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. Last Updated: 07/27/2016

Vimpelcom Reports Lackluster 2nd Quarter

Mobile telephone company Vimpelcom has reported disappointing second-quarter results, sending its stock tumbling by 8 percent to $15.50 per share on the New York Stock Exchange this week, after a day of relatively heavy trading.

The Moscow-based company, which markets services under the Beeline brand, reported a slight decrease in revenues compared with the first quarter.

This goes against predictions that Vimpelcom's financial performance would begin to recover after being hit hard by last year's August crisis.

Total operating revenues for the second quarter were $57.8 million, down from $57.9 million in the first quarter. "The numbers are poorer than most people expected," said Tom Adshead of Troika Dialog, whose brokerage predicted that Vimpelcom's second-quarter revenues would grow to $66.4 million.

The release of the disappointing results underscores the fact that Vimpelcom's post-crisis recovery will take longer than analysts predicted. Vimpelcom had capitalized on the growth of Russia's middle class, a marketing strategy that proved costly after the crash.

Vimpelcom's total operating revenues for the first half of this year were only $115.6 million, down 41 percent from the same period last year.

However, the company, which had 135,400 customers just before the crisis, has kept most of these and recruited new ones through an aggressive marketing campaign of lowering prices and targeting a wider swath of the population.

The strategy has been effective - the company reports it had 173,000 subscribers at the end of August, a 40 percent increase since the beginning of the year - but most customers have opted for prepaid call cards, which traditionally bring in lower revenues than full-paid subscriptions. Also, Adshead said, customers are not using cell phones as much as expected, pushing revenues still lower.

However, he said he expected Vimpelcom to perform well next year as the company's fundamentals remained sound and most of the costs associated with its new broad-based marketing campaign - such as dealer commissions ranging from $100 to $300 per new subscriber - will be behind it.

Vimpelcom brought in executives from Telnor, a Norwegian telecom that acquired a 25 percent voting stake late last year, to assist in restructuring, said Alexander Kabanovksy, a telecoms analyst with Brunswick Warburg brokerage. Vimpelcom needs to profit at $100 per month per subscriber but currently earns $122 per month per subscriber.