VimpelCom Announces First Quarter 2007 Financial And Operating Results

2007-05-25 12:37:45 -

MOSCOW and NEW YORK, May 25 /PRNewswire-FirstCall/ -- Open Joint Stock Company "Vimpel-Communications" ("VimpelCom" or the "Company") , 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 ended March 31, 2007.

Commenting on today's announcement, Alexander Izosimov, Chief Executive Officer of VimpelCom, said, "Our first quarter results were very strong with revenue, OIBDA, net income and cash flow all at record levels. We reported almost 60% year-on-year growth in revenue and OIBDA and almost 85% year-on- year growth in net income which is a remarkable achievement for a company of VimpelCom's size.

"On a sequential, quarter-on-quarter basis, our results were also very encouraging. Although the first quarter is the seasonally weakest quarter for revenue, we reported both revenue growth and substantially improved margins. It is a very good start to what we hope will become another successful year."

Changes in definitions and reported data

The Company believes that active subscriber base data and the corresponding MOU and ARPU more accurately reflect the trends and competitive positions of the business. Accordingly, beginning with this press release, the relevant operating and financial results (i.e., number of subscribers, ARPU and MOU) are reported on the basis of active subscribers.

The only exception is churn which we continue to calculate with regard to the registered subscriber base. Russian regulations require that telephone numbers should remain assigned to inactive subscribers for a period of six months. For uniformity, we will also use this approach in the countries of the CIS. Starting from this report we will publish churn numbers separately for each country where we have operated for more than one year.

For convenience, we will continue to report the registered subscriber base and the related figures, which are now defined as MOUREG and ARPUREG, for comparable periods (see Attachment A for the definitions and refer to Attachment D for relevant data).

All the above-mentioned definitions 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 reference data. Key Consolidated Financial and Operating Results Three months 1Q2007 1Q2006 Change, 4Q2006 Change, 1Q07/1Q06 1Q07/4Q06 Active subscribers 45,784,400 40,025,100 14.4% 45,547,700 0.5% Fixed line subscribers 607,400 na 608,500 -0.2% Net operating revenues (US$,000) 1,488,047 936,167 59.0% 1,451,412 2.5% OIBDA (US$, 000) 766,417 482,607 58.8% 689,825 11.1% OIBDA margin 51.5% 51.6% 47.5% Gross margin (US$, 000) 1,220,993 768,298 58.9% 1,179,453 3.5% Gross margin percentage 82.1% 82.1% 81.3% SG&A (US$, 000) 439,467 282,925 55.3% 478,423 -8.1% SG&A percentage 29.5% 30.2% 33.0% Net income (US$, 000) 277,275 150,223 84.6% 197,950 40.1% Net income per share (US$) 5.45 2.94 3.89 Net income per ADS (US$) 1.36 0.74 0.97

In the first quarter of 2007, VimpelCom invested approximately $303.5 million for the purchase of long-lived assets.

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

Three months RUSSIA 1Q2007 1Q2006 Change, 4Q2006 Change, 1Q07/1Q06 1Q07/4Q06 Net operating revenues*) (million US$) 1,278.4 871.0 46.8% 1,280.8 -0.2% including interconnect revenue 170.7 46.8 264.7% 167.8 1.7% OIBDA (million US$) 676.5 462.3 46.3% 645.1 4.9% OIBDA margin 52.9% 53.1% 50.3% Gross margin (million US$) 1064.5 725.4 46.7% 1061.1 0.3% Gross margin percentage 83.2% 83.3% 82.8% SG&A (million US$) 374.8 260.4 43.9% 406.6 -7.8% SG&A percentage 29.3% 29.9% 31.7% Net income (million US$) 280.4 155.0 80.9% 222.2 26.2% ARPU, (US$) 10.9 7.8 39.7% 10.9 0.0% MOU, (min) 160.9 132.0 21.9% 157.9 1.9% SAC (US$) 22.1 13.9 59.0% 21.8 1.4% Active subscribers 38,631,100 37,373,400 3.4% 39,782,700 -2.9% Churn 8.6% 8.7% 10.0% Subscriber market share**) 31.2% 33.9% 31.7% *) Excluding inter-company transactions. **) Subscriber market share data presented here and in the following country tables are published by independent organizations and are generally based on registered subscribers.

