VimpelCom Delivers Solid Profitable Organic Growth In 2Q12
AMSTERDAM, Aug. 15, 2012 /PRNewswire/ —
KEY RESULTS AND DEVELOPMENTS IN 2Q12(*)
- Revenues of USD 5.7 billion, with organic(1) growth of 4% YoY
- EBITDA of USD 2.5 billion, up 8% organically YoY; double digit growth in Russia, Africa & Asia and CIS
- Results negatively impacted by USD appreciation against operating currencies
- Total mobile subscriber base increased 8% YoY(2) to 208 million
- Positive operational development continues in Business Unit Russia
- Net income increased 83% YoY to USD 488 million
“VimpelCom Ltd.” (“VimpelCom”, “Company” or “Group”) (NYSE: VIP), a leading global provider of telecommunications services, today announces operating and financial results for the quarter ended June 30, 2012.
JO LUNDER, CHIEF EXECUTIVE OFFICER, COMMENTS:
“VimpelCom has made further progress in the second quarter of 2012, with year-on-year organic revenue growth of 4% and organic EBITDA growth of 8%.
In Russia, the positive performance trends are continuing with revenues increasing 8% and EBITDA up 12%. Mobile data revenues grew by 35% and we are ahead of schedule to deliver RUB 5 billion in annualized cost savings. Italy again outperformed its competitors, increasing revenue and subscriber market share. EBITDA was stable, despite a decline in revenue due to termination rate cuts and an expected decline in fixed line revenue, which were offset by strong growth in mobile data revenue. Africa & Asia delivered excellent organic revenue growth of 8% and EBITDA growth of 13%, mainly due to further expansion of the subscriber base and revenues from value added services in Pakistan, Bangladesh and Algeria. Year-on-year the EBITDA margin increased by 6.0 percentage points, highlighting the progress made on operational excellence initiatives. In Ukraine, total revenue declined by 1%. This was mainly caused by our investment in moving to bundled tariffs with a consequent impact on revenues and margins. We have maintained our number one market position and implemented a number of initiatives to improve performance, which we expect to have a positive impact in 2013. The CIS business unit delivered organic revenue growth of 10% and organic EBITDA growth of 11%, with mobile subscriber numbers up 17%.
Whilst the results have been impacted by adverse currency movements, this organic performance highlights further solid execution of our strategy in our business units.”
CONSOLIDATED FINANCIAL AND OPERATING HIGHLIGHTS
USD mln Pro forma Actual
2Q12 2Q11 YoY 2Q12 2Q11 YoY
Total operating revenues 5,745 6,011 -4% 5,745 5,536 4%
EBITDA 2,481 2,441 2% 2,481 2,253 10%
EBITDA margin 43.2% 40.6% 43.2% 40.7%
EBIT 1,192 982 21% 1,192 937 27%
Net income 488 267 83% 488 235 108%
EPS, basic (USD) 0.30 0.17 76% 0.30 0.15 100%
Capital expenditures 1,028 1,027 0% 1,028 967 6%
Net cash from operating activities 1,351 - - 1,351 1,317 3%
Net debt / LTM EBITDA 2.4 - - 2.4 - -
Total mobile subscribers (millions)(2) 208 193 8% 208 193 8%
------------------------------------- --- --- --- --- --- ---
*)Comparative figures are Pro forma
-for pro forma definition see next
page. 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 in
Attachment C. For more information
please see the definition of
Organic growth Revenue and EBITDA
in Attachment E.
2) Following the sale of Vietnam the
subscriber numbers for 2Q11 and
2Q12 exclude Vietnam subscribers.
CONSOLIDATED FINANCIAL AND OPERATING HIGHLIGHTS
USD mln Pro forma Actual
1H12 1H11 YoY 1H12 1H11 YoY
Total operating revenues 11,364 11,492 -1% 11,364 8,276 37%
EBITDA 4,792 4,726 1% 4,792 3,456 39%
EBITDA margin 42.2% 41.1% 42.2% 41.8%
EBIT 2,207 1,885 17% 2,207 1,564 41%
Net income 806 717 12% 806 735 10%
EPS, basic (USD) 0.50 0.44 14% 0.50 0.51 -2%
Capital expenditures 1,660 1,756 -5% 1,660 1,423 17%
Net cash from operating activities 2,958 - - 2,958 2,334 27%
Net debt / LTM EBITDA 2.4 - - 2.4 - -
Total mobile subscribers (millions)(2) 208 193 8% 208 193 8%
------------------------------------- --- --- --- --- --- ---
PRESENTATION OF FINANCIAL RESULTS
The Company believes pro forma comparisons
provide the most meaningful comparison of
financial performance and, unless otherwise
stated, all comparisons in this press
release are on a pro forma basis. The pro
forma information presented in this press
release reflects what the Company's results
of operations would have looked like had the
Company's transaction with Wind Telecom
occurred on January 1, 2011. For further
details about the adjustments and
assumptions of the pro forma results, please
refer to VimpelCom's press releases issued
on August 18, 2011 and May 14, 2012 and
available on the Company's website.
VimpelCom Ltd. results presented in this
earnings release are based on IFRS.
Certain amounts and percentages that appear
in this earnings release have been subject
to rounding adjustments. As a result,
certain numerical figures shown as totals,
including in tables, may not be exact
arithmetic aggregations of the figures that
precede or follow them.
The actual 2Q12 financial results in this
earnings release have not been audited.
STRATEGIC UPDATE AND MAIN EVENTS
- LTE license in Russia awarded
- Global initiatives launched to improve customer experience
- Global cooperation with leading telecom operations for fast growing M2M business
- Postponed dividend payment decision and announced that AGM will be held in December
In the quarter, the Company announced cooperation agreements with Opera Mini mobile and Google Play which are aimed at improving the customer experience. In addition, VimpelCom announced that it will be part of an alliance with NTT Docomo, Rogers, SingTel, Telefonica and KPN which will collaborate on M2M business. The initiative is also open to other operators.
In April, VimpelCom sold its controlling 49% interest in GTEL Mobile in Vietnam. The Company continues its strategic portfolio analysis, focused on allocating capital to those markets where the Company sees the best opportunities to generate shareholder value.
In July, VimpelCom was awarded an LTE license in Russia, allowing the Company to render services using radio-electronic devices in the territory of the Russian Federation. The license allows VimpelCom to provide services via networks that use the LTE standard and its further modifications within the frequency band of 791-862 MHz. VimpelCom will start providing services by June 1, 2013 in compliance with the terms of the license. The roll-out of the LTE network will need to occur with a phased approach based on a predefined schedule and must be fully completed by the end of 2019. A further condition of the license award is that VimpelCom will invest at least RUB 15 billion annually until its federal LTE network is built.
As previously announced, in April and May, a Russian court issued injunctions in relation to the claims by the Russian Federal Anti-Monopoly Service (“FAS”) against Telenor East Holding II AS (“Telenor”) and Weather Investments II S.a.r.l. (“Weather II”). The injunctions prohibited, among other things, the payment of dividends by VimpelCom’s wholly owned Russian subsidiary OJSC “Vimpel-Communications”.
In May, VimpelCom announced that in light of these injunctions:
- The Supervisory Board of the Company considers it prudent and in the best interests of VimpelCom to postpone the payment and cancel the June 1, 2012 record date of the previously announced final dividend relating to the Company’s 2011 results. The Supervisory Board of the Company will make a decision whether to pay the final 2011 dividend at a later date and will set a new record date as appropriate.
- The Company plans to hold its annual general shareholders meeting in December 2012, with the exact date to be notified by the Supervisory Board.
VIMPELCOM GROUP – FINANCIAL AND OPERATING RESULTS 2Q12
- Revenues of USD 5.7 billion with organic growth of 4% YoY
- EBITDA of USD 2.5 billion, up 8% organically YoY; double digit organic growth in Russia, Africa & Asia, CIS
- Total mobile subscriber base increased 8% YoY to 208 million
- Net cash from operating activities USD 1.35 billion, impacted by one-off tax payments of USD 200 million
- Capex of USD 1.0 billion; LTM Capex / Revenues of 21%
- Net debt / LTM EBITDA at 2.4x
OPERATING PERFORMANCE OVERVIEW
The reported results in USD in 2Q12 were significantly impacted by the appreciation of the USD against the local currencies in almost all of VimpelCom’s operating businesses. The organic development is highlighted below.
