately NIS 109 million aggregate principal amount of our Series D and Series E Debentures to investors who are members of the IDB group. The terms of participation of our affiliates in all of these transactions were the same as those of unaffiliated parties.

As of December 31, ~~2010,~~2011, an aggregate amount of approximately NIS ~~267~~214 million principal amount of our Series A, B,C,D and E Debentures were held by investors who are members of the IDB group and entities affiliated with IDB’s principal shareholders or officers, either for their own account or for the benefit of members of the public (through, among others, provident funds, mutual funds, pension funds, exchange traded funds, insurance policies and unaffiliated third-party client accounts, which are managed by indirect subsidiaries of IDB).

As of December 31, ~~2010,~~2011, an aggregate of ~~1,913,793~~584,226 of our ordinary shares (not included in the holdings set forth in the Beneficial Owners' table above) were held by members of the public through, among others, provident funds, mutual funds, pension funds, exchange traded funds, insurance policies and unaffiliated third-party client accounts, which are managed by indirect subsidiaries of IDB.

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In October 2006, we entered into an agreement with DIC, to benefit from the experience that DIC has in telecommunications and in the Israeli market generally, pursuant to which DIC provides us with services in the areas of management, finance, business and accountancy in consideration of NIS 2.0 million (linked to the Israeli Consumer Price Index for June 2006) plus VAT per year. Among the services included are consulting and assistance on managerial, economic and accounting issues, such as the preparation of an annual budget, strategic plans and central business processes for us. In addition, the provision of employees and officers of DIC and its affiliates to be directors of Cellcom is included in the agreement. This agreement is for a term of one year and is automatically renewed for one-year terms unless either party provides 60 days’ prior notice to the contrary. In July 2011, our annual shareholders meeting approved an amendment of the agreement so as to clarify that the DIC officers and employees whose service as directors are covered by the management fees, shall not include any person who serves solely as a director of a subsidiary (or several subsidiaries) of DIC (and does not serve as a director of DIC itself) and does not receive any compensation, other than director's fees, in his or her capacity as a director of any subsidiary of DIC. Also, due to an amendment to the Israeli Companies Law, an agreement with a controlling shareholder for a period or periods exceeding a total of three years, such as our management services agreement with DIC, cannot continue for more than three consecutive years unless re-approved by the audit committee, board of directors and shareholders every three years. Accordingly our audit committee, board of directors and annul shareholders meeting approved that the agreement may be renewed in accordance with its terms for up to three consecutive years from the anniversary of this agreement (October 2011 to October 2014).

In the ordinary course of business, from time to time, we purchase, lease, sell and cooperate in the sale of goods and services, or otherwise engage in transactions with entities that are members of the IDB group, ~~and~~ entities affiliated with IDB’s principal shareholders or ~~officers.~~officers and entities otherwise engaged with such IDB member or affiliates in a manner that may create a personal interest of our controlling shareholders or directors. We believe that all such transactions are on commercial terms comparable to those that we could obtain from unaffiliated parties

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Registration Rights Agreement

In 2006, we entered into a registration rights agreement with DIC, two wholly-owned subsidiaries of DIC which are shareholders and six other shareholders (some of whom no longer hold the registrable shares). For a summary of the terms of the agreement, see “Item 10. Additional Information – C. Material Contracts.”

Merger with Netvision

On August 31, 2011, we completed a merger transaction between us, a wholly-owned subsidiary of ours and Netvision, pursuant to which the abovementioned subsidiary was merged with and into Netvision as the surviving company, in accordance with the relevant provisions of the Companies Law. Following the merger, Netvision was delisted from the TASE and became a private company wholly owned by us.

The aggregate merger consideration was approximately NIS 1.57 billion ($411 million). The merger consideration included interest at an effective rate of 5% per year, calculated based on actual days elapsed from April 1, 2011 until the completion of the

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transaction, in accordance with the terms of the merger agreement. We financed the payment of the merger consideration by using cash on hand, as well as by issuance of additional debentures to the public in Israel.

Since both us and Netvision were public companies under the joint control of the IDB group, each of us was required by the Companies Law to obtain the approval of the audit committee, board of directors and a special majority of shareholders. Our audit committee and board of directors approved the merger on June 13, 2011 and June 15, 2011, respectively. On July 27, 2011, the merger was approved by our shareholders.

C. INTERESTS OF EXPERTS AND COUNSEL

Not applicable.

ITEM 8.

FINANCIAL INFORMATION~~FINANCIAL INFORMATION~~

A.	A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

Consolidated Financial Statements

See Item ~~17.~~18.

Legal Proceedings

General

We are served from time to time with claims concerning various matters, including disputes with customers, former employees, commercial disputes with third parties with whom we do business and disputes with government entities, including local planning and building committees and the Ministry of Communications. ~~The disputes with customers~~These include purported class actions, filed mainly by our subscribers, regarding claims such as alleged overcharging of tariffs, misleading representations, providing services not in compliance with applicable law, our license’s requirements or a subscriber’s agreement. The following is a summary of all significant or potentially significant litigation as well as all our ~~material litigation,~~purported class actions, pending as of the date of this annual report.

Various legislative and regulatory changes have ~~increased~~been imposed in recent years and additional changes may ~~increase further,~~occur. As a result, the number of requests for certification of class action lawsuits against us ~~and~~ have increased ~~and~~which may increase ~~further~~ our legal exposure as a result of such class action lawsuits and our legal costs in defending against such suits. See “Item 3. Key Information – D. Risk Factors - We are exposed to, and currently are engaged in, a variety of legal proceedings, including class action lawsuits.”

~~All amounts noted below are nominal and, in~~In cases where the claim is approved, all amounts noted below will be adjusted to reflect changes in the Israeli CPI and statutory interest, from the date that each claim was filed.

Based on advice of counsel, we believe it is more likely than not that substantially all the claims and disputes detailed below will be determined in our favor and accordingly, no provision has been made in the financial statements in respect of these claims and disputes. We have made a provision in the amount of approximately NIS ~~22 millions,~~74 million, for a class action recently decided against us and for the claim/s and dispute/s we are willing to settle or for

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which we cannot reach a conclusion that it is more likely than not that the claim/s and dispute/s will be determined in our favor.

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Purported class actions

~~In September 2000, a~~28 purported class ~~action lawsuit was~~actions have been filed against us in the District Court of Tel-Aviv–Jaffa by one of our subscribers in connection with VAT charges in respect of insurance premiums and the provision of insurance services that were allegedly provided not in accordance with the law. In February 2006, the motion for certification as a class action was denied. In March 2006, an appeal was filed with the Supreme Court challenging the dismissal. In December 2008, the appeal was partially allowed and the claim was returned for further consideration by the District Court of certain issues determined by the Supreme Court. If the lawsuit is certified as a class action, the amount claimed is estimated by the plaintiff to be NIS 402 million.

In August 2001, a purported class action lawsuit was filed against us in the District Court of Tel-Aviv–Jaffa by one of our subscribers in connection with our outgoing call tariffs on the “Talkman” (pre-paid) plan and the collection of a distribution fee for “Talkman” calling cards. In June 2004, the motion for certification as a class action was denied. In September 2004, this decision was appealed to the Israeli Supreme Court. In July 2007, the Israeli Supreme Court accepted a petition filed by both parties with mutual consent, in light of the Israeli Class Action Law, 2006, to resubmit the purported class action lawsuit for consideration in the District Court of Tel Aviv-Jaffa. If the lawsuit is certified as a class action, the amount claimed is estimated by the plaintiff to be NIS 135 million. In January 2010, during preliminary proceedings, the District Court accepted our defense of limitations for the period prior to March 1999. In April 2010, the plaintiff appealed the decision to the Supreme Court.

In August 2003, a purported class action lawsuit was filed against us in the District Court of Tel-Aviv–Jaffa (and later transferred to the District Court of the Central Region) by one of our subscribers in connection with our method of rounding the rates of calls, our method of linking rates of calls to the consumer price index and an alleged unlawful approval of a certain rate that was approved by the Ministry of Communications in 1996. Following the amendment to the Consumer Protection Law in December 2005, the plaintiff filed an amended statement of its claim in March 2006, to which we have replied. If the lawsuit is certified as a class action, the amount claimed (for the original claim) is estimated by the plaintiff to be NIS 150 million. In August 2009 and September 2010, during preliminary proceedings, the court rejected most of the alleged causes of action. As a result, the request to certify the lawsuit as a class action will continue to be heard in respect of one cause of action only: that we did not provide our customers full information in regards to the maximum airtime tariff set in the calling plan and our license, prior to entering into a calling plan. In November 2010, the plaintiff appealed the decision to the Supreme Court.

In August 2006, a purported class action lawsuit was filed against us (and two other cellular operators) in the District Court of Tel-Aviv–Jaffa by plaintiffs alleging to be subscribers of the defendants in connection with sums allegedly unlawfully charged for a segment of a call that was not actually carried out. In November 2010, the purported class action was dismissed with prejudice. In December 2010, an appeal was filed with the Supreme Court challenging the dismissal. If the lawsuit is certified as a class action, the total amount claimed is estimated by the plaintiffs to exceed NIS 100 million without specifying the amount claimed from us individually.

~~In December 2007, a purported class action lawsuit was filed against us (and two other cellular operators) in the District Court of Tel Aviv-Jaffa by plaintiffs alleging to be~~

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residing next to cell sites of the defendants which the plaintiffs allege were built in violation of the law. The plaintiffs allege that the defendants have created environmental hazards by unlawfully building cell sites and therefore demand that the defendants will compensate the public for damages (other than personal damages, such as depreciation of property and/or health related damages which are excluded from the purported class action), demolish existing unlawfully built cell sites and refrain from unlawfully building new cell sites. If the lawsuit is certified as a class action, the compensation claimed from the defendants (without any allocation of this amount among the defendants) is estimated by the plaintiffs to be NIS 1 billion.

~~In March 2008, a purported class action lawsuit was filed against us in the District Court of Central Region by plaintiffs alleging to be our subscribers,~~ in connection with allegations that we unlawfully, in violation of our license or agreements with our subscribers, charged or overcharged our subscribers for ~~providing them~~our services, in amounts estimated by the plaintiffs to be from approximately NIS 5 million to approximately NIS 200 million or which were not estimated by these plaintiffs, if the lawsuits are certified as class actions. In three of the purported class actions (two for a total amount claimed if certified as class actions, of approximately NIS 14 millions and third in which no amount claimed was estimated), settlement agreements in immaterial sums were filed with ~~call~~the court and the procedures are still pending. In a class action for an estimated amount claimed of NIS 28 million, a settlement agreement in which we guarantee the repayment of in-consequential sums by third parties was filed with the court and the procedure is still pending.

15 purported class actions were filed against us in connection with allegations that we misled our subscribers, in amounts estimated by the plaintiffs to be from approximately NIS 21 million to approximately NIS 2.7 billion, if the lawsuits are certified as class actions. In three of the purported class actions (for a total amount claimed if certified as class actions, of approximately NIS 149 million), settlement agreements of immaterial sums were filed with the court and the procedures are still pending. One purported class action (for which no amount claimed was estimated) was dismissed with prejudice and the plaintiffs appealed the ruling and another purported class action (for which no amount claimed was estimated) was dismissed following plaintiff's request and appealed by the Israeli General Counsel regarding a procedural question regarding such dismissal.

4 purported class actions were filed against us in connection with allegations that we unlawfully, in violation of our license or agreements with our subscribers, build and operate our network and sell handsets and related equipment, including in relation to alleged hazards relating to non ionizing radiation emitted from cell sites and end-user equipment in amounts estimated by the plaintiffs to be from approximately NIS 1 billion to approximately NIS 3.7 billion, if the lawsuits are certified as class actions.

3 purported class actions were filed against us in connection with allegations that we unlawfully sent to our subscribers and to other parties commercial messages, in amounts estimated by the plaintiffs in two purported class actions to be approximately NIS 3 million and approximately NIS 50 million and which were not estimated by the plaintiffs in the third purported class action, if the lawsuits are certified as class actions. In the purported class action in which no amount claimed was estimated, a settlement agreement for immaterial sums were filed with the court and the procedure is still pending.

3 purported class actions were filed against us in connection with allegations that we unlawfully, in violation of our license or agreements with our subscribers discriminate between our subscribers, in amounts estimated by the plaintiffs to be from approximately NIS 60 million to approximately NIS 306 million, if the lawsuits are certified as class actions.

2 purported class actions were filed against us in connection with allegations that we unlawfully, in violation of our license or agreements with our subscribers failed to provide

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certain services, in amounts estimated by the plaintiffs to be approximately NIS 20 millions and approximately NIS 60 million, if the lawsuits are certified as class actions.

2 purported class actions were filed against us in connection with allegations that we failed to provide customer care in accordance with the provisions of our license and applicable law, in amounts estimated by the plaintiffs to be approximately NIS 107 millions and approximately NIS 361 million (which was filled against three additional operators without specifying the amount claimed from us), if the lawsuits are certified as class actions.

For additional details ~~records.~~ regarding purported class actions in claimed amounts exceeding NIS 1 billion, see note 31 to our consolidated financial statements included elsewhere in this annual report.

We have recorded appropriate provisions for each of the settlement agreements filed with the courts and described above.

In August 2009, the District Court of Central Region approved a request to certify ~~the~~a lawsuit ~~as a class action was approved by the court and the claim will be tried~~ as a class action, relating to an allegation that we breached the agreements with our subscribers by charging them for ~~the~~a call detail service we previously provided free of charge, without obtaining their consent. In May 2010, our appeal and request to stay proceedings until the appeal is decided was not accepted by the Supreme Court, for reasons not related to the merits of the matter, and the lawsuit is tried in the District Court as a class action in relation to such allegation. If the lawsuit is certified as a class action, theThe total amount claimed iswas estimated by the plaintiffs to be approximately NIS 440 million. In December 2011, the Court decided against us, accepted the allegation and ordered us to repay our customers the sum charged for the service in the amount of approximately NIS 22 million plus interest and linkage differences from the date of each payment made by the subscribers, an amount of NIS 200,000 to be paid to the plaintiffs and a fee for the plaintiffs' attorney equal to 10% of the sum to be repaid plus VAT. In January 2012, we have appealed the judgment with the Supreme Court and the execution of the judgment was stayed until the appeal is decided. We have recorded a provision for the entire sum in our financial statements.