In Russia, a favorable business environment and conservative pricing resulted in essentially flat revenue in the first quarter of 2007 versus the fourth quarter of 2006. Stable revenue underscores the robustness of the Russian market as it was delivered in a seasonally weak quarter.

In January 2007, we tightened our definition of active subscribers excluding those who were included in the active base due only to a technical transaction. It was a one-time correction, and we believe it more correctly reflects the size of our base. As a result, our active subscriber base declined sequentially by 2.9%, somewhat supporting our ARPU which stayed flat. [To note, our ARPUREG also remained essentially flat on a sequential quarterly basis.]

Selling, general and administrative expenses (SG&A) as a percentage of net operating revenues improved on a sequential quarterly basis from 31.7% to 29.3% primarily due to a seasonal reduction in sales and marketing expenses. On a year-on-year basis it also improved, as compared with 29.9% reported for the first quarter of 2006. This improvement reflects the growing efficiency of our business and the increased scale of operations during the past 12 months.

The above-mentioned factors resulted in substantial improvements in the margins in the first quarter of 2007 as compared with the fourth quarter of 2006.

In the first quarter of 2007, VimpelCom invested approximately $199.5 million for the purchase of long-lived assets in Russia.

Three months KAZAKHSTAN 1Q2007 1Q2006 Change, 4Q2006 Change, 1Q07/1Q06 1Q07/4Q06 Net operating revenues*) (million US$) 118.9 54.0 120.2% 112.4 5.8% including interconnect revenue 20.5 12.2 68.0% 26.3 -22.1% OIBDA (million US$) 62.0 21.9 183.1% 35.7 73.7% OIBDA margin 51.9% 40.3% 31.6% Gross margin (million US$) 88.2 35.5 148.5% 77.3 14.1% Gross margin percentage 73.9% 65.3% 68.4% SG&A (million US$) 25.4 13.5 88.1% 40.2 -36.8% SG&A percentage 21.3% 24.8% 35.6% Net income**) (million US$) 13.1 3.9 235.9% -4.4 ARPU, (US$) 12.2 8.8 38.6% 13.8 -11.6% MOU, (min) 72.3 44.8 61.4% 78.0 -7.3% SAC (US$) 9.0 6.1 47.5% 8.8 2.3% Active subscribers 3,501,300 2,123,100 64.9% 3,052,900 14.7% Churn 5.5% 6.9% 6.1% Subscriber market share 50.2% 40.6% 49.5% *) Excluding inter-company transactions. **) After minority interest.

In the first quarter of 2007, the Company continued the successful development of its Kazakhstan operations. We achieved triple-digit year-on- year growth in net operating revenues, OIBDA and net income. These figures also grew as compared with the fourth quarter of 2006 in spite of a modest seasonal decline in MOU and ARPU. Our market share reached a new high of 50.2% in an environment of increased activity by the third competitor.

Our gross margin was positively impacted by the change in interconnect accounting when 10 second rounding was introduced by the regulator. This change and seasonal reduction in SG&A expenses as compared with the previous quarter resulted in great improvements in margins, leading the OIBDA margin to 51.9%, the highest ever recorded by the Company in Kazakhstan.

During the first quarter of 2007 the tenge, the Kazakh currency, strengthened against the US dollar from 127.0 tenge per $1 to 123.8 tenge per $1. This strengthening resulted in a net foreign exchange gain of $10.5 million reflected in net income.

Three months UKRAINE 1Q2007 1Q2006 Change, 4Q2006 Change, 1Q07/1Q06 1Q07/4Q06 Net operating revenues*) (US$, million) 15.7 2.1 647.6% 14.3 9.8% including interconnect revenue 5.4 0.7 671.4% 4.5 20.0% OIBDA (million US$) -6.5 -6.8 -10.5 Gross margin (million US$) 9.5 -0.4 7.3 30.1% Gross margin percentage 58.3% -19.0% 49.3% SG&A (million US$) 16.0 6.4 150.0% 17.6 -9.1% SG&A percentage 98.2% 304.8% 118.9% Net income (million US$) -18.4 -9.5 -21.5 ARPU, (US$) 3.0 3.4 -11.8% 4.2 -28.6% MOU, (min) 138.0 60.8 127.0% 149.1 -7.4% SAC (US$) 8.9 30.1 -70.4% 6.6 34.8% Active subscribers 1,953,200 144,000 1256.4% 1,523,700 28.2% Subscriber market share 4.5% 0.8% 3.8% *) Excluding inter-company transactions.

