* Bulk of increase from operational improvements
* Current operational cashflow around $5 bln-Reuters
* Hopes for resolution on Algeria, aims to invest this year
* May make divestments over coming year
By Megan Davies
MOSCOW, Jan 16 Telecoms group Vimpelcom,
with assets in Russia, Italy and various emerging markets, aims
to deliver a major boost of up to $2.9 billion in annual
cashflow by the end of 2015 to improve shareholder value.
In its first investor day since 2011, Vimpelcom pledged to
pay dividends equivalent to a 7 percent yield as it vies for
investor dollars with its Russia-focused rivals, New York-listed
MTS and recently-floated MegaFon .
Amsterdam-registered Vimpelcom's largest market is Russia,
in which it ceded the number two spot in 2010 to MegaFon while
pursuing global expansion through a more than $6 billion deal
for Egypt's Orascom Telecom and Italy's Wind.
Vimpelcom's shares rallied 4 percent in early trading in New
York. They rose by 8 percent in 2012, lagging MTS's gain of 26
percent. MegaFon trades 25 percent above its November IPO price.
"The biggest message today is that our value-creation model
is centered around increasing cashflows," CEO Jo Lunder told a
conference call with analysts. "That's up to $2.9 billion in
improved cashflows in a three-year perspective."
The company detailed plans to generate annual cashflow
improvements of $2 billion from operations and between $600
million and $900 million from financial improvements.
In a slide to accompany the call it said it would achieve
this by outsourcing, "lean processes" and "headcount
According to Reuters analysis of Vimpelcom's financial
statements, operational cashflow was around $5 billion over the
past 12 months.
Lunder said the bulk of the extra cashflow will come from
profitable growth initiatives as the industry develops, with
fourth generation services a "game changer" for mobile and
smartphones replacing computers.
"We think small screens will take out large screens and
traffic in the networks will grow rapidly," he said.
The telecoms sector is also now more resilient to economic
turmoil than a few years ago, Lunder said.
"The services we're providing are covering such basic needs
that you can almost group them with bread and butter," he said.
Vimpelcom's largest shareholders are Altimo, the telecoms
arm of Russian billionaire Mikhail Fridman's Alfa-Group, and
Norwegian telecoms group Telenor, which have long been
at loggerheads over strategy.
Lunder noted that the shareholder dispute between the pair
was now resolved, "so another uncertainty is off the table".
Russia's competition watchdog filed a lawsuit in April to
contest Telenor's dominant stake in Vimpelcom whose strategic
importance required it be kept free of foreign control.
It dropped its case in November, after Altimo raised its
stake in Vimpelcom, overtaking Telenor as the biggest
Altimo is increasing its economic interest in Vimpelcom to
56.2 percent from 52.7 percent by converting preferred shares.
Telenor has a 35.7 percent economic interest.
Vimpelcom is also hoping for a resolution to a dispute over
Djezzy, the Algerian asset it bought as part of Orascom.
Under pressure from the Algerian government, Vimpelcom
agreed to talks on selling a controlling stake in Djezzy to the
The Algerian government then imposed a $1.3 billion fine on
Djezzy for violating foreign currency regulations, souring the
"Negotiations in Algeria are still in progress and we are
optimistic on resolving that," said Lunder. "We hope we can
start investing in Algeria later this year."
Vimpelcom said in an emailed statement that it hopes to
retain an interest in the Algerian business.
The company also said it was a "reasonable expectation" that
it would make some divestments over the coming year. Vimpelcom
has been trying to sell its businesses in Burundi, Zimbabwe,
Central African Republic, Cambodia and Laos in order to focus on
its main markets of Russia and Italy, sources previously said.
Vimpelcom said it will make dividend payments of at least 80
cents per share a year through 2014, extending an earlier pledge
by a year. It recently beat expectations for third-quarter
earnings, highlighting the prospects of strong future dividends.