Transcript Third Quarter and Nine Month Financial and Operating

VimpelCom
Presentation of 3Q2004
Financial and Operating Results
November 18, 2004
Disclaimer
This presentation contains "forward-looking statements", as the phrase is defined in Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements relate, in part, to the
Company’s development plans, such as national and international expansion. These statements also relate to the
consummation of the merger between VimpelCom and each of VimpelCom-Region and KB Impuls, each of which is
subject to certain conditions. If any of the conditions are not met, the merger will not be consummated.
Furthermore, there are risks relating to such mergers due to the fact under Russian law, it appears that certain
licenses and permissions should be issued after the consummation of the mergers, and it is possible that they may
not be issued in a timely manner, or on the same terms as the existing licenses and permissions.The forwardlooking statements are based on management's best assessment of the Company's strategic and financial position,
future market conditions and trends and its ability to consummate the mergers and acquisition. These discussions
involve risks and uncertainties. The actual outcome may differ materially from these statements as a result of
unforeseen developments from regulatory authorities, competition, governmental regulations of the wireless
telecommunications industry, general political and social uncertainties in Russia and Kazakhstan, general economic
developments in Russia and Kazakhstan, the Company’s ability to continue to grow its overall subscriber base,
continued volatility in the world economy and other factors. There can be no assurance that such risks and
uncertainties will not have material adverse effects on the Company’s development plans. 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, 2003 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
presentation, or to make corrections to reflect future events or developments.
2
VimpelCom’s Strategy
Extract value from
existing operations
‣ Increase loyalty, reduce
churn
‣ Improve network quality
perception
‣ Increase market share
in business/Hi-value
segment
‣ Stimulate traffic usage
and up-sell / cross-sell
VAS
Win the regional
growth game
Expansion outside
Russia
‣ Capture organic growth
‣ Utilize unified business
model:





Brand, tariffs and products
Network rollout &
operations
Customer Service
IT, Billing and Reporting
Organizational structure
‣ Apply tailored strategy for
each region
‣ Acquisition in Kazakhstan
‣ Selective acquisitions and
green field opportunities in
the CIS
‣ Industrial approach
utilizing synergies with
existing VimpelCom
operations
Ensure cost efficiency
3
Become the leading wireless operator in Russia
and the CIS
Operating Highlights
‣ 22.3 million subscribers as of November 18, 2004,
including 725,500 in Kazakhstan
‣ Operations encompass 72 Russian regions, the
largest number of any Russian cellular operator
‣ Leader in subscriber net additions in Russia
‣ CIS expansion started with an acquisition of KaRTel, a GSM operator in Kazakhstan
‣ Strong financial results with the 3Q2004 OIBDA
close to $300 million
‣ Roaming available in 171 countries with GPRS
roaming available in 55 countries, one of the
largest coverage in the world
4
National GSM network rollout
Moscow
Population: 17.0 mln.
Central
Population: 21.0 mln.
59
44
58 49
47
11
4
19 5 1
24 9 2
23
8 7
12
46
3
28 15
29
56
Urals
Population: 18.3 mln.
70
39
43 42
33
Northwest
Population: 14.0 mln.
30
55
60
65
66
10
6
21
40
20
13
71
54
32 51
50 38 26
14
61
68
64
72
67
48
36
22
31
37
52
57
45
53
27
25
41
35
18
Volga
Population: 25.2 mln.
17
16
62
63
69
34
South
Population: 22.9 mln.
Siberia
Population: 15.3 mln.
In commercial operation
5
Other licensed regions
Far East
Population: 11.4 mln.
Unlicensed territories
National GSM network rollout (regions)
Area
Super
Region
1. City of Moscow*
2. Moscow Region*
3. Voronezh
4. Tver
5. Kaluga
6. Vladimir
7. Ryazan
8. Lipetsk
9. Tula
10.Yaroslavl
11.Smolensk
12.Belgorod
13.N. Novgorod
14.Saratov
15.Rostov
16.Barnaul
17.Kemerovo
MLA *
MLA *
Central
Central
Central
Central
Central
Central
Central
Central
Central
Central
Volga
Volga
South
Siberia
Siberia
Area
Popul.
