VEON Ltd.

Good afternoon, ladies and gentlemen. Welcome to VimpelCom's Analyst and Investor Day.

This afternoon, we have a quite interesting program for you [indiscernible] presenting the introduction in terms of the key achievements for 2015. Jean-Yves is sitting here in front.

Maybe you can raise your hand, so everybody can see you. Thank you.

After his introduction, Andrew Davies, CFO, will talk about the 2015 results in greater detail before handing over again to Jean-Yves to talk about the vision, and also, the first of the 6 strategic priorities that this presentation is centered around, called world-class operations.

After Jean-Yves, the show will be taken over by Christopher Schlaeffer, who's our new Chief Digital Officer, to talk about new revenue streams in our digital initiatives. After that, we will have a Q&A session, and then a little break for tea or coffee, okay.

We then continue the program with our Chief Technology Officer, Yogesh Malik, talking about the technological innovations that we're working at. Before handing over, like to discuss the performance transformation topic by Alex Matuschka.

Alex will hand back to Andrew Davies, who will then discuss the last of our 6 strategic priorities, called structural improvements, and the outlook for the year, okay? And thereafter, we will finish with Q&A and after the Q&A, we'll have refreshments with the opportunity to talk to management on a more informal basis.

The next slide is probably the most complicated of today. You have to read this carefully.

I have to tell you. Our presentation contains forward-looking statements, which therefore involve certain risks and uncertainties, for example, in terms of the financial targets for 2016, but also on planned performance, transformation goals and costs involved.

The disclaimer serves to say that actual results may differ materially from those that are in the forward-looking statements. All of the materials, including the reconciliations of non-GAAP measures presented today, can be downloaded from our website.

With that, I would like to hand over to Jean-Yves to open the presentation. Thank you.

Thank you, and thank you for taking the time to be with us today for this Investor and Analyst Meeting. I'd like to first focus, in fact, on 2015, and 2015 has been a year that VimpelCom has delivered on its targets and saw good operational momentum across all our operations despite, in fact, a difficult backdrop of currency devaluation, and obviously, economic challenges in the emerging markets that we operate in.

We first, in fact, delivered results in line with expectations for the full year. We've made significant progress in delivering against our objective of improving cash flow by $750 million per annum.

Alex will tell us more about that as we go through his presentation. And finally, in August, you recall, we launched our new strategic framework, and I'm pleased to inform you today that we are making significant progress in reinventing VimpelCom as a digital operator and delivering on our 6 strategic initiatives.

Let me now turn to, in fact, some of these more detailed key achievements in 2015 around our 6 strategic initiatives. And I'll first start out by focusing on a core foundation for us, which is really building world-class operations, and 2 dimensions there today that we'll discuss.

The first is how we're reinventing VimpelCom from a fragmented, relatively independent set of OpCos, and really implementing a new operating model, one that is much more globalized, one that utilizes our economies of scale. And within that, we feel that building a world-class set of operations, we need a very solid world-class management team.

And as you'll see today, over the course of the last 6 months across our operations, we have significantly strengthened our management team.

Whilst our focus, certainly, in the first 6 months has been around cost and cost transformation across the business, we recognize that for the medium and long term, it's absolutely essential to bring VimpelCom back into top line growth mode, and within our 6 strategic initiatives, we have 2 initiatives that are specifically focused on returning our business to growth. The first is really around the adjacent segment around our core telecom business, and there, in 2015, we've seen significant progress in terms of data monetization across the board.

We've seen 24% growth in terms of our data services, and we feel that we need to outperform the competition in terms of data monetization if we are to return to growth. And there, we're focusing really on implementing a very strong lineup of devices for our customers as many of our customers haven't yet bought yet their first smartphone, so absolutely critical to be the point of reference for the first smartphone for our customers, but also having a very strong lineup of mono brand stores across the world.

We feel that that's absolutely essential, in fact, in gaining momentum across data revenues.

During the year, we also implemented structured business units to better address the opportunity in the enterprise space. We believe that the business-to-business space is absolutely a significant opportunity over the medium to long term as the emerging markets in which we operate focus on building out the economic fabric across their countries.

And finally, also very important for us, we've been basically focused on leveraging the fixed broadband infrastructure that we've built over the years. Today, we have some 3.4 million customers on that fixed broadband infrastructure and leveraging that customer base and driving in the 5 OpCos where we have significant fiber infrastructure is absolutely an opportunity that we want to pursue.

But as a business that we outlined in August, we want to go well beyond connectivity. We want to reinvent VimpelCom as a digital operator, enhance the whole strategic initiative around digital services is absolutely crucial, and in 2015, we really started building our strategy that Christopher will articulate around these new digital opportunities.

We started making significant investments in new digital customer engagement models also in terms of new digital IT stacks for our business. We've announced that we were opening up a digital, in fact, division here in London, and we are building a number of mobile app development centers, the first of which will open in Amsterdam.

And over the course of the year, we've seen in terms of mobile financial services, which has been a focus for the group, a doubling of our revenues in this space, so quite significant progress in really putting in place in 2015 the foundations of renewing medium to long term with revenue growth in the business.

But as I indicated, 2015 was also the year that we really started our cost performance transformation program. We believe that we need to fundamentally reengineer our cost base.

We've implemented performance transformation teams across the board in every one of our OpCos. And we've seen that in 2015, we've started delivering on our program, particularly around our CapEx efficiencies in the business, as we'll discuss, by globalizing, for example, our procurement, but also better prioritizing the way that we roll out our networks.

the announcement in Italy to merge with Hutchinson; the announcement to merge with Warid in Pakistan; and on the light network operational model we've announced towards the back end of the year, further network sharing arrangements with MegaFon and MTS in Russia; as well as earlier in the year, tower disposable, for example, in Italy. And finally, we're rationalizing the portfolio by disposing of the smaller asset that we have across the world, and as you know, we announced the disposal of our business in Zimbabwe.

The final point where I think we've made significant progress is really addressing the structural challenges that faced VimpelCom, 3 that were certainly addressed during the course of the year where we've made significant progress. The first is really around refinancing, $5 billion of refinancing; reduction of $200 million in our interest cost across the business as a result of that; the settlement in Algeria; and finally, today, we are announcing that we've made progress in terms of the perspective settlement with the U.S.

and Dutch authorities relating to our business in Uzbekistan.

Now all in all, in fact, as a result of these strategic initiatives, we're delighted to report today that we've already delivered about 40% of our $750 million cash flow improvement objective that we articulated back in August. Now all of that, as I indicated, is against a backdrop of challenging economic conditions within the emerging markets that we operate in.

And during the course of 2015, as we'll see, we've pretty much stabilized our revenues on an organic basis, which we feel is a major improvement year-over-year in terms of the business. Yet in reported terms, obviously, the currency devaluations continue to impact reported revenues and profitability at VimpelCom.

Just to put it in perspective, ForEx impact, 11% in 2014. In 2015, 30% overall.

And yet, against that backdrop of challenging economic conditions, we've been able to broadly stabilize the revenue base on an organic basis.

Let me just give you some perspective on the numbers, and obviously, Andrew is going to take us through this in much more detail. But as I indicated, we've moved from a decline type of model in 2014 around both top line revenue and service revenues to broadly a stabilization of our revenues in 2015.

We've only seen or witnessed a slight erosion in our EBITDA margin during the year, and as Andrew will point out, we've seen a significant improvement in EBITDA margin in the fourth quarter on the back, really, of our performance transformation initiatives starting to take hold in the business. And we've made significant progress during the year in optimizing our CapEx efficiency, moving from roughly 21% in 2014 to 18.2% in 2015, and at the same time, improving substantially our operating cash flow margin within the business.

So I think, all in all, what we see is good operational momentum in the business.

And in terms of 2015, these financial results, in fact, are in line with the guidance that we provided. We had provided guidance of flat to single-digit decline year-over-year in terms of service revenue.

We've broadly come out flat. EBITDA margin, flat to minus 1 percentage point year-over-year.

We've come out at 0.6% decline year-over-year.

CapEx to revenue, we had improved the range from 21% to 18% to 20%. We've came out at 18.2%.

And from a leverage point of view, I think we've delivered pretty much in line with the guidance that we had provided, and our net debt to EBITDA levels are now at 1.4x.

So all in all, not only are we delivering in terms of expectations, but we're obviously building good operational momentum across the board, despite the difficult and challenging backdrop that we have in emerging markets. With that, let me hand over to Andrew to take us through, in fact, these financial results in much more detail.

Thank you, Jean-Yves, and good afternoon or good morning from me as well, depending on where you are. So let's start talking about the financial results, as we started showing from Q3 onwards.

We're going to decompose the service revenue and the EBITDA evolution year-on-year for the group into its major components. We're going to do that both on a full year basis and for the fourth quarter.

So on a full year basis, what you see is, in reported terms, is a pretty significant reduction in service revenues of roughly 29%, all driven by the foreign exchange impact, collapse in the ruble, hryvnia, and Algerian dinar, causing a major translational impact. On an organic basis, however, as Jean-Yves already mentioned, we actually declined by only 0.2% year-on-year, so almost stable, and what you see in terms of services and products is legacy, voice and text business in decline.

And then being more or less offset by growth in data and MFS type services, and data is growing by roughly 24% year-on-year, and MFS revenues have more than doubled year-on-year. When you look at geographies, what you actually see is some weakness in Russia, mainly in the legacy fixed voice business with very challenging macroeconomic conditions, then being offset by growth in emerging markets and Eurasia.

And when you look at Q4 service revenue evolution year-on-year, you actually see broadly the same patterns emerging, okay? So we've got a 0.8% organic decline year-on-year, a 25% decline in reported numbers, again, driven by foreign exchange weakness.

And again, you see voice being offset by growth in data and MFS, and again, the weakness in Russia being more than offset by growth in the other regions.

So we actually feel pretty good about the level of momentum that we've got in some of our service revenue trajectories right now, particularly in the emerging markets and the Eurasian business, and with a focus on driving all things ready to digital. From an EBITDA perspective, so very, very significant year-on-year reduction in reported EBITDA from $5.6 billion to just under $3 billion.

Clearly, a big impact there from ForEx, again, $1.7 billion, and also, a major impact from the exceptional items that we've reported this year, and I'll get into that particular aspect in more detail in a couple of slide's time. What you see though on an organic basis is a 0.6% decline in EBITDA margins for the full year, so well within the guidance range of flat to 1 percentage point down, and again, you see Russia weakness being offset by growth in the emerging markets and the Eurasian countries.

Fourth quarter, from a margin perspective, was our strongest quarter of the year by a long distance. We've got a 5.6% -- or 5.3% increase in EBITDA year-on-year, and a couple of percentage points improvement in the underlying EBITDA margin for the fourth quarter.

Again, a significant impact in terms of reported EBITDA from the foreign exchange impact, which cost us roughly $300 million of EBITDA on a year-on-year basis, and then also about $100 million of exceptional items in Q4.

So let's focus more on these exceptional items. So just over $1 billion of exceptional items for the full year, which affected EBITDA, clearly driven primarily by $900 million provision that we took in third quarter related to the Uzbekistan investigation, and then the rest of it is primarily driven by $156 million of cost that we've incurred in either supporting or as a result of the performance transformation program, and then roughly $100 million, $110 million of that manifests itself in Q4, which you can see on the right-hand side of this chart.

So now let's get into some of the major countries in a bit more detail. So Russia, from a mobile perspective, we continue to make very solid operational improvements.

We continue to grow NPS, and we're now within touching distance of the leader in NPS. And in particular, and this is a testimony to the work that we've done on improving network quality and coverage, we actually have the leading NPS indicators when it comes to mobile internet.

So the improvements that we've made in the customer experience in a broad way have enabled us to grow the customer base for the fifth successive quarter on a year-on-year basis, and have closed a 12 percentage points decrease year-on-year in churn to just over 50%. Despite the weakness in fixed business, service revenue decreased by only 4% year-on-year, with actually a slight increase in mobile service revenue.

And then, as I said earlier, a pretty material decrease of over 20% in the legacy fixed business, mainly due to B2B voice.

We've got very good growth in mobile data revenue in Russia, driven by increasing smartphone penetration and increasing penetration of our integrated family bundles, which has delivered 16% year-on-year growth in data revenues. And then basically, the underlying EBITDA is stable once you exclude the foreign exchange impact in Russia from having dollar-denominated interconnect costs, and actually, EBITDA margin showed a little bit of upwards movement in the fourth quarter year-on-year, and it's the first time we've seen that in Russia for quite some time.

Algeria, as we mentioned for several quarters, we're in the middle of a very fundamental transformation program and organizational restructuring and delayering. However, we do remain far and away the leader in NPS in that country, and data revenue has doubled year-on-year.

Service revenue continues to decline in the mid-single-digit range, mainly a result of continued loss of high-value customers and the elements of ARPU erosion.

EBITDA margin shows the benefits of the change in the MTR regime, which happened partway through third quarter, coupled with the impact of our performance transformation program, and we've got significant year-on-year increase in EBITDA and a very robust 54% EBITDA margins. CapEx showed a bit of an upwards increase for the fourth quarter, driven by the fact that we're now reaching out into more [indiscernible] than we previously thought we were going to.

But against that, we still have an underlying decrease in CapEx to revenue ratio within the -- within that country.

And moving onto Pakistan. So again, we continue to have very strong performance in Pakistan.

The mobile customer base shows a year-on-year decrease, but that was the impact of the SIM reverification program in Q1 and Q2 where we had to churn roughly 6 million customers. But we were much more successful with that program than our competitors and it enabled us to gain basically 1 point of market share from them.

Absent that verification program, we'd have had a significant year-on-year increase in customers. We've got a very strong data revenue growth of nearly 80%.

MFS is up more than 72%, which is now driving a significant increase year-on-year in total service revenues. And EBITDA margin, again, shows the benefit from the revenue growth, but also performance transformation program that we've put into place there.

And we're now above 40% EBITDA margin for the third successive quarter, and Yogesh later on will talk to you specifically around some of the things that we've worked on when it comes to utility costs in Pakistan. CapEx, a significant year-on-year decrease, mainly due to the fact that the 2G modernization program ended in Q4 2014 with a substantial improvement in network and service quality.

Now turning to Bangladesh. So we've got solid customer growth there of 5% year-on-year, driven by an attractive and a much more streamlined tariff architecture than our competitors.

However, it's much more transparent for customers, much easier for them to understand. We've got a very strong lead in NPS due to the strength in network and these data offers, and we've got ongoing data revenue growth of 65%, which has driven nearly a 6% year-on-year increase in service revenues.

And excluding the impacts of the performance transformation program and a one-time SIM tax provision that we took in fourth quarter, the underlying EBITDA margin was actually 48% in Bangladesh, which is I think the strongest we have reported in any given quarter for that country.

Ukraine continues to operate in a very, very robust manner, continues to strengthen its market leadership, despite what is a relatively challenging macroeconomic and geopolitical environment. Clearly, a very, very successful 3G launch that we've had.

That's what's driven the year-on-year increase in the CapEx-to-revenue ratio, but we continue to strengthen our market leadership and provide -- far and away the most expansive nationwide 3G coverage. The growth in service revenues of 12%, coupled with the impact of what we're doing on performance transformation there, has driven a very material increase in EBITDA year-on-year, and we're now within touching distance of a 50% EBITDA margin within Ukraine.

