Slide 1: FY 2018 Results and Business Update
F Y 2 0 1 8 R E S U LT S A N D B U S I N E S S U P D AT E London, 25 February 2019
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 “m
Slide 3: Agenda
Agenda OPENING Richard James - Head of IR KEY ACHIEVEMENTS & 2019 STRATEGIC FOCUS Ursula Burns - Executive Chairman and CEO DIGITAL UPDATE AND COUNTRY RESULTS Kjell Johnsen - COO GROUP FINANCIAL RESULTS AND TARGETS Trond Westlie - CFO RUSSIA UPDATE Vasyl Latsanych - CEO Beeline Russia Q&A AND REFRES
Slide 4: A significant year for VEON
A significant year for VEON VEON is an emerging markets connectivity and digital services specialist with 210 million customers in 10 countries FY 2018 RESULTS 4
Slide 5: Strategic achievements
Strategic achievements Execution on four strategic priorities • Lean operating model now adopted • Sale of 50% stake in Italy joint venture increased • FY 2018 corporate costs target achieved; on track our focus on emerging markets to halve run-rate corporate costs by year-end 2019 • Digital journey
Slide 6: Good progress in FY 2018, targets achieved
Good progress in FY 2018, targets achieved Target: low single-digit organic growth ✓ Target: mid single-digit organic growth ✓ Target: ~$ 1 billion ✓ $9.1bn $3.3bn $1,032m TOTAL EBITDA EQUITY REVENUE FCF EXCL. FY 2018 LICENSES2 +3.5% organic1 YoY +6.2% organic1 YoY +28.3% reported YoY -4.1% reported
Slide 7: Committed to our strategy through 2019
Committed to our strategy through 2019 1 ENHANCE OUR CORE TARGET COST EFFICIENCIES 2 • Invest in Digital Business Support Systems • HQ run-rate costs on track to be halved by end- • Deploy improved customer engagement tools (self-care, 2019 from FY 2017 automation) • Achieve operating cost reduction
Slide 8: Agenda
Agenda OPENING Richard James - Head of IR KEY ACHIEVEMENTS & 2019 STRATEGIC FOCUS Ursula Burns - Executive Chairman and CEO DIGITAL UPDATE AND COUNTRY RESULTS Kjell Johnsen - COO GROUP FINANCIAL RESULTS AND TARGETS Trond Westlie - CFO RUSSIA UPDATE Vasyl Latsanych - CEO Beeline Russia Q&A AND REFRES
Slide 9: Digital: monetizing data and reducing opex
Digital: monetizing data and reducing opex Digitizing Big Data Digital the core analytics services Machine learning and data New revenue streams from Lean operations and science to protect core ARPU digital categories and sustained cost optimization while driving new revenue growth partnerships thro
Slide 10: Digital services: building momentum locally
Digital services: building momentum locally Tariffs Offers Content JazzCash Beeline TV B2C ecosystems • Leader in Pakistan with 5 million active • Highly targeted TV everywhere service that • 12.4 million Monthly Active Users and 200+ mobile accounts at year-end 2018 combines live TV and Video on De
Slide 11: Q4 2018 revenue and EBITDA country trends
Q4 2018 revenue and EBITDA country trends Figures and trends in local currency Revenue RUSSIA PAKISTAN ALGERIA BANGLADESH UKRAINE UZBEKISTAN (RUB BILLION) (PKR BILLION) (DZD BILLION) (BDT BILLION) (UAH BILLION) (UZS BILLION) +7.8 % + 22.7% - 1.7% +1.3% + 16.6% + 1.2% YoY YoY YoY YoY YoY YoY 15 6 60
Slide 12: Russia: Euroset integration successfully completed
Russia: Euroset integration successfully completed, doubling of sales of equipment and accessories TOTAL REVENUE MOBILE CUSTOMERS • Total revenue growth of 7.8% YoY, driven by mobile service revenue growth of (RUB BILLION) (MILLION) + 7.8 % YoY - 5.0 % YoY 3.1% YoY and more than a doubling (+138%) o
Slide 13: Pakistan: revenue and EBITDA growth accelerated in Q4
Pakistan: revenue and EBITDA growth accelerated in Q4 TOTAL REVENUE MOBILE CUSTOMERS • The market remained competitive in Q4, particularly in data and social (PKR BILLION) (MILLION) + 22.7 % YoY +4.8% YoY network offers, against which Jazz maintained its premium price positioning • Revenue grew by 2
Slide 14: Algeria: sequential customer growth continues
Algeria: sequential customer growth continues • Q4 2018 saw continued intense price competition, especially in channel- related incentives as competitors continued to respond to Djezzy’s customer TOTAL REVENUE MOBILE CUSTOMERS (DZD BILLION) (MILLION) base expansion - 1.7 % YoY + 5.7 % YoY • Macroeco
Slide 15: Bangladesh: revenue trend flattened out
Bangladesh: revenue trend flattened out, supported by data revenue growth acceleration TOTAL REVENUE MOBILE CUSTOMERS • Data revenue growth accelerated (+25.2% YoY vs 11.9% in Q3), despite (BDT BILLION) (MILLION) +1.3 % YoY + 3.1 % YoY continued pricing pressures in the market ► Data customers (+15.
