2015 Global Communications GAAP Summit - PwC · 2015 Global Communications GAAP Summit. ... The...

Hotel Grande Bretagne, Athens, 8-9 June

2015 Global Communications GAAP Summit

Fi DolanWelcome and introduction

Global Communications GAAP Summit

2June 2015

PwC

Where have you come from?


3June 2015

PwC

Africa4%

MiddleEast7%

Europe74%

Asia Pacific5%

Americas10%

Consolidation: Industry (r)evolution

“Liberty Global to buy Virgin Media for £15 billion”

“AT&T to acquire DirecTV for $48.5 billion in blockbuster deal”

“TeliaSonera to Buy Tele2's Business in Norway”


4June 2015

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Strategy:Churn reduction

Consolidation to achieve convergence continues…

BT’s launch of BT sportand acquisition of Premier

League rights has beensuccessful in reversing

fixed churn – BT is also re-entering the mobile space

Vodafone has beenacquiring assets in a

number of countries toacquire capabilities to

offer quad-play

Telefonica respondedquickly to market

disruptors with a strongquad-play offering,

protecting market shareand reducing churn

Deutsche Telekom havecombined LTE and fixedline network capabilitieswith a hybrid router to

differentiate themselves

Strategy:Subscriber growth/

churn reduction

Strategy:Subscriber growth/churn defence andcustomer reclaim

Strategy:Exclusivity

2015

TV+Net+Voz+Móvel(Available in Portugal)

€51.80/m(24 month contract)

TV + Infinity 1 + Calls(Available in the UK)

£30/m(12 month contract)

Magenta One(Available in Germany)

€64.85/m(24 month contract)

Fusión TV Contigo(Available in Spain)

€ 47/m(12 month contract)


5June 2015

PwC

Megatrends shaping the communications landscape

1 2 3 4 5Shift in economicpower

• Growth beyondBRICS

• New geographicinvestments, M&A

Urbanisation

• Increase inurbanpopulation

• Rise of smartcities

• Infrastructuredeployment

Climate changeand resourcescarcity

• Energy efficiency

• CorporateResponsibility

Changingdemographics

• Population growth

• Aging population

• Changing consumerbehaviours

Technologyadvancements

• Technology drivenby innovation,increased R&D, etc.

• Digital strategies

Glo

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Urb

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Cli

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tech

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Ch

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gg

dem

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Tec

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6Increasedregulations

• Net neutrality

• IFRS 15

• Leasing

Incr

ease

dre

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lati

on

s


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Monday, 8 June

14:30 – 15:45 Registration and coffee

15:45 – 16:00 Introduction and welcome

16:00 – 18:00 Industry discussion

18:30 Buses depart for dinner

Today


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PwC

Tuesday, 9 June

08:00 – 09:45 Workshop 1 – revenue recognition

09:45 – 10:30 OTE market update

10:30 – 11:00 Coffee break

11:00 – 12:00 What’s new in accounting?

12:00 – 13:30 Lunch

13:30 – 15:15 Workshop 2 – Changing business models and regulations

15:15 – 15:30 Closing remarks

Tomorrow*


8June 2015

PwC

* Workshops are in breakout rooms. All other sessions are in the Grand Ballroom.

This is your summit...


9June 2015

PwC

Administration


10June 2015

PwC

Industry discussion


11June 2015

PwC

Karyn Brooks, Transition ResourceGroup for Revenue Recognition (TRG)

John Simcoe, Partner, PwC Canada


12June 2015

PwC

James Oehmke, Head of IFRS 15Programme, Vodafone


13June 2015

PwC

Alexey Savelyev, Director ExternalReporting, VimpelCom Ltd.


14June 2015

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Implementation of IFRS 15 in VimpelComPwC’s Global Communications GAAP Summit

Alexey SavelyevDirector External ReportingVimpelCom Ltd.

