VEON Ltd. ORD · RUS:VEON-RX
VEON Ltd. ORD — VimpelCom — Investor Day (July 2015)
145 slides from VEON Ltd. ORD's investor day presentation, Jul 9, 2015
Slide 1: Russia analyst & investor site visit
Russia analyst & investor site visit © VimpelCom Ltd 2015 Gerbrand Nijman Head of Investor Relations July 9, 2015 1
Slide 2: Disclaimer
Disclaimer This presentation contains “forward-looking statements”, as the phrase is defined in Section 27A of the US Securities Act of 1933, as amended and Section 21E of the US Securities Exchange Act of 1934, as amended. These statements relate to, among other things, VimpelCom Ltd.’s (“VimpelCom
Slide 3: Program
Program Time Russia analyst & investor site visit, July 9, Moscow 08:30-09:00 Registration of participants 09:00-09:45 Gerbrand Nijman – opening and VimpelCom Group Head of IR VimpelCom Group 09:45-10:15 Mikhail Slobodin CEO Russia 10:15-10:45 Anastasiya Orkina CMO Russia © VimpelCom Ltd 2015 10:45-
Slide 4: VimpelCom - an international telecoms operator
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 VimpelCom - an international telecoms operator 218m Russia Armenia Kazakhstan Uzbekistan Kyrgyzstan 740m population mobile customers 56m 1m 10m 10m 3m coverage Ukraine Tajikistan 26m 1m Italy Georgia 21m 1m $18b Algeria Revenue 19m L
Slide 5: Geographically diversified leading mobile operator
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Geographically diversified leading mobile operator Headquartered in Amsterdam USD 18.1 billion Total revenue split1 (%) 30 9 4 7 5 5 4 2 34 66% from Emerging markets USD 7.3 billion EBITDA split1 (%) 28 11 4 6 5 7 4 4 31 69% from Eme
Slide 6: Attractive emerging markets portfolio
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Attractive emerging markets portfolio 66% of revenue in emerging markets Emerging market portfolio ► #1 or #2 market position in six out LTM 1Q15 of seven of our major emerging Revenues markets: USD 12.3 bn – #1 in 4 (UKR, ALG, PAK,
Slide 7: Russia in the VimpelCom Group
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Russia in the VimpelCom Group EBITDA Breakdown (%) Russia 2010 2013 1Q’15 LTM Rest of the Group • Solid margins • Robust cash flows • Double digit data revenue growth • Rational regulation • Valuable links with other OpCos (e.g. Ukra
Slide 8: Significant mobile data upside across portfolio
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Significant mobile data upside across portfolio Mobile Data Penetration (%) Data Usage (MB / User) Western Europe Avg: 66% 1,313 1,213 57% 55% 52% 47% 43% 39% 37% 369 169 169 143 7% 106 52 ALG PAK BGD UKR ITA UZB KAZ RUS BGD UKR UZB
Slide 9: Leading customer experience in 2014
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Leading customer experience in 2014 #1 Co-leader Improving Bangladesh Kazakhstan Algeria Pakistan Kyrgyzstan Italy Russia Ukraine Uzbekistan NOTE: Independent agency research < 9>
Slide 10: Capital structure optimization continues
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Capital structure optimization continues Bought back USD 1.8 bln bonds using Algeria proceeds1 Repaid RUB 35 bln Sale of 90% shares in Italian bonds using Algeria towers Company for EUR 693 mln proceeds Closed transaction 3rd refinan
Slide 11: Significantly improved debt maturity schedule
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Significantly improved debt maturity schedule Group debt maturity schedule (in USD billion) ■ As at December 31, 2014 ■ As at March 31, 2015 Pro Forma1 5.8 6.0 6.3 5.4 3.2 2.7 2.2 2.0 1.9 1.5 1.1 2.1 2.1 1.3 1.6 1.2 1.3 1.1 2015 2016
Slide 12: FOREX impact on EBITDA offset by net debt reduction
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 FOREX impact on EBITDA offset by net debt reduction Net debt / EBITDA December 31, 2014 March 31, 2015 2.5 2.4 1.2 1.2 Excluding Group Excluding Group Italy Italy < 12>
Slide 13: Substantial reduction in cost of debt
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Substantial reduction in cost of debt Pro forma average cost of Average cost of debt 1Q14 Average cost of debt 4Q14 debt 1Q151 8.3% 8.3% 6.3% 6.2% 1 Average cost of debt at 1Q15 is pro-forma for the outcome of the tender. Settlement
Slide 14: Cash flow enhancing from financing improvements
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Cash flow enhancing from financing improvements during 2014 - 1Q 2015 Targeted potential Expected A&I day Jan 2014 savings In-house finance company USD 50 million USD 20 million Debt optimization USD 150 million USD 400 million Gross
Slide 15: Recent strategic highlights
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Recent strategic highlights • Closed Algeria transaction • Repaid USD 3.4 billion of debt • Completed Italian tower sale • Concluded 3rd and final stage of refinancing in Italy • Launched 3G in Ukraine • Launched 4G/LTE services in G
Slide 16: Creating sustainable differentiation in Russia
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Creating sustainable differentiation in Russia Mikhail Slobodin Chief Executive Officer < 16>
