Form 6-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 6-K

 

Report of Foreign Issuer

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934

For the month of November 2007

Commission File Number 1-14522

 

Open Joint Stock Company “Vimpel-Communications”

(Translation of registrant’s name into English)

 

10 Ulitsa 8-Marta, Building 14, Moscow, Russian Federation 127083

(Address of principal executive offices)

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F  [X]    Form 40-F  [    ]

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):             .

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):             .

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes  [    ]    No  [X]

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-            .

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

    OPEN JOINT STOCK COMPANY
    “VIMPEL-COMMUNICATIONS”
                    (Registrant)

Date: November 29, 2007

      
    By:  

/s/ Alexander V. Izosimov

    Name:   Alexander V. Izosimov
    Title:  

Chief Executive Officer and

General Director

LOGO

FOR IMMEDIATE RELEASE

VIMPELCOM ANNOUNCES THIRD QUARTER AND NINE MONTH 2007

FINANCIAL AND OPERATING RESULTS

Moscow and New York (November 29, 2007) - Open Joint Stock Company “Vimpel-Communications” (“VimpelCom” or the “Company”) (NYSE: VIP), a leading provider of wireless telecommunications services in Russia and the Commonwealth of Independent States (CIS) today announced its financial and operating results for the quarter and nine months ended September 30, 2007.

Financial and Operating Highlights

 

•  

Net operating revenues reached a record high $1,955.9 million in the third quarter, a year-on-year increase of 43.9% and a quarter-on-quarter increase of 13.9%.

 

•  

OIBDA reached a record high $1,015.2 million, a year-on-year increase of 41.4% and a quarter-on-quarter increase of 13.2%.

 

•  

OIBDA margin was 51.9%, including 52.7% in Russia and 52.7% in Kazakhstan.

 

•  

Net income totaled a record high $458.0 million, a year-on-year increase of 70.7%.

 

•  

Operating cash flow reached a record high $856.5 million, a year-on-year increase of 34.1%.

 

•  

MOU and ARPU grew sequentially, including 8.9% ARPU growth in Russia

Commenting on today’s announcement, Alexander Izosimov, Chief Executive Officer of VimpelCom, said, “It was another strong quarter for VimpelCom. The Company achieved all-time records in key financial parameters: revenue, OIBDA, net income and operating cash flow.

“We are pleased with our progress in Russia and in the CIS countries, particularly in Ukraine and Uzbekistan. On the back of strong revenue growth, OIBDA of our Ukrainian business moved into positive territory, confirming our ability to build a profitable business in that country. In Uzbekistan, we built our market share, while improving margins.

“We believe that the increasing usage in Russia and expanding subscriber base in the CIS countries will continue to keep our business growing robustly”.

Changes in definitions and reported data

Beginning with the Company’s 1Q2007 earnings press release, the number of subscribers, ARPU and MOU are reported on the basis of active subscribers. For convenience, we continue to report the registered subscriber base and the related figures for comparable periods (see Attachment A for relevant definitions and refer to Attachment D for relevant data).

We continue to tighten our reported churn policy in order to decrease license costs associated with keeping registered subscribers in the base. For example, in Russia and Kazakhstan during the second and third quarters of 2007 we decreased the period for the disconnection of inactive pre-paid subscribers with a positive balance from twelve months to ten months and in Ukraine – from twelve months to six months.

 

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VimpelCom Announces Third Quarter And Nine Month 2007 Financial And Operating Results

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These changes decrease the number of registered subscribers and affect our reported market share, but have no impact on our active subscriber base.

In the future, our intention is to switch the subscriber churn policy from reporting on the basis of registered subscribers to reporting on the basis of active subscribers. We also intend to discontinue providing the number of registered subscribers, as it has become operationally irrelevant.

All the definitions in Attachment A refer to mobile subscribers. With the acquisition of Armentel, the Company also has fixed-line subscribers which are treated separately.

Attachments A, B, C and D present respectively

 

  - definitions for certain terms used in this press release,

 

  - the condensed consolidated financial statements of VimpelCom,

 

  - tables with relevant reconciliations of non-U.S. GAAP financial measures to their most directly comparable U.S. GAAP financial measures, and

 

  - certain additional reference data relating to the registered subscriber base.

Key Consolidated Financial and Operating Results

 

     Three months  
     3Q2007     3Q2006     Change,
3Q07/3Q06		     2Q2007     Change,
3Q07/2Q07		  

Active subscribers

    50,685,787     42,643,900     18.9 %   47,701,300     6.3 %

Fixed line subscribers

    616,175     N/A       610,300     1.0 %

Net operating revenues (US$, 000)

    1,955,938     1,358,853     43.9 %   1,717,167     13.9 %

OIBDA (US$, 000)

    1,015,158     717,796     41.4 %   896,758     13.2 %

OIBDA margin

    51.9 %   52.8 %     52.2 %  

Gross margin (US$, 000)

    1,589,625     1,109,219     43.3 %   1,402,665     13.3 %

Gross margin percentage

    81.3 %   81.6 %     81.7 %  

SG&A (US$, 000)

    556,518     387,236     43.7 %   494,445     12.6 %

SG&A percentage

    28.5 %   28.5 %     28.8 %  

Net income (US$, 000)

    458,050     268,370     70.7 %   359,273     27.5 %

Net income per share (US$)

    9.02     5.28       7.07    

Net income per ADS (US$)*)

    0.45     0.26       0.35    

*)

Number of ADSs for the purposes of this calculation is based on the new ratio of 20 ADSs per one ordinary share, which came into effect on August 21, 2007.

In the third quarter of 2007, VimpelCom invested $338.8 million for the purchase of long-lived assets. Additionally, the Company paid $232.7 million (net of cash of $2.8 million) for the acquisition of Severnaya Korona, a mobile operator in the Irkutsk region of Russia.

Consolidated figures represent the combined effect of the Company’s operations in Russia, Kazakhstan, Ukraine, Uzbekistan, Tajikistan, Georgia and Armenia.

 

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RUSSIA

    Three months  
   3Q2007     3Q2006     Change,
3Q07/3Q06		     2Q2007     Change,
3Q07/2Q07		  

Net operating revenues*) (US$, 000)

    1,652,266     1,228,062     34.5 %   1,459,014     13.2 %

including interconnect revenue

    224,402     133,455     68.1 %   203,348     10.4 %

OIBDA (US$, 000)

    871,163     666,354     30.7 %   779,828     11.7 %

OIBDA margin

    52.7 %   54.2 %     53.4 %  

Gross margin (US$, 000)

    1,363,407     1,016,335     34.1 %   1,208,626     12.8 %

Gross margin percentage

    82.5 %   82.7 %     82.8 %  

SG&A (US$, 000)

    477,277     346,157     37.9 %   418,738     14.0 %

SG&A percentage

    28.9 %   28.2 %     28.7 %  

Net income (US$, 000)

    422,580     279,958     50.9 %   355,665     18.8 %

ARPU, (US$)

    13.4     10.6     26.4 %   12.3     8.9 %

MOU, (min)

    208.9     151.9     37.5 %   192.6     8.5 %

SAC (US$)

    24.8     18.3     35.5 %   22.8     8.8 %

Active subscribers

    41,801,545     38,790,400     7.8 %   40,139,600     4.1 %

Churn

    10.1 %   9.9 %     7.6 %  

Subscriber market share**)

    30.4 %   32.4 %     30.9 %  

*)

Net operating revenues here exclude inter-company transactions (US$696 thousand in 3Q 2007, US$658 thousand in 3Q 2006, US$1,029 thousand in 2Q 2007).

**)

Subscriber market share data presented here and in the following country tables are published by AC&M-Consulting and are generally based on registered subscribers.

In Russia, our continued efforts to deliver growth through active marketing led to 34.5% year-on-year revenue increase. Our marketing efforts have also resulted in further building our brand recognition. Notably, international consulting company Interbrand Zintzmeyer & Lux valued VimpelCom’s “Beeline” brand at US$7.2 billion, naming it the most valuable Russian brand for the third year in a row.

In the third quarter of 2007, our ARPU continued to expand, reaching US$13.4, up 26.4% year-on-year and 8.9% quarter-on-quarter. This growth was driven by an 8.5% quarter-on-quarter increase in usage with stable pricing.

The high volatility of VimpelCom’s share price in the third quarter of 2007 increased our stock option accrual by $16.6 million as compared with the second quarter. This non-cash factor more than explains the quarter-on-quarter drop in the OIBDA margin.

