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VimpelCom Ltd. (VIP)

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VimpelCom (VIP)

Q4 2011 Earnings Call

March 13, 2012 09:00 AM ET

Executives

Alex Tramont - IR

Jo Lunder - CEO

Henk van Dalen - CFO

Analyst

JP Davids -Barclays Capital

Jean Lemardeley - JPMorgan

Alex Kazbegi - Renaissance Capital

Cesar Tiron - Morgan Stanley

Herve Drouet - HSBC

Alex Balakhnin - Goldman Sachs

Victor Klimovich - VTB Capital

Dalibor Vavruska - Citi Group

Tibor Bokor - ING Bank

Presentation

Operator

Good day Ladies and gentlemen and welcome to the VimpelCom Fourth Quarter 2011 Investor and Analyst Call. (Operator Instructions). I would now like to turn your call over to your host for today, Ms. Alex Tramont of FTI Consulting. Ma'am you may begin.

Alex Tramont

Thank you. Good afternoon ladies and gentlemen and good morning to those of you connecting from the U.S. and welcome to VimpelCom’s Conference Call to discuss the Company’s fourth quarter 2011 financial and operating results. Before getting started I would like to remind everyone that forward-looking statements made on this conference call involves certain risks and uncertainties. These statements relate in part to one the Company’s plans to maintain profitable growth in its business units, two, the company’s expected future debt position and our refinancing plans and three the company’s financial performance objectives.

Certain factors may cause actual results to differ materially from those contained in the forward-looking statements, including the risk detailed in one, the company’s release announcing fourth quarter 2011 financial and operating results in the related presentation. Two the company’s annual report on Form 20F for the year ended December 31, 2011. And three other public filings made by the company with the SEC each of which are posted on the company’s website at www.vimpelcom.com and on the SEC’s website at www.sec.gov.

If you have not received the copy of the fourth quarter, 2011, financial and operating results release please contact investor relations at +31207977234 and it will be forwarded it to you.

In addition the press 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. 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 fourth quarter earnings presentation. Let me start by introducing the members of the team here in Amsterdam. We have Henk van Dalen, our Chief Financial Officer, who will be covering the financials in detail and Gerbrand Nijman, our Head of Investor Relations.

Moving on for our highlights, we are pleased with a positive development and solid operational performance. We had an organic increase in revenues and robust subscriber growth in all of our markets in the fourth quarter.

These results enabled us to achieve strong cash flows. Net income is impacted by non-cash items and Henk will address this matter later on in the presentation.

We are pleased to report positive development and resolutions in relation to a number of strategic subjects. As we announced in December we decided not to exercise the call option to acquire an additional 24.9% stake in Euroset.

VimpelCom’s partnership with Euroset has been and will continue to be a substantial part while the distribution strategy in the Russian market. In Algeria, discussions with the government are ongoing, the negotiations are quite sensitive so we are not today able to say more than what we have already disclosed on this matter.

In February Telenor withdrew its arbitration claims for preemption rights which is initiated in connection with the acquisition of Wind Telecom. This removes the risk of dilution for our shareholders. At the same time the shareholders agreement with Telenor terminated and the so called Section B bye-laws came into effect.

We believe that these bye-laws are in line with common corporate government standards for company of our size.

We are successfully completed the integration with Wind Telecom in the quarter which allows us to fully focus on our operation and on delivering on the value agenda in 2012 and beyond.

In February we completed the spin-off of certain assets of our Orascom Telecom to that reinvestment tree. The completion of the spin-off fulfills all of the Orascom obligation in relation to the VimpelCom merger with Wind Telecom and enhance renews the potential and related to the purchase of these assets by VimpelCom which would have occurred have the spin-offs not been completed with the agreed timeframe.

Today we also announce a final dividend of $35, which underscores our commitment to pay dividend of at least $80 per common share from 2011 through 2014.

Part of the value agenda of 2012 to 2014 is foreign strategic portfolio analysis. For running a detailed business plan of use of our operations in Vietnam and income (inaudible) we have booked an impairment of $527 million.

Finally, we have today communicated further details for our financial performance objectives for 2012 to 2014 as promised in our investor day in November. I will return to our objectives at the end of today’s presentation.

Now moving on to the results of the quarter, our performance and execution is just confidence in our group going forward. We achieved solid subscribed growth across all business units in particular in Africa and Asia with double digit growth in mobile subscribers that reach 205 million and close to 5 million subscribers in fixed line.

The group performance led to a 5% organic growth in revenue year-over-year reaching $5.9 billion. Excluding ForEx impact, EBITDA was stable at $2.2 billion leading to margins of 37%. Net cash from operating activities increased a 133% of the previous year reaching $1.8 billion. Net income for the full year was $489 million having been impacted by non-cash items that Henk will explain in detail later.

Moving now on to the performance of our five business units starting with Russia. The company met its 2011 target to regain the revenue market share. We are pleased with this achievement and our focus in 2012 is now shifting to maintaining this position. At the same time we are gearing our market activities towards stimulating usage in order to improve contribution margins.

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