Slide 17: Agenda
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Agenda 1. Telecom environment in Russia 2. Beeline historical performance 3. Recent performance objectives 4. Objectives and key initiatives < 17>
Slide 18: Russia is not a single market, but 83 different local markets
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Russia is not a single market, but 83 different local markets Russia facts Telecom market facts • SIM penetration >160% • Average ARPU is USD 5.5 • 97% B2C is prepaid. No legal way to lock a customer into a long-term contract • B2B i
Slide 19: From macroeconomic decline to stabilization
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 From macroeconomic decline to stabilization GDP Growth 4 3,4% 2,3% 2,3% 2,4% • Economic decline to bottom out in 2 1,3% 0,6% 2015 1,3% 0 0,5% • Situation to gradually normalize -2,8% (2) from 2016 onwards with GDP (4) -3,9% growth ar
Slide 20: Telco market growth dependent on mobile data
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Telco market growth dependent on mobile data Russian mobile telecom market • The traditional Russian telecom market (RUB billion; Latest estimates) has reached saturation, mobile data is the main growth driver 2011-2014 2015-2018 Mar
Slide 21: What was the state of the company
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 What was the state of the company < 21>
Slide 22: Underinvestment and lack of customer focus cost market share
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Underinvestment and lack of customer focus cost market share Gap with the competitors (in number of 3G NodeB) 40 VimpelCom Megafon 30 MTS 20 10 0 2009 2010 2011 2012 2013 < 22>
Slide 23: Customer service was not at the heart of the Company
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Customer service was not at the heart of the Company • Opaque and confusing pricing • Terms of service frequently changed • Share of unrequested services in company revenue reached 3.3% < 23>
Slide 24: Underinvestment impacted customer satisfaction and churn
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Underinvestment impacted customer satisfaction and churn Net Promoter Score Annual churn (% of customer base) 70% 40 30 60% 20 50% 10 40% 0 3Q 4Q 1Q 2Q 3Q 4Q 30% 2009 2010 2011 2012 2013 2012 2013 VimpelCom Megafon MTS VimpelCom Mega
Slide 25: Beeline built the most sales-dependent business model
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Beeline built the most sales-dependent business model VimpelCom share in sales • Combination of high churn and underdeveloped distribution channel 30.9% 30.9% 30.3% 35.2% 34.9% 31.5% 33.0% 33.9% 32.3% 33.5% 37.7% 36.1% 35.9% 32.4% 31
Slide 26: As a result Beeline lost market share
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 As a result Beeline lost market share Revenue market share (in %) 38% VimpelCom 36% Megafon МТS 34% VimpelCom 2009 level 32% 30% 28% 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 2009 2010 2011 2012 2013 < 26>
Slide 27: Beeline turnaround
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Beeline turnaround What we have done to change the situation < 27>
Slide 28: Focused on network quality
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Focused on network quality More than 90% of customers We are speed leaders in Good growth NPS in mobile have more than enough mobile data 40% of branches internet speed for online video streaming % customers in leading data % custome
Slide 29: Shift from Pay-As-You-Go voice plans to data bundles
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 We have shifted our focus from Pay-As-You-Go voice plans to data oriented bundles Share of bundles Bundles have highest ARPU (in %) (ARPU, RUB) 36% 23% 23% ALL Zero GO Welcome (bundle) Doubts PAYG) 14% And highest lifetime revenue 12
Slide 30: Sales channel shifted from uncontrolled to controlled
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Sales channel shifted from uncontrolled to controlled Channel mix development Alternative 19% 23% Retail 20% Regional 26% Consumer Dealers 1% Electronics 22% Evroset+ 22% Svyaznoy 19% Monobrand 17% Franchise 2% Know How 17% Own store
Slide 31: Customer-centric transformation
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Customer-centric transformation < 31>
Slide 32: Customer-centric transformation
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Customer-centric transformation Affordable smartphones Transparency of content subscription costs and no Most affordable data-roaming unwanted contracts Anti virus Personalized offerings SMS spam filter Attractive bundles New product
Slide 33: Improved performance
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Improved performance NPS improving 6 consecutive quarters Revenue Market Share stabilized (%) 40 39% 37% 30 35% 20 33% 31% 10 29% 0 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 27% 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2012 2013 2014 2015 2011 20
Slide 34: We will deliver Easy. Convenient. For you!
