VimpelCom Continues To Deliver On Strategy With Profitable Organic Growth In 3Q12

AMSTERDAM, Nov. 14, 2012 /PRNewswire/ --

KEY RESULTS AND DEVELOPMENTS IN 3Q12

  • Revenues of USD 5.7 billion; organic1 growth of 3% YoY
  • EBITDA of USD 2.5 billion, up 8% organically YoY; double digit growth in Russia and CIS
  • Results negatively impacted by USD appreciation against operating currencies
  • Total mobile subscriber base increased to 212 million
  • Positive operational development continues in Business Unit Russia
  • Net income increased 185% YoY to USD 538 million

"VimpelCom Ltd" ("VimpelCom", "Company" or "Group") (NYSE: VIP), a leading global provider of telecommunications services, today announces operating and financial results for the quarter ended September 30, 2012.


JO LUNDER, CHIEF EXECUTIVE OFFICER, COMMENTS:

"We have made further good progress in the execution of our strategy, with strong organic growth in Group revenue and EBITDA. The EBITDA margin of 44% is the highest reported since completion of the Wind Telecom acquisition in April 2011. In our emerging markets (excluding Italy) we delivered 7% organic revenue growth and a 14% increase in EBITDA.  In Russia, the positive trend seen in the first half continued, with year-on-year revenue growth of 7%, in part driven by strong mobile data revenue growth of 38%. EBITDA in Russia increased 16% year-on-year, with an improvement in the EBITDA margin to 43.2%. Our business in Italy has continued to outperform competition also showing strong mobile data revenue growth and CIS, Asia & Africa and Ukraine each delivered a solid set of figures in their respective markets.

"We are delivering on our objectives and our focus will remain on delivering profitable growth leading to increased cash flows."


CONSOLIDATED FINANCIAL AND OPERATING HIGHLIGHTS

USD mln

Actual





3Q12

3Q11

Reported

YoY


Organic

YoY

Total operating revenues

5,747

6,096

-6%


3%

EBITDA

2,530

2,572

-2%


8%

EBITDA margin

44.0%

42.2%

-


-

EBIT

1,255

1,076

17%


-

Net income

538

189

185%


-

EPS, basic (USD)

0.33

0.12

175%


-

Capital expenditures

829

1,193

-31%


-

Net cash from operating activities

1,998

1,914

4%


-

Net debt / LTM EBITDA

2.4

-

-


-

Total mobile subscribers (million)2

212

199

7%


-

1) Organic revenue and EBITDA growth are non-GAAP financial measures that exclude the effect of foreign currency movements and certain items like liquidations and disposals. A reconciliation of organic to reported Revenue and EBITDA growth can be found in Attachment C. For more information please see the definition of Organic growth Revenue and EBITDA in Attachment E.

2) Following the sale of Vietnam the subscriber numbers for 3Q12 exclude Vietnam subscribers while 3Q11 included 2 million subs in Vietnam.

For all definitions please see Attachment E.


CONSOLIDATED FINANCIAL AND OPERATING HIGHLIGHTS

USD mln

Pro forma


Actual


9M12

9M11

Reported
YoY

Organic
YoY


9M12

9M11

Reported
YoY

Total operating revenues

17,111

17,588

-3%

5%


17,111

14,373

19%

EBITDA

7,322

7,298

0%

7%


7,322

6,029

21%

EBITDA margin

42.8%

41.5%

-

-


42.8%

41.9%

-

EBIT

3,462

2,961

17%

-


3,462

2,640

31%

Net income

1,344

906

48%

-


1,344

924

45%

EPS, basic (USD)

0.83

0.56

48%

-


0.83

0.62

34%

Capital expenditures

2,489

2,949

-16%

-


2,489

2,615

-5%

Net cash from operating activities

4,956

-

-

-


4,956

4,248

17%

Net debt / LTM EBITDA

2.4

-

-

-


2.4

-

-

Total mobile subscribers (millions)2

212

199

7%

-


212

199

7%

PRESENTATION OF FINANCIAL RESULTS

The pro forma information presented in this earnings release reflects what the Company's results of operations would have looked like had the Company's transaction with Wind Telecom occurred on January 1, 2011. For further details about the adjustments and assumptions of the pro forma results, please refer to VimpelCom's press releases issued on August 18, 2011 and May 14, 2012 both of which are available on the Company's website.

VimpelCom results presented in this earnings release are based on IFRS.

Certain amounts and percentages that appear in this earnings release have been subject to rounding adjustments. As a result, certain numerical figures shown as totals, including in tables, may not be exact arithmetic aggregations of the figures that precede or follow them.

The actual financial results in this earnings release have not been audited.

On January 16th, 2013 VimpelCom will be hosting its
Analyst & Investor Day.
Updates will follow on VimpelCom.com

STRATEGIC UPDATE AND MAIN EVENTS

  • AGM to be held on December 21, 2012 subject to removal of injunction relating to the FAS claim OTH raising its voting stake in Canada to 65%
  • Aim to launch LTE in Moscow and 6 other Russian regions in 2013
  • Analyst & Investor Day on January 16, 2013

In 3Q12 VimpelCom continued to deliver on its strategic priorities as defined by the Company's Value Agenda for 2012-2014, with profitable organic growth in almost all business units. Without the reduction of MTRs in Italy, Revenue growth would have been close to 5% organically YoY and EBITDA organic growth would have been approximately 9% YoY. In Russia, the Company continued to deliver on its turnaround strategy.

