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VimpelCom Reports 35% Increase in Fourth Quarter Earnings


  • 95% Year-to-Year Subscriber Growth

 

Moscow and New York (March 26, 1998) - Open Joint Stock Company Vimpel-Communications ("VimpelCom") (NYSE:VIP) today reported increased earnings and continued strong subscriber growth for the fourth quarter and the twelve months ended December 31, 1997.

For the fourth quarter ended December 31, 1997, VimpelCom reported total operating revenues of $89.9 million, a 34% increase over the $67.1 million in total operating revenues reported in the same period in 1996. For the fourth quarter of 1997, total net operating revenues (net of revenue-based taxes) were $86.5 million, a 35% increase over the $64.0 million in net operating revenues reported in the same period in 1996. Operating income for the fourth quarter of 1997 was $27.4 million, an increase of 47% compared to $18.7 million in operating income reported in the same period in 1996. Net income for the quarter ended December 31, 1997, was $14.2 million, or $0.74 per share ($0.55 per ADS), a 35% increase over the net income of $10.5 million, or $0.55 per share ($0.41 per ADS), earned in the same period in 1996. Each ADS represents 0.75 of one share of common stock.

For the year ended December 31, 1997, VimpelCom reported total operating revenues of $305.9 million compared with total operating revenues of $213.2 million for 1996, an increase of 43%. Net operating revenues (net of revenue-based taxes) for 1997 were $293.9 million, a 44% increase over the $204.2 million in net operating revenues reported in 1996. Service revenues for 1997 represented approximately 87% of total operating revenues as compared to approximately 72% reported in 1996. The Company reported operating income of $86.8 million in 1997, an increase of 23% over the $70.5 million in operating income reported in 1996. Net income for the year ended December 31, 1997, was $61.1 million or $3.17 per share ($2.38 per ADS), a 36% increase over the net income of $44.9 million, or $2.53 per share ($1.90 per ADS), earned in 1996.

As of December 31, 1997, VimpelCom had 110,140 subscribers in the Moscow License Area, representing a growth of 95% over the 56,584 subscribers at the end of 1996, and a market share which the Company estimates to be approximately 52%. Average revenue per subscriber per month for 1997 was approximately $277, 14% lower than in 1996 and in line with Company estimates. Churn for the year ended December 31, 1997 was 15.9% compared to 16.1% in 1996. In addition, good progress was made in the Company's 50% joint venture in Samara, as the number of subscribers grew 131% from 2,420 at the end of 1996 to 5,602 at the end of 1997.

Commenting on today's announcement, Dmitri Zimin, President and Chief Executive Officer of VimpelCom said: "We are very pleased with our fourth quarter results and particularly, with our strong subscriber growth. Overall, 1997 has seen record investment in our networks and the successful launch of Russia's first GSM-1800 (PCS) network. Despite increased investments and higher operating expenses in 1997, our EBITDA for the year was strong and grew by more than 30% and net income grew by 36% over 1996. In 1998, we will continue to concentrate on the further expansion of our networks in Moscow and introduction of new services, which will form the basis for long-term earnings growth, as we begin to develop the Russian wireless mass market."

EBITDA for the fourth quarter of 1997 was a record $35.7 million, 62% higher than the $22.1 million in the same period in 1996. EBITDA for the year ended December 31, 1997, was $112.0 million, a 30% increase over the EBITDA of $85.9 million reported in 1996. The EBITDA margin for the year ended December 31, 1997, was 38.1%, a decrease from the 42.1% EBITDA margin in 1996. This decrease in EBITDA margin is due primarily to higher selling, general and administrative expenses (including expenses related to the launch of the new GSM-1800 network) and a reduction in the contribution from connection fees and the sale of handsets when compared to 1996.

Selling, general and administrative expenses for the fourth quarter of 1997, increased 7% to $22.6 million compared to the $21.2 million reported in the same period in 1996. As a percentage of net revenue in the fourth quarter of 1997, selling, general and administrative expenses decreased from 33.0% to 26.1% compared to the same period in 1996 and from 27.1% in the third quarter of 1997. Selling, general and administrative expenses for the year ended December 31, 1997, were $80.2 million, 58% higher than the $50.7 million incurred in 1996. The absolute increase in selling, general and administrative expenses in 1997 was due primarily to the increase in the level of business activity compared with 1996 and expenses arising from the commercial launch of the new GSM-1800 network.