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 We will deliver “Easy. Convenient. For you!” Easy. Convenient. Price For You! Product • Fair price / perceived parity in • Simple and concise product offering level of price in mobile • CBM-powered Segment of One Superiority best • T
Slide 35: Key initiatives
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Key initiatives • Total bundlezation • Best distribution • Digital customer experience • Quad Play • Operational Excellence • Mobile Financial Services • Network sharing • CIS evolution • Media • B2B: SME+ICT < 35>
Slide 36: Our aspirations
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Our aspirations Most Most Most efficient diversified preferred Best team and culture < 36>
Slide 37: B2C - Connecting with heart, mind and pockets of our customers
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 B2C-Connecting with heart, mind and pockets of our customers Anastasia Orkina Chief Marketing Officer < 37>
Slide 38: Crisis: people limit their spending
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Crisis: people limit their spending 63% 31% Cut down their Postpone buying a expenses number of products 43% 45% Save on footwear State deterioration of and clothes their material status Sources: FOM, VCIOM. January– April 2015 < 38>
Slide 39: Crisis takes toll on spending yet telecom services last to go
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Crisis takes toll on spending yet telecom services last to go Which non-food products and services First thing in the morning I*… you began to save more on? Clothes and footwear 26% Go online on my mobile phone 39% Entertainment, lei
Slide 40: Beeline continues with its client-centric strategy
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Beeline continues with its client-centric strategy < 40>
Slide 41: Catching up in NPS
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Catching up in NPS Market NPS, Russia 30% 25% #2 20% 15% 10% 5% 0% 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 Megafon MTS Beeline Source: NPS tracking, 2Q2015 < 41>
Slide 42: NPS measured and set as KPIs for all key touchpoints
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Bottom up NPS measured and set as KPIs for all key touchpoints... Dealers Call Centre Monobrand Voice Marketing 23.4 22.3 23.5 62.3 63.3 22.0 21.9 21.8 60.3 60.1 59.4 60.8 20.3 55.8 58.4 18.3 55.3 52.3 63.1 15.0 15.8 20.5 20.2 21.3 2
Slide 43: B2C products and services
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 B2C products and services < 43>
Slide 44: Leading in bundles in Russia: value for money
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Leading in bundles in Russia: value for money Bundle tariffs = 23% customer base 300 Translation: We froze «VSE»! Prices on the 2014 level < 44>
Slide 45: Leading in bundles: Driving on-net traffic
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Leading in bundles: Driving on-net traffic Share of on-net, B2C 68% 66% 66% 64% 62% 60% 58% 56% 54% 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 < 45>
Slide 46: Beeline's unique post-paid offer
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Leading in bundles: Beeline's unique post-paid offer • Postpaid price plans users change operator 4 times less often • ARPU +4% comparing to same prepaid bundle * ”VSE” vice versa, first everything, then payment < 46>
Slide 47: Entry level smartphones create new data usage
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Entry level smartphones create new data usage RUB 990 Smartphone Full price with prepaid bundle RUB 3,390 < 47>
Slide 48: Beeline leads product innovation in Russia
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Beeline leads product innovation in Russia < 48>
Slide 49: Freemium model: content offering
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Freemium model: content offering New episodes of “The Game of Thrones» first and free with “VSE!” RUB 600 + price plans Partnership with Amediateka (Local equivalent of HBO GO) Free subscription: RUB 1,000 but for our clients — free
Slide 50: Freemium model: data for tablets
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Freemium model: data for tablets Internet - forever! Every 3rd 43% switches to choose heavy additional volume data bundles bundle new go-to-market channels Translation: Free Internet forever 200 Mb every month Price plan for tablets
Slide 51: Shared data bundle
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Shared data bundle • 72% clients connect tablets • 11% clients connect 2 additional devices • 60% new devices in Beeline base • 60% users are ready to recommend SDB to their friends < 51>
