65 slides from VEON Ltd. ORD's investor presentation, March 2015
Slide 1: Creating Value, Investing in the Future
Creating Value © VimpelCom Ltd 2015 Investing in the Future www.vimpelcom.com iPad App 1
Slide 2: A well diversified leading international mobile operator
A well diversified leading international mobile operator Headquartered in Amsterdam Mobile Population USD 19.6 billion customers covered Total revenue 222 739 split2 (%) 37 8 5 5 4 43 31 million2 million3 69% from Emerging markets © VimpelCom Ltd 2015 USD 8.0 billion Countries Number EBITDA split2 1
Slide 3: Strong EBITDA margin versus our global peers
Strong EBITDA margin versus our global peers EBITDA Margin (FY14) 50% 44% 44% 41% 37% 37% © VimpelCom Ltd 2015 33% 33% 31% 29% 23% VIP WE Telcos with CIS / Emerging Market1 Others2 CEE Exposure 1 3Q14 LTM EBITDA Margin for MTS 3 2 Others include a sample of more than 80 listed telecom operators in D
Slide 4: Growth drivers
Growth drivers External growth drivers VimpelCom’s positioning ► Customer growth from increase in mobile ► Leading player in growth markets with high penetration quality networks ► Mobile data usage growth ► Significant upsides in penetration and usage in key markets Continued emerging markets growt
Slide 5: Significant upside in terms of mobile penetration & data usage
Significant upside in terms of mobile penetration & data usage Mobile Penetration1 (%) Mobile Data Penetration2 (%) Data Usage2 (MB / User) Western Europe 171% Avg: 66% 160% 1,313 147% 1,213 Western Europe 138% Avg: 133% 57% © VimpelCom Ltd 2015 55% 113% 52% 47% 72% 73% 43% 66% 39% 37% 369 169 169 1
Slide 6: VimpelCom has an attractive emerging markets portfolio
VimpelCom has an attractive emerging markets portfolio 69% of revenue in emerging markets Emerging market portfolio ► Solid market positions in our seven FY14 major emerging markets: © VimpelCom Ltd 2015 Revenues – #1 in 4 (UKR, ALG, PAK, UZB) USD 13.5 bn EBITDA1 – #2 in 2 (BAN, KAZ) USD 5.6 bn – #3
Slide 7: Delivered on 2014 targets
Delivered on 2014 targets Targets1 2014 Actuals 2014 Low to mid single Revenue -4% YoY digit decline YoY © VimpelCom Ltd 2015 Low to mid single EBITDA -6% YoY digit decline YoY Leverage (Net Debt / EBITDA) ~2.4x 2.5x CAPEX excl. licenses / Revenue ~21% 20% 7 1. The annual targets for 2014 assumed co
Slide 8: Recent strategic highlights
Recent strategic highlights • Algeria transaction signed and closed • Portfolio clean up almost complete • Improved capital structure with USD 21 billion in financing activities in 2014 © VimpelCom Ltd 2015 • USD 0.5 billion annualized net income enhancement from refinancing of Italy and use of proc
Slide 9: Successful investment in high-speed networks
Successful investment in high-speed networks Russia: • Leading NPS in mobile Internet in 4Q14 • Accelerated roll out and network sharing agreement on 4G/LTE Italy: • 97% coverage HSPA+ & 37% coverage 4G/LTE © VimpelCom Ltd 2015 Africa & Asia: • 3G launched and 21 regions covered in Algeria • 2G netw
Slide 10: Leading in customer experience
Leading in customer experience #1 Co-leader Improving Bangladesh Kazakhstan © VimpelCom Ltd 2015 Algeria Pakistan Kyrgyzstan Italy Russia Ukraine Uzbekistan 10 NOTE: Independent agency research
Slide 11: FY14 Financial highlights
FY14 Financial highlights Service revenue Net loss • Revenue declined 4% YoY organically, well (USD billion) (USD million) within the FY14 target 18.7 691 • EBITDA declined 6% organically, in line with FY14 target • Solid EBITDA margin © VimpelCom Ltd 2015 - 4% organic2 YoY +74% YoY - 13% reported Y
Slide 12: FY14 Income statement
FY14 Income statement USD million FY14 FY13 YoY Revenue 19,627 22,546 -13% • Total revenue declined organically 4% YoY, while service revenue declined organically 4% YoY of which service revenue 18,725 21,529 -13% EBITDA 7,970 8,260 -4% • EBITDA decreased organically 6% YoY, mainly due to revenue de
Slide 13: FY14 Cash flow statement
FY14 Cash flow statement USD million FY14 FY13 YoY EBITDA 7,970 8,260 -4% Changes in working capital and other 150 1,403 -89% • FY13 included accrual for Bank of Algeria fine of USD 1.3 billion Net interest paid (2,111) (2,047) 3% • Increase in interest paid mainly as result of one-off payments in I
