VEON Ltd. ORD · RUS:VEON-RX
VEON Ltd. ORD — VimpelCom — Investor Day (February 2017)
116 slides from VEON Ltd. ORD's investor day presentation, Feb 27, 2017
Slide 1: FY 2016 Analyst and Investor Day
FY 2016 ANALYST AND INVESTOR DAY Barcelona 27 February 2017 ©VimpelCom Ltd
Slide 2: Disclaimer
DISCLAIMER This presentation contains “forward-looking statements,” as the phrase is defined in Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended. These forward-looking statements may be identified by words such as “ma
Slide 3: Agenda
AGENDA BART MORSELT - HEAD OF IR ALEXANDER MATUSCHKA - CPO Opening Performance transformation JEAN-YVES CHARLIER - CEO KJELL MORTEN JOHNSEN - HEAD OF MAJOR Reinventing VimpelCom MARKETS, CEO RUSSIA Russia update ANDREW DAVIES - CFO 2016 results and corporate finance initiatives MAXIMO IBARRA - CEO I
Slide 4: Reinventing VimpelCom
REINVENTING VIMPELCOM Jean-Yves Charlier Chief Executive Officer ©VimpelCom Ltd 2017
Slide 5: Months ago, we announced a strategy to transform VimpelCom
18 MONTHS AGO, WE ANNOUNCED A STRATEGY TO TRANSFORM VIMPELCOM… Performance Transformation New Revenue Streams $ $ $$ 5
Slide 6: Transformation progress
TRANSFORMATION PROGRESS 1 STRUCTURAL IMPROVEMENTS 2 WORLD CLASS OPERATIONS 3 TRANSFORMING THE COST BASE ► Algeria transaction ► New global vision & values ► Reduced legacy costs by USD 402 ► Uzbekistan settlement million, enabling re-investment in our ► New leadership team and talent digital strateg
Slide 7: Transformation progress
TRANSFORMATION PROGRESS 4 PORTFOLIO OPTIMIZATION 5 NEW REVENUE STREAMS 6 DIGITAL LEADERSHIP ► In-market consolidation: Italy and ► Returned to organic growth ► Changing the business model Pakistan transactions from bricks and mortar to digital ► 26% organic growth in mobile data ► Disposal of non-st
Slide 8: These initiatives allowed us to deliver robust results in 2016
THESE INITIATIVES HAVE ALLOWED US TO DELIVER ROBUST RESULTS IN 2016 ALL NUMBERS EXCLUDE WARID CONTRIBUTION Organic1 service revenue2 development Underlying EBITDA3 margin development -0.3 p.p. +0.2 p.p. organically 40.9% 40.6% 0.5% -0.2% FY 2015 FY 2016 FY 2015 FY 2016 LTM capex (excl. licenses)/rev
Slide 9: Currency headwinds are receding
AT THE SAME TIME, THE CURRENCY HEADWINDS ARE RECEDING… 110 100 100 98 94 90 82 80 76 73 70 70 67 66 67 64 67 60 50 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 9 VimpelCom currency weightings calculated from the sum of the individual countries’ relative contribution to total countries
Slide 10: The company delivered on 2016 targets
AND THE COMPANY DELIVERED ON 2016 TARGETS USD MILLION UNLESS OTHERWISE STATED FY 20151 FY 2016 target2 FY 2016 pro-forma (excl. Warid) 8,402 Service revenue 9,313 Flat to low single digit +0.5% YoY organically EBITDA margin 40.6% 40.9% Flat to +1 p.p. YoY underlying +0.2 p.p. YoY organically CAPEX /
Slide 11: Major financial announcements on the back of robust results
3 MAJOR FINANCIAL ANNOUNCEMENTS ON THE BACK OF THESE ROBUST RESULTS DIVIDEND POLICY EURONEXT LISTING EXPECTED STRONGER OUTLOOK PROJECTED ► Announcement of a meaningful ► Logical second listing in Amsterdam ► Returned to financial health with strong dividend policy ► Listing expected Q2 2017 2016 pro
Slide 12: Transformation progress: telecoms growth challenge
TRANSFORMATION PROGRESS GROWTH HAS BEEN LAGGING BEHIND OTHER NO MEANINGFUL ENGAGEMENT WITH CUSTOMERS DIGITAL SECTORS TELECOMS IS FACING A GROWTH CHALLENGE YESTERDAY TODAY IDATE digiworld yearbook 2016, Citi research – 2013-2015 revenue CAGR (Euro constant currency) Internet services 20.0% IT service
Slide 13: Digital strategy: from telco to tech
DIGITAL STRATEGY: FROM TELCO TO TECH NEW INTERNET PLATFORM RE-INVENTING BRICKS RE-ENGINEERING LEGACY & MORTAR MODEL SYSTEMS & DATA ARCHITECTURE ► Zero rating as a fundamental component of the service , allowing ► Smooth, easy, fun & intuitive ► Strong data and analytics fuelling users to stay connec
Slide 14: VimpelCom is now...
