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VimpelCom announces second quarter and six month financial results

  • Strong subscriber growth since beginning of year

Moscow and New York (August 31, 1999) - Open Joint Stock Company "Vimpel-Communications" ("VimpelCom" or the "Company") (NYSE:VIP) today reported its financial results for the second quarter and six months ended June 30, 1999. The Company also reported as of the end of August, 1999 a subscriber base of approximately 173,000 on its Moscow GSM and D-AMPS networks, representing a growth of approximately 40% since the beginning of the year.

As of June 30, 1999, VimpelCom had approximately 154,600 subscribers on its Moscow GSM and D-AMPS networks. This represents a growth of approximately 14% over the 135,400 subscribers reported at the end of the second quarter of 1998 and a growth of approximately 25% over the 124,000 subscribers reported at the end of 1998. As of June 30, 1999, the Company's Moscow GSM subscriber base was approximately 25,000, compared to approximately 21,000 as of December 31, 1998. As of June 30, 1999, prepaid subscribers constituted approximately 45% of VimpelCom's Moscow subscriber base. Management believes that the number of prepaid subscribers as a percentage of the Company's overall Moscow subscriber base will continue to increase in the future.

For the second quarter ended June 30, 1999, VimpelCom reported total operating revenues of $57.8 million, a decrease of 44% from the $103.5 million reported in the same period in 1998. Total net operating revenues (net of revenue-based taxes) in the second quarter of 1999 were $54.9 million, a decrease of 45% from the $99.3 million reported in the same period last year. The Company's operating loss for the second quarter of 1999 was $1.5 million, a decrease of $31.9 million compared to operating income of $30.4 million reported in the same period a year ago.

For the six months ended June 30, 1999, VimpelCom reported total operating revenues of $115.6 million, a decrease of 41% from the $195.9 million reported in the same period in 1998. Total net operating revenues (net of revenue-based taxes) for the six months ended June 30, 1999 were $110.2 million, a decrease of 41% from the $188.3 million reported in the same period last year. The Company's operating loss for the first six months of 1999 was $0.2 million, a decrease of $59.0 million compared to operating income of $58.8 million reported in the same period a year ago.

EBITDA for the second quarter of 1999 was $12.9 million, 68% lower than the $40.3 million reported in the same period in 1998. The Company's EBITDA margin for the second quarter of 1999 was approximately 24%, a decrease from the approximately 41% EBITDA margin reported in the same quarter of 1998.

For the second quarter of 1999, the Company reported a net loss of $8.4 million, or $0.40 per share ($0.30 per ADS). In the second quarter of 1998, the Company reported net income of $13.7 million, or $0.71 per share ($0.53 per ADS). Each ADS represents 0.75 of one share of common stock. The Company's net loss for the six months ended June 30, 1999 was $8.3 million, or $0.41 per share ($0.31 per ADS), compared to the Company's reported net income of $30.2 million, or $1.57 per share ($1.17 per ADS) for the six months ended June 30, 1998.

During the second quarter and six months ended June 30, 1999 the Company experienced a sharp reduction in operating revenues and EBITDA, as well as a net loss, primarily due to the Russian crisis-driven churn of a number of high revenue generating subscribers. Despite healthy margins for prepaid subscribers, the Company's lower average revenues per subscriber (ARPU) derived from prepaid subscribers did not offset the loss of such high revenue generating subscribers in the reported period. Other contributing factors to the reduction in EBITDA included the fixed service costs of unused leased lines with direct Moscow telephone numbers and the subsidization of handsets in connection with prepaid card promotional campaigns. The higher depreciation also contributed to the Company's net loss for the second quarter and the six months ended June 30, 1999.

Selling, general and administrative expenses for the second quarter of 1999 represented approximately 32% of net operating revenues, which is approximately the same as compared to the first quarter of 1999.

 

For the second quarter of 1999, the Company recorded a $3.5 million provision for doubtful accounts receivable compared with $6.7 million reported in the same period in 1998. The 48% decrease in provision for doubtful accounts receivable was primarily due to a general decrease in revenues and growth in the number of the Company's prepaid subscribers. The Company continues to believe its allowance for doubtful accounts receivable is conservative and adequate.

Depreciation and amortization expense was $14.5 million for the second quarter of 1999, a 46% increase compared to the $9.9 million reported in the same period of 1998. The increase in depreciation and amortization expense was primarily due to a change in the Company's depreciation schedule for certain network software.

Commenting on today's announcement, Dmitri Zimin, President and Chief Executive Officer of VimpelCom said, "Despite our losses for the second quarter and the first six months of this year, we are pleased with the positive subscriber trends that began this spring. Consumer confidence is returning and we are capitalizing on this fact with aggressive marketing campaigns, particularly for our GSM products. In fact, in August alone we have sold about 10,000 new GSM subscriptions. We are also enhancing our operational structure and systems and continuing to implement our strategy of gradually developing into a truly national telecommunications operator. We believe that together with the assistance of our strategic partner Telenor, which remains committed to the Russian market, VimpelCom is well positioned to sustain and accelerate growth."

