VimpelCom Delivers Profitable Growth And Strong Increase In Cash Flow In 4Q12 And FY12

AMSTERDAM, March 6, 2013 /PRNewswire/ --

KEY RESULTS AND DEVELOPMENTS IN 2012*

Q4

  • Revenues of USD 6.0 billion; organic1) growth of 3% YoY
  • EBITDA of USD 2.4 billion, up 13% YoY organically
  • EBITDA margin increased 3.3 p.p. YoY to 41.1%
  • Total mobile subscriber base grew 5% YoY to 214 million
  • Net income increased to USD 801 million
  • Net Cash from Operating Activities up 24% YoY to USD 2.3 billion

FY

  • Revenues of USD 23.1 billion; organic growth of 4% YoY
  • EBITDA of USD 9.8 billion, up 8% YoY organically
  • EBITDA margin increased 1.8 p.p. YoY to 42.4%
  • Net income increased to USD 2.1 billion
  • Net Cash from Operating Activities up 19% YoY to USD 7.3 billion

"VimpelCom Ltd" ("VimpelCom", "Company" or "Group") (NYSE: VIP), a leading global provider of telecommunications services, today announced operating and financial results for the quarter and full year ended December 31, 2012.

JO LUNDER, CHIEF EXECUTIVE OFFICER COMMENTS:

"I am very pleased to report strong performances from all of our Business Units in the fourth quarter of 2012. Russia delivered a 4% increase in revenue year-on-year with mobile ARPU up 5%, stimulated by usage and Value Added Services growth with mobile data revenues up 37%. EBITDA in Russia increased 15% as a result of the revenue improvement and strong execution on our operational excellence programs. In Italy, we have again outperformed the market, strengthening our market position in both the mobile and fixed-line segments. Excluding the impact of mobile termination rate cuts, mobile service revenues were up 2% year-on-year, with mobile internet revenues growing 37%. In Africa & Asia, we experienced strong increases in subscribers leading to organic revenue growth of 11%. We have made good progress on the transition to bundled tariff plans in Ukraine, resulting in a return to growth, while at the same time increased our subscriber numbers by 5%. Finally, our CIS business continued to deliver double digit revenue and EBITDA growth. The Group EBITDA margin in 4Q12 rose to 41.1%. Our 2012 results, with clear operational improvements, demonstrate our ability to deliver on our strategy and objectives. In 2013 we expect to deliver results in line with our enhanced Value Agenda objectives for 2013-2015."

CONSOLIDATED FINANCIAL AND OPERATING HIGHLIGHTS (FY11 IS PRO FORMA)*

USD mln

4Q12

4Q11

Reported
YoY

Organic
YoY


FY12

FY11

Reported
YoY

Organic
YoY

Net operating revenues

5,950

5,889

1%

+3%


23,061

23,477

-2%

+4%

EBITDA

2,446

2,227

10%

+13%


9,768

9,525

3%

+8%

EBITDA margin

41.1%

37.8%

-



42.4%

40.6%

-


EBIT

709

214

241%



4,171

3,175

31%


Net income

801

(381)

n.m.



2,145

525

309%


Capital expenditures**

1,631

3,734

-56%



4,120

6,683

-38%


Net cash from operating activities

2,301

1,858

24%



7,257

-

-


Net debt / LTM EBITDA

2.2

2.6

-



2.2

2.6

-


Total mobile subscribers (millions)***

214

204

5%



214

204

5%


*          Comparative FY11 figures are Pro forma - for pro forma definition see next page.
**       Including licenses of USD 1.8 billion in 4Q11 & FY11 and USD 0.1 billion in FY12
***     Following the sale of Vietnam the subscriber numbers for 4Q12 exclude the Vietnam subscriber numbers while 4Q11 included 2 million subs in Vietnam
For all other definitions see Attachment E.

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 on page 2. For more information please see the definition of Organic growth Revenue and EBITDA in Attachment E.

