UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of August 2008
Commission File Number 1-14522
Open Joint Stock Company Vimpel-Communications
(Translation of registrants name into English)
10 Ulitsa 8-Marta, Building 14, Moscow, Russian Federation 127083
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F x Form 40-F ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): .
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): .
Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes ¨ No x
If Yes is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- .
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
OPEN JOINT STOCK COMPANY | ||||
VIMPEL-COMMUNICATIONS | ||||
(Registrant) | ||||
Date: August 28, 2008 | ||||
By: | /s/ Alexander V. Izosimov | |||
Name: | Alexander V. Izosimov | |||
Title: | Chief Executive Officer and General Director |
Moscow and New York (August 28, 2008) - Open Joint Stock Company Vimpel-Communications (VimpelCom or the Company) (NYSE: VIP), 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 June 30, 2008.
Financial and Operating Highlights
| Net operating revenues reached $2,611 million, an increase of 52.1% versus 2Q2007. |
| OIBDA reached $1,223 million, an increase of 36.3% versus 2Q2007. |
| OIBDA margin was 46.8%, including 47.3% in Russia and 52.0% in Kazakhstan. |
| Net income totaled $470 million, an increase of 30.9% versus 2Q2007. |
| Mobile subscribers increased by 6.0 million versus 2Q2007, reaching 53.7 million. |
| $2 billion Eurobond issued to refinance short-term bridge loan. |
| Joint venture agreement signed in Vietnam, license acquired in Cambodia. |
Commenting on todays announcement, Alexander Izosimov, Chief Executive Officer of VimpelCom, said, We are pleased with our robust second quarter results. The Company showed solid 52% annual revenue growth with a healthy 47% OIBDA margin, which is in line with our internal target for this stage of the integration of Golden Telecom. The increase in revenue was driven by fast organic growth in both our mobile and fixed-line operations as well as by the first full quarter consolidation of Golden Telecom.
In the second quarter we successfully refinanced our short-term debt related to the Golden Telecom acquisition. Following the refinancing, we started to intensify our sales and marketing efforts in the Russian mobile segment, resulting in 11% quarter-on-quarter revenue growth in this segment.
We are also very happy with our performance in the CIS, where we showed strong growth and increased revenue market share and ARPU in all geographies.
We will continue to focus our efforts along three key priorities for the Company: developing integrated operations in Russia, including a strong push in the broadband business, continued development in the CIS markets and expansion outside of the CIS. These priorities prompted us to make some adjustments to our organizational structure which we believe will enhance the focus and efficiency of our business.
2
Key Consolidated Financial and Operating Results
CONSOLIDATED OPERATIONS (US$, mln) |
2Q 2008 |
2Q 2007 |
y-o-y | 1Q 2008 |
q-o-q | ||||||||||
Net operating revenues |
2,611 | 1,717 | 52.1 | % | 2,108 | 23.9 | % | ||||||||
OIBDA |
1,223 | 897 | 36.3 | % | 1,126 | 8.6 | % | ||||||||
OIBDA margin, % |
46.8 | % | 52.2 | % | 53.4 | % | |||||||||
SG&A |
774 | 494 | 56.7 | % | 528 | 46.6 | % | ||||||||
Including Sales & Marketing Expenses |
215 | 167 | 28.7 | % | 187 | 15.0 | % | ||||||||
Including General & Administrative Costs |
559 | 327 | 70.9 | % | 341 | 63.9 | % | ||||||||
SG&A percentage |
29.6 | % | 28.8 | % | 25.0 | % | |||||||||
Net income |
470 | 359 | 30.9 | % | 601 | -21.8 | % | ||||||||
Net income per common share, (US$) |
9.26 | 7.07 | 11.84 | ||||||||||||
Net income per ADS equivalent*), (US$) |
0.46 | 0.35 | 0.59 | ||||||||||||
Capital expenditures |
664.0 | 334.8 | 98.3 | % | 358.5 | 85.2 | % | ||||||||
Mobile subscribers (000) |
53,707 | 47,702 | 12.6 | % | 52,293 | 2.7 | % | ||||||||
Broadband subscribers (000) |
610 | n/a | 534 | 14.2 | % |
* | 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 2Q 2008*) (US$ mln) |
Russia | CIS | Eliminations | Total | ||||
Mobile business |
1,862 | 319 | -3 | 2,178 | ||||
Fixed business |
414 | 74 | -11 | 477 | ||||
Eliminations |
-37 | -5 | -2 | -44 | ||||
Total net operating revenue |
2,239 | 388 | -16 | 2,611 |
* | 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. Reconciliation is presented in Attachment C. |
In the second quarter we consolidated the business of Golden Telecom for the first full period. Smaller net income compared to the first quarter was due to an increase in interest expense, depreciation and amortization resulting from the Golden Telecom acquisition and a significant decrease in foreign exchange gain resulting from slower appreciation of the Russian ruble versus the US dollar.
3
RUSSIA (US$ mln) |
2Q 2008 |
2Q 2007 |
y-o-y | 1Q 2008 |
q-o-q | ||||||||||
Net operating revenues |
2,239 | 1,460 | 53.4 | % | 1,797 | 24.6 | % | ||||||||
OIBDA |
1,059 | 780 | 35.8 | % | 992 | 6.8 | % | ||||||||
OIBDA margin, % |
47.3 | % | 53.4 | % | 55.2 | % | |||||||||
SG&A |
658 | 419 | 57.0 | % | 434 | 51.6 | % | ||||||||
Including Sales & Marketing Expenses |
181 | 141 | 28.4 | % | 158 | 14.6 | % | ||||||||
Including General & Administrative Costs |
477 | 278 | 71.6 | % | 276 | 72.8 | % | ||||||||
SG&A percentage |
29.4 | % | 28.7 | % | 24.2 | % | |||||||||
Net income |
448 | 356 | 25.8 | % | 616 | -27.3 | % |
Our revenue in Russia showed good growth of 53.4%, including 27.5% organic growth in mobile revenues.
Strengthening our sales and marketing activities in the mobile segment led to positive dynamics in new subscriber additions in May and June. Strong growth in usage was enhanced by positive seasonal trends, which, when coupled with stable pricing, resulted in an 11.4% quarterly increase in ARPU.
In residential broadband we continued the active rollout of our fiber-to-the-building networks (FTTB). By the end of the second quarter we reached 5.5 million households passed by our FTTB network and accumulated 476,000 FTTB subscribers, yielding a current take-up rate of 8.6%. The total number of broadband subscribers, taking into account all of the broadband technologies, reached 604,000.
Substantial growth in our G&A expenses both quarter-on-quarter and year-on-year is mainly connected with the full quarter consolidation of Golden Telecom ($127 million in the second quarter) and an abnormally low level of G&A shown in the first quarter due to the reversal of a $43 million accrual in our stockprice based compensation plans, resulting from the decline in VimpelComs ADS price during the first quarter of 2008.
OIBDA of our Russian operations in the second quarter passed the $1 billion mark. Despite some one-off costs related to the buyout of minority shareholders in Corbina Telecom in June 2008, the OIBDA margin was in line with our expectations for this stage of the integration of Golden Telecom.
