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VimpelCom announces second quarter and six month 2004 financial and operating results

  • 61% year-on-year increase in net operating revenues
  • 73% year-on-year increase in net income
  • 75% year-on-year increase in OIBDA
  • approximately 18.3 million subscribers
  • commercial operations in 70 regions of Russia

Moscow and New York (August 26, 2004) - Open Joint Stock Company "Vimpel-Communications" ("VimpelCom" or the "Company") (NYSE: VIP), a leading provider of wireless telecommunications services in Russia, today announced its financial and operating results for the quarter and six months ended June 30, 2004. During the second quarter, the Company reported rapid subscriber growth in the regions and increases in net operating revenues, OIBDA and net income. Consolidated financial statements of VimpelCom and consolidated financial statements of VimpelCom-Region, VimpelCom's subsidiary for regional development, are attached.

Commenting on today's announcement, Alexander Izosimov, Chief Executive Officer of VimpelCom, said, "We are pleased with the Company's performance in the second quarter. We added approximately 3 million new subscribers, our largest quarterly increase in new subscribers in the Company's history. We launched five new networks in the regions and gained access to operations in three regions in the Far East through an acquisition. In addition, our financial results continue to strengthen, with our OIBDA margin reaching a new high of 49.8%." Mr. Izosimov continued: "We are pleased to see progress with the supply of numbering capacity and we look forward to continued strong growth, particularly in the Russian regions."

Key Financial and Operating Indicators

(Definitions as well as reconciliation of each of OIBDA,
OIBDA margin, ARPU and SAC to its most directly comparable U.S. GAAP
financial measures are presented below in the attachment)

  Three months ended Six months ended
June
30, 2004
June
30, 2003
Change
Y-on-Y
(%)
June
30, 2004
June
30, 2003
Change
Y-on-Y
(%)
Net operating revenues (US$,000) 490,901 304,440 61.2% 908,598 548,877 65.5%
OIBDA (US$,000) (1) 244,694 139,929 74.9% 446,719 247,865 80.2%
OIBDA margin (2) 49.8% 46.0% - 49.2% 45.2% -
Gross margin (US$,000) (3) 406,217 249,022 63.1% 748,358 445,592 67.9%
Gross margin percentage (4) 82.7% 81.8% - 82.4% 81.2% -
Net income (US$,000) 90,955 52,647 72.8% 167,086 94,034 77.7%
Net income per share (US$) 2.26 1.38 63.8% 4.16 2.47 68.4%
Net income per ADS (US$) (5) 1.70 1.04 63.5% 3.12 1.85 68.6%
ARPU (US$) (6) 10.8 14.3 -24.7% 10.8 13.9 -22.6%
MOU, revised definition (min) (7) 96.3 100.2 -3.9% 94.1 94.4 -0.4%
SAC (US$) (8) 14.1 21.1 -33.0% 15.3 21.0 -27.2%

Significant improvements in VimpelCom's financial and operating results in the second quarter of 2004, as compared with the second quarter of 2003, were achieved largely as a result of rapid subscriber growth combined with the effects of economies of scale, efficient cost control and lower acquisition costs per subscriber in the regions outside of Moscow.

The Company's financial results include the activities in the Moscow license area and in the regions. Net operating revenues, excluding inter-company transactions, for Moscow stand-alone and the regions in the second quarter of 2004 were $289.1 million and $201.8 million, respectively. Net income for Moscow stand-alone and in the regions in the second quarter of 2004 was $68.9 million and $43.0 million, respectively.

Selling, general and administrative ("SG&A") expenses, as a percentage of net operating revenues, improved to 32.3% reported in the second quarter of 2004 as compared with 35.1% in the second quarter of 2003. In part, it was caused by a temporary decrease in subscriber acquisition costs in Moscow in the second quarter of 2004 due to the transition from payments of a one-time dealer commission to payments of dealer commissions over six months.

VimpelCom's total capital expenditures for the second quarter of 2004 were approximately $272.4 million, spent for the purchase of long-lived assets. On June 30, 2004, VimpelCom acquired approximately 93.5% of the outstanding shares of Dal Telecom International for a total purchase price of approximately US$74.1 million. Dal Telecom International, which operates in three regions in the Russian Far East, has short-term debt of approximately US$8.0 million.

