FOR IMMEDIATE RELEASE
VIMPELCOM ANNOUNCES FOURTH QUARTER
AND ANNUAL 2003 FINANCIAL AND OPERATING RESULTS
— 74% YEAR-ON-YEAR INCREASE IN NET OPERATING REVENUES —
— 81% YEAR-ON-YEAR INCREASE IN NET INCOME —
— 90% YEAR-ON-YEAR INCREASE IN OIBDA —
— APPROXIMATELY 13.2 MILLION SUBSCRIBERS
INCLUDING 7.2 MILLION REGIONAL SUBSCRIBERS AS OF TODAY –
Moscow and New York (March 25, 2004) - Open Joint Stock Company “Vimpel-Communications” (“VimpelCom” or the “Company”) (NYSE: VIP), a leading provider of wireless telecommunications services in Russia, today announced its financial and operating results for the fourth quarter of 2003 and year ended December 31, 2003. During the fourth quarter of 2003, as it did throughout the year 2003, the Company continued its rapid growth in new subscribers and strengthened its financial performance, with the regions growing faster than Moscow. Consolidated financial statements of VimpelCom and consolidated financial statements of VimpelCom-Region, VimpelCom’s subsidiary for regional development, are attached.
Commenting on today’s announcement, Alexander Izosimov, Chief Executive Officer of VimpelCom, said, “2003 was a great year for both the Russian cellular industry and VimpelCom. With an increase of our subscriber base from 5.15 million to 11.44 million in 2003, VimpelCom significantly contributed to the growth of the Russian cellular industry, one of the fastest growing cellular markets in the world. In 2003, while more than doubling our total number of subscribers, we were able to substantially improve our financial condition, positioning ourselves well as we enter 2004. We are confident that we will continue to benefit from the growth in the Russian cellular market and from our strategy of profitable growth with an emphasis on high quality services, customer satisfaction and efficient marketing.”
VimpelCom Announces Fourth Quarter And Annual 2003 Financial and Operating Results
Page 2 of 4
Key Financial and Operating Indicators
(Definitions as well as reconciliation of each of OIBDA and
OIBDA margin to its most directly comparable U.S. GAAP
financial measurement are presented below in the attachment)
| Three months ended |
Years ended |
|||||||||||||||||
| Dec. 31, 2003 |
Dec. 31, 2002 |
Change (%) |
Dec. 31, 2003 |
Dec. 31, 2002 |
Change (%) |
|||||||||||||
| Net operating revenues (US$,000) |
407,740 | 228,978 | 78.1 | % | 1,335,598 | 768,496 | 73.8 | % | ||||||||||
| OIBDA (US$,000) (1) |
186,893 | 84,615 | 120.9 | % | 613,230 | 322,209 | 90.3 | % | ||||||||||
| OIBDA margin (2) |
45.8 | % | 37.0 | % | 45.9 | % | 41.9 | % | ||||||||||
| Gross margin (US$,000) (3) |
334,329 | 181,209 | 84.5 | % | 1,090,113 | 615,345 | 77.2 | % | ||||||||||
| Gross margin percentage (4) |
82.0 | % | 79.1 | % | 81.6 | % | 80.1 | % | ||||||||||
| Net income (US$,000) |
67,738 | 39,078 | 73.3 | % | 233,962 | 129,552 | 80.6 | % | ||||||||||
| Net income per share (US$) |
1.75 | 1.03 | 6.12 | 3.41 | ||||||||||||||
| Net income per ADS (US$) (5) |
1.31 | 0.77 | 4.59 | 2.56 | ||||||||||||||
| ARPU (US$) (6) |
12.5 | 16.0 | -21.9 | % | 13.6 | 18.3 | -25.7 | % | ||||||||||
| MOU (min) (7) |
89.3 | 89.3 | 0.0 | % | 89.8 | 92.3 | -2.7 | % | ||||||||||
| SAC (US$) (8) |
18.1 | 20.9 | -13.4 | % | 19.3 | 25.7 | -24.9 | % | ||||||||||
Significant improvements in VimpelCom’s financial and operating results in the fourth quarter and full year 2003, as compared with the fourth quarter and full year 2002, were achieved largely as a result of rapid subscriber growth combined with the effects of economies of scale, efficient cost control and lower acquisition costs per subscriber in the regions outside of Moscow. In the fourth quarter of 2003 we experienced expected seasonal effects (reduced roaming revenue and reduced minutes of use), which resulted in a reduced rate of growth in net operating revenues compared with the third quarter of 2003.