4
RUSSIA REVENUE (US$ mln) |
2Q 2008 |
2Q 2007 |
y-o-y | 1Q 2008 |
q-o-q | ||||||||||
Net operating revenues |
2,239 | 1,460 | 53.4 | % | 1,797 | 24.6 | % | ||||||||
Mobile revenue |
1,862 | 1,460 | 27.5 | % | 1,675 | 11.2 | % | ||||||||
Fixed revenue |
414 | n/a | 132 | ||||||||||||
Eliminations |
-37 | n/a | -10 | ||||||||||||
RUSSIA OPERATING DEVELOPMENT |
2Q 2008 |
2Q 2007 |
y-o-y | 1Q 2008 |
q-o-q | ||||||||||
Mobile subscribers (000) |
42,485 | 40,140 | 5.8 | % | 42,079 | 1.0 | % | ||||||||
Subscriber market share*), % |
24.6 | % | 30.9 | % | 25.0 | % | |||||||||
MOU, min |
220.3 | 192.6 | 14.4 | % | 198.7 | 10.9 | % | ||||||||
ARPU, US$ |
14.7 | 12.3 | 19.5 | % | 13.2 | 11.4 | % | ||||||||
Broadband subscribers (000) |
604 | 0 | n/a | 530 | 14.0 | % |
* | Subscriber market share data presented here and in the following country tables are published by AC&M-Consulting. Starting from January 1, 2008 VimpelComs 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 second quarter of 2008 as compared to the second quarter of 2007 is mainly caused by the change of reporting methodology. |
RUSSIA OIBDA DEVELOPMENT (US$ mln) |
2Q 2008 |
2Q 2007 |
y-o-y | 1Q 2008 |
q-o-q | ||||||||||
OIBDA Total |
1,059 | 780 | 35.8 | % | 992 | 6.8 | % | ||||||||
Mobile OIBDA |
969 | 780 | 24.2 | % | 959 | 1.0 | % | ||||||||
Fixed OIBDA |
90 | n/a | 33 | ||||||||||||
Total OIBDA margin, % |
47.3 | % | 53.4 | % | 55.2 | % | |||||||||
Mobile OIBDA margin, % |
52.0 | % | 53.4 | % | 57.2 | % | |||||||||
Fixed OIBDA margin, % |
21.7 | % | n/a | 25.0 | % |
5
CIS OPERATIONS (US$ mln) |
2Q 2008 |
2Q 2007 |
y-o-y | 1Q 2008 |
q-o-q | ||||||||||
Net operating revenues |
388.1 | 260.1 | 49.2 | % | 316.9 | 22.5 | % | ||||||||
OIBDA |
164.4 | 116.9 | 40.6 | % | 134.3 | 22.4 | % | ||||||||
OIBDA margin, % |
42.4 | % | 44.9 | % | 42.3 | % | |||||||||
SG&A |
115.4 | 76.4 | 51.0 | % | 94.3 | 22.4 | % | ||||||||
including Sales & Marketing Expenses |
33.9 | 26.0 | 30.4 | % | 29.0 | 16.9 | % | ||||||||
including General & Administrative Costs |
81.5 | 50.4 | 61.7 | % | 65.3 | 24.8 | % | ||||||||
SG&A percentage |
29.7 | % | 29.4 | % | 29.8 | % | |||||||||
Net income |
22.3 | 3.7 | 502.7 | % | -14.3 | n/a |
In the CIS revenue growth was strong and ahead of major competitors in each of our markets*.
In Kazakhstan our efforts to strengthen the direct dealership network, improve service quality and maintain a conservative pricing policy resulted in 13.8% quarter-on-quarter revenue growth, which is twice the rate of our major competitor. We grew ARPU by 6% compared to the first quarter, which is particularly encouraging in light of ongoing economic difficulties in the country.
We also grew our revenue market share ahead of the competition in Uzbekistan. Due to a conservative pricing policy and our focus on network and service quality we were the only operator in Uzbekistan that increased ARPU compared to the first quarter.
As our business in Ukraine has become more robust, we initiated an aggressive sales and marketing campaign targeting high-quality subscribers. The improved quality of our subscriber base, coupled with a positive seasonal trend, helped us to grow ARPU through an increase in both usage and average price per minute. As a result, we organically boosted our mobile revenue by 26% compared to the first quarter and by 92% year-on-year. Additionally, consolidation of Golden Telecom led to total annual revenue growth of 199%.
We introduced the Beeline brand in Armenia in April 2008. A strong marketing campaign, supported by improved execution in retail, resulted in a gain in revenue market share of almost one percentage point compared to the previous quarter.
* | Comparisons with competitors are based on publicly available information |
6
CIS Revenues Development
KAZAKHSTAN (US$ mln) |
2Q 2008 |
2Q 2007 |
y-o-y | 1Q 2008 |
q-o-q | |||||||
Net operating revenue |
185.3 | 149.3 | 24.1 | % | 162.8 | 13.8 | % | |||||
Mobile |
182.5 | 149.3 | 22.2 | % | 162.1 | 12.6 | % | |||||
Fixed |
4.9 | n/a | 1.1 | |||||||||
Elimination |
-2.1 | n/a | -0.4 | n/a | ||||||||
UKRAINE (US$ mln) |
2Q 2008 |
2Q 2007 |
y-o-y | 1Q 2008 |
q-o-q | |||||||
Net operating revenue |
71.2 | 23.8 | 199.2 | % | 44.8 | 58.9 | % | |||||
Mobile |
45.7 | 23.8 | 92.0 | % | 36.4 | 25.5 | % | |||||
Fixed |
28.4 | n/a | 8.9 | |||||||||
Elimination |
-2.9 | n/a | -0.5 | n/a | ||||||||
ARMENIA (US$ mln) |
2Q 2008 |
2Q 2007 |
y-o-y | 1Q 2008 |
q-o-q | |||||||
Net operating revenue |
64.7 | 58.4 | 10.8 | % | 59.1 | 9.5 | % | |||||
Mobile |
26.4 | 23.2 | 13.8 | % | 22.9 | 15.3 | % | |||||
Fixed |
38.3 | 35.2 | 8.8 | % | 36.2 | 5.8 | % | |||||
Elimination |
0.0 | n/a | 0.0 | n/a | ||||||||
UZBEKISTAN (US$ mln) |
2Q 2008 |
2Q 2007 |
y-o-y | 1Q 2008 |
q-o-q | |||||||
Net operating revenue |
52.0 | 23.2 | 124.1 | % | 39.5 | 31.6 | % | |||||
Mobile |
49.5 | 23.2 | 113.4 | % | 38.7 | 27.9 | % | |||||
Fixed |
2.6 | n/a | 0.8 | |||||||||
Elimination |
-0.1 | n/a | 0.0 | |||||||||
TAJIKISTAN (US$ mln) |
2Q 2008 |
2Q 2007 |
y-o-y | 1Q 2008 |
q-o-q | |||||||
Net operating revenue |
11.2 | 5.2 | 115.4 | % | 8.4 | 33.3 | % | |||||
Mobile |
11.2 | 5.2 | 115.4 | % | 8.4 | 33.3 | % | |||||
Fixed |
n/a | n/a | n/a | |||||||||
Elimination |
n/a | n/a | n/a | |||||||||
GEORGIA (US$ mln) |
2Q 2008 |
2Q 2007 |
y-o-y | 1Q 2008 |
q-o-q | |||||||
Net operating revenue |
