Download 2007 Annual Report in PDF (4.8Mb - VimpelCom

per ADS) during 2006. In 2007, we reported diluted net income of US$28.78
per common share (US$1.44 per ADS), compared to diluted net income of
US$15.93 per common share (US$0.79 per ADS) during 2006.
The table below provides selected information about net income of our
seven reportable segments for the year ended December 31, 2007 compared
to the year ended December 31, 2006 (in millions of U.S. dollars):
As of December 31,
Net Income 2007 2006
Russia 1,422.3 857.6
Kazakhstan 141.6 19.8
Ukraine (59.6) (61.0)
Tajikistan (5.8) (4.4)
Uzbekistan 19.6 8.2
Georgia (14.9) (2.0)
Armenia 23.2 3.3
Intersegment transactions
and minority interest (63.7) (8.1)
Cumulative effect of changes
in accounting principles – (1.9)
Total Net Income 1,462.7 811.5
The increase in our total net income in 2007 was primarily attributable to
the reasons set out above.
Year Ended December 31, 2006
Compared to Year Ended December 31, 2005
Operating Revenues
Our net operating revenues increased by 51.6% to US$4,868.0 million
during 2006 from US$3,211.1 million during 2005. Net operating revenues
from our operations in Russia, excluding intragroup transactions,
increased by 45.1% to US$4,400.3 million during 2006 from US$3,033.0
million during 2005. Net operating revenues from our operations in
Russia constituted 90.4% of our total net operating revenues during 2006
compared to 94.5% in 2005.
We increased our net operating revenues in 2006 primarily as a result of the
improved quality of our subscriber base, increased traffic on our network,
an increase in interconnect fees between mobile operators, a conservative
pricing policy and the introduction of a first-minute charge on certain tariff
plans, as well as our switch to Russian ruble denominated tariffs and the
implementation of a fixed exchange rate for our U.S dollar linked tariffs.
Service revenues. Our service revenues increased by 52.7% to US$4,847.7
million during 2006 from US$3,175.2 million during 2005. Service revenues
constituted approximately 99.6% and 98.9% of our net operating revenues for
the years ended December 31, 2006 and 2005, respectively.
During 2006, we generated US$3,415.4 million of our services revenues
from airtime charges from contract and prepaid subscribers and monthly
contract fees, or 70.2% of net operating revenues, compared to US$2,394.9
million, or 74.6% of net operating revenues in 2005. The increase was
primarily related to increased traffic on our network.
ВымпелКом / Годовой отчет 2007
During 2006, we generated US$503.9 million of our service revenues from
interconnect revenues, or 10.3% of net operating revenues, compared
to US$83.1 million, or 2.6% of net operating revenues in 2005. This increase
was primarily related to changes implemented by us in connection with the
introduction of CPP in July 2006. Specifically, in response to the introduction
of CPP we began to charge fixed-line operators rather than our subscribers for
incoming calls, we increased interconnect fees with other mobile operators
and we increased pricing on some tariff plans.
During 2006, we generated US$149.5 million of our service revenues from
roaming revenues generated by our subscribers, or 3.1% of net operating
revenues, compared to US$115.2 million, or 3.6% of net operating revenues
in 2005. During 2006, we generated US$126.8 million of our service revenues
from roaming revenues received from other mobile services operators for
providing roaming services to their subscribers, or 2.6% of net operating
revenues, compared to US$114.2 million, or 3.6% of net operating revenues in
2005. These increases were primarily due to improved and expanded network
coverage and an increase in the number of our roaming partners. Our service
revenues, excluding roaming revenues, grew at a faster rate than our roaming
revenues. As a result, roaming revenues as a percentage of our net operating
revenues decreased from 7.1% during 2005 to 5.7% during 2006.
During 2006, we generated US$641.2 million of our service revenues
from value added services, or 13.2% of net operating revenues, compared
to US$456.0 million, or 14.2% of net operating revenues in 2005.
In Russia, we generated US$603.3 million of revenues from value added
services, or 94.1% of our revenues from value added services, in 2006,
compared with US$448.0 million of revenues from value added services,
or 98.2% of our revenues from value added services, in 2005. We do not
derive a significant amount of revenue from value added services in the
CIS. The increase in our value added services revenues was primarily due
to increased consumption of value added services during 2006 compared
to 2005 as a result of our promotional and marketing campaigns.
Revenues from sales of handsets and accessories. Revenues from sales
of handsets and accessories during 2006 decreased by 36.7%
to US$19.3 million from US$30.5 million during 2005, primarily
as a result of a decrease in the price of handsets and an increase in dealer
sales (as opposed to sales directly from our company).
Operating Expenses
Our total operating expenses increased by 55.4% to US$3,470.7 million
during 2006 from US$2,233.1 million during 2005. Total operating
expenses from our operations in Russia increased by 45.5% to US$2,998.6
million during 2006 from US$2,060.5 million during 2005. Total operating
expenses from our operations in Russia constituted 86.4% of our total
operating expenses during 2006 compared to 92.3% in 2005.
Service costs. Our service costs increased by 69.7% to US$872.4 million
during 2006 from US$514.1 million during 2005. As a percentage of total
operating expenses, our service costs increased to 25.1% during 2006
from 23.0% during 2005. Our gross margin decreased to 82.0% during
2006 from 83.8% during 2005.
51