62 slides from VEON Ltd. ORD's investor presentation, April 2014
Slide 1: Creating Value: Investing in the future
Creating Value © VimpelCom Ltd 2014 Investing in the future Investor Presentation April 2014 www.vimpelcom.com iPad App 1
Slide 2: International telecoms operator with attractive emerging markets exposure
International telecoms operator with attractive emerging markets exposure Mobile Population customers covered 220 753 million** million*** No 7 Mobile operator in the world* © VimpelCom Ltd 2014 Countries Number 17 of brands 9 USD 22.5 billion** Russia USD 9.6 billion** Africa & Asia Total operating
Slide 3: Strategic value agenda to create value
Strategic value agenda to create value © VimpelCom Ltd 2014 3
Slide 4: Last three years' performance and 2014 targets
Last three years’ performance and 2014 targets Targets Macro economic and 2011 2012 2013 2014 regulatory headwinds Revenue +4% YoY +4% YoY Stable YoY2 Stable YoY ► Russia GDP growth slowed down © VimpelCom Ltd 2014 EBITDA -1% YoY +8% YoY Stable YoY2 Stable YoY ► Continued weak economy in Italy EBITD
Slide 5: Strong EBITDA margin versus our global peers
Strong EBITDA margin versus our global peers EBITDA Margin (FY13)1 © VimpelCom Ltd 2014 VIP WE Telcos with CIS / Emerging Market Others2 CEE Exposure 1 Vodafone reported for 6M2013, MTS and Others are based on LTM 3Q13 5 2 Others include a sample of more than 80 listed telecom operators in Developed
Slide 6: Stable underlying FY13 results
Stable underlying FY13 results FY12 USD million FY13 YoY Restated1 Revenue 22,548 23,061 (2%) • Revenue organically stable, excluding one-off charges and MTR cuts of which service revenue 21,531 22,122 (3%) EBITDA 9,619 9,768 (2%) • EBITDA organically stable, excluding one-off charges and MTR cuts E
Slide 7: Net income FY13 impacted by non-cash impairments
Net income FY13 impacted by non-cash impairments USD million © VimpelCom Ltd 2014 (2,973) 1 1 1 Non-cash impairments: ► Ukraine: related to macro-economic developments, increase in country risk premium and weakening operational performance ► Canada: fully impaired due to the challenges faced in the
Slide 8: Sensitivity to FOREX movements
Sensitivity to FOREX movements FOREX sensitivities1 FY13 figures RUB vs. USD EUR vs. USD UAH vs. USD USD billion +/-10% +/-10% +/-10% Revenue 22.5 4% 3% 1% Average FOREX © VimpelCom Ltd 2014 EBITDA 9.6 4% 2% 1% Gross Debt 27.5 2% 5% n.a. Year-end FOREX Net Debt 22.6 2% 6% n.a. Manageable impact on t
Slide 9: Dividend policy to support deleverage and investments
Dividend policy to support deleverage and investments ► More long-term value in deleveraging and investing in high quality, 3G and 4G networks to capture high mobile data growth ► Paid ordinary DPS USD 0.8 per share for last 3 years, supported by strong operational cash flows © VimpelCom Ltd 2014 ►
Slide 10: Future growth drivers
Future growth drivers ► Customer growth from increase in mobile penetration ► Mobile data revenue growth; investing in high quality networks, 3G and 4G/LTE ► Continued emerging markets growth © VimpelCom Ltd 2014 ► General economic recovery, particularly in Italy ► Global partnership agreements in t
Slide 11: VimpelCom has an attractive emerging markets portfolio
VimpelCom has an attractive emerging markets portfolio 71% of revenues in emerging markets Emerging market portfolio ► Solid market positions ► Strong cash flow generation © VimpelCom Ltd 2014 FY 13 Revenues USD 15.9 bn ► Low leverage EBITDA USD 6.9 bn CAPEX USD 3.1 bn Cash Flow1 USD 3.9 bn Leverage
Slide 12: 2013 Emerging markets progress: Russia
2013 Emerging markets progress Russia ► Substantially improved mobile data network: at par in key regions ► Tripled number of owned mono-brand stores ► Launched LTE in Moscow Oblast and six regions © VimpelCom Ltd 2014 ► Completed Phase 1 of the transformation process ► New management to implement P