The total mobile subscriber base increased 8% YoY to 208 million at the end of the second quarter. The largest absolute contribution came from accelerated growth in subscribers in the Africa & Asia Business Unit, but the Company also achieved strong growth in fixed and mobile broadband subscribers in Russia, Italy and Ukraine.
In Russia, the Company continued the positive trend seen in the first quarter, delivering an organic revenue growth of 8% YoY. Mobile broadband subscribers in Russia increased 5% YoY to 2.5 million, while the fixed broadband subscriber base reached 2.3 million, up 35% YoY.
The Company’s Italian business continued to outperform the broader Italian telecom market in the second quarter. VimpelCom strengthened its market position in Italy in both mobile and fixed-line, increasing its revenue share in both segments. Fixed broadband revenues were up 4% YoY, while Mobile internet revenues increased 50% YoY.
In the Africa & Asia Business Unit, the Company achieved strong subscriber growth across all countries of operation, exceeding 84 million in total. Performance was strong across the main operations, Algeria, Pakistan and Bangladesh.
The Ukraine Business Unit continued to invest in its market position in the mobile segment through ongoing transition to bundled tariff plans, which caused mobile revenues to decline by 2% YoY. Mobile subscribers increased by 2% YoY to 25.1 million. Fixed-line revenues increased by 10% YoY, mainly due to an 81% increase in fixed residential broadband revenues.
The CIS Business Unit delivered double digit organic revenue growth and was able to maintain high quality subscriber growth despite an increasingly competitive environment.
OPERATING FINANCIALS PER BUSINESS UNIT (PRO FORMA)
Pro forma
USD mln 2Q12 2Q11 Reported Organic
YoY YoY
Total operating revenues 5,745 6,011 -4% 4%
of which:
BU Russia 2,267 2,329 -3% 8%
BU Europe & North America 1,774 2,015 -12% -1%
BU Africa & Asia 953 949 0% 8%
BU Ukraine 406 412 -1% -1%
BU CIS 411 389 6% 10%
other (66) (83) - -
EBITDA 2,481 2,441 2% 8%
of which:
BU Russia 977 968 1% 12%
BU Europe & North America 672 757 -11% 0%
BU Africa & Asia 466 407 14% 13%
BU Ukraine 204 227 -10% -10%
BU CIS 182 175 4% 11%
other (20) (93) - -
EBITDA margin 43.2% 40.6%
Capital expenditures 1,028 1,027 0% -
* See definitions in
Attachment E.
FINANCIAL PERFORMANCE OVERVIEW
PRO FORMA 2Q12
Total operating revenues in the second quarter 2012 decreased by 4% YoY impacted by unfavorable currency movements. Overall organic revenue growth was 4%, with a strong performance across most business units.
EBITDA increased 2% YoY, impacted by unfavorable currency movements. Excluding these forex effects, EBITDA increased 8% compared to the same period last year. Double digit organic EBITDA growth YoY was seen in the markets of the business units of Russia, Africa & Asia and CIS, up 12%, 13% and 11%, respectively. Overall growth was partly offset by the YoY organic EBITDA decline of 10% in Ukraine due to the ongoing transition to bundles.
EBIT grew by 21% YoY positively affected, as reported previously, by the declining amortization pattern applied to intangible assets associated with customer relationships as part of the Wind Telecom acquisition where amortization of later periods is lower than amortization in the year of acquisition.
Profit before tax increased by 68% YoY due to the higher EBIT, higher gain from the investment in Euroset and the negative fair value adjustment on the investment in Vietnam recorded in 2Q11. In 2Q11 the net foreign exchange loss was USD 6 million, while in 2Q12 there was a gain of USD 1 million.
Net income grew by 83% YoY as a result of the increase in Profit before tax and lower effective tax rate, due to certain net operating losses incurred in 2Q11, but not recognized for tax purposes.
Capex was USD 1.0 billion, excluding licenses, with investments in the further roll out of the mobile networks in Russia, Bangladesh and the CIS. In Italy, Wind continued to invest in the roll-out of HSDPA and in backbone capacity to support the growth in data.
ACTUAL 2Q12
On an actual basis, revenues increased 4% YoY and EBITDA and EBIT increased by 10% and 27% YoY respectively as a result of the combination with Wind Telecom on April 15, 2011.
Profit before tax grew by 72% YoY due to the increase in EBIT and the negative fair value adjustment on the investment in Vietnam recorded in 2Q11, but offset by 16% higher financing costs as a result of the Wind Telecom acquisition. In 2Q11 the foreign exchange loss was USD 33 million, while in 2Q12 there was a gain of USD 1 million.
USD mln Pro forma Actual
2Q12 2Q11 YoY 2Q12 2Q11 YoY
Total operating revenues 5,745 6,011 -4% 5,745 5,536 4%
EBITDA 2,481 2,441 2% 2,481 2,253 10%
EBITDA margin 43.2% 40.6% 43.2% 40.7%
EBIT 1,192 982 21% 1,192 937 27%
Financial income and expenses (476) (470) 1% (476) (425) 12%
Net foreign exchange (loss)/gain and others 13 (77) n.m. 13 (89) n.m.
Profit before tax 729 435 68% 729 423 72%
Income tax expense (247) (176) 40% (247) (166) 49%
Profit for the period 482 259 86% 482 257 88%
Net income 488 267 83% 488 235 108%
Capital expenditures 1,028 1,027 0% 1,028 967 6%
-------------------- ----- ----- --- ----- --- ---
STATEMENT OF FINANCIAL POSITION & CASH FLOW (ACTUAL)
USD mln 2Q12 1Q12 QoQ
Total assets 52,543 56,121 -6%
Shareholders' equity 13,942 14,343 -3%
Gross debt 26,559 28,591 -7%
Net debt 23,067 24,339 -5%
-------- ------ ------ ---
2Q12 2Q11 YoY
Net cash from operating activities 1,351 1,317 3%
Net cash used (in)/from investing activities (1,441) (997) 45%
Net cash used (in)/provided from financing activities (922) 947 n.m.
----------------------------------------------------- ---- --- ----
Total assets decreased by 6% in the quarter to USD 52.5 billion, primarily as a result of the depreciation of RUB and EUR against USD. Gross debt decreased in the quarter from USD 28.6 billion to USD 26.6 billion, mainly due to foreign exchange movements and repayments of Ruble bank loans and Euro bank loans, partially refinanced by issued Euro bonds. Net debt decreased to USD 23.1 billion, leading to a net debt to LTM EBITDA of 2.4x on a pro forma basis at the end of the second quarter.
Net cash from operating activities of USD 1.35 billion at the Group level was positively impacted by higher EBITDA, offset by higher interest and tax payments. The higher tax payments were mainly related to one-off tax payments by OTH of approximately USD 200 million, mainly related to its sale of Tunisiana in 2011. Net cash used in investing activities was mainly impacted by a substantial movement from cash to deposits in 2012, partially offset by the higher investments in property, equipment and intangible assets in 2012 resulting from the consolidation of Wind Telecom. Net cash used in financing activities in 2Q12 was mainly the result of the net repayment of debt.
Net cash from operation activities 1H12 is USD 3.0 billion, or 27% higher than in 1H11.
BUSINESS UNITS PERFORMANCE IN 2Q12
- Russia
- Europe & North America
- Africa & Asia
- Ukraine
- CIS
BUSINESS UNIT RUSSIA – FINANCIAL AND OPERATING RESULTS
- Positive operational development continued in 2Q12
- Solid revenue increase of 8% YoY; strong growth in data
- EBITDA increase of 12% YoY and EBITDA margin growth of 1.6 p.p. to 43.1%, the highest margin in 5 quarters
- Operational excellence program of RUB 5 billion in annualized savings ahead of schedule
- LTE license awarded with services expected to launch in 2013
In 2Q12 the Russian Business Unit continued to deliver profitable growth, in line with the Company’s overall corporate Value Agenda.
