VimpelCom Reports Stable Underlying Results In 3Q13 IMPACTED BY REGULATORY MEASURES AND MARKET SLOWDOWN WITH CONTINUED STRONG MOBILE DATA REVENUE GROWTH

DECLARES INTERIM DIVIDEND OF USD 0.45 PER SHARE

AMSTERDAM, Nov. 6, 2013 /PRNewswire/ --

KEY RESULTS AND DEVELOPMENTS IN 3Q13

  • Revenues of USD 5.7 billion; organic1 decline of 1% YoY
  • EBITDA of USD 2.5 billion; organic1 decline of 2% YoY
  • Results impacted by regulatory and governmental measures, market slowdown as well as one-off charges
  • EBITDA organic stable YoY excluding MTR cuts and one-off charges
  • EBITDA margin of 43.5%
  • Net cash from operating activities of USD 1.7 billion
  • Total mobile subscriber base increased 5%2 YoY to 219 million
  • Interim dividend 2013 of USD 791 million or USD 0.45 per share declared
  • Andrew Davies to start as Group CFO on November 7, 2013

"VimpelCom Ltd" ("VimpelCom", "Company" or "Group") (NASDAQ: VIP), a leading global provider of telecommunications services, today announces financial and operating results for the quarter ended September 30, 2013.

JO LUNDER, CHIEF EXECUTIVE OFFICER, COMMENTS:
"The third quarter results were impacted by regulatory and competitive pressures. Our underlying performance was stable and the operational improvements we are making in Russia are on track, with mobile service revenue growth of 3%. To better serve our customers, we plan further substantial investment in our mobile data networks in Russia in the final quarter of the year. In Italy, we have continued to gain mobile market share although competition remains strong. The Africa & Asia business unit delivered stable EBITDA and continuing strong subscriber growth. In Ukraine, we experienced significant pressure on our results and we are taking measures to improve our performance. The CIS business unit showed organic revenue growth of 9% and a substantial increase in the customer base. Overall, mobile data revenues again showed strong growth. Our EBITDA margin remained amongst the highest in the industry at 43.5%, and cash flows from our operating businesses were solid at USD 1.7 billion. We will remain focused on delivering value to our customers and shareholders."

CONSOLIDATED FINANCIAL AND OPERATING HIGHLIGHTS











USD mln


3Q13

3Q12

Reported
YoY 


Organic YoY


9M13

9M12

Reported
YoY 


Organic YoY

Total operating revenues


5,685

5,747

-1%


-1%


16,994

17,111

-1%


0%

EBITDA


2,474

2,530

-2%


-2%


7,247

7,322

-1%


0%

EBITDA margin


43.5%

44.0%

-




42.6%

42.8%

-



EBIT


1,233

1,255

-2%




3,564

3,462

3%



Net income attributable to VimpelCom shareholders


255

538

-53%




1,236

1,344

-8%



EPS, basic (USD)


0.15

0.33

-55%




0.73

0.83

-12%



Capital expenditures 3


1,040

829

25%




2,426

2,489

-3%



Net cash from operating activities


1,675

1,998

-16%




4,341

4,956

-12%



Net debt / LTM EBITDA


2.3

2.4

-




2.3

2.4

-



Total mobile subscribers (millions) 2


219

209

5%




219

209

5%


















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

2)

The subscriber numbers for 2012 have been adjusted to remove subscribers in operations that have been sold and to reflect revised subscriber numbers in Algeria, due to the reported technical issue, and Ukraine where the definition of subscribers have been aligned to the group definition.

3)

Capex 9M13 excludes EUR 136 million of non-cash increase in Intangible Assets related to the contract with Terna in relation to the Right of Way of WIND's backbone. Capex includes 3G license in Bangladesh of USD 110 million.

For all definitions please see Attachment E.

 

ORGANIC GROWTH REVENUE AND EBITDA





3Q13 vs 3Q12






Revenue




EBITDA


Business Units 


Organic 

FX and others

Reported


Organic 

FX and others

Reported

Russia


+1%

-2%

-1%


0%

-2%

-2%

Italy


-6%

+6%

0%


-6%

+6%

0%

Africa & Asia


-1%

-3%

-4%


-1%

-1%

-2%

Ukraine


-7%

0%

-7%


-10%

0%

-10%

CIS


+9%

-2%

+7%


+6%

-1%

+5%

Total


-1%

0%

-1%


-2%

0%

-2%























9M13 vs 9M12






Revenue




EBITDA


Business Units 


Organic 

FX and others

Reported


Organic 

FX and others

Reported

Russia


+4%

-2%

+2%


+3%

-2%

+1%

Italy


-8%

+3%

-5%


-7%

+3%

-4%

Africa & Asia


-1%

-4%

-5%


-1%

-3%

-4%

Ukraine


-2%

0%

-2%


-6%

0%

-6%

CIS


+16%

-2%

+14%


+24%

-2%

+22%

Total


0%

-1%

-1%


0%

-1%

-1%



















 

PRESENTATION OF FINANCIAL RESULTS

VimpelCom results presented in this earnings release are based on IFRS and have not been audited.

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 AND MAIN EVENTS

  • VimpelCom switched its ADS listing to NASDAQ and was added to NASDAQ-100® Index
  • Interim dividend 2013 of USD 791 million or USD 0.45 per share declared
  • Awarded 3G license in Bangladesh
  • Awarded provisional 3G license in Algeria, exceptional approval to import 3G equipment
  • Andrew Davies to start as Group CFO on November 7, 2013
  • Mikhail Slobodin started as Head of Business Unit Russia
  • Analyst & Investor Conference on January 28 and 29, 2014

VimpelCom switched the listing of its ADSs to the NASDAQ Global Stock Market from the New York Stock Exchange (NYSE) on September 10. Shareholders approved technical amendments to the bye-laws related to the switch to NASDAQ at a Special General Meeting on September 25. Since the listing on NASDAQ, VimpelCom achieved another major milestone with its inclusion in the NASDAQ-100® Index on October 29.

In September, the Company's operating unit in Bangladesh, banglalink, received a 5 MHZ block of 3G spectrum. The total price of the spectrum was USD 110 million including 5% VAT. The license will be valid for 15 years.

The Company's subsidiary in Algeria, Orascom Telecom Algerie (OTA), was granted one of the three provisional 3G licenses. Final licenses with the relevant coverage obligations are expected to be granted after payment of fees, satisfaction of the conditions indicated in the tender documents and receipt of clearances and approvals from various governmental authorities. The 3G license will cost DZD 3 billion (approximately USD 40 million) and will be valid for 15 years, after which successive renewals will be in five-year fixed terms. OTA received an exceptional approval from the Bank of Algeria allowing OTA to make foreign payments to acquire equipment exclusively dedicated to 3G technologies. This approval  is a conditioned derogation to the current ban on foreign payments.

Andrew Davies will start as VimpelCom's new Group CFO on November 7, 2013.

In September, VimpelCom announced the promotion of Anton Kudryashov to the Group Executive Board as Chief Group Business Development and Portfolio Officer and the appointment of Mikhail Slobodin as Head of the Russia Business Unit.

The Supervisory Board authorized the payment of an interim 2013 dividend of USD 791 million, or USD 0.45 per common share. The interim dividend is in line with the Company's stated dividend guidelines, under which VimpelCom aims to pay out at least USD 0.80 per share per year, assuming 1,757 million common shares issued and outstanding. For the full dividend guidelines, please refer to the Company's website at vimpelcom.com. The record date for the Company's shareholders entitled to receive the dividend has been set for November 18, 2013. The ex-dividend date is November 14, 2013. It is expected that the dividend will be paid in December 2013. The Company will make appropriate tax withholdings of up to 15% when the dividend is paid to the Company's ADS depositary, The Bank of New York Mellon.

VimpelCom will host its next annual Analyst & Investor Conference on January 28 and 29, 2014 in London, when the Company will  provide an update on its strategy, the Value Agenda. The event will also be available via webcast.

VIMPELCOM GROUP – FINANCIAL AND OPERATING RESULTS 3Q13

  • Revenues of USD 5.7 billion, an organic decline of 1% YoY, impacted by MTR cuts in Italy
  • EBITDA of USD 2.5 billion, an organic decline of 2% YoY, primarily due to one-off charges of USD 27 million, MTR cuts in Italy and VoIP deactivation impact in Bangladesh
  • EBITDA margin of 43.5%CAPEX of USD 1.0 billion; LTM CAPEX1/ Revenues of 17%
  • Net cash from operating activities of USD 1.7 billion
  • Net debt / LTM EBITDA of 2.3x at the end of 3Q13
  • Total mobile subscriber base up 5%2 YoY to 219 million

OPERATING PERFORMANCE OVERVIEW
In USD terms, 3Q13 revenues were negatively impacted by regulatory and governmental actions in the business unit in Africa & Asia and the MTR cuts in Italy. Notably, excluding the reduction of MTR in Italy, Group revenues would have remained stable organically YoY.

The Company's total mobile subscriber base increased by 5%2 YoY to 219 million at the end of the third quarter. The largest absolute contribution came from a substantial increase in subscribers in A&A. VimpelCom also delivered subscriber growth in all other business units.