Slide 13: 2013 Emerging markets progress: Algeria, Pakistan, Bangladesh
2013 Emerging markets progress Algeria Pakistan Bangladesh ► Solid performance and ► Stable market ► Strong growth market leadership position momentum ► 3G license awarded ► Network ► 3G license awarded, ► Roll out of 3G modernization rollout started © VimpelCom Ltd 2014 ► Negotiated settlement is ►
Slide 14: 2013 Emerging markets progress: Ukraine
2013 Emerging markets progress Ukraine ► Pressure on results, whilst taking measures to improve performance ► Solid growth of mobile data revenues ► Ongoing network modernization © VimpelCom Ltd 2014 ► Operational excellence program continues ► Transformation program launched ► Solid cash flow gener
Slide 15: 2013 Emerging markets progress: Kazakhstan, Uzbekistan, Other CIS
2013 Emerging markets progress Kazakhstan Uzbekistan Other CIS ► Strong market position ► Transitioned to a ► Strong mobile data ► Successful transition 2-player market growth to bundles ► Improved network ► Moved to value based ► Improved value quality commissions in all © VimpelCom Ltd 2014 propos
Slide 16: Italy provides a strong value creation opportunity
Italy provides a strong value creation opportunity Italy ► General macro economic recovery ► MTR reductions completed ► Strong management team & WIND brand © VimpelCom Ltd 2014 ► Carefully watching: ► Industry developments ► Financing options ► Strategic opportunities Continued outperformance with g
Slide 17: Group value add
Group value add $ $ Best Procurement Capex practices © VimpelCom Ltd 2014 advantages synergies sharing Global Roaming Talent partnerships 17
Slide 18: Cash flow potential from financing improvements
Cash flow potential from financing improvements Updated potential 2013-2015 In-house finance company USD 50 million © VimpelCom Ltd 2014 Debt optimization USD 150 million Gross debt reduction USD 150 million Withholding tax saving USD 50 million Total USD 400 million per year Assumptions: Resolution
Slide 19: Conclusion
Conclusion ► Strong emerging markets portfolio ► Solid cash flow generation ► Strong EBITDA margin versus our global peers © VimpelCom Ltd 2014 ► Manageable FOREX exposures ► Dividend policy to support deleverage and investments ► Investments in high quality mobile data networks for the future ► Ita
Slide 20: Appendices
© VimpelCom Ltd 2014 20 Appendices
Slide 21: Key strategic milestones
Key strategic milestones Acquisitions: - 100% of URS (Ukraine) VimpelCom and Kyivstar merged into a new entity VimpelCom Ltd. 200 Mobile customer base surpassed Listing on NASDAQ Mln 200 - 60% of Tacom (Tajikistan) million mark in VimpelCom founded by a Russian scientist Headquarters moved to Amster
Slide 22: Achieving business excellence
Achieving business excellence The VimpelCom Way Passionate Professional Leadership Empower employees to Admired for customer Passion and commitment to perform at the highest level experience and operational achieve exceptional results and lead with a focus on excellence execution © VimpelCom Ltd 201
Slide 23: Sharing best practices
Sharing best practices eBusiness: MNP B2B Store design self-care experiences campuses harmonization © VimpelCom Ltd 2014 Sales Customer Learnings from Call centre incentive experience 3G and LTE processes schemes programs launches 23
Slide 24: VimpelCom Ltd. ownership structure
VimpelCom Ltd. ownership structure* Total Economic % Economic Preferred Total voting % of voting Shareholder Common DRs rights shares DRs and shares rights and shares Telenor(1) 580 578 840 33.0% 305 000 000 885 578 840 43.0% © VimpelCom Ltd 2014 Altimo(2) 986 572 563 56.2% - 986 572 563 47.9% Minor
Slide 25: VimpelCom Finance
© VimpelCom Ltd 2014 25 VimpelCom Finance
Slide 26: Maturity profile and FY13 ratios
