Download 2007 Annual Report in PDF (4.8Mb - VimpelCom

86
VimpelCom / Annual Report 2007
4. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consisted of the following at December 31:
2007 2006
US dollars $183,746 $182,740
Roubles 736,490 126,398
Uzbekistani Som 43,283 15,991
Armenian Dram 10,772 8,106
Kazakhstan Tenge 11,214 6,614
Ukrainian Hryivna 1,078 714
EURO and other currencies 17,128 3,931
$1,003,711 $344,494
5. DERIVATIVES
VimpelCom uses derivative instruments, including swaps, forward
contracts and options to manage certain foreign currency and interest
rate exposures. The Company views derivative instruments as risk
management tools and does not use them for trading or speculative
purposes. Derivatives are considered to be effective economic hedges,
however all derivatives are accounted for on a fair value basis and
the changes in fair value are recorded in the statement of income.
In June and July 2006 VimpelCom entered into a series of short-term
forward agreements for a total amount of US$570,000 to hedge its short
term US dollar denominated obligations. The forward exchange rates in
the contracts ranged from 26.79 Rouble / 1 US$ to 26.98 Rouble/ 1 US$
and matured in the year ended December 31, 2006. The change in fair value
of these contracts before July 1, 2006 was recognized as non-operating gain/
loss and starting from July 1, 2006 due to the functional currency change
– as foreign exchange gain/loss. The accompanying financial statements
include US$14,336 of foreign exchange loss from recognising these contracts
at fair value as of December 31, 2006. In November 2006, VimpelCom entered
into forward foreign exchange contracts for a total amount of US$736,629
to hedge its US dollar denominated obligations due in 2007 and 2008.
These contracts ranged from 26.6 Rouble / 1 US$ to 26.7 Rouble/ US$.
In March 2007 VimpelCom entered into short-term forward agreements
for a total amount of US$53,010 to hedge its short-term US dollar
denominated obligations with a forward exchange rate 26.1775 Russian
rouble per 1 USD.
During the third quarter 2007 VimpelCom entered in short-term zerocost
collar agreement for a total amount of US$120,545 to hedge its US
dollar debt. The forward exchange rate of protection was 27.0323 Russian
roubles per 1 US dollar and the rate of participation was 24.9281 Russian
roubles per 1 US dollar. The accompanying financial statements include
US$31,239 of foreign exchange loss from recognising these contracts at
fair value as of December 31, 2007.
During the fourth quarter of 2006 VimpelCom entered into a short-term
cross-currency interest rate swap transaction. The amount of the swap
is US$236,111 at 26.64 Russian rubles per 1 USD as well as a 6.37% interest
rate. The amount of the contract will be subject to remeasurement going
forward, in conjunction with the change of the exchange rate of the US dollar
to the Russian ruble and LIBOR fluctuation. The accompanying financial
statements include US$8,551 of foreign exchange loss from recognizing this
contract at fair value as of December 31, 2007.
6. PROPERTY AND EQUIPMENT
Property and equipment, at cost, consisted of the following at December 31:
2007 2006
Telecommunications equipment $5,517,009 $4,295,048
Land and buildings 281,744 174,705
Office and measuring equipment 637,392 449,303
Other equipment 326,439 203,250
6,762,584 5,122,306
Accumulated depreciation (2,209,951) (1,536,910)
Equipment not installed
and assets under construction 945,186 1,030,279
$5,497,819 $4,615,675
7. TELECOMMUNICATIONS LICENSES
AND ALLOCATIONS OF FREQUENCIES,
GOODWILL AND OTHER INTANGIBLE ASSETS
Telecommunications licenses and allocations of frequencies acquired
directly by VimpelCom were initially recorded at cost. Telecommunications
licenses and allocations of frequencies acquired in business combinations
were initially recorded at their fair value as of the acquisition date.
The total gross carrying value and accumulated amortization
of VimpelCom’s telecommunication licenses as of December 31, 2007 and
2006 was as follows:
2007 2006
Telecommunication licenses, at cost $1,331,531 $1,244,311
Accumulated depreciation (495,805) (319,502)
Telecommunication licenses not
in current use 79,485 -
Total telecommunication licenses $915,211 $924,809
Telecommunication licenses not in current use is comprised
of licenses for IMT-2000/UMTS («3G») and a license for the provision
of telecommunication services for the purpose of over-the-air
broadcasting on a Digital Video Broadcasting – Handheld platform,
for which the business operations have yet to start.