In Russia, the Company continued a positive trend, although at a slower pace, delivering organic revenue growth of 1% YoY. Mobile data revenues increased 30% YoY. Mobile broadband subscribers in Russia increased 20% YoY to 3.0 million, while the fixed broadband subscriber base was stable YoY at 2.3 million.

In Italy, WIND continued to outperform its peers and further strengthened its position in a market which became even more competitive in July and August. During September, there was lower promotional pressure by the big three mobile operators, the first positive sign of stabilization in the market. In local currency, mobile Internet revenues increased 44% YoY and fixed broadband revenues increased 8% YoY.

The Africa & Asia Business Unit was impacted by regulatory and governmental actions in several countries. Revenues declined 1% YoY organically in 3Q13. In Algeria, Djezzy maintained its leadership position, with revenues slightly up YoY despite limitations resulting from the on-going restrictions in the country. In Pakistan, revenue growth was impacted by several government-forced cellular network closures and a severe power blackout. In Bangladesh, the decline in revenues was mainly due to the ongoing deactivation of suspected VoIP customers in compliance with new regulations set by the regulator. The subscriber base in the Africa & Asia business unit increased 4% YoY to approximately 87 million.

The Ukraine Business Unit increased its subscriber base by 6% YoY to 26 million. Total revenues decreased 7% YoY. Fixed-line revenues were up 9% YoY mainly due to a 50% YoY increase in fixed residential broadband revenues. Mobile revenues declined 8% YoY as customers switched to lower priced bundled tariff plans, difficulties in up-selling of the subscriber base to higher bundles and an unsuccessful top-up plan.

The CIS Business Unit continued to deliver strong organic revenue growth YoY, with results benefiting from the situation in Uzbekistan. The Company continues to face particularly strong competition in Kazakhstan, as well as in Armenia and Kyrgyzstan. In Kazakhstan, VimpelCom is transitioning its subscriber base to bundled tariff plans. The Company's competitive market position improved as a result of its new attractive value proposition.




1)

CAPEX excluding licenses and EUR 136 million of non-cash increase in Intangible Assets related to the contract with Terna

2)

Following the sale of Vietnam and Cambodia the subscriber numbers for 2012 exclude Vietnam and Cambodia subscribers. The 2012 numbers for Algeria have been adjusted for the technical issue and in Ukraine for the definition alignment as communicated in 2Q13 earnings release.

 

OPERATING FINANCIALS PER BUSINESS UNIT

USD mln


3Q13 

3Q12 

Reported YoY


Organic YoY


9M13 

9M12 

Reported YoY


Organic YoY

Total operating revenues


5,685

5,747

-1%


-1%


16,994

17,111

-1%


0%


of which:














BU Russia


2,298

2,326

-1%


1%


6,936

6,818

2%


4%


BU Italy


1,657

1,662

0%


-6%


4,934

5,202

-5%


-8%


BU Africa & Asia


869

904

-4%


-1%


2,643

2,784

-5%


-1%


BU Ukraine


420

452

-7%


-7%


1,216

1,243

-2%


-2%


BU CIS


513

478

7%


9%


1,445

1,268

14%


16%


other


(72)

(75)

-


-


(180)

(204)

-


-















EBITDA


2,474

2,530

-2%


-2%


7,247

7,322

-1%


0%


of which:














BU Russia


980

1,005

-2%


0%


2,939

2,900

1%


3%


BU Italy


673

672

0%


-6%


1,901

1,983

-4%


-7%


BU Africa & Asia


415

424

-2%


-1%


1,268

1,314

-4%


-1%


BU Ukraine


208

231

-10%


-10%


595

632

-6%


-6%


BU CIS


246

234

5%


6%


706

577

22%


24%


other


(48)

(36)

-


-


(161)

(84)

-


-















EBITDA margin


43.5%

44.0%





42.6%

42.8%




Capital expenditures*


1,040

829

25%




2,426

2,489

-3%





*

Capex 9M13 excludes EUR 136 million of non-cash increase in Intangible Assets related to the contract with Terna in relation to the Right of Way of WIND's backbone

 

FINANCIAL PERFORMANCE OVERVIEW
EBITDA decreased 2% YoY, reflecting the negative impact of the reduction of MTR in Italy, the VoIP effect in Bangladesh and certain one-off charges of approximately USD 27 million related to restructuring charges, rebranding in Pakistan, an adjustment in Kazakhstan related to USB-dongles revenue recognition and M&A related costs. In the same quarter a year ago, the Company recorded a one-off release of a provision in Kazakhstan of USD 13 million. Underlying EBITDA excluding MTR cuts and one-offs would have been stable YoY.

In Russia, EBITDA was stable YoY organically due to reinvestment of savings from the operational excellence program in the network and owned mono-brand stores.

In Italy, EBITDA declined 6% YoY organically, mainly due to the MTR cuts in January 2013 and July 2013 and to the pressure on service revenues as a result of intense competition.

In Africa & Asia, EBITDA declined 1% YoY organically despite governmental and regulatory actions in Pakistan and Bangladesh and one-off rebranding costs in Pakistan.

In Ukraine, EBITDA declined 10% YoY organically mainly due to lower YoY revenues, higher commercial costs resulting from an increase in mobile gross additions and growth in network & IT costs, partially offset by a decline in HR costs.

In CIS, EBITDA increased 6% YoY organically, driven primarily by a strong performance in Uzbekistan following the continued closure of a competitor's network by the Uzbek authorities, which began in 3Q12.

EBIT in 3Q13 decreased by 2% YoY mainly due to the negative EBITDA movement as well as an impairment on certain equipment and Laos goodwill, partly offset by the positive impact of declining amortization applied to intangible assets associated with customer relationships, as part of the Wind Telecom acquisition.

Profit before tax decreased by 17% YoY to USD 665 million, compared to profit before tax of USD 802 million in the same period a year ago. The decrease is primarily the result of negative FX effects and higher finance costs due to the Eurobonds issued in 1Q13 for the repayment of maturing debt in 2013 and 2014.

Net income attributable to VimpelCom shareholders of USD 255 million in 3Q13 compared to net income of USD 538 million in 3Q12. The decrease is mainly the result of lower profit before tax and higher tax expenses. The higher tax expenses are due to a deferred tax provision related to planned, future intragroup dividends from OJSC VimpelCom.

CAPEX totaled USD 1.0 billion in 3Q13, reflecting the continued roll out of the mobile networks in Russia, Bangladesh and CIS, as well as the continued roll out of HSPA+ and backbone capacity to support data growth in Italy and acquisition of 3G license in Bangladesh. LTM CAPEX excluding licenses to revenues stood at 17%. Due to increased investments in Russia, the Company expects FY13 CAPEX excluding licenses to be approximately 20% of revenue.

INCOME STATEMENT ELEMENTS

USD mln



3Q13 

3Q12 

YoY 


9M13 

9M12 

YoY 

Total operating revenues



5,685

5,747

-1%


16,994

17,111

-1%

EBITDA



2,474

2,530

-2%


7,247

7,322

-1%

EBITDA margin



43.5%

44.0%



42.6%

42.8%


EBIT



1,233

1,255

-2%


3,564

3,462

3%

Financial income and expenses



(526)

(472)

11%


(1,548)

(1,391)

11%

Net foreign exchange (loss)/gain and others


(42)

19

n.m.


(46)

53

n.m.

Profit before tax



665

802

-17%


1,970

2,124

-7%

Income tax expense



(390)

(225)

73%


(807)

(711)

14%

Profit for the period



275

577

-52%


1,163

1,413

-18%

Net income attributable to VimpelCom shareholders


255

538

-53%


1,236

1,344

-8%

 

STATEMENT OF FINANCIAL POSITION & CASH FLOW

USD mln



3Q13

2Q13

QoQ





Total assets



53,051

52,547

1%





Shareholders' equity



14,255

13,999

2%





Gross debt



27,566

27,386

1%





Net debt



22,485

22,622

-1%



































USD mln



3Q13

3Q12

YoY


9M13

9M12

YoY

Net cash from operating activities


1,675

1,998

-16%


4,341

4,956

-12%

Net cash used in investing activities


(979)

(1,137)

-14%


(2,710)

(3,493)

-22%

Net cash used in financing activities 


(316)

(481)

-34%


(1,545)

(462)

+234%

 

Total assets increased by 1% QoQ in 3Q13 to USD 53.1 billion, primarily reflecting an increase in property and equipment. Gross debt increased 1% QoQ in 3Q13 to USD 27.6 billion, primarily due to unfavorable FX movements. Net debt decreased 1% QoQ to USD 22.5 billion, leading to a net debt to LTM EBITDA ratio of 2.3x at the end of the third quarter. The decline in net debt in 3Q13 primarily reflects cash flow generated from operations.

Net cash from operating activities was USD 1.7 billion in 3Q13, a decrease of 16% YoY, explained by a lower interest received compared to 3Q12 when income from a derivatives settlement was included. Net cash used in investing activities decreased 14% to USD 1.0 billion in 3Q13 compared to USD 1.1 billion in 3Q12. The decrease in net cash used in financing activities in 3Q13 compared to 3Q12 was mainly the result of lower loan repayments.

