Transcript Fourth Quarter and Annual 2003 Financial and Operating

VimpelCom
Presentation of 4Q and Annual 2003
Financial and Operating Results
March 25, 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 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 regulatory and certain other approvals, as well as certain other conditions
precedent, including the transfer of all respective licenses and permissions to VimpelCom. If any of the
respective approvals are not obtained or any condition precedent is not met, the mergers will not be
consummated. The forward-looking 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. 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, 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. 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, 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 presentation, or to make corrections to reflect future events or developments.
2
VimpelCom 2003 Financial Highlights
Net Revenues, $ Million
73.8%
Net Income, $ Million
80.6%
234.0
1335.6
129.6
768.5
2002
2003
2002
2003
OIBDA Margin
OIBDA, $ Million
90.3%
613.2
41.9%
45.9%
322.2
2002
3
Source: VimpelCom
2003
2002
2003
VimpelCom-R 4Q2003 Financial Highlights
Net Revenues, $ Million
20.6%
Net Income, $ Million
102.3%
35.6
155.2
128.7
17.6
3Q2003
4Q2003
3Q2003
4Q2003
OIBDA Margin
OIBDA, $ Million
25.1%
62.3
49.8
3Q2003
4
Source: VimpelCom
38.7%
4Q2003
3Q2003
40.2%
4Q2003
Operating Highlights
‣ 13.2 million subscribers in Russia as of March 25,
2004
‣ National market share increased from 28% to 31%
during 2003
‣ Fastest growing operator in Central, Volga, South
and Siberia super-regions
‣ 15 new regions launched in 2003 increasing
VimpelCom’s footprint to 55 regions
‣ Migration of regional subscribers to the unified
integrated billing and customer relations
management system is completed
‣ Introduction of countrywide prepaid on-line
roaming and GPRS based services
5
National GSM Network Rollout
Moscow
Population: 17.0 mln.
Central
Population: 21.0 mln.
Northwest
Population: 14.0 mln.
Urals
Population: 18.3 mln.
39
44
49 47
11
4
10
5 1
9 2 6 21 20
2324
8 7
13
12
46 54
32 51
3
50
38 26
30 14
28 15
36
29
31
22
43 42 55
37
40
19
45
48
52
33
56
41
53
27
25
35
18
Volga
Population: 25.2 mln.
South
Population: 22.9 mln.
17
16
34
Siberia
Population: 15.3 mln.
Far East
Population: 11.4 mln.
In commercial operation
6
Other licensed regions
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
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
MLA *
MLA *
Central
Central
Central
Central
Central
Central
Central
Central
Central
Central
Volga
Volga
South
Siberia
Siberia
Siberia
Central
Central
Central
Volga
Central
Central
Siberia
Volga
Siberia
South
South
South
Volga
* Moscow license area
7
** Acquisitions
Area
Popul.
(‘000)
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
2,692
1,379
737
1,149
2,177
1,236
861
2,079
3,780
1,046
5,571
-2,702
4,103
Network
Launch
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
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
Area
Super
Region
32. Cheboksary
33. Nalchik
34. Gorno-Altaysk
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. Ekaterinburg
49. Novgorod
50. Penza
51. Yoshkar-Ola
52. Chelyabinsk
53. Tyumen
54. Saransk
55. Elista
56. Vladikavkaz
Volga
South
Siberia
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
South
Area
Popul.
