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VimpelCom announces first quarter 2002 financial and operating results

  • More than fivefold year-to-year increase in net income
  • 127% Year-to-year increase in EBITDA
  • Approximately 3.1 million subscribers as of today

Moscow and New York (May 30, 2002) - Open Joint Stock Company "Vimpel-Communications" ("VimpelCom" or the "Company") (NYSE: VIP) today announced its financial and operating results for the quarter ended March 31, 2002. VimpelCom reported strong results in subscriber acquisitions and continued growth in net operating revenues, EBITDA and net income. For the quarter ended March 31, 2002, VimpelCom reported net operating revenues of $145.1 million, an 81.9% increase from the $79.7 million reported for the same period in 2001; EBITDA of $63.3 million, a 126.8% increase from the $27.9 million reported for the same period in 2001; and net income of $28.0 million, an increase of 447.1% from the $5.1 million reported for the first quarter of 2001. The Company's EBITDA margin for the first quarter of 2002 was approximately 43.6% compared to approximately 35.0% for the same period of 2001.

As of March 31, 2002, VimpelCom had approximately 2.66 million subscribers on its wireless networks and networks operated by VimpelCom's subsidiaries and an affiliate, including 2.38 million subscribers in the Moscow license area, a total year-to-year growth of approximately 170.3%. As of today, VimpelCom's total number of subscribers is approximately 3.09 million, with approximately 2.70 million subscribers in the Moscow license area.

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 51.5% at the end of the first quarter of 2002, a significant improvement compared to the Company's estimated market share of 40.0% reported at the end of the first quarter of 2001.

Commenting on today's announcement, Jo Lunder, Chief Executive Officer of VimpelCom said, "Our first quarter results demonstrate the further strengthening of VimpelCom's position in the Russian cellular market. We are especially pleased with the steady improvement of our financial performance which has always been a priority to the Company. Going forward, we intend to continue pursuing our policy of profitable growth combining further progress in the key Moscow market with a balanced nationwide expansion."

Key Financial and Operating Indicators

 
  Three
months
ended
March 31,
2002
Three
months
ended
March 31,
2001
Change
(%)
Three
months
ended
Dec. 31,
2001
Change
(%)
Net revenue (US$,000) 145,060 79,743 81.9% 134,082 8.2%
EBITDA (US$,000) 63,270 27,898 126.8% 43,756 44.6%
EBITDA margin 43.6% 35.0% 24.6% 32.6% 33.7%
Net income (US$,000) 28,046 5,126 447.1% 18,846 48.8%
ARPU (US$) (1) 19.4 27.0 -28.1% 24.0 -19.2%
MOU (min) (2) 87.0 94.0 -7.4% 106.6 -18.4%
SAC (US$) (3) 30.4 39.0 -22.1% 35.7 -14.8%

 

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.

Significant improvements in VimpelCom's financial and operating results were achieved primarily as a result of rapid subscriber growth with an increasing effect of economies of scale, efficient cost control, improved interconnect agreements with telephone line providers and lower acquisition costs per subscriber. In the first quarter of 2002, the Company continued to reduce its direct service costs, bringing its gross margin up to 81.3%, compared to a gross margin of 77.0% recorded in the fourth quarter of 2001 and a gross margin of 69.1% recorded in the first quarter of 2001. This improvement was primarily due to further growth in usage of federal telephone numbers which have lower interconnect service costs than direct Moscow telephone numbers. Significant improvements in EBITDA, EBITDA margin and net income reported for the first quarter of 2002 compared with previous quarters were primarily due to the growing strength of the Company's Moscow operations, while a significant part of the Company's 2002 national expansion activities are planned for the second half of this year.

The Company's financial results include the activities of VimpelCom-Region, which holds the Company's GSM licenses for areas outside of Moscow. VimpelCom-Region's expenses continue to exceed revenues as the Company's national operations are still predominantly in the phase of network build-out and infrastructure development. Total operating revenues, excluding inter-company transactions, for Moscow stand-alone and VimpelCom-Region in the first quarter of 2002 were $140.1 million and $7.0 million, respectively. Net income for Moscow stand-alone in the first quarter of 2002 was $33.6 million and VimpelCom-Region's net loss was $5.7 million.

Selling, general and administrative expenses were $50.0 million in the first quarter of 2002, an increase of 106.6% compared to the $24.2 million reported in the same period of 2001 and a decrease of 10.6% compared to the $55.9 million reported for the fourth quarter of 2001. This improvement, during a period of high subscriber growth, was primarily due to the decrease in the Company's acquisition cost per subscriber from $39.0 in the first quarter of 2001 and $35.7 in the fourth quarter of 2001 to $30.4 in the first quarter of 2002. This reduced acquisition cost per subscriber was driven, in part, by the increased percentage of lower cost prepaid sales and more efficient advertising. The remaining portion of SG&A expense improved from 21.0% of net revenue in the first quarter of 2001 to 20.1% of net revenue in the first quarter of 2002.

VimpelCom's total capital expenditures for the first quarter of 2002 were approximately $83.4 million, with $59.4 million spent in the Moscow license area.

