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Leveraging Broadband and ICTs as an Enabling Cross-Cutting Infrastructure for a Sustainable Connected Society and Economic Growth

Vientiane, 14th Dec 2016

Dmytro Ponomarenko

VimpelCom Lao Company Ltd

Dmytro.Ponomarenko@beeline.la

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VimpelCom: a global communications and technology company

Amsterdam

VimpelCom

236 million subscribers

59 thousand employees

$9.6 billion revenues

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New technologies bring significant economic benefits

Source: McKinsey Global Institute analysis

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ICTs – Key element in achieving SDGs

ICTs asan enabler

Areas ofcontribution

Key focus

• ICTs as key enabler and means of implementation

• 4.b: ICT higher education

• 5.b: ICTs as an enabling technology to promote the empowerment of women

• 9c: Increased access to ICTs / Universal and affordable access to the Internet

• 17.8: ICTs as enabling technology

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Digitalization and economic growth go together in our markets

Algeria

Bangladesh

Pakistan

Armenia

GeorgiaKazakhstan

Kyrgyzstan

Tajikistan

Ukraine

Uzbekistan

Russia

Italy

Laos

-1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

0% 10% 20% 30% 40% 50% 60%

GD

P g

row

th (

5y

aver

age)

ICT Development Index growth (2010 – 2015)

“A 10% increase in broadband could raise economic growth by between

0.25% - 1.4%” ITU, 2016

GDP/Capita$12,500

Unemployment6.4%

Higher education35.8%

Market Averages

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Connectivity is increasing

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…and Mobile technologies are leading the way

Years to reach 1 billion users

Source: The State of Broadband 2015, Broadband Commission

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…with explosion of mobile data traffic

2 1.4 1.1 1

3.8

1.2

18

6.9 6.3 6.9

22

6

Western Europe Central andEastern Europe

Middle East andAfrica

Asia Pacific North America Latin America

Monthly mobile data traffic per region(in GB)

2015 2021

Source: Ericsson Mobility Report, 2016

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However, the majority of the world population remains unconnected

3.2 billion(43.3%)

4.1 billion(56.7%)

237.9 million(33.5%)

≈2.1million(30%)

472.1 million(66.5%)

≈4.8 million(70%)

Connected

World VimpelCom Laos

Unconnected

Source: ITU IDI Index, 2015

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Regional differences remain

7.4

42.3

0

10

20

30

40

50

60

70

80

90

2010 2011 2012 2013 2014 2015*

Mobile broadband subscription(per 100 inhabitants)

Africa Asia & Pacific Europe The Americas

9.4

36.9

0

10

20

30

40

50

60

70

80

90

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015*

Individuals using the internet(per 100 inhabitants)

Africa Asia & Pacific Europe The Americas

Source: ITU, 2015

~57% ~60%

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Connectivity is important, but not sufficient though…

Connectivity

Digital Financial Services

Data Flows

Digital Platforms

ICT Empowered Communities and Individuals

e-c

om

me

rce

e-a

gric

ult

ure

e-e

du

cati

on

e-h

eal

th

e-g

ov

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Data flows have become a crucial economic driver…

The economic model shows that global flows account for approximately 10 percent of global GDP output

Source: TeleGeography, Global Internet Geography; McKinsey Global Institute analysis, 2015

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The volume of data is exploding…

Used cross-border bandwidth

Lines represent interregional bandwidth (e.g. between Europe and North America) but excludeintraregional cross-border bandwidth (e.g. connecting European nations with one another).

90% of the world’s data has been generated in the last two years

40 Zettabytes (40 trillion GB) will have been created by 2020, compared to 4.4 in 2015

More than 1/3 of all data produced will live in or pass through the cloud by 2020

Sources: IBM, CSC, McKinsey

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…however Legal Frameworks are lagging behind

- “National and regional legal frameworks that protect data in the ever-expanding digital economy are often outdated, incompatible or missing”

- “Insufficient protection can create negative market effects by reducing consumer confidence, and overly stringent protection can unduly restrict businesses, with adverse economic effects as a result”

- - Data localization requirements can have a negative impact on GDP between 0.7% and 1.1%

- - Data localization requirements increase costs for local companies by 30-60 percent

108

35

60

Countries with data protection laws

No legislation Draft legistlation Legislation

Source: UNCTAD, 2016

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Factors determining successful digitalization

ICT-Empowered Communities and Individuals

Access to Infrastructure

Access to Devices

Digital Literacy and Skills

Relevant Content

Sustainable Business Models

Enabling Policy Environment

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Enabling policy-environment is key for increasing connectivity

“Successful reforms must take into account the need for comprehensive changes that cut across traditional

technological and commercial boundaries”

(World Bank)

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Enabling policies: Cost savings through network sharing

Source: Network Sharing at Vodafone

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Mobile devices are the primary gateway to digital services

Our Smartphone Penetration GoalsSmartphone Penetration

World

VimpelCom

44%

31%

Source: GSMA, 2016

36%

Asia Pacific

2015 smartphone penetration

2020 smartphone penetration

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Our contribution to Digital LiteracyDigital Literacy

Digital skills are key to unlock digital opportunities for everyone

Together with UNESCO and the BuyadFoundation we developed an mLiteracyprogram to educate rural women, a groupmostly excluded from the conventionaleducational system in Pakistan.

