VimpelCom

Last updated June 2012

VimpelCom Ltd. is incorporated in Bermuda, headquartered in the Netherlands, and is listed on the New York Stock Exchange. The VimpelCom Group includes companies operating in Russia, Italy, Ukraine, Kazakhstan, Uzbekistan, Tajikistan, Armenia, Georgia, Kyrgyzstan, Canada, Cambodia, Laos, Algeria, Bangladesh, Pakistan, Burundi, Zimbabwe and the Central African Republic. The operations of these companies cover a territory with a total population of approximately 865 million, providing services under the “Beeline,” “Kyivstar,” “djuice,” “banglalink,” “Mobilink,” “Telecel,” “Leo,” “Djezzy,” “Wind” and “Infostrada” brands. VimpelCom, through its subsidiaries, had 209 million subscribers as at 31 March 2012. Telenor Group holds 39.51% of the economic interests and 35.66% of the voting rights in VimpelCom Ltd.

On an actual basis, Vimpelcom’s revenues in the first quarter of 2012 more than doubled as compared to the same period last year, and EBITDA and EBIT increased by 92% and 62% respectively as a result of the combination with Wind Telecom in April 2011.

As of 31 March 2012, total assets in VimpelCom increased by 4% since the end of 2011 to USD 56.1 billion, primarily as a result of investments in the business, external financing and the appreciation of RUB and EUR against USD offset by the transfer of the spin-off assets to Weather II. Gross debt increased during the first quarter 2012 from USD 26.9 billion to USD 28.6 billion, mainly due to the issuance of Ruble bonds for RUB 35 billion (approximately USD 1.2 billion) and FX movements. Net debt decreased to USD 24.3 billion, leading to a net debt to EBITDA ratio of 2.6 on a pro forma basis at the end of the first quarter 2012.

As of December 31 2011, more than 82% of the group’s total debt was fixed rate debt. VimpelCom’s intention is to increase the floating rate share of the debt portfolio over time in order to improve the funding cost profile of the company as a whole. As of March 31 2012, VimpelCom group’s debt portfolio consisted 49% of EUR, 26% of USD and 23% of RUB.

In 2011, Telenor received dividends of NOK 2.3 billion from VimpelCom Ltd., of which NOK 1.34 billion in the fourth quarter of 2011.The payment of the announced final dividend of USD 0.35 per American Depositary Share (“ADS”) in relation to Vimpelcom’s 2011 results will be paid before June 30, 2012.

VimpelCom’s strategy focuses on three pillars; profitable growth, operational excellence and capital efficiency. The group’s businesses combine strong cash-generating companies with emerging growth opportunities in a number of regions. In some markets, VimpelCom has growing positions in both mobile and fixed broadband businesses.

Legal proceedings

On 28 January 2011, Telenor commenced an arbitration proceeding in London against Altimo Holdings & Investments Ltd., Altimo Cooperatief U.A. (collectively, “Altimo”) and VimpelCom Ltd. in which Telenor claimed that it is entitled to exercise its pre-emptive rights in the context of VimpelCom’s proposed acquisition of Wind Telecom S.p.A. in October 2010.

In April 2011, VimpelCom Ltd. completed the acquisition of Wind Telecom. As a result, Telenor’s economic stake was diluted from 39.6% to 31.7% and the voting stake from 36.03% to 25.01%.

On April 15, 2011, Altimo announced that in connection with the closing of the Wind Telecom Transaction, it intended to take measures to trigger the termination of the VimpelCom Shareholders Agreement. On June 6, 2011, Altimo announced that it had entered into an agreement to sell 123,600,000 of VimpelCom’s convertible preferred shares to Forrielite, a company based in Cyprus, whose beneficial owner is Oleg Kiselev, a Russian investor. The transaction closed on 9 June 2011, and resulted in Altimo reducing its voting rights in VimpelCom to below 25%, and as a result the VimpelCom Shareholders Agreement would terminate six months following the date of such notice.

