57 slides from VEON Ltd. ORD's earnings presentation, November 2014
Slide 1: Creating Value, Investing in the Future
Creating Value © VimpelCom Ltd 2014 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 20.8 billion2 customers covered Total operating 223 739 revenue split (%) 38 8 6 5 4 33 30 million2 million3 70% from Emerging markets © VimpelCom Ltd 2014 USD 8.7 billion2 Countries Number 14 o
Slide 3: Experienced international management team
Experienced international management team Rene Jo Lunder Andrew Schuster CEO Davies Chief Chief Operating Financial Officer Officer © VimpelCom Ltd 2014 Anton Yogesh Anja Mikhail Scott Romano Enrique Kudryashov Malik Uitdehaag Gerchuk Dresser Righetti Aznar Chief Strategy Chief Chief Human Chief Gen
Slide 4: 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 5: 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 6: 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) 171% Western Europe Avg: 66% 155% 1,195 151% 55% Western Europe Avg: 133% 53% © VimpelCom Ltd 2014 51% 996 120% 44% 43% 85% 66% 68% 37% 53% 33% 231 118 103 68 3
Slide 7: VimpelCom has an attractive emerging markets portfolio
VimpelCom has an attractive emerging markets portfolio 70% of revenue in emerging markets Emerging market portfolio ► Solid market positions in our seven LTM 3Q14 major emerging markets: © VimpelCom Ltd 2014 Revenues – #1 in 4 (UKR, ALG, PAK, UZB) USD 14.4 bn EBITDA1 – #2 in 2 (BAN, KAZ) USD 6.2 bn
Slide 8: Continued sequential improvements in 3Q14
Continued sequential improvements in 3Q14 Service revenue Mobile customers1 (USD billion) (million) • Sequential improvements: Revenue and EBITDA growth 4.8 223 ► ► Higher EBITDA margin ► Strong customer growth © VimpelCom Ltd 2014 - 5% organic YoY + 5.0 million YoY • Service revenue organic3 declin
Slide 9: Key recent developments in 3Q14
Key recent developments in 3Q14 • Macro-economic slow down and material currency devaluation in Russia and Ukraine, due to geopolitical unrest • Resolution in Algeria is on track for closing by end of 2014 © VimpelCom Ltd 2014 • Successful commercial 3G launch in Algeria and Pakistan • Streamlined p
Slide 10: 3Q14: Financial performance negatively impacted by one-off costs
3Q14: Financial performance negatively impacted by one-off costs related to WIND refinancing and FOREX USD million 3Q14 3Q13 YoY Revenue 5,145 5,685 (9%) • Revenue declined organically 3% YoY, due to YoY performance, macro slowdown in some markets and continued market weakness in Italy of which serv
Slide 11: 3Q14: Resilient cash flow
3Q14: Resilient cash flow USD million 3Q14 3Q13 Delta EBITDA 2,205 2,474 (269) • Due to FOREX, lower revenue and higher network costs Changes in working capital and other 40 123 (83) Net interest paid (477) (634) 157 • As a result of the April and July 2014 WIND refinancing © VimpelCom Ltd 2014 Inco
Slide 12: Interest savings from WIND's refinancing & Algeria resolution
Interest savings from WIND’s refinancing & Algeria resolution • Refinanced WIND’s debt, annual interest savings of ~USD 0.4 billion and improved debt maturity profile © VimpelCom Ltd 2014 • Net proceeds from Algeria resolution targeted for repayment of gross debt, annual interest savings of ~USD 0.3
Slide 13: Improved debt maturity profile in 3Q14
Improved debt maturity profile in 3Q14 As at 30 September 2014, in USD billion Group debt maturity schedule by unit Debt composition by unit Italy Russia 5.9 6.0 3% A&A 22% Italy HQ © VimpelCom Ltd 2014 2.9 3.3 USD Russia 2.2 51% 2.0 1.9 27.7bn HQ 1.5 1.2 0.8 A&A 24% 2014 2015 2016 2017 2018 2019 20
Slide 14: Financing activities and available headroom in 3Q14
Financing activities and available headroom in 3Q14 USD 18.6 billion financing activities YTD: USD 2.3 billion available RCF headroom: Refinancing WIND USD 10.6 billion new SNs and SSNs VimpelCom USD 1.3 billion © VimpelCom Ltd 2014 banglalink USD 0.3 billion Senior Notes (SNs) OJSC VimpelCom USD 0.
