Good morning, ladies and gentlemen, and welcome to VEON’s Third Quarter 2018 Results Conference Call. Today, I’m pleased to be joined by Trond Westlie, VEON’s Chief Financial Officer; and Kjell Johnsen, VEON’s Chief Operating Officer. Trond will start the presentation with the group highlights. Kjell will then cover the Q3 country reviews. Finally Trond will run us through the detailed group results and provide an update on our 2018 outlook. At the end of the presentation, we’ll open the line for the Q&A session. Before getting started, I’d like to remind you that we may make forward-looking statements during today’s presentation, which involves certain risks and uncertainties. These statements relate in part to the company’s anticipated performance and guidance for 2018, future market developments and trends, operation and network development and network investment, and the company’s ability to realize its targets and strategic initiatives including current and future transactions. 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 filings made by the company with the SEC. The earnings release and earnings presentation, each of which includes reconciliations of non-IFRS financial measures presented today, can be downloaded from our website. I would now like to hand over to Trond for the group highlights. Trond?

Good morning from me as well this morning, ladies and gentlemen. So this is the third quarter update from VEON. And the starting statement from us is that we have a good operational performance in the third quarter of 2018 with a total revenue of $2.32 billion. And of that, mobile data is $548 million with a growth – organic growth of almost 29% or 28.5%. So we’re also seeing a good organic growth in the EBITDA of 4.6% to $848 million even though it’s reporting number is coming down due to the fact of a settlement that we had as an income last year together with the currency effect. I’ll come back to the currency effects later. Equity or cash flow conversion in third quarter was stable considering the previous quarters. So $263 million coming into equity free cash flow in the third quarter. And as a result of the proceeds from Italy coming in, the net leverage was coming down to 1.7 times. In addition to that, the corporate cost is $92 million, since the focus on optimizing the corporate costs is one of the elements that we’re following this year and working on this year, which is a 30% reduction from previous year. So that’s really the headlines for this quarter. When we then look at the trend line as we have been working on, we have worked on the four topics of simplifying structure, emerging market focused progressive dividends and a strong balance sheet. Starting with the simplified structure, we have – and so far this year, changed our operating model by canceling the regional setup. We have reduced central responsibility of functions and we have established a Chief Operating Officer with direct operational responsibility to all of our countries. And of course, those elements are…

Yes. Thank you, Trond, and good morning to everyone on the call from me as well. I’ll take you through some of the numbers and developments in our different countries, but let me first dwell a little bit with our digital journey. Within VEON, we have come quite far in our digital aspirations over the last couple of quarters. I’m happy to say that the work we do on digitizing the core and changing the customer experience in our outcomes is bearing fruits. We see that we have launched from the platform side the DBSS, the core platforms, in Georgia and Algeria. Important steps, complicated but started to give is clear operational results in terms of simplification. We have taken a lot of the learnings in the development of the VEON platform. We’re applying them now through our self-care platforms in multiple countries. In some countries, this will mean an upgrade of the existing capabilities, for example in countries like Russia. In a country like Pakistan, it mean introducing new capabilities to the market. We’re also deriving value both internally and externally from our DMP and big data capabilities, where we are actively using this in our upselling and also in selling to third parties. With the Pakistan MFS services, we see we have a strong position that we can continue to build on in the local market. We have continued to develop the VEON platform and are looking out different options for applying those learnings in the markets. And of course, the Beeline TV has now come in a new shape which basically looks more like Apple than cable TV of five years ago, and we’re very happy with the uptake and the reception this has received in the local market. We look forward to replicating some of these…

Having then got the review of the development and composition of the revenue and EBITDA, I’m going to take you through the rest of the Q3 income statement. Going then from the EBITDA of $848 million for the third quarter, we’re seeing that depreciation is upholding on the same level, but we have an additional impairment cost putting in to this quarter of $781 million. Internally process wise, we had moved our internal time for annual review of impairments to the third quarter. So that we’re not conflicting with the year-end process. And as a result of that, we have done the annual review during this quarter. And that has led to the charge of $781 million. The biggest one in that is Bangladesh with $450 million, and the remainder is almost evenly divided or divided between Algeria, Armenia, Kyrgyzstan, and Georgia. That leaves the depreciation amortization on $1,239,000,000, and that leaves a negative operating profit of $391 million. If you take out the impairment level, the operating profit is positive with $390 million. Financial income expenses, same level as previous years, and ForEx and other gains are negative with $37 million, while in 2017 it was positive with $25 million. The biggest difference there is that we had settlements or relating to WIND in 2017 with $44 million that made the positive element in 2017. And this year we have closing out some of our euro derivatives when paying down our euro debt during third quarter. And as a result of that, we have a small charge on that in the other gains. The ForEx part both in 2017 and 2018 is at the same level. And that leaves us a profit before tax of a $626 million of loss. Taxes come down to $92 million. It’s a big…

Thank you. [Operator Instructions] We will now take our first question from Alex Kazbegi from Renaissance Capital. Please go ahead.