As previously disclosed, in January 2004, VimpelCom adopted a new depreciation policy. Based on periodic internal studies of the useful economic lives of the Company's property and equipment, the Company changed the estimated useful life of GSM telecommunications equipment from 9.5 to 7 years. This new policy was largely responsible for the increase to $62.7 million in depreciation reported for the second quarter of 2004 as compared to the $33.9 million reported for the same period in 2003. Depreciation expense did not increase significantly in the second quarter of 2004 as compared to the $57.3 million reported for the first quarter of 2004.

The Company's MOU in the second quarter of 2004 was 96.3 minutes, a decrease of approximately 3.9% compared to 100.2 minutes recorded in the second quarter of 2003. As compared with 91.4 minutes recorded for the first quarter of 2004, MOU increased by 5.3%, primarily due to seasonal effects. ARPU for the second quarter of 2004 was approximately $10.8, a 24.7% decrease from the $14.3 reported for the second quarter of 2003. The downward trend in ARPU is caused primarily by rapid regional expansion, which increases the proportion of lower ARPU regional subscribers in the network. A very competitive environment in some regions amplifies this trend by putting additional pressure on tariffs. As compared with the first quarter of 2004, these effects were offset primarily by the seasonal increase in MOU.

 

Key Subscriber Statistics

  As of
June 30, 2004
As of
June 30, 2003
Change,
Y-on-Y
(%)
As of
March 31, 2004
Change
Q-on-Q
(%)
Moscow license area 6,183,400 4,428,800 39.6% 6,042,300 2.3%
Contract 843,900 763,200 10.6% 826,800 2.1%
Prepaid 5,339,500 3,665,600 45.7% 5,215,500 2.4%
Regions (predominantly prepaid subscribers) 10,120,500 3,004,800 236.8% 7,329,200 38.1%
Total Number of Subscribers 16,303,900 7,433,600 119.3% 13,371,500 21.9%
 
Churn (quarterly) 9.4% 10.5% - 8.6% -


The Company reported a record subscriber growth in the second quarter of 2004 due to the acceleration in subscriber growth in the regions, the launch of new networks in five regions and the acquisition of Dal Telecom International, a cellular operator in three regions of the Russian Far East. The acquisition was closed on June 30, 2004, as a result of which VimpelCom obtained approximately 322,000 additional subscribers as of the date of acquisition. VimpelCom's subscriber growth in the second quarter of 2004 was negatively affected by the shortage of numbering capacity, particularly in Moscow. As previously disclosed, VimpelCom was granted additional numbering capacity in August both for Moscow and the regions.

Using independent sources to estimate the number of subscribers of the Company's competitors, VimpelCom estimates its market share in Russia at 32.9% at the end of the second quarter of 2004, compared to 30.0% estimated at the end of the second quarter of 2003. VimpelCom's market share in the Moscow license area was 46.0% at the end of the second quarter of 2004, compared to the Company's estimated market share of 48.8% reported at the end of the second quarter of 2003.

The Company's quarterly churn rate in the second quarter of 2004 was 9.4%, compared to the Company's churn rate of 10.5% reported for the same period in 2003. An increase in churn rate as compared with the 8.6% churn rate reported for the first quarter of 2004 was primarily due to the shortage of numbering capacity which forced the Company to temporarily reduce the termination period for inactive subscribers. This resulted in approximately 200,000 additional disconnects, which increased the second quarter churn rate by approximately 1.4%.

The Company's management will discuss its second quarter 2004 results during a conference call and slide presentation on August 26, 2004 at 6:30 pm Moscow time (10:30 am EDT in New York). The call and slide presentation may be accessed via webcast at the following URL address http://www.vimpelcom.com. The conference call replay and the slide presentation webcast will be available through September 2, 2004 and September 27, 2004, respectively. The slide presentation will also be available for download on VimpelCom's website http://www.vimpelcom.com.

