Hotel Grande Bretagne, Athens, 8-9 June
2015 Global Communications GAAP Summit
Fi DolanWelcome and introduction
Global Communications GAAP Summit
2June 2015
PwC
Where have you come from?
Global Communications GAAP Summit
3June 2015
PwC
Africa4%
MiddleEast7%
Europe74%
Asia Pacific5%
Americas10%
Consolidation: Industry (r)evolution
“Liberty Global to buy Virgin Media for £15 billion”
“AT&T to acquire DirecTV for $48.5 billion in blockbuster deal”
“TeliaSonera to Buy Tele2's Business in Norway”
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4June 2015
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Strategy:Churn reduction
Consolidation to achieve convergence continues…
BT’s launch of BT sportand acquisition of Premier
League rights has beensuccessful in reversing
fixed churn – BT is also re-entering the mobile space
Vodafone has beenacquiring assets in a
number of countries toacquire capabilities to
offer quad-play
Telefonica respondedquickly to market
disruptors with a strongquad-play offering,
protecting market shareand reducing churn
Deutsche Telekom havecombined LTE and fixedline network capabilitieswith a hybrid router to
differentiate themselves
Strategy:Subscriber growth/
churn reduction
Strategy:Subscriber growth/churn defence andcustomer reclaim
Strategy:Exclusivity
2015
TV+Net+Voz+Móvel(Available in Portugal)
€51.80/m(24 month contract)
TV + Infinity 1 + Calls(Available in the UK)
£30/m(12 month contract)
Magenta One(Available in Germany)
€64.85/m(24 month contract)
Fusión TV Contigo(Available in Spain)
€ 47/m(12 month contract)
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5June 2015
PwC
Megatrends shaping the communications landscape
1 2 3 4 5Shift in economicpower
• Growth beyondBRICS
• New geographicinvestments, M&A
Urbanisation
• Increase inurbanpopulation
• Rise of smartcities
• Infrastructuredeployment
Climate changeand resourcescarcity
• Energy efficiency
• CorporateResponsibility
Changingdemographics
• Population growth
• Aging population
• Changing consumerbehaviours
Technologyadvancements
• Technology drivenby innovation,increased R&D, etc.
• Digital strategies
Glo
ba
lisa
tio
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Urb
an
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tio
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Cli
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tech
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Ch
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gg
dem
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Tec
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cem
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6Increasedregulations
• Net neutrality
• IFRS 15
• Leasing
Incr
ease
dre
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6June 2015
PwC
Monday, 8 June
14:30 – 15:45 Registration and coffee
15:45 – 16:00 Introduction and welcome
16:00 – 18:00 Industry discussion
18:30 Buses depart for dinner
Today
Global Communications GAAP Summit
7June 2015
PwC
Tuesday, 9 June
08:00 – 09:45 Workshop 1 – revenue recognition
09:45 – 10:30 OTE market update
10:30 – 11:00 Coffee break
11:00 – 12:00 What’s new in accounting?
12:00 – 13:30 Lunch
13:30 – 15:15 Workshop 2 – Changing business models and regulations
15:15 – 15:30 Closing remarks
Tomorrow*
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8June 2015
PwC
* Workshops are in breakout rooms. All other sessions are in the Grand Ballroom.
This is your summit...
Global Communications GAAP Summit
9June 2015
PwC
Administration
Global Communications GAAP Summit
10June 2015
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Industry discussion
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11June 2015
PwC
Karyn Brooks, Transition ResourceGroup for Revenue Recognition (TRG)
John Simcoe, Partner, PwC Canada
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12June 2015
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James Oehmke, Head of IFRS 15Programme, Vodafone
Global Communications GAAP Summit
13June 2015
PwC
Alexey Savelyev, Director ExternalReporting, VimpelCom Ltd.
Global Communications GAAP Summit
14June 2015
PwC
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Implementation of IFRS 15 in VimpelComPwC’s Global Communications GAAP Summit
Alexey SavelyevDirector External ReportingVimpelCom Ltd.
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Content
1. VimpelCom at glance
2. Purpose and benefits of the IFRS 15 project
3. Overall project timeline
4. Project governance
5. Key steps
6. Main focus areas
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1.1. VimpelCom at glanceVimpelCom - a truly international telecoms operator
Kyrgyzstan
3m
Uzbekistan
11m
Kazakhstan
10m
Armenia
1m
Ukraine
26m
Italy
22m
Algeria
18m
Zimbabwe
0.2m
Tajikistan
1m
Russia
57m
Laos
2m
Bangladesh
31m
Pakistan
39m
Georgia
1m
222mmobilecustomers
№7mobile providerin the world
740mPopulationcoverage
$20bRevenue
40.6%EBITDA MarginIndustryLeading
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1 Based on consolidated mobile customers2 Mobile customers as at FY14; Total revenue and EBITDA for the FY143 Population figures are provided by CIA – The World Factbook4 EBITDA less CAPEX excluding licenses for the FY14
1.2. VimpelCom at glanceA well diversified leading international mobile operatorHeadquartered in Amsterdam
Total revenuesplit2 (%)
EBITDA split2
(%)
Mobilecustomers
222million2
Populationcovered
739million3
Countries
14Numberof brands
8
37 8 5 5 443 31
69% from Emergingmarkets
Russia
Algeria
Ukraine Uzbekistan
Bangladesh
Operating cashflow split4 (%)
Kazakhstan Other
Italy
Pakistan
USD 19.6 billion
35 11 6 5 4 5 3 29
71% from Emergingmarkets
32 11 8 5 8 30
70% from Emergingmarkets
USD 4.1 billion
USD 8.0 billion
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1992
VimpelCom founded by a Russianscientist and an American entrepreneur
Company registered as joint stockcompany
2010
VimpelCom and Kyivstar mergedinto a new entity VimpelCom Ltd.