Slide 52: Personal Beeline: more than personalized offers
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Personal Beeline More than 1,100,000 personalized offers < 52>
Slide 53: Capable CBM as a foundation for our marketing
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Capable CBM as a foundation for our marketing 1. Integrated customer lifecycle offers (incl. active archive tariffs migration) 2. Advanced up-sell strategy 3. Local offers for regional markets 4. Self-service CBM capability developme
Slide 54: Superb data quality: try for yourself
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Superb Data quality: try for yourself - 1 week free 2.1 mln of new data users To be continued * We won’t get stuck! < 54> Superfast mobile internet for free
Slide 55: Beeline data roaming brings best value in market
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Beeline data roaming brings best value in market Data traffic +263% increase year to year Income +12% increase year to year < 55>
Slide 56: 4G/LTE-roaming now in 48 countries
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 4G/LTE-roaming now in 48 countries! < 56>
Slide 57: Push into Mobile Financial Services
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Push into Mobile Financial Services * Money Beeline Key activities ATM cash M-commerce withdrawal «Beeline» Paypass card +25% 4 million 310,000 Insurance Launched in monobrand Customers Revenue Beeline cards in 2015 Micro loan Pilot
Slide 58: Loyalty program: pay by card – talk free!
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Loyalty program: pay by card – talk free! 1 2 3 Use bonus to Pay by Card Get loyalty pay the phone Beeline bonuses Accrual 1.5% bonuses on each transaction Use bonus to pay for mobile equipment Free of charge and free SMS servi
Slide 59: 4G/LTE customer experience on G devices
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 4G/LTE customer experience on 3G devices 4G-Routers RUB 799 (promo) < 59>
Slide 60: We capped unlimited data bundles and competitors followed
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 We capped unlimited data bundles and competitors followed From unlimited to 30Gb < 60>
Slide 61: Beeline leads in migrant services
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Beeline leads in migrant services, leveraging best CIS footprint 3.9 mln Customers Smartphone 25% users < 61>
Slide 62: FTTB & IPTV coverage – quad-play player
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 FTTB & IPTV coverage – we are the quad-play player 2.3 mln 1.05 mln FTTB subs IPTV subs RUB 491 39 Regions ARPU of Russia < 62>
Slide 63: Local initiatives in regions – increasing competitive advantage
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Local initiates in regions – increasing competitive advantage * Tablets from 3990 rub. * Closer to loved ones Only in Beeline offices Phone calls without intercity-roaming within +200 mb forever South and the North Caucases *Catch 4G
Slide 64: Initial results
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Initial results < 64>
Slide 65: Mobile data revenue up 18 percent
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Traffic, GB 52 508 142 Mobile data revenue up 24 187 678 18 percent YoY 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 < 65>
Slide 66: Customer base increased 1.2 percent YoY
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Customer base increased 1.2 percent YoY 4Q14 trend maintained By 1.2% YoY < 66>
Slide 67: Churn decreased YoY
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Churn decreased 5 percent YoY By 5 p.p. YoY < 67>
Slide 68: Leading in mobile data perception
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Leading in mobile data perception 4G +70% 90 89 90 84 79 82 73 74 3G +12% 66 69 65 63 2G +6% Speed Coverage Expenses Convenience transparency Sources: Own data – mobile data tracking. Q1 2015 < 68>
Slide 69: Beeline - #1 telecom brand in Russia
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Beeline - #1 telecom brand in Russia Top of mind Top of mind 45 advertising awareness 35 brand awareness 40 30 35 25 30 25 20 20 15 15 10 10 5 5 0 0 Билайн МегаФон МТС Билайн МегаФон МТС Source: Brand Health Tracking, May 2015 < 69>
Slide 70: Improving the quality of distribution
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Improving the quality of distribution Sergey Rumyantsev Chief Distribution Officer < 70>
Slide 71: Russian mobile market distribution
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Russian mobile market distribution Alternative Own shops Retail 26.1% 14.5% Multibrand Controlled Monobrand Regional Controlled Dealers Franchise 21.7% 3.5% Online Channel 0.3% Online Key accounts 0% Non-controlled Consumer Monobrand
