AMSTERDAM, May 15, 2012 /PRNewswire/ --?
KEY RESULTS AND DEVELOPMENTS IN 1Q12*
- Organic Revenue growth of 6% YoY; revenues of USD 5.6 billion
- Organic EBITDA growth of 5% YoY; EBITDA of USD 2.3 billion
- Total mobile subscriber base increased 12% YoY to 209 million
- Organic EBITDA growth of 9% YoY in Russia, reversing previous negative trend
- Double-digit organic EBITDA growth in Africa & Asia; strong performance in Pakistan
- Net income of USD 318 million
- Net cash from operating activities of USD 1.6 billion
"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 March 31, 2012.
JO LUNDER, CHIEF EXECUTIVE OFFICER COMMENTS:
"We have delivered strong organic EBITDA and revenue growth leading to another quarter of good cash flows. The benefits of executing on our strategy can be seen across our businesses: in Russia, our focus on profitable growth has delivered a strong organic increase of 9% in EBITDA and 11% in revenues. In the Africa & Asia business unit organic revenues rose by 9%, with a particularly strong contribution from Pakistan. In Italy we again gained market share, outperforming our competitors and our Ukraine and our CIS business units delivered solid revenue increases. We will continue to review our portfolio of operations and we will remain focused on profitable growth and cash generation."
| CONSOLIDATED FINANCIAL AND OPERATING HIGHLIGHTS |
|
| USD mln |
| Pro forma |
|
| Actual |
|
|
| 1Q12 | 1Q11 | YoY |
| 1Q12 | 1Q11 | YoY |
| Total operating revenues |
| 5,619 | 5,481 | 3% |
| 5,619 | 2,740 | 105% |
| EBITDA |
| 2,311 | 2,285 | 1% |
| 2,311 | 1,203 | 92% |
| EBITDA margin |
| 41.1% | 41.7% |
|
| 41.1% | 43.9% |
|
| EBIT |
| 1,015 | 903 | 12% |
| 1,015 | 627 | 62% |
| Net Income |
| 318 | 450 | -29% |
| 318 | 500 | -36% |
| EPS, basic (USD) |
| 0.20 | 0.28 | -29% |
| 0.20 | 0.39 | -49% |
| Capital expenditures |
| 632 | 729 | -13% |
| 632 | 456 | 39% |
| Net cash from operating activities |
| 1,607 | - | - |
| 1,607 | 1,017 | 58% |
| Net debt / LTM EBITDA |
| 2.5 | - | - |
| - | - | - |
| Total mobile subscribers (millions) |
| 209 | 186 | 12% |
| 209 | 95 | 120% |
|
| * Comparative figures are Pro forma - for pro forma definition see next page.
? For all other definitions see Attachment E. |
?
| ORGANIC* GROWTH REVENUE AND EBITDA (PRO FORMA) |
|
|
| ? Revenue | ? EBITDA |
|
|
|
|
|
|
|
|
| Business Units |
| Organic | FX and others | Reported | Organic | FX and Others | Reported |
|
|
|
|
|
|
|
|
| Russia |
| 11% | -3% | 8% | 9% | -3% | 6% |
| Europe & NA |
| 0% | -5% | -5% | -2% | -4% | -6% |
| Ukraine |
| 3% | 0% | 3% | -2% | 0% | -2% |
| Africa & Asia |
| 9% | -5% | 4% | 12% | -7% | 5% |
| CIS |
| 9% | -1% | 8% | 2% | -1% | 1% |
| Total |
| 6% | -3% | 3% | 5% | -4% | 1% |
|
| * Organic growth excludes 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. |
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 transactions with Wind Telecom occurred on January 1, 2011. For further details about the adjustments and assumptions of our pro forma results, please refer to VimpelCom's press release issued on August 18, 2011 and available on our website.
VimpelCom Ltd. results presented in this earnings release are based on IFRS. The revised unaudited pro forma condensed combined financial information prepared in accordance with IFRS for 1Q11, 2Q11, 3Q11, 4Q11 and FY11 was published on May 14, 2012 and are available on the Company's website www.vimpelcom.com.
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 1Q12 financial results in this earnings release have not been audited. As previously announced, the Company published its full year 2011 audited financial results under IFRS when it filed its annual report on Form 20-F for the year ended December 31, 2011 on April 30, 2012.
STRATEGIC UPDATE AND MAIN EVENTS
- VimpelCom's subsidiary OTH submitted formal notice of arbitration against Algerian Government
- Significant part of 2012 debt maturities refinanced by bonds issued in March and April
- Sale of controlling interest in GTEL Mobile Vietnam
- Final dividend to be paid before June 30th 2012 ?