BUSINESS UNITS PERFORMANCE IN 3Q13

  • Russia
  • Italy
  • Africa & Asia
  • Ukraine
  • CIS

BUSINESS UNIT RUSSIA – FINANCIAL AND OPERATING RESULTS

  • Revenue increased 1% YoY with 3% growth in mobile service revenues
  • Mobile data revenue grew 30% YoY with 35% YoY improvement in data revenues from small screens
  • Stable EBITDA YoY, leading to an EBITDA margin of 42.6%
  • Mobile subscriber base increased 3% YoY to 58.1 million; mobile broadband subscribers up 20% to 3 million

VimpelCom´s Russian Business Unit continued to report growth in mobile service revenues, mainly supported by increasing mobile data revenues. The mobile subscriber base increased 3% YoY to 58.1 million. The Company will continue to focus on mobile service revenue growth, supported by improvements in the quality of the mobile data network, increasing the number of owned mono-brand stores and reducing churn.

Mobile revenues increased 1% YoY, primarily driven by mobile data revenue growth of 30%, while data revenues from small screens increased 35% YoY. The strong growth of mobile data revenues more than offset the decline in mobile voice revenues in 3Q13. ARPU declined slightly YoY to RUB 349. Mobile voice revenues decreased due to a combination of declining voice average price per minute and an increase in bundle subscribers with higher consumption of data services that shifts allocation of revenues towards data. The growth of mobile service revenues was partly offset by declining sales of equipment and accessories after the wholesale contract with Apple was terminated earlier this year.

Fixed-line revenues increased 3% YoY, mainly driven by 8% YoY growth in FTTB revenues. Growth in fixed-line revenues is moderating, in line with the Company´s strategy of focusing on profitability in regions where it currently has significant market share, thereby focusing on CAPEX and OPEX efficiency and increasing ARPU in the FTTB segment.

EBITDA was stable with increasing service revenues, mainly due to rising network and IT costs as a result of the increased demand-driven network investments and start-up costs due to the continued rollout of owned mono-brand stores. EBITDA margin decreased 0.6 p.p. YoY to 42.6%

VimpelCom has almost reached parity in quality of the mobile network in key strategic regions in Russia with significant improvements of its data network and stable high quality in voice. Now 73% of all 3G base stations in Russia are connected via IP, an increase of 46 p.p. YoY. The amount of 3G base stations increased by 38% YoY to more than 24 thousand. The quality of the mobile data network in Moscow is improving fast to be on par with competition by the end of 2013. End-user speeds increased 122% YoY with simultaneous 350% traffic growth while 93% of the 3G stations is connected via IP, with a 190% YoY increase in 3G base stations.

VimpelCom continues to expand its network of owned mono-brand stores and now owns more than 1,150 stores at the end of 3Q13. The Company aims to add more stores in the fourth quarter of the year. One of the benefits of an increased number of owned mono-brand stores is that VimpelCom will be able to offer better customer service and provide an improved product offering to subscribers, which reduces churn.

In September, VimpelCom announced the appointment of Mikhail Slobodin as the new Head of the Russian Business Unit, succeeding Anton Kudryashov, who was promoted to the Group Executive Board as Chief Group Business Development and Portfolio Officer. Other strategic appointments made in the Russian Business Unit in October included Nikolay Ivanov as the new Chief Financial Officer and Artem Nitz as Chief Strategy Officer. The strengthened management team will continue the implementation of the already launched strategic initiatives to ensure continued growth of the Russian business.

KEY DEVELOPMENTS 3Q13

  • Total revenue in Russia grew 1% YoY to RUB 75.4 billion.
  • Mobile revenues increased 1% YoY to RUB 62.4 billion, with mobile service revenues up 3% YoY.
  • Fixed-line revenues increased 3% YoY to RUB 13.0 billion, with fixed-line service revenues up 3% YoY.
  • EBITDA was stable YoY at RUB 32.1 billion.
  • EBITDA margin was 42.6%.
  • The mobile subscriber base increased 3% YoY to 58.1 million; mobile broadband subscribers increased 20% YoY to 3.0 million. The fixed broadband subscriber base was stable YoY at 2.3 million.
  • Mobile ARPU declined slightly YoY to RUB 349.
  • Mobile data traffic grew 106% YoY.
  • LTM CAPEX/Revenues was 19%. The Company expects CAPEX/Revenues to increase to up to 22% in FY13. VimpelCom remains on track to deliver continued improvement in network quality to support Russian's growth of mobile data.

RUSSIA KEY INDICATORS 

RUB mln


3Q13

3Q12

YoY


9M13

9M12

YoY

Total operating revenues


75,354

74,458

1%


219,250

211,738

4%

Total operating expenditures


43,223

42,278

2%


126,307

121,638

4%

EBITDA


32,131

32,180

0%


92,943

90,100

3%

EBITDA margin


42.6%

43.2%

-


42.4%

42.6%

-

Capex


12,946

10,288

26%


30,921

25,623

21%

Capex / revenues


17%

14%

-


14%

12%

-










Mobile









Mobile total operating revenues


62,395

61,842

1%


181,766

175,343

4%

- of which mobile data


8,054

6,210

30%


22,897

17,293

32%

Mobile subscribers ('000)


58,103

56,181

3%


58,103

56,181

3%

- of which mobile broadband ('000)


3,012

2,507

20%


3,012

2,507

20%

Mobile ARPU (RUB)


349

352

-1%





MOU (min)


290

282

3%














Fixed-line









Fixed-line total operating revenues


12,960

12,617

3%


37,484

36,395

3%

Fixed-line broadband revenues


3,119

2,891

8%


9,479

8,571

11%

Fixed-line broadband subscribers ('000)


2,302

2,294

0%


2,302

2,294

0%

Fixed-line broadband ARPU (RUB)


443

421

5%





 

BUSINESS UNIT ITALY - FINANCIAL AND OPERATING RESULTS

  • Continued outperformance despite highly competitive market environment
  • Total revenues at EUR 1.25 billion down 6% YoY; excluding MTR impact, total revenues declined 1%
  • EBITDA margin increases to 40.6%; EBITDA down 6%; excluding MTR impact, EBITDA down 4%
  • Mobile subscriber base increased 4% YoY to 22.4 million
  • Strong data revenue growth: mobile Internet up 44% YoY and fixed broadband up 8% YoY

In Italy, WIND continued to outperform its competitors in 3Q13 despite the fierce competitive environment, particularly in July and August. In September, WIND and the two incumbents did not renew their aggressive summer promotions, leading to a more stable mobile market.

Total revenues in 3Q13 decreased 6% YoY, primarily due to the competitive pressure on prices and the two cuts in mobile termination rates which occurred in 2013. Excluding the MTR impact total revenues declined 1%.

Mobile service revenues in 3Q13 decreased 7%, as a result of the aforementioned MTR cuts, net of which they would have been stable, and of the intensified price competition witnessed during July and August. WIND's mobile subscriber base increased 4% YoY driven by the success of its All-Inclusive bundles which are characterized by the simplicity and transparency of the offerings.

WIND continued to deliver solid gross adds in 3Q13 although these were slightly below those posted in previous months as a result of lower promotions which in turn led to lower subscribers acquisition costs. The more rational market also resulted in lower churn for WIND in September leading to a positive performance on net adds.

In fixed-line, service revenues decreased 7%, mainly due to the decline in the overall customer base as a result of the new strategy focused on higher margin LLU customers and less expensive pull sales channels. The performance was also negatively impacted by the EUR 7 million site sharing revenues reclassified from service revenues in order to lower rental costs. The strategy continues to deliver solid results with a substantial increase in fixed-line marginality.

In 3Q13, WIND posted strong results in its data offerings with mobile Internet revenues up 44% YoY and fixed broadband revenues increasing by 8% YoY. Mobile broadband consumer subscribers grew 64% YoY, while fixed LLU broadband customers remained stable.

EBITDA in 3Q13 declined by 6% YoY, due to the above mentioned intensified price competition faced in the mobile market and MTR cuts. Excluding the MTR impact, EBITDA declined 4%. EBITDA margin in 3Q13 increased slightly YoY (+0.2 p.p.) to 40.6%.

In 3Q13, LTM operational cash flow, defined as EBITDA minus CAPEX, remained strong and increased over the previous year by 2%.

KEY DEVELOPMENTS 3Q13

  • Total revenues declined 6% YoY to EUR 1,250 million; excluding MTR impact total revenues declined by 1%.
  • EBITDA declined 6% to EUR 507 million, with margin improving to 40.6%.
  • CAPEX totaled EUR 153 million, which was invested primarily in the expansion of mobile HSPA+ coverage, capacity, and performance, as well as in the backhaul capacity to support the strong data growth.
  • Mobile customer base increased 4% YoY to 22.4 million subscribers. Mobile broadband consumer subscribers grew 64% YoY.
  • Mobile data ARPU increased by 16% to EUR 4.7, accounting for 37% of the total ARPU. Total mobile ARPU declined to EUR 12.5, as a result of the intense competitive environment that negatively impacted prices in July and August coupled with the two MTR cuts. Additionally, ARPU was impacted by the ongoing success of WIND's data-only SIM card offerings for tablets, PCs and dongles, which do not generate voice revenues.
  • In fixed-line, LLU broadband and dual play subscribers both remained stable at 1.85 million.
  • Fixed-line ARPU declined marginally to EUR 30.0 with fixed Broadband ARPU increasing 9% YoY to EUR 20.4.