VimpelCom is a leading provider of telecommunications services in Russia, operating under the "Bee Line GSM" brand. The VimpelCom Group's license portfolio covers approximately 94% of Russia's population (136 million people), including the City of Moscow, the Moscow Region and the City of St. Petersburg. 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 plans. These and other forward-looking statements 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 regulation of the wireless telecommunications industry, general political uncertainties in Russia and general economic developments in Russia, the Company's ability to continue to grow its overall subscriber base, continued volatility in the world economy 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, 2003 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)
Tel: 7(095) 974-5888
vgoldin@vimpelcom.com
Christopher Mittendorf
Edelman Financial Worldwide
Tel: 1(212) 704-8134
christopher.mittendorf@edelman.com


- Definitions and Tables attached-


Definitions

  1. OIBDA is a non-U.S. GAAP financial measure. OIBDA, previously referred to as EBITDA by the Company, is defined as operating income before depreciation, amortization and one-time write-down of AMPS/D-AMPS related assets in the Samara region of $7,354 thousand in the second quarter of 2004. The Company believes that OIBDA provides useful information to investors because it is an indicator of the strength and performance of our business operations, including our ability to finance capital expenditures, acquisitions and other investments and our ability to incur and service debt. While depreciation, amortization and one-time write-down of AMPS/D-AMPS related assets in the Samara region of $7,354 thousand in the second quarter of 2004, are considered operating costs under U.S. GAAP, these expenses primarily represent the non-cash current period allocation of costs associated with long-lived assets acquired or constructed in prior periods. Our OIBDA calculations are commonly used as bases for some investors, analysts and credit rating agencies to evaluate and compare the periodic and future operating performance and value of companies within the wireless telecommunications industry. OIBDA should not be considered in isolation as an alternative to net income, operating income or any other measure of performance under U.S. GAAP. OIBDA does not include our need to replace our capital equipment over time. Reconciliation of OIBDA to operating income, the most directly comparable U.S. GAAP financial measure, is presented below in the tables section.
  2. OIBDA margin is OIBDA expressed as a percentage of total operating revenues. Reconciliation of OIBDA margin to operating income as a percentage of total operating revenues, the most directly comparable U.S. GAAP financial measure, is presented below in the tables section.
  3. Gross margin is defined as total operating revenues less service costs and cost of handsets and accessories sold.
  4. Gross margin percentage is gross margin expressed as a percentage of total operating revenues.
  5. Each ADS represents 0.75 of one share of common stock.
  6. Monthly ARPU (Monthly Average Revenue per User), a non-U.S. GAAP financial measure, is calculated for each month in the relevant period by dividing the Company's service revenue during that month, including roaming revenue, but excluding revenue from connection fees, sales of handsets and accessories and other non-service revenue, by the average number of the Company's subscribers during the month. Reconciliation of ARPU to service revenues and connection fees, the most directly comparable U.S. GAAP financial measure, is presented below in the tables section. The Company believes that ARPU provides useful information to investors because it is an indicator of the performance of the Company's business operations and assists management in budgeting. The Company also believes that ARPU provides management with useful information concerning usage and acceptance of the Company's services. ARPU should not be viewed in isolation or an alternative to other figures reported under U.S. GAAP.
  7. MOU (Monthly Average Minutes of Use per User) is calculated for each month of the relevant period by dividing the total number of minutes of usage for incoming and outgoing calls during that month (excluding guest roamers) by the average number of subscribers during the month.
  8. SAC (Average Acquisition Cost Per User), a non-U.S. GAAP financial measure, is calculated as dealers' commissions, advertising expenses and handset subsidies for the relevant period divided by the number of new subscribers added during the relevant period. Reconciliation of SAC to selling, general and administrative expenses, the most directly comparable U.S. GAAP financial measure, is presented below in the tables section. The Company believes that SAC provides useful information to investors because it is an indicator of the performance of the Company's business operations and assists management in budgeting. The Company also believes that SAC assists management in quantifying the incremental costs to acquire a new subscriber. SAC should not be viewed in isolation or as an alternative to other figures reported under U.S. GAAP.