In ~~April 2008, a purported class action lawsuit was filed against us in~~November 2010, the District Court of Tel Aviv-Jaffa ~~by plaintiffs alleging~~approved a request to ~~be our subscribers, in connection with allegations that we overcharged certain subscribers entitled to rebates under their agreement with us, by miscalculating the rebate. If the~~certify a lawsuit ~~is certified~~ as a class action, relating to an allegation that Netvision, our wholly owned subsidiary and two other long distance providers, misled the purchasers of certain prepaid cards for long distance calls bought between 2004 and 2008 in relation to certain bonus minutes and reduced certain minutes in certain circumstances. The total amount claimed isfrom all the defendants was estimated by the plaintiffs to be approximately NIS ~~100 million.~~

~~In July 2008, a purported class action lawsuit was filed against us in the District Court~~2.2 billion, of Tel Aviv-Jaffa, by a plaintiff alleging to be our subscriber, in connection with allegations that we mislead and overcharge certain subscribers, in relation to airtime packages. If the lawsuit is certified as a class action, the amount claimed is estimated by the plaintiff to bewhich approximately NIS ~~72 million.~~

818 million was attributed to Netvision. In May 2009, a purported class action lawsuit was filed against us in the District Court of Tel-Aviv-Jaffa, by a plaintiff alleging to be our subscriber, in connection with allegations that we misled our subscribers whose calling plan includes certain reduced tariff calls, by failing to specify certain limitations on reduced tariff calls. The plaintiff did not specify the amount claimed if the lawsuit is certified as a class action.

In November 2009, a purported class action lawsuit was filed against us in the District Court of Tel-Aviv-Jaffa, by a plaintiff alleging to be our subscriber in connection with allegations that we unlawfully included commercial content in internet pages viewed by our subscribers through cellular "surfing", and unlawfully charged them for such surfing. The plaintiff did not estimate the total amount claimed, if the lawsuit is certified as a class action.

~~In March~~December 2010, ~~a purported class action lawsuit was filed against us and another cellular operator, in the District Court of Tel-Aviv-Jaffa, by two plaintiffs alleging to be subscribers of~~ the defendants in connection with allegations that the defendants breached their license by failing to purchase insurance against monetary liability which the defendants may suffer due to bodily damages that allegedly may be caused by cellular radiation. The

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~~plaintiffs~~filed a request ~~the court to award compensation in an amount equal to the insurance premiums allegedly payable~~ for insuring such liability (estimated by the plaintiffs to be NIS 300 million per year per defendant) for the past seven years and to order the defendants to purchase such insurance coverage in the future. If the lawsuit is certified as a class action, the total amount claimed is estimated by the plaintiffs to be approximately NIS 4.2 billion, out of which NIS 2.1 billion is attributed to us individually.

In May 2010, a purported class action lawsuit was filed against us and two other defendants in the District Court of Central Region, by a plaintiff alleging to be our subscriber, in connection with allegations that the defendants unlawfully sent commercial messages to certain recipients. In June 2010, one of the other defendants was deleted from the list of defendants at its request andappeal with the ~~consent of~~Supreme Court challenging the ~~plaintiff. The plaintiff did not estimate the total amount claimed if the lawsuit is certified as a class action.~~

In May 2010, a purported class action lawsuit was filed against us (and the three other Israeli cellular operators) in the District Court of Central Region, by four plaintiffs alleging to be subscribers of the defendants. The plaintiffs allege that the defendants unlawfullydecision and in ~~violation of their license and agreements with their subscribers fail to construct cell sites in a sufficient quantity, scope and coverage in order to provide cellular services in~~March 2011 the requisite quality; fail to test, repair and notify the subscribers that non-ionizing radiation level for repaired handsets may exceed the manufacturer's specifications and the maximum level allowed by law; fail to inform and caution the subscribers of the risks related to the manner of carrying the handset and its distance from the subscriber's body; all of which allegedly increase the level of non-ionizing radiation and health risks to which the subscribers are exposed. In September 2010, at our and two other cellular operators' request, the Court instructed the transfer of this purported class action to the Tel-Aviv-Jaffa District Court, to be heard by the Judge hearing the purported class action filed against us in December 2007 (by plaintiffs alleging that we and the two other Israeli cellular operators have created environmental hazards by unlawfully building cell sites). If the lawsuit is certified as a class action, the total amount claimed from us is estimated by the plaintiffs to be approximately NIS 3.68 billion (the total amount claimed from the four defendants is estimated by the plaintiffs to be approximately NIS 12 billion).

~~In May 2010, a purported class action lawsuit~~district court's decision was filed against us in the District Court of Tel Aviv, by a plaintiff alleging to be our subscriber, in connection with the allegation that we unlawfully returned certain amounts to our subscribers at their nominal value without adjustments for interest and consumer price index differences. If the lawsuit is certified as a class action, the total amount claimed from us is estimated by the plaintiff to be approximately NIS 54 million.

In July 2010, a purported class action lawsuit was filed against us in the District Court of Central region, by a plaintiff alleging to be our subscriber in connection with the allegation that we unlawfully charged our subscribers with value added tax for services provided abroad. In October 2010, thisstayed. A similar purported class action was ~~joined with two other similar purported class actions,~~ filed against ~~two other Israeli cellular operators. In December 2010,~~ the ~~Israeli Tax Authority was joined as defendant at our and another defendant's request . The plaintiff did not estimate the total amount claimed if the lawsuit is certified as a class action.~~

~~In July 2010, a purported class action lawsuit was filed against us~~defendants in ~~the District Court of Tel Aviv-Jaffa, by two plaintiffs alleging to be our subscribers, in connection with the allegation that our subscribers' agreements violate certain format requirements under the~~

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~~Israeli Standard Contracts Law. If the lawsuit is certified as a class action, the total amount claimed from us is estimated by the plaintiffs to be approximately NIS 100 million.~~

In September 2010, a purported class action lawsuit was filed against us in the District Court of Tel Aviv-Jaffa, by a plaintiff alleging to be our subscriber, in connection with the allegation that our handset repair services violate the Israeli Consumer Protection Law. If the lawsuit is certified as a class action, the total amount claimed from us is estimated by the plaintiff to be approximately NIS 100 million.

In September 2010, a purported class action lawsuit was filed against us in the District Court of Tel Aviv-Jaffa, by a plaintiff alleging to be our subscriber, in connection with the allegation that we did not provide the plaintiff with a written document containing information about the right to cancel a non frontal transaction, in violation of the Israeli Consumer Protection Law. If the lawsuit is certified as a class action, the total amount claimed from us is estimated by the plaintiff to be approximately NIS 98 million.

In October 2010, a purported class action lawsuit was filed against us in the District Court of Tel Aviv-Jaffa, by a plaintiff alleging to be our subscriber and her son, in connection with the allegation that we unlawfully misused data bases regarding our customers, in violation of the Israeli Privacy Protection Law. If the lawsuit is certified as a class action, the total amount claimed from us is estimated by the plaintiffs to be approximately NIS 50 million.

In November 2010, a purported class action lawsuit was filed against us in the District Court of Tel Aviv-Jaffa, by a plaintiff alleging to be our subscriber, in connection with the allegation that we charge our subscribers for certain content services without obtaining their consent. If the lawsuit is certified as a class action, the total amount claimed from us is estimated by the plaintiff to be approximately NIS 405 million (out of which NIS 300 million for mental anguish).

In November 2010, a purported class action lawsuit was filed against us in the District Court of Tel Aviv-Jaffa, by a plaintiff alleging to be our subscriber, in connection with the allegation that we breached our agreements with our subscribers in relation to rebates for handsets. If the lawsuit is certified as a class action, the total amount claimed from us is estimated by the plaintiff to be approximately NIS 79 million.

In November 2010, a purported class action lawsuit was filed against us in the District Court of Tel-Aviv-Jaffa, by a plaintiff alleging to be our subscriber, in connection with allegations that we, unlawfully and in violation if our license, do not allow our subscribers to review their agreements prior to signing them. If the lawsuit is certified as a class action, the total amount claimed from us is estimated by the plaintiff to be approximately NIS 150 million.

In December 2010, nine purported class action lawsuits were filed against us in various District Courts, by plaintiffs alleging to be our subscribers, claiming compensation for damages (in some of the lawsuits mental anguish as well), in connection with allegations (in all or some of the lawsuits) that we misled our subscribers and unlawfully and in violation of our license and agreements with our subscribers, failed to provide serviceFebruary 2012. See note 31 to our ~~subscribers during the network malfunction that occurred on December 1, 2010. As per our request, all lawsuits (except for one~~consolidated financial statements included elsewhere in ~~which the plaintiff has requested its dismissal) were transferred to the District Court of Central Region to be heard by the same judge. If the~~

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lawsuits are certified as a class action, the total amount claimed in each lawsuit is estimated by the respective plaintiffs to be approximately NIS 1.3 billion, NIS 1.32 billion, NIS 1.18 billion, NIS 990 million, NIS 200 million, NIS 61 million, NIS 57 million (in which the plaintiff has requested its dismissal) and NIS 25 million. An additional purported class action lawsuit for NIS 22 million was dismissed without prejudice at the plaintiff's request. In addition, the Ministry of Communications appointed an examination committee to investigate the causes and our handling of the malfunction.

In December 2010, a purported class action lawsuit was filed against us in the District Court of Central region, by a plaintiff alleging to be our subscriber, in connection with allegations that we misled our subscribers by not allowing them to update reduced tariff destinations in breach of their agreements. If the lawsuit is certified as a class action, the total amount claimed from us is estimated by the plaintiff to be approximately NIS 148 million.

In January 2011, a purported class action lawsuit was filed against us in the District Court of Jerusalem, by a plaintiff alleging to be our subscriber, in connection with allegations that we unlawfully charged our subscribers for "surfing" services provided abroad while the handset shifted from WiFi to cellular "surfing" without prior notice and without the subscriber's consent. If the lawsuit is certified as a class action, the total amount claimed from us is estimated by the plaintiff to be approximately NIS 69 million.

~~Commercial and other disputes~~

In April 2005, a lawsuit was filed against us in the District Court of Tel-Aviv–Jaffa by one of our former dealers and importers for the amount of NIS 28 million (reduced for court fee purposes from approximately NIS 38 million), alleging that we have breached an agreement between the parties. We reject all claims made by the plaintiff against us.

In January 2007, a lawsuit was filed against us in an arbitration proceeding for the amount of approximately NIS 35 million by a company that purchased cellular services from us in order to sell the services to its customers, alleging, among other things, that we have breached our agreements with the plaintiff and making claims concerning our conduct. We reject all claims made by the plaintiff against us.this annual report.

Dividend Policy

In February 2006, our board of directors adopted a dividend policy to distribute each year at least 75% of our annual net income determined (in accordance with IFRS for periods commencing on or after January 1, 2008), subject to applicable law, our license and our contractual obligations and provided that such distribution would not be detrimental to our cash needs or to any plans approved by our Board of Directors. In March 2007, our Board of Directors resolved to distribute dividends within the boundaries of the February 2006 dividend policy and until resolved otherwise, on a quarterly basis. In March 2012, in connection to our plans to raise additional debt, we amended the indenture included in our

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shelf prospectus to include additional undertakings in regards to certain new series of debentures, if offered by us, including a covenant not to distribute more than 95% of the profits available for distribution according to the applicable Israeli law (“Profits”), provided that if net leverage (defined as the ratio of net debt to EBITDA over four consecutive quarters) exceeds 3.5:1, we will not distribute more than 80% of the Profits and if net leverage exceeds 4.0:1, we will not distribute more than 70% of the Profits. In February 2012, we issued two new series of debenture to which such undertakings apply. See "Item 5. Operating and Financial Review and Prospects - B. Liquidity and Capital Resources - Debt Service –Shelf Prospectus". Our Board of Directors will consider, among other factors, our expected results of operation, including changes in pricing, regulation and competition, planned capital expenditure for technological upgrades and changes in debt service needs, including due to changes in interest rates or currency exchange rates, in order to reach its conclusion that a distribution of dividends will not prevent us from satisfying our existing and foreseeable obligations as they become due. In addition, there is an agreement among the controlling shareholders of IDB, our ultimate parent company, to target a dividend distribution of at least 50% of its distributable gains each year. Dividend payments are not guaranteed and our Board of Directors may decide, in

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its absolute discretion, at any time and for any reason, not to pay dividends or to pay dividends at a ratio to net income that is less than that paid in the past. For example, our Board of Directors may determine that our cash needs for debt service, capital expenditures or operations may increase and that it would not be prudent to distribute dividends. Accordingly, shareholders should not expect that any particular amount will be distributed by us as dividends at any time, even if we have previously made dividend payments in such amount.

Our ability to pay dividends is subject to the following limitations under Israeli law: (1) dividends may only be paid out of cumulative retained earnings or out of retained earnings over the prior two years, provided that there is no reasonable concern that the payment of the dividend will prevent us from satisfying our existing and foreseeable obligations as they become due; and (2) our license requires that we and our 10% or more shareholders maintain at least $200 million of combined shareholders’ equity. DIC’s shareholders’ equity on December 31, ~~2010~~2011 was significantly well over $ 200 million.

We declare dividends in NIS and convert them for payment in US$ (where applicable) based upon the daily representative rate of exchange as published by the Bank of Israel prior to the distribution date.

Prior to 2006, we had not distributed dividends. In 2006, we distributed dividends in the amount of NIS 3.83 billion ($1.08 billion), constituting substantially all of our retained earnings from inception to December 31, 2005. In 2007, we distributed dividends in the amount of NIS 655 million ($185 million). In 2008 we distributed dividends in the amount of NIS 1,530 million ($431 million). In 2009 we distributed dividends in the amount of NIS 1,187 million ($~~334~~311 million). In ~~March~~ 2010, we distributed a dividend in the amount of NIS 1,327 million ($347 million). In April 2011, we distributed a dividend in the amount of approximately NIS ~~257~~303 million ($7279 million). In ~~June 2010~~July 2011 we distributed a dividend in the amount of approximately NIS ~~360~~292 million ($~~101~~76 million). In October ~~2010~~2011 we distributed a dividend in the amount of approximately NIS ~~310~~232 million ($8761 million). In ~~December 2010~~January 2012 we distributed a dividend in the amount of approximately NIS ~~400~~189 million ($ ~~113~~49 million) for the third quarter of 2011. The dividends distributed in respect of ~~2007, 2008,~~ 2009, 2010 and the first nine months of ~~2010~~2011 constituted approximately 95% of our net income ~~(in accordance with Israeli GAAP for periods until December 31, 2007 and in accordance with IFRS for periods commencing on or after January 1, 2008)~~ for the respective period and in some cases, part of our retained earnings from earlier ~~periods.~~periods as well.

On March ~~14, 2011~~6, 2012 our board of directors declared a cash dividend for the fourth quarter of ~~2010~~2011 of NIS ~~3.05~~0.72 per share, or approximately NIS ~~303~~72 million in the aggregate. The dividend for the fourth quarter of ~~2010~~2011 constitutes approximately 95% of our net income ~~(in accordance with IFRS)~~ for the quarter. The dividend per share that we will pay for the fourth quarter of 2010 does not reflect the level of dividends that may be paid for future quarterly periods, which can change at any time in accordance with the policy set out above.