 

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KAZAKHSTAN

    Three months  
   3Q2007     3Q2006     Change,
3Q07/3Q06		     2Q2007     Change,
3Q07/2Q07		  

Net operating revenues*)(US$, 000)

    166,262     103,497     60.6 %   148,622     11.9 %

including interconnect revenue

    28,494     23,975     18.8 %   26,487     7.6 %

OIBDA (US$, 000)

    88,127     49,023     79.8 %   80,317     9.7 %

OIBDA margin

    52.7 %   47.0 %     53.7 %  

Gross margin (US$, 000)

    122,084     71,929     69.7 %   111,960     9.0 %

Gross margin percentage

    73.1 %   69.0 %     75.0 %  

SG&A (US$, 000)

    32,650     22,508     45.1 %   31,723     2.9 %

SG&A percentage

    19.5 %   21.6 %     21.2 %  

Net income**) (US$, 000)

    21,653     -567       16,381     32.2 %

ARPU, (US$)

    13.6     14.4     -5.6 %   13.6     0.0 %

MOU, (min)

    112.7     87.5     28.8 %   88.8     26.9 %

SAC (US$)

    10.0     8.5     17.6 %   10.9     -8.3 %

Active subscribers

    4,343,073     2,596,300     67.3 %   3,857,600     12.6 %

Churn

    5.9 %   11.5 %     6.3 %  

Subscriber market share

    47.3 %   46.7 %     49.3 %  

*)

Net operating revenues exclude inter-company transactions (US$860 thousand in 3Q 2007, US$711 thousand in 3Q 2006, US$704 thousand in 2Q 2007).

**)

After minority interest.

In the third quarter we continued to rapidly build our business in Kazakhstan. The number of our active subscribers increased by 67.3% year-on-year and 12.6% quarter-on-quarter. This growth came on the back of intensive summer promotional activities, which also led to an exceptionally strong 26.9% increase in MOU and a temporary decline in average price per minute.

Subscriber growth, coupled with resilient quarter-on-quarter ARPU, drove revenue gains of 60.6% year-on-year and 11.9% quarter-on-quarter. Temporary promotional activities together with seasonal growth in roaming put pressure on our gross margin.

As the market approaches saturation, and as competition intensifies, we believe it is the right time to begin shifting our efforts towards the quality of the subscriber base and revenue market share.

 

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UKRAINE

    Three months  
   3Q2007     3Q2006     Change,
3Q07/3Q06		     2Q2007     Change,
3Q07/2Q07		  

Net operating revenues*) (US$, 000)

    36,271     11,542     214.3 %   22,741     59.5 %

including interconnect revenue

    10,861     3,648     197.7 %   7,630     42.3 %

OIBDA (US$, 000)

    6,455     -6,072       -3,073    

OIBDA margin

    17.5 %   N/A       N/A    

Gross margin (US$, 000)

    23,314     7,335     217.8 %   13,487     72.9 %

Gross margin percentage

    63.0 %   59.4 %     56.7 %  

SG&A (US$, 000)

    16,465     13,466     22.3 %   16,527     -0.4 %

SG&A percentage

    44.5 %   109.0 %     69.5 %  

Net income (US$, 000)

    -6,443     -12,974       -17,234    

ARPU, (US$)

    5.8     6.7     -13.4 %   4.2     38.1 %

MOU, (min)

    168.2     168.4     -0.1 %   159.9     5.2 %

SAC (US$)

    5.5     12.3     -55.3 %   9.3     -40.9 %

Active subscribers

    2,212,250     766,100     188.8 %   1,821,800     21.4 %

Churn

    25.5 %   0.8 %     7.0 %  

Subscriber market share

    5.1 %   2.4 %     5.2 %  

*)

Net operating revenues exclude inter-company transactions (US$708 thousand in 3Q 2007, US$810 thousand in 3Q 2006, US$1040 thousand in 2Q 2007).

Our Ukrainian operations demonstrated very good performance with 188.8% year-on-year and 21.4% quarter-on-quarter growth in active subscribers. Implemented price increases, coupled with seasonally high guest roaming, allowed us to increase our ARPU by 38.1% on a quarter-on-quarter basis despite a continued aggressive pricing environment.

As a result of subscriber and ARPU growth we managed to achieve an impressive 59.5% quarter-on-quarter revenue growth. We would note, however, that seasonal effects on revenue are more pronounced in Ukraine than in our other markets, because of the impact of roamers and short-term seasonal users.

While revenue was up, our sales, general and administrative expenses remained flat quarter-on-quarter, enabling us to become OIBDA-positive in the third quarter, essentially in line with our earlier projections.

Our high level of churn reported in the third quarter was driven by our efforts to increase tariffs, continued tightening of our churn policy and expected seasonal churn of subscribers acquired during the last New Year’s promotion campaign.

Our focus in Ukraine remains on increasing our subscriber base, paying particular attention to the profitability of the business.

 

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UZBEKISTAN

    Three months  
   3Q2007     3Q2006     Change,
3Q07/3Q06		     2Q2007     Change,
3Q07/2Q07		  

Net operating revenues*) (US$, 000)

    29,913     15,675     90.8 %   23,126     29.3 %

OIBDA (US$, 000)

    16,923     9,532     77.5 %   11,388     48.6 %

OIBDA margin

    56.1 %   60.5 %     49.1 %  

Gross margin (US$, 000)

    25,794     14,018     84.0 %   19,967     29.2 %

Gross margin percentage

    85.6 %   89.0 %     85.9 %  

SG&A (US$, 000)

    8,668     4,462     94.3 %   8,355     3.7 %

SG&A percentage

    28.7 %   28.3 %     36.0 %  

Net income (US$, 000)

    6,879     3,229     113.0 %   4,253     61.7 %

ARPU, (US$)

    7.6     11.8     -35.6 %   7.2     5.6 %

MOU, (min)

    289.8     304.8     -4.9 %   265.6     9.1 %

SAC (US$)

    4.4     8.6     -48.8 %   4.4     0.0 %

Active subscribers

    1,586,890     484,200     227.7 %   1,192,400     33.1 %

Churn

    14.2 %   6.7 %     28.7 %  

Subscriber market share

    35.6 %   25.0 %     32.7 %  

*)

Net operating revenues exclude inter-company transactions (US$237 thousand in 3Q 2007, US$79 thousand in 3Q 2006, US$108 thousand in 2Q 2007).

Uzbekistan demonstrated steady growth in subscribers over the last four quarters, with our active subscriber base growing 227.7% year-on-year and 33.1% quarter-on-quarter. This growth, coupled with a 5.6% increase in ARPU, led to a healthy 29.3% quarter-on-quarter revenue growth and OIBDA margin expansion to 56.1%.

With a mobile penetration rate of only about 17%, our operational focus in Uzbekistan remains on accelerating network build-out, maintaining high subscriber growth and developing our sales and distribution network.

 

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TAJIKISTAN

    Three months  
   3Q2007     3Q2006     Change,
3Q07/3Q06		     2Q2007     Change,
3Q07/2Q07		  

Net operating revenues*) (US$, 000)

    7,615     77     9789.6 %   5,161     47.5 %

OIBDA (US$, 000)

    1,646     -980       94     1651.1 %

OIBDA margin

    21.5 %   N/A       1.8 %  

Gross margin (US$, 000)

    5,153     -33       3,237     59.2 %

Gross margin percentage

    67.3 %   -42.9 %     62.4 %  

SG&A (US$, 000)

    3,515     947     271.2 %   3,118     12.7 %

SG&A percentage

    45.9 %   1229.9 %     60.1 %  

Net income**) (US$, 000)

    -276     -782       -1,771    

ARPU, (US$)

    10.8     3.1     248.4 %   10.1     6.9 %

MOU, (min)

    230.3     69.8     229.9 %   224.2     2.7 %

SAC (US$)

    12.8     18.2     -29.7 %   15.3     -16.3 %

Active subscribers

    268,446     6,900     3790.5 %   204,900     31.0 %

Churn

    1.8 %   26.9 %     0.8 %  

Subscriber market share

    16.7 %   1.9 %     15.2 %  

*)

Net operating revenues exclude inter-company transactions (US$39 thousand in 3Q 2007, US$0 in 3Q 2006, US$23 thousand in 2Q 2007).

**)

After minority interest.

In Tajikistan we continue to demonstrate excellent dynamics with consistent growth in financial performance and subscriber base. On a quarter-on-quarter basis, the Company reported 47.5% growth in revenues and 31.0% growth in the number of active subscribers.

OIBDA turned positive in the second quarter and continued to grow in the third quarter, with the OIBDA margin expanding to 21.5%.

 

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ARMENIA

    Three months  
   3Q2007     2Q2007     Change,
3Q07/2Q07		  

Net operating revenues*) (US$, 000), including

   63,277     58,349     8.4 %

mobile revenues

    25,723     23,135     11.2 %

fixed revenues

    37,554     35,214     6.6 %

OIBDA (US$, 000)

    32,888     30,069     9.4 %

OIBDA margin

    51.9 %   51.6 %  

Net income**) (US$, 000)

    15,961     3,963     302.8 %

Mobile active subscribers

    446,957     471,000     -5.1 %

ARPU, (US$)

    17.6     17.3     1.7 %

MOU, (min)

    181.0     185.1     -2.2 %

Churn***)

    4.4 %   14.1 %  

Mobile subscriber market share***)

    33.6 %   33.5 %  

Fixed subscribers

    616,175     610,300     1.0 %

ARPU fixed (US$)

    20.4     19.3     5.7 %

*)

Net operating revenues exclude inter-company transactions (US$85 thousand in 3Q 2007, US$74 thousand in 2Q 2007).

