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VimpelCom announces first quarter financial results

  • 46% GSM subscriber growth during first quarter 573,700 total subscribers as of June 20, 2000

Moscow and New York (June 20, 2000) - Open Joint Stock Company "Vimpel-Communications" ("VimpelCom" or the "Company") (NYSE: VIP) today announced financial results for the first quarter ended March 31, 2000 and reported that as of June 20, 2000, it had 573,700 subscribers on all of its wireless networks, including those operated by VimpelCom's subsidiaries outside of Moscow.

As of March 31, 2000, VimpelCom had approximately 474,100 subscribers in the Moscow license area, a 287% increase from the 122,400 subscribers reported as of March 31, 1999, and a 35% increase from the 350,500 subscribers reported as of December 31, 1999. As of March 31, 2000, VimpelCom and its subsidiaries had approximately 24,600 subscribers outside of the Moscow license area, a 95% increase from the 12,600 subscribers reported as of March 31, 1999.

As of today, VimpelCom also reported that it had approximately 573,700 subscribers on all of its wireless networks. Comprised of approximately 543,400 subscribers in the Moscow license area and approximately 30,300 subscribers outside the Moscow license area, including those on networks operated by its subsidiaries.

The Company's subscriber growth in the first quarter of 2000 was primarily due to an increase in the Company's Moscow GSM subscriber base, which grew 46% in the first quarter of 2000 compared to the fourth quarter of 1999. As of March 31, 2000, VimpelCom's Moscow GSM network had approximately 193,000 subscribers, which constituted approximately 41% of the Company's Moscow subscriber base, compared to 22,900 GSM subscribers or 19% of the Company's Moscow subscriber base as of March 31, 1999. Prepaid subscribers totaled approximately 318,300 or 67% of the Company's Moscow subscriber base as of March 31, 2000, compared to approximately 21,200 subscribers or 17% of the Company's Moscow subscriber base reported as of March 31, 1999.

VimpelCom estimates that as of March 31, 2000, its subscriber market share in Moscow was approximately 47%.

VimpelCom's average monthly minutes of use per subscriber ("MOU") for the first quarter of 2000 was approximately 88 minutes, a 51% decrease from the 181 minutes reported for the same period in 1999 and a 20% decrease from the 110 minutes reported for the fourth quarter of 1999. VimpelCom's average monthly revenue per user ("ARPU") for the first quarter of 2000 was approximately $43, a 71% decrease from the $148 reported for the same period of 1999 and a 35% decrease from the $66 reported for the fourth quarter of 1999. The declines in MOU and ARPU were primarily due to increased competition, which resulted in lower tariffs, and a change in the Company's subscriber mix that resulted from penetrating new segments of the market. The Company expects the competitive environment to continue to apply downward pressure on MOU and ARPU.

VimpelCom's total operating revenues for the first quarter of 2000 were approximately $65.8 million, a 14% increase from the $57.9 million reported for the same period in 1999. Net operating revenues (less revenue-based taxes) were $63.0 million for the first quarter of 2000, a 14% increase from the $55.3 million reported for the first quarter of 1999.

EBITDA for the first quarter of 2000 was approximately $11.2 million, a 35% increase from the $8.2 million reported in the same period in 1999. In the first quarter of 2000, EBITDA increased $16.9 million from the fourth quarter of 1999, when the Company reported a negative EBITDA of $5.7 million. The Company's EBITDA margin for the first quarter of 2000 was approximately 18% compared to approximately 15% for the same period of 1999. The increase in EBITDA in the first quarter of 2000 was primarily due to a number of cost improvements, particularly a decrease in acquisition costs per subscriber, a reduction in interconnect tariffs and a decrease in general and administrative expenses, excluding advertising and distribution commission expenses.