Maturity profile and FY13 ratios Group debt maturity schedule as at 31 December 2013 Debt composition USD billion by currency1 9.3 2% Wind 18% USD GTH 30% 6.1 EUR VimpelCom/OJSC 4Q13 RUB © VimpelCom Ltd 2014 2.6 2.4 Other 1.8 49% 1.5 1.2 0.9 1.0 0.6 2014 2015 2016 2017 2018 2019 2020 2021 2022 > 202
Slide 27: Debt as per December 2013
Debt as per 31 December 2013 VimpelCom Group Wind Group Gross Debt (USD billion) Gross Debt (USD billion) PIK Notes 1.6 VIP 4.4 Senior bank loan 3.2 © VimpelCom Ltd 2014 OJSC Group 7.9 Debt to Government 0.3 Annuity 0.1 Wind Group 14.5 RCF 0.1 Other debt 0.2 GTH Group 0.7 HY Notes 2017 3.7 Gross Tot
Slide 28: Optimum funding model
Optimum funding model External VimpelCom Ltd. Dividends to VIP parties shareholders Dividends Group VimpelCom Debt Equity Amsterdam Dividends © VimpelCom Ltd 2014 In-house VimpelCom finance company Holding IC loan funding Equity Dividends Minimal Local debt Cash generating entities Other operating e
Slide 29: Solid progress against financial management objectives in 13
Solid progress against financial management objectives in 2013 © VimpelCom Ltd 2014 In-house finance Successfully company Improvement in secured external delivered first working capital funding USD 2.5 savings realized billion 29
Slide 30: Improve financial standing
Improve financial standing • Maintain BB rating short term ► Secure operating performance • Moving towards ~ 2 times Net Debt to EBITDA, ► Secure cash flow up-streaming Investment Grade © VimpelCom Ltd 2014 ► Gross debt to be around 3 times EBITDA maximum • Flexible access to • Grow to BB+ / BBB- ca
Slide 31: VimpelCom Financials 2013
VimpelCom Financials 2013 © VimpelCom Ltd 2014 31
Slide 32: Effective tax rate analysis
Effective tax rate analysis FY12 USD million FY13 Restated1 Income/(Loss) before tax (679) 2,282 Dutch statutory tax rate (170) 25% 571 25% © VimpelCom Ltd 2014 WHT on undistributed earnings 227 97 • Withholding taxes on intercompany dividends from Russia and CIS Impairments 743 97 • Non-deductible
Slide 33: Cash flow
Cash flow USD million FY13 FY12 YoY Restated1 EBITDA 9,619 9,768 (149) CAPEX (4.233) (4.120) (113) Operating cash flow 5,386 5,648 (262) • Decline in EBITDA and accelerated investments for future growth • Interest rate swaps unwound in 2012 © VimpelCom Ltd 2014 Net Interest paid (2,047) (1,761) (286
Slide 34: Financial performance 4Q13
Financial performance 4Q13 GROUP BUSINESS UNITS (USD million) 4Q13 4Q12 YoY Revenue EBITDA Revenues 5,554 5,950 (7%) FX and FX and Organic Reported Organic Reported EBITDA 2,372 2,446 (3%) others others D&A/Other (4,245) (1,737) n.m. Russia (4%) (4%) (8%) (6%) (4%) (10%) EBIT (1,873) 709 n.m. Italy
Slide 35: Business Units Performance 2013
Business Units Performance © VimpelCom Ltd 2014 2013 35
Slide 36: Business dashboard 4Q13
Business dashboard 4Q13 Russia Italy Revenue (4%) RUB 70.7 bn EBITDA Revenue (10%) (3%)*EUR 1.2 bn EBITDA margin margin Total Operating Revenue EBITDA (6%) RUB 28.5 bn 40.3% EBITDA (3%) (1%)*EUR 0.5 bn 40.4% Mobile Mobile 95% 1% 57 mln 3% 22 mln Customers Customers Mobile ARPU (4%) RUB 327 Mobile AR
Slide 37: Russia 4Q13: Pressure on margins while investing in the future
Russia 4Q13: Pressure on margins while investing in the future RUB BILLION, UNLESS STATED OTHERWISE Revenue Mobile customers (million) -4% YoY +1% YoY • Mobile service revenue decreased 73.6 75.4 70.7 2% YoY; adjusted for one-offs increased 0.3% YoY • Mobile data revenue grew 25% YoY © VimpelCom Ltd
Slide 38: Italy 4Q13: Continued market outperformance
Italy 4Q13: Continued market outperformance EUR MILLION, UNLESS STATED OTHERWISE Revenue Mobile customers (million) -10% YoY +3% YoY • Continued mobile market share 1,369 21.6 22.3 increase 1,250 1,237 • Mobile broadband customers2 up 50% YoY to 8.3 million © VimpelCom Ltd 2014 • Strong data revenue