The Company’s financial results include the activities in the Moscow license area and in the regions. Net operating revenues, excluding inter-company transactions, for Moscow stand-alone and the regions in the fourth quarter of 2003 were $263.0 million and $144.7 million, respectively. For the year ended December 31, 2003, net operating revenues were $918.7 million and $416.8 million, respectively. Net income for Moscow stand-alone and in the regions in the fourth quarter of 2003 was $48.6 million and $35.5 million, respectively. For the year ended December 31, 2003, net income in Moscow stand-alone and in the regions was $197.2 million and $62.4 million, respectively. These figures reflect the growing importance of regional operations for the Company’s business.
In the fourth quarter of 2003, income before income taxes and minority interest reached approximately $122.2 million, an increase of 9.3% compared with $111.8 million reported for the third quarter of 2003. However, net income in the fourth quarter of 2003 fell approximately 6.2%, from $72.2 million reported for the third quarter of 2003 to $67.7 million. This was largely due to growth in minority interest in net earnings of subsidiaries, from approximately $7.5 million reported for the third quarter of 2003 to approximately $15.7 million reported for the fourth quarter of 2003. The growth in minority interest was caused by the growing profitability of regional operations as well as the increase in a minority stake (from approximately 35% to 45%) in VimpelCom-Region after the completion of the third tranche of investments by Alfa Group in August 2003. This effect will disappear after the merger between VimpelCom and VimpelCom-Region is completed, which the Company expects to take place in the second quarter of 2004.
VimpelCom Announces Fourth Quarter And Annual 2003 Financial and Operating Results
Page 3 of 4
Selling, general and administrative (“SG&A”) expenses, as a percentage of net operating revenues, decreased from 39.2% reported in the fourth quarter of 2002 to 36.5% in the fourth quarter of 2003. SG&A for the year 2003, as a percentage of net operating revenues, was 35.0%, practically unchanged from the 35.4% reported for 2002. The increase in SG&A from $126.9 million in the third quarter of 2003 to $148.8 million in the fourth quarter of 2003 was in part due to traditional Christmas and New Year sales campaigns as well as expenses related to the opening of new branch offices in the regions.
For the year ended December 31, 2003, the Company recorded a $9.2 million provision for doubtful accounts receivable, a 56.6% decrease compared with $21.2 million reported in 2002. As a percentage of net operating revenues, this reflects an improvement from approximately 2.8% in 2002 to 0.7% in 2003. The reduction in provision for doubtful accounts was the result of improved cash collection and credit control procedures as well as the increased proportion of prepaid subscribers in the Company’s subscriber base.
VimpelCom’s total capital investments for 2003 were approximately $770.5 million, with $728.0 million of capital expenditures for purchase of property and equipment and $42.5 million of acquisitions of new entities. Capital expenditures for the Moscow license area in 2003 were approximately $234.6 million.
In 2003, the Company’s MOU became more stable despite the rapid growth in subscribers, with 89.3 minutes of use for the fourth quarter of 2003 and 89.8 minutes of use for the year 2003. MOU for the fourth quarter of 2003 showed no change as compared with the fourth quarter of 2002 and MOU for the year 2003 showed a 2.7% decline as compared with 92.3 minutes reported for the year 2002. Primarily due to seasonal effects, MOU in the fourth quarter of 2003 fell by 3.7% compared with the third quarter of 2003. ARPU for 2003 was approximately $13.6, a 25.7% decline from $18.3 reported for 2002. The decline in ARPU in 2003 compared to 2002 was primarily due to a change in the Company’s subscriber mix (including a significant increase in regional subscribers) and increased competition, which resulted in the reduction of tariffs. The decline in ARPU in the fourth quarter of 2003 compared to the third quarter of 2003 was primarily caused by seasonal effects and the growing proportion of subscribers in the regions where tariffs are approximately 20% lower than in Moscow.
Key Subscriber Statistics
| As of December 31, 2003 |
As of December 31, 2002 |
Change Y-on-Y (%) |
As of Sept. 30, 2003 |
Change Q-on-Q (%) |
|||||||||||
| Moscow license area |
5,659,600 | 3,712,700 | 52.4 | % | 5,076,200 | 11.5 | % | ||||||||
| Contract |
819,900 | 725,200 | 13.1 | % | 799,000 | 2.6 | % | ||||||||
| Prepaid |
4,839,700 | 2,987,500 | 62.0 | % | 4,277,200 | 13.2 | % | ||||||||
| Regions |
5,777,300 | 1,440,400 | 301.1 | % | 4,183,000 | 38.1 | % | ||||||||
| Total Number of Subscribers |
11,436,900 | 5,153,100 | 121.9 | % | 9,259,200 | 23.5 | % | ||||||||
| Churn (quarterly) |
9.7 | % | 8.7 | % | — | 9.6 | % | — |
Rapid subscriber growth continued in the first quarter of 2004. As of March 25, 2004, VimpelCom’s total number of subscribers reached approximately 13.21 million, with approximately 6.05 million subscribers in the Moscow license area and 7.16 million in the regions outside Moscow.
