VimpelCom’s annual net loss widens to USD691m

17 Feb 2016

Amsterdam-based, US-listed telecoms group VimpelCom Ltd has reported that its total group revenue declined 29% year-on-year in 2015 to USD9.625 billion due to the adverse impact of currency movements. However, underlying total organic group revenue in 2015 increased by 1%, driven by positive performances in Pakistan, Bangladesh, Ukraine, Uzbekistan and Kyrgyzstan, in part offset by negative performance primarily in Algeria and Kazakhstan. Service revenue was broadly flat year-on-year on an organic basis, as a decline in voice turnover was offset by strong growth in mobile data, although in reported currency terms service revenues dropped by 29% to USD9.332 billion. On a pro forma basis, total mobile customers decreased by 800,000 year-on-year to 196.3 million at the end of December 2015, mainly due to the impact of regulation in Pakistan, where unverified SIMs were blocked. Excluding this effect, the mobile base would have grown by 4.8 million year-on-year.

Reported group EBITDA in FY15 declined by 49% to USD2.857 billion due to exceptional costs totalling USD1.069 billion, excluding which, underlying EBITDA decreased by 1% on an organic basis to around USD3.9 billion. The major exceptional items comprise USD927 million of provisions for investigations and legal costs (of which USD900 million represents future costs of US/Dutch investigations into previous deals related to Uzbekistan operations) as well as costs of USD156 million for VimpelCom’s group-wide performance transformation programme, offset by adjustments of USD14 million. Annual net loss attributable to VimpelCom shareholders reached USD691 million, compared to USD647 million in FY14.

At VimpelCom Russia (Beeline), revenue organically declined 1% year-on-year as a result of a 12% reduction in fixed line turnover, while mobile service revenue increased by 0.2%, driven by 17% growth in mobile data revenue. On a reported currency basis, Russian total revenue dropped 38% to USD4.602 billion, accounting for 47.8% of group sales. Russian mobile customers expanded 4% to 59.8 million year-on-year.

At VimpelCom’s Emerging Markets division, total revenue decreased organically 2% in 2015, whilst turnover in reported currency fell 12% to USD2.910 billion, due to negative performance in Algeria, partially offset by positive performance in Bangladesh and Pakistan. Competition in all countries intensified during 2015, especially in data offers, although the Emerging Markets unit continued to see customer growth, with 4.2 million net new users added in the year if excluding the impact of unverified SIM blocking in Pakistan, which eliminated 5.6 million customers in 2Q15.

Revenue at VimpelCom’s Eurasia division increased organically 3% in 2015, mainly driven by service revenue growth in Ukraine, Uzbekistan and Kyrgyzstan, partially offset by a decline in service revenue in Kazakhstan, whilst in reported currency terms, Eurasia revenue decreased by 25% to USD2.206 billion. In Ukraine, local unit Kyivstar’s service revenue grew 10% year-on-year as a result of increased international incoming revenue (positively impacted by USD dollar pricing), strong growth of mobile data revenue and new commercial offers based on the recent launch of its 3G network.

Russia, Beeline (Russia), VEON