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VimpelCom reports 60% increase in EBITDA for 2nd quarter 1998


  • 84% Year-to-year subscriber growth

 


Moscow and New York (August 27, 1998) - Open Joint Stock Company Vimpel-Communications ("VimpelCom" or the "Company") (NYSE:VIP)
today reported higher EBITDA and continuing subscriber growth for the second quarter ended June 30, 1998.

As of June 30, 1998, VimpelCom had over 135,400 subscribers on its networks. This represents a growth of approximately 84% over the 73,681 subscribers at the end of the second quarter of 1997. At the end of the second quarter of 1998, VimpelCom's 50% subsidiary in Samara had over 8,900 subscribers, a growth of 154% over the 3,500 subscribers at the end of the second quarter of 1997.

Commenting on today's announcement, Dmitri Zimin, President and Chief Executive Officer of VimpelCom said: "We are pleased with our second quarter results particularly with our continued strong revenue and EBITDA growth. In the second quarter, however, we did start to experience some of the effects of the deterioration in the economic situation in Russia, resulting in increased churn and higher provision for doubtful accounts receivable. As telecommunications is a vital sector of the economy, and with cellular penetration rates in Moscow just barely over 3%, there continues to be a good opportunity for long term growth for our company. In addition, despite the current economic situation, July 1998 was the second highest subscriber sales month in our history and August 1998 subscriber sales are already over 20% ahead of August 1997 subscriber sales."

For the second quarter ended June 30, 1998, VimpelCom reported total operating revenues of $103.5 million, a 45% increase over the $71.3 million in total operating revenues reported in the same period in 1997. Net operating revenues (net of revenue-based taxes) in the second quarter of 1998 were $99.3 million, a 45% increase over the $68.3 million in net operating revenues reported in the same period in 1997. Operating income for the second quarter of 1998 was a record $30.4 million, an increase of 54% compared with the $19.7 million in operating income reported in the same period a year ago.

For the six months ended June 30, 1998, VimpelCom reported total operating revenues of $195.9 million, a 42% increase over the $138.0 million in total operating revenues reported in the same period in 1997. Net operating revenues (net of revenue-based taxes) for the six months ended June 30, 1998 were $188.3 million, a 42% increase over the $132.4 million in net operating revenues reported in the same period in 1997. Operating income for the six months of 1998 was $58.8 million, an increase of 47% compared with the $40.0 million in operating income reported in the same period a year ago.

EBITDA for the second quarter of 1998 was strong, reaching $40.3 million, 60% higher than the $25.2 million in the same period in 1997. The EBITDA margin for the second quarter of 1998, was 40.6%, an improvement over the 36.9% EBITDA margin in the same quarter in 1997. The increase in EBITDA margin was due primarily to an improvement in service revenue margins, which more than offset the reduction in the margin on sales of handsets and lower contributions from one-time activation fees.

Net income for the quarter ended June 30, 1998, was $13.7 million, or $0.71 per share ($0.53 per ADS), compared to $15.8 million, or $0.82 per share ($0.61 per ADS), earned in the same period in 1997. Each ADS represents 0.75 of one share of common stock. Net income for the six months ended June 30, 1998, was $30.2 million, or $1.57 per share ($1.17 per ADS), compared to $32.6 million, or $1.69 per share ($1.27 per ADS), earned in the same period in 1997. Net income growth in the second quarter of 1998 was constrained by higher depreciation and financing charges, reflecting the increased investments the Company has been making in its networks, and higher provisions for accounts receivable and income taxes when compared to the same period in 1997.

Selling, general and administrative expenses for the second quarter of 1998 increased 24% to $24.7 million compared to the $19.9 million reported in the same period in 1997. The absolute increase in selling, general and administrative expenses in the second quarter of 1998 was due primarily to a general increase in the level of business activity compared with the same period in 1997.

For the second quarter of 1998, the Company recorded a $6.7 million provision for doubtful accounts compared with $3.2 million in the same period in 1997. This increase in provision for doubtful accounts receivable was in part due to the overall growth in business activity and in part intended to provide for certain customers who are taking longer to pay their bills than they have in the past. The Company continues to believe the provision for doubtful accounts is conservative and adequate.

