VimpelCom Announces First Quarter 2008 Financial and Operating Results
MOSCOW and NEW YORK, June 4 /PRNewswire-FirstCall/ — Open Joint Stock Company “Vimpel-Communications” (“VimpelCom” or the “Company”) , a leading provider of telecommunications services in Russia and the Commonwealth of Independent States (CIS) today announced its financial and operating results for the quarter ended March 31, 2008.
Financial and Operating Highlights — Net operating revenues reached $2,108 million, an increase of 41.7% versus 1Q2007. — OIBDA reached $1,126 million, an increase of 47.0% versus 1Q2007. — OIBDA margin was 53.4%, including 55.2% in Russia and 50.4% in Kazakhstan. — Net income totaled $601 million, an increase of 117.0% versus 1Q2007. — Active mobile subscribers increased by 6.5 million versus 1Q2007, reaching 52.3 million. — Acquisition of Golden Telecom was completed on February 28, 2008. — The Board of Directors proposed a dividend of $0.58* per ADS, an increase of 81% compared to the previous year.
Commenting on today’s announcement, Alexander Izosimov, Chief Executive Officer of VimpelCom, said, “The first quarter of 2008 should be viewed as the beginning of a new era for VimpelCom. Completion of the Golden Telecom acquisition has opened an entirely new set of growth opportunities which, when realized, should further strengthen our position in the Russian telecom sector.
“Meanwhile our mobile business continues to show strong financial results. We are growing revenues and OIBDA in virtually all of our markets, in spite of the negative impact of economic problems in Central Asia, particularly in Kazakhstan.
“With an OIBDA margin above 50% and a revenue growth rate above 40%, VimpelCom remains a rare example of a large, fast growing and highly profitable business. The underlying strength of our core business coupled with new opportunities of being an integrated player should provide a robust platform for our future growth ambitions.”
* On April 16, 2008, VimpelCom’s Board of Directors recommended a dividend of 270.01 rubles per ordinary share. Last year’s dividends were approved at 166.88 rubles per ordinary share. Dividend per ADS was calculated only for information purposes given Russian Central Bank exchange rate and the ratio of ADS to ordinary shares on the date of the respective Board recommendations. The actual amount in US$ to be paid to the ADS- holders in case of the AGM approval will depend on the exchange rate around the payment date and any required withholding tax. Changes in Definitions and Reported Data
Beginning with this quarterly report, we have made significant changes in the reporting structure in order to reflect the integration with Golden Telecom, which we began to consolidate into VimpelCom’s accounts starting from March 1, 2008.
Adjusting to the new complexity of the business we now consolidate our revenues along four segments: two geographic segments (Russia and the CIS) and two business segments (Mobile and Fixed). Fixed-line operations in Armenia (representing $36.2 million of revenue in the first quarter of 2008) are now reflected within the CIS fixed-line segment, while the results of Golden Telecom’s mobile operations in Ukraine (representing $0.5 million of revenue in March 2008) are now part of the mobile business segment in the CIS.
Due to the increasing integration between different parts of our business, we include inter-company transactions in the reported revenues of geographic and business segments, and indicate the amount of inter-company eliminations within and between the segments.
We discontinued providing registered subscriber base numbers, completely shifting to active base. We have also aligned our churn rate reporting to the three month active subscriber base, which we believe is the most meaningful way of reporting. Consequently, this shift caused a step-change in our reported subscriber market share.
Within sales, general and administrative costs (SG&A) we now provide an explicit breakdown between general and administrative costs (G&A) and sales and marketing costs (S&M). As sales and marketing costs include all of the relevant costs of subscriber acquisition, retention and usage stimulation, we believe these measures provide more accurate information than subscriber acquisition costs. Previously part of our S&M costs was shown in G&A.
A country-by-country CAPEX breakdown can be found in Attachment D.
A detailed country-by-country breakdown of the main financial and operating data can be found in the file entitled FinancialOperatingQ12008.xls on our website at http://www.vimpelcom.com/news/qrep.wbp.