Slide 16: Ukraine: strong performance during 2018
Ukraine: strong performance during 2018 • Kyivstar continued to report strong results in a growing market, driven by TOTAL REVENUE MOBILE CUSTOMERS successful marketing activities, strong data growth and a focus on high value (UAH BILLION) (MILLION) + 16.6 % YoY - 0.5 % YoY customers • Mobile servic
Slide 17: Uzbekistan: solid revenue growth but EBITDA pressured
Uzbekistan: solid revenue growth but external costs and provisions pressured EBITDA TOTAL REVENUE MOBILE CUSTOMERS • Uzbekistan’s market growth is driven by increased mobile data penetration. (UZS BILLION) (MILLION) + 1.2% YoY -6.2% YoY Unitel continues to focus on high value customers as the clear
Slide 18: Agenda
Agenda OPENING Richard James - Head of IR KEY ACHIEVEMENTS & 2019 STRATEGIC FOCUS Ursula Burns - Executive Chairman and CEO DIGITAL UPDATE AND COUNTRY RESULTS Kjell Johnsen - COO GROUP FINANCIAL RESULTS AND TARGETS Trond Westlie - CFO RUSSIA UPDATE Vasyl Latsanych - CEO Beeline Russia Q&A AND REFRES
Slide 19: Good operational performance in Q4 2018
Good operational performance in Q4 2018 TOTAL EBITDA EQUITY $2.25bn $714m $229m REVENUE FCF EXCL. LICENSES2 +5.3% organic1 YoY +10.0% organic1 YoY -3.1% reported YoY -5.1% reported YoY $550m 1.7X $135m MOBILE NET LEVERAGE CORPORATE DATA RATIO3 COSTS REVENUE +30.2% organic1 YoY Below 2x Group target
Slide 20: Revenue and EBITDA development
Revenue and EBITDA development USD MILLION (-3.1%) YoY reported 26 2 1 15 86 (4) (5) (285) 2,441 93 2,320 2,249 1 2 Total reported Russia Pakistan Ukraine Uzbekistan Algeria Bangladesh Other Organic total FOREX Euroset Total reported revenue 4Q17 revenue revenue 4Q18 4Q18 (-5.1%) YoY reported 29 11
Slide 21: Revenue and EBITDA development
Revenue and EBITDA development Data revenue driving organic growth in revenue and EBITDA USD MILLION +5.3% YoY organic 14 20 163 (76) (285) 2,441 93 2,320 2,249 1 Reported total Equipment & Voice Data and MFS Other Organic total revenue FOREX Euroset Reported total revenue accessories 4Q18 revenue 4
Slide 22: Corporate costs
Corporate costs FY 2018 target achieved. Mid-term target confirmed • FY 2018 corporate costs were USD 359 million, a CORPORATE COSTS (USD MILLION) decrease of ~20% YoY from USD 431 million 1 in FY 2017; target achieved 431 • Corporate costs were USD 135 million in Q4 2018, 359 including USD 52 milli
Slide 23: Reduce cost intensity ratio by at least 1 percentage point per annum
Reduce cost intensity ratio 1 by at least 1 percentage point per annum organically 2 over 3 years 61.8%1 60.4%1 Service Contribution to cost intensity reduction costs & in FY 2019 expected from: technology • Service costs & technology (~55%) ~55%3 • G&A (~30%) • Commercial (~15%) Commercial G&A ~15%
Slide 24: Q4 2018 income statement
Q4 2018 income statement USD MILLION Organic1 4Q18 4Q17 Reported YoY YoY Revenue 2,249 2,320 (3.1%) 5.3% Service revenue 2,083 2,214 (5.9%) 4.6% EBITDA 714 753 (5.1%) 10.0% Depreciation, amortization and other (506) (564) (10.1%) ► D&A and other decreased year on year mainly due to currency deprecia
Slide 25: Continued strong cash flow generation in Q4 2018
Continued strong cash flow generation in Q4 2018 USD MILLION 26 73 136 163 37 (302) 44 129 368 229 195 Russia Pakistan Algeria Bangladesh Ukraine Uzbekistan Other countries Group OPCF Working capital Interest, tax Equity free OpCF OpCF OpCF OpCF OpCF OpCF OpCF and provisions and other cash flow excl
Slide 26: Cash flow reconciliation table