B.	146 Table of Contents B. SIGNIFICANT CHANGES

No significant change has occurred since December 31, ~~2010,~~2011, except as otherwise disclosed in this annual report.

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ITEM 9.

~~ITEM 9.~~

THE OFFER AND LISTING

A.	A. OFFER AND LISTING DETAILS

Trading in Israel

Our ordinary shares have traded on the Tel Aviv Stock Exchange under the symbol CEL since July 1, 2007. Our ordinary shares do not trade on any other trading market in Israel.

The following table sets forth, for the periods indicated, the reported high and low prices in NIS for our ordinary shares on the Tel Aviv Stock Exchange, as retroactively adjusted by the Tel Aviv Stock Exchange to reflect the payment of dividends.

High Low
NIS NIS
Annually
2007 ₪ 94.8 ₪ 67.5
2008 ₪ 92.2 ₪ 62.3
2009 ₪ 110.4 ₪ 63.6
2010 ₪ 123.0 ₪ 91.1

Quarterly
2007*
Third Quarter ₪ 78.5 ₪ 67.5
Fourth Quarter ₪ 94.8 ₪ 67.6
2008
First Quarter ₪ 89.5 ₪ 73.6
Second Quarter ₪ 90.6 ₪ 80.7
Third Quarter ₪ 92.2 ₪ 76.4
Fourth Quarter ₪ 84.5 ₪ 62.3
2009
First Quarter ₪ 74.1 ₪ 63.6
Second Quarter ₪ 89.9 ₪ 71.6
Third Quarter ₪ 101.2 ₪ 85.5
Fourth Quarter ₪ 110.4 ₪ 96.0
2010
First Quarter ₪ 121.2 ₪ 104.4
Second Quarter ₪ 116.6 ₪ 91.4
Third Quarter ₪ 107.5 ₪ 91.1
Fourth Quarter ₪ 123.0 ₪ 108.1

Monthly
2008
September ₪ 86.9 ₪ 76.4
October ₪ 84.4 ₪ 75.7
November ₪ 86.1 ₪ 71.5
December ₪ 94.8 ₪ 84.7
2009
September ₪ 101.2 ₪ 93.4
October ₪ 103.0 ₪ 97.5
November ₪ 106.5 ₪ 96.0
December ₪ 110.4 ₪ 104.3
2010
September ₪ 107.5 ₪ 97.3
October ₪ 119.1 ₪ 108.1
November ₪ 123.0 ₪ 113.3
December ₪ 122.6 ₪ 113.6

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2011
January ₪ 119.1 ₪ 110.3
February ₪ 117.5 ₪ 109.6

* No information is provided regarding the first two quarters of 2007 since trading in our Ordinary Shares on the TASE commenced only on July 1, 2007.


	High		Low
	NIS		NIS
Annually
2007		84.3		60.0
2008		82.0		55.4
2009		98.2		56.6
2010		109.4		81.0
2011		105.9		59.5

Quarterly
2010
First Quarter		107.7		92.8
Second Quarter		103.7		81.3
Third Quarter		95.6		81.0
Fourth Quarter		109.4		96.1
2011
First Quarter		105.9		97.3
Second Quarter		104.2		86.9
Third Quarter		90.5		70.0
Fourth Quarter		79.4		59.5

Monthly
2011
September		75.4		70.0
October		79.4		69.9
November		77.9		61.2
December		63.4		59.5
2012
January
February

On March ~~9, 2011,~~5, 2012, the closing price per share of our Ordinary Shares on the TASE was NIS ~~111.2.~~49.6.

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Trading in the United States

Our ordinary shares have traded on the New York Stock Exchange under the symbol CEL since February 6,7, 2007.

The following table sets forth, for the periods indicated, the high and low prices in $ for our ordinary shares on The New York Stock Exchange, as retroactively adjusted by the New York Stock Exchange to reflect the payment of dividends.

High
$

Low
$

Annually
2007 $ 23.4 $ 11.5
2008 $ 27.3 $ 16.2
2009 $ 29.3 $ 15.9
2010 $ 33.9 $ 23.5

Quarterly
2007
      First Quarter $ 12.6 $ 11.6
      Second Quarter $ 17.4 $ 11.5
      Third Quarter $ 17.5 $ 15.5
      Fourth Quarter $ 23.4 $ 16.1
2008
First Quarter $ 23.9 $ 19.9
Second Quarter $ 26.7 $ 21.9
Third Quarter $ 27.3 $ 21.9
Fourth Quarter $ 23.3 $ 16.2
2009
First Quarter $ 18.0 $ 15.9
Second Quarter $ 22.8 $ 17.3
Third Quarter $ 27.3 $ 22.0
Fourth Quarter $ 29.3 $ 25.4
2010
First Quarter $ 31.8 $ 28.4
Second Quarter $ 31.5 $ 23.5
Third Quarter $ 29.4 $ 23.5
Fourth Quarter $ 33.9 $ 29.6

Monthly
2008
September $ 24.0 $ 21.9
October $ 23.3 $ 20.3
November $ 22.2 $ 17.3
December $ 23.4 $ 20.6
2009
September $ 27.3 $ 24.8

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October	$	28.1	$	26.1
November	$	28.0	$	25.4
December	$	29.3	$	27.9

					High $		Low $
Annually
2007						20.8		10.2
2008						24.2		14.4
2009						26.0		14.1
2010						30.1		20.8
2011						30.1		15.7

Quarterly
2010
First Quarter						28.2		25.2
Second Quarter						28.0		20.9
Third Quarter						26.1		20.8
Fourth Quarter						30.1		26.3
2011
First Quarter						29.8		26.8
Second Quarter						30.1		25.4
Third Quarter						26.5		18.9
Fourth Quarter						22.1		15.7

Monthly
2011
September	$	29.4	$	25.6		20.9		18.9
October	$	32.9	$	29.6		22.1		18.6
November	$	33.7	$	31.8		21.1		16.1
December	$	33.9	$	31.7		16.6		15.7
2011
2012
January	$	33.6	$	30.5		33.6		30.5
February	$	32.3	$	30.4		32.3		30.4

On March ~~9, 2011,~~5, 2012, the closing price per share of our Ordinary Shares on the NSYE was ~~$31.52.~~$12.94.

B.	B. PLAN OF DISTRIBUTION

Not applicable.

C.	C. MARKETS

Our ordinary shares are listed on the New York Stock Exchange and Tel Aviv Stock Exchange under the symbol “CEL”

D.	~~SELLING SHAREHOLDERS~~

D. SELLING SHAREHOLDERS

Not applicable.

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E. DILUTION

Not applicable.

F. EXPENSES OF THE ISSUE

Not applicable.

E.ITEM 10.

~~DILUTION~~ADDITIONAL INFORMATION

A. SHARE CAPITAL

Not applicable.

F.	~~EXPENSES OF THE ISSUE~~

~~Not applicable.~~

~~ITEM 10.~~

~~ADDITIONAL INFORMATION~~

A.	~~SHARE CAPITAL~~

~~Not applicable.~~

B.	B. MEMORANDUM AND ARTICLES OF ASSOCIATION

Objects and Purposes

Our registration number with the Israeli registrar of companies is 51-1930125. Our object is to engage, directly or indirectly, in any lawful undertaking or business whatsoever as determined by our Board of Directors, including, without limitation, as stipulated in our memorandum of association.

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Transfer of Shares

Fully paid ordinary shares are issued in registered form and may be freely transferred unless the transfer is restricted or prohibited by our articles of association, applicable law, our licenses, the rules of the SEC or the rules of a stock exchange on which the shares are traded. The ownership or voting of ordinary shares by non-residents of Israel is not restricted in any way by our articles of association or the laws of the State of Israel, except for ownership by nationals of some countries that are, or have been, in a state of war with Israel.

According to our licenses, investors are prohibited from acquiring (alone or together with relatives or with other parties who collaborate on a regular basis) or transferring our shares, directly or indirectly (including by way of creating a pledge which if foreclosed, will result in the transfer of shares), in one transaction or a series of transactions, if such acquisition or transfer will result in a holding or transfer of 10% or more of any of our means of control, or from transferring any of our means of control if as a result of such transfer, control over our company will be transferred from one party to another, without the prior approval of the Ministry of Communications. Our specific licenses also require approval of the Minister of Communications before acquiring the ability to effect a significant influence over us. In this context, holding 25% of our means of control is presumed to confer significant influence. In addition, according to our licenses, if you hold more than 5% of our means of control, you may not hold, directly or indirectly, more than 5% of the means of control in Bezeq or another cellular operator in Israel (subject to certain exceptions) and may not serve as an office holder of one of our competitors, other than in specific circumstances and subject to the approval of the Ministry of Communications. For more details relating to these restrictions, please see “Item 4. Information on the Company – B. Business Overview – Government Regulations - Our Principal License” and our principal license, a convenience translation of which has been filed with the SEC. See "Item 19 – Exhibits". The holding and transfer restrictions under our licenses are posted on our website at www.cellcom.co.il under “Investor Relations – Corporate Governance – Company Profile - Legal & Corporate.”

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Voting

Holders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote of shareholders at a shareholder meeting. Shareholders may vote at shareholder meetings either in person, by proxy or by written ballot. Shareholder voting rights may be affected by the grant of special voting rights to the holders of a class of shares with preferential rights that may be authorized in the future. The Companies Law provides that a shareholder, in exercising his or her rights and performing his or her obligations toward the company and its other shareholders, must act in good faith and in a customary manner, and avoid abusing his or her power. This is required when voting at general meetings on matters such as changes to the articles of association, increasing the company’s registered capital, mergers and approval of related party transactions. A shareholder also has a general duty to refrain from depriving any other shareholder of their rights as a shareholder. In addition, any controlling shareholder, any shareholder who knows that its vote can determine the outcome of a shareholder vote and any shareholder who, under the company’s articles of association, can appoint or prevent the appointment of an office holder, is required to act with fairness towards the company. The Companies Law does not describe the substance of this duty, except to state that the remedies generally available upon a breach of contract will apply also in the event of a breach of the duty to act with fairness, ~~and,~~but recent case law addressing the substance of this duty, suggests that the duty to act in fairness towards the company may include in certain circumstances, the following: the duty to refrain from competing with the company (applicable to closely held companies), the duty to provide access to the ~~best of our knowledge, there is no binding case law that addresses this subject directly.~~company's documents to other shareholders, and the duty to refrain from exercising a minority shareholders' voting power in a manner aimed at "blackmailing" the controlling shareholder. As required under our license, our articles of association provide that any holdings of our ordinary shares

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that contravene the holding or transfer restrictions contained in our license, which are summarized under “—Transfer of Shares” and “Item 4. Information on the Company – B. Business Overview - Government Regulations—Our Principal License,” will not be entitled to voting rights. In addition, our license requires that as a condition to voting at any meeting of shareholders, in person or by proxy, each shareholder must certify that its holdings of our shares do not contravene the restrictions contained in our license.

Election of Directors

Our ordinary shares do not have cumulative voting rights for the election of directors. Rather, under our articles of association our directors (other than external directors and directors appointed by Israeli citizens and residents from among our founding shareholders) are elected at a shareholders meeting by a simple majority of our ordinary shares. As a result, the holders of our ordinary shares that represent more than 50% of the voting power represented at a shareholders meeting, have the power to elect any or all of our directors whose positions are being filled at that meeting, subject to the special approval requirements for external directors described under “Item 6.A – Directors and Senior Management—External Directors” and the right of DIC to directly appoint 20% of our directors described under “Item 6.A – Directors and Senior Management—Israeli Appointed Directors.” Directors may also be appointed for office by our Board of Directors until the next annual general meeting of shareholders.

Dividend and Liquidation Rights

Our board of directors may declare a dividend to be paid to the holders of ordinary shares on a pro rata basis. Dividends may only be paid out of our profits and other surplus

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funds, as defined in the Companies Law, as of our most recent financial statement or as accrued over the past two years, whichever is higher, or, in the absence of such profits or surplus, with court approval. In any event, a dividend is permitted only if there is no reasonable concern that the payment of the dividend will prevent us from satisfying our existing and foreseeable obligations as they become due. In the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of ordinary shares on a pro rata basis. This right may be affected by the grant of preferential dividend or distribution rights to the holders of a class of shares with preferential rights that may be authorized in the future. For a description of a covenant we undertook in March 2012, in connection to our plans to raise additional debt, in regards to our dividend distributions under certain circumstances see “Item 8. Financial Information – A. Statements and Other Financial Information - Dividend Policy” and “— B. Liquidity and Capital Resources – Debt Service – Public Debentures".

Shareholders Meetings

We are required to convene an annual general meeting of our shareholders once every calendar year within a period of not more than 15 months following the preceding annual general meeting. Our board of directors is required to convene a special general meeting of our shareholders at the request of two directors or one quarter of the members of our Board of Directors or at the request of one or more holders of 5% or more of our share capital and 1% of our voting power or the holder or holders of 5% or more of our voting power. All shareholders meetings require prior notice of at least 21 days, or up to 35 days if required by applicable law or regulation. We provide at least 40 day advance written notice, in accordance with the NYSE’s rules. The chairperson of our Board of Directors presides over our general meetings. Subject to the provisions of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at general meetings are the shareholders of record on a date to be decided by the board of directors, which may be between four and 40 days prior to the date of the meeting.

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Quorum

Our articles of association provide that the quorum required for any meeting of shareholders shall consist of at least two shareholders present, in person or by proxy or written ballot, who hold or represent between them at least one-third of the voting power of our issued share capital. A meeting adjourned for lack of a quorum generally is adjourned to the same day in the following week at the same time and place or, if not set forth in the notice to shareholders, to a time and place set by the chairperson of the meeting with the consent of the holders of a majority of the voting power represented at the meeting and voting on the question of adjournment. At the reconvened meeting, the required quorum consists of at least two shareholders present, in person or by proxy or written ballot, unless the meeting was called pursuant to a request by our shareholders in which case the quorum required is the number of shareholders required to call the meeting as described under “—Shareholder Meetings.”

Resolutions

An ordinary resolution at a shareholders meeting requires approval by a simple majority of the voting rights represented at the meeting, in person, by proxy or written ballot, and voting on the resolution. Under the Companies Law, unless otherwise provided in the articles of association or applicable law, all resolutions of the shareholders require a simple

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majority. A resolution for the voluntary winding up of the company requires the approval by holders of 75% of the voting rights represented at the meeting, in person or by proxy or written ballot, and voting on the resolution.

Modification of Class Rights

The rights attached to any class, such as voting, liquidation and dividend rights, may be amended by written consent of holders of a majority of the issued shares of that class, or by adoption of a resolution by a simple majority of the shares of that class represented at a separate class meeting.