Italy. So again, we report Italy as an asset held for sale, consequent to the announcement of the JV with Hutch in August last year.

I think, as you know, we've completed our formal notification to the EC within the last couple of weeks in early February, and we expect that this transaction will close somewhere around the end of 2016. On an operational basis, we continue to see gradual improvements in Italy.

Our mobile service revenue trend year-on-year is gradually plateauing out, and was only a 3.3% decline in total for fourth quarter, and was almost flat when it comes to mobile service revenues. Mobile ARPU is stable for the quarter, seeing the trend that we've now seen for the last 2 to 3 quarters, and again, here, the country where we're still generating double-digit data revenue growth, driven by increasing smartphone penetration, as evidenced by the fact that data customers have grown by 14% year-on-year.

Fixed broadband customer base continues to grow slightly, and we've got dual play customers at 7% year-on-year. 4G coverage at the end of the year stood at just over 50% at roughly 56%, and we've got broadly stable EBITDA margins.

And again, in Italy now, we actually have the highest EBITDA margin of any mobile operator.

So let's now turn back to the total year income statement. So I've talked in quite some detail already about both revenue and EBITDA, so I'm now going to focus much more on the below-the-line items.

So depreciation and amortization showed a very material year-on-year decrease of roughly $1.3 billion, $1.4 billion. That's mainly driven by the fact that we booked $1 billion of impairments last year against only $250 million roughly of impairments in 2015.

And then there's also been an impact, obviously, from the foreign exchange situation and the retranslation impact. Financial expenses declined by roughly $250 million year-on-year, which is the impact of the refinancing activities that we've conducted through 2015.

Tax, again, shows a significant year-on-year decrease. That's mainly related to having to make lower provisions for withholding taxes related to inter-company dividends and the upstreaming of cash from OpCos to headquarters.

The profit from discontinued operations shows a major year-on-year turnaround. So we had a net loss there of $680 million in 2014.

It's a net profit of $263 million in 2015, so a swing of nearly $1 billion.

Two things driving that. So first of all, we did record a onetime gain of roughly $100 million in Q1 related to the sale of the towers in Italy.

And secondly, and more importantly, it shows the benefit of 3 rounds of refinancing activity, which we did -- which we've done in Italy -- started from kind of Q1 2014, ending in Q1 2015, which has reduced the financing cost in Italy by a very material figure in excess of $500 million. And then finally, there's also a movement year-on-year in the noncontrolling interest, which is mainly driven by the sale of the 51% stake in Algeria to FNI.

So last slide related to results for the year. So net debt evolution.

So at the end of 2014, we reported net debt of basically $20 billion. Adjusting for the reclassification of Italy as an asset held-for-sale removes roughly $13.25 billion from that number, so you get down to somewhere around $6.7 billion on a pro forma basis at the end of 2014.

We've then got operational sources and uses of funds in the year, which broadly offset each other, where your interest, tax and CapEx slightly offsets the cash that we've generated from EBITDA. We then have a $1.2 billion favorable impact from the closing of the Algeria transaction, which was roughly the $2.6 billion we got from the sale of the state, the tax impact on that, and then paying a $1.1 billion fine to the Bank of Algeria.

And then in ForEx and other, the single biggest component there is actually the Uzbekistan provision, which we stripped out from the underlying normal changes in working capital because it's obviously a noncash event. And that gets us to net debt of roughly $5.5 billion at the end of 2015, which is commensurate with roughly a 1.4x net debt to trailing 12 months EBITDA ratio.

So that concludes the discussion on 2015 and fourth quarter results, and with that, I'll now hand back to Jean-Yves.

Thank you, Andrew. All right.

Let me say a few words about vision and how we're building world-class operations. And as I said, our strategy is really to reinvent, transform profoundly VimpelCom to go beyond connectivity and make this business a digital operator in the emerging markets where we operate.

And whilst in August, we started articulating really our strategic framework in the past few months beyond implementing our strategic initiatives. We really focused on defining that vision and where ultimately we want to take long-term our business, and so fundamentally, we want to reinvent, transform VimpelCom to become, once again, a pioneer, working on the frontier, to unlock opportunities for customers as they navigate the digital world.

And ultimately, we think that there's a significant opportunity, second to none, perhaps, in emerging markets. Most of our customers have not yet purchased smartphones.

Most of our customers have not yet engaged in terms of digital internet type of services. Most of our customers haven't adopted yet a digital lifestyle.

And yet, we fundamentally believe with the advent of the Fourth Industrial Revolution, that in emerging markets, there's a significant opportunity to go beyond connectivity to offer much more to these customers than the basic voice and data services that we are offering today. So we want to ultimately be more than a series of dumb pipes in these marketplaces down the road.

We want to innovate again. We want to make our services attractive again, exciting again, as they were perhaps 5 or 6 years ago.

And we believe that these opportunities are ultimately very significant as we reposition VimpelCom as a digital operator, and we really take the 217 million customers that we serve today in terms of this digital lifestyle journey.

And if you step back, the opportunity is even bigger for us in terms of these marketplaces because we serve or we have the opportunity to serve 1/10 of the world population in the markets that we operate today. That's the addressable market that VimpelCom has, ultimately and as we know, within that, we have a very, very solid position already with the 217 million customers that we serve.

Fundamentally, to deliver on this vision, clearly, we have to implement each of the strategic initiatives that we've talked about.

It's no good just trying to create a digital operator if we can't fundamentally build, for example, world-class operations. And as I articulated in my introductory remarks, we're focusing on building world-class operations as a foundation for really this transformation program.

And 3 initiatives that I'd like to touch on today are really around how we basically substantially improve the customer experience. That's fundamental, not only fundamental in terms of market share gains, but ultimately, fundamental in terms of starting to operate as a digital operator.

Within that, as I've articulated, we need to build a next-generation operating model for VimpelCom. We don't think that we should do things on an incremental basis by just slightly improving revenues or slightly cutting costs that we fundamentally have to rethink the way that an operator is going to work in the digital market.

And obviously, without the right management team, none of this would obviously be possible. We've made significant progress in terms of the customer experience in our geographies over the course of 2015.

In fact, today, in 7 of our OpCos, we're either leader or coleader in terms of NPS. And as Andrew articulated, in many of our markets, we are making significant improvements in terms of customer experience, customer service, and we think that's materially important to determine, in fact, medium- to long-term market share gains, because, ultimately, as I've articulated, our objective is to be #1 or #2 in the markets in which we operate today, and we are already on the basis of the transactions that we've announced, #1 or #2 in 7 of the OpCos or markets in which we operate.

So really, this focus on NPS is going to be a strategic foundation for our business going forward.

Reinventing VimpelCom, as I said, is much more than just doing things better in the old operating model. We fundamentally believe that the operating model that made our success in the past is not going to be the operating model that's going to make our success in the future; and there are 3 dimensions that we're focused on in terms of this profound change of our business.

The first is that we need to move from a very complex business model. In many of our markets, we have hundreds, if not, thousands of tariffs, right.

We need to massively simplify the operating models that we have, not only to improve customer experience because ultimately, we want every customer to be 3 or 2 clicks away from being able to take one of VimpelCom services. But obviously, simplification is absolutely critical to be able to reduce our cost structure, to standardize our systems across the world and to move to more of a global operating model.

The second dimension is that we're still very much a brick-and-mortar business, and we're still very much a paper-based business in most of the emerging markets that we operate in. We need to change that fundamentally.

We need to digitalize our business internally, but obviously, digitalize completely our customer experience and make our services, as I said, no more than 3 clicks away from any customer. And finally, we want to move from a fragmented set of operations, from a set of operations that have been completely independent in the past to much more of a global model.

We started doing that, for example, in purchasing in 2015. In 2014, less than 10% of our purchasing was done on a global basis.

We want to use our economies of scale, obviously, to better leverage our purchasing power across the world and globalization of certain parts of our business are going to be essential.

Now we're going to put in place this new operating model. We're just kicking this off as we speak.

We will see what will remain a lean HQ, but ultimately, within this operating model, the globalization element is absolutely critical, whether it's in terms of managed services, shared services. These are the type of models that we're going to be implementing across the board.

I'm also delighted to report that we've made significant progress in strengthening our management teams across the world. In terms of the executive committee today, 75% of the members of the executive committee are new, and they've come from top-notch company.

They have world-class type of experiences, and I think that this is fundamental to reinventing, transforming profoundly VimpelCom. In terms of our top 50 executives, in fact 75% of our top 50 executives have joined the company, again, in the last 2 years.

And we will certainly continue reinforcing our management structures across the board, whilst attracting more and more digital talent within the organization.

I'll now hand over to Christopher Schlaeffer. Christopher has joined us a few weeks ago.

He's going to focus really on our revenue acceleration program, but also how we transform VimpelCom into a digital operator, and Christopher has a fantastic background in joining us. He not only understands telecoms, having been in very senior management positions for years within Dutch Telecom.

But also, in the past few years, he's had an entrepreneurial venture, in fact, building digital products and services. And obviously, we're delighted to have been able to attract that type of world-class talent to really drive the revenue agenda within VimpelCom.

So Christopher, welcome.

Thank you. Good afternoon, ladies and gentlemen.

Well, this is actually my week #5 in the business, and I'm delighted to be in front of you and talk you through the revenue side and the digital side of the business. Of course, after 5 weeks, I don't know it all, that's clear, but I'll do my best to describe to you what the plan is here.

As Jean-Yves said, the last 5 years I have spent as an entrepreneur, basically in Berlin with a couple of companies founded there, one of them now in London, and before that, I was 12 years with Deutsche Telekom. I was the Chief Strategy Officer around the Millennium.

I was CTO, CIO, Chief Innovation Officer, Chief Marketing Officer of T-Mobile International.

And the last 4 years, I was the Chief Product officer of Deutsche Telekom until 2010, so I've seen quite a couple of things in the telecoms industry, and it seems coming back into the scene and that is exciting. I think VimpelCom really is different.

It is different in terms of the strategic framework Jean-Yves have said last year, which is more radical than you would usually see it in the telecoms industry, and I can embark on that and really base my thinking around that. And I've split my role, which is a commercial and a digital role, into 2 programs basically for the year 2016.

First of all, this is about the core. This is about revenue acceleration.

As Jean-Yves has described, we are coming from a history where we have declined in service revenues basically in the years from 2011 to 2014, and starting to stabilize the business in 2015 with a service revenue growth of slightly negative 0.2%, so that's where we are. But breaking this trend and resuming service revenue growth is not an easy challenge for an organization like that where we have trends in the voice and messaging business, which are negative in terms of market trends.

And there's, of course, a couple of adjacent businesses where you can put a growth focus on.

Besides that revenue acceleration, I'll be focusing on the digital transformation with the teams around the globe, and doing something entirely different in this industry, not just an incremental add-on in terms of innovation, but something at last largely radical. I'd like to say, and I'd to outline these plans to you in effect, but let us focus on the revenue acceleration first.

Just a couple of weeks ago, we have instituted a massive revenue acceleration program across the group, which is dealing, basically, with the 4 main categories in the core telecoms business. First of all, to defend our core, which is a declining business in terms of market trends, the voice and messaging business.

To my mind, it is much more important to be really aggressive as a defender before you even think about growth because lost business, and especially, in a segment where we have high margin is really hurting yourself and it is reducing the base before you can actually grow on that basis. In the 3 segments, which of course, are the 3 archetype growth segments in the telecoms industries after last years in the Western World, but increasingly also in the coming years in our markets and in the emerging footprint where we're going.

That is the mobile data challenge. And we need to realize the full potential of growth here.

That is, of course, also the fixed broadband challenge. We are not only a mobile carrier.

We are becoming an Internet integrated carrier as we speak. And besides the consumer segment, it's also the significant opportunity in the business segment across the various sub-segments we're dealing here, very small enterprises, small and medium-sized enterprises, large accounts, even multinational, some of them in our footprint.

So if you look at that, we are approaching that, first of all, really from a customer experience point of view. Before you go there and talk about propositions, you have to think about where are consumers going in the markets, and we have always realized that we are operating in markets, which are not like the U.K.

or France or Germany or the U.S. These are emerging markets, where, for instance, only 30% today have a smartphone in their hand, and often, they're not even using the smartphone as a mobile internet device.

If you look at the trends in these segments, voice messaging, in our footprint over the next 3 years, will be, as a market, a 3% declining business. Data, of course, is growing, roughly by 11% growth rate in the market, and Jean-Yves has already described that we have grown by 24% in the last year, so we have doubled the base.

If you compare these numbers in terms of the growth, we are winning market share. Fixed broadband in our markets is pretty much a stable market trend, and B2B is a growing segment by 3% to 5% in the marketplace.

In terms of sizes, if you think about that, the mobile internet business is a business for us with roughly USD 1.2 billion in revenues. If you include Italy, it's roughly USD 2 billion.

If you look at the fixed broadband segment, it's USD 0.9 billion without Italy, and including Italy, it's USD 2.2 billion. If we look at -- think about B2B, it is USD 1.2 billion without Italy, and USD 1.8 billion with Italy.

So this is very sizable segments where we're attacking, and we are not only trying to resume revenue growth in the flat to low single digit range in 2016, but we are really dedicated to win service revenue market share in all these segments. That is, in essence, the 3 years targets we are looking at.

Now let us undertake a closer survey into these segments and what we have launched as a group in terms of the initiatives in these 4 buckets. The first bucket is voice and messaging.

This is about increasing the share of wallet in that segment, and here is a series of levers we need to pull, which are known to the marketplace, but we are not best-in-class yet in really applying that like we sometimes are used to in the Western markets.

First of all, this is about advanced analytics in the base. We need to understand where our customers are, where the segments are, what the user behavior is and how we can really exploit the full potential in the core voice and messaging business.

That has to do with a professional introduction of customer segmentation across our OpCos. It has to do with not only conjoint analysis, but micro segmentation, advanced analytics machine, learning in the base.

That is a fundamental challenge to us in terms of building also a database, a data management platform which works realtime in order to enable us at every point of customer contact to really come up with personalized offers, which are right in the context for that, in essence, segment of one. So that is customer segmentation.

The second thing has to do with smart pricing and portfolio simplification. Portfolio simplification, Jean-Yves has talked about, is a tremendous thing for us, not only in terms of customer experience, but also simplifying the IT challenges and the processes if you look into our business.

In some of our OpCos, we have more than 10,000 different tariffs and products in the place. Imagine what the IT systems need to do and how, for instance, customer care agents can or cannot deal with that complexity.

We are, at the moment, in an initiative to cut down the tariff portfolio by 62% until end of June this year. This is something which was launched already last year, and that is only the first step.

At the end of the day, we want to end up with a tariff portfolio, which is as simple that you just have a couple of dozen tariffs as per OpCo, and for instance, Italy is very advanced in moving now to only 40 tariffs out of a legacy, which was much larger than that. This will, at the end of the day, reduce IT costs indirectly by 15% to 20%, so that is the cost lever we are pulling here.

Smart pricing, on the other hand, in the base is a fundamental lever to defend and even increase, in some segments, core revenues in voice and messaging. And usually, if you do that right, you can increase revenues by 4 to 8 percentage points, vis-?-vis, your competition without losing any revenue market share if you understand your segments and how you can change the price points there.

