VEON Ltd. · NASDAQ:VEON
VEON — VimpelCom — Merger or Acquisition (September 2016)
23 slides from VEON's merger presentation, Sep 2, 2016
Slide 1: WIND and 3 Italia merger: transformative transaction approved by EC
WIND and 3 Italia merger: transformative transaction approved by EC Amsterdam – 2 September 2016 Jean-Yves Charlier – Chief Executive Officer Kjell Morten Johnsen – Head of Major Markets Andrew Davies – Chief Financial Officer
Slide 2: Disclaimer
Disclaimer This presentation contains “forward-looking statements”, as the phrase is defined in Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended. Forward-looking statements are not historical facts, and include statem
Slide 3: Wind and 3 Italia merger – agenda
Wind and 3 Italia merger – agenda Jean-Yves Charlier – Chief Executive Officer A transformative transaction Beneficial transaction for all stakeholders Strategic fit and benefits for VimpelCom shareholders Joint venture corporate governance Kjell Morten Johnsen – Head of Major Markets Andrew Davies
Slide 4: Wind and 3 Italia merger – agenda
Wind and 3 Italia merger – agenda Jean-Yves Charlier – Chief Executive Officer A transformative transaction Beneficial transaction for all stakeholders Strategic fit and benefits for VimpelCom shareholders Joint venture corporate governance Kjell Morten Johnsen – Head of Major Markets Andrew Davies
Slide 5: Transformative transaction for VimpelCom and the Italian market
Transformative transaction for VimpelCom and the Italian market Completion expected in Q4 2016 European Commission clearance obtained on 1 September 2016 Creates a leading convergent operator in Europe’s fourth largest telecom market, serving more than 31 million mobile customers and more than 2.8 m
Slide 6: Beneficial transaction for all stakeholders
Beneficial transaction for all stakeholders… Provides a compelling alternative vis-à-vis other operators Accelerated 4G/LTE mobile broadband roll-out Unlocking value through the combination of #3 (WIND) and #4 (3 Italia) in the market EUR 5 billion NPV in synergies Supporting Digital Italy Plan EUR
Slide 7: Strategic fit and benefits for VimpelCom shareholders
Strategic fit and benefits for VimpelCom shareholders A leading world-class player able to compete in the same league with other operators Major portfolio and in-market consolidation milestone for VimpelCom, following the July 2016 closing of the Warid transaction in Pakistan Future cash flow growth
Slide 8: Solid joint venture corporate governance
Solid joint venture corporate governance Detailed shareholder agreement to ensure successful JV governance Strong empowered and independent management team led by Maximo Ibarra (CEO of WIND) Board consisting of 6 directors (3 by VIP, 3 by CKHH) Chairman rotating every 18 months, with casting vote to
Slide 9: Wind and 3 Italia merger – agenda
Wind and 3 Italia merger – agenda Jean-Yves Charlier – Chief Executive Officer A transformative transaction Beneficial transaction for all stakeholders Strategic fit and benefits for VimpelCom shareholders Joint venture corporate governance Kjell Morten Johnsen – Head of Major Markets Andrew Davies
Slide 10: A converged player serving both consumer and business segments
A converged player serving both consumer and business segments High network density: enlarged and improved quality network with over 21,000 sites Superior coverage: accelerated roll-out of 4G/LTE services with 99% population outdoor coverage2 expected by 2019 Expansion of fibre offerings and infrast
Slide 11: JV will serve more than 31 million mobile and 2.8 million fixed-line customers
JV will serve more than 31 million mobile and more than 2.8 fixed-line customers Enhanced household-centric value proposition addressing demand for fixed-mobile convergence Cross-selling and bundling opportunities for the combined mobile B2C and B2B customer base Enhanced customer experience 1 90% i