Slide 14: Capital structure optimization: 2014 progress
Capital structure optimization: 2014 progress Secured new USD 21 billion © VimpelCom Ltd 2015 credit facilities financing activities Refinanced Italy Substantial dividend in 2 phases with reduction to delever PIK repayment and support investments 14
Slide 15: Capital structure optimization: Actions 1Q15
Capital structure optimization: Actions 1Q15 Use of proceeds from Algeria transaction to retire debt © VimpelCom Ltd 2015 Closed transaction Sale of Italian in Algeria towers 15
Slide 16: Significantly improved debt maturity schedule
Capital structure optimization: Significantly improved debt maturity schedule As at December 31, 2014 (in USD billion) Group debt maturity schedule © VimpelCom Ltd 2015 5.8 6.0 3.2 2.7 2.2 2.0 1.9 1.5 1.1 2015 2016 2017 2018 2019 2020 2021 2022 >2022 16
Slide 17: Increased credit facilities
Capital structure optimization: Increased credit facilities As at March 31, 2014 As at December 31, 2014 pro forma1 (in USD billion) (in USD billion) 3.1 © VimpelCom Ltd 2015 1.2 0.6 0.3 0.4 2014 2015 2016 2017 2018 2019 17 1 Pro forma for group as at 31 December 2014 reflects HQ repayment RCF for U
Slide 18: Reduced gross debt and leverage
Capital structure optimization: Leverage 1Q14 debt and leverage Reduced gross Gross debt / EBITDA December 31, 2014 December 31, 2014 pro forma1 3.3 © VimpelCom Ltd 2015 2.9 2.3 1.7 Excluding Group Excluding Group Italy Italy 18 1 Pro forma for group as at 31 December 2014 reflects debt reduction fr
Slide 19: Reduced net debt and leverage
Capital structure optimization: Leverage 1Q14 Reduced net debt and leverage Net debt / EBITDA December 31, 2014 December 31, 2014 pro forma1 © VimpelCom Ltd 2015 2.5 2.4 1.2 1.1 Excluding Group Excluding Group Italy Italy 19 1 Pro forma for group as at 31 December 2014 reflects debt reduction from A
Slide 20: Significantly reduced the cost of debt
Significantly reduced the cost of debt Average cost of debt 1Q14 Average cost of debt 4Q14 © VimpelCom Ltd 2015 8.3% 6.3% 20
Slide 21: Cash flow enhancing from financing improvements
Cash flow enhancing from financing improvements Targeted potential1 Targeted potential Expected savings 2013-2015 In-house finance company USD 50 million USD 20 million © VimpelCom Ltd 2015 Debt optimization USD 150 million USD 375 million Gross debt reduction USD 150 million USD 275 million Withhol
Slide 22: Significant financing improvements
Significant financing improvements Delivering on promises announced on the A&I day 2014: • USD 21 billion of finance activities in FY14 • Improved maturity schedule • Increased credit facilities and liquidity © VimpelCom Ltd 2015 • Average cost of debt substantially reduced With a strong cash positi
Slide 23: Targets 2015
Targets 2015 Targets 20151 Flat to low single Service Revenue digit decline YoY Flat to minus one © VimpelCom Ltd 2015 EBITDA Margin p.p. YoY EPS2 USD 0.35 – 0.40 CAPEX / Revenue ~20% Leverage (Net Debt / EBITDA) ~3.2x Excl. Italy … ~1.7x 1. The annual targets for 2015 assume constant currency, no m
Slide 24: Conclusion
Conclusion • Delivered on 2014 targets in a challenging environment • Reported results 2014 impacted by currency headwinds • Closed Algeria © VimpelCom Ltd 2015 • Significantly improved capital structure • Successful investments in high speed networks • Building a more customer centric organization
Slide 25: Appendices
© VimpelCom Ltd 2015 25 Appendices
Slide 26: VimpelCom Analyst & Investor site visit
VimpelCom Analyst & Investor site visit Georgia and Kazakhstan March 31, 2015 April 1, 2015 Tbilisi, Georgia Almaty, Kazakhstan © VimpelCom Ltd 2015 Presentations by Head of BU Presentations by local CIS and local management management 26
Slide 27: Financial calendar 2015 – accelerating reporting
Financial calendar 2015 – accelerating reporting 20151 A&I site visit Georgia and Kazakhstan March 31 – April 1 1Q15 results May 13 © VimpelCom Ltd 2015 A&I site visit Russia July 8 2Q15 results (analyst meeting in London) August 6 A&I Conference (London) October 8 - 9 3Q15 results November 6 27 1.