- Maximo Ibarra appointed to lead Italy Business
VimpelCom continued its progress in the first quarter against its strategic priorities as defined by the Company's Value Agenda for 2012-2014, which was presented on November 15, 2011.
In March, the Company announced that an Algerian Court of first instance handed down a judgment against Orascom Telecom Algerie ("OTA") and a member of OTA's senior executive team. The judgment relates to a previously disclosed claim brought in 2010 by the Algerian authorities alleging breaches of foreign exchange regulations. The judgment consists of fines of 99 billion Algerian Dinar (approximately USD 1.3 billion) and a criminal sentence against a member of OTA's senior executive team. OTA has appealed and accordingly the judgment was provisionally suspended.
In April, VimpelCom's subsidiary Orascom Telecom Holding S.A.E. ("OTH"), submitted a formal Notice of Arbitration against the government of the People's Democratic Republic of Algeria. The arbitration is in respect of actions taken by the Algerian government against Orascom Telecom Algerie ("OTA") and will be conducted in an international forum. OTA is 96.8% owned by OTH, which, in turn, is 51.9% owned by VimpelCom. VimpelCom continues to be open to finding an amicable resolution with the Algerian government that is mutually beneficial to both parties.
In March the Company issued non-convertible interest-bearing Russian Ruble-denominated bonds in an aggregate principal amount of RUB 35 billion (USD 1.2 billion) with a 10 year maturity and an 8.85% coupon. The proceeds of the offerings will be used for OJSC VimpelCom's general corporate purposes and refinancing of existing debt.
In early April, WIND prepaid its term loan A maturities for 2012 and 2013 for an amount of EUR 500 million. Concurrently, its subsidiary WAF SA issued a EUR?500?million equivalent tap of Senior Secured Notes due 2018 (EUR tranche is at 7.375% and the USD tranche is at 7.25%). The proceeds of the offering were used, in part, to repay EUR 250 million of indebtedness related to an outstanding bridge loan entered into in October 2011 in relation to the LTE spectrum purchase.
On April 23, 2012, VimpelCom announced the sale of 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.
The shareholders of OTH in their meeting held on May?3,?2012 approved OTH entering into a five-year USD?2.5?billion uncommitted Credit Facility Agreement with VimpelCom Amsterdam B.V. Advances under this Facility, which will be drawn from time to time based on the business development needs of OTH agreed upon with VimpelCom, will bear an interest rate of 12.5% and accrued interest will be paid in kind (payable by automatic addition to the principal balance).
In April, VimpelCom and its subsidiary VimpelCom Holdings B.V., which together own 100% of the Group's Russian subsidiary OJSC VimpelCom, were named as third parties in a claim brought by the Russian Federal Anti-Monopoly Service ("FAS") in a Moscow Arbitration Court against two of VimpelCom's strategic shareholders, Telenor East Holding II AS ("Telenor") and Weather Investments II S.a.r.l. ("Weather II"). The FAS claim alleges that Telenor's February 15, 2012 purchase of 234 million VimpelCom preferred shares from Weather II violated relevant Russian law and seeks to, among other things, invalidate the purchase.? In connection with this claim, FAS obtained from the Moscow court an order for interim relief which prohibits VimpelCom and VimpelCom Holdings from voting their shares in OJSC VimpelCom at shareholder meetings of OJSC VimpelCom, to change the OJSC VimpelCom Board of Directors and approve major transactions and interested party transactions, as such terms are defined under Russian law. The order does not prohibit VimpelCom and VimpelCom Holdings from exercising their other rights as shareholders of OJSC VimpelCom, including, among other things, rights to approve OJSC VimpelCom's annual accounts, to appoint OJSC VimpelCom's external auditor, to approve dividend payments by OJSC VimpelCom and to re-elect the current OJSC VimpelCom Board members.? According to the order, the first hearing on the merits of the FAS claim is scheduled for October 17, 2012.
The payment of the previously announced final dividend of USD 0.35 per American depositary share ("ADS") in relation to its 2011 results will be paid before June 30, 2012.
Finally, VimpelCom announced the appointment of Maximo Ibarra as CEO of WIND Telecomunicazioni in Italy effective May 11, 2012. Mr. Ibarra will focus on the further development of the Company's operations in Italy, aligned with VimpelCom's Value Agenda.