The Russian Business Unit posted a solid revenue performance and strong EBITDA growth, continuing the positive turnaround trend witnessed in 1Q12. EBITDA margin in 2Q12 reached 43.1%, an increase of over 1.6 p.p. both QoQ and YoY, and the highest EBITDA margin the Company has achieved in the last 5 quarters. The effect of YoY forex moves in 2Q12 on the business was negative, impacting EBITDA margin by 0.3 p.p. during the quarter.
During 2Q12, VimpelCom continued to promote mobile data services through bundled offerings and targeted tariffs with the main focus on small and medium screens, ensuring that mobile data continues to be one of the fastest growing revenue streams. The 8% growth in total revenues was supported by a 35% increase in mobile data revenue.
The Russian Business Unit continued to implement a number of Operational Excellence initiatives, including the optimization of business processes and of the organizational structure, to meet the Company’s goals. As part of this program, the Company is reducing HR costs and controlling operational costs. One of the projects currently being implemented is the rationalization of the regional reporting structure. In addition, the Company will create a Shared Service Center in Yaroslavl which will be responsible for the Business Unit’s back office functions and processes starting in early 2013. By concentrating these business processes together in one location, the Company expects to improve productivity, and reduce operating expenses. At the same time VimpelCom continues to improve the operational efficiency of its networks and to this end has already signed agreements with other telecom operators and service providers for joint use, maintenance and development of network infrastructure. In addition, the Company is divesting certain non-core activities. The Operational Excellence program, with a target of RUB 5 billion in annualized savings, is ahead of schedule.
In 2Q12 VimpelCom continued its efforts to optimize subscriber acquisition costs and activities with the objective of reducing churn rates; initiatives in this program are focused on improving the quality of services and increasing customer loyalty. The results are increasingly visible with churn having decreased from more than 17% in 1Q12 to 15% in 2Q12. However, further improvements are required and targeted.
On July 12, 2012 VimpelCom was awarded a license to provide services over the LTE standard within the radio frequency band of 813.5-821/854.5-862MHz across the Russian territory. VimpelCom has already commenced modernizing its network and making it LTE-compatible. The Company expects to offer up-to-date and customized services with high-speed Internet access to its customers on cutting-edge 4G technology. LTE is expected to improve the mobile internet experience, contributing to the growing popularity of mobile data services.
KEY DEVELOPMENTS 2Q12
- Total revenue in Russia grew by 8% YoY to RUB 70.3 billion mainly driven by the increase in mobile revenues.
- Mobile revenues increased 7% YoY mainly as a result of growing usage, VAS and equipment revenues.
- Mobile data traffic grew 86% YoY in 2Q12, leading to revenues totaling RUB 6 billion, a revenue increase of 35% from 2Q11.
- Fixed-line revenues increased 14% YoY due to continuing growth in fixed broadband revenues, up 41% YoY.
- EBITDA increased by 12% YoY as a result of the increase in revenues and cost control initiatives.
- EBITDA margin was 43.1%, an increase of 1.6 p.p. compared to 2Q11, driven by the Operational Excellence projects mentioned above.
- Mobile subscriber base grew 1% YoY to 55.7 million; mobile broadband subscribers increased 5% YoY to 2.5 million. The fixed broadband subscriber base exceeded 2 million, up 35% YoY.
- Capex/Revenues was 13% in 2Q12, in line with the network construction schedule. Capex/Revenues LTM stood at 21%. The Company will continue to invest in its 3G network development and aims to match its main competitors in terms of population coverage in the main cities in the 43 key regions by 2013. Following the receipt of its LTE license this quarter, the Company is finalizing its LTE investment plan.
RUSSIA KEY INDICATORS
RUB mln 2Q12 2Q11 YoY
Total operating revenues 70,258 65,179 8%
Total operating expenditures 39,992 38,103 5%
EBITDA 30,266 27,076 12%
EBITDA margin 43.1% 41.5%
Capex 9,195 11,348 -19%
Capex / Revenues 13% 17%
Mobile
Mobile total operating revenues 57,925 54,360 7%
- of which mobile data 5,574 4,118 35%
Mobile subscribers ('000) 55,739 55,251 1%
- of which mobile broadband ('000) 2,472 2,362 5%
Mobile ARPU (RUB) 336 327 3%
MOU 279 244 14%
Fixed
Fixed-line total operating revenues 12,333 10,818 14%
Fixed Broadband revenues 2,885 2,053 41%
Fixed Broadband subscribers ('000) 2,255 1,671 35%
Fixed Broadband ARPU (RUB) 427 413 3%
------------------------- --- --- ---
BUSINESS UNIT EUROPE & NA – FINANCIAL AND OPERATING RESULTS ITALY
- Continuing relative outperformance of market
- Revenues down 1% YoY but revenues excl. MTR impact grew 2%
- Strong data revenue performance: Mobile Internet revenue accelerating over 1Q12 to 50% YoY, messaging revenues up 10%, fixed broadband revenues up 4% with LLU Broadband revenues up 12%
- EBITDA stable YoY and increase in EBITDA margin to 37.9%
- Solid subscriber growth momentum: mobile subscribers up 3% with 75% share of MNO net adds and fixed broadband subscribers up 7%
In Italy, WIND continued to outperform the market and delivered a solid second quarter of 2012. In a highly competitive market with a challenging macroeconomic and regulatory environment, the Company further strengthened its market share, both in terms of revenues and subscribers.
Total revenues declined 1% as a result of a decline in service revenues, driven by a 26% cut in MTR, partially offset by certain business related positive settlements with other operators and certain non-recurring items with a total net positive impact of approximately EUR 17 million compared to 2Q11.
Excluding the MTR impact, revenues grew 2% YoY. Mobile service revenues, excluding the MTR impact, increased 2% driven by strong performance in mobile data revenues. Fixed-line service revenues decreased by 5% as a result of the strategic shift in focus to the higher margin direct subscriber segment and a decrease in pay per use prices and usage. This strategic decision is intended to increase the profitability of the fixed-line business.
Despite the decline in total revenues and the unfavorable impact of higher energy related operating expenditures and higher bad debt in fixed-line, the Company was able to deliver stable EBITDA in 2Q12 over the previous year and an increase in EBITDA margin.
From a commercial perspective the second quarter was particularly strong in mobile where WIND, thanks to a highly successful summer campaign, achieved 75% share of net additions by MNO’s in the market. The impressive performance in gross additions, more than offset the MNP churn impact and was achieved with a reduction in acquisition costs in the period. It is worth noting that despite the challenging economic environment in 2Q12 WIND’s customers continued to increase their voice and SMS usage. In the second quarter WIND continued to deliver strong results in the core data market with growth in mobile Internet revenues of 50% YoY, messaging revenues up 10% and fixed broadband revenues up 4% (+12% in core LLU BB segment).
The further cut in MTRs from 5.2 Eurocent to 2.5 Eurocent effective from July 1, 2012 is expected to increase pressure on the top-line in the second half of the year. Early evidence from July confirms this negative impact on revenues.
KEY DEVELOPMENTS 2Q12
- Total revenues declined 1% YoY to EUR 1,383 million with an underlying growth (excl. MTR cut) of 2%.
- EBITDA in 2Q12 was stable at EUR 524 million, delivering an increase in overall margin to 37.9%.
- Capex in 2Q12, excluding LTE spectrum, was EUR 217 million mainly invested in expanding coverage and capacity on the HSDPA mobile network and increasing the backhauling capacity to support the strong growth in data. In the quarter WIND continued its site sharing initiatives.