Using independent sources to estimate the number of subscribers of the Company’s competitors, VimpelCom estimates that its market share in the Moscow license area was 49.0% at the end of 2003, compared to the Company’s estimated market share of 51.6% reported at the end of 2002. On a nationwide basis, independent sources estimate VimpelCom’s market share at 31.0% at the end of 2003, compared to the 28.0% recorded at the end of 2002.
VimpelCom Announces Fourth Quarter And Annual 2003 Financial and Operating Results
Page 4 of 4
The Company’s annual churn rate in 2003 was 39.3%, compared to the Company’s churn rate of 30.8% reported for 2002. The increase in churn was primarily a result of high subscriber growth, particularly in the low-end user segment, as well as internal migration, which is technically regarded as churn, and increased competition.
The Company’s management will discuss its fourth quarter and the year 2003 results during a conference call and slide presentation on March 25, 2004 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 April 1, 2004 and April 26, 2004, respectively. The slide presentation will also be available for download on VimpelCom’s website http://www.vimpelcom.com.
VimpelCom is a leading provider of telecommunications services in Russia, operating under the “Bee Line” brand, which is one of the most recognized brand names in Russia. The VimpelCom Group’s license portfolio covers approximately 92% of Russia’s population (134 million people), including the City of Moscow, the Moscow Region and the City of St. Petersburg. 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”.
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 development plans. These statements also relate to the consummation of the merger between VimpelCom and VimpelCom-Region which is subject to regulatory and certain other approvals, as well as certain other conditions precedent, including the transfer of all of VimpelCom-Region’s licenses and permissions to VimpelCom. If any of the approvals are not obtained or any condition precedent is not met, the merger will not be consummated. 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 and its ability to consummate the merger. 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 industry, general political uncertainties in Russia and general economic developments in Russia, 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 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, 2002 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 |
Christopher Mittendorf | |
| VimpelCom (Moscow) |
Edelman Financial Worldwide | |
| Tel: 7(095) 974-5888 |
Tel: 1(212) 704-8134 | |
| vgoldin@vimpelcom.com |
christopher.mittendorf@edelman.com |
Definitions
| 1. | 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. |
| 2. | OIBDA margin is OIBDA expressed as a percentage of net operating revenues. Reconciliation of OIBDA margin to operating income as a percentage of net operating revenues, the most directly comparable U.S. GAAP financial measure, is presented below in the tables section. |
| 3. | Gross margin is defined as net operating revenues less selected operating costs (specifically, service costs, cost of handsets and accessories sold and cost of other revenues). |
| 4. | Gross margin percentage is gross margin expressed as a percentage of net operating revenues. |
| 5. | Each ADS represents 0.75 of one share of common stock. |
| 6. | ARPU (Monthly Average Revenue per User) 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 and sales of handsets and accessories, by the average number of the Company’s subscribers during the month. |
| 7. | MOU (Monthly Average Minutes of Use per User) is calculated for each month of the relevant period by dividing the total number of billable minutes of usage for incoming and outgoing calls during that month (excluding guest roamers) by the average number of subscribers during the month. |
