- 94% Year-to-Year Subscriber Growth
Moscow and New York (December 10, 1997) Р Open Joint Stock Company Vimpel-Communications (ТVimpelCom") (NYSE: VIP) today reported results for the third quarter ended September 30, 1997.
For the third quarter of 1997, VimpelCom reported total operating revenues of $78.0 million, a 30% increase over the $60.2 million reported in the third quarter of 1996. For the third quarter of 1997, net operating revenues (net of revenue-based taxes) were $75.0 million, a 30% increase of the $57.7 million reported in the same quarter of 1996. Operating income for the third quarter of 1997 was $19.4 million, a decrease of 15% compared with the $22.7 million reported in the same period of 1996. Net income for the quarter ended September 30, 1997, was $14.3 million, or $0.74 per share ($0.56 per ADS), a 13% decrease from the net income of $16.5 million, or $1.02 per share ($0.77 per ADS) earned in the third quarter of 1996. Each ADS represents 0.75 of one share of common stock. The decrease in net income was due primarily to increased operating costs resulting from the significant expansion of our activities and continued investments in our networks and infrastructure compared to one year ago.
For the nine months ended September 30, 1997, VimpelCom reported total operating revenues of $216.0 million, a 48% increase over the $146.1 million reported for the same period in 1996. Net operating revenues for the nine months ended September 30, 1997 were $207.4 million, a 48% increase compared with the $140.5 million in net operating revenues reported for the same period in 1996. Operating income for the nine months ended September 30, 1997 rose to $59.4 million, up 15% compared with the $51.8 million reported in the same period in 1996. Net income for the nine months ended September 30, 1997 was $46.9 million, or $2.43 per share ($1.82 per ADS), a 36% increase over the net income of $34.4 million, or $1.96 ($1.47 per ADS) earned for the same period in 1996.
As of September 30, 1997, VimpelCom had approximately 87,600 subscribers in the Moscow License Area, representing a growth of 94% over the approximately 45,200 subscribers at the end of the third quarter of 1996.
Commenting on today’s announcement, Dmitri Zimin, President and Chief Executive Officer of VimpelCom said: ТWe are pleased with our strong subscriber growth and overall progress this quarter. We added a record number of subscribers in the third quarter. As part of our strategy, we are aggressively signing up subscribers and expanding our D-AMPS network while continuing to roll out the GSM-1800 network to build the base for future growth. The build-out of the GSM-1800 network is proceeding as planned. In addition, the Company has concluded international roaming agreements with seven countries including the UK, Germany and Switzerland."
ТIn the third quarter of 1997, the Moscow D-AMPS Network was extended to reach the capital of the Kaluga Region (some 200 kilometers south-west of Moscow) providing contiguous coverage. The D-AMPS network maintains its lead as the largest cellular network in Russia. We have also been active in developing new AMPS licensed territories. We acquired an AMPS license for our joint venture (51%) in Ulyanovsk and started test mode operations in Petrozavodsk, the capital of the Republic of Karelia where our joint venture (65%) was awarded an AMPS license. These new licenses add two million pops Р giving us over 26 million people in our territories. Our goal is to continue to expand our regional footprint in Russia."
EBITDA for the third quarter of 1997 was $26.6 million, 4% higher than the $25.5 million in the same quarter of 1996. The EBITDA margin in the third quarter of 1997 was 35%, a decrease from 44% EBITDA margin in the same period in 1996. This decrease in EBITDA margin is due primarily to increases in the provision for doubtful accounts and higher selling, general and administrative expenses due to the overall increase in business activity compared to the same period in 1996 and start-up expenses related to the new GSM-1800 service.
Selling, general and administrative expenses, excluding depreciation and amortization, for the third quarter of 1997, increased 124% to $20.4 million from the $9.1 million reported in the same quarter in 1996. The increase in selling, general and administrative expenses over the third quarter of 1996 resulted primarily from the increase in the level of business activity compared with the same period of 1996, including increases in salaries, marketing and dealer commissions, rents, professional fees and other operating expenses associated with the build-out of the Company’s support infrastructure and other customer-related and administrative facilities. In addition, the third quarter of 1997 included organizational costs resulting from the commercial launch of the new GSM-1800 network.
