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VimpelCom announces first quarter 2006 financial and operating results

Moscow and New York (June 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 newly acquired operations in Ukraine, Uzbekistan and Tajikistan, today announced its financial and operating results for the first quarter ended March 31, 2006. During the first quarter of 2006 the Company reported continued growth in new subscribers and improved financial results.

The principal results of operations with comments are presented in the following tables. All definitions are presented in Attachment A. The condensed consolidated financial statements of VimpelCom are presented in Attachment B. Reconciliation of each of OIBDA, OIBDA margin, ARPU and SAC to the most directly comparable U.S. GAAP financial measures appear in Attachment C.

Financial and Operating Highlights

  • Net operating revenues reached $936.2 million, a year-on-year increase of 46%.
  • OIBDA reached $482.6 million, a year-on-year increase of 58%.
  • OIBDA margin was 51.6%.
  • Net income totaled $150.2 million, a year-on-year increase of 37%.
  • Operating cash flow was $362.9 million, a year-on-year increase of 69%.
  • Approximately 50.0 million subscribers as of June 1, 2006 including 3.7 million subscribers in the CIS outside of Russia.
  • Strong growth and improved subscriber market share in Kazakhstan.
  • Two mobile operators were acquired in Uzbekistan bringing to five the number of countries where VimpelCom operates.

Key Consolidated Operating Indicators

  March 31, 2006 March 31, 2005 Change, Y-on-Y Dec. 31, 2005 Change, Q-on-Q
Subscribers 48,052,800 30,748,400 56.3% 45,430,300 5.8%
% of prepaid 96.9% 96.2% -- 96.9% --
Churn, quarterly 8.4% 5.9% -- 8.3% --
ARPU (US$) 6.6 7.3 -9.6% 7.1 -7.0%
MOU (min) 107.8 86.9 24.1% 106.5 1.2%
SAC (US$) 12.6 14.3 -11.9% 13.8 -8.7%

 

Key Consolidated Financial Indicators

  March 31, 2006 March 31, 2005 Change,
Y-on-Y
Dec. 31, 2005 Change,
Q-on-Q
Net operating revenues (US$,000) 936,167 640,636 46.1% 910,421 2.8%
including interconnect revenue 59,720 10,519 467.7% 31,433 90.0%
OIBDA (US$,000) 482,607 306,107 57.7% 419,692 15.0%
OIBDA margin 51.6% 47.8% -- 46.1% --
Gross margin (US$,000) 768,298 531,690 44.5% 757,443 1.4%
Gross margin percentage 82.1% 83.0% -- 83.2% --
SG&A (US$,000) 282,925 223,523 26.6% 335,666 -15.7%
SG&A percentage 30.2% 34.9% -- 36.9% --
Net income (US$,000) 150,223 109,664 37.0% 151,748 -1.0%
Net income per share (US$) 2.94 2.14   2.97  
Net income per ADS (US$) 0.74 0.54   0.74  

 

Commenting on today's announcement, Alexander Izosimov, Chief Executive Officer of VimpelCom, said, "Our business continued its successful development in the first quarter of 2006. This was the 26th consecutive quarter of revenue growth. In the first quarter of 2006, we achieved the highest quarterly OIBDA and OIBDA margin in our history. These results came on the back of strong performance both in Russia and Kazakhstan.

"The first quarter results confirm the stabilizing trend in ARPU which we have previously reported. We believe that stabilizing ARPU indicates that Russia, our main market, retains substantial growth potential.

"We would like to again specifically note improving momentum in Kazakhstan where our efforts to enhance the Company's position have started to bear fruit.

"Significant progress in Kazakhstan, good start in Ukraine and promising entry into Tajikistan and Uzbekistan substantiate our CIS expansion strategy and we intend to vigorously pursue it going forward."

In the first quarter of 2006, VimpelCom invested approximately $195.4 million for the purchase of property and equipment and $261.0 million for the acquisition of mobile providers in Uzbekistan.

In the first quarter of 2006 we began to revise interconnect charges with operators in Russia in anticipation of the introduction of CPP (Calling Party Pays) on July 1, 2006. As a result, our revenue and service cost increased by approximately the same amount. These interconnect revisions caused gross margin percentage to decrease by approximately 2 percentage points. However, the impact of further revisions to interconnect charges for future periods is still unclear and therefore cannot be derived based on our first quarter results.