As previously announced, in April and May, a Russian court issued injunctions in relation to the claims by the Russian Federal Anti-Monopoly Service ("FAS") against Telenor East Holding II AS ("Telenor") and Weather Investments II S.a.r.l. ("Weather II"). The injunctions prohibited, among other things, the payment of dividends by VimpelCom's wholly owned Russian subsidiary OJSC "Vimpel-Communications". In May, VimpelCom announced that in light of these injunctions the Supervisory Board of the Company considered it prudent and in the best interests of VimpelCom to postpone the payment and cancel the June 1, 2012 record date of the previously announced final dividend relating to the Company's 2011 results. The Supervisory Board of the Company will make a decision whether to pay the final 2011 dividend at a later date and will set a new record date as appropriate.

The Company has announced that its Supervisory Board has set the date for the Company's 2012 Annual General Meeting of Shareholders (the "Shareholders Meeting") for December 21, 2012. The record date for the Shareholders Meeting has been set for November 20, 2012. In light of the injunctions issued by the Moscow Arbitration Court in relation to the claims by the Russian Federal Anti-Monopoly Service ("FAS") against Telenor and Weather II, the Supervisory Board has determined that if the injunctions are not lifted prior to November 27, 2012 it would be prudent to postpone the Shareholders Meeting. In case the Shareholders Meeting is postponed, an announcement in that respect will be issued on or around November 27, 2012. Further details on the agenda, the slate of nominees to the Supervisory Board and procedural matters related to the Shareholders Meeting will be made available through an official notice to be distributed by VimpelCom to its shareholders prior to the Shareholders Meeting.


The Company has also taken several important steps with respect to Orascom Telecom Holding (OTH). VimpelCom and OTH, of which VimpelCom is 51.9% shareholder, have entered into mutual service level agreements to create synergies and operational efficiencies. Additionally, in light of an agreement between VimpelCom and Weather II that required the cessation of the use of the "Orascom" name and brand by OTH and its subsidiaries by the end of 2012, Orascom Telecom Holding S.A.E. will be renamed to Global Telecom Holding S.A.E. Furthermore, following the change in Canada's foreign ownership laws earlier this year OTH will convert its non-voting shares into voting shares of Globalive Investment Holding Corp. (GIHC), the parent company of Wind Mobile Canada and Globalive Canada. As a result, the indirect voting stake of OTH in GIHC will increase from 32.02% to 65.08%. The required approval for the conversion from the Canadian investment authorities is expected by early 2013. Finally, OTH's shareholder loans to GIHC group will be restructured.

In July, VimpelCom was awarded an LTE license in Russia, allowing the Company to provide services using radio-electronic devices in the territory of the Russian Federation via networks that use the LTE standard and its further modifications within the frequency band of 791-862 MHz. VimpelCom aims to launch its LTE services in Moscow and in 6 other Russian regions in 2013. The roll-out of the LTE network will need to occur with a phased approach based on a predefined schedule and must be fully completed by the end of 2019. A further condition of the license award is that VimpelCom will invest at least RUB 15 billion annually until its federal LTE network is built.

VimpelCom announces today that it will hold its second Analyst & Investor Day on January 16, 2013 in London. An update of the Group strategy, the Value Agenda, will be presented both for the Group and for Business Units.

VIMPELCOM GROUP – FINANCIAL AND OPERATING RESULTS 3Q12                    

  • Revenues of USD 5.7 billion with organic growth of 3% YoY, mainly impacted by MTR cut in Italy
  • Strong mobile data growth
  • EBITDA of USD 2.5 billion, up 8% organically YoY; double digit organic growth in Russia and CIS
  • Total mobile subscriber base increased 7% YoY to 212 million; incidental strong growth in Uzbekistan
  • Net cash from operating activities USD 2.0 billion, impacted by interest swap receipt of USD 190 million
  • Capex of USD 0.8 billion; LTM Capex / Revenues of 19%
  • Net debt / LTM EBITDA at 2.4x, stable QoQ

OPERATING PERFORMANCE OVERVIEW

The 3Q12 reported results in USD were significantly impacted by the appreciation of the USD against the local currencies in almost all of VimpelCom's operating businesses. The organic development is highlighted below.

The total mobile subscriber base increased 7% YoY to 212 million at the end of the third quarter. The largest absolute contribution came from accelerated growth in subscribers in the Africa & Asia Business Unit and a large increase in subscribers in CIS resulting primarily from the temporary network closure of a competitor by the Uzbek authorities. In addition, the Company also achieved strong growth in fixed and mobile broadband subscribers in Russia, Italy and Ukraine.

In Russia, the Company continued the positive trend witnessed in the first half of the year, delivering organic revenue growth of 7% YoY. Mobile data revenues increased 38% YoY. Mobile broadband subscribers in Russia increased 5% YoY to 2.5 million, while the fixed broadband subscriber base reached 2.3 million, up 25% YoY.

The Company's Italian business continued to outperform the broader Italian telecom market in the third quarter. VimpelCom strengthened its market position in Italy in both the mobile and fixed-line segments. Fixed broadband revenues were up 7% YoY, while mobile internet revenues increased 40% YoY.

