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VimpelCom announces fourth quarter and year end 2001 financial and operating results

  • Net revenue, EBITDA and net income growth continuing
  • 2.6 Million subscribers as of today

Moscow and New York (March 20, 2002) - Open Joint Stock Company "Vimpel-Communications" ("VimpelCom" or the "Company") (NYSE: VIP) today announced its financial and operating results for the fourth quarter and year ended December 31, 2001. The fourth quarter of 2001 was the fourth consecutive quarter of profitable growth as the Company reported strong results in subscriber acquisitions in the Moscow license area and significant progress in its national expansion. The Company also reported continued growth in net revenues, EBITDA and net income. For the year ended December 31, 2001, VimpelCom reported net revenues of $422.6 million, a year-to-year growth of 54.2% from $274.1 million in 2000; EBITDA of $148.5 million, a year-to-year growth of 185.5% from $52.0 million in 2000; and net income of $47.3 million compared to a net loss of $77.8 million in 2000.

As of December 31, 2001, VimpelCom had approximately 2.11 million subscribers on its wireless networks and networks operated by VimpelCom's subsidiaries, including 1.91 million subscribers in the Moscow license area, a total year-to-year growth of approximately 153.3%. As of today, VimpelCom's total number of subscribers reached approximately 2.6 million, with approximately 2.33 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 46.5% at the end of 2001, a significant improvement compared to the Company's estimated market share of 39.1% reported at the end of 2000.

Commenting on today's announcement, Jo Lunder, CEO and General Director of VimpelCom, said, "2001 was a breakthrough year for VimpelCom. During 2001, the Company:

  • continued its trend of increasing profitability every quarter;
  • showed strong revenue and EBITDA growth;
  • regained leadership in gross sales and net subscriber additions in the key Moscow market through successful marketing and advertising campaigns as well as its high quality network and customer service;
  • concluded a strategic partnership agreement with Alfa Group, a leading Russian financial industrial consortium, in order to accelerate the Company's national expansion; and
  • between May and December, doubled its total subscriber base from 1 million to 2 million subscribers, with a strong growth trend continuing into 2002."

Mr. Lunder continued, "In 2002, we plan to further strengthen our position in Moscow and continue to upgrade and expand our national operations. A distinctive feature of our strategy is to provide our subscribers with the same high quality services across Russia in a unified nationwide wireless network."

 

Key Financial and Operating Indicators

 

Three months ended Year ended
  Dec. 31,2001 Dec. 31,2000 Change (%) Dec. 31,2001 Dec. 31,2000 Change (%)
Net revenue (US$,000) 134,082 74,832 79.2% 422,602 274,136 54.2%
EBITDA (US$,000) 43,756 13,812 216.8% 148,456 51,993 185.5%
EBITDA margin 32.6% 18.5% 76.2% 35.1% 19.0% 84.7%
Net income (loss) (US$,000) 18,846 (53,427) 135.3% 47,301 (77,801) 160.8%
Net income (loss) per share (US$) 0.52 (1.62) 132.1% 1.41 (2.57) 154.9%
Net income (loss) per ADS (US$) (1) 0.39 (1.21) 132.1% 1.06 (1.93) 154.9%
ARPU (US$) (2) 24.0 32.3 -25.7% 26.2 37.2 -29.6%
MOU (min) (3) 106.6 96.7 10.2% 105.3 90.6 16.2%
SAC (US$) (4) 35.7 63.9 -44.1% 37.6 73.6 -48.9%

Note:

  1. Each ADS represents 0.75 of one share of common stock.
  2. 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 our subscribers during the month.
  3. 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.
  4. 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 as a result of rapid subscriber growth with an increasing effect of economies of scale, efficient cost control, decreasing telecommunications equipment costs, improved interconnect agreements with telephone line providers and lower acquisition costs per subscriber. In the fourth quarter of 2001, the Company continued to reduce its direct service costs, bringing its gross margin up to 77.0%, compared to a gross margin of 73.2% recorded in the third quarter of 2001 and a gross margin of 64.4% recorded in the fourth quarter of 2000. This improvement was largely due to further growth in usage of lower-cost federal telephone numbers.

The Company's financial results include the activities of VimpelCom-Region, which reflect the impact of expenses exceeding 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 fourth quarter of 2001 were $130.6 million and $5.3 million, respectively. For the year ended December 31, 2001, these revenues were $416.9 million and $11.0 million, respectively. Net income for Moscow stand-alone in the fourth quarter of 2001 was $23.1 million and VimpelCom-Region's net loss was $2.5 million. For the year ended December 31, 2001, net income was $55.0 million in Moscow and VimpelCom-Region reported a $7.0 million net loss.