Slide 28: Business Units Performance 4Q14
Business Units Performance 4Q14 © VimpelCom Ltd 2015 28
Slide 29: Business dashboard 4Q14
Business dashboard 4Q14 YoY dynamics Russia Russia Italy Total revenue split (%) Italy Revenue 5% RUB 73.9 bn EBITDA Revenue (9%) EUR 1.1 bn EBITDA 35 31 9 5 6 4 43 Algeria margin margin Ukraine EBITDA (5%) RUB 27.0 bn 36.6% EBITDA (16%) EUR 0.4 bn 37.3% Pakistan Mobile EBITDA split (%) Mobile (3%)
Slide 30: Russia: Delivering on plans
Russia: Delivering on plans RUB BILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers (million) • Increasing NPS and improving churn led +3% YoY +1% YoY to the first YoY increase in service 68.7 71.0 70.6 56.5 57.2 revenue and mobile customers since 12.4 13.2 14.2 3Q13 56.3 57.8 56.4 • I
Slide 31: Russia: Continued adjustments to a new reality
Russia: Continued adjustments to a new reality © VimpelCom Ltd 2015 FOREX 4G/LTE network Cost and asset management sharing efficiency program • Hedged all USD cash costs for the first six • ~3,000 base stations in 36 regions • Optimization and increasing efficiencies months • Substantial savings in
Slide 32: Italy: Solid performance in a challenging market
Italy: Solid performance in a challenging market EUR MILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers (million) -7% YoY -3% YoY • Total revenue of EUR 1.1 billion, down 9% YoY; underlying decline of 5% YoY 1,120 1,054 1,038 22.3 21.6 320 • Service revenue trend improving 291 292 • S
Slide 33: Italy: Preparing for the future
Italy: Preparing for the future © VimpelCom Ltd 2015 WIND digital Capital and “Digital Home & Life” transformation cost efficiency • WIND Digital innovative offering • WIND closer to its customer • Innovative insourcing and with customer interaction through “Digital Home & Life” productivity increas
Slide 34: Algeria: Transaction kick starts transformation
Algeria: Transaction kick starts transformation DZD BILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers (million) • Djezzy is the leader in a very attractive –7 % YoY +5% YoY growth market, with a strong local partner 18.4 35.9 33.9 33.5 17.6 • Launch of 3G fueled strong competition •
Slide 35: Pakistan: Network modernization completed
Pakistan: Network modernization completed PKR BILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers (million) • Secured leading customer market –2 % YoY +2% YoY share 38.5 24.7 23.0 24.3 37.6 • Service revenue decreased due to transparent VAS charging and price competition in voice © Vim
Slide 36: Bangladesh: Market position continued to improve
Bangladesh: Market position continued to improve BDT BILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers (million) • Continued double digit revenue growth +18 % YoY +7% YoY YoY 11.2 9.5 10.9 28.8 30.8 • EBITDA increased 38% YoY driven by revenue growth and savings • Banglalink maintain
Slide 37: Ukraine: Good progress of transformation program
Ukraine: Good progress of transformation program UAH BILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers (million) • # 1 position in NPS leading to -2% YoY +2% YoY substantial YoY improvement in churn 25.8 26.2 and increase in customer base 3.1 3.2 3.1 0.3 0.3 0.2 • Mobile data revenue
Slide 38: CIS: Continued solid results
CIS1: Continued solid results USD MILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers (million) • Increased YoY market shares in 5 Reported -4% YoY Organic +4% YoY +4% YoY countries 497 494 42 42 475 41 25.4 26.5 • Mobile service revenue increased organically 4% YoY due to strong 455 4