CONSOLIDATED FINANCIAL AND OPERATING HIGHLIGHTS (ACTUAL REPORTED)







USD mln


FY12

FY11

Reported
YoY

Net operating revenues


23,061

20,262

14%

EBITDA


9,768

8,256

18%

EBITDA margin


42.4%

40.7%

-

EBIT


4,171

2,854

46%

Net income attributable to VimpelCom Ltd.


2,145

543

295%

Capital expenditures


4,120

6,349

-35%

Net cash from operating activities


7,257

6,106

19%

Net debt / LTM EBITDA


2.2

2.6

-

Total mobile subscribers (millions)


214

204

5%

















ORGANIC GROWTH REVENUE AND EBITDA (FY11 IS PRO FORMA)


4Q12 versus 4Q11


FY12 versus FY11

USD mln

Revenue

EBITDA


Revenue

EBITDA

Business Units

Organic

FX and

others

Reported

Organic

FX and

others

Reported


Organic

FX and

others

Reported

Organic

FX and

Others

Reported

Russia

4%

0%

4%

15%

1%

16%


7%

-6%

1%

13%

-6%

7%

Europe & NA

-4%

-4%

-8%

-4%

-2%

-6%


-3%

-7%

-10%

-3%

-7%

-10%

Africa & Asia

11%

-9%

2%

36%

-3%

33%


9%

-9%

0%

15%

-4%

11%

Ukraine

4%

0%

4%

9%

0%

9%


2%

0%

2%

-1%

-1%

-2%

CIS

21%

-5%

16%

45%

-8%

37%


15%

-5%

10%

22%

-6%

16%

Total

3%

-2%

1%

13%

-3%

10%


4%

-6%

-2%

8%

-5%

3%

















 

PRESENTATION OF FINANCIAL RESULTS

Actual twelve months 2011 results reflect the consolidation of Wind Telecom as of April 15, 2011. The Company believes pro forma of FY11 results versus FY12 actual reported results provide the most meaningful comparison of financial performance. For further details about the presentation of the adjustments and assumptions of our pro forma results, please refer to VimpelCom's press release issued on August 18, 2011 and May 14, 2012 both which are available on the Company's website.

 

The pro forma full year 2011 information presented in this press release reflects what the Company's results of operations would have looked like had the Company's transactions with Wind Telecom occurred on January 1, 2011.

 

VimpelCom Ltd. consolidated results presented in this earnings release are based on IFRS and have not been audited. The full year 2012 audited financial results under IFRS will be published when the Company files its annual report on Form 20-F for the year ended December 31, 2012.

 

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.

STRATEGIC UPDATE

  • Enhanced Value Agenda for 2013-2015 announced highlighting medium-term objectives
  • Successful issuance of USD 2.0 billion Eurobonds for debt refinancing
  • AGM elected new Supervisory Board
  • Acquisition of 0.1% in Euroset, increasing total stake to 50.0%
  • Paid final dividend 2011 and interim dividend 2012 of in total USD 1.3 billion 

In January, VimpelCom hosted its second annual Analyst & Investor Day in London, where the Company presented its enhanced business strategy, the Value Agenda 2013-2015. This Value Agenda, which is focused on increasing Net Cash from Operating Activities, has four main pillars: Profitable Growth, Customer Excellence, Operational Excellence and Capital Efficiency.

VimpelCom's objectives* for the period 2013 - 2015 are:

  • Revenue and EBITDA CAGR of around mid-single digit;
  • Net Debt/EBITDA below 2x in 2015; and
  • CAPEX/Revenues, excl. licenses, below 15% in 2015.

As a result of the execution of the Value Agenda the Company indicated its intention to have annual cash flow improvements of USD 2 billion from operations and of between USD 0.6 billion and USD 0.9 billion from finance optimization by the end of 2015.

In December 2012, Altimo delivered a notice to VimpelCom that it intends to convert 128,532,000 Convertible Preferred Shares into Common Shares at a ratio of one Convertible Preferred Share for one Common Share. Altimo set the conversion date for April 16, 2013 and the conversion premium to be paid by Altimo to the Company upon conversion is USD 10.835 per Convertible Preferred Share. Based on this conversion premium, the Company will receive approximately USD 1.4 billion from Altimo for the conversion. Altimo's voting percentage will remain 47.9%, while its economic interest in the Company will increase from 52.7% to 56.2%.

