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VimpelCom Reports 41% Increase in Second Quarter Earnings


  • 110% Year-to-Year Subscriber Growth

 

Moscow and New York (August 27, 1997) Open Joint Stock Company Vimpel-Communications ("VimpelCom") (NYSE: VIP) today reported increased earnings and continued strong subscriber growth for the second quarter and six months ended June 30, 1997.

For the second quarter of 1997, VimpelCom reported total operating revenues of $71.3 million, a 57% increase over the $45.5 million reported in the same quarter of 1996. Net operating revenues (net of revenue based taxes) in the second quarter of 1997 were $68.3 million, a 58% increase over the $43.2 million reported in the second quarter of 1996. Operating income for the second quarter of 1997 rose to $19.7 million, up 39% compared with the $14.2 million reported in the same period a year ago.

Net income for the quarter ended June 30, 1997, was $15.8 million, or $0.82 per share ($0.61 per ADS), a 41% increase over the net income of $11.2 million, or $0.67 per share ($0.50 per ADS), earned in the same period a year ago. Each ADS represents 0.75 of one share of common stock.

For the six months ended June 30, 1997, VimpelCom reported operating revenues of $138.0 million compared to total operating revenues of $ 85.9 million in the same period in 1996, an increase of 61%. Net operating revenues (net of revenue based taxes) for the six months ended June 30, 1997 were $132.4 million, a 60% increase over the $82.8 million in net operating revenues reported for the same period in 1996. Operating income for the six months ended June 30, 1997, rose to $40.0 million, up 38% compared with the $29.1 million reported in the same period in 1996. Net income for the first six months of 1997 was $32.6 million, or $1.69 per share ($1.27 per ADS), an 82% increase over the net income of $17.9 million, or US $1.03 per share ($0.77 per ADS), earned in the same period in 1996.

As of June 30, 1997, VimpelCom had approximately 73,600 subscribers in the Moscow License Area, representing a growth of 110% over the approximately 35,100 subscribers reported at the end of the second quarter of 1996.

Commenting on today's announcement, Dmitri Zimin, President and Chief Executive Officer of VimpelCom said: "We are quite pleased with our results this quarter. They met our expectations and reflect the seasonality of the Moscow market which traditionally tends to be stronger in the second half of the year than the first. On June 10, we launched Russia's first GSM-1800 network in Moscow, and also reduced our start-up prices. As a result, we saw a marked increase in subscriber uptake at the end of the quarter, a trend that has continued throughout the summer with July being a record month for subscriber growth.

EBITDA for the second quarter of 1997 remained strong, reaching $25.2 million, 52% higher than the $16.5 million in the same quarter of 1996. EBITDA for the six months ended June 30, 1997, was $49.7 million, a 30% increase over the EBITDA of $38.4 million reported for the same period in 1996. The EBITDA margin in the second quarter of 1997 was 36.9%, slightly less than the 38.3% in the same period of 1996, primarily resulting from increased selling, general and administrative expenses related to increased business activity and from start-up expenses related to the launch of the new GSM-1800 service.

Selling, general and administrative expenses, excluding depreciation and amortization, for the second quarter of 1997, increased 70% to $19.9 million from the $11.7 million reported in the same period in 1996. The increase in selling, general and administrative expenses over the second quarter of 1996 resulted primarily from the increase in the level of business activity in the D-AMPS cellular business compared with the same period of 1996, including increases in advertising, marketing and other operating expenses required to build out the Company's support infrastructure and other customer-related and administrative facilities. In addition, the second quarter of 1997 includes start-up costs related to the commercial launch of the new GSM-1800 network.

The Company recorded a $3.2 million provision for doubtful accounts receivable compared with $2.1 million in the corresponding quarter of 1996. The increase in the provision for doubtful accounts is due primarily to the increase in the level of business activity in the second quarter of 1997 as compared with the corresponding period of 1996.

Depreciation and amortization expense was $5.5 million for the second quarter of 1997, a 130% increase compared to the $2.4 million in the corresponding period of 1996. The increase was due to increased depreciable asset base resulting from the Company's continuing capital investments in both its D-AMPS and GSM-1800 networks in order to expand capacity and coverage throughout its licensed areas.