That is why smart pricing is so important. We have installed a global center of excellence on smart pricing, where OpCos work together in the exchange of the knowledge around that.

I think that is fundamental.

The last thing is, of course, the customer base management, to reduce churn, to cross and upsell. And we have started initiatives in certain OpCos already in piloting that where the uptake in upsell was 50% to 70%.

So these are, if you wish, conventional instruments, but really applied in a new manner and a professional manner across the OpCos. And that is the core voice and messaging segment.

The second segment is mobile data. As Jean-Yves has said, we have grown by 24% in 2015, market growth was at 11%.

So this is already a very strong start. We want to outperform competition and win service revenue market share going forward.

And we are in a segment where we have today, as I said, 30% smartphone presentation -- penetration to date. So that's where we start.

And that goes along with roughly 2.5 million smartphones turned over in 2015 into our base. Now think about 217 million customers we have, but only 2.5 million smartphones.

So the growth clearly is ahead of us, in front of us, and not behind us in these markets. That is the fundamental difference to Western markets.

And how we go there is, first of all, with a completely new device lineup and device strategy.

First of all, of course, we want to capitalize on the market growth. Secondly, we're going there with a target of roughly a quarter unbranded devices in the base.

The same time last year, we have started globalizing the device management in the group, which is bringing down procurement costs by 5% to 10% in the device segment. So that is the logic we're applying there.

And we're going out there with a complete new lineup, now we have 3 major OEMs under contract in the global model already. And as Barcelona is approaching at the World Mobile Congress next week, we will strike further deals with OEMs and ODMs to really have a globalized device portfolio, accessories included, of course, et cetera.

What is, in a way, revolutionary is that we have started working with OEMs and ODMs on price points for smartphones which are new to the market. For instance, here is a smartphone, a full Android 5.1 Lollipop smartphone 3G, which we are launching in Barcelona next week.

It is an unbranded phone, and the fundamental thing is this is a price point, the first time, below USD 30 for a smartphone. Imagine where we are, below USD 30.

So this is the first for Barcelona next week. That is the phone.

And that's what we're doing in order to tap segments where we have to recognize that ARPU sometimes is at USD 1 or USD 2 per month, up to USD 5. And there's no way that customers can afford smartphones like we know them in the rest of the world with price points from USD 500 to USD 900, or something like that.

So sub-USD 30. That is a well-balanced device portfolio.

Secondly, our mobile data. But overall, we are doing heavy work on our distribution network around the globe.

Today, we have roughly 6,000 monobrand stores. We're expanding that footprint vastly in the years to come.

So we're going there. And really, we have a new design of these stores, we have a very structured way of offering the portfolio across the board, both mobile and fixed-line, including the B2B segment and certainly performance of the store.

And we also want to control stores in a different way. Our target is really to control 40% of these stores are only coming from roughly 30%.

But we have to also balance out the direct channels and indirect channels and consolidate indirect channels. So that is a major initiative.

We have to, thirdly, integrate the mobile data in the group pricing strategy to really start, it sounds as simple, start bundling mobile data into voice. So we're just starting there and even bundling a device into mobile data.

So that is all something which we need to do going forward. And we need to stimulate the data usage, of course, where a different digital strategy, and I'll be talking about that in a sec.

On fixed broadband, we have, excluding Italy, as Jean-Yves has said, 3.4 million broadband households under management. If you include Italy, we even have 5.7 million households in fixed-line.

So that is what our footprint is. And that is something you can really build on.

And we are going for the classical chain, first of all, with these fixed product offerings from a double play to a triple play. The triple play, we are entering not in the old legacy fashion to produce IPTV products on old legacy platforms, now we're leapfrogging into video OTT services in there, which are modern, much more flexible, much more cost-efficient.

And we're working on such a platform in the Russian-speaking countries as we speak. So that is the triple play.

A triple play usually gives you roughly directionally a 7 percentage point churn reduction, if you move from double to triple play. So that is important.

And secondly, of course, it's also freezing ARPU levels and working against price decline. So the triple play is the first step.

And of course, also bundling in terms of quadruple play is a very significant opportunity to us because we are coming from a vast mobile user base of 217 million customers and trying to cross-sell into the fixed plan segment where we only have, as I said, 5.7 million households to date, and that is something. But you can also do it, of course, vice versa and sell out of the fixed footprint into mobile and, for instance, Italy has already fixed mobile conversion offerings for 50% of the fixed-line installed base.

So that is something which has progressed very well. We're launching such a fixed mobile convergence proposition also in Russia in springtime this year, and are going into the quadruple play.

On top of that, of course, the next wave of development is the Internet of Things. And for the household, that does mean connected home.

So we're going much further than only offering voice, data access and video. We are going towards connecting other technical instances in the home, which could be energy management systems, heating systems, like the next thermostat proposition, stuff like that, security systems, other stuff.

So that is really fixed-line and it is a major focus point for our growth initiative.

And last but not least, our business segment. We, today, are serving roughly 10,000 small and medium-sized enterprises around the globe, rather high end I have to say.

Looking at the analysis and we're serving roughly 1,000 large accounts and key accounts across the world, and we really have a strong sales force out there in terms of an organization of 3,600 people engaged in business. But what we don't have, we're not reaching fair share yet in terms of the ratio where the business segment should be as part of our revenue overall.

And that means there's tremendous growth ahead of us, and we have to outperform the market also here and really exploit the full potential. How do we do that?

We really have to, first of all, strengthen the mobile and fixed core business. Andrew has reported that, for instance, in Russia, we have a weakness at the moment in business voice and we have to address that.

Also, we have a new product lineup in terms of what our future VPN, et cetera, voice products. So that is important.

We need to extend our offering increasingly into adjacent value-added services, points by IT. That could be enterprise mobility, that could be machine-to-machine, and we need to deliver our best quality here.

[indiscernible] is really the untapped customer segment. If I give you a number for Russia, we are serving normally 90% of Russian business customers, but our share of wallet is below 20% with these customers.

So here, you see the opportunity again.

Mobile churn reduction, mobile up sell and data monetization to fixed mobile convergence and value-added services are the levers. And what we have done already last year we've really now a focused global business organization in place with a dedicated business unit, centers of excellence around these growth levers, results delivery offices, clear NPS tracking as a first time in the business segment, and then a very tailored go-to-market across the segments, unified practices and digital transformation, of course.

So that has been a snapshot on the revenue acceleration program we have put in place only basically 2 weeks ago in a very systematic manner. And we'll report going forward to you on progress of this program.

The overlying objective, as I said, is we want to resume flat to single low-digit revenue growth in 2016 in terms of service revenue, and what we want to win service revenue market share across all 4 categories going forward for the next 3 years.

Now let me turn to the other topic, which is digital, and of course, is close to our heart as we are becoming a digital operator and try to rewrite a chapter in the book of telecoms, really. And digital, as we know in Western markets, is something which is completely disrupting, not only the telco industry, the tech industry, but fundamentally, all the industries around us in terms of the Industrial Revolution Davies was talking about.

And I think it is fundamental. The interesting facet on that chart is that a day in digital is not 24 hours, a day could be 31 hours, 28 minutes.

And why is that? Because people are starting to multitask.

If you're listening to music whilst you're doing something in parallel, some people or kids often have multiple devices in front of them doing different things. And if you look at the day for consumer, it is 7 hours sleep, that's clear.

It is work, which is roughly the other gray area, 6 hours, 4 minutes here on average. This is a U.S.

statistics. It is some, still on the lower left corner, offline activities like cooking, housework, et cetera.

But on the right-hand side, it is the different digital categories where consumers engage today ever more increasing. That is predominantly video.

We're still watching video an incredibly 5 hours, 18 minutes a day, can you imagine? So if you don't do that, others must watch more video than 5 hours, 18 minutes.

Audio is a fundamental category in radio music streaming download, et cetera, 3 hours, 39 minutes; social media, et cetera. So what I'm telling you, you have to look at the consumer behavior where it is when you want to become a digital operator and understand at the same time the technology disruption, which is enabling the new business model.

If you sum it up, we are in the first place, addressing 11 hours, 5 minutes a day of digital behavior where we could help users -- there's a Norwegian statement that says navigate the digital world as a pioneer. And I think for doing that, we need to fundamentally change the approach in telecom.

Look at history in telecom. Telecoms operators were proud companies 15 years ago.

They have introduced the Internet with networks. They were very strong in producing the PC online experience at home for a certain time and then came the technology disruption in Silicon Valley, basically with iOS and Android from the 2 companies which cut off telecoms operators from the consumer relationship in a logical way in the digital space.

And since that, we are not recovering. The telcos have to strive for something different.

They have to really be a companion of the consumer as he navigates the digital world. And that is why we are on the verge of capitalizing on that trend.

That trend which I just showed you of 11 hours, 5 minutes in the Western world of digital user behavior a day is going east and it's approaching our markets. If not yet there, so you have much lower usage in terms of digital behavior in our markets, but that means only that the opportunity is ahead of us and we can jump into that.

And the way how we do it is we have a complicated chart in the beginning, which I'd like to make simple for you and guide you through and take some time on. And that is the new digital strategy.

When we look at digital, we are customer first. We are not mobile first, we are customer first.

There is a vast difference because there's a couple of fundamental flaws with mobile first. Customer first is, first of all, multi-screened, not only the mobile screen.

And if you're dealing with a consumer as part of a household at home, that is something different in a consumer on a mobile phone and his personal device. And as we know, in today's ecosystems, coming from the mobile apps, native kind of things like iOS and Android have a hard time dealing with that phenomenon.

Maybe you had the same experience that suddenly at home, if you have a couple of Apple devices, you get a phone call but your wife gets the same phone call, and the SMS directed to your wife is coming to your daughter because Apple is really coming from the mobile part and cannot really manage the household community because it's not made for multiscreen. So that is important.

Second is easy in, easy out. The telecoms industry is handcuffing customers so far with 2-year subscriptions, et cetera.

But customers in our geographies want to test things in Pakistan, they want to hook on a music service for a day for $0.20 and they cannot afford to buy into a music service of $10 a month like Spotify. That doesn't work.

So easy in, easy out.

Thirdly, a community thing. Me and my identity in the household in the office, et cetera, and how I interrelate with others is different things.

And fourthly, the privacy phenomenon. We have the privilege of not being an advertising finance business in telecoms.

We are services finance. That is why we can afford not to sell consumer data to advertisers, and hence, not compromise privacy.

If you think that [indiscernible] what a huge opportunity in terms of creating a new digital operating model, vis-?-vis we see Silicon Valley companies who have to, at the end of the day, compromise privacy because they got to sell consumer data in order to monetize an advertising as their single and only revenue source. So that is customer experience first.

And then a platform around that where we with that knowledge and being the part of consumers can really think about a novel set of APIs, Automatic Program Interfaces, to outside services, which we expose in a different way than today's logics from the West too. So we'll work on that, and I cannot go into much detail yet there, because it's too early to really talk about it, maybe next time.

But that is the core of it.

I join a relationship with a new type of model; I pay for something; I manage my account or my contract; I solve issues for myself even in the digital world as a consumer. And also the way I leave a subscription then is all customer interactions where we need to fundamentally look at the customer journey, Silicon Valley style, and recreate that in a digital operating model.

So that is what we're going for, on the one hand; and the other aspect is the upper chart of -- the upper part of the chart is what kinds of new product and services are we actually launching, as we have started with mobile financial services, but we'll go much further.

I join, I pay, I manage, I solve, I leave, is a fundamental opportunity in transforming our model. We have to really design these processes anew completely with a marketing and customer experience thinking.

And then take the consequences in IT and renew the entire OSS, BSS tech in order to become a digital operator here.

If you look at today's situation, waiting times roughly on average 5 minutes in call centers still, that's what you do, your issues are not resolved, and you have to change that in terms of I manage. That can be done with eCare, with chats, and stuff like that.

And these are processes we are tapping into. So that is the engagement platform we are creating with the APIs.

And that will be a full digitalization of that with a 24/7 type of digital services going forward. So that is the first building block.

And the second building block, and I go into some more detail here, is the new products and services we are entering. This, not always, is a "we build it."

It can be a partnering approach. It can be an acquisition approach, but it can also be a build approach like, for instance, financial services.

As Andrew has said, we have doubled the revenues in financial services the last year. And recall, we are in countries which are completely underbanked where you don't have a bank account.

They don't have credit cards, so there's no payment facilities in there. And you fundamentally need a wallet, and if you can transform that into digital, you're completely disrupting the model of financial services in these economies.

And that's why we're jumping on that, and financial services is one of these things.

Communication messaging, we think, in the West is a done deal. We all use WhatsApp here.

But look at emerging markets and how many different types of messaging services are out there, not only WeChat in China, which not only is a messaging services but it's actually an app in the app system, which is replacing the app store of Apple and Google in that place. There's a series of other messaging propositions out there and we're definitely looking into our core communication and messaging segment.

We're entering entertainment, that's clear. Video is the first thing in the fixed broadband.

I talked about that. We need an OTT video streaming platform because this is part of the core business.

But we also need to think about other entertainment model. Models, for instance, music.

And I alluded to that already. We need music with a lot of content.

Music in our markets is not the global 40 million catalog of Spotify. It is up to 90% local music being listened to, so you have to work on that model first.

It needs to be, secondly, priced differently so that people can afford it in our markets. And thirdly, is it needs to be tightly integrated in your platform and not always a separate app where you go to.

So there's a fundamental opportunity in music. And differentiating sports content, like for instance, cricket in Pakistan and Bangladesh can play a role, things like that.

Third pillar here, the local discovery and commerce part. People want to participate in the economic world for these emerging market nations and they have no way today to really participate.

That's why platforms like Alibaba and goods [ph] in China work so well. And in our markets, there's tremendous opportunity to introduce similar models in terms of goods commerce, but also service commerce in terms of an Uber model.

For instance, in Pakistan, it's largely different than here in the Western world because in Pakistan Uber has, for instance, the issue that taxi drivers don't own a smartphone so they cannot conduct the business. So a cooperation between services businesses like Uber and a VimpelCom open new doors to really enter the local discovery and commerce swing, and it is really local.

That is not the Western models. And beyond these 4 categories, it's been really the Internet of Things which is next [ph] , both in the consumer and the business growth in consumer.

I talked about it. It's the extension of the fixed-line broadband offering.

And in business, that is the machine-to-machine segment we are focusing on already and beyond.

Now key principles here is this all needs to be sizable in the short and midterm, so we will have to, of course, deliver on that. It needs to be asset-light and it can.

It needs to be effective in terms of using our own assets and it drives the customer base stickiness at the same time. And the good news here is, here is a lot of untapped potential in our emerging markets because the level of international competition is much lower and there is a strong need for localization.

Last statement on digital. This is a massive transformation journey for VimpelCom.

We, today, are still a classic telecoms operator, but we are on a radical transformation to being a digital operator in the future. And what does that mean?

We will start with personalizing the user experience. That is really the driving principle for that transformation.

That is so important that we sign it down to the segment of one, and everything we do in the future is that this is an Internet phenomenon, which all tech entrepreneurs know, a telco carrier is still not personalizing the user experience.

And secondly, we need to understand how technology enables that. And within that, 4 transformatory blocks are really there.