VIMPELCOM IS NOW… 14
Slide 15: Video
VIDEO 15
Slide 16: From telco to tech
FROM TELCO TO TECH Grow equity free cash flow to more than REVITALIZE USD 1 billion for 2018 REINVENT to support a sustainable dividend policy REVITALIZING OUR BUSINESS TO REINVENTING A GLOBAL ACHIEVE WORLD CLASS STANDARDS COMMUNICATIONS PIONEER INTO Aggressively grow B2B + FMC A GLOBAL TECH COMPANY
Slide 17: 2016 Results & Corporate Finance Initiatives
2016 RESULTS & CORPORATE FINANCE INITIATIVES Andrew Davies Chief Financial Officer ©VimpelCom Ltd 2017
Slide 18: FY2016 targets achieved
FY2016 TARGETS ACHIEVED USD MILLION FY 20151 FY 2016 target2 FY 2016 pro-forma UNLESS OTHERWISE STATED (excl. Warid) 8,402 Service revenue 9,313 Flat to low single digit +0.5% YoY organically Underlying EBITDA 40.6% 40.9% Flat to +1 p.p. YoY margin +0.2 p.p. YoY organically CAPEX/revenue 18.5% 17-18
Slide 19: FY 2016 service revenue evolution
FY 2016 SERVICE REVENUE EVOLUTION FOREX HEADWINDS PARTIALLY MITIGATED BY CONTRIBUTION FROM WARID USD MILLION -8.2% 56 (258) (81) 331 (958) 151 9,313 9,361 8,553 Service Voice Interconnect Data and MFS Other 1 Organic service FOREX Warid Service revenue FY15 and roaming revenue FY16 revenue FY16 (exc
Slide 20: FY 2016 EBITDA evolution
FY 2016 EBITDA EVOLUTION EBITDA IMPACTED BY FOREX HEADWINDS ... USD MILLION -9.7% 48 402 (341) (394) 29 1,051 (438) 3,926 3,544 2,875 3,232 EBITDA Exceptional Underlying Service Performance Re-investment in FOREX Underlying EBITDA Exceptional Warid EBITDA 1 2 FY15 items EBITDA FY15 revenue transform
Slide 21: FY 2016 income statement
FY 2016 INCOME STATEMENT Organic USD MILLION FY16 FY15 YoY YoY Revenue 8,885 9,606 (7.5%) 1.0% Service revenue 8,553 9,313 (8.2%) 0.5% EBITDA 3,232 2,875 12.4% 26.6% Depreciation & amortization (1,936) (2,067) (6.3%) Lower depreciation due to FOREX headwinds Impairments and other (212) (283) (25%) E
Slide 22: FY 2016 net debt evolution
FY 2016 NET DEBT EVOLUTION USD MILLION 608 335 1,092 166 165 1,486 (3,581) 420 7,162 5,496 5,831 248 726 5,461 Net debt Warid Net debt EBITDA Change in Net interest Taxes Cash capex Licenses Dividend Net debt Exceptionals FOREX and Net debt 1 31 December net debt 31 December underlying working excl.