Yes, good morning. Couple of questions from me, please. If I start with Russia, firstly on the subscriber base, I mean it has been decreasing especially vis-a-vis a competition there. So I just wonder what are the reasons for the main leakage and also what do you think you can do to reverse the situation there? The second related to Russia question is on your retail strategy there. I mean you restructured already the Euroset shops. I think you have said no . Agreement is coming to an end in the first quarter of 2019. So could you just tell us maybe how do you see your retail hoops generally developing? Are you looking at shrinking it? What can we expect from the retail presence in Russia? Now moving to Pakistan just to understand also the nature of the regulatory non-approval of the tower sale, is that something structural so you cannot go back to possibility of selling towers in this country? Or is it something which can be overcome and we would still look for possibility of loading towers in some near future? And lastly a very quick one on the IFRS 16, just maybe if you could give us a color in terms of what could we expect in terms of improvement or change on the margin side because we have seen couple of companies adopting it to really the standard? And while there is not much change on the cash flow side, the EBITDAs tend to either go significantly up if you have a lot of balance sheet legal obligations or not. So if you could just give us a rough color what kind of impact on EBITDA margin you would expect from adoption of IFRS 16 into 2019 would be helpful? Thanks you very much.

Trond, shall we do business first or IFRS first?

Why don’t we do business first?

Let’s do business first. All right. So your question is about subscriber base in Russia. As you know, Alex, the composition of the customer base of Beeline has traditionally had lots of migrants. Now when we are executing the change in – where we’re moving towards our own retail, where we’re moving out of alternative channels and out of multi-brand channels, not completely, but to a large extent, you mentioned just now yourself, we still have some exposure there. That has led to a recomposition of our customer base. Our choice to go out of alternative channels does to some extent cover the cost, which is all remember that the sales that are going on an alternative channels will be illegal at some point in the near future. So people jumping in to fill that void are doing that at a risk to themselves. So we have made a very clear move into more of a monobrands, less multi-brand and zero or very limited alternative channels. And alternative channels only where we can execute the minimum amount of control on registrations that are crucial for that market. We are also focusing on value. We’re focusing on ARPU and subscriber numbers are important, but we focus on the whole equation and the whole equation looks pretty good. When it comes to retail, yes, we are executing fast on the integration of Euroset. This has been done. And I’m talked a bit about how we are moving into an omni-channel experience which is up and running today in the market, which provides more value to the customer base. So there is no doubt and I’ve been vocal about this before that we believe the longer term and even the kind of medium-term outlook is that multi-brand should take a much smaller part of retail in Russia. Now whether or not that means that we will work with just now for longer time than what we have contracted at this stage is not something that I want to go into detail on this call. That is a commercial decision that we have to make together with the Russian management team. But the direction is to move towards more monobrand. And I also believe you asked about a number of shops that the industry, once we have finalized that pivot towards monobrand, will reduce capacity overall. I think when we look at it, it’s clear that there are too many shops in Russia compared to an ideal scenario. So that is an upside for the industry in the medium term, we get that right. And then you talked about Pakistan?

Yes.

Yes. The reason for the PTA not approving the – or giving us the approval. Well, we have not got sort of a written response relative to explaining why they haven’t given us. So it’s more like our understanding on what has happened in the background. That is the reason for this. And to us, it’s not the structural part that is the reasoning for this. It’s more about participants. And so it’s not the industrial play or the evolvement as such. It’s more the parties involved and the structure of the transaction as we understand it. But that is purely our interpretation of it. When it comes to the IFRS 16, we are not ready yet to give you sort of an indication of the numbers. We do have, of course, internal numbers that we’re working on. But we are not in a position yet to give you that overview. We still have the statement that it will be material. And as you are alluding to, it will not have cash flow effect, but it will of course be effectful for relative to how you see the numbers. We will come out with the numbers as soon as we can and maybe we’re able to actually disclose it before year–end or before we announce the fourth quarter. But we have to work on that and see the timing of that. But as you say, it’s an accounting method. We have more than 100,000 contracts to register to actually make sure that that we can have a clear enough or concise enough or concise enough number to present. And we’re in the midst of that right now.

