VimpelCom returns to growth as turnaround strategy progresses (updated)

VEON

27/02/2017 06:14

* Company says delivered on all its 2016 financial targets 
    * Hikes dividend; sets higher '17-'18 cash flow targets 
    * Announces raft of partnerships; corporate name change to 
VEON 
    * Plans second share listing in Amsterdam as Telenor sells 
out 
 
 (Adds CEO comments, context) 
    By Eric Auchard 
    BARCELONA, Feb 27 (Reuters) - Russian and emerging markets 
communications network operator VimpelCom Ltd  VIP.O  on Monday 
reported a return to growth in the final quarter of last year 
and posted solid progress in its 18-month-old turnaround 
strategy, including a six-fold dividend increase. 
    For 2017, the company lifted its growth target for revenue, 
excluding acquisitions and disposals, to the low single digits 
as a percentage, compared with its prior outlook for flat to a 
low single digit. It also boosted its cash flow goal. 
    Marking its determination to overhaul its telecoms business, 
VimpelCom said it plans to rebrand as VEON, the moniker it has 
adopted for the messaging app at the centre of its strategy to 
become a major online player. 
    In a measure of progress in reinventing itself as an 
Internet player, VimpelCom said it had struck its first three 
distribution partnerships with Vivendi SA's  VIV.PA  Studio+, 
music streaming service Deezer SA  DZR.PA  and MasterCard Inc 
 MA.N . 
    VEON is a new-model messaging app designed to compete with 
the likes of Facebook Inc's  FB.O  WhatsApp and Rakuten Inc's 
 4755.T  Viber by offering free services to customers over its 
network without users incurring data charges as other apps do. 
    VimpelCom aims to offer basic communication for free, while 
taking a cut of proceeds from partnerships with popular internet 
services it offers through its app, using data insights it can 
glean as a network operator. 
    "We want to take this company from a telecom company to a 
tech company," VimpelCom Chief Executive Jean-Yves Charlier told 
Reuters in an interview ahead of the earnings results. "The 
group is in a very solid position as it moves into 2017," he 
added. 
    The VEON messaging app was introduced in November in Italy 
and has been downloaded by nearly 1 million users since, 
Charlier said. It ranked among the top five social media apps in 
Italy in February, according to data by market research firm 
SimilarWeb. (http://reut.rs/2lSQEZn) 
    The Amsterdam-based company is among the world's 10 largest 
communications network operators with more than 200 million 
customers. 
    VimpelCom, which operates in a dozen markets including 
Russia, Italy, Algeria, Pakistan and Bangladesh, aims to make a 
clean break from a corruption scandal in which it was accused of 
using shell companies and phoney contracts to funnel funds to a 
close relative of the president of Uzbekistan. A year ago, it 
paid $795 million to settle a U.S. and Dutch investigation into 
the scheme. 
    Charlier, the former chief executive of SFR, Vivendi's 
French telecom business before it was sold to Altice NV 
 ATCA.AS , joined in 2015 to undertake a house-cleaning, setting 
a strategy to first stabilise existing VimpelCom businesses 
before seeking to fuel faster growth with the internet. 
    "The first stage for all of this is to regain credibility 
with investors and financial markets," he said. 
    VimpelCom's makeover is among the more radical 
reincarnations being considered by the world's telecom industry, 
which is stuck in a rut of falling prices and tight regulation 
(http://reut.rs/2mkvXXm). 
     
    EXPANDING SHAREHOLDER BASE 
    VimpelCom said it aims to expand its free float to 45 
percent of shares to draw more European investors in coming 
months. On Monday, it set out plans for a second listing on the 
Euronext exchange in Amsterdam besides its current Nasdaq 
listing. 
    The larger float is the result of the decision by Norwegian 
emerging markets telecoms operator Telenor ASA  TEL.OL  to 
completely sell its one-time $2.5 billion investment in 
VimpelCom, following sharp disagreement over strategy (http://reut.rs/2kYH742). 
    Russian billionaire Mikhail Fridman holds 48 percent of 
VimpelCom and is said to be fed up with the commodity-like 
trends of the telecoms business. 
    VEON is developing partnerships with consumer and business 
brands to offer services integrated with its messaging app to 
mobile customers in frontier markets ranging from transport to 
retail to financial services. 
    Studio+ produces original video programming series for 
mobile users, with episodes typically running 10 minutes. 
    Deezer has expanded to offer music services in more than 180 
countries with funding from Access Industries Inc, the family 
office of Ukrainian-born U.S. billionaire Len Blavatnik. 
    For the fourth quarter, VimpelCom posted core earnings of 
$783 million while service revenue rose 3 percent across its 
dozen country markets, with strength in Pakistan and Ukraine 
offset by ongoing weakness in Algeria. 
    VimpelCom generated $588 million of underlying equity-free 
cash flow in 2016 and raised its 2017 target to a range of $700 
million to $800 million and to more than $1 billion for 2018, 
reflecting a return to stable growth and cost-cutting as it 
works to become a faster-moving data-driven company. 
    Introducing a new dividend policy, VimpelCom said it would 
pay out 23 cents a share, including a 3.5 cent interim dividend 
paid in December and a final dividend of 19.5 cents to be paid 
in April. Three years earlier, it slashed its expected dividend 
to a token 3.5 cents from 80 cents. (http://reut.rs/2leuT2c) 
    The VEON name change is subject to a shareholder vote at an 
extraordinary general meeting to be held on March 30. 
 
 (Reporting by Eric Auchard; Additional reporting by Anthony 
Deutsch; Editing by Christopher Cushing) 
 ((eric.auchard@thomsonreuters.com; +49 69 7565 1235; Reuters 
Messaging: eric.auchard.thomsonreuters.com@reuters.net)) 
 
Keywords: VIMPELCOM RESULTS/