Slide 23: 2016 structural improvements
2016 STRUCTURAL IMPROVEMENTS Closing of Italy transaction GTH refinancing Improving cash upstream Optimization of local debt structures Global capital allocation model Asset light strategy Create flexibility for re-investing 23
Slide 24: Corporate finance transactions
CORPORATE FINANCE TRANSACTIONS Italy tower Pakistan transaction sale announcement Italy JV closing and full deconsolidation Pakistan transaction of WIND debt Algeria Italy JV announcement closing and Warid transaction and subsequent debt consolidation Disposal of deconsolidation of Zimbabwe M&A and
Slide 25: Capital structure improved
CAPITAL STRUCTURE IMPROVED 2014 Group gross debt 2016 (USD 26.4 billion) (currency breakdown and evolution) (USD 10.5 billion) 0.8 8.2 2.0 14.6 0.5 7.7 3.0 USD RUB Net leverage ratio1: 2.5x Other EUR Net leverage ratio1: 2.0x Gross debt and leverage ratio reduced, annual interest savings ~USD 150 mi
Slide 26: Equity free cash flow improvement in 2016
EQUITY FREE CASH FLOW IMPROVEMENT IN 2016 UNDERLYING EQUITY FREE CASH FLOW1 EVOLUTION USD MILLION UNLESS OTHERWISE STATED 828 588 40 FY 2015 FY 2016 (280) Net cash from Net cash used operating in investing activities2 activities2 …driven by robust capital efficiency improvements 26 1 Underlying equi
Slide 27: Future priorities and ambitions
FUTURE PRIORITIES AND AMBITIONS Further improve: Debt structure … to structurally Tax efficiency support dividends and broaden the Portfolio and asset light strategy investor base Equity free cash flow + Dual listing in Amsterdam 27
Slide 28: Dual listing in Amsterdam
DUAL LISTING IN AMSTERDAM Increased free float allows us to launch a second listing1 on Euronext Amsterdam, broadening the investor base Amsterdam listing will be in Euro-denominated common shares, fully fungible with NASDAQ ADSs Listing will be launched in Q2 2017 with the ticker “VEON” Likely incl
Slide 29: Equity free cash flow improvement
EQUITY FREE CASH FLOW IMPROVEMENT UNDERLYING EQUITY FREE CASH FLOW1 EVOLUTION USD MILLION UNLESS OTHERWISE STATED ~700-800 >1,000 588 FY 2016 FY 2017E FY 2018E …coupled with further improvements to cash upstreaming 29 1 Underlying equity free cash flow is defined as free cash flow from operating act
Slide 30: FY 2017 targets
FY 2017 TARGETS USD MILLION UNLESS OTHERWISE STATED FY 2016 actual FY 2016 pro-forma (incl. Warid for 6 months) (incl. Warid for 12 months) FY 2017 targets1 Total revenue 8,885 9,040 Low single digit growth Underlying EBITDA margin 40.3% 40.0% Low single digit accretion Underlying equity free cash f
Slide 31: New dividend policy on back of robust results and outlook
NEW DIVIDEND POLICY ON BACK OF ROBUST RESULTS & OUTLOOK For the financial year ended 31 December 2016, the Company intends to pay a dividend in the aggregate amount of USD 23 cents per share comprised of USD 3.5 cents per share paid as an interim dividend in Thereafter, VimpelCom is committed to Dec
Slide 32: Christopher Schlaeffer, Chief Digital Officer
Christopher Schlaeffer Chief Digital Officer
Slide 33: Industry evolution
INDUSTRY EVOLUTION 2G 3G 4G 1995 2000 2005 2010 2015
Slide 34: Moving beyond the app economy
MOVING BEYOND THE APP ECONOMY 2007 2008 Now A revolutionary A dominating Emerging phone operating system ecosystems
Slide 35: Slide 35
Slide 36: A new internet platform
A NEW INTERNET PLATFORM PERSONAL FREE SECURE OPEN CONTEXTUAL
Slide 37: VEON
VEON All you need in one place A single account – and you stay in control Totally free Messaging – with chat and voice calling News, music and video entertainment – personalized for you Everything the internet has to offer - from a given context Beautifully delivered – in the “VEON Stream”
Slide 38: Free. Even when you are out of credit
FREE. EVEN WHEN YOU ARE OUT OF CREDIT.
Slide 39: Secure. Putting the user in control
SECURE. PUTTING THE USER IN CONTROL.
Slide 40: Global partnership
@ mastercard GLOBAL PARTNERSHIP
Slide 41: Contextual. What you need, when you need it
CONTEXTUAL. WHAT YOU NEED. WHEN YOU NEED IT.
Slide 42: Global partnership for Studio+
GLOBAL PARTNERSHIP FOR STUDIO+
Slide 43: Global partnership
GLOBAL PARTNERSHIP
Slide 44: Open. Everything the internet has to offer
OPEN. EVERYTHING THE INTERNET HAS TO OFFER.
