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VimpelCom announces significant improvement in its second quarter and six month 2001 financial results

  • $9.4 Million net income
  • $35.9 Million EBITDA and 37.9% EBITDA margin

Moscow and New York (August 22, 2001) - Open Joint Stock Company "Vimpel-Communications" ("VimpelCom" or the "Company") (NYSE: VIP) today announced its financial results for the second quarter and six months ended June 30, 2001. During the second quarter of 2001 VimpelCom showed significant improvement in its net revenue, operating income and EBITDA, reporting net income of approximately $9.4 million for the second quarter ended June 30, 2001. Strong subscriber growth continued throughout 2001 and VimpelCom reported approximately 1,317,000 subscribers on all of its wireless networks as of August 22, 2001 (including subscribers on networks operated by VimpelCom's subsidiaries), with approximately 1,205,000 subscribers in the Moscow license area.

Key Financial and Operating Indicators

 


3 months ended 6 months ended

June 30,2001 June 30,2000 Change (%) June 30,2001 June 30,2000 Change (%)
Net revenue (US$,000) 94,679 65,613 44.3% 174,422 128,588 35.6%
EBITDA (US$,000) 35,862 12,889 178.2% 63,760 24,047 165.1%
EBITDA margin 37.9% 19.6% 93.4% 36.6% 18.7% 95.7%
Net income/(loss), (US$,000) 9,414 (6,666) 241.2% 14,540 (18,499) 178.6%
ARPU(US$) (1) 27.7 38.6 -28.2% 27.6 41.6 -33.7%
MOU (min) (2) 107.7 85.5 26.0% 101.4 86.7 17.0%
SAC, (US$) (3) 42.3 91.5 -53.8% 40.1 82.0 -51.1%

 

Note:

  1. ARPU (Monthly Average Revenue per User) is calculated for each month in the relevant period by dividing our 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 our customers 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 customers 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.

VimpelCom's net operating revenues (net of revenue-based taxes) for the second quarter ended June 30, 2001 were approximately $94.7 million, a 44.3% increase from the $65.6 million reported for the second quarter of 2000 and an 18.8% increase from the $79.7 million reported for the first quarter of 2001. Revenue growth was largely due to the increase in the number of subscribers in the network.

In the second quarter of 2001, the Company's net income was approximately $9.4 million, or net income of $0.29 per common share ($0.22 per ADS), compared with a net loss of $6.7 million, or $0.24 per common share ($0.18 per ADS) in the same period in 2000. Each ADS represents 0.75 of one share of common stock.

EBITDA for the second quarter of 2001 was approximately $35.9 million, a 178.2% increase from the $12.9 million reported in the same period in 2000. The Company's EBITDA margin for the second quarter of 2001 was approximately 37.9% compared to approximately 19.6% for the same period of 2000. Growth in EBITDA in the second quarter of 2001 compared with previous periods was due to an increase in our revenues with a lower increase in the corresponding costs.

Service costs in the second quarter of 2001 grew much slower than revenues, which led to an improvement of gross margin from 65.1% in the second quarter of 2000 to 72.9% in 2001. This improvement was largely due to the continued growth in usage of low-cost federal telephone numbers and improved interconnect agreements with telephone line providers.

Selling, general and administrative expenses totaled approximately $30.2 million in the second quarter of 2001, an increase of 18.0% compared to the $25.6 million reported in the same period of 2000. This increase driven by higher sales volumes was significantly lower than the corresponding increase in revenues, primarily due to the decrease in the acquisition cost per subscriber to $42.3 in the second quarter of 2001 from $91.5 in the second quarter of 2000. The reduction in acquisition cost per subscriber was due in part to the increased percentage of sales through the Company's own offices, including through Mobile Center, a dealer network acquired in January 2001.

Another factor which contributed to the improvements in EBITDA and operating margin was the decrease in provision for doubtful accounts by 28.6% from $4.2 million in the second quarter of 2000 to approximately $3.0 million in the second quarter of 2001. This reduction in provision for doubtful accounts was the result of improved quality of VimpelCom's subscriber base and improved risk management procedures.

Depreciation and amortization expense for the second quarter of 2001 was approximately $15.2 million, a 5.6% increase compared to the $14.4 million reported in the same period of 2000. The relatively small increase in depreciation expense despite significant capital investments during the last 12 months is due to the one-time write-down of AMPS/D-AMPS related assets in the fourth quarter of 2000.

The growth in MOU reflects the growth in airtime usage among all subscriber segments over the second quarter of 2001 compared with previous periods. As a result of this increase, VimpelCom reported ARPU of $27.7 for the second quarter of 2001, which is slightly higher than the ARPU of $27.5 reported in the first quarter of 2001.

 

Key Subscriber Statistics

 

  June 30, 2001 June 30, 2000 Change,
year-to-year
March 31, 2001 Change,
quarter-to-quarter
Moscow license area 1,085,100 551,500 96.8% 927,100 17.0%
Postpaid 377,500 187,500 101.3% 306,500 23.2%
Prepaid 707,600 364,400 94.2% 620,600 14.0%
Regions 100,000 30,800 224.7% 57,400 74.2%
Total Number of Subscribers. 1,185,100 582,300 103.5% 984,500 20.04%






Churn (quarterly) 6.8% Not reported -- 7.3%* --

 

* The previously reported 6.5% churn for the first quarter of 2001 was revised to 7.3% to reflect 6,271 prepaid subscribers who were deactivated after the first quarter figures were announced.

