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. Last Updated: 07/27/2016

Vimpelcom Q3 Profit Up $14M

MTVimpelcom CEO Jo Lunder
Cellular operator Vimpelcom on Tuesday reported a profit for the third quarter and said it increased its subscriber base amid extremely competitive market conditions.

The company also said it would decrease its Moscow tariffs in December to coincide with the holiday buying season, which is expected to produce a final surge in new subscribers before growth starts to taper off.

Russia's second-leading mobile provider said its third-quarter net profit to U.S. generally accepted accounting standards rose to $13.92 million from a loss of $5.88 million in the third quarter of 2000. Net operating revenues climbed to $114.10 million from $70.72 million and operating expenses rose to $88.64 million versus $71.63 million. Earnings before interest, taxes, depreciation and amortization totaled $40.94 million compared with $14.13 million.

"The continuing improvement in the results of our Moscow operation make us confident that we can develop more and more quickly in Russia's regions, where we see significant potential for growth," Vimpelcom CEO Jo Lunder told a news conference.

Vimpelcom solidly beat out competitor Mobile TeleSystems for net additions in Moscow this autumn. Citing outside sources, Lunder said in a conference call that Vimpelcom had acquired more than 60 percent of new Moscow subscribers in the past two months.

Lunder said an increased subscriber base, along with a high level of subscriber loyalty, had fuelled growth and supported the company's position in the key Moscow market.

Vimpelcom said its subscribers totaled 1.48 million at the end of the third quarter, including 123,000 on the regional network, and its subscriber base had more than doubled year on year.

Vimpelcom estimated that by Sept. 30 its Moscow market share was 39.8 percent, up from between 38 percent to 39 percent last quarter, but below first-quarter levels of around 40 percent. In the third quarter of 2000, Vimpelcom controlled about 40 percent of the market.

Vimpelcom said it had around 1.8 million subscribers as of Tuesday, including approximately 1,635,000 subscribers in the Moscow license area.

Part of the increase was due to the company's push for growth in Russia's far-flung regions, where Vimpelcom -- boosted by financing from new strategic investor Alfa Group -- has recently launched operations in several cities and towns.

Both Vimpelcom and MTS could feel a small pinch in coming months from Moscow's newly minted third GSM operator, Sonic Duo, whose small network coverage and limited number of dealers made for a soft launch into the city last week.

Lunder said he expected tariff decreases of 10 percent to 15 percent from Moscow operators next year and that Vimpelcom would decrease its own tariffs in December, which would bring them in line with recent decreases from MTS.

The competitors are racing to obtain and keep customers before Moscow hits its saturation point. Lunder put the region's addressable market at around 50 percent, or more than 7 million mobile users, through 2003.

He estimated a penetration rate of 27 percent to 28 percent at the end of 2001 and 40 percent by the end of 2002. (Reuters, MT)