34 slides from VEON Ltd. ORD's earnings presentation, Aug 6, 2014
Slide 1: 2Q 2014 Presentation
2Q 2014 © VimpelCom Ltd 2014 Presentation Amsterdam - August 6, 2014 Jo Lunder – CEO Andrew Davies – CFO 1
Slide 2: Disclaimer
Disclaimer This presentation contains “forward-looking statements”, as the phrase is defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements relate to, among other things, the Company's anticipated performance, its expectation to
Slide 3: VimpelCom reports 2Q14 results
VimpelCom reports 2Q14 results Service revenue Mobile customers (USD billion) (million) • Service revenue organic decline 5% YoY 4.9 221 • Mobile customers increased by 5.2 million YoY © VimpelCom Ltd 2014 • EBITDA organic decline 9% YoY • Solid EBITDA margin, down 1.4 p.p. YoY • Resilient cash flow
Slide 4: Key recent developments
Key recent developments ► Resolution in Algeria, on track for closing by end of 2014 ► Successful WIND refinancing ► 3G launched in Algeria and Pakistan © VimpelCom Ltd 2014 ► Strengthened management team ► VimpelCom’s Annual General Meeting elected new Supervisory Board ► 2014 targets confirmed 4
Slide 5: Algeria resolution and WIND refinancing enhance earnings
Algeria resolution and WIND refinancing enhance earnings • Refinanced EUR 8.0 billion of WIND’s debt, annual interest savings of ~USD 0.4 billion ► Funded by: – EUR 0.5 billion cash injection by VimpelCom © VimpelCom Ltd 2014 – EUR 3.8 billion new Senior Notes – EUR 4.1 billion new Senior Secured No
Slide 6: Business Units Performance
Business Units Performance © VimpelCom Ltd 2014 6
Slide 7: Russia: Expected YoY pressure on results, while investing in high-speed data network
Russia: Expected YoY pressure on results, while investing in high-speed data network and distribution RUB BILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers (million) • Mobile data revenue grew 17% YoY -4% YoY -1% YoY • Mobile service revenue decreased 5% 70.4 57.1 67.3 56.3 YoY, driv
Slide 8: Russia: Improved network quality and customer experience
Russia: Improved network quality and customer experience © VimpelCom Ltd 2014 Continued 4G/LTE co-branded investments in high- Shared data service smartphone speed data networks • Demand driven investments • Best value for money 4G/LTE • Offering the option of multiple SIM cards • Offering 4G/LTE in
Slide 9: Positive QoQ developments in Russia
Positive QoQ developments in Russia Results of actions taken to improve customer experience RUB BILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers (million) • Relative outperformance QoQ versus +4% QoQ +2% QoQ competition 64.6 67.3 55.0 56.3 • 1.3 million new mobile customers QoQ 12.2
Slide 10: Italy: Continued market outperformance
Italy: Continued market outperformance EUR MILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers (million) • Increased mobile market share, -10% YoY -2% YoY without aggressive pricing 1,159 1,035 1,039 22.3 21.9 • Best in class Net Promoter Score 330 306 303 • Annualized churn reduced to
Slide 11: Africa & Asia: Investments in 3G networks to drive future revenue growth
Africa & Asia: Investments in 3G networks to drive future revenue growth USD MILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers (million) • Revenue and EBITDA organically -4% YoY +6% YoY declined, mainly due to Algeria and 900 860 85.6 90.6 Pakistan 830 • Mobile customer growth of 5.0
Slide 12: Algeria: Successful 3G launch
Algeria: Successful 3G launch, supporting the return to growth and market share stabilization in 2H14 Resolution in Algeria: VimpelCom maintains management control with a strong and committed local partner © VimpelCom Ltd 2014 Successful 3G offers for high-value Other Unique 3G offer 3G launch custo
Slide 13: Bangladesh: Successful turnaround and 3G launched
Bangladesh: Successful turnaround and 3G launched Mobile service revenue growth YoY (%) Customer growth YoY (%) 13% 10% 11% 8% 10% 6% 5% 5% © VimpelCom Ltd 2014 -13% -14% -15% -15% 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3G Coverage in all 3G handsets MFS growth 64 regions with b
Slide 14: Pakistan: Addressing the underperformance
Pakistan: Addressing the underperformance • Issues: ► Challenging political and macro-economic environment ► Aggressive competition on pricing of bundles and on-net offers ► Network congestion limiting our pricing flexibility © VimpelCom Ltd 2014 ► Delay of network modernization • Actions: ► Jeffrey
Slide 15: Ukraine: Transformation on track in a difficult environment
Ukraine: Transformation on track in a difficult environment UAH BILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers (million) • Transformation program on track, -4% YoY -1% YoY showing improving NPS and declining 3.2 3.0 25.6 25.4 churn 3.0 0.3 0.3 0.3 • Financial results negatively im
Slide 16: CIS: Continued organic growth