The program combines technology with on-siteeducation and has received the prestigiousGlobal Mobile Award in 2013.

0

5,000

10,000

15,000

2009 2011 2012 2013 2015

Program Outreach

Digital Illiteracy

Illiteracy

Low Income*

Age (65+)

15%43%

13%47%

8%3%

*low income: $1.90 per day

Developing

World

Source: World Bank, 2016

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Lack of content means less people will go online

Source: World Economic Forum, 2015

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ToFrom

We are moving beyond mere connectivity

Communication

Mobile Education

e-Commerce

Mobile Agriculture

Mobile Finance

Mobile Health

Calls

Texts

Data

Traditional Telecom

Customer-centric digital service provider

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30m MFS users

40m monthly transactions

465m underbanked within VimpelCom’sfootprint

Gender empowerment: 40% of our MFS operations are headed by women

Example: Mobile Financial Services

88% 87%

82% 82%

69%

60% 59%

50%47% 46%

33%

13%

Unbanked population (% of 15+)

Source: Global Findex 2014

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And also…

VimpelCom provides a portfolioof services for the farmers ofBangladesh. These include aspecialist call center, and a‘voice-based’ virtual agriculturalmarket place for buying andselling produce. In Armenia weaim to integrate digital andagricultural education at thegrass-roots level.

AgricultureHealthcare Education

In Bangladesh, we provideservices aimed at peoplesuffering from stress ormental issues, and inPakistan we provide apersonal safety app. InKazakhstan we give peopleaccess to information ondiagnosing and treatingcommon types of diseases.

We engage with a wide varietyof NGOs, typically thosefocused on developmentissues such as education andthose working withmarginalized communities. Weprovided access to ICTequipment to a number ofschools in our markets forexample.

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Some challenges for traditional telecoms operators

Data traffic is growing exponentially and significant network investments are needed to meet the future demand

The needed investments can not (yet) be recovered by data revenues and traditional voice revenues continue to shrink

In addition, OTT players re-shuffle the market balance by focusing on the content offering rather than traffic

Operator profit margins significantly decrease over time and require innovative solutions to address these challenges

Need for sustainable business models in a transforming market…

Profitability trap for traditional Telcos

2010 2012 2014 2016 2018 2020 2022 2024 2026

CAPEX + Depreciation

OPEX

Revenues

Shrinkingmargins

EBITnegative

EBITDAnegative

Source: Strategy Analytics (2014) - Wireless Operator Performance Benchmarking Q1 2014

Revenues are shifting towards OTT players

OTT services market revenues (bn US$)

Telco services market revenues (bn US$)

Forecasts2019

368

649

2018

257

624

2017

180

600

2016

158

580

2015

137

560

2014

117

540

2013

94

519

+699%

+35%

2021

753702

2020

526675

Drivers for fixed and mobile data growth

Source: IDATE World Internet Services Markets, 2013

25,000

30,000

20,000

15,000

10,000

5,000

0

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…and balanced “like-for-like” policies and regulation

Regulatory parameters Telecom operators OTTs

Licence costs High N/a

Spectrum costs High N/a

Telecom tax/royalty Sometimes high N/a

USO funding Sometimes high N/a

Corporate tax 20 – 35% Often avoided

Customer care Mandatory Not mandatory

Municipal permissions Required Not required

Emergency services Required Not required

QoS parameters Stringent N/a

Security Mandatory Not mandatory

Rollout obligations Often stringent N/a

Interoperability Interconnection required Not required

Network neutrality Often required N/a

Source: Rory Macmillan, 2016

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Operator Response: adapt operating model

ToFrom

Shared service centers

Managed servicesLean HQ and OpCos1

2

3

4Regional hubs

Fragmented operating model

Global Operating Model

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Operator Response: Move from traditional- to digital services

ToFrom

Communication

Mobile Education

e-Commerce

Mobile Agriculture

Mobile Finance

Mobile Health

Calls

Texts

Data

Traditional Telecom

Customer-centric digital service provider

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Impact of macro-economic policies remains significant

The impact of tax rebalancing on the economy

Consumer taxes as a proportion ofTCMO* have increased over theyears, from 17% in 2007, to 18% in2011 to 20% in 2013* Total cost of mobile ownership

Source: GSMA & Deloitte, 2015

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The policy environment becomes increasingly complex

eID

Traffic management

Cybersecurity

Financial regulation

VoInternet | Internet messaging

Privacy | Data transfers | Data management

Content requirements

Piracy

Meeting Policy

Objectives

While enabling

digital development

Mobile Finance

Comms

Enter-tainment

Big Data

e-CommerceMobileHealth

New Policy Topics Digital Offerings

Stat

e-o

f-th

e-A

rt O

pe

rati

ng

Mo

de

l

IoT

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…and requires innovative approaches

Self-regulation

Co-regulation

Outcome-based regulation

Speed of technological change demands forward-looking, principles-based regulations with clear intent, rather than prescriptive regulations

Rules and codes developed by the industry, in consultation with the government, and with legislative backing should be considered as alternatives to direct regulation

Where appropriate, self-regulation may be adopted, for which industry itself is responsible for enforcement

www.vimpelcom.com

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“Our Vision is for our business to play a key role in the socio-economic success of the communities where we operate by

providing high quality services to our customers, behaving as a responsible corporate citizen, and leveraging our technology to

support development.”

Alexey M. ReznikovichChairman of the Supervisory Board