Slide 45: Economics
ECONOMICS CUSTOMER IMPACT ON NEW REVENUE ENGAGEMENT CORE BUSINESS MODEL DIGITAL GROSS ADDS SUBSCRIBER ACQUISITION COST DIGITAL TOP-UPS MONTHLY ACTIVE USERS VALUE SHARING WITH (MAU) PARTNERS CUSTOMER CARE CALLS CHURN SUBSCRIBER MARKET SHARE
Slide 46: Italy: more than 1 million downloads
ITALY > 1 million Downloads
Slide 47: VEON: be truly free
VEON BE TRULY FREE
Slide 48: Technology leadership
TECHNOLOGY LEADERSHIP Yogesh Malik Chief Technology Officer ©VimpelCom Ltd 2017
Slide 49: Myth: telcos cannot compete with OTTs
MYTH: TELCOS CANNOT COMPETE WITH OTTS Tangible features thanks to deep integration with core network (Voip Override, SMS in/out, etc.) Real-time data continuously enriched fueling relevant customer offerings & marketplace 56
Slide 50: Data sources: device, account, user, service usage
DEVICE ACCOUNT USER DEMOGRAPHIC SERVICE USAGE CUSTOMER SERVICE ► Device IMEI ► Account type ► Time stamp ► Acquisition source ► Time stamp ► Service status ► Customer appeals ► Device Brand ► Account code BAN ► Start Service Date data ► Allowed services ► Service description ► Contact timings & ► SI
Slide 51: Myth: telcos cannot compete with OTTs
MYTH: TELCOS CANNOT COMPETE WITH OTTS Tangible features thanks to deep integration with core network (Voip Override, SMS in/out, etc.) Real-time data continuously enriched fueling relevant customer offerings & marketplace Strong presence and distribution networks 51
Slide 52: Telco to tech challenges
TELCO TO TECH CHALLENGES Siloed, non data-centric architecture No software expertise System integrator dependent Our Vision Micro-services based architecture Developing software skills Full control over front end using open source 52
Slide 53: Our vision
Our Vision • Micro-services based architecture • Developing software skills • Full control over front end using open source 53
Slide 54: Building future software-defined products
BUILDING FUTURE SOFTWARE-DEFINED PRODUCTS Network Data Micro- New business IT Stack APIs assets management services enablement 54
Slide 55: Uplifting our networks at fast pace
UPLIFTING OUR NETWORKS AT FAST PACE TRADITIONAL TELCO NETWORKS FUTURE TELCO NETWORKS ► Hardware and ► Software defined, software locked intelligent together ► Dynamic scaling and ► Very hard to scale or pooling pool ► Modernizations and ► Sharing is still nascent sharing 55
Slide 56: Milestones achieved at record pace
MILESTONES ACHIEVED – AT RECORD PACE Countries where Network Sharing 4G/LTE population coverage in our footprint 4G/LTE was and Consolidation Million people, change in % launched in 2016 +72% 165 96 2015 2016 63
Slide 57: Modernizing majority of sites by end of 2017
MODERNIZING MAJORITY OF SITES BY THE END OF 2017 Number of sites swapped / modernized in Ukraine example 2016 and 2017 ~57,000 Full country swap in record time with 4G/LTE readiness ~25,000 Significant leadership to competitors in NPS 60% of urban sites have fibre connectivity 2016 2017 57
Slide 58: Virtualizing our networks all across
VIRTUALIZING OUR NETWORKS ALL ACROSS Implemented vEPC covering five Eurasian countries Adopting a comprehensive network function virtualization strategy Introducing virtual HLR in Bangladesh 58
Slide 59: Much more can be done with less resources
OUR EXPERIENCE: MUCH MORE CAN BE DONE WITH LESS RESOURCES CAPEX TO REVENUE RATIO, (%) Modernization at pace 21.0 18.5 17.4 ~15 Group-wide prioritization Focus on quality of service 2014 2015 2016 Medium- term goal 59
Slide 60: Keeping world-class network quality
KEEPING WORLD-CLASS NETWORK QUALITY Total volume of traffic, 3G 4G/LTE share of and 4G/LTE total data traffic Petabytes % +57% +70% #1 in six countries for 1,512 21.4 network throughput 961 12.6 2015 2016 2015 2016 60
Slide 61: Building future software-defined products
BUILDING FUTURE SOFTWARE-DEFINED PRODUCTS Network Data Micro- New business IT Stack APIs assets management services enablement 61