- Mobile subscriber growth remained strong in 2Q12 driven by the success of WIND’s summer campaign, with a 3% increase in subscriber base to over 21.2 million. Mobile broadband also delivered a strong performance in the period with consumer subscribers increasing by more than 10% YoY. Mobile churn remained high, mainly driven by the continued market focus on MNP promotions to acquire new subscribers.
- Mobile data ARPU grew over 15% YoY to EUR 3.8 representing 26% of the total ARPU of EUR 15.0. Voice ARPU declined over the previous year mainly as a result of the reduction in incoming revenues, driven by the MTR cut, the ongoing success of WIND’s data only SIM card offerings for tablets, PCs and dongles which do not generate voice revenues and competitive intensity.
- In fixed-line the focus on the direct market was increasingly visible with voice subscribers growing 2% to 3.19 million, driven by a 6% increase in higher value direct voice subscribers, to over 2.5 million, only partially offset by the decrease in indirect customers. The broadband segment continued to perform strongly with subscribers growing by over 7% to 2.24 million, driven by a 10% increase in LLU Broadband customers, in line with the Company’s strategy. Dual-play subscribers grew over 10% YoY to 1.86 million.
- Fixed-line ARPU decreased by 7% to EUR 31.2 in 2Q12 driven by the above-mentioned decline of pay per use traffic and prices, coupled with promotional activity resulting from competitive pressure. Broadband ARPU declined marginally to EUR 18.5.
ITALY KEY INDICATORS*
Euro mln 2Q12 2Q11 YoY
Total operating revenues 1,383 1,399 -1%
Total operating expenditures 859 873 -2%
EBITDA 524 526 0%
EBITDA margin 37.9% 37.6%
Capex 243 234 4%
Capex / revenues 18% 17%
Mobile
Total revenues 1,015 1,029 -1%
Subscribers ('000) 21,225 20,559 3%
- of which mobile broadband ('000) (1) 4,444 4,030 10%
ARPU (EUR) 15.0 16.0 -6%
MOU 209 198 5%
Fixed
Total revenues 368 370 -1%
Total voice subscribers ('000) 3,189 3,128 2%
Total fixed-line ARPU (EUR) 31.2 33.4 -7%
Broadband subscribers ('000) 2,236 2,082 7%
Broadband ARPU (EUR) 18.5 19.2 -4%
Dual-play subscribers ('000) 1,862 1,689 10%
--------------------------- ----- ----- ---
(1) Mobile broadband includes
consumer customers that have
performed at least one mobile
Internet event in the previous
month on 2.5G/3G/3.5G
CANADA
In 2Q12, Wind Mobile continued its “Value Plus” strategy execution, adding primarily postpaid subscribers while carefully managing prepaid economics for both voice and mobile broadband customers.
Wind Mobile continues to grow its market share on a normalized basis for its coverage by adding 42 thousand subscribers during the second quarter, growing its active subscriber base to 457 thousand, an increase of 44% YoY.
The company maintained a special focus on handsets, continuing to target the needs of its “Value Plus” customer segment. Wind Mobile focused on raising awareness with the “WINDimonial” mixed media advertising campaign, shining a spotlight on over 450,000 customers by featuring real customer testimonials.
The company continued to expand its network by launching in the city of Barrie and paid special focus on improving its quality in existing markets, increasing its on Air site count to more than 1,200 sites.
The Telecom Act was amended effective June 29, 2012 to remove foreign investment restrictions for telecom companies that hold less than a 10% share of the total Canadian telecom market. Companies that are successful in growing their market share to greater than 10% organically (i.e., other than by way of merger or acquisitions) will continue to be exempt from the restrictions.
CANADA KEY INDICATORS
2Q12 2Q11 YoY
Subscribers ('000) 457 317 44%
ARPU (CAD) 27.7 27.8 0%
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BUSINESS UNIT AFRICA & ASIA – FINANCIAL AND OPERATING RESULTS
- Revenues of USD 953 million with organic growth of 8% YoY
- EBITDA of USD 466 million with organic growth of 13% YoY
- EBITDA margin up 6.0 p.p. YoY to 48.9%, mainly resulting from cost savings
- Subscriber base increased by 15% YoY to more than 84 million
Revenues in the Africa & Asia Business Unit had organic growth of 8% YoY and were adversely impacted by local currency devaluation against the USD in the main operating units, leading to stable reported revenues YoY. Organic growth in revenues was driven by strong subscriber growth and an increase in data and VAS uptake in our key subsidiaries in Algeria, Pakistan and Bangladesh. EBITDA amounted to USD 466 million, achieving organic growth of 13%, as a result of cost savings in our major subsidiaries, mainly driven by Pakistan.
ALGERIA (“DJEZZY”)
Djezzy grew its subscriber base by 11% YoY, driven by strong subscriber acquisitions coupled with the “Imtiyaz” loyalty program aimed at customer retention. Despite the challenging operating and regulatory environment, revenues increased by 4% in local currency terms, mostly due to higher subscriber growth in 1Q12 coupled with ongoing customer retention programs. EBITDA increased 6% YoY in local currency terms, as a result of continued cost savings. Capex remained low due to the on-going ban on foreign currency transfers preventing the payment of essential suppliers and importation of equipment critical to network maintenance and necessary expansion. Nevertheless, Djezzy maintained its leadership position with a 57% subscriber market share.
PAKISTAN (“MOBILINK”)
Mobilink increased its subscriber base despite intense competition in the market, by 8% YoY. However, during 2Q12, growth in the Pakistani market was capped due to regulatory developments following the implementation of a new regime for registering and activating new SIM cards. Revenues grew 9% YoY in local currency terms as a result of increased data and VAS uptake as well as tariff adjustments. Consequently, ARPU remained stable YoY in local currency terms. EBITDA exhibited an increase of 19% in local currency terms, due to improved cost control measures for cost of sales and tariff optimization.
As a result, EBITDA margin improved by 3.9 p.p. YoY, a testament to strong operational excellence initiatives across the board, leading to profitable growth, a pillar of the Value Agenda. The slowdown in capacity roll-out for the network in anticipation of the network modernization, led to a decline of 41% in Capex.
BANGLADESH (“BANGLALINK”)
banglalink’s subscriber base increased by more than 26% YoY, surpassing the 25 million mark. Revenues achieved a remarkable growth of 24% in local currency terms, driven by a larger subscriber base, in addition to a higher level of VAS and data adoption. ARPU remained relatively stable in local currency terms and was preserved through a particular focus on VAS and data offerings. EBITDA increased 11% in local currency terms, mostly attributable to higher revenues for the quarter. In order to accommodate banglalink’s growing subscriber base, Capex increased by 143%.
SUB SAHARAN AFRICA (“TELECEL GLOBE”)
Telecel Globe subscribers grew by 34% compared to 2Q11, mostly driven by additions to the subscriber base in Zimbabwe and supported by market leadership positions in Burundi and CAR. Capex decreased by 43% for 2Q12, as part of the efforts exerted to optimize the capital investment as a pillar of the Value Agenda, namely capital efficiency, when compared with the aggressive 3G roll-out and network expansion investments implemented during 2011.
SOUTH EAST ASIA
Subscribers in the South East Asia cluster increased 45% YoY on a comparative basis after the exclusion of Vietnam subscribers from 2011. In Laos, market seasonality had an adverse impact on usage for the quarter, while in Cambodia subscriber acquisition and VAS activity was on the rise despite a general market slowdown during 2Q12.
