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 September 2006
Commission File Number 1-14522
Open Joint Stock Company
“Vimpel-Communications”
(Translation of registrant’s 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: September 1, 2006 | By: | /s/ Alexander V. Izosimov | ||
| Name: | Alexander V. Izosimov | |||
| Title: | Chief Executive Officer and General Director | |||
FOR IMMEDIATE RELEASE
VIMPELCOM ANNOUNCES SECOND QUARTER
AND SIX MONTH 2006 FINANCIAL AND OPERATING RESULTS
Moscow and New York (September 1, 2006) - Open Joint Stock Company “Vimpel-Communications” (“VimpelCom” or the “Company”) (NYSE: VIP), a leading provider of wireless telecommunications services in Russia and Kazakhstan, with recently acquired operators in Ukraine, Uzbekistan, Tajikistan and Georgia, today announced its financial and operating results for the quarter and six months ended June 30, 2006. During the second quarter of 2006 the Company reported continued growth in new subscribers and improved financial results.
Attachments A, B and C present, respectively, definitions for certain terms used in this press release, the condensed consolidated financial statements of VimpelCom and tables with relevant reconciliations of non-U.S. GAAP financial measures to their most directly comparable U.S. GAAP financial measures. Selected financial and operating results are also reported for each of the countries where VimpelCom operates.
Financial and Operating Highlights
| • | Net operating revenues reached $1,121.5 million, a year-on-year increase of 45.7%. |
| • | OIBDA reached $561.6 million, a year-on-year increase of 42.0%. |
| • | OIBDA margin was 50.1%. |
| • | Net income totaled $194.9 million, a year-on-year increase of 22.7%. |
| • | Operating cash flow was $431.9 million, a year-on-year increase of 35.7%. |
| • | Approximately 51.9 million subscribers as of September 1, 2006 including 4.4 million subscribers in the CIS outside of Russia |
| • | Strong growth and improved subscriber market share in Kazakhstan. |
| • | Solid growth in Ukraine after launch of the Beeline brand in April 2006. |
Commenting on today’s announcement, Alexander Izosimov, Chief Executive Officer of VimpelCom, said,
“It was a very strong quarter. On the back of continued growth, we achieved all-time records in revenue, OIBDA and net income. For the first time our quarterly revenue exceeded the $1 billion mark. This success underlines our ability to deliver results against strategic priorities.
“In Russia, we focused on revenue growth and on reversing the negative trends in ARPU. We were able to stabilize ARPU via conservative pricing and stimulated usage. ARPU of active subscribers showed year-on-year growth, driving our strong revenue performance.
“In Kazakhstan, our priorities were increasing subscriber market share and usage. In the second quarter alone, we gained 3.6 percentage points in market share. As a result of market expansion and share gains, we recorded exceptionally high revenue growth as well as triple-digit year-on-year growth in OIBDA and net income.
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VimpelCom Announces Second Quarter And Six Month 2006 Financial And Operating Results
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“In Ukraine, we are off to a promising start following the launch of our “Beeline” brand in April of this year. As of June 30, 2006, after less than three months of operations, we had almost half a million active subscribers with active subscriber ARPU close to $6. At the same time, we continued our work to improve network coverage and quality and this remains our key operational priority in Ukraine.
“In Uzbekistan and Tajikistan, we are in the process of building-out our networks, integrating operations into the VimpelCom group and preparing for the launch of our brand later this month.
“In addition, we are pleased to note that in July we acquired a GSM license holder in Georgia, and we plan to start full-scale commercial operations there in the beginning of 2007.”
Key Consolidated Operating Indicators
| 2Q2006 | 2Q2005 | Change, Y-on-Y |
1Q2006 | Change, Q-on-Q | ||||||
| Subscribers, end of period (EOP) |
50,822,100 | 35,102,000 | 44.8% | 48,052,800 | 5.8% | |||||
| % of prepaid |
96.8% | 96.5% | 96.9% | |||||||
| Churn, quarterly |
7.8% | 6.7% | 8.4% | |||||||
| ARPU (US$) |
7.5 | 7.8 | -3.8% | 6.6 | 13.6% | |||||
| MOU, (min) |
114.4 | 99.2 | 15.3% | 107.8 | 6.1% | |||||
| SAC, (US$) |
16.3 | 13.3 | 22.6% | 12.6 | 29.4% | |||||
|
Key Consolidated Financial Indicators
| ||||||||||
| 2Q2006 | 2Q2005 | Change, Y-on-Y |
1Q2006 | Change, Q-on-Q | ||||||
| Net operating revenues (US$,000) |
1,121,546 | 769,770 | 45.7% | 936,167 | 19.8% | |||||
| including interconnect revenue |
84,502 | 17,560 | 381.2% | 59,720 | 41.5% | |||||
| OIBDA (US$, 000) |
561,555 | 395,554 | 42.0% | 482,607 | 16.4% | |||||
| OIBDA margin |
50.1% | 51.4% | 51.6% | |||||||
| Gross margin (US$, 000) |
920,276 | 641,632 | 43.4% | 768,298 | 19.8% | |||||
| Gross margin percentage |
82.1% | 83.4% | 82.1% | |||||||
| SG&A (US$, 000) |
355,031 | 242,762 | 46.2% | 282,925 | 25.5% | |||||
| SG&A percentage |
31.7% | 31.5% | 30.2% | |||||||
| Net income (US$, 000) |
194,946 | 158,844 | 22.7% | 150,223 | 29.8% | |||||
| Net income per share (US$) |
3.83 | 3.11 | 2.94 | |||||||
| Net income per ADS (US$) |
0.96 | 0.78 | 0.74 | |||||||
Strong growth in the second quarter of 2006 resulted in record figures reached in net revenue, OIBDA and net income. At the same time, the modest decline in OIBDA margin as compared with the previous quarter was driven by seasonal and competitive marketing investments as well the growing contribution of the lower margin CIS operations.
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Investments made in the prior year to support our rapid growth led to approximately 72% year-on-year growth in depreciation and amortization expenses. This resulted in a slower year-on-year growth rate in net income as compared with net revenue and OIBDA.
In the second quarter of 2006, VimpelCom invested approximately $402.3 million for the purchase of long-lived assets.
RUSSIA
| 2Q2006 | 2Q2005 | Change, Y-on-Y |
1Q2006 | Change, Q-on-Q | ||||||
| Net operating revenues (million US$) |
1,020.5 | 725.9 | 40.6% | 871.0 | 17.2% | |||||
| including interconnect revenue |
63.8 | 6.9 | 824.6% | 46.8 | 36.3% | |||||
| OIBDA (million US$) |
529.7 | 378.6 | 39.9% | 462.3 | 14.6% | |||||
| OIBDA margin |
51.9% | 52.2% | 53.1% | |||||||
| Gross margin (US$, 000) |
849.4 | 612.1 | 38.8% | 725.4 | 17.1% | |||||
| Gross margin percentage |
83.2% | 84.3% | 83.3% | |||||||
| SG&A (US$, 000) |
317.6 | 230.7 | 37.7% | 260.4 | 22.0% | |||||
| SG&A percentage |
31.1% | 31.8% | 29.9% | |||||||
| Net income (million US$) |
197.6 | 156.5 | 26.3% | 155.0 | 27.5% | |||||
| ARPU (US$) |
7.4 | 7.6 | -2.6% | 6.6 | 12.1% | |||||
| ARPUACT (active subscribers), (US$) |
9.0 | 8.7 | 3.4% | 7.8 | 15.4% | |||||
| MOU (min.) |
115.9 | 100.9 | 14.9% | 110.6 | 4.8% | |||||
| MOUACT (active subscribers) (min) |
140.7 | 115.3 | 22.0% | 132.0 | 6.6% | |||||
| SAC (US$) |
17.5 | 13.4 | 30.6% | 13.2 | 32.6% | |||||
| Subscribers, EOP |
46,905,600 | 33,700,400 | 39.2% | 44,814,000 | 4.7% | |||||
| Active subscribers, EOP |
38,161,700 | 29,250,900 | 30.5% | 37,373,400 | 2.1% | |||||
| Subscriber market share, EOP |
33.4% | 34.6% | 33.9% | |||||||
*) Excluding inter-company transactions.