In the Africa & Asia Business Unit, the Company exceeded the 86 million subscriber level through strong subscriber growth across all countries of operation, with Algeria, Pakistan and Bangladesh performing well in the period. However there was a slowdown in revenue growth in Pakistan and Algeria due to Ramadan. In addition, revenue growth in Pakistan was also negatively impacted by heavy rains in September and two government forced cellular network closures.

The Ukraine Business Unit continued to invest in solidifying its market position in the mobile segment through the ongoing transition to bundled tariff plans. The transition is showing good results with flat mobile service revenues YoY and an improvement QoQ. Mobile subscribers increased by 2% YoY to 25.2 million. Fixed-line service revenues increased by 11% YoY, mainly due to a 60% increase in fixed residential broadband revenues.

The CIS Business Unit delivered double digit organic revenue growth, partly supported by a temporary decrease in competition in Uzbekistan. Overall, CIS was able to maintain high quality subscriber growth despite an increasingly competitive environment.


OPERATING FINANCIALS PER BUSINESS UNIT

USD mln



3Q12

3Q11

Reported
YoY

Organic
YoY

Total operating revenues


5,747

6,096

-6%

3%


of which:







BU Russia


2,326

2,397

-3%

7%


BU Europe & North America


1,662

1,970

-16%

-5%


BU Africa & Asia


904

957

-6%

5%


BU Ukraine


452

437

3%

4%


BU CIS


478

430

11%

17%


Other


(75)

(95)

-

-

EBITDA



2,530

2,572

-2%

8%


of which:







BU Russia


1,005

961

5%

16%


BU Europe & North America


672

798

-16%

-5%


BU Africa & Asia


424

434

-2%

6%


BU Ukraine


231

235

-2%

-1%


BU CIS


234

198

18%

28%


Other


(36)

(54)

-

-

EBITDA margin


44.0%

42.2%

-

-

Capital expenditures


829

1,193

-31%

-

* See definitions in Attachment E.


FINANCIAL PERFORMANCE OVERVIEW

Total operating revenues in the third quarter 2012 decreased by 6% YoY impacted by unfavorable currency movements. Overall organic revenue growth was 3%, with a strong performance across most business units.

EBITDA decreased 2% YoY, impacted by unfavorable currency movements. Excluding these forex effects, EBITDA increased 8% compared to the same period last year. Double digit organic EBITDA growth YoY was seen in the Russia and CIS business units, up 16%, and 28%, respectively. EBITDA in CIS was supported by one-off adjustments totaling USD 12.5 million in Kazakhstan. Italy showed a YoY organic EBITDA decline of 5% in Italy mainly due to the MTR cut in July 2012 and Ukraine a 1% decline due to the ongoing transition to bundled tariff plans.

EBIT grew by 17% YoY positively affected, as reported previously, by the declining amortization pattern applied to intangible assets associated with customer relationships as part of the Wind Telecom acquisition where amortization of later periods is lower than amortization in the year of acquisition.

Profit before tax increased by 136% YoY due to higher EBIT, foreign exchange gains and a higher result from the investment in Euroset.  The net foreign exchange gain was USD 36 million in 3Q12, while in 3Q11 there was a loss of USD 137 million.

Net income nearly tripled as a result of higher Profit before tax and a lower effective tax rate this year compared to 3Q 2011 when certain net operating losses incurred were not recognized for tax purposes.

Capex was USD 829 million with investments in the further roll out of the mobile networks in Russia, Bangladesh and the CIS. In Italy, Wind continued to invest in the roll-out of HSDPA and in backbone capacity to support the growth in data. The Company expects FY12 Capex to be approximately 19% of revenue.


USD mln



3Q12

3Q11

Reported

YoY

Organic

YoY

Total operating revenues


5,747

6,096

-6%

3%

EBITDA



2,530

2,572

-2%

8%

EBITDA margin


44.0%

42.2%



EBIT



1,255

1,076

17%


Financial income and expenses


(472)

(449)

5%


Net foreign exchange (loss)/gain and others


19

(287)

n.m.


Profit before tax


802

340

136%


Income tax expense


(225)

(188)

20%


Profit for the period


577

152

280%


Net income



538

189

185%


Capital expenditures


829

1,193

-31%




STATEMENT OF FINANCIAL POSITION & CASH FLOW (ACTUAL)

USD mln

 


3Q12

2Q12

QoQ

Total assets


53,490

52,543

2%

Shareholders' equity


14,779

13,942

6%

Gross debt


26,637

26,559

0%

Net debt


22,681

23,067

-2%

Net cash from operating activities


1,998

1,914

4%

Net cash used (in)/from investing activities


(1,137)

(1,278)

-11%

Net cash used (in)/provided from financing activities


(481)

(187)

157%

Total assets increased by 2% in the quarter to USD 53.5 billion, primarily as a result of cash generation, investment in fixed assets and positive impact of currency translation in the third quarter. Gross debt was stable in the quarter at USD 26.6 billion, mainly due to foreign exchange movements and repayments of Ruble loans and Euro loans, including the repayment of the final part of the bridge loan in Italy. Net debt decreased to USD 22.7 billion, leading to a net debt to LTM EBITDA of 2.4x at the end of the third quarter.

