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 May 2004
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: May 27, 2004 | By: | /s/ Alexander V. Izosimov | ||
| Name: | Alexander V. Izosimov | |||
| Title: | Chief Executive Officer and General Director | |||
FOR IMMEDIATE RELEASE
VIMPELCOM ANNOUNCES FIRST QUARTER 2004
FINANCIAL AND OPERATING RESULTS
— 71% YEAR-ON-YEAR INCREASE IN NET OPERATING REVENUES —
— 84% YEAR-ON-YEAR INCREASE IN NET INCOME —
— 87% YEAR-ON-YEAR INCREASE IN OIBDA —
— APPROXIMATELY 14.9 MILLION SUBSCRIBERS
INCLUDING 8.7 MILLION REGIONAL SUBSCRIBERS AS OF TODAY –
Moscow and New York (May 27, 2004)-Open Joint Stock Company “Vimpel-Communications” (“VimpelCom” or the “Company”) (NYSE: VIP), a leading provider of wireless telecommunications services in Russia, today announced its financial and operating results for the first quarter ended March 31, 2004. During the first quarter, the Company continued its rapid growth in new subscribers and strengthened its financial performance, with the regions growing significantly faster than Moscow. Consolidated financial statements of VimpelCom and consolidated financial statements of VimpelCom-Region, VimpelCom’s subsidiary for regional development, are attached.
Commenting on today’s announcement, Alexander Izosimov, Chief Executive Officer of VimpelCom, said, “We are pleased with our first quarter results. In a very competitive market that is now the fastest growing wireless market in the world we added approximately 2 million subscribers, and we increased our OIBDA margin to 48.4%, the highest level achieved since our listing on the New York Stock Exchange in 1996. We were able to achieve these results by successfully implementing our strategy of national expansion.”
- more -
VimpelCom Announces First Quarter 2004 Financial and Operating Results
Page 2 of 4
Key Financial and Operating Indicators
(Definitions as well as reconciliation of each of OIBDA, OIBDA
margin, ARPU and SAC to its most directly comparable U.S. GAAP
financial measurement are presented below in the attachment)
| Three months ended Mar. 31, 2004 |
Three months ended Mar. 31, 2003 |
Change Y-on-Y (%) |
|||||||
| Net operating revenues (US$,000) |
417,697 | 244,437 | 70.9 | % | |||||
| OIBDA (US$,000) (1) |
202,025 | 107,936 | 87.2 | % | |||||
| OIBDA margin (2) |
48.4 | % | 44.2 | % | — | ||||
| Gross margin (US$,000) (3) |
342,141 | 196,570 | 74.1 | % | |||||
| Gross margin percentage (4) |
81.9 | % | 80.4 | % | — | ||||
| Net income (US$,000) |
76,131 | 41,387 | 83.9 | % | |||||
| Net income per share (US$) |
1.90 | 1.09 | 74.3 | % | |||||
| Net income per ADS (US$) (5) |
1.43 | 0.82 | 74.4 | % | |||||
| ARPU (US$) (6) |
10.8 | 13.5 | -20.0 | % | |||||
| MOU, revised definition (min) (7) |
91.4 | 87.5 | 4.5 | % | |||||
| SAC (US$) (8) |
16.8 | 20.8 | -19.2 | % |
Significant improvements in VimpelCom’s financial and operating results in the first quarter of 2004, as compared with the first quarter of 2003, were achieved largely as a result of rapid subscriber growth combined with the effects of economies of scale, efficient cost control and lower acquisition costs per subscriber in the regions outside of Moscow. When compared with the fourth quarter of 2003, strong seasonal effects (reduced roaming revenue and reduced minutes of use) resulted in a reduced rate of growth in net operating revenues. On the other hand, margins improved both on OIBDA and net income levels as compared with the fourth quarter of 2003.
