Funding and Investing Review
In 2012 , cash flows generated from operating activities before interest payments, net of cash flows used for investing activities (" Free Cash Flow"), totaled NIS 1,234 million (US$ 331 million), an increase of 14% from NIS 1,082 million for 2011 (without taking into account the cash outflow of NIS 597 million used for the acquisition of 012 Smile.
Cash generated from operations increased by 9% from NIS 1,570 million in 2011 to NIS 1,705 million (US$ 458 million) in 2012. This was mainly explained by the changes in operating working capital. In 2012 working capital decreased by NIS 268 million, primarily due to a decrease of NIS 467 million in trade receivables reflecting the decrease in handset sales purchased in 36 monthly installment payment plans, while in 2011, operating working capital increased by NIS 266 million, primarily reflecting the impact of the significant increase in handset sales over that period. The change in working capital was partially offset by the decrease in profit before depreciation and amortization as described above.
The level of investment in fixed assets including intangible assets but excluding capitalized subscriber acquisition and retention costs, net, was NIS 492 million (US$ 132 million) in 2012, an increase of 4% from NIS 471 million in 2011, and the equivalent of 9% of total revenues in 2012 compared with 7% in 2011. Most of the investments were made in the Orange ultranet upgrade project which included improvements to the Company's cellular network, as well as in information systems and software, and in the optical fiber transmission network.The amount of subscriber acquisition and retention costs, net, that was capitalized by the Company decreased from NIS 33 million in 2011 to NIS 9 million (US$ 2 million) in 2012, reflecting the impact of the amendment to the Communications Law, introduced in February 2011, which restricts the imposition of subscriber exit fines for cellular subscribers and in August 2011 for fixed-line subscribers.