**)

After minority interest.

***)

According to AC&M-Consulting, our mobile subscriber market share in Armenia as of the end of October was 25.4%, reflecting among other things, additional clean-up of our subscribers.

The Armenian business, acquired in the fourth quarter of 2006, continues to show stable financial performance. Our mobile revenues demonstrated solid 11.2% quarter-on-quarter growth. OIBDA margin remains strong at 51.9%.

Our subscriber market share in the mobile market remains our key area of concern. We have already taken a number of steps to strengthen our competitive position. While these actions are already showing early signs of positive impact, it will take time to fully realize the effects of our efforts.

GEORGIA

The Company launched commercial operations in Georgia on March 15, 2007. Currently we continue to build the network and develop our sales and distribution channels. In the third quarter, we reached approximately 26,600 active subscribers and had revenues of US$0.33 million, representing 90% quarter-on-quarter subscriber growth and 117% revenue growth on a quarter-on-quarter basis. However our operations in this country are still in an early phase of development.

 

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The Company’s management will discuss its third quarter results during a conference call and slide presentation on November 29, 2007 at 6:30 pm Moscow time (10:30 am ET in New York). The call and slide presentation may be accessed via webcast at the following URL address http://www.vimpelcom.com. The conference call replay will be available through December 06, 2007. The slide presentation webcast will also be available for download on VimpelCom’s website http://www.vimpelcom.com.

The VimpelCom Group includes companies operating in Russia, Kazakhstan, Ukraine, Uzbekistan, Tajikistan, Georgia and Armenia. The VimpelCom Group’s GSM and 3G license portfolio covers a territory with a population of about 250 million. This includes the entire territories of Russia, Kazakhstan, Ukraine, Uzbekistan, Tajikistan, Georgia and Armenia. VimpelCom was the first Russian company to list its shares on the New York Stock Exchange (“NYSE”). VimpelCom’s ADSs are listed on the NYSE under the symbol “VIP”.

This press release contains “forward-looking statements”, as the phrase is defined in Section 27A of the Securities Act and Section 21E of the Exchange Act. These statements relate to the Company’s strategic and development plans, including network development plans, and developments in the telecommunications markets in which the Company operates. These and other forward-looking statements are based on management’s best assessment of the Company’s strategic and financial position and of future market conditions and trends. These discussions involve risks and uncertainties. The actual outcome may differ materially from these statements as a result of unforeseen developments from competition, governmental regulation of the telecommunications industries in Russia and the CIS, general political uncertainties in Russia and the CIS and general economic developments in Russia and the CIS, challenges to 3G and Far East tenders and/or litigation with third parties or our shareholders (including Telenor), the Company’s ability to continue to grow its overall revenues and its subscriber base and continued volatility in the world economy. The actual outcome may also differ materially if the Company is unable to obtain all necessary corporate approvals relating to its business (including approval of funding and specific transactions) and other factors. As a result of such risks and uncertainties, there can be no assurance that the effects of competition or current or future changes in the political, economic and social environment or current or future regulation of the Russian and CIS telecommunications industries will not have a material adverse effect on the VimpelCom Group. 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, 2006 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 release, or to make corrections to reflect future events or developments.

For more information, please contact:

 

Alexander Boreyko

    Peter Schmidt/Michael Polyviou

VimpelCom

    Financial Dynamics

Tel: 7(495) 910-5977

    Tel: 1(212) 850-5600

Investor_Relations@vimpelcom.com

    mpolyviou@fd-us.com

– Definitions and tables are attached –

 

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Attachment A: Definitions

Registered subscriber is an authorized user of cellular services, using one SIM card (GSM/3G) with one or several selective numbers or one handset (DAMPS/CDMA) with one selective number. The number of subscribers includes employees using cellular services and excludes guest roamers and users of test SIM cards or handsets.

Reported churn rate is defined as the total number of registered subscribers disconnected from our network within a given period of time expressed as a percentage of the midpoint of subscribers in our network at the beginning and end of that period. Contract subscribers are disconnected if they have not paid their bills for two months. Prepaid subscribers are disconnected in two cases: (1) an account have been blocked after the balance drops to $0 or below for up to six months, (2) an account showed no chargeable transaction for up to ten months. The exact number of months prior to the disconnection varies by country and depends on the legislation and market specifics.

Active subscribers are those subscribers in the registered subscriber base who were a party to a revenue generating activity in the past three months and remain in the base at the end of the reported period. Such activities include all incoming and outgoing calls, subscriber fee accruals, debits related to service, outgoing SMS, MMS, data transmission and receipt sessions, but do not include incoming SMS and MMS sent by our Company or abandoned calls.

Prepaid subscribers are those subscribers who pay for their services in advance.

Fixed-line subscriber is an authorized user of fixed-line communications services.

OIBDA is a non-U.S. GAAP financial measure. OIBDA, previously referred to as EBITDA by the Company, is defined as operating income before depreciation and amortization. The Company believes that OIBDA provides useful information to investors because it is an indicator of the strength and performance of our business operations, including our ability to finance capital expenditures, acquisitions and other investments and our ability to incur and service debt. While depreciation and amortization are considered operating costs under U.S. GAAP, these expenses primarily represent the non-cash current period allocation of costs associated with long-lived assets acquired or constructed in prior periods. Our OIBDA calculations are commonly used as bases for some investors, analysts and credit rating agencies to evaluate and compare the periodic and future operating performance and value of companies within the wireless telecommunications industry. OIBDA should not be considered in isolation as an alternative to net income, operating income or any other measure of performance under U.S. GAAP. OIBDA does not include our need to replace our capital equipment over time. Reconciliation of OIBDA to operating income, the most directly comparable U.S. GAAP financial measure, is presented below in the reconciliation tables section.

OIBDA margin is OIBDA expressed as a percentage of total net operating revenues. Reconciliation of OIBDA margin to operating income as a percentage of total net operating revenues, the most directly comparable U.S. GAAP financial measure, is presented below in the reconciliation tables section.

Gross margin is defined as total operating revenues less service costs and cost of handsets and accessories sold.

Gross margin percentage is gross margin expressed as a percentage of total net operating revenues.

Each ADS represents 0.05 of one share of common stock. This ratio was established effective August 21, 2007.

ARPU (Monthly Average Revenue per User), a non-U.S. GAAP financial measure, is calculated by dividing the Company’s service revenue during the relevant period, including roaming revenue and interconnect revenue, but excluding revenue from connection fees, sales of handsets and accessories and other non-service revenue, by the average number of the Company’s active subscribers during the period and dividing by the number of months in that period. Reconciliation of ARPU to service revenues and connection fees, the most directly comparable U.S. GAAP financial measure, is presented below in the tables section. The Company believes that ARPU provides useful information to investors because it is an indicator of the performance of the Company’s business operations and assists management in budgeting. The Company also believes that ARPU provides management with useful information concerning usage and acceptance of the Company’s services. ARPU should not be viewed in isolation or an alternative to other figures reported under U.S. GAAP.

ARPUREG is ARPU calculated with regard to the registered subscriber base.

MOU (Monthly Average Minutes of Use per User) is calculated by dividing the total number of minutes of usage for incoming and outgoing calls during the relevant period (excluding guest roamers) by the average number of active subscribers during the period and dividing by the number of months in that period.

MOUREG is MOU calculated with regard to the registered subscriber base.

SAC (Average Acquisition Cost Per User), a non-U.S. GAAP financial measure, is calculated as dealers’ commissions (for sales and bonus for exclusivity* ), advertising expenses and handset subsidies for the relevant period divided by the number of new subscribers added during the relevant period. Reconciliation of SAC to selling, general and administrative expenses, the most directly comparable U.S. GAAP financial measure, is presented below in the tables section. The Company believes that SAC in growing markets provides useful information to investors because it is an indicator of the performance of the Company’s business operations and assists management in budgeting. The Company also believes that SAC assists management in quantifying the incremental costs to acquire a new subscriber. SAC should not be viewed in isolation or as an alternative to other figures reported under U.S. GAAP.

Market share of subscribers for each relevant area is calculated by dividing the estimated number of our subscribers in Russia, Kazakhstan, Ukraine, Uzbekistan, Tajikistan and Armenia, respectively, by the total estimated number of subscribers in Russia, Kazakhstan, Ukraine, Uzbekistan, Tajikistan and Armenia, respectively.