The Company improved its position in Ukraine in the first quarter of 2007. Our market share grew from 3.8% to 4.5%, as our incremental market share (IMS) for the first quarter was more than 20%. In fact, our IMS grew in each month of the quarter and reached almost 45% in March. This indicates very good momentum in subscriber growth.

As compared with the previous quarter, we increased our active subscriber base by approximately 28.2% and net operating revenues by 9.8%. Gross margin was better than in the previous quarter and OIBDA, though still negative, is improving as well. Thus, the Company is making progress in Ukraine despite further deterioration of the difficult pricing environment that began in the fourth quarter of 2006. Our focus in Ukraine remains on building our subscriber base and growing market share, while striving towards breakeven OIBDA.

Three months UZBEKISTAN 1Q2007 1Q2006 Change, 4Q2006 Change, 1Q07/1Q06 1Q07/4Q06 Net operating revenues*) (million US$) 18.0 8.9 102.2% 15.8 13.9% OIBDA (million US$) 8.7 5.2 67.3% 7.8 11.5% OIBDA margin 47.7% 58.6% 49.1% Gross margin (million US$) 15.2 7.7 97.4% 13.9 9.4% Gross margin percentage 83.5% 86.8% 87.1% SG&A (million US$) 6.4 2.5 156.0% 5.9 8.5% SG&A percentage 35.5% 27.8% 37.3% Net income (million US$) 2.5 1.0 150.0% 0.4 525.0% ARPU, (US$) 6.7 16.6 -59.6% 9.8 -31.6% MOU, (min) 242.2 453.5 -46.6% 268.8 -9.9% SAC (US$) 3.7 20.6 -82.0% 5.8 -36.2% Active subscribers 1,106,300 374,000 195.8% 700,500 57.9% Subscriber market share 33.9% 31.5% 28.2% *) Excluding inter-company transactions.

The Company made good progress in Uzbekistan in the first quarter of 2007. The number of active subscribers during the quarter grew by 57.9% in the first quarter of 2007 as compared to the fourth quarter of 2006. On a quarter-on- quarter and year-on-year basis, net operating revenues, OIBDA and net income grew while MOU and ARPU declined. ARPU in the first quarter declined due partially to seasonality, but also reflecting the impact of promotional pricing in this rapidly growing market.

Our key priorities in Uzbekistan are subscriber growth and network and infrastructure build-out, as the penetration rate in the country is still less than 15%.

Three months TAJIKISTAN 1Q2007 1Q2006 Change, 4Q2006 Change, 1Q07/1Q06 1Q07/4Q06 Net operating revenues*) (million US$) 2.85 0.18 1483.3% 0.80 256.3% including interconnect revenue 0.21 0.00 0.07 200.0% OIBDA (million US$) -0.34 -0.05 -1.11 Gross margin (million US$) 1.55 0.10 1450.0% 0.37 318.9% Gross margin percentage 54.2% 55.6% 45.1% SG&A (million US$) 1.89 0.15 1160.0% 1.48 27.7% SG&A percentage 66.1% 83.3% 180.5% Net income**) (million US$) -1.00 -0.20 -1.11 ARPU, (US$) 8.7 5.1 70.6% 9.0 -3.3% MOU, (min) 205.8 39.2 425.0% 187.9 9.5% SAC (US$) 9.0 19.0 -52.6% 2.5 260.0% Active subscribers 145,300 10,700 1257.9% 72,000 101.8% Subscriber market share 14.8% 9.5% 8.9% *) Excluding inter-company transactions. **) After minority interest.

The explosive growth in Tajikistan which started in the fourth quarter of 2006 following the launch of the "Beeline" brand continued through the first quarter of 2007. The Company again reported triple-digit sequential growth in the number of active subscribers and net operating revenues. Market share growth in the first quarter of 2007 was also substantial, as it increased by approximately 6 percentage points.

NEW OPERATIONS Three months ARMENIA Change, 1Q 2007 4Q 2006**) 1Q07/4Q06 Net operating revenues*) (million US$) 54.07 27.37 97.6% including mobile revenues 19.83 10.45 89.8% including fixed revenues 34.24 16.92 102.4% including interconnect revenues 11.97 0.00 OIBDA (million US$) 27.31 13.29 105.5% OIBDA margin 50.4% 48.6% Net income***) (million US$) 2.55 2.93 -13.0% Mobile active subscribers 439,900 416,000 5.7% ARPU, (US$) 14.5 17.0 -14.7% MOU, (min) 141.3 178.0 -20.6% Mobile subscriber market share 37.3% 38.2% Fixed subscribers 607,400 608,500 -0.2% ARPU fixed (US$) 18.8 18.5 1.6% Total assets (million US$) 624.8 622.6 0.4% *) Excluding inter-company transactions. **) Figures in this column represent the results of operations after November 16, 2006, i.e. only the second half of the fourth quarter of 2006. ***) After minority interest.