(‘000)
Network
Launch
10,358
6,627
2,379
1,473
1,041
1,525
1,228
1,213
1,676
1,368
1,050
1,512
3,524
2,669
4,407
2,607
2,900
Jul 1999
Jul 1999
May 2000
Sep 2001
Sep 2001
Sep 2001
Sep 2001
Oct 2001
Oct 2001
Oct 2001
Nov 2001
Nov 2001
Jan 2002
Jan 2002
Jan 2002
Jan 2002
Jan 2002
* Moscow license area
6
Area
Super
Region
18. Novosibirsk
19. Bryansk
20. Kostroma
21. Ivanovo
22. Orenburg**
23. Kursk
24. Orel
25. Omsk
26. Kazan
27. Tomsk
28. Krasnodar
29. Maykop
30. Volgograd
31. Ufa
32. Cheboksary
33. Nalchik
34. GornoAltaysk
Siberia
Central
Central
Central
Volga
Central
Central
Siberia
Volga
Siberia
South
South
South
Volga
Volga
South
Siberia
** Acquisitions
Area
Popul.
(‘000)
2,692
1,379
737
1,149
2,177
1,236
861
2,079
3,780
1,046
5,571
-2,702
4,103
1,314
900
203
Network
Launch
Jan 2002
May 2002
May 2002
Jun 2002
Jul 2002
Aug 2002
Aug 2002
Aug 2002
Aug 2002
Sep 2002
Sep 2002
Sep 2002
Oct 2002
Oct 2002
Oct 2002
Oct 2002
Oct 2002
National GSM network rollout (regions)
Area
Super
Region
35. Krasnoyarsk
36. Samara
37. Astrakhan
38. Ulyanovsk
39. Kaliningrad**
40. Norilsk
41. Makhachkala
42. Stavropol**
43. Cherkessk**
44. St.Petersburg
45. Tura
46. Tambov
47. Leningrad Reg.
48. Ekatirinburg
49. Novgorod
50. Penza
51. Yoshkar-Ola
52. Chelyabinsk
53. Tyumen
54. Saransk
55. Elista
Siberia
Volga
South
Volga
North W
Siberia
South
South
South
North W
Siberia
Central
North W
Ural
North W
Volga
Volga
Ural
Ural
Volga
South
Area
Popul.
(‘000)
2,966
3,240
1,007
1,382
955
135
2,584
2,730
440
4,669
18
1,180
1,671
4,490
695
1,453
728
3,606
3,266
889
292
Network
Launch
Oct 2002
Nov 2002
Nov 2002
Dec 2002
Dec 2002
Dec 2002
Jan 2003
Jan 2003
Jan 2003
April 2003
Aug 2003
Oct 2003
Oct 2003
Dec 2003
Dec 2003
Dec 2003
Dec 2003
Dec 2003
Dec 2003
Dec 2003
Dec 2003
Area
56. Vladikavkaz
South
57. Kurgan
Ural
58. Pskov
North W
59. Petrozavodsk North W
60 Vologda
North W
61. Izhevsk
Volga
62. Blagovesch.** Far East
63. Khabarovsk** Far East
64.P-Kamchatsky** Far East
65. Arkhangelsk
North W
66. Naryan-Mar
North W
67. Perm
Volga
68. Kudymkar
Volga
69. Abakan
Siberia
70. Murmansk
North W
71. Kirov
Volga
72. Surgut
Ural
** Acquisitions
7
Super
Region
Area
Popul.
