VEON Ltd. ORD · RUS:VEON-RX

VEON Ltd. ORD — VimpelCom — Morgan Stanley European TMT Conference 2016

38 slides from VEON Ltd. ORD's conference presentation, Nov 16, 2016

  1. Slide 1: Morgan Stanley European TMT Conference

    Morgan Stanley European TMT Conference © VimpelCom Ltd 2016 Summary Q3 2016 results Closing transaction Italy JV Barcelona, 16-17 November 2016 1

  2. 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

  3. Slide 3: Highlights

    Highlights • Stable Q3 2016 results in line with expectations; operational performance particularly strong in Pakistan and Ukraine • Mobile data revenue grew 28.0% YoY in Q3 2016 • Strong operating cash flow margin of 24.5% in Q3 2016 • FY 2016 guidance confirmed, albeit at lower end of range for se

  4. Slide 4: VimpelCom's free float nearly doubled after Telenor's share sale

    VimpelCom’s free float nearly doubled after Telenor’s share sale Before Telenor equity Telenor equity offering Potential free float from offering1 (163.9 mln VimpelCom ADS2) exchangeable bonds conversion3 (base case scenario 204.1 mln ADS) 8.3% 8.3% 8.3% © VimpelCom Ltd 2016 10.8% 20.1% 31.7% 47.9%

  5. Slide 5: Performance Transformation accelerating and on track

    Performance Transformation accelerating and on track… Agile operating model Procurement Supply chain © VimpelCom Ltd 2016 • 14%1 net reduction of headcount • Globally managed contract value • 18%1 reduction in inventory levels • 30%1 reduction of line managers doubled to 40%1 • 7%1 warehouse space r

  6. Slide 6: Financial highlights Q3 2016

    Financial highlights Q3 2016 Service revenue EBITDA margin, underlying2 (USD billion) (%) • Reported service revenue declined 3% YoY, reaching an inflection point as a result of an improving trend in FOREX 2.3 40.6 • Service revenue increased 0.6% YoY organically, with strong performance in Pakistan

  7. Slide 7: Financial highlights Q3 2016 – YoY trends

    Financial highlights Q3 2016 – YoY trends Total revenue and service revenue YoY organic1 development Underlying EBITDA2 margin development -1.1 p.p. YoY 0.0 p.p. organic YoY Total revenue Service revenue 41.7% 40.6% 0.9% 0.7% 0.8% 0.6% LTM of 40.5% LTM of 40.3% © VimpelCom Ltd 2016 3Q 15/14 3Q 16/15

  8. Slide 8: FOREX movements in VimpelCom's footprint: improving trend

    FOREX movements in VimpelCom’s footprint: improving trend VIP coin1 vs USD 100 98 © VimpelCom Ltd 2016 94 82 76 73 +5% vs low 70 66 67 66 64 -4% YoY 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 8 1 VimpelCom currency weightings calculated from the sum of the individual countries’ relative

  9. Slide 9: Q3 2016 service revenue evolution – organically stable

    Q3 2016 service revenue evolution – organically stable USD million -3.3% (1) 12 (93) 95 (167) 2,377 77 2,364 Reported service revenue declining … 2,287 © VimpelCom Ltd 2016 Service revenue Voice Data and MFS Interconnect Other Organic service FOREX Warid Service revenue 3Q15 and roaming revenue 3Q16

  10. Slide 10: Q3 2016 EBITDA evolution – organically stable

    Q3 2016 EBITDA evolution – organically stable USD million -7.4% 11 118 (122) (82) (66) 20 959 1,017 942 896 Underlying EBITDA declining... 58 © VimpelCom Ltd 2016 1 EBITDA Exceptional Underlying Service revenue Performance Re-investment in Forex Underlying Exceptional Warid EBITDA 3Q15 items EBITDA

  11. Slide 11: Q3 2016 Income statement

    Q3 2016 Income statement Note: Q3 2016 numbers include Warid financials USD million Q3 2016 Q3 2015 YoY Revenue 2,372 2,442 (3%) EBITDA reported 896 58 n.m. Q3 2015 EBITDA mainly impacted by USD 916 million charges for investigations (USD 900 million) and other legal costs (USD 16 million) D&A and o

  12. Slide 12: Q3 2016 net income from continued operations

    Q3 2016 net income from continued operations USD million +52 41 (18) 9 8 (97) 109 (90) (0) 110 162 72 © VimpelCom Ltd 2016 957 (847) Net Income from Impairment & Net EBITDA 2 Depreciation and 2 Net income Income Impairments & 3 1 NetIncome Income Net financial Tax Net FOREX JV, associates Net underl

