Download 2007 Annual Report in PDF (4.8Mb - VimpelCom

44
VimpelCom / Annual Report 2007
base, a high proportion of which consisted of lower income mass market
subscribers, who typically use their cellular telephone less than higher
income subscribers.
Armenia. In 2007, our MOU in Armenia decreased by 4.5% to 169.9 from 178.0
in 2006. Our MOU decreased due to the fact that MOU for 2006 represents only
the last two months of 2006 where there is typically higher mobile usage due
to holidays.
ARPU
We calculate ARPU, a non-U.S. GAAP financial measure, by dividing our
service revenue during the relevant period, 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 our active mobile subscribers during the period and dividing by
the number of months in that period. Reconciliation of ARPU to service
revenues, the most directly comparable U.S. GAAP financial measure, is
presented below in «Additional Reconciliation of Non-U.S. GAAP Financial
Measures (Unaudited).» We believe that ARPU provides useful information
to investors because it is an indicator of the performance of our mobile
operations and assists management in budgeting. We also believe that
ARPU provides management with useful information concerning usage and
acceptance of our mobile services. ARPU should not be viewed in isolation or
as an alternative to other figures reported under U.S. GAAP.
The following table shows our ARPU for the periods indicated:
Year ended December 31,
2007 2006 2005
Russia $12.6 $9.6 $8.5
Kazakhstan 13.1 12.6 11.3
Ukraine 4.7 5.0 4.3
Tajikistan 9.7 6.8 –
Uzbekistan 7.1 11.9 –
Armenia 16.7 17.0 –
Georgia 7.4 – –
Total ARPU $12.1 $9.7 $8.7
Russia. In 2007, our ARPU in Russia increased by 31.3% to US$12.6 from
US$9.6 in 2006. The increase in ARPU in 2007 was primarily attributable
to the increased traffic on our network, improved quality of our mobile subscriber
base, an increase in interconnect fees between mobile operators and
the introduction of a first-minute charge on certain tariff plans. Additionally,
ARPU increased in 2007 in part due to our switch to Russian ruble denominated
tariffs, which reduced the negative effect on revenues of the depreciating Russian
ruble value of the U.S. dollar, and the implementation of a fixed exchange
rate for our U.S dollar linked tariffs, which was set at a Russian ruble/U.S. dollar
exchange rate that was above the official exchange rate.
Kazakhstan. In 2007, our ARPU in Kazakhstan increased by 4.0% to
US$13.1 from US$12.6 in 2006. The increase in 2007 was the result of
our successful marketing campaigns, including the launch of new tariff
plans designed to stimulate traffic among our subscribers.
Ukraine. In 2007, our ARPU in Ukraine decreased by 6.0% to US$4.7 from
US$5.0 in 2006. The decline in 2007 was the result of an increased number
of mass market subscribers as a proportion of our total subscriber
base in Ukraine and a general reduction in tariffs resulting from increased
competition in the market. Mass market subscribers generally
have lower ARPU compared to corporate and business subscribers.
Tajikistan. In 2007, our ARPU in Tajikistan increased by 42.6% to US$9.7 from
US$6.8 in 2006. The increase in ARPU in 2007 was primarily attributable to
the end of promotional tariffs launched in 2006 at the start of commercial
operations.
Uzbekistan. In 2007, our ARPU in Uzbekistan decreased by 40.3% to
US$7.1 from US$11.9 in 2006 mainly due to the rapid growth of our
subscriber base and the geographic expansion of our mobile operations
within Uzbekistan, which resulted in lower MOU as we increased coverage
of regions with lower income mass market subscribers.
Armenia. In 2007, our ARPU in Armenia decreased by 1.8% to US$16.7
from US$17.0 in 2006 as a result of lower MOU due to a growing portion of
our mobile subscriber base being comprised of mass market subscribers.
Churn rate
We define our churn rate as the total number of registered subscribers
disconnected from our network within a given period expressed as a percentage
of the midpoint of registered subscribers in our network at the
beginning and end of that period. Contract subscribers are disconnected
if they have not paid their bills for up to two months. Prepaid subscribers
are disconnected in two cases: (1) an account has been blocked after the
balance drops to US$0 or below for up to six months or (2) an account
showed no chargeable transaction for up to ten months. The exact number
of months prior to disconnection varies by country and depends on
the legislation and market specifics. Policies regarding the calculation of
churn differ among operators.
Migration between prepaid and contract forms of payment is technically
recorded as churn, which contributes to our churn rate even though we
do not lose those subscribers. Similarly, prepaid customers who change
tariff plans by purchasing a new SIM card with our company are also
counted as churn.
The following table shows our churn rates for the periods indicated:
Year ended December 31,
2007 2006 2005
Russia 32.9% 35.4% 30.4%
Kazakhstan 23.5% 32.8% 30.3%
Ukraine 61.8% 18.6% –
Tajikistan 4.6% 95.1% –
Uzbekistan 61.7% 44.9% –
Armenia 49.7% 9.1% –
Georgia 1.0% – –
Total Churn 34.1% 35.1% 30.4%