The Company's operating loss for the first quarter of 2000 was approximately $2.8 million compared to a $4.8 million operating loss reported for the first quarter of 1999, an improvement of 43%. In the first quarter of 2000, the Company recognized a net loss of $11.8 million, or a loss of $0.42 per share ($0.32 per ADS), compared with a net loss of $5.1 million, or $0.26 per share ($0.20 per ADS) in the same period in 1999. Each ADS represents 0.75 of one share of common stock. The increase in net loss compared to the same period in 1999 was primarily due to differences in the Company's provision for income taxes. In the first quarter of 1999, the Company recognized an income tax benefit of $6.0 million primarily due to a reduction in its corporate income tax rate from 35% to 30%. In the first quarter of 2000, the Company recorded a $5.5 million income tax expense primarily due to differences in accounting principles between Russian accounting standards and U.S. GAAP.

Selling, general and administrative expenses for the first quarter of 2000 increased 37% to approximately $24.9 million compared to the $18.2 million reported for the same period in 1999. This increase was primarily due to higher total subscriber acquisition costs that resulted from a greater number of subscriber sales. However, VimpelCom's average acquisition cost per subscriber in the first quarter of 2000 decreased 69% to approximately $78 from approximately $250 in the same period of 1999 due to reductions in distribution commissions, advertising expenses and handset subsidies.

Depreciation and amortization expense for the first quarter of 2000 was approximately $14 million, a 7% increase compared to the $13.1 million reported in the same period of 1999. The increase was primarily due to an increased depreciable asset base resulting from the Company's continuing capital investments in connection with the expansion of its wireless networks. The Company expects depreciation to increase as it continues making significant capital expenditures in its GSM network.

For the first quarter of 2000, the Company recorded provision for doubtful accounts of approximately $4.8 million, a decrease of 50% compared to the $9.5 million reported for the same period in 1999. This decrease was primarily due to the improved state of the Russian economy in 2000 compared to the crisis environment that existed during the first quarter of 1999.

Commenting on the Company's first quarter results, Dmitri Zimin, President and Chief Executive Officer of VimpelCom said, "We are very pleased with the very strong growth of our GSM subscriber base and the fact that we were able to reduce our subscriber acquisition costs by 37% during last quarter. In addition, after reporting a negative EBITDA last quarter, we are pleased that we were able to return to positive territory in this quarter. We see this positive trend continuing."

Zimin continued, "As the second GSM-900 licensee, we intend to continue focusing our marketing and advertising campaigns on increasing our GSM market share, by targeting both the mass market with our GSM prepaid products and the corporate and higher use segments with more personalized programs. In fact, last week we initiated an innovative corporate service to provide single phone numbers and short dialing for office and mobile phones in an alliance with Combellga, one of the market leaders in corporate telephony services. In addition, this quarter we also introduced WAP services on an experimental-commercial basis and will soon launch it as an attractive service for our subscribers offering Russian content including weather, financial news, train and airline schedules, dictionaries, horoscopes, and the like. We also recently signed an agreement with Nokia to build a GPRS (general packet radio system) data transmission platform, which we expect will be the basis for further growth in data traffic in both our business and mass market segments."

VimpelCom is a leading wireless telecommunications service company in Russia, operating under the "Bee Line" family of brand names, which are among the most recognized brand names in Russia. VimpelCom's license portfolio covers approximately 70% of Russia's population (100 million people), including the City of Moscow and the Moscow Region, which is the Company's primary market. VimpelCom was the first Russian company to list its shares on the New York Stock Exchange ("NYSE"). VimpelCom's ADSs are listed on the NYSE under the symbol "VIP".

 

This press release contains "forward-looking statements," as the phrase is defined in Section 27A of the Securities Act and Section 21E of the Exchange Act. These statements relate to the Company's development and are based on Management's best assessment of the Company's strategic and financial position and of future market conditions and trends. These discussions involve risks and uncertainties. The actual outcome may differ materially from these statements as a result of unforeseen developments from competition, governmental regulations of the wireless telecommunications industry, general political uncertainties in Russia and general economic developments in Russia and other factors. As a result of such risks and uncertainties, there can be no assurance that the effects of competition or current or future changes in the political, economic and social environment or current or future regulation of the Russian telecommunications industry will not have a material adverse effect on the VimpelCom Group. Certain factors that could cause actual results to differ materially from those discussed in any forward-looking statements include the risks described in the Company's Annual Report on Form 20-F for the year ended December 31, 1998 and other public filings made by the Company with the United States Securities and Exchange Commission, which risk factors are incorporated herein by reference. VimpelCom disclaims any obligation to update developments of these risk factors or to announce publicly any revision to any of the forward-looking statements contained in this release, or to make corrections to reflect future events or developments.