Slide 12: Merger integration plan ready to start immediately after completion
Merger integration plan ready to start immediately after completion Completion expected by Q4 2016, with integration to start immediately thereafter Network integration expected to start beginning of 2017 and expected to be completed before the end of 2019 Roaming available to 3 Italia customers on
Slide 13: Material proceeds and cost savings from agreement with Iliad
Material proceeds and cost savings from agreement with Iliad 1 2x5MHz at 900MHz, 2x10MHz at 1800MHz, 2x10MHz at 2100MHz and 2x10MHz at 2600MHz 2 2x10MHz at 800MHz, 2x10MHz at 900MHz, 2x20MHz at 1800MHz, 2x20MHz at 2100MHz and 2x20MHz at 2600MHz 3 Proceeds from Iliad to the JV will consist of EUR 450
Slide 14: Wind and 3 Italia merger – agenda
Wind and 3 Italia merger – agenda Jean-Yves Charlier – Chief Executive Officer A transformative transaction Beneficial transaction for all stakeholders Strategic fit and benefits for VimpelCom shareholders Joint venture corporate governance Kjell Morten Johnsen – Head of Major Markets Andrew Davies
Slide 15: The JV improves VimpelCom's financial profile significantly
The JV improves VimpelCom’s financial profile significantly Significantly reducing net debt by EUR 9.8 billion (USD 11.9 billion): As at 30 June 2016, USD billion 1 Net debt/EBITDA underlying Substantially improving leverage (Net debt/EBITDA1):
Slide 16: The JV is a financially stronger asset
The JV is a financially stronger asset Cash flow improvements through synergies Potential to rationalize non-core assets and achieve substantial proceeds, leveraging on agreement with Iliad The joint venture is expected to distribute to parents: 40% of its consolidated FCF1, when leverage is below 4
Slide 17: Transaction structure
Transaction structure 50/50 JV of VimpelCom and CK Hutchison Holdings VimpelCom to contribute WIND with existing net debt (EUR 9.8 billion as of June 2016) CK Hutchinson Holdings to contribute 3 Italia virtually debt free plus EUR 200 million cash No cash contributions or closing adjustments for Vim
Slide 18: A value accretive transaction
A value accretive transaction… EUR 700 million annual run-rate cash synergies2 ~1.3 ~3.1 ~0.6 Customer operations Network & IT SG&A Main areas for synergies NPV3 (EUR billion) Total ~5.0 Future proceeds and cost savings from Iliad agreement (net effect will depend on how the market and new entrant w
Slide 19: Enhanced profitability and cash flow generation
Enhanced profitability and cash flow generation Revenue and EBITDA An operator with EUR 6.3 billion revenues and… (EUR billion, FY 2015) …EBITDA margin of 39%… (EUR billion, FY 2015 and % margin) OpFCF2 and leverage …and significant deleveraging profile …cash conversion of approximately 60%… (% cash
Slide 20: P&L accounting treatment for VimpelCom
P&L accounting treatment for VimpelCom Current accounting of Italy FY2015 Intermediate accounting FY2016E1 Long term accounting FY 2017E - onward 50% of net result of Italy JV (from closing to 31 December 2016) USD million FY15 Revenue 9,625 Service Revenue 9,332 EBITDA underlying 3,908 EBITDA repor
Slide 21: JV debt maturity profile from H2 2016 onwards
JV debt maturity profile from H2 2016 onwards Note: Excluding shareholder loans, factoring. Notional amounts. $ tranche has been converted at CCS €/$ Exchange Rate EUR million
Slide 22: Final remarks
Final remarks A transformative transaction Building a new leading operator in Italy with significant synergies Strengthening the financial profile and portfolio of VimpelCom Beneficial to all stakeholders
Slide 23: Wind and 3 Italia merger – agenda
Wind and 3 Italia merger – agenda Jean-Yves Charlier – Chief Executive Officer A transformative transaction Beneficial transaction for all stakeholders Strategic fit and benefits for VimpelCom shareholders Joint venture corporate governance Kjell Morten Johnsen – Head of Major Markets Andrew Davies