Slide 62: Bringing it all together for a unique user experience
BRINGING IT ALL TOGETHER FOR A UNIQUE USER EXPERIENCE Micro-services Marketplaces Payment Gateway OpCo Scheduling Campaign Campaign/ MS API Manager API BSS Manageme End Points nt API Gateway Microservices PartnerPortal Platform New digital stack User facing Execution Campaign Scheduling Campaign ID,
Slide 63: 2016: a vision became reality
2016: A VISION BECAME REALITY Mobile Financial Software VEON Data Management Digital Stack Services platform Development launched Platform launched overhaul started launched center opened 63
Slide 64: Break
BREAK
Slide 65: Performance transformation
PERFORMANCE TRANSFORMATION Alexander Matuschka Chief Performance Officer ©VimpelCom Ltd 2017
Slide 66: Performance transformation: restructure, re-invest
PERFORMANCE TRANSFORMATION RESTRUCTURE RE-INVEST RESUME MEANINGFUL DIVIDEND POLICY 66
Slide 67: Improving cash flow
IMPROVING CASH FLOW USD MILLION >1,000 OPEX 750 >75% Optimize legacy cost base 588 achieved CAPEX Scale volumes through standardization across our footprint WORKING CAPITAL Inventory management Payment days Original Achieved New 2018 2018 target1 in 2016 target2 1. Original medium term cash flow tar
Slide 68: Global operating model
GLOBAL OPERATING MODEL SHARED HUBS SERVICE CENTERS CONSOLIDATION STANDARDIZATION CONTACT MANAGED CENTERS SERVICES DIGITIZATION 68
Slide 69: Designing principles
DESIGNING PRINCIPLES 80 INITIATIVES STRINGENT GOVERNANCE 400 ACTION OWNERS LINK TO PROFIT & LOSS USD 402 million OPEX SAVINGS IN 2016 ONE PROJECT MANAGEMENT USD 503 million CAPABILITIES INTERNALIZED RUN RATE SAVINGS 76
Slide 70: Cost optimization: procured volume
COST OPTIMIZATION: PROCURED VOLUME 2016 TOTAL CAPEX AND STRUCTURAL OPEX 4% 20% ProcuredOPEX Procured OPEX 36% USD ProcuredCAPEX Procured CAPEX 3.9 billion Personnel costs 40% Real estate costs Structural opex is total opex less service costs, costs of equipment and accessories, commercial costs and
Slide 71: Vendor day methodology: guiding principles
VENDOR DAY METHODOLOGY: GUIDING PRINCIPLES PRESENT STRATEGY DECISION AND MAKERS VALUES PRESENT 48h SIGN REAL TIME CONTRACTS AUCTIONS & & AWARD NEGOTIATIONS VENDORS 71
Slide 72: Global vendor days
GLOBAL VENDOR DAYS TOTAL VOLUME OF SHARE OF 4G/LTE AMONG TRAFFIC, 3G AND 4G/LTE TOTAL DATA TRAFFIC Petabytes (%) PROCUREMENT SPEND +57% +70% STANDARDIZE AND ELIMINATE VARIANCES 1,512 21.4 4% 961 12.6 SCALE VOLUME 70% 2015 2016 2015 2016 FOSTER COLLABORATIVE BEHAVIOR CONSISTENTLY REDUCING CAPEX CAPEX
Slide 73: Local vendor days
LOCAL VENDOR DAYS PROCUREMENT SPEND BE LOCAL TO BE GLOBAL Bangladesh Pakistan Algeria Russia Armenia 4% SHARE GROUP VISION 70% AND VALUES -52% -24% -33% -19% -9% FOCUS ON OPEX OPTIMIZATION 96% 30% 2014 2017 PARTNER WITH LOCAL VENDORS Local Global Kazakhstan Ukraine Georgia Kyrgyzstan Uzbekistan 9 Ma
Slide 74: De-risking forex mitigation
DE-RISKING FOREX MITIGATION AMOUNT OF TOTAL SPEND USD billion 1,600 contracts RISK SHARED WITH VENDORS representing 80% of total procured spend FULLY MITIGATED IMPROVEMENT OF 65% 2.3 1.2 1.5 NON MITIGATED REDUCTION OF 78% 0.2 0.6 0.9 0.2 Addressable Fully Shared Not Spend mitigated risk mitigated in
Slide 75: Cost optimization: personnel costs
COST OPTIMIZATION: PERSONNEL COSTS 2016 TOTAL CAPEX AND STRUCTURAL OPEX 4% 20% Procured OPEX 36% USD Procured CAPEX 3.9 billion Personnelcosts Personnel costs 40% Real estate costs Structural opex is total opex less service costs, costs of equipment and accessories, commercial costs and litigation c
Slide 76: Structural shift from telco to tech: headcount
STRUCTURAL SHIFT FROM LINE MANAGERS TELCO TO TECH: HEADCOUNT -36% HEADCOUNT -8% -33% -28% 5,000 7,000 4,500 15,000 3,000 2015 2016 ORG. STRUCTURE LAYERS Large OpCo Small OpCo 8 6 6 5 60,000 55,000 40,000 43,000 2015 2016 Jan Re- Dec Re- Re- Dec 2015 structure 2015 structure investment 2016 76 Headco
