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VimpelCom. Presentation of 3Q 200 4 F inancial and O perating R esults. November 18, 2004. Disclaimer. - PowerPoint PPT Presentation
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VimpelComVimpelCom
Presentation of 3Q2004Financial and Operating Results
Presentation of 3Q2004Financial and Operating Results
November 18, 2004
2
Disclaimer
This presentation contains "forward-looking statements", as the phrase is defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements relate, in part, to the Company’s development plans, such as national and international expansion. These statements also relate to the consummation of the merger between VimpelCom and each of VimpelCom-Region and KB Impuls, each of which is subject to certain conditions. If any of the conditions are not met, the merger will not be consummated. Furthermore, there are risks relating to such mergers due to the fact under Russian law, it appears that certain licenses and permissions should be issued after the consummation of the mergers, and it is possible that they may not be issued in a timely manner, or on the same terms as the existing licenses and permissions.The 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 and acquisition. These discussions involve risks and uncertainties. The actual outcome may differ materially from these statements as a result of unforeseen developments from regulatory authorities, competition, governmental regulations of the wireless telecommunications industry, general political and social uncertainties in Russia and Kazakhstan, general economic developments in Russia and Kazakhstan, the Company’s ability to continue to grow its overall subscriber base, continued volatility in the world economy and other factors. There can be no assurance that such risks and uncertainties will not have material adverse effects on the Company’s development plans. Certain factors that could cause actual results to differ materially from those discussed in any forward-looking statements include the risks described in the Company's Annual Report on Form 20-F for the year ended December 31, 2003 and other public filings made by the Company with the United States Securities and Exchange Commission, which risk factors are incorporated herein by reference. VimpelCom disclaims any obligation to update developments of these risk factors or to announce publicly any revision to any of the forward-looking statements contained in this presentation, or to make corrections to reflect future events or developments.
3
VimpelCom’s Strategy
‣ Increase loyalty, reduce churn
‣ Improve network quality perception
‣ Increase market share in business/Hi-value segment
‣ Stimulate traffic usage and up-sell / cross-sell VAS
‣ Capture organic growth
‣ Utilize unified business model:
Brand, tariffs and products Network rollout &
operations Customer Service IT, Billing and Reporting Organizational structure
‣ Apply tailored strategy for each region
Ensure cost efficiency
‣ Acquisition in Kazakhstan
‣ Selective acquisitions and green field opportunities in the CIS
‣ Industrial approach utilizing synergies with existing VimpelCom operations
Extract value from Win the regional Expansion outside existing operations growth game Russia
Become the leading wireless operator in Russia and the CIS
4
Operating Highlights
‣ 22.3 million subscribers as of November 18, 2004, including 725,500 in Kazakhstan
‣ Operations encompass 72 Russian regions, the largest number of any Russian cellular operator
‣ Leader in subscriber net additions in Russia‣ CIS expansion started with an acquisition of
KaR-Tel, a GSM operator in Kazakhstan‣ Strong financial results with the 3Q2004
OIBDA close to $300 million‣ Roaming available in 171 countries with
GPRS roaming available in 55 countries, one of the largest coverage in the world
5
National GSM network rollout
In commercial operation In commercial operation
Other licensed regions Other licensed regions Unlicensed territories Unlicensed territories
12
3
4
5
678
9
1011
12 13
1415
1617
18
192021
22
2324
25
26
27
2829
30
31
32
33
34
35
36
37
38
39
40
41
4243
44
45
46
47
48
49
5051
52
53
54
55
56
MoscowPopulation: 17.0 mln.MoscowPopulation: 17.0 mln.
CentralPopulation: 21.0 mln.CentralPopulation: 21.0 mln.
SouthPopulation: 22.9 mln.SouthPopulation: 22.9 mln.
VolgaPopulation: 25.2 mln.VolgaPopulation: 25.2 mln.
SiberiaPopulation: 15.3 mln.SiberiaPopulation: 15.3 mln.
Far EastPopulation: 11.4 mln.Far EastPopulation: 11.4 mln.
UralsPopulation: 18.3 mln.UralsPopulation: 18.3 mln.
NorthwestPopulation: 14.0 mln.NorthwestPopulation: 14.0 mln.
