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VimpelCom announces third quarter and nine month financial results

  • 61% Revenue growth year-to-year
  • 190% EBITDA Growth year-to-year
  • 1.8 Million subscribers as of today

Moscow and New York (November 27, 2001) - Open Joint Stock Company "Vimpel-Communications" ("VimpelCom" or the "Company") (NYSE: VIP) today announced its financial results for the quarter and nine months ended September 30, 2001. During the quarter ended September 30, 2001, VimpelCom showed further improvement in its revenue, EBITDA and net income figures, reporting net income of approximately $13.9 million. Subscriber growth has accelerated in the second half of 2001 to date and VimpelCom reported approximately 1,800,000 subscribers on all of its wireless networks as of November 27, 2001 (including subscribers on networks operated by VimpelCom's subsidiaries), with approximately 1,635,000 subscribers in the Moscow license area.

VimpelCom has continued to strengthen its business, improving indoor coverage in Moscow, enhancing its support systems to increase the efficiency of its distribution network and customer service and introducing new value added services, including GPRS. Having introduced prepaid roaming, VimpelCom significantly increased the attractiveness of its prepaid offerings. All of these measures accelerated subscriber growth and helped reduce the Company's churn rate.

VimpelCom-Region, VimpelCom's arm for national expansion outside of Moscow, has also increased its activities. In the past two months VimpelCom-Region launched GSM networks and started commercial operations in eight regions in Central Russia (Lipetsk, Smolensk, Yaroslavl, Tula, Tver, Kaluga, Vladimir and Ryazan). Following the closing of the first tranche of investment of $103 million by Alfa Group on November 5, 2001, VimpelCom-Region will further intensify the scale and speed of its national development. Particularly, in the next few months VimpelCom-Region plans to launch GSM networks and start commercial operations in several large industrial centers, such as Rostov, Nizhny Novgorod and Novosibirsk.

Key Financial and Operating Indicators

 

3 months ended 9 months ended

Sept. 30,2001 Sept. 30,2000 Change (%) Sept. 30,2001 Sept. 30,2000 Change (%)
Net revenue (US$,000) 114,098 70,716 61.3% 288,520 199,304 44.8%
EBITDA (US$,000) 40,940 14,134 189.7% 104,700 38,181 174%
EBITDA margin 35.9% 20.0% 79.5% 36.3% 19.2% 89.1%
Net income/(loss) (US$,000) 13,915 (5,875) 336.9% 28,455 (24,374) 216%
ARPU(US$) (1) 27.8 36.4 -23.6% 27.6 39.5 -30.1%
MOU (min) (2) 110.8 89.4 23.9% 105.0 87.8 19.6%
SAC, (US$) (3) 40.9 75.2 -45.6% 40.1 80.7 -50.3%

Note:

  1. ARPU (Monthly Average Revenue per User) is calculated for each month in the relevant period by dividing our service revenue during that month, including roaming revenue but excluding revenue from connection fees and sales of handsets and accessories, by the average number of our customers during the month.

  2. MOU (Monthly Average Minutes of Use per User) is calculated for each month of the relevant period by dividing the total number of billable minutes of usage for incoming and outgoing calls during that month (excluding guest roamers) by the average number of customers during the month.

  3. SAC (Subscriber Acquisition Cost) is calculated as dealer commissions, advertising expenses and handset subsidies for the period divided by the number of gross sales during the period.

VimpelCom's net operating revenues (net of revenue-based taxes) for the quarter ended September 30, 2001 were approximately $114.1 million, a 61.3% increase from the $70.7 million reported for the third quarter of 2000 and a 20.5% increase from the $94.7 million reported for the second quarter of 2001. Revenue growth was largely due to the increase in the number of subscribers using the Company's network.

In the third quarter of 2001, the Company's net income was approximately $13.9 million, or net income of $0.42 per common share ($0.32 per ADS), compared with a net loss of $5.9 million, or a net loss of $0.19 per common share ($0.14 per ADS) in the same period in 2000. Each ADS represents 0.75 of one share of common stock.

EBITDA for the third quarter of 2001 was approximately $40.9 million, a 189.7% increase from the $14.1 million reported in the same period in 2000. The Company's EBITDA margin for the third quarter of 2001 was approximately 35.9% compared to approximately 20.0% for the same period of 2000. Growth in EBITDA in the third quarter of 2001 compared with previous periods was primarily due to an increase in the Company's revenues with a lower increase in the corresponding costs.

