VEON Ltd. · NASDAQ:VEON
VEON — VimpelCom — Q2 2014 Earnings Presentation
34 slides from VEON's earnings presentation, Aug 6, 2014
Slide 1: 2Q 2014 Presentation
2Q 2014 Presentation Amsterdam - August 6, 2014 Jo Lunder - CEO Andrew Davies - CFO
Slide 2: 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
Slide 3: VimpelCom reports 2Q14 results
VimpelCom reports 2Q14 results EBITDA margin is EBITDA divided by total revenue; EBITDA and EBITDA margin are non-GAAP financial measures Operating cash flow = EBITDA minus CAPEX (excl. licenses) Service revenue (USD billion) 4.9 Mobile customers (million) 221 EBITDA (USD billion) 2.1 EBITDA margin1
Slide 4: Key recent developments
Key recent developments Resolution in Algeria, on track for closing by end of 2014 Successful WIND refinancing 3G launched in Algeria and Pakistan Strengthened management team VimpelCom's Annual General Meeting elected new Supervisory Board 2014 targets confirmed
Slide 5: 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 EUR 3.8 billion new Senior Notes EUR 4.1 billion new Senior Secured Notes USD 4.0 billion net proceed
Slide 6: Business Units Performance
Business Units Performance
Slide 7: Russia: Expected YoY pressure on results, while investing in high-speed data network
(CHART) (CHART) (CHART) RUB BILLION, UNLESS STATED OTHERWISE Service revenue Mobile Fixed-line -4% YoY EBITDA and EBITDA margin CAPEX and CAPEX/revenue -10% YoY Russia: Expected YoY pressure on results, while investing in high-speed data network and distribution Mobile data revenue grew 17% YoY Mobi
Slide 8: Russia: Improved network quality and customer experience
Offering the option of multiple SIM cards for one account, making it convenient for customers to manage their data account across multiple devices Shared data service Russia: Improved network quality and customer experience Demand driven investments Offering 4G/LTE in 22 regions Avg. download speed
Slide 9: Positive QoQ developments in Russia
(CHART) (CHART) (CHART) (CHART) RUB BILLION, UNLESS STATED OTHERWISE Service revenue Mobile Fixed-line +4% QoQ EBITDA and EBITDA margin Annualized Churn +7% QoQ Positive QoQ developments in Russia Results of actions taken to improve customer experience Relative outperformance QoQ versus competition
Slide 10: Italy: Continued market outperformance
Italy: Continued market outperformance EUR MILLION, UNLESS STATED OTHERWISE Increased mobile market share, without aggressive pricing Best in class Net Promoter Score Annualized churn reduced to 30%, the lowest in more than 2 years Strong mobile data revenue growth of 18% YoY Mobile data customers u
Slide 11: Africa & Asia: Investments in 3G networks to drive future revenue growth
(CHART) Africa & Asia: Investments in 3G networks to drive future revenue growth USD MILLION, UNLESS STATED OTHERWISE Revenue and EBITDA organically declined, mainly due to Algeria and Pakistan Mobile customer growth of 5.0 million YoY supported by strong additions in Bangladesh and solid growth in
Slide 12: Resolution in Algeria: VimpelCom maintains management control
Resolution in Algeria: VimpelCom maintains management control with a strong and committed local partner Djezzy proven to be the preferred choice of Algerians with its superior network quality, best customer service and unique commercial offers Algeria: Successful 3G launch, supporting the return to
Slide 13: Bangladesh: Successful turnaround and 3G launched
Bangladesh: Successful turnaround and 3G launched (CHART) (CHART) 3G Coverage in all 64 regions 3G handsets with bundle MFS growth opportunities High growth potential as smartphone penetration currently only 2% Ticketing Payments Remittance Mobile money transfer
Slide 14: 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 Delay of network modernization Actions: Jeffrey Hedberg appointed as CEO 3G launch
Slide 15: Ukraine: Transformation on track in a difficult environment
Ukraine: Transformation on track in a difficult environment UAH BILLION, UNLESS STATED OTHERWISE Transformation program on track, showing improving NPS and declining churn Financial results negatively impacted by customer's more conservative spending Mobile data revenue growth 11% YoY EBITDA decline