Indemnification of Directors and Officers

Under the Companies Law, an Israeli company may not exempt an office holder from liability for breach of his duty of loyalty, but may exempt in advance an office holder from liability to the company, in whole or in part, for a breach of his or her duty of care (except in connection with distributions), provided the articles of association of the company allow it to do so. Our articles of association allow us to do so.

Our articles of association provide that, subject to the provisions of the Companies Law, we may enter into a contract for insurance against liability of any of our office holders with respect to each of the following:

a breach of his or her duty of care to us or to another person;

a breach of his or her duty of loyalty to us, provided that the office holder acted in good faith and had reasonable grounds to assume that his or her act would not prejudice our interests;

a financial liability imposed upon him or her in favor of another person concerning an act performed in the capacity as an office holder.

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reasonable litigation expenses, including attorney fees, incurred by the office holder as a result of an administrative enforcement proceeding instituted against him, including a payment imposed on the office holder in favor of an injured party as set forth in the Israeli Securities Law and expenses that the office holder incurred in connection with a relevant proceeding under the Securities Law, including reasonable legal expenses, which term includes attorney fees.

We maintain a liability insurance policy for the benefit of our officers and directors. In respect to office holders that are or are related to controlling shareholders or in respect of whom our controlling shareholders have a personal interest, who may serve from time to time, such liability insurance was approved for a period of three years from our annual shareholder meeting held on July 2011.

Our articles of association provide that we may indemnify an office holder against:

a financial liability imposed on or incurred by an office holder in favor of another person by any judgment, including a settlement or an arbitrator’s award approved by a court concerning an act performed in his or her capacity

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as an office holder. Such indemnification may be approved (i) after the liability has been incurred or (ii) in advance, provided that the undertaking is limited to types of events which our Board of Directors deems to be foreseeable in light of our actual operations at the time of the undertaking and limited to an amount or criterion determined by our Board of Directors to be reasonable under the circumstances, and further provided that such events and amounts or criteria are set forth in the undertaking to indemnify;

reasonable litigation expenses, including attorney’s fees, incurred by the office holder as a result of an investigation or proceeding instituted against him or her by a competent authority, provided that such investigation or proceeding was concluded without the filing of an indictment against him or her and either (A) concluded without the imposition of any financial liability in lieu of criminal proceedings or (B) concluded with the imposition of a financial liability in lieu of criminal proceedings but relates to a criminal offense that does not require proof of criminal intent; or in connection with an administrative enforcement proceeding or a financial sanction, including a payment imposed on the office holder in favor of an injured party as set forth in the Israeli Securities Law, 1968, as amended (the "Securities Law"), and expenses that the office holder incurred in connection with a relevant proceeding under the Securities Law, including reasonable legal expenses, which term includes attorney fees; and

reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or charged to him or her by a court, in proceedings instituted by us or on our behalf or by another person, or in a criminal indictment from which he or she was acquitted, or a criminal indictment in which he or she was convicted for a criminal offense that does not require proof of intent, in each case relating to an act performed in his or her capacity as an office holder.

We have undertaken to indemnify our directors, officers and certain other employees for certain events listed in the indemnification letters given to them. In respect of office holder who are our controlling shareholders or are related thereto, or in respect of whom our controlling shareholders have a personal interest in their receiving indemnification letters from us, such indemnification was approved for a period of three years from our annual shareholder meeting held on July 2011. Excluding reasonable litigation expenses, as described above, the aggregate amount payable to all directors and officers and other employees who may have been or will be given such indemnification letters is limited to the amounts we receive from our insurance policy plus 30% of our shareholders’ equity as of December 31, 2001, or NIS 486 million, and to be adjusted by the Israeli CPI.

The Companies Law provides that a company may not exempt or indemnify an office holder, or enter into an insurance contract, which would provide coverage for any monetary liability incurred as a result of any of the following:

a breach by the office holder of his or her duty of loyalty unless, with respect to insurance coverage or indemnification, the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the company;

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a breach by the office holder of his or her duty of care if the breach was done intentionally or recklessly;

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any act or omission done with the intent to derive an illegal personal benefit; or

any fine or penalty levied against the office holder.

Under the Companies Law, any exemption of, indemnification of, or procurement of insurance coverage for, our office holders must be approved by our audit committee and our Board of Directors and, if the beneficiary is a director, by our shareholders.

Mergers and Acquisitions under Israeli Law

The Companies Law includes provisions that allow a merger transaction and requires that each company that is a party to a merger have the transaction approved by its board of directors and a vote of the majority of its shares at a shareholders meeting. For purposes of the shareholder vote, unless a court rules otherwise, the merger will not be deemed approved if a majority of the shares represented at the shareholders meeting that are held by parties other than the other party to the merger, or by any person who holds 25% or more of the shares or the right to appoint 25% or more of the directors of the other party, vote against the merger. Upon the request of a creditor of either party of the proposed merger, the court may delay or prevent the merger if it concludes that there exists a reasonable concern that as a result of the merger, the surviving company will be unable to satisfy the obligations of any of the parties to the merger. In addition, a merger may not be completed unless at least (i) 50 days have passed from the time that the requisite proposal for the merger has been filed by each party with the Israeli Registrar of Companies and (ii) 30 days have passed since the merger was approved by the shareholders of each party.

The Companies Law also provides that an acquisition of shares of a public company must be made by means of a special tender offer if as a result of the acquisition the purchaser would become a 25% or greater shareholder of the company and there is no existing 25% or greater shareholder in the company. An acquisition of shares of a public company must also be made by means of a tender offer if as a result of the acquisition the purchaser would become a 45% or greater shareholder of the company and there is no existing 45% or greater shareholder in the company. These requirements do not apply if the acquisition (i) occurs in the context of a private placement by the company that received shareholder approval, (ii) was from a 25% shareholder of the company and resulted in the acquirer becoming a 25% shareholder of the company or (iii) was from a 45% shareholder of the company and resulted in the acquirer becoming a 45% shareholder of the company. The special tender offer must be extended to all shareholders but the offeror is not required to purchase shares representing more than 5% of the voting power attached to the company’s outstanding shares, regardless of how many shares are tendered by shareholders. The special tender offer may be consummated only if (i) at least 5% of the voting power attached to the company’s outstanding shares will be acquired by the offeror and (ii) the number of shares tendered in the offer exceeds the number of shares whose holders objected to the offer.

If, as a result of an acquisition of shares, the acquirer will hold more than 90% of a company’s outstanding shares, the acquisition must be made by means of a tender offer for all of the outstanding shares. If less than 5% of the outstanding shares are not tendered in the tender offer, all the shares that the acquirer offered to purchase will be transferred to it. The law provides for appraisal rights if any shareholder files a request in court within ~~three~~six months

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following the consummation of a full tender ~~offer.~~offer, but the acquirer may elect to determine that any shareholder tendering his shares will not be entitled to appraisal rights. If more than 5% of the outstanding

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shares are not tendered in the tender offer, then the acquirer may not acquire shares in the tender offer that will cause his shareholding to exceed 90% of the outstanding shares.

Furthermore, Israeli tax considerations may make potential transactions unappealing to us or to our shareholders who are not exempt from Israeli income tax under Israeli law or an applicable tax treaty. For example, Israeli tax law does not recognize tax-free share exchanges to the same extent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment of numerous conditions, including a holding period of two years from the date of the transaction during which sales and dispositions of shares of the participating companies by certain shareholders are restricted. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires, tax then becomes payable even if no actual disposition of the shares has occurred. For information regarding Israeli tax on the sale of our shares, please see “Item 10.E - Taxation—Israeli Tax Considerations—Capital Gains Tax on Sales of Our Ordinary Shares.”

Anti-Takeover Measures under Israeli Law

The Companies Law allows us to create and issue shares having rights different from those attached to our ordinary shares, including shares providing certain preferred or additional rights to voting, distributions or other matters and shares having preemptive rights. We do not have any authorized or issued shares other than ordinary shares. In the future, if we do create and issue a class of shares other than ordinary shares, such class of shares, depending on the specific rights that may be attached to them, may delay or prevent a takeover or otherwise prevent our shareholders from realizing a potential premium over the market value of their ordinary shares. The authorization of a new class of shares will require an amendment to our articles of association and to our memorandum, which requires the prior approval of a simple majority of our shares represented and voting at a shareholders meeting. Our articles of association provide that our Board of Directors may, at any time in its sole discretion, adopt protective measures to prevent or delay a coercive takeover of us, including, without limitation, the adoption of a shareholder rights plan.

C.	C. MATERIAL CONTRACTS

For a description of our material suppliers, see “Item 4. Information on the Company – A. History and Development of the Company – Significant Developments during 2011 – Acquisition of Netvision Ltd.”, “Item 4. Information on the Company – B. Business Overview – Network and Technology”, “Item 4. Information on the Company – B. Business Overview – Customer Care” ~~and~~, “Item 4. Information on the Company – B. Business Overview - Services and ~~Products.~~Products” and “Item 4. Information on the Company – B. Business Overview – NETISION.”

For a description of our debt agreements, see “Item 5. Operating and Financial Review and Prospects – B. Liquidity and Capital Resources – Debt Service – Public Debentures.”

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Registration Rights Agreement

Upon the sale of shares by DIC to Goldman Sachs International on March 15, 2006, we entered into a registration rights agreement with Goldman Sachs International, DIC and two other shareholders who are subsidiaries of DIC on customary terms and conditions. Upon the subsequent sales of shares by DIC to Migdal Insurance Company Ltd. and two of its affiliates, to Leumi & Co. Investment House Ltd. (an affiliate of Bank Leumi Le-Israel Ltd), and to Stocofin (Israel) Ltd. (an affiliate of the First International Bank of Israel Ltd.),

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these shareholders also joined the registration rights agreement. We refer to DIC, its two subsidiaries and the additional shareholders who are parties to the registration rights agreement as the registration rights holders. The shares eligible for registration under the agreement are ordinary shares held by the registration rights holders as of the respective dates they entered into the registration rights agreement and any additional ordinary shares such holders may thereafter acquire, so long as they are held by a registration rights holder or a “permitted transferee” (a person directly or indirectly controlling, controlled by or under common control with such registration rights holder) thereof. As of December 31, ~~2010, 48,037,500~~2011, 43,381,135 ordinary shares, held by DIC directly and through its wholly owned ~~subsidiaries,~~subsidiary, are entitled to registration rights as well as any additional shares still held, if held, by the other shareholders who joined the agreement.

Commencing August 9, 2008, the registration rights holders are entitled to one demand registration per 12-month period, so long as such request is initiated by registration rights holders of at least 3.25% of the then outstanding registrable securities and the demand refers to a minimum of 3% of our then outstanding share capital, subject to customary deferral rights. In addition, in connection with any public offerings that we initiate in the future, if we propose to register any of our securities for our own account or for the account of any of our shareholders other than in a demand registration or in a registration relating solely to an incentive plan, the registration rights holders have piggyback rights to include their shares subject to customary underwriters’ cutback rights. In the case of a cut back, each registration rights holder that is not a member of the IDB group will be entitled to register registrable shares in an amount equal to its percentage holding of the aggregate number of registrable shares held by all registration rights holders wishing to participate in such registration, or, if such registration rights holder then holds more than 20% of its holdings as of the date it signed the registration rights agreement, registrable shares in an amount equal to twice its percentage holding of the aggregate number of registrable shares held by all registration rights holders wishing to participate in such registration. Members of the IDB group will be entitled to register a number of registrable shares equal to the aggregate number of registrable shares to be included in the registration, less the registrable shares of all the other registration rights holders being registered pursuant to the foregoing calculation.

All registration rights terminate, with respect to any individual registration rights holder, at such time as all registrable shares of such holder may be sold without registration pursuant to Rule 144 under the Securities Act during any three-month period. We are required to pay all expenses incurred in carrying out the above registrations, as well as the reasonable fees and expenses of one legal counsel for the selling registration rights holders, except for underwriter discounts and commissions with respect to the shares of such holders. The agreement provides for customary indemnification and contribution provisions. Our initial public offering on February 2007 was effected in accordance with the registration rights agreement, except that the selling shareholders agreed to bear the expenses of the offering.

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Underwriting agreement

We entered into an underwriting agreement among Goldman, Sachs & Co., Citigroup Global Markets, Inc. and Deutsche Bank Securities, Inc., as the representatives of the underwriters, and DIC and Goldman Sachs International, as the selling shareholders, on February 5, 2007, with respect to the ordinary shares sold in our initial public offering.

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We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, and to contribute to payments the underwriters may be required to make in respect of such liabilities.

D.	D. EXCHANGE CONTROLS

There are currently no Israeli currency control restrictions on payments of dividends or other distributions with respect to our ordinary shares or the proceeds from the sale of the shares, except for the obligation of Israeli residents to file reports with the Bank of Israel regarding certain transactions. However, legislation remains in effect pursuant to which currency controls can be imposed by administrative action at any time.

E.	E. TAXATION

U.S. Federal Income Tax Considerations

The following is a general discussion of certain material U.S. federal income tax consequences of ownership and disposition of the Company’s shares by a “U.S. holder” (as defined below). This discussion does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a U.S. holder in light of the holder’s particular circumstances and does not address U.S. state, local and non-U.S. tax consequences. The discussion applies only to U.S. holders (as defined below) that hold ~~the~~Company's shares as capital assets for U.S. federal income tax purposes and it does not describe all of the tax consequences that may be relevant to U.S. holders subject to special rules, such as certain financial institutions, insurance companies, dealers ~~and~~or traders in securities or foreign currencies, persons holding the shares as part of a hedge, straddle, conversion transaction or other integrated transaction, persons whose functional currency for U.S. federal income tax purposes is not the U.S. dollar, partnerships or other entities classified as partnerships for U.S. federal income tax purposes, persons liable for the alternative minimum tax, tax-exempt organizations, shareholders that own or are deemed to own 10% or more of the Company’s voting power, or shareholders that hold our shares in connection with a trade or business conducted outside of the United States.

This discussion is based on the Internal Revenue Code of 1986, as amended (the "Code"), administrative pronouncements, judicial decisions and final, temporary and proposed Treasury regulations, all as of the date hereof. These laws are subject to change, possibly on a retroactive basis. Shareholders are urged to consult their tax advisors regarding the U.S. federal, state, local and foreign tax consequences of purchasing, owning and disposing of Company's shares in light of their particular circumstances.

The discussion below applies only to U.S. holders. As used herein, a “U.S. holder” is a beneficial owner of the Company’s shares that is eligible for the benefits of the Israel –U.S. income tax treaty and is, for U.S. federal income tax purposes:

a citizen or resident of the United States;

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a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States or any political subdivision thereof; or

an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.

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If an entity that is classified as a partnership for U.S. federal income tax purposes holds ~~the~~Company's shares, the U.S. federal income tax treatment of a partner will generally depend on the status of the partner and upon the activities of the entity. ~~Partners~~Such entities and their partners or members ~~of such entities~~ should consult their tax advisors regarding the tax consequences of investments in the Company’s shares.