VimpelCom completed the acquisition of 90% of Armentel on November 16, 2006 and the acquisition of the remaining 10% on April 18, 2007. We began to consolidate Armentel's results in our financial reporting from November 16, 2006. Therefore the first quarter of 2007 was the first full quarter of VimpelCom's operations in Armenia and we deferred a more detailed analysis of the results until next quarter.

Armentel operates both fixed-line and mobile networks. In Armenia, VimpelCom plans to enhance Armentel's position in the mobile market and continue to operate the fixed-line network, exploring fixed-to-mobile convergence opportunities.

VimpelCom acquired Mobitel, a Georgian GSM-1800 license holder, in July 2006. Since that time we have worked to organize our business in Georgia, build the network, infrastructure and distribution channels. The Company launched commercial operations on March 15, 2007.

The Company's management will discuss its first quarter results during a conference call and slide presentation on May 25, 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 and the slide presentation webcast will be available through June 1, 2007 and June 25, 2007, respectively. The slide presentation 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".

Although the first quarter 2007 U.S. GAAP financial statements were approved by the requisite majority of our board, the three directors on our board who were nominated by our shareholder Telenor East Invest AS and who are officers of Telenor or its affiliates voted against approval.

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, the Company's ability to continue to grow its overall revenues and its subscriber base, continued volatility in the world economy 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.

-Definitions and tables are attached - 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.

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 2 months and prepaid subscribers are disconnected 6 months after their services have been blocked. We typically block a prepaid subscriber's service in two cases: (1) their balance drops to $0 or below, and (2) an account shows no chargeable activity within 6 months. The Company retains the right to change its disconnect policy to reflect changes in business or regulatory environment.

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 operating revenues.

Each ADS represents 0.25 of one share of common stock. This ratio was established effective November 22, 2004.

ARPU (Monthly Average Revenue per User), a non-U.S. GAAP financial measure, is calculated for each month in the relevant period by dividing the Company's service revenue during that month, 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 month. 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 for each month of the relevant period by dividing the total number of minutes of usage for incoming and outgoing calls during that month (excluding guest roamers) by the average number of active subscribers during the month.

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. Market share data is published by consulting agencies specializing in the telecommunications industry in Russia and the CIS.

