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VimpelCom announces fourth quarter and year end 2000 financial results

  • $34.6 Million loss before one-time non-cash write-down
  • $77.8 Million net loss after write-down
  • 102% EBITDA growth during 2000
  • Over one million subscribers as of today

Moscow and New York (April 26, 2001) - Open Joint Stock Company "Vimpel-Communications" ("VimpelCom" or the "Company") (NYSE: VIP), a leading provider of telecommunications services in Russia, today announced audited financial results for the fourth quarter and twelve months ended December 31, 2000, as well as having surpassed 1,000,000 subscribers on all of its wireless networks as of today.

The Company also announced that Jo Lunder has been named Chief Executive Officer of VimpelCom and Dr. Dmitri Zimin has been named President and General Director.

VimpelCom also announced a write-down of fixed assets in the amount of US$66.5 million (US$43.2 million net after tax adjustments) related to its D-AMPS network. This one-time non-cash write-down resulted in a net loss of $77.8 million as compared to $34.6 million calculated before the write-down. The fast pace of VimpelCom's GSM network expansion and the faster than anticipated rate of migration of its customers from the D-AMPS network to the GSM network resulted in impairment of VimpelCom's D-AMPS related assets. VimpelCom will continue to operate the D-AMPS network, targeting mostly mass market consumers.

As of December 31, 2000, VimpelCom's overall subscriber base, including subscribers on networks operated by its subsidiaries, totaled approximately 833,600 subscribers, an increase of 124% over the 372,300 subscribers reported as of December 31, 1999. In the Moscow License Area VimpelCom had approximately 780,100 subscribers on its GSM and D-AMPS networks. A strong rate of growth in the Moscow License Area was also recorded in the fourth quarter of 2000 with the subscriber base growing by 20.6% from the 646,900 subscribers reported as of September 30, 2000. An even stronger rate of growth was recorded in the regions outside of the Moscow License Area. As of December 31, 2000, VimpelCom and its subsidiaries had approximately 53,500 subscribers in the regions outside of the Moscow License Area, an increase of 145% over the 21,800 subscribers reported at the end of 1999. Subscriber growth in the regions was particularly strong in the fourth quarter, increasing by 56.4% from the 34,200 subscribers reported as of September 30, 2000.

As of today, VimpelCom has approximately 1,020,000 subscribers, including 962,000 subscribers in the Moscow License Area and 58,000 subscribers in the regions. This represents an increase in the total number of subscribers of 22.4% since the beginning of the year 2001.

Subscriber growth was particularly strong on VimpelCom's GSM network in the Moscow License Area, with 85% of new customers during 2000 subscribing to VimpelCom's GSM service. The number of subscribers on the GSM network in the Moscow License Area increased 238%, from the 132,000 recorded as of December 31, 1999 to 446,300 as of December 31, 2000. As a result, the number of VimpelCom's GSM subscribers surpassed the number of its D-AMPS subscribers, with GSM constituting 57% of the Company's Moscow subscriber base at the end of 2000, as compared with 38% at the end of 1999. VimpelCom expects this trend to continue in the future.

VimpelCom's success in increasing its GSM subscriber base during 2000 was significantly due to successfully repositioning VimpelCom as a GSM operator and improving the coverage and quality of the GSM network. As of December 31, 2000, VimpelCom had installed 735 GSM base stations in the Moscow License Area, as compared to 485 base stations recorded at the same date in 1999. VimpelCom also increased its international roaming agreements, now covering 90 countries with 193 operators. As a result of an aggressive marketing campaign to re-position VimpelCom as a GSM operator, the Company's "Bee Line GSM" trademark was awarded a "Trademark of the Year" award in 2000.

VimpelCom estimates that as of December 31, 2000, its share of the subscriber market in Moscow was approximately 39.1%.