Slide 72: Controlled channels taking bigger share
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Controlled channels taking bigger share Total Russia (%) Beeline revenue market share, % 18% 19% 27% 28% 28 30 32+ 18% 19% 16% 17% 19% 23% 22% 22% 20% 20% 20% 18% 25% 19% 15% 14% 1Q14 1Q15 1Q14 1Q15 Controlled Monobrand Non-Controlle
Slide 73: Channel mix shifting towards controlled channels
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Channel mix shifting towards controlled channels Channel mix in sales and revenue • Own shops – our main Channel 2014 strategic focus, as highest ARPU and lifetime channel Monobrand 17% • Whilst we build out more own shops, key accou
Slide 74: Beeline shops
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Beeline shops < 74>
Slide 75: Building towards optimal store count
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Building towards optimal store count We are opening 30 new stores per month POS# 1 shop for 50 thousand people 50% Franchise 70% We will cover 70-75% of population, the rest will be covered by franchise 50% Own Stores 30% current < 7
Slide 76: Omni-channel is the main tool for overtaking competitors
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Omni-channel is the main tool for overtaking competitors < 76>
Slide 77: Customer satisfaction in focus
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Customer satisfaction in focus Daily report 2014 – 2015 +13pp 62 60 57 52 49 NPS New service standards +26% 2Q14 3Q14 4Q14 1Q15 2Q15 Feedback work Medallia report < 77>
Slide 78: Know-How multibrand franchise more efficient than classic franchise
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Know-How multibrand franchise will be more efficient than classic franchise April 2015 ARPU LT (months) LT revenue per sale Cost of Contribution distribution Margin Know How 176% 83% 154% 212% 142% Franchising 100% 100% 100% 100% 100
Slide 79: Know-How concept
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Multibrand franchise Know-How concept Total area ~40 m2 Focus on Bundles In city centers Store trade area 35 «SIM + Data (except Moscow and m2 device» with Low- St-Pete) Warehouse 2 m2 end devices Know-How Unified offers for cust
Slide 80: Closing ineffective franchising stores
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Closing ineffective franchising stores Stores Modules 1,626 1,005 88 105 Closed Closed Negative 5-month CM stores Negative 5-month CM stores < 80>
Slide 81: Cutting low quality sales in alternative retail
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Cutting low quality sales in alternative retail Active sales (thousands customers) -31% 1Q14 1Q15 Revenue new-new (mln RUB) ARPU (RUB) -9% +22% 1Q14 1Q15 1Q14 1Q15 < 81>
Slide 82: Regional dealer market is decreasing due to crisis
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Regional dealer market is decreasing due to crisis Number of POS 13,500 ► Device market drop, no credits, customers falling incomes, traffic decrease ► 16% of partners’ sales points were closed ► SIM sales are decreasing 2014 2015 20
Slide 83: Growing consumer electronics channel
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Growing consumer electronics channel Who #POS Share National 1% in sales, electronics 990 POS 1% in hypermarkets revenue of with both new physical customers stores and online shops < 83>
Slide 84: Drive Consumer Electronics sales with regular products and Freemium
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Drive Consumer Electronics sales by launching regular products and “Freemium” 1. Regular products sales started at all CE stores across Russia 2. 183K Freemium SIM bundled with free tablets in MVideo campaign 3. 1Q15 Freemium total s
Slide 85: Exploring new sales channels
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Exploring new sales channels Proposal concept: Russian Post Main pool of tariffs exposed in 20,000+ branches in Russia New Channels Proposal concept: (banks, coffee houses, 100% Freemium, one-off proposal by restaurants, cosmetics ch
Slide 86: Conclusion
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Conclusion • Strategic focus on owned Beeline monobrand stores • NPS improving • Increasing efficiency of franchise channel, cutting low quality in alternative channel • Expansion in new channels < 86>
Slide 87: Digital in Beeline Russia
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Digital in Beeline Russia Alexander Pyatigorskiy Chief Digital Officer < 87>
Slide 88: Why Digital?