*)

Dealers’ bonus for exclusivity which we counted prior to the fourth quarter of 2006 as a part of general and administrative expenses is now included in the dealers’ commission expense. Historical numbers including SAC were recalculated accordingly.

Attachment B: VimpelCom financial statements

Open Joint Stock Company “Vimpel-Communications”

Unaudited Condensed Consolidated Statements of Operations

 

     Three months ended
September 30,		     Nine months ended
September 30,		  
     2007     2006     2007     2006  
     (In thousands of US dollars , except per share (ADS) amounts)  

Operating revenues:

         

Service revenues and connection fees

    $ 1,953,719     $ 1,354,305     $ 5,155,393     $ 3,400,607  

Sales of handsets and accessories

      1,427       4,365       4,212       15,013  

Other revenues

      1,822       710       4,024       2,274  
                                

Total operating revenues

      1,956,968       1,359,380       5,163,629       3,417,894  

Revenue based tax

      (1,030 )     (527 )     (2,477 )     (1,328 )
                                

Net operating revenues

      1,955,938       1,358,853       5,161,152       3,416,566  

Operating expenses:

         

Service costs (exclusive of depreciation shown separately below)

      365,297       245,359       943,634       604,652  

Cost of handsets and accessories sold

      1,016       4,275       4,235       14,121  

Selling, general and administrative expenses

      556,518       387,236       1,490,430       1,025,192  

Depreciation

      285,572       243,593       840,109       609,532  

Amortization

      55,583       45,648       162,679       129,751  

Provision for doubtful accounts

      17,949       4,187       44,520       10,643  
                                

Total operating expenses

      1,281,935       930,298       3,485,607       2,393,891  
                                

Operating income

      674,003       428,555       1,675,545       1,022,675  

Other income and expenses:

         

Interest income

      9,158       6,152       21,467       11,035  

Other income

      945       723       3,986       4,518  

Interest expense

      (51,117 )     (49,210 )     (144,565 )     (139,802 )

Other expenses

      (10,613 )     (8,480 )     (32,334 )     (20,795 )

Net foreign exchange gain (loss)

      26,250       (11,753 )     51,341       13,929  
                                

Total other income and expenses

      (25,377 )     (62,568 )     (100,105 )     (131,115 )
                                

Income before income taxes and minority interest

      648,626       365,987       1,575,440       891,560  

Income taxes expense

      171,109       99,088       434,703       262,832  

Minority interest in net earnings of subsidiaries

      19,467       (1,471 )     46,139       13,307  
                                

Income before cumulative effect of change in accounting principle

      458,050       268,370       1,094,598       615,421  

Cumulative effect of changes in accounting principles

      —         —         —         (1,882 )

Net income

    $ 458,050     $ 268,370     $ 1,094,598     $ 613,539  
                                

Net income per common share

    $ 9.02     $ 5.28     $ 21.53     $ 12.09  

Net income per ADS equivalent

    $ 0.45     $ 0.26     $ 1.08     $ 0.6  
                                

Weighted average common shares outstanding (thousands)

      50,773       50,843       50,832       50,929  

Dividends per share

      —         —       $ 6.47       —    

Dividends per ADS equivalent

      —         —       $ 0.32       —    
                                

Open Joint Stock Company “Vimpel–Communications”

Unaudited Condensed Consolidated Balance Sheets

 

     September 30,
2007		    December 31,
2006
     (In thousands of US dollars)

Assets

      

Current assets:

      

Cash and cash equivalents

    $ 1,027,797    $ 344,494

Trade accounts receivable

      287,689      311,991

Other current assets

      441,767      468,071
             

Total current assets

      1,757,253      1,124,556

Non–current assets

      

Property and equipment, net

      5,087,603      4,615,675

Telecommunication licenses and allocation of frequencies, net

      887,031      924,809

Other intangible assets, net

      1,273,776      1,033,140

Other assets

      781,360      738,366
             

Total non–current assets

      8,029,770      7,311,990

Total assets

    $ 9,787,023    $ 8,436,546
             

Liabilities and shareholders’ equity

      

Current liabilities:

      

Accounts payable

    $ 511,378    $ 671,953

Customer advances and deposits

      360,061      314,375

Bank and other loans, current portion

      411,222      424,103

Accrued liabilities

      410,752      201,545
             

Total current liabilities

      1,693,413      1,611,976

Deferred income taxes

      543,557      528,025

Bank and other loans, less current portion

      2,332,064      2,065,329

Accrued liabilities

      33,171      30,447

Minority Interest

      268,967      257,859

Shareholders’ equity

      4,915,851      3,942,910
             

Total liabilities and shareholders’ equity

    $ 9,787,023    $ 8,436,546
             

Open Joint Stock Company “Vimpel–Communications”

Unaudited Condensed Consolidated Statements of Cash Flows

 

     Nine months ended September 30,  
     2007     2006  
     (In thousands of US dollars)  

Net cash provided by operating activities

    $ 2,208,039     $ 1,434,817  

Proceeds from bank and other loans

      519,349       747,909  

Sale of treasury stock

     39,788       —    

Payments of fees in respect of bank loans

      (7,121 )     (41,651 )

Repayment of rouble denominated bonds

      —         (110,783 )

Repayment of bank and other loans

      (325,934 )     (335,116 )

Payment of dividends

      (331,886 )     —    

Purchase of treasury stock

      (81,069 )     (38,535 )
                

Net cash provided by financing activities

      (186,873 )     221,824  

Purchase of property and equipment

      (832,831 )     (883,720 )

Acquisition of subsidiaries, net of cash

      (288,667 )     (265,264 )

Purchase price adjustment for ArmenTel and Tacom

      (12,688 )     —    

Purchase of intangible assets

      (25,682 )     (25,758 )

Purchase of other assets

      (212,467 )     (248,271 )
                

Net cash used in investing activities

      (1,372,335 )     (1,423,013 )

Effect of exchange rate changes on cash

      34,472       7,619  
                

Net increase (decrease) in cash

      683,303       241,247  

Cash and cash equivalents at beginning of period

      344,494       363,646  
                

Cash and cash equivalents at end of period

    $ 1,027,797     $ 604,893  
                

Supplemental cash flow information

     

Cash paid during the period:

     

Income tax

      418,626       232,490  

Interest

      126,211       116,137  

Non–cash activities:

     

Equipment acquired under financing and capital lease agreements

    $ 39,365     $ 15,785  

Accounts payable for equipment and other long–lived assets

      191,894       160,111  

Offset of 2009 Tendered Notes

      —         232,766  

Utilized part of Ericsson non–cash discount in Ukraine

      (4,714 )     17,899  

Acquisitions:

     

Fair value of assets acquired

      76,007       166,034  

Fair value of minority interest acquired

      41,636       —    

Difference between the amount paid and the fair value of net assets acquired

      189,657       154,061  

Cash paid for the capital stock

      (291,433 )     (273,716 )
                

Liabilities assumed

    $ 15,867     $ 46,379  
                

Attachment C. Reconciliation tables (Unaudited)

CONSOLIDATED

Reconciliation of OIBDA

(In thousands of US dollars)

 

     Three months ended  
   September 30,
2007		     September 30,
2006		     June 30,
2007		  

OIBDA

    1,015,158     717,796     896,758  

Depreciation

    (285,572 )   (243,593 )   (285,365 )

Amortization

    (55,583 )   (45,648 )   (53,807 )

Operating income

    674,003     428,555     557,586  

Reconciliation of OIBDA Margin

 

     Three months ended  
   September 30,
2007		     September 30,
2006		     June 30,
2007		  

OIBDA margin

    51.9 %   52.8 %   52.2 %

Less: Depreciation as a percentage of net operating revenue

    (14.6 )%   (17.9 )%   (16.6 )%

Less: Amortization as a percentage of net operating revenue

    (2.8 )%   (3.4 )%   (3.1 )%

Operating income as a percentage of net operating revenue

    34.5 %   31.5 %   32.5 %

RUSSIA

Reconciliation of OIBDA in Russia

(In thousands of US dollars)

 

     Three months ended  
   September 30,
2007		     September 30,
2006		     June 30,
2007		  

OIBDA

    871,163     666,354     779,828  

Depreciation

    (249,781 )   (221,973 )   (240,387 )

Amortization

    (29,470 )   (26,429 )   (28,478 )

Operating income

    591,912     417,952     510,963  

Reconciliation of OIBDA Margin in Russia

 

     Three months ended  
   September 30,
2007		     September 30,
2006		     June 30,
2007		  

OIBDA margin

    52.7 %   54.2 %   53.4 %

Less: Depreciation as a percentage of net operating revenue

    (15.1 )%   (18.0 )%   (16.5 )%

Less: Amortization as a percentage of net operating revenue

    (1.8 )%   (2.2 )%   (1.9 )%

Operating income as a percentage of net operating revenue

    35.8 %   34.0 %   35.0 %

Reconciliation of SAC in Russia

(In thousands of US dollars, except for SAC and subscriber amounts)