*) Dealers' bonus for exclusivity which, prior to the fourth quarter of 2006, we counted 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 March 31, 2007 2006 (In thousands of US dollars, except per share (ADS) amounts) Operating revenues: Service revenues and connection fees US$ 1,486,192 US$ 930,150 Sales of handsets and accessories 1,522 5,329 Other revenues 966 987 Total operating revenues 1,488,680 936,466 Revenue based tax (633) (299) Net operating revenues 1,488,047 936,167 Operating expenses: Service costs 265,326 162,919 Cost of handsets and accessories sold 1,728 4,950 Selling, general and administrative expenses 439,467 282,925 Depreciation and amortization 322,461 212,049 Provision for doubtful accounts 15,109 2,766 Total operating expenses 1,044,091 665,609 Operating income 443,956 270,558 Other income and expenses: Interest income 4,652 1,392 Other income 2,177 2,104 Interest expense (45,805) (43,173) Other expense (12,991) (4,577) Net foreign exchange gain 16,729 5,579 Total other income and expenses (35,238) (38,675) Income before income taxes, minority interest 408,718 231,883 Income tax expense 119,946 75,878 Minority interest in net earnings of subsidiaries 11,497 3,900 Income before cumulative effect of change in accounting principle US$ 277,275 US$ 152,105 Cumulative effect of changes in accounting principle - (1,882) Net income US$ 277,275 US$ 150,223 Net income per common share US$ 5.45 US$ 2.94 Net income per ADS equivalent US$ 1.36 US$ 0.74 Weighted average common shares outstanding (thousands) 50,892 51,032 Open Joint Stock Company "Vimpel-Communications" Unaudited Condensed Consolidated Balance Sheets March 31, December 31, 2007 2006 (unaudited) (In thousands of US dollars) Assets Current assets: Cash and cash equivalents US$ 738,554 US$ 344,494 Trade accounts receivable 323,786 311,991 Other current assets 417,108 468,071 Total current assets 1,479,448 1,124,556 Non-current assets Property and equipment, net 4,706,226 4,615,675 Telecommunication licenses and allocation of frequencies, net 907,806 924,809 Goodwill 802,087 775,223 Other intangible assets, net 247,734 257,917 Other assets 736,247 738,366 Total non-current assets 7,400,100 7,311,990 Total assets US$ 8,879,548 US$ 8,436,546 Liabilities and shareholders' equity Current liabilities: Accounts payable US$ 564,068 US$ 671,532 Due to related parties 628 421 Customer advances and deposits 279,064 314,375 Bank loans, current portion 367,435 358,211 Accrued liabilities 377,212 267,437 Total current liabilities 1,588,407 1,611,976 Deferred income taxes 512,425 528,025 Bank loans, less current portion 2,126,311 1,980,726 Equipment financing and other liabilities 109,801 115,050 Minority interest 270,211 257,859 Shareholders' equity 4,272,393 3,942,910 Total liabilities and shareholders' equity US$ 8,879,548 US$ 8,436,546 Open Joint Stock Company "Vimpel-Communications" Unaudited Condensed Consolidated Statements of Cash Flows Three months ended March 31, 2007 2006 (In thousands of US dollars) Net cash provided by operating activities US$ 655,865 US$ 361,887 Purchase of property and equipment (325,676) (207,688) Purchase of intangible assets (5,161) (6,043) Acquisition of subsidiaries, net of cash - (252,522) Late payments of purchase price for Armentel and Tacom (12,688) - Purchase of other assets (62,054) (167,658) Net cash used in investing activities (405,579) (633,911) Proceeds from bank and other loans 228,594 253,606 Sale of treasury stock 8,087 989 Repayments of bank and other loans (75,974) (91,202) Payments of fees in respect of bank loans and debt issues (382) (1,581) Repayment of equipment financing obligations (18,619) (21,701) Net cash provided by financing activities 141,706 140,111 Effect of exchange rate changes on cash and cash equivalents 2,068 6,281 Net increase (decrease) in cash and cash equivalents 394,060 (125,632) Cash and cash equivalents at beginning of period 344,494 363,646 Cash and cash equivalents at end of period US$ 738,554 US$ 238,014 Supplemental cash flow information Cash paid during the period: Income tax US$ 122,062 US$ 57,074 Interest 