(‘000)
710
1,020
761
717
1,270
1,571
903
1,435
359
1,336
42
2,824
-546
893
1,504
1,433
Network
Launch
Mar 2004
Apr 2004
Apr 2004
Apr 2004
May 2004
Jun 2004
Jun 2004
Jun 2004
Jun 2004
July 2004
July 2004
Aug 2004
Aug 2004
Aug 2004
Aug 2004
Sep 2004
Sep 2004
Strong Subscriber Growth
VimpelCom Subscriber Base, mln
VimpelCom Market Share
60%
20.55
Including KaR-Tel’s
676,300
49%
49%
16.30
48%
46%
45%
13.37
13.22
11.44
31%
10.12
9.26
4.18
40%
3Q03
5.78
5.66
4Q03
6.04
1Q04
6.18
2Q04
6.65
3Q04
21%
33%
34%
Moscow
Regions
Source: VimpelCom, independent sources
23%
28%
30%
2Q04
3Q04
25%
0%
3Q03
8
32%
7.33
20%
5.08
31%
4Q03
Moscow
1Q04
Russia
Regions
Strong Growth In Russian Regions
VimpelCom Regional Subscriber Base, ('000)
13,223
387
10,120
7,329
5,777
4,183
316
824
744
1,073
1,226
3Q03
9
Central
Northwest
496
1,030
96
619
1,267
479
1,090
322
2,084
1,615
2,512
240
852
1,938
3,104
1,494
2,442
1,166
1,830
1,458
1,616
4Q03
Volga
Ural
2,023
1Q04
2,711
2Q04
South
Far East
3,566
3Q04
Siberia
Network Rollout As Of Sept. 30, 2004
Moscow
Regions
3Q2004 2Q2004
3Q2004 2Q2004
3Q2004 2Q2004
№ of BTSs
2 957
2 847
6 809
5 641
9 766
8 488
№ of BSCs
119
117
164
137
283
254
№ of MSCs
12
12
66
57
78
69
Note:
BTS – base transceiver station
BSC – base station controller
MSC – mobile switching center
10
Total
Source: VimpelCom
Key Subscriber Statistics
(‘000)
Moscow
30 Sep 03
YtY
30 Jun 04
QtQ
6,646
5,076
31%
6,183
8%
Contract
Prepaid
867
5,779
799
4,277
9%
35%
844
5,339
3%
8%
Regions
13,223
4,183
216%
10,121
31%
KaR-Tel
Total
676
n/a
--
n/a
--
20,545
9,259
122%
16,304
26%
2,865
17,680
1,470
7,789
95%
127%
2,160
14,144
33%
25%
Churn (quarterly) 7.2%
9.6%
-
9.4%
-
Contract
Prepaid
11
30 Sep 04
Kazakhstan
Key Financial and Operating Figures For the Period of
September 3 – September 30, 2004
Number of subscribers as of
September 30, 2004
Contract
Prepaid
Total operating revenues (US$,000)
Net income (US$,000)
12
676,300
580,600
95,700
10,759
2,284
ARPU (US$)
16.3
MOU (min)
71.8
SAC (US$)
25.2
VimpelCom 3Q2004 Financial Highlights
Net Revenues, $ Million
58.9%
Net Income, $ Million
41.6%
102.2
602.4
72.2
379.0
3Q2003
3Q2004
3Q2003
OIBDA Margin
OIBDA, $ Million
65.7%
295.7
3Q2004
47.1%
49.1%
178.5
3Q2003
13
Source: VimpelCom
3Q2004
3Q2003
3Q2004
Key Financial Figures
($ mln)
3Q04
Net Revenues*
Moscow*
Regions*
Kazakhstan*
Gross Margin
OIBDA
OIBDA Margin
602.4
313.8
277.8
10.8
81.6%
295.7
49.1%
379.0
259.7
119.3
n/a
81.8%
178.5
47.1%
Net Income*
Net Income Margin
Moscow
Regions
Kazakhstan
102.2
17.0%
55.9
75.2
2.3
72.2
19.0%
61.6
17.9
n/a
SG&A
% of Net Revenues
192.5
32.0%
126.9
33.5%
D&A
% of Net Revenues
Capex
3Q03
YtY
58.9%
20.8%
132.9%
--65.7%
--
QtQ
490.9
289.1
201.8
n/a
82.7%
244.7
49.8%
22.7%
8.5%
37.7%
--20.8%
--
41.6%
--9.3%
320.1%
--
91.0
18.5%
68.9
43.0
n/a
12.3%
--18.9%
74.9%
--
51.7%
--
158.5
32.3%
21.5%
--
85.7
14.2%
