64 slides from VEON Ltd. ORD's investor presentation, May 2014
Slide 1: Creating Value: Investing in the future
Creating Value © VimpelCom Ltd 2014 Investing in the future Investor Presentation May 2014 www.vimpelcom.com iPad App 1
Slide 2: International telecoms operator with attractive emerging markets exposure
International telecoms operator with attractive emerging markets exposure Mobile Population customers covered 218 754 million** million*** No 7 Mobile operator in the world* © VimpelCom Ltd 2014 Countries Number 17 of brands 9 USD 5.0 billion** Russia USD 2.1 billion** Africa & Asia Total operating
Slide 3: Strategic value agenda to create value
Strategic value agenda to create value © VimpelCom Ltd 2014 3
Slide 4: Strong EBITDA margin versus our global peers
Strong EBITDA margin versus our global peers EBITDA Margin (FY13)1 © VimpelCom Ltd 2014 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 assets to operating expenses in Uzbekistan 4 2
Slide 5: 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 ► Future dividends of 3.5 US cents per share per annum until targeted leverage of less than 2.0 net d
Slide 6: Future growth drivers
Future growth drivers ► Customer growth from increase in mobile penetration ► Mobile data revenue growth; investing in high quality networks, 3G and 4G/LTE © VimpelCom Ltd 2014 ► Continued emerging markets growth ► General economic recovery, particularly in Italy ► Global partnership agreements in t
Slide 7: VimpelCom has an attractive emerging markets portfolio
VimpelCom has an attractive emerging markets portfolio 69% of revenues in emerging markets Emerging market portfolio ► Solid market positions ► Strong cash flow generation © VimpelCom Ltd 2014 FY 13 Revenues USD 15.9 bn ► Low leverage EBITDA1 USD 6.9 bn CAPEX USD 3.1 bn Cash Flow1 USD 3.9 bn Leverag
Slide 8: Emerging markets progress: Russia
Emerging markets progress Russia ► Substantially improved mobile data network: at par in key regions ► Tripled number of owned mono-brand stores ► Launched LTE in Moscow Oblast and six regions © VimpelCom Ltd 2014 ► Completed Phase 1 of the transformation process ► New management to implement Phase
Slide 9: Russia 1Q14: Pressure on results while investing in the network
Russia 1Q14: Pressure on results while investing in the network RUB BILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers (million) -2% YoY -1% YoY • Mobile data revenue grew 22% YoY 65.8 68.7 64.6 55.7 55.0 • Service revenue decreased 2% YoY, 11.8 12.4 12.2 mainly affected by measures t
Slide 10: Transformation Phase in Russia: Continued investments in high speed data network
Transformation Phase 2 in Russia: Continued investments in high speed data network © VimpelCom Ltd 2014 4G/LTE launched in 8 cities Continued roll out of Improved network Including Moscow Oblast, 3G and 4G/LTE performance St. Petersburg and Leningradskaya Oblast • + 40% in 3G base stations YoY • 4G/
Slide 11: Transformation Phase in Russia: Enhanced customer experience
Transformation Phase 2 in Russia: Enhanced customer experience with new content and spam policy © VimpelCom Ltd 2014 Transparency of content Filter SMS spam subscription costs and Free anti virus protection no undesired subscription for Android • Filtering external SMS traffic, with spam • Clear SMS
Slide 12: Transformation Phase in Russia: Improved customer value proposition
Transformation Phase 2 in Russia: Improved customer value proposition 300 600 © VimpelCom Ltd 2014 1200 2700 Beeline smartphone New range of RUB 490 bundles and Brand proposition (< USD 15) new roaming tariffs • Most affordable smartphone in the • Simplified tariff plans • Launched TV campaign to co