Taxation of Distributions

Subject to the discussion in "- Passive Foreign Investment Company Rules" below, distributions paid on the Company’s shares, other than certain pro rata distributions of ordinary shares, will be treated as dividends to the extent paid out of current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Since the Company does not maintain calculations of its earnings and profits under U.S. federal income tax principles, U.S. holders will generally be required to treat such distributions as taxable dividends and include them in income on the date of receipt. Subject to applicable limitations, dividends paid to certain non-corporate U.S. holders in taxable years beginning before January 1, 2013, will be taxable at a maximum rate of 15%. The amount of a dividend will include any amounts withheld by the Company or its paying agent in respect of Israeli taxes. The ~~amount of the~~ dividend will be treated as foreign source ~~dividend~~ income and will not be eligible for the dividends-received deduction generally allowed to U.S. corporations under the Code.

Dividends paid in NIS will be included in a U.S. holder’s income in a U.S. dollar amount calculated by reference to the exchange rate in effect on the date of receipt of the dividend, regardless of whether the payment is in fact converted into U.S. dollars. If the dividend is converted into U.S. dollars on the date of receipt, a U.S. holder generally should not be required to recognize foreign currency gain or loss in respect of the dividend income. A U.S. holder may have foreign currency gain or loss if the ~~holder does not convert the amount of such~~ dividend is converted into U.S. dollars onafter the date of ~~its~~ receipt. Such gain or loss would generally be treated as U.S. source ordinary income or loss.

Subject to applicable limitations that may vary depending upon a U.S. holder’s particular circumstances, Israeli taxes withheld from dividends at a rate not exceeding the applicable rate provided by the U.S.-Israel income tax treaty will be creditable against the holder’s U.S. federal income tax liability. Israeli taxes withheld in excess of the applicable rate allowed by the treaty will not be eligible for credit against a U.S. holder’s federal income tax liability. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. Instead of claiming a credit, a U.S. holder may, at the holder’s election, deduct the otherwise creditable foreign taxes in computing the taxable income for the year, subject to generally applicable limitations under U.S. law. An election to deduct foreign taxes instead of claiming foreign tax credits applies to all foreign taxes paid or accrued in the taxable year. The rules governing foreign tax credits are complex and U.S. holders should consult their tax advisors regarding the availability of foreign tax credits and the deductibility of foreign taxes in their particular circumstances.

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Sale and Other Disposition of the Company’s Shares

Subject to the discussion in "- Passive Foreign Investment Company Rules" below, gain or loss realized on the sale or other disposition of the Company's shares will be capital gain or loss, and will be long-term capital gain or loss if the U.S. holder held the shares for more than one year. The amount of gain or loss will be equal to the difference between the tax basis in the

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shares disposed of and the amount realized on the disposition. Such gain or loss will generally be U.S. source gain or loss for foreign tax credit purposes. The deductibility of capital losses is subject to limitations.

Passive Foreign Investment Company Rules

The Company believes that it was not a “passive foreign investment company” for U.S. federal income tax purposes, or PFIC, for the taxable year of ~~2010.~~2011. However, since PFIC status depends upon the composition of a company’s income and assets and the market value of its assets (including, among others, equity investments in less than 25%-owned entities) from time to time, there can be no assurance that the Company will not be considered a PFIC for any taxable year. If the Company were to be treated as a PFIC for any taxable year during which a U.S. holder held a share in the Company, certain adverse consequences could apply to the U.S. holder. Specifically, gain recognized by a U.S. holder on a sale or other disposition of a share would be allocated ratably over the U.S. holder’s holding period for the share. The amounts allocated to the taxable year of the sale or other exchange and to any year before the Company became a PFIC would be taxed as ordinary income in the current year. The amount allocated to each other taxable year would be subject to tax at the highest rate in effect for individuals or corporations, as appropriate, and an interest charge would be imposed on the resulting tax liability. Further, any distribution in excess of 125% of the average of the annual distributions received by the U.S. holder during the preceding three years or the U.S. holder’s holding period, whichever ifis shorter, would be subject to taxation as described immediately above. Certain elections may be available (including a mark-to-market election) to U.S. holders that may mitigate the adverse consequences resulting from PFIC status. In addition, if we were to be treated as a PFIC in a taxable year in which we pay a dividend or the prior taxable year, the 15% dividend rate discussed above with respect to dividends paid to certain non-corporate holders would not apply.

Information Reporting and Backup Withholding

Payment of dividends and sales proceeds that are made within the United States or through certain U.S.-related financial intermediaries generally are subject to information reporting and to backup withholding unless (i) the U.S. holder is a corporation or other exempt recipient or (ii) in the case of backup withholding, the U.S. holder provides a correct taxpayer identification number and certifies that the U.S. holder is not subject to backup withholding. The amount of any backup withholding from a payment to a U.S. holder will be allowed as a credit against the U.S. holder’s U.S. federal income tax liability and may entitle the U.S. holder to a refund, provided that the required information is timely furnished to the Internal Revenue Service.

Certain U.S. holders who are individuals, or are controlled by individuals, may be required to report on IRS Form 8983 information relating to their holdings of the Company's shares, subject to certain exceptions (including an exception for securities held in accounts

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maintained by U.S. financial institutions). U.S. holders should consult their tax advisers regarding the application of these rules in the holders' particular circumstances.

Israeli Tax Considerations

The following is a discussion of certain material Israeli tax consequences to purchasers of our ordinary shares. The discussion also contains a description of certain relevant material provisions of the current Israeli income tax ~~structure~~system applicable to companies in Israel, with special reference to its effect on us. To the extent that the discussion is based on new tax legislation that has not been subject to judicial or administrative interpretation, we cannot assure you that the appropriate tax authorities or the courts will accept the views expressed in this discussion.

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This discussion applies to ~~purchasers~~shareholders that ~~will~~ hold our ordinary shares as capital assets and does not address all of the tax consequences that may be relevant to ~~purchasers~~holders of our ordinary shares in light of their particular circumstances or certain types of ~~purchasers~~holders of our ordinary shares subject to special tax treatment. Because individual circumstances may differ, ~~purchasers~~shareholders should consult their tax advisor to determine the applicability of the rules discussed below to them, including the application of Israeli or other tax laws. The discussion below is not intended, and should not be construed, as legal or professional tax advice and is not exhaustive of all possible tax considerations.

Taxation of Israeli Companies

General Corporate Tax Structure

Generally, Israeli companies are subject to corporate tax at the rate of ~~25% for the 2010 tax year and~~ 24% for the 2011 tax year and 25% for the 2012 tax year. Israeli companies are generally subject to capital gains tax at the corporate tax rate. Following an amendment to the Israeli Income Tax Ordinance ~~enacted in July 2009,~~ which ~~provides for an additional~~came into effect on January 1, 2012, scheduled gradual reduction of the corporate tax rate in future years was canceled, and the corporate tax rate ~~will decrease as follows: 23%~~was increased to 25% for the 2012 tax year ~~22%~~and is scheduled to remain at such rate for ~~the 2013~~future tax ~~year, 21% for the 2014 tax year, 20% for the 2015 tax year and to 18% for the 2016 tax year and onward.~~years .

Amendment No. 174 to the Income Tax Ordinance, enacted in January 2010, provides that Israeli Accounting Standard No. 29 will not apply with respect to the tax years 2007, 2008 and 2009, and as a result the International Financial Reporting Standards (IFRS) will not apply for purposes of determining taxable income for such tax years. In January ~~2011, the Israeli Tax Authority published its intention to recommend~~2012, Amendment No. 188 to the Income Tax Ordinance was enacted which provides that Israeli ~~Minister of Finance~~Accounting Standard No. 29 (and as a result IFRS) will not apply also with respect to ~~extend~~ the ~~aforementioned amendment so that it will also apply for the~~tax years 2010 ~~tax year.~~and 2011. The effect of this amendment on our financial statements, included elsewhere in this annual report, is not material.

Capital Gains Tax on Sales of Our Ordinary Shares

Israeli law generally imposes a capital gains tax on the sale of any capital assets by residents of Israel, as defined for Israeli tax purposes, and on the sale of assets located in Israel, including shares in Israeli resident companies, by non-residents of Israel, unless a specific exemption is available or unless a tax treaty between Israel and the shareholder’s country of residence provides otherwise. In calculating capital gain, the law distinguishes between real gain and inflationary surplus. The inflationary surplus is the portion of the total capital gain equal to the increase in the relevant asset’s value that is attributable to the increase in the Israeli CPI between the date of purchase and the date of sale. The real gain is

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the excess of the total capital gain over the inflationary surplus. A non-resident that invests in taxable assets with foreign currency, or any individual ~~that~~who holds securities the price of which is stated in foreign currency, may elect to calculate the amount of inflationary surplus in that foreign currency.

Taxation of Israeli Residents

~~The~~As of January 1, 2012, the tax rate generally applicable to real capital gains derived from the sale of shares, whether listed on a stock market or not, is ~~20%~~25% for Israeli individuals, unless such shareholder claims a deduction for financing expenses in connection with such shares, in which case the gain will generally be taxed at a rate of ~~25%~~30%. Additionally, if such shareholder is considered ~~to be~~ a significant shareholder at any time during the 12-month period preceding such sale, the tax

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rate will be ~~25%~~30%. For this purpose, a significant shareholder is one that holds, directly or indirectly, including with others, at least 10% of certain means of control in a company.

Israeli companies are generally subject to the corporate tax rate (see above) on capital gains derived from the sale of shares listed on a stock market.

Taxation of Non-Israeli Residents

Non-Israeli residents are generally exempt from Israeli capital gains tax on any gains derived from the sale of shares of Israeli companies publicly traded on the Tel Aviv Stock Exchange or a recognized stock exchange outside of Israel (including the New York Stock Exchange), provided that such shareholders did not acquire their shares prior to the issuer’s initial public offering (in which case a partial exemption may be available) and that the gains were not derived from a permanent establishment maintained by such shareholders in Israel. Shareholders that do not engage in activity in Israel generally should not be subject to such law. However, a non-Israeli corporation will not be entitled to the exemption from capital gains tax if Israeli residents (i) have a controlling interest of 25% or more in such non-Israeli corporation or (ii) are the beneficiaries of or are entitled to 25% or more of the revenues or profits of such non-Israeli corporation, whether directly or indirectly.

In addition, under the Convention between the Government of the United States of America and the Government of Israel with respect to Taxes on Income, as amended, referred to as the U.S.-Israel tax treaty, the sale of our ordinary shares by a shareholder who qualifies as a resident of the United States within the meaning of the U.S.-Israel tax treaty and who is entitled to claim the benefits afforded to such person by the U.S.-Israel tax treaty, referred to as a treaty U.S. resident, and who holds its ordinary shares as a capital asset is also exempt from Israeli capital gains tax unless either (i) the treaty U.S. resident holds, directly or indirectly, shares representing 10% or more of our voting power during any part of the 12-month period preceding such sale or (ii) the capital gains arising from such sale are attributable to a permanent establishment of the treaty U.S. resident that is located in Israel. However, under the U.S.-Israel tax treaty, a treaty U.S. resident would be permitted to claim a credit for taxes paid in Israel against the U.S. federal income tax imposed on the sale, subject to the limitations in U.S. laws applicable to foreign tax credits. The U.S.-Israel tax treaty does not relate to U.S. state or local taxes.

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Taxation of Dividends Paid on Our Ordinary Shares

Taxation of Israeli Residents

~~Individuals~~Following an amendment to the Israeli Income Tax Ordinance which came into effect on January 1, 2012, individuals who are Israeli residents are generally subject to Israeli income tax on the receipt of dividends paid on our ordinary shares at the rate of 25% (previously 20%), unless the recipient is a significant shareholder (as defined above) at any time during the 12-month period preceding the distribution in which case the applicable tax rate will be 30% (previously 25%). The company distributing the dividend is required to withhold tax at the rate of 25% (previously 20%) (a different rate may apply to dividends paid on shares deriving from the exercise of stock options or other equity based awards granted as compensation to employees or office holders of the company). Companies which are Israeli residents are generally exempt from income tax on the receipt of dividends from another Israeli company, unless the source of such dividends is located outside of Israel in which case tax will generally apply at a rate of 25%.

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Taxation of Non-Israeli Residents

Non-residents of Israel are generally subject to Israeli income tax on the receipt of dividends paid on our ordinary shares at the rate of ~~20%~~25% unless the recipient is a significant shareholder at any time during the 12-month period preceding the distribution in which case the applicable tax rate will be ~~25%~~30%. The company distributing the dividend is required to withhold tax at the source at the rate of ~~20%~~25%.

Under the U.S.-Israel tax treaty, the maximum rate of tax withheld in Israel on dividends paid to a holder of our ordinary shares who is a treaty U.S. resident is 25%. ~~Furthermore, the~~The maximum rate of withholding tax on dividends that are paid in certain circumstances to a U.S. corporation holding 10% or more of our outstanding voting power throughout the tax year in which the dividend is distributed as well as the previous tax year, is 12.5%.

A non-resident of Israel who has dividend income derived from or accrued in Israel, from which tax was withheld at source, is generally exempt from the duty to file tax returns in Israel in respect of such income, provided such income was not derived from a business conducted in Israel by such non-Israeli resident.

F.	F. DIVIDENDS AND PAYING AGENTS

Not applicable.

G.	G. STATEMENT BY EXPERTS

Not applicable.

H.	H. DOCUMENTS ON DISPLAY

We are subject to the information reporting requirements of the Securities Exchange Act of 1934, as amended, referred to as the Exchange Act, applicable to foreign private issuers. As a foreign private issuer, we are exempt from certain rules and regulations under the Exchange Act prescribing the content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act, with respect to their purchase and

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sale of our ordinary shares. In addition, we are not required to file reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act. However, we file annual reports with the SEC on Form 20-F containing financial statements audited by an independent accounting firm. We also furnish reports to the SEC on Form 6-K containing unaudited financial information for the first three quarters of each fiscal year and other material information, in accordance with the reporting requirements applicable to us as a dual listed company and as required due to our controlling shareholder's reporting obligations with respect to us. You may read and copy any document we file, including any exhibits, with the SEC without charge at the SEC's public reference room at 100 F Street, N.E., Washington, D.C. 20549. Copies of such material may be obtained by mail from the Public Reference Branch of the SEC at such address, at prescribed rates. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Substantially all of our SEC filings are also available to the public at the SEC's website at http://www.sec.gov and as of July 2007 also at the TASE's

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website at http://maya.tase.co.il and at the Israeli Securities Authority's website at http://www.magna.isa.gov.il.

I.	SUBSIDIARY INFORMATION

Not applicable.