AFRICA & ASIA* KEY INDICATORS
USD mln 2Q12 2Q11 YoY
Total operating revenues 953 949 0%
Total operating expenditures 487 542 -10%
EBITDA 466 407 14%
EBITDA margin 48.9% 42.9%
Capex 86 102 -16%
Capex / revenues 9% 11%
Mobile Subscribers ('000) 84,432 73,370 15%
------------------------ ------ ------ ---
*Africa & Asia operations include
operations in Algeria, Pakistan,
Bangladesh, Sub-Saharan Africa
and
South East Asia. For details per
country unit please see
Attachment B
AFRICA & ASIA BUSINESS UNIT: COUNTRY DETAIL
ALGERIA
DZD bln
2Q12 2Q11 YoY
Total operating revenues 35.8 34.4 4%
EBITDA 21.6 20.4 6%
EBITDA margin 60.3% 59.2%
------------- ---- ----
PAKISTAN
PKR bln
2Q12 2Q11 YoY
Total operating revenues 27.2 24.9 9%
EBITDA 12.0 10.0 19%
EBITDA margin 44.1% 40.2%
------------- ---- ----
BANGLADESH
BDT bln
2Q12 2Q11 YoY
Total operating revenues 11.6 9.4 24%
EBITDA 4.4 4.0 11%
EBITDA margin 38.0% 42.8%
------------- ---- ----
BUSINESS UNIT UKRAINE – FINANCIAL AND OPERATING RESULTS
- Revenues declined 1% YoY to UAH 3.2 billion, materially impacted by transition to bundled tariff plans
- Growth in fixed-line revenue continued with 10% YoY growth; mobile revenue declined 2% YoY
- EBITDA declined by 10% YoY to UAH 1.6 billion; EBITDA margin at 50.2%
- Mobile subscriber base up 2% YoY to 25.1 million
- Fixed residential broadband subscriber base grew 71% YoY to 501 thousand
The Ukraine Business Unit continued to invest in its market position in the mobile segment through the continued transition to bundles. VimpelCom has been successful in maintaining its market share. The Company expects the migration to bundles to have a temporary negative effect on ARPU and margins. The negative effects of this transition have been partly offset by accelerating fixed-line revenue growth. This overall negative effect is expected to persist for the remainder of 2012, although with an improving trend towards the end of the year.
- Total revenues declined 1% YoY to UAH 3.2 billion due to a 2% decline in mobile revenues, partly offset by 10% growth in fixed-line revenues.
- Mobile revenues were down 2% YoY mainly due to the declining ARPU as a result of the transition to bundles.
- VimpelCom has been able to maintain its market position in 2Q12 and increased its active mobile subscriber base by 2% YoY to 25.1 million. The churn reduction program is showing good results with churn declining QoQ.
- Fixed-line revenues increased by 10% YoY, mainly due to an 81% increase in fixed residential broadband revenue driven by a significant increase in the fixed residential broadband subscriber base of 71% YoY to 501 thousand, resulting from increased buildings coverage and active sales in already connected buildings.
- EBITDA declined 10% YoY to UAH 1.6 billion, primarily due to lower mobile service revenues and higher interconnect costs caused by the growth of outgoing off-net mobile traffic, as well as increased operational costs, mainly related to network and IT, affected by network development and inflation. EBITDA margin decreased by 4.6 p.p. YoY to 50.2%, with lower margin fixed-line revenue also impacting the overall EBITDA margin.
- Capex was at the same level as 2Q11 and in line with the infrastructure optimization program in the framework of the Value Agenda.
- VimpelCom is taking actions to improve sales and margins in the coming 12 months. The Company has started accelerated pricing initiatives to improve service mobile revenue trends from 4Q12 onwards. Initiatives are focused on up-selling low and medium ARPU customers after they have transitioned to bundles. The Company has also launched sales excellence programs with regional differentiation in dealer commissions and tariffs. In addition to these measures, VimpelCom continues to focus on optimizing its cost base in order to control operational costs and maintain efficiency. With the aforementioned measures the Company expects that the operating performance of the business in the Ukraine will improve substantially in 2013.
UKRAINE KEY INDICATORS
UAH mln 2Q12 2Q11 YoY
Total operating revenues 3,247 3,287 -1%
Total operating expenditures 1,616 1,485 9%
EBITDA 1,630 1,802 -10%
EBITDA margin 50.2% 54.8%
Capex 462 463 0%
Capex / revenues 14% 14%
Mobile
Mobile total operating revenues 2,977 3,042 -2%
Mobile subscribers ('000) 25,132 24,695 2%
Mobile ARPU (UAH) 39.0 41.0 -5%
MOU 493 474 4%
Fixed-line
Fixed-line total operating revenues 269 245 10%
Fixed-line broadband revenues 65 36 81%
Fixed-line broadband subscribers ('000) 501 293 71%
Fixed-line broadband ARPU (UAH) 45.1 46.2 -2%
------------------------------ ---- ---- ---
BUSINESS UNIT CIS – FINANCIAL AND OPERATING RESULTS
- Revenue reached USD 411 million with organic growth of 10% YoY
- Mobile data revenue growth of 57% YoY to USD 28 million
- EBITDA of USD 182 million with organic growth of 11% YoY; EBITDA margin of 44.3%
- Mobile subscribers up 17% to 20.5 million
- Mobile broadband subscribers up 30% to 9.7 million
- Fixed broadband subscribers almost doubled to 256 thousand
The CIS markets delivered double digit organic growth in revenue and EBITDA in 2Q12. EBITDA margin declined slightly YoY, but improved over 1Q12 as result of the operational excellence program. In the CIS, in particular in Kazakhstan, competition is increasing, but the Company has been able to strengthen its market position in its key markets in 2Q12 by improving the quality of its subscriber base. The subscriber base and traffic are growing as a result of increasing penetration and strong data growth is outpacing the slowdown in voice growth. The fixed-line broadband subscriber base nearly doubled YoY and is another pillar of the strong organic revenue growth for this quarter.
- In 2Q12, total revenues grew 10% organically YoY, with main contributions coming from Kazakhstan, Uzbekistan and Kyrgyzstan. Reported revenues increased 6% YoY to USD 411 million mainly due to currency movements.
- Total mobile revenue increased organically by 11% YoY in 2Q12 supported by significant data growth resulting from increasing data services consumption which more than offset the slowdown in voice growth and decline in revenue from sales of devices.
- Total fixed-line revenue decreased 5% YoY in 2Q12, impacted mainly by voice and wholesale revenue declines in Armenia and Tajikistan.
- EBITDA reached USD 182 million growing 11% YoY on an organic basis and 4% on a reported basis, driven by strong growth in Uzbekistan and Kyrgyzstan.
- EBITDA margin of 44.3% in 2Q12 was 0.7 p.p. lower than 2Q11, primarily impacted by intensified competition in key markets, but control of operational costs provided evident improvements QoQ.
- Capex decreased by 20% YoY in 2Q12 in line with investment plans. The Company’s main investment projects, focused on continued data development, are on schedule and network expansion continues to support both traffic and revenue growth.
KAZAKHSTAN
Kazakhstan, the largest market in the CIS, achieved organic revenue growth of 4% YoY in 2Q12. Growth was affected by the competitive environment and a limitation on tariffs introduced by the regulator, which resulted in an APPM decline. VimpelCom protected its market position by focusing on the quality of subscribers and on mobile broadband subscriber growth improving ARPU QoQ and increasing data revenue YoY and QoQ. Mobile subscribers grew 9% YoY and mobile broadband subscribers increased by 15% YoY. EBITDA margin declined by 1.8 p.p. YoY, however EBITDA in local currency grew by 0.3% YoY to 47.0%, improving from the YoY decline in 1Q12.
UZBEKISTAN
In Uzbekistan, the subscriber base continued to grow strongly, up 31% YoY, with record mobile internet user growth of 53% YoY. Revenue was up 35% YoY in 2Q12, supported by 121% YoY mobile data revenue growth. EBITDA margin was 50.6%, a sharp increase YoY, as a result of a change in tariff terms in the market and implementation of a cost efficiency program.
ARMENIA
Revenues in Armenia declined organically by 8% YoY in 2Q12, as a result of macro-economic conditions, stagnating voice revenues and a lower level of terminated traffic in the fixed-line segment. The 9% decrease in mobile revenues was mainly attributable to lower sales of handsets and to the slowdown of interconnect revenues. Fixed and mobile data services, however, demonstrated strong growth both in revenue and subscribers. EBITDA declined by 9% YoY and EBITDA margin was down 0.4 p.p. YoY to 37.9%.