Slide 13: Transformation Phase in Russia: Improving customer service
Transformation Phase 2 in Russia: Improving customer service © VimpelCom Ltd 2014 “My Beeline” account Self service Reduced waiting time details in one click upgrade (app) in service centers • User friendly online cost overview: • App for Android and iOS: • 16% reduction average waiting time ► Costs
Slide 14: Emerging markets progress: Algeria, Pakistan, Bangladesh
Emerging markets progress Algeria Pakistan Bangladesh ► Solid performance and ► Stable market ► Strong growth market leadership position momentum ► 3G license awarded ► Network ► 3G launched ► Roll out of 3G modernization ► Good recovery in © VimpelCom Ltd 2014 ► 3G to be launched in 2Q14 ► Rapid gr
Slide 15: Africa & Asia 1Q14: Good recovery in Bangladesh, solid performance in Pakistan
Africa & Asia1 1Q14: Good recovery in Bangladesh, solid performance in Pakistan, resolution in Algeria USD MILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers (million) -2% YoY +8% YoY • Revenue and EBITDA organically 848 83.3 89.8 declined 1% YoY and 3% YoY 830 830 • Mobile customer g
Slide 16: Algeria plans post settlement
Algeria plans post settlement • Closing of the transaction is expected by the end of 2014 • Agreement will facilitate the procurement procedures, the deployment of the 3G network and the revamping of the existing network • Agreement enables modernization of the existing network and fulfilment of © V
Slide 17: Emerging markets progress: Ukraine
Emerging markets progress Ukraine ► Pressure on results, whilst taking measures to improve performance ► Solid growth of mobile data revenues ► Ongoing network modernization © VimpelCom Ltd 2014 ► Operational excellence program continues ► Transformation program launched, delivering first signs of i
Slide 18: Ukraine 1Q14: Transformation program on track
Ukraine 1Q14: Transformation program on track, delivering first signs of improvements UAH BILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers • Kyivstar’s operations in 1Q14 not -5% YoY (million) materially impacted despite -3% YoY challenging macro- economic and 3.1 3.1 3.0 26.3 25.6
Slide 19: Emerging markets progress: Kazakhstan, Uzbekistan, Other CIS
Emerging markets progress Kazakhstan Uzbekistan Other CIS ► Strong market position ► Transitioned to a ► Strong mobile data ► Successful transition 2-player market growth to bundles ► Improved network ► Moved to value based ► Improved value quality commissions in all © VimpelCom Ltd 2014 proposition
Slide 20: CIS 1Q14: Solid results
CIS1 1Q14: Solid results USD MILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers • Mobile service revenue increased (million) -3% YoY +6% YoY organically 2% YoY 447 500 42 434 23.9 25.3 • Mobile data revenue growth of 29% 38 40 YoY 458 409 • Mobile customers increased 6% YoY, © VimpelC
Slide 21: Italy provides a strong value creation opportunity
Italy provides a strong value creation opportunity Italy ► General macro economic recovery ► MTR reductions completed ► Strong management team & WIND brand © VimpelCom Ltd 2014 ► Successful refinancing of WIND most expensive debt in April 2014 ► Carefully watching: ► Industry developments ► Strategi
Slide 22: Italy 1Q14: Continued market outperformance
Italy 1Q14: Continued market outperformance EUR MILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers • Continued market outperformance in (million) -10% YoY 0% YoY a competitive environment 1,147 1,120 1,035 22.0 22.0 • Mobile broadband customers2 up 40% 332 YoY to 9.3 million 320 306 •
Slide 23: Financial performance 1Q14
