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1 Presentation of 2Q2003 Financial and Operating Results VIMPELCOM August 28, 2003 Merger Proposal for VimpelCom and VimpelCom- Region
1
Presentation of 2Q2003 Financial and Operating Results
VIMPELCOM
August 28, 2003
Merger Proposal for VimpelCom and VimpelCom-Region
2
Disclaimer
This presentation 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, in part, to the Company’s development plans, such as future subscriber growth, national expansion and wireless penetration. These statements also relate to the consummation of the merger and related transactions which are subject to shareholder, regulatory and certain other approvals, as well as certain other conditions precedent, including the transfer of all of VimpelCom-Region’s licenses and permissions to VimpelCom. If any of the approvals are not obtained or any condition precedent is not met, the merger 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 its ability to consummate the merger and related transactions. 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, general economic developments in Russia, 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 or that the merger will be consummated. 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, 2002 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.
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Participants
Jo Lunder Chief Executive Officer
Nikolai N. PryanishnikovFirst Vice President – Commercial Director
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Participants
Elena A. ShmatovaChief Financial Officer
Valery P. GoldinVice President, International and Investor Relations
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VimpelCom 2Q2003 Financial and Operating Results
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2Q2003 Highlights
$53 million consolidated net income and $9.0 million net income in the regions
46% consolidated EBITDA margin and 36% EBITDA margin in the regions
8.5 million subscribers as of August 28, 2003
$97 million ruble bonds placed by VimpelCom-Region
Launch of operations in St. Petersburg
Number one position achieved in Siberia
One of the world’s first on-line prepaid roaming launched nationwide
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VimpelCom 2Q2003 financial highlights
Source: VimpelCom
Net revenues, $ million Net income, $ million
EBITDA, $ million EBITDA margin
173.4304.4
2Q2002 2Q2003
75.6%
52.621.9
2Q2002 2Q2003
139.9%
71.8139.9
2Q2002 2Q2003
95.0%
41.4%46.0%
30.0%
35.0%
40.0%
45.0%
50.0%
2Q2002 2Q2003
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Key financial figures
($ million) 2Q03 2Q02 YoY 1Q03 QoQ
Net revenues 304.4 173.4 75.6% 244.4 24.5%
Moscow* 216.7 163.7 32.4% 179.4 20.8%Regions* 87.7 12.4 607.4% 65.1 34.8%
Gross margin 81.8% 80.2% -- 80.4% --
EBITDA 139.9 71.8 95.0% 107.9 29.6%EBITDA margin 46.0% 41.4% -- 44.2% --
Net income 52.6 21.9 139.9% 41.4 27.2%Net income margin 17.3% 12.7% -- 16.9% --
Moscow 47.1 27.3 72.5% 39.9 18.1%Regions 9.0 (6.4) 242.0% 0.04 24,365%
SG&A 106.7 63.8 67.3% 85.3 25.1%% 35.1% 36.8% -- 34.9% --
Bad debt 2.4 3.5 -31.4% 3.3 -27.3%% 0.8% 2.0% -- 1.4% --
Capex 174.2 109.6 58.9% 136.9 27.2%
* Total operating revenues excluding inter-company transactions
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Market performance
Source: VimpelCom, Consensus estimates
VimpelCom market share VimpelCom subscriber base
30%
24% 24%25% 26% 26% 27%
28% 29%
49%
52%53%52%52%
47%
39%40%
50%
10%
20%
30%
40%
50%
60%
70%
2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03
Russia MoscowRussiaMoscow
3.31 3.71 3.95 4.43 4.84
3.70
1.44
0.72
2.24
3.00
0
1
2
3
4
5
6
7
8
9
10
3Q02 4Q02 1Q03 2Q03 28.08.03
Moscow Regions
4.03
5.15
6.19
7.43
8.54
million
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Key subscriber statistics
('000) 30 Jun 03 30 Jun 02 YoY 31 Mar 03 QoQ
Moscow 4,429 2,845 56% 3,946 12%Contract 763 702 9% 732 4%Prepaid 3,666 2,144 71% 3,214 14%% of GSM 97% 93% - 96% -
Regions 3,005 431 597% 2,242 34%
Total 7,434 3,276 127% 6,188 20%Contract 1,415 864 64% 1,360 4%Prepaid 6,018 2,412 150% 4,828 25%% of GSM 96% 89% - 95% -
Churn (quarterly) 10.5% 6.9% - 9.6% -
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National GSM network rollout
SouthPopulation: 22.9 mln.
MoscowPopulation:17.0 mln.
VolgaPopulation: 25.2 mln.
CentralPopulation:21.0 mln.
SiberiaPopulation: 15.3 mln.
1
2
3
45
6
7
8
910
11
12
1314
15
1617
20 1918
2223
2426
25
21
NorthwestPopulation: 14.0 mln.
