Third Quarter Results
VimpelCom's net income for the third quarter rose 70.7% to $458.05 million or $9.02 per share from $268.37 million or $5.28 per share a year ago. Net income per ADS for the quarter increased to $0.45 from $0.26 in the prior-year quarter. On average, three analysts polled by First Call/Thomson Financial expected the company to earn $0.41 per share for the quarter.
VimpelCom's quarterly net operating revenues were $1.96 billion, a 43.9% surge from $1.36 billion in the year-ago quarter. Sequentially, the company's operating revenues were up 13.9%. Wall Street analysts were looking for revenues of $1.93 billion in the quarter.
Commenting on the results, Alexander Izosimov, Chief Executive Officer of VimpelCom said, "We are pleased with our progress in Russia and in the CIS countries, particularly in Ukraine and Uzbekistan. On the back of strong revenue growth, OIBDA of our Ukrainian business moved into positive territory, confirming our ability to build a profitable business in that country. In Uzbekistan, we built our market share, while improving margins."
VimpelCom's service revenues and connection fees for the quarter were $1.95 billion, up 44.4% from $1.35 billion in the previous-year quarter. However, sales of handsets and accessories declined to $1.43 million from $4.37 million a year earlier. Other revenues totaled $1.82 million, higher than $0.71 million reported in the same quarter of fiscal 2006.
Gross margin for the quarter surged 43.3% to $1.59 million from $1.11 million in the year-ago quarter. Gross margin percentage for the quarter was 81.3% compared to 81.6% in the prior-year period.
Selling, general and administrative expenses for the quarter surged 43.7% to $556.52 million from $387.24 million in the comparable period of the previous year. Total operating expenses for the quarter were $1.28 billion, compared to $930.30 million in the previous-year period.
Operating income for the quarter rose to $674.00 million from $428.56 million in the comparable period of the previous year.
The company recorded a net foreign exchange gain of $26.25 million compared to net foreign exchange loss of $11.75 million in the year-ago quarter.
During the quarter, the company's active subscribers grew 18.9% to 50.69 million from 42.64 million in the same quarter of 2006. Fixed line subscribers for the quarter were 616,175. According to the company, Monthly Average Minutes of Use per User or MOU, and Monthly Average Revenue per User or ARPU, rose sequentially in all markets, including 8.9% ARPU growth in Russia.
The company's OIBDA reached $1.02 billion in the quarter, an increase of 41.4% from $717.80 million in the prior-year quarter and a quarter-over-quarter increase of 13.2%. OIBDA margin for the quarter was 51.9% compared to 52.8% in the similar period of last year. OIBDA margin includes 52.7% each in Russia and Kazakhstan.
Region wise, Russia generated operating revenues of $1.65 billion, a 34.5% increase from $1.23 billion in the previous-year quarter, helped by active marketing. The company noted that ARPU for the quarter reached $13.4, up 26.4% from $10.6 a year ago.
The company's revenue from Kazakhstan totaled $166.26 million, up 60.6% from $103.50 million in the previous-year quarter. The company attributed the increase in revenue to subscriber growth, coupled with resilient quarter-on-quarter ARPU. Number of active subscribers increased 67.3% from the prior-year quarter on the back of intensive summer promotional activities and a 26.9% increase in MOU. However, temporary promotional activities together with seasonal growth in roaming put pressure on the company's gross margin.
Ukraine reported revenue growth of 214.3% in the quarter to $36.27 million from $11.54 million last year. Active subscribers increased 188.8% to 2.21 million from 0.76 million in the previous-year quarter. However, the company noted that seasonal effects on revenue are more pronounced in Ukraine than in its other markets, because of the impact of roamers and short-term seasonal users.
The company recorded revenues of $29.91 million from Uzbekistan, up 90.8% from $15.68 million in the same quarter of last year, boosted by 227.7% growth in active subscribers to 1.59 million from 0.48 million in the comparable period of the prior year.
The company reported revenues of $7.62 million from Tajikistan, compared to $77 thousand in the year-ago period. Active subscribers rose to 0.27 million from 6,900 in the prior-year period. OIBDA turned positive in the second quarter and continued to grow in the third quarter, with the OIBDA margin expanding to 21.5%.
The Armenian business, which VimpelCom acquired in the fourth quarter of 2006, generated net operating revenues of $63.28 million in the quarter, compared to revenues of $58.35 million a year ago. OIBDA increased 9.4% to $32.89 million from $30.07 million in the similar period of last year. However, mobile active subscribers declined 5.1% to 0.45 million from 0.47 million in the year-ago period.
VimpelCom said it launched commercial operations in Georgia on March 15, 2007. At the end of the third quarter, the company had approximately 26,600 active subscribers and had revenues of $0.33 million.
Year-To-Date Results
For the nine months, VimpelCom's net income came in at $1.09 billion or $21.53 per share, up from $613.54 million or $12.09 per share in the prior-year period. In terms of ADS, earnings reached $1.08, in comparison with $0.6 in the same period of 2006.
The company's total operating revenues for the nine-month period were $5.16 billion, up from $3.42 billion in the previous-year period.
Peer Performance
Among others in the industry, Golden Telecom Inc. (GLDN | charts | news | PowerRating), a Russian provider of integrated telecommunication and Internet services, reported on November 20 that its net income for the third quarter rose to $74.38 million from $24.23 million in the year-ago quarter. Revenues grew 53.1% to $350.39 million from $228.72 million a year ago.
Stock Movements
VIP closed Wednesday's regular trading session at $36.00, up $1.50 on a volume of 4.56 million shares. In Thursday's pre-market trading, the stock is currently trading at $38.00, up $2.00 or 5.56%. In the 52-week period, the stock has been trading in a range of $14.12-$36.34.
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