6 Min Read
* Company says delivered on all its 2016 financial targets
* Hikes dividend; sets higher '17-'18 cash flow targets
* Announces raft of partnerships; corporate name change to VEON
* Plans second share listing in Amsterdam as Telenor sells out (Adds CEO comments, context)
By Eric Auchard
BARCELONA, Feb 27 (Reuters) - Russian and emerging markets communications network operator VimpelCom Ltd on Monday reported a return to growth in the final quarter of last year and posted solid progress in its 18-month-old turnaround strategy, including a six-fold dividend increase.
For 2017, the company lifted its growth target for revenue, excluding acquisitions and disposals, to the low single digits as a percentage, compared with its prior outlook for flat to a low single digit. It also boosted its cash flow goal.
Marking its determination to overhaul its telecoms business, VimpelCom said it plans to rebrand as VEON, the moniker it has adopted for the messaging app at the centre of its strategy to become a major online player.
In a measure of progress in reinventing itself as an Internet player, VimpelCom said it had struck its first three distribution partnerships with Vivendi SA's Studio+, music streaming service Deezer SA and MasterCard Inc .
VEON is a new-model messaging app designed to compete with the likes of Facebook Inc's WhatsApp and Rakuten Inc's Viber by offering free services to customers over its network without users incurring data charges as other apps do.
VimpelCom aims to offer basic communication for free, while taking a cut of proceeds from partnerships with popular internet services it offers through its app, using data insights it can glean as a network operator.
"We want to take this company from a telecom company to a tech company," VimpelCom Chief Executive Jean-Yves Charlier told Reuters in an interview ahead of the earnings results. "The group is in a very solid position as it moves into 2017," he added.
The VEON messaging app was introduced in November in Italy and has been downloaded by nearly 1 million users since, Charlier said. It ranked among the top five social media apps in Italy in February, according to data by market research firm SimilarWeb. (reut.rs/2lSQEZn)
The Amsterdam-based company is among the world's 10 largest communications network operators with more than 200 million customers.
VimpelCom, which operates in a dozen markets including Russia, Italy, Algeria, Pakistan and Bangladesh, aims to make a clean break from a corruption scandal in which it was accused of using shell companies and phoney contracts to funnel funds to a close relative of the president of Uzbekistan. A year ago, it paid $795 million to settle a U.S. and Dutch investigation into the scheme.
Charlier, the former chief executive of SFR, Vivendi's French telecom business before it was sold to Altice NV , joined in 2015 to undertake a house-cleaning, setting a strategy to first stabilise existing VimpelCom businesses before seeking to fuel faster growth with the internet.
"The first stage for all of this is to regain credibility with investors and financial markets," he said.
VimpelCom's makeover is among the more radical reincarnations being considered by the world's telecom industry, which is stuck in a rut of falling prices and tight regulation (reut.rs/2mkvXXm).
VimpelCom said it aims to expand its free float to 45 percent of shares to draw more European investors in coming months. On Monday, it set out plans for a second listing on the Euronext exchange in Amsterdam besides its current Nasdaq listing.
The larger float is the result of the decision by Norwegian emerging markets telecoms operator Telenor ASA to completely sell its one-time $2.5 billion investment in VimpelCom, following sharp disagreement over strategy (reut.rs/2kYH742).
Russian billionaire Mikhail Fridman holds 48 percent of VimpelCom and is said to be fed up with the commodity-like trends of the telecoms business.
VEON is developing partnerships with consumer and business brands to offer services integrated with its messaging app to mobile customers in frontier markets ranging from transport to retail to financial services.
Studio+ produces original video programming series for mobile users, with episodes typically running 10 minutes.
Deezer has expanded to offer music services in more than 180 countries with funding from Access Industries Inc, the family office of Ukrainian-born U.S. billionaire Len Blavatnik.
For the fourth quarter, VimpelCom posted core earnings of $783 million while service revenue rose 3 percent across its dozen country markets, with strength in Pakistan and Ukraine offset by ongoing weakness in Algeria.
VimpelCom generated $588 million of underlying equity-free cash flow in 2016 and raised its 2017 target to a range of $700 million to $800 million and to more than $1 billion for 2018, reflecting a return to stable growth and cost-cutting as it works to become a faster-moving data-driven company.
Introducing a new dividend policy, VimpelCom said it would pay out 23 cents a share, including a 3.5 cent interim dividend paid in December and a final dividend of 19.5 cents to be paid in April. Three years earlier, it slashed its expected dividend to a token 3.5 cents from 80 cents. (reut.rs/2leuT2c)
The VEON name change is subject to a shareholder vote at an extraordinary general meeting to be held on March 30. (Reporting by Eric Auchard; Additional reporting by Anthony Deutsch; Editing by Christopher Cushing)