The Company's MOU in the first quarter of 2002 was 87.0 minutes, a decrease of approximately 7.4% compared to 94.0 minutes reported in the first quarter of 2001. ARPU for the first quarter of 2002 was approximately $19.4, a 28.1% decrease from $27.0 reported for the first quarter of 2001. The decrease in MOU and ARPU in the first quarter of 2002 was primarily related to the increased proportion of prepaid subscribers on the Company's networks.

 

Key Subscriber Statistics

 

  As of
March 31, 2002
As of
March 31, 2001
Change
(%)
As of
Dec. 31,2001
Change
q-to-q
(%)
Moscow license area 2,377,000 927,100 156.4% 1,911,200 24.4%
Contract 667,000 306,500 117.6% 607,500 9.8%
Prepaid 1,710,000 620,600 175.5% 1,303,700 31.2%
Regions 284,500 57,400 395.6% 200,300 42.0%
Total Number of Subscribers 2,661,500 984,500 170.3% 2,111,500 26.0%
 
Churn (quarterly) 5.7% 6.5% -- 6.3% --

 

The first quarter of 2002 was marked by strong subscriber growth in Moscow 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 68.2% at the end of the fourth quarter of 2001 to 71.9% at the end of the first quarter of 2002. VimpelCom's GSM subscribers in Moscow as a percentage of its overall Moscow subscriber base were 90.2% at the end of the first quarter of 2002, compared to 65.0% at the end of the first quarter of 2001. The Company also reported growth in its regional subscribers from 200,300 at the end of the fourth quarter of 2001 to approximately 284,500 at the end of the first quarter of 2002, or 42.0% of quarter-to-quarter growth.

The Company's quarterly churn rate in the first quarter of 2002 was 5.7%, compared to the Company's churn rate of 6.5% reported for the same period in 2001. The Company believes that this improvement was primarily due to increased subscriber satisfaction as well as a decline in the contribution of Moscow-based subscriber migration from the Company's D-AMPS network to its GSM network, which is technically recorded by the Company as churn. The Company expects a rise in churn later this year as a result of high subscriber growth rates in previous periods.

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".

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, including its plans to continue pursuing a policy of profitable growth, combining further progress in the key Moscow market with a balanced nationwide 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, most notably in the regions of Russia outside of Moscow, governmental regulations 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 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
March 31,
2002 2001
(In thousands of US dollars,
except per share (ADS) amounts)
Operating revenues:  
  Service revenues and connection fees US$134,753 US$71,257
Sales of handsets and accessories 11,896 9,135
Other revenues 401 339
Total operating revenues 147,050 80,731
  Less revenue based taxes (1,990) (988)
Net operating revenues 145,060 79,743
 
Operating expenses  
  Service costs 20,077 15,129
Cost of handsets and accessories sold 7,076 9,470
Cost of other revenues 16 34
Selling, general and administrative expenses 49,954 24,223
Depreciation 16,246 10,808
Amortization 2,704 3,109
Provision for doubtful accounts 4,667 2,989
Total operating expenses 100,740 65,762
 
Operating income 44,320 13,981
 
Other income and expenses:  
  Other income 585 346
Other expenses (677) (84)
Gain on trading in securities 52 61
Interest income 1,211 1,977
Interest expense (6,608) (7,205)
Net foreign exchange (loss) gain (421) 805
Total other income and expenses (5,858) (4,100)
 
Income before income taxes and minority interest 38,462 9,881
 
Income taxes expense 10,426 4,755
Minority interest in net earnings of subsidiaries (10) -
 
Net income US$28,046 US$5,126
 
Net income per common share US$0.74 US$0.16
Net income per ADS equivalent US$0.56 US$0.12
Weighted average common shares outstanding (thousands) 38,001 32,851
EBITDA US$63,270 US$27,898
 
Open Joint Stock Company "Vimpel-Communications"
Condensed Consolidated Balance Sheets
 
  March 31,
2002
(unaudited)
December 31,
2001
(In thousands of US dollars)
Assets  
Current assets
  Cash and cash equivalents US$139,451 US$144,172
Short-term investments 955 920
Accounts receivable 55,306 49,678
Other current assets 86,207 69,217
Total current assets 281,919 263,987
 
Non-current assets
  Property and equipment, net 588,764 535,405
Intangible assets, net 69,751 70,926
Other assets 62,278 55,488
Total non-current assets 720,793 661,819
 
Total assets US$1,002,712 US$925,806
 
Liabilities and shareholders' equity
Current liabilities:
  Accounts payable US$51,585 US$42,680
Due to related parties 653 883
Customer deposits 68,604 63,019
Deferred revenue 1,597 1,874
Bank loans, current portion 25,710 17,852
Capital lease obligation, current portion 3,742 4,208
Equipment financing obligation, current portion 84,410 68,290
Accrued liabilities 22,036 13,035
Total current liabilities 258,337 211,841
 
Deferred income taxes 16,278 18,214
Bank loans, less current portion 41,750 50,100
5.5% Senior convertible notes due July 2005 82,201 81,027
Equipment financing, less current portion 68,266 56,196
 
Minority Interest 0 307
 
Shareholders' equity 535,880 508,121
 
Total liabilities and shareholders' equity US$1,002,712 US$925,806
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