Slide 15: Lower leverage and average cost of debt in 3Q14
Lower leverage and average cost of debt in 3Q14 EBITDA1 / Financial Average Cost Net Debt/ EBITDA1 Gross Debt/ EBITDA1 income and expenses of Debt 3Q14 2.5 3.2 4.2 6.3% © VimpelCom Ltd 2014 -0.1 QoQ -0.1 QoQ -0.1 QoQ -0.8 p.p. QoQ With a cash position of USD 6 billion, additional financial facilitie
Slide 16: Summary 3Q14 results
Summary 3Q14 results ► Results impacted by unfavorable currency movements, macro-economic headwinds and operational performance in some markets ► Continued sequential improvements driven by investments in high quality networks and improved customer experience © VimpelCom Ltd 2014 ► Streamlined portf
Slide 17: 2014 targets
2014 targets Targets1 2014 Low to mid single Revenue digit decline YoY © VimpelCom Ltd 2014 Low to mid single EBITDA digit decline YoY Leverage (Net Debt / EBITDA) ~2.4x CAPEX excl. licenses / Revenue ~21% 17 1. The annual targets for 2014 assume constant currency, no major regulatory changes, no ch
Slide 18: Business Units Performance 3Q14
Business Units Performance 3Q14 © VimpelCom Ltd 2014 18
Slide 19: Business dashboard 3Q14
Business dashboard 3Q14 YoY dynamics Russia Russia Italy Total revenue split (%) Italy Revenue (3%) RUB 73.1 bn EBITDA Revenue (2%) EUR 1.2 bn EBITDA 38 31 8 5 5 4 43 Algeria margin margin Ukraine EBITDA (7%) RUB 29.9 bn 40.9% EBITDA 3% EUR 0.5 bn 42.7% Pakistan Mobile EBITDA split (%) Mobile (3%) 2
Slide 20: Russia: 3Q14 results in line with expectations
Russia: 3Q14 results in line with expectations RUB BILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers (million) • Mobile data revenue grew 22% YoY -4% YoY -1% YoY • Mobile service revenue decreased 5% 73.6 58.1 12.8 71.0 57.3 YoY, driven by measures taken to 13.2 improve Customer Expe
Slide 21: Russia: Continued improvements in network quality and customer experience
Russia: Continued improvements in network quality and customer experience © VimpelCom Ltd 2014 Continued investments in high- Stimulating mobile data speed data networks • #1 or #2 in 75% of regions1 in mobile • Free data for 4G/LTE customers in data speed Moscow Oblast until January 15, 2015 • Mosc
Slide 22: Russia: Continued improvements QoQ in 3Q14
Russia: Continued improvements QoQ in 3Q14 RUB BILLION, UNLESS STATED OTHERWISE Service revenue Mobile data revenue • Customer satisfaction increased, with +6% QoQ +10% QoQ higher Net Promoter Score, leading to 67.3 71.0 9.8 improvement in churn 9.0 13.2 12.4 • Strong customer growth of 1 million 54
Slide 23: Italy: Solid 3Q14 performance in a weak, but improving market
Italy: Solid 3Q14 performance in a weak, but improving market EUR MILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers (million) • Mobile service revenue decreased 9% -8% YoY -3% YoY YoY: 1,151 1,039 1,054 22.4 21.8 ► Intense price competition 2013 312 303 291 ► SMS disintermediation •
Slide 24: Italy: Strong operational and financial progress
Italy: Strong operational and financial progress © VimpelCom Ltd 2014 WIND Digital: Mobile broadband double 8 billion euro refinancing oriented to the future digit growth continues concluded with success • “MyWind” App for smart-phones and • Mobile broadband revenue up 14% YoY • Average cost of debt
Slide 25: Africa & Asia: Successful 3G launches in 3Q14
Africa & Asia: Successful 3G launches in 3Q14 to drive future revenue growth USD MILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers • Revenue and EBITDA organically -4% YoY (million) declined: +5% YoY 91.6 ► Competitive pressure in Algeria and 857 860 824 87.2 Pakistan ► Partly offset
