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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

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FORM 6-K

 

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Report of Foreign Issuer

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

the Securities Exchange Act of 1934

For the month of May 2007

Commission File Number 1-14522

 

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Open Joint Stock Company “Vimpel-Communications”

(Translation of registrant’s name into English)

 

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

(Address of principal executive offices)

 

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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-            .

 

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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: May 25, 2007
		By:		/s/ Alexander V. Izosimov
		Name:		Alexander V. Izosimov
		Title:		Chief Executive Officer and General Director

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FOR IMMEDIATE RELEASE

VIMPELCOM ANNOUNCES FIRST QUARTER 2007

FINANCIAL AND OPERATING RESULTS

Moscow and New York (May 25, 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 ended March 31, 2007.

Financial and Operating Highlights

 

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Net operating revenues reached $1,488.0 million in the first quarter, a year-on-year increase of 59.0% and a quarter-on-quarter increase of 2.5%.

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OIBDA reached $766.4 million, a year-on-year increase of 58.8%.

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OIBDA margin was 52.9% in Russia and 51.5% for the Company.

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Net income totaled $277.3 million, a year-on-year increase of 84.6%.

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Operating cash flow was $655.9 million, a year-on-year increase of 81.2%.

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ARPU was unchanged in Russia as compared with the previous quarter.

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Market share exceeded 50% in Kazakhstan.

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

 

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VimpelCom Announces First Quarter 2007 Financial And Operating Results

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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 MOU_REG and ARPU_REG, 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

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definitions for certain terms used in this press release,

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the condensed consolidated financial statements of VimpelCom,

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

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certain reference data.

Key Consolidated Financial and Operating Results

 

		Three months
		1Q2007			1Q2006			Change, 1Q07/1Q06			4Q2006			Change, 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.

 

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VimpelCom Announces First Quarter 2007 Financial And Operating Results

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RUSSIA

 

		Three months
		1Q2007			1Q2006			Change, 1Q07/1Q06			4Q2006			Change, 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	%

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*)	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 ARPU_REG 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.

 

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VimpelCom Announces First Quarter 2007 Financial And Operating Results

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KAZAKHSTAN

 

		Three months
		1Q2007			1Q2006			Change, 1Q07/1Q06			4Q2006			Change, 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	%

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*)	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.

 

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VimpelCom Announces First Quarter 2007 Financial And Operating Results

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UKRAINE

 

		Three months
		1Q2007			1Q2006			Change, 1Q07/1Q06			4Q2006			Change, 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	%

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*)	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.

UZBEKISTAN

 

		Three months
		1Q2007			1Q2006			Change, 1Q07/1Q06			4Q2006			Change, 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	%

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*)	Excluding inter-company transactions.

 

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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%.

TAJIKISTAN

 

		Three months
		1Q2007			1Q2006			Change, 1Q07/1Q06			4Q2006			Change, 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	%

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*)	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.

 

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VimpelCom Announces First Quarter 2007 Financial And Operating Results

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NEW OPERATIONS

 

ARMENIA		Three months
		1Q 2007			4Q 2006**)			Change, 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	%

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*)	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

 

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VimpelCom Announces First Quarter 2007 Financial And Operating Results

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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.

 

For more information, please contact:
Marine Babayan		Peter Schmidt/Michael Polyviou
VimpelCom (Moscow)		Financial Dynamics
Tel: 7(495) 974-5888		Tel: 1(212) 850 5600
Investor_Relations@vimpelcom.com		mpolyviou@fd-us.com

 

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-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.

ARPU_REG 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.