During 2000, VimpelCom experienced an increase in its churn rate to 34.5%, as compared to 25.0% reported for 1999. The higher churn rate in 2000 was due, in part, to the rapid growth of prepaid subscribers in the second half of 1999, which contributed to churn in 2000. In addition, even though the Company does not actually lose subscribers when they migrate from VimpelCom's D-AMPS to its GSM network and between tariff plans, these movements are, in certain cases, recorded as churn.

In 2000, VimpelCom continued to lay the groundwork for future revenue streams by promoting non-voice data services and by educating consumers about alternative wireless-based services. VimpelCom's introductory launch in 2000 of free short messaging service (SMS) was very successful, culminating in subscribers sending 1 million messages per day by the end of 2000. VimpelCom also incorporated important new technologies into its services in 2000 introducing a multi-access portal "BeeOnline" and wireless application protocol (WAP). With this technology, VimpelCom developed and introduced to the market a number of new services providing its customers with access to various information, data, entertainment and news services.

VimpelCom's average monthly airtime usage per subscriber (MOU) in 2000 was 91 minutes, a decrease of approximately 34% from the 137 minutes reported for 1999. VimpelCom's average monthly revenue per user (ARPU) for 2000 was approximately $37, a 63% decrease from the $99 reported for the same period of 1999. MOU in the fourth quarter of 2000 was approximately 97 minutes, a decrease of approximately 12% from the 110 minutes for the same period of 1999. ARPU in the fourth quarter of 2000 was approximately $32, a decrease of 52% from the $66 reported for the same period of 1999. The continued decline in MOU and ARPU is attributable to the mass market strategy which resulted in increased penetration levels, and, in the case of ARPU, to increased competition resulting in lower tariffs.

The Company's average acquisition cost per subscriber during 2000 decreased to approximately $64 per subscriber for the fourth quarter of 2000. This is compared to $124 per subscriber reported for the same period in 1999. On a year-on-year basis, the Company reduced its subscriber acquisition cost by 46%, from $137 in 1999 to $74 in 2000. This reduction in acquisition cost per subscriber was caused by the rapid increase in the number of subscribers combined with a reduction in distribution commissions paid.

VimpelCom's total operating revenues for the twelve months ended December 31, 2000 were $285.7 million, an increase of 19.7% compared to $238.6 million reported at the end of 1999. Total net operating revenues (net of revenue-based taxes) for 2000 were $274.1 million, an increase of 21.1% compared to $226.4 million reported at the end of 1999. The Company's operating loss for 2000 (calculated before a one-time non-cash write-down of D-AMPS related assets) was $8.0 million, compared to an operating loss of $29.1 million reported at the end of 1999. EBITDA for the twelve months ended December 31, 2000 was $52.0 million, 102.3% higher than the $25.7 million reported at the end of 1999. As of December 31, 2000, the EBITDA margin was approximately 19.0%, an increase from the 11.4% reported at the end of 1999.

VimpelCom's total operating revenues for the quarter ended December 31, 2000 were $77.4 million, an increase of 17.1% compared to the $66.1 million reported for the fourth quarter of 1999. Total net operating revenues (net of revenue-based taxes) for the fourth quarter of 2000 were $74.8 million, an increase of 18.4% compared to the $63.2 million reported for the fourth quarter of 1999.

The Company's operating loss for the fourth quarter of 2000 (calculated before a one-time non-cash write-down of D-AMPS related assets) was $2.8 million, a decrease of 86% compared to an operating loss of $19.4 million reported for the fourth quarter of 1999. EBITDA for the fourth quarter of 2000 was $13.8 million, a significant improvement compared to the negative $5.7 million reported for the same quarter of 1999. For the fourth quarter of 2000, EBITDA margin was approximately 18.5%, compared to the negative 9.0% reported for the fourth quarter of 1999.

VimpelCom's loss for the 12 months ended December 31, 2000 was $34.6 million (calculated before a one-time non-cash write-down of D-AMPS related assets) compared to a $39.6 million net loss in 1999. Net loss for the fourth quarter of 2000 (calculated before a one-time non-cash write-down of D-AMPS related assets) was $10.2 million, an improvement of 61.2% compared to the $26.3 million net loss in the fourth quarter of 1999.