In the Russian market, our continued focus on revenue growth produced a positive response. Substantial increase in usage and positive trends in ARPU resulted in the record revenue, OIBDA and net income figures in the second quarter of 2006.
In connection with the introduction of the CPP (“Calling Party Pays”) regime in Russia from July 1, 2006, we have been revising our charges for interconnection with other operators. The full effect of these changes will be seen in the third quarter results.
SAC went up due to the increase in advertising and marketing expenses and return of net dealer commissions from an exceptionally low level in the previous quarter to a normal figure. The same factors had a depressing effect on the margins as well.
Net income growth rate in Russia in the second quarter of 2006 was behind that of revenue and OIBDA primarily due to approximately 67% year-on-year growth in the depreciation and amortization expenses as a result of ongoing investing activities.
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KAZAKHSTAN
| 2Q2006 | 2Q2005 | Change, Y-on-Y |
1Q2006 | Change, Q-on-Q | ||||||
| Net operating revenues*) (million US$) |
80.1 | 43.9 | 82.5% | 54.0 | 48.3% | |||||
| including interconnect revenue |
18.9 | 10.7 | 76.6% | 12.2 | 54.9% | |||||
| OIBDA (million US$) |
33.9 | 16.9 | 100.6% | 21.9 | 54.8% | |||||
| OIBDA margin |
42.2% | 38.6% | 40.3% | |||||||
| Gross margin (US$, 000) |
55.3 | 29.5 | 87.5% | 35.5 | 55.8% | |||||
| Gross margin percentage |
68.9% | 67.0% | 65.3% | |||||||
| SG&A (US$, 000) |
20.2 | 12.1 | 66.9% | 13.5 | 49.6% | |||||
| SG&A percentage |
25.2% | 27.5% | 24.8% | |||||||
| Net income (million US$) |
11.0 | 2.4 | 358.3% | 3.9 | 182.1% | |||||
| ARPU (US$) |
10.0 | 11.7 | -14.5% | 7.8 | 28.2% | |||||
| ARPUACT (active subscribers), (US$) |
12.6 | 12.4 | 1.6% | 8.8 | 43.2% | |||||
| MOU (min.) |
52.4 | 58.1 | -9.8% | 40.0 | 31.0% | |||||
| MOUACT (active subscribers) (min) |
66.3 | 61.6 | 7.6% | 44.8 | 48.0% | |||||
| SAC (US$) |
9.3 | 10.6 | -12.3% | 6.1 | 52.5% | |||||
| Subscribers, EOP |
2,880,900 | 1,401,600 | 105.5% | 2,512,700 | 14.7% | |||||
| Active subscribers, EOP |
2,204,300 | 1,356,100 | 62.5% | 2,123,100 | 3.8% | |||||
| Subscriber market share, EOP |
44.2% | 38.2% | 40.6% | |||||||
*) Excluding inter-company transactions.
In Kazakhstan, our investments in network build-out, branding and distribution have paid off and resulted in overall great progress. We made substantial market share gains, and improved all financial indicators. Quarter-on-quarter MOU and ARPU growth was exceptionally high and resulted in record growth in net revenue, OIBDA and net income. Margins also improved due to the new interconnect rules which allow a direct link between mobile operators, bypassing an expensive fixed-line intermediary. The overall financial performance and particularly exceptional growth of net income were helped by an 8% appreciation of the local currency in the second quarter of 2006.
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UKRAINE
| 2Q2006 | 1Q2006 | Change, Q-on-Q | ||||
| Net operating revenues *) (million US$) |
5.8 | 2.1 | 176.2% | |||
| including interconnect revenue |
1.8 | 0.7 | 157.1% | |||
| OIBDA (million US$) |
-11.3 | -6.8 | ||||
| Gross margin (US$, 000) |
2.3 | -0.4 | ||||
| Gross margin percentage |
39.0% | -19.0% | ||||
| SG&A (US$, 000) |
13.2 | 6.4 | 106.3% | |||
| SG&A percentage |
223.7% | 304.8% | ||||
| Net income (million US$) |
-17.0 | -9.5 | ||||
| ARPU (US$) |
4.7 | 2.6 | 80.8% | |||
| ARPUACT (active subscribers), (US$) |
5.9 | 3.4 | 73.5% | |||
| MOU (min.) |
137.2 | 47.3 | 190.1% | |||
| MOUACT (active subscribers) (min) |
172.4 | 60.8 | 183.6% | |||
| SAC (US$) |
14.5 | 30.1 | -51.8% | |||
| Subscribers, EOP |
569,400 | 278,000 | 104.8% | |||
| Active subscribers, EOP |
473,300 | 144,000 | 228.7% | |||
| Subscriber market share, EOP |
1.6% | 0.8% | ||||
*) Excluding inter-company transactions.
Despite teething problems in our new operations in Ukraine caused by some delays in the supply of network equipment and a tough competitive environment, we made progress in important areas. The new brand and the associated marketing campaign have led to rapid growth in net additions. The Company’s diligent implementation of its growth policy resulted in a high percentage of active subscribers in the network (83.1%) and a relatively strong ARPU given the initial phase of our operations.
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NEW OPERATIONS
| 2Q2006 | 1Q2006 | Change, Q-on-Q | ||||
| Uzbekistan |
||||||
| Net operating revenues *) (million US$) |
15.0 | 8.9 | 68.5% | |||
| OIBDA (million US$) |
9.5 | 5.2 | 82.7% | |||
| OIBDA margin |
63.3% | 58.6% | ||||
| Net income (million US$) |
3.6 | 1.0 | 260.0% | |||
| Subscribers, EOP |
451,600 | 421,400 | 7.2% | |||
| Subscriber market share, EOP |
26.7% | 31.5% | ||||
| Tajikistan |
||||||
| Net operating revenues *) (million US$) |
0.12 | 0.18 | -33.3% | |||
| OIBDA (million US$) |
-0.31 | -0.05 | ||||
| Net income (million US$) |
-0.30 | -0.20 | ||||
| Subscribers, EOP |
14,600 | 26,700 | -45.3% | |||
| Subscriber market share, EOP |
5.1% | 9.5% |
| *) | Excluding inter-company transactions. |
In Uzbekistan and Tajikistan, in the second quarter of 2006, VimpelCom continued organizational work in order to strengthen staff and prepare the ground for the launch of the “Beeline” brand in September 2006.
The Company’s management will discuss its second quarter 2006 results during a conference call and slide presentation on September 1, 2006 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 and the slide presentation webcast will be available through September 8, 2006 and September 29, 2006, respectively. The slide presentation will also be available for download on VimpelCom’s website http://www.vimpelcom.com.
VimpelCom is a leading international provider of mobile telecommunications services in Russia and Kazakhstan, with recently acquired operators in Ukraine, Uzbekistan, Tajikistan and Georgia. The VimpelCom Group’s license portfolio covers approximately 237 million people. Geographically it covers 78 regions in Russia (with 136.5 million people, representing 94% of Russia’s population) as well as the entire territories of Kazakhstan, Ukraine, Uzbekistan, Tajikistan and Georgia. 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”.
Although the second quarter 2006 U.S. GAAP financial statements were approved by the requisite majority of our board, the three directors on our board who were nominated by our shareholder Telenor East Invest AS and who are officers of Telenor or its affiliates voted against approval.
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, and developments in the telecommunications markets in which the Company operates. 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
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unforeseen developments from competition, governmental regulation of the wireless telecommunications industries in Russia and the CIS, the implementation of CPP rules in Russia, general political uncertainties in Russia and the CIS and general economic developments in Russia and the CIS, the Company’s ability to continue to grow its overall revenues and its subscriber base, continued volatility in the world economy 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, 2005 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 | Peter Schmidt/Michael Polyviou | |
| VimpelCom (Moscow) |
Financial Dynamics | |
| Tel: 7(495) 974-5888 |
Tel: 1(212) 850 5600 | |
| Investor_Relations@vimpelcom.com |
mpolyviou@fd-us.com |
-Definitions and tables are attached –
Attachment A: Definitions
Subscriber is an authorized user of cellular services, using one SIM card (GSM) with one or several selective numbers or one handset (DAMPS) with one selective number. The number of subscribers includes employees using cellular services and excludes guest roamers and users of test SIM cards (GSM) or handsets (DAMPS).