VimpelCom held its Annual General Meeting of Shareholders (AGM) in Amsterdam in December 2012. The AGM approved that the Supervisory Board will continue to consist of nine directors, four nominated by Altimo, three nominated by Telenor and two independent directors.  In addition, the Supervisory Board unanimously elected Alexey Reznikovich as its Chairman. As announced yesterday, the Company will have its AGM 2013 on April 24, 2013.

In December 2012, VimpelCom increased its stake in Russian mobile retailer Euroset to 50.0% by acquiring 0.1% of the shares of Euroset. As a result, VimpelCom and Lefbord, a company owned by Megafon and Garsdale Services Investment, have equal economic and governance rights in Euroset.  VimpelCom will continue to account for Euroset using the equity method.

Also in December 2012, VimpelCom signed a USD 500 million bilateral credit facility with China Development Bank for financing equipment and services from Huawei. The Facility has a tenor of 8 years and is to date undrawn. In February 2013, VimpelCom completed approximately USD 2 billion in debt refinancing, by issuing 6-year USD 600 million 5.20% guaranteed notes, 10-year USD 1.0 billion 5.95% guaranteed notes and 5-year RUB 12.0 billion 9.0% guaranteed notes. The proceeds will be used for the repayment of maturing debt in VimpelCom and general corporate purposes. The coupon on the USD notes was the lowest coupon in VimpelCom's history. Additionally, the RUB denominated Eurobonds represent the first such issuance by a non-financial services or non-state-owned company. Following the recent debt refinancing,  VimpelCom has secured its refinancing requirements into 2014.

The Company announced a final dividend 2011 of USD 0.35 per common share and an interim dividend 2012 of USD 0.45 per common share in December 2012, which has been paid in January 2013 for a total amount of USD 1.3 billion. The dividend guideline of USD 0.80 per common share, assuming 1,628 million common shares are issued and outstanding, is currently under review following the aforementioned intended conversion of Convertible Preferred Shares by Altimo. The Company expects a decision on the dividend policy by the Supervisory Board in 2Q13. The Company also expects to announce the final dividend 2012 and a possible extra-ordinary dividend related to proceeds of a conversion in 2Q13.

The Company recently announced the appointment of Ziad Shatara to the position of CEO of banglalink in Bangladesh and of Taras Parkhomenko as CEO of VimpelCom's operating company in Kazakhstan.

VimpelCom's 51.9%-owned subsidiary Orascom Telecom Holding ("OTH") took steps to increase its stake in WIND Mobile in Canada to 100%, subject to Canadian regulatory approvals.

Finally, negotiations with the Algerian Government are still progressing and the Company aims to reach a mutually beneficial resolution.


* The above objectives assume constant currency exchange rates, no major regulatory changes, current asset portfolio mix and a stable macroeconomic environment.

VIMPELCOM GROUP – FINANCIAL AND OPERATING RESULTS 4Q12

  • Organic revenue growth of 3% YoY; revenues of USD 6.0 billion
  • EBITDA growth of 13% YoY on an organic basis, reaching USD 2.4 billion
  • Total mobile subscriber base grew by 5% YoY to 214 million
  • Net cash from operating activities increased 24% YoY to USD 2.3 billion
  • CAPEX of USD 1.6 billion
  • Net debt / LTM EBITDA was 2.2 at end 4Q12

OPERATING PERFORMANCE OVERVIEW 4Q12

4Q12 results were strong on an organic basis, but in USD terms the results were significantly impacted by the YoY appreciation of the USD against the local currencies in most of VimpelCom´s operating businesses. The organic development is highlighted below.

The total mobile subscriber base increased 5% YoY to 214 million by the end of the fourth quarter. The largest absolute contribution came from accelerated growth in subscribers in the Africa & Asia Business Unit and a large increase in subscribers in the CIS Business Unit from growth in Uzbekistan. The Company also achieved solid growth in fixed and mobile broadband subscribers in Russia, Italy and Ukraine.