25,813 27,898 Non-cash activities: Equipment acquired under financing agreements 17,102 - Accounts payable for equipment and license 140,413 149,749 Accrued debt and equity offering costs - 480 Acquisitions: Fair value of assets acquired - 150,021 Difference between the amount paid and the fair value of net assets acquired - 154,061 Cash paid for the acquisition of subsidiaries - (260,974) Liabilities assumed US$ - US$ (43,108) Attachment C. Reconciliation tables (Unaudited) CONSOLIDATED Reconciliation of OIBDA (In thousands of US dollars) Three months ended March 31, March 31, December 31, 2007 2006 2006 OIBDA 766,417 482,607 689,825 Depreciation (269,172) (171,094) (265,086) Amortization (53,289) (40,955) (50,095) Operating income 443,956 270,558 374,644 Reconciliation of OIBDA Margin Three months ended March 31, March 31, December 31, 2007 2006 2006 OIBDA margin 51.5% 51.6% 47.5% Less: Depreciation as a percentage of net operating revenue (18.1%) (18.3%) (18.3%) Less: Amortization as a percentage of net operating revenue (3.6%) (4.4%) (3.4%) Operating income as a percentage of net operating revenue 29.8% 28.9% 25.8% RUSSIA Reconciliation of OIBDA in Russia (In thousands of US dollars) Three months ended March 31, March 31, December 31, 2007 2006 2006 OIBDA 676,476 462,337 645,144 Depreciation (232,681) (161,936) (229,544) Amortization (28,536) (24,977) (27,091) Operating income 415,259 275,424 388,509 Reconciliation of OIBDA Margin in Russia Three months ended March 31, March 31, December 31, 2007 2006 2006 OIBDA margin 52.9% 53.1% 50.3% Less: Depreciation as a percentage operating revenue (18.2%) (18.6%) (17.9%) Less: Amortization as a percentage of net operating revenue (2.2%) (2.9%) (2.1%) Operating income as a percentage of net operating revenue 32.5% 31.6% 30.3% Reconciliation of SAC in Russia (In thousands of US dollars, except for SAC and subscriber amounts) Three months ended March 31, March 31, December 31, 2007 2006 2006 Selling, general and administrative expenses 374,757 260,398 406,642 Less: General and administrative expenses 284,977 184,591 298,222 Sales and marketing expenses, including 89,780 75,807 108,420 advertising & marketing expenses 43,132 33,704 59,892 dealers' commission expense 46,648 42,103 48,528 New gross subscribers,'000 4,056 5,459 4,971 Subscriber Acquisition Cost (SAC) (US$) 22.1 13.9 21.8 Reconciliation of ARPU in Russia (In thousands of US dollars, except for ARPU and subscriber amounts) Three months ended March 31, March 31, December 31, 2007 2006 2006 Service revenue and connection fees 1,276,754 864,767 1,276,276 Less: Connection fees 169 404 308 Less: Revenue from rent of fiber-optic channels 964 328 433 Service revenue used to calculate ARPU 1,275,621 864,035 1,275,535 Average number of registered subscribers, '000 47,974 43,919 47,541 ARPU REG (US$) 8.9 6.6 8.9 Average number of active subscribers,'000 39,021 36,784 39,102 ARPU (US$) 10.9 7.8 10.9 KAZAKHSTAN Reconciliation of OIBDA in Kazakhstan (In thousands of US dollars) Three months ended March 31, March 31, December 31, 2007 2006 2006 OIBDA 62,007 21,907 35,744 Depreciation (15,817) (7,672) (21,142) Amortization (9,154) (8,785) (9,134) Operating income 37,036 5,450 5,468 Reconciliation of OIBDA Margin in Kazakhstan (In thousands of US dollars) Three months ended March 31, March 31, December 31, 2007 2006 2006 OIBDA margin 51.9% 40.3% 31.6% Less: Depreciation as a percentage of net operating revenue (13.2%) (14.1%) (18.7%) Less: Amortization as a percentage of net operating revenue (7.7%) (16.2%) (8.1%) Operating income as a percentage of net operating revenue 31.0% 10.0% 4.8% Reconciliation of SAC in Kazakhstan (In thousands of US dollars, except for SAC and subscriber amounts) Three months ended March 31, March 31, December 31, 2007 2006 2006 Selling, general and administrative expenses 25,423 13,504 40,200 Less: General and administrative expenses 18,700 9,693 33,080 Sales and marketing expenses, including 6,723 3,811 7,120 advertising & marketing expenses 3,895 1,768 4,419 dealers' commission expense 2,828 2,043 2,701 New gross subscribers,'000 744 