60
59
58
57
61
62 63
64
6566
70
67
68
69
71
72
6
National GSM network rollout (regions)
NetworkLaunch
NetworkLaunch
1.City of Moscow*2.Moscow Region*3.Voronezh4.Tver5.Kaluga6.Vladimir7.Ryazan8.Lipetsk9.Tula10.Yaroslavl11.Smolensk12.Belgorod13.N. Novgorod14.Saratov15.Rostov16.Barnaul17.Kemerovo
1.City of Moscow*2.Moscow Region*3.Voronezh4.Tver5.Kaluga6.Vladimir7.Ryazan8.Lipetsk9.Tula10.Yaroslavl11.Smolensk12.Belgorod13.N. Novgorod14.Saratov15.Rostov16.Barnaul17.Kemerovo
Jul 1999Jul 1999
May 2000Sep 2001Sep 2001Sep 2001Sep 2001Oct 2001Oct 2001Oct 2001Nov 2001Nov 2001Jan 2002Jan 2002Jan 2002Jan 2002Jan 2002
Jul 1999Jul 1999
May 2000Sep 2001Sep 2001Sep 2001Sep 2001Oct 2001Oct 2001Oct 2001Nov 2001Nov 2001Jan 2002Jan 2002Jan 2002Jan 2002Jan 2002
AreaArea SuperRegionSuperRegion
10,3586,6272,3791,4731,0411,5251,2281,2131,6761,3681,0501,5123,5242,6694,4072,6072,900
10,3586,6272,3791,4731,0411,5251,2281,2131,6761,3681,0501,5123,5242,6694,4072,6072,900
AreaPopul.(‘000)
AreaPopul.(‘000)
MLA *MLA *
CentralCentralCentralCentralCentralCentralCentralCentralCentralCentralVolgaVolgaSouthSiberiaSiberia
MLA *MLA *
CentralCentralCentralCentralCentralCentralCentralCentralCentralCentralVolgaVolgaSouthSiberiaSiberia
* Moscow license area
** Acquisitions
NetworkLaunch
NetworkLaunch
18. Novosibirsk19. Bryansk20. Kostroma21. Ivanovo22. Orenburg**23. Kursk24. Orel25. Omsk26. Kazan27. Tomsk28. Krasnodar29. Maykop30. Volgograd31. Ufa32. Cheboksary33. Nalchik34. Gorno- Altaysk
18. Novosibirsk19. Bryansk20. Kostroma21. Ivanovo22. Orenburg**23. Kursk24. Orel25. Omsk26. Kazan27. Tomsk28. Krasnodar29. Maykop30. Volgograd31. Ufa32. Cheboksary33. Nalchik34. Gorno- Altaysk
Jan 2002May 2002May 2002Jun 2002Jul 2002
Aug 2002Aug 2002Aug 2002Aug 2002Sep 2002Sep 2002Sep 2002Oct 2002Oct 2002Oct 2002Oct 2002Oct 2002
Jan 2002May 2002May 2002Jun 2002Jul 2002
Aug 2002Aug 2002Aug 2002Aug 2002Sep 2002Sep 2002Sep 2002Oct 2002Oct 2002Oct 2002Oct 2002Oct 2002
AreaArea SuperRegionSuperRegion
2,6921,379
7371,1492,1771,236
8612,0793,7801,0465,571
--2,7024,1031,314
900203
2,6921,379
7371,1492,1771,236
8612,0793,7801,0465,571
--2,7024,1031,314
900203
AreaPopul.(‘000)
AreaPopul.(‘000)
SiberiaCentralCentralCentralVolga
CentralCentralSiberiaVolga
SiberiaSouthSouthSouthVolgaVolgaSouthSiberia
SiberiaCentralCentralCentralVolga
CentralCentralSiberiaVolga
SiberiaSouthSouthSouthVolgaVolgaSouthSiberia
7
National GSM network rollout (regions)
NetworkLaunch
NetworkLaunch
35. Krasnoyarsk36. Samara37. Astrakhan38. Ulyanovsk39. Kaliningrad**40. Norilsk41. Makhachkala42. Stavropol**43. Cherkessk**44. St.Petersburg45. Tura46. Tambov47. Leningrad Reg.48. Ekatirinburg49. Novgorod50. Penza51. Yoshkar-Ola52. Chelyabinsk53. Tyumen54. Saransk55. Elista
35. Krasnoyarsk36. Samara37. Astrakhan38. Ulyanovsk39. Kaliningrad**40. Norilsk41. Makhachkala42. Stavropol**43. Cherkessk**44. St.Petersburg45. Tura46. Tambov47. Leningrad Reg.48. Ekatirinburg49. Novgorod50. Penza51. Yoshkar-Ola52. Chelyabinsk53. Tyumen54. Saransk55. Elista