Key Consolidated Financial and Operating Results CONSOLIDATED OPERATIONS (US$, mln) Three months 1Q 2008 1Q 2007 y-o-y 4Q 2007 q-o-q Net operating revenues 2,108 1,488 41.7% 2,010 4.9% OIBDA 1,126 766 47.0% 918 22.7% OIBDA margin, % 53.4% 51.5% 45.7% SG&A 528 439 20.3% 716 -26.3% including Sales & Marketing Expenses 187 136 37.5% 219 -14.6% including General & Administrative Costs 341 303 12.5% 497 -31.4% SG&A percentage 25.0% 29.5% 35.6% Net income 601 277 117.0% 368 63.3% Net income per common share, (US$) 11.84 5.45 117.2% 7.25 63.3% Net income per ADS equivalent*, (US$) 0.59 0.27 118.5% 0.36 63.9% Capital expenditures 358 303 18.2% 796 -55.0% Mobile subscribers (’000) 52,293 45,784 14.2% 51,740 1.1% Broadband internet service subscribers (’000) 534 n/a n/a * Number of ADSs is based on the ratio of 20 ADSs per one ordinary share, which came into effect on August 21, 2007. Prior year amounts have been adjusted to reflect the new ratio. Net operating revenue 1Q 2008 (US$ mln) Russia CIS Eliminations Total Mobile business 1,675 271 -2 1,944 Fixed business 132 47 -4 175 Eliminations -10 -1 -11 Total net operating revenue 1,797 317 -6 2,108 RUSSIA (US$ mln) Three months 1Q 2008 1Q 2007 y-o-y 4Q 2007 q-o-q Net operating revenues 1,797 1,279 40.5% 1,702 5.6% OIBDA 992 676 46.7% 773 28.3% OIBDA margin, % 55.2% 52.9% 45.4% SG&A 434 375 15.7% 633 -31.4% including Sales & Marketing Expenses 158 114 38.6% 186 -15.1% including General & Administrative Costs 276 261 5.7% 447 -38.3% SG&A percentage 24.2% 29.3% 37.2% Net income 616 280 120.0% 364 69.2%
Our Russian operations continue to show year-on-year revenue growth over 40% with a record-high OIBDA margin. In the first quarter our OIBDA in the Russian mobile segment reached $959 million. This includes a $43 million reversal of our stock-price based compensation plans accruals, resulting mainly from the decline in VimpelCom’s ADS price in the first quarter of 2008. However, even excluding this effect, the OIBDA margin of the Russian mobile segment stayed close to 55%.
With the acquisition of Golden Telecom, a cornerstone of our integrated operator strategy, we assumed substantial debt and absorbed a lower-margin business. The acquisition dictated a more conservative approach to the Russian mobile market aimed at preserving our margins and maximizing cash-flow by restricting marketing expenses and maintaining stable pricing.
Reduced marketing activities in a seasonally weak quarter resulted in a slight decline in ARPU, and, as a result, in mobile revenues compared to the previous quarter. Evidently, the decline in mobile revenue was more than offset by the addition of fixed-line revenue for March.
Golden Telecom’s revenue in Russia for the entire first quarter was approximately 61% higher than a year ago, driven by very good development in all business lines.
Now that the Golden Telecom transaction and the initial part of the integration are behind us, we plan to step up marketing activities in order to protect our revenue market share on the Russian mobile market.
The growth in our net income was disproportionately higher than the growth in our OIBDA, primarily due to a foreign exchange gain of $185 million. This foreign exchange gain resulted mainly from the revaluation of our U.S. dollar- denominated loans.