The whole transformation of customer-facing operations to really have a segment of one there, 24 x 7 operations in all customer-facing digital channels in there, the product development, which needs to change in digital. And that is why we're offering -- opening that London-based digital division, product development, just is a different ballgame than a classical telecoms.

It is about HR processes where you look at product release cycles of 14 days instead of 2 years. So every 14 days, you look at a new product.

We have [indiscernible] masters in place, product owners in place, we have solid technology and software architecture in place, so that product development needs to be there. And that's why we are concentrating that around the globe in various hubs, led by the London global division.

Amsterdam is a development center. We have a very strong development center in Milan in Italy, but also in Russia, Pakistan, et cetera, all these resources will be globalizing that new model.

We've completely also new capabilities in terms of software engineering. In a sense if you wish, this is the creation of a software factory within VimpelCom, which we're doing in product development.

In process, I talked about the digitization of all these processes, which is a fundamental thing. And that goes along with an HR and adaptive OSS and BSS stack in IT, which Yogesh will be talking about in the technology part, which is a major investment for telecoms operator.

And it goes, of course, along with a change of culture because we completely also need to change the DNA of VimpelCom going forward. You need to acquire these new capabilities and we need to subscribe to the notion fully of open innovation.

Open innovation means you are not alone, and the likelihood is very low that all the good ideas of the world are in-house, they rather are outside. That's why you need to find a way to embrace the technology crowd out there, the ecosystem, and hence, also the decision to go to London with the London digital division to embed ourselves in the global ecosystems of software and digital, much rather than staying in the old telecoms spot.

I thank you for your attention.

Thank you, Christopher. Thank you, ladies and gentlemen.

So far, what we'd like to do is to do a first Q&A session. So I would like to invite our presenters, all of them, to take stage whilst recreating here a little bit [indiscernible], also quickly introduce to the rules of the game in the sense that we'd very much like to have your questions, if possible, focus on the first parts of the presentations.

Please do wait for the microphone. Mention your name and company, that makes it easier for all of us to hear it, also in the webcast.

After we've done the audience here, I also invite the webcast people to ask their questions and we'll move on from there.

With that, we'd like to open the floor for the Q&A, to whom can I give the first question?

Igor, over here. [indiscernible]

Igor Semenov from Deutsche Bank. Can I actually start with Algeria?

Why is the dynamics kind of slow there? And why is CapEx so low, given that you still have a gap with coverage compared to competition?

Why is CapEx so low? Why you're not investing more?

What's going on there?

All right. Maybe I can take the first part of the question.

I think in Algeria, I might have indicated in August that I think we're in a medium to long-term turnaround of the business. The business, I think, whilst it has remained the #1 in Algerian marketplace, needs a profound modernization in terms of its customer focus, its marketing capability, its distribution, so there are many parts of the business that we need to fundamentally reinvest to once again be a effective competitor in the marketplace.

The second dimension is you know of our turnaround plan and where we probably have made more progress is really around the performance and cost transformation of the business. And there, I'd say that we're pretty much on track, as you've seen from the underlying numbers of what we've achieved up to now.

But getting our business right in Algeria is about also addressing still a number of regulatory issues that we have in the marketplace. For example, part of our catch-up in terms of the network rollout is due to the fact that, in fact, it's not an investment issue, it's a regulatory issue.

We do not have the licenses to be able to roll out our networks on a national basis, right. We've just obtained that to be able to roll out the networks in Algeria on a national basis.

So there are still a number of regulatory issues that we need to solve with the Algerian government and we're working and focused ultimately on that, right. So I think it remains very much still a medium-term plan overall for the business in terms of its turnaround.

Do you want to say something more on CapEx outside...

I'll just provide maybe a little more context on the last point you made. So we had, if you like, a nationwide license per se, but what we had within the terms of that license was actually restrictions on the number of reliers that we could reach at the end of each given financial year, which is November for -- in Algeria's particular case, from a fiscal perspective.

So when we started rolling out 3G network in 2014, the restrictions then meant that it was going to take us roughly 3 years to get to coverage across the whole country. Now that's only recently been relaxed, which is why you did see a little bit of an uptick in the CapEx number in Q4 year-on-year.

But you will see somewhat of an acceleration in CapEx in Algeria in 2016 because we're now able, basically, to reach all reliers in the country within 2016, again, with a little bit of regulatory-enforced phasing. But by the end of 2016 versus against the end of 2017, which is our original assumptions, we will be able to get to pretty much nationwide 3G coverage.

So relative to competition, you're now, in terms of this regulatory position, you're now on par?

Yes, we will be on par. Yes, absolutely.

And what I would say is...

On that dimension of regulatory. There are other dimensions of regulatory where we're still not on par with the competition.

Yes. What I would say is in the reliers that we were already present in, in terms of 3G coverage, we have population coverage in those geographies on par or ahead of the competition.

And why is your partnership -- or shareholder structure, rather, is not helping? Having a government as your partner, essentially, why is it not helping you?

Why are you still being handicapped?

Well, we've had a dominant position in the marketplace on one dimension. That's been recognized by the regulator in Algeria.

Secondly, the partnership with the government is a partnership that was really reborn only less than 12 months ago. And so we're tackling each of the issues that remains, and some of these issues take simply time to be tackled.

But we're very much in a partnership with the Algerian government, clearly.

All right. Next question, in front here, Herve.

First row, in the middle.

Questions maybe on Italy. I know it's something you are deconsolidated.

I just wanted to have your view on how do you see some of your competitors' recent move. One, planning to spend more CapEx, for example.

How you see that impacted potentially your plan in Italy? And another one on maybe on the mobile side being -- getting more aggressive while we'll expect some kind of price rationalizations.

I wanted to have your thought on that.

I think on network rollout, what we've seen is certainly Vodafone and Telecom in Italy have accelerated LTE rollout across the country. And right now, the gap is about 30 percentage points of their position versus WIND's position in the marketplace where we've reached about 55%, 56% LTE coverage across the board.

We are not going to accelerate our CapEx plans to catch up. We feel that the current CapEx plans are appropriate.

We don't see any loss of market competitiveness as a result of increased spending by our competitors in the marketplace, and we feel that we continue to be well positioned. And in fact, we saw in the fourth quarter a substantial improvement in, for example, our network NPS across the board in Italy as a result of some of the initiatives that we've taken.

I think on the pricing side, I think the market does remain quite competitive on the mobile front. But what we've seen certainly, as Andrew indicated, is some good momentum that's been building up in our business over the last 3 quarters, and perhaps, you want to add some flavor to that.

Yes. I mean, I think what we see on pricing is 2 vastly different dynamics, and this has been the case for probably 6 quarters now where you see actually headline rates that are available in retail distribution are pretty static, and I'm very rational, right.

So you're talking about EUR 10 to EUR 12 for the 2 gigabyte data package with either unlimited voice and text, on such a large quantity that it makes it practically unlimited. But then what you also see is, maybe every quarter for the 4-week time period, a sporadic breakout with a bit of guerrilla warfare with -- under the radar, off the radar, win back campaigns where people will be offering maybe only EUR 5 or EUR 6 for a 2 gigabyte data package, which is maybe not so rational pricing.

But yes, that patterns kind of -- it ebbs and flows and is not a major issue.

Thank you. All right [indiscernible].

Yes.

Stella Cridge from Barclays. I was wondering if I can ask 2 questions.

The first in relation to the Russian market which obviously clearly still remains the biggest contributor from an EBITDA perspective. I mean obviously, we've had the very sharp decline in oil prices in the last few months.

And I'm just wondering what you're really seeing in Q1 so far in terms of trends in the local market, in terms of competition. And of course, we've seen some pressure push regarding consolidation.

Would something like that makes sense, and from your perspective? and that would be great.

And the second is if you could give us an update on the status of the Russia towers? And how does that actually work for VimpelCom if this was to go through both from a cost perspective going forward?

If there's going to be proceeds from that, how would they be used? And that would be great as well.

Yes, I think what we've seen in the Russian marketplace that, in spite of the ruble devaluation and the economic challenges, our business over the last few quarters has been stabilizing more and more and we've, I think, gained some market position and effectiveness, which for us is already a major milestone compared to 2 or 3 years ago in terms of our performance in Russia. So I'd say so far so good from an economic impact.

The second dimension perhaps to note is the concerns the market had with the entry of Tele2 in Moscow. And we've seen that entry as not very successful ultimately from a general market perspective.

And Moscow remains, as we know, the critical market in Russia where, in fact, we have a leadership position within Moscow and the Moscow region. And within that, in terms of portability, we've been the lowest donor of low-end customers in fact to Tele2.

So I think our marketing position of a focus in fact on bundles, particularly in Moscow, has been highly effective to counter Tele2's entry. So at this stage, to your point, would consolidation makes sense in the Russian marketplace?

Our perspective is that there's no need for consolidation at this stage and the market structure, as it is, is satisfactory to our perspective. So I think I've covered pretty much unless you want to add something on Russia, Andrew?

No. I think in terms of macroeconomics, that's okay.

On towers, I think that what we've articulated as part of our strategy is that we would seek to move towards a more network asset-light model. And 3 dimensions of that strategy are absolutely crucial for us.

The first is that we introduce in our network much more disruptive network technologies than we have in the past or fundamentally look at how we can shift, not only the services, the quality of service, but the cost base of the network, first dimension. Second dimension is that we focus much more on network sharing opportunities where those network sharing opportunities exist.

And hence, the announcements that we've made in Russia. There is no economic rationale to roll out in large geographies networks on a standalone basis in what has become mature marketplaces.

So we think it's a highly effective strategy to basically share different dimensions of the network with one or the other partner in each of our geographies. So we will continue pursuing those opportunities where they exist.

And the third really is a strategy around our tower portfolio. We will seek to dispose of our tower portfolio.

Italy was the first of transactions at the beginning of 2015 and we're actively pursuing a number of transactions across virtually the entire portfolio. Now having said that, we will only undertake transactions at this point in time that create substantial shareholder value.

This is not about selling the portfolio for the sake of selling the portfolio. We're very attached to the economics of the transaction and really the NPV creation for our shareholders as a business.

So at this stage, I think we will be able to pursue a number of transactions. I wouldn't be bullish about pursuing every one of the market transactions, given some of the economic challenges that this marketplace faces.

It's not necessarily the right time in all the markets at this stage to dispose of the tower portfolio. Do you want to talk about treatments?

Yes. I'll pick up on your last comment as well just to emphasize that we're only interested in doing tower transactions with a strategic investor.

I was actually going to run them as tower assets and drive synergies and collocation benefits, et cetera, et cetera. And then -- and that's how we get significant NPV.

I mean, if we're just a financial investor like an expensive form of debt, at the end of the day, just an expensive liquidity play. I think in terms of what we'd look to do with potential tower proceeds, I'm stealing a bit of the thunder from my later presentation, but one of the focus areas is going to be to further diversify away from dollar funding, subject to market pricing, liquidity and tenor.

And so with that, we'd probably look, first of all, to take care of some dollar-denominated debt. But we're quite away from that at the moment.

Next question, please. [indiscernible]

[indiscernible] I just had 2 questions, 1 in Pakistan and kind of 2 small questions on Bangladesh. On Pakistan, could you comment just on the recent reports that your merger is facing a bit of scrutiny from some of the other competitors, I think, namely, Telenor who might be objecting?

And on Bangladesh, I think some merger is taking place there as well. I was just wondering if you could tell us what -- how you think that will impact the market.

And what is behind the difference between the underlying EBITDA that you disclosed in Bangladesh of the transformation? I'm just wondering what those relate to, please.

In Pakistan, as you know, we've announced at the back end of 2015 our intention to merge with Warid. There is a formal regulatory process that we are going through.

The merger will obviously reinforce our leadership position in the marketplace, and obviously, a number of our competitors are being heard during that regulatory process last Friday. In fact, there was a hearing by the regulatory bodies of various competitors in the marketplace to get their perspective of this merger.

I was, in fact, in Pakistan last week, and I think that the government in Pakistan continues to have a very pro-business attitude. We are one of the largest companies and largest investor in Pakistan and we are confident that, that transaction will go through in that marketplace.

And the transaction timeframe is a much reduced transaction timeframe compared to Europe, and we'd expect to be able to close that transaction before the summer timeframe. As to Bangladesh, Bangladesh is seeing a merger between the #3 and #4 in the marketplace.

And I think that we welcome the consolidation process in these marketplaces. I think that when I think of emerging markets, I don't think there's room for 5, 6 potential competitors or even 4, ultimately.

I think the market structure should be around more of 3 or 4 than 4, 5 or 6. So I think whilst we'll see the creation of a stronger competitor, we welcome I think the type of consolidation process overall in those marketplaces.

I'll take the last part of your question on Bangladesh, so the difference between reported and underlying EBITDA. We recognized within the quarter about BDT 1.8 billion of exceptional costs.

Approximately, 2/3 of that relates to a onetime provision for a replacement SIM tax dispute that we've got with the government, as with all our operators in the country have that dispute which goes back to 2005 actually. And then the rest of it is cost specifically related to the performance transformation program.

All right. Next question, please.

[indiscernible]

Roman Arbuzov from UBS. So a question for Christopher.

So you're obviously talking about a very major transformation of the business, and it's clearly very big undertaking. So can you just talk us through what you think are the biggest challenges to executing on that?

Well, as I said on the last chart, it's really the transformation in terms of, first of all, attracting the talent into that. I think it has to do a lot with getting the right people into that digital division.

And the second thing is the clear strategy and shareholder support we have here and on the VimpelCom side. You have to be radical on a transformation.

You cannot go there like most of the operators do today from my perspective and do incremental innovation, talk a lot about it. But in essence, focus on the old networking of the telco core business.

So I think the combination of these 2 things are very clear strategy that we will write a new chapter in this book of telecoms and become a digital operator, then attracting the talent I think is the first ingredient at the moment, I would say.

More questions here or shall we move to the webcast questions? One more up front here.

It's Herve Drouet from HSBC again. Sorry, just on the inflation.

I mean, we see, I mean, relative inflations in emerging markets. I'm trying to get out, I mean, do you see -- I mean, we see, obviously, some stabilizations of the different business.

But do you see more room now to maybe catch up with inflation? Do you think it's too difficult to pass inflation back to the end customers?

I think it really is a market-by-market equation. I don't think that we can generalize.

We have, in Ukraine, very successfully in 2015 done a number of price increases during the year given the inflationary pressures in the marketplace. And these have been successful overall.

In Russia, we've seen that it's more difficult at this stage to pass on this type of inflationary pressure. So I think that our strategy, and what Christopher needs to do in the revenue acceleration plan, that is certainly one dimension that we need to be able to test ultimately market by market.

But we can't be alone, as you know, trying to impose this type of price increases in those marketplace. And that's the fine line that we need to achieve ultimately.

And hopefully, being able to increase our prices without having obviously an exodus of customers as we do that. All right.

But it's got to be one of the pillars in emerging markets and in the environments that we operate in.

Yes. I mean, just a couple more comments from me on that.

So not so much trying to pass on inflationary impact so much. But within similar markets, we've done a lot of work in 2015 on data pricing.

I alluded to some of that in the presentation and we've cleaned up and standardized some of the tariff architecture in countries such as Bangladesh and Pakistan and even Kazakhstan. And in Pakistan, as an example, we've been able to basically double data yields on a per megabyte basis from the end of Q1, early Q2 to Q4.