The Company’s financial results include the activities in the Moscow license area and in the regions. Net operating revenues, excluding inter-company transactions, for Moscow stand-alone and the regions in the first quarter of 2004 were $256.3 million and $161.4 million, respectively. Net income for Moscow stand-alone and in the regions in the first quarter of 2004 was $60.0 million and $26.8 million, respectively.
Selling, general and administrative (“SG&A”) expenses, as a percentage of net operating revenues, improved to 33.0% reported in the first quarter of 2004 as compared with 34.9% in the first quarter of 2003. The decrease in SG&A from $148.8 million in the fourth quarter of 2003 to $138.0 million in the first quarter of 2004 was in part due to a decrease in aggregate subscriber acquisition costs from $57.2 million in the fourth quarter of 2003 to $50.1 million in the first quarter of 2004.
VimpelCom’s total capital expenditures for the first quarter of 2004 were approximately $157 million, spent entirely for the purchase of property and equipment.
In January 2004, VimpelCom adopted a new depreciation policy. Based on periodic internal studies of the useful economic lives of the Company’s property and equipment, the Company changed the estimated useful life of GSM telecommunications equipment from 9.5 to 7 years.
- more -
VimpelCom Announces First Quarter 2004 Financial and Operating Results
Page 3 of 4
Beginning with the first quarter of 2004, the Company will use a new definition of MOU based on total minutes of usage (including both billable minutes of usage and free minutes of usage) rather than only billable minutes as used in the previous definition. This approach is similar to that currently used by the majority of cellular operators in and outside of Russia and the Company believes the new definition better reflects the relationship between traffic, capital expenditures, revenues and operating costs. The tables with the quarterly MOU numbers for 2003 calculated under both the new and previous definitions are presented below in the definition section. The MOU figures used throughout this release have been calculated under the new definition.
The Company’s MOU in the first quarter of 2004 was 91.4 minutes, an increase of approximately 4.5% compared to 87.5 minutes recorded in the first quarter of 2003. As compared with 96.8 minutes recorded for the fourth quarter of 2003, MOU declined by 5.6%, primarily due to seasonal effects. ARPU for the first quarter of 2004 was approximately $10.8, a 20.0% decrease from the $13.5 reported for the first quarter of 2003 and a 13.6% decrease from the $12.5 reported for the fourth quarter of 2003.
The decline in ARPU was due to seasonal effects, which are most pronounced in the first quarter, and a growing proportion of regional subscribers who generate lower ARPU than Moscow subscribers. In addition, the decline in ARPU was caused by strong competition which resulted in tariff reductions and an effective decline in average price per minute. An increase in the proportion of intra-network traffic also led to an effective decline in average price per minute, although this decline was mitigated by the absence of interconnect charges.
Key Subscriber Statistics
| As of Mar. 31, 2004 |
As of Mar. 31, 2003 |
Change Y-on-Y (%) |
As of Dec. 31, 2003 |
Change Q-on-Q (%) |
|||||||||||
| Moscow license area |
6,042,300 | 3,945,600 | 53.1 | % | 5,659,600 | 6.8 | % | ||||||||
| Contract |
826,800 | 732,000 | 13.0 | % | 819,900 | 0.8 | % | ||||||||
| Prepaid |
5,215,500 | 3,213,600 | 62.3 | % | 4,839,700 | 7.8 | % | ||||||||
| Regions |
7,329,200 | 2,242,400 | 226.8 | % | 5,777,300 | 26.9 | % | ||||||||
| Total Number of Subscribers |
13,371,500 | 6,188,000 | 116.1 | % | 11,436,900 | 16.9 | % | ||||||||
| Churn (quarterly) |
8.6 | % | 9.6 | % | — | 9.7 | % | — | |||||||
Rapid subscriber growth continued in the first quarter of 2004, particularly in the regions. As of May 27, 2004, VimpelCom’s total number of subscribers reached approximately 14.93 million, with approximately 6.22 million subscribers in the Moscow license area and 8.72 million in the regions outside Moscow.