2728
29 30
31
32
- other licensed regions
- in commercial operation - launch in 2003E
33
34
35
36
39
37
UralsPopulation:18.3 mln.38
40
4142
43
AreaSuper Region
Area popul. ('000)
Network Launch /
Acquisition1 Moscow Central 16,985 Jul 19992 Voronezh Central 2,379 May 20003 Tver Central 1,473 Sep 20014 Kaluga Central 1,041 Sep 20015 Vladimir Central 1,525 Sep 20016 Ryazan Central 1,228 Sep 20017 Lipetsk Central 1,213 Oct 20018 Tula Central 1,676 Oct 20019 Yaroslavl Central 1,368 Oct 2001
10 Smolensk Central 1,050 Nov 200111 Belgorod Central 1,512 Nov 200112 N. Novgorod Volga 3,524 Jan 200213 Saratov Volga 2,669 Jan 200214 Rostov South 4,407 Jan 200215 Barnaul Siberia 2,607 Jan 200216 Kemerovo Siberia 2,900 Jan 200217 Novosibirsk Siberia 2,692 Jan 200218 Bryansk Central 1,379 May 200219 Kostroma Central 737 May 200220 Ivanovo Central 1,149 Jun 200221 Orenburg Volga 2,177 Jul 200222 Kursk Central 1,236 Aug 200223 Orel Central 861 Aug 200224 Omsk Siberia 2,079 Aug 200225 Kazan Volga 3,780 Aug 200226 Tomsk Siberia 1,046 Sep 200227 Krasnodar South Sep 200228 Maykop South Sep 200229 Volgograd South 2,702 Oct 200230 Ufa Volga 4,103 Oct 200231 Cheboksary Volga 1,314 Oct 200232 Nalchick South 900 Oct 200233 Gorno-Altaysk Siberia 203 Oct 200234 Krasnoyarsk Siberia 2,966 Oct 200235 Samara Volga 3,240 Nov 200236 Astrakhan South 1,007 Nov 200237 Ulyanovsk Volga 1,382 Dec 200238 Kaliningrad North W 955 Dec 200239 Norilsk Siberia 135 Dec 200240 Makhachkala South 2,584 Jan 200341 Stavropol South 2,730 Feb 200342 Cherkessk South 440 Feb 200343 St. Petersburg North W 6,340 April 200344 Tura Siberia 18 Aug 2003
Total 101,265
5,571
- unlicensed territories
44
12
Central Volga
Source: VimpelCom
317
523
706
903
1,096
0
200
400
600
800
1,000
1,200
1,400
3Q02 4Q02 1Q03 2Q03 28.08.03
246
416
952775
579
0
200
400
600
800
1,000
1,200
3Q02 4Q02 1Q03 2Q03 28.08.03
‘000‘000
Regions – number of subscribers
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Regions – number of subscribers (continued)
Source: VimpelCom
South‘000Siberia
Northwest
662
545
416
10616
0
100
200
300
400
500
600
700
800
3Q02 4Q02 1Q03 2Q03 28.08.03
110 119
0
50
100
150
200
4Q02 1Q03 2Q03
142
735
594
422
285
0100200300400
500600700800900
3Q02 4Q02 1Q03 2Q03 28.08.03
110 119
188
249
0
50
100
150
200
250
300
4Q02 1Q03 2Q03 28.08.03
‘000
‘000
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Operational indicators
2Q03 2Q02 YoY 1Q03 QoQ
ARPU, blended ($) 14.3 18.9 -24.3% 13.5 5.8%
ARPU Moscow 16.9 19.6 -13.8% 15.2 11.0%
Contract (Moscow) 51.0 47.0 8.5% 45.6 11.6%
Prepaid (Moscow) 9.5 9.9 -4.8% 8.1 17.0%
ARPU regions 11.2 12.9 -13.2% 10.8 3.3%
MOU, blended (min) 93.8 94.7 -1.0% 81.5 15.1%
MOU Moscow 95.1 96.5 -1.4% 78.9 20.6%
Contract (Moscow) 273.7 215.2 27.2% 237.2 15.4%
Prepaid (Moscow) 56.0 54.4 3.0% 41.7 34.5%
MOU regions 91.6 77.4 18.4% 86.9 5.4%
SAC, blended ($) 21.1 31.3 -32.6% 20.8 1.2%
Moscow 29.7 35.1 -15.5% 29.9 -0.8%
Regions 12.3 14.8 -17.0% 11.7 4.6%
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2Q2003 2Q2002 2Q2003 2Q2002
№ of BTSs 2,388 1,670 2,794 517
№ of BSCs 108 49 74 19
№ of MSCs 10 7 38 13
Moscow Regions
Network rollout as of June 30, 2003
Note:BTS – base transceiver stationBSC – base station controllerMSC – mobile switching center Source: VimpelCom
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Merger Proposal for VimpelCom and VimpelCom-Region
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Strong performance in the regions
Six super-regional licenses
– 117 million pops
150% revenue growth in first half 2003
Positive contribution to EBITDA since 3Q02 and to net income since 1Q03
No. 1 in Siberia super-region
No. 2 and fastest growing in Central and Volga (incl. Orenburg) super-regions
Solid growth in South and promising start in Northwest
Urals to be launched in 4Q2003
Regional and Moscow operations now equally important parts of our business
VimpelCom market share, %
VimpelCom regional subscribers, 000s