Slide 26: Algeria: Focus on commercial 3G launch
Algeria: Focus on commercial 3G launch Data revenue x4 times © VimpelCom Ltd 2014 2Q14 3Q14 Successful Data & handsets New special 3G 3G launch promotion value added services • 3G services currently in 14 main • Smartphone and dongle promotions • Facebook zero provinces, including Algiers and main w
Slide 27: Bangladesh: Successful turnaround and 3G roll out
Bangladesh: Successful turnaround and 3G roll out Mobile service revenue growth YoY (%) Customer base (millions) 30.2 29.8 10% 29.4 8% 8% 28.8 28.1 27.1 25.9 © VimpelCom Ltd 2014 -13% -14% -15% -15% 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 Smartphone MFS The fastest 3G p
Slide 28: Pakistan: Challenging political and macro-economic environment
Pakistan: Challenging political and macro-economic environment and strong competition MOU development © VimpelCom Ltd 2014 3Q13 4Q13 1Q14 2Q14 3Q14 Improved network and Transparency in value MFS promotion is increased usage added services in focus, +30% QoQ • 2G coverage/capacity rollout on track •
Slide 29: Ukraine: Transformation showing operational improvements in 3Q14
Ukraine: Transformation showing operational improvements in 3Q14 in a difficult environment UAH BILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers (million) • Transformation program on track: -4% YoY +2% YoY ► #1 in NPS 3.3 0.3 3.0 3.2 0.3 25.9 26.3 ► Substantial improvement in 0.3 an
Slide 30: CIS: Continued organic growth in 3Q14
CIS: Continued organic growth in 3Q14 USD MILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers (million) • Increased market shares in most -4% YoY +6% YoY countries 510 494 41 461 41 42 24.9 26.3 • Mobile service revenue increased organically 5% YoY 469 452 420 • Mobile data revenue gro
Slide 31: Kazakhstan: Completion of successful turnaround
Kazakhstan: Completion of successful turnaround Mobile service revenue growth YoY (%) Customer base (millions) 9.8 9.6 6% 9.2 9.2 4% 09 8.8 3% 2% 8.5 1% © VimpelCom Ltd 2014 -1% -1% 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 3G Coverage New data tariff #1 in NPS offerings
Slide 32: Appendices
© VimpelCom Ltd 2014 32 Appendices
Slide 33: 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 34: Group value add
Group value add $ $ Best Procurement Capex practices © VimpelCom Ltd 2014 advantages synergies sharing Global Roaming Talent partnerships 34
Slide 35: 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 35
Slide 36: 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 2014 Telenor(1) 580 578 840 33.0% 305 000 000 885 578 840 43.0% LetterOne(2) 986 572 563 56.2% - 986 572 563 47.9% Mi
Slide 37: 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 ► Dividends of 3.5 US cents per share per annum until targeted leverage of less than 2.0 net debt / E
Slide 38: Financing structure
Financing structure VimpelCom Ltd. VimpelCom Amsterdam B.V. VimpelCom Holdings VimpelCom Amsterdam WIND Telecom B.V. Finance B.V. S.p.A. © VimpelCom Ltd 2014 USD 2.7 bln Total Wind Group Weather Capital Wind Acquisition USD 14.0 bln S.a.r.l. Holdings Finance S.p.A. OJSC VimpelCom PJSC Kyivstar Senio
Slide 39: Market Overviews
© VimpelCom Ltd 2014 39 Market Overviews
Slide 40: 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: 164% Pen: 73% Pen: 112% GDP: 5,900 GDP: 5,600 GDP: 13,900 GDP: 3,500 GDP: 2,400 Ukraine Pop: 44.3 M Tajikistan Pen: 120% Pop: 8.1
Slide 41: Competitive situation and market trends - Russia
Competitive situation and market trends - Russia Mobile1 Mobile Market Share1 • ~ 90% pre-paid market (on service revenue), % • ~ 173% penetration • 3 major players (Megafon, MTS and VimpelCom) with 26 25 24 VimpelCom comparable market shares • ARPU ~USD 8 28 26 27 Megafon • 4G launched in 24 region