Net cash from operating activities of USD 2.0 billion at the Group level was positively impacted by the receipt of USD 190 million related to the monetization of an interest swap and working capital movement, partially offset by higher interest and tax payments compared to the same period last year. The decrease in net cash used in investing activities compared to 2Q12 was mainly impacted by lower investments in property, equipment and intangible assets in 2012. The increase in net cash used in financing activities in 3Q12 compared to 2Q12 was mainly the result of the net repayment of debt. Net cash from operating activities in the first 9 months of 2012 is USD 5.0 billion, or 17% higher than in 9M11.

BUSINESS UNITS PERFORMANCE IN 3Q12

  • Russia
  • Europe & North America
  • Africa & Asia
  • Ukraine
  • CIS

BUSINESS UNIT RUSSIA – FINANCIAL AND OPERATING RESULTS

  • Positive operational development continued in 3Q12
  • Solid revenue increase of 7% YoY; continuing strong growth in mobile data of 38% YoY
  • Strong EBITDA increase of 16% YoY and EBITDA margin growth of 3.2 p.p. to 43.2%
  • LTE launch planned in Moscow and 6 other regions in 2013

In 3Q12 the Russian Business Unit continued to demonstrate positive developments in operations and delivered on the Company´s strategy of profitable growth.

Revenue for the quarter showed a solid growth of 7% YoY and EBITDA grew strongly by 16% YoY, continuing the trend in the first half of this year. EBITDA margin in 3Q12 reached 43.2%, an increase of 3.2 p.p. YoY, including the negative effect of forex changes in 3Q12 which impacted EBITDA margin by 0.4 p.p. during the quarter.

Mobile revenues grew by 6% YoY, supported by continued uplift in mobile data usage during the quarter. Mobile data revenues increased by 38% YoY and VAS revenues were up by 29% YoY. VimpelCom´s initiatives aimed at stimulating data usage for small and medium screen users by promoting bundles has resulted in a strong increase in bundle subscribers since the start of the year. Mobile ARPU increased by 5% YoY following the growth of mobile data.

Fixed line revenue grew by 10% YoY on the back of strong growth in wholesale voice and FTTB revenues. As part of the operational excellence program, the efficiency of the FTTB business has increased resulting in improved EBITDA margin.

VimpelCom launched new initiatives during the third quarter as part of its ongoing operational excellence program. These initiatives are focused on process re-engineering to increase operational productivity and both the efficiency and effectiveness of all functions within the Russian headquarters. In addition, the Company continued its focus on network outsourcing by signing contracts for the Volga and Far East regions in the third quarter. VimpelCom expects to outsource network maintenance in more regions in the future.

Churn was 15% in 3Q12, down from 16% in 3Q11, however stable QoQ. VimpelCom continues its activities focused on reducing churn rates. The transition to a revenue sharing model with the Company's distribution channels has helped reduce churn and the Company is taking further measures, such as offering competitive tariffs and improving the network quality.

VimpelCom is on track to deliver continued improvement in network quality to support the growth of mobile data customers. In addition, the Company finalized its plans for the rollout of LTE. VimpelCom aims to launch its LTE services in Moscow and in 6 other regions in 2013.

KEY DEVELOPMENTS 3Q12

  • Total revenue in Russia grew by 7% YoY to RUB 74.5 billion driven by the increase in fixed and mobile revenues.
  • Mobile revenues increased 6% YoY mainly as a result of growth in data revenue by 38% YoY and VAS by 29% YoY, as well as in equipment revenues. Mobile ARPU increased by 5% YoY to RUB 350.
  • Mobile data traffic grew by 78% YoY in 3Q12.
  • Fixed line revenue increased 10% YoY due to continuing growth in fixed broadband revenues, up 33% YoY, and wholesale voice, up 13% YoY.
  • EBITDA increased by 16% YoY as a result of the increase in revenues and cost control initiatives.
  • EBITDA margin was 43.2%, an increase of 3.2 p.p. compared to 3Q11, mainly driven by the Operational Excellence projects mentioned above.
  • Mobile subscriber base decreased by 1% YoY to 56.2 million; mobile broadband subscribers increased 5% YoY to 2.5 million. The fixed broadband subscriber base exceeded 2.3 million, up 25% YoY.
  • Capex/Revenues was 14% in 3Q12, in line with the network construction schedule. Capex/Revenues LTM stood at 18%. In 4Q12 we expect to complete the annual rollout and we expect Capex/Revenues FY12 to be below 20%. The Company will continue to invest in its 3G network development in order to match its main competitors in terms of population coverage by the end of 2013.

RUSSIA KEY INDICATORS







RUB mln


3Q12

3Q11

YoY



Total operating revenues


74,458

69,553

7%



Total operating expenditures


42,278

41,701

1%



EBITDA


32,180

27,852

16%



EBITDA margin


43.2%

40.0%




Capex


10,288

13,643

-25%



Capex / Revenues


14%

20%











Mobile







Mobile total operating revenues


61,842

58,094

6%



- of which mobile data


6,210

4,486

38%



Mobile subscribers ('000)


56,181

56,824

-1%



- of which mobile broadband ('000)


2,507

2,387

5%



Mobile ARPU (RUB)


352

334

5%



MOU


282

251

12%










Fixed







Fixed-line total operating revenues


12,617

11,459

10%



Fixed Broadband revenues


2,891

2,169

33%



Fixed Broadband subscribers ('000)