VimpelCom is a leading provider of cellular telecommunications in Russia, marketing its services under the brand name "Bee Line". The VimpelCom Group operates GSM-900/1800 and D-AMPS cellular networks in the Moscow License Area, which includes the City of Moscow and the Moscow Region. The VimpelCom Group holds cellular licenses covering a total population of approximately 100 million (70% of Russia's population). VimpelCom was the first Russian company listed on the New York Stock Exchange (November 1996), and its ADSs trade under the symbol "VIP".

 

This press release contains forward-looking statements related to the development of the Company's business which involve risks and uncertainties. These statements are based on Management's best assessment of future market conditions and trends. The actual outcome may differ materially 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 and other factors, all of which may be aggravated by the current economic and political crisis. No assurance can be given that the economic crisis will abate in the foreseeable future or that the full impact of the economic crisis on the VimpelCom Group can be assessed at this time. As a result of such uncertainties, there can be no assurance that 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, 1998 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)
7(095) 974-5888
vgoldin@vimpelcom.com

Glenn Wiener
Edelman Financial Worldwide
1 (212) 704 8174
glenn_wiener@edelman.com

Open Joint Stock Company "Vimpel-Communications"

Consolidated Condensed Statements of Operations

   

Three months ended

 

Six Months Ended

   

June 30,

 

June 30,

   

1999

1998

 

1999

1998

   

(In thousands, except per share (ADS) amounts)

Operating revenues:

         
 

Service revenues and connection fees

US$51,211

US$93,154

 

US$104,663

US$177,545

 

Sales of handsets and accessories

6,392

9,847

 

10,704

17,779

 

Installation and equipment contracts

154

490

 

264

586

Total operating revenues

57,757

103,491

 

115,631

195,910

 

less revenue based taxes

2,813

4,227

 

5,406

7,564

Net operating revenues

54,944

99,264

 

110,225

188,346

             

Operating expenses

         
 

Service costs

14,347

19,402

 

28,956

36,291

 

Cost of handsets and accessories sold

6,797

7,739

 

11,577

13,562

 

Cost of installation and equipment contracts

50

344

 

89

355

 

Selling, general and administrative expenses

17,335

24,715

 

34,794

48,446

 

Depreciation and amortization

14,451

9,877

 

27,418

19,028

 

Provision for doubtful accounts

3,506

6,738

 

7,588

11,884

Total operating expenses

56,486

68,815

 

110,422

129,566

             

Operating income (loss)

(1,542)

30,449

 

(197)

58,780

             

Other income and expenses:

         
 

Other income

156

352

 

229

722

 

Gain (loss) on trading in securities

0

(730)

 

658

(81)

 

Interest expense

(4,712)

(3,603)

 

(9,092)

(6,016)

 

Net foreign exchange gain / (loss)

(1,254)

(261)

 

(4,310)

(2,482)

Total other income and expenses

(5,810)

(4,242)

 

(12,515)

(7,857)

             

Income before income taxes and minority interest

(7,352)

26,208

 

(12,712)

50,923

             

Provision for income taxes

202

12,466

 

(6,319)

20,206

Minority interest in net losses of subsidiaries

890

67

 

1,903

516

             

Net income (loss)

(US$ 8,444)

US$13,675

 

(US$ 8,296)

US$ 30,201

             

Net income (loss) per common share

(US$ 0.40)

US$ 0.71

 

(US$ 0.41)

US$ 1.57

             

Net income (loss) per ADS equivalent

(US$ 0.30)

US$ 0.53

 

(US$ 0.31)

US$ 1.17

             

Weighted average common shares outstanding (thousands)

21,033

19,280

 

20,166

19,280

             

EBITDA

US$12,909

US$40,326

 

US$ 27,221

US$ 77,808

Open Joint Stock Company "Vimpel-Communications"

Consolidated Condensed Balance Sheets

     

June 30,

December 31,

     

1999

1998

     

(unaudited)

 
     

(In thousands US dollars)

Assets

       

Current assets

   
 

Cash and cash equivalents

 

US$ 70,735

US$ 14,479

 

Short-term investments

2,277

2,167

 

Accounts receivable

25,701

34,354

 

Other current assets

28,986

21,377

Total current assets

127,699

72,377

         

Non-current assets

   
 

Property and equipment, net

409,228

416,036

 

Other assets

42,285

47,654

Total non-current assets

451,513

463,690

         

Total assets

 

US$ 579,212

US$ 536,067

         

Liabilities and shareholders' equity

   

Current liabilities

   
 

Accounts payable

US$ 28,821

US$ 36,573

 

Customer deposits

36,132

46,214

 

Bank loans

0

10,754

 

Equipment financing, current portion

41,448

17,501

 

Other accrued liabilities

8,545

7,594

Total current liabilities

114,946

118,636

         

Deferred income taxes

37,523

41,151

Equipment financing, and other liabilitiea

124,364

164,075

         

Minority Interest

11,170

9,269

         

Shareholders' equity

291,209

202,936

         

Total liabilities and shareholders' equity

US$ 579,212

US$ 536,067

         



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