(‘000)
1,314
900
203
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
710
Network
Launch
Oct 2002
Oct 2002
Oct 2002
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
Mar 2004
Strong Subscriber Growth
VimpelCom Subscriber Base, mln
11.44
VimpelCom Market Share
60%
52%
9.26
7.43
6.19
5.15
49%
49%
29%
30%
31%
31%
4.18
40%
3.00
28%
1.44
3.95
49%
5.78
2.24
3.71
50%
4.43
5.08
5.66
20%
17%
19%
21%
23%
13%
0%
4Q02
1Q03
2Q03
Moscow
8
3Q03
Regions
Source: VimpelCom, independent sources
4Q03
4Q02
1Q03
Moscow
2Q03
Russia
3Q03
4Q03
Regions
Strong Growth In The Regions
VimpelCom Regional Subscriber Base, ('000)
5,777
496
4,183
1,030
316
3,005
2,242
1,440
110
285
106
416
416
523
706
4Q02
Central
9
119
422
188
594
545
1,166
824
744
1,458
1,073
775
579
1Q03
Volga
903
2Q03
South
1,616
1,226
3Q03
4Q03
Siberia
Northwest
Network Rollout As Of 12/31/03
Moscow
Regions
Total
4Q2003 3Q2003
4Q2003 3Q2003
4Q2003 3Q2003
№ of BTSs
2,681
2,556
4,330
3,525
7,011
6,081
№ of BSCs
116
114
111
89
227
203
№ of MSCs
12
10
47
45
59
55
Note:
BTS – base transceiver station
BSC – base station controller
MSC – mobile switching center
10
Source: VimpelCom
Key Subscriber Statistics
(‘000)
31 Dec 03
Moscow
5,660
3,713
52%
5,076
12%
Contract
Prepaid
820
4,840
725
2,988
13%
62%
799
4,277
3%
13%
Regions
5,777
1,440
301%
4,183
38%
11,437
5,153
122%
9,259
24%
1,491
9,946
1,082
4,071
38%
144%
1,470
7,789
1%
28%
Churn (quarterly) 9.7%
8.7%
-
9.6%
-
Total
Contract
Prepaid
11
31 Dec 02
YtY
30 Sept 03
QtQ
Key Financial Figures
($ mln)
4Q03
4Q02
YtY
Net Revenues*
Moscow*
Regions*
407.7
263.0
144.7
229.0
192.5
39.8
78.1%
36.6%
263.7%
379.0
259.7
119.3
7.6%
1.3%
21.3%
Gross Margin
OIBDA
OIBDA Margin
82.0%
186.9
45.8%
79.1%
84.6
37.0%
-120.9%
--
81.8%
178.5
47.1%
-4.7%
--
Net Income*
Net Income Margin
Moscow
Regions
67.7
16.6%
48.6
35.5
39.1
17.1%
46.3
(8.7)
73.3%
-5.1%
507.3%
72.2
19.1%
61.6
17.9
-6.2%
--21.5%
98.1%
SG&A
% of Net Revenues
148.8
36.5%
89.8
39.2%
65.6%
--
126.9
33.5%
17.3%
--
Bad Debt
% of Net Revenues
-1.3
-0.3%
6.7
2.9%
-119.7%
--
4.9
1.3%
-127.3%
--
251.6
179.9
39.8%
165.3
52.2%
Capex
12
* Net operating revenues and net income excluding inter-company transactions
3Q03
QtQ
Operational Indicators
ARPU, Blended ($)
ARPU Moscow
Contract (Moscow)
Prepaid (Moscow)
ARPU Regions
MOU, Blended (min)
MOU Moscow
Contract (Moscow)
Prepaid (Moscow)
MOU Regions
SAC, Blended ($)
Moscow
Regions
13
4Q03
4Q02
YtY
3Q03
QtQ
12.5
15.7
52.7
9.1
10.0
16.0
17.6
48.9
9.4
11.8
-21.9%
-10.8%
7.8%
-3.2%
-15.3%
14.4
17.5
53.6
10.4
11.5
-13.2%
-10.3%
-1.7%
-12.5%
-13.0%
89.3
84.7
303.1
45.9
94.4
89.3
89.5
243.4
49.6
88.5
0.0%
-5.4%
24.5%
-7.5%
6.7%
92.7
92.5
284.2
54.7
93.0
-3.7%
-8.4%
6.7%
-16.1%
1.5%
18.1
28.4
12.1
20.9
29.4
13.5
-13.4%
-3.4%
-10.4%
18.8
27.0
12.3
-3.7%
5.2%
-1.6%
Strong Balance Sheet
Assets and Liabilities, $'000
($’000)
2,302
1,693
Cash and Cash Equivalents
Total Assets
Total Debt
- Short-term
- Long-term
Shareholder’s Equity
12/31/03 12/31/02 12/31/01
157,611
263,657
2,302,232 1,692,744
606,991
650,580
214,717
176,265
392,274
474,315
998,216
662,663
LTM OIBDA*
- LTM Depreciation and amortization
- LTM Operating income
926
700
223
2000
LTM Interest
651
607
278
2001
2002
2003
Total Debt Total Assets
Debt/Equity