Using independent sources to estimate the number of subscribers of the Company’s competitors, VimpelCom estimates that its market share in the Moscow license area was 48.4% at the end of the first quarter of 2004, compared to the Company’s estimated market share of 49.5% reported at the end of the first quarter of 2003. On a nationwide basis, VimpelCom estimates its market share at 32.0% at the end of the first quarter of 2004, compared to 29.0% estimated at the end of the first quarter of 2003.
The Company’s quarterly churn rate in the first quarter of 2004 was 8.6%, compared to the Company’s churn rate of 9.6% reported for the same period in 2003. Marketing activities in the past few quarters resulted in some improvement in churn in the first quarter of 2004. Loyalty and retention, especially in the Company’s more saturated markets, remain one of VimpelCom’s priorities going forward.
- more -
VimpelCom Announces First Quarter 2004 Financial and Operating Results
Page 4 of 4
The Company’s management will discuss its first quarter 2004 results during a conference call and slide presentation on May 27, 2004 at 6:30 pm Moscow time (10:30 am EDT 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 June 3, 2004 and June 28, 2004, respectively. The slide presentation will also be available for download on VimpelCom’s website http://www.vimpelcom.com.
VimpelCom is a leading provider of telecommunications services in Russia, operating under the “Bee Line GSM” brand. The VimpelCom Group’s license portfolio covers approximately 92% of Russia’s population (134 million people), including the City of Moscow, the Moscow Region and the City of St. Petersburg. VimpelCom was the first Russian company to list its shares on the New York Stock Exchange (“NYSE”). VimpelCom’s ADSs are listed on the NYSE under the symbol “VIP”.
This press release contains “forward-looking statements”, as the phrase is defined in Section 27A of the Securities Act and Section 21E of the Exchange Act. These statements relate to the Company’s development plans. These and other forward-looking statements are based on management’s best assessment of the Company’s strategic and financial position and of future market conditions and trends. These discussions involve risks and uncertainties. The actual outcome may differ materially from these statements as a result of unforeseen developments from competition, governmental regulation of the wireless telecommunications industry, general political uncertainties in Russia and general economic developments in Russia, the Company’s ability to continue to grow its overall subscriber base, 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 telecommunications industry will not have a material adverse effect on the VimpelCom Group. Certain factors that could cause actual results to differ materially from those discussed in any forward-looking statements include the risks described in the Company’s Annual Report on Form 20-F for the year ended December 31, 2003 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 | Christopher Mittendorf | |
| VimpelCom (Moscow) | Edelman Financial Worldwide | |
| Tel: 7(095) 974-5888 | Tel: 1(212) 704-8134 | |
| vgoldin@vimpelcom.com | christopher.mittendorf@edelman.com |
- Definitions and Tables attached-
Definitions
| 1. | 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. |