So there's a lot of emphasis on pricing discipline and pricing analytics than the business.

There's one here [indiscernible].

Alex Balakhnin from Goldman Sachs. Two short questions.

One, you mentioned in the beginning that moving from the local procurement to the global procurement resulted in tremendous savings. If you could share some data points, that would be helpful.

Second, your CapEx last year was pretty much at the low end of your guidance. And this time, you also guided for the relatively low spending.

Does that mean that pretty much across your operations, we're moving into, let's say, structurally lower capital intensity, well, especially given that you probably have some Algerian CapEx cycle hat that sort of leaves even less for places like Russia, Ukraine and Kazakhstan. Just to -- well, I just wanted to know your thought process behind that.

Is that a step to improve your original capital, I mean, a low growth or -- so how do you think, especially given most of the currencies are basically devalued against the currencies in which equipment is priced?

Well, I think that our starting point is that, ultimately, with most of our markets being nongrowth markets today because of the economic challenges and the maturity in terms of mobile penetration, the equation of having CapEx levels at 20% to revenue just don't work ultimately anymore. And the returns on that incremental CapEx are marginal ultimately at best.

So we're doing 2 things, as I talked about. First is that we've got to reinvent the network deployment model to become much more asset-light than we have done in the past.

And our focus on CapEx efficiency is not just about procurement, or it's not just about better prioritization. It's about building things differently than we have done in the past.

Not building out towers necessarily, not building out every component everywhere of the network independently from some of our competitors. So I think that's a major shift and that hasn't yet kicked in, right.

And we see that as a medium-term opportunity, and Yogesh will talk about that in his presentation. But the other dimension is just leveraging our economies of scale.

As I said, less than 10% of our procurement was done on a global basis in 2014. VimpelCom operated in a very independent matter and we think that there are significant opportunities for globalizing our procurement.

So perhaps Alex, not to steal completely all the thunder of your presentation, but maybe you could say a few things about what we've done in the last 6 months around procurement and what the objectives are.

Well, it's pretty simple, what we do. [indiscernible] Ericsson, Nokia, [indiscernible] or Huawei, they operate locally.

And one engineer meets the other engineer and then they overengineer. The consequences that the boxes we deploy get features by features by features specifically for this country.

As they do that, a global product becomes local. And now we're doing exactly the opposite.

We're standardizing across our networks. And as we standardize, we drive complexity out of our networks.

We simplify and we scale the volume. Another good example for that, which I will show later in the presentation is that we identified price differences for the same box across our countries or across our footprint up to 40%.

And ask me now to scale, ask me now to globalize, start to globalize, we're eliminating these price differences.

So fundamentally, I want to drive CapEx efficiency across the business in a much more enhanced manner than what we've done in the past, and I think the opportunity is there to go further than what we've achieved already today, not only from a network point of view, but also from an IT point of view. And Yogesh will talk about the IT perspective where we think that completely reengineering our IT stack will fundamentally cost a lot less than what it's costing us today.

We'll take a final question from the audience here, at the back from the lady, before we move to webcast and then a short break because we have a second Q&A at the end of the session. So I think you had a question, right?

[indiscernible] from Babson Capital. You've given a leverage target for this year of about 1.7x.

Does this include any tower transactions that you might possibly get involved in? And also, one of the revenue drivers you've mentioned, it's driving fixed broadband revenues on fixed mobile convergence.

Could you just tell us what market you'd be focusing on the fixed side because you don't necessarily have big investments on the fixed side in most of the countries that you operate in?

Okay. Andrew, do you want to take the first part?

Yes. We -- So I think you're referring to 2015, not 2016 actually.

So we guided initially at the start of 2015 to a 1.7x net-debt-to-EBITDA ratio. And at that point in time, it was absent any major M&A or any other structural transactions.

So we've actually ended up at 1.4x. Obviously, there's nothing to do with the Italy transaction because that's been deconsolidated anyway.

So hopefully, that answers the first part of that question.

Sorry, we can't hear you.

Target for 2016.

Yes, yes, I know. Yes, we'll address that in the second half.

But yes, there is a target of 2x for 2016.

All right. To the point on the fixed broadband mobile convergence.

I think what we see as an opportunity is twofold. First, in the markets where we operate, mobile is pretty much the platform but more and more middle class, want to be connected at home through a fixed broadband connection.

And so I think that we're going to see exactly what's happened in the West over time in many of these emerging markets, particularly in the major cities where fixed broadband demand is going to increase. The second dimension is in fact that VimpelCom has invested quite substantially in terms of fixed broadband platforms in a number of markets and we've completely undermanaged those platforms and opportunities simply because we defined ourselves in the past as a mobile-centric business.

I think we're defining ourselves much more today than just a mobile centric business, whether it's on the digital operator dimension, or whether it's in terms of what Christopher articulated, not only focusing on mobile and fixed broadband, but different segments across the board. Where we have pretty significant today fixed broadband assets is in fact in some of our major OpCos in Russia, in Italy, in Kazakhstan, and Ukraine, and finally, in Armenia where we have significant footprint, which represents already to-date 3.4 million households that are customers of that footprint.

So I think we want to better leverage that infrastructure and focus on that opportunity at hand.

Thank you and I'll pass it on to the operator of the webcast to take 1 or 2 questions from that before we break.

Two questions from my side, please. Firstly on the dividend payment.

So you've been talking before about getting back to more substantial dividend payments as some of the net leverage goes below 2x and obviously the Italy transaction needs to close for that. You also referred to macro and need for free cash improvement before.

It's a little hard to say whether markets have stabilized, but it looks like a lot of negatives have happened and you have a decent progress on free cash flow. So are you going to review your dividend policy any time soon?

Should we expect some dividends maybe in the second half of this year? And then, secondly, on the digital services on those new things like mobile financial services and music, sports, content, can you share with us what the contribution to your revenue is at the moment and where do you see that as a ballpark number in 2, 3 years?

Andrew, you want to take the dividend side?

Yes. Sure, Ivan.

So I think, clearly, we're thinking very hard around dividend situation and we have an ongoing dialogue with the board around that. From our perspective -- yes, nothing has changed.

So clearly, before we're able to talk more formally and more substantially about resuming a meaningful dividend policy, we absolutely need to ensure that the Italian transaction gets approved and that we can finally and permanently deconsolidate all of that Italian debt. And then we need to see how the rest of this year kind of shapes up from a macroeconomic perspective and see what volatility we have around foreign exchange rates.

But I think that the focus on resuming a meaningful dividend policy is certainly on our agenda, and that certainly is an objective of the management team, and hence, why we're so attached to a variety of initiatives that we've articulated today, particularly on the cost transformation and improvement in cash flow over the course of the next 3 years to be able to sustain a meaningful dividend policy for our investors. The second part of the question, sorry.

Digital potential.

Guidance on the new services.

New services, okay. If you recall, in August, what we've articulated around the strategic framework, was really -- that this needed to lead to substantial cash flow improvement and that we were focused on both EBITDA and cash flow improvements in the short to medium term.

On the revenue side, getting back to a meaningful growth dimension and particularly in new services for the company is really a medium to longer term, obviously, strategy. Today, the digital services still account for very little in our overall revenues.

MFS, Andrew, is roughly what today?

3%, 4%.

Yes, 3%, 4% of our revenues. So it's not yet material.

So what we're building here I think is a platform for potentially returning to growth if the macroeconomic situations of emerging market obviously stabilize or improve over the course of the medium and long term. But what was important today for us is start articulating that message and to demonstrate that we've got a clear vision, that we're putting the talent in place, that we're making the investments, that will take us well beyond connectivity because we think as a business, that's not good enough to return to growth.

Okay. Let's take last question from the webcast before we break.

Can you please comment on the fine settlements?

I didn't hear that. Did you?

No.

Sorry, can you hear me?

Yes.

Perfect. Can you please comment on the fine settlements?

Okay. I think you referred to the prospective settlement in the case of Uzbekistan.

So let me say perhaps a few words about that. As you know, we've disclosed that we have engaged in discussions with both the U.S.

and Dutch authorities over the course of last quarter towards the resolution of the potential liabilities in the ongoing investigation relating to our business in Uzbekistan. Our discussions have resulted, in fact, in us disclosing today a potential prospective set of settlements which remains subject to the approval of authorities and are not going to become final and announced until that time.

What we can also say is that based on this prospective set of settlements, we have previously in our Q3 numbers taken a provision of $900 million. And today in our accounts, we are not making any change to that provision.

All right. Well, with that, I would like to thank you for the first part attending here.

We'll take a break of 20 minutes, so back here at 4:15. And that also applies to people on the webcast.

Back in 20 minutes. Thank you for your time so far.

We have tea, coffee served outside and some opportunity for informal chat. See you back in 20 minutes.

[Break]

Ladies and gentlemen, if you would be so kind to take your seat again, we'd like to continue with the program. Next on the roll is Yogesh Malik, our Chief Technology Officer.

We'd like to invite him to come onstage and to start talking about basically 2 topics, the digital leadership again but then on how we organize it as a company; and secondly, to talk about portfolio and asset optimization [indiscernible].

So good afternoon. I would just like to kind of start by that then I listen to the question, they were mainly around how are we doing with the CapEx.

So I'm going to address that in very much detail.

It's not like we're underinvesting. I will say we are rightfully investing.

That's one. But then let me start with the digital leadership because it's important that we put ourselves into a right perspective.

As Christopher mentioned, we are at a turning point where we need to regain back the customer confidence. Today, the customer is much more closer

[Audio Gap]

to applications or to devices than to us where we have connectivity and we have a lot of data.

So when we talk about digital leadership from a platform perspective, there are 3 types. The first one, we want to make sure that we look at the architecture in a completely new way.

We cannot think about architecture the way

[Audio Gap]

The second one, which we have to embrace, is we cannot just buy technologies anymore. Technology is a differentiator, and we need to own critical parts of the technology ourselves.

And the third one is by far the key. We need to ensure that we can deliver execution.

And execution for me is, as Christopher mentioned, to think alternative, to attract right talent and to deliver.

So let's just go through what do I mean by architecture being thought about in a different manner, I call telecom pitfalls, and there are several of them.

The first pitfall where we had and the reason we stumble and we overinvest is because we are reliant on the vendors and the innovation which is brought by them. Big vendors.

I'm not going to name names, but we are very much reliant on the innovation which is done by the vendors. That's the first one.

Second one, our skills which are inside, they are very much on project management skills, vendor management skills, not really coding, not really development skills.

The third one is we are not looking at products. We are looking at system integrators, and that doesn't take us too far either.

So if you look at the whole telecom model, the reason.

[Audio Gap]

Why we are heavy on CapEx, the reason why we are not close to customer is because our architecture is based on a very, very old way of communicating with a customer. It's not personal [indiscernible]

[Audio Gap]

So when we think about a new age, as Jean-Yves was mentioning, as Christopher were mentioning, we need to change the way we think. And I'll go into the way we are thinking at VimpelCom when we talk about architecture.

We are going to own critical parts of the technology. We are going to be product based.

We are not going to be system integrator based. And we are not going to think locally.

We are going to think globally, which means we can replicate innovation in a much more instant manner.

[Audio Gap]

So if I look at the trends going forward, transaction are going to increase exponentially. If I look at the amount of messages which are going through the service bus or the layer, they are going to multiply by tens, if not hundreds.

As we have more and more financial services like interactions, transactions are going to increase.

[Audio Gap]

Second, we will face a situation where we will be needing to be real time. Today, Uber is real time.

The moment you finish a ride, you get the bill. Though the bill is postpaid because it's a credit card, you get the bill instantly.

If you want to put a surge pricing and there is a lot of traffic, you put a surge pricing. You actually enter 2.1x the price or 1.4x the price.

Hence, it's complete transfer and seeing it's real time. That's the way the world is going.

And third, there's a lot of data, and we need to unlock that potential. The only way we'll be able to do that, if you think architecture in a layered manner.

First, we decouple the infrastructure. And the infrastructure needs to be absolutely elastic.

There is no differentiation. Many of the company, they run on AWS and the infrastructure is totally elastic.

We got to decouple that.

Second, there needs to be a clear differentiation between the data layer and the application layer. It cannot be together in a way messed up because what happens is in the old model, the data was sitting below the application.

What happens with that, if the second application wants to access that data, it becomes impossible. And hence, you cannot serve the customer.

So we want to decouple that in a way that all applications can use the overall data which we are storing.

So these principles, once we take them into our design, we will be able to then make not only a customer proposition which is instant but also which is global.

There are 3 big initiatives which we started on a global basis when it comes to the digital

[Audio Gap]

leadership. The first one is [indiscernible] stack.

[Audio Gap]

For me, it needs to be absolutely flexible. Today, we are heavily dependent on big vendors.

We are unable to delink data and application, and our cost to serve is increasing year-over-year because of the complexity which we have in the system. We want to simplify that not only from the tariffs, not only from the channels but actually from the way we are working with each and every product.

CRM, the future of CRM in my view would be no CRM. CRM needs to change through behavior analytics, which goes straight from order management into the data link.

That is the way we have to see. When we create data links, it needs to be completely ubiquitous, from the interactions in the Internet to the transactions which are happening online.

web, retail and electronic channel.

Third one. We want to really use the real-time analytics.

Because we have a lot of data, we want to harness the potential.

So when I look at these 3 layers in our group, we are doing this across all business units. So it is not -- we are not just switching a BSS stack into a new.

We're not just switching a customer interaction into a new mode, but we are doing all these 3 at the same time across. And that is why I have a firm belief that we'll be able to get to a better model of delivering our services in a much more compelling manner.

OSS and BSS, I'll take a little deep dive in this. Just to give you an example, in Russia, we have 9 billing system instances in -- just in 1 country, while if I look at the Internet companies, they run from 1 instance multiple places.

Respecting the regulation, using open source like Cassandra to be able to handle data privacy at the same time have a very, very high processing power, that is what we want to bring in, the new BSS environment.

We are doing this initiative across 11 countries right now. And what -- by this, we will come closer to the customer.

The costs will significantly drop down. And when we operate, we will operate on the same core base across countries.

So we don't need to have multiple teams managing each country. We can do that in a much more streamlined manner, much more seamless manner.

So we will have development centers, operation centers which can do multiple geographies at the same time. That's the next generation of the model in BSS, the way we see going forward.

I've talked a lot about data, but let's go a little bit deeper in that. We have a lot of data, but we haven't harnessed the full potential yet.

We have a lot of data where customer profile can be done. Today, our customer profile is very much, I'm talking about the whole industry, is very much at the gigabyte level.

We are not going below to see what is a profile, where do I go and how do I get my gigabyte at the reasonable price? How can I dynamically access the network capacity and adjust my pricing as well?

We are not going there. We are actually just having network capacity done on a mass basis.

So we are changing that principle.

The second one is how do we optimize network investment where the high-value subscribers are, where high-value usage is at the same time that we are eliminating investments where we don't really have usage of the network.

Third one, we would be able to tailor and personalize services with the data we have.

So if I look at these dimensions, we are going to become much more effective. At the same time, we'll come closer to the customer.

But as I say, every strategy, every plan is a plan until you really have the tools to execute it. So I just want to go through 2 slides where I'll show you how we ensure that the execution is on track.