Oct 2002Nov 2002Nov 2002Dec 2002Dec 2002Dec 2002Jan 2003Jan 2003Jan 2003
April 2003Aug 2003Oct 2003Oct 2003Dec 2003Dec 2003Dec 2003Dec 2003Dec 2003Dec 2003Dec 2003Dec 2003
Oct 2002Nov 2002Nov 2002Dec 2002Dec 2002Dec 2002Jan 2003Jan 2003Jan 2003
April 2003Aug 2003Oct 2003Oct 2003Dec 2003Dec 2003Dec 2003Dec 2003Dec 2003Dec 2003Dec 2003Dec 2003
AreaArea SuperRegionSuperRegion
2,9663,2401,0071,382
955135
2,5842,730
4404,669
181,1801,6714,490
6951,453
7283,6063,266
889292
2,9663,2401,0071,382
955135
2,5842,730
4404,669
181,1801,6714,490
6951,453
7283,6063,266
889292
AreaPopul.(‘000)
AreaPopul.(‘000)
SiberiaVolgaSouthVolga
North WSiberiaSouthSouth
South North WSiberiaCentralNorth W
UralNorth W
VolgaVolgaUralUral
VolgaSouth
SiberiaVolgaSouthVolga
North WSiberiaSouthSouth
South North WSiberiaCentralNorth W
UralNorth W
VolgaVolgaUralUral
VolgaSouth
** Acquisitions
NetworkLaunch
NetworkLaunch
56. Vladikavkaz57. Kurgan58. Pskov59. Petrozavodsk60 Vologda61. Izhevsk62. Blagovesch.**63. Khabarovsk**64.P-Kamchatsky**
65. Arkhangelsk66. Naryan-Mar67. Perm68. Kudymkar69. Abakan70. Murmansk71. Kirov72. Surgut
56. Vladikavkaz57. Kurgan58. Pskov59. Petrozavodsk60 Vologda61. Izhevsk62. Blagovesch.**63. Khabarovsk**64.P-Kamchatsky**
65. Arkhangelsk66. Naryan-Mar67. Perm68. Kudymkar69. Abakan70. Murmansk71. Kirov72. Surgut
Mar 2004Apr 2004Apr 2004Apr 2004May 2004Jun 2004Jun 2004Jun 2004Jun 2004July 2004July 2004Aug 2004Aug 2004Aug 2004Aug 2004Sep 2004Sep 2004
Mar 2004Apr 2004Apr 2004Apr 2004May 2004Jun 2004Jun 2004Jun 2004Jun 2004July 2004July 2004Aug 2004Aug 2004Aug 2004Aug 2004Sep 2004Sep 2004
AreaArea SuperRegionSuperRegion
7101,020
761717
1,2701,571
9031,435
3591,336
422,824
--546893
1,5041,433
7101,020
761717
1,2701,571
9031,435
3591,336
422,824
--546893
1,5041,433
AreaPopul.(‘000)
AreaPopul.(‘000)
SouthUral
North WNorth W North W
VolgaFar EastFar EastFar EastNorth WNorth W
VolgaVolga
SiberiaNorth W
VolgaUral
SouthUral
North WNorth W North W
VolgaFar EastFar EastFar EastNorth WNorth W
VolgaVolga
SiberiaNorth W
VolgaUral
8
5.08
4.18
5.66
5.78
6.04
7.33
6.18
10.12
6.65
13.22
3Q03 4Q03 1Q04 2Q04 3Q04
VimpelCom Subscriber Base, mln
Moscow Regions
5.08
4.18
5.66
5.78
6.04
7.33
6.18
10.12
6.65
13.22
3Q03 4Q03 1Q04 2Q04 3Q04
VimpelCom Subscriber Base, mln
Moscow Regions
VimpelCom Market Share
45%46%48%49%49%
34%33%32%31%31%
21%
28%25%23%
30%
0%
20%
40%
60%
3Q03 4Q03 1Q04 2Q04 3Q04
Moscow Russia Regions
VimpelCom Market Share
45%46%48%49%49%
34%33%32%31%31%
21%
28%25%23%
30%
0%
20%
40%
60%
3Q03 4Q03 1Q04 2Q04 3Q04
Moscow Russia Regions
Strong Subscriber Growth
Source: VimpelCom, independent sources
9.26
11.44
13.37
16.30
20.55
Including KaR-Tel’s 676,300
9
Strong Growth In Russian Regions
1,226
1,073
744824
316
1,616