Churn rate is defined as the total number of registered subscribers disconnected from our network within a given period of time expressed as a percentage of the midpoint of subscribers in our network at the beginning and end of that period. Contract subscribers are disconnected if they have not paid their bills for 2 months and prepaid subscribers are disconnected 6 months after their services have been blocked. We typically block a prepaid subscriber’s service in two cases: (1) their balance drops to $0 or below, and (2) an account shows no chargeable activity within 6 months. The Company retains the right to change its disconnect policy to reflect changes in business or regulatory environment.
Active subscribers are those who in the past three months made a transaction which brought revenue to the Company.
Prepaid subscribers are those subscribers who pay for their services in advance.
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 tables section.
OIBDA margin is OIBDA expressed as a percentage of total operating revenues. Reconciliation of OIBDA margin to operating income as a percentage of total operating revenues, the most directly comparable U.S. GAAP financial measure, is presented below in the tables section.
Gross margin is defined as total operating revenues less service costs and cost of handsets and accessories sold.
Gross margin percentage is gross margin expressed as a percentage of total operating revenues.
Each ADS represents 0.25 of one share of common stock. This ratio was established effective November 22, 2004. Previously each ADS represented 0.75 of one share of common stock.
ARPU (Monthly Average Revenue per User), a non-U.S. GAAP financial measure, 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, sales of handsets and accessories and other non-service revenue, by the average number of the Company’s subscribers during the month. 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.
ARPUACT is ARPU calculated with regard to active subscribers.
MOU (Monthly Average Minutes of Use per User) is calculated for each month of the relevant period by dividing the total number of minutes of usage for incoming and outgoing calls during that month (excluding guest roamers) by the average number of subscribers during the month.
MOUACT is MOU calculated with regard to active subscribers.
SAC (Average Acquisition Cost Per User), a non-U.S. GAAP financial measure, is calculated as dealers’ commissions, advertising expenses and handset subsidies for the relevant period divided by the number of new subscribers added during the relevant period. Reconciliation of SAC to selling, general and administrative expenses, the most directly comparable U.S. GAAP financial measure, is presented below in the tables section. The Company believes that SAC 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 SAC assists management in quantifying the incremental costs to acquire a new subscriber. SAC should not be viewed in isolation or as an alternative to other figures reported under U.S. GAAP.
Market share of subscribers for each relevant area is calculated by dividing the estimated number of our subscribers in Russia, Kazakhstan, Ukraine, Tajikistan and Uzbekistan, respectively, by the total estimated number of subscribers in Russia, Kazakhstan, Ukraine and Tajikistan, respectively. Subscriber statistics for these countries are taken from reports published by consulting agencies specializing in the telecommunications industry in Russia and the CIS, reports of other mobile operators, or are estimated by the Company.
Attachment B: VimpelCom financial statements and pertinent reconciliation tables
Open Joint Stock Company “Vimpel-Communications”
Unaudited Condensed Consolidated Statements of Income
| Three months ended June 30, |
Six months ended June 30, | |||||||||
| 2006 | 2005 | 2006 | 2005 | |||||||
| (In thousands of US dollars , except per share (ADS) amounts) | ||||||||||
| Operating revenues: |
||||||||||
| Service revenues and connection fees |
US$ 1,116,152 | US$ 760,723 | US$ 2,046,302 | US$ 1,392,464 | ||||||
| Sales of handsets and accessories |
5,319 | 8,056 | 10,648 | 16,023 | ||||||
| Other revenues |
577 | 991 | 1,564 | 1,919 | ||||||
| Total operating revenues |
1,122,048 | 769,770 | 2,058,514 | 1,410,406 | ||||||
| Revenue based tax |
(502) | - | (801) | - | ||||||
| Net operating revenues |
1,121,546 | 769,770 | 2,057,713 | 1,410,406 | ||||||
| Operating expenses: |
||||||||||
| Service costs |
196,374 | 120,700 | 359,293 | 222,603 | ||||||
| Cost of handsets and accessories sold |
4,896 | 7,438 | 9,846 | 14,481 | ||||||
| Selling, general and administrative expenses |
355,031 | 242,762 | 637,956 | 466,285 | ||||||
| Depreciation |
194,845 | 103,393 | 365,939 | 189,727 | ||||||
| Amortization |
43,148 | 34,939 | 84,103 | 68,568 | ||||||
| Provision for doubtful accounts |
3,690 | 3,316 | 6,456 | 5,376 | ||||||
| Total operating expenses |
797,984 | 512,548 | 1,463,593 | 967,040 | ||||||
| Operating income |
323,562 | 257,222 | 594,120 | 443,366 | ||||||
| Other income and expenses: |
||||||||||
| Interest income |
3,491 | 649 | 4,883 | 2,991 | ||||||
| Other income |
1,691 | 628 | 3,795 | 6,823 | ||||||
| Interest expense |
(47,419) | (34,681) | (90,592) | (71,598) | ||||||
| Other expenses |
(7,738) | (7,606) | (12,315) | (11,846) | ||||||
| Net foreign exchange (loss) gain |
20,103 | 2,160 | 25,682 | (176) | ||||||
| Total other income and expenses |
(29,872) | (38,850) | (68,547) | (73,806) | ||||||
| Income before income taxes and minority interest |
293,690 | 218,372 | 525,573 | 369,560 | ||||||
| Income taxes expense |
87,866 | 59,494 | 163,744 | 100,839 | ||||||
| Minority interest in net earnings of subsidiaries |
10,878 | 34 | 14,778 | 213 | ||||||
| Net income before cumulative effect of a change in accounting principle | US$194,946 | US$158,844 | US$347,051 | US$268,508 | ||||||
| Cumulative effect of a change in accounting principle |
- | - | 1,882 | - | ||||||
| Net income |
US$194,946 | US$158,844 | US$345,169 | US$268,508 | ||||||
| Net income per common share |
US$3.83 | US$3.11 | US$6.77 | US$5.25 | ||||||
| Net income per ADS equivalent |
US$0.96 | US$0.78 | US$1.69 | US$1.31 | ||||||
| Weighted average common shares outstanding (thousands) | 50,913 | 51,102 | 50,972 | 51,116 | ||||||
Open Joint Stock Company “Vimpel-Communications”
Unaudited Condensed Consolidated Balance Sheets
| June 30, | December 31, | |||
| 2006 (unaudited) | 2005 | |||
| (In thousands of US dollars) | ||||
| Assets | ||||
| Current assets: |
||||
| Cash and cash equivalents |
US$ 457,811 | US$ 363,646 | ||
| Trade accounts receivable, net |
242,219 | 144,197 | ||
| Other current assets |
504,326 | 453,582 | ||
| Total current assets |
1,204,356 | 961,425 | ||
| Property and equipment, net |
3,584,199 | 3,211,112 | ||
| Telecommunication licenses and allocation of frequencies, net |
864,114 | 826,948 | ||
| Goodwill |
651,711 | 477,495 | ||
| Other intangible assets, net |
215,249 | 196,356 | ||
| Other assets |
628,433 | 633,700 | ||
| Total non-current assets |
5,943,706 | 5,345,611 | ||
| Total assets | US$7,148,062 | US$6,307,036 | ||
| Liabilities and shareholders’ equity | ||||
| Current liabilities: |
||||
| Accounts payable |
498,190 | 544,961 | ||
| Due to related parties |
1,865 | 709 | ||
| Customer advances and deposits |