| 8. | SAC (Average Acquisition Cost Per User) is calculated as dealer commissions, advertising expenses and handset subsidies for the relevant period divided by the number of gross sales during the relevant period. |
Open Joint Stock Company “Vimpel-Communications”
Condensed Consolidated Statements of Operations
| Three months ended December 31, |
Years ended December 31, |
|||||||||||||||
| 2003 |
2002 |
2003 |
2002 |
|||||||||||||
| Unaudited | ||||||||||||||||
| (In thousands of US dollars, except per share (ADS) amounts) | ||||||||||||||||
| Operating revenues: |
||||||||||||||||
| Service revenues |
US$ | 386,120 | US$ | 216,763 | US$ | 1,265,383 | US$ | 725,938 | ||||||||
| Connection fees |
202 | 382 | 1,279 | 1,930 | ||||||||||||
| Sales of handsets and accessories |
20,256 | 14,568 | 64,975 | 49,934 | ||||||||||||
| Other revenues |
1,162 | 654 | 3,961 | 1,842 | ||||||||||||
| Total operating revenues |
407,740 | 232,367 | 1,335,598 | 779,644 | ||||||||||||
| Less revenue based taxes |
— | (3,389 | ) | — | (11,148 | ) | ||||||||||
| Net operating revenues |
407,740 | 228,978 | 1,335,598 | 768,496 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Service costs |
57,207 | 33,244 | 191,441 | 111,387 | ||||||||||||
| Cost of handsets and accessories sold |
16,202 | 14,515 | 54,032 | 41,709 | ||||||||||||
| Cost of other revenues |
2 | 10 | 12 | 55 | ||||||||||||
| Selling, general and administrative expenses |
148,764 | 89,846 | 467,655 | 271,963 | ||||||||||||
| Depreciation and amortization |
51,859 | 30,155 | 185,326 | 97,417 | ||||||||||||
| Provision for doubtful accounts |
(1,328 | ) | 6,748 | 9,228 | 21,173 | |||||||||||
| Total operating expenses |
272,706 | 174,518 | 907,694 | 543,704 | ||||||||||||
| Operating income |
135,034 | 54,460 | 427,904 | 224,792 | ||||||||||||
| Other income and expenses: |
||||||||||||||||
| Other income |
4,237 | 1,527 | 3,045 | 1,761 | ||||||||||||
| Interest income |
2,512 | 2,093 | 8,378 | 7,169 | ||||||||||||
| Interest expense |
(16,339 | ) | (14,128 | ) | (68,246 | ) | (46,586 | ) | ||||||||
| Net foreign exchange loss |
(3,255 | ) | (1,783 | ) | (1,279 | ) | (9,439 | ) | ||||||||
| Total other income and expenses |
(12,845 | ) | (12,291 | ) | (58,102 | ) | (47,095 | ) | ||||||||
| Income before income taxes and minority interest |
122,189 | 42,169 | 369,802 | 177,697 | ||||||||||||
| Provision for income taxes |
38,454 | 5,016 | 108,641 | 49,939 | ||||||||||||
| Minority interest in net earnings (losses) of subsidiaries |
15,670 | (1,925 | ) | 26,872 | (1,794 | ) | ||||||||||
| Cumulative effect of changes in accounting principles |
(379 | ) | — | (379 | ) | — | ||||||||||
| Minority interest on cumulative effect of changes in accounting principles |
52 | — | 52 | — | ||||||||||||
| Net income |
US$ | 67,738 | US$ | 39,078 | US$ | 233,962 | US$ | 129,552 | ||||||||
| Net income per common share |
US$ | 1.75 | US$ | 1.03 | US$ | 6.12 | US$ | 3.41 | ||||||||
| Net income per ADS equivalent |
US$ | 1.31 | US$ | 0.77 | US$ | 4.59 | US$ | 2.56 | ||||||||
| Weighted average common shares outstanding (thousands) |
38,722 | 38,026 | 38,241 | 38,014 | ||||||||||||
Open Joint Stock Company “Vimpel-Communications”
Condensed Consolidated Balance Sheets
| December 31, 2003 |
December 31, 2002 | |||||
| (In thousands of US dollars) | ||||||
| Assets |
||||||
| Current assets: |
||||||
| Cash and cash equivalents |
US$ | 157,611 | US$ | 263,657 | ||
| Accounts receivable |
113,092 | 75,399 | ||||
| Other current assets |
255,540 | 149,309 | ||||
| Total current assets |
526,243 | 488,365 | ||||
| Non-current assets |
||||||
| Property and equipment, net |
1,460,542 | 957,602 | ||||
| Telecommunication licenses, net |
103,817 | 88,385 | ||||
| Other intangible assets, net |
59,369 | 55,730 | ||||
| Other assets |
152,261 | 102,662 | ||||
| Total non-current assets |
1,775,989 | 1,204,379 | ||||
| Total assets |
2,302,232 | US$ | 1,692,744 | |||
| Liabilities and shareholders’ equity |
||||||
| Current liabilities: |