In Russia, the Company continued the positive trend of the first nine months of the year, delivering organic revenue growth of 4% YoY. Mobile broadband subscribers in Russia increased 5% YoY to 2.7 million and fixed broadband subscribers grew 15% YoY to 2.4 million.

In Italy, the Company continued to outperform the broader Italian, highly competitive telecom market in the fourth quarter, in a highly competitive environment. VimpelCom strengthened its market position in Italy in both mobile and fixed-line, increasing its market  share in both segments. The fixed broadband subscriber base increased 4% YoY to more than 2.2 million. Mobile broadband consumer subscribers grew 24% YoY.

In the Africa & Asia Business Unit, the Company exceeded the 85 million subscribers mark, an increase of 8% YoY,  through strong subscriber growth in most of its operations. Solid performance across the main operations, Algeria, Pakistan and Bangladesh, led to organic revenue growth of 11% YoY.

The Ukraine Business Unit continued to solidify its market position in the mobile segment through the ongoing transition to bundled tariff plans. The transition is showing good results with mobile total operating revenues returning to growth. Mobile subscribers increased by 5% YoY to 26.0 million.

The CIS Business Unit delivered double digit organic revenue growth, mainly resulting from a temporary decrease in competition in Uzbekistan. The Company continues to face particularly strong competition in Kazakhstan, but also in Armenia and Tajikistan.

OPERATING FINANCIALS PER BUSINESS UNIT (FY11 IS PRO FORMA)



USD mln

4Q12

4Q11

Reported
YoY

Organic

YoY 


FY12

FY11

Reported
YoY

Organic

YoY 

Net operating revenues

5,950

5,889

1%

3%


23,061

23,477

-2%

4%


of which:











BU Russia

2,371

2,274

4%

4%


9,190

9,064

1%

7%


BU Europe & North America

1,778

1,924

-8%

-4%


6,982

7,771

-10%

-3%


BU Africa & Asia

937

922

2%

11%


3,721

3,719

0%

9%


BU Ukraine

432

417

4%

4%


1,676

1,641

2%

2%


BU CIS

488

419

16%

21%


1,755

1,589

10%

15%


Other

(56)

(67)

-

-


(263)

(307)

-

-












EBITDA


2,446

2,227

10%

13%


9,768

9,525

3%

8%


of which:











BU Russia

978

844

16%

15%


3,878

3,641

7%

13%


BU Europe & North America

674

718

-6%

-4%


2,658

2,952

-10%

-3%


BU Africa & Asia

426

321

33%

36%


1,741

1,566

11%

15%


BU Ukraine

227

209

9%

9%


859

873

-2%

-1%


BU CIS

235

171

37%

45%


813

703

16%

22%


Other

(94)

(36)

-

-


(181)

(210)

-

-

EBITDA margin

41.1%

37.8%

-

-


42.4%

40.6%

-

-

CAPEX

1,631

3,734

-56%

-


4,120

6,683

-38%

-














FINANCIAL PERFORMANCE OVERVIEW 4Q12

Total operating revenues in the fourth quarter of 2012 increased by 1% YoY impacted by unfavorable currency movements. Organic revenue growth was 3%, with solid performance across most Business Units.

EBITDA increased 10% YoY, also impacted by unfavorable currency movements. Excluding these forex effects, EBITDA increased 13% compared to 4Q11. In addition to the focus on operational excellence throughout the businesses, EBITDA in 4Q11 included certain one-off charges, including provisions for HR costs in Russia, Africa & Asia and Ukraine and inventory write-offs in Russia. In addition, 4Q11 included a provision in Africa & Asia  for a corporate contingent liability and costs associated with the demerger of OTMT. These combined effects resulted in a more favorable comparison for 4Q12.

Strong  EBITDA organic growth YoY was seen in the Russia, Africa & Asia, Ukraine and CIS Business Units, up 15%, 36%, 9% and 45%, respectively. The strong increase in Africa & Asia is also driven by the doubling of the EBITDA in Bangladesh as a result of significantly lower commercial opex in 4Q12, while in 4Q11 banglalink recorded very high customer acquisition costs. Italy showed an EBITDA decline of 4% YoY in local currency, mainly due to the MTR cut in July 2012. Net of the MTR cut, EBITDA would have increased by 2% YoY, supported by cost efficiency measures.