2,294

1,833

25%



Fixed Broadband ARPU (RUB)


421

410

3%













BUSINESS UNIT EUROPE & NA - FINANCIAL AND OPERATING RESULTS ITALY

  • Relative outperformance continues, despite regulatory headwinds, macro slow down and intense competition
  • Revenues decline 5% YoY, revenues excl. MTR impact stable YoY
  • Data revenue growth momentum remains strong: Mobile Internet up 40%, fixed LLU broadband up 8%
  • EBITDA declines 5% YoY, mainly impacted by the July 2012 MTR cut
  • Solid subscriber growth: mobile up 3% with highest ever gross adds in July and fixed LLU BB up 9%

In Italy the third quarter was characterized by significant regulatory and competitive headwinds, further impacted by the ongoing week economic environment. Despite this challenging context WIND was able to outperform the market further growing its market share in mobile and fixed line. Operating free cash flow generation also remained strong and was stable over 3Q11.

Total revenues declined by 5% mainly driven by the reduction in service revenues, as a result of the 53% cut in mobile termination rates which came into effect on July 1, partially offset by other revenues and by a solid increase in handset sales. Excluding the impact from MTRs total revenues were flat YoY. Mobile service revenues declined 8% over the previous year but, excluding the MTR impact, were flat over 3Q11 driven by a strong performance in mobile data revenues. In fixed line the strategic shift towards higher margin LLU led to an expected slower total subscriber growth and a 4% decline in service revenues, but yielded a significant improvement in margin. In the core LLU segment the voice customer base grew a solid 6% while the LLU broadband customer base grew 9%.

From a commercial perspective the third quarter was impressive with WIND achieving its highest ever number of gross additions in mobile in July and recording a strong performance in August and September. In the quarter WIND secured over 63% of MNO net additions driven by a solid inflow of MNP customers; market churn in the period however remained high at levels in excess of 30% driven by intense promotional activity on MNP. WIND's customers continued to increase their voice usage. Mobile broadband revenue grew 40% over the previous year, traditional messaging revenues were up 9% and fixed broadband revenues were up 3%.

On October 10, 2012 WIND signed an agreement with the trade unions and employees of the company to adopt an innovative cost efficiency plan aimed at reducing network maintenance opex by approximately EUR 40-45 million per year from January 1, 2013 onwards  through increased productivity of network maintenance personnel and a general reduction of HR costs. The project is expected to deliver the same savings as the previously announced managed services outsourcing plan, without outsourcing approximately 1,700 employees.

KEY DEVELOPMENTS 3Q12

  • Total revenues declined 5% YoY to EUR 1,329 million with a flat underlying trend (excl. MTR cut).
  • EBITDA in 3Q12 declined 5% to EUR 537 million, delivering a stable overall margin of 40.4%.
  • Capex in 3Q12, excluding LTE spectrum, was EUR 197 million mainly invested in expanding coverage and capacity on the HSDPA mobile network and increasing the backhauling capacity to support the strong growth in data.
  • Mobile subscriber growth remained solid in 3Q12 driven by the success of WIND's "minuto vero" campaign which led to a 3% increase in subscribers to over 21.5 million. Mobile broadband also delivered a strong performance in the period with consumer subscribers increasing by more than 14% YoY.
  • Mobile data ARPU grew by 11% YoY to EUR 4.0 reaching 29% of the total ARPU of EUR 14.0. Mobile voice ARPU in 3Q12 declined materially YoY as a result of the sharp MTR cut and competitive intensity coupled with the above mentioned ongoing success of WIND's data only SIM card offerings for tablets, PCs and dongles which do not generate voice revenues.
  • In fixed-line WIND's focus on the direct market was clearly evident with the 1% growth in voice subscribers being entirely driven by the increase in direct voice subscribers, up 5.5% to 2.48 million. In fixed broadband the momentum remained strong, despite a seasonally weak quarter, with subscribers growing by 7% to 2.22 million, driven by a 9% increase in LLU Broadband customers, in line with the Company's strategy. Dual-play subscribers grew by over 9% YoY to 1.85 million.
  • Fixed-line ARPU decreased by 6% to EUR 30.7 in 3Q12 driven by the decline of pay per use traffic and prices coupled with promotional activity resulting from competitive pressure. Broadband ARPU declined marginally to EUR 18.7.

ITALY KEY INDICATORS






Euro mln


3Q12

3Q11

YoY

Total operating revenues


1,329

1,397

-5%

Total operating expenditures


792

832

-5%

EBITDA


537

565

-5%

EBITDA margin


40.4%

40.5%


Capex


222

226

-2%

Capex / revenues


17%

16%







Mobile





Total revenues


959

1,026

-6%

Subscribers ('000)


21,455

20,802

3%

- of which mobile broadband ('000) (1)


4,734

4,141

14%

ARPU (€)


14.0

15.7

-11%

MOU


202

196

3%






Fixed





Total revenues


370

371

0%

Total voice subscribers ('000)


3,138

3,094

1%

Total fixed-line ARPU (€)


30.7

32.6

-6%

Broadband subscribers ('000)


2,216

2,073

7%

Broadband ARPU (€)


18.7

19.5

-4%

Dual-play subscribers ('000)