The increase in selling, general and administrative ("SG&A") expenses related primarily to increased sales activity. In 2001, SG&A increased from 33.9% of net revenue in the third quarter to 41.7% in the fourth quarter and, compared to the same period last year, from 40.7% to 41.7%. The increase in SG&A from $30.5 million in the fourth quarter of 2000 to $55.9 million in the fourth quarter of 2001 related to the large increase in subscribers, which grew 42.7% compared to the third quarter of 2001 (third quarter subscribers grew 24.9% compared to the second quarter of 2001). In comparing SACs per sale, however, the Company's 2001 fourth quarter cost was $35.7 compared to $40.9 in the third quarter of 2001 and $63.9 for the fourth quarter of 2000. The decrease in SACs in 2001 as compared to 2000 was primarily due to an increased percentage of sales through the Company's own offices, a decrease in dealer commissions in the beginning of 2001, more efficient advertising and no use of handset subsidies in 2001. The remaining portion of SG&A expense (general and administrative expense) improved from 27.6% of net revenue in the fourth quarter of 2000 to 21.9% of net revenue in the fourth quarter of 2001.

For the year ended December 31, 2001, the Company recorded a $13.4 million provision for doubtful accounts receivable, a 26.1% reduction compared with $18.1 million reported in 2000. This reduction in provision for doubtful accounts and was the result of improved quality of VimpelCom's subscriber base and improved risk management and cash collection procedures.

VimpelCom's total capital expenditures for 2001 were approximately $238.3 million, with $163.1 million spent in the Moscow license area.

The Company's MOU in 2001 was 105.3 minutes, a growth of approximately 16.2% compared to 90.6 minutes reported in 2000. This increase reflected the growth in airtime usage in 2001 in several segments of VimpelCom's subscriber base. ARPU for 2001 was approximately $26.2, a 29.6% decline from $37.2 reported for 2000. The decline in ARPU in 2001 compared to 2000 was primarily due to increased competition, which resulted in the reduction of tariffs and a change in the Company's subscriber mix. The decline in ARPU in the fourth quarter of 2001 compared to the third quarter of 2001 was primarily related to an increased percentage of lower-use subscribers and to roaming revenues which remained at approximately the same level as in the third quarter of 2001. Both factors approximately equally contributed to the decline in ARPU in the fourth quarter of 2001 compared to the third quarter of 2001.

 

Key Subscriber Statistics

 

  As of December 31, 2001 As of December 31, 2000 Change,(year-to-year) As of September 30, 2001 Change,(quarter-to-quarter)
Moscow license area 1,911,200  780,100 145.0% 1,357,100 40.8%
Contract 607,500 260,900 132.8% 477,900 27.1%
Prepaid 1,303,700 519,200 151.1% 879,200 48.3%
Regions 200,300 53,500 274.4% 123,000 62.8%
Total Number of Subscribers 2,111,500 833,600 153.3% 1,480,100 42.7%
Churn (quarterly) 6.3% Not reported -- 6.5% --


The fourth quarter of 2001 was marked by strong subscriber growth in Moscow as VimpelCom added approximately 554,100 new subscribers, which amounted to a 40.8% growth in a period of three months. As a result, the percentage of VimpelCom's prepaid subscribers in its Moscow subscriber base increased from approximately 64.8% at the end of the third quarter of 2001 to 68.2% at the end of the fourth quarter of 2001. The number of VimpelCom's GSM subscribers in Moscow as a percentage of its overall Moscow subscriber base was 85.8% at the end of 2001.

 

The number of the Company's subscribers outside of Moscow increased by almost four times during 2001, as the Company's national expansion gained momentum. VimpelCom-Region, VimpelCom's subsidiary dedicated to national development, launched 15 networks between September 2001 and January 2002, including networks in several key Russian cities, such as Nizhniy Novgorod, Novosibirsk, Kemerovo, Novokuznetsk, Rostov and Saratov. The Company intends to significantly intensify its national expansion in 2002, providing coverage and services to a substantial part of the 85 million people in its licensed territories outside of Moscow.

The Company's annual churn rate in 2001 was 23.0%, which was a significant improvement compared to the Company's churn rate of 34.5% reported for 2000. The Company believes that this improvement was largely due to increased subscriber satisfaction as well as the decline in the contribution of migration from D-AMPS to GSM, which is technically recorded as churn.

