Beeline AR 2005 - VimpelCom

Management’s Discussion and Analysis of Financial Condition
72 and Results of Operations
VimpelCom
Management’s Discussion and Analysis of Financial Condition
ВымпелКом
Annual Report 2005 and Results of Operations
Годовой отчет 2005 73
Additional Reconciliations of Non-U.S. GAAP Financial
Measures (Unaudited)
ARPU and SAC are non-U.S. GAAP financial measures. ARPU is used to measure the
average monthly services revenue on a per subscriber basis. ARPU is calculated as
service revenue generated by subscribers, including roaming revenue, but excluding
revenue from connection fees, sales of handsets and accessories and other nonservice
revenue, divided by the average number of our subscribers for the period.
SAC is used to measure the average cost of adding a new subscriber. SAC is calculated
as dealers’ commissions, advertising expenses and handset subsidies for the relevant
period divided by the number of new subscribers added in the period.
Reconciliation of ARPU to Service Revenue and Connection Fees
(Unaudited, in thousands of U.S. dollars, except for ARPU and subscriber amounts)
We believe that ARPU and SAC provide useful information to investors because they
are indicators of the performance of our business operations and assist
management in budgeting. We believe that ARPU provides management with useful
information concerning usage and acceptance of our services. We believe that SAC
assists management in quantifying the incremental costs to acquire a new
subscriber. Non-U.S. GAAP financial measures should not be viewed in isolation or
as an alternative to other figures reported under U.S. GAAP. Reconciliation of ARPU
to service revenue and connection fees and SAC to selling, general and
administrative expenses, the most directly comparable U.S. GAAP financial
measures, is presented below.
Years Ended December 31,
2005 2004 2003 2002 2001
Total ARPU:
Total service revenues $ 3,175,221 $ 2,070,720 $ 1,269,927 $ 728,729 $ 383,321
Less: Connection fees 876 720 1,279 1,962 2,079
Less: Revenue from rent of fiber optic channels 1,370 1,788 1,299 1,831 2,032
Service revenue used to calculate ARPU 3,172,975 2,068,212 1,267,349 724,936 379,210
Average number of subscribers (‘000) 35,393 16,986 7,749 3,305 1,208
Total average revenue per subscriber per month $ 7.5 $ 10.1 $ 13.6 $ 18.3 $ 26.2
Russia ARPU:
Total service revenues $ 2,997,388 $ 2,025,638 $ 1,269,927 $ 728,729 $ 383,321
Less: Connection fees 876 720 1,279 1,962 2,079
Less: Revenue from rent of fiber optic channels 1,370 1,788 1,299 1,831 2,032
Service revenue used to calculate ARPU 2,995,142 2,023,130 1,267,349 724,936 379,210
Average number of subscribers (‘000) 33,958 16,734 7,749 3,305 1,208
Russia average revenue per subscriber per month $ 7.4 $ 10.1 $ 13.6 $ 18.3 $ 26.2
Kazakhstan ARPU:
Total service revenues $ 176,924 $ 45,082 $ – $ – $ –
Less: Connection fees – – – – –
Service revenue used to calculate ARPU 176,924 45,082 – – –
Average number of subscribers (‘000) 1,404 716 – – –
Kazakhstan average revenue per subscriber per month $ 10.5 $ 15.7 $ – $ – $ –
Ukraine ARPU:
Total service revenues $ 1,952 $ – $ – $ – $ –
Less: Connection fees – – – – –
Service revenue used to calculate ARPU 1,952 – – – –
Average number of subscribers (‘000) 239 – – – –
Ukraine average revenue per subscriber per month $ 4.1 $ – $ – $ – $ –
Reconciliation of SAC to Selling, General and Administrative Expenses
(Unaudited, in thousands of U.S. dollars, except for SAC and subscriber amounts)
Years Ended December 31,
2005 2004 2003
Total SAC:
Revenues from sales of handsets and accessories $ 30,478 $ 38,711 $ 55,765
Less: Cost of handsets and accessories sold 28,294 30,583 36,447
Selling, general and administrative expenses 1,085,807 720,127 467,655
Less: General and administrative expenses 702,193 454,050 290,870
Sales and marketing expenses, including 383,614 266,077 176,785
advertising & marketing expenses 135,248 68,142 50,867
dealers’ commission expense 248,366 197,935 125,918
Customer acquisition costs 383,614 266,077 176,785
New gross subscribers (‘000) 29,246 19,204 9,144
Total Subscriber Acquisition Cost $ 13.1 $ 13.9 $ 19.3
Russia SAC:
Revenues from sales of handsets and accessories $ 30,478 $ 38,711 $ 55,765
Less: Cost of handsets and accessories sold 28,234 30,583 36,447
Selling, general and administrative expenses 1,032,040 707,739 467,655
Less: General and administrative expenses 668,285 447,078 290,870
Sales and marketing expenses, including 363,755 260,661 176,785
advertising & marketing expenses 127,292 67,189 50,867
dealers’ commission expense 236,463 193,472 125,918
Customer acquisition costs 363,755 260,661 176,785
New gross subscribers (‘000) 27,591 18,945 9,144
Russia Subscriber Acquisition Cost $ 13.2 $ 13.8 $ 19.3
Kazakhstan SAC:
Revenues from sales of handsets and accessories $ – $ – $ –
Less: Cost of handsets and accessories sold – – –
Handsets and accessories subsidies – – –
Selling, general and administrative expenses 51,322 12,388 –
Less: General and administrative expenses 31,822 6,972 –
Sales and marketing expenses, including 19,500 5,416 –
advertising & marketing expenses 7,626 953 –
dealers’ commission expense 11,874 4,463 –
Customer acquisition costs 19,500 5,416 –
New gross subscribers (‘000) 1,616 259 –
Kazakhstan Subscriber Acquisition Cost $ 12.1 $ 20.9 $ –
Ukraine SAC:
Revenues from sales of handsets and accessories $ – $ – $ –
Less: Cost of handsets and accessories sold – – –
Selling, general and administrative expenses 2,445 – –
Less: General and administrative expenses 2,086 – –
Sales and marketing expenses, including 359 – –
advertising & marketing expenses 330 – –
dealers’ commission expense 29 – –
Customer acquisition costs 359 – –
New gross subscribers (‘000) 39 – –
Ukraine Subscriber Acquisition Cost $ 9.2 $ – $ –