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Why Digital? Monthly Reach 64% Daily Reach 52% 78.8 64.0 mln. mln. < 88>
Slide 89: Service
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Service App launched in March 2014 More then 10 mln downloads Russia Telco App ratings Beeline 4 4,5 4 MTS 1,5 2,8 No Megafon 2 3,5 No Yota 3 3,9 No < 89>
Slide 90: Self-Service instead of Call Center
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Self-Service instead of Call Center Self-service vs Call Center (millions) 75,000 2.0 1.6 60,000 1.2 45,000 0.8 30,000 0.4 January February March April May Millions Calls to Call Center Self-Service authorizations after Call to CC <
Slide 91: Sale & Upsell
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Sale & Upsell < 91>
Slide 92: Promotion & Advertisement
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Promotion & Advertisement ► #200деньгинаместе ► 3 mln views ► 742K views ► 1250 participants ► Programmatic buying ► Less money more result < 92>
Slide 93: Thank you!
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Thank you! < 93>
Slide 94: Creating a network for the future
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Creating a network for the future Martin Skop Chief Technology Officer < 94>
Slide 95: Creating a network for the future
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Creating a network for the future 1. Overview of current network 2. Performance 3. Innovation 4. Future readiness 5. CAPEX evolution < 95>
Slide 96: Overview of current network
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Overview of current network Focus on core location with the Complexity biggest influence: 240 7 Too many vendors Complex vendor map: 5+ 2-3 Network operation in the Country with many core locations biggest country is a challenge
Slide 97: Improving network performance
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Improving network performance • In-house benchmarking: 40% of our customers live in areas where we are #1 in data speed • Customer feedbacks: Net promoter score (NPS) is growing • Cluster approach (A, B, C, D) % Customers in leading
Slide 98: Recent innovations
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Recent innovations 4G/LTE active radio sharing 4G/LTE-Advance First First Voice over 4G/LTE WiFi integration First Biggest < 98>
Slide 99: Network transformation underway
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Network transformation underway Voice Data - Voice Full HD Centric Network 4G/LTE + Wi-Fi + FTTB On-line “Always-Connected” “Network Agnostic Digital Data Services “Fast Time-To- Service” FMCG-network Digital Market” services < 99>
Slide 100: Future
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Future Best customer Smart rollout experience and investment process Design for Operational the future Excellence <100>
Slide 101: Forward looking mobile strategy
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Forward looking mobile strategy • Good in voice Always On & Online • Behind in 4G/LTE coverage • Seamless handover RAN/WiFi • Network needs modernising • In key regions Fixed/Mobile (FMC) Technology • IT needs simplification • Simple
Slide 102: Provide best customer experience
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Provide best customer experience Priority Key initiatives Always best network where we are • Always on with best KPI • No preventable outages • Best HD voice, best video Best • Automated optimisation (SON) customer experience Best cu
Slide 103: Designed for the future
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Designed for the future Priority Key initiatives • IMS services (VoLTE etc) • Core site reduction Design for • New transmission architecture • All IP transmission the future • Radio modernisation • Core virtualisation • Disaster reco
Slide 104: A smart rollout
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 A smart rollout Priority Key initiatives Focused network deployment • By branch priority (A, B, C, D) • By geography locations Smart • Based on customer data rollout Share everywhere • Active and passive everywhere • Sharing program
Slide 105: 4G/LTE-sharing with MTS
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 4G/LTE-sharing with МТS Estimated savings of 30-40% of construction costs <105>
Slide 106: Fixed-line network strategy
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Fixed-line network strategy Priority Key initiatives Fixed-line • Maximize our assets footprint • Common core with mobile network • Cloud & virtualization. vCPE • Develop new OTT Product TV • Plug & play IPTV solution <106>
Slide 107: Operational Excellence: focus on simplification while improving reliability
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Operational Excellence: focus on simplification while improving reliability • Focus on location with the biggest influence ZERO Outage • Routine for day to day tasks • Train and repeat with our staff every day • Efficiency in our bus
Slide 108: CAPEX dynamics 2011-2014 with changing USD rate