Slide 77: Structural shift from telco to tech: headcount
STRUCTURAL SHIFT FROM TELCO TO TECH: HEADCOUNT HEADCOUNT HEADCOUNT ADMINISTRATIVE vs NON-ADMINISTRATIVE (in %) -8% -33% -28% 5,000 2015 2016 2018 3,000 15,000 55% 74% 81% 60,000 55,000 40,000 43,000 Jan Re- Dec Re- Re- Dec 2015 structure 2015 structure investment 2016 77 Headcount includes both empl
Slide 78: Structural shift from telco to tech: headcount
STRUCTURAL SHIFT FROM TELCO TO TECH: HEADCOUNT HEADCOUNT HEADCOUNT GSS & HUBS & COE vs ADMINISTRATIVE (in %) -8% -33% -28% 5,000 2015 2016 2018 3,000 15,000 2% 10% 20% 60,000 55,000 40,000 43,000 Jan Re- Dec Re- Re- Dec 2015 structure 2015 structure investment 2016 GSS refers to Global Shared Servic
Slide 79: Structural shift from telco to tech: headcount
STRUCTURAL SHIFT FROM TELCO TO TECH: HEADCOUNT HEADCOUNT HEADCOUNT HQ DIGITAL vs HQ TOTAL (in %) -8% -33% -28% 5,000 2015 2016 2018 3,000 15,000 2% 21% 50% 60,000 55,000 40,000 43,000 Jan Re- Dec Re- Re- Dec 2015 structure 2015 structure investment 2016 79 HQ refer to headquarters Headcount includes
Slide 80: Cost optimization: real estate costs
COST OPTIMIZATION: REAL ESTATE COSTS 2016 TOTAL CAPEX AND STRUCTURAL OPEX 4% 20% Procured OPEX 36% USD Procured CAPEX 3.9 billion Personnel costs 40% Realestate Real estate costscosts Structural opex is total opex less service costs, costs of equipment and accessories, commercial costs and litigatio
Slide 81: Visualization of the cultural change: real estate
VISUALIZATION OF THE CULTURAL CHANGE: REAL ESTATE SHARING RATIO OFFICE OCCUPANT / OFFICE WORKSTATION NUMBER OF ADMINISTRATIVE SITES (in points) -6% -22% 640 600 500 +75% Jan. 2015 Dec. 2015 2016 SPACE 0.8 0.9 1.4 (in k sqm) 2015 2016 2018 -1% -13% 1,070 1,060 930 Jan. 2015 Dec. 2015 2016 81
Slide 82: Visualization of the cultural change: real estate
VISUALIZATION OF THE CULTURAL CHANGE: REAL ESTATE OPEN OFFICE SPACE DEVELOPMENT (%) NUMBER OF ADMINISTRATIVE SITES -6% -22% 2015 2016 2018 640 600 500 Jan. 2015 Dec. 2015 2016 SPACE 40% 45% 80% (in k sqm) -1% -13% 1,070 1,060 930 Jan. 2015 Dec. 2015 2016 82
Slide 83: Performance transformation: restructure, re-invest
PERFORMANCE TRANSFORMATION RESTRUCTURE RE-INVEST RESUME MEANINGFUL DIVIDEND POLICY 83
Slide 84: Russia update
RUSSIA UPDATE Kjell Morten Johnsen Head of Major Markets and Russia CEO ©VimpelCom Ltd 2017 ©VimpelCom Ltd
Slide 85: Strong position in Russia
STRONG POSITION IN RUSSIA SOLID #3 POSITION IN MOBILE STRONG FIXED LINE ASSETS DIGITAL PIONEER ► 57 million mobile customers ► 10 million FTTB households passed, ► Successful launch of fixed mobile 2.2 million broadband customers convergence product ► 36 million mobile data customers ► > 100 thousan
Slide 86: Priorities
PRIORITIES ARPU Grow revenue Increase customer satisfaction Customer base NPS Become fully digital Increase cash flow generation 86
Slide 87: Russia: performance stabilized
RUSSIA: PERFORMANCE STABILIZED SERVICE REVENUE MOBILE CUSTOMERS Total service revenue decreased: RUB BILLION MILLION -1.3% -2.5% Declining fixed-line service revenue YoY YoY Slight growth in mobile service revenue mobile 55.7 57.0 55.8 59.8 58.3 Continued strong mobile data revenue fixed-line growth
Slide 88: Monetization through data centric pricing
MONETIZATION THROUGH DATA CENTRIC PRICING ► Current mobile data pricing not sustainable Value for customer ► Beeline leading market bundle penetration > 50% ► Market ready for data centric pricing with smartphone penetration > 50% GB driven Mobility driven Data centric pricing will enable operators
Slide 89: FMC to support fixed-line business
FMC TO SUPPORT FIXED-LINE BUSINESS Successful launch of FMC: Strong pull: 500k+ convergent customers in just 9 months Strong 2.5x ARPU uplift and lower churn Become the leading convergent operator Fixed and convergent footprint expansion via partnerships with regional operators Focus on B2B segment