?VIMPELCOM GROUP ? FINANCIAL AND OPERATING RESULTS 1Q12
- Organic Revenue growth of 6% YoY; Revenues of USD 5.6 billion
- Organic EBITDA growth of 5% YoY; EBITDA of USD 2.3 billion
- Total mobile subscriber base increased 12% YoY to 209 million
- Net cash from operating activities was USD 1.6 billion
- CAPEX of USD 0.6 billion, with a CAPEX / Revenues of 11%
- Net debt / LTM EBITDA was 2.5x at the end of the first quarter
OPERATING PERFORMANCE OVERVIEW
The total mobile subscriber base increased 12% YoY to 209?million at the end of the first quarter. The largest absolute contribution came from accelerated growth in subscribers in the Africa & Asia Business Unit. The Company also achieved strong growth in fixed and mobile broadband subscribers in Russia, Italy and Ukraine.
In line with the strategy of targeting profitable growth and resetting the overall commercial model to achieve this goal, VimpelCom in Russia engaged in more targeted sales activities in the first quarter of 2012. As a result, overall subscribers declined in the first quarter 2012 compared to the fourth quarter of 2011, which benefited from extensive pre-holiday sales. Mobile broadband subscribers in Russia increased 12% YoY to 2.6 million, while the Fixed broadband subscriber base reached over 2 million, up 42% YoY. Overall, organic revenue growth in Russia was strong at 11% YoY.
The Company's Italian business continued to outperform the broader Italian telecom market in the first quarter despite the ongoing weak macroeconomic environment and unfavorable regulatory developments. VimpelCom strengthened its market position in Italy in both mobile and fixed-line, increasing its revenue share in both segments. The fixed broadband subscriber base increased 9% YoY to more than 2.2 million, with an increase in Fixed broadband revenues of 9% YoY, while Mobile internet revenues increased 40% YoY.??????
In the Africa & Asia Business Unit, the Company achieved strong growth in its subscriber base across all countries of operation, exceeding 86 million in total. Solid performance across the main operations led to organic revenue growth of 9% YoY. In particular Pakistan and Bangladesh contributed strongly. Reported total operating revenues increased by 4% YoY, adversely impacted by local currency devaluation against the USD in the main operating countries of Algeria, Pakistan and Bangladesh.
The Ukraine Business Unit continued to deliver solid revenue growth in mobile and fixed data revenues and almost doubled its Fixed broadband subscribers. Mobile revenues were up 2% YoY driven by growth of voice and data traffic as a result of the strategy of transition to bundles. Fixed-line revenues increased by 16% YoY, mainly due to an 82% increase in fixed residential broadband revenues.
The CIS Business Unit delivered strong revenue growth and was able to maintain high quality subscriber growth despite a sharpening competitive environment also affected by certain governmental measures in key markets.
| OPERATING FINANCIALS PER BUSINESS UNIT (PRO FORMA) |
|
|
|
| Pro forma |
|
|
|
|
|
|
|
| USD mln |
|
| 1Q12 | 1Q11 | Reported
YoY | Organic
YoY |
| Total operating revenues |
| 5,619 | 5,481 | 3% | 6% |
| of which: |
|
|
|
|
|
| BU Russia |
| 2,225 | 2,064 | 8% | 11% |
| BU Europe & North America |
| 1,766 | 1,862 | -5% | 0% |
| BU Africa & Asia |
| 927 | 891 | 4% | 9% |
| BU Ukraine |
| 385 | 375 | 3% | 3% |
| BU CIS |
| 379 | 351 | 8% | 9% |
| other |
| (63) | (62) |
|
|
| EBITDA |
|
| 2,311 | 2,285 | 1% | 5% |
| of which: |
|
|
|
|
|
| BU Russia |
| 918 | 868 | 6% | 9% |
| BU Europe & North America |
| 639 | 679 | -6% | -2% |
| BU Africa & Asia |
| 424 | 404 | 5% | 12% |
| BU Ukraine |
| 197 | 202 | -2% | -2% |
| BU CIS |
| 161 | 159 | 1% | 2% |
| other |
| (28) | (27) |
|
|
|
|
|
|
|
|
|
| EBITDA margin |
| 41.1% | 41.7% |
|
|
| Capital expenditures |
| 632 | 729 | -13% |
|
|
| * See definitions in Attachment E. |
FINANCIAL PERFORMANCE OVERVIEW
PRO FORMA 1Q12
Total operating revenues in the first quarter 2012 increased by 3% YoY, with a strong performance across most business units. Overall organic revenue growth was 6%.