||||||
| Accounts payable |
158,467 | US$ | 80,241 | |||
| Due to related parties |
8,603 | 4,114 | ||||
| Customer advances and deposits |
181,475 | 106,655 | ||||
| Deferred revenue |
2,701 | 2,016 | ||||
| Ruble denominated bonds payable |
101,852 | — | ||||
| Bank loans, current portion |
35,343 | 37,780 | ||||
| Capital lease obligations, current portion |
6,587 | 3,868 | ||||
| Equipment financing obligations, current portion |
70,935 | 134,617 | ||||
| Accrued liabilities |
127,689 | 49,492 | ||||
| Total current liabilities |
693,652 | 418,783 | ||||
| Deferred income taxes |
34,380 | 35,227 | ||||
| Bank loans, less current portion |
330,112 | 306,080 | ||||
| Capital lease obligations, less current portion |
9,154 | 899 | ||||
| Accrued liabilities, less current portion |
4,046 | 3,265 | ||||
| 5.5% Senior convertible notes due July 2005 |
— | 85,911 | ||||
| Equipment financing obligations, less current portion |
53,008 | 81,425 | ||||
| Minority interest |
179,664 | 98,491 | ||||
| Shareholders’ equity |
998,216 | 662,663 | ||||
| Total liabilities and shareholders’ equity |
US$ | 2,302,232 | US$ | 1,692,744 | ||
Condensed Consolidated Statements of Cash Flows
| Years ended December 31, |
||||||||
| 2003 |
2002 |
|||||||
| (In thousands of US dollars) | ||||||||
| Net cash provided by operating activities |
US$ | 511,877 | US$ | 221,723 | ||||
| Proceeds from bank and other loans |
160,285 | 331,082 | ||||||
| Proceeds from issuance of ruble denominated bonds |
97,119 | — | ||||||
| Capital contributions in a consolidated subsidiary by minority shareholders |
58,520 | 116,960 | ||||||
| Repayment of senior convertible notes |
(1,300 | ) | — | |||||
| Payments of fees in respect of debt issue |
(4,207 | ) | (6,203 | ) | ||||
| Payments of fees in respect of capital contributions |
(2,478 | ) | — | |||||
| Repayment of bank and other loans |
(86,261 | ) | (30,461 | ) | ||||
| Repayment of equipment financing obligations |
(256,902 | ) | (115,473 | ) | ||||
| Repayment of capital lease obligations |
(917 | ) | (1,450 | ) | ||||
| Net cash provided by financing activities |
(36,141 | ) | 294,455 | |||||
| Purchase of property and equipment |
(506,716 | ) | (291,437 | ) | ||||
| Proceeds from sale of property and equipment |
12,433 | — | ||||||
| Purchase of Orensot stock, net of cash acquired of US$344 |
— | (17,758 | ) | |||||
| Purchase of StavTeleSot stock, net of cash acquired of US$658 |
(42,455 | ) | — | |||||
| Purchase of Bee-Line Samara, net of cash acquired of US$449 |
— | (231 | ) | |||||
| Purchase of Extel, net of cash acquired of US$713 |
— | (24,599 | ) | |||||
| Purchase of Vostok-Zapad Telecom, net of cash acquired of US$31 |
— | (26,577 | ) | |||||
| Purchase of intangible assets |
(18,654 | ) | (14,769 | ) | ||||
| Purchase of other assets |
(38,561 | ) | (26,560 | ) | ||||
| Net cash used in investing activities |
(593,953 | ) | (401,938 | ) | ||||
| Effect of exchange rate changes on cash |
12,171 | 5,238 | ||||||
| Net increase in cash |
(106,046 | ) | 119,485 | |||||
| Cash and cash equivalents at beginning of year |
263,657 | 144,172 | ||||||
| Cash and cash equivalents at end of year |
US$ | 157,611 | US$ | 263,657 | ||||
| Supplemental cash flow information |
||||||||
| Non-cash activities: |
||||||||
| Equipment acquired under financing and capital lease agreements |
US$ | 88,689 | US$ | 140,367 | ||||
| Accounts payable for equipment and other long-lived assets |
78,032 | 50,117 | ||||||
| Operating activities financed by sale of treasury stock |
4,729 | 1,917 | ||||||
| Conversion of Senior convertible notes |
91,236 | — | ||||||
| Acquisitions: |
||||||||
| Fair value of assets acquired |
73,290 | 121,388 | ||||||
| Difference between the amount paid and the fair value of net assets acquired |
(4,699 | ) | — | |||||
| Carrying value of equity method investment in Beeline-Samara before the acquisition of controlling interest |
— | (6,540 | ) | |||||
| Cash paid for the capital stock |