320,942 | 317,503 | ||
| Ruble denominated bonds payable, current portion |
- | 104,230 | ||
| Bank loans, current portion |
403,711 | 278,537 | ||
| Accrued liabilities |
187,852 | 173,412 | ||
| Total current liabilities |
1,412,560 | 1,419,352 | ||
| Deferred income taxes |
430,515 | 371,008 | ||
| Bank loans, less current portion |
1,926,278 | 1,540,043 | ||
| Accrued liabilities |
65,553 | 47,458 | ||
| Minority Interest |
223,329 | 188,626 | ||
| Shareholders’ equity |
3,089,827 | 2,740,549 | ||
| Total liabilities and shareholders’ equity |
US$7,148,062 | US$6,307,036 | ||
Open Joint Stock Company “Vimpel-Communications”
Unaudited Condensed Consolidated Statements of Cash Flows
| Six months ended June 30, | ||||
| 2006 | 2005 | |||
| (In thousands of US dollars) | ||||
| Net cash provided by operating activities |
US$ 794,808 | US$ 533,500 | ||
| Purchase of property and equipment |
(532,422) | (551,177) | ||
| Purchase of minority interest in consolidated subsidiary |
- | (8,020) | ||
| Purchase of intangible assets |
(21,275) | (9,361) | ||
| Purchase of Unitel, net of cash acquired $8,364 |
(192,172) | - | ||
| Purchase of Buztel, net of cash acquired $88 |
(60,350) | - | ||
| Proceeds from prepayment for sale of minority interest in consolidated subsidiary |
- | 40,000 | ||
| Purchase of other assets |
(194,529) | (170,550) | ||
| Net cash used in investing activities |
(1,000,748) | (699,108) | ||
| Proceeds from bank and other loans |
744,409 | 384,015 | ||
| Repayment of bank and other loans |
(234,372) | (306,892) | ||
| Payments of fees in respect of bank loans |
(37,789) | (9,888) | ||
| Repayment of rouble denominated bonds |
(110,783) | - | ||
| Purchase of treasury stock |
(38,535) | (18,374) | ||
| Repayment of equipment financing obligations |
(31,946) | (35,530) | ||
| Net cash provided by financing activities |
290,984 | 13,331 | ||
| Effect of exchange rate changes on cash |
9,121 | (2,483) | ||
| Net increase / (decrease) in cash |
94,165 | (154,760) | ||
| Cash and cash equivalents at beginning of period |
363,646 | 305,857 | ||
| Cash and cash equivalents at end of period |
US$457,811 | US$151,097 | ||
| Supplemental cash flow information |
||||
| Non-cash activities: |
||||
| Equipment acquired under financing and capital lease agreements |
US$3,536 | US$12,628 | ||
| Utilized part of Ericsson non-cash discount in Ukraine |
US$22,161 | - | ||
| Accounts payable for equipment and other long-lived assets |
170,804 | 160,286 | ||
| Offset of 2009 Tendered Notes |
232,766 | - | ||
| Accrued debt and equity offering costs |
- | - | ||
| Operating activities financed by sale of treasury stock |
2,783 | 295 | ||
| Offset of the capital lease liability with accounts receivable |
3,039 | 928 | ||
| Acquisitions: |
||||
| Fair value of assets acquired |
150,021 | - | ||
| Difference between the amount paid and the fair value of net assets acquired |
154,061 | - | ||
| Cash paid for the capital stock |
(260,974) | - | ||
| Liabilities assumed |
(43,108) | - | ||
Attachment C. Reconciliation
Reconciliation of OIBDA (Unaudited)
(In thousands of US dollars)
| Three months ended | ||||||
| June 30, 2006 |
June 30, 2005 |
March 31, 2006 | ||||
| OIBDA |
561,555 | 395,554 | 482,607 | |||
| Depreciation |
(194,845) | (103,393) | (171,094) | |||
| Amortization |
(43,148) | (34,939) | (40,955) | |||
| Operating income |
323,562 | 257,222 | 270,558 | |||
Reconciliation of OIBDA Margin
| Three months ended | ||||||
| June 30, 2006 |
June 30, 2005 |
March 31, 2006 | ||||
| OIBDA margin |
50.1% | 51.4% | 51.6% | |||
| Less: Depreciation as a percentage of net operating revenue |
(17.4%) | (13.4%) | (18.3%) | |||
| Less: Amortization as a percentage of net operating revenue |
(3.9%) | (4.5%) | (4.4%) | |||
| Operating income as a percentage of net operating revenue |
28.8% | 33.5% | 28.9% | |||
Reconciliation of SAC
(In thousands of US dollars, except for SAC and subscriber amounts)
| Three months ended | ||||||
| June 30, 2006 |
June 30, 2005 |
March 31, 2006 | ||||
| Selling, general and administrative expenses |
355,031 | 242,762 | 282,925 | |||
| Less: General and administrative expenses |
247,291 | 155,613 | 205,903 | |||
| Sales and marketing expenses, including |
107,740 | 87,149 | 77,022 | |||
| advertising & marketing expenses | 58,563 | 36,103 | 36,416 | |||
| dealers’ commission expense | 49,177 | 51,046 | 40,606 | |||
| New gross subscribers,’000 |
6,592 | 6,572 | 6,134 | |||
| Subscriber Acquisition Cost (SAC) (US$) |
16.3 | 13.3 | 12.6 | |||
Reconciliation of ARPU
(In thousands of US dollars, except for ARPU and subscriber amounts)
| Three months ended | ||||||
| June 30, 2006 |
June 30, 2005 |
March 31, 2006 | ||||
| Service revenue and connection fees |
1,116,152 | 760,723 | 930,150 | |||
| Less: Connection fees |
622 | 132 | 404 | |||
| Less: Revenue from rent of fiber-optic channels |
325 | 269 | 328 | |||
| Service revenue used to calculate ARPU |
1,115,205 | 760,322 | 929,418 | |||
| Average number of subscribers, ‘000 |
49,383 | 32,652 | 46,803 | |||
| Average revenue per subscriber per month (US$) |
7.5 | 7.8 | 6.6 | |||
| Average number of active subscribers,’000 |
40,607 | 28,646 | 39,258 | |||
| Average revenue per active subscriber per month (US$) |
9.2 | 8.8 | 7.9 | |||
RUSSIA
Reconciliation of OIBDA in Russia
(In thousands of US dollars)
| Three months ended | ||||||
| June 30, 2006 |
June 30, 2005 |
March 31, 2006 | ||||
| OIBDA |
529,704 | 378,607 | 462,337 | |||
| Depreciation |
(182,684) | (98,789) | (161,936) | |||
| Amortization |
(25,657) | (26,280) | (24,977) | |||
| Operating income |
321,363 | 253,538 | 275,424 | |||
Reconciliation of OIBDA Margin in Russia
| Three months ended | ||||||
| June 30, 2006 |
June 30, 2005 |
March 31, 2006 | ||||
| OIBDA margin |
51.9% | 52.2% | 53.1% | |||
| Less: Depreciation as a percentage of net operating revenue |
(17.9%) | (13.6%) | (18.6%) | |||
| Less: Amortization as a percentage of net operating revenue |
(2.5%) | (3.6%) | (2.9%) | |||
| Operating income as a percentage of net operating revenue |
31.5% | 35.0% | 31.6% | |||
Reconciliation of SAC in Russia
(In thousands of US dollars, except for SAC and subscriber amounts)
| Three months ended | ||||||
| June 30, 2006 |
June 30, 2005 |
March 31, 2006 | ||||
| Selling, general and administrative expenses |
317,608 | 230,711 | 260,398 | |||
| Less: General and administrative expenses |
221,992 | 147,333 | 188,439 | |||
| Sales and marketing expenses, including |
95,616 | 83,378 | 71,959 | |||
| advertising & marketing expenses |
50,709 | 33,290 | 33,704 | |||
| dealers’ commission expense |
44,907 | 50,088 | 38,255 | |||
| New gross subscribers,’000 |
5,469 | 6,217 | 5,459 | |||
| Subscriber Acquisition Cost (SAC) (US$) |
17.5 | 13.4 | 13.2 | |||
Reconciliation of ARPU in Russia
(In thousands of US dollars, except for ARPU and subscriber amounts)
| Three months ended | ||||||
| June 30, 2006 |
June 30, 2005 |
March 31, 2006 | ||||
| Service revenue and connection fees |
1,014,810 | 716,955 | 864,767 | |||
| Less: Connection fees |
622 | 132 | 404 | |||
| Less: Revenue from rent of fiber-optic channels |
325 | 269 | 328 | |||
| Service revenue used to calculate ARPU |
1,013,863 | 716,554 | 864,035 | |||
| Average number of subscribers,’000 |
45,803 | 31,395 | 43,919 | |||
| Average revenue per subscriber per month (US$) |
7.4 | 7.6 | 6.6 | |||