Starting from the first quarter of 2006, in addition to consolidated financial and operating results, VimpelCom reports its selected results along the following reportable segments: (1) Russia, which includes the operating results of VimpelCom and all of its subsidiaries operating in Russia; (2) Kazakhstan, which includes the operating results of VimpelCom's subsidiary KaR-Tel; (3) Ukraine, which includes the operating results of VimpelCom's subsidiary URS; (4) Tajikistan, which includes the operating results of VimpelCom's subsidiary Tacom; and (5) Uzbekistan, which includes the operating results of VimpelCom's subsidiaries Buztel and Unitel. VimpelCom's management analyzes the reportable segments separately because of different economic environments and the different stages of development of markets of wireless telecommunications services in Russia and the countries of the CIS, which require different investment and marketing strategies. Accordingly, VimpelCom's reportable segments are presented and discussed separately below.

In countries with high penetration levels and predominantly prepaid subscribers, such as Russia, Ukraine and Kazakhstan, there are substantial numbers of multiple SIM card users and inactive subscribers. According to the current arrangements and legal requirements, subscribers in certain tariff plans may stay inactive but still remain registered as subscribers for a period of up to one year. In order to properly analyze our subscriber base and make proper comparisons with other markets, in 2005 we introduced the definition of active subscribers as those subscribers who made a revenue producing transaction in the past three months. We also started to calculate ARPU and MOU for the active subscriber base (see Attachment A). In addition to our standard presentation of performance indicators, in this release we present ARPU and MOU in Russia and Kazakhstan calculated on the basis of "active subscribers" and we will do the same for our new markets as soon as we establish more reliable data collection mechanisms for these statistics at our subsidiaries in those markets.

 

RUSSIA

 

  As of and for the three months ended March 31, 2006 As of and for the three months ended March 31, 2005 Change, Y-on-Y As of and for the three months ended December 31, 2005 Change, Q-on-Q
Net revenue*) (million US$) 871.0 605.6 43.8% 859.2 1.4%
OIBDA (million US$) 462.3 293.9 57.3% 404.1 14.4%
OIBDA margin 53.1% 48.5% --  47.0% -- 
Net income (million US$) 155.0 113.5 36.6% 153.2 1.2%
ARPU (US$) 6.6 7.2 -8.3% 7.0 -5.7%
ARPUACT (US$) (active subscribers) 7.8 8.1 -3.7% 8.4 -7.1%
MOU (min.) 110.6 88.1 25.5% 109.5 1.0%
MOUACT (min) (active subscribers) 132.0 99.3 32.9% 131.4 0.5%
SAC (US$) 13.2 14.1 -6.4% 14.0 -5.7%
Subscribers 44,814,000 29,617,700 51.3% 43,096,700 4.0%
Active subscribers 37,373,400 25,980,300 43.9% 35,936,400 4.0%
Market share 33.9% 34.6% -- 34.3% --


*) Excluding inter-company transactions.

In the Russian market, VimpelCom's focus is concentrated on stimulating increased usage of our services and revenue growth. In the first quarter of 2006 this resulted in improved trends in MOU (year-on-year and quarter-on-quarter increases) and ARPU (the lowest year-on-year and quarter-on-quarter decrease ever recorded by the Company in the first quarter). Our OIBDA margin in Russia was the highest ever recorded by the Company.

Due to significant strengthening of the ruble against the dollar during the first quarter we faced pressure on our net income from a substantial increase in our taxable income in our Russian accounts, as our debts stated in US dollars were favorably revalued leading to taxable foreign exchange gain. As a result, we recognized approximately $18 million of additional expense leading to an increase in our effective consolidated tax rate from 26.4% for 2005 to 32.7% for the first quarter of 2006.

