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VimpelCom announces third quarter and nine month 2002 financial and operating results

  • 94% Year-to-year increase in net operating revenues
  • 191% Year-to-year increase in net income
  • 151% Year-to-year increase in EBITDA
  • Approximately 4.5 million subscribers
  • Including approximately 1 million regional subscribers as of today


Moscow and New York (November 21, 2002) - 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 nine months ended September 30, 2002. During the third quarter of 2002, VimpelCom showed strong subscriber growth and substantial improvement in net operating revenues, operating income, EBITDA and EBITDA margin. For the quarter ended September 30, 2002, VimpelCom reported net operating revenues of $221.1 million, a 93.8% increase from the $114.1 million reported for the same period in 2001; EBITDA of $102.6 million, a 150.5% increase from the $40.9 million reported for the same period in 2001; and net income of $40.5 million, an increase of 191.0% from the $13.9 million reported for the third quarter of 2001. The Company's EBITDA margin for the third quarter of 2002 was approximately 46.4% compared to approximately 35.9% for the same period of 2001.

As of September 30, 2002, VimpelCom had approximately 4.03 million subscribers on its wireless networks and networks operated by VimpelCom's subsidiaries, including 3.31 million subscribers in the Moscow license area, representing a total year-to-year growth of approximately 172%. As of today, VimpelCom's total number of subscribers is 4.52 million, with 3.53 million subscribers in the Moscow license area and 0.99 million subscribers in the regions outside of Moscow.

Using independent sources to estimate the number of subscribers of the Company's competitors in the Moscow license area, VimpelCom estimates that its market share in the Moscow license area was 52.7% at the end of the third quarter of 2002, a significant improvement compared to the Company's estimated market share of 39.8% reported at the end of the third quarter of 2001.

Commenting on today's announcement, Jo Lunder, Chief Executive Officer of VimpelCom, said, "We are very pleased with our third quarter results. Our growth was faster than expected and we are confident of our ability to continue to take advantage of the great potential of the Russian market. In addition to maintaining our strong position in Moscow, we have made significant progress in our national expansion, and now have 34 GSM networks in commercial operation outside of Moscow. With the recently completed second tranche of investment in VimpelCom-Region, we expect our national expansion will continue to proceed at a fast pace. "

Key Financial and Operating Indicators

 

  3 months ended 9 months ended
Sept. 30,
2002
Sept. 30,
2001
Change
(%)
Sept. 30,
2002
Sept. 30,
2001
Change
(%)
Net operating revenues (US$,000) 221,077 114,098 93.8% 539,518 288,520 87.0%
EBITDA (US$,000) 102,567 40,940 150.5% 237,594 104,700 126.9%
EBITDA margin 46.4% 35.9% 29.2% 44.0% 36.3% 21.2%
Net income (US$,000) 40,487 13,915 191.0% 90,474 28,455 218.0%
ARPU (US$) (1) 19.8 27.8 -28.8% 19.4 27.6 -29.7%
MOU (min) (2) 97.2 110.8 -12.3% 93.8 105.0 -10.7%
SAC (US$) (3) 24.6 40.9 -39.9% 28.4 40.1 -29.2%

 

Note:

  1. ARPU (Monthly Average Revenue per User) 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 and sales of handsets and accessories, by the average number of the Company's subscribers 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 subscribers 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.

In the third quarter of 2002, the Company's business showed increasing efficiency that resulted in the substantial growth of several key financial indicators compared with results reported for the second quarter of 2002. In the third quarter of 2002, net operating revenues grew to $221.1 million, a 27.5% increase compared to the $173.4 million reported for the second quarter of 2002. EBITDA increased by 42.9% in the third quarter compared to the second quarter of 2002 to $102.6 million from $71.8 million, and the Company's EBITDA margin improved to 46.4% in the third quarter compared to 41.4% in the second quarter of 2002. Net income in the third quarter of 2002 increased 84.9% to $40.5 million from the $21.9 million reported for the second quarter of 2002. The primary reasons for these improvements from the second to third quarter of 2002 were (1) growth of VimpelCom's subscriber base; (2) stable ARPU; (3) improved operating margins; (4) improved control over the Company's exposure to U.S. dollar/euro exchange rate fluctuations; and (5) improved financial performance of VimpelCom-Region.