ITALY KEY INDICATORS

EUR mln


3Q13 

3Q12 

YoY


9M13 

9M12 

YoY

Total operating revenues


1,250

1,329

-6%


3,746

4,058

-8%

Total operating expenditures


743

792

-6%


2,303

2,510

-8%

EBITDA


507

537

-6%


1,443

1,549

-7%

EBITDA margin


40.6%

40.4%

-


38.5%

38.2%

-

Capex (1)


153

222

-31%


498

658

-24%

Capex (1)/ revenues


12%

17%

-


13%

16%

-










Mobile









Total revenues 


926

959

-3%


2,741

2,957

-7%

Subscribers ('000)


22,394

21,455

4%


22,394

21,455

4%

- of which mobile broadband ('000) (2)


7,760

4,734

64%


7,760

4,734

64%

ARPU (€)


12.5

14.0

-11%





MOU (min)


240

202

19%














Fixed









Total revenues 


325

370

-12%


1,005

1,101

-9%

Total voice subscribers ('000)


3,002

3,138

-4%


3,002

3,138

-4%

Total fixed-line ARPU (€)


30.0

30.7

-2%





Broadband subscribers ('000)


2,191

2,216

-1%


2,191

2,216

-1%

Broadband ARPU (€)


20.4

18.7

9%





Dual-play subscribers ('000)


1,853

1,854

0%


1,853

1,854

0%


1)

CAPEX excludes EUR 136 million of non-cash increase in Intangible Assets related to the contract with Terna in relation to the Right of Way of WIND's backbone in 9M13. CAPEX 2012 includes LTE license costs

2)

Mobile broadband include Consumer customers that have Performed at least one mobile Internet event in the previous Month on 2.5G/3G/3.5G

 

BUSINESS UNIT AFRICA & ASIA – FINANCIAL AND OPERATING RESULTS 

  • Revenue of USD 869 million, an organic decline of 1%, impacted by regulatory and governmental actions
  • EBITDA declined 1%  YoY organically, leading to an EBITDA margin of 47.7%
  • Subscriber base increased 4% to 87.2 million, driven by steady growth in Pakistan and Bangladesh

Revenue in the Africa & Asia business unit decreased 1% YoY organically to USD 869 million, due to the negative impact of regulatory and governmental actions. EBITDA declined 1% YoY organically at USD 415 million. However, EBITDA included one-off items in total of USD 7 million; a restructuring charge for Global Telecom Holding and rebranding cost associated with Mobilink, Pakistan. Without these one-offs, EBITDA would have been stable YoY organically. Reported results in US dollar terms were adversely affected by local currency devaluation against the US dollar, mainly in Pakistan, which resulted in a reported revenue decline of 4% YoY and an EBITDA decline of 2% YoY. The subscriber base in the Africa & Asia business unit increased 4% to 87.2 million.

ALGERIA ("DJEZZY")
Djezzy's revenue were stable YoY in local currency, driven by higher mobile data revenues EBITDA decreased 2% YoY, due to the lack of competitive pricing plans for B2B and high-value customers, which led to nearly flat revenues YoY, in parallel with the increase in HR and rental costs. Djezzy was awarded a provisional 3G license on October 14, 2013. The final license with the relevant coverage obligations are expected to be granted after payment of fees, satisfaction of conditions indicated in the tender documents and receipt of clearances and approvals from various governmental authorities. The license will cost DZD 3 billion (approx. USD 40 million) and will be valid for 15 years. Djezzy has received an exceptional approval from the Bank of Algeria, allowing it to make foreign payments to acquire equipment exclusively dedicated to 3G technologies. Djezzy's subscribers' base grew 2% YoY to 17.0 million customers with a market share of 53%.

PAKISTAN ("MOBILINK")
Both Revenue and EBITDA increased 5% YoY, driven by higher VAS, data and other revenues alongside a higher subscriber base, which grew 4% YoY to 37.4 million customers with a stable YoY ARPU. Growth in subscribers resulted from continued management of churn coupled with a focus on reactivation offers, the launch of competitive bundles and data products. The political and economic landscape, coupled with harsh weather conditions and floods, impacted the operating environment during 3Q13, further aggravated by a power shortage.

The government increased commercial electricity tariffs by 30% effective October 1, 2013. At the same time, the government increased petroleum prices by 5% to PKR 108/liter. Effective July 1, 2013, withholding tax on recharge was increased by 5% to 15%. The devaluation of the local currency against the US dollar continued. After the PTA Chairman took charge, the preliminary process for the 3G spectrum auction was initiated.

BANGLADESH ("BANGLALINK")
In 3Q13, banglalink subscribers grew 5% YoY to 28.1 million customers. Revenue decreased 15%, due to lower usage per subscriber, affected by the implementation of regulatory directives to deactivate suspected VoIP customers. As previously communicated, the deactivation of suspected VoIP customers, in compliance with regulations set by BTRC, is expected to have a prolonged negative impact during 2013. In addition, fifteen days of national strikes during 3Q13 negatively impacted the business. EBITDA grew 5% YoY despite the YoY decline in revenues. EBITDA growth was supported by savings on G&A and network costs, and lower SIM tax subsidy. On September 8, 2013, banglalink was officially announced as one of the winners of the 3G spectrum auction, conducted by BTRC. The total price for the 5MHz of 3G spectrum acquired, was USD 110 million, inclusive of 5% VAT and the license is valid for 15 years. The government will allow banglalink to offer LTE and 4G services over its 3G spectrum, as well as on the existing 2G spectrum, subject to permissions. banglalink launched 3G services on October 10, 2013. The government directed all mobile operators to complete the MNP process within seven months effective June 13, 2013. Mobile operators were instructed to finalize the details of the MNP process and governance modality jointly. However, MNOs have responded that timing is not appropriate considering the 3G process and the timeline to implement MNP is not feasible and the timeline should be set realistically only after consultation.

SOUTH EAST ASIA
After the sale of Vietnam in 2012 and Cambodia in April 2013, Laos is the only operator remaining from our South East Asia cluster. Revenues in Laos decreased slightly YoY,  as result of a lower subscriber base.

AFRICA & ASIA* KEY INDICATORS

USD mln


 3Q13 

 3Q12 

YoY


 9M13 

 9M12 

YoY

Total operating revenues


869

904

-4%


2,643

2,784

-5%

Total operating expenditures


454

480

-5%


1,376

1,470

-6%

EBITDA


415

424

-2%


1,268

1,314

-4%

EBITDA margin


47.7%

46.9%

-


48.0%

47.2%

-

Capex **


190

57

233%


289

200

44%

Capex / revenues


22%

6%

-


11%

8%

-

Mobile Subscribers ('000)***


87,213

84,168

4%


87,213

84,168

4%



*

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

**

CAPEX incl. USD 110 million for 3G license in Bangladesh

***

Following the sale of Vietnam and Cambodia the subscriber numbers for 2012 exclude Vietnam and Cambodia subscribers. In addition, the subscriber base in Algeria has been adjusted retroactively for the technical issue

 

AFRICA & ASIA BUSINESS UNIT: COUNTRY DETAIL

ALGERIA

DZD bln


 3Q13 

 3Q12 

YoY


 9M13 

 9M12 

YoY

Total operating revenues


36

36

0%


107

106

1%

EBITDA


21

21

-2%


63

63

-1%

EBITDA margin


57.2%

58.6%



58.8%

59.6%


 

PAKISTAN

PKR bln


 3Q13 

 3Q12 

YoY


 9M13 

 9M12 

YoY

Total operating revenues


27

26

5%


82

79

5%

EBITDA


12

11

5%


35

34

4%

EBITDA margin


43.1%

43.0%



42.8%

43.1%


 

BANGLADESH

BDT bln


 3Q13 

 3Q12 

YoY


 9M13 

 9M12 

YoY

Total operating revenues


10

12

-15%


29

34

-14%

EBITDA


4

3

5%


11

12

-3%

EBITDA margin


36.3%

29.3%



38.2%

33.8%


 

BUSINESS UNIT UKRAINE – FINANCIAL AND OPERATING RESULTS

  • Revenues decreased 7% YoY to UAH 3.4 billion due to YoY decline in mobile revenues, primarily as customers switched to lower priced bundled tariff plans and lack of up-selling
  • EBITDA declined 10% YoY to UAH 1.7 billion, leading to an EBITDA margin of 49.6%
  • Mobile subscriber base1) grew 6% YoY to 25.9 million

While the Ukraine Business Unit still delivered strong margins during the third quarter, the Company continued to experience significant pressure on results. Due to strong price competition, existing customers switched to lower priced bundled tariff plans, increasing the number of lower ARPU subscribers in the customer base and negatively impacting mobile revenues. The Company expects this pressure to continue for the remainder of the year.

VimpelCom's mobile subscriber base1) in the Ukraine increased 6% YoY to 25.9 million as a result of the improved market offering and regionalized sales efforts.

VimpelCom believes that the issues it is facing are marketing related as the Company operates the highest quality network in Ukraine. The Company is taking further measures to improve mobile service revenue trends. During the quarter, VimpelCom introduced a new tariff plan and cancelled the obligatory UAH 40 top-up rule, which was installed for most of its subscriber base, but was not a commercial success. The focus of the Company will be on customer excellence for the current subscriber base, where the Company will optimize offers to each client's segment needs. VimpelCom also discontinued sales under the Djuice brand, which focused on low-end subscribers, and the Company will entice subscribers to move to Kyivstar by offering more value.