Open Joint Stock Company "Vimpel-Communications"
Unaudited Condensed Consolidated Statements of Income

  Three months ended
June 30,
Six months ended
June 30,
2004 2003 2004 2003
(In thousands of US dollars , except per share (ADS) amounts)
Operating revenues:  
  Service revenues and connection fees US$472,808 US$290,426 US$873,711 US$520,525
Sales of handsets and accessories 17,507 12,956 33,281 26,382
Other revenues 586 1,058 1,606 1,970
Total operating revenues 490,901 304,440 908,598 548,877
 
Operating expenses:  
  Service costs 69,327 42,774 131,692 79,934
Cost of handsets and accessories sold 15,357 12,644 28,548 23,351
Selling, general and administrative expenses 158,537 106,721 296,550 192,031
Depreciation 62,743 33,914 120,080 65,592
Amortization 9,513 8,738 18,656 16,110
Impairment of long-lived assets 7,354 0 7,354 0
Provision for doubtful accounts 2,986 2,372 5,089 5,696
Total operating expenses 325,817 207,163 607,969 382,714
 
Operating income 165,084 97,277 300,629 166,163
 
Other income and expenses:  
  Other income 534 90 888 664
Other expenses (898) (950) (1,301) (1,382)
Interest income 362 2,278 1,863 4,276
Interest expense (12,904) (17,961) (26,760) (33,997)
Net foreign exchange gain (loss) 861 (1,286) 2,532 41
Total other income and expenses (12,045) (17,829) (22,778) (30,398)
 
Income before income taxes and minority interest 153,039 79,448 277,851 135,765
 
Income taxes expense 44,040 23,129 80,739 38,041
Minority interest in net earnings of subsidiaries 18,044 3,672 30,026 3,690
 
Net income US$90,955 US$52,647 US$167,086 US$94,034
 
Net income per common share US$2.26 US$1.38 US$4.16 US$2.47
Net income per ADS equivalent US$1.70 US$1.04 US$3.12 US$1.85
Weighted average common shares outstanding (thousands) 40,178 38,079 40,175 38,076
 

Open Joint Stock Company "Vimpel-Communications"
Unaudited Condensed Consolidated Balance Sheets
 
  June 30,
2004
December 31,
2003
(In thousands of US dollars)
Assets  
Current assets:
  Cash and cash equivalents US$243,553 US$157,611
Trade accounts receivable 108,375 113,092
Other current assets 290,580 255,540
Total current assets 642,508 526,243
 
Non-current assets:
  Property and equipment, net 1,720,740 1,460,542
Telecommunication licenses and allocation of frequencies, net 130,963 103,817
Other intangible assets, net 106,614 59,369
Other assets 213,151 152,261
Total non-current assets 2,171,468 1,775,989
 
Total assets US$ 2,813,976 US$ 2,302,232
 
Liabilities and shareholders' equity
Current liabilities:
  Accounts payable 200,128 158,467
Due to related parties 6,330 8,603
Customer advances and deposits 209,749 181,475
Deferred revenue 2,626 2,701
Ruble denominated bonds payable, current portion 34,450 101,852
Bank loans, current portion 288,211 35,343
Capital lease obligation, current portion 6,879 6,587
Equipment financing obligations, current portion 53,697 70,935
Accrued liabilities 68,738 127,689
Total current liabilities 870,808 693,652
 
Deferred income taxes 71,810 34,380
Bank loans, less current portion 442,084 330,112
Capital lease obligation, less current portion 6,974 9,154
Ruble denominated bonds payable, less current portion 14,382 -
Accrued liabilities, less current portion 5,214 4,046
Equipment financing obligations, less current portion 23,949 53,008
 
Minority Interest 211,395 179,664
 
Shareholders' equity 1,167,360 998,216
 
Total liabilities and shareholders' equity US$2,813,976 US$2,302,232
 
Open Joint Stock Company "Vimpel-Communications"
Unaudited Condensed Consolidated Statements of Cash Flows
 
  Six months ended
June 30,
2004 2003
(In thousands of US dollars)
Net cash provided by operating activities US$ 298,657 US$ 196,614
 
Proceeds from bank and other loans 382,325 121,732
Proceeds from issuance of ruble denominated bonds 5,200 97,119
Payments of fees in respect of bank loans (7,216) -
Payments of fees in respect of debt issue (2,500) (1,815)
Repayment of rouble denominated bonds (59,764) -
Repayment of bank and other loans (25,668) (57,545)
Repayment of equipment financing obligations (43,126) (149,384)
Repayment of lease obligations (260) (661)
Net cash provided by financing activities 248,991 9,446
 