(43,113 | ) | (70,702 | ) | ||||
| Liabilities assumed |
US$ | 25,478 | US$ | 44,146 | ||||
Reconciliation of VimpelCom OIBDA to operating income
(In thousands of US dollars)
| Three months ended |
Years ended |
|||||||||||
| Dec.31 2003 |
Dec.31 2002 |
Dec.31 2003 |
Dec.31 2002 |
|||||||||
| OIBDA |
186,893 | 84,615 | 613,230 | 322,209 | ||||||||
| Less: Depreciation |
(42,776 | ) | (26,679 | ) | (151,262 | ) | (85,204 | ) | ||||
| Less: Amortization |
(9,083 | ) | (3,476 | ) | (34,064 | ) | (12,213 | ) | ||||
| Operating income |
135,034 | 54,460 | 427,904 | 224,792 | ||||||||
| Reconciliation of VimpelCom OIBDA margin to operating income as percentage of net operating revenues |
| |||||||||||
| Three months ended |
Years ended |
|||||||||||
| Dec. 31, 2003 |
Dec. 31, 2002 |
Dec. 31, 2003 |
Dec. 31, 2002 |
|||||||||
| OIBDA margin |
45.8 | % | 37.0 | % | 45.9 | % | 41.9 | % | ||||
| Less: Depreciation as percentage of net operating revenues |
(10.5 | )% | (11.7 | )% | (11.3 | )% | (11.0 | )% | ||||
| Less: Amortization as percentage of net operating revenues |
(2.2 | )% | (1.5 | )% | (2.6 | )% | (1.6 | )% | ||||
| Operating income as percentage of net operating revenues |
33.1 | % | 23.8 | % | 32.0 | % | 29.3 | % | ||||
Open Joint Stock Company “VimpelCom - Region”
Condensed Consolidated Statements of Operations
| Three months ended Dec. 31, |
Years ended Dec. 31, |
|||||||||||
| 2003 |
2002 |
2003 |
2002 |
|||||||||
| Unaudited | ||||||||||||
| (In thousands of US dollars) | ||||||||||||
| Operating revenues: |
||||||||||||
| Service revenues and connection fees |
143,698 | 32,263 | 401,488 | 66,891 | ||||||||
| Sales of handsets and accessories |
10,340 | 7,127 | 35,505 | 17,000 | ||||||||
| Other revenues |
1,123 | 228 | 3,880 | 530 | ||||||||
| Total operating revenues |
155,161 | 39,618 | 440,873 | 84,421 | ||||||||
| Less revenue based taxes |
— | (443 | ) | — | (914 | ) | ||||||
| Net operating revenues |
155,161 | 39,175 | 440,873 | 83,507 | ||||||||
| Operating expenses: |
||||||||||||
| Service costs |
25,168 | 8,647 | 81,405 | 18,939 | ||||||||
| Cost of handsets and accessories sold |
9,055 | 8,745 | 32,374 | 18,675 | ||||||||
| Equipment lease |
3,458 | 2,626 | 10,357 | 2,626 | ||||||||
| Selling, general and administrative expenses |
51,047 | 17,574 | 142,489 | 41,486 | ||||||||
| Network maintenance |
3,954 | 1,300 | 11,200 | 4,292 | ||||||||
| Depreciation and amortization |
17,734 | 4,584 | 61,887 | 10,880 | ||||||||
| Provision for doubtful accounts |
135 | 309 | 2,282 | 553 | ||||||||
| Total operating expenses |
110,551 | 43,785 | 341,994 | 97,451 | ||||||||
| Operating income (loss) |
44,610 | (4,610 | ) | 98,879 | (13,944 | ) | ||||||
| Other income and expenses: |
||||||||||||
| Interest income |
(696 | ) | (122 | ) | (1,480 | ) | (381 | ) | ||||
| Interest expense |
7,030 | 1,372 | 23,075 | 3,809 | ||||||||
| Net foreign exchange (gain) loss |
(315 | ) | 1,969 | (767 | ) | 5,013 | ||||||
| Other expenses (income) |
(3,166 | ) | 92 | (2,668 | ) | 259 | ||||||
| Total other income and expenses |
2,853 | 3,311 | 18,160 | 8,700 | ||||||||
| Income (loss) before income taxes and minority interest |
41,757 | (7,921 | ) | 80,719 | (22,644 | ) | ||||||
| Income taxes expense |
5,914 | 1,029 | 18,764 | 646 | ||||||||
| Minority interest in net earnings of subsidiaries |
93 | (1 | ) | 729 | 142 | |||||||
| Cumulative effect of changes in accounting principles |
(148 | ) | — | (148 | ) | — | ||||||
| Net income (loss) |
35,602 | (8,949 | ) | 61,078 | (23,432 | ) | ||||||
*) Net income of VimpelCom-Region as a legal entity differs from the $35.461 million net income reported in the fourth quarter 2003 and $62.422 million net income reported for the year ended December 31, 2003 for the regional segment reported above in this press release. The difference is caused by the fact that the financial statements of Bee-Line Samara are included in the regions for segment reporting purposes, but are not included in the consolidated financial statements of