In addition to these measures, VimpelCom is optimizing the organizational structure in order to improve efficiency and effectiveness and maximize operating cash flows.

KEY DEVELOPMENTS 3Q13



  • Total revenues decreased 7% YoY to UAH 3.4 billion.
  • Mobile revenues decreased 8% YoY to UAH 3.1 billion primarily due to lower mobile voice revenues following reconnection of existing customers to previously launched price-attractive offers, but also due to decreased sales of equipment and accessories. ARPU declined by 12% YoY to UAH 38.
  • Fixed-line revenues were up 9% YoY as a result of strong growth in fixed residential broadband (FTTB) revenue. As reported in previous quarters, FTTB revenue continued to outgrow the market, increasing 50% YoY. The increase was driven by growth in the fixed broadband subscriber base of 31% YoY to 723 thousand and growth of fixed broadband ARPU of 11% YoY to UAH 49.
  • Despite EBITDA decreased 10% YoY to UAH 1.7 billion, EBITDA margin was still at a high level of 49.6%. The decline in margin was mainly due to higher commercial costs associated with increased sales and increased Network & IT costs, related to higher frequency fees and inflation, which was partially offset by savings in HR costs.
  • Quarterly churn increased 0.3 p.p. to 8.0% in 3Q13, which was driven by the move to lower revenue bundled tariff plans.
  • CAPEX totaled UAH 525 million in 3Q13 and LTM CAPEX/Revenues was at the efficient level of 14%.


1)

Business Unit Ukraine has adjusted the definition for active subscriber base to align with the rest of the VimpelCom Group, which led to a decline of the subscriber base by 1.4 million. This does not impact historically reported Revenues and EBITDA, but positively affected MOU and ARPU.



UKRAINE KEY INDICATORS


UAH mln


 3Q13 

 3Q12 

YoY


 9M13 

 9M12 

YoY

Total operating revenues


3,359

3,613

-7%


9,722

9,939

-2%

Total operating expenditures


1,694

1,765

-4%


4,970

4,886

2%

EBITDA


1,666

1,849

-10%


4,752

5,053

0%

EBITDA margin


49.6%

51.2%

-


48.9%

50.8%

-

Capex


525

428

23%


1,243

1,246

0%

Capex / revenues


16%

12%

-


13%

13%

-










Mobile









Mobile total operating revenues


3,069

3,346

-8%


8,902

9,190

-3%

Mobile subscribers ('000)


25,905

24,532

6%


25,905

24,532

6%

Mobile ARPU (UAH)


38.2

43.4

-12%





MOU (min)


497

514

-3%














Fixed-line









Fixed-line total operating revenues


290

267

9%


820

749

10%

Fixed-line broadband revenues


104

69

50%


301

192

56%

Fixed-line broadband subscribers ('000)


723

551

31%


723

551

31%

Fixed-line broadband ARPU (UAH)


48.8

43.8

11%






*   Subscriber base 2012 has been adjusted for the alignment of the active subscriber base definition


BUSINESS UNIT CIS – FINANCIAL AND OPERATING RESULTS

  • Revenues increased 9% YoY organically
  • EBITDA reached USD 246 million with organic growth of 6% YoY
  • EBITDA margin declined 1.0 p.p to 48.0%
  • Mobile subscribers increased 8% YoY to 24.9 million
  • Mobile data subscriber base grew 16% YoY to 13.0 million; mobile data revenue growth of 57% YoY

The CIS Business Unit continued to perform strongly in 3Q13, delivering high single-digit YoY organic growth in revenue.

VimpelCom increased its mobile subscriber base in the CIS business by 8% YoY, driven by 12% growth in subscribers in Uzbekistan and 5% growth in Kazakhstan.

  • Total revenues increased organically by 9% YoY. Reported revenues grew 7% to USD 513 million,  negatively affected by a one-off adjustment in Kazakhstan totaling USD 2 million, related to a correction in USB-dongle sales.
  • Total mobile revenues increased organically by 7% YoY in 3Q13.
  • Fixed-line revenues increased organically by 10% YoY due to strong growth in Kazakhstan.
  • EBITDA grew 6% organically and 5% on a reported basis mainly due to strong mobile revenue growth in Uzbekistan. Excluding the one-off adjustment of USD 11 million in Kazakhstan related to USB-dongle sales which negatively affected EBITDA and correcting for the positive one-off adjustment of USD 13 million reported in 3Q12 related to the release of a provision, EBITDA organic growth was 17% YoY in 3Q13.
  • EBITDA margin declined 1.0 p.p. YoY to 48.0% in 3Q13, but remains at a high level.
  • LTM CAPEX/Revenues was 23%.

KAZAKHSTAN
The telecommunications market in Kazakhstan remains highly competitive and, in response, VimpelCom is transitioning its subscriber base to bundled tariff plans. The Company's competitive market position improved as a result of its attractive value proposition in the market and the subscriber transition is progressing according to plan.

Revenues in Kazakhstan increased by 4% YoY in 3Q13, driven by a 53% YoY increase in fixed-line revenues, while mobile revenues grew by 1% YoY. Excluding the one-off adjustment described above, total revenue growth would have been 5% YoY. Mobile data revenues increased 42% YoY as a result of the Company´s focus on increasing data usage for small screens. The subscriber base increased 5% YoY to 9.0 million subscribers. Churn improved during the quarter, supported by the introduction of a revenue share model with distributors. ARPU decreased by 4% YoY due to declining voice revenues, partly offset by strong mobile data revenue growth. EBITDA declined 11% YoY and EBITDA margin decreased 7.7 p.p. to 43.9%, caused by the one-offs described above.

UZBEKISTAN
In Uzbekistan, VimpelCom continued to deliver strong YoY results in 3Q13. Revenue increased 29% YoY, driven by 12% YoY growth in the subscriber base and a 12% YoY improvement in ARPU due to growth in high value subscribers and increasing mobile data revenues. EBITDA grew 51% YoY and EBITDA margin was 66.0%, a strong increase from 56.2% in 3Q12. These results were supported by the continuing revenue growth and control of structural OPEX. The primary focus in Uzbekistan is to sustain quality of service and further improve network capacity.

KYRGYZSTAN
Kyrgyzstan continued to deliver strong revenue and EBITDA growth in a highly competitive environment. Revenues increased organically by 25% YoY in 3Q13, primarily supported by growth in interconnect revenue. Additionally, mobile data revenue grew 40% YoY as a result of initiatives aimed at stimulating data usage for small screens. The subscriber base increased by 5% due to attractive on-net and data offerings. EBITDA grew organically by 15% YoY and EBITDA margin was 51.0%, down 4.7 p.p. YoY.

ARMENIA
Revenues in Armenia declined organically by 8% YoY in 3Q13 primarily due to decreasing fixed-line and mobile voice revenues, as well as lower sales of mobile equipment. The mobile segment faced strong competition and, while mobile data revenue increased 19%, it did not fully compensate for the 15% YoY decrease in mobile voice revenue. EBITDA declined 10% YoY and EBITDA margin decreased 1.1 p.p. to 42.4% due to decreasing service revenues.

TAJIKISTAN
In Tajikistan, revenues increased organically by 42% YoY in 3Q13, as a result of increased international interconnect revenue from Russia, while EBITDA increased by 48% YoY. EBITDA margin increased 1.6 p.p. to 53.8% in 3Q13. The mobile subscriber base in Tajikistan increased by 29% YoY and mobile ARPU increased by 17%, mainly due to growth in interconnect revenue.

GEORGIA
VimpelCom's market position strengthened further in Georgia in 3Q13. Subscriber growth was 11% YoY, leading to a 6% YoY increase in revenues and a 23% YoY increase in local currency EBITDA. EBITDA margin increased 3.8 p.p. YoY to 33.6%, primarily due to a higher service margin and on-going operational excellence program implementation.

CIS* KEY INDICATORS










USD mln


3Q13

3Q12

YoY


9M13

9M12

YoY

Total operating revenues


513

478

7%


1,445

1,268

14%

Total operating expenditures


267

244

9%


739

691

7%

EBITDA


246

234

5%


706

577

22%

EBITDA margin


48.0%

49.0%

-


48.8%

45.5%

-

Capex


129

90

43%


308

256

20%

Capex / revenues


25%

19%

-


21%

20%

-










Mobile









Mobile subscribers ('000)


24,919

22,985

8%


24,919

22,985

8%

- of which mobile broadband ('000)


13,013

11,173

16%


13,013

11,173

16%










Fixed









Fixed-line broadband subscribers ('000)


349

277

26%


349

277

26%

Fixed-line broadband revenues


15

11

32%


44

32

38%



*

CIS operations include operations in Kazakhstan, Uzbekistan, Armenia, Kyrgyzstan, Tajikistan, and Georgia. For details per country unit please see Attachment B

 

CIS BUSINESS UNIT: COUNTRY DETAIL

KAZAKHSTAN











KZT mln


3Q13

3Q12

YoY


9M13

9M12

YoY

Total operating revenues


34,068

32,626

4%


94,019

91,609

3%

EBITDA


14,966

16,828

-11%


43,330

43,990

-2%

EBITDA margin


43.9%

51.6%

-


46.1%

48.0%

-

 

UZBEKISTAN











USD mln


3Q13

3Q12

YoY


9M13

9M12

YoY

Total operating revenues


176

137

29%


500

305

64%

EBITDA


116

77

51%


326

157

108%

EBITDA margin


66.0%

56.2%

-


65.3%

51.5%

-

 

CONFERENCE CALL INFORMATION
On November 6, 2013, the Company will host an analyst & investor conference call on its third quarter results at 2:00 pm CET. The call and slide presentation may be accessed at http://www.vimpelcom.com.