623 809 Subscriber Acquisition Cost (SAC) (US$) 9.0 6.1 8.8 Reconciliation of ARPU in Kazakhstan (In thousands of US dollars, except for ARPU and subscriber amounts) Three months ended March 31, March 31, December 31, 2007 2006 2006 Service revenue and connection fees 119,399 54,382 112,963 Less: Connection fees 0 0 0 Less: Revenue from rent of fiber-optic channels 0 0 0 Service revenue used to calculate ARPU 119,399 54,382 112,963 Average number of registered subscribers, '000 4,086 2,316 3,498 ARPU REG (US$) 9.7 7.8 10.8 Average number of active subscribers,'000 3,271 2,070 2,728 ARPU (US$) 12.2 8.8 13.8 UKRAINE Reconciliation of OIBDA in Ukraine (In thousands of US dollars) Three months ended March 31, March 31, December 31, 2007 2006 2006 OIBDA (6,518) (6,814) (10,546) Depreciation (3,203) (76) (4,325) Amortization (5,210) (4,692) (5,722) Operating income (14,931) (11,582) (20,593) Reconciliation of SAC in Ukraine (In thousands of US dollars, except for SAC and subscriber amounts) Three months ended March 31, March 31, December 31, 2007 2006 2006 Selling, general and administrative expenses 15,980 6,397 17,624 Less: General and administrative expenses 10,844 5,765 11,346 Sales and marketing expenses, including 5,136 632 6,278 advertising & marketing expenses 4,158 632 5,144 dealers' commission expense 978 0 1,134 New gross subscribers,'000 578 21 948 Subscriber Acquisition Cost (SAC) (US$) 8.9 30.1 6.6 Reconciliation of ARPU in Ukraine (In thousands of US dollars, except for ARPU and subscriber amounts) Three months ended March 31, March 31, December 31, 2007 2006 2006 Selling, general and administrative expenses 15,980 6,397 17,624 Less: General and administrative expenses 10,844 5,765 11,346 Sales and marketing expenses, including 5,136 632 6,278 advertising & marketing expenses 4,158 632 5,144 dealers' commission expense 978 0 1,134 New gross subscribers,'000 578 21 948 Subscriber Acquisition Cost (SAC) (US$) 8.9 30.1 6.6 ARPU (US$) 3.0 3.4 4.2 UZBEKISTAN Reconciliation of OIBDA in Uzbekistan (In thousands of US dollars) Three months ended March 31, March 31, December 31, 2007 2006 2006 OIBDA 8,664 5,227 7,815 Depreciation (3,097) (1,374) (2,720) Amortization (3,383) (2,084) (3,378) Operating income 2,184 1,769 1,717 Reconciliation of OIBDA Margin in Uzbekistan Three months ended March 31, March 31, December 31, 2007 2006 2006 OIBDA margin 47.7% 58.6% 49.1% Less: Depreciation as a percentage of net operating revenue (17.0%) (15.4%) (17.1%) Less: Amortization as a percentage of net operating revenue (18.6%) (23.4%) (21.2%) Operating income as a percentage of net operating revenue 12.0% 19.8% 10.8% Reconciliation of SAC in Uzbekistan (In thousands of US dollars, except for SAC and subscriber amounts) Three months ended March 31, March 31, December 31, 2007 2006 2006 Selling, general and administrative expenses 6,442 2,476 5,933 Less: General and administrative expenses 4,630 1,858 4,287 Sales and marketing expenses, including 1,812 618 1,646 advertising & marketing expenses 699 310 767 dealers' commission expense 1,113 308 879 New gross subscribers,'000 488 30 284 Subscriber Acquisition Cost (SAC) (US$) 3.7 20.6 5.8 Reconciliation of ARPU in Uzbekistan (In thousands of US dollars, except for ARPU and subscriber amounts) Three months ended March 31, March 31, December 31, 2007 2006 2006 Service revenue and connection fees 18,778 9,207 16,446 Less: Connection fees 0 0 0 Less: Revenue from rent of fiber-optic channels 0 0 0 Service revenue used to calculate ARPU 18,778 9,207 16,446 Average number of registered subscribers, '000 980 273 625 ARPU REG (US$) 6.4 11.2 8.8 Average number of active subscribers,'000 930 185 558 ARPU (US$) 6.7 16.6 9.8 TAJIKISTAN Reconciliation of OIBDA in Tajikistan (In thousands of US dollars) Three months ended March 31, March 31, December 31, 2007 2006 2006 OIBDA (343) (50) (1,112) Depreciation (345) (37) (204) Amortization (158) (416) (69) Operating income (846) (503) (1,385) Reconciliation of SAC in Tajikistan (In thousands of US dollars, except for SAC and subscriber amounts) Three months ended March 31, March 31, December 