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, including its plans to strengthen its position in the Moscow license area, its ability to continue to upgrade and expand its national operations and regional wireless networks, most notably by intensifying its regional activities in 2002, and its ability to provide its subscribers with the same high quality services across Russia in a unified nationwide wireless network 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, 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 Sigrid Peterson
VimpelCom (Moscow) Edelman Financial Worldwide
Tel: 7(095) 974-5888 Tel: 1(212) 704-8284
vgoldin@VimpelCom.com Sigrid.Peterson@edelman.com


-Tables Attached-

Open Joint Stock Company “Vimpel-Communications"
Consolidated Condensed Statements of Operations

 

 

 

 

 

 

 

 

 

Three months ended

 

Year ended

 

 

December 31,

 

December 31,

 

 

2001

2000

 

2001

2000

 

 

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

Operating revenues:

 

 

 

 

 

 

Service revenues and connection fees

US$121,368

US$68,928

 

US$383,321

US$252,333

 

Sales of handsets and accessories

14,216

8,138

 

43,228

32,031

 

Other revenues

322

321

 

1,347

1,309<

Total operating revenues

135,906

77,387

 

427,896

285,673

 

Less revenue based taxes

(1,824)

(2,555)

 

(5,294)

(11,537)

Net operating revenues

134,082

74,832

 

422,602

274,136

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

Service costs

18,943

16,283

 

72,942

60,913

 

Cost of handsets and accessories sold

11,828

10,340

 

38,626

34,443

 

Cost of other revenues

31

40

 

120

157

 

Selling, general and administrative expenses

55,915

30,470

 

149,052

108,482

 

Depreciation and amortization

16,689

16,654

 

61,306

60,022

 

Impairment of long-lived assets

-

66,467

 

-

66,467

 

Provision for doubtful accounts

3,609

3,887

 

13,406

18,148

Total operating expenses

107,015

144,141

 

335,452

348,632

 

 

 

 

 

 

 

Operating income (loss)

27,067

(69,309)

 

87,150

(74,496)

 

 

 

 

 

 

 

Other income and expenses:

 

 

 

 

 

 

Other income (loss)

(771)

1,063

 

(481)

2,152

 

Interest income

864

2,075

 

5,733

4,039

 

Gain (loss) on trading in securities

173

(213)

 

420

(44)

 

Interest expense

(6,797)

(6,638)

 

(26,865)

(21,089)

 

Net foreign exchange gain (loss)

1,497

(2,320)

 

(110)

(2,661)

Total other income and expenses

(5,034)

(6,033)

 

(21,303)

(17,603)

 

 

 

 

 

 

 

Income (loss) before income taxes and minority interest

22,033

(75,342)

 

65,847

(92,099)

 

 

 

 

 

 

 

Provision for income taxes

3,246

(21,919)

 

18,539

(14,343)

Minority interest in net earnings (losses)

of subsidiaries

 

(59)

 

4

 

 

7

 

45

 

 

 

 

 

 

 

Net income (loss)

US$18,846

US$(53,427)

 

US$47,301

US$(77,801)

 

 

 

 

 

 

 

Net income (loss) per common share

US$0.52

US$(1.62)

 

US$1.41

US$(2.57)

 

 

 

 

 

 

 

Net income (loss) per ADS equivalent

US$0.39

US$(1.21)

 

US$1.06

US$(1.93)

 

 

 

 

 

 

 

Weighted average common shares outstanding (thousands)

35,987

33,074

 

33,642

30,264

 

 

 

 

 

 

 

EBITDA

US$43,756

US$13,812

 

US$148,456

US$51,993



Open Joint Stock Company “Vimpel-Communications"
Consolidated Condensed Balance Sheet

 

 

 

 

 

 

 

 

December 31,

December 31,

 

 

 

2001

2000

 

 

 

 

 

 

 

 

(In thousand US dollars)

Assets

 

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

 

US$144,172

US$152,141

 

Short-term investments

920

550

 

Accounts receivable

49,678

29,666

 

Other current assets

69,217

53,117

Total current assets

263,987

235,474

 

 

 

 

 

Non-current assets

 

 

 

Property and equipment, net

535,405

356,666

 

Intangible assets, net

70,926

79,649

 

Other assets

55,488

28,526

Total non-current assets

661,819

464,841

 

 

 

 

 

Total assets

 

US$925,806

US$700,315

 

 

 

 

 

Liabilities and shareholders' equity

 

 

Current liabilities:

 

 

 

Accounts payable

US$42,680

US$28,356

 

Due to related parties

883

2,003

 

Customer deposits

63,019

33,243

 

Deferred revenue

1,874

1,747

 

Bank loans, current portion

17,852

-

 

Capital lease obligation, current portion

4,208

 

 

Equipment financing obligation, current portion

68,290

34,721

 

Accrued liabilities

13,035

13,134

Total current liabilities

211,841

113,204

 

 

 

 

 

Deferred income taxes

18,214

29,922

Bank loans, less current portion

50,100

66,800

5.5% Senior convertible notes due July 2005

81,027

76,702

Equipment financing obligation, less current portion

56,196

44,541

 

 

 

 

 

Minority interest

307

523

 

 

 

 

 

Shareholders' equity

508,121

368,623

 

 

 

 

 

Total liabilities and shareholders' equity

US$925,806

US$700,315

 

 

 

 

 

 

 

 

 

 

 

 

 

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