| 2. | OIBDA margin is OIBDA expressed as a percentage of net operating revenues. Reconciliation of OIBDA margin to operating income as a percentage of net operating revenues, the most directly comparable U.S. GAAP financial measure, is presented below in the tables section. |
| 3. | Gross margin is defined as net operating revenues less selected operating costs (specifically, service costs, cost of handsets and accessories sold and cost of other revenues). |
| 4. | Gross margin percentage is gross margin expressed as a percentage of net operating revenues. |
| 5. | Each ADS represents 0.75 of one share of common stock. |
| 6. | 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. |
| 7. | 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. |
| 8. | SAC (Average Acquisition Cost Per User), a non-U.S. GAAP financial measure, is calculated as dealer commissions, advertising expenses and handset subsidies for the relevant period divided by the number of gross sales 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 an alternative to other figures reported under U.S. GAAP. |
MOU numbers for 2003 calculated under the new definition
(including both billable and free minutes of usage)
| 1Q2003 |
2Q2003 |
3Q2003 |
4Q2003 | |||||
| MOU, blended (min) |
87.5 | 100.2 | 104.3 | 96.8 | ||||
| MOU Moscow |
90.3 | 107.4 | 115.2 | 108.0 | ||||
| Contract (Moscow) |
258.6 | 297.3 | 320.9 | 343.0 | ||||
| Prepaid (Moscow) |
50.8 | 65.9 | 74.7 | 66.2 | ||||
| MOU, Regions |
81.8 | 88.7 | 89.8 | 84.6 |
MOU numbers for 2003 calculated under the prior definition (including only billable minutes of usage)
| 1Q2003 |
2Q2003 |
3Q2003 |
4Q2003 | |||||
| MOU, blended (min) |
81.5 | 93.8 | 92.7 | 89.3 | ||||
| MOU Moscow |
78.9 | 95.1 | 92.5 | 84.7 | ||||
| Contract (Moscow) |
237.2 | 273.7 | 284.2 | 303.1 | ||||
| Prepaid (Moscow) |
41.7 | 56.0 | 54.7 | 45.9 | ||||
| MOU, Regions |
86.9 | 91.6 | 93.0 | 94.4 |
Open Joint Stock Company “Vimpel-Communications”
Unaudited Condensed Consolidated Statements of Income
| Three months ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| (In thousands of US dollars, except per share (ADS) amounts) |
||||||||
| Operating revenues: |
||||||||
| Service revenues and connection fees |
US$ | 400,903 | US$ | 230,099 | ||||
| Sales of handsets and accessories |
15,774 | 13,426 | ||||||
| Other revenues |
1,020 | 912 | ||||||
| Total operating revenues |
417,697 | 244,437 | ||||||
| Operating expenses |
||||||||
| Service costs |
62,365 | 37,160 | ||||||
| Cost of handsets and accessories sold |
13,191 | 10,707 | ||||||
| Selling, general and administrative expenses |
138,013 | 85,310 | ||||||
| Depreciation |
57,337 | 31,678 | ||||||
| Amortization |
9,143 | 7,372 | ||||||
| Provision for doubtful accounts |
2,103 | 3,324 | ||||||
| Total operating expenses |
282,152 | 175,551 | ||||||
| Operating income |
135,545 | 68,886 | ||||||
| Other income and expenses: |
||||||||
| Other income |
354 | 574 | ||||||
| Other expenses |
(403 | ) | (432 | ) | ||||
| Interest income |
1,501 | 1,998 | ||||||
| Interest expense |
(13,856 | ) | (16,036 | ) | ||||
| Net foreign exchange gain (loss) |
1,671 | 1,327 | ||||||
| Total other income and expenses |
(10,733 | ) | (12,569 | ) | ||||
| Income before income taxes and minority interest |
124,812 | 56,317 | ||||||
| Income taxes expense |
36,699 | 14,912 | ||||||
| Minority interest in net earnings (losses) of subsidiaries |
11,982 | 18 | ||||||
| Net income |
US$ | 76,131 | US$ | 41,387 | ||||
| Net income per common share |
US$ | 1.90 | US$ | 1.09 | ||||
| Net income per ADS equivalent |