3.9 | 0.2 | 1850 | % | 2.4 | 62.5 | % | |||||
Mobile |
3.9 | 0.2 | 1850 | % | 2.4 | 62.5 | % | |||||
Fixed |
n/a | n/a | n/a | |||||||||
Elimination |
n/a | n/a | n/a |
7
CIS REVENUES (US$ mln) |
2Q 2008 |
2Q 2007 |
y-o-y | 1Q 2008 |
q-o-q | |||||||
Net operating revenue |
388.1 | 260.1 | 49.2 | % | 316.9 | 22.5 | % | |||||
Mobile |
318.9 | 224.9 | 41.8 | % | 270.9 | 17.7 | % | |||||
Fixed |
74.1 | 35.2 | 110.5 | % | 47.0 | 57.7 | % | |||||
Eliminations |
-4.9 | n/a | n/a | -1.0 | n/a |
8
CIS Operating Highlights
KAZAKHSTAN |
2Q 2008 |
2Q 2007 |
y-o-y | 1Q 2008 |
q-o-q | ||||||||||
Mobile subscribers (000) |
5,098 | 3,858 | 32.1 | % | 4,777 | 6.7 | % | ||||||||
Subscriber market share*), % |
39.6 | % | 49.3 | % | 39.5 | % | |||||||||
MOU, min |
109.7 | 88.8 | 23.5 | % | 99.1 | 10.7 | % | ||||||||
ARPU, US$ |
12.3 | 13.6 | -9.6 | % | 11.6 | 6.0 | % | ||||||||
UKRAINE |
2Q 2008 |
2Q 2007 |
y-o-y | 1Q 2008 |
q-o-q | ||||||||||
Mobile subscribers (000) |
2,111 | 1,822 | 15.9 | % | 1,971 | 7.1 | % | ||||||||
Subscriber market share*), % |
3.8 | % | 5.2 | % | 3.5 | % | |||||||||
MOU mobile, min |
231.0 | 159.9 | 44.5 | % | 210.2 | 9.9 | % | ||||||||
ARPU mobile, US$ |
7.5 | 4.2 | 78.6 | % | 6.1 | 23.0 | % | ||||||||
Broadband subscribers (000) |
6 | n/a | 4 | 50.0 | % | ||||||||||
ARPU broadband, US$ |
32.7 | n/a | 39.4 | ** | -17.0 | % | |||||||||
ARMENIA |
2Q 2008 |
2Q 2007 |
y-o-y | 1Q 2008 |
q-o-q | ||||||||||
Mobile subscribers (000) |
655 | 471 | 39.1 | % | 520 | 26.0 | % | ||||||||
Subscriber market share*), % |
30.5 | % | 33.5 | % | 26.9 | % | |||||||||
MOU mobile, min |
164.9 | 185.1 | -10.9 | % | 158.9 | 3.8 | % | ||||||||
ARPU mobile, US$ |
15.3 | 17.3 | -11.6 | % | 16.1 | -5.0 | % | ||||||||
UZBEKISTAN |
2Q 2008 |
2Q 2007 |
y-o-y | 1Q 2008 |
q-o-q | ||||||||||
Mobile subscribers (000) |
2,754 | 1,192 | 131.0 | % | 2,422 | 13.7 | % | ||||||||
Subscriber market share*), % |
31.2 | % | 32.7 | % | 33.6 | % | |||||||||
MOU, min |
294.6 | 265.6 | 10.9 | % | 265.3 | 11.0 | % | ||||||||
ARPU, US$ |
6.6 | 7.2 | -8.3 | % | 5.8 | 13.8 | % | ||||||||
TAJIKISTAN |
2Q 2008 |
2Q 2007 |
y-o-y | 1Q 2008 |
q-o-q | ||||||||||
Mobile subscribers (000) |
435 | 205 | 112.2 | % | 378 | 15.1 | % | ||||||||
Subscriber market share*), % |
17.4 | % | 15.2 | % | 16.5 | % | |||||||||
MOU, min |
241.1 | 224.2 | 7.5 | % | 205.8 | 17.2 | % | ||||||||
ARPU, US$ |
9.4 | 10.1 | -6.9 | % | 8.0 | 17.5 | % | ||||||||
GEORGIA |
2Q 2008 |
2Q 2007 |
y-o-y | 1Q 2008 |
q-o-q | ||||||||||
Mobile subscribers (000) |
169 | 14 | 1107 | % | 146 | 15.8 | % | ||||||||
Subscriber market share*), % |
4.9 | % | 0.8 | % | 4.7 | % | |||||||||
MOU, min |
89.3 | 82.5 | 8.2 | % | 87.1 | 2.5 | % | ||||||||
ARPU, US$ |
8.2 | 4.8 | 70.8 | % | 7.4 | 10.8 | % |
* | Source: AC&M-Consulting. The drop in the reported market share is caused by the fact that starting from January 1, 2008 VimpelComs market share is calculated on the basis of active subscribers, while before that date it was based on registered subscribers. |
** | Broadband ARPU for March 2008 only. |
9
CIS OIBDA Development
KAZAKHSTAN (US$ mln) |
2Q 2008 |
2Q 2007 |
y-o-y | 1Q 2008 |
q-o-q | ||||||||||
OIBDA total |
96.4 | 80.3 | 20.0 | % | 82.0 | 17.6 | % | ||||||||
Mobile |
94.2 | 80.3 | 17.3 | % | 81.6 | 15.4 | % | ||||||||
Fixed |
2.2 | n/a | 0.4 | ||||||||||||
OIBDA Margin, % |
52.0 | % | 53.8 | % | 50.4 | % | |||||||||
UKRAINE (US$ mln) |
2Q 2008 |
2Q 2007 |
y-o-y | 1Q 2008 |
q-o-q | ||||||||||
OIBDA total |
9.4 | -3.1 | n/a | 3.2 | 193.8 | % | |||||||||
Mobile |
2.5 | -3.1 | n/a | 1.1 | 127.3 | % | |||||||||
Fixed |
6.9 | n/a | 2.1 | ||||||||||||
OIBDA margin, % |
13.2 | % | n/a | 7.1 | % | ||||||||||
ARMENIA (US$ mln) |
2Q 2008 |
2Q 2007 |
y-o-y | 1Q 2008 |
q-o-q | ||||||||||
OIBDA total |
30.3 | 30.1 | 0.7 | % | 29.1 | 4.1 | % | ||||||||
Mobile |
10.3 | 11.6 | -11.2 | % | 10.4 | -1.0 | % | ||||||||
Fixed |
20.0 | 18.5 | 8.1 | % | 18.7 | 7.0 | % | ||||||||
OIBDA Margin, % |
46.8 | % | 51.5 | % | 49.2 | % | |||||||||
UZBEKISTAN (US$ mln) |
2Q 2008 |
2Q 2007 |
y-o-y | 1Q 2008 |
q-o-q | ||||||||||
OIBDA total |
27.8 | 11.4 | 143.9 | % | 20.9 | 33.0 | % | ||||||||
Mobile |
27.2 | 11.4 | 138.6 | % | 20.6 | 32.0 | % | ||||||||
Fixed |
0.6 | n/a | 0.3 | ||||||||||||
OIBDA Margin, % |
53.5 | % | 49.1 | % | 52.9 | % | |||||||||
TAJIKISTAN (US$ mln) |
2Q 2008 |
2Q 2007 |
y-o-y | 1Q 2008 |
q-o-q | ||||||||||
OIBDA total |
2.6 | 0.1 | 2500 | % | 1.3 | 100.0 | % | ||||||||
Mobile |
2.6 | 0.1 | 2500 | % | 1.3 | 100.0 | % | ||||||||
Fixed |
n/a | n/a | n/a | ||||||||||||
OIBDA Margin, % |
23.2 | % | 1.9 | % | 15.5 | % | |||||||||
GEORGIA (US$ mln) |
2Q 2008 |
2Q 2007 |
y-o-y | 1Q 2008 |
q-o-q | ||||||||||
OIBDA total |
-2.1 | -1.9 | n/a | -2.2 | n/a | ||||||||||
Mobile |
-2.1 | -1.9 | n/a | -2.2 | n/a | ||||||||||
Fixed |
n/a | n/a | n/a | ||||||||||||
OIBDA Margin, % |
n/a | n/a | n/a |
10
CIS OIBDA (US$ mln) |
2Q 2008 |
2Q 2007 |
y-o-y | 1Q 2008 |
q-o-q | ||||||||||
OIBDA total |
164.4 | 116.9 | 40.6 | % | 134.3 | 22.4 | % | ||||||||
Mobile |
134.7 | 98.4 | 36.9 | % | 112.8 | 19.4 | % | ||||||||
Fixed |
29.7 | 18.5 | 60.5 | % | 21.5 | 38.1 | % | ||||||||
OIBDA margin, % |
42.4 | % | 44.9 | % | 42.3 | % |
For more information on financial and operating data for specific countries, please refer to the supplementary file FinancialOperatingQ22008.xls on our website at http://www.vimpelcom.com/news/qrep.wbp.