| Average number of active subscribers,’000 |
37,733 | 27,460 | 36,784 | |||
| Average revenue per active subscriber per month (US$) |
9.0 | 8.7 | 7.8 | |||
KAZAKHSTAN
Reconciliation of OIBDA in Kazakhstan
(In thousands of US dollars)
| Three months ended | ||||||
| June 30, 2006 |
June 30, 2005 |
March 31, 2006 | ||||
| OIBDA |
33,908 | 16,947 | 21,907 | |||
| Depreciation |
(9,363) | (4,604) | (7,672) | |||
| Amortization |
(9,324) | (8,659) | (8,785) | |||
| Operating income |
15,221 | 3,684 | 5,450 | |||
Reconciliation of OIBDA Margin in Kazakhstan
(In thousands of US dollars)
| Three months ended | ||||||
| June 30, 2006 |
June 30, 2005 |
March 31, 2006 | ||||
| OIBDA margin |
42.2% | 38.6% | 40.3% | |||
| Less: Depreciation as a percentage of net operating revenue |
(11.7%) | (10.5%) | (14.1%) | |||
| Less: Amortization as a percentage of net operating revenue |
(11.5%) | (19.7%) | (16.2%) | |||
| Operating income as a percentage of net operating revenue |
19.0% | 8.4% | 10.0% | |||
Reconciliation of SAC in Kazakhstan
(In thousands of US dollars, except for SAC and subscriber amounts)
| Three months ended | ||||||
| June 30, 2006 |
June 30, 2005 |
March 31, 2006 | ||||
| Selling, general and administrative expenses |
20,240 | 12,051 | 13,504 | |||
| Less: General and administrative expenses |
14,761 | 8,280 | 9,693 | |||
| Sales and marketing expenses, including |
5,479 | 3,771 | 3,811 | |||
| advertising & marketing expenses |
2,275 | 2,813 | 1,768 | |||
| dealers’ commission expense |
3,204 | 958 | 2,043 | |||
| New gross subscribers,’000 |
588 | 355 | 623 | |||
| Subscriber Acquisition Cost (SAC) (US$) |
9.3 | 10.6 | 6.1 | |||
Reconciliation of ARPU in Kazakhstan
(In thousands of US dollars, except for ARPU and subscriber amounts)
| Three months ended | ||||||
| June 30, 2006 |
June 30, 2005 |
March 31, 2006 | ||||
| Service revenue and connection fees |
80,301 | 44,002 | 54,382 | |||
| Less: Connection fees |
0 | 0 | 0 | |||
| Less: Revenue from rent of fiber-optic channels |
0 | 0 | 0 | |||
| Service revenue used to calculate ARPU |
80,301 | 44,002 | 54,382 | |||
| Average number of subscribers,’000 |
2,681 | 1,257 | 2,316 | |||
| Average revenue per subscriber per month (US$) |
10.0 | 11.7 | 7.8 | |||
| Average number of active subscribers,’000 |
2,120 | 1,186 | 2,070 | |||
| Average revenue per active subscriber per month (US$) |
12.6 | 12.4 | 8.8 | |||
UKRAINE
Reconciliation of OIBDA in Ukraine
(In thousands of US dollars)
| Three months ended | ||||||
| June 30, 2006 |
June 30, 2005 |
March 31, 2006 | ||||
| OIBDA |
(11,259) | n/a | (6,814) | |||
| Depreciation |
(859) | n/a | (76) | |||
| Amortization |
(4,909) | n/a | (4,692) | |||
| Operating income |
(17,027) | n/a | (11,582) | |||
Reconciliation of SAC in Ukraine
(In thousands of US dollars, except for SAC and subscriber amounts)
| Three months ended | ||||||
| June 30, 2006 |
June 30, 2005 |
March 31, 2006 | ||||
| Selling, general and administrative expenses |
13,216 | n/a | 6,397 | |||
| Less: General and administrative expenses |
7,283 | n/a | 5,765 | |||
| Sales and marketing expenses, including |
5,933 | n/a | 632 | |||
| advertising & marketing expenses |
5,312 | n/a | 632 | |||
| dealers’ commission expense |
621 | n/a | 0 | |||
| New gross subscribers,’000 |
408 | n/a | 21 | |||
| Subscriber Acquisition Cost (SAC) (US$) |
14.5 | n/a | 30.1 | |||
Reconciliation of ARPU in Ukraine
(In thousands of US dollars, except for ARPU and subscriber amounts)
| Three months ended | ||||||
| June 30, 2006 |
June 30, 2005 |
March 31, 2006 | ||||
| Service revenue and connection fees |
5,948 | n/a | 2,103 | |||
| Less: Connection fees |
0 | n/a | 0 | |||
| Less: Revenue from rent of fiber-optic channels |
0 | n/a | 0 | |||
| Service revenue used to calculate ARPU |
5,948 | n/a | 2,103 | |||
| Average number of subscribers,’000 |
424 | n/a | 268 | |||
| Average revenue per subscriber per month (US$) |
4.7 | n/a | 2.6 | |||
| Average number of active subscribers,’000 |
338 | n/a | 208 | |||
| Average revenue per active subscriber per month (US$) |
5.9 | n/a | 3.4 | |||
UZBEKISTAN
Reconciliation of OIBDA in Uzbekistan
(In thousands of US dollars)
| Three months ended | ||||||
| June 30, 2006 |
June 30, 2005 |
March 31, 2006 | ||||
| OIBDA |
9,507 | n/a | 5,227 | |||
| Depreciation |
(1,902) | n/a | (1,374) | |||
| Amortization |
(3,113) | n/a | (2,084) | |||
| Operating income |
4,492 | n/a | 1,769 | |||
Reconciliation of OIBDA Margin in Uzbekistan
| Three months ended | ||||||
| June 30, 2006 |
June 30, 2005 |
March 31, 2006 | ||||
| OIBDA margin |
63.3% | n/a | 58.6% | |||
| Less: Depreciation as a percentage of net operating revenue |
(12.7%) | n/a | (15.4%) | |||
| Less: Amortization as a percentage of net operating revenue |
(20.7%) | n/a | (23.4%) | |||
| Operating income as a percentage of net operating revenue |
29.9% | n/a | 19.8% | |||
TAJIKISTAN
Reconciliation of OIBDA in Tajikistan
(In thousands of US dollars)
| Three months ended | ||||||
| June 30, 2006 |
June 30, 2005 |
March 31, 2006 | ||||
| OIBDA |
(305) | n/a | (50) | |||
| Depreciation |
(37) | n/a | (37) | |||
| Amortization |
(145) | n/a | (416) | |||
| Operating income |
(487) | n/a | (503) | |||
VimpelCom
Presentation of 2Q 2006
Financial and Operating Results
September 1, 2006
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 Company’s strategy and development plans, such as growth in Russia and the CIS (in terms of subscribers, revenues and operating coverage area), ARPU trends and free cash flow projections. The forward-looking statements are based on management’s best assessment of the Company’s strategic and financial position, and future market conditions and trends in Russia and the CIS. These discussions involve risks and uncertainties. The actual outcome may differ materially from these statements as a result of risks and uncertainties relating to developments from competition, governmental regulations of the wireless telecommunications industry, general political uncertainties in Russia and the CIS, general economic developments in Russia and the CIS, and/or litigation with third parties or our shareholders (including Telenor). The actual outcome may also differ materially if the VimpelCom Group is unable to obtain all necessary corporate approvals relating to the business of VimpelCom and its subsidiaries (including approval of funding and specific transactions), and other factors. There can be no assurance that these risks and uncertainties will not have a material adverse effect on the VimpelCom Group, that the VimpelCom Group will be able to grow in Russia and the CIS, that Russian operations will be cash flow positive in 2006, that the new CPP regime will not have a material adverse effect on the Company’s results of operations or that the Company will be successful in integrating its acquired CIS operations into 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, 2005 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.
2
Welcome Remarks
Alexander Izosimov, Chief Executive Officer
Russia and CIS License Footprint
Ukraine
Population: 47.6 mln. Launched: Nov.2005
Belarus
Population: 10.3 mln.
Russia
Population: 145.2 mln.
Moldova
Population: 4.5 mln.
Georgia
Population: 4.7 mln. Acquired: Jul. 2006
Armenia
Population: 3.0 mln.
Azerbaijan
Population: 8.0 mln.
Turkmenistan
Population: 5.0 mln.
