Senior Management Corporate Information Старший ... annual report.pdf · Новые возможности ... ной связи, ... Временно свободные средства

Senior Management

Dmitry B. ZiminChief Executive Officer and Founder

Jo LunderPresident and Chief Operating Officer

Nikolai N. PryanishnikovFirst Vice President — CommercialDirector

Maurice H. WorsfoldChief Financial Officer

Sergei M. AvdeevVice President of NetworkDevelopment

Valery V. FrontovVice President of Licensing

Vladimir V. Preobrazhenski Vice President of BusinessDevelopment

Valery P. GoldinVice President of International andInvestor Relations

Vladimir M. BychenkovVice President, Chief Accountant

Georgy V. Silvestrov Secretary of the Board

Corporate Information

Legal AdvisersAkin, Gump, Strauss, Hauer & Feld,L.L.P.

Independent Auditors Ernst & Young (CIS) Limited

Depositary BankThe Bank of New York

CUSIP # 68370R109

Custodian BankING Bank Eurasia

Primary Trading InformationNYSE: VIP (ADS)VIP 05 (Convertible Bonds)

Requests forCorporate Information:

VimpelCom 10, 8 Marta Street Moscow, Russia 125083 Tel: +7 (095) 974 5888 Fax: +7 (095) 721 [email protected]

Edelman Financial Worldwide 1500 Broadway New York, N.Y 10036 - 4015 Tel: +1 (212) 768 0550 Fax: +1 (212) 704 0128www.edelman.com

Старшийменеджмент

Дмитрий Борисович ЗиминГенеральный директор и учредитель

Джо ЛундерПрезидент — директор пооперациям

Николай Николаевич Прянишников Первый вице-президент —коммерческий директор

Морис Уорсфолд Вице-президент по финансам иадминистрированию — главныйфинансовый директор

Сергей Михайлович Авдеев Вице-президент по сетевомуразвитию

Валерий Вячеславович ФронтовВице-президент, директор пообеспечению операторскойдеятельности

Владимир ВладимировичПреображенский Вице-президент по развитиюбизнеса

Валерий Павлович ГольдинВице-президент по международнымсвязям и отношениямс инвесторами

Владимир Михайлович БыченковЗаместитель генеральногодиректора — главный бухгалтер

Георгий Владимирович Сильвестров Cекретарь Совета директоров

Корпоративнаяинформация

ЮрисконсультЭйкин, Гамп, Страус, Хауэр энд Фелд, Л.Л.П.

Независимый аудиторЭрнст энд Янг (СНГ) Лимитед

Банк-депозитарийБэнк оф Нью-Йорк

CUSIP # 68370R109

Банк-хранитель в РоссииИНГ Банк Евразия

Символ на бирже Нью-Йоркская фондовая биржа:VIP (АДС) VIP 05 (конвертируемые облигации)

Справки по корпора-тивным вопросам:

АО «ВымпелКом»ул. 8 Марта, 10 125083 Россия, Москва Тел: +7 (095) 974 5888 Факс: +7 (095) 721 [email protected]

Эдельман Файнэншиал Уорлдвайд Бродвей, 1500 Нью-Йорк, Нью-Йорк 10036 - 4015 Teл: +1 (212) 768 0550 Факс: +1 (212) 704 0128www.edelman.com

All information contained herein is qualified in its entirety byreference to VimpelCom’s Annual Report on Form 20-F which will befiled with the U.S. Securities & Exchange Commission by June 30,2001 pursuant to Section 15(d) of the United States SecuritiesExchange Act of 1934, as amended.

