VimpelCom Ltd. (VIP)

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VimpelCom Ltd (VIP)

Q4 2012 Earnings Call

March 06, 2013, 08:30 am ET


Jo Lunder - CEO

Henk van Dalen - CFO


Haim Israel - Bank of America

Herve Drouet - HSBC

Alex Balakhnin - Goldman Sachs

Dalibor Vavruska - Citigroup

Olga Bystrova - Credit Suisse

Igor Semenov - Deutsche Bank

Alex Wright - UBS



Good day ladies and gentlemen, and welcome to the VimpelCom Fourth 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, this conference call maybe recorded.

I would now like to introduce your host for today's conference, FTI Consulting. Please go ahead.

Unidentified Company Representative

Good afternoon ladies and gentlemen, and welcome to VimpelCom’s conference call to discuss the company’s fourth 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 future dividend payments, the company’s medium term value agenda objectives and 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 the company’s earnings release and presentation announcing fourth quarter 2012 results, the company’s annual report on Form 20-F, and other recent public 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 fourth quarter of 2012 are unaudited.

If you have not received a copy of the fourth quarter 2012 financial and operating results 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 Lunder

Thank you. Good afternoon for those in Europe and good morning to our guests from the United States and welcome to our fourth quarter 2012 earnings presentation. I am joined here in Amsterdam by Henk van Dalen, our Chief Financial Officer who will be covering the financials in detail and Gerbrand Nijman, our Head of Investor Relations.

Our fourth quarter results reflect continued delivery on our strategic priorities highlighted by profitable growth and strong cash flow generation. The Group recorded organic revenue growth of 3% year-on-year, with revenues reaching $6 billion, with solid performance across our business units. Excluding the impact of the reduction of mobile termination rate in Italy, organic revenue growth would have been 5%.

EBITDA increased 13% over the previous year leading to an EBITDA margin growth of 3.3 percentage points to 41.1%. Organic EBITDA was up double-digit in Russia, Africa, Asia and the CIS.

Operational developments continued to be positive in Russia and in Italy we continue to outperform the market. Additionally, we are successfully transitioning our customers to bundled offerings in the Ukraine.

In the fourth quarter, we achieved strong overall subscriber growth with an increase of 5% year-over-year to 240 million mobile subscribers. Africa and Asia delivered especially strong subscriber growth in the quarter.

Despite unfavorable currency movement, our financial performance was strong with net income increasing substantially to $801 million. Net cash from operating activities increased 24% to $2.3 billion in the quarter.

Moving on to our full-year results, 2012 has been a successful year, with solid organic performance in all our business units. We achieved a 4% organic growth in revenues reaching $23.1 billion as well as an 8% organic increase in EBITDA to $9.8 billion. This led us to deliver a 2 percentage point increase in EBITDA margin to 42.4%.

Net income grew to $2.1 billion in the full year. It is worth highlighting the turnaround we have witnessed in Russia, where in 2012, we realized more than double the initial targets of the RUB 5 billion in annualized savings. Our strategy remained centered around increasing cash flows and our efforts on these objectives are clearly visible in the 19% increase in the net cash that we realized in 2012.

Before discussing our business unit performance, I would like to mention some recent important developments. On January 16th, we held our Analyst and Investor Day in London. We presented our enhanced value agenda for ‘13 through 2015. We also announced our medium term objectives which include revenue and EBITDA CAGR of around mid single-digits, net debt-to-EBITDA below two times by the end of 2015 and CapEx to revenues excluding licenses below 15% in 2015. We indicated our intention to deliver improvements in annual cash flows compared to 2012 of $2 billion from operations and of between $600 million and $900 million from finance optimization by the end of 2015. In February this year, we successfully completed a debt refinancing of $2 billion equivalent.

We held our Annual General Meeting on December 21st in which nine Supervisory Board Members were elected, four of Alfa, three of Telenor and two Independent Directors. The Supervisory Board also unanimously elected Alexey Reznikovich as Chairman.

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