US$ | 1.43 | US$ | 0.82 | ||||
| Weighted average common shares outstanding (thousands) |
40,172 | 38,073 | ||||||
Open Joint Stock Company “Vimpel-Communications”
Condensed Consolidated Balance Sheets
| March 31, 2004 |
December 31, 2003 | |||||
| (In thousands of US dollars) | ||||||
| Assets |
||||||
| Current assets: |
||||||
| Cash and cash equivalents |
130,552 | US$ | 157,611 | |||
| Accounts receivable |
109,386 | 113,092 | ||||
| Other current assets |
271,775 | 255,540 | ||||
| Total current assets |
511,713 | 526,243 | ||||
| Non-current assets |
||||||
| Property and equipment, net |
1,530,372 | 1,460,542 | ||||
| Telecommunication licenses, net |
98,799 | 103,817 | ||||
| Other intangible assets, net |
59,919 | 59,369 | ||||
| Other assets |
175,260 | 152,261 | ||||
| Total non-current assets |
1,864,350 | 1,775,989 | ||||
| Total assets |
US$ | 2,376,063 | US$ | 2,302,232 | ||
| Liabilities and shareholders’ equity |
||||||
| Current liabilities: |
||||||
| Accounts payable |
US$ | 172,047 | 158,467 | |||
| Due to related parties |
6,290 | 8,603 | ||||
| Customer advances and deposits |
196,323 | 181,475 | ||||
| Deferred revenue |
2,596 | 2,701 | ||||
| Ruble denominated bonds payable |
105,317 | 101,852 | ||||
| Bank loans, current portion |
30,691 | 35,343 | ||||
| Capital lease obligations, current portion |
8,451 | 6,587 | ||||
| Equipment financing obligations, current portion |
73,622 | 70,935 | ||||
| Accrued liabilities |
100,298 | 127,689 | ||||
| Total current liabilities |
695,635 | 693,652 | ||||
| Deferred income taxes |
31,634 | 34,380 | ||||
| Bank loans, less current portion |
331,490 | 330,112 | ||||
| Capital lease obligations, less current portion |
7,924 | 9,154 | ||||
| Accrued liabilities, less current portion |
4,113 | 4,046 | ||||
| 5.5% Senior convertible notes due July 2005 |
— | |||||
| Equipment financing obligations, less current portion |
36,288 | 53,008 | ||||
| Minority interest |
193,104 | 179,664 | ||||
| Shareholders’ equity |
1,075,875 | 998,216 | ||||
| Total liabilities and shareholders’ equity |
US$ | 2,376,063 | US$ | 2,302,232 | ||
Unaudited Condensed Consolidated Statements of Cash Flows
| Three months ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| (In thousands of US dollars) | ||||||||
| Net cash provided by operating activities |
US$ | 116,669 | US$ | 75,065 | ||||
| Proceeds from bank and other loans |
7,189 | 56,962 | ||||||
| Payments of fees in respect of debt issue |
(1,249 | ) | ||||||
| Repayment of bank loans |
(10,587 | ) | (20,910 | ) | ||||
| Repayment of equipment financing obligations |
(14,265 | ) | (23,824 | ) | ||||
| Repayment of lease obligations |
(131 | ) | (439 | ) | ||||
| Net cash provided by (used in) financing activities |
(17,794 | ) | 10,540 | |||||
| Purchase of property and equipment |
(107,536 | ) | (87,799 | ) | ||||
| Purchase of StavTeleSot stock, net of cash acquired of US$658 |
(38,143 | ) | ||||||
| Purchase of intangible assets |
(4,039 | ) | (5,435 | ) | ||||
| Purchase of other assets |
(13,550 | ) | (7,969 | ) | ||||
| Net cash used in investing activities |
(125,125 | ) | (139,346 | ) | ||||
| Effect of exchange rate changes on cash |
(809 | ) | 1,442 | |||||
| Net decrease in cash |
(27,059 | ) | (52,299 | ) | ||||
| Cash and cash equivalents at beginning of period |
157,611 | 263,657 | ||||||
| Cash and cash equivalents at end of period |
US$ | 130,552 | US$ | 211,358 | ||||
| Supplemental cash flow information |
||||||||
