VimpelCom to maintain 2012 capex at last year’s level at around 60 bln rubles (Part 2)

VimpelCom to maintain 2012 capex at last year’s level at around 60 bln rubles (Part 2)Vimpelcom Ltd forecasts capex for its Russian subsidiary, OJSC VimpelCom (RTS: VIMP) in 2012 at the same level as last year, Vimpelcom Ltd’s general director, Jo Lunder, told journalists on Tuesday.”In absolute terms, capex will remain the same as in 2011,” Lunder said.Russian company VimpelCom’s capex for 2011 came to 59.8 billion rubles. The ratio to sales revenue came to 22%.He said that capex to sales revenue ratio should decrease since Vimpelcom hopes to boost revenue in 2012. Lunder declined to provide specific figures for sales revenue this year.Lunder said that Vimpelcom Group plans to reduce its capex to sales revenue ratio to 15%. This figure came to 21.4% excluding costs for acquiring licenses.The group hopes to see Vimpelcom Ltd’s EBTIDA increase in the single digits over 2012-2015, which, in conjunction with a decrease in capex, would help reduce the debt to EBITDA ratio from 2.6 to 2.Capital investment in Russia will focus on developing 2G and 3G networks, Vimpelcom Technical Director Dmitry Uryvaev said at a press conference Tuesday. Vimpelcom had 15,300 3G base stations and 32,800 2G base stations at the end of 2011. He did not say how many base stations would be added this year.”We have a focus on certain key regions and already at the end of last year with the number of base stations that were built we ensured 3G coverage for 75% of the Russian population. This year our investment program is aimed at providing the 43 priority regions with parity coverage and parity service quality in comparison to our partners on the market,” Uryvaev said, adding that 80% of the country’s population live in these 43 regions.The second component of Vimpelcom spending is the development of transport infrastructure. The length of the Vimpelcom network at the end of 2011 exceeded 120,000 kilometers and 40,000 kilometers of fiber optic networks in cities. “It will be used for the 3G network and for the LTE network in the future,” he said.Vimpelcom began to install LTE-ready equipment at its base stations last year, which with additional software solutions will enable the quick upgrade of base stations for LTE, Uryvaev said. LTE-ready equipment is being installed throughout the country not just in Moscow, he added.”The substantial cost of LTE has not yet been figured into capital investment for this year because we do not yet know, in fact, what we will need this year,” Vimpelcom General Director Anton Kudryshov told the press.He explained that the opportunity to develop a fourth generation network will come after a tender is held for the distribution of LTE frequencies. The company expects the tender to take place in the second quarter of 2012.”We will carry out all the necessary preparations, technical and engineering calculations and hold specification talks with suppliers so that after we obtain a license, for example if we talk about Moscow, we can quite quickly develop a broadcasting fragment in Moscow. We will be able to do this rather quickly,” Kudryashov said.The company is not worried that its closest rivals might launch an LTE network before it does, for example Skartel plans to do this in April 2012, he said. “We believe LTE is a long-distance race that will last many years so here who starts a month earlier or later in a certain region will not change the overall picture,” he said.Vimpelcom Vice President Natalya Chumachenko added that all the conditions for a complete 4G network in Russia have not yet been created, for example there is not enough equipment that can work in LTE. “We are not going to have 100% coverage in the first steps, we will gradually develop based on the needs of the business segment in particular and high earning customers,” she said.Vimpelcom hopes to reduce capital spending on network development, including fourth generation, by working with other market participants. Kudryashov said he had over the past week discussed the possibility of creating infrastructure alliances with major telecom operators. The companies could work together to build fiber-optic networks, especially in the Far East and Siberia, exchange existing infrastructure and jointly use telecommunication towers.Over 90% of fiber-optic communication line construction projects in 2012 will be carried out in partnership with other operators, Uryvaev said.Infrastructure is one of the elements of the Vimpelcom spending cut program. Kudryashov said it proposes a 5 billion ruble cut in spending in 2012, including through dealership commission optimization, recycling of old equipment, disposal of non-core assets (for example a commercial call center and construction company) and outsourcing certain activities.