51.8
13.7%
65.4%
--
79.6
16.2%
7.7%
--
346.5
165.3
109.6%
272.4
27.2%
* Net operating revenues and net income excluding inter-company transactions
14
2Q04
Operational Indicators
15
3Q04
3Q03
YtY
2Q04
QtQ
ARPU, Blended ($)
ARPU Moscow
Contract (Moscow)
Prepaid (Moscow)
ARPU Regions
10.7
16.0
56.6
9.7
8.4
14.4
17.5
53.6
10.4
11.5
-25.7%
-8.6%
5.6%
-6.7%
-27.0%
10.8
15.2
54.0
9.0
8.3
-0.9%
5.3%
4.8%
7.8%
1.2%
MOU, Blended (min)
MOU Moscow
Contract (Moscow)
Prepaid (Moscow)
MOU Regions
99.4
123.7
370.8
85.2
86.7
92.7
92.5
284.2
54.7
93.0
7.3%
33.7%
30.5%
55.8%
-6.8%
96.3
112.7
364.1
72.9
84.5
3.2%
9.8%
1.8%
16.9%
2.6%
SAC, Blended ($)
Moscow
Regions
14.2
25.4
10.8
18.8
27.0
12.3
-24.5%
-5.9%
-12.2%
14.1
23.4
11.0
0.7%
8.5%
-1.8%
Strong Balance Sheet
Assets and Liabilities, $'000
3,607
2,302
Cash and Cash Equivalents
Total Assets
Total Debt
- Short-term
- Long-term
Shareholder’s Equity
189,044
157,611
263,657
3,607,015 2,302,232 1,692,744
1,324,420
606,991
650,580
476,037
214,717
176,265
848,383
392,274
474,315
1,273,699
998,216
662,663
929,275
613,230
322,209
185,326
427,904
97,417
224,792
68,045
68,246
46,586
1.0
1.4
13.7
0.4
0.6
1.0
9.0
0.3
1.0
2.0
6.9
0.4
- LTM Depreciation and amortization * * 283,634
- LTM Operating income
645,641
1,324
651
2003
Source: VimpelCom
LTM Interest
Debt/Equity
Debt/OIBDA * * *
OIBDA/Interest
Debt/Assets
607
Total Debt
16
09/30/04 12/31/03 12/31/02
LTM OIBDA*
1,693
2002
($’000)
9M2004
Total Assets
* LTM OIBDA constitutes the sum of the lines: LTM Operating income and LTM Depreciation and amortization
LTM stands for “last twelve months” to reporting date
* * Includes Impairment of long-lived assets
* * * In cases when OIBDA is part of financial ratios it is deemed to be calculated in accordance with the
reconciliation tables herein
Net Operating Cash Flow vs CAPEX
Net Operating Cash Flow/Capex, $ mln
1,028
68.0%*
70.3%*
509.1
728.0
699.2
511.9
43.5%*
221.7
2002
2003
30.09.2004, LTM
Net Operating Cash Flow
* Net operating cash flow as % of Capex
17
Capex
Corporate Activities
‣ Federal Agency on Communications
granted VimpelCom 10 million telephone
numbers since August 2004
‣ Merger between VimpelCom and
VimpelCom-R is planned to be completed
by December 9, 2004
‣ Merger between VimpelCom and KB Impuls
is planned to be completed by year end of
2004
‣ ADR to common share ratio change from
4:3 to 4:1 is effective November 22, 2004
18
Summary
‣ Ongoing rapid subscriber growth resulted in more
than 22 million subscribers
‣ Overall market share in Russia has increased to
34%
‣ The Company has taken a strong lead in the
subscriber acquisitions in the regions of Russia
‣ Strong financial results with the 3Q2004 OIBDA
close to $300 million
‣ Acquisition of Kar-Tel, a Kazakh cellular operator,
gives VimpelCom an important footprint in the
richest country in the CIS outside Russia