 

KAZAKHSTAN

  As of and for the three months ended March 31, 2006 As of and for the three months ended March 31, 2005 Change, Y-on-Y As of and for the three months ended December 31, 2005 Change, Q-on-Q
Net revenue*) (million US$) 54.0 35.0 54.3% 49.2 9.8%
OIBDA (million US$) 21.9 12.2 79.5% 17.0 28.8%
OIBDA margin 40.3% 34.8% -- 34.2% --
Net income (million US$) 3.9 -3.8 -- 2.5 56.0%
ARPU (US$) 7.8 11.5 -32.2% 9.1 -14.3%
ARPUACT (US$) (active subscribers) 8.8 12.4 -29.0% 10.3 -14.6%
MOU (min.) 40.0 53.6 -25.4% 43.4 -7.8%
MOUACT (min) (active subscribers) 44.8 57.9 -22.6% 49.2 -8.9%
SAC (US$) 6.1 17.6 -65.3% 11.4 -46.5%
Subscribers 2,512,700 1,130,700 122.2% 2,050,300 22.6%
Active subscribers 2,123,100 1,052,900 101.6% 1,813,900 17.0%
Market share 40.6% 35.2% -- 37.2% --

 

*) Excluding inter-company transactions.

In Kazakhstan, VimpelCom made substantial progress in improving all financial indicators primarily due to rapid subscriber growth, efficient cost control and an improved interconnect regime. Recently, we acquired additional spectrum of 2.5 MHz in the 900 MHz frequency band, which will allow us to make a significant improvement to the capacity and quality of our network.

In the first quarter of 2006, operations in Ukraine, Tajikistan and Uzbekistan were in their initial phase and their contribution to the Company's results was insignificant:

UKRAINE, TAJIKISTAN, UZBEKISTAN: Selected financial and operating data as of and for the three months ended March 31, 2006:

 

Country Ukraine Tajikistan Uzbekistan
Net revenue*) (million US$) 2.1 0.18 8.9
OIBDA (million US$) -6.8 -0.05 5.2
Net income (million US$) -9.5 -0.2 1.0
Subscribers 278,000 26,700 421,400
Market share 0.8% 9.5% 31.5%

 

*) Excluding inter-company transactions.

Business in Ukraine is developing in line with the Company's plans. We are in the process of integrating URS into the VimpelCom Group. The "Beeline" brand was launched in April 2006. The new brand and the associated marketing campaign have led to rapid growth in net additions. URS's incremental market share in April grew to almost 20% according to independent sources. URS is also applying substantial efforts to upgrading its network. In March, we acquired additional 1800 MHz spectrum in most of the regions in Ukraine.

VimpelCom acquired Tacom in Tajikistan in December 2005. At the time of acquisition, the company owned a number of licenses, including GSM 900/1800 but its GSM network was at the initial stage of development. Currently, we are focusing on building the network and conducting preparations for launching the "Beeline" brand. We expect to introduce our brand in Tajikistan in the fall of 2006.

VimpelCom's acquisitions of Unitel and Buztel in Uzbekistan were completed in January-February 2006 and the two acquired companies are now in the process of being integrated into the VimpelCom Group. We expect to introduce our brand in Uzbekistan in the fall of 2006.

The Company's management will discuss its first quarter 2006 results during a conference call and slide presentation on June 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 June 8, 2006 and June 30, 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 newly acquired operations in Ukraine, Tajikistan and Uzbekistan. The VimpelCom Group's license portfolio covers approximately 232 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, Tajikistan and Uzbekistan. 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 first 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, indicating that their vote against approval was due to the lack of a board approved budget. 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, including with respect to ARPU trends. 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 industries in Russia and the CIS, 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 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, 2004 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
VimpelCom (Moscow)
Tel: 7(495) 974-5888
ivnestor_relations@VimpelCom.com
Peter Schmidt/Michael Polyviou
Financial Dynamics
Tel: 1(212) 850-5600
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

 

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

  Three months ended
March 31,
2006 2005
Unaudited
(In thousands of US dollars, except per share (ADS) amounts)
Operating revenues:  
  Service revenues $930,150 $631,741
Sales of handsets and accessories 5,329 7,967
Other revenues 987 928
Total operating revenues 936,466 640,636
 
  Revenue based tax (299) -
Net operating revenues 936,167 640,636
 
Operating expenses:  
  Service costs 162,919 101,903
Cost of handsets and accessories sold 4,950 7,043
Selling, general and administrative expenses 282,925 223,523
Depreciation 171,094 86,334
Amortization 40,955 33,629
Provision for doubtful accounts 2,766 2,060
Total operating expenses 665,609 454,492
 