KYRGYZSTAN
Kyrgyzstan continued to show positive dynamics in revenue and EBITDA growth. Organic revenue grew 18%, supported by strong subscriber base growth of 13%, and EBITDA grew organically by 24% YoY, resulting in an increasing EBITDA margin in local currency of 55.4%, the highest among CIS countries. ARPU was flat YoY in 2Q12. Mobile broadband subscriber growth of 47% YoY coupled with the increase in mobile data usage resulted in a significant mobile data revenue growth, up 121% YoY.
TAJIKISTAN
In Tajikistan, revenues increased by 2% YoY for 2Q12, while EBITDA declined by 3% YoY due to a slowdown in international interconnect traffic leading to a 2.3 p.p. decline in EBITDA margin to 49.6%. The Company’s market position has improved in 2Q12. Data revenue grew by
154% supported by an increase in mobile broadband subscribers of 33% and an increase in average revenue per data user, in line with increasing usage of data services
GEORGIA
Georgia delivered strong results in 2Q12, with subscriber base growth of 26%, organic revenue growth of 19% and a 47% increase in EBITDA YoY in 2Q12, despite APPM erosion due to the competitive environment. EBITDA margin increased 5 p.p. YoY to 27.1%.
CIS* KEY INDICATORS
USD mln 2Q12 2Q11 YoY
Total operating revenues 411 389 6%
Total operating expenditures 228 214 7%
EBITDA 182 175 4%
EBITDA margin 44.3% 45.0%
Capex 105 132 -20%
Capex / revenues 26% 34%
Mobile
Mobile subscribers ('000) 20,522 17,594 17%
- of which mobile broadband ('000) 9,677 7,441 30%
Fixed
Fixed-line broadband subscribers ('000) 256 132 94%
Fixed-line broadband revenues 11 7 57%
----------------------------- --- --- ---
* 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
2Q12 2Q11 YoY
Total operating revenues 30,746 29,529 4%
EBITDA 14,456 14,414 0%
EBITDA margin 47.0% 48.8%
------------- ---- ----
UZBEKISTAN
USD mln
2Q12 2Q11 YoY
Total operating revenues 89 66 35%
EBITDA 45 28 61%
EBITDA margin 50.6% 42.9%
------------- ---- ----
CONFERENCE CALL INFORMATION
On August 15, 2012, the Company will host an analyst & investor conference call on its second quarter 2012 results. 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 calls replay and the slide presentation webcasts will be available until August 29, 2012.
The slide presentations 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 : 15408629
International replay: + 1 (402) 875-4763
Confirmation code : 15408629
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 financial performance objectives, development plans and anticipated performance, particularly in the Ukraine. The forward-looking statements included in this release 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. In addition, there are risks related to the combination with Wind Telecom, including the possibility that the anticipated benefits of the combination may not materialize as expected, that we are unable to realize the synergies anticipated from the transaction and other risks and uncertainties that are beyond the Company’s control. 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, 2011 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, Cambodia, 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 782 million people. VimpelCom provides services under the “Beeline”, “Kyivstar”, “djuice”, “Wind”, “Infostrada” “Mobilink”, “Leo”, “banglalink”, “Telecel”, and “Djezzy” brands. As of June 30, 2012 VimpelCom had 208 million mobile subscribers on a combined basis. VimpelCom is traded on the New York Stock Exchange under the symbol (VIP). For more information visit: http://www.vimpelcom.com
CONTENT OF THE ATTACHMENT TABLES
Attachment A VimpelCom Ltd Interim 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 29
Attachment E Definitions 30
For more information on financial and operating data for specific countries, please refer to the supplementary file Factbook2Q2012.xls on our website at http://vimpelcom.com/ir/financials/results.wbp
ATTACHMENT A: VIMPELCOM LTD INTERIM FINANCIAL STATEMENTS
VIMPELCOM LTD UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF INCOME (ACTUAL)
(In millions of USD, except per share amounts) 2Q12 2Q11 1H12 1H11
Service revenues 5,534 5,401 10,970 8,073
Sale of equipment and accessories 143 134 276 200
Other revenues 68 1 118 3
Total operating revenues 5,745 5,536 11,364 8,276
------------------------ ----- ----- ------ -----
Operating expenses
Service costs 1,192 1,380 2,418 2,004
Cost of equipment and accessories 145 146 280 228
Selling, general and administrative expenses 1,927 1,757 3,874 2,588
Depreciation 720 717 1,447 1,140
Amortization 522 585 1,054 728
Impairment loss 6 - - -
Loss on disposals of non-current assets 41 14 84 24
Total operating expenses 4,553 4,599 9,157 6,712
------------------------ ----- ----- ----- -----
Operating profit 1,192 937 2,207 1,564
---------------- ----- --- ----- -----
Finance costs 516 445 1,000 586
Finance income (40) (20) (81) (35)
Other non-operating losses/(gains) (24) 37 2 31
Shares of loss/(profit) of associates and joint ventures accounted for using the
equity method 12 19 28 (25)
Net foreign exchange (gain)/loss (1) 33 (64) (65)
Profit before tax 729 423 1,322 1,072
----------------- --- --- ----- -----
Income tax expense 247 166 486 295
Profit for the period 482 257 836 777
===================== === === === ===
Attributable to:
The owners of the parent 488 235 806 735
Non-controlling interest (6) 22 30 42
------------------------ --- --- --- ---
482 257 836 777
=== === === ===
Earnings per share
Basic, profit for the period attributable to ordinary equity holders of the parent $0.30 $0.15 $0.50 $0.51
Diluted, profit for the period attributable to ordinary equity holders of the parent $0.30 $0.15 $0.50 $0.51
------------------------------------------------------------------------------------ ----- ----- ----- -----
ATTACHMENT A: VIMPELCOM LTD INTERIM FINANCIAL STATEMENTS
VIMPELCOM LTD UNAUDITED INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION (ACTUAL)
(In millions of USD) 30 June 2012, 31 December 2011,
unaudited audited
Assets
Non-current assets
Property and equipment 14,699 15,165
Intangible assets 10,874 11,825
Goodwill 16,422 16,776
Investments in associates and joint ventures 421 388
Deferred tax asset 399 386
Financial assets 1,761 1,536
Other non-financial assets 30 92
Total non-current assets 44,606 46,168
------------------------ ------ ------
Current assets
Inventories 172 227
Other non-financial assets 1,356 1,320
Trade and other receivables 2,551 2,711
Current income tax asset 222 293
Other financial assets 749 345
Cash and cash equivalents 2,883 2,325
Total current assets 7,933 7,221
-------------------- ----- -----
Assets classified as held for sale 4 650
Total assets 52,543 54,039
============ ====== ======
Equity and liabilities
Equity
Equity attributable to equity owners of the parent 13,942 14,037
Non-controlling interests 703 865
Total equity 14,645 14,902
------------ ------ ------
Non-current liabilities
Financial liabilities 25,746 25,724
Provisions 516 402
Other non-financial liabilities 446 442
Deferred tax liability 1,548 1,624
Total non-current liabilities 28,256 28,192
----------------------------- ------ ------
Current liabilities
Trade and other payables 3,779 4,566
Dividend payables 554 -
Other non-financial liabilities 2,186 2,030
Other financial liabilities 2,865 3,118
Current income tax payable 199 399
Provisions 59 182
Total current liabilities 9,642 10,295
------------------------- ----- ------