The Company's MOU in the third quarter of 2002 was 97.2 minutes, a decrease of approximately 12.3% compared to 110.8 minutes reported in the third quarter of 2001. ARPU for the third quarter of 2002 was approximately $19.8, a 28.8% decrease from $27.8 reported for the third quarter of 2001. The decrease in MOU and ARPU in the third quarter of 2002 as compared with the third quarter of 2001 was primarily related to the Company's increased penetration level which resulted in a higher proportion of prepaid subscribers on the Company's networks. However, MOU and ARPU were stable during the first nine months of 2002 and even slightly increased in the third quarter of 2002, primarily due to seasonal factors. In the second quarter of 2002, MOU and ARPU were 94.7 minutes and $18.9, respectively.

Selling, general and administrative expenses (SG&A) as a percentage of net revenues significantly improved to 30.9% in the third quarter of 2002 from 36.8% in the second quarter of 2002. This was primarily driven by lower SAC that improved to $24.6 per subscriber from $31.3 reported for the second quarter of 2002.

The Company's financial results include the activities of VimpelCom-Region, which holds the Company's GSM licenses for areas outside of Moscow. As in previous quarters, in the third quarter of 2002, VimpelCom-Region's expenses exceeded its revenues as the company continues to launch new regional networks and upgrade the existing networks in its licensed territories. Total operating revenues, excluding intra-group transactions, for Moscow on a stand-alone basis and VimpelCom-Region (including the contribution from Orensot acquired in July 2002) in the third quarter of 2002 were $202.4 million and $21.7 million, respectively. Net income for Moscow on a stand-alone basis in the third quarter of 2002 was $43.5 million and VimpelCom-Region's net loss was $2.4 million. In the third quarter of 2002 VimpelCom-Region showed substantial improvement in its financial results over the figures reported for the second quarter of 2002 which were total operating revenues of $12.4 million and a net loss of $6.4 million.

VimpelCom's total capital expenditures for the third quarter of 2002 were approximately $136.2 million, with $62.3 million spent in the Moscow license area in order to maintain the quality and increase the capacity of the network as VimpelCom's Moscow subscriber base continues its rapid growth.

 

Key Subscriber Statistics

 

  As of
Sept. 30, 2002
As of
Sept. 30, 2001
Change
(%)
As of
June 30, 2002
Change
q-to-q
(%)
Moscow license area 3,305,200 1,357,100 143.5% 2,845,300 16.2%
Contract 714,958 477,900 49.6% 701,700 1.9%
Prepaid 2,590,242 879,200 194.6% 2,143,600 20.8%
Regions 723,100 123,000 487.9% 430,900 67.8%
Total Number of Subscribers 4,028,300 1,480,100 172.2% 3,276,200 23.0%
 
Churn (quarterly) 8.5% 6.5% -- 6.9% --

 

Strong subscriber growth in Moscow continued through the third quarter of 2002 with prepaid subscribers growing faster than contract subscribers. As a result, the percentage of VimpelCom's prepaid subscribers in its Moscow subscriber base increased from approximately 75.3% at the end of the second quarter of 2002 to 78.4% at the end of the third quarter of 2002. VimpelCom's GSM subscribers in Moscow as a percentage of its overall Moscow subscriber base were 94.3% at the end of the third quarter of 2002, compared to 78.0% at the end of the third quarter of 2001. The Company also reported significant growth in its regional subscribers from 430,900 at the end of the second quarter of 2002 to approximately 723,100 at the end of the third quarter of 2002, or 67.8% of quarter-to-quarter growth.

The Company's quarterly churn rate in the third quarter of 2002 was 8.5%, compared to the Company's churn rate of 6.5% reported for the same period in 2001. The increase in churn was primarily a result of high subscriber growth rates in 2002, particularly in the low-end user segment, as well as internal migration and increased competition.