Consolidated figures reported in this press release included the activities of VimpelCom-Region, which were predominantly in the phase of network build-out and infrastructure development with expenses exceeding revenues. Consequently, for the third quarter of 2001, net operating revenues, EBITDA, EBITDA margin and net income for the Company's Moscow operations alone were $111.7 million, $42.3 million, 37.9% and $15.9 million, respectively.

Gross margin in the third quarter of 2001 was 73.2% compared with gross margin of 66.3% recorded for the same period of 2000. This improvement was largely due to the growth in usage of low-cost federal telephone numbers and improved interconnect agreements with telephone line providers.

Selling, general and administrative expenses totaled approximately $38.7 million in the third quarter of 2001, an increase of 40.7% compared to the $27.5 million reported in the same period of 2000. This increase, driven by higher sales volumes, was significantly lower than the corresponding increase in revenues, primarily due to the decrease in the acquisition cost per subscriber to $40.9 in the third quarter of 2001 from $75.2 in the third quarter of 2000. The reduction in acquisition cost per subscriber was due in part to the increased percentage of sales through the Company's own offices.

For the third quarter of 2001, the Company recorded a $3.8 million provision for doubtful accounts receivable, a 26.9% reduction compared with $5.2 million reported in the same period in 2000. This reduction in provision for doubtful accounts was the result of improved quality of VimpelCom's subscriber base and improved risk management procedures.

As a result of changes in the law on taxation enacted in August 2001, the Company's income tax rate will be 24% effective January 1, 2002. This reduction in the Company's income tax rate resulted in a deferred tax benefit of approximately $5.8 million in the third quarter of 2001. Also impacting the quarter was a foreign exchange loss of $3.6 million ($1.6 million for the nine month period) caused primarily by a fall in the value of the U.S. dollar relative to the Euro which resulted in the revaluation of Euro-denominated liabilities.

Depreciation and amortization expense for the third quarter of 2001 was approximately $15.5 million, a small increase compared to the $15.1 million reported in the same period of 2000. This small increase in depreciation expense despite significant capital investments during the last 12 months is due to the one-time write-down of AMPS/D-AMPS related assets in the fourth quarter of 2000.

The growth in MOU reflected the growth in airtime usage among all subscriber segments in the third quarter of 2001 compared with the same period of 2000. This confirms the trend reported for the second quarter of 2001. As a result, ARPU remained stable at $27.8 for the third quarter of 2001, which was slightly higher than the ARPU of $27.7 reported in the second quarter of 2001. The Company believes that stable ARPU over the nine months of 2001 reflected a greater consumer satisfaction and improving economic conditions in Russia.

 

Key Subscriber Statistics

 


As of September 30,2001 As of September 30,2000 Change,(year-to-year) As of June 30,2001 Change,(quarter-to-quarter)
Moscow license area 1,357,100 646,900 109.8% 1,085,100 25.1%
Contract 477,900 232,900 105.2% 377,500 26.6%
Prepaid 879,200 414,000 112.4% 707,600 24.3%
Regions 123,000 34,200 259.6% 100,000 23%
Total Number of Subscribers 1,480,100 681,100 117.3% 1,185,100 24.9%
Churn (quarterly) 6.5% Not reported -- 6.8% --

 

As of September 30, 2001, VimpelCom had approximately 1,480,100 subscribers on all of its wireless networks, a 117.3% increase compared to the 681,100 subscribers reported as of September 30, 2000. In the third quarter of 2001, subscriber growth in the Moscow license area was entirely attributable to VimpelCom's GSM network. At the end of the third quarter of 2001, GSM subscribers constituted approximately 78% of the total Moscow subscriber base compared to 71% reported at the end of the second quarter of 2001. This trend is expected to continue.

VimpelCom estimates that as of September 30, 2001, its market share in Moscow was approximately 39.8%.

Commenting on the Company's third quarter results, Jo Lunder, Chief Executive Officer of VimpelCom, said, "We are pleased with our results for the third quarter of 2001. We have increased our revenues, EBITDA and net income, we are continuing to strengthen our position in our core Moscow market with strong subscriber growth and we are maintaining a high level of customer satisfaction. This continued improved performance in our Moscow business now gives us the confidence to accelerate the development of the regions of Russia, where we see significant growth potential. We believe that we are well positioned to expand VimpelCom into a leading national player."

VimpelCom is a leading provider of telecommunications services in Russia, operating under the "Bee Line" family of brand names, which are among the most recognized brand names in Russia. The Group's license portfolio covers approximately 70% of Russia's population (100 million people), including the City of Moscow and the Moscow Region. 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". VimpelCom's convertible notes are listed on the NYSE under the symbol "VIP 05".