| Non-cash activities: |
||||||||
| Equipment acquired under financing agreements |
US$ | 1,659 | US$ | 24,077 | ||||
| Accounts payable for equipment and other long-lived assets |
66,505 | 50,137 | ||||||
| Accrued debt and equity offering costs |
236 | 294 | ||||||
| Operating activities financed by sale of treasury stock |
— | 1,262 | ||||||
| Acquisitions: |
||||||||
| Fair value of assets acquired |
— | 66,634 | ||||||
| Difference between the amount paid and the fair value of net assets acquired |
— | (4,699 | ) | |||||
| Cash paid for the capital stock |
— | (38,801 | ) | |||||
| Liabilities assumed |
US$ | — | US$ | 23,134 | ||||
Reconciliation of VimpelCom OIBDA to operating income
(In thousands of US dollars)
| Three months ended |
|||||||||
| March 31, 2004 |
December 31, 2003 |
March 31, 2003 |
|||||||
| OIBDA |
202,025 | 186,893 | 107,936 | ||||||
| Depreciation |
(57,337 | ) | (42,776 | ) | (31,678 | ) | |||
| Amortization |
(9,143 | ) | (9,083 | ) | (7,372 | ) | |||
| Operating income |
135,545 | 135,034 | 68,886 | ||||||
Reconciliation of VimpelCom OIBDA margin to
operating income as percentage of net operating revenues
| Three months ended |
|||||||||
| March 31, 2004 |
December 31, 2003 |
March 31, 2003 |
|||||||
| OIBDA margin |
48.4 | % | 45.8 | % | 44.2 | % | |||
| Less: Depreciation as percentage of net operating revenues |
(13.7 | )% | (10.5 | )% | (13.0 | )% | |||
| Less: Amortization as percentage of net operating revenues |
(2.2 | )% | (2.2 | )% | (3.0 | )% | |||
| Operating income as percentage of net operating revenues |
32.5 | % | 33.1 | % | 28.2 | % | |||
Reconciliation of SAC to selling, general and
administrative expenses
(In thousands of US dollars, except for SAC and
subscriber amounts)
| Three months ended | ||||||
| March 31, 2004 |
December 31, 2003 |
March 31, 2003 | ||||
| Selling, general and administrative expenses |
138,013 | 148,764 | 85,310 | |||
| Less: General and administrative expenses |
87,865 | 91,533 | 56,643 | |||
| Sales and marketing expenses, including |
50,148 | 57,231 | 28,667 | |||
| advertising & marketing expenses |
13,245 | 16,236 | 9,445 | |||
| dealers’ commission expense |
36,903 | 40,995 | 19,222 | |||
| New gross subscribers,’000 |
2,979 | 3,170 | 1,377 | |||
| Subscriber Acquisition Cost (SAC) (US$) |
16.8 | 18.1 | 20.8 | |||
Reconciliation of ARPU to service revenue and
connection fees
(In thousands of US dollars, except for ARPU and
subscriber amounts)
| Three months ended | ||||||
| March 31, 2004 |
December 31, 2003 |
March 31, 2003 | ||||
| Service revenue and connection fees |
US$ 400,903 | US$ 386,322 | US$ 230,099 | |||
| Less: Connection fees |
185 | 202 | 337 | |||
| Less: Revenue from rent of fiber-optic channels |
549 | 417 | 372 | |||
| Service revenue used to calculate ARPU |
400,169 | 385,703 | 229,390 | |||
| Average number of subscribers,’000 |
12,318 | 10,277 | 5,658 | |||
| Average revenue per subscriber per month (US$) |
10.8 | 12.5 | 13.5 | |||
Open Joint Stock Company “VimpelCom-Region”
Unaudited Condensed Consolidated Statements of Income
| Three months ended March 31, |
||||||
| 2004 |
2003 |
|||||
| (In thousands of US dollars, except per share (ADS) amounts) |
||||||
| Operating revenues: |
||||||
| Service revenues and connection fees |
US$ 164,248 | US$ 55,902 | ||||
| Sales of handsets and accessories |
8,624 | 8,723 | ||||
| Other revenues |
1,300 | 535 | ||||
| Total operating revenues |
174,172 | 65,160 | ||||
| Operating expenses |
||||||