2:00 pm CET investor and analyst conference call
US call-in number: +1 (877) 616-4476

International call-in number: + 1 (402) 875-4763

The conference call replay and the slide presentations webcast will be available until November 13, 2013. The slide presentation will also be available for download on the Company's website.

Investor and analyst call replay
US Replay number: +1 (855) 859-2056
Confirmation Code: 64968743

International replay: +1 (404) 537-3406
Confirmation Code: 64968743

DISCLAIMER
This press release 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, expected capital expenditures, network developments in Russia, Italy's future operating cash flow position, the grant of a 3G license to Orascom Telecom Algeria (OTA), the timing and amount of future payments of dividends by the Company and its ability to realize its strategic initiatives in the various countries of operation. The forward-looking statements included in this presentation are based on management's best assessment of the Company's strategic and financial position and of future market conditions and trends. These discussions involve risks and uncertainties. The actual outcome may differ materially from these statements as a result of continued volatility in the economies in our markets, unforeseen developments from competition, governmental regulation of the telecommunications industries, general political uncertainties in our markets and/or litigation with third parties. There can be no assurance that such risks and uncertainties will not have a material adverse effect on the Company. Certain factors that could cause actual results to differ materially from those discussed in any forward-looking statements include the risk factors described in the Company's Annual Report on Form 20-F for the year ended December 31, 2012 filed with the U.S. Securities and Exchange Commission (the "SEC") and other public filings made by the Company with the SEC, which risk factors are incorporated herein by reference. The Company disclaims any obligation to update developments of these risk factors or to announce publicly any revision to any of the forward-looking statements contained in this release, or to make corrections to reflect future events or developments.

ABOUT VIMPELCOM LTD
VimpelCom is one of the world's largest integrated telecommunications services operators providing voice and data services through a range of traditional and broadband mobile and fixed technologies in Russia, Italy, Ukraine, Kazakhstan, Uzbekistan, Tajikistan, Armenia, Georgia, Kyrgyzstan, Laos, Algeria, Bangladesh, Pakistan, Burundi, Zimbabwe, Central African Republic and Canada. VimpelCom's operations around the globe cover territory with a total population of approximately 753 million people. VimpelCom provides services under the "Beeline", "Kyivstar", "djuice", "WIND", "Infostrada" "Mobilink", "Leo", "banglalink", "Telecel", and "Djezzy" brands. As of September 30, 2013 VimpelCom had 219 million mobile subscribers on a combined basis. VimpelCom is traded on the NASDAQ Global Stock Market under the symbol (VIP). For more information visit: http://www.vimpelcom.com.

The Company's corporate website (www.vimpelcom.com) was awarded the 'Investor Relations Standard of Excellence' in the Web Marketing Association's 2013 WebAwards and the Gold Award in the telecommunications category at the 2013 Stevie International Business Awards.

CONTENT OF THE ATTACHMENT TABLES




Attachment A          

VimpelCom Ltd Financial Statements

21




Attachment B           

Country units key indicators CIS and Africa & Asia

24




Attachment C           

Reconciliation Tables

27


Average Rates of Functional Currencies to USD





Attachment D          

WIND Telecomunicazioni group condensed financial statement of income

28




Attachment E         

Definitions

29




For more information on financial and operating data for specific countries, please refer to the supplementary file Factbook3Q2013.xls on VimpelCom's website at http://vimpelcom.com/ir/financials/results.wbp.

ATTACHMENT A: VIMPELCOM LTD INTERIM FINANCIAL STATEMENTS

VIMPELCOM LTD UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF INCOME








USD mln


3Q13

3Q122


9M13

9M122

Total operating revenues


5,685

5,747


16,994

17,111

of which other revenues


74

33


172

151








Operating expenses







Service costs1


1,482

1,574


4,497

4,563

Selling, general and administrative expenses


1,729

1,643


5,250

5,226

Depreciation


726

721


2,240

2,168

Amortization


441

507


1,333

1,561

Impairment loss


45

-


67

-

Loss on disposals of non-current assets


29

47


43

131

Total operating expenses


4,452

4,492


13,430

13,649








Operating profit


1,233

1,255


3,564

3,462

Finance costs


547

507


1,618

1,507

Finance income


(21)

(35)


(70)

(116)

Other non-operating losses/(gains)


(5)

29


(22)

31

Shares of loss of associates and joint ventures accounted for using the equity method


29

(12)


112

16

Net foreign exchange gain


18

(36)


(44)

(100)








Profit before tax


665

802


1,970

2,124








Income tax expense


390

225


807

711








Profit for the period


275

577


1,163

1,413

Non-controlling interest


(20)

(39)


73

(69)

Net income attributable to VimpelCom shareholders


255

538


1,236

1,344



1)

Service costs include costs related to equipment and accessories

2)

Income statement 2012 has been amended to reflect classification of certain operating costs at the Group level without any impact on net income, EBITDA and   performance of the business unit



 

ATTACHMENT A: VIMPELCOM LTD INTERIM FINANCIAL STATEMENTS

VIMPELCOM LTD UNAUDITED INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION

USD mln


30 September 2013


30 June 2013






Assets





Non-current assets





Property and equipment


14,896


14,680

Intangible assets


9,941


9,968

Goodwill


16,716


16,516

Investments in associates and joint ventures


464


483

Deferred tax asset


387


366

Financial assets


885


1,094

Other non-financial assets


28


28

Total non-current assets


43,317


43,135






Current assets





Inventories


214


218

Trade and other receivables


2,467


2,480

Other non-financial assets


1,292


1,403

Current income tax asset


280


239

Other financial assets


463


387

Cash and cash equivalents


4,890


4,551

Total current assets


9,606


9,278






Assets classified as held for sale


128


134






Total assets


53,051


52,547






Equity and liabilities





Equity





Equity attributable to equity owners of the parent


14,255


13,999

Non-controlling interests


407


468

Total equity


14,662


14,467






Non-current liabilities





Financial liabilities


27,034


27,058

Provisions


555


587

Other non-financial liabilities


411


331

Deferred tax liability


1,331


1,200

Total non-current liabilities


29,331


29,176






Current liabilities





Trade and other payables


3,925


4,011

Dividend payables


-


-

Other non-financial liabilities


2,264


2,197

Other financial liabilities


2,408


2,304

Current income tax payable


248


155

Provisions


149


177

Total current liabilities


8,994


8,844






Liabilities associated with assets held for sale


64


60






Total equity and liabilities


53,051


52,547

 

ATTACHMENT A: VIMPELCOM LTD INTERIM FINANCIAL STATEMENTS

VIMPELCOM LTD UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

USD mln


3Q13

3Q12
Restated


9M13

9M12
Restated*

Operating activities







 Profit after tax 


275

577


1,163

1,413

 Income Tax Expenses 


390

225


807

711

 Profit before tax 


665

802


1,970

2,124

 Non-cash adjustment to reconcile profit before tax to net

operating cash flows: 







Depreciation


726

721


2,240

2,168

Amortization


441

507


1,333

1,561

Impairment loss


45

-


67

-

Loss From Disposal Of Non Current Assets


29

47


43

131

Finance income


(21)

(35)


(70)

(116)

Finance cost


547

507


1,618

1,507

Other Non Operating Losses/ (Gain)


(5)

29


(22)

31

Net Foreign Exchange Gain


18

(36)


(44)

(100)

Share Of Loss/ (Gain) Of Associates And Joint Ventures


29

(12)


112

16

Movements in provisions and pensions


31

1


83

14

Cash from operations


2,505

2,531


7,330

7,336








Working capitals adjustments:







 Change in trade and other receivables and prepayments 


51

(78)


39

35

 Change in inventories 


3

26


(55)

19

 Change in trade and other payables 


39

124


(453)

(213)

Changes in working capital


93

72


(469)

(159)








Net interest paid


(634)

(362)


(1,659)

(1,314)

Income tax paid


(288)

(243)


(861)

(907)

Net cash from operating activities


1,675

1,998


4,341

4,956








Proceeds from sale of property, plant and equipment and

intangible assets


3

5


36

20

Purchase of property, plant and equipment and intangible

assets


(972)

(967)


(2,613)

(2,747)

Receipts from/(payments on) deposits and loans granted


(39)

(183)


(219)

(694)

Disposal of subsidiaries, net of cash disposed


26

5


80

(77)

Other


3

3


6

5

Net cash used in investing activities


(979)

(1,137)


(2,710)

(3,493)








Acquisition of non-controlling interest


0

-


(12)

(9)