Depreciation and amortization expense was $9.9 million for the second quarter of 1998, an 80% increase compared to $5.5 million in the same period of 1997. The increase was due to the increased depreciable asset base resulting from the Company's continuing capital investments in its D-AMPS and GSM-1800 networks.

VimpelCom is the largest provider of cellular telecommunications in Russia, marketing its services under the brand name "Bee Line". The VimpelCom Group operates the only Digital-AMPS cellular network and the first Russian PCS network, using GSM technology, in the Moscow License Area, which includes the City of Moscow and the Moscow Region. The VimpelCom Group holds various GSM-1800 and AMPS/D-AMPS licenses covering a total population of approximately 100 million (68% of Russia's population). VimpelCom was the first Russian company listed on the New York Stock Exchange (November 1996), trading under the symbol "VIP".

This press release contains forward-looking statements related to the development of the Company's business. These statements are based on Management's best assessment of future market conditions and trends. The actual outcome may differ 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. 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

Mona Walsh/AJ Goodman
Edelman Financial
1 (212) 704 4423/8101
mona_walsh@edelman.com
adam_goodman@edelman.com

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

  Three months ended
June 30,
Six months ended
June 30,
  1998 1997 1998 1997
  (In thousands, except per share (ADS) amounts)
Operating revenues  
   Service revenues and connection fees US$ 93,154 US$ 63,477 US$ 177,545 US$ 121,911
   Sales of handsets and accessories 9,847 6,361 17,779 14,361
   Installation and equipment contracts    490    1,420    586    1,715
      Total operating revenues 103,491 71,258 195,910 137,987
   less revenue-based taxes    4,227    2,979    7,564    5,561
Net operating revenues 99,264 68,279 188,346 132,426
 
Operating expenses:  
   Service costs 19,402 14,846 36,291 28,148
   Cost of handsets and accessories sold 7,739 4,332 13,562 9,564
   Cost of installation and equipment contracts 344 810 355 1,075
   Selling, general and administrative expenses 24,715 19,882 48,446 37,222
   Depreciation and amortization 9,877 5,487 19,028 9,679
   Provision for doubtful accounts    6,738    3,210    11,884    6,711
Total Operating expenses    68,815    48,567    129,566    92,399
 
Operating income 30,449 19,712 58,780 40,027
 
Other income and expenses:  
   Other income 352 137 722 137
   Interest income (730) 3,425 (81) 4,592
   Interest expense (3,603) (1,378) (6,016) (2,764)
   Net foreign exchange (loss) gain    (260)    568    (2,482)    2,410
Total other income and expenses    (4,241)    2,752    (7,857)    4,375
 
Income before income taxes and minority interest 26,208 22,464 50,923 44,402
 
Provision for income taxes 12,466 6,747 20,206 11,824
Minority interest in net losses of subsidiaries    67    (91)    516    (39)
Net income    US$ 13,675    US$ 15,808    US$ 30,201    US$ 32,617
 
Net income per common share $0.71 $0.82 $1.57 $1.69
Net income per ADS equivalent $0.53 $0.61 $1.17 $1.27
Weighted average common shares outstanding (thousands) 19,280 19,280 19,280 19,280
 
EBITDA US $40,326 US $25,199 US $77,808 US $49,706



Open Joint Stock Company Vimpel-Communications
Condensed Consolidated Balance Sheet

  June 30,
1998
(Unaudited)
December 31,
1997

 
 (In thousands US dollars)
Assets  
Current Assets:  
  Cash and cash equivalents US$ 34,290 US$ 14,333
  Short-term investments 14,016 24,169
  Accounts receivable 54,558 41,487
  Other current assets    43,711    34,436
Total current assets 146,575 114,425
 
Property and equipment, net 398,714 347,653
Other assets    26,216    21,020
Total Assets    571,505    483,098
 
Liabilities and shareholders' equity  
Current liabilities:  
  Accounts payable US$ 15,786 US$ 12,287
  Customer deposits 61,503 51,738
  Bank loans 10,000 11,001
  Equipment financing, current portion 15,464 10,389
  Other accrued liabilities    22,254    11,382
Total current liabilities 125,007 96,797
 
Deferred incomes taxes 42,851 35,201
Equipment financing and other liabilities 158,793 136,962
 
Minority interest 7,002 6,487
 
Shareholders' equity    237,852    207,651
 
Total liabilities and shareholders' equity    US$ 571,505    US$ 483,098



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