VimpelCom announces first quarter 2004
27 May 2004
-- 71% year-on-year increase in net operating revenues --
-- 84% year-on-year increase in net income --
-- 87% year-on-year increase in OIBDA --
-- approximately 14.9 million subscribers including 8.7 million regional subscribers as of today --
Moscow and New York (May 27, 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 first quarter ended March 31, 2004. During the first quarter, the Company continued its rapid growth in new subscribers and strengthened its financial performance, with the regions growing significantly 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, "We are pleased with our first quarter results. In a very competitive market that is now the fastest growing wireless market in the world we added approximately 2 million subscribers, and we increased our OIBDA margin to 48.4%, the highest level achieved since our listing on the New York Stock Exchange in 1996. We were able to achieve these results by successfully implementing our strategy of national expansion." Significant improvements in VimpelCom's financial and operating results in the first quarter of 2004, as compared with the first quarter of 2003, 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. When compared with the fourth quarter of 2003, strong seasonal effects (reduced roaming revenue and reduced minutes of use) resulted in a reduced rate of growth in net operating revenues. On the other hand, margins improved both on OIBDA and net income levels as compared with the fourth 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 first quarter of 2004 were $256.3 million and $161.4 million, respectively. Net income for Moscow stand-alone and in the regions in the first quarter of 2004 was $60.0 million and $26.8 million, respectively. Selling, general and administrative ("SG&A") expenses, as a percentage of net operating revenues, improved to 33.0% reported in the first quarter of 2004 as compared with 34.9% in the first quarter of 2003. The decrease in SG&A from $148.8 million in the fourth quarter of 2003 to $138.0 million in the first quarter of 2004 was in part due to a decrease in aggregate subscriber acquisition costs from $57.2 million in the fourth quarter of 2003 to $50.1 million in the first quarter of 2004. VimpelCom's total capital expenditures for the first quarter of 2004 were approximately $157 million, spent entirely for the purchase of property and equipment. In January 2004, VimpelCom adopted a new depreciation policy. Based on periodic internal studies of the useful economic lives of the Company's property and equipment, the Company changed the estimated useful life of GSM telecommunications equipment from 9.5 to 7 years. Beginning with the first quarter of 2004, the Company will use a new definition of MOU based on total minutes of usage (including both billable minutes of usage and free minutes of usage) rather than only billable minutes as used in the previous definition. This approach is similar to that currently used by the majority of cellular operators in and outside of Russia and the Company believes the new definition better reflects the relationship between traffic, capital expenditures, revenues and operating costs. The tables with the quarterly MOU numbers for 2003 calculated under both the new and previous definitions are presented below in the definition section. The MOU figures used throughout this release have been calculated under the new definition. The Company's MOU in the first quarter of 2004 was 91.4 minutes, an increase of approximately 4.5% compared to 87.5 minutes recorded in the first quarter of 2003. As compared with 96.8 minutes recorded for the fourth quarter of 2003, MOU declined by 5.6%, primarily due to seasonal effects. ARPU for the first quarter of 2004 was approximately $10.8, a 20.0% decrease from the $13.5 reported for the first quarter of 2003 and a 13.6% decrease from the $12.5 reported for the fourth quarter of 2003. The decline in ARPU was due to seasonal effects, which are most pronounced in the first quarter, and a growing proportion of regional subscribers who generate lower ARPU than Moscow subscribers. In addition, the decline in ARPU was caused by strong competition which resulted in tariff reductions and an effective decline in average price per minute. An increase in the proportion of intra-network traffic also led to an effective decline in average price per minute, although this decline was mitigated by the absence of interconnect charges. Rapid subscriber growth continued in the first quarter of 2004, particularly in the regions. As of May 27, 2004, VimpelCom's total number of subscribers reached approximately 14.93 million, with approximately 6.22 million subscribers in the Moscow license area and 8.72 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 48.4% at the end of the first quarter of 2004, compared to the Company's estimated market share of 49.5% reported at the end of the first quarter of 2003. On a nationwide basis, VimpelCom estimates its market share at 32.0% at the end of the first quarter of 2004, compared to 29.0% estimated at the end of the first quarter of 2003. The Company's quarterly churn rate in the first quarter of 2004 was 8.6%, compared to the Company's churn rate of 9.6% reported for the same period in 2003. Marketing activities in the past few quarters resulted in some improvement in churn in the first quarter of 2004. Loyalty and retention, especially in the Company's more saturated markets, remain one of VimpelCom's priorities going forward. For full press release, please follow the link http://www.vimpelcom.com. The slide presentation will also be available for download on VimpelCom's website http://www.vimpelcom.com.
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