31, 2007 2006 2006 Selling, general and administrative expenses 1,894 149 1,485 Less: General and administrative expenses 1,199 145 1,325 Sales and marketing expenses, including 695 3.8 160 advertising & marketing expenses 305 3.8 91 dealers' commission expense 390 0 69 New gross subscribers,'000 77 0.2 65 Subscriber Acquisition Cost (SAC) (US$) 9.0 19.0 2.5 Reconciliation of ARPU in Tajikistan (In thousands of US dollars, except for ARPU and subscriber amounts) Three months ended March 31, March 31, December 31, 2007 2006 2006 Service revenue and connection fees 2,891 185 840 Less: Connection fees 0 0 0 Less: Revenue from rent of fiber-optic channels 0 0 0 Service revenue used to calculate ARPU 2,891 185 840 Average number of registered subscribers, '000 113 27 36 ARPU REG (US$) 8.5 2.3 7.8 Average number of active subscribers,'000 111 12 31 ARPU (US$) 8.7 5.1 9.0 ARMENIA Reconciliation of OIBDA in Armenia (In thousands of US dollars) Three months ended March 31, March 31, December 31, 2007 2006 2006 OIBDA 27,309 na 13,290 Depreciation (13,941) na (7,148) Amortization (5,865) na (3,928) Operating income 7,503 na 2,214 Reconciliation of OIBDA Margin in Armenia Three months ended March 31, March 31, December 31, 2007 2006 2006 OIBDA margin 50.4% na 48.6% Less: Depreciation as a percentage of net operating revenue (25.7%) na (26.1%) Less: Amortization as a percentage of net operating revenue (10.8%) na (14.4%) Operating income as a percentage of net operating revenue 13.9% na 8.1% Reconciliation of mobile ARPU in Armenia (In thousands of US dollars, except for ARPU and subscriber amounts) Three months ended March 31, March 31, December 31, 2007 2006 2006 Service revenue and connection fees 19,912 na 10,451 Less: Connection fees 129 na 0 Less: Revenue from rent of fiber-optic channels 0 na 0 Service revenue used to calculate ARPU 19,783 na 10,451 Average number of registered subscribers, '000 468 na 445 ARPU REG (US$) 14.1 na 15.7 Average number of active subscribers,'000 456 na 409 ARPU (US$) 14.5 na 17.0 Reconciliation of fixed ARPU in Armenia (In thousands of US dollars, except for ARPU and subscriber amounts) Three months ended March 31, March 31, December 31, 2007 2006 2006 Service revenue and connection fees 34,242 na 16,922 Less: Connection fees 0 na 0 Service revenue used to calculate ARPU 34,242 na 16,922 Average number of subscribers,'000 607 na 609 Average revenue per subscriber per month (US$) 18.8 na 18.5 Attachment D. Additional reference data Operating and Financial Indicators Three months 1Q2007 1Q2006 Change, 4Q2006 Change, CONSOLIDATED 1Q07/1Q06 1Q07/ 4Q06 Registered mobile 56,805,600 48,052,800 18.2% 55,135,700 3.0% subscribers Registered fixed subscribers 607,400 na 608,500 -0.2% Three months 1Q2007 1Q2006 Change, 4Q2006 Change, RUSSIA 1Q07/1Q06 1Q07/ 4Q06 Registered subscribers 48,345,300 44,814,000 7.9% 48,141,200 0.4% ARPU (REG),(US$) 8.9 6.6 34.8% 8.9 0.0% MOU (REG),(min) 130.9 110.6 18.4% 129.8 0.8% Three months 1Q2007 1Q2006 Change, 4Q2006 Change, KAZAKHSTAN 1Q07/1Q06 1Q07/ 4Q06 Registered subscribers 4,345,649 2,512,700 72.9% 3,826,500 13.6% ARPU(REG),(US$) 9.7 7.8 24.4% 10.8 -10.2% MOU(REG),(min) 57.9 40.0 44.8% 60.8 -4.8% Three months 1Q2007 1Q2006 Change, 4Q2006 Change, UKRAINE 1Q07/1Q06 1Q07/ 4Q06 Registered subscribers 2,331,300 278,000 738.6% 1,876,100 24.3% ARPU(REG),(US$) 2.5 2.6 -3.8% 3.4 -26.5% MOU(REG),(min) 114.7 47.3 142.5% 122.4 -6.3% Three months 1Q2007 1Q2006 Change, 4Q2006 Change, UZBEKISTAN 1Q07/1Q06 1Q07/ 4Q06 Registered subscribers 1,147,200 421,400 172.2% 766,500 49.7% ARPU(REG),(US$) 6.4 11.2 -42.9% 8.8 -27.3% MOU(REG),(min) 229.9 307.3 -25.2% 240.1 -4.2% Three months 1Q2007 1Q2006 Change, 4Q2006 Change, TAJIKISTAN 1Q07/1Q06 1Q07/ 4Q06 Registered subscribers 149,900 26,700 461.4% 73,400 104.2% ARPU(REG),(US$) 8.5 2.3 269.6% 7.8 9.0% MOU(REG),(min) 201.2 17.0 1083.5% 160.8 25.1% Three months 1Q2007 1Q2006 Change, 4Q2006 Change, ARMENIA 1Q07/1Q06 1Q07/ 4Q06 Registered subscribers 478,000 na 452,000 5.8% ARPU(REG),(US$) 14.1 na 15.7 -10.2% MOU(REG),(min) 137.6 na 163.7 -15.9%

Source: Vimpel-Communications