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 CAPEX dynamics 2011-2014 with changing USD rate 39.3 22.5 21.7 20.3 32.3 31.1 29.7 17.8 59.795 58.792 61.310 2.012 1.822 50.699 1.631 1.560 2011 2012 2013 2014 2011 2012 2013 2014 CAPEX, RUB bln C/R, % CAPEX, USD mln RUB per USD <108
Slide 109: Creating a network for the future
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Creating a network for the future • Customer Excellence • Smart rollout and investment process • Design for future • Operational Excellence <109>
Slide 110: Driving Operational Excellence
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Driving Operational Excellence Nikolay Ivanov Chief Financial Officer <110>
Slide 111: Challenging macro economy
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Challenging macro economy GDP growth (in %) 1.3% 0.6% -2.2% 2013 2014 1Q15 (YoY) (YoY) (YoY) http://www.gks.ru/wps/wcm/connect/rosstat_main/rosstat/ru/statistics/accounts/# <111>
Slide 112: Inflation rate is the highest for the last 10 years
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Inflation rate is the highest for the last 10 years Inflation in Russia (in %) 16.2% 9.6% 6.4% 4Q13 4Q14 1Q15 (YoY) (YoY) (YoY) http://www.gks.ru/wps/wcm/connect/rosstat_main/rosstat/ru/statistics/tariffs/# <112>
Slide 113: Wage inflation at low level
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Wage inflation at low level Mobile share of overall spending at 1% Average salary in Russia per month (in RUB thousands) 32.6 31.6 29.8 4Q13 4Q14 1Q15 http://www.gks.ru/bgd/regl/b15_02/IssWWW.exe/stg/d010/4-02.doc <113>
Slide 114: Migration switched from net inflow to outflow
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Migration switched from net inflow to outflow Inflow (in thousand people) 264 156 -179 - 365 1H14 2H14 Uzbekistan Tajikistan Federal Migration Service <114>
Slide 115: Weak ruble beginning to stabilize
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Weak ruble beginning to stabilize USD/RUB Rate (May 2015 YTD) +106% 62.9 53.4 49.7 35.7 34.7 37.3 30.6 31.9 32.8 32.7 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 http://www.cbr.ru/currency_base/dynamics.aspx <115>
Slide 116: Customer base back to YoY growth
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Customer base back to YoY growth Customers +1.4% (in millions) 58.1 +1.2% 57.3 57.2 57.1 56.5 56.3 55.7 55.7 55.0 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 <116>
Slide 117: Turnaround in quarterly churn
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Turnaround in quarterly churn -1.3% Churn -2.5% (in %) 18.2% 17.1% 15.7% 15.8% 15.0% 15.0% 14.5% 14.0% 13.4% 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 Quarterly churn <117>
Slide 118: Back to YoY revenue growth
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Back to YoY revenue growth +0.2% Total revenue (in RUB billion) +4.7% 73.8 75.4 73.1 73.9 70.1 70.7 68.7 3.5 1.7 66.1 2.0 3.4 66.3 4.3 2.0 1.4 1.6 1.9 70.4 73.6 68.7 71.0 70.6 65.8 64.6 67.3 64.3 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q
Slide 119: Excluding content revenue growth even higher
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Excluding content revenue growth even higher +0.8% Total revenue (in RUB billion) +5.0% 69.4 70.9 70.5 71.1 67.7 66.2 65.5 1.7 63.3 2.0 3.4 63.8 3.5 2.0 1.4 4.3 1.6 1.9 65.9 69.2 65.7 64.8 68.4 67.7 61.2 61.7 61.9 1Q13 2Q13 3Q13 4Q13
Slide 120: Mobile revenue growing again
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Mobile revenue growing again +0.4% Total mobile revenue (in RUB billion) +2.7% 61.3 61.4 58.1 58.1 59.7 59.6 3.3 1.6 56.1 1.8 53.8 1.9 3.3 54.0 4.1 1.3 1.4 1.9 58.0 60.8 57.8 54.0 56.3 52.4 54.9 56.4 52.1 1Q13 2Q13 3Q13 4Q13 1Q14 2Q1
Slide 121: Excluding content mobile revenue growth even higher
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Excluding content mobile revenue growth even higher +1.2% Total mobile revenue (in RUB billion) +3.0% 56.8 58.0 57.1 56.8 53.5 55.1 53.6 3.3 1.6 50.9 1.9 3.3 51.5 1.8 1.3 4.1 1.4 1.9 53.5 56.4 53.3 52.3 55.2 53.5 49.4 49.5 49.7 1Q13
Slide 122: Mobile data revenue the growth engine
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Mobile data revenue the growth engine Mobile data revenue (in RUB billion) +18.4% +19.7% 10.5 10.4 9.8 9.0 8.8 8.8 8.1 7.6 7.2 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 <122>
Slide 123: Fixed-line revenue stable
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Fixed-line revenue stable -0.7% Total fixed-line revenue (in RUB billion) +13.8% 14.3 13.0 12.6 12.6 13.4 12.0 12.6 12.3 12.3 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 <123>
Slide 124: EBITDA and EBITDA margin growing, adjusted for FOREX
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 EBITDA and EBITDA margin growing, adjusted for FOREX EBITDA -7.8% -6.7% 121.4 29.3 +4.8% 27.8 113.3 26.5 111.9 26.1 2013 2014 2014 w/o 1Q13 1Q14 1Q15 1Q15 w/o FX impact FX impact EBITDA Margin % +4.6% -5.2% -4.1% 41.9 41.8 42.0 40.2
Slide 125: Operational Excellence
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Operational Excellence <125>