In connection with the preparation of its 2000 year end results, VimpelCom made a comprehensive review of its fixed assets and determined that as of December 31, 2000, its D-AMPS network equipment in the Moscow License Area and certain of its software licenses were impaired. The fast pace of VimpelCom's GSM network expansion and the faster than anticipated rate of migration of customers from the D-AMPS network to the GSM network resulted in impairment of VimpelCom's D-AMPS related assets. (Impairment is an accounting term that describes a condition whereby future cash flows expected to result from the use of the assets are less than the net book value of the assets). It was, therefore, appropriate that VimpelCom's D-AMPS network be re-valued and this has resulted in a write-down of $66.5 million (US$43.2 million net of related tax adjustments.) VimpelCom will continue to operate the D-AMPS network, targeting mostly mass market consumers. Reflecting this write-down, VimpelCom's total net loss for 2000 was $77.8 million. On an earnings per share basis, this constitutes a loss of $2.57 per share ($1.93 per ADS) for 2000 compared to a loss of $1.71 per share ($1.28 per ADS) reported at the end of 1999. Each ADS represents three-quarters of one share of VimpelCom's common stock. This one-time non-cash write-down does not affect EBITDA.

Selling, general and administrative expenses for the year ended December 31, 2000 were $108.5 million, which is 22.3% higher than the $88.7 million reported for 1999. As a percentage of net revenue in 2000, selling, general and administrative expenses for the year were 39.6%, slightly more than 39.2% reported for 1999. Selling, general and administrative expenses for the fourth quarter of 2000 were $30.5 million, a 10.6% decrease from the $34.1 million reported for the fourth quarter of 1999 when the Company intensified its marketing efforts to develop the mass market.

Provision for doubtful accounts receivable for the year ended December 31, 2000 was $18.1 million, 1.7% higher than the $17.8 million reported in 1999. For the fourth quarter of 2000, the Company recorded a $3.9 million provision for doubtful accounts receivable compared to a provision of $2.7 million for the same period in 1999. The increase in provision for doubtful accounts relates to higher revenues. As a percentage of net revenue in 2000, provision for doubtful accounts was 6.6%, as compared to 7.9% for 1999.

Depreciation and amortization expense was $60.0 million for the year ended December 31, 2000, 9.5% higher than the $54.8 million in 1999. For the fourth quarter of 2000, depreciation and amortization expense was $16.7 million, a 21.9% increase compared to the $13.7 million reported for the same period of 1999. The increase was largely due to the increased asset base resulting from the Company's continuing capital investments, primarily in its GSM-900/1800 network. Investments in property and equipment in 2000 amounted to $93.2 million (including $78.0 million for the purchase of network equipment), 80.6% higher than the $51.6 million invested in 1999.

In 2000, VimpelCom recognized an income tax benefit in the amount of US$14.3 million which includes US$23.3 million deferred tax benefit attributable to the D-AMPS write-down. Without this effect, income tax for the year would have been US$9.0 million. In 1999, there was a US$5.6 million income tax benefit, which was due to a decrease in income tax rate from 35% to 30% during 1999.

Commenting on today's announcement, Dr. Dmitri Zimin, President and General Director of VimpelCom said, "During 2000, we successfully changed our image to a full-fledged GSM operator. The importance of this success is underscored by the fact that 75% of our service revenues in the fourth quarter of 2000 were generated by our GSM subscribers. The rapid migration of our subscribers from D-AMPS to GSM emphasizes the speed with which we made this transformation in order to strengthen VimpelCom's competitive position in what is effectively a GSM-driven market." Dr. Zimin continued, "Our financial results steadily improved during 2000 and we anticipate further progress in 2001. We are confident that we have built a solid foundation for VimpelCom to return to profitability in 2001."

