50 slides from VEON Ltd. ORD's investor presentation, September 2014
Slide 1: Creating Value, Investing in the Future
Creating Value © VimpelCom Ltd 2014 Investing in the Future Investor Presentation September 2014 www.vimpelcom.com iPad App 1
Slide 2: A well diversified leading international mobile operator
A well diversified leading international mobile operator Mobile Population USD 21.3 billion2 customers covered 221 754 Total operating 38 8 6 5 4 32 30 million2 million3 revenue (%) 70% from Emerging markets © VimpelCom Ltd 2014 Countries Number USD 9.0 billion2 17 of brands 9 EBITDA (%) 37 11 7 4 4
Slide 3: Strong EBITDA margin versus our global peers
Strong EBITDA margin versus our global peers EBITDA Margin (FY13)1 44% 44% 45% 43% 37% © VimpelCom Ltd 2014 35% 34% 34% 30% 31% 20% VIP WE Telcos with CIS / Emerging Market Others2 CEE Exposure 1 VIP EBITDA Margin, excluding write-off related to favorable Algeria resolution and write-off of fixed as
Slide 4: Growth drivers
Growth drivers External growth drivers VimpelCom’s positioning ► Customer growth from increase in mobile ► Investing in high quality networks, 3G and penetration 4G/LTE ► Mobile data usage growth ► Attractive emerging markets portfolio – solid market positions and high growth potential © VimpelCom L
Slide 5: Significant upside in mobile penetration & data usage
Significant upside in terms of mobile penetration & data usage Mobile penetration1 (%) Mobile data penetration2 (%) Data usage2 (MB / User) 1,195 55% 53% 171% 51% 966 151% 155% © VimpelCom Ltd 2014 44% 43% 120% 37% 33% 85% 66% 68% 53% 231 103 118 3% 68 10 26 1 Mobile penetration is for the market, b
Slide 6: Financial performance 2Q14 negatively impacted by FX
Financial performance 2Q14 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, of which service revenue 4,861 5,440 (11%) Ukraine and Pak
Slide 7: 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 8: 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 9: VimpelCom has an attractive emerging markets portfolio
VimpelCom has an attractive emerging markets portfolio 70% of revenues in emerging markets Emerging market portfolio ► Solid market positions in our seven major markets: © VimpelCom Ltd 2014 LTM 2Q14 – #1 in 4 (UKR, ALG, PAK, UZB) Revenues USD 14.8 bn – #2 in 2 (BAN, KAZ) EBITDA1 USD 6.4 bn CAPEX ex
Slide 10: Russia: Expected YoY pressure on 2Q14 results
Russia: Expected YoY pressure on 2Q14 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,
Slide 11: 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 12: Russia: Positive QoQ developments in 2Q14
Russia: Positive QoQ developments in 2Q14 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 Qo
Slide 13: Africa & Asia: Investments in 3G networks
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 YoY, mainly due to Algeria 900 860 85.6 90.6 and Pakistan 830 • Mobile customer growth of
Slide 14: Algeria: Successful 3G launch
Algeria: Successful 3G launch, supporting the return to growth and market share stabilization in 2H14 Resolution in Algeria – closing expected by the end of year VimpelCom maintains management control with a strong and committed local partner © VimpelCom Ltd 2014 Successful 3G offers for high-value
Slide 15: 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 16: 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 17: 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 18: CIS: Continued organic growth in 2Q14
CIS: Continued organic growth in 2Q14 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 439 420 © VimpelCom Ltd 2014 394 • Mobile
Slide 19: Kazakhstan: Successful turnaround
Kazakhstan: Successful turnaround Mobile service revenue growth YoY (%) Customer growth YoY (%) 9% 8% 6% 7% 5% 3% 4% 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 cov
Slide 20: Italy: strong value creation opportunity
Italy: strong value creation opportunity Italy ► MTR reductions completed, signs of stabilization in the competitive environment ► Strong management team & WIND brand ► Successful refinancing of WIND most expensive debt in 1H 2014 © VimpelCom Ltd 2014 ► Carefully watching: ► Industry developments ►
Slide 21: Italy: Continued market outperformance in 2Q14
Italy: Continued market outperformance in 2Q14 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 re
Slide 22: 2014 targets confirmed
2014 targets confirmed Targets1 2014 Low to mid single digit Revenue decline YoY © VimpelCom Ltd 2014 Low to mid single digit EBITDA 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 regulatory chan
