Good day, ladies and gentlemen. And welcome to VimpelCom's Q1 2015 Results Conference. At this time all participants are in a listen-only-mode. Later we'll conduct a question-answer-session and instructions will follow at that time and instructions will follow at that time. [Operator Instructions] As reminder this conference call is being recorded. I would now like to introduce your host for today's conference Mr. Gerbrand Nijman. Sir, you may begin.

Thank you, operator. Good afternoon, ladies and gentlemen and good morning to our guest from the United States. A warm welcome to VimpeCom's first quarter results analyst and investor conference call. Today I am pleased to be joined by Jean-Yves Charlier, our new Chief Executive Officer and Andrew Davies our CFO. Jean-Yves will first make a few introductory comments and Andrew will then talk you through the quarter’s financial results and operating highlights. Thereafter we will be ready to take any questions you might have. Turning to slide 2. Before getting started, I would like to remind everyone that forward-looking statements made on this conference call involve certain risks and uncertainties. These statements relates in part, to the company's anticipated interest cost savings, the 2015 targets, and the anticipated improvement in performance and results of our capital structure optimization effort. Certain factors may cause actual results to differ materially from those in the forward-looking statements, including the risks detailed in the company's Annual Report on Form 20-F and other recent public filings made by the company with the SEC, including today's earnings release. The earnings release and the earnings presentation, each of which includes reconciliations of non-GAAP financial measures presented today can be downloaded from the VimpelCom website. I will now hand over to turn the discussion over to Jean-Yves for his introductory comments.

Good morning, good afternoon and thank you for joining us on this call. As you know it is exactly one month ago that I joined VimpelCom as Group Chief Executive and I am pleased to share with you my first observation. VimpelCom's foundation is strong, positioning us for an exciting and bright future. We have an attractive portfolio of market leading businesses across three continents and a growing base over 218 million customers who we proudly serve with innovative, cutting-edge technologies and services. Our emerging markets focused ability to leverage the knowledge and expertise we have gained through developing advanced data services in our more mature businesses, as well as a stronger emphasis on the transformation of our cost base, means that we are well placed to improve our financial results. VimpelCom has strong market position in its emerging markets portfolio and is in a unique position to capitalize on the new digital opportunities ahead of us. The first quarter results indicate that we are on track to deliver our 2015 targets, despite a currency and geopolitical headwinds that we face. We are encouraged by the continuing growth in data that we are reporting and we will continue to invest to support this demand We are also encouraged by the NPS rating many of our businesses have achieved in the quarter. In Italy we have completed the final stage of the refinancing and the business continues to outperform in a challenging market with improving trends. WIND is a strong business with clear evidence of excellent customer loyalty. We would also like to confirm today that we are in discussions with Hutchison regarding a possible equal joint venture between 3 Italia and our subsidiary WIND. There can be no assurances that an agreement will be signed and any transaction would be…

Thank you, Jean-Yves. And good afternoon or good morning from me as well. So moving on to slide 5. Our key financial metrics for the quarter were pretty much as we anticipated when we provided our full year guidance. Service revenue declined organically by 2% year-on-year, primarily due to the delayed 3G launch in Algeria and continued market weakness in Italy. EBITDA decreased organically by 6% year-on-year, inline with our expectations, mainly due to higher network cost in Russia and the externally influenced cost increases in Ukraine and a 40% of our EBITDA margin remained one of the highest in the industry. Our customer base continue to see growth in most of our markets reaching $218 million at the end of the quarter, an increase of nearly $5 million compared to the end of March 2014. Clearly, reported results were significantly impacted by currency headwinds. In particular, the depreciation of the Russian ruble was deteriorated by 78% against the US dollar versus the first quarter of 2014. If we move on to the business units, and starting with Russia. We maintained the operational improvements that we saw in the second half of 2014. Churn continued to improve declining 5 percentage point’s year-on-year, driven by our focus on customer excellence and the implementation of a cultural shift to a more customer-centric organization. NPS improved for the fifth quarter in succession and our revenue market share remained stable, which is more positive thing given that we are more exposed to the macro [ph] segment than our competitors and therefore typically see a little market share erosion in both Q4 and Q1. In local currency, service revenue was broadly flat with strong 18% mobile data growth. EBITDA decreased 2% mainly due to the negative impact on costs and the weakening of the ruble…

Thank you, Andrew. With this we will open the floor for the questions now. Operator, could we have the first question please?

Thank you. [Operator Instructions] Our first question comes from San Dhillon of Royal Bank of Canada. Your line is open.