Slide 126: Cover all the value add elements
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Cover all the value add elements: OPEX, CAPEX, Margins, Inventory, Cash <126>
Slide 127: Creating a continuous improvement culture
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Creating a continuous improvement culture <127>
Slide 128: Value generation not just cost reduction
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Value generation not just cost reduction <128>
Slide 129: Long-term, not just short-term, targets and solutions
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Long-term, not just short-term, targets and solutions <129>
Slide 130: Changing the mind set regarding traditional structures
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Changing the mind set regarding traditional structures, processes and practices <130>
Slide 131: Go digital and use new technologies
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Go digital and use new technologies <131>
Slide 132: Align personal and company goals
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Align personal and company goals <132>
Slide 133: Integrating efficiency targets with personal KPIs
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Integrating efficiency targets with personal KPIs <133>
Slide 134: Site rental cost to decrease in 2015
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Site rental cost to decrease in 2015 17.8 17.8 • Small cell usage 17.6 • Joint negotiations and rent seeking • Optimization of equipment set • Motivation program for employees 16.8 • Centralized negotiations (with monopolists) 2011 2
Slide 135: Transportation network rental costs also decreasing
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Transportation network rental costs also decreasing Change in network rental costs • Own network construction (in % YoY) 1.7% 1.2% • Joint construction and sharing • Replacement of rented space channels by own space capacity • Channe
Slide 136: Strong reduction in vehicle expenses
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Strong reduction in vehicle expenses Vehicle costs • Reduced the number of models • Review the required 283 number of vehicles 255 203 • New vehicle policy • Started to use own GPS tracking system to optimize the number and usage of
Slide 137: Cost per vehicle declining despite inflation
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Cost per vehicle declining despite inflation Cost reduction per vehicle (in % YoY) 1.0% -1.0% -2.8% 2012 2013 2014 2015E <137>
Slide 138: Reducing headcount without impacting front office functions
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Reducing headcount without impacting front office functions (Thousand employees) -4.8% +4.1% 29.1 28.4 28.6 27.9 27.1 26.8 26.0 26.1 24.8 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 Headcount <138>
Slide 139: Increasing efficiencies through Shared Service Centre project
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Increasing efficiencies through Shared Service Centre project Further Wave 1 Wave 2 Wave 3 optimization 2013 2014 2Q15 2Q16 33 FTE 23 FTE 44 FTE reduced reduced reduced 22% estimated total S&B savings per year * Based on number of FT
Slide 140: Three phased logistics optimization project
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Three phased logistics optimization project leading to substantial savings Phase 1 Phase 2 Phase 3 2014 2015 2016 Central warehouse Regional warehouses Branches warehouses optimization optimization optimization 35% estimated 57% esti
Slide 141: Improving capital efficiency
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Improving capital efficiency • Increased level of accountability • Improvement of quality of investment cases and decisions taken • Greater focus on project management • Focus on monitoring and post investments reviews • Tighter cont
Slide 142: Strong working capital improvement
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Strong working capital improvement 2012-2014 net working capital improved by RUB 3.1bn: • Overall OPEX inventory decreased due to improvement of planning, logistics and obsolete inventory sale off • Strict rules on advance payments:
Slide 143: Ruble weakness related risks
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Ruble weakness related risks Risks of ruble weakness • Price increase • Pricing and supply chain – suppliers pass on currency risks to integrators • Supplier bankruptcy • Supply refusal <143>
Slide 144: Adjusting to new reality
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Adjusting to new reality • All currency risks are managed individually • Fix prices in rubles • Price reduction by discounts, direct contracts with modified logistics schemes, currency risk compensation (flexible discount) • Transfer
Slide 145: Conclusion
Russia Site Visit 2015 Moscow, July 9 - 2015 © VimpelCom Ltd. 2015 Conclusion • Macro environment expected to remain challenging • Turnaround visible in YoY improvements • Continued focus on operational efficiencies <145>