1,854

1,696

9%

 (1) Mobile broadband includes consumer customers that have performed at least one mobile Internet event in the previous month on 2.5G/3G/3.5G

CANADA
In 3Q12 Wind Mobile continued executing on its "Value Plus" strategy, adding primarily postpaid subscribers while carefully managing prepaid economics for both voice and mobile broadband customers. Wind Mobile crossed the 500,000 customer milestone in September 2012 becoming the fastest growing new entrant wireless operator in the Canadian market. The Company added over 53.6 thousand subscribers during the quarter increasing its active subscriber base to 510 thousand, with over 90% of the net additions during the quarter being postpaid subscribers. On the commercial side, Wind Mobile enjoyed a strong back to school season supported by a new, vibrant media campaign and the launch of promotional offers. The Company continued to grow its distribution footprint and branded points of sale increased to 265 at the end of the quarter. Wind Mobile also continued to expand its network and launched in Barrie and Woodstock in 3Q12, increasing population coverage to over 13.6 million. The Company continues to focus on improving network quality and increased sites on air to 1,270 sites.

CANADA KEY INDICATORS



3Q12

3Q11

YoY

Subscribers ('000)


510

358

43%

ARPU (CAD)


27.9

27.1

3%

 

BUSINESS UNIT AFRICA & ASIA – FINANCIAL AND OPERATING RESULTS

  • Revenues of USD 904 million with organic growth of 5% YoY
  • EBITDA of USD 424 million with organic growth of 6% YoY
  • EBITDA margin of 46.9%, supported by good organic growth and operational excellence initiatives and despite the negative impact from Ramadan
  • Subscriber base increased by 13% to more than 86 million

Revenues in the Africa & Asia business unit recorded an organic growth of 5%, but its actual results were adversely affected by the local currency devaluation against the US dollar in Algeria and Pakistan. Organic growth in revenues was driven by strong subscribers growth and an increase in data and Value-Added Services (VAS). EBITDA amounted to USD 424 million, an organic growth of 6%, mainly driven by strong EBITDA growth and healthy margins in Pakistan, as well as the ongoing operational excellence initiatives, a pillar to the Value Agenda.

ALGERIA ("DJEZZY")
Djezzy grew its subscriber base by 9% YoY to reach 17.7 million customers by the end of 3Q12. Revenues increased by 2% YoY in local currency terms and was affected by the shift in Ramadan seasonality impacting the peak summer period of July. EBITDA increased 1% YoY in local currency terms. Despite the extremely challenging conditions with the on-going restrictions imposed on Orascom Telecom Algeria, Djezzy maintained its leadership position with a 56% market share.


PAKISTAN ("MOBILINK")
During 3Q12, Mobilink maintained its focus on voice, data, VAS and customer acquisition offers along with brand building activities, all of which led to an 8% increase in subscribers YoY. Total subscribers were 36.1 million as at the end of 3Q12. Revenues for the quarter increased by 4% YoY in local currency terms. Revenue growth is attributable to the focus on customer acquisition, as well as increased data and VAS uptake. This quarter all cellular networks were closed in major cities on Government instructions on August 20th (Feast day) and September 21st, resulting in revenue loss for all cellular operators. Furthermore, revenues were impacted by monsoon and floods in the southern and central regions. Mobilink's EBITDA grew by 10% YoY in local currency terms, mostly
on account of growing revenue and ongoing cost control measures, including lower customer acquisition and retention costs.


BANGLADESH ("BANGLALINK")
banglalink's subscriber base increased 21% YoY in 3Q12, reaching 26.8 million customers. Revenues achieved a significant growth of 23% YoY in local currency terms, driven by a larger subscriber base, in addition to a higher level of VAS and data adoption, and targeted start-up and reactivation promotions. EBITDA increased 9% YoY in local currency terms. EBITDA growth in local currency was slowed by higher subscriber acquisition costs YoY, as well as a market dynamic of increased activations in September, in anticipation of lower future sales due to regulatory requirements on registration of sim cards prior to activation, which was implemented in mid-October.

SUB SAHARAN AFRICA ("TELECEL GLOBE")
Telecel Globe subscribers increased nearly 50% in 3Q12 compared to the previous year, with strong additions for the quarter in Zimbabwe. Revenues, for Burundi and CAR combined, increased 23% YoY, as a result of a strong increase in subscribers alongside an increase in data revenues in Burundi. EBITDA showed significant improvement YoY, increasing 54%. In Zimbabwe, which is not consolidated, service revenues increased by 50% YoY while EBITDA increased by 80% YoY, mainly due to the 92% YoY increase in subscriber base.

SOUTH EAST ASIA
Subscribers in the South East Asia cluster increased 4% YoY after the exclusion of Vietnam subscribers from comparative figures for 2011. In Laos, new promotional guidelines for new sales and a customer registration decree had a negative impact on subscriber acquisition, which was mitigated by successful data uptake and a growing contribution to revenues. In Cambodia, the hosting of the ASEAN summit boosted roaming revenues for 3Q12.