Okay understood. Just to clarify on the regulatory side, so if indeed this – the explanation is as you said, Trond, then that could mean possibly that as long as you find another party, this all can still be completed?

Well, the element as I said, there is no industrial or structural element that we understand is the argument. But then again it’s our interpretation.

Yes understood.

Okay thank you very much.

We will now take our next question from Madhi Singh from Morgan Stanley. Your line is open. Please go ahead.

Thanks for the call. There’s two questions. Firstly on the GTH side. You mentioned that you are still exploring options. So I’m just wondering what are the – those options you are exploring at the moment and is it a possibility to retry the previously tried options still? Then secondly, are there any licenses or spectrum auctions due in the next 12 months? And then thirdly, just wondering how are you using the cash you received from the Italian sale? I mean how much of that will be used to pay down the debt and how much will be used for the corporate proposals and what is the timeline on that? Thank you.

Well, when it comes to the GTH options, as we said, we are continuously working on finding the – or solving our structural challenges through the – our GTH ownership. It’s not like – I think that you as analyst as well as we, it’s not like we’re trying to invent possible solutions here. So I don’t think that we can come up with different kinds or structural solution that we have been doing. There might be packaging that might be different. But we are continue – the way we are doing this is are continuing our dialogue with the Egyptian environments, both the shareholder – the majority shareholders there as well as government bodies. And GTH is doing the same thing. And we are, of course, also talking to the international minority investors to try to find opportunities. And then, we are continuing that dialogue. As of now, we have nothing more to say in that regard. Coming to licenses, the only license that comes out in 2019 of substance is really Pakistan on renewals and that what is – what’s coming up. On the Italian cash, as we said, we are looking to use the proceeds from that to debt repayment and general corporate purposes. And as a result of that, we have repaid debt during – our bank debt during third quarter, approximately $800 million. And we are looking at continuing repayment of debt both on the bank and corporate side. And we haven’t decided on either timing or structure on that yet. We’ll announce that to the market when we made our final decision. And you then asked me how much is general purposes and how much is repayment? Well, I guess we have to take that when it come back to next quarter.

And just following-up on the Pakistan license renewal. Is there any indication on the potential cost or any other obligations required at this stage?

Not really. We haven’t looked at the details and I don’t think that the elements and the details have been announced yet. We know it’s coming up for renewal in the fall of or second half of 2019.

Thank you. And very quickly last question. Any update on the search for the group CEO? Thank you.

Not more than it is ongoing and the Board is diligently working on finding candidates. And as you know in these processes, we are not going to say anything until we have something to say.

Thank you.

[Operator Instructions] We will now take our first question from Herve Drouet from HSBC. Please go ahead.

My first question is back to GTH on the option. Can you give us an update on the plan up the right issue and potentially the repayment of the corporate shareholder loans from GTH to VEON? And the second question is regarding back to the Pakistan tower sale. What is the blotting factors for the transaction more towards the type of the financing that was arranged? Or was it all the reason that blot this transaction?

Well, on the particularly Pakistan I think, I’m not going to give more specifics than that because it’s our interpretation. And it’s not like we have a written response from the authority to actually say why they did that and why they didn’t. So as a result of that, I won’t be more specific than our understanding is that is not industrial. It’s not structural as such or from an operational point of view. And then we just have to –to show the VEON stays the same. We are looking for balance sheet optimizations. We’re looking for the same in-market consolidation. We are looking for the structural solution on GTH. Our ambition, our strategic ambition of going in this direction stays the same. But of course, we don’t need to find solution that is going to accommodate the local legislation and the countries as well as our ambition to proceed. So it’s a combination. On the GTH rights issue, then I have to refer you to GTH. They are in lead of the process of that rights issue. So it’s coming back to the statement I made to the market previously that if in case the transactions that we had proposed did not come true, then it was likely or it was probable that they would come out with a rights issue. I expect they are now working with that as a result of the funding situation in GTH. But as of now, I cannot give you more detail. When it comes to the inter-company or the lending, VEON is either guaranteeing or lending the whole balance sheet of GTH. So we are very much involved in the funding and the guaranteeing of that funding in GTH.

And maybe just a follow-up question maybe then on your asset life strategy. I mean do you believe there is further room potentially, I mean especially after what happened with the tower sale terminations in Pakistan? You think there is still further room for you to be more asset-light as was highlighted previously in your strategy? Maybe in other countries or back to some of the countries in Pakistan, do you think that’s – there is possibility there?