Cash flow reconciliation table USD MILLION 4Q18 4Q17 YoY EBITDA 714 753 (5.1%) ► EBITDA decreased due to currency depreciation in Russia, Pakistan and Uzbekistan (USD 111 million) and the financial impact of Euroset integration Changes in working capital 116 122 (6.3%) of USD 3 million in 4Q18 Movem
Slide 27: Q4 2018 net debt development
Q4 2018 net debt development USD MILLION (74) (714) 444 81 5,736 (163) 159 5,469 Net debt EBITDA Change in working capital Financial Taxes Cash capex incl. licenses FOREX and Other Net debt 30 September and provisions charges 31 December 2018 2018 NET DEBT EBITDA 1.7x 1.7x At 1.7x, Group leverage ra
Slide 28: Rebalancing of debt currency mix
Rebalancing of debt currency mix • EUR and USD debt reduction via use of Italy proceeds (~USD 2.1 billion in 2018 and ~USD 0.6 billion in 2019 year -to-date) • USD debt swaps to RUB (~USD 950 million) • Average cost of debt increased to 7.5%, due to elimination of euro debt and the increase of the r
Slide 29: Reclassification of lease cash flow
IFRS 16 • IFRS 16 “Lease accounting” came into effect on 1 January 2019, requiring all leases to be capitalized on the balance sheet • Operating lease expenses will no longer be presented in the Income Statement. Instead, capitalized lease assets will lead to depreciation charges, and lease liabilit
Slide 30: Delivered on full year 2018 guidance
Delivered on full year 2018 guidance FY 2018 FY 2018 targets3 actual Low Total revenue single-digit organic1 growth 3.5% ✓ EBITDA Low to mid single-digit organic1 growth 6.2% ✓ Equity free cash flow2 USD ~1 billion USD 1,032 million ✓ 1 Organic change is a non-IFRS measure and reflects changes in re
Slide 31: Final dividend and dividend policy
Final dividend and dividend policy For the financial year ended 31 December 2018, the Company intends to pay a dividend in the aggregate amount of US 29 cents per share comprised of USD 12 cents per share paid as an interim dividend in VEON is committed to paying a sustainable and progressive August
Slide 32: Group equity free cash flow evolution
Group equity free cash flow 1 evolution Equity free cash flow 1 run-rate broadly stable at ~USD 800 million 2 USD MILLION ~(200) Equity free cash flow1 run-rate: ~USD 800 million2 350 Cost intensity ~(200) improvement ~(50) 1,032 ~280 ~1,000 ~(150) (~700 ~830 normalized) FY 2018 FY 2018 FY 2018 D D
Slide 33: Full Year 2019 guidance
Full Year 2019 guidance FY 2018 FY 2019 actual targets3 Low single-digit Total revenue 9,086 organic1 growth ► Supported by expected cost efficiencies resulting in Low to mid single- EBITDA 3,273 digit organic1 growth an organic reduction of at least 1% of the cost intensity ratio 4 per annum betwee
Slide 34: Summary
Summary 2018 targets and guidance achieved Dividend growth of ~4% year on year delivered Good organic growth in revenue and EBITDA expected in 2019 Run-rate equity free cash flow expected at ~USD 800 million over the next three years, underpinning our commitment to dividend distributions FY 2018 RES
Slide 35: Agenda
Agenda OPENING Richard James - Head of IR KEY ACHIEVEMENTS & 2019 STRATEGIC FOCUS Ursula Burns - Executive Chairman and CEO DIGITAL UPDATE AND COUNTRY RESULTS Kjell Johnsen - COO GROUP FINANCIAL RESULTS AND TARGETS Trond Westlie - CFO RUSSIA UPDATE Vasyl Latsanych - CEO Beeline Russia Q&A AND REFRES
Slide 36: Beeline Russia: Solid Foundation for Growth
B E E L I N E R U S S I A : S O L I D F O U N D AT I O N F O R G R O W T H London, 25 February 2019