 

As of June 30, 2001, VimpelCom had approximately 1,185,100 subscribers on all of its wireless networks, a 103.5% increase compared to the 582,300 subscribers reported as of June 30, 2000. In the second quarter of 2001, subscriber growth in the Moscow license area was entirely attributable to VimpelCom's GSM network. At the end of the second quarter 2001, GSM subscribers constituted approximately 71% of the total Moscow subscriber base compared to 65% reported at the end of the first quarter of 2001. This trend is expected to continue.

VimpelCom estimates that as of June 30, 2001, its market share in Moscow was approximately 39.0%

Commenting on the Company's second quarter results, Jo Lunder, Chief Executive Officer of VimpelCom said,"We are very pleased that only two years after the launch of our GSM network in Moscow, we have recaptured the confidence of the Moscow subscriber market, and were able to report two solid quarters of profitability with increasing revenues and EBITDA. We believe we are well positioned to continue to build on this success in Moscow, and working with our partners Telenor and Alfa Group, we believe we are well positioned to capture the potential of the cellular markets in the regions."

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". 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, 2000 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"

Consolidated Condensed Statements of Operations

             
   

Three months ended

 

Six Months Ended

   

June 30,

 

June 30,

   

2001

2000

 

2001

2000

   

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

Operating revenues:

         
 

Service revenues and connection fees

US$85,953

US$60,303

 

US$ 157,210

US$116,871

 

Sales of handsets and accessories

9,599

7,989

 

18,734

16,957

 

Other revenues

314

342

 

653

641

Total operating revenues

95,866

68,634

 

176,597

134,469

 

Less revenue based taxes

(1,187)

(3,021)

 

(2,175)

(5,881)

Net operating revenues

94,679

65,613

 

174,422

128,588

             

Operating expenses:

         
 

Service costs

17,007

14,332

 

32,136

28,689

 

Cost of handsets and accessories sold

8,579

8,514

 

18,049

16,231

 

Cost of other revenues

33

50

 

67

104

 

Selling, general and administrative expenses

30,179

25,583

 

54,402

 

50,487

 

Depreciation and amortization

15,219

14,358

 

29,136

28,316

 

Provision for doubtful accounts

3,019

4,245

 

6,008

9,030

Total operating expenses

74,036

67,082

 

139,798

132,857

             

Operating income (loss)

20,643

(1,469)

 

34,624

(4,269)

             

Other income and expenses:

         
 

Other (loss) / income

(305)

387

 

(43)

739

 

Interest income

1,708

205

 

3,685

641

 

Gain (loss) on trading in securities

179

(49)

 

240

162

 

Interest expense

(7,460)

(4,091)

 

(14,665)

(7,950)

 

Net foreign exchange gain / (loss)

1,233

283

 

2,038

(334)

Total other income and expenses

(4,645)

(3,265)

 

(8,745)

(6,742)

             

Income (loss) before income taxes and minority interest

15,998

(4,734)

 

25,879

(11,011)

             

Income tax expense

6,551

1,930

 

11,306

7,457

Minority interest in net earnings

of subsidiaries

33

2

 

33

31

             

Net income (loss)

US$ 9,414

(US$ 6,666)

 

US$ 14,540

(US$ 18,499)

             

Net income (loss) per common share

US$ 0.29

(US$ 0.24)

 

US$ 0.44

(US$ 0.66)

             

Net income (loss) per ADS equivalent

US$ 0.212

(US$ 0.18)

 

US$ 0.33

(US$ 0.50)

             

Weighted average common shares outstanding (thousands)

32,851

28,178

 

32,851

28,154

             

EBITDA

US$ 35,862

US$12,889

 

US$ 63,760

US$ 24,047

 

Open Joint Stock Company "Vimpel-Communications"

Consolidated Condensed Balance Sheets

         
         
         
   

June 30,

December 31,

   

2001

2000

     

(unaudited)

 
 

(In thousands of US dollars)

Assets

       

Current assets

   
 

Cash and cash equivalents

US$119,250

US$152,141

 

Short-term investments

4,389

550

 

Accounts receivable

41,618

29,666

 

Other current assets

55,262

53,117

Total current assets

220,519

235,474

         

Non-current assets

   
 

Property and equipment, net

412,303

356,666

 

Intangible assets, net

75,894

79,649

 

Other assets

38,466

28,526

Total non-current assets

526,663

464,841

         

Total assets

US$747,182

US$700,315

         

Liabilities and shareholders' equity

   

Current liabilities

   
 

Accounts payable

27,333

US$28,356

 

Customer deposits

44,702

33,243

 

Deferred revenue

2,321

1,747

 

Due to related parties

2,285

2,003

 

Bank loans

491

-

 

Capital lease obligation, current portion

5,106

-

 

Equipment financing, current portion

40,622

34,721

 

Accrued liabilities

145,998402

13,134

Total current liabilities

1378,858262

113,204

         

Deferred income taxes

29,359

29,922

Bank loans

68,928

66,800

5.5% Senior convertible notes due July 2005

78,799

76,702

     

Equipment financing, less current portion

48,340

44,541

         

Minority Interest

331

523

         

Shareholders' equity

383,163

368,623

         

Total liabilities and shareholders' equity

US$747,182

US$ 700,315

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