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56
VimpelCom / Annual Report 2007
(1) In connection with the exchange offer by our company completed in May 2006, the outstanding principal amount due under this loan was reduced from
US$450.0 million to US$217.2 million.
(2) In April 2007, we entered into an agreement to sell a 33.3% ownership interest in its wholly-owned subsidiary, Freevale Enterprises, Inc. (BVI) for a sale price
of US$20.0 million. Freevale Enterprises owns 21.0% of Unitel. The sale effectively represents 7.0% of Unitel. The transaction was finalized on June 14, 2007.
In connection with this agreement, the purchaser granted us an option to acquire the entire remaining interest held by the purchaser and, simultaneously, we granted
the purchaser an option to sell to us the entire remaining interest held by the purchaser. The future price is based on a prescribed formula; however in no event will
the future price be less than US$57.5 million or more than US$60.0 million. Following the provisions of EITF No. 00-4, Majority Owner’s Accounting for a Transaction
in the Shares of a Consolidated Subsidiary and a Derivative Indexed to the Minority Interest in That Subsidiary, the sale consideration was accounted for as a secured
borrowing of US$20.0 million. The borrowing will be accreted to the minimum purchase price of the put and call arrangement up to August 31, 2009, which is the date
at which the put and call options first become exercisable. As of December 31, 2007, principal amount of debt outstanding under this agreement was US$26.0 million.
million, compared to negative working capital of US$487.4 million
as of December 31, 2006. Working capital is defined as current assets
less current liabilities. The improvement in our negative working
capital as of December 31, 2007 was primarily due to the increase
in cash and cash equivalents and short-tem cash deposits that
compensated for the increase in our accounts payable, customer
advances and accrued liabilities. As of December 31, 2007, customer
advances amounted to US$386.9 million compared to US$282.6
million as of December 31, 2006. The growth in our accounts payable
and customer advances as of December 31, 2007 was primarily due to
an increase in the volume of our operations. The increase in accrued
liabilities was primarily due to an increase in accrual for stock based
compensation. We believe that our working capital is sufficient to
meet our present requirements.
Operating activities
During 2007, net cash provided by operating activities was US$3,037.7
million, a 54.1% increase over the US$1,971.3 million of net cash
provided by operating activities during 2006, which in turn was a
52.5% increase from the US$1,292.9 million of net cash provided
by operating activities during 2005. The improvement in net cash
from operating activities during 2007 as compared to 2006 and 2005
was primarily due to the increased net income and the increase in
the volume of operations, which, in turn, was primarily the result of
an increase in the number of subscribers during these periods and
increased usage of our mobile services by existing subscribers. In
2007, there were no significant changes in the terms of payments to
our suppliers and our policies in respect of customer advances and
accounts payable as compared to 2006 and 2005.
Financing activities
The following table provides a summary of VimpelCom’s outstanding
indebtedness with an outstanding principal balance exceeding
US$10.0 million as of December 31, 2007. Many of the agreements
relating to this indebtedness contain various restrictive covenants,
including change of control restrictions and financial covenants.
In addition, certain of these agreements subject our subsidiaries
to restrictions on their ability to pay dividends or repay debts to
VimpelCom. For additional information on this indebtedness, please
refer to the notes to VimpelCom’s consolidated financial statements
contained elsewhere in this annual report. For information regarding
changes in certain of our outstanding indebtedness subsequent to
December 31, 2007, including indebtedness incurred and assumed
in connection with our acquisition of Golden Telecom, see «2008»
on the next page.