Well, we still think it’s possibilities. But of course, when you have worked on the transaction for more than a year and it’s terminated due to the fact of authorities not giving you the approval, of course, you need to revisit how you want to proceed and how you want to go forward. Having said that, that doesn’t say that our ambition still remains. So we would just have to cater for that. The probability is then of course how can you find solution or counterparts or finding structures that both operationally as well as financially is sound in the development of Pakistan. And then that’s – right now that is much duality to have any views on our side.

Alright okay thank you.

We will now take our next question from Cesar Tiron from Bank of America. Please go ahead.

I have three questions, if that’s okay. The first one is on Russia. In the press release, you suggest that unlimited offers don’t have much of an impact, but how do you think about the risk of subscribers that have an ARPU which is higher than the unlimited offer price plan, for example RUB 1,000 in Moscow, and might be tempted to downgrade to the RUB 650 unlimited offer? Second question, still on Russia, can you please confirm that the spectrums increase in Russia is just for 3Q and 4Q and we are not going to see such charges in 2019? And then third question on the guidance. Just wanted to check if the decision to not increase the free cash flow guide despite the increase in your organic revenue and EBITDA guide is solely due to FX and not, for example, your expectations that you would spend more CapEx in Q4 than you initially expected? Thank you so much.

Yes. On your question about unlimited. So there are two aspects of this at least. One of them is the P& L short-term aspect where my comment was – which my comment was related to. I do not foresee a short-term negative impact on our P&L simply because the ARPU is significantly lower than RUB 650. So you are absolutely right. And then you are touching on the strategic element of the whole pricing of Russia that when players start introducing these unlimited offers, now of course that they are relatively high level of RUB 650. It is fundamentally wrong and it does limit the long-term opportunity for the industry to continue keeping at least an ARPU growth that is on par with inflation, so that the business can get a decent return on the investments we do in our network. Now I think it’s important not to see these things as permanent, even though they get introduced at some stage. We have seen from other markets and I remember how this played out in particular in Scandinavia and Sweden, how you had unlimited for a certain period of time and then the industry moved away from that into more of a normal bundle approach again. And that is in my opinion likely to happen at some stage also in Russia. So let’s not extrapolate this into forever and take the negative view on it. But again, since most of our customers are in lower bundles, it doesn’t impact our short-term P&L in a negative way. Strategically, unlimited is wrong and we have always advocated against it. When it comes to spectrum fee for 2018, as we have outlined the recent effect of that in the third quarter, the effect will be a bit bigger in the fourth quarter. But it has been communicated clearly as a one-off for 2018. So to the extent that we are aware, there is – this is not a recurring cost into 2019. And the free cash flow guidance, Trond?

When it comes to the guidance, yes, you are correct in saying that it is the currency that is the driver for this. And when it comes to the CapEx, that is in the range that we had stipulated in the beginning of the year. So it’s no single – it’s not that that drives the changes as such or no changes, but the pressure downwards.

Thank you so much, that was very clear. Thank you.

We will now take our next question from Stella Cridge from Barclays. Please go ahead.

Hi, there good morning, and then thanks for the presentation. If I could ask a couple of things, please. Firstly, in Pakistan, so first, it’s been a volatile few months from a macro point of view over there. How do things look at the moment with regards to upstreaming dividends? And do you think that there’s some constraint there? And the second question would be on refinancing. So of course, you have the additional cash that you want to use to pay down debt. But when I’m looking at the whole debt structure, the debt maturity profile and obviously quarter by quarter, it’s becoming a little bit more short dated. So I was wondering what are you thinking about refinancing? I mean, obviously the bond markets have not been great the last few months. But if there was an opportunity there, would you be potentially interested in trying to extend the maturity profile? That would be great. Thanks.

When it comes to the Pakistani question of upstreaming, as you are aware, Pakistan have had challenges with their currency reserves and as a result of that, it has been a challenge of getting approval, of getting the money out. So as of now, we have been – it has been difficult to declare dividends from Pakistan on upstreaming it so far this year and in 2008. There are some – you can say that it’s from some very dark to a slightly lighter grade. There are – we’re seeing some – yes, opportunities that it might be eased off slightly. But we do not think that upstreaming cash from Pakistan will sort of come back to the average over the last three years. That has been sort of the going rate. So we still think it’s going to be restrictions, and as restraint – or not restrictions, but restraint in giving approvals of upstreaming. But hopefully, it’s going to be at least opportunities to upstream some. Coming to the structure of the down payment of debt, as I said, we are looking at both public and the bank debt in that regard. And when it comes to that structure, we’ll announce. When we make that decision, we will announce that. And other than that, I do not want to speculate as of this point.

