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VimpelCom / Annual Report 2007
Investing activities
Our investing activities included capital expenditures on the purchase
of equipment, telephone line capacity, frequency allocations, buildings
and other assets as a part of the ongoing development of our mobile
networks and acquisitions of businesses. In 2007, our total payments
for purchases of equipment, intangible assets, software and other noncurrent
assets were approximately US$1,690.7 million (compared to
US$1,607.2 and US$1,515.3 million during 2006 and 2005, respectively).
In 2007, our total payments in respect of acquisitions (net of cash
holdings of acquired companies) were approximately US$301.3 million
(compared to US$679.8 million and US$308.1 million during 2006 and
2005, respectively).
Acquisitions and dispositions
Our significant acquisitions and disposals from 2005, 2006 and 2007 are
described below.
In July 2005, we acquired 84.4% of the issued and outstanding shares of
STM for a purchase price of US$51.2 million. At the same time, we also
acquired 60.0% of Limited Liability Company Joint Venture «Sakhalin
Telecom Limited,» or Sakhalin Telecom, a fixed-line alternative operator,
for a purchase price of US$5.0 million. We subsequently sold Sakhalin
Telecom in September 2005 to Sovintel for approximately US$5.0 million.
At the time we acquired Sakhalin Telecom, it owned 5.2% of STM, which
we subsequently purchased for US$3.2 million, increasing our share in
STM to 89.6%. STM held GSM-1800 and D-AMPS licenses for the territory
of Sakhalin, one of the regions within the Far East super-region where we
do not have a super-region license to conduct cellular operations. At the
time of its acquisition, STM had approximately 96,000 subscribers.
On August 22, 2005, we completed the sale of a minority interest of
50.0% less one share in KaR-Tel’s parent company, Limnotex, to Crowell
for a purchase price of US$175.0 million. Following the transaction, we
owned 50.0% plus one share of KaR-Tel. In addition, we entered into a
shareholders agreement with Crowell that, among other things, grants
us a call option to re-acquire 25.0% less one share of Limnotex at any
time and an additional call option to re-acquire the remaining 25.0%
share in Limnotex in the event of a deadlock at a shareholders meeting,
in each case at a price based upon a prescribed formula.
On November 10, 2005, we acquired 100.0% of URS, a cellular operator
in Ukraine, through the acquisition of 100.0% of the issued and
outstanding stock of each of its shareholders—Crayola Properties
Limited, Cradel Investments Limited, Wintop Management Limited,
Crisden Holdings Limited and Cellcroft Holding Limited. The total
cash purchase price of URS was US$231.2 million plus the assumption
of approximately US$23.5 million in debt. URS had a GSM-900 license
that covers the entire territory of Ukraine and a GSM-1800 license that
covers 23 of Ukraine’s 27 administrative regions (excluding the City
of Kyiv, the Kyiv Region, the Dnipropetrovsk Region and the Odessa
Region). At the time of its acquisition, URS had approximately 240,000
subscribers. Our acquisition of URS was challenged by Telenor.
On December 29, 2005, we acquired a 60.0% interest in Tacom, a cellular
operator in Tajikistan, for a purchase price of US$11.1 million. Tacom
held national GSM-900/1800, UMTS and AMPS licenses. At the time of its
acquisition, Tacom had approximately 10,000 subscribers. In connection
with our acquisition of Tacom, we entered into a shareholders agreement
with the remaining shareholders of Tacom that grants us an option to acquire
up to the entire remaining interests held by the shareholders under certain
circumstances for a price specified in a prescribed formula. On December
22, 2006, we acquired an additional 20.0% of Tacom for a purchase price of
US$5.0 million. Thus we increased our stake in Tacom to 80.0%.
On January 18, 2006, we acquired 100.0% of Buztel for a purchase
price of US$60.0 million plus the assumption of approximately
US$2.4 million in debt. On February 9, 2006, we acquired 100.0% of
Unitel for a purchase price of US$200.0 million plus the assumption of
approximately US$7.7 million in debt. Buztel and Unitel held national
GSM-900 and GSM-1800 licenses. At the time of their acquisitions,
Buztel and Unitel had approximately 2,500 and 364,000 subscribers,
respectively. In July 2006, we merged Buztel into Unitel.
On July 11, 2006, we acquired 51.0% of Mobitel and a call option for
the remaining 49.0% for a purchase price of US$12.6 million plus the
assumption of approximately US$0.2 million in net debt of Mobitel.
Mobitel held a national GSM-1800 license that covers the entire territory
of Georgia. At the time of its acquisition, Mobitel had no subscribers.
On November 16, 2006 we acquired 90.0% of ArmenTel, which held
a GSM-900 license and had fixed line operations in Armenia, for a
purchase price of approximately US$445.0 million. At the time of its
acquisition, ArmenTel had approximately 400,000 mobile subscribers
and 600,000 fixed line subscribers.
On December 14, 2006, we acquired 75.0% of Limited Liability Company
«Dominanta,» a mobile digital television services company in the DVB-H
standard in Moscow and the Moscow region, for a purchase price of
approximately US$10.5 million. At the time of its acquisition, Dominanta
had no subscribers. In connection with this transaction, the seller
granted us an option to acquire the entire interest held by the seller
and we granted the seller an option to sell to us its entire interest
under certain circumstances for a price to be determined based on a
prescribed procedure.
From December 2006 through September 2007, KaR-Tel acquired 100.0%
of Limited Liability Partnership «Teta Telecom,» a holding company
which holds 100.0% of Limited Liability Partnership «KZ-Trans,» a
fiber-optic operator in Kazakhstan, and a minority interest in Limited
Liability Partnership «TNS-Plus,» which holds a license for long-distance
operations, for an aggregate purchase price of approximately US$10.1
million. Teta Telecom increased its stake in TNS-Plus from 2.0% to 49.0%,
for an aggregate consideration of approximately US$4.5 million. Teta
Telecom also has the right to acquire an additional 2.0% interest in TNS-
Plus (bringing its total shareholding to 51.0%) upon a change in Kazakh
legislation allowing foreign entities to control long-distance operators.