Operating income 270,558 186,144
 
Other income and expenses:  
  Interest income 1,392 2,342
Other income 2,104 6,195
Net foreign exchange loss 5,579 (2,336)
Interest expense (43,173) (36,917)
Other expense (4,577) (4,240)
Total other income and expenses (38,675) (34,956)
 
Income before income taxes and minority interest 231,883 151,188
 
Provision for income taxes 75,878 41,345
Minority interest in net earnings of subsidiaries 3,900 179
Net income before cumulative effect of a change in accounting principle 152,105 109,664
Cumulative effect of change in accounting principle (1,882) -
Minority interest on cumulative effect of changes in accounting principles - -
 
Net income $150,223 $109,664
Net income per common share $2.94 $2.14
Net income per ADS equivalent $0.74 $0.54
Weighted average common shares outstanding (thousands) 51,032 51,130
 
Open Joint Stock Company "Vimpel-Communications"
Condensed Consolidated Balance Sheets
 
  March 31,
2006
(unaudited)
December 31,
2005
(In thousands of US dollars, except share amounts)
Assets  
Current assets:
  Cash and cash equivalents $238,014 $363,646
Accounts receivable 156,004 144,197
Other current assets 469,910 453,582
Total current assets 863,928 961,425
 
Non-current assets
  Property and equipment, net 3,329,211 3,211,112
Telecommunication licenses and allocation of frequencies, net 864,811 826,948
Goodwill 638,571 477,495
Other intangible assets, net 218,004 196,356
Other assets 608,511 633,700
Total non-current assets 5,659,108 5,345,611
 
Total assets $6,523,036 $6,307,036
 
Liabilities and shareholders' equity
Current liabilities:
  Accounts payable $418,060 $544,961
Due to related parties 785 709
Customer advances and deposits 286,205 317,503
Deferred revenue 1,030 1,301
Ruble denominated bonds payable 108,059 104,230
Bank loans, current portion 266,977 278,537
Capital lease obligations 3,709 2,913
Equipment financing obligations, current portion 36,295 35,787
Accrued liabilities 135,322 133,411
Total current liabilities 1,256,442 1,419,352
 
Deferred income taxes 398,856 371,008
Bank loans, less current portion 1,715,523 1,540,043
Capital lease obligations, less current portion 1,757 751
Accrued liabilities, less current portion 11,237 10,802
Equipment financing obligations, less current portion 30,714 35,905
 
Minority Interest 198,851 188,626
 
Shareholders' equity 2,909,656 2,740,549
 
Total liabilities and shareholders' equity $6,523,036 $6,307,036
 
Condensed Consolidated Statements of Cash Flows
 
  Three months ended
March 31,
2006 2005
Unaudited
(In thousands of US dollars)
 
Net cash provided by operating activities $362,876 $215,210
 
Proceeds from bank and other loans 253,606 300,000
Payments of fees in respect of bank  loans (1,581) -
Payments of fees in respect of debt issue - (9,888)
Repayment of bank and other loans (91,202) (4,219)
Repayment of equipment financing obligations (21,701) (14,596)
Net cash provided by (used in) financing activities 139,122 271,297
 
Purchase of property and equipment (207,688) (285,048)
Purchase of Unitel, net of cash acquired $8,364 (192,172) -
Purchase of Buztel, net of cash acquired $88 (60,350) -
Purchase of minority interest in consolidated subsidiary - (8,020)
Purchase of intangible assets (6,043) (2,263)
Proceeds from prepayment for sale of minority interest in consolidated subsidiary - 20,000
Purchase of other assets (167,658) (65,561)
Net cash used in investing activities (633,911) (340,892)
 
Effect of exchange rate changes on cash and cash equivalents 6,281 (384)
 
Net increase (decrease) in cash and cash equivalents (125,632) 145,231
Cash and cash equivalents at beginning of period 363,646 305,857
 
Cash and cash equivalents at end of period $238,014 $451,088
 
Supplemental cash flow information
Non-cash activities:
  Equipment acquired under financing and capital lease agreements - 6,599
Accounts payable for equipment and other long-lived assets 149,749 151,198
Operating activities financed by sale of treasury stock 989 -
Offset of the capital lease liability with accounts receivable 1,345 -
Accrued debt and equity offering costs 480 -
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 tables

Reconciliation of OIBDA
(In thousands of US dollars)