RUSSIA REVENUE (US$ mln) Three months 1Q 2008 1Q 2007 y-o-y 4Q 2007 q-o-q Net operating revenues 1,797 1,279 40.5% 1,702 5.6% Mobile revenue 1,675 1,279 31.0% 1,702 -1.6% Fixed revenue 132 n/a n/a Eliminations -10 n/a n/a RUSSIA OPERATING DEVELOPMENT Three months 1Q 2008 1Q 2007 y-o-y 4Q 2007 q-o-q Active mobile subscribers (’000) 42,079 38,631 8.9% 42,221 -0.3% Subscriber market share*, % 25.0% 31.2% 29.9% MOU, min 198.7 160.9 23.5% 204.1 -2.6% ARPU, US$ 13.2 10.9 21.1% 13.5 -2.2% Broadband internet service subscribers (’000) 530 n/a n/a * Subscriber market share data presented here and in the following country tables are published by AC&M-Consulting. Starting from January 1, 2008 VimpelCom’s subscriber market share is being reported solely on the basis of active subscribers, while previously it was based on registered subscribers. The drop in the reported market share in the first quarter is mainly caused by the change of reporting methodology. RUSSIA OIBDA DEVELOPMENT (US$ mln) Three months 1Q 2008 1Q 2007 y-o-y 4Q 2007 q-o-q OIBDA Total 992 676 46.7% 773 28.3% Mobile OIBDA 959 676 41.7% 773 23.9% Fixed OIBDA 33 n/a n/a Total OIBDA margin, % 55.2% 52.9% 45.4% Mobile OIBDA margin, % 57.2% 52.9% 45.4% Fixed OIBDA margin, % 25.0% n/a n/a CIS OPERATIONS (US$ mln) Three months 1Q 2008 1Q 2007 y-o-y 4Q 2007 q-o-q Net operating revenues 317 211 50.2% 314 1.0% OIBDA 134 90 48.9% 145 -7.6% OIBDA margin, % 42.3% 42.7% 46.2% SG&A 94 65 44.6% 84 11.9% including Sales & Marketing Expenses 29 22 31.8% 33 -12.1% including General & Administrative Costs 65 43 51.2% 51 27.5% SG&A percentage 29.7% 30.8% 26.8% Net income -14 -3 4
Our operations in the CIS countries continue to demonstrate strong financial performance, with revenue growth of more than 50% and OIBDA margin over 40%. The main growth contributors are Kazakhstan and Ukraine, which now includes the Ukrainian business of Golden Telecom. We are also pleased with the growth in Uzbekistan, signs of improvements in Armenia, and continued strong growth in our smaller markets.
However, our business dynamics were affected by economic problems in the Central Asian republics. In Kazakhstan, our largest market, the economy suffered from a liquidity crisis, while Tajikistan and Uzbekistan were seriously impacted by extremely cold weather and power outages.
In Armenia we started to see positive trends and an increase in the number of active subscribers. We introduced our Beeline brand on the local market and accelerated our marketing activities. Our focus will remain on building market share and expanding fixed-mobile convergence opportunities.
Net income losses in the first quarter were caused mainly by one-off factors, such as a $16 million write-off of equipment in Armenia in the course of modernizing the network.
