VimpelCom Posts Mixed Q4 Results

VimpelCom, the nation's No. 2 cellular operator, announced a sharp rise in fourth-quarter earnings Wednesday, but analysts said the year-end report fell short of expectations.

VimpelCom, which operates the Beeline brand, said it posted $918.4 million in fourth-quarter operating income before depreciation and amortization, or OIBDA, a year-on-year increase of 33.1 percent.

The figure shows a more than 2 percent dip in profit compared with the previous year, however, triggering a slight fall in the company share prices. VimpelCom shares tumbled 8.6 percent in German trading Wednesday, Bloomberg reported.

The weak showing was due to a one-off payment of $118.7 million as part of the company's compensation package for executives, VimpelCom said Wednesday in a statement.

These accruals are $78.2 million higher than in the third quarter of 2007 and $94.5 million higher than in the fourth quarter of the previous year, the statement said.

It added that OIBDA margin would have been well above 50 percent without the compensation plan.

"VimpelCom's share trading in Europe is taking a beating Wednesday because of the lower-than-expected OIBDA margin, which the company attributed to a sharp appreciation of its share price," said Nadezhda Golubeva, a telecoms analyst at UniCredit Aton.

"The company needed to factor in expenses connected with its compensation plans, since the process started long before the fourth quarter."

VimpelCom said revenues exceeded $7 billion in 2007 and grew 47 percent. The company said it had a better-than-expected quarterly net profit of $368.1 million, up 86 percent year on year.

Full-year net profit was $1.46 billion, an increase of 80.2 percent compared with the previous year and nearly in line with analysts' expectations.

"2007 was another excellent year for VimpelCom," CEO Alexander Izosimov said at a news conference. "Our strong revenue growth, coupled with a healthy margin and a balanced investment policy, resulted in free cash flow of $1.26 billion, almost tripling the 2006 level."

Izosimov said the company's strong financial position would help it expand into adjacent businesses and new geographic areas.

Sales growth was also strong through the year, he said, reaching $7.1 billion, an increase of 47 percent compared with 2006.

Average monthly revenues per user, a key measure of subscriber quality, reached $13.5 by the fourth quarter, an increase of 23.9 percent compared with the fourth quarter of 2006.

The number of subscribers was growing as well, with 6.2 million new customers in 2007, reaching a total of 51.7 million consumers.

"Our Russian business is performing well and we were able to substantially improve our financial condition, positioning ourselves well as we enter 2008," Izosimov said.