Debt/OIBDA * *
OIBDA/Interest
Debt/Assets
144,172
925,806
277,673
90,350
187,323
508,121
613,230
322,209
148,456
185,326
427,904
97,417
224,792
61,306
87,150
46,586
26,865
1.0
2.0
6.9
0.4
0.5
1.9
5.5
0.3
68,246
0.6
1.0
9.0
0.3
* 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
* * In cases when OIBDA is part of financial ratios it is deemed to be calculated in accordance with the
reconciliation tables herein
14
Source: VimpelCom
Net Operating Cash Flow vs CAPEX
Net Operating Cash Flow/Capex, $ mln
728.0
509.1
238.3
511.9
221.7
101.1
2001
2002
Net Operating Cash Flow
15
Source: VimpelCom
2003
Capex
Corporate Actions
‣ Merger between VimpelCom and VimpelCom-R
Major remaining steps:
 Approval at the Joint EGM of VimpelCom and VimpelCom-R
shareholders on April 16;
 Transfer of licenses and frequencies to VimpelCom;
 Liquidation of VimpelCom-R;
 Placement of VimpelCom shares to Alfa and Telenor in
exchange for their ownership position in VimpelCom-R
16
Corporate Actions (con’t)
‣ Merger between VimpelCom and KB Impuls
Major steps:
 Approval at the AGM on May 26 by more than 50% of all
disinterested shareholders;
 Approval by anti-monopoly authorities;
 Obtaining third party consents (suppliers, creditors);
 Approval at the Joint EGM of VimpelCom and KB Impuls
shareholders (a formality required by Russian law);
 Transfer of licenses and frequencies from KB Impuls to
VimpelCom;
 Liquidation of KB Impuls
17
Summary
‣ Ongoing rapid subscriber growth resulted in more
than 13 million subscribers
‣ Strong financial results with net income growth
over 80%
‣ Leader in the key Moscow market; overall market
share in Russia has increased to 31%
‣ Ongoing corporate actions will create full
exposure for minority shareholders to regional
growth and simplify corporate structure
‣ Proposed merger with KB Impuls will safeguard
VimpelCom’s Moscow operations against
regulatory risks and simplify corporate structure
‣ Operational focus going forward: maintain
growth, sustain profitability and combat churn
18
Reconciliation of OIBDA and OIBDA margin
(Three months ended)
Dec. 31, 2003
Dec. 31, 2002
($ ‘000)
(Years ended)
Dec.31, 2003
Dec. 31, 2002
Reconciliation of VimpelCom OIBDA to operating income
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)
54,460
427,904
224,792
Operating Income
135,034
Reconciliation of VimpelCom OIBDA margin to operating income
as percentage of net operating revenues
OIBDA margin
45.8%
37.0%
45.9%
41.9%
Less: Depreciation as %
of net operating revenues
(10.5%)
(11.7%)
(11.3%)
(11.0%)
Less: Amortization as %
of net operating revenues
(2.2%)
(1.5%)
(2.6%)
(1.6%)
33.1%
23.8%
32.0%
29.3%
Operating income as %
of net operating revenues
19
Reconciliation of OIBDA and OIBDA margin
(Three months ended)
Dec. 31, 2003
Dec. 31, 2002
($ ‘000)
(Years ended)
Dec.31, 2003
Dec. 31, 2002
Reconciliation of VimpelCom-Region OIBDA to operating income
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
OIBDA margin
Less: Depreciation as %
of net operating revenues
Less: Amortization as %
of net operating revenues
Operating income as %
of net operating revenues
20
40.2%
(7.6%)
(3.9%)
28.7%
(0.1%)
36.5%
(3.7%)
(9.9%)
(9.1%)
(11.2%)
(1.8%)
(5.0%)
(1.8%)
22.4%
(16.7%)
(11.8%)