Slide 42: Competitive situation and market trends - Italy
Competitive situation and market trends - Italy Mobile Mobile Market Share1 • ~ 80 % pre-paid market (on revenue), % • ~ 147% penetration 20 21 22 Wind • 4 major players: TIM, Vodafone, WIND and H3G 8 8 9 3 • 30% smartphone penetration on SIM cards 37 36 35 Vodafone Fixed © VimpelCom Ltd 2014 • Tele
Slide 43: 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 44: 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 90%, 3d player is discounter (Tele2) • ARPU ~USD 6 38 37 35 VimpelCom • 3G launched by all players, 4G network introduced only
Slide 45: 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 ~USD 6 23 27 42 VimpelCom • 3G launched by two operators 58 51 MTS • First commercial launch of 4G/LTE in Uzbek
Slide 46: 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 47: 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 elected and in place since May 2013, working 30 30 29 Mobilink on achieving political stability and econom
Slide 48: 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 49: Competitive situation in rest of CIS
Competitive situation in rest of CIS Tajikistan Armenia • 4 competitors: Beeline 1th, Babilon Mobile4st, • 3 international competitors: Beeline 2nd, Tcell (TeliaSonera) 2nd, MegaFon 3rd. Vivacell (MTS) 1st, Orange 3rd. • SIM penetration 100% (GSMA data 3Q14) • SIM penetration 117% (GSMA data 3Q14),
Slide 50: Reconciliation Tables and Forex
Reconciliation Tables and Forex © VimpelCom Ltd 2014 50
Slide 51: Sensitivity to FOREX movements
Sensitivity to FOREX movements FOREX sensitivities1 9M14 RUB vs. USD EUR vs. USD UAH vs. USD © VimpelCom Ltd 2014 +/-10% +/-10% +/-10% USD billion Revenue 15.2 4% 3% 1% Average FOREX EBITDA 6.4 4% 2% 1% Gross Debt 27.7 2% 5% n.a. Year-end FOREX Net Debt 21.7 2% 6% n.a. 51 1. RUB vs USD +10% = 10% ap
Slide 52: FOREX rates used in annual targets for 2014
FOREX rates used in annual targets for 2014 Currency FX rates versus USD Algeria DZD 81 Armenia AMD 420 Bangladesh BDT 80 © VimpelCom Ltd 2014 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
Slide 53: Revenue and EBITDA development in 3Q14
Revenue and EBITDA development in 3Q14 3Q14 Revenue YoY EBITDA YoY Organic Reported Organic Reported Russia (3%) (12%) (7%) (16%) © VimpelCom Ltd 2014 Italy (2%) (3%) 3% 3% Africa & Asia (4%) (3%) (12%) (11%) Ukraine (6%) (40%) (14%) (45%) CIS 5% (3%) 12% 3% Consolidated (3%) (9%) (4%) (11%) 53
Slide 54: FOREX development
FOREX development RATES OF FUNCTIONAL CURRENCY TO USD Ave r a ge r a t e s Closing r a t e s 3 Q1 4 3 Q1 3 YoY 3 Q1 4 2 Q1 4 QoQ Russian Ruble 36,19 32,80 (9,4%) 39,39 33,63 (14,6%) © VimpelCom Ltd 2014 Euro 0,76 0,75 (0,1%) 0,79 0,73 (7,7%) Algerian Dinar 80,27 80,66 0,5% 83,22 79,25 (4,8%) Pakista
Slide 55: Reconciliation of EBITDA
Reconciliation of EBITDA USD mln 3Q14 3Q13 9M14 9M13 Unaudited EBITDA 2,205 2,474 6,370 7,247 Depreciation (717) (726) (2,217) (2,240) Amortization (381) (441) (1,155) (1,333) Impairment loss 61 (45) 59 (67) Loss on disposals of non-current assets (24) (29) (50) (43) © VimpelCom Ltd 2014 EBIT 1,143
Slide 56: Reconciliation of consolidated net debt
Reconciliation of consolidated net debt USD mln 3Q13 2Q14 3Q14 Net debt 22,485 23,242 21,736 C ash and cash equivalents 4,890 5,505 5,852 © VimpelCom Ltd 2014 Long-term and short-term deposits 191 275 126 Gross debt 27,566 29,022 27,714 Interest accrued related to financial liabilities 430 432 402 U
Slide 57: 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