Uzbekistan
Population: 26.0 mln. Launched: Jan. 2006
Tajikistan
Population: 6.8 mln. Launched: Dec. 2005
Kyrgyzstan
Population: 5.2 mln.
Kazakhstan
Population: 15.0 mln. Launched: Sept. 2004
In commercial operation Other licensed regions Unlicensed territories
4
VimpelCom 2Q2006 Financial Highlights
Revenue, $ mln
+45.7%
Net Income, $ mln
+22.7%
1121.5 890.3 910.4 936.2 769.8
194.9 194.9 158.8 151.7 150.2
2Q 05 3Q 05 4Q 05 1Q 06 2Q 06
2Q 05 3Q 05 4Q 05 1Q 06 2Q 06
OIBDA, $ mln +42.0%
OIBDA Margin, %
482.6 561.6 395.6 450.0 419.7
51.4% 50.5% 46.1% 51.6% 50.1%
2Q 05 3Q 05 4Q 05 1Q 06 2Q 06
2Q 05 3Q 05 4Q 05 1Q 06 2Q 06
5
Strong Balance Sheet
Assets and Liabilities, $’mln
6,307 7,148 4,780
2,395 1,998 1,581
2004 2005 6M2006
Total Debt
Total Assets
| ($ mln) |
06/ 30/ 06 |
12/ 31/ 05 |
12/ 31/ 04 | |||
| Cash and Cash Equivalents |
458 |
364 |
306 | |||
| Total Assets |
7,148 |
6,307 |
4,780 | |||
| Total Debt |
2,395 |
1,998 |
1,581 | |||
| -Short-term |
438 |
421 |
190 | |||
| -Long-term |
1,957 1,577 |
1,391 | ||||
| Shareholders’ Equity |
3,090 |
2,741 |
2,157 | |||
| LTM OIBDA* |
1,914 |
1,571 |
1,027 | |||
| - LTM Depreciation and amortization** |
785 |
593 |
353 | |||
| - LTM Operating Income |
1,129 |
978 |
674 | |||
| LTM Interest |
166 |
147 |
86 | |||
| Debt/ Equity |
0.8 |
0.7 |
0.7 | |||
| Debt/ OIBDA*** |
1.3 |
1.3 |
1.5 | |||
| OIBDA/ Interest |
11.5 |
10.7 |
12 | |||
| Debt/ Assets |
0.3 |
0.3 |
0.3 | |||
*LTM OIBDA constitutes the sum of the lines: LTM Operating income and LTM
Depreciation and amortization
LTM stands for “last twelve months” to reporting date
* * Includes Impairment of long-lived assets
* * * In cases when OIBDA is part of financial ratios it is deemed to be calculated in accordance with the reconciliation tables herein
Source: VimpelCom
6
Net Operating Cash Flow vs CAPEX
101.3%*
79. 4%*
64.8%*
1,559.5
1,539.2
1,635.3
1,242.0
1,298.2
70.3%*
728.0
805.4
511.9
2003 2004 2005 30.06.06LTM
Net Operating Cash Flow Capex
* Net operating cash flow as % of Capex
7
Operating Highlights: Russia
VimpelCom Subscriber Base in Russia, mln
Subscriber Market Share in Russia
| 33.7 |
38.4 |
43.1 |
44.8 |
46.9 | ||||
| 4.4 |
6.2 |
7.2 |
7.4 |
8.7 | ||||
| 29.3 |
32.2 |
35.9 |
37.4 |
38.2 | ||||
| 2Q05 |
3Q05 |
4Q05 |
1Q06 2Q06 | |||||
| 40% |
35% |
35% |
35% |
35% |
34% | |||||
| 20% |
35% |
34% |
34% |
34% |
||||||
| 0% |
||||||||||
| 33% | ||||||||||
| 19% |
19% |
19% |
18% |
18% | ||||||
| 11% |
12% |
12% |
13% |
14% | ||||||
| 2Q05 |
3Q05 |
4Q05 |
1Q06 2Q06 | |||||||
Active Inactive
MTS VimpelCom MegaFon others
ARPU (US$)
MOU (min)
| 8.7 |
9.0 |
9.0 | ||||||
| 8.4 |
||||||||
| 7.8 |
||||||||
| 7.6 |
7.7 |
7.4 | ||||||
| 7.0 |
6.6 |
| 140.7 | ||||||||
| 115.3 |
129.9 |
131.4 |
132.0 |
|||||
| 100.9 |
111.6 |
109.5 |
110.6 |
115.9 |
2Q05 3Q05 4Q05 1Q06 2Q06
2Q05 3Q05 4Q05 1Q06 2Q06
ARPU active base ARPU
MOU active base MOU
8
Financial Highlights: Russia
Net Revenues, $ mln
OIBDA, $ mln
| +40.6% | ||||||||
| 871.0 |
1,020.5 | |||||||
| 725.9 |
842.2 |
859.2 |
||||||
| 2Q 05 |
3Q 05 |
4Q 05 |
1Q 06 |
2Q 06 |
| +39.9% |
462.3 |
529.7 | ||||||
| 378.6 |
431.4 |
404.1 |
||||||
| 2Q 05 |
3Q 05 |
4Q 05 |
1Q 06 |
2Q 06 |
CAPEX, $ mln
CAPEX/ Revenue, LTM
| 622.6 |
||||||||
| 372.1 |
||||||||
| 297.4 | ||||||||
| 230.8 |
||||||||
| 146.4 |
||||||||
| 2Q 05 |
3Q 05 |
4Q 05 |
1Q 06 |
2Q 06 |
| 56.5% |
||||||||
| 47. 5% |
49.4% |
|||||||
| 41. 6% |
||||||||
| 36.1% |
| 2Q 05 |
3Q 05 |
4Q 05 |
1Q 06 |
2Q 06 |
9
Relative Performance of Major Operators as of 1Q2006
Revenue in Russia, $ mln
| 460 |
565 |
659 |
704 |
|
700 | ||||
| 24.6% |
25.5% |
26.2% |
28.0% |
|
28.0% | ||||
| 804 |
929 |
1,016 |
955 |
|
930 | ||||
| 43.0% |
41.8% |
40.4% |
37.9% |
|
37.2% | ||||
| 606 |
726 |
842 |
859 |
|
871 | ||||
| 32.4% |
32.7% |
33.5% |
34.1% |
|
34.8% | ||||
| 1Q 05 |
2Q 05 |
3Q 05 |
4Q 05 |
|
1Q 06 | ||||
| VIP |
MBT |
Megafon |
* |
Revenue Market Share in Russia, %
| 50% |
43.0% |
41.8% |
40.4% |
37.9% |
37.2% | |||||
| 45% |
32.4% |
32.7% |
33.5% |
34.1% |
34.8% | |||||
| 40% |
24.6% |
25.5% |
26.2% |
28.0% |
28.0% | |||||
| 35% |
1Q 05 |
2Q 05 |
3Q 05 |
4Q 05 |
1Q 06 | |||||
| 30% |
25% |
20% |
VIP |
MBT |
Megafon* |
OIBDA in Russia, $ mln
| 206 |
253 |
324 |
332 |
|
343 | ||||
| 415 |
491 |
543 |
428 |
|
434 | ||||
| 294 |
379 |
431 |
404 |
|
462 | ||||
| 1Q 05 |
2Q 05 |
3Q 05 |
4Q 05 |
|
1Q 06 | ||||
| VIP |
MBT |
Megafon |
* |
OIBDA Margin in Russia, %
| 55% |
51.6% |
52.9% |
53.4% |
53.1% |
|
||||||
| 50% |
48.5% |
52.1% |
51.2% |
47.0% |
|
49.0% | |||||
| 45% |
44.7% |
44.7% |
49.1% |
47.1% |
|
46.7% | |||||
| 40% |
44.8% |
|
|||||||||
| 1Q 05 |
2Q 05 |
3Q 05 |
4Q 05 |
|
1Q 06 | ||||||
| VIP |
MBT |
Megafon |
* |
* Megafon data includes Tajikistan (Megafon Subs in Tajikistan are about 0.3% of the total Megafon subscriber base)
10
Operating Highlights: Kazakhstan
VimpelCom Subscriber Base in Kazakhstan, mln.