Slide 37: Russia is building a digital economy on a high-speed network
Russia is building a digital economy on a high-speed mobile and fixed network MONTHLY INTERNET USERS 90m AVERAGE NUMBER OF SOCIAL MEDIA 4 ONLINE VIDEO USERS PAY FOR CONTENT 35% ACCOUNTS PER INTERNET USER all ages are active on the internet, including 36% of over-55s H i g h s p e e d s a n d q u a l
Slide 38: Smartphones are driving customer acquisition
Smartphones are driving customer acquisition OF MOBILE USERS USE SMARTPHONES 2/3 DAILY AVERAGE SCREEN TIME 5HR USE INTERNET ON SMARTPHONES 59% all ages are active on the internet, including 36% of over-55s N e w d i g i t a l i n c o m e s t re a m s o p p o r t uni t y DEVICES EXCEED 3G 4G/ ARE MOB
Slide 39: 2018: regulatory landscape
2018: regulatory landscape INTRANET ROAMING WATCHDOG’S CRACKDOWN ON CANCELLATION IN RUSSIA GRAY SIM CARDS NO MATERIAL IMPACT AND EMERGING ROOM TO GROW FOR OPERATORS’ GROWTH IN REVENUE AND RETAIL CONSUMPTION YAROVAYA LAW 5G FREQUENCIES ARE LIMITED AND NOT YET AVAILABLE BEELINE SPENT LESS THAN PLANNED
Slide 40: 2018: retail
2018: retail Footprint almost doubled to 3100 shops 1,602 X 2.1 +22% EUROSET SHOPS SHARE OF DEVICE REBRANDED AND MONOBRAND REVENUE INTEGRATED INTO RETAIL IN GROWTH 50% BEELINE SALES 28% MONOBRAND RETAIL 360 +RUB +11% NEW CITIES WITH CUSTOMER DEVICE MARGIN BEELINE RETAIL FACING GROWTH 1.7 bn OPERATIO
Slide 41: 2018: mobile network
2018: mobile network Accelerated deployment LEADER IN NETWORK DEPLOYMENT IN CAPEX GROWTH (EXCL. LICENSES AND YAROVAYA) +16% SHARE OF LTE USERS, WHO ARE ABLE TO +82% 9M 2018 BY WATCH HD ROSCOMNADZOR VIDEO NEW BASE STATIONS 16K+ RUSSIA’S FIRST LIVE HOLOGRAPHIC CALL USING 5G – FIRST TERRITORIES WITH 4G
Slide 42: 2018: fixed-line
2018: fixed-line Business turnaround NEW FTTB BUILDINGS CONNECTED 5,119+ FIXED-LINE B2C & B2B REVENUE FMC CLIENTS +26% 1.1m RETURNED TO GROWTH IN Q4 x4 YoY 20181 2017 2018 MODERNIZED FIBER RINGS 200 BEELINE TV EVERYWHERE: OTT, STB, 400 BUSINESS CENTERS ANDROID, IOS, CONNECTED AND 1Q 2Q 3Q 4Q 1Q 2Q 3
Slide 43: 2018: digital
2018: digital Strengthen core, reduce costs and create new revenue streams MYBEELINE ECOSYSTEM MAU 8.3m CHAT-BOTS AUTOMATION RATE 63% BIG DATA ENABLED REVENUE RUB 1.7m 13.7bn (DATA-DRIVEN DAU DECISION MAKING) 10% 200+ ON-LINE SALES OF • Big Data Geo-analytics UNIQUE PARTNER TOTAL DEVICE • Big Data M
Slide 44: 2018: strong financial results
2018: strong financial results YEAR ON YEAR TOTAL REVENUE GROWTH +5.7% MOBILE SERVICE REVENUE +2.6% SERVICE MARGIN GROWTH +3.1% GROWTH DEVICE REVENUE GROWTH X2.1 ARPU GROWTH +5.4% CHURN IMPROVEMENT 7.9pp Source: GFK, Beeline internal analysis FY 2018 RESULTS 44
Slide 45: 2018: back to EBITDA growth and a healthier business
2018: back to EBITDA growth and a healthier business E B I T DA - R U B b i l l i o n Fixes: • Retail 121,4 • Network rollout • Digital • Value creation 111,9 110,1 2018 Headwinds: • Euroset integration costs 104,8 104,3 104,7 • Spectrum fees increase • Intranet roaming cancellation 2013 2014 2015 2
Slide 46: Beeline strategy update for 2019-2021
Beeline strategy update for 2019-2021 46
Slide 47: Growth is our strategic focus in core and new business
Growth is our strategic focus in core and new business B U S I N E S S AG E N DA Grow faster than the market by being telecom and beyond K E Y S T R AT E G I C P I L L A R S Growth Efficiency Partnership Customer & revenue growth Costs transparency & intensity External & internal • Grow the networks
Slide 48: Revenue growth becoming strategic focus