| Service costs |
32,252 | 15,592 | ||||
| Cost of handsets and accessories sold |
8,180 | 8,496 | ||||
| Equipment lease |
2,562 | 2,221 | ||||
| Selling, general and administrative expenses |
55,805 | 21,289 | ||||
| Network maintenance |
4,578 | 1,811 | ||||
| Depreciation and amortization |
24,360 | 11,310 | ||||
| Provision for doubtful accounts |
872 | 361 | ||||
| Total operating expenses |
128,609 | 61,080 | ||||
| Operating income |
45,563 | 4,080 | ||||
| Other income and expenses: |
||||||
| Other income |
16 | 240 | ||||
| Other expenses |
(138 | ) | (205 | ) | ||
| Interest income |
240 | 152 | ||||
| Interest expense |
(7,008 | ) | (3,306 | ) | ||
| Net foreign exchange gain (loss) |
(32 | ) | (292 | ) | ||
| Total other income and expenses |
(6,922 | ) | (3,411 | ) | ||
| Income before income taxes and minority interest |
38,641 | 669 | ||||
| Income taxes expense |
11,909 | (1,373 | ) | |||
| Minority interest in net earnings (losses) of subsidiaries |
60 | (19 | ) | |||
| Net income |
US$ 26,672 | (US$ 723 | ) | |||
*) Net income of VimpelCom-Region as a legal entity differs from the $26.785 million net income reported above in this press release for the regional segment for the first quarter of 2004. The difference is caused by the fact that the financial statements of Bee-Line Samara are included in the regions for segment reporting purposes, but are not included in the consolidated financial statements of VimpelCom-Region. Bee-Line Samara operates in the Samara region but, for historical reasons, is owned directly by VimpelCom. The following table provides reconciliation between these figures (all numbers are in thousands of US$):
| Three months ended Mar. 31, 2004 |
|||
| Net income of VimpelCom-Region |
26,672 | ||
| Net income of BeeLine-Samara |
598 | ||
| Net effect of transactions between VimpelCom-Region and BeeLine-Samara |
(485 | ) | |
| Net income of VimpelCom’s regional segment |
26,785 |
Operating revenue of VimpelCom-Region as a legal entity differs from the $161.401 million operating revenues for the regional segment excluding inter-company transactions, reported above in this press release for the first quarter of 2004. The following table provides reconciliation between these figures (all numbers are in thousands of US$):
| Three months ended Mar. 31, 2004 |
|||
| Operating revenue of VimpelCom-Region |
174,172 | ||
| Operating revenue of Bee-Line-Samara |
7,967 | ||
| Net effect of transactions between VimpelCom-Region and Bee-Line-Samara |
(4,114 | ) | |
| Operating revenue of VimpelCom’s regional segment |
178,025 | ||
| Inter-company operating revenue of VimpelCom-Region and Bee-Line-Samara |
(16,624 | ) | |
| Regional segment operating revenue excluding inter-company transactions |
161,401 |
Open Joint Stock Company “VimpelCom-Region”
Condensed Consolidated Balance Sheets
| March 31, 2004 |
December 31, 2003 | |||||
| (In thousands of US dollars) | ||||||
| Assets |
||||||
| Current assets: |
||||||
| Cash and cash equivalents |
US$ | 58,106 | US$ | 42,729 | ||
| Trade accounts receivable |
15,240 | 22,726 | ||||
| Other current assets |
167,058 | 137,529 | ||||
| Total current assets |
240,404 | 202,984 | ||||
| Non-current assets: |
||||||
| Property and equipment, net |
679,241 | 624,306 | ||||
| Telecommunication licenses and allocation of frequencies, net |
83,086 | 87,175 | ||||
| Other intangible assets, net |
22,178 | 20,383 | ||||
| Other assets |
84,056 | 62,995 | ||||
| Total non-current assets |
