VimpelCom Ltd. (VIP)

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VimpelCom (VIP)

Q3 2012 Earnings Call

November 14, 2012 08:00 AM ET


Alex Tramont - FTI Consulting

Jo Lunder - CEO

Henk van Dalen - CFO


JP Davids – Barclays Capital

Alex Balakhnin - Goldman Sachs

Igor Semenov - Deutsche Bank

Ivan Kim - VTB Capital

Evgeny Golosnoy - Metropol



Good day ladies and gentlemen, and welcome to the VimpelCom Third Quarter 2012 Investor and Analyst Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, today’s conference call is being recorded.

I would now like to introduce your host for today's conference Alex Tramont of FTI Consulting. Ma’am you may begin.

Alex Tramont

Thank you. Good afternoon ladies and gentlemen, and welcome to VimpelCom’s conference call to discuss the company’s second quarter 2012 financial and operating results.

Before getting started, I would like to remind everyone that forward-looking statements made on this conference call involve certain risks and uncertainties. These statements relate, in part to one, the timing of the dividend authorization; the company’s plans to maintain cost in Russia and Italy and to roll out its LTE network in Russia; and three, the company's expected future debt position and refinancing plans.

Certain factors may cause actual results to differ materially from those contained in the forward-looking statements, including the risks detailed in one; the company’s earnings release and presentation announcing third quarter 2012 results; two, the company’s Annual Report on Form 20-F, and three, other recent filings made by the company with the SEC.

Certain amounts and percentages that are used here 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 proceed or follow them. Please note that the actual financial results of the third quarter of 2012 are not added in. If you have not received a copy of the third quarter 2012 financial and operating results press release, please contact investor relations at +31207977234 and it will be forwarded to you. In addition, the earnings release and the earnings presentation, each of which includes reconciliations of non-GAAP financial measures presented on this conference call can be downloaded from the VimpelCom website.

At this time, I would like to turn the call over to Jo Lunder, Chief Executive Officer of VimpelCom. Jo Please go ahead.

Jo Lunder

Thank you. Good afternoon to those in Europe and good morning to our guests from the United States and welcome to our third quarter earnings presentation. Let me start by introducing the members of the teams sitting with me here. We have Henk van Dalen, our Chief Financial Officer who will be covering the financials in detail and (inaudible) our Head of Investor Relations.

In the third quarter VimpelCom continued to deliver only strategic priorities as defined by the company’s value agenda for 2012 and 2014 with profitable organic growth in almost all business units. The group recorded a 3% organic growth in revenues year-over-year reaching $5.7 billion. Excluding the impact of the reduction of MTRs Wind Italy, the organic growth would have been 5%. EBITDA increased 8% compared to the same period last year leading a margin of 44%. This is the heights margin we have achieved since the combination with VimpelCom in April 2011.

We are pleased with the continued positive operational development in Russia where EBITDA in local currency grew double digits in the third quarter. Likewise, CIS also delivered double digit organic growth in EBITDA. Wind Italy, we are facing a challenging regulatory and economic environment but our operations there continue to outperform the market and win (inaudible) market share.

In Ukraine 2012, remains a transition year and we see an improved and accelerated migrations to bundled offerings. In the third quarter, we achieved strong overall subscriber growth with an increase of 7% reaching 212 million mobile subscribers, the largest contribution came from Austria and Asia and from CIS. The company was able to deliver a solid financial performance in the third quarter despite a considerable negative impact from currency movements. Net income reached $538 million, almost triple last year’s third quarter results and we continued to deliver strong cash flow with net cash from operating activities of $2 billion.

Before moving from operations by business units, I would like to briefly touch on some important recent development. The supervisory board of VimpelCom has decided to schedule the VimpelCom annual general meeting on December 21st, assuming that the fast claim will have been resolved by November 27th. We expect that once the fast claim has been resolved, the supervisory board will consider the payment of the final dividend for 2011. As you might have noted, the dividend is not included in the AGM agenda as this decision is a matter that rests with the supervisory board.

In relations to Algeria, we continue to negotiate with the local authorities on finding a mutually beneficial agreement and discussions are still progressing well.

Turning to Canada, VimpelCom reports OTH efforts to increase the voting stake in Canada to 65% and we are optimistic that the Canadian investment authorities will approve this petition.

And finally, we announced today that we will be hosting our Analyst and Investor Day on January 16, in London and I hope you will all join us for this event.

Now moving on to the performance of the five business units, starting with Russia. In Russia the company maintained the positive operating results as seen in the first half of the year. The business saw organic revenue growth of 7% while EBITDA increased 16% leading to an EBITDA margin of 43.2% delivering on our strategic strategy of profitable growth. The revenue growth was reported by a 38% increase in mobile data revenues as we continued to promote these services.

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