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VimpelCom / Annual Report 2007
Our accrued capital expenditures for 2007 were approximately
US$1,772.8 million for the purchase of property and other long-lived
assets and for 2006 were approximately US$1,512.1 million for the
purchase of property.
We estimate that our aggregate capital expenditures during 2008
will be approximately US$2,700.0 million for our current operations,
including GSM and 3G network development and fixed-line network
development in Russia and the CIS. Our aggregate capital expenditures
in 2008 may increase to approximately US$2,900.0 million if we
enter new markets or businesses in 2008. The actual amount of
our capital expenditures for 2008 will be influenced by the pace of
subscriber growth and network development requirements over the
remainder of 2008. The capital expenditure amounts stated above do
not include any amounts that may be invested in acquiring existing
telecommunications operators in various license areas and/or in the
purchase of telecommunications licenses in these areas.
On April 16, 2008, our board of directors recommended that our
shareholders approve at the next annual general meeting of
shareholders on June 9, 2008 annual dividends in the amount of
270.01 Russian rubles per common share (or approximately US$0.58
per ADS based on the exchange rate as of April 16, 2008) for the 2007
fiscal year, amounting to a total of 13.8 billion Russian rubles (or
approximately US$588.0 million based on the exchange rate of April
16, 2008) to be payable within 60 days of approval at the shareholders
meeting.
We anticipate that the funds necessary to meet our current capital
requirements and those to be incurred in the foreseeable future
(including with respect to any possible acquisitions) will come from:
• cash currently held by our company;
• operating cash flows;
• Export Credit Agency guaranteed financing;
• borrowings under bank financings, including credit lines
currently available to us;
• syndicated loan facilities; and
• debt financings from Russian and international capital markets.
We believe that funds from a number of these sources, coupled with cash
on hand, will be sufficient to meet our projected capital requirements for
the next 12 months.
We expect positive cash flows from operations will continue to provide
us with internal sources of funds as our subscriber base and traffic on
our network grows. The availability of external financing is difficult to
predict because it depends on many factors, including the success of
our operations, contractual restrictions, availability of guarantees from
export credit agencies, or ECAs, the financial position of international
and Russian banks, the willingness of international banks to lend to
Russian companies and the liquidity of international and Russian capital
markets. The actual amount of debt financing that we will need to raise
will be influenced by the actual pace of subscriber growth over the period,
network construction, our acquisition plans and our ability to continue
revenue growth and stabilize ARPU. In addition, we are currently
actively pursuing opportunities for expansion. We cannot, however, give
you any assurance of the exact amount that we will invest in acquiring
telecommunications operators or that we will be able to complete any
acquisitions successfully. If we make any further significant acquisitions
beyond what is currently contemplated by our plan, we will need to
increase the amount of additional debt financing over this period above
the amount currently projected.
Contractual Obligations
As of December 31, 2007, we had the following contractual obligations,
including long-term debt arrangements, equipment financing, capital
leases, and commitments for future payments under non-cancelable
lease arrangements and purchase obligations. We expect to meet our
payment requirements under these obligations with cash flows from our
operations and other financing arrangements. Subsequent to December
31, 2007, there have been a number of additional changes in certain of
our outstanding indebtedness. For more information regarding these
changes, see «—Financing activities—2008.»
Basis of Presentation of Financial Results
We maintain our records and prepare our statutory financial statements
in accordance with Russian accounting principles and tax legislation and
in accordance with U.S. GAAP. Our subsidiaries outside of Russia record
and prepare their statutory financial statements in accordance with local
accounting principles and tax legislation and in accordance with U.S.
GAAP. Our subsidiary in Kazakhstan, KaR-Tel, also records and prepares
its financial statements in accordance with International Financial
Reporting Standards. Our consolidated financial statements have been
prepared in accordance with U.S. GAAP. They differ from our financial
statements issued for statutory purposes. The principal differences
relate to:
• revenue recognition;
• recognition of interest expense and other operating expenses;
• valuation and depreciation of property and equipment;
• foreign currency translation;
• deferred income taxes;
• capitalization and amortization of telephone line capacity;
• valuation allowances for unrecoverable assets;
• capital leases;
• stock based compensations;
• business combinations;
• consolidation and accounting for subsidiaries; and
• provisions for bad debt.
Our company’s consolidated financial statements set forth in this annual
report include the accounts of our company and our consolidated
subsidiaries. All inter-company accounts and transactions have been
eliminated. We have used the equity method of accounting for companies
in which our company has significant influence. Generally, this represents
voting stock ownership of at least 20.0% and not more than 50.0%.