Slide 90: Investing smarter
INVESTING SMARTER Network sharing 10 regions with Megafon ► Maximizing network investment efficiency 43 regions with MTS through network sharing ► Medium-term goal to invest 15% capex to revenue ► Continuing network buildout, leveraging Top down NPS, Top down NPS, quality of voice quality of data sm
Slide 91: VEON: rolling out global vision locally
VEON: ROLLING OUT GLOBAL VISION LOCALLY “Big bang” go-to-market strategy Involvement of online celebrities (top bloggers) Active promo campaign Joint projects with popular web sites VEON internet platform differentiates through local content and partnerships LaModa – leading on-line fashion store Am
Slide 92: Wind Tre hits the market
HITS THE MARKET Maximo Ibarra Wind Tre Chief Executive Officer ©VimpelCom Ltd 2017
Slide 93: Disclaimer
DISCLAIMER This presentation has been prepared by, and is the sole responsibility of, Wind Tre management, and no information contained herein, including, but not limited to, financial and industry data, market projections and strategy, has been prepared by or on behalf of, nor approved by, VimpelCo
Slide 94: Agenda
AGENDA A B C D WHAT WE WHO WE ARE WHERE WE COMPETE WHAT WE’LL DO ACCOMPLISHED 94
Slide 95: Wind Tre identity: who we are
WIND TRE IDENTITY A Who we are OUR OUR OUR COMPANY NAME MISSION CUSTOMERS 31.3 mln 2.7 mln BE1 #1 TO BE 1st mobile operator 2nd fixed operator 95
Slide 96: Wind Tre management team
WIND TRE IDENTITY A Who A Whowewe areare Our Management Team Paolo Nanni Benoit Hanssen Business & Wholesale Technology Michiel Van Eldik Stefano Invernizzi Consumer & Digital Finance, Control & Procurement Massimo Angelini PR Internal & External Communications Mark Shalaby Legal, Compliance & Regul
Slide 97: Financial highlights FY 2016 combined data
FINANCIAL HIGHLIGHTS FY 2016 A Who we are COMBINED DATA Total revenue EBITDA1 EBITDA1 % Operating cash flow (EBITDA1 – CAPEX) +0.8% +7.5% FY 33.6% +170bps vs 2015 EUR 6.5 +1.3% EUR 2.2 +6.8% ~EUR 1 +9.5% billion vs 2015 billion vs 2015 Q4 34.8% +220bps vs Q4 2015 billion vs 2015 in Q4 2016 in Q4 201
Slide 98: Competitive landscape
COMPETITIVE LANDSCAPE B Where we compete Mobile market Fixed direct OLO’s Mobile share market 1 share1 The near future scenario market share2 Mobile ► Vodafone and TIM consolidating their ‘high network quality’ positioning 36.5% 37.2% 39.4% 38.8% ► Iliad expected to enter the mobile market in the se
Slide 99: Pillars of our strategy
PILLARS OF OUR STRATEGY C What we'll do Market leadership Digital all in Beyond mobile B2C Lean company ► Secure leadership in ► Develop state of the art ► Capture opportunities in ► Foster a new, agile customer satisfaction digital service model growth segments such modus operandi ► Deploy the larg
Slide 100: Dual brand strategy
DUAL BRAND STRATEGY C What we'll do Brand positioning ► Two well-recognized, strong and perfectly harmonized brands ► Each brand focused on Closer to you a specific value proposition, ready to face both new attackers and major operators The future you want In B2B segment one differentiated and 360°
Slide 101: Main financial goals
MAIN FINANCIAL GOALS C What we'll do Return on Synergies Deleverage investments ► Zero base rethinking of ► Leverage target below ► Shareholder distribution all cost elements to 3.0x in the long-term based on the following: efficiency ► Exploring potential Leverage1 % EFCF2 ► EUR 5 billion NPV benef
Slide 102: What we accomplished
WHAT WE ACCOMPLISHED D What we accomplished Fast-track to an Set-up of a single Contract with remedy Effective governance integrated technology commercial strategy taker infrastructure Business plan and Budget Brand strategy defined Creating a Spectrum transfer: first approved Proposition portfolio
Slide 103: Key takeaways
