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VimpelCom reports 53% increase in EBITDA for 1st quarter 1998


  • VimpelCom awarded GSM-1800 licenses covering 84 million population
  • 91% Year-to-year subscriber growth

 


Moscow and New York (June 4, 1998) - Open Joint Stock Company Vimpel-Communications ("VimpelCom") (NYSE:VIP) today reported higher EBITDA and continuing subscriber growth for the first quarter ended March 31, 1998, as well as the award of 4 new GSM-1800 (PCS) licenses. The new licenses increase VimpelCom’s population coverage to approximately 100 million, including Moscow.

For the first quarter ended March 31, 1998, VimpelCom reported total operating revenues of $92.4 million, a 39% increase over the $66.7 million in total operating revenues reported in the same period in 1997. For the first quarter of 1998, total net operating revenues (net of revenue-based taxes) were $89.1 million, a 39% increase over the $64.1 million in net operating revenues reported in the same period in 1997. Operating income for the first quarter of 1998 increased 39% to a record $28.3 million, compared with the $20.3 million in operating income reported in the same period a year ago.

Net income for the quarter ended March 31, 1998, was $16.5 million, or $0.86 per share ($0.64 per ADS), compared to $16.8 million, or $ 0.87 per share ($0.65 per ADS), earned in the same period in 1997. Each ADS represents 0.75 of one share of common stock. Net income growth in the first quarter of 1998 was constrained by higher depreciation and financing charges, reflecting the increased investments the company has been making in its networks, higher provision for income taxes and a net loss on foreign exchange when compared to the same period in 1997.

EBITDA for the first quarter ended March 31, 1998 was strong and reached a record $37.5 million, 53% higher than the $24.5 million in the first quarter of 1997. The EBITDA margin for the quarter ended March 31, 1998, was 42.1%, an increase over the 38.2% EBITDA margin in the same quarter of 1997. The increase in EBITDA margin is due primarily to an improvement in service revenue margins, which more than offset the reduction in the margin on sales of handsets and lower contributions from one-time activation fees.

Selling, general and administrative expenses for the first quarter of 1998, increased 37% to $23.7 million compared to the $17.3 million reported in the same period in 1997. The increase in selling, general and administrative expenses in the first quarter of 1998 was due primarily to the increase in the level of business activity compared with the same period in 1997 and growth in VimpelCom’s infrastructure to better support increases in business activity.

For the first quarter of 1998, the Company recorded a $5.1 million provision or 5.8% of net revenues for doubtful accounts compared with $3.5 million or 5.5% of net revenues in the same period in 1997. This increase in provision for doubtful accounts receivable was due to the growth in business activity.

Depreciation and amortization expense was $9.2 million for the first quarter of 1998, 118% increase compared to $4.2 million in the same period of 1997. The increase was due to the increased depreciable asset base resulting from the Company’s continuing capital investments in its D-AMPS and GSM-1800 networks.

At the end of the first quarter of 1998, VimpelCom had 123,324 subscribers on its networks. This represents a growth of approximately 91% over the 64,607 subscribers at the end of the first quarter of 1997. At the end of the first quarter of 1998, VimpelCom’s 50% subsidiary in Samara had 7,023 subscribers, a growth of 163% over the 2,675 subscribers at the end of the first quarter of 1997.

Commenting on today’s announcement, Dmitri Zimin, President and Chief Executive Officer of VimpelCom said: "We are delighted with our first quarter results and especially with our continued strong EBITDA performance. Subscriber growth is in line with our expectations as the Moscow market tends to be much stronger during the second half of the year. Recently we introduced new tariff plans for the full range of our services with the aim to better position our GSM-1800 product in the Moscow market and to stimulate sales growth. Early indications show that the market has responded well to these new tariff plans. We also continue to expand our D-AMPS Moscow central network, as we recently signed our 8th expansion contract for $22 million with Ericsson.