Recent Developments
In July 2008 VimpelCom signed a definitive agreement to establish GTEL-Mobile, a joint venture in Vietnam created to build a GSM network in the country. According to the terms of this agreement VimpelCom will receive a 40% interest in GTEL-Mobile for $267 million*.
In July 2008 VimpelCom acquired a 90% stake in Sotelco, a company holding a GSM license in Cambodia, for $28 million**.
VimpelCom announced today it has signed an agreement with Apple to bring iPhone 3G to Russia expected later this year.
* * *
The Companys management will discuss its second quarter results during a conference call and slide presentation on August 28, 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 September 4, 2008. The slide presentation webcast will also be available for download on VimpelComs website http://www.vimpelcom.com.
The VimpelCom Group consists of telecommunications operators providing voice and data services through a range of wireless, fixed and broadband technologies. The Group includes companies operating in Russia, Kazakhstan, Ukraine, Uzbekistan,
* | Full text of the relevant press-release can be found at http://www.vimpelcom.com/vietnam.wbp |
** | Full text of the relevant press-release can be found at http://www.vimpelcom.com/cambodia.wbp |
11
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). VimpelComs ADSs are listed on the NYSE under the symbol VIP.
12
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 Companys strategic and development plans, including network development plans and developments in the telecommunications markets in which the Company operates. These and other forward-looking statements are based on managements best assessment of the Companys 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, the CIS and South-East Asia, general political uncertainties in Russia, the CIS and South-East Asia and general economic developments in Russia, the CIS and South-East Asia, 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 Companys 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.
For more information, please contact: | ||
Alexander Boreyko | Michael Polyviou | |
VimpelCom | FD | |
Tel: 7(495) 910-5977 | Tel: 1(212) 850-5600 | |
Investor_Relations@vimpelcom.com | mpolyviou@fd-us.com |
13
- Definitions and tables are attached
Attachment A: Definitions
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 Companys 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 Companys subscribers during the period and dividing by the number of months in that period. The Company believes that ARPU provides useful information to investors because it is an indicator of the performance of the Companys business operations and assists management in budgeting. The Company also believes that ARPU provides management with useful information concerning usage and acceptance of the Companys services. ARPU should not be viewed in isolation or an alternative to other figures reported under U.S. GAAP.
Broadband subscribers are those subscribers in the registered subscriber base who were a party to a revenue generating activity in the past three months. 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.
Household passed are households located within buildings, in which indoor installation of all the FTTB equipment necessary to install terminal residential equipment has been completed.
14
Market share of subscribers for each relevant area is calculated by dividing the estimated number of our subscribers in Russia, Kazakhstan, Ukraine, Uzbekistan, Tajikistan, Georgia and Armenia, respectively, by the total estimated number of subscribers in Russia, Kazakhstan, Ukraine, Uzbekistan, Tajikistan, Georgia 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 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.
Take-up rate for the FTTB network is calculated by dividing the number of FTTB subscribers by the total number of households passed.
15
Attachment B: VimpelCom financial statements
Open Joint Stock Company Vimpel-Communications
Unaudited Condensed Consolidated Statements of Operations
Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
(In thousands of US dollars , except per share (ADS) amounts) | ||||||||||||||||
Operating revenues: |
||||||||||||||||
Service revenues and connection fees |
$ | 2,604,081 | $ | 1,715,482 | $ | 4,709,353 | $ | 3,201,674 | ||||||||
Sales of handsets and accessories |
2,719 | 1,263 | 4,398 | 2,785 | ||||||||||||
Other revenues |
5,700 | 1,236 | 8,147 | 2,202 | ||||||||||||
Total operating revenues | 2,612,500 | 1,717,981 | 4,721,898 | 3,206,661 | ||||||||||||
Revenue based tax |
(1,843 | ) | (814 | ) | (3,342 | ) | (1,447 | ) | ||||||||
Net operating revenues | 2,610,657 | 1,717,167 | 4,718,556 | 3,205,214 | ||||||||||||
Operating expenses: | ||||||||||||||||
Service costs |
596,316 | 313,011 | 1,027,310 | 578,337 | ||||||||||||
Cost of handsets and accessories sold |
2,382 | 1,491 | 3,993 | 3,219 | ||||||||||||
Selling general and administrative expenses |
773,589 | 494,445 | 1,302,034 | 933,912 | ||||||||||||
Depreciation |
385,012 | 285,365 | 742,004 | 554,537 | ||||||||||||
Amortization |
100,864 | 53,807 | 168,258 | 107,096 | ||||||||||||
Provision for doubtful accounts |
15,704 | 11,462 | 36,641 | 26,571 | ||||||||||||
Total operating expenses | 1,873,867 | 1,159,581 | 3,280,240 | 2,203,672 | ||||||||||||
Operating income | 736,790 | 557,586 | 1,438,316 | 1,001,542 | ||||||||||||
Other income and expenses: | ||||||||||||||||
Interest income |
24,687 | 7,657 | 39,408 | 12,309 | ||||||||||||
Interest expense |
(121,078 | ) | (47,643 | ) | (200,215 | ) | (93,448 | ) | ||||||||
Net foreign exchange gain |
25,737 | 8,362 | 210,745 | 25,091 | ||||||||||||
Other expenses |
(2,531 | ) | (7,866 | ) | (10,691 | ) | (18,680 | ) | ||||||||
Total other income and expenses | (73,185 | ) | (39,490 | ) | 39,247 | (74,728 | ) | |||||||||
Income before income taxes and minority interest | 663,605 | 518,096 | 1,477,563 | 926,814 | ||||||||||||
Income taxes expense | 178,648 | 143,648 | 374,276 | 263,594 | ||||||||||||
Minority interest in net earnings of subsidiaries | 14,796 | 15,175 | 31,841 | 26,672 | ||||||||||||
Net income | 470,161 | 359,273 | 1,071,446 | 636,548 | ||||||||||||
Net income per common share |
$ | 9.26 | $ | 7.07 | $ | 21.10 | $ | 12.52 | ||||||||
Net income per ADS equivalent |
$ | 0.46 | $ | 0.35 | $ | 1.05 | $ | 0.63 | ||||||||
Weighted average common shares outstanding (thousands) | 50,797 | 50,833 | 50,787 | 50,862 | ||||||||||||
16
Open Joint Stock Company Vimpel-Communications
Unaudited Condensed Consolidated Balance Sheets
June 30, 2008 |
March 31, 2008 | |||||
(In thousands of US dollars) | ||||||
Assets |
||||||
Current assets: |
||||||
Cash and cash equivalents |
$ | 978,782 | $ | 620,680 | ||
Trade accounts receivable |
535,080 | 525,599 | ||||
Other current assets |
791,227 | 685,934 | ||||
Total current assets |
2,305,089 | 1,832,213 | ||||
Noncurrent assets | ||||||