Slide 39: Africa & Asia 4Q13
Africa & Asia1 4Q13: Negative impact from regulatory measures, unstable macro environments and FOREX USD MILLION, UNLESS STATED OTHERWISE Revenue Mobile customers2 (million) -8% YoY +7% YoY • Revenue and EBITDA organically 937 863 declined 5% YoY and 3% YoY 869 • Unfavorable regulatory and governmen
Slide 40: Algeria 4Q13
Algeria 4Q13: Maintaining strong market share despite ongoing restrictions DZD BILLION, UNLESS STATED OTHERWISE Revenue Mobile customers1 (million) • Revenue decreased due to ongoing restrictions on its commercial -3% YoY +5% YoY activities and propositions • Maintained a strong market share of 56%
Slide 41: Pakistan 4Q13
Pakistan 4Q13: Regulatory measures and unstable macro environment PKR BILLION, UNLESS STATED OTHERWISE Revenue Mobile customers (million) • Pressure on revenue due to unstable -6% YoY +4% YoY macro situation, higher withholding taxes and government requested network shutdowns • Customers increased d
Slide 42: Bangladesh 4Q13
Bangladesh 4Q13: Regulatory measures and unstable macro environment BDT BILLION, UNLESS STATED OTHERWISE Revenue Mobile customers (million) • Revenue negatively impacted by unstable macro situation and -11% YoY +11% YoY disconnection of suspected VoIP customers • Customers growth driven by the launc
Slide 43: Ukraine 4Q13: Continued pressure on results
Ukraine 4Q13: Continued pressure on results, transformation program launched UAH BILLION, UNLESS STATED OTHERWISE Revenue Mobile customers1 (million) -9% YoY +3% YoY • Mobile service revenue decreased 9% 3.5 3.4 3.1 YoY following the transition to lower priced bundled tariff plans • Increase in cust
Slide 44: CIS 4Q13: Solid results
CIS1 4Q13: Solid results USD MILLION, UNLESS STATED OTHERWISE Revenue Mobile customers (million) +3% YoY +5% YoY • Mobile service revenue increased 3% 488 513 503 24.2 25.4 YoY driven by strong mobile data revenue growth of 39% YoY • Mobile customers increased 5% YoY, © VimpelCom Ltd 2014 mainly due
Slide 45: Kazakhstan 4Q13
Kazakhstan 4Q13: Profitable growth with an improved market position KZT BILLION, UNLESS STATED OTHERWISE Revenue Mobile customers (million) • Mobile service revenue increased 2% +5% YoY +7% YoY and fixed-line service revenue by 41% YoY • Mobile data revenue increased 28% YoY © VimpelCom Ltd 2014 • A
Slide 46: Uzbekistan 4Q13: Continued profitable growth
Uzbekistan 4Q13: Continued profitable growth USD MILLION, UNLESS STATED OTHERWISE Revenue Mobile customers (million) +11% YoY +3% YoY • Strong revenue growth in a 2 player 176 176 market 158 • Mobile data revenue growth of 61% YoY © VimpelCom Ltd 2014 Mobile Fixed-line EBITDA and CAPEX and EBITD
Slide 47: Market Overviews
© VimpelCom Ltd 2014 47 Market Overviews
Slide 48: A truly international telecoms operator
A truly international telecoms operator Canada Georgia Armenia Kazakhstan Uzbekistan Tajikistan Pop: 34.8 M Pop: 4.3 M Pop: 3.1 M Pop: 16.5 M Pop: 28.3 M Pop: 7.1 M Pen: 80% Pen: 126% Pen: 121% Pen: 164% Pen: 73% Pen: 133% GDP*:41,500 GDP*: 5,900 GDP*: 5,600 GDP*: 13,900 GDP*: 3,500 GDP*: 2,200 Ukra
Slide 49: Competitive situation and market trends - Russia
Competitive situation and market trends - Russia Mobile1 Mobile market share1 • ~90 % pre-paid market (on service revenue), % • ~ 171% penetration • 3 major players (Megafon, MTS and VimpelCom) with comparable 26 25 24 VimpelCom market shares • ARPU ~USD 10 28 26 27 Megafon • 4G launched in 2013 in
Slide 50: Competitive situation and market trends - Italy
Competitive situation and market trends - Italy Mobile Mobile market share1 • ~ 80 % pre-paid market (on revenue), % • ~ 155% penetration • 4 major players: TIM, Vodafone, WIND and H3G 20 21 22 Wind • 35% smartphone penetration on SIM cards 8 8 9 3 37 36 35 Vodafone Fixed © VimpelCom Ltd 2014 • Tele