VimpelCom-Region. Bee-Line Samara operates in the Samara region but, for historical reasons, is owned directly by VimpelCom. The following table provides reconciliation between these figures (all numbers are in thousands of US$):
| Three months ended Dec. 31, 2003 |
Year ended Dec. 31, 2003 |
|||||
| Net income of VimpelCom-Region |
35,602 | 61,078 | ||||
| Net income of BeeLine-Samara |
59 | 3,063 | ||||
| Net effect of transactions between VimpelCom-Region and BeeLine-Samara |
(82 | ) | (1,719 | ) | ||
| Net income of VimpelCom’s regional segment |
35,461 | 62,422 |
Operating revenue of VimpelCom-Region as a legal entity differs from the $144.736 million and $416.849 million operating revenues for the regional segment excluding inter-company transactions, reported above in this press release for the fourth quarter of 2003 and for the year ended December 31, 2003, respectively. The following table provides reconciliation between these figures (all numbers are in thousands of US$):
| Three months ended Dec. 31, 2003 |
Year ended Dec. 31, 2003 |
|||||
| Operating revenue of VimpelCom-Region |
155,161 | 440,873 | ||||
| Operating revenue of Bee-Line-Samara |
8,098 | 28,883 | ||||
| Net effect of transactions between VimpelCom-Region and Bee-Line-Samara |
(3,814 | ) | (10,401 | ) | ||
| Operating revenue of VimpelCom’s regional segment |
159,445 | 459,355 | ||||
| Inter-company operating revenue of VimpelCom-Region and Bee-Line-Samara |
(14,709 | ) | (42,506 | ) | ||
| Regional segment operating revenue excluding inter-company transactions |
144,736 | 416,849 |
Open Joint Stock Company “VimpelCom - Region”
Condensed Consolidated Balance Sheets
| December 31, 2003 |
December 31, 2002 | |||||
| (In thousands of US dollars) | ||||||
| Assets |
||||||
| Current assets: |
||||||
| Cash and cash equivalents |
US$ | 42,729 | US$ | 52,703 | ||
| Trade accounts receivable |
22,726 | 2,768 | ||||
| Other current assets |
137,529 | 68,348 | ||||
| Total current assets |
202,984 | 123,819 | ||||
| Non-current assets: |
||||||
| Property and equipment, net |
624,306 | 277,480 | ||||
| Telecommunication licenses and allocation of frequencies, net |
87,175 | 72,322 | ||||
| Other intangible assets, net |
20,383 | 10,780 | ||||
| Other assets |
62,995 | 22,975 | ||||
| Total non-current assets |
794,859 | 383,557 | ||||
| Total assets |
US$ | 997,843 | US$ | 507,376 | ||
| Liabilities and shareholders’ equity |
||||||
| Current liabilities: |
||||||
| Accounts payable |
US$ | 73,345 | US$ | 20,523 | ||
| Due to related parties |
71,420 | 25,157 | ||||
| Customer advances and deposits |
41,916 | 14,046 | ||||
| Deferred revenue |
713 | 699 | ||||
| Rouble denominated bonds payable |
101,852 | — | ||||
| Bank loans, current portion |
4,710 | 1,157 | ||||
| Capital lease obligation, current portion |
0 | 3,196 | ||||
| Equipment financing obligations, current portion |
17,078 | 74,295 | ||||
| Accrued liabilities |
16,076 | 3,103 | ||||
| Total current liabilities |
327,110 | 142,176 | ||||
| Deferred income taxes |
24,713 | 18,689 | ||||
| Bank loans, less current portion |
66,500 | 39,380 | ||||
| Long-term loans due to VimpelCom |
176,231 | 40,000 | ||||
| Equipment financing obligations, less current portion |
16,097 | 6,563 | ||||
| Accrued liabilities |
2,718 | — | ||||
| Minority interest |
350 | 188 | ||||
| Shareholders’ equity |
384,124 | 260,380 | ||||
| Total liabilities and shareholders’ equity |
US$ | 997,843 | US$ | 507,376 | ||
Open Joint Stock Company “VimpelCom - Region”
Condensed Consolidated Statements of Cash Flows
| Years ended Dec. 31, |
||||||||
| 2003 |
2002 |
|||||||
| (In thousands of US dollars) | ||||||||
| Net cash provided by (used in) operating activities |
US$ | 146,565 | US$ | (10,273 | ) | |||
| Proceeds from bank and other loans |
118,933 | 78,521 | ||||||
| Proceeds from loans from VimpelCom |
136,231 | 98,500 | ||||||