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

 

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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, 2007			December 31, 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, 2007			March 31, 2006			December 31, 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, 2007			March 31, 2006			December 31, 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, 2007			March 31, 2006			December 31, 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, 2007			March 31, 2006			December 31, 2006
OIBDA margin		52.9	%		53.1	%		50.3	%
Less: Depreciation as a percentage of net 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, 2007		March 31, 2006		December 31, 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, 2007		March 31, 2006		December 31, 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, 2007			March 31, 2006			December 31, 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, 2007			March 31, 2006			December 31, 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, 2007		March 31, 2006		December 31, 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, 2007		March 31, 2006		December 31, 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

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UKRAINE

Reconciliation of OIBDA in Ukraine

(In thousands of US dollars)

 

		Three months ended
		March 31, 2007			March 31, 2006			December 31, 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, 2007		March 31, 2006		December 31, 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, 2007		March 31, 2006		December 31, 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

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UZBEKISTAN

Reconciliation of OIBDA in Uzbekistan

(In thousands of US dollars)

 

		Three months ended
		March 31, 2007			March 31, 2006			December 31, 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, 2007			March 31, 2006			December 31, 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, 2007		March 31, 2006		December 31, 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

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Reconciliation of ARPU in Uzbekistan

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

 

		Three months ended
		March 31, 2007		March 31, 2006		December 31, 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, 2007			March 31, 2006			December 31, 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, 2007		March 31, 2006		December 31, 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

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Reconciliation of ARPU in Tajikistan

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

 

		Three months ended
		March 31, 2007		March 31, 2006		December 31, 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, 2007			March 31, 2006		December 31, 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, 2007			March 31, 2006		December 31, 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	%

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Reconciliation of mobile ARPU in Armenia

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

 

		Three months ended
		March 31, 2007		March 31, 2006		December 31, 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, 2007		March 31, 2006		December 31, 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

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Attachment D. Additional reference data

Operating and Financial Indicators

CONSOLIDATED

 

		Three months
		1Q2007		1Q2006		Change, 1Q07/1Q06			4Q2006		Change, 1Q07/4Q06
Registered mobile subscribers		56,805,600		48,052,800		18.2	%		55,135,700		3.0	%
Registered fixed subscribers		607,400		na					608,500		-0.2	%

RUSSIA

 

		Three months
		1Q2007		1Q2006		Change, 1Q07/1Q06			4Q2006		Change, 1Q07/4Q06
Registered subscribers		48,345,300		44,814,000		7.9	%		48,141,200		0.4	%
ARPUREG, (US$)		8.9		6.6		34.8	%		8.9		0.0	%
MOUREG, (min)		130.9		110.6		18.4	%		129.8		0.8	%

KAZAKHSTAN

 

		Three months
		1Q2007		1Q2006		Change, 1Q07/1Q06			4Q2006		Change, 1Q07/4Q06
Registered subscribers		4,345,649		2,512,700		72.9	%		3,826,500		13.6	%
ARPUREG, (US$)		9.7		7.8		24.4	%		10.8		-10.2	%
MOUREG, (min)		57.9		40.0		44.8	%		60.8		-4.8	%

UKRAINE

 

		Three months
		1Q2007		1Q2006		Change, 1Q07/1Q06			4Q2006		Change, 1Q07/4Q06
Registered subscribers		2,331,300		278,000		738.6	%		1,876,100		24.3	%
ARPUREG, (US$)		2.5		2.6		-3.8	%		3.4		-26.5	%
MOUREG, (min)		114.7		47.3		142.5	%		122.4		-6.3	%

UZBEKISTAN

 

		Three months
		1Q2007		1Q2006		Change, 1Q07/1Q06			4Q2006		Change, 1Q07/4Q06
Registered subscribers		1,147,200		421,400		172.2	%		766,500		49.7	%
ARPUREG, (US$)		6.4		11.2		-42.9	%		8.8		-27.3	%
MOUREG, (min)		229.9		307.3		-25.2	%		240.1		-4.2	%

TAJIKISTAN

 

		Three months
		1Q2007		1Q2006		Change, 1Q07/1Q06			4Q2006		Change, 1Q07/4Q06
Registered subscribers		149,900		26,700		461.4	%		73,400		104.2	%
ARPUREG, (US$)		8.5		2.3		269.6	%		7.8		9.0	%
MOUREG, (min)		201.2		17.0		1083.5	%		160.8		25.1	%

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ARMENIA

 

		Three months
		1Q2007		1Q2006		Change, 1Q07/1Q06		4Q2006		Change, 1Q07/4Q06
Registered subscribers		478,000		na				452,000		5.8	%
ARPUREG, (US$)		14.1		na				15.7		-10.2	%
MOUREG, (min)		137.6		na				163.7		-15.9	%

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