EBIT in 4Q12 grew by 231% compared to 4Q11. The 4Q11 results were negatively impacted by impairments for a total of USD 527 million and the impact of the Purchase-Price Allocation related to the acquisition of Wind Telecom in addition to the one-offs mentioned above. EBIT in 4Q12 was positively affected by the declining amortization schedule applied to intangible assets as part of the Wind Telecom acquisition. EBIT in 4Q12 was also impacted by negative forex and an impairment of OTH's shareholder loan to WIND Mobile Canada of USD 328 million, following a detailed business plan review.

Excluding these combined effects for 4Q11 and 4Q12, EBIT would have grown by 24%. 

Profit before tax increased to USD 764 million, compared to a loss of USD 559 million in the same period a year ago.  This increase was primarily the result of a substantially higher EBIT and a Euroset fair value adjustment of USD 606 million, due to IFRS requirements, as a result of the acquisition of the additional 0.1%. Net foreign exchange loss was USD 30 million in 4Q12, while in 4Q11 there was a loss of USD 119 million.

Net income increased to USD 801 million compared to a net loss in 4Q11 of USD 381 million. The increase is mainly the result of the aforementioned increase in Profit before tax.

CAPEX was USD 1,631 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 HSPA+ and in backbone capacity to support the growth in data.



Actual

USD mln

4Q12

4Q11

YoY

Total operating revenues

5,950

5,889

1%

EBITDA

2,446

2,227

10%

EBITDA margin

41.1%

37.8%

-

EBIT

709

214

231%

Financial income and expenses

(484)

(467)

4%

Net foreign exchange (loss)/gain and others

539

(306)

n.m

Profit before tax

764

(559)

n.m

Income tax expense

(195)

(101)

93%

Profit for the period

569

(660)

n.m

Net income

801

(381)

n.m

Capital expenditures

1,631

3,734

-56%






STATEMENT OF FINANCIAL POSITION & CASH FLOW (ACTUAL)


USD mln

4Q12

3Q12

QoQ


FY12

FY11

YoY

Total assets

55,360

53,490

3%


55,360

54,039

2%

Shareholders' equity

14,869

14,779

1%


14,869

14,037

6%

Gross debt

26,987

26,637

1%


26,987

26,733

1%

Net debt

21,971

22,681

-3%


21,971

24,230

-9%











4Q12

4Q11

YoY


FY12

FY11

YoY

Net cash from operating activities

2,301

1,858

24%


7,257

6,106

19%

Net cash used (in)/from investing activities

(515)

(3,363)

-85%


(4,008)

(6,945)

-42%

Net cash used (in)/provided financing activities

(125)

691

n.m.


(587)

2,583

n.m.













Total assets in the  quarter increased by 3% to USD 55.4 billion, primarily as a result of cash generation, investments in fixed assets and the positive impact of currency translation YoY. Gross debt increased marginally in the quarter to USD 27.0 billion, mainly due to foreign exchange movements. Net debt decreased to USD 22.0 billion, leading to a net debt to LTM EBITDA of 2.2x at the end of the fourth quarter.

Net cash from operating activities increased 24% YoY to USD 2.3 billion positively impacted by the increase in EBITDA and improvement in working capital, partially offset by higher  tax payments compared to the same period last year. The decrease in net cash used in investing activities compared to 3Q12 was mainly impacted by lower cash out for investments in property, equipment and intangible assets in 2012. The decrease in net cash used in financing activities in 4Q12 compared to 4Q11 was mainly the result of the net repayment of debt. Net cash from operating activities in FY12 is USD 7.3 billion, or 19% higher than in FY11.

NON-CASH ITEMS IN 4Q12 AND FY12 IMPAIRMENTS

On a regular basis the Company performs an impairment test per cash generating unit. Following a detailed business plan review of Wind Mobile in Canada, the Company has recorded an impairment of USD 328 million.

REVALUATIONS

As a result of the acquisition of the additional 0.1% in Euroset, the Company had to adjust the fair value of the previously held interest in Euroset by USD 606 million due to IFRS requirements.