ITEM 11.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In the course of our normal operations, we are exposed to market risks including fluctuations in foreign currency exchange rates, interest rates and the Israeli CPI. We are exposed to currency risks primarily as a result of purchasing inventory and fixed assets mainly in U.S. dollars while almost all of our cash receipts are in NIS. A substantial amount of our cash payments are incurred in, or linked to foreign currencies. In particular, in ~~2009~~2010 and ~~2010,~~2011, such payments represented approximately ~~36%~~33% and ~~33%~~39%, respectively, of total cash outflows (including payments of principal and interest on our ~~debentures)~~debentures, but excluding payments associated with the acquisition of Netvision). Also, we are exposed to interest rate risks through our hedging instruments and to possible fluctuations in the Israeli CPI through our Series A, B , C and D debentures.

In order to protect ourselves from fluctuations in foreign currency exchange rates, we have established a foreign currency hedging program. Under this program, we currently hedge part of our U.S. dollar liabilities, firm commitments and budgeted expenditures for the next 6 to 12 months using foreign currency forward exchange contracts and currency options. A foreign currency forward exchange contract is a contract whereby we agree to buy or sell a foreign currency at a predetermined exchange rate at a future date. A currency option is an option to buy or sell a foreign currency at a predetermined exchange rate at a future date. The exchange rate fluctuations that impact our foreign currency denominated financial liabilities, firm commitments and budgeted expenditures are intended to be offset by gains and losses on these hedging instruments.

The goal of our hedging program is to limit the impact of exchange rate fluctuations on our transactions denominated in U.S. dollars. We do not hold derivative financial instruments for trading purposes. Nevertheless, under IFRS, we are required to treat our hedges of budgeted expenditures for which there is no contractual commitment as though they were speculative investments. As a result, we are required to value these hedge positions

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at the end of each fiscal quarter and record a gain or loss equal to the difference in their market value from the last balance sheet date, without any reference to the change in value to the related budgeted expenditures. Accordingly, these differences could result in significant fluctuations in our reported net income.

As of December 31, ~~2010,~~2011, we had four outstanding series of debentures, which are linked to the Israeli CPI, in an aggregate principal amount of approximately NIS ~~3.5~~3.7 billion. As of December 31, ~~2010,~~2011, we had forward Israeli CPI / NIS transactions, in a total amount of approximately NIS ~~1.3~~1.8 billion, with an average maturity period of 14 months, in order to hedge our exposure to fluctuations in the Israeli CPI. We periodically review the possibility of entering into additional transactions in order to lower the exposure in respect of the debentures.

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Set forth below is the composition of the derivative financial instruments at the following dates:

	As of December 31,															As of December 31,
	2008					2009					2010					2009					2010					2011
	Par Value		Fair Value			Par Value		Fair Value			Par Value		Fair Value			Par Value		Fair Value			Par Value		Fair Value			Par Value		Fair Value
	(In NIS millions)															(In NIS millions)
Forward contracts on exchange rate (mainly US$– NIS)		763		23			586		(10	)		240		(17	)		586		(10	)		439		(14	)		497		24
Forward contracts on Israeli CPI rate		1,850		(1	)		1,700		51			1,325		12			1,700		51			1,325		12			1,825		(22	)
Options on the exchange rate (mainly US$– NIS)		1,226		5			868		2			500		2			868		2			500		2			377		1
Compounded foreign currency and interest swap		320		(12	)		240		(5	)		-		-			240		(5	)		-		-			-		-
Total		4,159		15			3,394		38			2,065		(3	)		3,394		38			2,264		-			2,699		3

Sensitivity information

Without taking into account our hedging instruments and based upon our debt outstanding as at December 31, ~~2010,~~2011, fluctuations in foreign currency exchange rates, or the Israeli CPI would affect us as follows:

an increase of 0.1% of the Israeli CPI would result in an increase of approximately NIS ~~3.5~~4.2 million in our financing expenses;

a devaluation of the NIS against the U.S. dollar of 1.0% would increase our financing expenses by approximately NIS ~~1.4~~1.9 million.

ITEM 12.

DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

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PART II

ITEM 13.

~~ITEM 13.~~

DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None.

ITEM 14.

~~ITEM 14.~~

MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

Not applicable.

ITEM 15.

CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our chief executive officer and chief financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended) as of December 31, ~~2010,~~2011, have concluded

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that, as of such date, our disclosure controls and procedures were effective and ensured that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act is accumulated and communicated to our management, including our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms.

Management Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS and includes those policies and procedures that:

·	Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

·	Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use of disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future

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periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting, as of December 31, ~~2010.~~2011. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.

Management has excluded Netvision, from its assessment of internal control over financial reporting as of December 31, 2011 because it was acquired by us during the third quarter of 2011. Total assets and total revenues of Netvision, which were consolidated in our financial statements, included elsewhere in this annual report, represents approximately 10.4%, or NIS 886 million ($232 million) and 5.9%, or NIS 381 million ($100 million), respectively, of the related consolidated financial statement amounts as of, and for the year ended, December 31, 2011.

Based on our assessment, management believes that as of December 31, ~~2010~~2011 our internal control over financial reporting is effective based on this criteria.

The effectiveness of management's internal control over financial reporting as of December 31, ~~2010~~2011 has been audited by the Company's independent registered public accounting firm, Somekh Chaikin, a member of KPMG International and their report as of March ~~15, 2011,~~7, 2012, herein expresses an unqualified opinion on the Company's internal control over financial reporting.

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Attestation Report of the Registered Public Accounting Firm

Our independent registered public accounting firm have issued an audit report on the effectiveness of our internal control over financial reporting. This report is included in page F-1 of this Form 20-F.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the period covered by this annual report that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 16A.

AUDIT COMMITTEE FINANCIAL EXPERT

Our board of directors has determined that Ms. Baytel qualifies as “audit committee financial expert” as defined in Item 16A of Form 20-F. Ms. Baytel qualifies as an independent director under the independence standards applicable to listed company audit committee members, pursuant to Rule 10A-3 under the Securities Exchange Act.

ITEM 16B.

CODE OF ETHICS

Our Code of Ethics applies to all of our officers, directors and employees. Our Board of Directors amended our Code of Ethics during ~~2010~~2011 by updating and clarifying a number of matters, including: ~~non discrimination policy; employment of relatives; adherence to labor laws; health and safety policy, dress code at work;~~ conflicts of interest between our employees and our vendors or customers, including the receipt of ~~gifts; internal control over financial reporting; fraud~~gifts and ~~embezzlement;~~prohibition on payment and receipt of bribe; confidentiality of business information; ~~and~~usage of social networks; usage of company ~~property.~~property including

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privacy aspects in that regard and reporting of suspected violation of Company policy. We have posted a copy of our Code of Ethics on our website at www.cellcom.co.il under “Investor Relations – Corporate Governance –Code of Ethics.”

ITEM 16C.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

Somekh Chaikin, a member of KPMG International, has served as our independent registered public accounting firm for ~~2009~~2010 and ~~2010.~~2011. These accountants billed the following fees to us for professional services in each of those fiscal years:

	2009		2010		2010		2011
	(NIS in thousands)				(NIS in thousands)
Audit Fees		2,445		1,860		1,860		2,671
Audit-Related Fees		-		-		-		180
Tax Fees		90		106		106		120
Total		2,535		1,966		1,966		2,971

“Audit Fees” are the aggregate fees billed for the audit of our annual financial statements. This category also includes services that generally the independent accountant provides, such as consents and assistance with and review of documents filed with the SEC. “Audit-Related Fees” are the aggregate fees billed for assurance and related services that are reasonably related to the performance of the audit and are not reported under Audit Fees. These fees include mainly accounting consultations regarding the accounting treatment of matters that occur in the regular course of business, implications of new accounting pronouncements and other accounting issues that occur from time to time. “Tax Fees” are the aggregate fees billed for professional services rendered for tax compliance, tax advice, other

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than in connection with the audit. Tax compliance involves preparation of original and amended tax returns, tax planning and tax advice.

Our Audit Committee has adopted a pre-approval policy for the engagement of our independent accountant to perform certain audit and non-audit services. Pursuant to this policy, which is designed to assure that such engagements do not impair the independence of our auditors, the audit committee pre-approves annually a catalog of specific audit and non-audit services in the categories of audit service, audit-related service and tax services that may be performed by our independent accountants, and the maximum pre-approved fees that may be paid as compensation for each pre-approved service in those categories. Any proposed services exceeding the maximum pre-approved fees require specific approval by the Audit Committee.

The Audit Committee has delegated part of its pre-approval authority to the chairman of the Audit Committee, subject to ratification by the entire Audit Committee.

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

None.

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

None.

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ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

~~Not applicable.~~None.

ITEM 16G. CORPORATE GOVERNANCE

The following are the significant ways in which our corporate governance practices differ from those followed by domestic companies under the listing standards of the NYSE:

Majority of Independent Directors - Under Section 303A.01 of the NYSE Listed Company Manual, or LCM, U.S. domestic listed companies, other than controlled companies (i.e. companies with a person or group owning more than 50% of the voting power), must have a majority of independent directors. ~~We would not be subject to this requirement even if we were a U.S. company as we are a controlled company.~~ The Israeli Companies Law enables, but does not require, Israeli companies to voluntarily include a similar arrangement in their articles of association (which in regards to a controlled company provides that a third of the directors be independent). We did not include such a provision in our articles of ~~association.~~association and we do not have a majority of independent directors.

Nominating/Corporate Governance Committee -Under Section 303A.04 of the LCM, a U.S. domestic listed company, other than a controlled company, must have a nominating/corporate governance committee composed entirely of independent directors. We ~~would~~do not ~~be subject to this requirement even if we were~~have a ~~U.S. company~~nominating/corporate governance committee as we ~~are a controlled company, and~~ are not required to have such a committee under the Israeli Companies Law.

Compensation Committee - Under Section 303A.05 of the LCM, a U.S. domestic listed company, other than a controlled company, must have a compensation committee composed

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entirely of independent directors. We ~~would not be subject to this requirement even if we were a U.S. company as we are a controlled company, and~~ do not have a compensation committee, as we do not have a requirement for a compensation committee under the Israeli Companies Law.

Separate Meetings of Non-Management Directors - Under Section 303A.03 of the LCM, the non-management directors of each U.S. domestic listed company must meet at regularly scheduled executive sessions without management. We do not have a similar requirement under the Israeli Companies Law, and our independent directors do not meet separately from directors who are not independent, other than in the context of audit committee meetings.

Audit Committee - Under Section 303A.06 of the LCM, domestic listed companies are required to have an audit committee that complies with the requirements of Rule 10A-3 of the Securities and Exchange Act of 1934. Rule 10A-3 requires the audit committee of a U.S. company to be directly responsible for the appointment, compensation, retention and oversight of the work of any registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review, or attest services, and that each such firm must report directly to the audit committee. However, Rule 10A-3 provides that foreign private issuers may comply with applicable home country law that (i) requires or permits shareholders to appoint the registered public accounting firm or (ii) prohibits the delegation of responsibility to the issuer’s audit committee without being in conflict with Rule 10A-3. Pursuant to the Israeli Companies Law, our registered public accounting firm is appointed by the shareholders at the annual meeting of shareholders. Our audit committee is responsible for recommending to the shareholders the appointment of our registered public accounting firm and to pre-approve the amounts to be paid to our registered public accounting firm. In addition, pursuant to the Israeli Companies Law, our financial statements must be approved by our board of directors and as of the financial statements for December 31, 2010, such approval may be given only after the review and recommendation of our audit committee, in its capacity as our financial reports review committee of the board. See C. Board Practices - Board Committees – Audit Committee. Pursuant to our audit committee charter, our audit committee is responsible for overseeing the work of our registered public accounting firm.

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Equity Compensation Plans - Under Section 303A.08 of the LCM, shareholders must be given the opportunity to vote on all equity-compensation plans and material revisions thereto, with certain limited exemptions as described in the Rule. We follow the requirements of the Israeli Companies Law under which approval of equity-compensation plans and material revisions thereto is within the authority of the board of directors. However, under the Israeli Companies Law, any compensation to directors, including equity based compensation, requires the approval of the audit committee, the board of directors and the shareholders, in that order.

Corporate Governance Guidelines - Under Section 303A.09 of the LCM, domestic listed companies must adopt and disclose their corporate governance guidelines. We do not have a similar requirement under the Israeli Companies Law and therefore, other than as disclosed in this annual report on Form 20-F, we are not required to disclose our corporate governance guidelines.

ITEM 16H. MINE SAFETY DISCLOSURE

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Not applicable.

PART III

ITEM 17. FINANCIAL STATEMENTS

See ~~pages F-1 through F-65 of this annual report.~~Item 18.

ITEM 18. FINANCIAL STATEMENTS

~~Not applicable~~See pages F-1 through F-72 of this annual report.

ITEM 19. EXHIBITS

	Exhibit Number		Description

	1.1		Updated Articles of Association and Memorandum of Association †*
2.1	~~2.1~~	Form of Ordinary Share Certificate†
4.1	~~4.1~~	Series A Indenture dated December 21, 2005 and an addendum dated February 27, 2006 between Cellcom and Aurora Fidelity Trust Ltd. †
4.1.1	~~4.1.1~~	Series A Debentures Trustee Replacement Agreement dated June 11, 2009. †††
4.2	~~4.2~~	Series B Indenture dated December 21, 2005 and an addendum dated February 27, 2006 between Cellcom and Hermetic Trust (1975) Ltd. †
4.3	~~4.3~~	Series C Indenture dated September 20, 2007, between Cellcom and Aurora Fidelity Trust Ltd. ††
4.3.1	~~4.3.1~~	Series C Debentures Trustee Replacement Agreement dated June 11, 2009. †††

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Exhibit

Number

Description

4.4		Series D Indenture dated September 20, 2007, between Cellcom and Hermetic Trust (1975) Ltd. ††
4.5	~~4.5~~	Series E Indenture dated March 31, 2009, between Cellcom and Hermetic Trust (1975) Ltd. †††
	4.6		Shelf Prospectus Indenture dated July 14, 2011, between Cellcom and Hermetic Trust (1975) Ltd. *
4.6.1		Shelf Prospectus Indenture dated March 7, 2012, between Cellcom and Strauss Lazar Trust Company (1992) Ltd.*
4.6.2.		Amendment and Addendum no. 1 to the Indenture from March 7, 2012, dated March 7, 2012, between Cellcom and Strauss Lazar Trust Company (1992) Ltd.*
4.7		Amended 2006 Share Incentive ~~Plan~~††Plan*
4.8	~~4.7~~	Registration Rights Agreement dated March 15, 2006 among Cellcom, Goldman Sachs International, DIC, DIC Communication and Technology Ltd. and PEC Israel Economic Corporation†
4.9	~~4.8~~	Amended Non-Exclusive General License for the Provision of Mobile Radio Telephone Services in the Cellular Method dated June 27, 1994*~~(1)~~
4.10		Netvision Ltd. Merger Agreement*
8.1		Subsidiaries of the Registrant†*
12.1	~~12.1~~	Certification of Principal Executive Officer pursuant to 17 CFR 240.13a-14(a), as adopted pursuant to §302 of the Sarbanes-Oxley Act *
12.2	~~12.2~~	Certification of Principal Financial Officer pursuant to 17 CFR 240.13a-14(a), as adopted pursuant to §302 of the Sarbanes-Oxley Act *

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	~~Exhibit~~ ~~Number~~	~~Description~~
13.1
	~~13.1~~	Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act *
	15		Consent of Independent Registered Public Accounting Firm *

*	Filed herewith.