CIS Revenues Development KAZAKHSTAN (US$ mln) Three months 1Q 2008 1Q 2007 y-o-y 4Q 2007 q-o-q Net operating revenue 162.8 119.4 36.3 % 174.6 -6.8 % Mobile 162.1 119.4 35.8 % 174.6 -7.2 % Fixed 1.1 n/a n/a Elimination -0.4 n/a n/a UKRAINE (US$ mln) Three months 1Q 2008 1Q 2007 y-o-y 4Q 2007 q-o-q Net operating revenue 44.8 16.3 174.8 % 34.5 29.9 % Mobile 36.4 16.3 123.3 % 34.5 5.5 % Fixed 8.9 n/a n/a Elimination -0.5 n/a n/a ARMENIA (US$ mln) Three months 1Q 2008 1Q 2007 y-o-y 4Q 2007 q-o-q Net operating revenue 59.1 54.1 9.2 % 59.8 -1.2 % Mobile 22.9 19.9 15.1 % 23.5 -2.4 % Fixed 36.2 34.2 5.8 % 36.3 -0.1 % Elimination 0.0 n/a n/a UZBEKISTAN (US$ mln) Three months 1Q 2008 1Q 2007 y-o-y 4Q 2007 q-o-q Net operating revenue 39.5 18.2 117.0 % 36.6 7.9 % Mobile 38.7 18.2 112.6 % 36.6 5.7 % Fixed 0.8 n/a n/a Elimination 0.0 n/a n/a TAJIKISTAN (US$ mln) Three months 1Q 2008 1Q 2007 y-o-y 4Q 2007 q-o-q Net operating revenue 8.4 2.9 189.7 % 8.1 3.7 % Mobile 8.4 2.9 189.7 % 8.1 3.7 % Fixed n/a n/a n/a Elimination n/a n/a n/a GEORGIA (US$ mln) Three months 1Q 2008 1Q 2007 y-o-y 4Q 2007 q-o-q Net operating revenue 2.4 0.03 7900 % 0.9 166.7 % Mobile 2.4 0.03 7900 % 0.9 166.7 % Fixed n/a n/a n/a Elimination n/a n/a n/a CIS REVENUES (US$ mln) Three months 1Q 2008 1Q 2007 y-o-y 4Q 2007 q-o-q Eliminations -0.9 n/a n/a Mobile 270.9 176.7 53.3 % 278.2 -2.6 % Fixed 47 34.2 37.4 % 36.4 29.1 % Net operating revenue 317 210.9 50.3 % 314.6 0.8 % CIS Operating Highlights KAZAKHSTAN Three months 1Q 2008 1Q 2007 y-o-y 4Q 2007 q-o-q Active mobile subscribers (’000) 4,777 3,501 36.4 % 4,603 3.8 % Subscriber market share*), % 39.5 % 50.2 % 46.5 % MOU, min 99.1 72.3 37.1 % 98.9 0.2 % ARPU, US$ 11.6 12.2 -4.9 % 13.0 -10.8 % UKRAINE Three months 1Q 2008 1Q 2007 y-o-y 4Q 2007 q-o-q Active mobile subscribers (’000) 1,971 1,953 0.9 % 1,941 1.5 % Subscriber market share*), % 3.5 % 4.5 % 4.8 % MOU mobile, min 210.2 138.0 52.3 % 183.2 14.7 % ARPU mobile, US$ 6.1 3.0 103.3 % 5.6 8.9 % Broadband internet subscribers (’000) 4 n/a n/a ARPU broadband, US$ 39.4 n/a n/a ARMENIA Three months 1Q 2008 1Q 2007 y-o-y 4Q 2007 q-o-q Active mobile subscribers (’000) 520 440 18.2 % 442 17.6 % Subscriber market share*), % 26.9 % 37.3 % 26.1 % MOU mobile, min 158.9 141.3 12.5 % 171.8 -7.5 % ARPU mobile, US$ 16.1 14.5 11.0 % 17.4 -7.5 % UZBEKISTAN Three months 1Q 2008 1Q 2007 y-o-y 4Q 2007 q-o-q Active mobile subscribers (’000) 2,422 1,106 119.0 % 2,120 14.2 % Subscriber market share*), % 33.6 % 33.1 % 37.3 % MOU, min 265.3 242.2 9.5 % 283.4 -6.4 % ARPU, US$ 5.8 6.7 -13.4 % 6.8 -14.7 % TAJIKISTAN Three months 1Q 2008 1Q 2007 y-o-y 4Q 2007 q-o-q Active mobile subscribers (’000) 378 145 160.7 % 339 11.5 % Subscriber market share*), % 15.9 % 11.2 % 18.1 % MOU, min 205.8 205.8 0.0 % 216.3 -4.9 % ARPU, US$ 8.0 8.7 -8.0 % 9.0 -11.1 % GEORGIA Three months 1Q 2008 1Q 2007 y-o-y 4Q 2007 q-o-q Active mobile subscribers (’000) 146 7 1985.7 % 73 100.0 % Subscriber market share*), % 5.3 % 0.4 % 3.7 % MOU, min 87.1 47.9 81.8 % 121.5 -28.3 % ARPU, US$ 7.4 3.2 131.3 % 9.0 -17.8 % * Source: AC&M-Consulting. The drop in the reported market share is caused by the fact that starting from January 1, 2008 VimpelCom’s market share is calculated on the basis of active subscribers, while before that date it was based on registered subscribers. CIS OIBDA Development CIS OIBDA (US$ mln) Three months 1Q 2008 1Q 2007 y-o-y 4Q 2007 q-o-q OIBDA total 134 90 48.9 % 145 -7.6 % OIBDA margin, % 42.3 % 42.7 % 46.2 % Mobile 112.8 73.7 53.1 % 122.4 -7.8 % Fixed 21.5 16.2 32.7 % 22.8 -5.7 % KAZAKHSTAN (US$ mln) Three months 1Q 2008 1Q 2007 y-o-y 4Q 2007 q-o-q OIBDA total 82.0 62.0 32.3 % 92.2 -11.1 % OIBDA Margin, % 50.4 % 51.9 % 52.8 % Mobile 81.6 62.0 31.6 % 92.2 -11.5 % Fixed 0.4 n/a n/a UKRAINE (US$ mln) Three months 1Q 2008 1Q 2007 y-o-y 4Q 2007 q-o-q OIBDA total 3.2 -6.5 n/a 3.6 -11.1 % OIBDA Margin, % 7.1 % n/a 10.4 % Mobile 1.1 -6.5 n/a 3.6 -69.4 % Fixed 2.1 n/a n/a ARMENIA (US$ mln) Three months 1Q 2008 1Q 2007 y-o-y 4Q 2007 q-o-q OIBDA total 29.1 27.3 6.6 % 32.5 -10.5 % OIBDA Margin, % 49.2 % 50.5 % 54.3 % Mobile 10.4 11.1 -6.3 % 9.7 7.2 % Fixed 18.7 16.2 15.4 % 22.8 -18.0 % UZBEKISTAN (US$ mln) Three months 1Q 2008 1Q 2007 y-o-y 4Q 2007 q-o-q OIBDA total 20.9 8.6 143.0 % 17.8 17.4 % OIBDA Margin, % 52.9 % 47.3 % 48.6 % Mobile 20.6 8.6 139.5 % 17.8 15.7 % Fixed 0.3 n/a n/a TAJIKISTAN (US$ mln) Three months 1Q 2008 1Q 2007 y-o-y 4Q 2007 q-o-q OIBDA total 1.3 -0.3 n/a 1.4 -7.1 % OIBDA Margin, % 15.5 % n/a 17.3 % Mobile 1.3 -0.3 n/a 1.4 -7.1 % Fixed n/a n/a n/a GEORGIA (US$ mln) Three months 1Q 2008 1Q 2007 y-o-y 4Q 2007 q-o-q OIBDA total -2.2 -1.2 83.3 % -2.3 -4.3 % OIBDA Margin, % n/a n/a n/a Mobile -2.2 -1.2 83.3 % -2.3 -4.3 % Fixed n/a n/a n/a
For more information on financial and operating data of the CIS countries, please refer to the supplementary file FinancialOperatingQ12008.xls on our website at http://www.vimpelcom.com/news/qrep.wbp.
Recent Developments
On May 27, 2008, VimpelCom received the preliminary conclusion of the Russian Tax Inspectorate’s review of VimpelCom’s tax filings for the 2005 and 2006 financial years. According to this document, VimpelCom owes approximately $54 million in additional taxes (excluding fines and penalties) for the respective years. Most of the claims are similar to the claims we received for previous financial years, and in the past we have been able to successfully reverse most of these claims in the Russian courts. On June 3, 2008, we submitted our preliminary objections to the Tax Inspectorate. We expect to receive a final tax claim in the near future and to appeal the final tax claim in the Russian courts to the extent that it is not reduced by our objections. We have not made any reserves for these tax claims, because we believe that the claims will ultimately be resolved in our favor.