CIS: Continued organic growth USD MILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers (million) • Mobile service revenue increased -4% YoY +6% YoY organically 5% YoY 480 24.2 25.7 41 434 461 41 • Mobile data revenue growth of 24% 40 YoY 439 394 420 © VimpelCom Ltd 2014 • Mobile custome
Slide 17: Successful turnaround in Kazakhstan
Successful turnaround in Kazakhstan Mobile service revenue growth YoY (%) Customer growth YoY (%) 9% 8% 7% 6% 5% 4% 3% 2% 2% 1% © VimpelCom Ltd 2014 -1% -1% 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3G Coverage Best value proposition New products or initiatives 3G coverage 2G c
Slide 18: Financial Highlights
Financial Highlights © VimpelCom Ltd 2014 18
Slide 19: Financial performance negatively impacted by FX
Financial performance negatively impacted by FX USD million 2Q14 2Q13 YoY Revenue 5,067 5,718 (11%) • Revenue declined organically 6% YoY, mainly due to continued market weakness in Italy, underperformance and market slowdown in Russia, Ukraine and Pakistan and 3G delay in Algeria of which service r
Slide 20: Resilient cash flow
Resilient cash flow USD million 2Q14 2Q13 YoY EBITDA 2,076 2,425 (349) Changes in working capital and other (160) (243) 83 • Mainly due to improvements in trade working capital Net interest paid (549) (443) (106) • Accelerated interest payment related to bonds repaid with WIND refinancing © VimpelCo
Slide 21: Improved maturity profile
Improved maturity profile Pro-forma group debt maturity schedule as at 30 June 20141 Debt composition USD billion by currency2 WIND new SSN 2020 Proceeds of new SSN used for repayment SSN 2018 2% Proceeds of new SSN used for repayment SFA 17% 6.3 6.1 Euro Wind GTH USD VimpelCom/OJSC $29.0bn © Vimpel
Slide 22: 2014 targets confirmed
2014 targets confirmed Targets1 2014 Revenue Low to mid single digit decline YoY ✓ © VimpelCom Ltd 2014 EBITDA Low to mid single digit decline YoY ✓ Leverage (Net Debt / EBITDA) ~2.4x ✓ CAPEX excl. licenses / Revenue ~21% ✓ 22 1. The annual targets for 2014 assume constant currency, no major regulat
Slide 23: Conclusion
© VimpelCom Ltd 2014 23 Conclusion
Slide 24: Conclusion
Conclusion ► Results impacted by operational performance and macro economics in Russia, Ukraine and Pakistan, market weakness in Italy and 3G delay in Algeria ► Focus on investments in quality networks and customer experience demonstrating clear results © VimpelCom Ltd 2014 ► Transformation in Russi
Slide 25: Q&A
© VimpelCom Ltd 2014 25 Q&A
Slide 26: Further information
Further information Investor Relations Claude Debussylaan 88 1082 MD Amsterdam The Netherlands T: +31 20 79 77 234 © VimpelCom Ltd 2014 E: ir@vimpelcom.com Visit our awards winning website Install VimpelCom’s App www.vimpelcom.com iPad App 26
Slide 27: Thank you!
© VimpelCom Ltd 2014 27 Thank you!
Slide 28: Appendices
© VimpelCom Ltd 2014 28 Appendices
Slide 29: Debt and cash
Debt and cash Consolidated cash and net debt development Actual 2Q14 (USD million) During 2Q14: • VimpelCom: Alfa Bank loans USD 1.0 billion • VimpelCom: repayment bond USD 0.2 billion 5,780 171 4,959 1,217 (2,087) • Wind: refinancing (new senior notes USD 5.2 265 billion; repayment senior notes and
Slide 30: FOREX rates used in annual targets for 2014
FOREX rates used in annual targets for 2014 Currency FX rates versus USD Algeria DZD 81 Armenia AMD 420 Bangladesh BDT 80 © VimpelCom Ltd 2014 Canada CAD 1.05 Egypt EGP 8.0 Georgia GEL 1.7 Italy EUR 0.80 Kazakhstan KZT 155 Kyrgyzstan KGS 47 Laos LAK 8,000 Pakistan PKR 110 Russia RUB 32 Ukraine UAH 9
Slide 31: Revenue and EBITDA development in 2Q14
Revenue and EBITDA development in 2Q14 2Q14 Revenue YoY EBITDA YoY Organic Reported Organic Reported Russia (7%) (16%) (10%) (18%) © VimpelCom Ltd 2014 Italy (9%) (5%) (8%) (4%) Africa & Asia (4%) (3%) (11%) (11%) Ukraine (5%) (35%) (12%) (40%) CIS 5% (4%) 5% (4%) Consolidated (6%) (11%) (9%) (14%)
Slide 32: FOREX development
FOREX development RATES OF FUNCTIONAL CURRENCY TO USD Average rates Closing rates 2Q14 2Q13 YoY 2Q14 1Q14 YoY © VimpelCom Ltd 2014 Russian Ruble 35.00 31.62 (9.7%) 33.63 35.69 6.1% Euro 0.73 0.77 5.0% 0.73 0.73 (0.1%) Algerian Dinar 78.95 79.14 0.2% 79.25 78.54 (0.9%) Pakistan Rupee 98.29 98.49 0.2%
Slide 33: Reconciliation of EBITDA
Reconciliation of EBITDA USD mln 2Q14 2Q13 1H14 1H13 Unaudited EBITDA 2,076 2,425 4,164 4,773 Depreciation (742) (748) (1,500) (1,514) Amortization (379) (438) (773) (892) Impairment loss (2) (4) (2) (22) Loss on disposals of non-current assets (15) (11) (26) (14) © VimpelCom Ltd 2014 EBIT 938 1,224
Slide 34: Reconciliation of consolidated net debt
Reconciliation of consolidated net debt USD mln 2Q13 1Q14 2Q14 Net debt 22,622 22,434 23,242 C ash and cash equivalents 4,551 4,540 5,505 © VimpelCom Ltd 2014 Long-term and short-term deposits 213 419 275 Gross debt 27,386 27,393 29,022 Interest accrued related to financial liabilities 574 434 432 U