The Company's management will discuss its third quarter 2002 results on a conference call on November 21, 2002 at 6:30 pm Moscow time (10:30 am EST in New York). The call may be accessed via webcast at the following URL address http://audioevent.mshow.com/78915.

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 VimpelCom Group's license portfolio covers approximately 79% of Russia's population (115 million people), including the City of Moscow and 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". 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 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, most notably in the regions of Russia outside of Moscow, 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, 2001 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

 

- Tables attached -

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

  Three months ended
Sept. 30,
Nine months ended
Sept. 30,
2002 2001 2002 2001
(In thousands of US dollars,
except per share (ADS) amounts)
Operating revenues:  
  Service revenues and connection fees 211,642 104,743 510,723 261,953
Sales of handsets and accessories 12,098 10,278 35,366 29,012
Other revenues 394 372 1,188 1,025
Total operating revenues 224,134 115,393 547,277 291,990
  Less revenue based taxes (3,057) (1,295) (7,759) (3,470)
Net operating revenues 221,077 114,098 539,518 288,520
 
Operating expenses  
  Service costs 32,841 22,094 78,143 54,572
Cost of handsets and accessories sold 11,023 8,518 27,194 26,225
Cost of other revenues 13 22 45 89
Selling, general and administrative expenses 68,354 38,735 182,117 93,137
Depreciation and amortization 26,431 15,481 67,262 44,617
Provision for doubtful accounts 6,279 3,789 14,425 9,797
Total operating expenses 144,941 88,639 369,186 228,437
 
Operating income 76,136 25,459 170,332 60,083
 
Other income and expenses:  
  Other income / (loss) (937) 333 176 290
Interest income 2,030 1,184 5,076 4,869
Gain (loss) on trading in securities 0 7 58 247
Interest expense (13,852) (5,403) (32,458) (20,068)
Net foreign exchange (loss) / gain 2,225 (3,645) (7,656) (1,607)
Total other income and expenses (10,534) (7,524) (34,804) (16,269)
 
Income before income taxes and minority interest 65,602 17,935 135,528 43,814
 
Income taxes expense 24,974 3,987 44,923 15,293
Minority interest in net earnings of subsidiaries 141 33 131 66
 
Net income 40,487 13,915 90,474 28,455
 
Net income per common share 1.06 0.42 2.38 0.87
Net income per ADS equivalent 0.80 0.32 1.79 0.65
Weighted average common shares
outstanding (thousands)
38,021 32,851 38,010 32,851
EBITDA 102,567 40,940 237,594 104,700
 
Open Joint Stock Company "Vimpel-Communications"
Condensed Consolidated Balance Sheets
 
  Sept. 30,
2002
(unaudited)
December 31,
2001
(In thousands of US dollars)
Assets  
Current assets
  Cash and cash equivalents US$ 293,342 US$144,172
Short-term investments 0 920
Accounts receivable 79,314 49,678
Other current assets 111,184 69,217
Total current assets 483,840 263,987
 
Non-current assets
  Property and equipment, net 789,729 535,405
Intangible assets, net 79,876 70,926
Other assets 94,965 55,488
Total non-current assets 964,570 661,819
 
Total assets US$ 1,448,410 US$ 925,806
 
Liabilities and shareholders' equity
Current liabilities:
  Accounts payable US$ 79,123 US$ 42,680
Due to related parties 1,089 883
Customer deposits 94,027 63,019
Deferred revenue 2,031 1,874
Bank loans, current portion 34,190 17,852
Capital lease obligation, current portion 2,968 4,208
Equipment financing obligation, current portion 121,763 68,290
Accrued liabilities 51,017 13,035
Total current liabilities 386,208 211,841
 
Deferred income taxes 22,317 18,214
Bank loans, less current portion 275,050 50,100
5.5% Senior convertible notes due July 2005 84,642 81,027
Equipment financing, less current portion 79,416 56,196
 
Minority Interest 1,950 307
 
Shareholders' equity 598,827 508,121
 
Total liabilities and shareholders' equity US$ 1,448,410 US$ 925,806
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