1 vimpelcom – september 2004 company presentation vimpelcom september 2004 brunswick ubs annual...
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1VimpelCom – September 2004
Company Presentation
VIMPELCOM
September 2004
Brunswick UBS Annual Conference
2VimpelCom – September 2004
Disclaimer
This presentation contains "forward-looking statements", as the phrase is defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements relate, in part, to the Company’s development plans, such as national and international expansion, and to estimated future growth in Russia of subscribers, wireless revenues and GDP. These statements also relate to the consummation of the merger between VimpelCom and each of VimpelCom-Region and KB Impuls, each of which is subject to regulatory and certain other approvals, as well as certain other conditions precedent, including the transfer of all respective licenses and permissions to VimpelCom in the case of the mergers. These statements also relate to the planned sale of a stake in KaR-Tel to a local Kazakh Partner, which is subject to the execution of definitive documentation as well as the satisfaction of certain conditions precedent that will be included in such documentation. If any of the respective approvals are not obtained or any condition precedent is not met, the mergers or stake sale, as applicable, will not be consummated. The forward-looking statements are based on management's best assessment of the Company's strategic and financial position, future market conditions and trends and its ability to consummate the mergers and stake sale. 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. This document is not an offer of securities for sale in the United States. Securities may not be offered or sold in the United States or to or for the account or benefit of U.S. persons (as such terms are defined in Regulation S under the U.S. Securities Act of 1933 (the “Securities Act”)) absent registration under the Securities Act or an exemption therefrom. This document should not be distributed into the United States.
3VimpelCom – September 2004
VimpelCom – company profile
Second-largest national cellular operator in Russia GSM license portfolio covering 136 million people 45% market share in Moscow and 33% in Russia
First Russian company with NYSE listing 50% free float US$ 5.3 billion market cap (as of August 31, 2004)
Benchmark for transparency and corporate governance in Russia
Strategic alliances with Telenor and Alfa Group
Strong financial performance
$, mln 2Q04 2Q03 , %
Net Revenues 490.9 304.4 61.2%
OIBDA 244.7 139.9 74.9%
OIBDA margin 49.8% 46.0% --
Net Income 91.0 52.6 72.8%
0
2
4
6
8
10
12
14
16
18
20
2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 26.08
VimpelCom subscriber base
20042002 2003
million
Source: Company data
Moscow Regions
4VimpelCom – September 2004
VimpelCom-Region and shareholder structure
The merger of VimpelCom-Region (VimpelCom’s subsidiary for regional development) into VimpelCom was approved on October 24, 2003 at the EGM of VimpelCom
The merger was also approved at the Joint EGM of VimpelCom and VimpelCom-Region shareholders on April 16, 2004 as required by Russian law
The merger will be completed as soon as licenses and frequencies are transferred from VImpelCom-Region to VimpelCom
In connection with the merger of VimpelCom and VimpelCom-Region, Alfa and Telenor will exchange their aggregate 44.7% interest in VimpelCom-Region for 10.9 million new VimpelCom common shares (equal to 14.6 million ADSs)
VimpelCom shareholder structure
%Common
sharesVoting shares
Common shares
Voting shares
Telenor 29.0 25.0+ 29.9 26.6
Alfa Group 13.0 25.0+ 24.5 32.9
Free float / others 58.0 50.0- 45.6 40.5
Total 100.0 100.0 100.0 100.0
Current Post-merger
5VimpelCom – September 2004
0
10
20
30
40
50
60
70
80
90
2001 2002 2003 2004E 2005E 2006E
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Moscow Regions
High End Average
Source: Consensus forecasts, independent research
Subscriber Growth in Russia
Wireless growth expected to continue
Russia: Wireless Revenues and GDP
Source: Goskomstat, Brunswick UBS, VimpelCom estimates
million
National
penetration
forecast
15.5
5.0
2.81.9
1.3
777
434
346307
260
0
100
200
300
400
500
600
700
800
900
2000 2001 2002 2003 2013E
0
4
8
12
16
20
Wireless revenues , $ bln (rhs), % of GDP
Russia Nominal GDP, $ bln (lhs)
0.5%
0.6%
0.8%
1.2%
2.0%
6VimpelCom – September 2004
Goals and Directions
Strategic Factors:
Macroeconomy
Political and regulatory environment
New technologies
Industry competition, mergers & acquisitions
Become the leading operator in Russia and expand in the CIS countries
Strengthening VimpelCom’s position on the Russian market – “Market Leader”
New products and technologies
New markets
VimpelComin Russia
2.5G
VimpelComin Russia
3G
VimpelComin CIS+ +
Strategic Factors Strategic Directions
7VimpelCom – September 2004
KAZAKHSTAN: country profile Population – 15 million GDP per capita - $1,970 – second-largest in the CIS Cellular penetration – 13%
KAR-TEL: company profile Second-largest cellular operator in Kazakhstan
National GSM-900 license Over 600,000 subscribers 31% market share
ACQUISITION DETAILS: 100% stake is purchased for $350 million & the assumption of
$75 million in debt Up to 50% - 1 share is to be sold to a local partner
Acquisition in Kazakhstan
8VimpelCom – September 2004
Main Russian GSM players
Market share in Moscow as of July 31, 2004 Market share in Russia as of July 31, 2004
Source: Company data
MTS MegaFonVimpelCom
MTS46%
MegaFon 9%
VimpelCom45%
VimpelCom33%
MegaFon 18%
Others13%
MTS36%
9VimpelCom – September 2004
National GSM network rollout
In commercial operation In commercial operation
Other licensed regions Other licensed regions Unlicensed territories Unlicensed territories
39
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.