Slide 16: CIS: Continued organic growth
CIS: Continued organic growth USD MILLION, UNLESS STATED OTHERWISE Mobile service revenue increased organically 5% YoY Mobile data revenue growth of 24% YoY Mobile customers increased by 1.5 million YoY, primarily due to the growth in Kazakhstan EBITDA increased 5% organically YoY, mainly due to Kaz
Slide 17: Successful turnaround in Kazakhstan
Successful turnaround in Kazakhstan (CHART) (CHART) 3G Coverage Best value proposition New products or initiatives 3G coverage 2G coverage 3G download speed 2 Mb/s >220 cities covered by 3G: ~60% population ~3% territory 92% 2G pop. coverage New data portfolio launch and core bundle "Gigabyte+" prom
Slide 18: Financial Highlights
Financial Highlights
Slide 19: Financial performance negatively impacted by FX
Financial performance negatively impacted by FX Net income attributable to VimpelCom shareholders EBITDA declined organically 9% YoY, due to higher infrastructure and distribution costs in Russia, increasing frequency and utility costs in Ukraine and 3G investments in the Africa & Asia BU Revenue de
Slide 20: Resilient cash flow
Resilient cash flow Mainly due to improvements in trade working capital Investments in high-speed data networks and 3G license in Pakistan WIND refinancing and drawdowns under credit facilities in 2Q14; repayment of Eurobond by OJSC VimpelCom for USD 801 million in 2Q13 USD 2.0 billion in dividend p
Slide 21: Improved maturity profile
(CHART) Improved maturity profile USD billion Pro-forma group debt maturity schedule as at 30 June 20141 Net Debt/ EBITDA3 Gross Debt/ EBITDA3 EBITDA3 / Financial income and expenses 4.3 Average Cost of Debt 2Q14 7.1% 3.3 2.6 Debt composition by currency2 $29.0bn The WIND Group refinancing in July 2
Slide 22: 2014 targets confirmed
2014 targets confirmed Revenue CAPEX excl. licenses / Revenue Leverage (Net Debt / EBITDA) 1. The annual targets for 2014 assume constant currency, no major regulatory changes, no change to the asset portfolio and no major macro-economic changes EBITDA Targets1 2014 Low to mid single digit decline Y
Slide 23: Conclusion
Conclusion
Slide 24: Conclusion
Conclusion 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 Transformation in Russia and Ukraine on track Stre
Slide 25: SVirpetcom
SVirpetcom
Slide 26: Further information
Further information Investor Relations Claude Debussylaan 88 1082 MD Amsterdam The Netherlands T: +31 20 79 77 234 E: ir@vimpelcom.com Install VimpelCom's App iPad App Visit our awards winning website www.vimpelcom.com
Slide 27: SVirpetcom
SVirpetcom
Slide 28: Appendices
Appendices
Slide 29: Debt and cash
(CHART) Debt and cash During 2Q14: VimpelCom: Alfa Bank loans USD 1.0 billion VimpelCom: repayment bond USD 0.2 billion Wind: refinancing (new senior notes USD 5.2 billion; repayment senior notes and PIK notes USD 5.0 billion) PMCL: new funding for license USD 0.2 billion Available headroom under co
Slide 30: Currency FX rates versus USD
Currency FX rates versus USD Algeria DZD 81 Armenia AMD 420 Bangladesh BDT 80 Canada CAD 1.05 Egypt EGP 8.0 Georgia GEL 1.7 Italy EUR 0.80 Kazakhstan KZT 155 Kyrgyzstan KGS 47 Laos LAK 8,000 Pakistan PKR 110 Russia RUB 32 Ukraine UAH 9.5 Zimbabwe ZWD 325 FOREX rates used in annual targets for 2014
Slide 31: Revenue and EBITDA development in 2Q14
Russia Italy Africa & Asia Ukraine CIS Consolidated Revenue YoY Revenue YoY EBITDA YoY EBITDA YoY Organic Reported Organic Reported (7%) (16%) (10%) (18%) (9%) (5%) (8%) (4%) (4%) (3%) (11%) (11%) (5%) (35%) (12%) (40%) 5% (4%) 5% (4%) (6%) (11%) (9%) (14%) Revenue and EBITDA development in 2Q14 2Q1
Slide 32: FOREX development
Source: National Banks of the respective countries, Company calculations FOREX development RATES OF FUNCTIONAL CURRENCY TO USD
Slide 33: Reconciliation of EBITDA
Reconciliation of EBITDA SVirmpetcom
Slide 34: Reconciliation of consolidated net debt
Reconciliation of consolidated net debt Table of Contents VimpelCom Ltd. Index sheet Consolidated VIP Ltd. Consolidated BU Russia Russia BU Europe and North America Italy BU Africa and Asia Algeria Pakistan Bangladesh Sub Saharan Africa SEA BU Ukraine Ukraine BU CIS Kazakhstan Uzbekistan Armenia Taj