Okay, is it super. And if you don’t mind asking just a bit more of a specific question. So there’s the Banglalink maturity and that’s also the debt, as you said you do guarantee within GTH, and you understand this is a kind of fluid situation on the GTH side as well. But what’s the thinking at VEON, I mean, when it comes to Banglalink, what’s the best case there for how that’s refinanced. If there is a cash squeeze at GTH while the situation is ongoing and resolved, are you still willing to provide intercompany loans to help smooth the kind of interest payments, et cetera, there? And any comments on that will be great.

Well, when it comes to the GTH situation, we kind of agree that the situation is a bit fluid. And whether that is relating to our approach or the other stakeholders approach towards the situation, I don’t think that we can agree on that. But when it comes to the debt structure, I do think that we are intermediately helping or funding GTH in a period which GTH needs to resolve. They also need to resolve the challenges of their funding structure in Banglalink. And I do think that the Board of GTH will take those into consideration when they are looking at that or I hope they will take those into consideration when they are proposing the rights issue and the need for capital going forward.

Okay. And on the Banglalink?

Well, I thought I said that because they – GTH needs to handle the situation as such. So, as I said, I hope the Board takes into those consideration of the refinancing need in Banglalink that’s coming up in first half or the late first half of 2019.

Sure. No, no, I definitely appreciate the comments. I guess some more just from a VEON credit investor perspective, there’s obviously there the kind of cross-default situation and number of point to the capital structure. So it’s more just kind of looking at for just to make sure there’s kind of no risk coming on to the VEON side as well?

Well, of course, I mean, we will look at this as the majority owner of GTH and also making sure that our structure as a whole in VEON is taken care of. So we will approach this both as the careful – with a careful view of our total debt structure in VEON together with our responsibility as the major shareholder in GTH.

Okay, understood many thanks.

We will now take our next question from Andre [indiscernible] from UBS. Please go ahead.

Hi, thanks for taking my question. I just want to get back quickly to Russia. So your service revenue growth rate jumped from roughly 3.5% to 0.5% in the third quarter. I just want to understand in terms of your like-for-like sales, what that would look like if you have any estimate because you said that the sales were impacted by your pulling out of the alternative sales channels and maybe they were also influenced by a slight cribbing or exposure to the third party channels? So if you could elaborate a bit on what your like-for-like sales would have been and what part of the decline in the sales, what sort of self-inflicted it and how you see this going forward? Thank you.

Yes. I think overall the numbers for the third quarter are pretty good in terms of the organic development. We see that the shift from one set of retail to another – to the preferred retail is coming along quite well. There is a cost element or a transition element related to going out of the alternative channels. And I would also point out that the comparison to last year, the third quarter of last year was a very strong performance. So I think you see the numbers over a longer period of time, and also this third quarter development from VEON is pretty strong.

Okay. Thank you.

We will now take our final question from Madhi Singh from Morgan Stanley. Please go ahead. Your line is open.

Yes. Hi, thanks. Just one follow-up. Given the IFRS 16 adoption due in 2019, I’m just wondering whether that was – that had anything to do or maybe is it driving any change in your tower sales strategy? Because if the whole purpose of selling towers is not going to be fulfilled, if you have to still continue to report that as debt on the balance sheet, then maybe that is why – is that something to do with your tower strategy at all?

The clear answer of that is no. No, but it has no effect. So it’s not background. So it’s a very clear answer, no.

Yes, but what I’m wondering is should we continue to expect tower sales across the portfolio given that Russian tower sale also didn’t happen, Pakistan one also didn’t happened? So is there a continued strategy still or there is a change in the strategy there?

There is no change in the strategy as such as I said. So the question is whether IFRS is affecting the – our strategy or towards how we look at the towers, no, it does not.

Okay. Thank you.

As there are no further questions, I would like to turn the call back for any additional or closing remarks.

Well, I would just like to thank all of you for participating and listening to us. As we said, good operational performance, good organic growth both on revenue, EBITDA in the third quarter. Good trend line so far this year. And I think we’re well on our way to deliver on our targets for 2018. So again, thank you everybody.

Thank you. That will conclude today’s conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.