  Three months ended
March 31, 2006 March 31, 2005 December 31, 2005
OIBDA 482,607 306,107 419,692
  Depreciation (171,094) (86,334) (143,425)
  Amortization (40,955) (33,629) (39,040)
Operating income 270,558 186,144 237,227



Reconciliation of OIBDA Margin

  Three months ended
March 31, 2006 March 31, 2005 December 31, 2005
OIBDA margin 51.6% 47.8% 46.1%
Less: Depreciation as a percentage of net operating revenue (18.3%) (13.5%) (15.7%)
Less: Amortization as a percentage of net operating revenue (4.4%) (5.2%) (4.3%)
Operating income as a percentage of net operating revenue 28.9% 29.1% 26.1%



Reconciliation of SAC
(In thousands of US dollars, except for SAC and subscriber amounts)

  Three months ended
March 31, 2006 March 31, 2005 December 31, 2005
Selling, general and administrative expenses 282,925 223,523 335,666
Less: General and administrative expenses 205,903 139,672 216,163
Sales and marketing expenses, including 77,022 83,851 119,503
advertising & marketing expenses 36,416 20,217 48,042
dealers' commission expense 40,606 63,634 71,461
New gross subscribers,'000 6,134 5,856 8,659
Subscriber Acquisition Cost (SAC) (US$) 12.6 14.3 13.8



Reconciliation of ARPU
(In thousands of US dollars, except for ARPU and subscriber amounts)

  Three months ended
March 31, 2006 March 31, 2005 December 31, 2005
Service revenue and connection fees 930,150 631,741 900,916
Less: Connection fees 404 160 259
Less: Revenue from rent of fiber-optic channels 328 272 309
Service revenue used to calculate ARPU 929,418 631,309 900,348
Average number of subscribers,'000 46,803 28,783 42,426
Average revenue per subscriber per month (US$) 6.6 7.3 7.1
Average number of active subscribers,'000 39,258 25,588 35,473
Average revenue per active subscriber per month (US$) 7.9 8.2 8.5



 

RUSSIA

Reconciliation of OIBDA in Russia
(In thousands of US dollars)

  Three months ended
March 31, 2006 March 31, 2005 December 31, 2005
OIBDA 462,337 293,933 404,113
  Depreciation (161,936) (83,055) (135,740)
  Amortization (24,977) (24,538) (27,998)
Operating income 275,424 186,340 240,375



Reconciliation of OIBDA Margin in Russia

  Three months ended
March 31, 2006 March 31, 2005 December 31, 2005
OIBDA margin 53.1% 48.5% 47.0%
Less: Depreciation as a percentage of net operating revenue (18.6%) (13.7%) (15.7%)
Less: Amortization as a percentage of net operating revenue (2.9%) (4.1%) (3.3%)
Operating income as a percentage of net operating revenue 31.6% 30.7% 28.0%



Reconciliation of SAC in Russia
(In thousands of US dollars, except for SAC and subscriber amounts)

  Three months ended
March 31, 2006 March 31, 2005 December 31, 2005
Selling, general and administrative expenses 260,398 211,487 318,457
Less: General and administrative expenses 188,439 133,047 205,643
Sales and marketing expenses, including 71,959 78,440 112,814
advertising & marketing expenses 33,704 19,258 45,291
dealers' commission expense 38,255 59,182 67,523
New gross subscribers,'000 5,459 5,549 8,064
Subscriber Acquisition Cost (SAC) (US$) 13.2 14.1 14.0



Reconciliation of ARPU in Russia
(In thousands of US dollars, except for ARPU and subscriber amounts)

  Three months ended
March 31, 2006 March 31, 2005 December 31, 2005
Service revenue and connection fees 864,767 596,769 849,775
Less: Connection fees 404 160 259
Less: Revenue from rent of fiber-optic channels 328 272 309
Service revenue used to calculate ARPU 864,035 596,337 849,207
Average number of subscribers,'000 43,919 27,770 40,484
Average revenue per subscriber per month (US$) 6.6 7.2 7.0
Average number of active subscribers,'000 36,784 24,651 33,754
Average revenue per active subscriber per month (US$) 7.8 8.1 8.4



 

KAZAKHSTAN

Reconciliation of OIBDA in Kazakhstan
(In thousands of US dollars)