The Company recorded a $4.1 million provision for doubtful accounts receivable compared with $1.9 million in the corresponding quarter of 1996. The increase in the provision for doubtful accounts is due primarily to the increase in the level of business activity in the third quarter of 1997 as compared to the corresponding period of 1996.
Depreciation and amortization expense increased to $7.2 million in the third quarter of 1997, a 157% increase compared to $2.8 million in the corresponding period of 1996. The increase was due to the increased depreciable asset base resulting from the Company’s continuing capital investments in both its D-AMPS and GSM-1800 networks in order to expand capacity and coverage throughout its licensed areas.
Having begun full-scale operations in 1994, VimpelCom is now the largest provider of cellular telecommunications in Russia, marketing its services under the brand name ТBee Line." The Group’s primary operating area includes the City of Moscow and the Moscow Region, which together cover a population of 15 million people. The Group operates the only Digital Advanced Mobile Phone System (ТD-AMPS") cellular system and the first Russian PCS network, using GSM technology, in the Moscow License Area. VimpelCom completed an initial public offering of American Depository Shares (ADS) in November 1996 and is the first and only Russian company listed on the New York Stock Exchange.
This press release contains forward-looking statements related to the development of the Company’s business. These statements are based on management’s best assessment of future market conditions and trends. The actual outcome may differ from these statements as a result of unforeseen developments from competition, governmental regulations of the wireless telecommunications industry, general political uncertainties in Russia and general economic developments in Russia. 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 release, or to make corrections to reflect future events or developments.
For more information, contact:
John McInerney, Lekha Rao
Dewe Rogerson, Inc.
Open Joint Stock Company Vimpel-Communications
Unaudited Consolidated Condensed Statements of Income
|Three months ended
|Nine months ended
|(In thousands, except per share (ADS) amounts)|
|Service revenues and connection fees||US$47,679||US$69,805||US$115,658||US$191,716|
|Sales of handsets and accessories||10,301||8,041||25,966||22,402|
|Installation and equipment contracts||2,263||148||4,510||1,863|
|Total operating revenues||60,243||77,994||146,134||215,981|
|less revenue-based taxes||2,560||3,013||5,657||8,574|
|Net operating revenues||57, 683||74,981||140,477||207,407|
|Service costs||11, 118||16,985||27,135||45,133|
|Cost of handsets and accessories sold||8,180||6,837||15,871||16,401|
|Cost of installation and equipment contracts||1,924||95||3,744||1,170|
|Selling, general and administrative expenses||9,105||20,357||29,857||57,579|
|Depreciation and amortization||2,764||7,185||7,152||16, 864|
|Provision for doubtful accounts||1,885||4,129||4,935||10,840|
|Total Operating expenses||34,976||55,588||88,694||147,987|
|Other income and expenses:|
|Net foreign exchange (loss) gain||510||(132)||(303)||2,278|
|Total other income and expenses||(212)||(146)||(4,329)||4,229|
|Income before income taxes and minority interest||22,495||19,247||47,544||63,649|
|Provision for income taxes||5,996||5,253||13,141||17,077|
|Minority interest in net losses of subsidiaries||0||(281)||0||(320)|
|Net income per common share||$1.02||$0.74||$1.96||$2.43|
|Net income per ADS equivalent||$0.77||$0.56||$1.47||$1.82|
|Weighted average common shares outstanding (thousands)||16,175||19,280||17,539||19,280|
|EBITDA||US $25,471||US $26,578||US $63,835||US $76,284|
Open Joint Stock Company Vimpel-Communications
Condensed Consolidated Balance Sheet
|(In thousands US dollars)|
|Cash and cash equivalents||US$ 33,316||US$ 20,223|
|Other current assets||21,967||29,255|
|Total current assets||99,040||135,273|
|Property and equipment, net||179,808||297,577|
|Total Assets||US$ 298,889||US$ 451,479|
|Liabilities and shareholders' equity|
|Other accrued liabilities||10,507||20,896|
|Total current liabilities||63,931||114,191|
|Deferred incomes taxes||23,774||28, 840|
|Equipment financing and other liabilities||61,818||108,584|
|Total liabilities and shareholders' equity||US$ 298,889||US$ 451,479|