Liabilities associated with assets held for sale - 650
------------------------------------------------ --- ---
Total equity and liabilities 52,543 54,039
---------------------------- ------ ------
ATTACHMENT A: VIMPELCOM LTD INTERIM FINANCIAL STATEMENTS
VIMPELCOM LTD UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (ACTUAL)
(In millions of USD) 2Q12 1H12 1H11
Operating activities
Profit after tax 482 836 777
Tax expense 247 486 295
Profit/(loss) from discontinued
operations - - -
------------------------------- --- ---
Profit before tax 729 1,322 1,072
----------------- --- ----- -----
Non-cash adjustment to reconcile
profit before tax to net cash flows:
Depreciation 720 1,447 1,140
Amortization 522 1,054 728
Impairment loss/(gain) 6 - -
Loss on disposals of non-current
assets 41 84 24
Finance income (40) (81) (35)
Finance costs 516 1,000 586
Other non-operating losses (24) 2 31
Net foreign exchange gain (income) (1) (64) (65)
Share of loss / (profit) of associate 12 28 (25)
Movements in provisions and pensions 7 13 -
Cash from operations 2,488 4,805 3,456
Working capital adjustments:
Change in trade and other receivables
and prepayments 32 (110) 3
Change in inventories 11 11 179
Change in trade and other payables (37) (132) (480)
Interest paid (651) (1,059) (518)
Interest received 11 107 35
Income tax paid (503) (664) (341)
---------------
Net cash flows from operating
activities 1,351 2,958 2,334
----------------------------- ----- ----- -----
Investing activities
Proceeds from sale of property, plant
and equipment and intangible assets 8 15 58
Purchase of property, plant and
equipment and intangible assets (908) (1,780) (1,523)
Payments of loans granted (28) (78) -
Receipts/(payments) from deposits and
loans granted (434) (433) 151
Receipts from/(investments in)
associates 3 3 13
Proceeds from sales of share in
subsidiaries, net of cash (82) (82) -
Acquisition of subsidiaries, net of
cash acquired - (1) (1,003)
Net cash flows used in investing
activities (1,441) (2,356) (2,304)
-------------------------------- ------ ------ ------
Financing activities
Net proceeds from exercise of share
options - - -
Acquisition of non-controlling
interest - (9) -
Proceeds from borrowings net of fees
paid 783 2,195 8,390
Repayment of borrowings (1,707) (2,170) (5,807)
Purchase of treasury shares - - (4)
Proceeds from sale of treasury stock 2 3 -
Dividends paid to equity holders of
the parent - - (500)
Dividends paid to non-controlling
interests - - -
---------------------------------
Net cash flows used in financing
activities (922) 19 2,079
-------------------------------- ---- --- -----
Net increase in cash and cash
equivalents (1,012) 621 2,109
Net foreign exchange difference (138) (63) 51
Cash and cash equivalents re-
classified as held for sale - - 145
Cash and cash equivalents at beginning
of period 4,033 2,325 885
-------------------------------------- ----- ----- ---
Cash and cash equivalents at end of
period 2,883 2,883 3,190
----------------------------------- ----- ----- -----
ATTACHMENT B: COUNTRY UNITS KEY INDICATORS
AFRICA & ASIA BUSINESS UNIT: COUNTRY DETAIL
ALGERIA
DZD bln
2Q12 2Q11 YoY
Total operating revenues 35.8 34.4 4%
EBITDA 21.6 20.4 6%
EBITDA margin 60.3% 59.2%
Capex (USD) 10 10 2%
Capex / revenues (USD) 29% 29%
Mobile
Subscribers ('000) 17,748 15,964 11%
ARPU 660 711 -7%
MOU 267 290 -8%
--- --- --- ---
PAKISTAN
PKR bln
2Q12 2Q11 YoY
Total operating revenues 27.2 24.9 9%
EBITDA 12.0 10.0 19%
EBITDA margin 44.1% 40.2%
Capex (USD) 31 52 -41%
Capex / revenues (USD) 113% 209%
Mobile
Subscribers ('000) 35,953 33,378 -8%
ARPU 246 247 -1%
MOU 214 210 2%
--- --- --- ---
BANGLADESH
BDT bln
2Q12 2Q11 YoY
Total operating revenues 11.6 9.4 24%
EBITDA 4.4 4.0 11%
EBITDA margin 38.0% 42.8%
Capex (USD) 35 14 143%
Capex / revenues (USD) 297% 150%
Mobile
Subscribers ('000) 25,491 20,203 26%
ARPU 151 153 -1%
MOU 231 208 11%
--- --- --- ---
SUB SAHARAN AFRICA (TELECEL GLOBE)
USD mln
2Q12 2Q11 YoY
Total operating revenues 22.9 23.9 -4%
EBITDA 9.3 1.8 411%
EBITDA margin 40.5% 7.5%
Mobile
Subscribers ('000) 3,736 2,789 34%
----------------- ----- ----- ---
SEA (CONSOLIDATED)
USD mln
2Q12 2Q11 YoY
Total operating revenues 13.1 17.8 -26%
EBITDA (3) (37) n.m.
EBITDA margin -22% -210%
Mobile
Subscribers ('000) 1,504 1,037 45%
----------------- ----- ----- ---
CIS BUSINESS UNIT: COUNTRY DETAIL
KAZAKHSTAN
KZT mln
2Q12 2Q11 YoY
Total operating revenues 30,746 29,529 4%
EBITDA 14,456 14,414 0%
EBITDA margin 47.0% 48.8%
Capex (USD) 45 68 -34%
Capex / revenues (USD) 22% 34%
Mobile
Subscribers ('000) 8,497 7,831 9%
ARPU (KZT) 1,137 1,249 -9%
MOU 211 144 47%
--- --- --- ---
ARMENIA
AMD mln
2Q12 2Q11 YoY
Total operating revenues 16,021 17,490 -8%
EBITDA 6,065 6,699 -9%
EBITDA margin 37.9% 38.3%
Capex (USD) 4 6 -33%
Capex / revenues (USD) 11% 13%
Mobile
Subscribers ('000) 771 733 5%
ARPU (AMD) 2,741 3,089 -11%
MOU 279 262 6%
--- --- --- ---
UZBEKISTAN
USD mln
2Q12 2Q11 YoY
Total operating revenues 89 66 35%
EBITDA 45 28 61%
EBITDA margin 50.6% 42.9%
Capex (USD) 36 27 33%
Capex / revenues (USD) 41% 40%
Mobile
Subscribers ('000) 7,031 5,347 31%
ARPU (USD) 4 4 0%
MOU 433 413 5%
--- --- --- ---
TAJIKISTAN
USD mln
2Q12 2Q11 YoY
Total operating revenues 26 26 2%
EBITDA 13 14 -3%
EBITDA margin 49.6% 51.9%
Capex (USD) 7 7 0%
Capex / revenues (USD) 27% 28%
Mobile
Subscribers ('000) 957 870 10%
ARPU (USD) 9 9 0%
MOU 246 234 5%
--- --- --- ---
GEORGIA
GEL mln
2Q12 2Q11 YoY
Total operating revenues 30 25 19%
EBITDA 8 6 47%
EBITDA margin 27.1% 22.1%
Capex (USD) 4 9 -56%
Capex / revenues (USD) 24% 56%
Mobile
Subscribers ('000) 899 712 26%
ARPU (GEL) 11 11 0%
MOU 234 224 4%
--- --- --- ---
KYRGYZSTAN
KGS mln
2Q12 2Q11 YoY
Total operating revenues 1,896 1,603 18%
EBITDA 1,050 847 24%
EBITDA margin 55.4% 52.8%
Capex (USD) 8 15 -47%
Capex / revenues (USD) 19% 43%
Mobile
Subscribers ('000) 2,368 2,102 13%
ARPU (KGS) 264 261 1%
MOU 289 319 -9%
--- --- --- ---
ATTACHMENT C: RECONCILIATION TABLES
RECONCILIATION OF CONSOLIDATED EBITDA OF VIMPELCOM* (PRO FORMA)
USD mln
2Q12 2Q11 1H12 1H11
Unaudited pro forma
EBITDA 2,481 2,441 4,792 4,726
Depreciation (720) (778) (1,447) (1,508)
Amortization (522) (667) (1,054) (1,332)
Impairment (loss)/gain (6) - - 23
Loss on disposals of non-current assets (41) (14) (84) (24)
EBIT 1,192 982 2,207 1,885
Financial Income and Expenses (476) (470) (919) (934)
- including finance income 40 39 81 75
- including finance costs (516) (509) (1,000) (1,009)
Net foreign exchange (loss)/gain and others 13 (77) 34 107
- including Other non-operating (losses)/gains 24 (47) (2) (47)
- including Shares of (loss)/profit of associates and joint ventures (12) (24) (28) (8)
accounted for using the equity method
- including Net foreign exchange (loss)/gain 1 (6) 64 162
Profit before tax 729 435 1,322 1,058
Income tax expense (247) (176) (486) (361)
Profit for the period 482 259 836 697
Profit for the period attributable to non-controlling interest 6 8 (30) 20
Net income 488 267 806 717
* See also the supplementary file Factbook2Q2012.xls on our website at
http://vimpelcom.com/ir/financials/results.wbp
ATTACHMENT C: RECONCILIATION TABLES
RECONCILIATION OF CONSOLIDATED EBITDA OF VIMPELCOM* (ACTUAL)
USD mln
2Q12 2Q11 1H12 1H11
Unaudited
EBITDA 2,481 2,253 4,792 3,456
Depreciation (720) (717) (1,447) (1,140)
Amortization (522) (585) (1,054) (728)
Impairment (loss)/gain (6) - - -
Loss on disposals of non-current assets (41) (14) (84) (24)
EBIT 1,192 937 2,207 1,564
