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VimpelCom announces first quarter financial results

Moscow and New York (May 28, 1999) - Open Joint Stock Company “Vimpel-Communications" (“VimpelCom" or the “Company") (NYSE: VIP) today announced financial results for the first quarter ended March 31, 1999.

At the end of the first quarter of 1999, VimpelCom had 122,441 subscribers on its Moscow networks, less than a 1% decline compared to 123,324 subscribers reported at the end of the first quarter of 1998. At the end of the first quarter of 1999, VimpelComЌs 50% subsidiary in Samara had 11,464 subscribers, a growth of 63% over the 7,023 subscribers reported in the same period a year ago.

Despite the decline in the CompanyЌs overall subscriber base, VimpelComЌs Moscow GSM network experienced a moderate increase in subscribers in the first quarter of 1999. As of March 31, 1999, VimpelComЌs Moscow GSM network had 22,883 subscribers, which constituted approximately 19% of the CompanyЌs total subscriber base as of such date, compared to 11% at the end of March 1998.

VimpelCom reported total operating revenues of $57.9 million for the first quarter of 1999, a 37% decline from the $92.4 million reported in the same period in 1998. Total net operating revenues (net of revenue-based taxes) for the first quarter of 1999, were $55.3 million, 38% lower than the $89.1 million reported in the same period a year ago. The decline in operating revenues, as well as for other financial results reported for the first quarter of 1999, was largely due to the continued deterioration of the Russian economy.

Net income for the first quarter of 1999, was $0.1 million, or earnings of $0.01 per share ($0.01 per ADS), compared with net income of $16.5 million, or $0.86 per share ($0.64 per ADS), earned in the same period in 1998. Each ADS represents 0.75 of one share of common stock. Operating income for the first quarter of 1999 was $1.3 million, 95% lower than the $28.3 million in operating income reported at the end of the first quarter of 1998. The decline in net income was due primarily to a sharp reduction in revenues resulting from considerably lower traffic volumes and higher depreciation and financing charges, reflecting the increased investments the Company has been making in its networks when compared to the same period in 1998.

EBITDA for the first quarter of 1999 was $14.3 million, 62% lower than the $37.5 million reported in the same period in 1998. The CompanyЌs EBITDA margin for the quarter ended March 31, 1999, was 25.9%, significantly lower than the 42.1% EBITDA margin in the same period a year ago. The decrease in the CompanyЌs EBITDA margin is due primarily to lower service revenue margins, as a result of fixed costs associated with unused line capacity, subsidization of handset sales, and as a percentage of revenues, increases in the provision for doubtful accounts receivable and selling, general and administrative expenses.

Selling, general and administrative expenses for the first quarter of 1999 declined 26% to $17.5 million, compared with $23.7 million reported in the same period in 1998. The absolute decrease in selling, general and administrative expenses was due primarily to the decrease in the level of business activity compared with the same period in 1998. However, as a percentage of net revenues in the first quarter of 1999, selling, general and administrative expenses were 31.6%, a 5.0% increase over the 26.6% for the same period in 1998.

For the first quarter of 1999, the Company recorded a $4.1 million provision for doubtful accounts receivable compared with $5.1 million reported for the same period in 1998. This decrease in provision for doubtful accounts receivable in dollar terms was due to the reduction in business activity in the first quarter of 1999 compared with the same period in 1998. However, as a percentage of revenues, the provision for doubtful accounts was 7.4% in the first quarter of 1999 compared to 5.8% in the same period a year ago. The increase in the provision in percentage terms was due to the continuing economic crisis in Russia, which resulted incustomers taking longer to pay their bills than they have in the past and an increase in customers from whom the Company believes payment is unlikely. The Company believes that its provision for doubtful accounts receivable is conservative and adequate.

Depreciation and amortization expense was $13.0 million for the first quarter of 1999, a 41% increase compared to $9.2 million reported in the same period of 1998. The increase in depreciation and amortization expense was due to the increased depreciable asset base resulting from the CompanyЌs continuing capital investments in its D-AMPS and GSM-900/1800 networks and the amortization of the CompanyЌs GSM-900 frequency payments.

Commenting on the CompanyЌs first quarter results, Dmitri Zimin, President and Chief Executive Officer said, “During the first quarter of 1999, we continued to experience difficult operating conditions which, are a direct result of the economic downturn in Russia. As a consequence, we have continued to experience a loss of subscribers and reductions in air time volumes which have combined to reduce our overall revenues compared to a year ago. However, beginning in March 1999 and continuing into the second quarter, there are clear signs that the high churn level first experienced in the fourth quarter of this past year is beginning to stabilize and decline. In addition, sales volumes have recently picked up significantly and we have started to increase our subscriber base as a result of the marketing initiatives we have taken."