Headquarters moved toAmsterdam
2004
KaR-Tel (Kazakhstan) acquired
1996
Listing on NYSE
1998
Prepaid introduced – abreakthrough on the Russianmass-market
Telenor becomes a strategicinvestor
2001
Alfa becomes astrategic investor
2006
Acquisitions:- 100% of Buztel and Unitel(Uzbekistan)- 51% of Mobitel (Georgia)- 90% of Armentel (Armenia)- Tacom (Tajikistan) stakeincreased to 80%
2008
Acquisitions:- 100% of Golden Telecom- 40% in the joint ventureGTEL-Mobile (Vietnam)- 90% of Sotelco (Cambodia)- 49.9% in Euroset, the largest mobileretailer in Russia and the CIS
2005
Acquisitions:- 100% of URS (Ukraine)- 60% of Tacom (Tajikistan)
A successfulre-branding campaigncompleted
2007
Armentel stake increased to 100%Reached an agreement on GTI acquisitionAwarded with 3G license
2012
Sale of stake in jointventure GTEL-Mobile(Vietnam)
2011
VimpelCom acquires WindTelecom
78% of Millicom (Laos) acquired
Mobile customerbase surpassed200 million markin October
200Mln
1.3. VimpelCom at glanceKey strategic milestones
2013
Acquired 0.1% andincreased to 50% ofEuroset
Sale Interest Cambodia
Listing on NASDAQ
NASDAQ-100Index®
inclusion
2014
Sale interestin WindCanada
Saleinterest inCAR andBurundi
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VimpelCom has been listed in the US since 1996under the symbol “VIP”
Starting from September 2013, VimpelComAmerican Depository Shares listed on the NASDAQGlobal Selected Market and included in NASDAQ-100 index
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1.4. VimpelCom at glanceAccounting and reporting
IFRS is not primarily GAAP in most of the countries
Mainly prepaid markets
Transitioned to IFRS in 2011-2012
Foreign private issuer on NASDAQ – 20-F and SOX
Quarterly earnings releases calls
Listed minorities
Extensive M&A history
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2. Purpose and benefits of the project
► Compliance to the new IFRS standard as per the effective date (1 January 2018)
► Create awareness and sponsorship (operational, commercial and financial impact)
► Assess impact on ratios and other performance measures, e.g. dividends to be distributed
► Ensure the required systems and policies are in place at transition date
► Timely commencement of the project will
► Ensure timely compliance with IFRS 15 disclosures and recognition
► Result in a cost effective, well controlled and governed project
► Provide transparency to shareholders
► Alignment with other projects
► Increased availability of management information as a result of new disclosure requirements
► Provide insight into contract profitability
► If the project is not undertaken by VimpelCom
► Non-compliance with the new IFRS standard
► If the project commences too late
► Insufficient time to obtain information for disclosures required (e.g. comparatives)
► Potential for significant impact not timely communicated to shareholders
► Other affected departments may not be ready for the impact in time
Purpose
Key benefits
Key risks
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1 Initial assessment of contracts, questionnaires, site visits.
Pilot options and design, Roll-out strategy. Identifyresources, create and develop project plans.