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Content

1. VimpelCom at glance

2. Purpose and benefits of the IFRS 15 project

3. Overall project timeline

4. Project governance

5. Key steps

6. Main focus areas

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1.1. VimpelCom at glanceVimpelCom - a truly international telecoms operator

Kyrgyzstan

3m

Uzbekistan

11m

Kazakhstan

10m

Armenia

1m

Ukraine

26m

Italy

22m

Algeria

18m

Zimbabwe

0.2m

Tajikistan

1m

Russia

57m

Laos

2m

Bangladesh

31m

Pakistan

39m

Georgia

1m

222mmobilecustomers

№7mobile providerin the world

740mPopulationcoverage

$20bRevenue

40.6%EBITDA MarginIndustryLeading

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1 Based on consolidated mobile customers2 Mobile customers as at FY14; Total revenue and EBITDA for the FY143 Population figures are provided by CIA – The World Factbook4 EBITDA less CAPEX excluding licenses for the FY14

1.2. VimpelCom at glanceA well diversified leading international mobile operatorHeadquartered in Amsterdam

Total revenuesplit2 (%)

EBITDA split2

(%)

Mobilecustomers

222million2

Populationcovered

739million3

Countries

14Numberof brands

8

37 8 5 5 443 31

69% from Emergingmarkets

Russia

Algeria

Ukraine Uzbekistan

Bangladesh

Operating cashflow split4 (%)

Kazakhstan Other

Italy

Pakistan

USD 19.6 billion

35 11 6 5 4 5 3 29


32 11 8 5 8 30


USD 4.1 billion

USD 8.0 billion

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1992

VimpelCom founded by a Russianscientist and an American entrepreneur

Company registered as joint stockcompany

2010

VimpelCom and Kyivstar mergedinto a new entity VimpelCom Ltd.

Headquarters moved toAmsterdam

2004

KaR-Tel (Kazakhstan) acquired

1996

Listing on NYSE

1998

Prepaid introduced – abreakthrough on the Russianmass-market

Telenor becomes a strategicinvestor

2001

Alfa becomes astrategic investor

2006

Acquisitions:- 100% of Buztel and Unitel(Uzbekistan)- 51% of Mobitel (Georgia)- 90% of Armentel (Armenia)- Tacom (Tajikistan) stakeincreased to 80%

2008

Acquisitions:- 100% of Golden Telecom- 40% in the joint ventureGTEL-Mobile (Vietnam)- 90% of Sotelco (Cambodia)- 49.9% in Euroset, the largest mobileretailer in Russia and the CIS

2005

Acquisitions:- 100% of URS (Ukraine)- 60% of Tacom (Tajikistan)

A successfulre-branding campaigncompleted

2007

Armentel stake increased to 100%Reached an agreement on GTI acquisitionAwarded with 3G license

2012

Sale of stake in jointventure GTEL-Mobile(Vietnam)

2011

VimpelCom acquires WindTelecom

78% of Millicom (Laos) acquired

Mobile customerbase surpassed200 million markin October

200Mln

1.3. VimpelCom at glanceKey strategic milestones

2013

Acquired 0.1% andincreased to 50% ofEuroset

Sale Interest Cambodia

Listing on NASDAQ

NASDAQ-100Index®

inclusion

2014

Sale interestin WindCanada

Saleinterest inCAR andBurundi

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VimpelCom has been listed in the US since 1996under the symbol “VIP”

Starting from September 2013, VimpelComAmerican Depository Shares listed on the NASDAQGlobal Selected Market and included in NASDAQ-100 index

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1.4. VimpelCom at glanceAccounting and reporting

IFRS is not primarily GAAP in most of the countries

Mainly prepaid markets

Transitioned to IFRS in 2011-2012

Foreign private issuer on NASDAQ – 20-F and SOX

Quarterly earnings releases calls

Listed minorities

Extensive M&A history

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2. Purpose and benefits of the project