AFRICA & ASIA* KEY INDICATORS








USD mln


 3Q12

 3Q11

Reported

YoY

Organic

YoY


Total operating revenues


904

957

-6%

5%


Total operating expenditures


480

523

-8%



EBITDA


424

434

-2%

6%


EBITDA margin


46.9%

45.4%




Capex


57

156

-64%



Capex / revenues


6%

16%




Mobile Subscribers ('000)


86,132

75,970

13%













*Africa & Asia operations include operations in Algeria, Pakistan, Bangladesh, Sub-Saharan Africa and South East Asia. For details per country unit please see Attachment B

AFRICA & ASIA BUSINESS UNIT: COUNTRY DETAIL

ALGERIA

DZD bln








 3Q12

 3Q11

YoY


Total operating revenues


36

35

2%


EBITDA


21

21

1%


EBITDA margin


58.6%

59.1%




PAKISTAN

PKR bln








 3Q12

 3Q11

YoY


Total operating revenues


26

24

4%


EBITDA


11

10

10%


EBITDA margin


43.0%

41.0%




BANGLADESH

BDT bln








 3Q12

 3Q11

YoY


Total operating revenues


12

10

23%


EBITDA


3

3

9%


EBITDA margin


29.3%

33.1%



 

BUSINESS UNIT UKRAINE – FINANCIAL AND OPERATING RESULTS

  • Revenues increased 4% YoY to UAH 3.6 billion, supported by fixed line revenue growth of 11% YoY
  • Improved migration to mobile bundled offerings
  • EBITDA decreased by 1% YoY to UAH 1.8 billion; EBITDA margin at 51.2%, increasing QoQ
  • Mobile subs up 2% YoY to 25.2 million; Fixed BB subs up 70% YoY to 551 thousand

During the third quarter, VimpelCom continued to invest in solidifying its market position in the mobile segment. The Company showed a QoQ improvement in revenues and EBITDA, driven by an ongoing migration of its customers to bundled offerings and strong dynamics in fixed line revenues. VimpelCom recorded an EBITDA margin of 51.2% in 3Q12.

  • Total revenues were up 4% to UAH 3.6 billion, due to a gradual recovery in the mobile segment, 11% growth in fixed line revenues and strong sales of handsets.
  • Mobile service revenues were stable in 3Q12 versus the previous year and up 9% QoQ driven by the ongoing transition to bundle offerings. ARPU was down to UAH 42.3 from UAH 43.1 in 2Q11, due to the transition to bundles. The Company continues to see a temporary negative impact on ARPU and margins as a result of this transition, which will continue for the remainder of 2012.
  • Fixed line revenues were up 11% on the back of strong FTTB revenues and wholesale transit in 3Q12. Fixed residential broadband revenue increased by 60% driven by an increase in fixed broadband subscriber base of 70% YoY to 551 thousand.
  • Churn has increased to 8.4% as a result of higher sales and re-pricing activities. Although the churn level is still the lowest in the market, VimpelCom has launched a comprehensive churn reduction program.
  • EBITDA decreased 1% YoY in 3Q12 to UAH 1.8 billion, due to higher service costs, higher subscriber acquisition costs reflecting increased sales and an increased network and IT costs. EBITDA margin for the quarter decreased 2.5 p.p. YoY to 51.2% due to the reasons mentioned above, but improved by 1 p.p. QoQ compared to 2Q12 as result of cost control measures and improving dynamics in the migration to bundles.
  • LTM Capex/Revenues was 15% and showed a declining trend as a result of reduced investments in the FTTB network due to completion of the rollout, and in line with the infrastructure optimization initiatives within the Company's Value Agenda.
  • VimpelCom is taking actions to improve sales and margins in the coming quarters. The Company has launched a dedicated sales excellence program with regional differentiation in dealer commissions and tariffs. The Company is also continuing its pricing initiatives designed to improve service mobile revenue trends from 4Q12 onwards. These initiatives are focused on up-selling low and medium ARPU customers after they have transitioned to bundles. In addition to these measures, VimpelCom continues to focus on optimizing its cost base in order to maintain efficiency. With the aforementioned measures, the Company expects to further solidify its market position in 2013.

UKRAINE KEY INDICATORS






 UAH mln


 3Q12

 3Q11

YoY

Total operating revenues


3,613

3,485

4%

Total operating expenditures


1,765

1,615

9%

EBITDA


1,849

1,870

-1%

EBITDA margin


51.2%

53.7%


Capex


428

644

-34%

Capex / revenues


12%

18%


Mobile





Mobile total operating revenues


3,329

3,227

3%

Mobile subscribers ('000)


25,221

24,747

2%

Mobile ARPU (UAH)


42.3

43.1

-2%

MOU


497

467

6%

Fixed-line





Fixed-line total operating revenues


284

257

11%

Fixed-line broadband revenues


69

43

60%

Fixed-line broadband subscribers ('000)


551

324

70%

Fixed-line broadband ARPU (UAH)


43.8

46.6

-6%









BUSINESS UNIT CIS – FINANCIAL AND OPERATING RESULTS

  • Strong organic growth of revenues of 17% YoY; incidental strong positive impact from Uzbekistan
  • EBITDA of USD 234 million, with organic growth of 28% YoY, supported by one-off adjustments in Kazakhstan and by incidental strong revenue growth in Uzbekistan
  • EBITDA margin of 49.0%, supported by one-off adjustments of USD 12.5 million in Kazakhstan
  • Mobile subscribers up 23% YoY to 23 million; incidental strong positive impact from Uzbekistan
  • Mobile BB subs up 35% YoY to 11.2 million; Fixed BB subs up 67% to 277 thousand

The CIS markets delivered double digit organic growth in revenue and EBITDA in 3Q12. Results were substantially impacted by the situation in Uzbekistan after the temporary network closure of a competitor by the Uzbek authorities.