 

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 intention to consummate the proposed transaction described above 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 and there can be no assurance that the Company will be able to complete this proposed transaction. 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, 2000 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
Sigrid Peterson
Edelman Financial Worldwide
Tel: (212) 704-8284
sigrid_peterson@edelman.com

-Tables Attached-


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

    Three months ended   Nine months ended
    September 30,   September 30,
    2001 2000   2001 2000
    (In thousands of US dollars , except per share (ADS) amounts)

Operating revenues:

         
 

Service revenues and connection fees

US$ 104,743 US$ 66,534   US$ 261,953 US$ 183,405
 

Sales of handsets and accessories

10,278

6,936

  29,012

23,893

 

Other revenues

372

347

  1,025

    988

Total operating revenues

115,393

         73,817

  291,990

208,286

 

Less revenue based taxes

(1,295)

(3,101)

  (3,470)

(8,982)

Net operating revenues

114,098

70,716

  288,520

199,304

             

Operating expenses:

         
 

Service costs

21,863

15,941

  53,999

44,630

 

Cost of handsets and accessories sold

8,749

7,872

  26,798

24,103

 

Cost of other revenues

22

13

  89

117

 

Selling, general and administrative expenses

38,735

27,525

  93,137

78,012

 

Depreciation and amortization

15,481

15,052

  44,617

43,368

 

Provision for doubtful accounts

3,789

5,231

  9,797

14,261

Total operating expenses

88,639

71,634

  228,437

204,491

             

Operating income (loss)

25,459

(918)

  60,083

(5,187)

             

Other income and expenses:

         
 

Other income

333

350

  290

1,089

 

Interest income

1, 184

1,323

  4,869

1,964

 

Gain on trading in securities

7

7

  247

169

 

Interest expense

(5,403)

(6,501)

  (20,068)

(14,451)

 

Net foreign exchange loss

(3,645)

(7)

  (1,607)

(341)

Total other income and expenses

(7,524)

(4,828)

  (16,269)

(11,570)

             

Income (loss) before income taxes and minority interest

17,935

(5,746)

  43,814

(16,757)

             

Provision for income taxes

3,987

119

  15,293

7,576

Minority interest in net earnings

of subsidiaries

33

10

  66

41

             

Net income (loss)

US$ 13,915 US$ (5,875)   US$ 28,455 US$ (24,374)
             

Net income (loss) per common share

US$ 0.42 US$ (0.19)   US$ 0.87 US$ (0.83)
             

Net income (loss) per ADS equivalent

US$ 0.32 US$ (0.14)   US$ 0.65 US$ (0.62)
             

Weighted average common shares outstanding (thousands)

32,851 31,627   32,851 29,320

EBITDA

US$ 40,940 US$ 14,134   US$ 104,700 US$ 38,181

Open Joint Stock Company "Vimpel-Communications" Consolidated Condensed Balance Sheets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

December 31,

 

 

 

2001

2000

 

 

 

(unaudited)

 

 

 

 

(In thousands of US dollars)

Assets

 

 

 

 

Current assets

 

 

 

Cash and cash equivalents

 

US$ 102,659

 US$ 152,141

 

Short-term investments

4,393

550

 

Accounts receivable

47,708

29,666

 

Other current assets

55,479

53,117

Total current assets

210,239

235,474

 

 

 

 

 

Non-current assets

 

 

 

Property and equipment, net

451,561

356,666

 

Intangible assets, net

72,741

79,649

 

Other assets

47,254

28,526

Total non-current assets

571,556

464,841

 

 

 

 

 

Total assets

 

US$ 781,795

 US$ 700,315

 

 

 

 

 

Liabilities and shareholders' equity

 

 

Current liabilities

 

 

 

Accounts payable

38,756

 28,356

 

Customer deposits

50,270

33,243

 

Deferred revenue

2,202

1,747

 

Due to related parties

850

2,003

 

Bank loans, current portion

8,579

-

 

Capital lease obligation, current portion

4,661

-

 

Equipment financing obligation, current portion

37,650

34,721

 

Accrued liabilities

17,465

13,134

Total current liabilities

160,433

113,204

 

 

 

 

 

Deferred income taxes

20,468

29,922

Bank loans, less current portion

60,087

66,800

5.5% Senior convertible notes due July 2005

79,904

76,702

 

 

 

Equipment financing obligation, less current portion

63,464

44,541

 

 

 

 

 

Minority Interest

361

523

 

 

 

 

 

Shareholders' equity

397,078

368,623

 

 

 

 

 

Total liabilities and shareholders' equity

US$ 781,795

 US$ 700,315

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