Gross proceeds from borrowings


438

432


4,166

2,627

Repayment of borrowings


(754)

(913)


(3,810)

(3,083)

Dividends paid to equity holders


(0)

-


(3,281)

-

Proceeds from sale of treasury stock


-

-


-

3

Share capital issued and paid


-

-


1,392

-

Net cash from/(used in) financing activities


(316)

(481)


(1,545)

(462)








Net increase in cash and cash equivalents


381

380


86

1,001



*

The amount of Interest paid was amended to reflect its proper classification without any impact on Net cash from operating activities

 

ATTACHMENT B: COUNTRY UNITS KEY INDICATORS

AFRICA & ASIA BUSINESS UNIT: COUNTRY DETAIL

ALGERIA



DZD bln

3Q13  

3Q12  

YoY  

9M13  

9M12  

YoY

Total operating revenues  

36

36

0%

107

106

1%

EBITDA  

21

21

-2%

63

63

-1%

EBITDA margin  

57.2%

58.6%


58.8%

59.6%


Capex (USD)  

7

6

13%

33

26


Capex / revenues  

2%

1%


2%

2%









Mobile







Subscribers ('000)  

17,038

16,750

2%

17,038

16,750

2%

ARPU (DZD)  

680

710

-4%




MOU (min)  

216

271

-20%




 

PAKISTAN










PKR bln


 3Q13 

 3Q12 

YoY


 9M13 

 9M12 

YoY

Total operating revenues


27

26

5%


82

79

5%

EBITDA


12

11

5%


35

34

4%

EBITDA margin


43.1%

43.0%



42.8%

43.1%


Capex (USD)


52

29

84%


100

84

19%

Capex / revenues 


20%

11%



12%

10%











Mobile









Subscribers ('000)


37,365

36,074

4%


37,365

36,074

4%

ARPU (PKR)


229

231

-1%





MOU (min)


222

212

5%





 

BANGLADESH










BDT bln


 3Q13 

 3Q12 

YoY


 9M13 

 9M12 

YoY

Total operating revenues


10

12

-15%


29

34

-14%

EBITDA


4

3

5%


11

12

-3%

EBITDA margin


36.3%

29.3%



38.2%

33.8%


Capex (USD)*


127

20

549%


152

84


Capex / revenues 


99%

14%



40%

20%











Mobile









Subscribers ('000)


28,101

26,776

5%


28,101

26,776

5%

ARPU (BDT)


121

149

-19%





MOU (min)


189

225

-16%





*   Including USD 110 million for 3G license

 

SUB SAHARAN AFRICA (TELECEL GLOBE)










USD mln


 3Q13 

 3Q12 

YoY


 9M13 

 9M12 

YoY

Total operating revenues


23

26

-11%


63

71

-12%

EBITDA


(3)

11

-127%


7

27

-74%

EBITDA margin


n.m.

41.2%



11.7%

34.4%











Mobile









Subscribers ('000)


4,423

4,231

4%


4,423

4,231

4%

 

SEA (CONSOLIDATED)










USD mln


 3Q13 

 3Q12 

YoY


 9M13 

 9M12 

YoY

Total operating revenues


7

12

-46%


26

48

-45%

EBITDA


2

(1)

-299%


3.8

-10

-139%

EBITDA margin


30.5%

n.m.



14.4%

n.m.











Mobile









Subscribers ('000)*


286

337

-15%


286

337

-15%



*

Following the sale of Vietnam and Cambodia the subscriber numbers for 2012 exclude Vietnam and Cambodia subscribers

 

CIS BUSINESS UNIT: COUNTRY DETAIL

KAZAKHSTAN










KZT mln


3Q13

3Q12

YoY


9M13

9M12

YoY

Total operating revenues


34,068

32,626

4%


94,019

91,609

3%

EBITDA


14,966

16,828

-11%


43,330

43,990

-2%

EBITDA margin


43.9%

51.6%



46.1%

48.0%


Capex (USD)


39

52

-24%


101

110

-8%

Capex / revenues


18%

24%



16%

18%











Mobile









Subscribers ('000)


9,040

8,596

5%


9,040

8,596

5%

ARPU (KZT)


1,141

1,187

-4%





MOU (min)


311

222

40%





 

ARMENIA










AMD mln


3Q13

3Q12

YoY


9M13

9M12

YoY

Total operating revenues


15,237

16,611

-8%


43,901

47,735

-8%

EBITDA


6,468

7,225

-10%


17,919

19,055

-6%

EBITDA margin


42.4%

43.5%



40.8%

39.9%


Capex (USD)


4

4

-13%


7

12

-42%

Capex / revenues


10%

10%



7%

10%











Mobile









Subscribers ('000)


690

803

-14%


690

803

-14%

ARPU (AMD)


3,292

2,994

10%





MOU (min)


377

271

39%





 

UZBEKISTAN










USD mln


3Q13

3Q12

YoY


9M13

9M12

YoY

Total operating revenues


176

137

29%


500

305

64%

EBITDA


116

77

51%


326

157

108%

EBITDA margin


66.0%

56.2%



65.3%

51.5%


Capex (USD)


65

20

227%


159

95

68%

Capex / revenues 


37%

15%



32%

31%











Mobile









Subscribers ('000)


10,328

9,229

12%


10,328

9,229

12%

ARPU (USD)


6

5

12%





MOU (min)


504

543

-7%





 

TAJIKISTAN










USD mln


3Q13

3Q12

YoY


9M13

9M12

YoY

Total operating revenues


44

31

42%


112

79

42%

EBITDA


24

16

48%


56

38

47%

EBITDA margin


53.8%

52.2%



50.2%

48.3%


Capex (USD)


3

5

-40%


11

15

-25%

Capex / revenues 


7%

15%



10%

19%











Mobile









Subscribers ('000)


1,225

947

29%


1,225

947

29%

ARPU (USD)


12

10

17%





MOU (min)


277

242

15%





 

GEORGIA










GEL mln


3Q13

3Q12

YoY


9M13

9M12

YoY

Total operating revenues


40

38

6%


109

95

15%

EBITDA


14

11

23%


34

25

35%

EBITDA margin


33.6%

29.8%



31.0%

26.4%


Capex (USD)


12

2

483%


14

9

57%

Capex / revenues 


48%

10%



21%

16%











Mobile









Subscribers ('000)


1,104

991

11%


1,104

991

11%

ARPU (GEL)


11

12

-7%





MOU (min)


250

251

-1%





 

KYRGYZSTAN










KGS mln


3Q13

3Q12

YoY


9M13

9M12

YoY

Total operating revenues


2,599

2,076

25%


7,151

5,574

28%

EBITDA


1,326

1,156

15%


3,775

3,095

22%

EBITDA margin


51.0%

55.7%



52.8%

55.5%


Capex (USD)


6

7

-17%


15

16

-6%

Capex / revenues 


11%

16%



10%

14%











Mobile









Subscribers ('000)


2,531

2,419

5%


2,531

2,419

5%

ARPU (KGS)


353

285

24%





MOU (min)


310

273

14%





 

CANADA: COUNTRY DETAIL






Mobile


3Q13

3Q12

YoY






Subscribers ('000)


637

510

25%

ARPU (CAD)


30.4

27.9

9%

 

ATTACHMENT C: RECONCILIATION TABLES

RECONCILIATION OF CONSOLIDATED EBITDA OF VIMPELCOM








USD mln


3Q13

3Q12


9M13

9M12

Unaudited














EBITDA


2,474

2,530


7,247

7,322








Depreciation


(726)

(721)


(2,240)

(2,168)

Amortization


(441)

(507)


(1,333)

(1,561)

Impairment loss


(45)

-


(67)

-

Loss on disposals of non-current assets


(29)

(47)


(43)

(131)








EBIT


1,233

1,255


3,564

3,462








Financial Income and Expenses


(526)

(472)


(1,548)

(1,391)

 -  including  finance income


21

35


70

116

 -  including finance costs


(547)

(507)


(1,618)

(1,507)

Net foreign exchange (loss)/gain and others


(42)

19


(46)

53

 -  including Other non-operating (losses)/gains


5

(29)


22

(31)

 -  including Shares of loss of associates and joint ventures accounted for using the equity method


(29)

12


(112)

(16)

 -  including Net foreign exchange gain


(18)

36


44

100








EBT


665

802


1,970

2,124








Income tax expense


(390)

(225)


(807)

(711)








Profit/(loss) for the year


275

577


1,163

1,413








(Profit)/loss for the year attributable to non-controlling interest


(20)

(39)


73

(69)








Profit for the year attributable to the owners of the parent


255

538


1,236

1,344








 

ATTACHMENT C: RECONCILIATION TABLES

RECONCILIATION OF VIMPELCOM CONSOLIDATED NET DEBT 

USD mln


3Q12

2Q13

3Q13

Net debt


22,681

22,622

22,485

Cash and cash equivalents 


3,241

4,551

4,890

Long - term and short-term deposits


715

213

191

Gross debt


26,637

27,386

27,566

Interest accrued related to financial liabilities


451

574

430

Fair value adjustment 


28

-

-

Unamortised fair value adjustment under acquisition method of accounting


817

718

696

Other unamortised adjustments to financial liabilities (fees, discounts etc.)