The Company’s management will discuss its first quarter results during a conference call and slide presentation on June 4, 2008 at 6:30 pm Moscow time (10:30 am ET in New York). The call and slide presentation may be accessed via webcast at the following URL address http://www.vimpelcom.com/. The conference call replay will be available through June 13, 2008. The slide presentation webcast will also be available for download on VimpelCom’s website http://www.vimpelcom.com/.
The VimpelCom Group is a telecommunications operator, providing voice and data services, covered through a range of wireless, fixed and broadband technologies. The Group includes companies operating in Russia, Kazakhstan, Ukraine, Uzbekistan, Tajikistan, Georgia and Armenia, in territories with a total population of about 250 million. 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 strategic and development plans, including network development plans, developments in the telecommunications markets in which the Company operates, and the resolution of the tax claim for the financial years 2005 and 2006. These and other forward-looking statements 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 regulation of the telecommunications industries in Russia and the CIS, general political uncertainties in Russia and the CIS and general economic developments in Russia and the CIS, continued volatility in the world economy, challenges to 3G and Far East tenders and/or litigation with third parties. The actual outcome may also differ materially if the Company is unable to obtain all necessary corporate approvals relating to its business (including approval of funding and specific transactions), if the Company is unable to successfully integrate newly-acquired businesses, including Golden Telecom, 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 and CIS telecommunications industries 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, 2007 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.
-Definitions and tables are attached – Attachment A: Definitions
Active mobile subscribers are those subscribers in the registered subscriber base who were a party to a revenue generating activity in the past three months and remain in the base at the end of the reported period. Such activities include all incoming and outgoing calls, subscriber fee accruals, debits related to service, outgoing SMS, MMS, data transmission and receipt sessions, but do not include incoming SMS and MMS sent by our Company or abandoned calls.
Each ADS represents 0.05 of one share of common stock. This ratio was established effective August 21, 2007.
ARPU (Monthly Average Revenue per User), a non-U.S. GAAP financial measure, is calculated by dividing the Company’s service revenue during the relevant period, including roaming revenue and interconnect revenue, but excluding revenue from connection fees, sales of handsets and accessories and other non-service revenue, by the average number of the Company’s active subscribers during the period and dividing by the number of months in that period. Reconciliation of ARPU to service revenues and connection fees, the most directly comparable U.S. GAAP financial measure, is presented below in the tables section. The Company believes that ARPU provides useful information to investors because it is an indicator of the performance of the Company’s business operations and assists management in budgeting. The Company also believes that ARPU provides management with useful information concerning usage and acceptance of the Company’s services. ARPU should not be viewed in isolation or an alternative to other figures reported under U.S. GAAP.
Broadband internet service subscribers are those subscribers in the registered subscriber base who were a party to a revenue generating activity in the past three months and remained in the base at the end of the reported period. Such activities include monthly internet access using FTTB, xDSL and WiFi technologies.
CIS Geographic Segment for the purpose of VimpelCom reporting includes our operations in the following countries: Kazakhstan, Ukraine, Uzbekistan, Tajikistan, Armenia and Georgia.
Fixed-line subscriber is an authorized user of fixed-line communications services.
General and administrative costs (G&A) include salaries and outsourcing costs, including related social contributions required by Russian law; stock price-based compensation expenses; repair and maintenance expenses; rent, including lease payments for base station sites; utilities; other miscellaneous expenses, such as insurance, operating taxes, license fees, and accounting, audit and legal fees.
Market share of subscribers for each relevant area is calculated by dividing the estimated number of our subscribers in Russia, Kazakhstan, Ukraine, Uzbekistan, Tajikistan and Armenia, respectively, by the total estimated number of subscribers in Russia, Kazakhstan, Ukraine, Uzbekistan, Tajikistan and Armenia, respectively and is provided by AC&M-Consulting.
Mobile services are wireless voice and data transmission services excluding WiFi.
MOU (Monthly Average Minutes of Use per User) is calculated by dividing the total number of minutes of usage for incoming and outgoing calls during the relevant period (excluding guest roamers) by the average number of active subscribers during the period and dividing by the number of months in that period.