Purchase of property and equipment (334,895) (221,754)
Purchase of StavTeleSot stock, net of cash acquired of US$658 - (38,143)
Purchase of DalTelecom stock, net of cash acquired of US$382 (73,689) -
Purchase of intangible assets (15,219) (12,387)
Purchase of other assets (38,890) (14,420)
Net cash used in investing activities (462,693) (286,704)
 
Effect of exchange rate changes on cash 987 5,477
 
Net increase (decrease) in cash 85,942 (75,167)
Cash and cash equivalents at beginning of period 157,611 263,657
Cash and cash equivalents at end of period US$243,553 US$188,490
 
Supplemental cash flow information
 
Non-cash activities:
  Equipment acquired under financing and capital lease agreements US$1,659 US$68,053
Accounts payable for equipment and other long-lived assets 77,004 25,587
Accrued debt and equity offering costs 1,230 249
Operating activities financed by sale of treasury stock 1,268 1,777
Acquisitions:
  Fair value of assets acquired 86,655 66,634
Difference between the amount paid and the fair value of net assets acquired 17,401 (4,699)
Cash paid for the capital stock (74,071) (38,801)
  Liabilities assumed US$29,985 US$23,134


Reconciliation of VimpelCom OIBDA to operating income (Unaudited)
(In thousands of US dollars)


  Three months ended
June 30, 2004 March 31, 2004 June 30, 2003
OIBDA 244,694 202,025 139,929
Impairment loss (7,354) - -
Depreciation (62,743) (57,337) (33,914)
Amortization (9,513) (9,143) (8,738)
Operating income 165,084 135,545 97,277


Reconciliation of VimpelCom OIBDA margin to operating income as percentage of net operating revenues
(Unaudited)


  Three months ended
June 30, 2004 March 31, 2004 June 30, 2003
OIBDA margin 49.8% 48.4% 46.0%
Less: Impairment loss (1.5%) 0% 0%
Less: Depreciation as percentage of net operating revenues (12.8%) (13.7%) (11.1%)
Less: Amortization as percentage of net operating revenues (1.9%) (2.2%) (2.9%)
Operating income as percentage of net operating revenues 33.6% 32.5% 32.0%


Reconciliation of SAC to selling, general and administrative expenses(Unaudited)
(In thousands of US dollars, except for SAC and subscriber amounts)


  Three months ended
June 30, 2004 March 31, 2004 June 30, 2003
Selling, general and administrative expenses 158,537 138,013 106,721
Less: General and administrative expenses 102,247 87,865 65,474
Sales and marketing expenses, including 56,290 50,148 41,247
advertising & marketing expenses 16,468 13,245 13,518
dealers' commission expense 39,822 36,903 27,729
New gross subscribers,'000 3,987 2,979 1,959
Subscriber Acquisition Cost (SAC) (US$) 14.1 16.8 21.1


Reconciliation of ARPU to service revenue and connection fees (Unaudited)
(In thousands of US dollars, except for ARPU and subscriber amounts)


  Three months ended
June 30, 2004 March 31, 2004 June 30, 2003
Service revenue and connection fees US$472,808 US$400,903 US$290,426
Less: Connection fees 151 185 379
Less: Revenue from rent of fiber-optic channels 304 549 278
Service revenue used to calculate ARPU 472,353 400,169 289,769
Average number of subscribers,'000 14,625 12,318 6,754
Average revenue per subscriber per month (US$) 10.8 10.8 14.3


Reconciliation of VimpelCom OIBDA to operating income (Unaudited)
(In thousands of US dollars)


  Six months ended
June 30, 2004 June 30, 2003
OIBDA 446,719 247,865
Impairment loss (7,354) -
Depreciation (120,080) (65,592)
Amortization (18,656) (16,110)
Operating income 300,629 166,163


Reconciliation of VimpelCom OIBDA margin to operating income as percentage of net operating revenues
(Unaudited)


  Six months ended
June 30, 2004 June 30, 2003
OIBDA margin 49.2% 45.2%
Less: Impairment loss (0.8%) 0%
Less: Depreciation as percentage of net operating revenues (13.2%) (12.0%)
Less: Amortization as percentage of net operating revenues (2.1%) (2.9%)
Operating income as percentage of net operating revenues 33.1% 30.3%


