VimpelCom announces fourth quarter and annual 2003 financial and operating results
25 Mar 2004
-- 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." 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. 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. 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. 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. Full Press Release see on on VimpelCom's website http://www.vimpelcom.com.
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