On 15 February 2012, Telenor purchased 234 million preferred shares of VimpelCom Ltd. from Weather Investments II for a consideration of NOK 2.2 billion, thereby increasing the Group’s voting share in VimpelCom Ltd. from 25.01% to 36.36%. At the same time, Telenor and Weather entered into an option agreement, granting Weather a put-option on Telenor for the remaining 71,000,000 preference shares in VimpelCom at the same price per share as in the first transaction. Telenor has in addition certain situational call-options, related to the remaining and any future preference shares. In connection with the transaction, Telenor withdrew all its claims against Altimo Holdings & Investments Ltd., Altimo Cooperatief U.A. and VimpelCom Ltd. in the arbitration proceeding mentioned above. Telenor’s withdrawal of its claims resulted in the termination of the VimpelCom shareholders agreement, with effect from 10 December 2011.

In July 2011, Telenor East Holding II AS entered into a cash-settled total return swap in respect of up to 40,000,000 VimpelCom Ltd. ADRs (each representing one VimpelCom common share) with J.P. Morgan Securities Ltd. The agreement was amended in October 2011 to cover up to 65,000,000 ADRs.

On 4 April 2012, Telenor East Holding II AS terminated its cash-settled total return swap in respect of VimpelCom Ltd. shares that it had entered into with J.P. Morgan Securities Ltd. on 22 July 2011, as amended on 7 October 2011. Following such termination, Telenor East Holding II AS purchased depositary receipts representing 65 million VimpelCom common shares from J.P. Morgan Securities Ltd., thereby increasing Telenor’s economic and voting interests in VimpelCom Ltd. to 35.66% and 39.51%, respectively.

The Federal Antimonopoly Service of Russia (“FAS”) has filed a claim in the Moscow Arbitration Court asking for the invalidation of the Preferred Sale Share transaction and the option agreement between Telenor and Weather II. The claim was filed by FAS on the alleged basis that Telenor East’s February 15, 2012 purchase (the “Purchase”) of 234 million preferred shares in VimpelCom company from Weather II violated relevant Russian law because Telenor East Holding, as a company controlled by a foreign state (the Kingdom of Norway), may not exercise control over a Russian entity having strategic importance for the national defence and state security (such as VimpelCom’s Russian subsidiary, OJSC VimpelCom). FAS is asking the Moscow Arbitration Court to: a) invalidate the share purchase agreement between Telenor and Weather II of February 15, 2012 and rescind the transaction,; b) invalidate the option agreement between Telenor and Weather II of February 15, 2012, relating to call and put options under which Telenor could acquire an additional 71 million preferred shares in our company from Weather II extending into January 2016; c) oblige VimpelCom, Telenor and Altimo to enter into a shareholders’ agreement on substantially the same terms as the recently terminated VimpelCom Shareholders Agreement.

VimpelCom in Russia

Telenor’s indirect subsidiary (held through Telenor Mobile Holdings AS), Telenor East Invest AS, became a shareholder in VimpelCom in Russia in 1998.

VimpelCom in Russia operates under the “Beeline” brand, and offers mobile, Internet, fixed-line voice and data products and services to consumer and corporate subscribers. As of 31 December 2011, the mobile penetration and number of subscriptions measured in number of SIM cards were 164% and 229.5 million, respectively, out of a population of approximately 142 million. VimpelCom in Russia had 53.0 million mobile subscriptions as at March 31 2012. VimpelCom’s competitors in Russia are MTS Russia (“MTS”), MegaFon and Tele2. As of December 31 2011, MTS had 70.0 million subscriptions in Russia, representing a subscription market share of 30.5%, while MegaFon had approximately 60.8 million subscriptions, representing a market share of 26.5%. At the same time, Tele2 had approximately 20.6 million mobile subscriptions, representing a market share of 9.0%. In 2010, Megafon overtook VimpelCom as the second largest mobile operator in terms of revenue market share, and has maintained this position. MTS remains the largest mobile operator in Russia.

As of December 31 2011, VimpelCom had approximately 4.6 million broadband subscribers in Russia, representing an increase of approximately 39.4% over the approximately 3.3 million broadband subscribers as of 31 December 2010.