The first one is talent, and Christopher mentioned this very, very right, to attract the right talent. We have refurbished the whole team or revamped the whole team.

At the headquarter in Amsterdam, we have skills which are superior. We have skills which have come from different industries.

For example, our digital enablement head, he used to be the CTO of NASDAQ in the U.S., and we are acquiring those kind of skills to work with us right now.

The same with the business units. We have looked at the complete CTO minus 1 and CTO minus 2 layers, and we have refurbished all the skills and we have attracted talent which is savvy not only in partner management but actually enabling coding in the countries.

Second one. As we mentioned before, that we are establishing office in London.

At the same time, we are establishing a development center so that we can code, and we are able to then own that technology ourselves.

[Audio Gap]

This ramp-up is happening as we speak, and our view is that by mid this year, we should be able to completely finish the ramp-up and we should be able to code ourselves.

So that was on the digital. So you can at least see the way we are thinking, what we are doing and what are the plans which are coming

ahead of us.

[Audio Gap]

Now when I go to the portfolio and asset-lite strategy, if I may, the first one is the question on CapEx. And I'll dwell into that.

It's important that we do not see networks as full stack of networks in each location. The same like BSS.

We don't need to have full stack of network in every country. And we want to move away from there and go to a next-generation operating model.

With virtualization coming, we should be able to get more and more core operations from a central place, respecting again the data privacy and data regulations of the countries.

The second one is when we talk about CapEx, we don't talk about am I investing more than my competition or less? I think the question we ask ourselves is, am I doing the right things?

Am I investing money into the right initiatives? And those are on IT.

Those are on active sharing. Those are on carrier aggregation.

Those are not in civil works because that we can share completely. Networks, we can consolidate.

So hence, when we talk about CapEx, we want to talk about right investments without losing any market leverage but be able to generate more cash flow.

And the last one, which is actually very tough, is a structural OpEx reduction. And I will go through concrete examples on how we are doing that because it's almost lowering a bar.

The structural OpEx is fixed. So how do we take that down?

So as I mentioned, our next-generation operating model, and I gave an example of Russia, we have a lot of NOCs, network operating centers. We are going to consolidate them, and we will make sure that it can be operated in a very lean manner.

The outage time will reduce. The response time will be much faster.

And at the same time, it would cost much less.

CapEx, there are 3 things. First, are we investing into the right things?

We discussed that. Second, we need to share much more because we truly believe that network sharing can unleash a new potential.

And third one when it comes to CapEx is to really have the right prioritization. And Alex will talk a lot more about procurement, but actually in the countries where we are having currency risk, we are able and we have negotiated with our partners in a way that the currency risk is shared, so which means we are not paying in U.S.

dollars when it comes to OpEx, we are paying in local currency, and that's a very big differentiator when it comes to the EBITDA.

I'm going to talk about sharing. I want to go beyond active sharing.

We talked infrastructure sharing. There's a lot of fiber in many of our countries.

There are a lot of fiber to the sites. And if we can really leave -- unleash the potential of sharing, what we see when we did with MTS for LTE for the 37 regions, when we did with MegaFon just lately, we can replicate the same in different territories where we are allowed to share by the regulation.

And actually, where we are not allowed yet to share, we are consulting the regulators in a proper manner so that we can allow network sharing, passive and active, both. And when we talk about sharing, we want to go towards full consolidation because that's where you'll remove all the duplicated assets and you create one network which is much, much more powerful and cost effective to run.

And we have partners in different countries. I'm not going to go into detail right now.

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Where we are much ahead in our discussions and they see that there is a potential.

On tower, I still remember 20 years ago when I used to plan networks. Tower was an asset.

Not really. Okay, we built a tower.

Alleluia.

[Audio Gap]

Let's see that. But now what we see when you travel, that there are 3 towers next to each other.

Tower monetization. And as Andrew mentioned, to have a professional strategic investor, industrial investor to run that passive infrastructure, we believe, can unleash a new potential for us.

We've done that in Italy, and we are systematically studying this and we are going into that direction. Because at the end of the day, we want to invest where we can make a difference towards the customer.

Structural OpEx. Of course, U.S.

dollar has gained a lot. Russian ruble, Ukrainian hryvnia, Algerian dinar, they have dropped.

So of course, you can say that in dollar, your structural OpEx looks better.

But if I leave that FX element alone, the run rate on the local currency, how are we doing on the structural OpEx? I'll show you 3 initiatives.

First one is in Russia, where we went site by site to all the sites renegotiating the rental agreements.

Second one, in Pakistan. And if you know, in Pakistan, the biggest P&L item which is being affected is transportation and fuel.

If you know how to manage the fuel properly, you can really manage your EBITDA in a better way.

And the third one, in Algeria, where we have in-sourced certain things.

And these steps are just the first steps, but I just want to demonstrate that working together with our teams on the ground, concretely addressing these points, we are able to take wastage out of the system.

In Russia, in spite of increase of sites, and you can see that here there's an increase of sites of 7%, the rent actually -- average rental dropped by 3%. And this was only possible because we could go site by site, convert some sites who used to have a U.S.

dollar rental into local rental and then go and see if the landlord is able to renegotiate the lease. And in most of the cases, they were because we had an alternative to that.

But this took quite a lot of effort from the team.

Pakistan. And I'm not going to go through each and every column.

I would just say focus on the fuel consumption in millions of liters. You can see that we have reduced fuel consumption by 30%.

[Audio Gap]

And the reason for that is very tight fuel management, modernization of the equipment and really have a local team which is fully empowered to manage that on a daily basis. And actually, this work

[Audio Gap]

though hard and -- on the ground it is, it's yielding a lot of value on the P&L right now.

In Algeria, we realize we had multiple layers before the maintenance of the site was done. We have cleaned that up.

We have in-sourced a lot. So by doing that systematically, what we believe is we can become much more cost effective in our network maintenance as well.

These initiatives, they are just the first one. Alex will mention more.

But what we are heading towards is every structural operational initiative which we take, we want to see it through the end. So in the country like Pakistan, now we are going to the next level where we are modernizing even more within the CapEx targets we have, and we are going to make it even more effective.

As we move into operation of network, we believe that no reason of duplicating skill sets across countries and, we think, vendor and us. So those are other initiatives which we are taking.

Okay? That's it from my side.

And I introduce Alex now?

Thank you, Yogesh. So hello, everybody.

We talked about -- Alex talked about performance transformation quite a lot. And as you see, it's already reflecting in the numbers.

And I would like to walk you now through greater detail what is the performance transformation all about.

So we also talked about that we will create the next generation of an operating model, that the old operating model of the way how the telcos operated are old fashioned and not working anymore.

For you, my background is 15 years in the automotive industry. As you know, this is by far the leanest industry in the world.

And then I was with Nokia and was leading there the transformation.

Having said this, we will transform VimpelCom. VimpelCom as of today is not better or worse than most of the operators.

So we are average. And I'm going to show you many examples, which are eye catching, which you will recognize that how much potential this company has.

Number one designing principle, we're going to save and we're going to reinvest. Overall, our aspiration is to drive $750 million cash improvement.

And how do we do it? We don't do that centralized because that will not work.

You need to have local management to take the ownership and to execute.

the new or the next generation of the operating model, procurement and supply chain, and this is across each and every OpCo, no exception as well as the headquarter.

So let's go to the next-generation operating model based on the designing principles are simplification, digitalization and globalization. We have 5 elements.

One is we move to shared service center activities. We will create or we are creating already center of excellence.

We renew our managed service approach, as mentioned from Yogesh as well as we transform our call centers and contact centers as well as we're going to lean our headquarter in Amsterdam accordingly.

So what we going to do? Today, VimpelCom consists of 14, more or less, very independent operators.

The Amsterdam headquarter as of today, or was driven in the last

[Audio Gap]

10 years, more or less was an administrative oversight. We will lean the headquarter, as mentioned.

I will give you some examples later on. And we have a patchwork of

[Audio Gap]

local competences. In one or the other OpCos, we have brilliant talents, but we've been unable or VimpelCom was, at that time, unable to scale, to duplicate or replicate this know-how from one OpCo to the other.

So shared services, something which is a commodity product in most of the industries. In the telco industry, it isn't.

We have a wide range of non-standardized processes. Each and every OpCo suboptimize themselves.

And we're going to standardize them and consolidate them. We have almost none automation in the processes, which is somehow ridiculous.

The industry talks about digitalization

[Audio Gap]

and we are not digital ourself. We will lean and automate these processes.

We have a very fragmented operating. And as mentioned

[Audio Gap]

we are moving it within our footprint to a global operating model.

Center of excellence, quite often mentioned. Skill set of our people is required to get to the next level.

And we truly have to say, as mentioned, we're working today out of local pockets, and we will create via the center of excellence global expertise.

We have very limited knowledge sharing. So there was a great CEO of Siemens who used to say if Siemens knows what Siemens knows, because they didn't communicate, we will change that by installing center of excellence.

And where are we going to today or when we started the exercise, we had 0. Tomorrow, we will have 15 and most of them are already on their way.

Managed service. It's country based.

And again, very old fashioned. OTT today does not think in borders.

They respect the local law, the regulations, but they don't think in borders. Our industry stopped thinking, let's say, at the Armenian border and start thinking again at the border of Georgia.

We will work cross-border.

We're network centric. So it's very technical.

What does network centric means? Very simple.

The KPIs or the SLAs, we agree with our vendors, will help us to improve our network, are based on technical KPIs. But the network itself should serve the subscriber.

So we need to change our style in being a service-orientated managed service activity.

And we have multiple network operation centers, so-called NOCs, as Yogesh mentioned, within a country. Again, no standardization, thousand of different tools and we will simplify and consolidate those.

Contact centers. From a call center to a contact center, we have almost 0 big data analytics.

And big data is which helps you to drive simplification.

Christopher spoke about many different tariffs we have. The contact point as of today for most of the operators is the call center.

So a call comes in. You hopefully get the service.

And hopefully, the subscriber's happy. But the big data analytics gives us an understanding which subscriber calls, which tariff he signed in and what makes a tariff complex for the subscriber.

And out of these analytics, we can simplify the tariffs as well as we can give a better service.

So obviously, as we have 14 different OpCos, we have a silo

[Audio Gap]

view. No experience changing -- sharing.

Best-in-class approach among all the call centers we have, we even don't do.

[Audio Gap]

We are moving to first contact resolution. Again, having said this, this is very black and white what I present you.

But I can assure you VimpelCom is no better, no worse than the average operator around the world. We have no standardized call centers, and we have more than 40 call centers across our footprint if you.

[Audio Gap]

Consider the outsourced ones as well. And we are truly going into a standardized best-in-class approach.

Just to give you a bit of a vision what the operating model is. And there was nothing highly sophisticated, it is fixing the basics what other industry -- industries have done a long time back.

Procurement. We spoke about procurement.

Let me give you a bit of an insight.

[Audio Gap]

Take the example of VimpelCom again. We have a local vendor strategy.

If you really want to scale, you need a footprint vendor strategy, which is also for the vendor on the other side beneficial because the vendor, as we are, have to take costs out. And if we enable the vendor to scale as well, he can serve us better and to give us obviously better pricing.

So it's a given and a take. So we're moving to a global vendor strategy or agreement.

As mentioned before from Yogesh as well as from Christopher, the Venice [ph] controllers. We have a call center, we have a tariff, we have a network, and we have no clue about software.

Innovation without being blind in one eye to develop ourself is quite difficult. We need to get control of the vendor [ph].

That does not mean that we are dictators, no. It means that we have knowledge ourself, and that means that we know exactly what the vendor does, and then we can control him better that he really does what we want him to do.

We have a very traditional approach. And the word traditional is actually, if you look at this building with all the nice, old books, strange because this industry only exists for 25 years, but we have 1 tradition since year 1.

There was no destructive movement among all the operators I know. And we approach innovation.

Actually, we're expecting this from the vendors we work with, and we also will introduce destructive vendors to our networks.

Procurement. As I mentioned before, Jean-Yves politely preached me that I'm not presenting, already doing the Q&A my entire presentation.

As we made a simple scan of the prices we have, we identified, and this is not one case, hundreds of cases, up to 40% price difference for the same product. Obviously, we will go for the same price across all OpCos.

We have less than 10%. Actually, it's less than 5% global when we started, and we are moving to 70% and we are already on a very good way.

As we started the journey of performance transformation, we faced 30% ForEx exposure, and we're moving to 10%. Again, what we're doing here is nothing highly sophisticated.

It is fix the basic. But a lot of other industries have done already 15 years back.

So we did a Vendor Day, and we convinced via proactive -- the active dialogue that we have to change our relationship to our vendors. So from a local vendor relationship, we moved up to 26 relationships with major vendors with a global agreement.

We had no global price books. So Armenia to Russia, Russia to Italy with no visualization, who's paying what for what?

Again, this is not specific for VimpelCom. This is telco average.

We agreed, in the meantime, for most of the major vendors global price books completely transparent. Local vendors, they define the terms and conditions.

If you want to buy from me in Ukraine, you pay in dollars. If you want to buy with me in Russia, 30 days payment terms.

Again, as you hear, black and white to make a bigger visualization, but we changed it to best-in-class and completely compliant.

Let's go to supply chain. Great word.

At one stage, invented by a consultant and sold many times. When we as a telco talk about supply chain, this is not really the truth.

This industry has really no clue what supply chain is. And again, VimpelCom is not better or worse than the others.

We actually in this industry operate with logistic procedures.

Let me give you here a bit of an insight. We have a budget-driven ordering.

What does it mean? We are a civil service company, as most of the telcos.

At the end of the year, I have budget left. Let's spend it for some CapEx.

Yogesh mentioned that before, we do smart CapEx. We allocate the CapEx to that what we need, and we don't spend what we budgeted.

Demand driven. We have a manual planning.

We go to a system-based planning. Again, nothing specific.

Automotive industry did this already 15 years back. 40% of the deliveries we are having are on time, industry standard.

That means, here's waste. You have a subcontractor who installs stuff for you at the tower, at the box.

And they go to the tower. There are 6 people standing.

They open up the boxes and 40% of the material is there, what they need. What they do?

They go home. And then they go back to the tower.

This is poor waste. Automotive industry standard is 99.99%.

We will move to 95%, and we are already on a good way.

We have more than 150 warehouses in our footprint. We go down to 50, which is still a lot but we need to go step-by-step.

Today, we have 180 days stock in the warehouse. Not really a stock revolution, we will half of that.

And we only update what we have in the stock every 3 months. And obviously, in our environment in the digital world, we need to do that real time.

So now I showed you a lot of things. [indiscernible] And you've been, I assume, in hundreds of meetings with telco, and they all told you they have a great program and it will succeed.

And at the end of the day, what happened? Why do we believe that we will succeed where the others failed?

Very simple. We have one global PMO, project management office, with satellites in each and every OpCo already installed.

Every initiative we agree on is based on a business case. If the business case does not fly, we just don't follow up.

Every business case is linked to the P&L, and every business case is validated by a 4-eye principle. So the organization I work with hands over the business case to finance, to Andrew, and if they can do the link to the P&L, they check mark.

If they don't, they don't agree, and the teams have to rework or we forget about it. The good thing about this designing principle is you identify immediately overlaps from business cases who are addressing the same cost centers.