Financial performance 1Q14 USD million 1Q14 1Q13 YoY Revenue 5,024 5,591 (10%) • Revenue declined organically 5% YoY, mainly due to operational performance in Russia and continued market weakness in Italy of which service revenue 4,810 5,322 (10%) EBITDA 2,088 2,348 (11%) • EBITDA declined organical
Slide 24: Annual targets for 2014
Annual targets for 2014 Targets1 2014 Low to mid single Revenue digit decline YoY © VimpelCom Ltd 2014 Low to mid single EBITDA digit decline YoY CAPEX excl. licenses / Revenue ~21% Leverage (Net Debt / EBITDA) ~2.4x 24 1. The annual targets for 2014 assume constant currency, no major regulatory cha
Slide 25: Conclusion
Conclusion ► Strong emerging markets portfolio ► Solid cash flow generation Strong EBITDA margin versus our global peers © VimpelCom Ltd 2014 ► ► Dividend policy to support deleverage and investments ► Investments in high quality mobile data networks for the future ► Favorable resolution in Algeria
Slide 26: Appendices
© VimpelCom Ltd 2014 26 Appendices
Slide 27: Key strategic milestones
Key strategic milestones Acquisitions: - 100% of URS (Ukraine) VimpelCom and Kyivstar merged into a new entity VimpelCom Ltd. 200 Mobile customer base surpassed Listing on NASDAQ Mln 200 - 60% of Tacom (Tajikistan) million mark in VimpelCom founded by a Russian scientist Headquarters moved to Amster
Slide 28: 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 29: Group value add
Group value add $ $ Best Procurement Capex practices © VimpelCom Ltd 2014 advantages synergies sharing Global Roaming Talent partnerships 29
Slide 30: 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 30
Slide 31: 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 Telenor(1) 580 578 840 33.0% 305 000 000 885 578 840 43.0% © VimpelCom Ltd 2014 Altimo(2) 986 572 563 56.2% - 986 572 563 47.9% Minor
Slide 32: Sensitivity to FOREX movements
Sensitivity to FOREX movements FOREX sensitivities1 FY13 figures RUB vs. USD EUR vs. USD UAH vs. USD +/-10% +/-10% +/-10% © VimpelCom Ltd 2014 USD billion Revenue 22.5 4% 3% 1% Average FOREX EBITDA 9.6 4% 2% 1% Gross Debt 27.5 2% 5% n.a. Year-end FOREX Net Debt 22.6 2% 6% n.a. 32 1. RUB vs USD +10%
Slide 33: FOREX rates used in annual targets 2014
FOREX rates used in annual targets 2014 Currency FX rates versus USD Algeria DZD 81 Armenia AMD 420 Bangladesh BDT 80 Canada CAD 1.15 © VimpelCom Ltd 2014 Egypt EGP 8.0 Georgia GEL 1.8 Italy EUR 0.74 Kazakhstan KZT 190 Kyrgyzstan KGS 55 Laos LAK 8,000 Pakistan PKR 110 Russia RUB 36 Ukraine UAH 10.5
Slide 34: VimpelCom Finance
© VimpelCom Ltd 2014 34 VimpelCom Finance
Slide 35: Favorable resolution in Algeria
Favorable resolution in Algeria Total cash proceeds of USD 4.0 billion net of taxes and fines • Sale of 51% in Djezzy to Algerian National Investment Fund, FNI, for USD 2.6 billion 5.6X EV/EBITDA multiple • Approx. USD 1.9 billion dividend paid by Djezzy to GTH (pre-closing) © VimpelCom Ltd 2014 •
Slide 36: Successful refinancing of WIND's most expensive debt
Successful refinancing of WIND’s most expensive debt • Refinanced WIND’s HY bonds and PIK notes of in total EUR 4.0 billion, funded by: ► EUR 3.8 billion of new senior notes ► EUR 0.5 billion cash injection by VimpelCom © VimpelCom Ltd 2014 • Benefits: ► Significant interest cost savings ► Stronger
Slide 37: Improved maturity profile
Improved maturity profile Pro forma1 group debt maturity schedule as at 31 March 2014 Debt composition USD billion by currency2 WIND refinancing 9.4 WIND 2% GTH 17% USD 31% 6.2 VimpelCom/OJSC 6.1 USD EUR (7.7) 27.4 bln RUB © VimpelCom Ltd 2014 3.1 5.2 2.5 1.8 2.4 Other 1.7 2.2 1.5 1.2 50% 0.6 0.9 1.