VimpelCom has been able to increase its mobile subscriber base by 23%, mainly driven by 62% growth in subscribers in Uzbekistan. The Company continues to face strong competition in its markets, especially in Kazakhstan, but also in other markets like Armenia and Tajikistan. Churn is showing an increasing trend in Kazakhstan, Tajikistan, Georgia and Kyrgyzstan, and VimpelCom launched a comprehensive churn reduction program in all of its CIS markets.

  • In 3Q12, total revenues grew organically 17% YoY and 11% on a reported basis, with the main contributions coming from Uzbekistan, Kyrgyzstan and Georgia. Reported revenues grew 11% to USD 478 million, impacted in part by disadvantageous forex movements. If Uzbekistan were adjusted to the growth level of 1H12, the underlying revenue growth in local currency would have had a similar YoY growth trend as that seen in 2Q12.
  • Total mobile revenue increased organically by 20% YoY in 3Q12 supported by strong subscriber growth in Uzbekistan and 60% YoY data growth, resulting from increasing data services consumption.
  • Fixed line revenues declined organically by 6% YoY, impacted mainly by voice and wholesale revenue decline in Armenia and Tajikistan.
  • EBITDA grew organically by 28% and on an actual basis by 18% mainly on the back of incidental strong mobile revenue growth in Uzbekistan and one-off adjustments in Kazakhstan totaling USD 12.5 million, primarily related to the release of a provision.
  • EBITDA margin of 49.0% in 3Q12 was 3 p.p. higher than 3Q11, impacted in part by the one-off adjustments in Kazakhstan and the contribution from Uzbekistan.
  • LTM Capex/Revenues was 29% and showed a declining trend, in line with investment plans. The Company's main investment projects, focused on data development, are on schedule and network expansion continues to support both traffic and revenue growth.

KAZAKHSTAN
Kazakhstan, the largest market in the CIS, reported a revenue decline of 0.3% YoY organically in 3Q12. The results were affected by the competitive environment and a limitation on tariffs introduced by the regulator last year, which led to an APPM decline. VimpelCom protected its market position by focusing on the quality of subscribers and on mobile broadband subscriber growth. Consequently, data revenue increased by 22% and mobile subscribers increased by 4% YoY. EBITDA grew 6% YoY and EBITDA margin was 51.6%, supported by the USD 12.5 million one-off adjustments described above.

UZBEKISTAN
In Uzbekistan VimpelCom substantially strengthened its market position in 3Q12 after the forced closure of a competitor´s network. Revenue was up 88% organically YoY in 3Q12, supported by a 62% YoY increase in the subscriber base as well as 26% ARPU growth. If this were adjusted to the growth level of 1H12, the underlying revenue growth would have been approximately 35% YoY. EBITDA grew 123% and EBITDA margin was 56.2%, a sharp increase from 47.3% in 3Q11, supported by interconnect cost reduction and control of structural OPEX. If the EBITDA growth were adjusted to the growth level of 1H12, the underlying growth would have been 45% YoY. The main focus of management in Uzbekistan is to sustain network quality and further improve network capacity to service subscribers.

ARMENIA
Revenues in Armenia declined organically by 11% YoY in 3Q12, mainly as a result of declining fixed voice and wholesale revenues. Mobile data revenues grew by 24% YoY. EBITDA declined 4% YoY. EBITDA margin increased 3.1 p.p. to 43.5% on the back of strict cost control.

KYRGYZSTAN
Kyrgyzstan continued to show positive dynamics in revenue and EBITDA growth. In local currency, revenue grew 20%, supported by subscriber base growth of 6%, and EBITDA grew organically by 21% YoY, resulting in an increased EBITDA margin in local currency of 55.7%. ARPU grew 10% YoY in 3Q12. Mobile broadband subscriber growth of 27% YoY coupled with the increase in mobile data usage resulted in significant mobile data revenue growth, up 104% YoY.

GEORGIA
Georgia delivered strong results in 3Q12, with subscriber base growth of 25%, revenue growth of 25% and a 32% increase in EBITDA YoY in local currency. EBITDA margin increased 1.4 p.p. YoY to 29.8% due to structural OPEX control. The Company was able to strengthen its market position further in 3Q12.

TAJIKISTAN
In Tajikistan, revenues increased organically by 6% YoY for 3Q12, while EBITDA increased by 17% YoY supported by increased high margin international traffic, leading to a 4.8 p.p. increase in EBITDA margin to 52.2%. Competition is strong with aggressive tariffs for calls to Russia, but VimpelCom is showing positive dynamics and strengthening its market position. Data revenue grew strongly by 118% supported by an increase in mobile broadband subscribers of 14% and an increase in average revenue per data user, in line with increasing usage of data services.


CIS* KEY INDICATORS

USD mln


3Q12

3Q11

Reported

YoY

Organic

YoY

Total operating revenues


478

430

11%

17%

Total operating expenditures


244

232

5%


EBITDA


234

198

18%

28%

EBITDA margin


49.0%

46.0%



Capex


90

180

-50%


Capex / revenues


19%

42%









Mobile