| 1.4 |
1.7 |
2.1 |
2.5 |
2.9 | ||||
| 0.1 |
0.04 |
0.24 |
0.4 |
0.7 | ||||
| 1.3 |
1.6 |
1.8 |
2.1 |
2.2 | ||||
| 2Q05 |
3Q05 |
4Q05 |
1Q06 |
2Q06 | ||||
| Active |
Inactive |
|||||||
| Subscriber Market Share in Kazakhstan | ||||||||||||
| 80% |
60% |
62% |
60% |
56% |
52% |
|||||||
| 60% |
37% |
36% |
37% |
41% |
44% |
|||||||
| 40% |
3% |
2% |
3% |
3% |
4% |
|||||||
| 20% |
||||||||||||
| 0% |
2Q05 |
3Q05 |
4Q05 |
1Q06 |
2Q06 | |||||||
| K’Cell |
KarTel |
Others | ||||||||||
| ARPU |
(US$) |
|||||||||
| 12.4 |
10.8 |
10.3 |
8.8 |
12.6 |
||||||
| 11.7 |
10.5 |
9.1 |
7.8 |
10.0 |
||||||
| 2Q05 |
3Q05 |
4Q05 |
1Q06 |
2Q06 | ||||||
| ARPU active base ARPU | ||||||||||
| MOU (min) |
||||||||
| 61.6 |
55.1 |
49.2 |
44.8 |
66.3 | ||||
| 58.1 |
53.5 |
43.4 |
40.0 |
52.4 | ||||
| 2Q05 |
3Q05 |
4Q05 |
1Q06 |
2Q06 | ||||
| MOU active base MOU | ||||||||
11
Financial Highlights: Kazakhstan
| Net Revenues, $ mln |
+82.5% | |||||||
| 43.9 |
48.1 |
49.2 |
54.0 |
80.1 | ||||
| 2Q 05 |
3Q 05 |
4Q 05 |
1Q 06 |
2Q 06 | ||||
| OIBDA, $ mln | ||||||||
| +100.6% | ||||||||
| 16.9 |
18.5 |
17.0 |
21.9 |
33.9 | ||||
| 2Q 05 |
3Q 05 |
4Q 05 |
1Q 06 |
2Q 06 | ||||
| CAPEX, $ mln | ||||||||
| 34.1 |
30.9 |
57.2 |
35.7 |
36.5 | ||||
| 2Q 05 |
3Q 05 |
4Q 05 |
1Q 06 |
2Q 06 | ||||
| CAPEX/ |
Revenue, LTM |
|||||||
| 80.9% |
||||||||
| 77. 5% |
||||||||
| 73. 5% |
||||||||
| 67. 0% |
69. 3% | |||||||
| 2Q 05 |
3Q 05 |
4Q 05 |
1Q 06 |
2Q 06 | ||||
12
Operating and Financial Highlights: Ukraine
| Three months |
|
||||||||
| June 30, 2006 |
|
March 31, 2006 |
|
Change, Q-on-Q |
| ||||
| Ukraine |
|||||||||
| Net Revenue* (mln., US$) |
5.8 |
|
2.1 |
|
176.2 |
% | |||
| OIBDA (mln., US$) |
- 11.3 |
|
-6.8 |
|
|||||
| Net Income (mln., US$) |
-17.0 |
|
-9.5 |
|
|||||
| ARPU (US$) |
4.7 |
|
2.6 |
|
80.8 |
% | |||
| ARPU ACT (active subscribers), (US$) |
5.9 |
|
3.4 |
|
73.5 |
% | |||
| MOU (min.) |
137.2 |
|
47.3 |
|
190.1 |
% | |||
| MOU ACT (active subscribers) (min) |
172.4 |
|
60.8 |
|
183.6 |
% | |||
| SAC (US$) |
14.5 |
|
30.1 |
|
-51.8 |
% | |||
| Subscribers, EOP |
569,400 |
|
278,000 |
|
104.8 |
% | |||
| Active subscribers, EOP |
473,300 |
|
144,000 |
|
228.7 |
% | |||
| Subscriber market share, EOP** |
1.6 |
% |
0.8 |
% |
* Excluding inter-company transactions
** Source: Company estimates and independent sources
13
The Rest of the CIS: 2Q2006 Highlights
| Three months ended |
||||||
| June 30, 2006 |
March 31, 2006 |
Change, Q-on-Q | ||||
| Uzbekistan |
||||||
| Net Revenue* (mln., US$) |
15.0 |
8.9 |
68.5% | |||
| OIBDA (mln., US$) |
9.5 |
5.2 |
82.7% | |||
| OIBDA Margin |
63.3% |
58.6% |
||||
| Net Income (mln., US$) |
3.6 |
1.0 |
260.0% | |||
| Subscribers, EOP |
451,600 |
421,400 |
7.2% | |||
| Subscriber Market Share** |
26.7% |
31.5% |
||||
| Tajikistan |
||||||
| Net Revenue* (mln., US$) |
0.12 |
0.18 |
-33.3% | |||
| OIBDA (mln., US$) |
-0.31 |
-0.05 |
||||
| Net Income (mln., US$) |
-0.30 |
-0.20 |
||||
| Subscribers, EOP |
14,600 |
26,700 |
-45.3% | |||
| Subscriber Market Share** |
5.1% |
9.5% |
* Excluding inter-company transactions
** Source: Company estimates and independent sources
14
Summary
Strong Y-o-Y revenue growth of 45.7%.
Robust ARPU growth in Russia in 2Q2006.
OIBDA growth of 42.0% and OIBDA margin of 50.1%.
Highest ever quarterly revenue and OIBDA figures exceeding $1.1 billion and $0.56 billion, respectively.
Exceptionally strong revenue growth and market share gain in Kazakhstan.
Promising start in Ukraine.
15
Questions and Answers
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Thank you for your interest in VimpelCom For more information visit www.vimpelcom.com or contact Investor_Relations@vimpelcom.com
16
Reconciliation Tables of non-U.S. GAAP Measures to Their Most Directly Comparable U.S. GAAP Financial Measures
Reconciliation of OIBDA and OIBDA Margin (Unaudited)
Three months ended
June 30, June 30, March 31,
($ ’000) 2006 2005 2006
Reconciliation of OIBDA to operating income
OIBDA 561,555 395,554 482,607
Impairment loss
Depreciation (194,845) (103,393) (171,094) Amortization (43,148) (34,939) (40,955)
Operating Income 323,562 257,222 270,558
Reconciliation of OIBDA margin to operating income as percentage of net operating revenue
OIBDA margin 50.1% 51.4% 51.6%
Less: Impairment loss Less: Depreciation as % of net operating revenues (17.4%) (13.4%) (18.3%)Less: Amortization as % of net operating revenues (3.9%) (4.5%) (4.4%)
Operating Income 28.8% 33.5% 28.9%
Note: Reconciliation of OIBDA and OIBDA Margin for 3Q and 4Q of 2005 are represented in respective press-releases for stated quarters, can be found on Vimpelcom’s website www.Vimpelcom.com
18
Reconciliation of OIBDA and OIBDA Margin in Russia (Unaudited)
Three months ended
June 30, June 30, March 31,
($ ’000) 2006 2005 2006
Reconciliation of OIBDA to operating income
OIBDA 529,704 378,607 462,337
Impairment loss
Depreciation (182,684) (98,789) (161,936) Amortization (25,657) (26,280) (24,977)
Operating Income 321,363 253,538 275,424
Reconciliation of OIBDA margin to operating income as percentage of net operating revenue
OIBDA margin 51.9% 52.2% 53.1%
Less: Impairment loss Less: Depreciation as % of net operating revenues (17.9%) (13.6%) (18.6%) Less: Amortization as % of net operating revenues (2.5%) (3.6%) (2.9%)
Operating Income 31.5% 35.0% 31.6%
Note: Reconciliation of OIBDA and OIBDA Margin for 1Q, 3Q and 4Q of 2005 are represented in respective press-releases for stated quarte can be found on Vimpelcom’s website www.Vimpelcom.com
19
Reconciliation of OIBDA and OIBDA Margin in Kazakhstan (Unaudited)
Three months ended
June 30, June 30, March 31,
($ ’000) 2006 2005 2006
Reconciliation of OIBDA to operating income
OIBDA 33,908 16,947 21,907
Depreciation (9,363) (4,604) (7,672) Amortization (9,324) (8,659) (8,785)
Operating Income 15,221 3,684 5,450
Reconciliation of OIBDA margin to operating income as percentage of net operating revenue
OIBDA margin 42.2% 38.6% 40.3%
Less: Depreciation as % of net operating revenues (11.7%) (10.5%) (14.1%) Less: Amortization as % of net operating revenues (11.5%) (19.7%) (16.2%)