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Company profileИнформация о компании

Financial highlightsФинансовые показатели

Letter to shareholdersПисьмо к акционерам

Russia: a new eraРоссия: наступление новой эры

Capturing the imaginationБеспроводная революция

Bee Line GSM: a new imageБи Лайн: новый имидж

A wireless worldБеспроводной мир

New wave of growthНовые возможности роста

Board of directorsСовет директоров

VimpelCom Annual Report

ВымпелКом Годовой отчет

Annual Report VimpelCom2

VimpelCom is a leading wireless telecommuni-cations service company in Russia, operatingunder the “Bee Line” family of brand names,which are among the most recognized brandnames in Russia. VimpelCom’s license portfo-lio covers 100 million people, approximately70% of Russia’s population.

From its inception, VimpelCom has played a key

role in the development of the Russian cellular

telecommunications industry. VimpelCom intro-

duced two digital cellular communications stan-

dards to Russia and built the first dual band

GSM–900/1800 cellular network. VimpelCom

also led the development and emergence of the

mass consumer market for wireless communi-

cations in Russia by introducing a prepaid prod-

uct solution.

By capturing people’s imagination throughproduct innovation, VimpelCom is leadingRussian consumers into the new wireless infor-mation age. In 2000, VimpelCom successfullyintroduced new technologies, such as WAP and“BeeOnline”, a multi–access Internet portal,which offer a multitude of wireless informationand entertainment services, including loca-tion–based features.

As of the end of 2000, VimpelCom’s total sub-scriber base was approximately 833,600, withapproximately 780,100 subscribers in theMoscow License Area.

VimpelCom was the first Russian company tolist its shares on the New York Stock Exchange(“NYSE”) in November 1996. VimpelCom’sADSs are listed on the NYSE under the symbol“VIP”. In July 2000, VimpelCom successfullycompleted an offering of its securities raising$225.4 million. The first for a Russian compa-ny, this offering included US SEC registeredconvertible notes. VimpelCom’s convertiblenotes are listed on the NYSE under the symbol“VIP 05”.

ВымпелКом является ведущей российскойсервисной компанией в области беспровод-ной связи, осуществляющей операторскуюдеятельность под семейством торговых ма-рок «Би Лайн», одной из наиболее широкоизвестных торговых марок России. ЛицензииВымпелКома охватывают территорию, на ко-торой проживает около 100 миллионов чело-век (приблизительно 70% населения страны).

С самого начала своей деятельности Вым-пелКом играет ключевую роль в развитии ин-дустрии сотовой связи в России. ВымпелКомвнедрил в России два цифровых сотовыхстандарта и построил первую двухдиапазон-ную сеть сотовой связи GSM–900/1800.ВымпелКом также вывел на рынок продукт с

предоплатой (prepaid), который стимулиро-вал возникновение и развитие массового по-требительского рынка беспроводной связи.

В 2000 году ВымпелКом успешно внедрилновые технологии, такие как WAP и портал«БиОнЛайн», на основе которых предлагает-ся широкий набор услуг беспроводной пере-дачи данных, развлекательных программ,а также услуг по определению местонахож-дения объектов. Разрабатывая и внедряя но-вые захватывающие воображение продуктыи услуги, ВымпелКом подготавливает почвудля наступления нового беспроводного ин-формационного века.

На конец 2000 года абонентская база Вымпел-Кома приблизительно насчитывала 833 600пользователей, при этом 780 100 из них про-живают в Москве.

ВымпелКом был первой российской компа-нией, включенной в листинг Нью–Йоркскойфондовой биржи (NYSE) в ноябре 1996 года.Американские депозитарные распискиВымпелКома котируются на NYSE под симво-лом «VIP». В июле 2000 ВымпелКом успешнозавершил размещение своих ценных бумаг вобъеме 225,4 миллиона долларов. При этомвпервые российская компанияразместила конвертируемые облигации, за-регистрированные в Комиссии по ценнымбумагам и биржам США. Конвертируемыеоблигации ВымпелКома котируются на NYSEпод символом «VIP 05».