Revenue growth becoming strategic focus BUILDING A SOLID FOUNDATION FOR GROWTH • Competitive mobile speeds anytime and anywhere, supported by network investments • Core business driven by FMC • Media, fintech, big data to support growth ambition FY 2018 RESULTS 48
Slide 49: Building new revenue streams with digital opportunities
Building new revenue streams with digital opportunities Beeline TV Financial services AdTech • Major streaming services and Live TV • Beeline-branded financial products • Marketing digital agency for brands • Available on any platform • Financial services inside Beeline’s app • Digital advertising p
Slide 50: Building an efficient and investment-savvy organization
Building an efficient and investment-savvy organization More for more Capex for growth Costs transparency • Business streams’ costs are allowed to Strategic sensitivity and strategic agility Efficiency enabled by transparency: increase if streams’ returns per ruble of capital: • Activity-based cost
Slide 51: Building partnership ecosystems that reinforce growth
Building partnership ecosystems that reinforce growth BEELINE’S AMBITION IS TO BECOME THE BEST PARTNERSHIP PLATFORM, Beeline will review strategic FACILITATING NEW REVENUE STREAMS AND SAVINGS partnerships aiming for long- term value accretion from mutually beneficial B2C partners’ B2B partners’ Reta
Slide 52: Grow faster than the market by being telecom and beyond
Grow faster than the market by being telecom and beyond Growth Efficiency Partnership FY 2018 RESULTS 52
Slide 53: Appendix
VEON APPENDIX
Slide 54: Group debt maturity schedule
Group debt maturity schedule 1 31 DECEMBER 2018 USD BILLION HQ Pakistan Other GTH Russia Bangladesh Group debt maturity schedule 2.0 1.2 1.2 1.2 1.2 0.5 2019 2020 2021 2022 2023 2024 Group debt maturity schedule by currency 2019 2020 2021 2022 2023 2024 USD 0.9 0.6 0.9 0.5 1.2 0.5 63% R UB 0.0 0.4 1
Slide 55: Liquidity overview
Liquidity overview GROUP CASH BREAKDOWN BY CURRENCY UNUSED RCF HEADROOM 31 DECEMBER 2018 31 DECEMBER 2018 Syndicated RCF facility USD 1.69 billion 20% UNUSED CF HEADROOM 31 DECEMBER 2018 10% 53% Pakistan – credit facilities PKR 14.3 billion (USD 0.10 billion) 17% USD PKR RUB Other Total cash and unu
Slide 56: Debt by entity
Debt by entity 31 DECEMBER 2018 USD MILLION Outstanding debt Type of debt Cash-pool Entity Bonds Loans Other Total overdrafts1 VEON Holdings B.V. 2,650 2,051 - - 4,701 GTH Finance B.V. 1,200 - - - 1,200 PJSC VimpelCom 278 - - 48 326 Pakistan Mobile Communications Limited 16 497 - 28 541 Banglalink D
Slide 57: Cash flow reconciliation table
Cash flow reconciliation table USD MILLION FY18 FY17 YoY EBITDA 3,273 3,587 (8.8%) Changes in working capital 282 197 51.2% Movement in provisions 40 (119) n.m. Net interest paid-received (676) (745) (9.3%) Income tax paid (404) (445) (9.1%) Cash flow from operating activities (excl. discontinued 2,
Slide 58: Forex
Forex Guidance rates Average rates Closing rates FY 2019 4Q18 4Q17 YoY 4Q18 4Q17 YoY Russian ruble 66.00 66.48 58.41 13.8% 69.47 57.60 20.6% Algerian dinar 119.00 118.63 114.77 3.4% 118.21 114.76 3.0% Pakistan rupee 139.00 134.20 106.42 26.1% 139.80 110.70 26.3% Bangladeshi taka 84.00 84.06 83.22 2.
Slide 59: Forex YoY impact on Revenue and EBITDA
Forex YoY impact on Revenue and EBITDA Revenue EBITDA Q4 2018 Q4 2018 Russia (158) (52) Algeria (7) (3) Pakistan (97) (46) Bangladesh (3) (1) Ukraine (7) (4) Uzbekistan (2) (1) Other (11) (4) Total (285) (111) FY 2018 RESULTS 59