What else do we do differently? Every OpCo is reviewed on a monthly base.

Every global initiative is reviewed on a monthly base. Every local initiative is reviewed monthly, because the program consists on global and on local initiatives.

Reviews held locally. In other words, I'm Mr.

Miles & More in the company. I'm flying to each and every OpCo almost every month.

So what else is different? What is the biggest differentiator we have?

We have one -- every initiative is tracked in one project management tool. We have installed a tool across the entire footprint.

Every initiative is linked to structural KPIs. I give you a bit of an insight what a structural KPI is later on as well as the financial KPIs.

So everything is monitored. Weekly progress update and a monthly reconciliation of the impact is done by Andrew.

What else did we do? We installed 150 people across our footprint, who are doing nothing else than performance transformation.

We have already more than 1,200 transformation measures in the one tool, with more than 1,700 trackable

[Audio Gap]

And every action has a owner. And the owner is not one of the performance transformation team.

It is one person who's responsible for the execution of day-to-day business.

[Audio Gap]

So now we created something else, which is quite unique in the industry. We created a so-called one big data mining tool.

Now we come to structured KPIs. We can measure on a monthly base how many layers each and every organization has, even down to the departments.

We are able to

[Audio Gap]

Line manager on average per week asked his team to create 10 PowerPoints. Let's assume if they work 50 weeks a year, you come up to 2,500 PowerPoints.

As more micro -- or as more managers you have, you have the multiple of all the PowerPoints. Now can you imagine that a company consists of micro-teams where one line manager has not more than 3 direct reports?

And what administrational work this line manager creates across the entire organization? Poor waste.

It eliminates agility, and it slows down the decision-making process.

We measure the span of control, on a monthly base, each and every organization. We even can measure now is somebody booking in advance when he does a business trip or not.

And on top of that, we can do the ticket travel as well as the desk share ratio.

Let me give you some examples. Why do we need this big data tool?

And what is the differentiator? This big data tool gives the fuel for a methodology, which is called structural KPIs.

I give you now 3 very simple examples. Usually, every person in a company has one desk.

The question is, do the person needs the desk, yes or no? Most of the people are on a road trip.

So the desk is empty. If you increase the desk share ratio to 1.4 person per desk, our need for office space is reduced by 25%.

[Audio Gap]

Are waste. In other words, by consequently, tracking this, and we are doing it, we will reduce 25% of our office space, which reduce, obviously, the OpEx quite dramatically.

And again, this is nothing quite sophisticated, but you need to have the tool into place, the governance into place, the project management into place and the tracking to do it.

Let me give you another example. We have within our footprint 3,300 micro-teams.

Please remember the amount of PowerPoints every manager creates. So we talk about millions and millions of PowerPoints.

And we have a span of control up to 9. What does 9 means?

you want to have a decision, in some decision-making processes, you need to pass 9 levels of management. Some are ill, some are on vacation.

The next one creates a PowerPoint. It takes you up to a year to get a decision.

Again, VimpelCom is not better or worse than most of the telcos. Our aspiration is down to 300 micro-teams and a span of control of 6 to maximum.

And the result is not the cost we take out. The real result is we become agile, we become lean as well as we reduce the amount of managers, the best talent stays so we upgrade the organization.

And that is the real benefit. So we become more than an OTT as a telco player.

So let me share with you the last example. Typical procurement goes and makes an agreement with an airline, and the airline then gives you back 10% of the spend you had at the end of the year.

This is so old-fashioned thinking. Because if you book a trip 3 days before you fly, it is usually up to 30% more costly than you book the same trip 2 weeks in advance.

if you do your vacation, you do that. In business life, people stop thinking about it.

Company is paying. So just by changing this behavior, you make people more cost sensitive, you change the culture and you reduce cost.

And again, this is a normal behavior. But I can assure you, as many industries are worked, it's a long process to make the people think about it, but it can be

[Audio Gap]

Will take place after the wire. Up to 25% actually.

From my experience, it's 30%. However, you see whatever we touch is not highly sophisticated.

It is basic things. We have an organization in place, which secures execution, and we have in each and every OpCo local champions.

And that's the reason why we are completely convinced with all the tools, with all the management, with all the activities we do, that we will change our operating model to the next generation, and that we will succeed where others failed.

Thank you very much. And Andrew's second round.

Okay. Thank you, Alex.

So I'm going to talk 2 things to finish off the day here. I'm going to talk about structural improvements and initiatives.

And then we're going to do a little bit of a change of gears and rubber hitting road and talk about what all of this means in terms of our progress towards our $750 million of annualized sustainable cash flow improvements and what specifically on the targets that we're expecting to achieve in 2016.

So first of all, on structural improvements. So I think you all recognize that we've accomplished a huge amount over the last 2 years.

At the top of the chart, we have what I would describe as the deleveraging or major liquidity type of activities. And then on the bottom of the chart, we've got kind of refinancing and things that we've done to optimize the cost and the risk management within the capital structure.

the Algeria transaction in -- early in 2015 for -- which freed up roughly $3.8 billion of cash to have towards headquarters; Italian tower sale for in excess of $700 million in Q1 of '15 as well; and then, obviously, in August, the announcement of the JV in Italy with Hutch and the subsequent deconsolidation of Italy from the consolidated financials.

On the bottom part of the chart, just focusing on what we've done in 2015. Very, very busy time period in the first quarter of the year, where we were focused on using the Algerian proceeds to execute a $1.8 billion bond tender in Russia, and then an exercise on ruble bonds that were coming due in the first quarter.

And then we capped off 12 months' worth of major refinancing of the Italian business with the third phase of that activity, which was very, very successful. And then towards the latter half of the year, we've been very much focused on, if you like, derisking some parts of the debt structure, and I'll show you the impact of that in a little while, where we've refinanced roughly RUB 40 billion worth of ruble debt -- or debt in Russia via a combination of different facilities.

So again, just a reminder of the impact of all of this on net debt levels and leverage. So across the 2 years, we've actually done in excess of $26 billion worth of refinancing activities, which is a stunning amount for an industrial company to embark upon.

And we've reduced net debt to now $5.5 billion at the end of 2015, with a leverage ratio of 1.4x.

So on debt optimization. So on a pro forma basis, gross debt at the end of 2014, excluding Italy, was $12.9 billion.

That is reduced to $9.5 billion over the course of 2015. The largest significant thing there, obviously, was the dollar bond tender discussed earlier in Russia in the first quarter.

You will see that within that debt portfolio, we've reduced the dollar debt by $2.5 billion year-on-year, and that was mainly the dollar bond tender in Russia. And if we hadn't had done that, basically we'd have been -- we would've ended up this year with nearly all of our debt as dollar denominated, which would not have been a good situation at all.

So the fact that we've -- in doing so, we've refinanced, and specifically in Russia, locally using slightly higher cost of debt, which means that the average cost of debt's gone up from 7.1% to 7.3%. But from an overall economic perspective and a risk management perspective, it's been a really, really beneficial exercise for us.

And the annualized run rate savings that we get from the deleveraging from end of '14 to end of '15 is in excess of $200 million of interest savings. And that's in addition to the in excess of $500 million of interest savings that we've generated in Italy from 3 rounds of refinancing of that asset over a 12-month time period.

So from a liquidity perspective, we're in a very, very good position at the moment. We have $4 billion of cash on the balance sheet

[Audio Gap]

2/3 of which is dollar-denominated, primarily located in Amsterdam. And then in addition, we've got another $4 billion worth of unused facilities available to us at different parts within the group.

So from an overall liquidity management perspective right now, we're in a very, very robust position.

So that talks about what we've done over the last year in particular. Let me focus on our main priority areas for 2016.

So our #1 priority -- and not just from a capital structure perspective, but probably the #1 business priority, is to actually get the Italian JV approved and to permanently be able to deconsolidate the debt. But also go -- step into that JV, which is going to be a significant benefit, as we said in August, to Italian business, Italian consumers and is a very value accretive transaction in its own right.

I mean, we talked about $5 billion of NPV in terms of the synergies and the EUR 700 million annualized run rate of synergies. Secondly, we want to focus on refinancing the GTH shareholder loan.

Third, we want to focus on improving the ability to upstream cash to headquarters in many different ways. And then fourth, from a capital structure perspective, we want to move towards -- further towards local debt structures and trying to derisk the balance sheet away from dollar-denominated debt, subject obviously, to the availability in the market in terms of liquidity, pricing and tenor.

And then within kind of the capital allocation side of things, we've developed a very, very robust framework where -- which we are deploying across the group where we look at all uses of capital, using very rigorous consistent criteria whether that's, if you like, organic CapEx or M&A-type activities. So we're rolling that out.

As Yogesh has already mentioned, we're very focused on supporting the move towards an asset-light strategy and driving towers transactions, which are genuinely value accretive and not just simple liquidity plays. And then, we want to be able to create the flexibility to reinvest in some of the growth initiatives that Yogesh and Christopher talked about.

And all of this is done fundamentally with one main purpose, which is, paving the way -- somebody discussed earlier, towards resuming a meaningful dividend policy. I want to be clear.

And it's just -- not just the focus within capital allocation that [indiscernible]. Everything that we've talked about today, I mean, the main purpose is getting this company in shape to be able to pay a meaningful dividend going forward.

So let's talk about progress towards the $750 million worth of cash flow improvements. So -- here, we've made big strides towards that in 2015 mainly, or almost exclusively, in the area of CapEx efficiency.

So we've taken 2.8 percentage points out of the CapEx. The revenue ratio has gone from 21% in 2014 to 18.2% in 2015.

And let me stress to you, there's no shortcuts in that. And there's no hitting a number just for the sake of hitting a number.

We've done all the network deployment and all the network modernization that we sought to achieve through the year. And the way in which we've got the CapEx savings is, as Yogesh and Alex have already mentioned, is a combination of procurement synergies, network sharing, moving away from hard currencies towards either soft currencies.

We're certainly getting into a risk/reward mechanism on ForEx with some of our vendors; more intelligent network design, as Yogesh alluded to; and then, yes, candidly being more rigorous and more disciplined on capital decision-making and being very focused on NPVs and IRRs.

In 2016, we expect that we will generate an incremental $100 million to $200 million of annualized cash flow savings, and that we'll exit 2016 with an accumulative annual improvement number of -- in excess of $500 million, which will put us significantly above 50% of the way towards our $750 million annual cash flow improvement target, which was for a 3-year time period, if you recall. Now for clarity within that, again, a reminder of what I said earlier.

We've incurred $150 million worth of transformation costs, which is within the exceptional items in 2015. And we expect to incur additional costs in 2016 of up to a further $250 million, okay?

So if I move onto the final slide for the day, which is guidance and the targets for 2016. Before I talk about 2016, let's just kind of reflect on 2015.

So as Jean-Yves mentioned right at the start of the day, we've achieved against every single target that we gave for 2015. And in most instances, where we gave a range, we were actually much, much towards the better end of the range, particularly on CapEx to revenue ratio again.

So 2015, we actually delivered what we said we'd deliver, right? So that gives us a lot of confidence that we're going to be able to deliver on the 2016 numbers.

Before I talk about the 2016 numbers, let me just be clear on the basis on which they're made. Actually, they're all organic numbers.

They assume no major regulatory changes, with the exception of the discussion I'm going to have on leverage. It doesn't include the impact of any major M&A or other structural-type transaction.

And it's all on an organic basis, assuming constant currencies.

So what are we targeting? So service revenue, we think it's a year where we return to growth, right?

So we're targeting flat to up to single-digit organic growth year-on-year. EBITDA margins, we're expecting to be stable to 1 percentage point of year-on-year accretion.

CapEx to revenue, we think we'll continue to make progress, maybe get up to a point better than we were in 2015. But we certainly expect to be within a 17% to 18% CapEx to revenue range.

And that then, those 2 things combined, will see our operating cash flow margins increase from roughly 22.5% in 2015 by a further 2 percentage points. And then leverage.

We expect leverage for the year to go from roughly 1.4x at the end of 2015 to about 2x at the end of 2016.

So first of all -- and I'll do these in kind of order of priority. First of all, as Jean-Yves mentioned earlier, we are -- we have reached a prospective settlement with regard to the Uzbekistan investigation.

And if you were to assume that the settlement was for the full value of the provision that we've made of $900 million, I mean, that's going to add 1/4 turn to the leverage ratio. Because obviously, the provision right now, just sits in short-term liabilities in the balance sheet, it's not part of net debt at the moment.

So as we pay out that settlement, whenever it will be, that could increase the leverage ratio by up to 1/4 of a turn.

Secondly, as we've announced earlier in December time period, we have reached agreement for a JV with Warid in Pakistan. Again, as we pointed out at that time, that's -- well, that would see us absorb roughly $0.5 billion worth of debt into the group.

And that's going to increase the leverage ratio by another roughly 0.2 of a turn.

And then secondly -- thirdly, we are expecting that foreign exchange environment will continue to give us some headwinds in 2016, and that's going to see the absolute level of dollar EBITDA probably reduce slightly year-on-year, notwithstanding what I said earlier about the organic improvement in EBITDA margins.

So I take all those 3 things together and that's kind of what gets us from a 1.4x ratio to a 2x ratio roughly at the end of 2016. And obviously, majorly implicit within that is also the fact that we will get approval for the Italian JV with Hutch, and that, that asset will be permanently deconsolidated.

Hopefully, that's clear on the -- how you walk from the leverage ratio at the end of '15 to what we expect at the end of '16.

So with that, that concludes the presentations for today, and I'll now invite my colleagues to rejoin me on stage for our final Q&A session.

Thank you, Andrew. Take a seat.

Let me get my notepad.

Very good. Okay.

So I think we're all set. Let's see, to whom can I give the first question in this session.

Igor?

Can I ask what's the time frame for the transformation project? How many years you think it will take?

I think that the -- I take 2 views on it. The performance transformation, that Alex is leading.

As you can see, it's far-reaching. I think that there'll be 2 stages to the program.

The first stage, really, is what we're articulating here over a 3-year period, which I think, will get our business to much more world-class type of operations and will deliver on the $750 million cash flow improvement. I think there'll be a second step beyond that when we really see the full effects of globalization, digitalization, simplification of the business.

So it's really a 2-step program. And obviously, the first I mentioned is the one that we articulated back in August.

And you can see the work that's been done is very significant in the last 6 months to make this a reality. And it's not just incremental cost cutting here and there.

It's a profound change in the overall operating model. I think on the revenue front, it's also a 2-stage program, right?

And as Andrew and I have articulated, our #1 objective is really to return VimpelCom to a meaningful dividend policy and, hence, the whole transformation program is really the underlying foundation to be able to presume that meaningful dividend policy. But we've got to think beyond that in terms of both profitability and cash flow growth and, hence, the revenue dimension is really critical.

And I see a 2-stage process there again: sort of a medium-term one around the adjacent telecoms revenue initiatives that Christopher has just embarked on. And what we're doing is that we're taking exactly the same type of program structure that has already proven itself in a number of months at VimpelCom around cost transformation, and we're going to apply that to revenue transformation.

All right? And then I think there's a digital piece beyond that.

And I don't think that we're going to see significant material impact on the digital piece in the short to medium term. That's really taking us to the next level over the medium to long term.

