VimpelCom “on track” to deliver 2015 targets; Wind merger deal moves closer

VimpelCom “on track” to deliver 2015 targets; Wind merger deal moves closer

13 MAY 2015

Amsterdam-headquartered VimpelCom, which operates in a number of emerging markets, pointed to mobile data growth and continued “cost transformation” as some of the grounds for optimism in meeting 2015 financial targets.

Those targets, however, envisage little in the way of growth: full-year service revenue is projected as flat to low single-digit organic year-on-year decline, while EBITDA margin is also expected to be flat to minus one percentage point organically.

VimpelCom’s Q1 results came against a backdrop of renewed speculation that Wind, the group’s Italian operation, was moving closer to a merger agreement with Hutchison Whampoa’s Three Italy, the country’s third and fourth largest mobile operators respectively.

A Bloomberg report, citing unnamed sources, said Hutchison and VimpelCom had agreed on who would fill the senior management positions in a combined entity, so making a merger more likely.

Groundhog quarter
Despite the apparent upbeat mood displayed by new CEO Jean-Yves Charlier (pictured) – “the first quarter results are in line with our expectations and most of our businesses show operational performance at par with or better than the markets we operate in” – Q1 results, in many ways, resembled previous quarters as the company wrestled with unfavourable exhange rates.

Year-on-year reported revenue slumped 30 per cent, to $3.5 billion, while core earnings – or EBITDA – fell 33 per cent, to $1.4 billion. EBITDA margin was squeezed 1.9 percentage points over the same period, to 39.7 per cent.

On an organic basis, however, things look much less gloomy. Turnover is down a more palatable 2 per cent when currency movements are stripped out of the equation. Organic EBITDA also fell by 2 per cent.

Market weakness in Italy – which accounts for around a third of Group service revenue – nonetheless continues to be a drag on financials. Q1 service revenue and EBITDA were down 5 per cent each in Italy, even on an organic basis.

Organic revenue in Russia, VimpelCom’s biggest market, was flat (yet down 44 per cent on a reported basis).

Charlier highlighted, too, the delayed launch of 3G services in Algeria as having a negative impact at Group level, but was quick to point out positive developments as well.

Aside from service revenue growth in Bangladesh and Ukraine, which “partially offset” organic revenue and EBITDA declines, Charlier flagged the sale of its Djezzy stake in Algeria, the sale of towers in Italy, the acquisition of a 3G license in Ukraine and the launch of 4G services in Georgia.

Subs and profit growth
“Our customer base grew by 2 per cent and we have made further progress in improving our debt structure,” said Charlier. “Across the Group, data revenue continues to grow in double digits, and we confirm our guidance for 2015. As the recently appointed Group CEO, I look forward to updating the market on our strategy in August.”

Net income attributable to VimpelCom shareholders jumped from $38 million (Q1 2014) to $184 million. Vimplecom said the increase was due to an increase in pre-tax profits, which, in turn, were boosted by lower financing costs due to a refinancing in Italy and the positive effect from hedging, which offset foreign exchange losses.


Ken Wieland

Ken has been part of the MWC Mobile World Daily editorial team for the last three years, and is now contributing regularly to Mobile World Live. He has been a telecoms journalist for over 15 years, which includes eight...More

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