Slide 38: Pro forma debt as per March 2014
Pro forma1 debt as per 31 March 2014 VimpelCom Group Wind Group Gross Debt (USD billion) Gross Debt (USD billion) Senior bank loan 3.3 VIP 4.6 Debt to Government 0.3 © VimpelCom Ltd 2014 OJSC Group 7.4 Annuity 0.1 RCF 0.5 Wind Group 14.7 Other debt 0.1 SSN 2018 4.4 GTH Group 0.7 SSN 2019/2020 0.8 Gr
Slide 39: Optimum funding model
Optimum funding model External VimpelCom Ltd. Dividends to VIP parties shareholders Dividends Group VimpelCom Debt Equity Amsterdam © VimpelCom Ltd 2014 Dividends In-house VimpelCom finance company Holding IC loan funding Equity Dividends Minimal Local debt Cash generating entities Other operating e
Slide 40: Improve financial standing
Improve financial standing • Maintain BB rating short term ► Secure operating performance • Moving towards ~ 2 times Net Debt to EBITDA, ► Secure cash flow up-streaming Investment Grade © VimpelCom Ltd 2014 ► Gross debt to be around 3 times EBITDA maximum • Flexible access to • Grow to BB+ / BBB- ca
Slide 41: Cash flow 1Q14
Cash flow 1Q14 USD million 1Q14 1Q13 YoY EBITDA 2,088 2,348 (260) Changes in working capital and other (34) (267) 233 • Mainly due to improvements in trade working capital Net interest paid (652) (581) (71) • Due to bonds issued in 1Q13 with semi-annual interest payment © VimpelCom Ltd 2014 Income t
Slide 42: Financial performance 1Q14
Financial performance 1Q14 GROUP BUSINESS UNITS (USD million) 1Q14 1Q13 YoY Revenue EBITDA Revenues 5,024 5,591 (10%) FX and FX and Organic Reported Organic Reported EBITDA 2,088 2,348 (11%) others others D&A/Other (1,163) (1,241) n.m. Russia (6%) (12%) (18%) (9%) (12%) (21%) EBIT 925 1,107 (16%) It
Slide 43: Business dashboard 1Q14
Business dashboard 1Q14 Russia Italy Revenue EBITDA EBITDA (6%) RUB 66.1 bn Revenue (7%) EUR 1.1 bn Total Operating Revenue margin margin EBITDA (9%) RUB 26.5 bn 40.1% EBITDA (7%) EUR 0.4 bn 37.6% Mobile Mobile 95% 55 mln 22 mln Customers (1%) Customers 0% Mobile ARPU (3%) RUB 310 Mobile ARPU (12%)
Slide 44: Algeria 1Q14: Preparing for 3G launch
Algeria 1Q14: Preparing for 3G launch DZD BILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers1 • Revenue decreased, as a result of (million) -2% YoY 3G services launched by competition +6% YoY 34.0 36.0 33.4 16.6 17.6 • Customer market share of 51% • EBITDA decreased due to higher netw
Slide 45: Pakistan 1Q14: Solid performance
Pakistan 1Q14: Solid performance PKR BILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers (million) • Pressure on revenue due to macro- -5% YoY +5% YoY economic slowdown, lower voice 26.3 38.2 revenue, strong competition and 24.5 24.9 36.3 lower interconnect revenue • Customers increase
Slide 46: Bangladesh 1Q14: Good recovery
Bangladesh 1Q14: Good recovery BDT BILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers • Revenue driven by growth in mobile (million) customer base, launch of 3G +10% YoY +13% YoY services and improved macro- 9.5 10.2 25.9 29.4 economic environment 9.0 • Customers growth, following the
Slide 47: Kazakhstan 1Q14: Profitable growth with an improved market position
Kazakhstan 1Q14: Profitable growth with an improved market position KZT BILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers (million) • Mobile service revenue increased 3% +6% YoY +8% YoY and fixed-line service revenue by 28.6 33.7 30.4 9.2 39% YoY 3.2 8.5 2.5 3.4 • Mobile data revenue
Slide 48: Uzbekistan 1Q14: Solid results
Uzbekistan 1Q14: Solid results USD MILLION, UNLESS STATED OTHERWISE Service revenue Mobile customers (million) +4% YoY +1% YoY • Solid revenue growth in a 2 player 156 173 163 10.3 10.4 market 2 2 2 • Mobile data revenue growth of 50% 154 171 161 YoY © VimpelCom Ltd 2014 1Q13 4Q13 1Q14 1Q13 1Q14 • C
Slide 49: Market Overviews
© VimpelCom Ltd 2014 49 Market Overviews
Slide 50: A truly international telecoms operator
