VimpelCom posts USD445m net profit in Q3; revenue slides 3%

3 Nov 2016

Mobile group VimpelCom has reported that its consolidated service revenue for Q3 2016 decreased by 3% year-on-year to USD2.3 billion due to adverse currency movements, while the company noted that on an organic basis revenues grew 0.6%, driven by positive performances in Pakistan (Mobilink/Warid) and Ukraine (Kyivstar), partially offset by ‘continued weakness’ in Algeria (Djezzy). Decreasing voice revenue across the group was offset by 28% organic growth in mobile data revenue in Q3, whilst total mobile customers increased by approximately 10.1 million to 205.5 million at the end of September 2016, mainly driven by the consolidation of Warid’s customers in Pakistan from July 2016. Group EBITDA reported in Q3 2016 was USD896 million, compared to USD58 million in 3Q15. Underlying EBITDA was USD962 million, reflecting an organic increase of 0.6%. The firm notes that exceptional items in this period primarily related to the cost of a group-wide performance transformation programme, whilst a year earlier in Q3 2015 VimpelCom recognised exceptional provisions of USD916 million for international legal investigations into previous Central Asian deals.

Net profit for the three-month period attributable to VimpelCom shareholders was USD445 million (compared to a year-ago loss of USD1.005 billion), which was positively impacted by the profit from discontinued operations (USD421 million in 3Q16). Group-wide CAPEX decreased 8% to USD425 million in Q3 2016, primarily as a result of the performance transformation programme. The company says it will maintain its strategy of investing in high speed data networks to capture mobile data growth, including the continued rollout of 4G LTE networks in Russia and Algeria, and 3G networks in Algeria, Bangladesh, Pakistan and Ukraine.

In Russia, VimpelCom (Beeline) posted a 1% organic service revenue decline in Q3 2016, as fixed line service revenue fell by 3% ‘mainly as a result of corporate customers changing their contracts from US dollar to ruble together with lower business to consumer revenue’ whilst Russian mobile service revenue fell organically by 0.7%, driven by lower voice and roaming revenue due to an average price per minute reduction, almost fully offset by strong organic growth in mobile data revenue of 21%. Beeline Russia’s mobile customer base decreased by 1.5% to 58.1 million at 30 September 2016. 3Q16 EBITDA fell by 6% in Russia, while underlying EBITDA decreased organically 5%, adjusted for exceptional costs related to the performance transformation programme.

Pakistan’s reported results were positively impacted by the consolidation of Warid: top-line service revenue increased by 47%, while organically, excluding Warid, it increased by 16%, driven by growth in all revenue streams. Data revenue, excluding Warid, organically increased by 71%, mainly due to successful data monetisation initiatives, including attractive bundle offers and the unification of the tariff portfolio, together with continued 3G network expansion. Underlying EBITDA margin, excluding integration costs related to the Warid transaction, was 42% in Q3 2016, supported by Warid’s improved margin resulting from the progress of integration activities.

In recent ownership developments, VimpelCom’s free float nearly doubled to 20.1% after Telenor’s sale of VimpelCom shares in September 2016.

In the post-results events, on 24 October 2016 the Italian Ministry of Economic Development gave final permission for the 50/50 joint venture merger of VimpelCom’s Wind Italia subsidiary and CK Hutchison’s 3 Italia unit.

Pakistan, Russia, Beeline (Russia), Jazz (formerly Mobilink/Warid), Telenor Group, VEON, Warid Telecom (Jazz)