| Proceeds from issuance of ruble denominated bonds |
97,119 | — | ||||||
| Proceeds from sale of capital stock |
58,520 | 175,440 | ||||||
| Repayment of bank and other loans |
(36,076 | ) | (70,080 | ) | ||||
| Payment of fee in respect of debt issue |
(1,740 | ) | — | |||||
| Repayment of equipment financing obligations |
(195,460 | ) | (60,694 | ) | ||||
| Repayment of capital lease obligations |
— | (1,025 | ) | |||||
| Net cash provided by financing activities |
177,527 | 220,662 | ||||||
| Purchase of property and equipment |
(260,087 | ) | (107,107 | ) | ||||
| Purchase of Orensot stock, net of cash acquired of US$344 |
— | (17,758 | ) | |||||
| Purchase of StavTeleSot stock, net of cash acquired of US$658 |
(42,455 | ) | — | |||||
| Purchase of Extel, net of cash acquired of US$713 |
— | (24,599 | ) | |||||
| Purchase of Vostok-Zapad Telecom, net of cash acquired of US$31 |
— | (26,577 | ) | |||||
| Purchase of intangible assets |
(15,445 | ) | (6,340 | ) | ||||
| Purchase of other assets |
(18,931 | ) | (4,173 | ) | ||||
| Net cash used in investing activities |
(336,918 | ) | (186,554 | ) | ||||
| Effect of exchange rate changes on cash |
2,852 | 266 | ||||||
| Net (decrease) increase in cash |
(9,974 | ) | 24,101 | |||||
| Cash and cash equivalents at beginning of year |
52,703 | 28,602 | ||||||
| Cash and cash equivalents at end of year |
US$ | 42,729 | US$ | 52,703 | ||||
| Supplemental cash flow information |
||||||||
| Non-cash activities: |
||||||||
| Equipment acquired under financing agreements |
US$ | 74,468 | US$ | 64,048 | ||||
| Accounts payable for equipment and other long-lived assets |
50,092 | 8,532 | ||||||
| Acquisitions: |
||||||||
| Fair value of assets acquired |
73,290 | 107,963 | ||||||
| Difference between the amount paid and the fair value of net assets acquired |
(4,699 | ) | — | |||||
| Cash paid for the capital stock |
(43,113 | ) | (70,022 | ) | ||||
| Liabilities assumed |
US$ | 25,478 | US$ | 37,941 | ||||
Reconciliation of VimpelCom-Region OIBDA to operating income
(In thousands of US dollars)
| Three months ended |
Years ended |
|||||||||||
| Dec.31 2003 |
Dec.31 2002 |
Dec.31 2003 |
Dec.31 2002 |
|||||||||
| OIBDA |
62,345 | (26 | ) | 160,766 | (3,064 | ) | ||||||
| Less: Depreciation |
(11,740 | ) | (3,871 | ) | (39,917 | ) | (9,350 | ) | ||||
| Less: Amortization |
(5,995 | ) | (713 | ) | (21,970 | ) | (1,530 | ) | ||||
| Operating income |
44,610 | (4,610 | ) | 98,879 | (13,944 | ) | ||||||
| Reconciliation of VimpelCom-Region OIBDA margin to operating income as percentage of net operating revenues |
| |||||||||||
| Three months ended |
Years ended |
|||||||||||
| Dec. 31, 2003 |
Dec. 31, 2002 |
Dec. 31, 2003 |
Dec. 31, 2002 |
|||||||||
| OIBDA margin |
40.2 | % | (0.1 | )% | 36.5 | % | (3.7 | )% | ||||
| Less: Depreciation as percentage of net operating revenues |
(7.6 | )% | (9.9 | )% | (9.1 | )% | (11.2 | )% | ||||
| Less: Amortization as percentage of net operating revenues |
(3.9 | )% | (1.8 | )% | (5.0 | )% | (1.8 | )% | ||||
| Operating income as percentage of net operating revenues |
28.7 | % | (11.8 | )% | 22.4 | % | (16.7 | )% | ||||
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of March 2004
Commission File Number 1-14522
Open Joint Stock Company
“VIMPEL-COMMUNICATIONS”
(Translation of registrant’s name into English)
10 ULITSA 8-MARTA, BUILDING 14, MOSCOW, RUSSIAN FEDERATION 127083
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. Form 20-F x Form 40-F ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): .
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): .
Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. Yes ¨ No x
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- .
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Open Joint Stock Company | ||||||
| ”Vimpel-Communications” | ||||||
| (Registrant) | ||||||
| Date: |
March 26, 2004 |
By: |
| |||
| Name: |
Alexander V. Izosimov | |||||
| Title: |
Chief Executive Officer and General Director | |||||