10VimpelCom – September 2004
31%31%28%27%26%
30%29%
33%32%
37%36%37%37%36% 37% 38% 37% 37%
17%17%
16%
18%
16%14%
18% 18% 18%23%21%
19%
17% 16%14%14%
12%13%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04
VIP MTS MegaFon Others
National market – key trends
Russia (Overall) Subscriber Market Share
Source: Independent research
Incremental Market Share(Organic Net Adds)
2003 2004
37%
34%
41%40%
35%
37%36% 37%
32%
36% 35%37%
36%36%35%
35%36%
30%
37%
33%35%
34%
32%35%
37%
33%
17%
21%19% 18%
11%
16%
12%
15% 16%
20%18%
20%22%
11%12% 11%12%
16%
10%11%
16%12%13%
13%
10%13%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul
VIP MTS MegaFon Others
11VimpelCom – September 2004
Moscow market – key trends
46%48%50% 49%
52% 53% 52%49% 49%
46%44%43%
46%44% 43% 43% 44%43%
8%8%8%3% 4% 6%6% 6% 8%
0%
10%
20%
30%
40%
50%
60%
2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04
VIP MTS MegaFon
0%
48%
6%
26%30%
56%
43%
58%52%
46%
43%
48%
34%
64%
91%
71%
55%51%
45%
50%
45%
35%
38%
20%22%
38%
3%
15%
30%
9%15%
7%9%13%
4%
37%
22%
14%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul
VIP MTS MegaFon
Subscriber Market Share
Incremental Market Share (Organic Net Adds)
Note: VimpelCom recorded negative net additions in June 2004
Source: Independent research and Company estimates
2003
12VimpelCom – September 2004
28%
12%31%
29%
25%
12%42%
22%
32%58%
2%8%
Market share – regions
Source: Company data and independent research
Central Region South RegionIncremental market share
(net adds, July 2004)
Market share
(July 31, 2004)
BeeLineMTS
MegaFonOthers
4%6%
49%41%
Siberia Region
25%
52%
8%15%
15%4%
44%
37%
13VimpelCom – September 2004
8%
20%
14% 36%
22%
Market share – regions
Source: Company data and independent research
Northwest Region Volga Region
BeeLineMTSMegaFon Smarts
Others
Incremental market share
(net adds, July 2004)
Market share
(July 31, 2004)
6%
19%
7%
47%
21%
29% 2% 27%
42%
48%
14%5%34%
Ural Region
16%
26%14%
43%
40%
5%
37%
17%
14VimpelCom – September 2004
Net Operating Cash Flow/Capex
613.9
511.9
221.7
846.1
728.0
509.1
0
100
200
300
400
500
600
700
800
900
2002 2003 30.06.2004, LTM
Net Operating Cash Flow Capex
Ratios, cash flow and capex
* Net operating cash flow as % of Capex
43.5%*
70.3%*
72.6%*
$, mln
2003 Actual
2004 Q2 LTM
Profitability
ROI (NAT/Total Assets, %) 12% 13%ROCE, % 33% 35%
Leverage
Debt / Equity 61% 75%
Debt / Assets 26% 31%
Debt / OIBDA 0.99 1.07
OIBDA / Interest expense (times) 9.0 13.3
15VimpelCom – September 2004
Summary
Leading national GSM operator in Russia
Committed and complementary strategic partners - Telenor and Alfa
Rapid subscriber growth and strong financial performance
A focused strategy for successful national expansion
The beginning of international expansion
A benchmark for corporate governance and transparency in Russia
Any statement made or opinion expressed in the presentation by VimpelCom, including any slides shown, are those of
VimpelCom only and not Brunswick UBS. Brunswick UBS was not involved in the preparation of these materials and
Brunswick UBS assumes no responsibility for that presentation.
16VimpelCom – September 2004
Debt/OIBDA, OIBDA/Interest expenses Reconciliation to U.S. GAAP measures
Reconciliations related to other non-U.S. GAAP measures can be found at:
http://www.vimpelcom.com/docs/VimpelCom_2Q2004_results.ppt
000'USD 2003 2004 Q2Actual LTM
Total Debt 606,991 870,626 Ruble denominated bonds payable, current portion 101,852 34,450 Bank loans, current portion 35,343 288,211 Capital lease obligations, current portion 6,587 6,879 Equipment financing obligations, current portion 70,935 53,697 Bank loans, less current portion 330,112 442,084 Capital lease obligations, less current portion 9,154 6,974 Ruble denominated bonds payable, less current portion - 14,382 Equipment financing obligations, less current portion 53,008 23,949
OIBDA 613,23 812,084Impairment loss - -7,354Depreciation & Amortization -185,326 -242,360Operating income 427,904 562,370
Debt/OIBDA 0.99 1.07
Interest expense 68,246 61,009
OIBDA/Interest expenses (times) 9.0 13.3
17VimpelCom – September 2004
ROCE,% Reconciliation to U.S. GAAP measures
ROCE, % = Operating income / Average Capital Employed *100%
000'USD 2003 2004 Q2Actual LTM
Operating income (EBIT) 427,904 562,370
Average Equity 830,440 963,680Average Debt 628,776 768,970Average Deferred tax 34,804 57,963Average Cash -210,634 -216,022Average Capital Employed 1283,385 1574,591
ROCE, % 33.3% 35.7%