  13. Slide 13: Q3 2016 net debt evolution

    Q3 2016 net debt evolution USD million 363 185 66 (962) 387 © VimpelCom Ltd 2016 88 6,938 195 6,804 6,575 (94) 6,553 Net debt Warid Net debt EBITDA Change in Net interest Taxes Capex Net debt Exceptionals FOREX and Net debt 30 June 2016 net debt 30 June underlying working before in 3Q16 other 30 201

  14. Slide 14: Strong improvement in cash flow

    Strong improvement in cash flow Net cash flow from continued operations before financing activities 9M 2015 9M 2016 Net cash flow from operating 619 Net cash from operating activities 808 activities © VimpelCom Ltd 2016 Exceptional payments, mainly related Exceptional payments, mainly to SEC/DOJ/OM

  15. Slide 15: FY 2016 guidance confirmed

    FY 2016 guidance confirmed - at lower end of range for service revenue, underlying EBITDA margin and capex/revenue Targets FY 2016 9M 2016 Flat to low single digit Service Revenue1 growth YoY +0.8% YoY © VimpelCom Ltd 2016 EBITDA underlying margin1 Flat to +1 p.p. YoY Organic +0.1 pp YoY (41.0%) Cap

  16. Slide 16: Conditions to introduce new dividend policy

    Paving the way to a meaningful dividend policy Conditions to introduce new dividend policy 1 Completion of Italy transaction in Q4 2016 Allowing the © VimpelCom Ltd 2016 VimpelCom Board to consider 2 adoption of a meaningful Group cash flow improvements dividend policy for its shareholders no later

  17. Slide 17: Closing transaction Italy JV

    Closing transaction Italy JV © VimpelCom Ltd 2016 17

  18. Slide 18: Wind and Italia merger completion – agenda

    Wind and 3 Italia merger completion – agenda Jean-Yves Charlier – Chief Executive Officer Andrew Davies – Chief Financial Officer 1. Strong momentum in the Italian market for the launch 1. Transaction structure of the joint venture (“JV”) 2. Enhanced profitability and cash flow generation 2. Italian

  19. Slide 19: Strong momentum in the Italian market for the launch of the JV

    1. Strong momentum in the Italian market for the launch of the JV Mobile telecommunication revenues EUR billion 7.7 -8.6% p.a. +1.3% Other 0.1 2015-16 © VimpelCom Ltd 2016 6.6 6.5 6.6 2.7 0.1 0.1 0.1 +1.5% 2.2 2.1 2.1 2.6 2.2 2.2 2.2 +0.6% 2.3 2.1 2.1 2.2 +1.6% H1 2013 H1 2014 H1 2015 H1 2016 The jo

  20. Slide 20: Strong momentum in the Italian market for the launch of the JV (cont'd)

    1. Strong momentum in the Italian market for the launch of the JV (cont’d) Fixed telecommunication internet/data revenue Favorable structural changes in the fixed Italian context EUR billion • New infrastructural operator Enel Open Fiber, targeting the creation of country-wide, independent fiber net

  21. Slide 21: Italian market structure: ARPU ~50% below average

    2. Italian market structure: ARPU ~50% below average Mobile ARPU – Italy vs. Western European countries French case – price comparison prior to Free launch 2016 EUR/month/customer Price of unlimited plans (unlimited voice + SMS), EUR/month, at Free launch (10 January, 2012) Data (GB) 22.9 90.0 3.0 ©

  22. Slide 22: Italian market structure: leading position for the JV

    2. Italian market structure: leading position for the JV On spectrum On customer base, distribution, network Mhz 800Mhz 900Mhz 1400Mhz (Dlink) Mobile 31.2 25.2 24.4 customer base3 1800Mhz 2100Mhz 2100Mhz (TDD) million 2600Mhz 2600Mhz (TDD) 7.1 © VimpelCom Ltd 2016 200 33.2% 30.5% 29.0% 7.3% 165 165

  23. Slide 23: Rationale and ambitions for the JV

    3. Rationale and ambitions for the JV Rationale for the JV: Ambitions for the JV: Creating a leading convergent player, serving Market leadership in Italy: becoming the true market both consumers and businesses, in Europe’s leader in Italy, not only in terms of number of customers fourth largest eco

  24. Slide 24: Integration plan now launched

    4. Integration plan now launched Overall Network & IT Commercial SG&A © VimpelCom Ltd 2016 • All integration planning • Integration of 2 networks • Commercial team starting • Renegotiation of top 70 activities kicked off already started to operate jointly contracts (>80% of total value) • Core strat

  25. Slide 25: JV will generate significant synergies across all areas

    5. JV will generate significant synergies across all areas NPV1 • Full network consolidation and footprint optimization: operate a 21k site network with >20% reduction vs sum of parts (EUR billion) Network & IT • Network modernization: efficiency through decommissioning of duplicative infrastructure