KEY TAKEAWAYS A B C D WHO WE ARE WHERE WE COMPETE WHAT WE’LL DO WHAT WE Ready with our solid Our goal is to become the ACCOMPLISHED #1 in mobile foundations to win future most innovative digital Fast integration, one challenges Telco with the largest and Company operating at full #2 in fixed in a ne
Slide 104: Final remarks
Change picture FINAL REMARKS Jean-Yves Charlier Chief Executive Officer ©VimpelCom Ltd 2017
Slide 105: Q&A
Change picture Q&A Barcelona 27 February 2017 ©VimpelCom Ltd 2017
Slide 106: Appendix
APPENDIX Barcelona 27 February 2017
Slide 107: Debt maturity schedule
DEBT MATURITY SCHEDULE As at 31 December 2016, USD BILLION Group debt maturity schedule by Business Units Russia GTH HQ 2.9 1.8 1.8 1.3 1.3 0.8 0.7 2017 2018 2019 2020 2021 2022 >2022 Group debt maturity schedule by currency1 2017 2018 2019 2020 2021 2022 >2022 USD 1.5 0.7 1.1 0.7 0.7 1.3 1.7 73% RU
Slide 108: Liquidity analysis
LIQUIDITY ANALYSIS Group Cash breakdown by currency Unused RCF headroom at the end 4Q16: (December 31, 2016) VimpelCom - syndicate USD 1.8 billion PJSC VimpelCom - RUB 15 billion (USD 0.2 billion ) Sberbank Unused VF/CF headroom at the end 48% 52% 4Q16: VimpelCom - CDB RMB 0.6 billion (USD 0.1 billi
Slide 109: Debt by entity
DEBT BY ENTITY As at 31 December 2016, USD millions Outstanding debt (millions) Type of debt/lender Vendor Entity Bonds Loans RCF Other Total Financing VimpelCom Holdings B.V. 3,380 - - 21 - 3,402 VimpelCom Amsterdam B.V. - 1,000 - 601 - 1,601 PJSC VimpelCom 1,810 1,021 - 71 63 2,965 GTH Finance B.V
Slide 110: Pakistan: double digit growth continues, integration ongoing
PAKISTAN: DOUBLE DIGIT GROWTH CONTINUES, INTEGRATION ONGOING SERVICE REVENUE MOBILE CUSTOMERS (PKR BILLION) (MILLION) +42.4% YoY +45.0% YoY +14.6% YoY organic +14.0% YoY organic ► Merger integration execution ahead of schedule: 51.6 36.1 7.7 36.7 7.7 46.5 10.3 ► annual run-rate of PKR 8.2 billion (U
Slide 111: Bangladesh: customer growth in a competitive market
BANGLADESH: CUSTOMER GROWTH IN A COMPETITIVE MARKET SERVICE REVENUE MOBILE CUSTOMERS (BDT BILLION) (MILLION) -2.0% YoY -5.9% YoY ► Service revenue decreased 2% YoY: ► aggressive competition on price and offers, accelerated after the SIM-verification and in-market consolidation 11.8 12.0 11.6 32.3 30
Slide 112: Algeria: continued pressure on results
ALGERIA: CONTINUED PRESSURE ON RESULTS SERVICE REVENUE MOBILE CUSTOMERS (DZD BILLION) (MILLION) -13.7% YoY -4.2% YoY ► Service revenue continued to decrease double digit YoY, notwithstanding strong data revenue (+70% YoY) 17.0 16.3 31.2 28.9 26.9 ► New CEO on board since 26 January, leading a renewe
Slide 113: Ukraine: strong results
UKRAINE: STRONG RESULTS SERVICE REVENUE MOBILE CUSTOMERS (UAH BILLION) (MILLION) +11.8% YoY +2.6% YoY ► Clear market leader in challenging environment 25.4 26.1 ► Annual churn at historic low of 18% 3.2 3.7 3.6 ► Service revenue increased 12% YoY, with mobile data 0.3 0.3 0.3 revenue growing at 63%
Slide 114: Uzbekistan: strengthened market position
UZBEKISTAN: STRENGHTENED MARKET POSITION SERVICE REVENUE MOBILE CUSTOMERS (UZS BILLION) (MILLION) +4.3% YoY -4.1% YoY ► Clear leader in NPS 493 502 514 ► Mobile service revenue grew 4% YoY, despite 9.9 9.5 increased competition 3.4 3.3 3.2 ► Mobile data revenue grew 9% YoY 4Q15 3Q16 4Q16 4Q15 4Q16 F
Slide 115: Italy: Wind Tre hits the market
ITALY: WIND TRE HITS THE MARKET COMBINED DATA SERVICE REVENUE1 MOBILE CUSTOMERS (EUR MILLION) (MILLION) +2.1% YoY +0.4% YoY ► Wind Tre fully operational since December 30, 2016 1,091 1,110 ► The leading mobile operator in Italy with a customer 31.2 31.3 base exceeding 31 million and market share abo
Slide 116: FOREX
FOREX Target rates Average rates Average rates Closing rates FY17 4Q16 4Q15 YoY FY16 FY15 YoY 4Q16 3Q16 QoQ Russian Ruble 67.00 63.07 65.94 (4.4%) 67.03 60.96 10.0% 60.66 63.16 -4.0% Pakistan Rupee 107.00 104.78 104.94 (0.2%) 104.72 102.75 1.9% 104.37 104.46 -0.1% Algerian Dinar 118.00 110.58 106.81