1,458
1,166
1,030
496
2,023
1,830
1,494
1,267
61996
2,711
2,442
1,938
1,615
852240322
3,566
3,104
2,512
2,084
1,090479387
3Q03 4Q03 1Q04 2Q04 3Q04
VimpelCom Regional Subscriber Base, ('000)
Central Volga South Siberia
Northwest Ural Far East
1,226
1,073
744824
316
1,616
1,458
1,166
1,030
496
2,023
1,830
1,494
1,267
61996
2,711
2,442
1,938
1,615
852240322
3,566
3,104
2,512
2,084
1,090479387
3Q03 4Q03 1Q04 2Q04 3Q04
VimpelCom Regional Subscriber Base, ('000)
Central Volga South Siberia
Northwest Ural Far East
7,329
5,777
4,183
10,120
13,223
10
Note:BTS – base transceiver stationBSC – base station controllerMSC – mobile switching center
Network Rollout As Of Sept. 30, 2004
Source: VimpelCom
№ of BTSs 2 957 2 847 6 809 5 641 9 766 8 488
№ of BSCs 119 117 164 137 283 254
№ of MSCs 12 12 66 57 78 69
3Q2004 2Q2004 3Q2004 2Q2004 3Q2004 2Q2004
Moscow Regions Total
11
Key Subscriber Statistics
Moscow 6,646 5,076 31% 6,183 8% Contract 867 799 9% 844 3% Prepaid 5,779 4,277 35% 5,339 8%
Regions 13,223 4,183 216% 10,121 31%KaR-Tel 676 n/a -- n/a --
Total 20,545 9,259 122% 16,304 26% Contract 2,865 1,470 95% 2,160 33% Prepaid 17,680 7,789 127% 14,144 25%
Churn (quarterly) 7.2% 9.6% - 9.4% -
(‘000) 30 Sep 04 30 Sep 03 YtY 30 Jun 04 QtQ
12
Total operating revenues (US$,000) 10,759
Kazakhstan
Number of subscribers as of 676,300September 30, 2004Contract 580,600Prepaid 95,700
Net income (US$,000) 2,284
ARPU (US$) 16.3
MOU (min) 71.8
SAC (US$) 25.2
Key Financial and Operating Figures For the Period of September 3 – September 30, 2004
13
VimpelCom 3Q2004 Financial Highlights
379.0
602.4
3Q2003 3Q2004
Net Revenues, $ Million
379.0
602.4
3Q2003 3Q2004
Net Revenues, $ Million
72.2102.2
3Q2003 3Q2004
Net Income, $ Million
72.2102.2
3Q2003 3Q2004
Net Income, $ Million
41.6%41.6%
178.5
295.7
3Q2003 3Q2004
OIBDA, $ Million
178.5
295.7
3Q2003 3Q2004
OIBDA, $ Million65.7%65.7%
47.1%49.1%
3Q2003 3Q2004
OIBDA Margin
47.1%49.1%
3Q2003 3Q2004
OIBDA Margin
58.9%58.9%
Source: VimpelCom
14
Key Financial Figures
Net Revenues* 602.4 379.0 58.9% 490.9 22.7% Moscow* 313.8 259.7 20.8% 289.1 8.5% Regions* 277.8 119.3 132.9% 201.8 37.7% Kazakhstan* 10.8 n/a -- n/a -- Gross Margin 81.6% 81.8% -- 82.7% -- OIBDA 295.7 178.5 65.7% 244.7 20.8% OIBDA Margin 49.1% 47.1% -- 49.8% --
Net Income* 102.2 72.2 41.6% 91.0 12.3% Net Income Margin 17.0% 19.0% -- 18.5% -- Moscow 55.9 61.6 -9.3% 68.9 -18.9% Regions 75.2 17.9 320.1% 43.0 74.9% Kazakhstan 2.3 n/a -- n/a --
SG&A 192.5 126.9 51.7% 158.5 21.5% % of Net Revenues 32.0% 33.5% -- 32.3% --
D&A 85.7 51.8 65.4% 79.6 7.7% % of Net Revenues 14.2% 13.7% -- 16.2% --
Capex 346.5 165.3 109.6% 272.4 27.2%
($ mln) 3Q04 3Q03 YtY 2Q04 QtQ
* Net operating revenues and net income excluding inter-company transactions
15
Operational Indicators