► Compliance to the new IFRS standard as per the effective date (1 January 2018)

► Create awareness and sponsorship (operational, commercial and financial impact)

► Assess impact on ratios and other performance measures, e.g. dividends to be distributed

► Ensure the required systems and policies are in place at transition date

► Timely commencement of the project will

► Ensure timely compliance with IFRS 15 disclosures and recognition

► Result in a cost effective, well controlled and governed project

► Provide transparency to shareholders

► Alignment with other projects

► Increased availability of management information as a result of new disclosure requirements

► Provide insight into contract profitability

► If the project is not undertaken by VimpelCom

► Non-compliance with the new IFRS standard

► If the project commences too late

► Insufficient time to obtain information for disclosures required (e.g. comparatives)

► Potential for significant impact not timely communicated to shareholders

► Other affected departments may not be ready for the impact in time

Purpose

Key benefits

Key risks

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1 Initial assessment of contracts, questionnaires, site visits.

Pilot options and design, Roll-out strategy. Identifyresources, create and develop project plans.

3.1. Overall project timelineTimeline

PHASE 1 - ASSESSMENT

Q1/15 Q3/15Q2/15Q4/14 Q4/15 Q1/16

PHASE 2 – DESIGN & PLANNING2

PHASE 3 – SOLUTION DEVELOPMENT

PHASE 4 - IMPLEMENTATION4

3

PHASE 5 – POST IMPLEMENTATION5Review go-liveprocedures

Provide additional support

Continued monitoring of IT implementations

Technical requirements documents and broad solutions

Auditor alignmentDefine KPI requirements

Pilot ready for implementationand roll out

Monitor IT progress and changes

Adoption of solutions across functionaldepartments

Detailed review of pilot outcome and flaws

Roll out pilot for Russia

Roll out pilot for Italy

Develop reliable Go-Live plan

Accounting

Reporting

Tax

IT Systems

Business Processes

Wo

rkS

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Preparing the accountingpolicy v0 & decision tree

IT – high level systems assessment and dataavailability

Preparing the accounting policy v1 & update decision tree

Roll out pilot for other countries

Design Build Test

Develop technical specifications based on IT assessment

Update log for changedrequirements

Testing of softwarechanges solutions

Auditor alignment



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3.2. Overall project timelinePhases

• Identify accounting, reporting and tax implications for VimpelCom

• Determine effects on business processes and IT systems and requirements

• PMO setup

• Set up project infrastructure, including timeline, project governance, resource planning and detailedtask planning per workstream

• Identify solutions, prepare implementation plan and develop solutions across works streams

• Align objectives regarding the pilot and what success looks like

• Approve and roll out solutions across countries in different waves

• Adopt solutions developed based on experiences roll out

• Address deferred items and transition to operational model

Phase 1:Assessment

Phase 2:Design &Planning

Phase 3:Solution

development

Phase 4:Implementation

Phase

Phase 5:Post

Implementation

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4.1. Project governanceCross functional impact

Accountingand

ReportingSystems

OperationsCross

functionalimpact

• Details and control• Reassessment required• Additional disclosures• Resources• Transition 2015-2017

• Change of flows andrelating systems

• Possible changes to:• Consolidation• COA

• Internal controls &governance

• Tax• Treasury• Internal audit• Internal control• HR

• Budgeting &Forecasting

• Compensationplans

• Performancemeasurement

• Product offerings

• Billing• Revenue

assurance• Commercial• Investor relations• Data

management

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4.2. Project governanceRoles