For the fourth quarter ended December 31, 1997, the Company reduced its provision for doubtful accounts receivable, which resulted in a gain of $0.6 million compared to a $2.4 million charge in the same period in 1996. For the year ended December 31, 1997, provision for doubtful accounts receivable was $10.2 million, compared to $7.3 million in 1996. This increase in provision for doubtful accounts receivable was due to the growth in business activities. As a percentage of net operating revenues, the provision for doubtful accounts receivable for 1997 was 3.5%, slightly lower than the 3.6% in 1996.

Overall capital additions in 1997 were approximately $194.1 million, 62% higher than the $120.0 million incurred in 1996, reflecting the Company's continued build out of its original D-AMPS network, investment in Bee-Net (the Company's proprietary fiber optic network) and the introduction of its new GSM-1800 network in June of 1997. As a result, depreciation and amortization expense increased 139% in 1997 to $25.2 million compared to $10.5 million in 1996.

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 cellular licenses in nine regions of European Russia which have a total population of approximately 28 million (19% 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
Edelman Financial Worldwide
212 704 4423
Mona_Walsh@edelman.com

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

  Three months ended
December 31,
Twelve months ended
December 31,
  1996 1997 1996 1997
  (In thousands, except per share (ADS) amounts)
Operating revenues  
  Service revenues and connection fees US$57,530 US$79,636 US$173,188 US$271,352
  Sales of handsets and accessories 9,350 9,532 35,316 31,934
  Installation and equipment contracts      216        781      4,726      2,644
    Total operating revenues 67,096 89,949 213,230 305,930
  less revenue-based taxes      3,055      3,422      9,061      11,996
Net operating revenues 64,041 86,527 204,169 293,934
 
Operating expenses:  
  Service costs 11,366 18,342 38,501 63,475
  Cost of handsets and accessories sold 6,608 9,627 21,988 26,028
  Cost of installation and equipment contracts 445 801 4,680 1,971
  Selling, general and administrative expenses 21,159 22,609 50,667 80,188
  Depreciation and amortization 3,397 8,374 10,549 25,238
  Provision for doubtful accounts      2,375      (628)      7,310    10,212
Total Operating expenses     45,350     59,125     133,695   207,112
 
Operating income 18,691 27,402 70,474 86,822
 
Other income and expenses:  
  Other income 0 1,331 0 1,646
  Interest income 7,547 (141) 27,603 6,441
  Interest expense (8,965) (4,125) (32,957) (9,071)
  Net foreign exchange (loss) gain        570      (443)      267      1,835
Total other income and expenses      (848)      (3,378)    (5,087)      851
 
Income before income taxes and minority interest 17,843 24,024 65,387 87,673
 
Provision for income taxes 7,336 9,750 20,477 26,827
Minority interest in net losses of subsidiaries           14      90           14      (230)
Net income    US$10,493    US$14,184    US$44,896    US$61,076
 
Net income per common share $0.55 $0.74 $2.53 $3.17
Net income per ADS equivalent $0.41 $0.55 $1.90 $2.38
Weighted average common shares outstanding (thousands) 19,246 19,280 17,739 19,280
 
EBITDA US $22,088 US $35,776 US $85,923 US $112,060



Open Joint Stock Company Vimpel-Communications
Condensed Consolidated Balance Sheet

  December 31,
1996
December 31,
1997
 
   (In thousands US dollars)
Assets  
Current Assets:  
  Cash and cash equivalents US$ 33,316 US$ 14,333
  Short-term investments 15,638 24,169
  Accounts receivable 28,119 41,487
  Other current assets         21,967         34,436
Total current assets 99,040 114,425
 
Property and equipment, net 179,808 347,653
Other assets         20,041         21,020
Total Assets US$ 298,889 US$ 483,098
 
Liabilities and shareholders' equity  
Current liabilities:  
  Accounts payable US$11,903 US$12,287
  Customer deposits 37,765 51,738
  Bank loans 3,756 11,001
  Other accrued liabilities         10,507         23,225
Total current liabilities 63,931 98,251
 
Deferred incomes taxes 23,774 33,747
Equipment financing and other liabilities 61,818 136,962
 
Minority interest 2,791 6,487
 
Shareholders' equity       146,575       207,651
 
Total liabilities and shareholders' equity US$298,889 US$483,098




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