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. Last Updated: 07/27/2016

Vimpel Drops Russian Flag On Wall Street

The Russian flag was unfurled last Friday on Wall Street. The appearance of the flag on the balcony of the stock exchange, the very heart of the Western business world, shows that Russians are advancing and have already established a beachhead for the attack. Last Friday was the first time since 1905 or 1906 that stocks from a Russian company were offered on the New York exchange, which was the occasion for the flag and for the head of the triumphant company, Dmitry Zimin, to go out on the balcony to greet the public.


Until quite recently, the telecommunications company he runs, Bee Line, was just one among many new businesses in Russia. But one particularity was that the people who set it up worked in the military-industrial complex and its founder and president, Zimin, was one of the designers of the Soviet version of Star Wars. They started with one of the biggest Moscow defense industries, Vympel, and therefore the stock company is called VimpelCom. Bee Line is the catchy trademark they found for the company.


The company began at a time when defense contracts were being severely cut back and the group of defense communications engineers had to think of ways of making a living. In 1991, an American entrepreneur, who wanted to sell mobile telephones in Russia, visited the Vympel plant. The American did not manage to sell any equipment, but the meeting played an important role. Without contracts and money, these defense workers found that they could fill a niche in the cellular communications market.


They appealed to the Communications Ministry to allow them a band that was formerly used by the military. They then led negotiations with the largest telecommunications companies, including AT&T and Motorola, which all expressed interest in their proposals but demanded government or bank guarantees that VimpelCom did not have.


The company Eriksson believed in these Russian entrepreneurs and extended them a trade credit of $5 million. The risk was justified. Very soon VimpelCom (or Bee Line, if you like) dominated the market in cellular communications. Of the 90,000 cellular subscribers in Moscow, 50,000 of them are Bee Line clients.


This January, the Renaissance Capital investment research firm proposed that Zimin's company issue stocks on the New York exchange. VimpelCom decided to try, even though the offer seemed more than a little exotic. The proposal was unusual in that the company offered American Depositary Receipts, or ADRs, which means that the company would have to fully disclose all information about its activities according to Western standards.


VimpelCom decided to take this brave step. Neither Lukoil nor Gazprom or other blue-chip companies has dared do so.


The results surpassed all expectations. The stock was one of the most actively traded on the New York Stock Exchange. On the first day of trading, the Russian company broke a record: The stock price rose by 40 percent in one day.


Today, VimpelCom's worth is valued at more that $700 million. A company that was little known outside the limits of Moscow in one day received world recognition and entered among the top large Russian companies in the level of capitalization.


Perhaps this is how the "Russian miracle" will begin?