12. Commitments and Contingencies

Commitments

As of December 31, 1998, VimpelCom has entered into agreements for the purchase of additional telephone line capacity for US$13,608, representing 31,500 lines by December 26, 2007. These agreements will require VimpelCom to pay additional subscription fees of US$0.015 per month for each telephone line supplied under the agreements and in use.

As of December 31, 1998, VimpelCom has outstanding commitments for the purchase of equipment from Alcatel amounting to US$22,233.

Contingencies

Legislation regarding foreign currency transactions and taxation in the Russian Federation is constantly evolving as the government manages the transformation from a command to a market-oriented economy. There were many new tax and foreign currency laws and related regulations introduced during 1998 and through March 26, 1999 which were not always clearly written and their interpretation is subject to the opinions of the local tax inspectors, CBRF officials and the Ministry of Finance. Instances of inconsistent opinions between local, regional and national tax authorities and between the CBRF and Ministry of Finance are not unusual. VimpelCom believes that it has paid or accrued all taxes that are applicable for current and prior years. Where practice concerning the provision of taxes is unclear, VimpelCom has accrued tax liabilities based on management's best estimate.

VimpelCom's operations and financial position will continue to be affected by Russian political developments, including the application of existing and future legislation, tax regulations, cancellation of license rights, and expropriation of property. VimpelCom does not believe that these contingencies, as related to its operations, are any more significant than those of similar enterprises in Russia.

VimpelCom's ability to generate revenues in Moscow and the Moscow region is dependent upon the operation of the mobile telephone systems under its licenses. VimpelCom's AMPS/D-AMPS license to operate in the city of Moscow and the Moscow region expires in November 2007, while the GSM licenses expire in April 2008. Resolution No. 642, dated June 5, 1994, of the Government of the Russian Federation defines the circumstances under which a license may be revoked. Under this resolution, grounds for termination are both broad and subjective and there is little precedent upon which to determine the practical likelihood of termination.

VimpelCom is dependent upon a small number of suppliers, principally Ericsson and Alcatel, for purchases of mobile telephone equipment. Similarly, as there is only a small number of telephone line capacity suppliers in Moscow, VimpelCom purchases telephone line capacity primarily from five suppliers: Telmos; Sovintel; TeleCommunications of Moscow; AO ASVT; and MTU Inform.

Presidential Decree No. 221, dated February 28, 1995, "On Measures for Streamlining State Regulation of Prices (Tariffs)" and its implementing Governmental Decree No. 239 dated March 7, 1995 provide that the prices and tariffs on certain telecommunications services to be established by the Government of the Russian Federation are subject to state regulation. Governmental Decision No. 1559, dated December 28, 1998, as amended, has established that the following communication services are subject to price controls by the executive authorities of the Russian Federation: subscription charges; installation fees; and charges for local and inter-city calls.

VimpelCom's licenses to operate cellular networks in the regions (not including Moscow and the Moscow region) include a condition to make non-returnable contributions to the development of the public switched telecommunications network of the Russian Federation. The amount of contribution is unspecified and will be agreed with or determined by the respective local administrations. VimpelCom has made no significant payments and it is not possible to determine the amount that will eventually become payable.