Property and equipment, net |
7,117,382 | 6,879,895 | ||||
Telecommunication licenses and allocation of frequencies, net |
1,035,420 | 1,062,501 | ||||
Other intangible assets, net |
5,307,097 | 4,946,283 | ||||
Other assets |
1,943,911 | 1,305,242 | ||||
Total noncurrent assets |
15,403,810 | 14,193,921 | ||||
Total assets | $ | 17,708,899 | $ | 16,026,134 | ||
Liabilities and shareholders equity |
||||||
Current liabilities: |
||||||
Accounts payable |
$ | 689,374 | $ | 634,414 | ||
Dividends Payable |
505,193 | 0 | ||||
Customer advances and deposits |
436,785 | 431,011 | ||||
Short-term debt |
1,248,033 | 968,772 | ||||
Accrued liabilities |
939,355 | 686,983 | ||||
Total current liabilities |
3,818,740 | 2,721,180 | ||||
Deferred income taxes |
880,300 | 945,265 | ||||
Long-term debt |
6,502,874 | 5,709,263 | ||||
Accrued liabilities |
71,036 | 66,688 | ||||
Minority Interest |
373,504 | 406,265 | ||||
Shareholders equity |
6,062,445 | 6,177,473 | ||||
Total liabilities and shareholders equity | $ | 17,708,899 | $ | 16,026,134 | ||
17
Open Joint Stock Company Vimpel-Communications
Unaudited Condensed Consolidated Statements of Cash Flows
Six month ended June 30, |
||||||||
2008 | 2007 | |||||||
(In thousands of US dollars) |
||||||||
Net cash provided by operating activities | $ | 1,821,228 | $ | 1,351,512 | ||||
Proceeds from bank and other loans |
4,955,985 | 291,896 | ||||||
Proceeds from sale of treasury stock |
17,457 | 34,995 | ||||||
Payments of fees in respect of debt issues |
(52,766 | ) | (1,288 | ) | ||||
Repayment of bank and other loans |
(319,362 | ) | (215,434 | ) | ||||
Purchase of treasury shares |
(41,783 | ) | (81,069 | ) | ||||
Net cash provided by financing activities | 4,559,531 | 29,100 | ||||||
Purchase of property and equipment |
(883,834 | ) | (558,550 | ) | ||||
Purchase of intangible assets |
(37,603 | ) | (14,185 | ) | ||||
Purchase of software |
(139,985 | ) | (83,636 | ) | ||||
Acquisition of subsidiaries, net of cash acquired |
(4,102,305 | ) | (55,924 | ) | ||||
Late payment of purchase price |
| (12,688 | ) | |||||
Loans granted |
(350,000 | ) | | |||||
Short term deposits |
(101,343 | ) | | |||||
Exercise of escrow cash depositing |
200,170 | | ||||||
Prepayment for Limnotex |
(561,800 | ) | | |||||
Purchase of minority interest in consolidated subsidiaries |
(425,254 | ) | | |||||
Purchase of other assets, net |
(29,654 | ) | (55,454 | ) | ||||
Net cash used in investing activities | (6,431,608 | ) | (780,437 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | 25,920 | 5,997 | ||||||
Net increase (decrease) in cash and cash equivalents | (24,929 | ) | 606,172 | |||||
Cash and cash equivalents at beginning of period | 1,003,711 | 344,494 | ||||||
Cash and cash equivalents at end of period | $ | 978,782 | $ | 950,666 | ||||
Supplemental cash flow information |
||||||||
Cash paid during the period: | ||||||||
Income tax |
$ | 330,721 | $ | 260,199 | ||||
Interest |
$ | 127,444 | $ | 99,475 | ||||
Noncash activities: | ||||||||
Equipment acquired under financing agreements |
$ | 54,880 | $ | 25,873 | ||||
Accounts payable for equipment and license |
275,074 | 199,033 | ||||||
Acquisitions: | ||||||||
Fair value of assets acquired |
2,544,330 | 41,636 | ||||||
Fair value of minority interest acquired |
48,770 | | ||||||
Difference between the amount paid and the fair value of net assets acquired |
3,152,540 | 14,288 | ||||||
Cash paid for the acquisition of subsidiaries |
(4,748,556 | ) | (55,924 | ) | ||||
Change in Fair value of Liabilities assumed |
$ | 997,084 | | |||||
18
Attachment C: Reconciliation Tables (Unaudited)
Reconciliation table of segments presented to segments
reported in financial statements due to inter-segment revenue adjustments
(In millions of US dollars)
Russia | CIS | Total | ||||
Segment operating revenue |
2,239 | 388 | 2,627 | |||
Inter-segment revenues |
-5 | -11 | -16 | |||
Operating revenues from external customers |
2,234 | 377 | 2,611 | |||
Mobile business |
Fixed business |
Total | ||||
Segment operating revenue |
2,178 | 477 | 2,655 | |||
Inter-segment revenues |
-1 | -5 | -6 | |||
Elimination adjustments |
-1 | -37 | -38 | |||
Operating revenues from external customers |
2,176 | 435 | 2,611 |
Reconciliation of Consolidated OIBDA
(In millions of US dollars)
Three months ended | |||||||||
OIBDA Consolidated Total |
June 30, 2008 |
June 30, 2007 |
Mar 31, 2008 |
||||||
OIBDA |
1,223 | 897 | 1,126 | ||||||
Depreciation |
(385 | ) | (285 | ) | (357 | ) | |||
Amortization |
(101 | ) | (54 | ) | (67 | ) | |||
Operating income |
737 | 558 | 702 |
19
Reconciliation of OIBDA Margin
OIBDA Margin Consolidated Total |
Three months ended | ||||||||
June 30, 2008 |
June 30, 2007 |
Mar 31, 2008 |
|||||||
OIBDA margin |
46.8 | % | 52.2 | % | 53.4 | % | |||
Less: Depreciation as a percentage of net operating revenue |
(14.7 | )% | (16.6 | )% | (16.9 | )% | |||
Less: Amortization as a percentage of net operating revenue |
(3.9 | )% | (3.1 | )% | (3.2 | )% | |||
Operating income as a percentage of net operating revenue |
28.2 | % | 32.5 | % | 33.3 | % |
Attachment D: Capex Development
CAPEX (in US$ mln) |
2Q 2008 |
2Q 2007 |
y-o-y | 1Q 2008 |
q-o-q | |||||||
Total capex |
664.0 | 334.8 | 98.3 | % | 358.5 | 85.2 | % | |||||
Russia |
425.1 | 189.0 | 124.9 | % | 212.5 | 100.0 | % | |||||
CIS |
238.9 | 145.8 | 63.9 | % | 146.0 | 63.6 | % | |||||
Kazakhstan |
55.4 | 45.8 | 21.0 | % | 42.6 | 30.0 | % | |||||
Ukraine |
54.1 | 46.0 | 17.6 | % | 26.6 | 103.4 | % | |||||
Armenia |
20.9 | 20.4 | 2.5 | % | 14.6 | 43.2 | % | |||||
Uzbekistan |
82.8 | 18.5 | 347.6 | % | 48.0 | 72.5 | % | |||||
Tajikistan |
13.5 | 5.7 | 136.8 | % | 7.2 | 87.5 | % | |||||
Georgia |
12.2 | 9.4 | 29.8 | % | 7.0 | 74.3 | % |
20
VimpelCom
Q2 Financial and Operating Results
August 28, 2008
Disclaimer
This presentation contains forward-looking statements, as the phrase is defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements relate, in part, to the Companys strategy and development plans. The forward-looking statements are based on managements best assessment of the Companys strategic and financial position, and 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, the CIS and South-East Asia, general political uncertainties in Russia, the CIS and South-East Asia and general economic developments in Russia, the CIS and South-East Asia, 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. There can be no assurance that these risks and uncertainties will not have a material adverse effect on the Company, that the Company will be able to grow or that it will be successful in executing its strategy and development plans. Certain factors that could cause actual results to differ materially from those discussed in any forward-looking statements include the risks described in the Companys 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. The Company 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.
