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UPDATE 2-Flood of new users swells Vimpelcom's Q3 profit.

November 27, 2001. TAG: Telecommunications

Fledgling operations in largely untapped markets outside of Moscow also pitched in healthy user numbers. But Vimpelcom officials said the expensive regional rollout project had knocked down profits and margins and said it would continue to do so until the end of next year. The company, which operates under the Bee Line brand, has covered Moscow - its home market - with its yellow and blue logo on banners and billboards. And it has took on its competition with an aggressive TV advertising campaign designed to recoup market share, which slipped as the company worked to improve on revived profitability in the first half. The campaign landed the company 1.8 million users as of Thursday, compared with 1.2 million at the end of the last quarter, outstripping analysts' predictions. Of its 1.48 million subscribers at the end of the third quarter, 123,000 were users of Vimpelcom's regional network. First President Nikolai Pryanishnikov told a news conference the boost in revenues from all the new users had helped the company post a third quarter U.S. GAAP standard net profit of $13.92 million after net profit of $9.41 million last quarter. The company posted a $5.88 million loss for third quarter 2000, the penultimate quarter of the losses it began to incur after the 1998 financial crisis, which cut into its subscriber base. "The increase in subscribers and traffic justifiably improved the financial results," Pryanishnikov said. Vimpelcom estimated that by September 30 its market share was 39.8 percent, up from 38-39 percent last quarter, but just below first quarter levels of around 40 percent.

REGIONS CUT INTO MARGINS Vimpelcom has been waging a minor price war with its nearest competitor MTS this quarter, but Pryanishnikov said average per minute tariffs fell only a cent. He added, however, that Vimpelcom would match MTS' last price cut by the year end. Average revenues per subscriber (ARPU) and monthly traffic both rose slightly quarter on quarter. Profit was raised by one-offs, including a reduction in bad debt provisions and a $5.8 million reduction in tax reserves due to a forthcoming drop in income tax rates, and a forex loss of $3.6 million due to changes in the dollar/euro rate. Analysts predicted the drive to win new users would dampen Vimpelcom's financial recovery by boosting costs, but subscriber acquisition costs came off by $1 quarter on quarter to $40.90. Net operating revenues climbed to $114.10 million from $94.68 million last quarter and $70.72 million for Q3 2000. Operating expenses rose to $88.64 million from $74.04 million and $71.63 million respectively. Earnings before interest, taxes, depreciation and amortisation (EBITDA) totalled $40.94 million compared with $14.13 million previously. Margins edged off quarter on quarter to 35.9 percent from 37.9 percent. The company has said it is aiming to keep margins in the low thirties. "In general, Moscow (operations are) probably going to improve in the fourth quarter and the regions will put pressure on margins because we are building green fields (projects)," CEO Jo Lunder told a conference call. Lunder said that trend would reverse at the end of 2002.

VimpelCom Ltd.

Altimo, a leading private equity group, operating on some of the world’s most desirable and potentially lucrative mobile telecommunications markets, was created in 2005 from Alfa Telecom, which itself was established in 2004 to hold the telecoms investments of the Alfa Group Consortium (VimpelCom Ltd. and Turkcell Iletisim Hizmetleri A.S.). Those assets are in Russia, the CIS and other promising emerging markets.

VimpelCom Ltd. provides voice and data services through a range of wireless, fixed and broadband technologies. VimpelCom Ltd. is headquartered in Amsterdam and has operations in Russia, Ukraine, Kazakhstan, Uzbekistan, Tajikistan, Georgia, Armenia, Kyrgyzstan, Laos, Algeria, Bangladesh, Canada, Italy, Pakistan, Burundi, Zimbabwe and Central African Republic covering territory with a total population of about 753 million with 214 mln subscribers. VimpelCom Ltd. operating companies provide services under the “Beeline”, “Kyivstar”, “Djuice”, “Wind”, “Infostrada”, “Mobilink”, “Leo”, “Banglalink”, “Telecel” and “Djezzy” brands. VimpelCom Ltd. is traded on NASDAQ under the symbol “VIP”. As of 18 April 2013, Altimo owned 47.85% of the voting shares of VimpelCom Ltd., economic interest is 56.2%.

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