A truly international telecoms operator Canada Georgia Armenia Kazakhstan Uzbekistan Kyrgyzstan Pop: 34.8 M Pop: 4.3 M Pop: 3.1 M Pop: 16.5 M Pop: 28.3 M Pop: 5.5 M Pen: 80% Pen: 126% Pen: 121% Pen: 164% Pen: 73% Pen: 112% GDP*:41,500 GDP*: 5,900 GDP*: 5,600 GDP*: 13,900 GDP*: 3,500 GDP*: 2,400 Ukra
Slide 51: Competitive situation and market trends - Russia
Competitive situation and market trends - Russia Mobile1 Mobile market share1 • ~90 % pre-paid market (on service revenue), % • ~ 171% penetration • 3 major players (Megafon, MTS and VimpelCom) with comparable 26 25 24 VimpelCom market shares • ARPU ~USD 10 28 26 27 Megafon • 4G launched in 2013 in
Slide 52: Competitive situation and market trends - Italy
Competitive situation and market trends - Italy Mobile Mobile market share1 • ~ 80 % pre-paid market (on revenue), % • ~ 155% penetration • 4 major players: TIM, Vodafone, WIND and H3G 20 21 22 Wind • 35% smartphone penetration on SIM cards 8 8 9 3 37 36 35 Vodafone Fixed © VimpelCom Ltd 2014 • Tele
Slide 53: 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 54: 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 91%, 3d player is discounter (Tele2) • ARPU $7 • 3G launched by all players, 4G network introduced only by Altel 38 37 35 Vimpe
Slide 55: Competitive situation and market trends - Uzbekistan
Competitive situation and market trends - Uzbekistan Mobile Mobile market share2 (on revenue), % • 66% penetration • 2 major players: VimpelCom, UCell, New Player entrance expected in 4Q14 23 27 • ARPU $5 42 VimpelCom 58 • 3G launched by two operators 51 MTS Fixed 45 25 © VimpelCom Ltd 2014 • Uzbekt
Slide 56: 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 60% (on revenue), % of GDP • 28% of the population is under 15 years old 56 55 53 • Presidential elections expected to commence in April 2014 Djezzy
Slide 57: Competitive situation and market trends - Pakistan
Competitive situation and market trends - Pakistan Macro Environment: Mobile market share1 • Continued devaluation of the Rupee against the USD (on revenue), % • Power shortfalls persist • 34% of the population under 15 years old • New government elected and in place since May 2013, working on 30 30
Slide 58: 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 59: Competitive situation in rest of CIS
Competitive situation in rest of CIS Tajikistan Armenia • 4 GSM competitors (Beeline 3rd), 2G •3 international competitors in GSM: Beeline – penetration 133%,3G operations first in 2nd, MTS (Russian competitor subsidiary) is 1st, CIS, low data usage, collaboration with BU Orange is 3rd Russia for mi
Slide 60: Reconciliation Tables and Forex
Reconciliation Tables and Forex © VimpelCom Ltd 2014 60
Slide 61: FOREX development
FOREX development RATES OF FUNCTIONAL CURRENCY TO USD Average rates Closing rates 1Q14 1Q13 YoY 1Q14 4Q13 YoY © VimpelCom Ltd 2014 Russian Ruble 34.96 30.41 (13.0%) 35.69 32.73 (8.3%) Euro 0.73 0.76 3.8% 0.73 0.73 0.2% Algerian Dinar 78.01 78.65 0.8% 78.54 78.38 (0.2%) Pakistan Rupee 103.55 97.89 (5
Slide 62: Reconciliation of EBITDA
Reconciliation of EBITDA USD mln 1Q14 1Q13 Unaudited EBITDA 2,088 2,348 Depreciation (758) (766) Amortization (394) (454) Impairment loss - (18) © VimpelCom Ltd 2014 Loss on disposals of non-current assets (11) (3) EBIT 925 1,107 Financial Income and Expenses (513) (501) - including finance income 1
Slide 63: Reconciliation of consolidated net debt
Reconciliation of consolidated net debt USD mln 1Q13 4Q13 1Q14 Net debt 22,861 22,603 22,434 C ash and cash equivalents 5,564 4,454 4,540 © VimpelCom Ltd 2014 Long-term and short-term deposits 190 396 419 Gross debt 28,615 27,453 27,393 Interest accrued related to financial liabilities 448 606 434 U
Slide 64: 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 the Company's anticipated performance, its expectation to close and derive bene