 

     Three months ended
   September 30,
2007		    September 30,
2006		    June 30,
2007

Selling, general and administrative expenses

    477,277    346,157    418,738

Less: General and administrative expenses

    351,028    247,190    305,941

Sales and marketing expenses, including

    126,249    98,967    112,797

advertising & marketing expenses

    59,478    46,487    57,636

dealers’ commission expense

    66,771    52,480    55,161

New gross subscribers,’000

    5,100    5,404    4,947

Subscriber Acquisition Cost (SAC) (US$)

    24.8    18.3    22.8

Reconciliation of ARPU in Russia

(In thousands of US dollars, except for ARPU and subscriber amounts)

 

     Three months ended
   September 30,
2007		    September 30,
2006		    June 30,
2007

Service revenue and connection fees

    1,650,358    1,223,681    1,457,896

Less: Connection fees

    184    410    164

Less: Revenue from rent of fiber-optic channels

    1,003    760    983

Service revenue used to calculate ARPU

    1,649,171    1,222,511    1,456,749

Average number of registered subscribers, ‘000

    49,926    47,306    49,043

ARPU REG (US$)

    11.0    8.6    9.9

Average number of active subscribers,’000

    40,933    38,365    39,359

ARPU (US$)

    13.4    10.6    12.3

KAZAKHSTAN

Reconciliation of OIBDA in Kazakhstan

(In thousands of US dollars)

 

     Three months ended  
   September 30,
2007		     September 30,
2006		     June 30,
2007		  

OIBDA

    88,127     49,023     80,317  

Depreciation

    (14,983 )   (17,981 )   (17,537 )

Amortization

    (9,091 )   (9,550 )   (9,419 )

Operating income

    64,053     21,492     53,361  

Reconciliation of OIBDA Margin in Kazakhstan

 

     Three months ended  
   September 30,
2007		     September 30,
2006		     June 30,
2007		  

OIBDA margin

    52.7 %   47.0 %   53.7 %

Less: Depreciation as a percentage of net operating revenue

    (9.0 )%   (17.2 )%   (11.7 )%

Less: Amortization as a percentage of net operating revenue

    (5.4 )%   (9.2 )%   (6.3 )%

Operating income as a percentage of net operating revenue

    38.3 %   20.6 %   35.7 %

Reconciliation of SAC in Kazakhstan

(In thousands of US dollars, except for SAC and subscriber amounts)

 

     Three months ended
  

September 30,

2007

   

September 30,

2006

   

June 30,

2007

Selling, general and administrative expenses

    32,650    22,508    31,723

Less: General and administrative expenses

    23,419    16,521    23,250

Sales and marketing expenses, including

    9,231    5,987    8,473

advertising & marketing expenses

    5,093    3,329    4,918

dealers’ commission expense

    4,138    2,658    3,555

New gross subscribers,’000

    919    704    779

Subscriber Acquisition Cost (SAC) (US$)

    10.0    8.5    10.9

Reconciliation of ARPU in Kazakhstan

(In thousands of US dollars, except for ARPU and subscriber amounts)

 

     Three months ended
  

September 30,

2007

   

September 30,

2006

   

June 30,

2007

Service revenue and connection fees

    167,122    104,208    149,326

Less: Connection fees

    0    0    0

Less: Revenue from rent of fiber-optic channels

    0    0    0

Service revenue used to calculate ARPU

    167,122    104,208    149,326

Average number of registered subscribers, ‘000

    5,120    3,077    4,598

ARPU REG (US$)

    10.9    11.3    10.8

Average number of active subscribers,’000

    4,107    2,412    3,655

ARPU (US$)

    13.6    14.4    13.6

UKRAINE

Reconciliation of OIBDA in Ukraine

(In thousands of US dollars)

 

     Three months ended  
  

September 30,

2007

    

September 30,

2006

    

June 30,

2007

  

OIBDA

    6,455     (6,072 )   (3,073 )

Depreciation

    (4,417 )   (1,218 )   (4,330 )

Amortization

    (5,210 )   (5,232 )   (5,234 )

Operating income

    (3,172 )   (12,522 )   (12,637 )

Reconciliation of OIBDA Margin in Ukraine

 

     Three months ended  
  

September 30,

2007

    

September 30,

2006

    

June 30,

2007

  

OIBDA margin

    17.5 %   (49.2 )%   (12.9 )%

Less: Depreciation as a percentage of net operating revenue

    (12.0 )%   (9.8 )%   (18.2 )%

Less: Amortization as a percentage of net operating revenue

    (14.1 )%   (42.4 )%   (22.0 )%

Operating income as a percentage of net operating revenue

    (8.6 )%   (101.4 )%   (53.1 )%

Reconciliation of SAC in Ukraine

(In thousands of US dollars, except for SAC and subscriber amounts)

 

     Three months ended
  

September 30,

2007

   

September 30,

2006

   

June 30,

2007

Selling, general and administrative expenses

    16,465    13,466    16,527

Less: General and administrative expenses

    12,454    8,841    11,833

Sales and marketing expenses, including

    4,011    4,625    4,694

advertising & marketing expenses

    2,753    3,861    3,723

dealers’ commission expense

    1,258    764    971

New gross subscribers,’000

    729    375    504

Subscriber Acquisition Cost (SAC) (US$)

    5.5    12.3    9.3

Reconciliation of ARPU in Ukraine

(In thousands of US dollars, except for ARPU and subscriber amounts)

 

     Three months ended
  

September 30,

2007

   

September 30,

2006

   

June 30,

2007

Service revenue and connection fees

    36,523    12,320    23,436

Less: Connection fees

    112    3    36

Less: Revenue from rent of fiber-optic channels

    0    0    0

Service revenue used to calculate ARPU

    36,411    12,317    23,400

Average number of registered subscribers, ‘000

    2,668    741    2,474

ARPU REG (US$)

    4.5    5.5    3.2

Average number of active subscribers,’000

    2,081    611    1,847

ARPU (US$)

    5.8    6.7    4.2

UZBEKISTAN

Reconciliation of OIBDA in Uzbekistan

(In thousands of US dollars)

 

     Three months ended  
  

September 30,

2007

    

September 30,

2006

    

June 30,

2007

  

OIBDA

    16,923     9,532     11,388  

Depreciation

    (4,011 )   (2,380 )   (3,312 )

Amortization

    (3,438 )   (3,268 )   (3,414 )

Operating income

    9,474     3,884     4,662  

Reconciliation of OIBDA Margin in Uzbekistan

 

     Three months ended  
  

September 30,

2007

    

September 30,

2006

    

June 30,

2007

  

OIBDA margin

    56.1 %   60.5 %   49.1 %

Less: Depreciation as a percentage of net operating revenue

    (13.3 )%   (15.1 )%   (14.3 )%

Less: Amortization as a percentage of net operating revenue

    (11.4 )%   (20.7 )%   (14.7 )%

Operating income as a percentage of net operating revenue

    31.4 %   24.7 %   20.1 %

Reconciliation of SAC in Uzbekistan

(In thousands of US dollars, except for SAC and subscriber amounts)

 

     Three months ended
  

September 30,

2007

   

September 30,

2006

   

June 30,

2007

Selling, general and administrative expenses

    8,668    4,462    8,355

Less: General and administrative expenses

    6,003    3,355    6,579

Sales and marketing expenses, including

    2,665    1,107    1,776

advertising & marketing expenses

    1,112    500    856

dealers’ commission expense

    1,553    607    920

New gross subscribers,’000

    603    128    403

Subscriber Acquisition Cost (SAC) (US$)

    4.4    8.6    4.4

Reconciliation of ARPU in Uzbekistan

(In thousands of US dollars, except for ARPU and subscriber amounts)

 

     Three months ended
  

September 30,

2007

   

September 30,

2006

   

June 30,

2007

Service revenue and connection fees

    31,159    16,279    24,009

Less: Connection fees

    0    0    0

Less: Revenue from rent of fiber-optic channels

    0    0    0

Service revenue used to calculate ARPU

    31,159    16,279    24,009

Average number of registered subscribers, ‘000

    1,408    490    1,148

ARPU REG (US$)

    7.4    11.1    7.0

Average number of active subscribers,’000

    1,372    458    1,109

ARPU (US$)

    7.6    11.8    7.2

TAJIKISTAN

Reconciliation of OIBDA in Tajikistan

(In thousands of US dollars)

 

     Three months ended  
  

September 30,

2007

    

September 30,

2006

    

June 30,

2007

  

OIBDA

    1,646     (980 )   94  

Depreciation

    (948 )   (41 )   (587 )

Amortization

    (158 )   (50 )   (158 )

Operating income

    540     (1,071 )   (651 )