Slide 51: Competitive situation and market trends - Ukraine
Competitive situation and market trends - Ukraine Mobile Mobile Market Share • Major players are Kyivstar, MTS and Astelit (“Life” brand) (on revenue), % • Kyivstar is the leading integrated operator with #1 in mobile and #2 in fixed residential broadband • Penetration ~120%, ~87% pre-paid market 52
Slide 52: Competitive situation and market trends - Kazakhstan
Competitive situation and market trends - Kazakhstan Mobile1 Mobile market share1 • 151% penetration (on revenue), % • 2 major players (VimpelCom, KCell) with cumulative MS 91%, 3d player is discounter (Tele2) • ARPU $7 • 3G launched by all players, 4G network introduced only by Altel 38 37 35 Vimpe
Slide 53: Competitive situation and market trends - Uzbekistan
Competitive situation and market trends - Uzbekistan Mobile Mobile market share2 (on revenue), % • 66% penetration • 2 major players: VimpelCom, UCell, New Player entrance expected in April-May 2014 23 27 • ARPU $5 42 VimpelCom 58 • 3G launched by two operators 51 MTS Fixed 45 25 © VimpelCom Ltd 201
Slide 54: Competitive situation and market trends - Algeria
Competitive situation and market trends - Algeria Macro Environment: Mobile market share1 • Government, trade and agricultural sectors account for over 60% (on revenue), % of GDP • 28% of the population is under 15 years old 56 55 53 • Presidential elections expected to commence in April 2014 Djezzy
Slide 55: Competitive situation and market trends - Pakistan
Competitive situation and market trends - Pakistan Macro Environment: Mobile market share1 • Continued devaluation of the Rupee against the USD (on revenue), % • Power shortfalls persist • 34% of the population under 15 years old 30 30 29 Mobilink • New government elected and in place since May 2013
Slide 56: Competitive situation and market trends - Bangladesh
Competitive situation and market trends - Bangladesh Macro Environment: Mobile market share1 • The world’s highest population density (on revenue), % • 33% of the population under 15 years old 28 27 25 banglalink • BDT continued to appreciate against the USD 7 7 7 Airtel • Elections and political in
Slide 57: Competitive situation in rest of CIS
Competitive situation in rest of CIS Tajikistan Armenia • 4 GSM competitors (Beeline 3rd), 2G •3 international competitors in GSM: Beeline – penetration 133%,3G operations first in 2nd, MTS (Russian competitor subsidiary) is 1st, CIS, low data usage, collaboration with BU Orange is 3rd Russia for mi
Slide 58: Reconciliation Tables and Forex
Reconciliation Tables and Forex © VimpelCom Ltd 2014 58
Slide 59: FOREX development
FOREX development RATES OF FUNCTIONAL CURRENCY TO USD Average rates Closing rates 4Q13 4Q12 YoY FY13 FY12 YoY Russian Ruble 32.53 31.08 (4.5%) 32.73 30.37 (7.2%) © VimpelCom Ltd 2014 Euro 0.73 0.77 4.8% 0.73 0.76 4.2% Algerian Dinar 80.18 79.40 (1.0%) 78.38 78.94 0.7% Pakistan Rupee 106.93 96.25 (10
Slide 60: Reconciliation of EBITDA
Reconciliation of EBITDA 4Q12 FY12 USD million 4Q13 FY13 Restated 1 Restated 1 Unaudited EBITDA 2,372 2,446 9,619 9,768 Depreciation (823) (758) (3,063) (2,926) Amortization (459) (519) (1,792) (2,080) Impaiment of C anada (768) (328) (768) (328) Impaiment of Ukraine (2,085) - (2,085) - © VimpelCom
Slide 61: Reconciliation of consolidated net debt
Reconciliation of consolidated net debt USD million 4Q12 3Q13 4Q13 Net debt 21,971 22,485 22,603 C ash and cash equivalents 4,949 4,890 4,454 Long-term and short-term deposits 67 191 396 Gross debt 26,987 27,566 27,453 Interest accrued related to financial liabilities 536 430 606 © VimpelCom Ltd 201
Slide 62: 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 the Company's anticipated performance, expected capital expenditures, potential