Zimin continued, “The launch of our prepaid services for our D-AMPS and GSM Moscow networks have helped boost sales by broadening our potential market and capturing a more cost-conscious subscriber segment to fill unused capacity of our networks. Prepaid services have also helped retain customers most affected by the economic downturn. During the months of March and April 1999, in response to our prepaid sales promotion, weekly sales rose to pre-crisis levels and higher. In fact, April was the best sales month in the CompanyЌs history, as we signed up over 15,000 new subscribers. During the course of 1999, as we complete the build out of our dual-band GSM 900/1800 network, we plan to launch other new products as a means of further growing our subscriber base. In addition, we were excited to report the closing of the Telenor transaction today, which will enhance our competitive position in the Moscow and Russian telecommunications markets."

VimpelCom is a leading provider of cellular telecommunications in Russia, marketing its services under the brand name “Bee Line". The VimpelCom Group operates GSM-900/1800 and Digital-AMPS cellular networks in the Moscow License Area, which includes the City of Moscow and the Moscow Region. The VimpelCom Group holds cellular licenses covering a total population of approximately 100 million (70% of Russia's population). VimpelCom was the first Russian Company listed on the New York Stock Exchange (November 1996), and its ADSs trade under the symbol “VIP".

This press release contains forward-looking statements related to the development of the Company's business. These statements are based on Management's best assessment of future market conditions and trends. The actual outcome may differ 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, all of which may be aggravated by the current economic and political crisis. No assurance can be given that the economic crisis will abate in the foreseeable future or that the full impact of the economic crisis on the VimpelCom Group can be assessed at this time. As a result of such uncertainties, there can be no assurance that 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. 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

Glenn Wiener
Edelman Financial Worldwide
1 (212) 704 8174
glenn_wiener@edelman.com

 

Open Joint Stock Company Vimpel-Communications
Unaudited Consolidated Condensed Statements of Income
       
       
    Three months ended
    March 31
    1999 1998
    (In thousands, except per share (ADS) amounts)
Operating revenues      
Service revenues and connection fees   US$ 53,562 US$ 84,391
Sales of handsets and accessories   4,312 8,028
Total operating revenues   57,874 92,419
Less revenue-based taxes   2,593 3,337
Net operating revenues   55,281 89,082
       
Operating expenses:      
Service costs   14,609 16,889
Cost of handsets and accessories sold   4,819 5,834
Selling, general and administrative expenses   17,459 23,731
Depreciation and amortization   12,967 9,151
Provision for doubtful accounts   4,082 5,146
Total Operating expenses   53,936 60,751
       
Operating income   1,345 28,331
       
Other income and expenses:      
Other income   73 370
Gain on trading securities     649
Gain on Russian government securities   658  
Interest expense   (4,380) (2,413)
Net foreign exchange (loss)/ gain   (3,056) (2,222)
Total other income and expenses   (6,705) (3,616)
       
Income before income taxes      
and minority interest   (5,360) 24,715
       
Income tax expense (benefit)   (6,521) 7,740
Minority interest in net losses of subsidiaries   1,013 449
Net income (loss)   US$ 148 US$ 16,526
       
Net income per common share   US$ 0.01 US$ 0.86
Net income per ADS equivalent   US$ 0.01 US$ 0.64
Weighted average common shares      
outstanding (thousands)   19,280 19,280
       
EBITDA   US$ 14,312 US$ 37,482

 

       
Open Joint Stock Company Vimpel-Communications
Condensed Consolidated Balance Sheet
       
  March 31,   December 31,
  1999   1998
  (unaudited)    
    (In thousands US dollars)  
Assets      
Current Assets:      
Cash and cash equivalents US$ 15,854   US$ 14,479
Short-term investments 1,495   2,167
Accounts receivable 25,956   34,354
Other current assets 22,095   21,377
Total current assets 65,400   72,377
       
Property and equipment, net 411,706   416,036
Other assets 47,353   47,654
Total Assets US$524,459   US$536,067
       
Liabilities and shareholders' equity      
Current liabilities:      
Accounts payable US$ 38,413   US$ 36,573
Customer deposits 36,889   46,214
Bank loans 11,000   10,754
Equipment financing, current portion 18,240   17,501
Other accrued liabilities 9,765   7,594
Total current liabilities 114,307   118,636
       
Deferred income taxes 35,376   41,151
Equipment financing and other liabilities 161,410   164,075
       
Minority interest 10,282   9,269
       
Shareholders' equity 203,084   202,936
Total liabilities and shareholders' equity US$524,459   US$536,067



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