OIBDA is a non-U.S. GAAP financial measure. OIBDA, previously referred to as EBITDA by the Company, is defined as operating income before depreciation and amortization. The Company believes that OIBDA provides useful information to investors because it is an indicator of the strength and performance of our business operations, including our ability to finance capital expenditures, acquisitions and other investments and our ability to incur and service debt. While depreciation and amortization are considered operating costs under U.S. GAAP, these expenses primarily represent the non-cash current period allocation of costs associated with long-lived assets acquired or constructed in prior periods. Our OIBDA calculations are commonly used as bases for some investors, analysts and credit rating agencies to evaluate and compare the periodic and future operating performance and value of companies within the wireless telecommunications industry. OIBDA should not be considered in isolation as an alternative to net income, operating income or any other measure of performance under U.S. GAAP. OIBDA does not include our need to replace our capital equipment over time. Reconciliation of OIBDA to operating income, the most directly comparable U.S. GAAP financial measure, is presented below in the reconciliation tables section.
OIBDA margin is OIBDA expressed as a percentage of total net operating revenues. Reconciliation of OIBDA margin to operating income as a percentage of total net operating revenues, the most directly comparable U.S. GAAP financial measure, is presented below in the reconciliation tables section.
Prepaid subscribers are those subscribers who pay for their services in advance.
Sales and marketing costs (S&M) include marketing, advertising and dealer commissions expenses.
Attachment B: VimpelCom financial statements Open Joint Stock Company “Vimpel-Communications” Condensed Consolidated Statements of Operations Three months ended March 31, 2008 2007 (In thousands of US dollars, except per share (ADS) amounts) Operating revenues: Service revenues and connection fees $2,105,272 $1,486,192 Sales of handsets and accessories 1,679 1,522 Other revenues 2,447 966 Total operating revenues 2,109,398 1,488,680 Revenue based tax (1,499) (633) Net operating revenues 2,107,899 1,488,047 Operating expenses: Service costs 430,994 265,326 Cost of handsets and accessories sold 1,611 1,728 Selling general and administrative expenses 528,445 439,467 Depreciation 356,992 269,172 Amortization 67,394 53,289 Provision for doubtful accounts 20,937 15,109 Total operating expenses 1,406,373 1,044,091 Operating income 701,526 443,956 Other income and expenses: Interest income 14,721 4,652 Interest expense (79,137) (45,805) Net foreign exchange gain 185,008 16,729 Other expenses (8,160) (10,814) Total other income and expenses 112,432 (35,238) Income before income taxes and minority interest 813,958 408,718 Income taxes expense 195,628 119,946 Minority interest in net earnings of subsidiaries 17,045 11,497 Income before cumulative effect of change in accounting principle 601,285 277,275 Cumulative effect of changes in accounting principles – – Net income 601,285 277,275 Net income per common share $11.84 $5.45 Net income per ADS equivalent $ 0.59 $0.27 Weighted average common shares outstanding (thousands) 50,777 50,892 Open Joint Stock Company “Vimpel-Communications” Unaudited Condensed Consolidated Balance Sheets March 31, December 31, 2008 2007 (In thousands of US dollars) Assets Current assets: Cash and cash equivalents $620,680 $1,003,711 Trade accounts receivable 525,599 281,396 Other current assets 685,934 441,810 Total current assets 1,832,213 1,726,917 Non-current assets Property and equipment, net 6,879,895 5,497,819 Telecommunication licenses