Financial Income and Expenses (476) (425) (919) (551)
- including finance income 40 20 81 35
- including finance costs (516) (445) (1,000) (586)
Net foreign exchange (loss)/gain and others 13 (89) 34 59
- including Other non-operating (losses)/gains 24 (37) (2) (31)
- including Shares of (loss)/profit of associates and joint ventures accounted for using the equity method (12) (19) (28) 25
- including Net foreign exchange (loss)/gain 1 (33) 64 65
Profit before tax 729 423 1,322 1,072
Income tax expense (247) (166) (486) (295)
Profit for the period 482 257 836 777
Profit for the period attributable to non-controlling interest 6 (22) (30) (42)
Profit for the period attributable to the owners of the parent 488 235 806 735
* See also the supplementary file Factbook2Q2012.xls on our website at http://vimpelcom.com/ir/financials/results.wbp
ORGANIC GROWTH REVENUE AND EBITDA (PRO FORMA)
2Q12 versus 2Q11
Revenue EBITDA
------- ------
Business Units Organic FX and others Reported Organic FX and others Reported
Russia 8% -11% -3% 12% -11% 1%
Europe & NA -1% -11% -12% 0% -11% -11%
Ukraine -1% 0% -1% -10% 0% -10%
Africa & Asia 8% -8% 0% 13% 1% 14%
CIS 10% -4% 6% 11% -7% 4%
Total 4% -8% -4% 8% -6% 2%
ATTACHMENT C: RECONCILIATION TABLES
RECONCILIATION OF VIMPELCOM CONSOLIDATED NET DEBT (ACTUAL)
USD mln 2Q12 1Q12
Net debt 23,067 24,339
Cash and cash equivalents 2,883 4,033
Long - term and short-term deposits 609 219
Gross debt 26,559 28,591
Interest accrued related to financial liabilities 558 450
Fair value adjustment 228 148
Discounts, unamortized fees related to financial liabilities (147) (103)
Unamortised fair value adjustment under acquisition method of accounting 841 909
Derivatives not designated as hedges 415 403
Derivatives designated as hedges 157 173
Total other financial liabilities 28,611 30,570
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AVERAGE RATES OF FUNCTIONAL CURRENCIES TO USD*
Average rates Closing rates
YTD12 YTD11 YoY YTD12 FY2011 Delta
Russian Ruble 30.64 28.62 -6.6% 32.82 32.20 -1.9%
Euro 0.77 0.71 -7.4% 0.79 0.77 -2.5%
Algerian Dinar 75.56 72.47 -4.1% 79.03 75.33 -4.7%
Pakistan Rupee 91.37 85.40 -6.5% 94.58 89.95 -4.9%
Bangladeshi Taka 82.30 72.37 -12.1% 81.82 81.83 0.0%
Ukrainian Hryvnia 7.99 7.96 -0.4% 7.99 7.99 0.0%
Kazakh Tenge 148.15 146.00 -1.5% 149.42 148.40 -0.7%
Armenian Dram 394.78 370.09 -6.3% 418.01 385.77 -7.7%
Kyrgyz Som 46.87 46.79 -0.2% 47.24 46.48 -1.6%
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* Functional currencies in
Tajikistan, Uzbekistan and
Cambodia are USD.
ATTACHMENT D: WIND TELECOMUNICAZIONI GROUP CONDENSED STATEMENTS OF INCOME
EUR mln 1H12 1H11 Change
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Total operating revenues 2,729 2,750 -0.7%
EBITDA 1,012 1,023 -1%
D&A (550) (508) 8%
EBIT 462 514 -10%
Financial Income and expenses (456) (406) 12%
EBT 6 109 -94%
Income Tax (84) (88) -5%
Profit/(Loss) from discontinued operations - 6 n.m.
Net income (78) 26 n.m.
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ATTACHMENT E: DEFINITIONS
EBITDA and EBITDA Margin are non-GAAP financial measures. VimpelCom calculates EBITDA as profit for the period before depreciation, amortization, impairment loss, finance costs, income tax expense and the other line items reflected in the reconciliation table above. Our Russia Business Unit excludes certain expenses from their EBITDA. EBITDA margin is calculated as EBITDA divided by total operating revenues. EBITDA and EBITDA margin should not be considered in isolation or as a substitute for analyses of the results as reported under IFRS. 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 and EBITDA margin include the key revenue and expense items for which the company’s operating managers are responsible and upon which their performance is evaluated. EBITDA and EBITDA margin also assist management and investors by increasing the comparability of the company’s performance against the performance of other telecommunications companies that provide EBITDA (earnings before interest, taxes, depreciation and amortization) or OIBDA (operating income before depreciation and amortization) 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 profit between periods. However, our EBITDA results may not be directly comparable to other companies’ reported EBITDA or OIBDA 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 or 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 profit for the period, the most directly comparable IFRS financial measure, is presented in Attachment C.
EBIT is a non-GAAP measure and is calculated as EBITDA plus depreciation, amortization, impairment loss and loss on disposals of non-current assets. 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 costs and Net foreign exchange (loss)/gain and others. Reconciliation of EBIT to profit for the period, the most directly comparable IFRS financial measure, is presented in Attachment C. EBIT equals operating profit.
Net foreign exchange (loss)/gain and others represents the sum of Net foreign exchange loss, Shares of loss/(profit) of associates and joint ventures accounted for using the equity method, and Other non-operating losses/(gains). 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.
Net income equals profit for the period attributable to the owners of the parent.
ARPU (Monthly Average Revenue per User) is calculated by dividing service revenue during the relevant period, including revenue from voice-, roaming-, interconnect-, and value added services (including mobile data, SMS, MMS), but excluding revenue from 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 Africa & Asia (except SEA) visitors roaming revenue is excluded from service revenues.
APPM (Average Price Per Minute) is a measure used by management to assess the average price our mobile subscribers pay for using our mobile services.
MTR (Mobile Termination Rate) is a rate a mobile operator receives from other operators for terminating calls on its mobile network.
MNP (Mobile Number Portability) is an option for mobile subscribers to retain their mobile phone number when switching from one mobile operator to another.
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 3G/HSDPA technologies. Italian subsidiary measures broadband subscribers based on the number of active contracts signed. Russian business unit includes IPTV activities.
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.
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.
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 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.
Net debt is a non GAAP financial measure and is calculated as gross debt represented by principal amounts of interest bearing loans, bonds, equipment financing and loans from others minus cash and cash equivalents, as well as long-term and short-term deposits. 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 or as an alternative to other financial liabilities, or any other measure of the company financial position. Reconciliation of net debt to other financial liabilities, the most directly comparable GAAP financial measure, is presented in Attachment C.
Reportable segments, the Company identified Russia, Europe and North America, 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.
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. Reconciliation of organic growth of revenue and EBITDA to reported growth of revenue and EBITDA is presented in Attachment C.
SOURCE VimpelCom Ltd.