Reconciliation of SAC to selling, general and administrative expenses (Unaudited)
(In thousands of US dollars, except for SAC and subscriber amounts)

  Six months ended
June 30, 2004 June 30, 2003
Selling, general and administrative expenses 296,550 192,031
Less: General and administrative expenses 190,112 122,117
Sales and marketing expenses, including 106,438 69,914
advertising & marketing expenses 29,713 22,963
dealers' commission expense 76,725 46,951
New gross subscribers,'000 6,967 3,333
Subscriber Acquisition Cost (SAC) (US$) 15.3 21.0


Reconciliation of ARPU to service revenue and connection fees (Unaudited)
(In thousands of US dollars, except for ARPU and subscriber amounts)


  Six months ended
June 30, 2004 June 30, 2003
Service revenue and connection fees US$873,711 US$520,525
Less: Connection fees 336 716
Less: Revenue from rent of fiber-optic channels 853 649
Service revenue used to calculate ARPU 872,522 519,160
Average number of subscribers,'000 13,471 6,207
Average revenue per subscriber per month (US$) 10.8 13.9


Open Joint Stock Company "VimpelCom-Region"
Unaudited Condensed Consolidated Statements of Income

  Three months ended
June 30,
2004 2003
(In thousands of US dollars, except per share (ADS) amounts)
Operating revenues:  
  Service revenues and connection fees 209,344 83,212
Sales of handsets and accessories 8,643 7,700
Other revenues 574 892
Total operating revenues 218,561 91,804
 
Operating expenses  
  Service costs 38,915 17,665
Cost of handsets and accessories sold 8,199 6,929
Equipment lease 2,763 2,233
Selling, general and administrative expenses 69,458 28,884
Network maintenance 4,518 2,296
Depreciation and amortization 26,222 14,161
Provision for doubtful accounts 1,845 554
Total operating expenses 151,920 72,722
 
Operating income 66,641 19,082
 
Other income and expenses:  
  Other income (414) (24)
Other expenses 128 281
Interest income (219) (239)
Interest expense 5,414 5,925
Net foreign exchange gain (568) (369)
Total other income and expenses 4,341 5,574
 
Income before income taxes and minority interest 62,300 13,508
 
Income taxes expense 16,764 4,573
Minority interest in net earnings of subsidiaries 59 286
 
Net income 45,477 8,649
 

*) Net income of VimpelCom-Region as a legal entity differs from the $42,960 million net income reported above in this press release for the regional segment for the second quarter of 2004. The difference is caused by the fact that the financial statements of BeeLine-Samara are included in the regions for segment reporting purposes, but are not included in the consolidated financial statements of VimpelCom-Region. BeeLine-Samara operates in the Samara region but, for historical reasons, is owned directly by VimpelCom. The following table provides reconciliation between these figures (all numbers are in thousands of US$):

  Three months ended
June 30, 2004
Net income of VimpelCom-Region 45,477
Net income of BeeLine-Samara (5,033)
Net effect of transactions between VimpelCom-Region and BeeLine-Samara 2,516
Net income of VimpelCom's regional segment 42,960


Operating revenue of VimpelCom-Region as a legal entity differs from the $201,760 million operating revenues for the regional segment excluding inter-company transactions, reported above in this press release for the second quarter of 2004. The following table provides reconciliation between these figures (all numbers are in thousands of US$):

  Three months ended
June 30, 2004
Operating revenue of VimpelCom-Region 218,561
Operating revenue of BeeLine-Samara 8,114
Net effect of transactions between VimpelCom-Region and BeeLine-Samara (4,321)
Operating revenue of VimpelCom's regional segment 222,354
Inter-company operating revenue of VimpelCom-Region and BeeLine-Samara (20,594)
Regional segment operating revenue excluding inter-company transactions 201,760


Open Joint Stock Company "VimpelCom-Region"
Unaudited Condensed Consolidated Balance Sheets
 
  June 30,
2004
December 31,
2003
(In thousands of US dollars)
Assets  
Current assets:
  Cash and cash equivalents US$32,801 US$42,729
Trade accounts receivable 13,513 22,726
Other current assets 176,729 137,529
Total current assets 223,043 202,984
 