Hi, guys. Two questions if I may. Firstly, on Italy, and some of the commentary from Vodafone and TI and seems to adjust for the pricing environment has improved quite markedly over the last couple of months, and is that something that you are seeing as well, WIND and then when do you expect to this to kind of flow-through the revenue line in Italy? And second question for Jean-Yves if I may, Jean-Yves, how do you compare the scale of the challenge of VimpelCom versus the one you had [indiscernible] which was in European telco line at least very large given [indiscernible] into mobile in January 2012, and what have you learned from that experience that can help you at VimpelCom? Thank you.

All right, let me let Andrew take the fist question. We can get out of the way and then I'll try to give you our first perspective.

Yes. So on pricing in Italy, I think I'd echo some of the sentiments with you, expressed, but with a slight caveat. So yes, I think that what I would describe as headline pricing that’s generally available in retail distribution and is moderating and have moderated over the last several quarters. However, what we do see happening on a path we go kind of sporadic basis is still a lot of under the radar aggressive price campaigns, mainly of an outbound telesales type of nature where people are offering a very large data bundle at a pretty discounted price, some 20% offer of retail right. So yes, headline pricing is reasonably stable, but we do know and again see a little bit of Guerrilla warfare breaking out.

Well, let me try to frame my perspectives on VimpelCom and parallels that I've seen and perhaps some of the Western European markets, including obviously France where I operated for the last 3 years. I think that the starting point is that the telecom industry requires profound change. And I think that our chairman, Alexey Reznikovich and I share a common vision that this change is absolutely required at VimpelCom. What's interesting I think about the set of assets that VimpelCom has built is that in many ways there are learning’s to take from what's happened in certain European countries, including France and apply those to our market. What's also interesting is that we've got a diversified portfolio, a strong customer base of close to 220 million customers and ultimately on sort of a long-term economic cycle some structural growth remaining in those countries. Having said that, we need to be able to monetize the promise of exponential mobile data growth. We have to be able to launch new added value services. We need to profoundly change the model in the way that we interact with our customers from mass marketing to a much more personalized relationship from leveraging much more of the interaction from a web perspective. And all this within a cost base that needs to be profoundly changed. So these are some of the things that come to mind as I spend my first few weeks within VimpelCom and look to update you on that strategic framework in the August time frame.

Wonderful. Thank you very much guys.

Thanks, San.

Thank you. Our next question comes from the line of Roman Arbuzov of UBS. Your line is open.

Good afternoon. Thank you for taking my question. My question relates to Jean-Yves, comments about the talks with Hutchison about the potential 50-50 JV in Italy, was there fact you've thought it was necessary to mention the ongoing talk may mean we are now closer to the potential deal than we ever were before, and also the potential deal maybe soon perhaps? So – but then also sort of bearing in mind the background to the whole story and the timeline expectations for the potential deal have shifted quite a lot in the past. So given your commentary today, is there anything you can add on the potential timeline, sort of is there a particular time where we could find out whether something will happen or if nothing happens at all. And secondly, question on potential stumbling block and sort of what's stopping you from completing [indiscernible]? Thank you very much.

Let me say a few words beyond the statement that I've made. I think the first and it relates to my experience in the past few years, I am a firm believer of in markets consolidation, and this comment applies not only to our business in Italy, but applies to all the geographies where we operate today. The second point is that in light of the more intense speculation over the last 24 hours we felt it was appropriate to come out with the statement that I made in our introductory remarks. But at the same time, I said that there could be no insurances that this agreement will be find and that’s – the transaction is still needed to be subject amongst other things achieving satisfactory debt levels and obviously going through all the required corporate and regulatory approvals. So I think that certainly signals that there is still some work on this transaction.

Okay. Can I ask a follow up to Andrew please?

Yes.

If given a potential transaction it does go through and you often sight your net debt and leverage figure where on a pro forma basis and without Italy, if the potential transaction were to go through and your leverage would fall below two times, would resume, would consider resuming dividends payment?