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. 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 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, 1999 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


Year ended



December 31,


December 31,



2000

1999


2000

1999



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

Operating revenues:







Service revenues and connection fees

US$68,928

US$52,526


US$252,333

US$206,542


Sales of handsets and accessories

8,138

13,409


32,031

31,457


Other revenues

321

171


1,309

638

Total operating revenues

77,387

66,106


285,673

238,637


Less revenue based taxes

2,555

2,932


11,537

12,232

Net operating revenues

74,832

63,174


274,136

226,405








Operating expenses:







Service costs

16,283

13,764


60,913

56,779


Cost of handsets and accessories sold

10,340

18,139


34,443

37,103


Cost of other revenues

40

67


157

242


Selling, general and administrative expenses

30,470

34,134


108,482

88,704


Depreciation and amortization

16,654

13,726


60,022

54,799


Impairment of long-lived assets

66,467



66,467



Provision for doubtful accounts

3,887

2,742


18,148

17,845

Total operating expenses

144,141

82,572


348,632

255,472








Operating (loss) income

(69,309)

(19,398)


(74,496)

(29,067)








Other income and expenses:







Other income

1,063

16


2,152

565


Interest income

2,075

968


4,039

1,756


Gain (loss) on trading in securities

(213)

(378)


(44)

905


Interest expense

(6,638)

(3,890)


(21,089)

(16,074)


Net foreign exchange loss

(2,320)

(1,067)


(2,661)

(2,572)

Total other income and expenses

(6,033)

(4,351)


(17,603)

(15,420)








Income (loss) before income taxes and minority interest

(75,342)

(23,749)


(92,099)

(44,487)








Income tax expense (benefit)

(21,919)

3,350


(14,343)

(5,564)

Minority interest in net (losses) earnings

of subsidiaries

 

4

 

(808)


 

45

 

673








Net (loss) income

US$(53,427)

US$(26,291)


US$(77,801)

US$(39,596)








Net (loss) income per common share

US$(1.62)

US$(0.98)


US$(2.57)

US$(1.71)








Net (loss) income per ADS equivalent

US$(1.21)

US$(0.74)


US$(1.93)

US$(1.28)








Weighted average common shares outstanding (thousands)

33,074

26,825


30,264

23,181








EBITDA

US$13,812

US$(5,672)


US$51,993

US$25,732

 

Open Joint Stock Company “Vimpel-Communications"

Consolidated Condensed Balance Sheet









December 31,

December 31,




2000

1999









(In thousand US dollars)

Assets





Current assets:




Cash and cash equivalents


US$152,141

US$35,609


Short-term investments

550

503


Accounts receivable

29,666

24,356


Deferred income tax

11,312

6,041


Inventory

10,976

9,532


Other current assets

30,829

30,748

Total current assets

235,474

106,789






Non-current assets




Property and equipment, net

356,666

369,053


Intangible assets, net

79,649

82,991


Due from related parties

1,223

1,376


Unamortised bond issue costs

4,380



Other assets

22,923

29,886

Total non-current assets

464,841

483,306






Total assets


US$700,315

US$590,095






Liabilities and shareholders' equity



Current liabilities:




Accounts payable

US$28,356

US$33,396


Due to related parties

2,003

348


Customer deposits

33,243

31,341


Deferred revenue

1,747

-


Capital lease obligation, current portion


21,739


Equipment financing and other liabilities, current portion

34,721

46,334


Accrued liabilities

13,134

12,413

Total current liabilities

113,204

145,571






Deferred income taxes

29,922

40,329

Bank loans

66,800

-

5.5% Senior convertible notes due July 2005

76,702


Capital lease obligation, less current portion


41,293

Equipment financing and other liabilities

44,541

51,972






Minority interest

523

9,942






Shareholders' equity

368,623

300,988






Total liabilities and shareholders' equity

US$700,315

US$590,095






 

 


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