ARPU, Blended ($) 10.7 14.4 -25.7% 10.8 -0.9%ARPU Moscow 16.0 17.5 -8.6% 15.2 5.3% Contract (Moscow) 56.6 53.6 5.6% 54.0 4.8% Prepaid (Moscow) 9.7 10.4 -6.7% 9.0 7.8%ARPU Regions 8.4 11.5 -27.0% 8.3 1.2%
MOU, Blended (min) 99.4 92.7 7.3% 96.3 3.2%MOU Moscow 123.7 92.5 33.7% 112.7 9.8% Contract (Moscow) 370.8 284.2 30.5% 364.1 1.8% Prepaid (Moscow) 85.2 54.7 55.8% 72.9 16.9%MOU Regions 86.7 93.0 -6.8% 84.5 2.6% SAC, Blended ($) 14.2 18.8 -24.5% 14.1 0.7% Moscow 25.4 27.0 -5.9% 23.4 8.5% Regions 10.8 12.3 -12.2% 11.0 -1.8%
3Q04 3Q03 YtY 2Q04 QtQ
16
Strong Balance Sheet
651
1,693
607
2,302
1,324
3,607
2002 2003 9M2004
Assets and Liabilities, $'000
Total Debt Total Assets
651
1,693
607
2,302
1,324
3,607
2002 2003 9M2004
Assets and Liabilities, $'000
Total Debt Total Assets
Cash and Cash Equivalents 189,044 157,611 263,657Total Assets 3,607,015 2,302,232 1,692,744 Total Debt 1,324,420 606,991 650,580 - Short-term 476,037 214,717 176,265 - Long-term 848,383 392,274 474,315Shareholder’s Equity 1,273,699 998,216 662,663 LTM OIBDA* 929,275 613,230 322,209 - LTM Depreciation and amortization * * 283,634 185,326 97,417 - LTM Operating income 645,641 427,904 224,792
LTM Interest 68,045 68,246 46,586
Debt/Equity 1.0 0.6 1.0 Debt/OIBDA * * * 1.4 1.0 2.0 OIBDA/Interest 13.7 9.0 6.9 Debt/Assets 0.4 0.3 0.4
($’000) 09/30/04 12/31/03 12/31/02
Source: VimpelCom
* LTM OIBDA constitutes the sum of the lines: LTM Operating income and LTM Depreciation and amortizationLTM stands for “last twelve months” to reporting date* * Includes Impairment of long-lived assets * * * In cases when OIBDA is part of financial ratios it is deemed to be calculated in accordance with thereconciliation tables herein
17
221.7
509.1 511.9
728.0699.2
1,028
2002 2003 30.09.2004, LTM
Net Operating Cash Flow/Capex, $ mln
Net Operating Cash Flow Capex
221.7
509.1 511.9
728.0699.2
1,028
2002 2003 30.09.2004, LTM
Net Operating Cash Flow/Capex, $ mln
Net Operating Cash Flow Capex
Net Operating Cash Flow vs CAPEX
* Net operating cash flow as % of Capex
43.5%*
70.3%*
68.0%*
18
Corporate Activities
‣Federal Agency on Communications granted VimpelCom 10 million telephone numbers since August 2004
‣Merger between VimpelCom and VimpelCom-R is planned to be completed by December 9, 2004
‣Merger between VimpelCom and KB Impuls is planned to be completed by year end of 2004
‣ADR to common share ratio change from 4:3 to 4:1 is effective November 22, 2004
19
Summary
‣ Ongoing rapid subscriber growth resulted in more than 22 million subscribers
‣ Overall market share in Russia has increased to 34%
‣ The Company has taken a strong lead in the subscriber acquisitions in the regions of Russia
‣ Strong financial results with the 3Q2004 OIBDA close to $300 million
‣ Acquisition of Kar-Tel, a Kazakh cellular operator, gives VimpelCom an important footprint in the richest country in the CIS outside Russia
Reconciliation tables of non-U.S. GAAP measures to their most directly comparable U.S. GAAP financial