Okay. Let me address that one. So, as I discussed when we did the Q4 result, and stated earlier, we placed much greater importance already on the groups net debt to EBITDA ratio, excluding Italy, which is 1.2 times end of the quarter and we've guided that it may increase to 1.7 times, but assuming the foreign exchange rate situation continued. And the reason for that is that Italy is fully [indiscernible] and now as the result of the very successful refinancing activities we've done over the 12 months, is capable of being – of self financing itself. So the leverage ratio we use as the – from a guiding light if you like is more the ratio excluding Italy. So to that – from that perspective my thought process is on dividends are somewhat agnostic to any potential deal in Italy. However, there is a big however, as I mentioned again, at the Q4 result and at many analyst conferences since, we need amongst other things far greater stability in the geopolitical and FX environment before we as a management and the board would consider a redemption of a more meaningful dividend payout. And in particular as well as some of the things that Jean-Yves alluded to in terms of the transformation of the – transformation or progress of the business, we need to have much greater line of sight to those programs going forward as well to give us the confidence that as dividend – isn’t something that we simply going reinstate because our leverage ratio is under control, but is going to based on sustainable ongoing material increases in operating cash flows.

Okay, Roman, it answers your question I think.

Thank you very much.

Can we have the next question please?

Thank you. Our next question comes from the line of Gavin McKeown of Pioneer Investments. Your line is open.

Yes. Hi, good afternoon. A follow up to Roman's question. Jean-Yves you [indiscernible] point in relation to, I think you said that leverage or debt levels would be sustainable in the combined entity? Are you referring to pre or post synergy, I assume it will be quite a substantial synergies in combining the two businesses? And if pre synergies were that suggest, that will be for requirements for some kind of injection of capital or shareholders into the combined entity?

Okay. I think it’s too early to answer that type of technical question at this stage. I think there is still as I said considerable work to be done. We've made the statement today about confirming these discussions. I'll leave it there for the time being and obviously we will update the markets at the appropriate point in time.

Okay. Thanks. A follow up question to Andrew. In relation to hedging, on natural hedging, I was just wondering, have you done the calculation and help us understand where leverage would be today or even outstanding gross debt would be today like-for-like and is in first quarter 2014 exchange rates accounting for the reduction of debt, if not [indiscernible] follow up offline?

Yes, we'll take it offline Gavin. Yes, we've got the calculation which is far to details – and I am not going to get into on this call, I will clear it off after the Gavin.

Thank you.

All right. We're just [indiscernible] Can we have the next question please?

Our next question comes from the line of Alex Balakhnin of Goldman Sachs. Your line is open.

Yes, good afternoon. Just wanted to follow up on the statement made on WIND, in opening of your remarks. If I understood you correctly, you are targeting a sort of equal JV where there is level of debt, and basically just wanted to get your clarification, when you talk about equal JV do you mean like the equality of the [indiscernible] stakes or more sort philosophical meaning of equality? And my second question is what is the reasonable debt level from your standpoint and are you planning to make any equity injection into WIND to bring this debt level to the what you say reasonable level? So basically your – some clarifications here would be really helpful? Thank you.

But they are all very I think interesting question. But again as I said, I think this is too early for us to provide any further detail of then what we provided today. As I said there is still considerable work to be done with WIND and I'll stick to that at this point in time.

Okay. May I ask a quick question on different topic, your Russian CapEx was quite low in the first quarter, I mean, clearly first quarter is where it won, but just wanted to make sure that there is just a seasonality thing in those dynamics and its not a sort of a based for thinking about the CapEx projections for the rest of the year. So what adjust the CapEx recognition issue and nothing more than that?

Yes, I'll take that on…

Yes, its little more nuance than that. So first of all, we still hold our CapEx to revenue guidance for the year which is roughly 20 percentage points and yes, and that’s from a group level, so you can infer from that that Russia is going to be obviously as elevated as it was last year. I think we generally get off to a bit of a slow start in the first quarter of the year, that was even more so the case in this particular year. If you recall, in the December, January time period when we were kind of placing orders we were facing with a ruble to dollar rate of 70 yen [ph] and continuing to deteriorate. So we just kind of hit poles button a little bit just to take stock of the foreign exchange situation and make sure that we didn’t make any moves that we were going quickly regret. So now that we are starting to see a little bit more stability on the foreign exchange side of things, it will be – it will start to become more business as usual CapEx revenue ratios going forward.

Okay. Thank you so much. That’s very helpful.

Thank you.

Can we have the next question please?

Our next question comes from the line of Dalibor Vavruska of Citigroup. Your line is open.

Hello. I just wanted to ask a question about free cash flows, I mean, obviously there is a lot of transactions that have happened in the past couple months, and you have significantly improved the shareholder value by refinancing in these transactions. Actually look at the underlying operations, what is your view about the free cash flow generation ability if you adjust all this, about how much cash you've been generating now and also I think the previous question on CapEx was quite relevant because in the first quarter the CapEx was very low. So just the CapEx where you think this – the run rate should be, how much free cash flow you think the business is generating now and how you think this may improve in the future? Thank you.