Reconciliation of OIBDA Margin in Tajikistan

 

     Three months ended  
  

September 30,

2007

    

September 30,

2006

    

June 30,

2007

  

OIBDA margin

    21.5 %   (1272.7 )%   1.8 %

Less: Depreciation as a percentage of net operating revenue

    (12.3 )%   (53.3 )%   (11.4 )%

Less: Amortization as a percentage of net operating revenue

    (2.1 )%   (64.9 )%   (3.0 )%

Operating income as a percentage of net operating revenue

    7.1 %   (1390.9 )%   (12.6 )%

Reconciliation of SAC in Tajikistan

(In thousands of US dollars, except for SAC and subscriber amounts)

 

     Three months ended
  

September 30,

2007

   

September 30,

2006

   

June 30,

2007

Selling, general and administrative expenses

    3,515    947    3,118

Less: General and administrative expenses

    2,470    885    2,044

Sales and marketing expenses, including

    1,045    62    1,074

advertising & marketing expenses

    553    62    665

dealers’ commission expense

    492    0    409

New gross subscribers,’000

    81.5    3.4    70

Subscriber Acquisition Cost (SAC) (US$)

    12.8    18.2    15.3

Reconciliation of ARPU in Tajikistan

(In thousands of US dollars, except for ARPU and subscriber amounts)

 

     Three months ended
   September 30,
2007		   

September 30,

2006

   

June 30,

2007

Service revenue and connection fees

    7,675    74    5,222

Less: Connection fees

    0    0    0

Less: Revenue from rent of fiber-optic channels

    0    0    0

Service revenue used to calculate ARPU

    7,675    74    5,222

Average number of registered subscribers, ‘000

    256    13    181

ARPU REG (US$)

    10.0    1.9    9.6

Average number of active subscribers,’000

    236    8    172

ARPU (US$)

    10.8    3.1    10.1

ARMENIA

Reconciliation of OIBDA in Armenia

(In thousands of US dollars)

 

     Three months ended  
  

September 30,

2007

    

September 30,

2006

   

June 30,

2007

  

OIBDA

    32,888     NA    30,069  

Depreciation

    (10,671 )   NA    (18,729 )

Amortization

    (6,951 )   NA    (5,875 )

Operating income

    15,266     NA    5,465  

Reconciliation of OIBDA Margin in Armenia

 

     Three months ended  
  

September 30,

2007

    

September 30,

2006

   

June 30,

2007

  

OIBDA margin

    51.9 %   NA    51.6 %

Less: Depreciation as a percentage of net operating revenue

    (16.8 )%   NA    (32.1 )%

Less: Amortization as a percentage of net operating revenue

    (11.0 )%   NA    (10.1 )%

Operating income as a percentage of net operating revenue

    24.1 %   NA    9.4 %

Reconciliation of mobile ARPU in Armenia

(In thousands of US dollars, except for ARPU and subscriber amounts)

 

     Three months ended
  

September 30,

2007

   

September 30,

2006

   

June 30,

2007

Service revenue and connection fees

    25,623    NA    23,208

Less: Connection fees

    64    NA    19

Less: Revenue from rent of fiber-optic channels

    0    NA    0

Service revenue used to calculate ARPU

    25,559    NA    23,189

Average number of registered subscribers, ‘000

    528    NA    486

ARPU REG (US$)

    16.1    NA    15.9

Average number of active subscribers,’000

    483    NA    446

ARPU (US$)

    17.6    NA    17.3

Reconciliation of fixed ARPU in Armenia

(In thousands of US dollars, except for ARPU and subscriber amounts)

 

     Three months ended
  

September 30,

2007

   

September 30,

2006

   

June 30,

2007

Service revenue and connection fees

    37,551    NA    35,214

Less: Connection fees

    88    NA    55

Service revenue used to calculate ARPU

    37,463    NA    35,159

Average number of subscribers,’000

    611    NA    608

Average revenue per subscriber per month (US$)

    20.4    NA    19.3

Attachment D. Additional reference data

Operating and Financial Indicators

 

CONSOLIDATED

    Three months  
   3Q2007    3Q2006   

Change,

3Q07/3Q06

     2Q2007   

Change,

3Q07/2Q07

  

Registered mobile subscribers

    60,990,302    52,381,500    16.4 %   59,049,700    3.3 %

Registered fixed subscribers

    616,175    N/A      610,300    1.0 %

RUSSIA

    Three months  
   3Q2007    3Q2006    Change,
3Q07/3Q06		     2Q2007    Change,
3Q07/2Q07		  

Registered subscribers

    50,296,378    47,651,000    5.6 %   49,594,300    1.4 %

ARPUREG, (US$)

    11.0    8.6    27.9 %   9.9    11.1 %

MOUREG, (min)

    171.3    123.2    39.0 %   154.6    10.8 %

KAZAKHSTAN

    Three months  
   3Q2007    3Q2006    Change,
3Q07/3Q06		     2Q2007    Change,
3Q07/2Q07		  

Registered subscribers

    5,456,505    3,230,400    68.9 %   4,837,200    12.8 %

ARPUREG, (US$)

    10.9    11.3    -3.5 %   10.8    0.9 %

MOUREG, (min)

    90.4    68.6    31.8 %   70.6    28.0 %

UKRAINE

    Three months  
   3Q2007    3Q2006    Change,
3Q07/3Q06		     2Q2007    Change,
3Q07/2Q07		  

Registered subscribers

    2,737,000    938,700    191.6 %   2,661,400    2.8 %

ARPUREG, (US$)

    4.5    5.5    -18.2 %   3.2    40.6 %

MOUREG, (min)

    131.2    139.0    -5.6 %   119.4    9.9 %

UZBEKISTAN

    Three months  
   3Q2007    3Q2006    Change,
3Q07/3Q06		     2Q2007    Change,
3Q07/2Q07		  

Registered subscribers

    1,631,673    546,900    198.3 %   1,224,800    33.2 %

ARPUREG, (US$)

    7.4    11.1    -33.3 %   7.0    5.7 %

MOUREG, (min)

    282.4    285.0    -0.9 %   256.5    10.1 %

TAJIKISTAN

    Three months  
   3Q2007    3Q2006    Change,
3Q07/3Q06		     2Q2007    Change,
3Q07/2Q07		  

Registered subscribers

    295,049    14,500    1934.8 %   218,000    35.3 %

ARPUREG, (US$)

    10.0    1.9    426.3 %   9.6    4.2 %

MOUREG, (min)

    212.7    40.6    423.9 %   213.7    -0.5 %

ARMENIA

    Three months  
   3Q2007    3Q2006    Change,
3Q07/3Q06		     2Q2007    Change,
3Q07/2Q07		  

Registered mobile subscribers

    538,411    N/A      497,600    8.2 %

ARPUREG, (US$)

    16.1    N/A      15.9    1.3 %

MOUREG, (min)

    165.4    N/A      169.9    -2.6 %

LOGO

 

VimpelCom

Presentation of 3Q 2007 Financial and Operating Results

LOGO

 

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 strategy and development plans in Russia and the CIS. The forward-looking statements are based on management’s best assessment of the Company’s strategic and financial position, and future market conditions and trends. These discussions involve risks and uncertainties. The actual outcome may differ materially from these statements as a result of risks and uncertainties relating to developments from competition, governmental regulations of the wireless telecommunications industry, general political uncertainties in Russia and the CIS, general economic developments in Russia and the CIS, challenges to 3G and Far East tenders, and/or litigation with third parties or our shareholders (including Telenor). The actual outcome may also differ materially if the Company is unable to obtain all necessary corporate approvals relating to its business (including approval of funding and specific transactions) and other factors. There can be no assurance that these risks and uncertainties will not have a material adverse effect on the Company, that the Company will be able to grow or that it will be successful in executing its strategy and 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, 2006 and other public filings made by the Company with the United States Securities and Exchange Commission, which risk factors are incorporated herein by reference. The Company 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.