Non-current assets:
  Property and equipment, net 827,930 624,306
Telecommunication licenses and allocation of frequencies, net 77,427 87,175
Other intangible assets, net 30,759 20,383
Other assets 108,653 62,995
Total non-current assets 1,044,769 794,859
 
Total assets US$1,267,812 US$997,843
 
Liabilities and shareholders' equity
Current liabilities:
  Accounts payable US$108,400 US$73,345
Due to related parties 122,054 71,420
Customer advances and deposits 72,282 41,916
Deferred revenue 1,125 713
Rouble denominated bonds payable, current portion 34,450 101,852
Bank loans, current portion 16,111 4,710
Capital lease obligation, current portion - -
Equipment financing obligations, current portion 10,164 17,078
Accrued liabilities 15,951 16,076
Total current liabilities 380,537 327,110
 
Deferred income taxes 21,019 24,713
Bank loans, less current portion 88,401 66,500
Long-term loans due to VimpelCom 295,435 176,231
Equipment financing obligations, less current portion 6,594 16,097
Rouble denominated bonds payable, less current portion 14,382 -
Accrued liabilities 3,263 2,718
 
Minority Interest 481 350
 
Shareholders' equity 457,700 384,124
 
Total liabilities and shareholders' equity US$1,267,812 US$997,843
 
Open Joint Stock Company "VimpelCom-Region"
Unaudited Condensed Consolidated Statements of Cash Flows
 
  Six months ended
June 30,
2004 2003
(In thousands of US dollars)
 
Net cash provided by operating activities US$ 173,076 US$ 32,836
 
Proceeds from bank and other loans 34,081 99,144
Proceeds from loans from VimpelCom 119,144 54,243
Proceeds from issuance of rouble denominated bonds 5,200 97,119
Repayment of issuance of rouble denominated bonds (59,764) -
Payment of fees in respect of bank loans (6,956) -
Repayment of bank and other loans (887) (34,488)
Repayment of equipment financing obligations (15,522) (120,259)
Repayment of capital lease obligations - (119)
Net cash provided by financing activities 75,296 95,640
 
Purchase of property and equipment (215,348) (103,951)
Purchase of StavTeleSot stock, net of cash acquired of US$658 - (38,143)
Purchase of intangible assets (12,805) (8,944)
Purchase of other assets (30,714) (3,058)
Net cash used in investing activities (258,867) (154,096)
 
Effect of exchange rate changes on cash 567 1,557
 
Net decrease in cash (9,928) (24,063)
Cash and cash equivalents at beginning of year 42,729 52,703
 
Cash and cash equivalents at end of year US$32,801 US$28,640


Reconciliation of VimpelCom-Region OIBDA to operating income (Unaudited)
(In thousands of US dollars)


  Three months ended
June 30, 2004 March 31, 2004 June 30, 2003
OIBDA 92,863 69,923 33,243
Depreciation (19,616) (18,194) (8,524)
Amortization (6,606) (6,166) (5,637)
Operating income 66,641 45,563 19,082


Reconciliation of VimpelCom-Region OIBDA margin to operating income as percentage of net operating revenues (Unaudited)

  Three months ended
June 30, 2004 March 31, 2004 June 30, 2003
OIBDA margin 42.5% 40.1% 36.2%
Less: Depreciation as percentage of net operating revenues (9.0%) (10.4%) (9.3%)
Less: Amortization as percentage of net operating revenues (3.0%) (3.5%) (6.1%)
Operating income as percentage of net operating revenues 30.5% 26.2% 20.8%


Reconciliation of VimpelCom-Region OIBDA to operating income
(Unaudited)
(In thousands of US dollars)


  Six months ended
June 30, 2004 June 30, 2003
OIBDA 162,786 48,633
Depreciation (37,810) (15,284)
Amortization (12,772) (10,187)
Operating income 112,204 23,162


Reconciliation of VimpelCom-Region OIBDA margin to operating income as percentage of net operating revenues (Unaudited)

  Six months ended
June 30, 2004 June 30, 2003
OIBDA margin 41.4% 31.0%
Less: Depreciation as percentage of net operating revenues (9.6%) (9.7%)
Less: Amortization as percentage of net operating revenues (3.3%) (6.5%)
Operating income as percentage of net operating revenues 28.5% 14.8%
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