EBITDA increased 1% YoY, impacted by unfavorable currency movements. Excluding these forex effects, EBITDA increased 5% compared to the same period last year. Strong organic EBITDA growth was seen in the markets of the business units of Russia and Africa & Asia, up 9% and 12% respectively, while the performance in CIS showed a 2% increase YoY. Overall growth was partly offset by the YoY organic EBITDA decline in Ukraine and Italy.
EBIT, which increased by 12% YoY, was 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 was negatively impacted by the lower foreign exchange gain in 1Q12 compared to 1Q11,?lower net gain realized in 1Q12 from investments in associated entities, mainly related to our investment in Euroset and fair value changes of embedded derivatives. In 1Q11 the foreign exchange gain was USD 168 million, while in 1Q12 the gain only amounted to USD 63 million, mainly due to the lower USD exposure in Russia.
Net income decreased by 29% YoY as a result of the increase in income tax expense of USD 54 million and USD?48 million change in profit for the period attributable to non-controlling interest, mainly resulting from a stronger performance in Orascom Telecom Holding.
CAPEX was USD 0.6 billion, excluding licenses, with investments in the further roll out of the mobile networks in Russia, Bangladesh and the CIS. In Italy, we continued to invest in the roll-out of HSDPA and in backbone capacity to support the growth in data.
ACTUAL 1Q12
On an actual basis, revenues more than doubled YoY and EBITDA and EBIT increased by 92% and 62% YoY respectively as a result of the combination with Wind Telecom in April 2011.
Profit before tax decreased by 9% YoY due to additional? finance costs as a result of the Wind Telecom acquisition; net losses from associated entities- mainly due to lower profits from Euroset and losses from the investment in Canada; as well as lower gains from foreign exchange rates movements, mainly attributable to the lower USD exposure in Russia.
The increase in the effective income tax rate, driven by higher non-deductible expenses and non-recognized losses in Wind Telecom entities as well as the effect of a reversal of tax provisions in Russia in 1Q11, has led to a decrease in net income of 36% to USD?318 million.
| USD mln |
|
| Pro forma |
| Actual |
|
|
|
|
|
|
|
|
|
|
|
|
| 1Q12 | 1Q11 | YoY |
| 1Q12 | 1Q11 | YoY |
| Total operating revenues |
| 5,619 | 5,481 | 3% |
| 5,619 | 2,740 | 105% |
| EBITDA |
|
| 2,311 | 2,285 | 1% |
| 2,311 | 1,203 | 92% |
| EBITDA margin |
| 41.1% | 41.7% |
|
| 41.1% | 43.9% |
|
| EBIT |
|
| 1,015 | 903 | 12% |
| 1,015 | 627 | 62% |
| Financial income and expenses |
| (443) | (464) | -5% |
| (443) | (126) | 252% |
| Net foreign exchange (loss)/gain and others |
| 21 | 184 | -89% |
| 21 | 148 | -86% |
| Profit before tax |
| 593 | 623 | -5% |
| 593 | 649 | -9% |
| Income tax expense |
| (239) | (185) | 29% |
| (239) | (129) | 85% |
| Profit for the period |
| 354 | 438 | -19% |
| 354 | 520 | -32% |
| Net income |
|
| 318 | 450 | -29% |
| 318 | 500 | -36% |
| Capital expenditures |
| 632 | 729 | -13% |
| 632 | 456 | 39% |
?
| STATEMENT OF FINANCIAL POSITION & CASH FLOW (ACTUAL) |
|
| USD mln |
| 1Q12 | 4Q11 | QoQ |
| Total assets |
| 56,121 | 54,039 | 4% |
| Shareholders' equity |
| 14,343 | 14,037 | 2% |
| Gross debt |
| 28,591 | 26,876 | 6% |
| Net debt |
| 24,339 | 24,373 | 0% |
|
|
|
|
|
|
| 1Q12 | 1Q11 | YoY |
| Net cash from operating activities |
| 1,607 | 1,017 | 58% |
| Net cash used (in)/from investing activities |
| (915) | (1,208) | -24% |
| Net cash used (in)/provided from financing activities |
| 941 | 1,132 | -17% |
|
|
|
|
|
Total assets increased by 4% to USD 56.1 billion, primarily as a result of investments in the business, external financing and the appreciation of RUB and EUR against USD offset by the transfer of the spin-off assets to Weather II. Gross debt increased in the quarter from USD 26.9 billion to USD?28.6?billion, mainly due to the issuance of Ruble bonds for RUB 35 billion (approximately USD 1.2 billion) and FX movements. Net debt decreased to USD 24.3 billion, leading to a net debt to LTM EBITDA of 2.5x on a pro forma basis at the end of the first quarter.