Operating Income 19.0% 8.4% 10.0%
Note: Reconciliation of OIBDA and OIBDA Margin for 3Q and 4Q of 2005 are represented in respective press-releases for stated quarters, can be found on Vimpelcom’s website www.Vimpelcom.com
20
Reconciliation of OIBDA in Ukraine (Unaudited)
| Three months ended | ||||||
| ($’000) |
June 30, 2006 |
June 30, |
March 31, | |||
| Reconciliation of OIBDA to operating income | ||||||
| OIBDA |
(11,259) |
n/ a |
(6,814) | |||
| Depreciation |
(859) |
n/a |
(76) | |||
| Amortization |
(4,909) |
n/a |
(4,692) | |||
| Operating Income |
(17,027) |
n/ a |
(11,582) | |||
Note: Reconciliation of OIBDA and OIBDA Margin for 4Q of 2005 are represented in respective press-releases for stated quarters, can be found on Vimpelcom’s website www.Vimpelcom.com
21
Reconciliation of OIBDA and OIBDA Margin in Uzbekistan (Unaudited)
| Three months ended | ||||||
| ($’000) |
June |
June |
March | |||
| Reconciliation of | ||||||
| OIBDA |
9,507 |
n/ a |
5,227 | |||
| Depreciation |
(1,902) |
n/a |
(1,374) | |||
| Amortization |
(3,113) |
n/a |
(2,084) | |||
| Operating Income |
4,492 |
n/ a |
1,769 | |||
| Reconciliation of margin to operating | ||||||
| OIBDA margin |
63.3% |
n/ a |
58.6% | |||
| Less: Depreciation as % of net operating revenues |
(12.7%) |
n/a |
(15.4%) | |||
| Less: Amortization as % of net operating revenues |
(20.7%) |
n/a |
(23.4%) | |||
| Operating Income |
29.9% |
n/ a |
19.8% | |||
22
Reconciliation of OIBDA in Tajikistan (Unaudited)
| Three months ended |
| |||||||
| ($’000) |
June 30, 2006 |
|
June 30, |
March 31, |
| |||
| Reconciliation of OIBDA |
| |||||||
| OIBDA |
(305 |
) |
n/ a |
(50 |
) | |||
| Depreciation |
(37 |
) |
n/a |
(37 |
) | |||
| Amortization |
(145 |
) |
n/a |
(416 |
) | |||
| Operating Income |
(487 |
) |
n/ a |
(503 |
) | |||
23
Reconciliation of ARPU (Unaudited)
| Three months ended |
||||||
| June 30, |
June 30, |
March 31, | ||||
| ($’000) |
2006 |
2005 |
2006 | |||
| Reconciliation of ARPU to service revenue | ||||||
| Service revenue and |
||||||
| connection fees |
1,116,152 |
760,723 |
930,150 | |||
| Less: Connection fees |
622 |
132 |
404 | |||
| Less: Revenue from rent of |
||||||
| fiber-optic channels |
325 |
269 |
328 | |||
| Service revenue used to |
||||||
| calculate ARPU |
1,115,205 |
760,322 |
929,418 | |||
| Average number of |
||||||
| subscribers (’000) |
49,383 |
32,652 |
46,803 | |||
| ARPU (US$) |
7.5 |
7.8 |
6.6 | |||
Note: Reconciliation of ARPU for 3Q and 4Q of 2005 are represented in respective press-releases for stated quarters, can be found on Vimpelcom’s website www.Vimpelcom.com
24
Reconciliation of ARPU in Russia (Unaudited)
| Three |
||||||||||||
| June 30, |
June 30, |
March | ||||||||||
| ($’000) |
2006 |
2005 |
2006 | |||||||||
| Reconciliation of ARPU to service | ||||||||||||
| Service revenue and connection |
||||||||||||
| fees |
1,014,810 |
716,955 |
864,767 | |||||||||
| Less: Connection fees |
622 |
132 |
404 | |||||||||
| Less: Revenue from rent of fiber-optic |
||||||||||||
| channels |
325 |
269 |
328 | |||||||||
| Service revenue used to calculate |
||||||||||||
| ARPU |
1,013,863 |
716,554 |
864,035 | |||||||||
| Average number of subscribers (‘000) |
45,803 |
31,395 |
43,919 | |||||||||
| ARPU(US$) |
7.4 |
7.6 |
6.6 | |||||||||
| Average number of active subscribers (‘000) |
37,733 |
27,460 |
36,784 | |||||||||
| ARPU per active subscriber (US$) |
9.0 |
8.7 |
7.8 | |||||||||
Note: Reconciliation of ARPU for 3Q and 4Q of 2005 are represented in respective press-releases for stated quarters, can be found on Vimpelcom’s website www.Vimpelcom.com
25
Reconciliation of ARPU in Kazakhstan (Unaudited)
| Three months ended |
||||||||||
| June 30, |
June 30, |
March 31, | ||||||||
| ($’000) |
2006 |
2005 |
2006 | |||||||
| Reconciliation of ARPU to service revenue | ||||||||||
| Service revenue and connection |
||||||||||
| fees |
80,301 |
44,002 |
54,382 | |||||||
| Less: Connection fees |
0 |
0 |
0 | |||||||
| Less: Revenue from rent of fiber-optic |
||||||||||
| channels |
0 |
0 |
0 | |||||||
| Service revenue used to calculate |
||||||||||
| ARPU |
80,301 |
44,002 |
54,382 | |||||||
| Average number of subscribers (‘000) |
2,681 |
1,257 |
2,316 | |||||||
| ARPU(US$) |
10.0 |
11.7 |
7.8 | |||||||
| Average number of active subscribers (‘000) |
2,120 |
1,186 |
2,070 | |||||||
| ARPU per active subscriber (US$) |
12.6 |
12.4 |
8.8 | |||||||
Note: Reconciliation of ARPU for 3Q and 4Q of 2005 are represented in respective press-releases for stated quarters, can be found on Vimpelcom’s website www.Vimpelcom.com
26
Reconciliation of SAC in Ukraine (Unaudited)
| Three months ended | ||||||||
| June 30, |
June 30, |
March 31, |
||||||
| ($’000) |
2006 |
2005 |
2006 |
|||||
| Reconcilliation of SAC to selling, general and administrative | ||||||||
| Selling, general and |
||||||||
| administrative expenses |
13,216 |
n/ a |
6,397 |
|||||
| Less: General and admin. |
||||||||
| Expenses |
7,283 |
n/a |
5,765 | |||||
| Sales and marketing |
||||||||
| expenses, including |
5,933 |
n/ a |
632 |
|||||
| advertising & marketing |
||||||||
| expenses |
5,312 |
n/a |
632 | |||||
| dealers’ commission |
||||||||
| expenses |
621 |
n/a |
0 | |||||
| New Gross subs, ‘000 |
408 |
n/ a |
21 |
|||||
| SAC (US$) |
14.5 |
n/ a |
30.1 |
|||||
27
Reconciliation of ARPU in Ukraine (Unaudited)
| Three months ended | ||||||
| ($’000) |
June 30, 2006 |
June 30, |
March 31, | |||
| Reconciliation of ARPU to service | ||||||
| Service revenue and connection |
||||||
| fees |
5,948 |
n/ a |
2,103 | |||
| Less: Connection fees |
0 |
n/a |
0 | |||
| Less: Revenue from rent of fiber-optic channels |
0 |
n/a |
0 | |||
| Service revenue used to calculate ARPU |
5,948 |
n/ a |
2,103 | |||
| Average number of subscribers (’000) |
424 |
n/a |
268 | |||
| ARPU (US$) |
4.7 |
n/ a |
2.6 | |||
| Average number of active subscribers (’000) |
338 |
n/a |
208 | |||
| ARPU per active subscriber (US$) |
5.9 |
n/ a |
3.4 | |||
28