We are particularly delighted with the recent award of four new GSM-1800 licenses, which, together with the existing Moscow license, cover 52 administrative units of Russia. The new licenses cover multiple administrative units which are generally defined in the licenses as the Central and Central Black Earth Region, Volga Region, North Caucasus Region and Siberian Region. These licenses will provide the Company with new opportunities to continue its business strategy of extending our foot-print across Russia. These new licenses will bring our total pops to approximately 100 million or 68% of the Russian population."

VimpelCom is the largest provider of cellular telecommunications in Russia, marketing its services under the brand name "Bee Line". The VimpelCom Group operates the only Digital-AMPS cellular network and the first Russian PCS network, using GSM technology, in the Moscow License Area, which includes the City of Moscow and the Moscow Region. The VimpelCom Group holds various GSM-1800 and AMPS/D-AMPS licenses covering a total population of approximately 100 million (68% of Russia’s population). VimpelCom was the first Russian company listed on the New York Stock Exchange (November 1996), trading under the symbol "VIP".

This press release contains forward-looking statements related to the development of the Company’s business. These statements are based on Management’s best assessment of future market conditions and trends. The actual outcome may differ from these statements as a result of unforeseen developments from competition, governmental regulations of the wireless telecommunications industry, general political uncertainties in Russia and general economic developments in Russia. 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)
7(095) 974-5888
vgoldin@vimpelcom.com

Mona Walsh/Joshua Hochberg
Edelman Financial
1 (212) 704 4423
mona_walsh@edelman.com
joshua_hochberg@edelman.com

Open Joint Stock Company Vimpel-Communications
Unaudited Consolidated Statements of Income

  Three months ended
March 31,
  1998 1997
  (In thousands, except per share (ADS) amounts)
Operating revenues  
  Service revenues and connection fees US$ 84,391 US$ 58,434
  Sales of handsets and accessories      8,028      8,295
    Total operating revenues 92,419 66,729
  less revenue-based taxes      3,337      2,582
Net operating revenues 89,082 64,147
 
Operating expenses:  
  Service costs 16,889 13,302
  Cost of handsets and accessories sold 5,834 5,497
  Selling, general and administrative expenses 23,731 17,340
  Depreciation and amortization 9,151 4,192
  Provision for doubtful accounts      5,146      3,501
Total Operating expenses     60,751     43,832
 
Operating income 28,331 20,315
 
Other income and expenses:  
  Other income 370 0
  Interest income 649 1,167
  Interest expense (2,413) (1,386)
  Net foreign exchange (loss) gain        2,222      1,842
Total other income and expenses      (3,616)      1,623
 
Income before income taxes and minority interest 24,715 21,938
 
Provision for income taxes 7,740 5,077
Minority interest in net losses of subsidiaries      449       52
Net income    US$ 16,526    US$ 16,809
 
Net income per common share $0.86 $0.87
Net income per ADS equivalent $0.64 $0.65
Weighted average common shares outstanding (thousands) 19,280 19,280
 
EBITDA US $37,482 US $24,507



Open Joint Stock Company Vimpel-Communications
Condensed Consolidated Balance Sheet

  March 31,
1998
(Unaudited)
December 31,
1997

 
   (In thousands US dollars)
Assets  
Current Assets:  
  Cash and cash equivalents US$ 14,864 US$ 14,333
  Short-term investments 15,496 24,169
  Accounts receivable 50,772 41,487
  Other current assets         39,699         34,436
Total current assets 120,831 114,425
 
Property and equipment, net 371,982 347,653
Other assets         24,890         21,020
Total Assets 517,703 483,098
 
Liabilities and shareholders' equity  
Current liabilities:  
  Accounts payable US$ 15,135 US$ 12,287
  Customer deposits 57,868 51,738
  Bank loans   11,001
  Equipment financing, current portion 12,530 10,389
  Other accrued liabilities         16,967         11,382
Total current liabilities 102,500 96,797
 
Deferred incomes taxes 35,424 35,201
Equipment financing and other liabilities 148,666 136,962
 
Minority interest 6,936 6,487
 
Shareholders' equity       224,117       207,651
 
Total liabilities and shareholders' equity US$ 517,703 US$ 483,098
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