The Value Agenda

Vimpelcom's Value Agenda

Our strategy

Our 220 million customers across the world are at the heart of our Strategy.

The demands of our customers are continuously evolving; they increasingly rely on mobile broadband as the primary service they demand from their operator, be it LTE in Russia and Italy, or 3G in other markets. We focus on capturing the growth in mobile data by introducing affordable bundles, partnering with leading OTT service providers, actively pushing affordable smartphones and differentiating our services through more sophisticated offerings.

We strongly believe in owning the relationship with the customer, focusing on our core assets: the billing relationship, sales and service channels and connectivity provision. We strive to be the best-perceived operator in all the markets where we operate.

Portfolio momentum is an important element of VimpelCom’s Strategy. Our portfolio combines mature, strong cash-generating companies with emerging growth opportunities in a number of regions. We combine strong and growing positions in mobile businesses with a selective presence in fixed-line, which we expect will further support our growth strategy as mobile services continue to expand across our markets. VimpelCom seeks to grow profitably in mobile data, fixed-line data and mobile voice, by tailoring our strategy in each individual market according to its local characteristics.

Beyond the core business, we are actively looking at adjacent businesses. We have focused on Mobile Financial Services and are now exploring further, considering a number of adjacent business opportunities, including Big Data-enabled opportunities.

We have a fundamental belief in a decentralized business model, where we capture the synergies and learnings at the Group level, while making the important decisions locally. We have implemented a passionate, performance oriented culture with a key focus on operations and execution at the Business Unit level. At the Group level, we remain a lean organization, focused on value creation through performance management, portfolio management, financial structure optimization, and shared services such as roaming and procurement.

Our ultimate strategic goal is to increase cash flows - to ensure value creation for our Shareholders, service our debt and continue investing into our networks and customer service. This approach is reflected in our Value Agenda.

The Value Agenda

Our Value Agenda, which is focused on increasing Net Cash from Operating Activities, has the following four key pillars supported by clear operational strategies executed within each of our Business Units.

Customer Excellence

We are committed to creating a superior customer experience, optimizing distribution and developing superior pricing capabilities, while continuously modernizing our networks to deliver quality service. We undertake a systematic effort involving dedicated analytics and research to continuously optimize the customer experience and drive superior pricing through integrated bundles that combine traditional voice with SMS and, most importantly, data. This will provide value to the customer while at the same time protecting our revenue stream from cannibalization among various services, such as SMS and instant messaging (“IM”). In order to optimize our distribution, we focus on the most efficient channels in each market. We expect these actions to reduce churn and limit our retention and commercial costs.

Profitable Growth

We aim to drive revenue growth that leads to higher profitability by focusing on gaining share in mobile data revenues and capitalizing on areas such as mobile financial services and partnerships with over-the-top players, while limiting cost of traffic. We seek to increase mobile data revenues by driving smartphone and tablet penetration through strong local distribution. We will also continue to introduce value-based commissioning, promoting tiered pricing for speed and time of data, partnering with Internet players and improving network quality. We believe effective deployment of integrated bundles will allow us to monetize the strong growth in mobile data.

Operational Excellence

Operational Excellence and cost management represents a Company-wide strategy, and we seek to implement this strategy at all levels of the organization by taking a holistic approach at both our group and Business Unit levels and implementing a continuous improvement culture across our businesses.

Capital Efficiency

Our goal is to ultimately reduce the ratio of our capital expenditure to revenues over time by deploying capital more efficiently through increased network sharing, continued business portfolio optimization and capital structure optimization. An important element of this strategy is network outsourcing and sharing in order to improve network utilization and quality. We also have a centrally led procurement model that provides advantages both at the group and local level. As part of our finance function, we have implemented a systematic approach to managing working capital and optimizing our capital structure.

Types of businesses

Our business largely comprises of three types of businesses, grouped according to their stages of development.

We consider as our “growth engine” the emerging markets in Russia, Ukraine, CIS, Bangladesh, Pakistan and Algeria. These markets each have a large potential customer base, high revenue growth from relatively low penetration, with the exception of Russia, and significant growth potential for mobile data. In these markets, we will seek to leverage our knowledge and experience across our emerging markets footprint and in our more mature market in Italy to capture this growth. In most of these emerging markets, we plan to deploy capital to modernize the networks to capture the growth potential from increased penetration and mobile data growth.

In Italy, a large and mature market, we are focused on increasing profitability and sustaining the strong cash flow generation.

We are also focused on deleveraging the business. The market is highly penetrated, but has potential for broadband growth in fixed-line and in mobile. Here, we will remain focused on reinforcing our solid market positions and continue to invest in our mobile data network.

Finally, we have early stage operations, such as in Canada and some Asian and African markets, which would require further investment to reach their full potential. We are performing a strategic contribution analysis of these operations.

Our objectives

Within our group’s priorities, we pursue the following specific objectives:

Drive value in the mature voice business in our core markets.

We recognize that in our industry prices of the traditional products and services that we provide are generally falling over time, despite price elasticity being significantly below one. In contrast, the costs of delivering these products and services experience significant inflationary pressure. To address this imbalance, we continuously focus on cost efficiency, especially on optimizing business support costs. We also strive to design our go-to-market actions thoughtfully, with the dual ambition of ensuring that we remain a highly attractive choice for consumers at all times, while at the same time promoting responsible industry conduct.

We also see that the telecommunications market is highly heterogeneous, consisting of a significant number of sub-segments with partially unique needs. Therefore, we selectively seek to capture opportunities in the B2C (consumer) and B2B (business) sub-segments, especially in those areas where we can leverage the fact that we have both fixed-line and mobile assets, or where our international footprint can be a source of competitive advantage.

We believe that the shift away from the traditional mobile voice- and SMS-centric world and towards a data-centric world is fundamental.

We therefore carefully scrutinize any investment in legacy infrastructure that does not also support our data business, while ensuring that we remain able to deliver a set of core traditional telephone services that fully meet customer expectations.

Emerge as leader from the transition to a mobile data-centric world.

We believe that the move towards a data-centric world is the single biggest industry change that our core mobile business has experienced so far. We also see that a key success factor over the coming few years for any telecommunications operator with a significant mobile business will be to manage pricing of mobile data well and to be able to monetize the growth in mobile data traffic. We therefore spend considerable time and effort to ensure that we offer a proactive and customer-centric transition from legacy voice pricing to data-centric pricing with bundled tariff plans, with the ambition to retain and ultimately grow ARPU.

We see that mobile data offerings are already becoming a significant operator decision parameter for certain customer segments and we expect this trend to broaden further. To ensure that we are the natural consumer choice in the data-centric world, we aim to provide the best “value-for-money” data product portfolio, while staying highly price-competitive at all times.

We recognize that a mobile data network is more complex to manage than a voice network and that the optimization potential in a data network is significant. We therefore pursue cost efficiency in technology investments, including traffic management and offloading of traffic, as well as content compression.

The Vimpelcom way. Passionate, Professional, Leadership