Slide 39: 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 40: Group value add
Group value add $ $ Best Procurement Capex practices © VimpelCom Ltd 2015 advantages synergies sharing Global Roaming Talent partnerships 40
Slide 41: Sharing best practices
Sharing best practices eBusiness: MNP B2B Store design self-care experiences campuses harmonization © VimpelCom Ltd 2015 Sales Customer Learnings from Call centre incentive experience 3G and LTE processes schemes programs launches 41
Slide 42: 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 © VimpelCom Ltd 2015 Free Float 189 579 732 10.8% - 189 579 732 9.1% Telenor(1) 580 578 840 33.0% 305 000 000 885 578 840 43.0% Lette
Slide 43: 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 2015 ► Dividends of 3.5 US cents per share per annum until targeted leverage of less than 2.0 net debt / E
Slide 44: Financing structure
Financing structure As at 31 December 2014, pro forma1 VimpelCom Ltd. VimpelCom Amsterdam B.V. VimpelCom Holdings VimpelCom Amsterdam WIND Telecom B.V. Finance B.V. S.p.A. © VimpelCom Ltd 2015 USD 2.7 bln Total Wind Group Weather Capital Wind Acquisition USD 13.5 bln S.a.r.l. Holdings Finance S.p.A.
Slide 45: Debt by entity
Debt by entity As at 31 December 2014, in USD billion Outstanding debt Type of debt/lender Vendor Entity Bonds Loans RCF Other Total Financing VimpelCom Holdings B.V. 3,813 3,813 © VimpelCom Ltd 2015 VimpelCom Amsterdam B.V. 1,000 500 752 2,252 OJSC VimpelCom 4,078 1,583 207 45 5,913 WIND Telecomuni
Slide 46: Credit facilities
Credit facilities USD 6.2 bn credit facilities arranged in FY14: Available RCF headroom at the end 2014: Financing VimpelCom USD 1.3 billion USD 1.8 billion RCF VIP Holdings USD 1.0 billion CF AlfaBank OJSC VimpelCom USD 0.3 billion (RUB 15 billion) USD 1.0 billion VF CDB/BoC WIND USD 0.6 billion (E
Slide 47: Debt maturity profile
Debt maturity profile As at 31 December 2014, in USD billion Group debt maturity schedule by Business Units Italy Russia 5.8 6.0 A&A HQ 3.2 © VimpelCom Ltd 2015 2.7 2.2 2.0 1.9 1.5 1.1 2015 2016 2017 2018 2019 2020 2021 2022 >2022 Group debt maturity schedule by currency1 2015 2016 2017 2018 2019 20
Slide 48: Market Overviews
© VimpelCom Ltd 2015 48 Market Overviews
Slide 49: A truly international telecoms operator
A truly international telecoms operator Georgia Armenia Kazakhstan Uzbekistan Kyrgyzstan Pop: 4.9 M Pop: 3.1 M Pop: 17.9 M Pop: 28.9 M Pop: 5.6 M Pen: 126% Pen: 121% Pen: 160% Pen: 70% Pen: 112% GDP: 5,900 GDP: 5,600 GDP: 13,900 GDP: 3,500 GDP: 2,400 Ukraine Pop: 44.3 M Tajikistan Pen: 138% Pop: 8.1
Slide 50: 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 25 24 22 VimpelCom comparable market shares • 2014: 4G/LTE launched in 46 regions 26 27 27 Megafon ©
Slide 51: Competitive situation and market trends - Italy
Competitive situation and market trends - Italy Mobile Mobile Market Share1 • ~ 79 % pre-paid market (on revenue), % • ~ 147% penetration 21 22 22 WIND • 4 major players: TIM, Vodafone, WIND and H3G 8 9 10 3 • 31% smartphone penetration on SIM cards 36 35 Vodafone 33 Fixed © VimpelCom Ltd 2015 • Tel
Slide 52: 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 ~138%, ~87% pre-paid market 49
Slide 53: 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 55 53 49 Djezzy Mobile: 27 23 25 Mobilis • © VimpelCom Ltd 2015 113% penetr
Slide 54: Competitive situation and market trends - Pakistan