1998 1999 2000

13.3%

5.2%

1.8%

39%

5%

56%

Company profile Информация о компании

Market share in Moscow Доли рынка в Москве

Moscow License Area cellular penetrationПроникновение на рынок сотовой связив Москве и Московской области

VimpelCom

NMT–450 operator

GSM incumbentcompetitor

3ВымпелКом Годовой отчет

Subscriber growth in Moscow

Рост числа абонентов в Москве

Total revenuesОбщие доходыUS$ in millions in US GAAP /в млн. долларов СШАв стандарте ГААП (США)

1998

1999

2000

1998

1999

2000

376.0

238.6

285.7

124,037

350,500

780,100

Financial highlightsФинансовые показатели

2000 1999 1998

Operating results

Total revenues 285,673 238,637 US$375,957

Net operating revenues (1) 274,136 226,405 360,998

Operating income (74,496) (29,067) 101,839

% net operating revenues (27.2%) (12.8%) 28.2%

Net income (loss) (77,801) (39,596) (4,715)

% net operating revenues (28.4%) (17.5%) (1.3%)

Net income (loss) per share of Common Stock (US$2.57) (US$1.71) (US$0.24)

Net income per ADS equivalent (2) (US$1.93) (US$1.28) (US$0.18)

EBITDA (3) 51,993 25,732 144,108

% 19% 11.4% 39.9%

2000 1999 1998

Cash, cash equivalents and short-term investments US$152,691 US$36,112 US$16,646

Working capital (deficit) 122,270 (38,782) (46,259)

Property and equipment, net 356,666 369,053 357,788

Intangible assets, net 79,649 84,134 89,724

Total assets 700,315 590,095 536,067

Total debt including current portion 222,764 161,338 192,330

Total liabilities 331,692 289,107 333,131

Total shareholders' equity 368,623 300,988 202,936

2000 1999 1998

End of period subscribers

Moscow License Area 780,100 350,500 124,037

The regions (4) 53,500 21,800 11,525

Total subscribers 833,600 372,300 135,562

Employees (5) 1,619 1,443 1,332

Market share — Moscow License Area (6) 39.1% 45% 44%

2000 1999 1998

Результаты операционной деятельности

Общий доход 285 673 238 637 US$375 957

Доход от операционнойдеятельности, нетто (1) 274 136 226 405 360 998

Прибыль от операционнойдеятельности (74 496) (29 067) 101 839

% с дохода от операционной

деятельности (27,2%) (12,8%) 28,2%

Чистая прибыль (убыток) (77 801) (39 596) (4 715)

% с дохода от операционной

деятельности (28,4%) (17,5%) (1,3%)

Чистый доход (убыток) на одну обыкновенную акцию (US$2,57) (US$1,71) (US$0,24)

Чистый доход (убыток) на одну депозитарную акцию (2) (US$1,93) (US$1,28) (US$0,18)

EBITDA (3) 51 993 25 732 144 108

% 19% 11,4% 39,9%

2000 1999 1998

Временно свободные средства и краткосрочные инвестиции US$152 691 US$36 112 US$16 646

Оборотные средства (дефицит) 122 270 (38 782) (46 259)

Основные фонды, нетто 356 666 369 053 357 788

Нематериальные активы, нетто 79 649 84 134 89 724

Общая сумма активов 700 315 590 095 536 067

Общая задолженность, включая задолженность за текущий период 222 764 161 338 192 330

Общая сумма обязательств 331 692 289 107 333 131

Акционерный капитал 368 623 300 988 202 936

2000 1999 1998

Количество абонентов в конце года

Московская лицензионная территория 780 100 350 500 124 037

Регионы (4) 53 500 21 800 11 525

Итого абонентов 833 600 372 300 135 562

Количество сотрудников (5) 1 619 1 443 1 332

Доля рынка — Московская лицензионная территория (6) 39.1% 45% 44%

1. Net operating revenues after deduction of revenue based taxes.2. Net income per share of common stock has been adjusted by a factor

of 1.33 to determine net income per ADS equivalent, as each ADS isequivalent to three quarters of one share of common stock.