measures
Reconciliation tables of non-U.S. GAAP measures to their most directly comparable U.S. GAAP financial
measures
21
Reconciliation of OIBDA and OIBDA margin
Reconciliation of VimpelCom OIBDA to operating income
OIBDA 295,663 178,472 742,382 426,337 Impairment loss -- -- (7,354) --
Depreciation (70,723) (42,894) (190,803) (108,486) Amortization (14,962) (8,871) (33,618) (24,981) Operating Income 209,978 126,707 510,607 292,870
(Three months ended) (Nine months ended)($ ‘000) Sep. 30, 2004 Sep. 30, 2003 Sep. 30, 2004 Sep. 30, 2003
Reconciliation of VimpelCom OIBDA margin to operating income as percentage of net operating revenuesOIBDA margin 49.1% 47.1% 49.1% 45.9% Impairment loss 0% 0% (0.5%) 0%
Depreciation as % of net operating revenues (11.7%) (11.3%) (12.6%) (11.6%)
Amortization as % of net operating revenues (2.5%) (2.4%) (2.2%) (2.7%)Operating income as %of net operating revenues 34.9% 33.4% 33.8% 31.6%
22
Reconciliation of OIBDA and OIBDA margin
Reconciliation of VimpelCom-Region OIBDA to operating income
OIBDA 135,032 49,788 297,818 98,421 Depreciation (22,899) (12,893) (60,709) (28,177) Amortization (5,710) (5,788) (18,482) (15,975) Operating Income 106,423 31,107 218,627 54,269
(Three months ended) (Nine months ended)($ ‘000) Sep. 30, 2004 Sep. 30, 2003 Sep. 30, 2004 Sep. 30, 2003
Reconciliation of VimpelCom-Region OIBDA margin to operating income as percentage of net operating revenuesOIBDA margin 47.8% 38.7% 44.1% 34.4% Depreciation as % of net operating revenues (8.1%) (10.0%) (9.0%) (9.9%)
Amortization as % of net operating revenues (2.0%) (4.5%) (2.7%) (5.6%)Operating income as %of net operating revenues 37.7% 24.2% 32.4% 19.0%
23
Reconciliation of ARPU
Reconciliation of ARPU to service revenue and connection fees
Service revenue and connection fees US$ 583,278 US$ 359,815 US$ 1,456,989 US$ 880,340
Less: Connection fees 191 361 527 1,077 Less: Revenue from rent of fiber-optic channels 408 308 1,261 958 Service revenue used to calculate ARPU 582,679 359,146 1,455,201 878,305
Average number of subscribers, ‘000 18,184 8,305 15,042 6,906 ARPU per month (US$) 10.7 14.4 10.7 14.1
(Three months ended) (Nine months ended)($ ‘000) Sep. 30, 2004 Sep. 30, 2003 Sep. 30, 2004 Sep. 30, 2003
24
Reconciliation of SAC
Reconciliation of SAC to selling, general and administrative expensesSelling, general and administrative expenses 192,513 126,860 489,063 318,891 Less: General and admin.
expenses 122,913 77,220 313,025 199,337 Sales and marketing expenses, including 69,600 49,640 176,038 119,554 advertising & marketing expenses 16,780 11,668 46,493 34,631 dealers’ commission expenses 52,820 37,972 129,545 84,923
New gross subs, ‘000 4,894 2,641 11,861 5,974
SAC (US$) 14.2 18.8 14.8 20.0
(Three months ended) (Nine months ended)($ ‘000) Sep. 30, 2004 Sep. 30, 2003 Sep. 30, 2004 Sep. 30, 2003