VIMPELCOM GROUP – FINANCIAL RESULTS FULL YEAR 2012

  • Revenues reached USD 23.1 billion; organic growth of 4% YoY
  • EBITDA of USD 9.8 billion, up 8% YoY organically
  • EBITDA margin increased 1.8 p.p. YoY to 42.4%
  • Net Income increased to USD 2.1 billion
  • CAPEX excl. licenses of USD 4.0 billion leading to CAPEX/LTM Revenues of 17%
  • Net cash from operating activities increased by 19% to USD 7.3 billion


FULL YEAR 2012

On a pro forma basis, total operating revenues in 2012 decreased by 2% YoY. Overall organic revenue growth was 4%, with strong performance across all Business Units. In Russia, revenues increased by 1% in USD terms and 7% in local currency. In Italy, revenues in USD decreased by 10% and decreased in local currency by 3%, as a result of the sharp MTR cuts. Excluding MTR effect, net operating revenues improved by 5%.  The Africa & Asia Business Unit reported organic revenue growth of 9% and had stable revenues in USD terms, while the Ukraine Business Unit delivered growth of 2% in both USD and in local currency. Lastly, the CIS Business Unit continued to achieve strong performance with a revenue increase of 15% organically, primarily as a result of the network closure of a competitor by the Uzbek authorities.

On a pro forma basis, EBITDA increased by 3% YoY. Strong organic EBITDA growth of 13% was seen in the Russia Business Unit, while EBITDA growth in the Africa & Asia and CIS Business Units were up 15% and 22%, respectively. In the Europe & North America Business Unit, EBITDA decreased 10% in USD terms and declined by 3% in local currency, mainly due to the impact of the MTR cuts. The Ukraine Business Unit EBITDA decreased by 1% in local currency and by 2% in USD terms.

CAPEX excluding licenses stood at USD 4.0 billion, with investments in the further roll out of the mobile networks in Russia, Bangladesh, Pakistan and the CIS. The CAPEX/LTM Revenues excluding licenses for FY12 is 17%.

The Company expects FY13 CAPEX, excluding licenses, to be approximately 21% of revenue.



 

Pro-forma

 


 

Actual

 

USD mln

FY12

FY11

YoY


FY12

FY11

YoY

Total operating revenues

23,061

23,477

-2%


23,061

20,262

14%

EBITDA

9,768

9,525

3%


9,768

8,256

18%

EBITDA margin

42.4%

40.6%

-


42.4%

40.7%

-

EBIT

4,171

3,175

31%


4,171

2,854

46%

Financial income and expenses

(1,875)

(1,850)

1%


(1,875)

(1,467)

28%

Net foreign exchange (loss)/gain and others

592

(486)

n.m.


592

(533)

n.m

Profit before tax

2,888

839

244%


2,888

854

238%

Income tax expense

(906)

(650)

39%


(906)

(585)

55%

Profit for the period

1,982

189

949%


1,982

269

637%

Net income

2,145

525

309%


2,145

543

295%

Capital expenditures*

4,120

6,683

-38%


4,120

6,349

-35%

*  Including licenses of USD 1.8 billion in 4Q11 & FY11 and USD 0.1 billion in FY12

 

ORGANIC REVENUE AND EBITDA GROWTH FY12 VERSUS FY11 (FY 11 IS PRO FORMA)

USD mln


Revenue


EBITDA

Business Units


Organic

FX and
others

Reported


Organic

FX and
others

Reported

Russia


7%

-6%

1%


13%

-6%

7%

Europe & NA


-3%

-7%

-10%


-3%

-7%

-10%

Africa & Asia


9%

-9%

0%


15%

-4%

11%

Ukraine


2%

0%

2%


-1%

-1%

-2%

CIS


15%

-5%

10%


22%

-6%

16%

Total


4%

-6%

-2%


8%

-5%

3%


BUSINESS UNITS PERFORMANCE IN 4Q12

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

BUSINESS UNIT RUSSIA – FINANCIAL AND OPERATING RESULTS

  • Positive operational trend of previous quarters continued in 4Q12
  • Revenue growth of 4% YoY, supported by 37% increase YoY in mobile data revenues
  • EBITDA increase of 15% YoY leading to EBITDA margin growth of 4.2 p.p. YoY to 41.3%
  • Operational Excellence program delivered more than double of targeted RUB 5 billion annualized savings