VimpelCom Company August 2008 2 © Beeline 2008 Presentation
Participants
Alexander Izosimov, CEO
Presentation
Elena Shmatova, CFO
Q&A Session will be joined by:
Jean-Pierre Vandromme,
Executive VP, Russian Operations
Nikolay Pryanishnikov,
Executive VP, International Business Development
VimpelCom Company August 2008 3 © Beeline 2008 Presentation
Q2 2008 in Brief
Good growth in all the markets
Re-gaining momentum in the Russian mobile segment
Strong underlying growth in key elements of fixed-line business; integration with Golden Telecom is on track
Superior competitive performance in the CIS
Agreements signed to enter Vietnam and Cambodia
VimpelCom Company August 2008 4 © Beeline 2008 Presentation
Quarterly Financial Dynamics
Net Revenues, $ mln Net Income, $ mln
+52.1%
+30.9%
2,108 2,611
1,488 1,717 1,956 2,010 359 458 368 601
277 470
1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08 1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08
OIBDA, $ mln OIBDA Margin
+36.3%
51.9% 45.7% 53.4% 46.8% 51.5% 52.2%
766 897 1,015 918 1,126 1,223
1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08 1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08
VimpelCom Company August 2008 5 © Beeline 2008 Presentation
Stock Price Based Compensation Plans Accruals and ADS Price
41.60
118.7 29.89 29.68 27.04
21.07 18.97 15.79 12.12 8.60 9.16 40.5 24.2 27.8 21.3
15.1 12.2 3.2 6.8
1Q 06 2Q 06 3Q 06 4Q 06 1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08
-42.7
Accruals, US$ mln ADS price, ($)
VimpelCom Company August 2008 6 © Beeline 2008 Presentation
Continued Increase in Cash Flow
Balance Sheet
June 30, Dec 31, Dec 31, ($ mln) 2008 2007 2006
3,507 Cash and Cash Equivalents 979 1,004 344 3,038 Total Assets 17,709 10,569 8,437 Total Debt 7,751 2,767 2,489
-Short-term 1,248 527 424 1,971 -Long-term 6,503 2,240 2,065
1,350 Shareholders Equity 6,062 5,412 3,943
1,293 1,265
LTM OIBDA* 4,282 3,597 2,452
- LTM Depreciation and
459 amortization 1,638 1,391 1,055 - LTM Operating Income 2,644 2,206 1,397
2005 2006 2007 2Q 08 LTM LTM Interest 302 195 186 -342
Debt/ Equity 1.3 0.5 0.6 Debt/ OIBDALTM 1.8 0.8 1.0
-1,635
-1,512 -1,773 OIBDA/ Interest 14.2 18.4 13.2
-2,157
Debt/ Assets 0.44 0.26 0.30 CAPEX, $ mln Net Debt 6,772 1,763 2,145
Operating Cash Flow, $ mln
* LTM OIBDA constitutes the sum of the lines: LTM Operating income Free Cash Flow before acquisitions, $ mln and LTM Depreciation and amortization. LTM stands for last twelve months to reporting date. In cases when OIBDA is part of financial ratios it is deemed to be calculated in accordance with the reconciliation tables in the Companys earnings release.
VimpelCom Company August 2008 7 © Beeline 2008 Presentation
Sources of Revenue Growth*
2,611 413 448 1,717 481 35 2,163 1,682
2Q 07 Mobile Fixed 2Q 08
2,611
119
377 775
1,717
258
2,234 1,459
2Q 07 Russia CIS 2Q 08
VimpelCom Company August 2008 8 * Segment revenues exclude inter-company transactions. © Beeline 2008
Presentation
Russia: Total Operations
Revenue*, $ mln CAPEX, $ mln
2,239 1,797 414 1653 1702 1460 132 1279
1675 1862
200 189 217 467 213 425
1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08 1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08
OIBDA ($ mln) and OIBDA Margin CAPEX / Revenue LTM
992 1,059
780 871 773
676 959 969 23%
55.2% 18% 17% 18% 17%
52.9% 53.4% 52.7% 19% 47.3% 45.4%
1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08 1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08
Mobile Fixed OIBDA Margin
VimpelCom Company August 2008 9 * Total revenue adjusted for eliminations © Beeline 2008 Presentation
Russia: Mobile Highlights
Active Subscribers, mln Revenue, $ mln
38.6 40.1 41.8 42.2 42.1 42.5 1,702 1,675 1,862 1,279 1,460 1,653
1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08 1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08
Mobile ARPU & MOU OIBDA & OIBDA Margin
14.7 959 969 871
13.4 13.5 13.2 780 773
676 57.2%
12.3
220 53.4%
209 204 52.9% 52.7% 52.0%
10.9 199
193 45.4%
161
1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08 1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08
ARPU ($) MOU (min) OIBDA ($ mln) OIBDA Margin
VimpelCom Company August 2008 10 © Beeline 2008 Presentation
Russia: Fixed Revenue
Business Segment, $ mln
192 193 172 132 151 68
207
Fixed Revenue, $ mln 124
362 376 1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08
324 Wholesale Segment, $ mln
273 132 233
414 144 139
244 129
90 109 50
160 94
1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08 1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08
Residential Segment, $ mln
40 31
23 14
13 47
10 26
1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08
GT revenue VIP revenue
VimpelCom Company August 2008 11 © Beeline 2008 Presentation
Russia: Residential Broadband Development
Broadband Revenue, $ mln FTTB* Households Passed (mln) & Take-up Rate
5.5 4.1 3.8
9 3.0 2.3 2.6
29 10.3%
8.9% 8.6% 8.0% 8.4%
19 15 6.9%
10 13 7
1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08 1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08
Take-up rate
Broadband Subscribers, 000 Broadband ARPU, $
16.3 17.1 16.6** 16.9 16.0 15.2 183 244 310 428 530 604
1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08 1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08
GT results VIP results
VimpelCom Company *Fiber-to-the-Building
August 2008 12 **ARPU $17.6 reported in 1Q 08 related to GT operations in © Beeline 2008 Presentation March 2008 only
Composition of the CIS Business
Revenue, $ mln
