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. Last Updated: 07/27/2016

Vimpelcom Nets $61M in '97, Subscriber Numbers Double




Cellular operator Vimpelcom on Friday reported a 1997 net income of $61 million for the year -- a 36 percent increase over the $44.9 million recorded for 1996 -- while the number of subscribers almost doubled.


The company also plans to introduce a new payment system that offers tariff breaks to those who talk more, President Dmitry Zimin said at a news conference.


According to an audit by Ernst & Young, Vimpelcom's revenues jumped 43 percent to $305.9 million compared to 1996 revenues, company officials said.


But growth was lower than in 1996, when revenues shot up 110.2 percent and profits 52.5 percent.


Analysts attributed the lower figures to increased competition from other cellular operators and VimpelCom's high-cost investment in building a GSM-1800 frequency network this past year.


"This year's results are very good results," said Andrei Bogdanov, an analyst at ING Bank Russia. "But margins will most likely drop further this year, too."


Operating income, at $86 million, was up 23.2 percent from 1996, while operating costs jumped 55 percent to $207 million: Vimpelcom spent more on its core business activities than it made.


The company invested a total of $194.1 million during the year, compared to $120.0 million in 1996.


Because of trouble on world markets, Vimpelcom's market capitalization fell to $916 million from $1.073 billion in the third quarter. Capitalization at the end of 1996 was $610 million.


At year's end, Vimpelcom had 110,140 subscribers in the Moscow area, up 95 percent from 1996, when the company had 56,584 clients.


"These results correspond to the company's expectations," Zimin said.


Vimpelcom is No. 1 on the market, beating out Mobile TeleSystems, or MTS, and Moscow Cellular Network, or MTC, by thousands of subscribers.


The gap is narrowing a bit as MTS and MTC develop more sophisticated marketing campaigns, but Vimpelcom faces no serious threat to its market pos ition for three years, analysts said.


Vimpelcom's start-up fees are about 15 percent higher than those of MTC and MTS.


By April 1, the company plans to introduce a payment plan whereby customers who talk for less than 100 minutes pay 59 cents a minute, those who talk up to 200 minutes pay 39 cents a minute, and those talking more than 200 minutes pay 33 cents a minute, company officials said. Details about the plan will be released in a few weeks, Zimin said.


Since March 16, clients are paying 39 cents a minute instead of the previous charge of 45 cents a minute, although the company never announced this change.