Andrew?

Yes. Sure. It’s a good question Dalibor. Yes, so clearly first quarter cash flow statement significantly distorted by a number of one off, mainly the Algeria transaction and the Italian towers transaction. So I think underlying operating cash flows for the quarter as we said would be roughly $600 million, clearly impacted by the foreign exchange situation. And also in the first quarter typically we have – we kind of have a bit of an outflow from a working capital perspective because we tend to carry high payables at the end of the year. So I would say that even that the underlying first quarter cash flow number from operating perspective is a little on the low side to project going forward, we clearly as Jean-Yves already mentioned, there is a significant need to transform the business. We are – we simply not generating enough operating cash flows, and again, at the risk of repeating myself. But again one of the other considerations is being able to resume a meaningful dividend policy. So its something that we are very, very heavily focused on.

Thank you.

Okay. Thank you, Daibor.

Our next question…

Can we have the next question please?

Comes from the line of [indiscernible] Your line is open.

Thank you very much. So I had three questions. Actually first on Russia, could you possibly comment just on convertibility and up streaming of rubles. I was quite surprised to see that how those [ph] proceeds were used to pay down these all sort of ruble cash would have been kind of better off used for kind of repaying some of these bonds that were put, those are my question. Maybe we start with that, and then I can follow up?

Andrew, that’s for you too.

Yes. Absolutely. So some of the – we had about 35 billion rubles of ruble bonds mature in March. I mean, some rubles were dealt with from local cash flows. So when we talk about use of proceeds and take it on gross debt, I mean, its kind of all fungible, right. So – but in Russia specifically a large portion of the ruble bond was actually repaid out of ruble cash flow.

I understand. Thanks for clarifying that. And on different topic, on Algeria, I was wondering if you could give us just a bit more color on strategy and this kind of transition here in the past that you expect. I was looking at your competitor’s numbers it doesn’t seem that down tick in ARPU in this first quarter was as strong. So I was wondering if this was just more aggressive positioning or you re-pricing your base, what can we see there in the kind of medium term, in terms of gross churn and adds and so forth?

Maybe I can frame the perspective I have already on Algeria and then Andrew can put some color to that. When I look at our business in Algeria, and I've been there already in the first four weeks, so I think in many ways given the focus on closing the transaction with the Algerian government, this is a business where we need to put more energy, real focus and a business that we need to transform in many ways. The opportunities are very significant as we know in Algeria looking at penetration levels, looking at fact that we're just at the beginning of 3G monetization of mobile data services sale off. That continue to be incurred towards the long-term perspectives of the business. There is clearly a number of positioning operational issues that are near term that we need to fundamentally direct. Part of that, ARPU decline is result of a re-pricing a new tariff exercise that we launched at the back end of the fourth quarter and maybe Andrew you want to give more color to that.

Yes, absolutely. So we launched two new active tariff in Algeria end of the fourth quarter, one targeting medium and lower value customers and the other targeting the high end, ultra high value customers. Candidly what we are seeing is that the tariff that were aimed at the medium and low value customers are kind of off to a bit of slow start but gradually picking up momentum and we're seeing a little bit of ARPU uplift within that customer segment. Not quite so rosy candidly in the upper value segment and what we are seeing there is that we have a number of ultra high value customers who remain customers with us, but w can tell from a usage pattern that they shifted from using Djezzy as their primary SIM to know their secondary SIM. So we need to re-look at those particular tariffs and see what we can do better to stimulate more usage in adoption of them and transform those customers from being secondary SIM to primary SIM in nature. I mean the good thing candidly is that at least we still got them as customers and they’ve not churned out completely.

Okay. Thanks, thank you for that. I just had one final small question which was on your shareholder loan outstanding to Global Telecom. I was wondering if you have been approached by Global Telecom management or Board about refinancing the rate which is at 12.5% currently, which seems quite high in this age of plentiful debt?

We’ve not been formally approached by either the management or the Board, yes I hear what you say is that relatively it looks relatively expensive right now, but we remind that it got overwhelmingly approved by the shareholders at last year’s AGM and it was for a period of 37 months. So again in danger of repeating what I said three months ago, it’s something that we will now take a look at whether we just reduce the rate of that shareholder loan or whether we completely refinance it using external debt and that was something that I said we take a look at few months ago once we will complete, it really have much more meaningful corporate finance activities. So it’s something it is that we ought about to take a look at.