VimpelCom in Italy

VimpelCom in Italy operates under the “Wind Italy” brand, and offers mobile, Internet, fixed line voice and data products and services to consumer and corporate subscribers. As at 31 March 2012, the Wind Italy group’s mobile business had approximately 20.3 million subscriptions. In the Italian mobile telecommunications market, Telecom Italia, operating under the “TIM” brand name, Vodafone Italy, operating under the “Vodafone” brand name, and Hutchison 3G, operating under the “3” brand name, are currently VimpelCom’s principal competitors. Telecom Italia and Vodafone have well established positions in the Italian mobile market as number one and two respectively.. The forth operator, Hutchison 3G, has been aggressively seeking new customers through the use of handset subsidies, which are not customarily offered in the Italian market.

The four network operators in Italy offer mobile telecommunications services to approximately 92.4 million registered subscribers as of December 31, 2011, representing a penetration rate of approximately 152% of the Italian population and the number of mobile subscriptions, measured in number of SIM cards, was approximately 91 million out of a population of approximately 60 million. As of December 31, 2011 there were 18 MVNO/ESPs providing services in the Italian market, with an aggregate market share of approximately 4.5%. Penetration is distorted by the widespread use of multiple SIM cards by individual users. The market is mostly prepaid. As of December 31 2011, excluding MVNOs, Telecom Italia had a market share of 34.9%, followed by Vodafone with 32.4%, WIND Italy with 22.8% and Hutchison 3G with 9.9% based on VimpelCom’s 20F for 2011.

VimpelCom in Ukraine

VimpelCom in Ukraine operates under the “Kyivstar” brand, and offers mobile, Internet, fixed line voice and data products and services to consumer and corporate subscribers. As of December 31 2011, approximately 8.1% of Kyivstar’s subscribers in Ukraine were on postpaid plans, and approximately 91.9% were on prepaid plans. VimpelCom in Ukraine had 24.4 million mobile subscriptions as at March 31 2012.

As of December 31 2011, according to Informa Telecoms & Media, there were approximately 53.0 million subscribers in Ukraine, representing a penetration rate of approximately 117.3%. There are currently three mobile operators with national coverage in Ukraine: Kyivstar, Mobile TeleSystems—Ukraine, or “MTS Ukraine,” and LLC Astelit. Kyivstar and PJSC “UkrainianRadioSystems,” or “URS,” were unified under the brand Kyivstar following the VimpelCom Ltd. Transaction in 2010. As of December 31 2011, MTS had 19.2 million subscriptions in Ukraine, representing a subscription market share of 36.3%, while Astelit had approximately 7.1 million subscriptions, representing a market share of 13.4%.

As of December 31 2011, VimpelCom had approximately 0.4 million fixed-line broadband subscribers in Ukraine, compared to 0.2 million as of 31 December 2010. The increase was due to further development of fixed residential broadband business.

VimpelCom in Algeria

VimpelCom in Algeria operates under the “Djezzy” brand, and offers mobile services to consumer and corporate subscribers. According to Informa Telecoms & Media, there were approximately 35.7 million subscribers in Algeria as of December 31 2011, representing a penetration rate of approximately 99.4%. Djezzy’s subscribers increased 14% in the first quarter of 2012.

In Algeria, there are three mobile operators: Djezzy operating through VimpelCom’s 51.7% owned subsidiary Orascom Telecom Holdings (“OTH”); Mobilis, a subsidiary of Algeria’s incumbent, Algerie Telecom; and Nedjma, a subsidiary of Qtel-owned Wataniya. Algerie Telecom launched its Mobilis GSM network in April 1998 and was the only operator until the second GSM license was awarded to Orascom Telecom Algerie (“OTA”) in July 2001, for a period of 15 years. OTA launched under the Djezzy brand in February 2002. Wataniya Telecom Algerie was awarded the third GSM license in December 2003. Competition is based primarily on local and international tariff prices, network coverage, quality of service, the level of customer service provided, brand identity and the range of value added and other subscriber services offered. As of 31 December 2011, Djezzy had 16.6 million subscriptions in Algeria, while Mobilis and Nedjma had 10.8 million and 8.3 million respectively.

For further information about VimpelCom, please visit http://www.vimpelcom.com