Key

Consultants role

VimpelCom roleSteering committee

IFRS 15 project

Monitoring committee

VimpelComOpCo’s Heads of reporting

OpCo’s IT representatives

HQ ER and Accounting

ConsultantsPartner/Senior Manager

IFRS Technical Desk

Work stream Lead

Russia

Italy

WS1 — Accounting

Othercountries

HQ

WS2 — Reporting

Work stream Lead

Russia

Italy

Othercountries

HQ

WS3 — Tax

Work stream Lead

Russia

Italy

Othercountries

HQ

WS4 — IT Systems

Work stream Lead

Russia

Italy

Othercountries

HQ

WS5 — Business processes

Work stream Lead

Russia

Italy

Othercountries

HQ

WS6 — Changemanagement

Work stream Lead

Legal

HR

Communication

Central project team

VimpelCom projectLead

Consultant projectteam

Group CFO, Group Controller, OpCo CFO’s,

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5.1. Key stepsPhase I - Questionnaire and logistics

Based on the initial assessment and scoping, prepare a questionnaire for thedifferent OpCo’s in order to obtain a more detailed understanding of the localbusiness, addressing relevant factors such as:

Type of contracts and commercials behind the business

Key issues expected/identified from initial assessment

Data requirements

Timing and logistics

Kick-off call with local VimpelCom teams

Local VimpelCom team to receive Questionnaire

Questionnaire to be returned to HQ

Project Team processing of local input, in anticipation of visit

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5.2. Key stepsPhase II - Local teams

Finalization of first high level impact assessment

Communication from HQ on the next phase of the project providing/discussing:

• Detailed instructions

• Timeline

• Resource and other requirements

• Next steps

Receive the first draft accounting policy for IFRS 15

Receive the guidelines on how to assess future product offerings for IFRS 15during IFRS 15 implementation project

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Current phase Next steps and phases

IT phase 1:High-level

informationrequirement

gapassessment

Understanddata andsystems

landscape

Identifydata needs

identifygaps

(applicability and

availability)

IT phase 2:Detailed gap

assessment androadmap

Define datacollection model;

portfolio vsContract-by-

contract approach

Define dataremediation plan

Roadmap forphase 3-5,

including proof ofconcept for datamigration (data

collectionmodel)

IT phase 3-5

Solution development- Define detailed pilot systems & approach for

deployment- Support build, test, go-live

- Commence organisation-wide data collection fordata gaps

Implementation: Deploy and monitor- Validate and refine systems design and deployment

approach for local variance- Extend data needs and calculations

- Support local deployment- Test input data and generated adjustments

- Finalise adjustment and calculations

Post implementation- Support cut-over and go-live- Manage contingency plans

5.4. Key StepsIT

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6. Main focus areasAccounting

Bundled revenue – both handset and service AND multipleservice components (voice, data etc.)

Dealer commission treatment – OPEX vs CAPEX

Deferred revenue – connection and activation fees

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Summary

Clear and visible sponsorship

Local buy-in is crucial

On-board IT as soon as possible

Benefit from any other cross-functional or cross-border project

Workshops

• Workshop 1 will start at 8am tomorrow morning

• The groups will be in the following rooms:

› Group 1 – Grand Ballroom

› Group 2 – Royal

› Group 3 – Golden AB

› Group 4 – Golden CD

• Your group number is on the workshop listing on your table


32June 2015

PwC

Tonight: Balux Prive

Meet in hotel lobby at 18:30 for a prompt departure to restaurant


33June 2015

PwC

Thank you

This publication has been prepared for general guidance on matters of interest only, and doesnot constitute professional advice. You should not act upon the information contained in thispublication without obtaining specific professional advice. No representation or warranty(express or implied) is given as to the accuracy or completeness of the information containedin this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, itsmembers, employees and agents do not accept or assume any liability, responsibility or duty ofcare for any consequences of you or anyone else acting, or refraining to act, in reliance on theinformation contained in this publication or for any decision based on it.

© 2015 PricewaterhouseCoopers LLP. All rights reserved. In this document, “PwC” refers toPricewaterhouseCoopers LLP which is a member firm of PricewaterhouseCoopersInternational Limited, each member firm of which is a separate legal entity.

2015 Global Communications GAAP Summit - PwC · 2015 Global Communications GAAP Summit. ... The...

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