3.9 11.2
52.0
71.2
388.1 64.7
185.3
OIBDA, $ mln
2.6
-2.1 27.8
9.4
30.3 164.4
96.4
CAPEX, $ mln
12.2 13.5
82.8
238.9 54.1
20.9
55.4
CIS Total Georgia Tajikistan Uzbekistan Ukraine Armenia Kazakhstan
VimpelCom Company August 2008 13 © Beeline 2008 Presentation
Kazakhstan: Operating & Financial Highlights
Mobile Active Subscribers, mln Revenues* ($ mln) & OIBDA Margin
185
175 163 5 167 149 1 162 183 119 53.8% 52.7% 52.8% 5.1 51.9% 50.4% 52.0%
3.5 3.9 4.3 4.6 4.8
1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08
1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08
Mobile Fixed OIBDA Margin
Mobile ARPU & MOU Capex / Revenue (LTM)
113 99 110
89 99
41%
72 37% 35% 34% 34% 30%
12.2 13.6 13.6 13.0 11.6 12.3
1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08 1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08
ARPU ($) MOU (min)
VimpelCom Company August 2008 14 * Total revenue adjusted for eliminations between fixed © Beeline 2008 Presentation and mobile segments in Kazakhstan
Uzbekistan: Operating & Financial Highlights
Mobile Active Subscribers, mln Revenues* ($ mln) & OIBDA Margin
52.0 39.5
56.0% 52.9% 53.5% 49.1% 48.8% 47.8%
23.2 30.2 36.5 38.7 49.5
1.6 2.1 2.4 2.8 18.2 1.1 1.2
1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08
1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08
Mobile Fixed OIBDA Margin
Mobile ARPU & MOU Capex / Revenue (LTM)
290 283 265 295 242 266
151% 124% 134%
6.8
6.7 7.2 7.6 5.8 6.6 81% 80% 84%
1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08
ARPU($) MOU (min) 1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08
VimpelCom Company August 2008 15 * Total revenue adjusted for eliminations between fixed © Beeline 2008 Presentation and mobile segments in Uzbekistan
Ukraine: Operating & Financial Highlights
Mobile Active Subscribers, mln Revenues* ($ mln) & OIBDA Margin
71.2 44.8 28.4 37.0 34.5
2.2 8.9
2.0 1.8 1.9 2.0 2.1 23.8 45.7 16.3 36.4 17.6% 10.4% 7.1% 13.2% -12.9%
1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08
1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08
-40.0%
Mobile Fixed OIBDA Margin
Mobile ARPU & MOU Capex / Revenue (LTM)
231
210 441%
183
160 168 311% 138
171% 140%
110% 86%
3.0 4.2 5.8 5.6 6.1 7.5
1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08
1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08
ARPU ($) MOU (min)
VimpelCom Company August 2008 16 * Total revenue adjusted for eliminations between fixed © Beeline 2008 Presentation and mobile segments in Ukraine
Armenia: Operating & Financial Highlights
Mobile Active Subscribers, 000 Revenues* ($ mln) & OIBDA Margin
58.4 63.4 59.8 59.1 64.7 54.1
37.6 38.3 35.2 36.3 36.2 34.2 54.3% 51.5% 51.9% 49.2%
440 471 447 442 520 655 50.5% 46.8%
19.9 23.2 25.8 23.5 22.9 26.4
1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08 1Q 07 2Q 07 3Q 54.10 07 4Q 07 1Q 08 2Q 08
Mobile Fixed OIBDA Margin
ARPU & MOU CAPEX/ Revenue (LTM)
185 181
172 159
165 180 42% 41% 141 39% 27%
130
14.5 17.3 17.6 17.4 16.1 15.3
80
1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08 3Q 07 4Q 07 1Q 08 2Q 08
Mobile ARPU ($) Mobile MOU (min)
VimpelCom Company August 2008 17 * Total revenue adjusted for eliminations between © Beeline 2008 Presentation fixed and mobile segments in Armenia
Expansion into the South-East Asia
Definitive agreement signed to establish GTEL-Mobile
Vietnam
Population: 86.1 mln.
Penetration: ~30%* GTEL-Mobile to receive license and frequencies and build GSM
GDP per capita: $2,600**
network in Vietnam
VimpelCom to receive 40% of GTEL-Mobile for $267 million
Our partners: Vietnamese state-owned companies GTEL and GTEL TSC
GSM license in Cambodia acquired
90% stake in Sotelco, a holder of GSM license for Cambodia acquired for $28 million
Cambodia
Population: 14.2 mln. Low penetration, attractive growth prospects
Penetration: ~18%*
GDP per capita: $1,800** Potential for cluster synergies with Vietnamese operations
VimpelCom Company August 2008 18 * Source: company estimates. © Beeline 2008
Presentation ** PPP adjusted; Source: CIA World Factbook.
Summary
Momentum in Russian mobile and broadband markets
Strong competitive dynamics in the CIS
New growth platform in South-East Asia
Healthy balance sheet and good profitability
VimpelCom Company August 2008 19 © Beeline 2008 Presentation
Questions and Answers
If you would like to ask a question, please press the star key followed by the digit one on your touch-tone telephone.
Due to time constraints, we ask that you limit yourselves to one question and one follow-up question.
If you are using a speakerphone, please make sure your mute button is turned off to allow your signal to reach the equipment.
Thank you for your interest in VimpelCom
For more information please visit www.vimpelcom.com or contact Investor_Relations@vimpelcom.com
VimpelCom Company August 2008 20 © Beeline 2008 Presentation
APPENDICES
VimpelCom Company August 2008 21 © Beeline 2008 Presentation
Map of Operations
Population: 46.5 mln. Population: 4.5 mln.
Acquired: Nov. 2005 Acquired: Jul. 2006
Penetration: 119% Penetration: 76% GDP* 6,900 GDP* 4,700
Population: 142.2 mln. Penetration: 121%
Population: 3.2 mln.
Acquired: Nov. 2006 GDP*: 14,700
Penetration: 67% GDP* 4,900
Population: 15.4 mln.
Acquired: Sept. 2004
Penetration: 83% GDP* 11,100
Population: 26.7 mln.
Acquired: Jan. 2006
Penetration: 33% Population: 86.1 mln. GDP* 2,300 JVA signed: Jul. 2008**
Penetration: ~30% Population: 7.0 mln. GDP* 2,600
Acquired: Jan. 2006
Penetration: 35% GDP* 1,800
Population: 14.2 mln.