Okay. So I understand your perspective, I just think Global Telecom has a different duty in this case, right?

Yes.

Thank you.

Post-engagement. Thanks. Can we move to the next question please?

Thank you. Our next question comes from the line of Iven Kim of VTB Capital. Your line is open.

Could you please share the latest thoughts about the free flow out of Global Telecom, whether you would consider taking it out or you’re still not interested in that? Thank you.

I think that’s one for you, Andrew.

Yes okay, thank you. So let’s now be careful here because GTH has traded itself. I mean I think it’s something that we had no particular plans to address for now and I think I’ve been in great danger of contributing stock exchange regulations if they’ve expanded any further than that.

Okay. Thank you.

Thank you. Next question please.

Our next question comes from the line of Alexander Vengranovich of Otkritie. Your line is open.

Yes hi, a couple of questions from my side. So first on Russia, just a general question how do you see your revenue market share evolving this year, so do you expect, do you see that your market share would be stable year-over-year and do you see any sort of acceleration of competition on data this year. The competitors have started to move for the customers aggressively on the bundled data, which impacts your price per mega data and you have to reduce the price and how this would impact the market and second question is on actually Ukraine, so results are quite good in the first quarter, I’m little bit surprised, how will they commence on your market share in Ukraine. So do you see that you are getting the market share from your main competitor and what are the factors positively impacted - having in Ukraine and did you have any sort of significant negative impact from the [indiscernible] actions in the eastern part of the country? Thank you.

Andrew, again you want to take both of those or technical questions?

Yes I can take those. So first of all the market share question in Russia as I mentioned earlier on, we think that we’ve got at least stable market share sequentially in the first quarter which, if that is the case would be the first time that has ever happened in the first quarter for our Russian business since we have more exposed to the Migrant segment as I said. And so we are cautiously optimistic that we’re going to see a little bit of market share gain overall on the full year basis and that reflects all of the hard work that Mikh [ph] has covered and his team have done over the last 12 to 18 months to turn around that business and we see improvements in NPS and turn et cetera. So all the leading indicators have done it and with regard to data, pricing we don’t really see a major change in the competitive dynamics.

It remains highly…

It remains highly competitive absolutely and there is some of the lowest data rates on the planet, we’ve said clearly that we going forward we want to improve from our perspective the data rates going forward. But that would be more a function of gradually reducing bundle size if the data allowance is all the time as opposed to have there been upward pressure on the headline rates and we made some moves in the quarter somewhat diversely our competitors, it actually went the opposite direction and actually increased net allowance but it’s not caused any major change in the dynamics of what was already a very competitive situation. On Ukraine, it the one word that constantly comes to my mind when I think about the performance of our Ukraine business is resilient, it for the – it is not just this quarter but for the last several quarters it has just been remarkably resilient and we’ve got good usage on the network, good foreign distribution et cetera. I think the market share gains that we’re seeing over the last two to three quarters currently are a function of our very strong network position, in a volatile environment such as that customers clearly have a need to talk and communicate and therefore will gravitate towards the network that’s best able to suit their requirements and I think that is even more the case when maybe in certain instances because of the volatility of this situation, network uptime tends to fluctuate more.

Okay. Thanks. That’s helpful.

Time for one more question, operator.

Thank you. Our next question comes from the line of [indiscernible] of UBS. Your line is open.

Hi this is [indiscernible] from UBS. Most of my questions have been answered just probably the last one, what challenges do you see in your Russian business. Thank you.

Look as I look at Russia, I think that’s obviously the first that comes to mind is the geopolitical and currency headwinds that we faced in our business in Russia. As Andrew indicated not just I look at our business in Russia where I’ve been already, I’m cautiously optimistic that the plans that our management team have put in place are starting to produce results and we’ve seen that in the last two quarters. Having said at the same time from my perspective is that there is more work to be done in terms of our differentiation in the marketplace in terms of simplifying our business, in terms of harnessing the web, in terms of transforming our cost structures and all these are topics that would allow us to have more robust longer-term outlook on the business. Andrew, I don’t know if you want to add to that.

I think everything is fine.

All right. Thank you. That was then the last question. Thank you all for your questions and thank you for your participation in today’s earnings call and of course for your continued interest in VimpelCom. We hope to see you when we are on the road in the next couple of months or we hope to see you in Moscow in July the 9th when we do our next Analyst and Investor site visits. Please do not hesitate to contact me or my team here in Amsterdam if you have any follow-up questions. And with that, I would like to wish you good day. Thank you.