LOGO

 

Agenda

Welcome Remarks

   

Alexander
Izosimov,
CEO

Financial Overview

   

Elena
Shmatova,
CFO

Operational Overview

   

Alexander
Izosimov,
CEO

Q&A Session

   

will be joined
by:

    

Nikolay
Pryanishnikov,
Executive VP,
General
Director,
Russia Kent
McNeley,
CMO

LOGO

 

Quarterly Financial Dynamics

Net Revenues, $ mln Net Revenues, $ mln

OIBDA, $ mln OIBDA Margin

LOGO

 

Continuing Increase in Operating Cash Flow

Operating Cash Flow, $ mln CAPEX, $ mln Operating ?ash Flow less CapEx, $ mln

LOGO

 

Strong Balance Sheet

OIBDA LTM/ Interest LTM Debt/ Equity Debt/ OIBDA LTM

($ mln)

   

Sep
30,’07

   

Dec
31,’06

   

Dec
31,’05

Cash and Cash Equivalents

   

1,028

   

344

   

364

Total Assets

   

9,787

   

8,437

   

6,307

Total Debt

   

2,743

   

2,489

   

1,998

-Short-term

   

411

   

424

   

421

-Long-term

   

2,332

   

2,065

   

1,577

Shareholders’ Equity

   

4,916

   

3,943

   

2,741

LTM OIBDA*

   

3,368

   

2,452

   

1,571

- LTM Depreciation andamortization

   

1,318

   

1,055

   

593

- LTM Operating Income

   

2,050

   

1,397

   

978

LTM Interest

   

191

   

186

   

147

Debt/ Assets

   

0.28

   

0.30

   

0.32

Net Debt

   

1,715

   

2,145

   

1,634

* In cases when OIBDA is part of financial ratios it is deemed to be calculated in accordance with the reconciliation tables herein

LOGO

 

Operating Highlights: Russia

Active Subscriber Base, mln Subscriber Market Share*

VimpelCom MTS MegaFon Others

ARPU, US$ MOU, min

*) Source: AC&M Consulting

LOGO

 

Financial Highlights: Russia

Net Revenues, $ mln OIBDA, $ mln

CAPEX, $ mln CAPEX / Revenue, LTM

LOGO

 

Sources of Year-on-Year Growth

Net Revenue Growth, $ mln OIBDA Growth, $ mln

Subscriber Growth, ‘000

Russia CIS

LOGO

 

Operating Highlights: Kazakhstan

Active Subscriber Base, mln Subscriber Market Share*

VIP K’Cell Others

ARPU, US$ MOU, min

*) Source: AC&M Consulting

LOGO

 

Financial Highlights: Kazakhstan

Net Revenues, $ mln OIBDA, $ mln

CAPEX, $ mln CAPEX / Revenue, LTM

LOGO

 

Operating Highlights: Ukraine

Active Subscriber Base, mln Subscriber Market Share*

VIP Kyivstar UMC (MTS) Astelit Others

ARPU (US$) MOU, min

*

 

) Source: AC&M Consulting

LOGO

 

Financial Highlights: Ukraine

Net Revenues, $ mln OIBDA, $ mln

CAPEX, $ mln CAPEX / Revenue, LTM

LOGO

 

Operating Highlights: Uzbekistan

Active Subscriber Base, mln Subscriber Market Share*

ARPU (US$) MOU, min

*

 

) Source: AC&M Consulting

LOGO

 

Financial Highlights: Uzbekistan

Net Revenues, $ mln OIBDA, $ mln

CAPEX, $ mln CAPEX / Revenue, LTM

LOGO

 

Operating and Financial Highlights: Armenia

Active Subscriber Base, mln Net Revenues, $ mln

ARPU, US$ CAPEX, $ mln

* The 4Q 2006 data represent the results of operations for 1.5 months since the date of acquisition by VimpelCom

LOGO

 

Operating and Financial Highlights: Georgia and Tajikistan

Georgia

• Operations launched at the end of Q1 and are still in a start-up phase

• Focus on roll-out and distribution network development

Tajikistan

• Sequential rapid growth continues:

948% revenue growth

931% increase in active subscribers

• Substantial expansion in OIBDA and OIBDA margin

• Market share increased from 15.2% to 16.7%

LOGO

 

Summary

Strong growth of financial and operating results

• ARPU in Russia continues to expand driven by increasing usage and stable pricing

• Subscriber and revenue growth in the CIS despite increasing competition

LOGO

 

Questions and Answers

If you would like to ask a question, please press the star key followed by the digit one on your touch-tone telephone.

Due to time constraints, we ask that you limit yourselves to one question and one follow-up question.

If you are using a speakerphone, please make sure your mute button is turned off to allow your signal to reach the equipment.

Thank you for your interest in VimpelCom

For more information please visit www.vimpelcom.com or contact Investor_Relations@vimpelcom.com

LOGO

 

APPENDICES

LOGO

 

Russia and CIS License Footprint

LOGO

 

Public Recognition

VimpelCom trademark “Beeline” was rated as the “Most Valuable Russian Brand” for the 3rd year in a row by Interbrand with an estimated value of $7.2 billion

• VimpelCom`s Senior Managers topped the annual rankings of the Best Russian Business Leaders in the Telecommunications area by Institutional Investor Magazine and Russian Association of Managers

• VimpelCom named the winner of the Best IR by a Russian Company for the 5th year in a row by IR Magazine

LOGO

 

FOREX Development During 3Q 2007

    

Average
quarterly FX rate
to US$

 
 
 

Currency

   

Change
from
Q2 07

 
 
 

  

Change
from
Q3 06

 
 
 

RUB

   

1.4

%

  

4.8

%

KZT

   

-1.4

%

  

-0.7

%

UAH

   

0.0

%

  

0.0

%

TJS

   

0.0

%

  

-2.4

%

UZS

   

-1.0

%

  

-3.5

%

AMD

   

4.5

%

  

16.1

%

GEL

   

0.9

%

  

4.8

%

*) Source: Prime TASS, National Banks of the CIS countries

LOGO

 

Reconciliation Tables of non-U.S. GAAP Measures to Their Most Directly Comparable U.S. GAAP Financial Measures

LOGO

 

Reconciliation of OIBDA and OIBDA Margin (Unaudited)

    

Three months ended

 

($’000)

   

Sept 30,
2007

 
 

  

June 30,
2007

 
 

  

March
31, 2007

 
 

  

Dec 31,
2006

 
 

  

Sept 30,
2006

 
 

  

June 30,
2006

 
 

    

Reconciliation of OIBDA to operating income

 

OIBDA

   

1,015,158

 

  

896,758

 

  

766,417

 

  

689,825

 

  

717,796

 

  

561,555

 

Depreciation

   

(285,572

)

  

(285,365

)

  

(269,172

)

  

(265,086

)

  

(243,593

)

  

(194,845

)

Amortization

   

(55,583

)

  

(53,807

)

  

(53,289

)

  

(50,095

)

  

(45,648

)

  

(43,148

)

Operating Income

   

674,003

 

  

557,586

 

  

443,956

 

  

374,644

 

  

428,555

 

  

323,562

 

    

Reconciliation of OIBDA margin to operating income as
percentage of net operating revenue

 
 

OIBDA margin

   

51.9

%

  

52.2

%

  

51.5

%

  

47.5

%

  

52.8

%

  

50.1

%

Less: Depreciation as % of net operating revenues

   

(14.6

%)

  

(16.6

%)

  

(18.1

%)

  

(18.3

%)

  

(17.9

%)

  

(17.4

%)

Less: Amortization as % of net operating revenues

   

(2.8

%)

  

(3.1

%)

  

(3.6

%)

  

(3.4

%)

  

(3.4

%)

  

(3.9

%)

Operating Income

   

34.5

%

  

32.5

%

  

29.8

%

  

25.8

%

  

31.5

%

  

28.8

%

LOGO

 

Reconciliation of OIBDA and ARPU in Russia (Unaudited)

    

Three months ended

($’000)

   

Sept 30,
2007

  

June 30,
2007

  

March 31,
2007

  

Dec 31,
2006

  

Sept 30,
2006

  

June 30,
2006

    

Reconciliation of OIBDA to operating income

OIBDA

   

871,163

  

779,828

  

676,476

  

645,144

  

666,354

  

529,704

Depreciation

   

(249,781)

  

(240,387)

  

(232,681)

  

(229,544)

  

(221,973)

  

(182,684)

Amortization

   

(29,470)

  

(28,478)

  

(28,536)

  

(27,091)

  

(26,429)

  

(25,657)

Operating Income

   

591,912

  

510,963

  

415,259

  

388,509

  

417,952

  

321,363

    

Reconciliation of ARPU to service revenue and connection fees

Service revenue andconnection fees

   

1,650,358

  

1,457,896

  

1,276,754

  

1,276,276

  

1,223,681

  

1,014,810

Less: Connection fees

   

184

  

164

  

169

  

308

  

410

  

622

Less: Revenue from rent of fiber-optic channels

   

1,003

  

983

  

964

  

433

  

760

  

325

Service revenue used to calculate ARPU

   

1,649,171

  

1,456,749

  

1,275,621

  

1,275,535

  

1,222,511

  

1,013,863

Average number of active subscribers (‘000)

   

40,933

  

39,359

  

39,021

  

39,102

  

38,365

  

37,733

ARPU (US$)

   

13.4

  

12.3

  

10.9

  

10.9

  

10.6

  

9.0

LOGO

 

Reconciliation of OIBDA and ARPU in Kazakhstan (Unaudited)

    

Three months ended

 

($’000)

   

Sept
30,
2007

 
 
 

  

June 30,
2007

 
 

  

March 31,
2007

 
 

  

Dec 31,
2006

 
 