Competitive situation and market trends - Pakistan Macro Environment: Mobile Market Share1 • Power shortfalls persist (on revenue), % • 34% of the population under 15 years old • New government working on achieving political stability and 30 29 28 Mobilink economic reform 25 25 26 Telenor Mobile: 14
Slide 55: 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 27 25 26 banglalink • Elections and political instability 7 7 7 Airtel Mobile: 42 42 42 GrameenPhone • 73%
Slide 56: Competitive situation and market trends - Kazakhstan
Competitive situation and market trends - Kazakhstan Mobile1 Mobile Market Share1 • 160% penetration (on revenue), % • 2 major players (VimpelCom, KCell) with cumulative MS 90%, 3d player is discounter (Tele2) • 3G launched by all players, 4G network introduced only by Altel 37 35 36 VimpelCom (gove
Slide 57: Competitive situation and market trends - Uzbekistan
Competitive situation and market trends - Uzbekistan Mobile Mobile Market Share2 • 70% penetration (on revenue), % • 2 major players: VimpelCom, UCell, MTS entrance in Dec’14 • 3G launched by two operators 42 VimpelCom • First commercial launch of 4G/LTE in Uzbekistan in 58 58 September 2014 MTS 25
Slide 58: Competitive situation in rest of CIS
Competitive situation in rest of CIS Tajikistan Armenia • 4 competitors: Beeline 4th, Babilon Mobile1st, • 3 international competitors: Beeline 2nd, Tcell (TeliaSonera) 2nd, MegaFon 3rd Vivacell (MTS) 1st, Orange 3rd • First 3G operations in CIS, low data usage, • 3G license collaboration with BU Ru
Slide 59: Reconciliation Tables and Forex
Reconciliation Tables and Forex © VimpelCom Ltd 2015 59
Slide 60: Forex sensitivities
Forex sensitivities FOREX translation sensitivities on Group level FOREX sensitivities1 FY14 RUB vs. USD EUR vs. USD UAH vs. USD © VimpelCom Ltd 2015 USD billion +/-10% +/-10% +/-10% Revenue 19.6 Average 4% 3% 0.5% FOREX EBITDA 8.0 4% 3% 0.6% Gross Debt 26.4 1% 5% n.a. Year-end FOREX Net Debt 20.0 1
Slide 61: FOREX rates used in annual targets for 2015
FOREX rates used in annual targets for 2015 Currency FX rates versus USD Algeria DZD 92.0 Armenia AMD 415.0 © VimpelCom Ltd 2015 Bangladesh BDT 79.0 Egypt EGP 7.5 Georgia GEL 1.8 Italy EUR 0.91 Kazakhstan KZT 190.0 Kyrgyzstan KGS 55.0 Pakistan PKR 105.0 Russia RUB 70.0 Ukraine UAH 25.0 61
Slide 62: Revenue and EBITDA development in 4Q14 and FY14
Revenue and EBITDA development in 4Q14 and FY14 4Q 2014 vs 4Q 2013 Revenue EBITDA FX and FX and Business Units Organic Reported Organic Reported others others Russia 3% (30%) (27%) (0%) (34%) (34%) Italy (9%) (8%) (17%) (16%) (7%) (23%) Africa & Asia (5%) (4%) (9%) (19%) (2%) (21%) © VimpelCom Ltd 2
Slide 63: Reconciliation of EBITDA
Reconciliation of EBITDA USD mln 4Q14 4Q13 FY14 FY13 Unaudited EBITDA 1,600 1,013 7,970 8,260 Depreciation (623) (810) (2,839) (3,050) Amortization (324) (458) (1,479) (1,791) Impairment loss (1,051) (2,906) (992) (2,973) Loss on disposals of non-current assets (23) (57) (74) (100) EBIT (421) (3,218
Slide 64: Reconciliation of consolidated net debt and OCF
Reconciliation of consolidated net debt and OCF Reconciliation of consolidated net debt USD mln 4Q13 3Q14 4Q14 Net debt 22,604 21,736 19,992 C ash and cash equivalents 4,454 5,852 6,342 Long-term and short-term deposits 396 126 109 Gross debt 27,454 27,714 26,443 Interest accrued related to financia
Slide 65: 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, future market devel