  Three months ended
March 31, 2006 March 31, 2005 December 31, 2005
OIBDA 21,907 12,174 16,979
  Depreciation (7,672) (3,279) (7,655)
  Amortization (8,785) (9,091) (8,245)
Operating income 5,450 (196) 1,079



Reconciliation of OIBDA Margin in Kazakhstan

  Three months ended
March 31, 2006 March 31, 2005 December 31, 2005
OIBDA margin 40.3% 34.8% 34.2%
Less: Depreciation as a percentage of net operating revenue (14.1%) (9.4%) (15.4%)
Less: Amortization as a percentage of net operating revenue (16.2%) (26.0%) (16.6%)
Operating income as a percentage of net operating revenue 10.0% (0.6%) 2.2%



Reconciliation of SAC in Kazakhstan
(In thousands of US dollars, except for SAC and subscriber amounts)

  Three months ended
March 31, 2006 March 31, 2005 December 31, 2005
Selling, general and administrative expenses 13,504 12,036 14,764
Less: General and administrative expenses 9,693 6,625 8,434
Sales and marketing expenses, including 3,811 5,411 6,330
advertising & marketing expenses 1,768 959 2,420
dealers' commission expense 2,043 4,452 3,909
New gross subscribers,'000 623 307 556
Subscriber Acquisition Cost (SAC) (US$) 6.1 17.6 11.4



Reconciliation of ARPU in Kazakhstan
(In thousands of US dollars, except for ARPU and subscriber amounts)

  Three months ended
March 31, 2006 March 31, 2005 December 31, 2005
Service revenue and connection fees 54,382 34,972 49,668
Less: Connection fees 0 0 0
Less: Revenue from rent of fiber-optic channels 0 0 0
Service revenue used to calculate ARPU 54,382 34,972 49,668
Average number of subscribers,'000 2,316 1,013 1,818
Average revenue per subscriber per month (US$) 7.8 11.5 9.1
Average number of active subscribers,'000 2,070 937 1,604
Average revenue per active subscriber per month (US$) 8.8 12.4 10.3



 

UKRAINE

Reconciliation of OIBDA in Ukraine
(In thousands of US dollars)

  Three months ended
March 31, 2006 March 31, 2005 December 31, 2005
OIBDA (6,814) - (1,400)
  Depreciation (76) - (30)
  Amortization (4,692) - (2,797)
Operating income (11,582) - (4,227)



Reconciliation of OIBDA Margin in Ukraine

  Three months ended
March 31, 2006 March 31, 2005 December 31, 2005
OIBDA margin (320.0%) - (71.1%)
Less: Depreciation as a percentage of net operating revenue (3.6%) - (1.5%)
Less: Amortization as a percentage of net operating revenue (220.4%) - (142.0%)
Operating income as a percentage of net operating revenue (544.0%) - (214.6%)



 

TAJIKISTAN

Reconciliation of OIBDA in Tajikistan
(In thousands of US dollars)

  Three months ended
March 31, 2006 March 31, 2005 December 31, 2005
OIBDA (50) - -
  Depreciation (37) - -
  Amortization (416) - -
Operating income (503) - -



Reconciliation of OIBDA Margin in Tajikistan

  Three months ended
March 31, 2006 March 31, 2005 December 31, 2005
OIBDA margin (27.7%) - -
Less: Depreciation as a percentage of net operating revenue (20.4%) - -
Less: Amortization as a percentage of net operating revenue (229.8%) - -
Operating income as a percentage of net operating revenue (277.9%) - -



 

UZBEKISTAN

Reconciliation of OIBDA in Uzbekistan
(In thousands of US dollars)

  Three months ended
March 31, 2006 March 31, 2005 December 31, 2005
OIBDA 5,227 - -
  Depreciation (1,374) - -
  Amortization (2,084) - -
Operating income 1,769 - -



Reconciliation of OIBDA Margin in Uzbekistan

  Three months ended
March 31, 2006 March 31, 2005 December 31, 2005
OIBDA margin 58.6% - -
Less: Depreciation as a percentage of net operating revenue (15.4%) - -
Less: Amortization as a percentage of net operating revenue (23.4%) - -
Operating income as a percentage of net operating revenue 19.8% - -





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