Letter to shareholders

above: Dmitry B. Zimin, Chief Executive Officer and Founder Augie K. Fabela II, Chairman of the Board and Co–Founder

Dear shareholders:

The year 2000 was a seminal year in the development of Russia, ushering in a new generation of leadership that has brought long–awaited stabilization of economic and political conditions in Russia. Improved macro–economic performance led to an increase in Russian consumer confidence, creating a healthy environment for the further expansion of wireless communications. As a result, the total number of cellular subscribers in Russia increased from approximately 1.35 million at the end of 1999 to 3.4 million at the end of 2000. Even with this impressive 152% growth in the number of subscribers in Russia, market penetration in Russia still remains low at only 2.4%, indicating great potential for further growth.

The increase in cellular phone use in Russia in the year 2000 coincides with the way in which technology is capturing people’s imagination throughout the world. This trend is expected to continue as the world–wide convergence of wireless communications with the Internet continues to open new possibilities for the way people use mobile phones to conduct their lives. We pursued and achieved four key objectives in 2000:

• Expanding the coverage and quality of our GSM network in Moscow;
• Creating a new image for Bee Line as a GSM operator;
• Introducing new wireless services, beyond voice communications; and
• Focusing operations on the return to profitability during 2001.

Bee Line GSM: a new image

During the past year, we successfully repositioned VimpelCom as a GSM operator by continuing to build out our GSM network in the City of Moscow and the Moscow Region. We have achieved network coverage comparable to that of the incumbent GSM competitor, despite VimpelCom’s five–year late arrival as the second GSM licensee. Moreover, our GSM network quality is superior in terms of voice quality and other quality parameters due to the capacity advantage of the GSM–1800 component of our dual band GSM–900/1800 network. This repositioning is one of our most important achievements of 2000 because the GSM standard is considered the most advanced cellular standard and is preferred by subscribers, as evidenced by the percentage of GSM subscribers in Russia growing from 52% to 70% during 2000.

A wireless world

As the wireless revolution spreads throughout the world, VimpelCom remains committed to ensuring that the Russian market is at the forefront of new wireless services and data technologies. Over the past year, we began heavily promoting a short messaging service (SMS), and by the end of 2000 we were transmitting 1,000,000 SMS messages per day. During 2000, we introduced Wireless Application Protocol (WAP) services and launched "BeeOnline", our wireless portal. We also successfully tested General Packet Radio Services (GPRS), which we plan to implement in 2001 to provide high speed data transmission rates.

A new wave of growth

Due to our continued mass marketing efforts, the number of subscribers on all our networks, including those operated by our subsidiaries, increased by 124%, from approximately 372,300 at the beginning of the year to 833,600 at the end of 2000. Most significantly, the proportion of our GSM subscriber base in the Moscow License Area increased from 35% to 54%. With the increased popularity of our GSM product, we launched a number of initiatives to increase our market share of business users, capitalizing on our competitive advantage in network capacity and customer service. These initiatives include a "Super GSM" package with unlimited local calls; a special VIP customer care service; a joint corporate customer program with Combellga, an alternative overlay wireline operator majority–owned by Telenor, our strategic partner; and a “calling party pays” principle for mobile–to–mobile calls between all mobile operators. As a result of these and other efforts, our market share of business users increased in the second half of 2000, from approximately 24% to 33%.

In 2000, we also continued the expansion of our distribution network, increasing the number of points of sale to 2,300 from approximately 1,000, and the number of points of sale for prepaid scratch cards to 3,500 from 1,125. In an effort to expand our network of VimpelCom–owned sales offices, we acquired the “Mobile Center” dealer network (the acquisition was finalized in January 2001), increasing the number of our own sales offices from 3 to 15. This improvement in our distribution network will enable us to exercise more control over our dealers and to further reduce subscriber acquisition costs, which decreased from $124 in the fourth quarter of 1999 to $65 in the fourth quarter of 2000.

Financial results

This past year was fundamental in preparing the groundwork for our objective of returning to profitability, and during 2000 we improved our financial results. Net operating revenues grew by 21.1%, to $274.1 million at year end, and our gross margin increased from 58% to 65%. EBITDA doubled, from $25.7 to $52.0 million, and the EBITDA margin grew from 11% to 19%. These improvements were achieved mainly due to the increase in our subscriber base, an increased use of low–cost federal numbers, tighter control of administrative expenses and the reduction of our subscriber acquisition costs.

We ended the year with a loss of $34.6 million (calculated before a one-time non-cash write-down and related tax adjustments) compared to a $39.6 million net loss in 1999, largely due to the network and marketing investments required for the rapid transition of VimpelCom into a GSM company. The fast pace of our GSM network expansion and the faster than anticipated rate of migration of our business customers from our D–AMPS network to our GSM network resulted in impairment of our 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 our D–AMPS network be re–valued and this has resulted in a write–down of $66.5 million ($43.3 million net of related tax adjustments). The Company will continue to operate the D–AMPS network targeting specific market segments. Reflecting this write-down, our total loss for 2000 was $77.8 million. This one time non–cash write–down does not affect EBITDA.

In July 2000, we successfully raised $225.4 million in an offering of equity and convertible bonds, allowing us to close the year with over $152.1 million in cash and cash equivalents in our bank accounts — a strong strategic and competitive position for further developing our Moscow operations and expanding nationwide.

We anticipate that if current trends continue to prevail, our repositioning and focus will pay off and will return our Moscow operations to profitability during 2001.

Leading the way

As we look forward, we believe that future growth will be driven by expanding our business nationally. During 2000, our regional subscriber base grew by 145%, to 53,500 subscribers, from approximately 21,800 subscribers at the end of 1999. In 2001, we intend to make significant efforts in the development of our regional GSM licenses, which cover a population of approximately 85 million, and transition VimpelCom from a primarily Moscow–based operator to a national operator. This strategic expansion will give us a new source of revenues, provide easy and convenient national roaming, and strategically position the Company to participate in the process of the globalization of the telecom industry.

Since our inception, we have managed our business in line with the highest international business standards. We were the first Russian company to list on the New York Stock Exchange in November 1996. In May 2000, we were recognized as Russia’s number one company in corporate governance by Brunswick UBS Warburg investment bank. In March 2001, we were ranked number one in corporate governance by the Moscow Institute of Corporate Law and Governance — which is headed by the former Chairman of the Federal Commission for Securities Markets of the Russian Federation. We are proud to be recognized as the leader in corporate governance and transparency in Russia.

We are committed to remaining a pioneer in the Russian market. We are preparing and evolving our business along with the technologies that are opening up new opportunities for the provision of services which will change the way people in Russia and around the world communicate, access information and live in the information age. In doing so, we rely on strong support from our strategic partner Telenor, which is one of the leading global innovators of the new wireless information age.

Our goals are to retain our leadership position in product innovation, strengthen our position in the business segment, expand nationally and return to profitability in our Moscow operations. This will bring us back to the position of the premier wireless operator in Russia.

Finally, we would like to thank all of you for the tremendous support during 2000 and assure you that the Company will spare no efforts to meet your expectations. We will continue to strive for providing the highest level of quality services to our customers and achieving maximum value for our shareholders.

Augie K. Fabela II Chairman of the Board and Co–Founder

Dmitry B. Zimin Chief Executive Officer and Founder