The Russian Business Unit continued the positive trend of the previous quarters, delivering profitable growth with a revenue increase of 4% YoY and EBITDA growing double digit YoY in 4Q12. The strong EBITDA YoY performance was partly the result of a relatively low comparable EBITDA in 4Q11, which was impacted by relatively high commercial and technical costs and one-offs of RUB 800 million in total, including a provision for HR costs and an inventory write-down. During 4Q12, VimpelCom continued its strong execution of its operational excellence program and realized more than double its initial target of RUB 5 billion in annualized savings in 2012.

The mobile subscriber base in Russia declined by 2% YoY to 56.1 million, but the impact on revenue was offset by an increase in ARPU of 5% YoY due to strong increase of mobile data revenues.

Mobile revenues grew by 4% YoY, driven by an increase in ARPU and strong equipment sales. Mobile data revenues increased by 37% YoY with revenues for small screens up by 52%.

Fixed-line revenue growth slowed to 0.4% YoY, mainly due to a decline in wholesale fixed-line voice revenues, while FTTB revenue recorded a strong growth of 24% YoY.

EBITDA margin in 4Q12 was 41.3%, an increase of 4.2 p.p. YoY. This includes the negative effect of forex changes in 4Q12, which impacted EBITDA margin by 0.2 p.p. Savings in commercial costs were among the biggest contributors to the EBITDA margin improvement, primarily driven by the shift to a revenue share model with distributors as part of the Operational Excellence program.

VimpelCom remains on track to deliver continued improvement in network quality to support the growth of mobile data. In 2012, VimpelCom significantly increased IP-zation to 48% from 11% at the start of the year and grew the number of node-Bs by 22%. Improving network quality continues to be the Company's focus with the aim to be on par with its peers in the key regions at the end of 2013. As a result of these efforts, the Company expects CAPEX/Revenues to increase to 22% in 2013.

KEY DEVELOPMENTS 4Q12

  • Total revenue in Russia grew by 4% YoY to RUB 73.6 billion driven by the increase in mobile revenues.
  • Mobile revenues increased 4% YoY mainly as a result of growth in data revenue by 37% YoY, as well as in equipment revenues. Mobile ARPU increased by 5% YoY to RUB 343.
  • Fixed-line revenue increased 0.4% YoY with continuing growth in fixed broadband revenues, up 23% YoY, offset by a 9% decline YoY in wholesale voice revenues.
  • EBITDA increased by 15% YoY and EBITDA margin was 41.3%, an increase of 4.2 p.p. compared to 4Q11, mainly driven by the strong execution of the Operational Excellence program.
  • Mobile subscriber base decreased by 2% YoY to 56.1 million; mobile broadband subscribers increased 5% YoY to 2.7 million. The fixed broadband subscriber base grew  15% YoY to 2.4 million.
  • CAPEX/Revenues was 34% in 4Q12, in line with the network construction schedule. CAPEX/Revenues for FY12 stood at 18%.

RUSSIA KEY INDICATORS


RUB mln


4Q12

4Q11

YoY


FY12

FY11

YoY

Total operating revenues


73,637

71,022

4%


285,375

266,087

7%

Total operating expenditures


43,259

44,664

-3%


164,897

159,407

3%

EBITDA


30,378

26,358

15%


120,478

106,681

13%

EBITDA margin


41.3%

37.1%



42.2%

40.1%


CAPEX


25,076

25,318

-1%


50,699

59,795

-15%

CAPEX / Revenues


34%

36%



18%

22%












Mobile










Mobile total operating revenues


61,579

59,012

4%


236,922

221,534

7%

- of which mobile data


7,036

5,118

37%


24,330

17,604

38%

Mobile subscribers ('000)


56,110

57,224

-2%





- of which mobile broadband ('000)