(1) The English translation of our General License, the original of which is in Hebrew, that is filed herewith is of the version of our General License amended as at December 12, 2010. A subsequent amendment received by us following the preparation of the English translation makes some minor, immaterial changes to certain sections of our General License that were added by amendment in November 2010. Further, the subsequent amendment also delayed the effective date of some of these new sections from March 2011 to various later dates, the first of which is in April 2011. While the new sections from the November 2010 amendment are included in the English translation that is filed herewith, the changes made by the subsequent amendment are not.

†	Incorporated by reference to our registration statement on Form F-1 (registration no. 333-140030) filed with the SEC on January 17, 2007.

††	Incorporated by reference to our annual report on Form 20-F for the year 2007 filed with the SEC on March 18, 2008.

† ~~Incorporated by reference to our registration statement on Form F-1 (registration no. 333-140030) filed w~~it~~h the SEC on January 17, 2007.~~

††~~Incorporated by reference to our annual report on Form 20-F for the year 2007 filed with the SEC on March 18, 2008.~~†

Incorporated by reference to our annual report on Form 20-F for the year 2009 filed with the SEC on March 2, 2010.

Title of each class	Name of each exchange on which registered
Ordinary Shares, par value NIS 0.01 per share	New York Stock Exchange (“NYSE”)

		Page
		~~PART I~~
	PART I
Item 1.	Identity of Directors, Senior Management and Advisers	5
Item 2.	Offer Statistics and Expected Timetable	5
Item 3.	Key Information	5
Item 4.	Information on the Company	30 32
Item 4A	Unresolved Staff Comments	78 94
Item 5.	Operating and Financial Review and Prospects	78 94
Item 6.	Directors, Senior Management and Employees	~~100~~ 119
Item 7.	Major Shareholders and Related Party Transactions	~~120~~ 139
Item 8.	Financial Information	~~124~~ 143
Item 9.	The Offer and Listing	~~131~~ 146
Item 10.	Additional Information	~~133~~ 149
Item 11.	Quantitative and Qualitative Disclosures About Market Risk	~~147~~ 163
Item 12.	Description of Securities Other than Equity Securities	~~148~~ 164

PART II
Item 13.	Defaults, Dividend Arrearages and Delinquencies	~~148~~ 165
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	~~148~~ 165
Item 15.	Controls and Procedures	~~148~~ 165
Item 16A.	Audit Committee Financial Expert	~~150~~ 166
Item 16B.	Code of Ethics	~~150~~ 166
Item 16C.	Principal Accountant Fees and Services	~~150~~ 167
Item 16D.	Exemptions from the Listing Standards for Audit Committees	~~151~~ 167
Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	~~151~~ 167
Item 16F.	Change In Registrant’s Certifying Accountant	~~151~~ 168
Item 16G.	Corporate Governance	~~151~~ 168

PART III
Item 17.	Financial Statements	~~153~~ 169
Item 18.	Financial Statements	~~153~~ 169
Item 19.	Exhibits	~~153~~ 169
Financial Statements		F-1

	~~Year Ended December 31,~~
	~~2006~~
	~~(In NIS millions, except per share data)~~
~~Net cash provided by operating activities~~		~~1,477~~
~~Net cash used in investing activities~~		~~(633~~	)
~~Net cash used in financing activities~~		~~(2,560~~	)
~~Subscribers (in thousands) (3)~~		~~2,884~~
~~Period churn rate(4)~~		~~16.8~~	%
~~ARPU (in NIS)(5)~~		~~149~~

	Year Ended December 31,
	2007			2008			2009			2010			2010
	(In NIS millions, except per share data)												(In US$ millions)
Income Statement Data: In accordance with IFRS
Revenues		6,050			6,417			6,483			6,662			1,877
Cost of revenues		3,315			3,396			3,333			3,322			936
Selling and marketing expenses		685			701			716			756			213
General and administrative expenses		653			659			660			641			181
Other (income) expenses, net		3			(29	)		6			5			1
Operating income		1,394			1,690			1,768			1,938			546
Financing expense, net		(147	)		(310	)		(219	)		(230	)		(65	)
Income tax		328			391			367			417			117
Net income		919			989			1,182			1,291			364
Basic earnings per share		9.42			10.12			12.01			13.04			3.68
Diluted earnings per share		9.34			9.96			11.90			12.98			3.66
Weighted average ordinary shares used in calculation of basic earnings per share		97,500,000			97,721,339			98,432,757			98,979,544
Weighted average ordinary shares used in calculation of diluted earnings per share		98,441,260			99,279,924			99,306,714			99,480,791
Other Data:
EBITDA(2)		2,187			2,482			2,529			2,667			751
Capital expenditures		651			633			663			735			207
Dividends declared per share		13.90			11.23			11.91			13.85			3.90
Net cash provided by operating activities		1,820			1,745			2,080			2,380			671
Net cash used in investing activities		(560	)		(528	)		(774	)		(889	)		(251	)
Net cash used in financing activities		(405	)		(1,853	)		(678	)		(1,861	)		(524	)
Subscribers (in thousands)(3)		3,073			3,187			3,292			3,394
Period churn rate(4)		16.3	%		18.9	%		19.6	%		20.5	%
ARPU (in NIS)(5)		150			149			144			144			40.6

	~~As at December 31,~~
	~~2006~~
	~~(In NIS millions)~~
~~Balance Sheet Data:~~ ~~In accordance with Israeli GAAP~~
~~Cash~~		56
~~Working capital~~		~~237~~
~~Total assets~~		~~5,323~~
~~Shareholders’ equity~~		~~597~~

~~U.S. GAAP Data(1)~~:
~~Total assets~~		~~8,998~~
~~Shareholders’ equity~~		~~4,134~~

	As at December 31,
	2007		2008			2009		2010		2010
			(In NIS millions)							(In US$ millions)
Balance Sheet Data: In accordance with IFRS
Cash		911		275	��		903		533		150
Working capital		716		461			1,254		924		260
Total assets		6,294		5,488			6,379		5,996		1,689
Shareholders’ equity		881		390			374		341		96

	Year Ended December 31,
	2006		2007		2008		2009		2010		2010
	(In NIS millions, except number of subscribers and months)										(In US$ millions)
Revenues		5,622		6,050		6,417		6,483		6,662		1,877
less revenues from equipment sales		636		635		745		751		802		226
less other revenues*		61		93		135		162		124		35
Revenues used in ARPU calculation (in NIS millions)		4,925		5,322		5,537		5,570		5,736		1,616
Average number of subscribers		2,757,133		2,955,855		3,105,022		3,215,492		3,322,891		3,322,891
Months during period		12		12		12		12		12		12
ARPU (in NIS, per month)		149		150		149		144		144		41

Average number of cellular subscribers	2,955,855	3,105,022	3,215,492	3,322,891	3,361,803	3,361,803
Months during period	12	12	12	12	12	12
Cellular ARPU (in NIS, per month)	150	149	144	144	106	28

Month	High (NIS)		Low (NIS)

September 2010		3.798		3.665
October 2010		3.645		3.569
November 2010		3.684		3.580
December 2010		3.665		3.549
January 2011		3.710		3.528
February 2011		3.713		3.602

Year	Average (NIS)		Average (NIS)

2006		4.442
2007		4.085		4.085
2008		3.568		3.568
2009		3.927		3.927
2010		3.732		3.732
2011				3.582

Population (millions, at end of year)	~~7.7~~7.8
GDP ($ billions) (1)	~~217~~239
GDP per capita ($ 000) (1)	2831
Exports of goods & services ($ billions) (1)	7888
CPI change	~~2.7%~~2.2%
Long-term local currency sovereign credit rating by S&P	~~A(Stable)~~A+(Stable)
Unemployment rate (average for nine months ending September ~~2010)~~2011)	~~6.7%~~5.7%

	December 31,															December 31,
	2006			2007			2008			2009			2010			2007			2008			2009			2010			2011
Total subscribers (millions)		8.4			9.0			9.2			9.5			9.8			9.0			9.2			9.5			9.8			10
Cellular penetration (%)		118	%		124	%		124	%		127	%		128	%		124	%		124	%		127	%		128	%		128	%

	1986	Bezeq and Motorola create a joint venture called “Pelephone”, which becomes ~~Israel's~~Israel’s first cellular operator. Pelephone launches N-AMPS services
	1994	Cellcom awarded a license and launches TDMA services
	1997	Cellcom introduces first pre-paid plan to the market

	1998	Partner awarded a license and launches GSM services
	1998	Pelephone launches CDMA services
	2001	Ministry of Communications allocates additional 2G and 3G cellular frequencies for existing cellular operators and for the licensing of a new operator
	2001	MIRS becomes ~~Israel's~~Israel’s fourth cellular operator with iDEN services
	2002	Cellcom launches GSM/GPRS services
	2003	Cellcom launches EDGE services
	2004	Partner launches UMTS services Pelephone launches EVDO services
	2006	Cellcom launches full scale UMTS/HSDPA services
	2007	Partner launches HSDPA services
	2008	Cellcom launches HSUPA services
	2009	Pelephone launches UMTS/HSPA services
	2010	Ministry of Communications provides MVNO licenses; Cellcom and Pelephone launch HSPA+ services
2011	Mirs and Golan awarded UMTS operator licenses Rami Levy , MVNO operator, commences operations Cellcom stops operating its TDMA network

	Year Ended December 31,									Change*						Year Ended December 31,									Change*
	2008			2009			2010			2009 vs. 2008			2010 vs. 2009			2009			2010			2011			2010 vs. 2009			2011 vs. 2010
Subscribers at end of period(1) (in thousands)		3,187			3,292			3,394			3.3	%		3.1	%		3,292			3,394			3,349			3.1	%		(1.3	%)
Period churn rate(1)(2)		18.9	%		19.6	%		20.5	%	0.7		pp	0.9		pp		19.6	%		20.5	%		25.1	%	0.9pp			4.6pp
Average monthly usage per subscriber (MOU) (in minutes)(1)(3)		329			331			335			0.6	%		1.2	%		331			335			346			1.2	%		3.3	%
Average monthly revenue per subscriber (ARPU) (1)(4) (in NIS)		149			144			144			(3.4	%)		-			144			144			106			-			(26.3	%)
Operating income (in NIS millions)		1,690			1,768			1,938			4.6	%		9.6	%		1,768			1,938			1,422			9.6	%		(26.6	%)
Net income (in NIS millions)		989			1,182			1,291			19.5	%		9.2	%		1,182			1,291			825			9.2	%		(36.1	%)
EBITDA(5) (in NIS millions)		2,482			2,529			2,667			1.9	%		5.5	%		2,529			2,667			2,167			5.5	%		(18.7	%)
Operating income margin(6)		26.3	%		27.3	%		29.1	%	1.0		pp	1.8		pp		27.3	%		29.1	%		21.9	%	1.8pp			(7.2)pp
EBITDA margin(7)		38.7	%		39.0	%		40.0	%	0.3		pp	1.0		pp		39.0	%		40.0	%		33.3	%	1.0pp			(6.7)pp

	~~Year Ended December 31,~~
	~~2006~~
	~~(In NIS millions)~~
~~In accordance with Israeli GAAP~~
~~Net income~~		~~559~~
~~Financing expense (income), net~~		~~155~~
~~Other expenses (income), net~~		6
~~Income taxes~~		~~314~~
~~Depreciation and amortization~~		~~830~~
~~EBITDA~~		~~1,864~~

	Year Ended December 31,						Change
	2008		2009		2010		2009 vs. 2008			2010 vs. 2009
	(In NIS millions)
Revenues		6,417		6,483		6,662		1.0	%		2.8	%

	* 2009					* 2010					2011
	Revenues		% of Total Revenues			Revenues		% of Total Revenues			Revenues		% of Total Revenues
	(NIS in millions)					(NIS in millions)					(NIS in millions)
Cellular voice services:
Outgoing air time**		2,953		45.5	%		2,760		41.4	%		2,167		33.3	%
Incoming air time		1,178		18.2	%		1,272		19.1	%		398		6.1	%
Roaming		340		5.3	%		358		5.4	%		314		4.8	%
Total cellular voice services		4,471		69.0	%		4,391		65.9	%		2,879		44.2	%
Cellular content and value added services***		882		13.6	%		1,112		16.7	%		1,167		17.9	%
Internet services (ISP)		-		-			-		-			216		3.3	%
International long distance services		-		-			-		-			96		1.5	%
Other services****		379		5.8	%		357		5.4	%		401		6.2	%
Total services		5,732		88.4	%		5,860		88.0	%		4,759		73.1	%
Equipment		751		11.6	%		802		12.0	%		1,747		26.9	%
Total		6,483		100.0	%		6,662		100.0	%		6,506		100.0	%

	Total		2011		2012- 2014	2015-2016	2017 and Beyond		Total		2012		2013- 2015	2016-2017	2018 and Beyond
Long-term debt obligations (including interest)(1)		5,235		573	2,412	1,537		713		7,281		1,002	3,968	2,311		-
Operating lease obligations		1,078		236	497	185		160		1,448		301	611	259		277
Purchase obligations		522		278	203	41		-		413		337	63	13		-
Total		6,835		1,087	3,112	1,763		873		9,142		1,640	4,642	2,583		277

Ami Erel (2), (3)		63	64	Chairman of the Board
Nochi Dankner (3)		56		~~Director~~
~~Isaac Manor~~		69	57	Director
Shay Livnat (2), (3)		52	53	Director
Raanan Cohen (2), (4)		43	44	Director
~~Avraham Bigger~~		64		Director*
Rafi Bisker ~~(2)~~ (4)		59	60	Director
Shlomo Waxe (1), (2), (4)		64	66	Independent Director
Haim Gavrieli		40	41	Director
Ari Bronshtein (2)		41	42	Director
Tal Raz		49	50	Director
Edith Lusky (2)	61	Director
Assaf Topaz (2)	41	Director(a)
Ephraim Kunda (1), (2)		58	59	Independent Director
Joseph Barnea (1), (2), (3), (4)		75	76	Independent / External Director
Ronit Baytel (1)		43	44	Independent / External Director

~~Name~~		~~Age~~		~~Position~~
Amos Shapira		61	62	President and Chief Executive ~~Officer~~Officer(b)
Yaacov Heen		41	42	Chief Financial Officer
~~Adi Cohen~~Yoni Sabag		45	39	Vice President of Marketing**Marketing
Eliezer (Lipa) Ogman		57	58	Chief Technology Officer
Isaiah Rozenberg		50	51	Vice President of Engineering and network operation
Itamar Bartov		48	49	Vice President of Executive and Regulatory Affairs
Yoav Kirmayer		39	40	Vice President of Business Customers ~~***~~(c)
Meir Barav		53	54	Vice President of Sales and ~~Services~~Service (d)
~~Ronit Ben-Basat~~Sharon Amit		43	45	Vice President of Human ~~Resources~~Resources(e)
Amos Maor		47	48	Vice President of Operations and Supply Chain (d)
Ran Harpaz	38	Vice President of Information Technology (f)
Liat Menahemi-Stadler		44	45	General Legal Counsel and Corporate Secretary
Teimurz Romashvily	33	Vice President of Pre Paid Activity (g)
Liat Straus	33	Netvision Vice President of Sales and Service (h)
Gil Ben-Itzhak		45	46	Controller

	Number of Full-Time Equivalent Positions						Number of Full-Time Equivalent Positions
Unit	December 2008**		December 2009**		December 2010**		December 2009 **		December 2010 **		December 2011 **
Management and headquarters		35		34		37		34		37		68
Human resources		49		54		52		54		52		72
Marketing		73		80		83		80		83		107
Customers*		3,310		3,452		3,779		3,452		3,779		5,518
Finance		121		133		134		133		134		176
Technologies		718		679		596		679		596		851
Netvision subsidiaries***								-		-		462
Total		4,306		4,432		4,681		4,432		4,681		7,254

Cellcom Israel Ltd.