 

For more information, please contact:
Valery Goldin
VimpelCom (Moscow)
7(095) 974-5888
vgoldin@vimpelcom.com

Sigrid Peterson
Edelman Financial Worldwide
1 (212) 704 8284
sigrid_peterson@edelman.com

Open Joint Stock Company "Vimpel-Communications"

Consolidated Condensed Statements of Operations

 

Three months ended

 

March 31,

 

2000

1999

 

(In thousands, except per share (ADS) amounts)

Operating revenues:

   
 

Service revenues and connection fees

US$ 56,568

US$ 53,516

 

Sales of handsets and accessories

8,968

4,312

 

Other revenues

299

110

Total operating revenues

65,835

57,938

 

less revenue based taxes

2,860

2,593

Net operating revenues

62,975

55,345

 

Operating expenses

   
 

Service costs

14,357

14,609

 

Cost of handsets and accessories sold

7,717

4,780

 

Cost of other revenues

54

39

 

Selling, general and administrative expenses

24,904

18,174

 

Depreciation

10,278

10,039

 

Amortization

3,680

3,060

 

Provision for doubtful accounts

4,785

9,498

Total operating expenses

65,775

60,199

 

Operating loss

(2,800)

(4,854)

 

Other income and expenses:

   
 

Other income

788

165

 

Gain on trading in securities

211

566

 

Interest expense

(3,859)

(4,380)

 

Net foreign exchange loss

(617)

(1,595)

Total other income and expenses

(3,477)

(5,244)

 

Loss before income taxes and minority interest

(6,277)

(10,098)

 

Provision for income taxes expense (benefit)

5,527

(6,034)

Minority interest in net earnings of subsidiaries

29

1,013

 

Net loss

(US$ 11,833)

(US$ 5,077)

 

Net loss per common share

(US$ 0.42)

(US$ 0.26)

Net loss per ADS equivalent

(US$ 0.32)

(US$ 0.20)

Weighted average common shares outstanding (thousands)

28,129

19,280

EBITDA

US$ 11,158

US$ 8,245

Open Joint Stock Company "Vimpel-Communications"

Consolidated Condensed Balance Sheets

 

March 31,

December 31,

 

2000

1999

 

(unaudited)

 
 

(In thousands US dollars)

Assets

Current assets

   
 

Cash and cash equivalents

US$ 34,080

US$ 35,609

 

Short-term investments

714

503

 

Accounts receivable

25,472

24,356

 

Other current assets

45,224

46,321

Total current assets

105,286

106,789

 

Non-current assets

   
 

Property and equipment, net

375,335

369,053

 

Intangible assets, net

92,118

84,134

 

Other assets

12,774

30,119

Total non-current assets

480,227

483,306

     

Total assets

 

US$ 585,717

US$ 590,095

 

Liabilities and shareholders' equity

   

Current liabilities

   
 

Accounts payable

US$ 36,101

US$ 33,397

 

Customer deposits

32,112

31,341

 

Bank loans

0

0

 

Accrued income

449

 
 

Equipment financing and lease obligations, current portion

59,674

68,074

 

Other current liabilities

10,340

12,761

Total current liabilities

138,676

145,574

 

Deferred income taxes

46,829

40,329

Equipment financing, and other liabilities

87,808

93,265

 

Minority Interest

506

9,941

 

Shareholders' equity

311,898

300,986

 

Total liabilities and shareholders' equity

US$ 585,717

US$ 590,095



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