  

Sept
30,
2006

 
 
 

  

June 30,
2006

 
 

    

Reconciliation of OIBDA to operating income

 

OIBDA

   

88,127

 

  

80,317

 

  

62,007

 

  

35,744

 

  

49,023

 

  

33,908

 

Depreciation

   

(14,983

)

  

(17,537

)

  

(15,817

)

  

(21,142

)

  

(17,981

)

  

(9,363

)

Amortization

   

(9,091

)

  

(9,419

)

  

(9,154

)

  

(9,134

)

  

(9,550

)

  

(9,324

)

Operating Income

   

64,053

 

  

53,361

 

  

37,036

 

  

5,468

 

  

21,492

 

  

15,221

 

    

Reconciliation of ARPU to service revenue and connection
fees

 
 

Service revenue and connection fees

   

167,122

 

  

149,326

 

  

119,399

 

  

112,963

 

  

104,208

 

  

80,301

 

Less: Connection fees

   

0

 

  

0

 

  

0

 

  

0

 

  

0

 

  

0

 

Less: Revenue from rent of fiber-optic channels

   

0

 

  

0

 

  

0

 

  

0

 

  

0

 

  

0

 

Service revenue used to calculate ARPU

   

167,122

 

  

149,326

 

  

119,399

 

  

112,963

 

  

104,208

 

  

80,301

 

Average number of active subscribers (‘000)

   

4,107

 

  

3,655

 

  

3,271

 

  

2,728

 

  

2,412

 

  

2,120

 

ARPU (US$)

   

13.6

 

  

13.6

 

  

12.2

 

  

13.8

 

  

14.4

 

  

12.6

 

LOGO

 

Reconciliation of OIBDA and ARPU in Ukraine (Unaudited)

    

Three months ended

 

($’000)

   

Sept
30,
2007

 
 
 

  

June 30,
2007

 
 

  

March 31,
2007

 
 

  

Dec
31,
2006

 
 
 

  

Sept
30,
2006

 
 
 

  

June 30,
2006

 
 

    

Reconciliation of OIBDA to operating income

 

OIBDA

   

6,455

 

  

(3,073

)

  

(6,518

)

  

(10,546

)

  

(6,072

)

  

(11,259

)

Depreciation

   

(4,417

)

  

(4,330

)

  

(3,203

)

  

(4,325

)

  

(1,218

)

  

(859

)

Amortization

   

(5,210

)

  

(5,234

)

  

(5,210

)

  

(5,722

)

  

(5,232

)

  

(4,909

)

Operating Income

   

(3,172

)

  

(12,637

)

  

(14,931

)

  

(20,593

)

  

(12,522

)

  

(17,027

)

    

Reconciliation of ARPU to service revenue and connection
fees

 
 

Service revenue and connection fees

   

36,523

 

  

23,436

 

  

16,158

 

  

14,652

 

  

12,320

 

  

5,948

 

Less: Connection fees

   

112

 

  

36

 

  

5

 

  

5

 

  

3

 

  

0

 

Less: Revenue from rent of fiber- optic channels

   

0

 

  

0

 

  

0

 

  

0

 

  

0

 

  

0

 

Service revenue used to calculate ARPU

   

36,411

 

  

23,400

 

  

16,153

 

  

14,647

 

  

12,317

 

  

5,948

 

Average number of active subscribers (‘000)

   

2,081

 

  

1,847

 

  

1,781

 

  

1,170

 

  

611

 

  

338

 

ARPU (US$)

   

5.8

 

  

4.2

 

  

3.0

 

  

4.2

 

  

6.7

 

  

5.9

 

LOGO

 

Reconciliation of OIBDA and ARPU in Uzbekistan (Unaudited)

    

Three months ended

 

($’000)

   

Sept
30,
2007

 
 
 

  

June 30,
2007

 
 

  

March 31,
2007

 
 

  

Dec
31,
2006

 
 
 

  

Sept
30,
2006

 
 
 

  

June 30,
2006

 
 

    

Reconciliation of OIBDA to operating income

 

OIBDA

   

16,923

 

  

11,388

 

  

8,664

 

  

7,815

 

  

9,532

 

  

9,507

 

Depreciation

   

(4,011

)

  

(3,312

)

  

(3,097

)

  

(2,720

)

  

(2,380

)

  

(1,902

)

Amortization

   

(3,438

)

  

(3,414

)

  

(3,383

)

  

(3,378

)

  

(3,268

)

  

(3,113

)

Operating Income

   

9,474

 

  

4,662

 

  

2,184

 

  

1,717

 

  

3,884

 

  

4,492

 

    

Reconciliation of ARPU to service revenue and connection
fees

 
 

Service revenue and connection fees

   

31,159

 

  

24,009

 

  

18,778

 

  

16,446

 

  

16,279

 

  

15,507

 

Less: Connection fees

   

0

 

  

0

 

  

0

 

  

0

 

  

0

 

  

0

 

Less: Revenue from rent of fiber- optic channels

   

0

 

  

0

 

  

0

 

  

0

 

  

0

 

  

0

 

Service revenue used to calculate ARPU

   

31,159

 

  

24,009

 

  

18,778

 

  

16,446

 

  

16,279

 

  

15,507

 

Average number of active subscribers

                                     

(‘000)

   

1,372

 

  

1,109

 

  

930

 

  

558

 

  

458

 

  

406

 

ARPU (US$)

   

7.6

 

  

7.2

 

  

6.7

 

  

9.8

 

  

11.8

 

  

12.7

 

LOGO

 

Reconciliation of ARPU in Armenia (Unaudited)

    

Three Months Ended

    

MOBILE

   

FIXED

($’000)

   

Sept
30,
2007

   

June
30,
2007

   

March
31,
2007

   

Dec
31,
2006

   

Sept
30,
2007

   

June
30,
2007

   

March
31,
2007

   

Dec
31,
2006

    

Reconciliation of ARPU to service revenue and connection fees

Service revenue and connection fees

   

25,623

   

23,208

   

19,912

   

10,451

   

37,551

   

35,214

   

34,242

   

16,922

Less: Connection fees

   

64

   

19

   

129

   

0

   

88

   

55

   

0

   

0

Less: Revenue from rent of fiber-optic channels

   

0

   

0

   

0

   

0

   

—  

   

—  

   

—  

   

—  

Service revenue used t o calculate ARPU

   

25,559

   

23,189

   

19,783

   

10,451

   

37,463

   

35,159

   

34,242

   

16,922

Average number of active subscribers (‘000)

   

483

   

446

   

456

   

409

   

611

   

608

   

607

   

609

ARPU (US$)

   

17.6

   

17.3

   

14.5

   

17.0

   

20.4

   

19.3

   

18.8

   

18.5

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Definitions

Registered subscriber is an authorized user of cellular services, using one SIM card (GSM/3G) with one or several selective numbers or one handset (DAMPS/CDMA) with one selective number. The number of subscribers includes employees using cellular services and excludes guest roamers and users of test SIM cards or handsets.

Active subscribers are those subscribers in the registered subscriber base who were a party to a revenue generating activity in the past three months and remain in the base at the end of the reported period. Such activities include all incoming and outgoing calls, subscriber fee accruals, debits related to service, outgoing SMS, MMS, data transmission and receipt sessions, but do not include incoming SMS and MMS sent by our Company or abandoned calls.

ARPU (Monthly Average Revenue per User), a non-U.S. GAAP financial measure, is calculated by dividing the Company’s service revenue during the relevant period, including roaming revenue and interconnect revenue, but excluding revenue from connection fees, sales of handsets and accessories and other non-service revenue, by the average number of the Company’s active subscribers during the period and dividing by the number of months in that period. Reconciliation of ARPU to service revenues and connection fees, the most directly comparable U.S. GAAP financial measure, is presented above in the tables section. The Company believes that ARPU provides useful information to investors because it is an indicator of the performance of the Company’s business operations and assists management in budgeting. The Company also believes that ARPU provides management with useful information concerning usage and acceptance of the Company’s services. ARPU should not be viewed in isolation or an alternative to other figures reported under U.S. GAAP.

MOU (Monthly Average Minutes of Use per User) is calculated by dividing the total number of minutes of usage for incoming and outgoing calls during the relevant period (excluding guest roamers) by the average number of active subscribers during the period and dividing by the number of months in that period.

Market share of subscribers for each country is calculated by dividing the estimated number of the subscribers of a particular company by the total estimated number of subscribers in that country. Market share data is published by consulting agencies specializing in the telecommunications industry in Russia and the CIS and generally based on registered subscribers.

Net debt is calculated as a total interest-bearing debt minus cash and cash equivalents

Free cash flow is calculated as operating cash flow minus capital expenditures before acquisitions

Average quarterly FX rate to US$ for the CIS countries is calculated as the sum of average exchange rates for each month within a quarter divided by three months