2,654

2,538

5%





Mobile ARPU (RUB)


343

327

5%





MOU (min)


290

259

12%














Fixed









Fixed-line total operating revenues


12,058

12,009

0%


48,453

44,554

9%

Fixed Broadband revenues


3,148

2,564

23%


11,719

8,676

35%

Fixed Broadband subscribers ('000)


2,378

2,073

15%





Fixed Broadband ARPU (RUB)


445

432

3%















BUSINESS UNIT EUROPE & NA - FINANCIAL AND OPERATING RESULTS ITALY

  • Continued relative outperformance of the market
  • Total Revenues, excluding MTR impact, increasing 2% YoY
  • EBITDA margin increased 0.1 p.p. YoY to 37.5%; MTR cut partially offset by cost efficiency
  • EBITDA-CAPEX increased YoY in 4Q12 and FY12  
  • Strong Data revenue growth: Mobile Internet up 37%, messaging up 6%, fixed broadband up 5%
  • 55% share of mobile net additions driven by positive MNP inflow balance

WIND posted a solid performance in 4Q12 with the strong commercial success of WIND's offerings offsetting the regulatory and macroeconomic challenges in the market. Despite the challenging context and the intense competitive environment, WIND was able to further strengthen its competitive position in the market.

Total revenues in 4Q12 declined 4% YoY mainly as a result of the 6% reduction in service revenues arising from the 53% cut in the mobile termination rate (MTR), which occurred in July, partially offset by a strong increase in handset sales driven by the success of WIND's "All Inclusive" mobile offerings and certain settlements with third parties. Excluding the impact from the MTR cut, total revenues grew 2% YoY with total service revenues up 1% YoY.

Mobile service revenues declined by 7% YoY due to the aforementioned MTR cut, net of which growth would have been 2% YoY. WIND's mobile subscriber base increased by 3% YoY due to strong net additions in the quarter, securing over 55% share of mobile network operator (MNO) net additions. The quarter was, however, characterized by a high churn rate due to an acceleration of MNP, but WIND managed to maintain a positive inflow balance.

In fixed-line, the results of the new strategy based on LLU focus and profitability, resulted in a slight decline in total subscribers. The decline in the overall customer base, coupled with a lower pay per use price and traffic driven by competitive pressure and economic slowdown, resulted in a 3% decline in fixed line service revenues, while the new strategy delivered a solid improvement in marginality.

In 4Q12, WIND continued to deliver strong performance in Data with Mobile Internet revenues growing 37%, messaging revenues up 6%, and fixed BB revenues increasing by 5%. The success of WIND's offerings in both fixed and mobile, under the "All Inclusive" umbrella proposition, was clearly demonstrated by the solid increase in mobile broadband subscribers, up 24% YoY, driven by the 23% increase in consumer small screen users which account for 66% of total consumer mobile internet revenues in 2012. Fixed broadband customers grow by 4%, mainly driven by the 6% increase in the more profitable LLU BB subscriber base.

EBITDA in 4Q12 declined by approximately 4% driven by the reduction in top-line, due to the MTR cut, partially offset by structural cost saving initiatives implemented in the period. The EBITDA margin increased by 0.1 percentage point YoY. Excluding the impact from MTRs, underlying EBITDA grew 2% YoY. MTR reductions will also impact 2013 with a first cut having taken place in January 2013 and a final cut scheduled for July 2013.  As part of the overall Cost Efficiency Project WIND launched its Network Transformation Project aimed at achieving OPEX savings of approximately EUR 40-45mln per annum starting in 2013.

KEY DEVELOPMENTS 4Q12


  • Total revenues declined 4% YoY to EUR 1,369 million with an underlying increase, excluding MTR impact, of 2%.
  • EBITDA in 4Q12 declined 4% to EUR 514 million, with a margin increase of 0.1 percentage points to 37.5%.
  • CAPEX in 4Q12, excluding LTE spectrum, was EUR 326 million bringing FY 2012 total CAPEX to EUR 905 million.
  • Mobile subscriber base increased 3% to over 21.6 million. Mobile broadband consumer subscribers grew 24% YoY.
  • Mobile data ARPU in