868,561 | 794,859 | ||||
| Total assets |
US$ | 1,108,965 | US$ | 997,843 | ||
| Liabilities and shareholders’ equity |
||||||
| Current liabilities: |
||||||
| Accounts payable |
US$ | 73,053 | US$ | 73,345 | ||
| Due to related parties |
95,290 | 71,420 | ||||
| Customer advances and deposits |
65,471 | 41,916 | ||||
| Deferred revenue |
873 | 713 | ||||
| Rouble denominated bonds payable |
105,317 | 101,852 | ||||
| Bank loans, current portion |
8,072 | 4,710 | ||||
| Capital lease obligation, current portion |
0 | 0 | ||||
| Equipment financing obligations, current portion |
23,482 | 17,078 | ||||
| Accrued liabilities |
16,108 | 16,076 | ||||
| Total current liabilities |
387,666 | 327,110 | ||||
| Deferred income taxes |
22,077 | 24,713 | ||||
| Bank loans, less current portion |
66,963 | 66,500 | ||||
| Long-term loans due to VimpelCom |
206,228 | 176,231 | ||||
| Equipment financing obligations, less current portion |
9,296 | 16,097 | ||||
| Accrued liabilities |
2,765 | 2,718 | ||||
| Minority interest |
412 | 350 | ||||
| Shareholders’ equity |
413,558 | 384,124 | ||||
| Total liabilities and shareholders’ equity |
US$ | 1,108,965 | US$ | 997,843 | ||
Open Joint Stock Company “VimpelCom-Region”
Condensed Consolidated Statements of Cash Flows
| Three months ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| (In thousands of US dollars) | ||||||||
| Net cash provided by (used in) operating activities |
US$ | 59,977 | US$ | 2,559 | ||||
| Proceeds from bank and other loans |
4,359 | 39,161 | ||||||
| Proceeds from loans from VimpelCom |
29,937 | 39,223 | ||||||
| Repayment of bank and other loans |
(569 | ) | (11,227 | ) | ||||
| Repayment of equipment financing obligations |
(1,879 | ) | (13,909 | ) | ||||
| Repayment of capital lease obligations |
(119 | ) | ||||||
| Net cash provided by financing activities |
31,848 | 53,129 | ||||||
| Purchase of property and equipment |
(57,898 | ) | (33,213 | ) | ||||
| Purchase of StavTeleSot stock, net of cash acquired of US$658 |
(38,143 | ) | ||||||
| Purchase of intangible assets |
(3,236 | ) | (4,164 | ) | ||||
| Purchase of other assets |
(14,356 | ) | — | |||||
| Net cash used in investing activities |
(75,490 | ) | (75,520 | ) | ||||
| Effect of exchange rate changes on cash |
(958 | ) | 67 | |||||
| Net (decrease) increase in cash |
15,377 | (19,765 | ) | |||||
| Cash and cash equivalents at beginning of year |
42,729 | 52,703 | ||||||
| Cash and cash equivalents at end of year |
US$ | 58,106 | US$ | 32,938 | ||||
Reconciliation of VimpelCom-Region OIBDA to operating income
(In thousands of US dollars)
| Three months ended |
|||||||||
| March 31, 2004 |
December 31, 2003 |
March 31, 2003 |
|||||||
| OIBDA |
69,923 | 62,345 | 15,390 | ||||||
| Depreciation |
(18,194 | ) | (11,740 | ) | (6,760 | ) | |||
| Amortization |
(6,166 | ) | (5,995 | ) | (4,550 | ) | |||
| Operating income |
45,563 | 44,610 | 4,080 | ||||||
Reconciliation of VimpelCom-Region OIBDA margin to
operating income as percentage of net operating revenues
| Three months ended |
|||||||||
| March 31, 2004 |
December 31, 2003 |
March 31, 2003 |
|||||||
| OIBDA margin |
40.1 | % | 40.2 | % | 23.6 | % | |||
| Less: Depreciation as percentage of net operating revenues |
(10.4 | )% | (7.6 | )% | (10.4 | )% | |||
| Less: Amortization as percentage of net operating revenues |
(3.5 | )% | (3.9 | )% | (7.0 | )% | |||
| Operating income as percentage of net operating revenues |
26.2 | % | 28.7 | % | 6.2 | % | |||