and allocation of frequencies, net 1,062,501 915,211 Other intangible assets, net 4,946,283 1,302,318 Other assets 1,305,242 1,126,619 Total non-current assets 14,193,921 8,841,967 Total assets $16,026,134 $10,568,884 Liabilities and shareholders’ equity Current liabilities: Accounts payable $634,414 $700,589 Customer advances and deposits 431,011 423,611 Short-term debt 968,772 526,512 Accrued liabilities 686,983 348,989 Total current liabilities 2,721,180 1,999,701 Deferred income taxes 945,265 576,276 Long-term debt 5,709,263 2,240,097 Accrued liabilities 66,688 52,614 Minority Interest 406,265 288,410 Shareholders’ equity 6,177,473 5,411,786 Total liabilities and shareholders’ equity $16,026,134 $10,568,884 Open Joint Stock Company “Vimpel-Communications” Unaudited Condensed Consolidated Statements of Cash Flows Three months ended March 31, 2008 2007 (In thousands of US dollars) Net cash provided by operating activities $859,919 $ 655,865 Proceeds from bank and other loans 3,708,000 228,594 Sale of treasury stock 800 8,087 Payments of fees in respect of bank loans (32,449) (382) Repayment of bank and other loans (109,754) (94,593) Net cash provided by financing activities 3,566,597 141,706 Sale of short-term investments 42,203 – Purchase of property and equipment (392,363) (279,988) Acquisition of subsidiaries, net of cash (4,225,662) – Late payment of purchase price (12,688) Purchase of intangible assets (17,678) (5,161) Purchase of software (74,150) (98,864) Exercise of escrow cash deposit 200,170 – Loans granted (350,000) – Purchase of other assets (12,146) (8,878) Net cash used in investing activities (4,829,626) (405,579) Effect of exchange rate changes on cash 20,079 2,068 Net increase (decrease) in cash (383,031) 394,060 Cash and cash equivalents at beginning of period 1,003,711 344,494 Cash and cash equivalents at end of period $ 620,680 $738,554 Supplemental cash flow information Cash paid during the period: Income tax $ 185,725 $122,062 Interest $42,498 $ 25,813 Non-cash activities: Equipment acquired under financing and capital lease agreements 37,204 17,102 Accounts payable for equipment and other long-lived assets 248,913 140,413 Acquisitions: Fair value of assets acquired 2,577,164 – Difference between the amount paid and the fair value of net assets acquired 2,746,221 – Cash paid for the capital stock (4,315,020) – Liabilities assumed $1,008,365 – Attachment C. Reconciliation tables (Unaudited) CONSOLIDATED Reconciliation of OIBDA (In millions of US dollars) OIBDA Consolidated Total Three months ended Mar 31, 2008 Mar 31, 2007 Dec 31, 2007 OIBDA 1,126 766 918 Depreciation (357) (269) (331) Amortization (67) (53) (56) Operating income 702 444 531 Reconciliation of OIBDA Margin OIBDA Margin Consolidated Total Three months ended Mar 31, 2008 Mar 31, 2007 Dec 31, 2007 OIBDA margin 53.4% 51.5% 45.7% Less: Depreciation as a percentage of net operating revenue (16.9%) (18.1%) (16.5%) Less: Amortization as a percentage of net operating revenue (3.2%) (3.6%) (2.8%) Operating income as a percentage of net operating revenue 33.3% 29.8% 26.4% Attachment D. Capex Development CAPEX (in US$ millions) Three months 1Q 2008 1Q 2007 y-o-y 4Q 2007 q-o-q Total capex 358.5 303.5 18.1% 795.8 -55.0% Russia 212.5 199.6 6.5% 467.2 -54.5% CIS 146.0 103.9 40.5% 328.6 -55.6% Kazakhstan 42.6 31.2 36.5% 96.4 -55.8% Ukraine 26.6 29.3 -9.2% 55.2 -51.8% Armenia 14.6 5.4 170.4% 44.3 -67.0% Uzbekistan 48.0 7.9 507.6% 83.6 -42.6% Tajikistan 7.2 13.5 -46.7% 20.2 -64.4% Georgia 7.0 16.6 -57.8% 28.9 -75.8%
Vimpel-Communications
CONTACT: Alexander Boreyko, VimpelCom, +7-495-910-5977,Investor_Relations@vimpelcom.com; or Michael Polyviou, mpolyviou@fd-us.com,FD, +1-212-850-5600
Web site: http://www.vimpelcom.com/http://www.vimpelcom.com/news/qrep.wbp