Acquired : Jul. 2008
Penetration: ~18% GDP* 1,800
Source: CIA World Factbook; CIS Statistics Committee; AC&M-Consulting; Company estimates
VimpelCom Company *GDP(PPP), $ per capita
August 2008 22 © Beeline 2008
Presentation ** Joint venture in Vietnam is in the process of obtaining GSM licenses and frequencies
FOREX Development
Average quarterly FX rate to US$ Closing FX rate to US$
Currency Change from Q1 08 Change from Q2 07 Change from Q1 08
RUB 2.7% 9.5% 0.2% KZT -0.1% 0.7% 0.0% UAH 1.8% 1.8% 4.1% TJS 0.8% 0.3% 0.1% UZS -0.8% -3.7% -0.8% AMD 0.2% 15.2% 1.5% GEL 7.6% 16.5% 4.1%
VimpelCom Company August 2008 23 Source: Prime TASS, National Banks of the CIS © Beeline 2008 Presentation countries
CIS Mobile: Financial Highlights
Kazakhstan Ukraine Uzbekistan
183 167 175 149 162 119
94 46 50
80 88 92 82 37 36 37 39
35 30
62 16 24 18 23
6 |
3 9 11 17 18 21 27 |
-7 -3 4 1
1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08 1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08 1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08
Armenia Tajikistan Georgia
26 26 23 23 23 20
11.2 7.7 8.1 8.4 11 12 5.2
13 2.9 3.9
10 10 10 0.9 2.4 1.6 2.6 0 0.2 0.3 0.1 1.4 1.3 -0.3 -1.2 -1.9 -2.0 -2.3 -2.2 -2.1
1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08 1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08 1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08
Revenue, $ mln OIBDA, $ mln
VimpelCom Company August 2008 24 © Beeline 2008 Presentation
CIS Mobile: Active Subscribers, mln
Kazakhstan Ukraine Uzbekistan
4.8 5.1 4.6 4.3 3.5 3.9
2.8 2.2 2.1 2.1 2.4 2.0 1.8 1.9 2.0 1.6 1.1 1.2
1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08 1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08 1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08
Armenia Tajikistan Georgia
0.65
0.47 0.52 0.44 0.44 0.45 0.44 0.38 0.34 0.27
0.15 0.20 0.15 0.17 0.03 0.07 0.01 0.01
1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08 1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08 1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08
VimpelCom Company August 2008 25 © Beeline 2008 Presentation
CIS Mobile: ARPU & MOU Development
Kazakhstan Ukraine Uzbekistan
290 283 295 266 265 231 242 13.6 13.6 13.0 210 12.2 11.6 12.3 168 183 138 160 113 7.5 7.6
99 110 6.1 6.7 7.2 6.8 6.6
72 89 99 5.8 5.6 5.8 4.2 3.0
1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08 1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08 1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08
Armenia Tajikistan Georgia
17.3 17.6 17.4 16.1 15.3
14.5 230 241 224 216 206 185 181 172 159 165 10.1 10.8 141 8.7 9.0 8.0 9.4
83 122 87 89 85 6. 0 48 9.0 6.3 4.8 7.4 8.2 3.2
1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08 1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08 1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08
ARPU ($) MOU (min)
VimpelCom Company August 2008 26 © Beeline 2008 Presentation
CIS Mobile: Subscriber Market Shares*
Kazakhstan Ukraine Uzbekistan
50% 49% 47% 47% 54% 53% 45% 46% 47% 47% 40% 40%
43% 43% 43% 42% 43% 42% 40% 39% 37% 36% 35% 35%
54% 52% 50% 48% 49% 49% 33% 33% 36% 37% 34% 31%
5% 5% 6% 6% 6% 7% 11% 9.0% 11.0%
5% 5% 5% 5% 4% 4% 3% 3% 3%
% 4% 4% 3% 1% 1% 1% 1% 1%
1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08 1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08 1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08
VIP KCell Other VIP Kievstar UMC VIP Uzdunrobita Astelit Other Coscom Other
Armenia Tajikistan Georgia
74% 53% 53% 52% 53% 48% 50% 66% 66% 63% 36% 35% 73% 34% 34% 35% 32% 48% 70% 47% 46% 46% 45%
28% 28% 29% 42% 25% 27% 33% 37% 18% 17% 34% 15% 17% 16%
34% 30% 13% 27% 13% 13% 14%
26% 12% 12% 11% 12% 12% 1.6% 3.5% 4.7% 5.0%
10% 7% 6% 6% 0.4% 1.0%
1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08 1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08 1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 2Q 08
VIP TT Mobile Indigo VIP Geocell Magticom VIP Vivacell
Babylon Other
VimpelCom Company August 2008 27 * Source: AC&M Consulting. The drop in reported market © Beeline 2008 Presentation share is mainly caused by the change of reporting methodology to active subscriber base
Reconciliation of Consolidated OIBDA and OIBDA Margin (Unaudited)
Three months ended
June 30, March 31, Dec 31, Sept 30, June 30, March 31,
($ 000) 2008 2008 2007 2007 2007 2007 Reconciliation of OIBDA to operating income
OIBDA 1,223 1,126 918 1,015 897 766
Depreciation (385) (357) (331) (286) (285) (269) Amortization (101) (67) (56) (55) (54) (53)
Operating Income 737 702 531 674 558 444
Reconciliation of OIBDA margin to operating income as percentage of net operating revenue
OIBDA margin 46.8% 53.4% 45.7% 51.9% 52.2% 51.5%
Less: Depreciation as % of net operating revenues (14.7%) (16.9%) (16.5%) (14.5%) (16.6%) (18.1%) Less: Amortization as % of net operating revenues (3.9%) (3.2%) (2.8%) (2.9%) (3.1%) (3.6%)
Operating Income 28.2% 33.3% 26.4% 34.5% 32.5% 29.8%
VimpelCom Company August 2008 28 © Beeline 2008 Presentation
Reconciliation table of segments presented to segments reported in financial statements due to inter-segment revenue adjustments
Russia CIS Total Segment operating revenue 2,239 388 2,627 Inter-segment revenues -5 -11 -16 Operating revenues from external customers 2,234 377 2,611
Mobile Fixed
Total business business Segment operating revenue 2,178 477 2,655 Inter-segment revenues -1 -5 -6 Elimination adjustments -1 -37 -38 Operating revenues from external customers 2,176 435 2,611
VimpelCom Company August 2008 29 © Beeline 2008 Presentation
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.
ARPU (Monthly Average Revenue per User), a non-U.S. GAAP financial measure, is calculated by dividing the Companys 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 Companys active subscribers during the period and dividing by the number of months in that period. The Company believes that ARPU provides useful information to investors because it is an indicator of the performance of the Companys business operations and assists management in budgeting. The Company also believes that ARPU provides management with useful information concerning usage and acceptance of the Companys services. ARPU should not be viewed in isolation or an alternative to other figures reported under U.S. GAAP.
Average quarterly FX rate to US$ for the CIS countries is calculated as the sum of average exchange rates for each month within a quarter divided by three months.
Active 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.
Free cash flow is calculated as operating cash flow minus accrued capital expenditures before acquisitions. FTTB Fiber-to-the-building broadband internet technology.
Household passed are households located within buildings, in which indoor installation of all the FTTB equipment, necessary to install terminal residential equipment has been completed.
Market share of subscribers for each country is calculated by dividing the estimated number of the subscribers of a particular company by the total estimated number of subscribers in that country. Market share data is published by consulting agencies specializing in the telecommunications industry in Russia.
Mobile subscriber is an authorized user of cellular services, using one SIM card (GSM/3G) with one or several selective numbers or one handset (DAMPS/CDMA) with one selective number. The number of subscribers includes employees using cellular services and excludes guest roamers and users of test SIM cards or handsets.
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.
Net debt is calculated as a total interest-bearing debt minus cash and cash equivalents.
Take-up rate for the FTTB network is calculated by dividing the number of active FTTB subscribers by the total number of households passed.
VimpelCom Company August 2008 30 © Beeline 2008 Presentation