Slide 23: Summary 2Q14
Summary 2Q14 ► 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 Rus
Slide 24: Appendices
© VimpelCom Ltd 2014 24 Appendices
Slide 25: 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 26: Group value add
Group value add $ $ Best Procurement Capex practices © VimpelCom Ltd 2014 advantages synergies sharing Global Roaming Talent partnerships 26
Slide 27: 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 27
Slide 28: 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 © VimpelCom Ltd 2014 ► Future dividends of 3.5 US cents per share per annum until targeted leverage of less than 2.0 net d
Slide 29: 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 30: 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 31: Pro forma debt as per June 2014
Pro forma1 debt as per 30 June 2014 VimpelCom Group Wind Group Gross Debt (USD billion) Gross Debt (USD billion) Senior bank loan 2.4 VIP 5.5 Debt to Government 0.3 © VimpelCom Ltd 2014 OJSC Group 7.7 Annuity 0.1 RCF 0.3 Wind Group 14.9 Other debt 0.1 SSN 2019/2020 0.8 GTH Group 0.9 SSN 2020 (2nd re
Slide 32: Business dashboard 2Q14
Business dashboard 2Q14 YoY dynamics Russia Russia Italy Total revenue split (%) Italy Revenue RUB 68.7 bn EBITDA Revenue EUR 1.1 bn EBITDA Algeria (7%) (9%) 37 31 8 7 5 4 33 margin margin Ukraine EBITDA (10%) RUB 28.5 bn 41.4% EBITDA (8%) EUR 0.4 bn 38.0% Pakistan Mobile Mobile EBITDA split (%) Cus
Slide 33: Market Overviews
© VimpelCom Ltd 2014 33 Market Overviews
Slide 34: A truly international telecoms operator
A truly international telecoms operator Canada Georgia Armenia Kazakhstan Uzbekistan Kyrgyzstan Pop: 34.8 M Pop: 4.3 M Pop: 3.1 M Pop: 16.5 M Pop: 28.3 M Pop: 5.5 M Pen: 80% Pen: 126% Pen: 121% Pen: 164% Pen: 73% Pen: 112% GDP*:41,500 GDP*: 5,900 GDP*: 5,600 GDP*: 13,900 GDP*: 3,500 GDP*: 2,400 Ukra
Slide 35: 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 26 25 24 VimpelCom comparable market shares • ARPU ~USD 10 28 26 27 Megafon • 4G launched in 2013 in
Slide 36: Competitive situation and market trends - Italy
Competitive situation and market trends - Italy Mobile Mobile Market Share1 • ~ 80 % pre-paid market (on revenue), % • ~ 155% penetration 20 21 22 Wind • 4 major players: TIM, Vodafone, WIND and H3G 8 8 9 3 • 35% smartphone penetration on SIM cards 37 36 35 Vodafone Fixed © VimpelCom Ltd 2014 • Tele
Slide 37: 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 38: 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 38 37 35 VimpelCom • 3G launched by all players, 4G network introduced only by A
Slide 39: Competitive situation and market trends - Uzbekistan
Competitive situation and market trends - Uzbekistan Mobile Mobile Market Share2 • 66% penetration (on revenue), % • 2 major players: VimpelCom, UCell, MTS entrance expected in 4Q14 • ARPU $5 23 27 42 VimpelCom • 3G launched by two operators 58 51 MTS Fixed 45 25 © VimpelCom Ltd 2014 • Uzbektelecom
Slide 40: 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 (on revenue), % 60% of GDP • 28% of the population is under 15 years old 56 55 53 Djezzy • Presidential elections expected to commence in April 2014
Slide 41: 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 42: 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 43: 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 CIS, 2nd, MTS (Russian competitor subsidiary) is low data usage, collaboration with BU Russia 1st, Orange is 3rd for m
Slide 44: Reconciliation Tables and Forex
Reconciliation Tables and Forex © VimpelCom Ltd 2014 44
Slide 45: Sensitivity to FOREX movements
Sensitivity to FOREX movements FOREX sensitivities1 FY13 figures RUB vs. USD EUR vs. USD UAH vs. USD +/-10% +/-10% +/-10% © VimpelCom Ltd 2014 USD billion Revenue 22.5 4% 3% 1% Average FOREX 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. 45 1. RUB vs USD +10%
Slide 46: FOREX rates used in annual targets 2014
FOREX rates used in annual targets 2014 Currency FX rates versus USD Algeria DZD 81 Armenia AMD 420 Bangladesh BDT 80 Canada CAD 1.15 © VimpelCom Ltd 2014 Egypt EGP 8.0 Georgia GEL 1.8 Italy EUR 0.74 Kazakhstan KZT 190 Kyrgyzstan KGS 55 Laos LAK 8,000 Pakistan PKR 110 Russia RUB 36 Ukraine UAH 10.5
Slide 47: 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 48: 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 49: 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
Slide 50: 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