69

38

43

Derivatives not designated as hedges


429

474

489

Derivatives designated as hedges


178

172

218

Total other financial liabilities


28,609

29,362

29,442

 

AVERAGE RATES OF FUNCTIONAL CURRENCIES TO USD*



Average rates


Closing rates



3Q13

3Q12

YoY


3Q13

FY2012

Delta

Russian Ruble


32.80

32.00

-2.4%


32.35

30.37

-6.1%

Euro


0.75

0.80

6.0%


0.74

0.76

2.5%

Algerian Dinar


80.66

80.76

0.1%


81.69

78.94

-3.4%

Pakistan Rupee


102.97

94.53

-8.2%


106.06

97.14

-8.4%

Bangladeshi Taka


77.74

81.67

5.1%


77.67

79.78

2.7%

Ukrainian Hryvnia


7.99

7.99

0.0%


7.99

7.99

0.0%

Kazakh Tenge


152.91

149.67

-2.1%


153.62

150.74

-1.9%

Armenian Dram


408.77

410.88

0.5%


405.29

403.58

-0.4%

Kyrgyz Som


48.84

47.03

-3.7%


48.62

47.40

-2.5%

*   Functional currencies in Tajikistan, Uzbekistan and Cambodia are USD.

 

ATTACHMENT D: WIND TELECOMUNICAZIONI GROUP CONDENSED STATEMENTS OF INCOME






EUR mln


9M13

9M12

Change

Total Revenue


3,746

4,058

-7.7%

EBITDA


1,443

1,549

-6.8%

D&A


(951)

(838)

13.5%

EBIT


493

712

-30.8%

Financial Income and expenses


(677)

(673)

0.6%

EBT


(185)

39

n.m.

Income Tax


(75)

(127)

-41.3%

Net income


(259)

(88)

n.m.






 

ATTACHMENT E: DEFINITIONS

ARPU (Average Revenue per User) is calculated by dividing service revenue for the relevant period, including revenue from voice-, roaming-, interconnect-, and value added services (including mobile data, SMS, MMS), but excluding revenue from visitors roaming, connection fees, sales of handsets and accessories and other non-service revenue, by the average number of subscribers during the period and dividing by the number of months in that period. For Business Unit Italy visitors roaming revenue is included into service revenues.

Broadband subscribers are the customer contracts that served as a basis for revenue generating activity in the three months prior to the measurement date, as a result of activities including monthly internet access using FTTB and xDSL technologies as well as mobile internet access via WiFi and USB modems using 2.5G/3G/4G/HSDPA technologies. Italian Business Unit measure broadband subscribers based on the number of active contracts signed. Russian Business Unit includes IPTV activities. For CIS subsidiaries mobile broadband customers are those who have performed at least one mobile internet event in the three-month period prior to the measurement date.

Capital expenditures (CAPEX), purchases of new equipment, new construction, upgrades, software, other long lived assets and related reasonable costs incurred prior to intended use of the non-current asset, accounted at the earliest event of advance payment or delivery. Long-lived assets acquired in business combinations are not included in capital expenditures.

EBIT is a non-GAAP measure and is calculated as EBITDA plus depreciation, amortization and impairment loss. Our management uses EBIT as a supplemental performance measure and believes that it provides useful information of earnings of the Company before making accruals for financial income and expenses and Net foreign exchange (loss)/gain and others. Reconciliation of EBIT to net income attributable to VimpelCom Ltd., the most directly comparable IFRS financial measure, is presented above.

EBITDA is a non-GAAP financial measure. EBITDA is defined as earnings before interest, tax, depreciation and amortization. VimpelCom calculates EBITDA as operating income before depreciation, amortization, loss from disposal of non-current assets and impairment loss and includes certain non-operating losses and gains mainly represented by litigation provisions for all of its Business Units except for its Russia Business Unit. The Russia Business Unit's EBITDA is calculated as operating income before depreciation, amortization, loss from disposal of non-current assets and impairment loss. EBITDA should not be considered in isolation or as a substitute for analyses of the results as reported under IFRS. Historically our management used OIBDA (defined as operating income before depreciation, amortization and impairment losses) instead of EBITDA. Following the acquisition of WIND Telecom, our management concluded that EBITDA is a more appropriate measure because it is more widely used amongst European-based analysts and investors to assess the performance of an entity and compare it with other market players. Our management uses EBITDA and EBITDA margin as supplemental performance measures and believes that EBITDA and EBITDA margin provide useful information to investors because they are indicators of the strength and performance of the Company's business operations, including its ability to fund discretionary spending, such as capital expenditures, acquisitions and other investments, as well as indicating its ability to incur and service debt. In addition, the components of EBITDA include the key revenue and expense items for which the Company's operating managers are responsible and upon which their performance is evaluated. EBITDA also assists management and investors by increasing the comparability of the Company's performance against the performance of other telecommunications companies that provide EBITDA information. This increased comparability is achieved by excluding the potentially inconsistent effects between periods or companies of depreciation, amortization and impairment losses, which items may significantly affect operating income between periods. However, our EBITDA results may not be directly comparable to other companies' reported EBITDA results due to variances and adjustments in the components of EBITDA (including our calculation of EBITDA) or calculation measures. Additionally, a limitation of EBITDA's use as a performance measure is that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues or the need to replace capital equipment over time. Reconciliation of EBITDA to net income attributable to VimpelCom Ltd., the most directly comparable IFRS financial measure, is presented above.

EBITDA margin is calculated as EBITDA divided by net operating revenues, expressed as a percentage.

Households passed are households located within buildings, in which indoor installation of all the FTTB equipment necessary to install terminal residential equipment has been completed.

LLU (local loop unbundling), in Italy, this is the regulatory process of allowing multiple telecommunications operators to use connections from Telecom Italia's local exchanges to the customer's premises.

MNP (Mobile number portability) is a facility provided by telecommunications operators which enables customers to keep their telephone numbers when they change operators.

Mobile subscribers are SIM-cards registered in the system as of a measurement date, users of which generated revenue at any time during the three months prior to the measurement date. This includes revenue coming from any incoming and outgoing calls, subscription fee accruals, debits related to service, outgoing SMS, Multimedia Messaging Service (referred to as MMS), data transmission and receipt sessions, but does not include incoming SMS and MMS sent by VimpelCom or abandoned calls. VimpelCom's total number of mobile subscribers also includes SIM-cards for use of mobile Internet service via USB modems and subscribers for WiFi. The number for Italy is based on SIM-cards, users of which generated revenue at any time during the twelve months prior to the measurement date. For the purpose of this earnings release, we include all subscribers of Zimbabwe, which is accounted for as investment at cost, into Business Unit Africa & Asia and subscribers of all our Canada equity investee into Business Unit Europe and North America, both of which are included into total subscribers of VimpelCom.

MOU (Monthly Average Minutes of Use per User) is generally calculated by dividing the total number of minutes of usage for incoming and outgoing calls during the relevant period (excluding guest roamers) by the average number of mobile subscribers during the period and dividing by the number of months in that period. A&A Business Unit measures MOU based on billed minutes

Net debt is a non-GAAP financial measure and is calculated as the sum of interest bearing long-term debt and short-term debt minus cash and cash equivalents, long-term and short-term deposits and fair value hedges. The Company believes that net debt provides useful information to investors because it shows the amount of debt outstanding to be paid after using available cash and cash equivalent and long-term and short-term deposits. Net debt should not be considered in isolation as an alternative to long-term debt and short-term debt, or any other measure of the company financial position. Reconciliation of net debt to long-term debt and short-term debt, the most directly comparable IFRS financial measures, is presented above in the reconciliation tables section.

Net foreign exchange (loss)/gain and others represents the sum of Net foreign exchange (loss)/gain, Equity in net (loss)/gain of associates and Other (expense)/income, net (primarily losses from derivative instruments), and is adjusted for certain non-operating losses and gains mainly represented by litigation provisions. Our management uses Net foreign exchange (loss)/gain and others as a supplemental performance measure and believes that it provides useful information about the impact of our debt denominated in foreign currencies on our results of operations due to fluctuations in exchange rates, the performance of our equity investees and other losses and gains the Company needs to manage to run the business.

Organic growth Revenue and EBITDA are non-GAAP financial measures that reflect changes in Revenue and EBITDA excluding foreign currency movements and other factors, such as business under liquidation, disposals, mergers and acquisitions.  We believe investors should consider these measures as they are more indicative of our ongoing performance and management uses these measures to evaluate the Company's operational results and trends.

Reportable segments, the Company identified Russia, Italy, Africa & Asia, CIS and Ukraine based on the business activities in different geographical areas. Although Georgia is no longer a member of the CIS, consistent with VimpelCom's historic reporting practice VimpelCom continues to include Georgia in its CIS reporting segment. Intersegment revenues are eliminated in consolidation.

Service costs, represents costs directly associated with revenue generating activity such as traffic related expenses, cost of content and sim-cards as well as cost of handsets, telephone equipment and accessories sold.

Selling, general and administrative expenses, represents expenses associated with customer acquisition and retention activities, network and IT maintenance, regular frequency payment, professional and consulting support, rent of premises, utilities, personnel and outsourcing as well as other general and administrative expenses. These expenses do not include personnel costs that have been capitalized as part of long-lived assets.

SOURCE VimpelCom Ltd



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