3.1. Overall project timelineTimeline
PHASE 1 - ASSESSMENT
Q1/15 Q3/15Q2/15Q4/14 Q4/15 Q1/16
PHASE 2 – DESIGN & PLANNING2
PHASE 3 – SOLUTION DEVELOPMENT
PHASE 4 - IMPLEMENTATION4
3
PHASE 5 – POST IMPLEMENTATION5Review go-liveprocedures
Provide additional support
Continued monitoring of IT implementations
Technical requirements documents and broad solutions
Auditor alignmentDefine KPI requirements
Pilot ready for implementationand roll out
Monitor IT progress and changes
Adoption of solutions across functionaldepartments
Detailed review of pilot outcome and flaws
Roll out pilot for Russia
Roll out pilot for Italy
Develop reliable Go-Live plan
Accounting
Reporting
Tax
IT Systems
Business Processes
Wo
rkS
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Preparing the accountingpolicy v0 & decision tree
IT – high level systems assessment and dataavailability
Preparing the accounting policy v1 & update decision tree
Roll out pilot for other countries
Design Build Test
Develop technical specifications based on IT assessment
Update log for changedrequirements
Testing of softwarechanges solutions
Auditor alignment
Testing of softwarechanges solutions
Testing of softwarechanges solutions
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3.2. Overall project timelinePhases
• Identify accounting, reporting and tax implications for VimpelCom
• Determine effects on business processes and IT systems and requirements
• PMO setup
• Set up project infrastructure, including timeline, project governance, resource planning and detailedtask planning per workstream
• Identify solutions, prepare implementation plan and develop solutions across works streams
• Align objectives regarding the pilot and what success looks like
• Approve and roll out solutions across countries in different waves
• Adopt solutions developed based on experiences roll out
• Address deferred items and transition to operational model
Phase 1:Assessment
Phase 2:Design &Planning
Phase 3:Solution
development
Phase 4:Implementation
Phase
Phase 5:Post
Implementation
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4.1. Project governanceCross functional impact
Accountingand
ReportingSystems
OperationsCross
functionalimpact
• Details and control• Reassessment required• Additional disclosures• Resources• Transition 2015-2017
• Change of flows andrelating systems
• Possible changes to:• Consolidation• COA
• Internal controls &governance
• Tax• Treasury• Internal audit• Internal control• HR
• Budgeting &Forecasting
• Compensationplans
• Performancemeasurement
• Product offerings
• Billing• Revenue
assurance• Commercial• Investor relations• Data
management
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4.2. Project governanceRoles
Key
Consultants role
VimpelCom roleSteering committee
IFRS 15 project
Monitoring committee
VimpelComOpCo’s Heads of reporting
OpCo’s IT representatives
HQ ER and Accounting
ConsultantsPartner/Senior Manager
IFRS Technical Desk
Work stream Lead
Russia
Italy
WS1 — Accounting
Othercountries
HQ
WS2 — Reporting
Work stream Lead
Russia
Italy
Othercountries
HQ
WS3 — Tax
Work stream Lead
Russia
Italy
Othercountries
HQ
WS4 — IT Systems
Work stream Lead
Russia
Italy
Othercountries
HQ
WS5 — Business processes
Work stream Lead
Russia
Italy
Othercountries
HQ
WS6 — Changemanagement
Work stream Lead
Legal
HR
Communication
Central project team
VimpelCom projectLead
Consultant projectteam
Group CFO, Group Controller, OpCo CFO’s,
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5.1. Key stepsPhase I - Questionnaire and logistics
Based on the initial assessment and scoping, prepare a questionnaire for thedifferent OpCo’s in order to obtain a more detailed understanding of the localbusiness, addressing relevant factors such as:
Type of contracts and commercials behind the business
Key issues expected/identified from initial assessment
Data requirements
Timing and logistics
Kick-off call with local VimpelCom teams
Local VimpelCom team to receive Questionnaire
Questionnaire to be returned to HQ
Project Team processing of local input, in anticipation of visit
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5.2. Key stepsPhase II - Local teams
Finalization of first high level impact assessment
Communication from HQ on the next phase of the project providing/discussing:
• Detailed instructions
• Timeline
• Resource and other requirements
• Next steps
Receive the first draft accounting policy for IFRS 15
Receive the guidelines on how to assess future product offerings for IFRS 15during IFRS 15 implementation project
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Current phase Next steps and phases
IT phase 1:High-level
informationrequirement
gapassessment
Understanddata andsystems
landscape
Identifydata needs
identifygaps
(applicability and
availability)
IT phase 2:Detailed gap
assessment androadmap
Define datacollection model;
portfolio vsContract-by-
contract approach
Define dataremediation plan
Roadmap forphase 3-5,
including proof ofconcept for datamigration (data
collectionmodel)
IT phase 3-5
Solution development- Define detailed pilot systems & approach for
deployment- Support build, test, go-live
- Commence organisation-wide data collection fordata gaps
Implementation: Deploy and monitor- Validate and refine systems design and deployment
approach for local variance- Extend data needs and calculations
- Support local deployment- Test input data and generated adjustments
- Finalise adjustment and calculations
Post implementation- Support cut-over and go-live- Manage contingency plans
5.4. Key StepsIT
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6. Main focus areasAccounting
Bundled revenue – both handset and service AND multipleservice components (voice, data etc.)
Dealer commission treatment – OPEX vs CAPEX
Deferred revenue – connection and activation fees
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Summary
Clear and visible sponsorship
Local buy-in is crucial
On-board IT as soon as possible
Benefit from any other cross-functional or cross-border project
Workshops
• Workshop 1 will start at 8am tomorrow morning
• The groups will be in the following rooms:
› Group 1 – Grand Ballroom
› Group 2 – Royal
› Group 3 – Golden AB
› Group 4 – Golden CD
• Your group number is on the workshop listing on your table
Global Communications GAAP Summit
32June 2015
PwC
Tonight: Balux Prive
Meet in hotel lobby at 18:30 for a prompt departure to restaurant
Global Communications GAAP Summit
33June 2015
PwC
Thank you
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