Net cash from operating activities at the Group level was positively impacted by higher EBITDA, partially offset by higher interest and tax payments. Net cash used in investing activities was mainly impacted by a substantial movement from cash to deposits in 2011, partially offset by the higher investments in property, equipment and intangible assets in 2012 resulting from the consolidation of Wind Telecom.
Net cash from financing activities in 1Q12 was mainly the result of obtaining external financing (issuance of Ruble bonds), primarily in anticipation for repayment of maturing debt as scheduled.
BUSINESS UNITS PERFORMANCE IN 1Q12
- Russia
- Europe and North America
- Africa & Asia
- Ukraine
- CIS
BUSINESS UNIT RUSSIA ? FINANCIAL AND OPERATING RESULTS
- Double-digit total Revenue growth of 11%
- Continued strong Revenue growth in Mobile and Fixed broadband
- EBITDA increase of 9% YoY; reversal of previously negative trend
- EBITDA margin of 41.3%
- Operational excellence program on track to deliver at least RUB 5 billion in annualized savings in 2012
In 1Q12 the Russian Business Unit was focused on clear actions to deliver sustainable and profitable growth in line with the announced new strategy as part of the Company's overall corporate Value Agenda.
The Russian Business Unit delivered double-digit revenue growth and a substantial improvement?in?EBITDA, reversing the EBITDA trend seen last year. The EBITDA margin in 1Q12 reached 41.3%, improving over the FY11 margin of 40.1%.
Mobile data continues to be one of the fastest growing revenue streams for VimpelCom in Russia. The Company continued to promote mobile data services to a wider audience, creating attractive bundled offerings and innovative tariffs with the main focus on small and medium screens. The total revenue growth of 11% YoY was accounted for by a 39% increase in mobile data growth.
In line with the strategy of targeting profitable growth and resetting the overall commercial model to achieve this goal, VimpelCom engaged in more targeted sales activities in the first quarter of 2012. As a result, overall subscribers declined in the first quarter 2012 compared to the fourth quarter of 2011, which also benefited from extensive pre-holiday sales, but was still 5% above 1Q11 level.
At the end of 2011, the Company launched a Customer Experience program focused on enhancing the Beeline brand and improving customer loyalty. Initiatives in this program are focused on improving the quality of services and increasing pricing transparency. As a result of these initiatives, in 1Q12 the Company received one of the highest ratings in the TRI*M Index, which is an indicator of increasing customer satisfaction across our products and services. This customer satisfaction indicator increased by approximately 7% YoY. Going forward, the Company will continue with the Customer Experience program in order to consistently improve the level of customer satisfaction with all Beeline brand products and services.
To optimize the expenses related to subscriber acquisition costs and to lower churn rates, the Company has also implemented a new dealer commission structure based on revenue sharing instead of upfront payments.
In 1Q12, the Russian Business Unit launched a number of initiatives aimed at increasing productivity through organizational structure optimization and through improving business process efficiency.
KEY DEVELOPMENTS 1Q12
- Mobile subscriber base grew 5% YoY to 55.6 million, but declined 3% as compared with 4Q11; mobile broadband subscribers increased 12% YoY to 2.6 million
- Total revenue in Russia grew by 11% YoY to RUB?67?billion primarily as a result of higher service revenues driven by growth in content and small screen internet activities.
- EBITDA increased by 9% YoY reversing the declining trend seen last year, as a result of revenue growth, improvement in service margins and cost control measures.
- EBITDA margin was 41.3% and declined compared to 1Q11, impacted primarily by a decrease in APPM driven by the competitive environment and growth in low-margin handset sales, as well as higher technical and IT costs and an increase in payroll tax.
- Mobile revenues increased 11% YoY driven by solid mobile data revenue growth and sales of devices.
- Mobile ARPU in Russia increased by 2% to RUB 314 from RUB 308 in 1Q11, stimulated by growing usage and VAS.
- Mobile data traffic grew 118% YoY in 1Q12, leading to revenues totaling RUB 6 billion, an increase of 39% from 1Q11.
- Fixed-line revenues increased 11% YoY due to continuing growth in fixed broadband revenues, up 48% YoY. The fixed broadband subscriber base reached over 2 million, up 42% YoY.
- CAPEX/Revenues was 9% in 1Q12, in line with our network construction planning. Capex/Revenues LTM stood at 20.7%. The Company will continue to invest in its 3G network development and aims to match its main competitors in terms of population coverage in main cities in 43 key regions by 2013. The Company expects Capex for the full year 2012 to be below 1Q12 LTM level.