Source: VimpelCom
57 100 123 200 285 431723
1,440
2,242
3,005
1Q01
2Q01
3Q01
4Q01
1Q02
2Q02
3Q02
4Q02
1Q03
2Q03
3,695
28.0
8.03
0%
10%
20%
30%
40%
50%
60%
1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03
Moscow Regions Russia
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Why accelerate the merger
VIP-R Shareholders Agreements give all parties the right to accelerate the merger process prior to December 2007
VimpelCom’s management sees significant benefits in merging now
– attractive terms achievable
– capturing 100% growth in the regions instead of only 55%
– unlocking synergies and achieving greater efficiencies
– lower cost of financing
– simplified corporate structure
Risk profile of the regions has changed - the VIP-R structure has now served its purpose
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The proposed transaction
In connection with the merger of VimpelCom and VIP-R, Alfa and Telenor will exchange their aggregate 44.7% interest in VIP-R for 10.9 million new VimpelCom common shares (equal to 14.6 million ADSs)
– VimpelCom the surviving entity
– 21.4% economic ownership dilution at closing (on a fully diluted basis)
Fairness opinion received from UBS Limited
Transaction expected to close during second quarter of 2004
– EGM called for 24 October 2003 (on certain issues, only disinterested shareholders may vote)
– 50% of disinterested shareholders are required to approve the transaction
The new VimpelCom ownership structure
Current Post - merger
Economic Voting Economic Voting
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
Economic Voting Economic Voting
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
%
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Relative valuation
Valuation ratio of 0.91 : 1 between VIP-R and the rest of VimpelCom (predominantly Moscow)
– implying that 33.6% of VimpelCom’s market cap. is attributable to its 55.3% stake in VIP-R
Number of subscribers in the regions to exceed Moscow during 2004
Revenues in the regions to exceed Moscowduring 2005
EBITDA in the regions to equal Moscow during 2005
Merger expected to be EPS accretive in 2005
– assuming synergies from tax, interest expense, G&A
Source: VimpelCom
2003E 2004E 2005E
2003E 2004E 2005E
Net revenues
Subscribers
2003E 2004E 2005E
Moscow Regions
EBITDA
21
73.5
55.9
14.0
71.4
44.4
6.0
28.2
12.0
0
15
30
45
60
75
Jan 01 July 03 Dec 05E
12.5
9.54.5
2.8
34.4
14.6
0
10
20
30
40
Jan 01 July 03 Dec 05E
Attractive growth opportunities in the regions
Population, million
Source: Goskomstat, S&P, AC&M Consulting, J’Son & Partners
Wireless penetration, %
6.317.0
121.9
Moscow license area
St. Petersburgand Leningrad region
Regions (excl. St. P.)
Mobile subscribers, millionGDP per capita (2002), $
1,770
5,850
1,770
Moscow St. Petersburgand Leningrad region
Regions(excl. St. P.)
Moscow
St. Petersburg
Regions
Regions
Moscow
St. Petersburg
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Capital expenditure, $ million
Our capital expenditure program
0
100
200
300
400
500
600
700
2002 2003E 2004E 2005E
Moscow Regions
Strong funding position
– Strong cash flow generation
– Strong balance sheet
– Access to debt capital markets
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A strong balance sheet
VimpelCom’s balance sheet (as of June 30, 2003)
$000
Cash and cash equivalents
Total assets
Interest bearing debt
Total shareholders’ equity
Debt*** / total shareholders’ equity
Debt*** / total assets
Actual
188,490
1,977,365
755,897
760,000
99%
38%
246,990
2,613,647
755,897
1,491,269
51%
29%
* Pro forma for Alfa Group's $58.5 million VIP-R equity contribution and VimpelCom / VIP-R merger** Includes long-term inter-company loans due to VimpelCom of $94,363
VIP-R
28,640
753,687
340,610**
271,397
*** Interest bearing debt only
consolidated
Debt*** / EBITDA**** 1.74 1.74
Pro formaconsolidated*
**** EBITDA - Operating income before depreciation & amortization for the 12 months ended June 30, 2003