Having begun full-scale operations in 1994, VimpelCom is now the largest provider of cellular telecommunications in Russia, marketing its services under the brand name "Bee Line". The Group's primary operating area includes the City of Moscow and Moscow Region, which together cover a population of over 15 million people. The Group operates the only Digital Advanced Mobile Phone System ("D-AMPS") cellular system and the first Russian PCS network, using GSM technology, in the Moscow License Area. VimpelCom completed an initial public offering of American Depository Shares (ADSs) in November 1996 and is the first and only Russian company listed on the New York Stock Exchange.

 

For more information, contact
Valery Goldin
VimpelCom (Moscow)
7(095) 974-5888
vgoldin@beeline.msk.ru


John McInerney or Perry Hall
Dewe Rogerson Inc.
(212) 688-6840

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

  Three months ended June 30, Six months ended June 30,
  1997 1996 1997 1996
  (In thousands of US dollars , except per share (ADS) amounts)
Operating revenues:        
Service revenues and connection fees US$ 63,477 36,525 121,911 68,721
Sales of handsets and accessories 6,361 8,957 14,361 17,170
Installation and equipment contracts 1,420 0 1,715 0
Total operating revenues 71,258 45,482 137,987 85,891
Less revenue-based taxes 2,979 2,254 5,561 3,097
Net operating revenues 68,279 43,228 132,426 82,794
         
Operating expenses:        
Service costs 14,846 8,930 28,148 16,212
Cost of handsets and accessories sold 4,332 4,011 9,564 9,316
Cost of installation and equipment contracts 810 0 1,075 0
Selling, general and administrative expenses 19,882 11,694 37,222 20,752
Depreciation and amortization 5,487 2,388 9,679 4,388
Provision for doubtful accounts 3,210 2,050 6,711 3,050
Total operating expenses 48,567 29,073 92,399 53,718
         
Operating Income 19,712 14,155 40,027 29,076
.        
Other income and expenses:        
Interest income 3,562 7,896 4,729 12,879
Interest expense (1,378) (10,017) (2,764) (16,093)
Net foreign exchange (loss) gain 568 (588) 2,410 (813)
Total other income and expenses 2,752 (2,709) 4,375 (4,027)
         
Income before income taxes and minority interest 22,464 11,446 44,402 25,049
         
Provision for income taxes 6,747 239 11,824 7,145
Minority interest in net losses of subsidiaries 91 0 39 0
Net Income US$ 15,808 US$ 11,207 US$ 32,617 US$ 17,904
.        
Net Income per common share US$ 0.82 US$ 0.67 US$ 1.69 US$ 1.03
Net Income per ADS equivalent US$ 0.61 US$ 0.50 US$ 1.27 US$ 0.77
Weighted average common shares outstanding 19,280 16,848 19,280 17,395
         
EBITDA US$ 25,199 16,543 US$ 49,706 38,364


Open Joint Stock Company Vimpel-Communications
Condensed Consolidated Balance Sheet

  June 30,
1997 (unaudited)
December 31,
1996
  (In thousands of US dollars)
Assets    
Current Assets:    
Cash and cash equivalents US$ 8,078 US$ 33,316
Short-term investments 53,993 15,638
Accounts receivable 30,057 28,119
Other current assets 25,936 21,967
Total current assets 118,064 99,040
     
Property and equipment, net 245,786 179,808
Other assets 19,106 20,041
Total Assets US$ 382,956 US$ 298,889
     
Liabilities and shareholders' equity:    
Current liabilities:    
Accounts payable US$ 9,588 US$ 11,903
Customer deposits 40,972 37,765
Bank loans 16,524 3,756
Other accrued liabilities 18,975 10,507
Total current liabilities 86,059 63,931
.    
Deferred income taxes 28,466 23,774
Equipment financing and other liabilities 86,487 61,818
     
Minority interest 2,752 2,791
     
Shareholders' equity 179,192 146,575
     
Total liabilities and shareholders' equity US$ 382,956 US$ 298,889



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