I think we've got real traction around MFS and that's an area that we're fast globalizing around the business. But we will take time to see, I think, areas of entertainment and others that Christopher has articulated.

So there, again, I think it's a 2-stage process for the business. So we're on full-blown transformation and reinventing, I think, VimpelCom over the course of 3 to 5 years.

And the first year was 2015, right?

Yes.

So I guess, my question was, so how do you think about the restructuring cost for 2017? So what's the total cost of the transformation projects, the $150 million last year, $250 million this year.

What's 2017?

Look, I think that a significant part of the restructuring costs will be incurred in 2016, but I think we'll

[Audio Gap]

As we go into 2017, particularly as we do the restructuring of our IT systems and other dimensions, which -- I think 2016 is about designing that transformation. 2017 will be about implementing the IT transformation and there -- that we could think of further restructuring costs.

I don't know if you want to give a different perspective to that or add...

No, not really a different perspective. I'd give some color on the $250 million estimate for 2016.

So the major thing to say is, I wouldn't think of them all as being cash costs in the year. I think there's going to be a fair amount of that cost, which is related, as kind of Alex alluded to, to vacating premises.

We're going to significantly reduce our space requirements over this year. And we think that will mean that we have to vacate completely some leasehold premises.

And there, we're going to have to make provisions for all the future leasehold costs until the expiry of the lease. So there'll be some cash costs in the year.

But there'd be a fair chunk of that $250 million, which would be cash costs in '17 and '18, et cetera.

Can I ask one more question? Sorry, Yogesh, when you talked about the new architecture principles, but at the same time, you also try to partner with other players, share a lot of infrastructure.

When you talk to MTS, MegaFon and other partners in other parts of the world, are you in agreement on how you see all these things and what, evolving?

No, no. I think what we see right now when we are talking to various partners is there is also a thinking on the network and infrastructure layer.

And there is also a thinking, which has developed in some partners or some operators and some are yet on the way, that the main differentiation will lie on the IT side and the operating model side. On network layers of 2G, 3G, 4G, in the future, 5G, that would not be the only differentiator.

The key differentiating parts would be IT, would be customer data, would be technologies which are allowed to communicate to the customer in a much more friendly manner.

Well, I think it's fair to say that in most of the emerging markets, I think we're at the forefront of that type of strategic thinking. And I think we're taking a very new model to these markets, because we fundamentally think that the models of the past, as I said, are not going to make our success in the future.

So we've got to profoundly rethink and, hence, why -- it's a journey also in terms of the number of network sharing-type arrangements that we can announce. As Yogesh mentioned, we're in multiple discussions.

And hopefully, over the course of 2016, we'll be able to announce some of those arrangements.

Very good. Next question, please?

The lady in V-neck. Okay.

You're second. Go ahead.

I have a question for Andrew, please. Just looking at the capital structure and capital allocation priorities, could you please elaborate more on a couple of them?

In particular what are the milestones? For example, for closing Italy transaction, the main milestone would be approval.

For refinancing at GTH, what is the main milestone is there? And perhaps you could give -- maybe you could give us a bit more on timing.

And improving cash flow -- cash upstream, are there any particular OpCos that you had in mind there? For example, like in Russia, there are no issues with sub-streaming.

In the Kazakhstan, you have recently resolved the issue. In Ukraine, there could be regulated constraints.

Just a bit more detail in there, okay?

Yes, sure. Well, I think the first one is relatively simple.

So in Italy, yes, I mean, all we're waiting for is EC approval. And it is that binary.

With regards to the GTH refinancing, so we've been looking at this for quite some time now. And in the latter part of last year, we were exploring 2 main avenues for refinancing, if you will: Firstly, we were exploring some debt -- some bank facilities from the Gulf states or maybe some Gulf-state sovereign wealth funds.

That became increasingly difficult to impossible through the latter part of last year as the oil price continued to fall and some of these countries started to get into fiscal difficulties. And it was just -- at the end of the day, there was just practically 0 appetite for refinancing GTH with that type of debt.

The other thing that we've looked at is some form of capital markets transaction: bond, paper, et cetera. And again, as we delved more deeply into that, it became clear kind of mid- to late Q4 that it was going to be impossible to execute on that kind of a transaction while we still have the aura of the Uzbekistan investigation.

So I think with that, in particular, we want to get the investigation finalized, the prospective settlement agreed and approved, and then we'd look forward -- we would look to move forward with the GTH refinancing. When it comes to upstreaming of cash to headquarters, I wasn't just talking or referring to countries where there are capital restrictions per se.

I mean, even in Russia, where there is no restriction, we still want to kind of optimize how much cash we can get out of the country and then really focus on ensuring that we're able to translate the operational performance and the efficiencies that Alex and Yogesh are driving into an ability to upstream cash. I think the only countries right now where we have a form of formal restriction in our ability to upstream cash would be 3, really: so Uzbekistan itself; secondly, Ukraine, where there is currently a restriction on converting hryvnia to dollars for the purposes of paying dividends, but you can do so in order to pay into company debt.

And certainly in 2016, we think that, that means from a practical perspective, we will be able to upstream basically all of the crash that the Ukraine business generates. And then finally, in Algeria.

So we have an agreement in Algeria as part of the settlement there whereby we can pay 42.5% of the prior year's net income in the form of dividends just with majority board vote, but that paying anything in excess of 42.5% requires unanimous board approval. So that's something that we're focused on for this year with our partner, the FNI.

Very good. Thank you.

Next question, up front here, the gentleman.

Wissam Charbel from Farallon. Can I just follow up on the cash flow point, I guess, in Algeria.

I mean, do you expect, once you've refinanced the shareholder loans, you expect more dividends to come and be upstreamed from GTH level? So you're going to refinance your shareholder loan.

You're going to get more than -- what $1 billion or so coming up from the holdco [indiscernible]. Do you expect GTH to keep paying dividends subsequently?

Is that how you'll seek to extract cash?

Well, I mean, I'm not sure that we're going to get $1 billion worth of refinancing completed for -- in GTH. I think it will be a number slightly lower than that.

But yes, to the extent that any cash that we get out of the GTH operating subsidiaries then enables GTH to fully repay the shareholder loan, then yes, we'd continue upstreaming cash from GTH, which would result in a dividend flow to the minority investors in GTH. But let's be clear, I mean, the shareholder loan needs to be repaid completely in one form or another before any dividends get paid out to anybody.

Good. And just another questions on Uzbekistan.

I mean, like after, again, the contemplated settlement, how should we think about the operations going forward? And there's substantial amount of cash there as well.

I mean, is it cleansed? Should it be considered as cleansed from an operational perspective?

We could -- we remain completely committed to our investment and to our operations in Uzbekistan. And that's clearly the position that we're taking as a result of this prospective settlement.

I think at this stage, there's no more to add there. And there's a lot of work for us, basically, to look at how the telecom industry, as a whole, in Uzbekistan really becomes a 21st century telecoms industry.

And obviously, the issue of repatriation of dividends is one that we, as an industry, needs to address with the government over a course of time.

All right. Next question then?

Good lady next to you.

Just a question for Andrew on accounting and the guidance. So with your guidance, on the leverage

[Audio Gap]

you're assuming that the Italy transaction goes through. But on revenues and EBITDA, that looks like you -- it's still fully consolidated.

It's not...

No, no, no.

It's not for 2016 guidance?

Agreed.

Can you just walk us through that so to understand how that works for 2016? Would we expect a change for 2017?

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Post the deal closing?

Well, in terms of guidance and on the operational metrics, there's almost -- well, there is no practical change from where we are now to post the deal, right? So right now, the asset is deconsolidated.

It's held right now as an asset held for sale, and it shows up as discontinued operations within both the P&L account and the cash flow statement. Once the deal is -- assuming the deal gets complete -- is completed, what we would then do is the net investment within the JV becomes part of the investments on the balance sheet, right?

So we account for it using the affiliate method of accounting. And then we just, from the P&L perspective, we just account for our share of the net income and the JV, like, about 2/3 down the way -- down the P&L account.

And there is no cash flow impact at that stage. We -- there's only a cash flow impact then if we actually receive dividends from the JV, okay?

Herve up front.

So I was wondering with still the macroeconomic environment and the emerging market still very easy, have you perceived any risk of potential tax or regulatory regime shifting in some of the countries you are operating in? And I understand in time of repatriation, is relatively clear.

But do you see as well on potential capital control in any shift?

Okay, I think that the first point that I'd make is that what we've seen up to now is that in spite of these currency and economic challenges, our businesses have been quite resilient overall in those marketplaces. And I think a perfect dimension of that is Ukraine, and what's happened in the Ukrainian market and how our business has performed in Ukraine.

And I think that is an important starting point. That if -- our both revenue and cost transformation programs are successful, we can certainly perform well in challenging economic type of environments.

And what we've seen in Ukraine in fact, is that in spite of the loss of purchasing power of consumers, the resilience of ARPU and the desire for better service is intact ultimately, and perhaps, that's very different from other industries. Do you want to take the tax regulatory regime dimension?

Yes, I think there's -- certainly, within the last quarter, there've been -- there's been some changes in some of the countries, which, for clarity, is already factored into our guidance and our targets for this year. So there has been an upwards movement in certain aspects of the tax regime in Algeria, which frankly, is not particularly material for the -- given the scope of our operations there.

The tax change, which is much more significant, actually is in Uzbekistan, where there's been a major change to the tax regime in the last -- well, since the start of this year. And I won't give you chapter and verse now because otherwise, this will turn into a tax convention.

But I mean, basically, it means our effective tax rate in Uzbekistan going forward goes above 50%. And I think it's roughly $100 million year-on-year impact in terms of the net taxes that we pay in that country.

I'd say to the final point on regulatory regimes, I think that as we engage well with all governments in where we operate, I think that there is certainly a very pro-business sort of messages that we're seeing, pro-foreign investment set of messages. And messages around the importance of the telecom industry and the performance of that telecom industry for these economies to be ultimately able to rebound.

So I find that the discussions, in fact, are more pro-business whilst these markets are more and more challenged economically.

All right. One question here.

Elizabeth [ph]?

I had a question on MFS. You mentioned that you see a big opportunity there.

Could you please elaborate then where -- would you know that Pakistan is a quite successful market for you and MFS? What are other markets where you could replicate success, that you have seen in Pakistan?

And also, in the Pakistan -- with the case of Pakistan in particular, perhaps you could give us a bit more details on the MFS. For example, is the revenue that we're seeing, is that your net commission that you received from the bank?

Does that mean that it's nearly 100% gross margin type of revenue?

Christopher, can I throw you in the fray and take that?

Yes, of course, [indiscernible]. Well, MFS is a series of different business model.

First, it's the traditional carrier billing, which we have in most of our countries with -- which are underbanked. The carrier billing sometimes is the only means to pay for apps and services, and we have that in place across a series of countries.

For instance, we were the first to strike a carrier billing agreement with Apple in Russia, if I name an example. Then the second thing is money transfers, and that plays a role in Pakistan.

We've developed an app, for instance, for money transfers for people outside Pakistan to transfer money into Pakistan to top up revenues, things like that. We definitely

[Audio Gap]

account for provisions only and not gross revenues in that business. And going forward, this is really now first step about the mobile wallet.

We need to be the mobile wallet to customers, and that will materialize, of course, in revenues.

[Audio Gap]

But also, it will increase the volume of transactions we're going to have with a customer dramatically. Think about more than 200 million consumers, who are starting to use our services on a daily basis for payments and transactions.

And imagine, there would be only 2 transactions a day, we would have 0.5 billion transactions a day with our consumers only out of mobile wallet, supplementing e-commerce kind of transactions, top-ups we have in our prepaid business. So that is a fundamental lever, to walk into a new game where we really are in the midst of consuming the actions, have data around that and can capitalize on that.

So it's a couple of aspects on that.

And we -- I just add that we see opportunities in MFS across the whole footprint, right? I think where we've been most successful up to now is in Pakistan.

But we see the opportunities across the whole footprint. And the strategy that Christopher is developing, in fact, is to roll out these MFS services across the board.

And in fact, Yogesh today is rolling out a global MFS system as the underpinning of being able to market our services in every one of the 14 markets we operate in today.

I was wondering if I can ask a follow-up question on Uzbekistan-related claims. Do you have any visibility, at this stage, about the class-action claims in the U.S.?

And what may have amounted there so far and whether it might be material for the group, particularly given some comments that you made today as well? And just second, the factual question, this cash break down by currency.

The other 36%, which is non-USD, is there any euros in there? Or is that all mostly local currencies, such as ruble?

You want to take the second part of the question first?

Yes. Sure, yes.

There's no euros in there. It's very little.

It's nearly all local currency in the markets that we operate in.

In terms of the first part of the question on Uzbekistan, it's really too early, in fact, to give any type of perspective or disclosure on the class action beyond what we've done up to now.

All right. I suggest, just for timing purposes, we also would like to take 1 or 2 from the webcast, questions.

And then we need to sort of round off. So I would like to ask the operator of the webcast to come in with the first question, please.

Perhaps you can take the second one, please?

So 2 questions on your network infrastructure. Firstly, on the potential monetization of towers in Russia.

So if you sell towers, it would provide an access to better restructure for Tele2, and theoretical, will strengthen Tele2. What's your view of that?

And do you think it would be worth it even if the transaction -- tower sale, I mean, is [indiscernible] positive for you? And secondly, I guess, there's a question to your guest.

So you talked a lot about, I think, centralization and globalization of the network and network management. So the question is how flexible do you think it will make you responding to the local market moves?

Because, I mean, I don't think anyone wants to invest in civil wars anymore for the sake of it. But your rivals can outspend you and you'll share.

So what's your approach, in general, to the local nature of telco markets?

So I'll take the second one first. This is no rocket science.

Mean, today, networks, if I look at all the networks in the U.S., they are being managed out of the geographies in the emerging markets, whether it's Romania, whether it's India, or what have you. The response time to any outage actually is very, very little because the infrastructures are very, very solid and there are element management in every country as well.

So when we talk about centralization within Russia of our 8 NOCs, which we have, it will actually reduce the outage time. It would be more cost effective, and it would be much, much more competitive from a customer quality point of view.

On Tele2 and towers. I think we take a perspective today and perhaps, it's a contrarian perspective in emerging markets.

But we don't believe that towers is any longer a competitive advantage in what are mature markets, such as Russia. It was a competitive advantage in the build-out phase.

We've reached saturation of the traditional telco model. And we don't believe that, that provides any relevant competitive advantage particularly in Russia.

Quite frankly, in the major cities, finding sites is not a challenge and rooftops are readily available. So Tele2 having, in rural areas, easier access to some towers, I don't think that, that changes the dynamics in the marketplace.

Having said that, I go back to outlining what Andrew and I said. We will look at every one of these transactions in terms of shareholder value creation on all dimensions to ensure that these transactions are absolutely accretive.

We are not in the business of attempting to refinance part of our balance sheet through the sale of towers.

Very good. What I suggest that we do, ladies and gentlemen, we'll take it informal from here.

We go next door for refreshments. The members of management will also be around for a little while, so you can have a chat.

I would like to thank all of you for your attention and being here today. It's very good.

Thank you very much. Also for on the webcast.

I hope you enjoyed it. We also have a little giveaway that we will give to you once you go away.

Now up to drinks. Thank you again for your attention.

Bye.