By:	/s/ ~~Amos Shapira~~		Nir Sztern
	Name:	~~Amos Shapira~~	Nir Sztern
	Title:	President and Chief Executive Officer

Contents

	Page

Auditors' Report	F2-F3

Consolidated Financial Statements

Consolidated Statements of Financial Position	F4

Consolidated Statements of Income	F5

Consolidated Statements of Comprehensive Income	F6

Consolidated Statements of Changes in Equity	F7

Consolidated Statements of Cash Flows	F8-F9

Notes to the Consolidated Financial Statements	F10-F72

			December 31 2009			December 31 2010			Convenience translation Into U.S. dollar (Note 2D) December 31 2010				December 31, 2010			December 31, 2011		Convenience translation into US dollar (Note 2D) December 31, 2011
	Note		NIS millions			NIS millions			US$ millions			Note	NIS millions			NIS millions		US$ millions
Assets
Cash and cash equivalents		6		903			533			150		8		533			920		241
Current investments, including derivatives				272			404			114				404			290		76
Trade receivables		7		1,579			1,478			416		9		1,478			1,859		487
Other receivables		7		63			64			18		9		64			93		24
Inventory		8		149			104			30		10		104			170		44

Total current assets				2,966			2,583			728				2,583			3,332		872

Trade and other receivables		7		606			597			168		9		597			1,337		350
Property, plant and equipment, net		9		2,096			2,063			581		11		2,063			2,168		567
Intangible assets, net		10		711			753			212		12		753			1,680		440

Deferred tax assets												28		-			40		10
Total non- current assets				3,413			3,413			961				3,413			5,225		1,367

Total assets				6,379			5,996			1,689				5,996			8,557		2,239

Liabilities
Short term borrowings		14		350			348			98
Short term credit and current maturities of long term loans and debentures												17		348			674		176
Trade payables and accrued expenses		11		806			716			202		13		716			1,026		268
Current tax liabilities				67			132			37				132			69		18
Provisions		12		84			84			23		14		84			148		39
Other current liabilities, including derivatives		13		405			379			107

Other payables, including derivatives												15		379			547		143
Dividend declared												19		-			189		49
Total current liabilities				1,712			1,659			467				1,659			2,653		693

Long-term loans from banks												17		-			19		5
Debentures		14		4,185			3,913			1,103		17		3,913			5,452		1,427
Provisions		12		16			17			5		14		17			21		5
Other long-term liabilities				1			1			-		16		-			41		11
Deferred taxes		25		91			65			18

Liability for employee rights upon retirement, net												18		1			10		3
Deferred tax liabilities												28		65			174		46
Total non- current liabilities				4,293			3,996			1,126				3,996			5,717		1,497

Total liabilities				6,005			5,655			1,593				5,655			8,370		2,190

Shareholders’ equity		16
Equity attributable to owners of the Company												19
Share capital				1			1			-				1			1		-
Cash flow hedge reserve				(23	)		(21	)		(6	)			(21	)		7		2
Retained earnings				396			361			102				361			175		46

Total shareholders’ equity				374			341			96

Total liabilities and shareholders’ equity				6,379			5,996			1,689
Non-controlling interest														-			4		1
Total equity														341			187		49
Total liabilities and equity														5,996			8,557		2,239

		Year ended December 31, 2009			Year ended December 31, 2010			Year ended December 31, 2011			Convenience translation into US dollar (Note 2D) Year ended December 31, 2011
	Note	NIS millions			NIS millions			NIS millions			US$ millions
Revenues	22		6,483			6,662			6,506			1,703
Cost of revenues	23		(3,333	)		(3,322	)		(3,408	)		(892	)
Gross profit			3,150			3,340			3,098			811
Selling and marketing expenses	24		(716	)		(756	)		(990	)		(259	)
General and administrative expenses	25		(660	)		(641	)		(685	)		(179	)
Other expenses, net	26		(6	)		(5	)		(1	)		-
Operating profit			1,768			1,938			1,422			373
Financing income			151			106			116			30
Financing expenses			(370	)		(336	)		(409	)		(107	)
Financing expenses, net	27		(219	)		(230	)		(293	)		(77	)
Profit before taxes on income			1,549			1,708			1,129			296
Taxes on income	28		(367	)		(417	)		(304	)		(80	)
Profit for the year			1,182			1,291			825			216
Attributable to:
Owners of the Company			1,182			1,291			824			216
Non-controlling interests			-			-			1			-
Profit for the year			1,182			1,291			825			216
Earnings per share
Basic earnings per share (in NIS)	19		12.01			13.04			8.28			2.17
Diluted earnings per share (in NIS)	19		11.90			12.98			8.28			2.17

	Attributable to owners of the Company											Non-controlling interests			Total equity			Convenience translation into US dollar (Note 2D)
	Share capital		Capital reserve			Retained earnings			Total
	NIS millions																	US$ millions

Balance as of January 1, 2009		1		(11	)		400			390			-			390			102
Other comprehensive income for the year, net of tax		-		(12	)		-			(12	)		-			(12	)		(3	)
Profit for the year		-		-			1,182			1,182			-			1,182			309
Share based payments		-		-			1			1			-			1			-
Dividend paid in cash		-		-			(1,187	)		(1,187	)		-			(1,187	)		(311	)

Balance as of December 31, 2009		1		(23	)		396			374			-			374			97
Other comprehensive income for the year, net of tax		-		2			-			2			-			2			1
Profit for the year		-		-			1,291			1,291			-			1,291			338
Share based payments		-		-			1			1			-			1			-
Cash dividend paid		-		-			(1,327	)		(1,327	)		-			(1,327	)		(347	)

Balance as of December 31, 2010		1		(21	)		361			341			-			341			89

Other comprehensive income for the year, net of tax		-		28			-			28			-			28			7
Profit for the year		-		-			824			824			1			825			216
Share based payments		-		-			6			6			-			6			2
Dividend paid in cash		-		-			(827	)		(827	)		-			(827	)		(216	)
Declared dividend		-		-			(189	)		(189	)		(1	)		(190	)		(50	)
Non-controlling interests in respect of business combination (see note 7)		-		-			-			-			4			4			1
Balance as of December 31, 2011		1		7			175			183			4			187			49

		Year ended December 31						Convenience translation into U.S. dollar (Note 2D) Year ended December 31
		2008		2009		2010		2010
	Note	NIS millions		NIS millions		NIS millions		US$ millions

Revenues	19	6,417		6,483		6,662		1,877

Cost of revenues	20	3,396		3,333		3,322		936

Gross profit		3,021		3,150		3,340		941

Selling and marketing expenses	21	701		716		756		213

General and administrative expenses	22	659		660		641		181

Other (income) expenses, net	23	(29	)	6		5		1

Operating income		1,690		1,768		1,938		546

Financing income		83		151		106		30

Financing expenses		(393	)	(370	)	(336	)	(95	)

Financing expenses, net	24	(310	)	(219	)	(230	)	(65	)

Income before income tax		1,380		1,549		1,708		481

Income tax	25	391		367		417		117

Net income		989		1,182		1,291		364

Earnings per share

Basic earnings per share in NIS	16	10.12		12.01		13.04		3.68

Diluted earnings per share in NIS	16	9.96		11.90		12.98		3.66

	Share capital amount		Cash flow hedge reserve			Retained earnings			Total			Convenience translation into U.S. dollar (Note 2D)
	NIS millions											US$ millions
Balance as of January 1, 2008		1		(33	)		913			881			248
Other comprehensive income for the year, net of tax		-		22			-			22			6
Net income for the year		-		-			989			989			279
Share based payments		-		-			28			28			8
Cash dividend paid		-		-			(1,530	)		(1,530	)		(431	)
Balance as of December 31, 2008		1		(11	)		400			390			110

Other comprehensive income for the year, net of tax		-		(12	)		-			(12	)		(3	)
Net income for the year		-		-			1,182			1,182			333
Share based payments		-		-			1			1			-
Cash dividend paid		-		-			(1,187	)		(1,187	)		(335	)
Balance as of December 31, 2009		1		(23	)		396			374			105

Other comprehensive income for the year , net of tax		-		2			-			2			1
Net income for the year		-		-			1,291			1,291			364
Share based payments		-		-			1			1			-
Cash dividend paid		-		-			(1,327	)		(1,327	)		(374	)
Balance as of December 31, 2010		1		(21	)		361			341			96

		%
~~Network and transmission equipment~~	Communication network	5-20
Control and testing equipment		15-25
Vehicles		15	15-33
Computers and hardware		15-33
Furniture and office equipment		6-15

		%
Licenses	5-6%	~~5-6~~	~~(mainly~~(mainly 6%)
Information systems		2525%
Software	15-25%	25
Customer relationship	approximately 6 years

				Year ended December 31, 2011
				NIS millions
							Reconciliation
							for
	Cellcom			Netvision*			consolidation			Consolidated

Revenues		6,125			381			-			6,506
Inter-segment revenues		7			19			(26	)		-
Interest income		92			1			-			93

Interest expenses		(286	)		-			-			(286	)
EBITDA**		2,084			83			-			2,167
Reconciliation of reoportable segment
EBITDA to net profit
Depreciation and amortization		(652	)		(40	)		(46	)		(738	)
Taxes on income		(313	)		(2	)		11			(304	)

Financing income											116

Financing expenses											(409	)

Other expenses											(1	)

Share based payments											(6	)

Net profit		821			39			(35	)		825

	NIS millions
Cash		1,570
Share-based awards - cost of past service		8
Total consideration transferred		1,578

	December 31				December 31
	2009		2010
Trade Receivables	NIS millions		NIS millions
Current					2010		2011
Trade Receivables*					NIS millions		NIS millions
Open accounts		514		486		486		524
Checks and credit cards receivables		199		221		221		250
Accrued income		171		115		115		148
Current maturity of long-term receivables		695		656		656		937
		1,579		1,478		1,478		1,859
Other Receivables
Prepaid expenses		50		49		49		60
Other		13		15		15		6
Assets held for sale						-		27
		63		64		64		93
						1,542		1,952
Current		1,642		1,542
Non-current		606		597
Trade receivables*						523		980
Rights of use of communication lines						-		259
Deposits and other receivables						55		56
Other						19		42
		2,248		2,139		597		1,337
						2,139		3,289

	Communication network			Control and testing equipment			Vehicles			Computers, furniture and office equipment			Leasehold improvements		Total
	NIS millions			NIS millions			NIS millions			NIS millions			NIS millions		NIS millions
Cost

Balance at January 1, 2010		5,927			342			32			863			216		7,380

Additions		319			20			14			47			20		420
Disposals		(121	)		-			(4	)		(14	)		-		(139	)
Balance at December 31, 2010		6,125			362			42			896			236		7,661

Business combination*		577			-			19			444			60		1,100
Additions		291			14			7			69			5		386
Disposals		(17	)		(1	)		(4	)		(11	)		-		(33	)
Reclassification to assets held for sale		(1	)		-			-			(4	)		-		(5	)
Balance at December 31, 2011		6,975			375			64			1,394			301		9,109

Accumulated Depreciation

Balance at January 1, 2010		4,202			261			10			661			150		5,284
Depreciation for the year		342			21			4			64			15		446
Disposals		(119	)		-			(2	)		(11	)		-		(132	)
Balance at December 31, 2010		4,425			282			12			714			165		5,598

Business combination*		493			-			6			376			45		920
Depreciation for the year		343			20			7			71			16		457
Disposals		(15	)		(1	)		(3	)		(11	)		-		(30	)
Reclassification to assets held for sale		(1	)		-			-			(3	)		-		(4	)
Balance at December 31, 2011		5,245			301			22			1,147			226		6,941

Carrying amounts

At January 1, 2010		1,725			81			22			202			66		2,096
At December 31, 2010		1,700			80			30			182			71		2,063
At December 31, 2011		1,730			74			42			247			75		2,168

	Network and transmission equipment			Control and testing equipment		Vehicles			Computers, furniture and office equipment			Leasehold improvements		Total
Cost	NIS millions			NIS millions		NIS millions			NIS millions			NIS millions		NIS millions

Balance at January 1, 2009		5,672			310		14			820			206		7,022

Additions		296			32		19			55			10		412
Disposals		(41	)		-		(1	)		(12	)		-		(54	)
Balance at December 31, 2009		5,927			342		32			863			216		7,380

Additions*		319			20		14			47			20		420
Disposals		(121	)		-		(4	)		(14	)		-		(139	)
Balance at December 31, 2010		6,125			362		42			896			236		7,661

Accumulated Depreciation

Balance at January 1, 2009		3,880			244		7			597			135		4,863

Depreciation for the year		358			17		3			74			15		467
Disposals		(36	)		-		-			(10	)		-		(46	)
Balance at December 31, 2009		4,202			261		10			661			150		5,284

Depreciation for the year		342			21		4			64			15		446
Disposals		(119	)		-		(2	)		(11	)		-		(132	)
Balance at December 31, 2010		4,425			282		12			714			165		5,598

Carrying amounts

At January 1, 2009		1,792			66		7			223			71		2,159
At December 31, 2009		1,725			81		22			202			66		2,096
At December 31, 2010		1,700			80		30			182			71		2,063