19
Reconciliation tables of non-U.S. GAAP measures
to their most directly comparable U.S. GAAP
financial measures
Reconciliation of OIBDA and OIBDA margin
(Three months ended)
Sep. 30, 2004
Sep. 30, 2003
($ ‘000)
(Nine months ended)
Sep. 30, 2004
Sep. 30, 2003
Reconciliation of VimpelCom OIBDA to operating income
OIBDA
295,663
Impairment loss
178,472
--
742,382
--
(7,354)
426,337
--
Depreciation
(70,723)
(42,894)
(190,803)
(108,486)
Amortization
(14,962)
(8,871)
(33,618)
(24,981)
126,707
510,607
Operating Income
209,978
292,870
Reconciliation of VimpelCom OIBDA margin to operating income
as percentage of net operating revenues
OIBDA margin
49.1%
47.1%
49.1%
45.9%
0%
0%
(0.5%)
0%
Depreciation as %
of net operating revenues
(11.7%)
(11.3%)
(12.6%)
(11.6%)
Amortization as %
of net operating revenues
(2.5%)
(2.4%)
(2.2%)
(2.7%)
34.9%
33.4%
33.8%
31.6%
Impairment loss
Operating income as %
of net operating revenues
21
Reconciliation of OIBDA and OIBDA margin
(Three months ended)
Sep. 30, 2004
Sep. 30, 2003
($ ‘000)
(Nine months ended)
Sep. 30, 2004
Sep. 30, 2003
Reconciliation of VimpelCom-Region OIBDA to operating income
OIBDA
135,032
49,788
297,818
98,421
Depreciation
(22,899)
(12,893)
(60,709)
(28,177)
Amortization
(5,710)
(5,788)
(18,482)
(15,975)
106,423
31,107
218,627
54,269
Operating Income
Reconciliation of VimpelCom-Region OIBDA margin to operating income
as percentage of net operating revenues
OIBDA margin
47.8%
38.7%
44.1%
34.4%
Depreciation as %
of net operating revenues
(8.1%)
(10.0%)
(9.0%)
(9.9%)
Amortization as %
of net operating revenues
(2.0%)
(4.5%)
(2.7%)
(5.6%)
37.7%
24.2%
32.4%
19.0%
Operating income as %
of net operating revenues
22
Reconciliation of ARPU
(Three months ended)
Sep. 30, 2004
Sep. 30, 2003
($ ‘000)
(Nine months ended)
Sep. 30, 2004
Sep. 30, 2003
Reconciliation of ARPU to service revenue and connection fees
Service revenue and
connection fees
US$ 359,815
US$ 1,456,989
US$ 880,340
Less: Connection fees
191
361
527
1,077
Less: Revenue from rent
of fiber-optic channels
408
308
1,261
958
Service revenue used to
calculate ARPU
Average number of
subscribers, ‘000
ARPU per month (US$)
23
US$ 583,278
582,679
359,146
1,455,201
878,305
18,184
8,305
15,042
6,906
10.7
14.4
10.7
14.1
Reconciliation of SAC
($ ‘000)
(Three months ended)
Sep. 30, 2004
Sep. 30, 2003
(Nine months ended)
Sep. 30, 2004
Sep. 30, 2003
Reconciliation of SAC to selling, general and
administrative expenses
Selling, general and
administrative expenses
192,513
126,860
489,063
318,891
122,913
77,220
313,025
199,337
69,600
49,640
176,038
119,554
16,780
11,668
46,493
34,631
52,820
37,972
129,545
84,923
4,894
2,641
11,861
5,974
14.2
18.8
14.8
20.0
Less: General and admin.
expenses
Sales and marketing
expenses, including
advertising & marketing
expenses
dealers’ commission
expenses
New gross subs, ‘000
SAC (US$)
24