  26. Slide 26: Iliad impact to be mitigated by strong JV position and remedy proceeds

    6. Iliad impact to be mitigated by the strong JV position and proceeds from the remedy taker agreements JV in a strong position to overcome effect from Iliad-JV remedy contract – binding and irrevocable2 new entrant Spectrum • Sales of 2x35MHz 3G & 4G/LTE frequencies for EUR 450 million (EUR 50 mill

  27. Slide 27: Solid corporate governance with senior board members

    7. Solid corporate governance with senior board members… Canning Fok Group Co-Managing Director, CK Hutchison Holdings HR and Remuneration Audit Committee Committee Frank Sixt Jean-Yves Charlier Group Finance Director and • VimpelCom representative: • VimpelCom representative: Chief Executive Office

  28. Slide 28: Solid corporate governance with empowered and accountable management team

    7. Solid corporate governance with empowered and accountable management team Shareholder agreed and Significantly empowered Avoidance of deadlock adopted vision management team © VimpelCom Ltd 2016 • Fundamental business objectives • Maximo Ibarra appointed as Managing • Chairman of the Board will h

  29. Slide 29: Strong management team in place from the start

    8. Strong management team in place from the start… JV senior leadership team Maximo Ibarra Chief Executive Officer Dina Ravera Stefano Invernizzi © VimpelCom Ltd 2016 Merger Integration Chief Financial Officer Officer Massimo Angelini Mark Shalaby Luciano Sale Michiel van Eldik Paolo Nanni Benoit Ha

  30. Slide 30: Wind and Italia merger completion – agenda

    Wind and 3 Italia merger completion – agenda Jean-Yves Charlier – Chief Executive Officer Andrew Davies – Chief Financial Officer 1. Strong momentum in the Italian market for the launch 1. Transaction structure of the joint venture (“JV”) 2. Enhanced profitability and cash flow generation 2. Italian

  31. Slide 31: Transaction structure

    1. Transaction structure • 50/50 JV of VimpelCom and CK Hutchison Holdings • VimpelCom contributed Wind with existing net debt (EUR 9.6 billion as of 30 September 2016) Key terms • CK Hutchinson Holdings contributed 3 Italia debt free plus EUR 200 and million cash VimpelCom CK Hutchinson Holdings st

  32. Slide 32: Enhanced profitability and cash flow generation

    2. Enhanced profitability and cash flow generation An operator with EUR 6.3 billion revenues and… …EBITDA margin of 39%… (EUR billion, FY 2015) (EUR billion, FY 2015 and % margin) 8pp 39% 1.8 6.3 31% Revenue 4.4 2.5 2.0 and EBITDA © VimpelCom Ltd 2016 WIND 3 Italia pro forma WIND + 3 Italia pro form

  33. Slide 33: JV expected to significantly deleverage and distribute to parents

    3. JV expected to significantly deleverage and distribute to parents The financial profile of the JV is stronger than Wind’s stand alone… Net leverage evolution1 Net debt – Net debt/EBITDA EUR billion • JV’s leverage ratio at closing is ~4.5x compared to an © VimpelCom Ltd 2016 expectation of 5x at

  34. Slide 34: JV has no imminent debt maturities

    4. JV has no imminent debt maturities Average interest rate is 5.5%, with no imminent maturities… EUR million 575 420 © VimpelCom Ltd 2016 3,513 3,780 150 22 700 775 2016 2017 2018 2019 2020 2021 Tap to SSN 2020 + FRN 2020 New Senior Credit Facility 3 Italia LTE liability Italian State New Senior Se

  35. Slide 35: JV significantly improves VimpelCom's financial profile

    5. JV significantly improves VimpelCom’s financial profile As at 30 September 2016, USD billion Net debt significantly reduced by USD 10.6 billion and the Net debt/EBITDA1 ratio below 2x… Net leverage evolution Net debt – Net debt/EBITDA1 © VimpelCom Ltd 2016 17.4 6.8 3.2x 1.9x Pro-forma, including

  36. Slide 36: P&L accounting treatment for VimpelCom

    6. P&L accounting treatment for VimpelCom Previous accounting of Italy Current accounting Long term accounting (from signing to completion) (after completion) FY2017E - onward FY2015 FY2016E1 USD million FY15 USD million USD million Revenue 9,625 Revenue Revenue Service Revenue 9,332 Service Revenue

  37. Slide 37: Final remarks

    7. Final remarks © VimpelCom Ltd 2016 JV launched with Italian Leading converged player Increasing capacity for JV Solid governance Iliad market entrance marketplace back to in the Italian market, to deleverage and designed to avoid impact for the JV growth and substantial pioneering in digital flex

  38. Slide 38: Further information

    Further information Investor Relations Claude Debussylaan 88 1082 MD Amsterdam The Netherlands T: +31 20 79 77 234 © VimpelCom Ltd 2016 E: ir@vimpelcom.com Visit our website www.vimpelcom.com 38

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