Financial highlights (Dollar amounts in thousands, except per share)

(US GAAP)

Основные финансовые показатели (Все величины, кроме доходов на одну акцию,приводятся в тысячах долларов)

ГААП (США)

Consolidated balance sheet data (Dollar amounts in thousands)

Данные консолидированного баланса (в тысячах долларов)

Statistics

Статистические данные

1. Чистый доход от операционной деятельности после вычета налогов надоходы.

2. Чистый доход (убыток) на одну обыкновенную акцию был разделен навеличину 1,33 для определения чистого дохода на одну американскую депозитарную акцию, так как одна американская депозитарная акция эквивалентна трем четвертям одной обыкновенной акции

3. Operating income before depreciation and amortization.4. The regions include Samara, Vladimir, Ryazan, Tver, Kaluga, Vologda,

Ulyanovsk, Voronezh and Karelia.5. VimpelCom and its principal subsidiaries. 6. Company’s estimates of active subscribers on its networks and on the

networks of the other wireless telecommunications providers in the MoscowLicense Area.

3. Определяется как прибыль от операционной деятельности до осуществления амортизационных отчислений.

4. Включены следующие области: Самарская, Владимирская, Рязанская, Тверская, Калужская, Вологодская, Ульяновская, Воронежская и республика Карелия.

5. АО ВымпелКом и его основные дочерние предприятия. 6. Данные основаны на оценке Компанией количества активных

абонентов АО ВымпелКом и других операторов сотовой связи на Московской лицензионной территории.


Dear shareholders:The year 2000 was a seminal year in the de-velopment of Russia, ushering in a new gener-ation of leadership that has broughtlong–awaited stabilization of economic andpolitical conditions in Russia. Improvedmacro–economic performance led to an in-crease in Russian consumer confidence, cre-ating a healthy environment for the further ex-pansion of wireless communications. As a re-sult, the total number of cellular subscribers inRussia increased from approximately 1.35million at the end of 1999 to 3.4 million at theend of 2000. Even with this impressive 152%growth in the number of subscribers inRussia, market penetration in Russia still re-mains low at only 2.4%, indicating grate po-tential for further growth.

The increase in cellular phone use in Russia inthe year 2000 coincides with the way in whichtechnology is capturing people’s imaginationthroughout the world. This trend is expected tocontinue as the world–wide convergence ofwireless communications with the Internet con-tinues to open new possibilities for the way peo-ple use mobile phones to conduct their lives.

We pursued and achieved four key objectivesin 2000:

• Expanding the coverage and quality of ourGSM network in Moscow;

• Creating a new image for Bee Line as a GSMoperator;

• Introducing new wireless services, beyondvoice communications; and

• Focusing operations on the return to

profitability during 2001.

Bee Line GSM: a new imageDuring the past year, we successfully reposi-tioned VimpelCom as a GSM operator by con-tinuing to build out our GSM network in the Cityof Moscow and the Moscow Region. We haveachieved network coverage comparable to thatof the incumbent GSM competitor, despiteVimpelCom’s five–year late arrival as the sec-ond GSM licensee. Moreover, our GSM networkquality is superior in terms of voice quality andother quality parameters due to the capacity ad-vantage of the GSM–1800 component of ourdual band GSM–900/1800 network. This repo-sitioning is one of our most important achieve-ments of 2000 because the GSM standard isconsidered the most advanced cellular standardand is preferred by subscribers, as evidenced bythe percentage of GSM subscribers in Russiagrowing from 52% to 70% during 2000.

A wireless worldAs the wireless revolution spreads through-out the world, VimpelCom remains commit-ted to ensuring that the Russian market is at

Letterto shareholders

above: Dmitry B. Zimin, Chief Executive Officer and FounderAugie K. Fabela II, Chairman of the Board and Co–Founder

на фото: Дмитрий Б. Зимин, Генеральный директорОги К. Фабела II, Председатель Совета директоров

the forefront of new wireless services anddata technologies. Over the past year, we be-gan heavily promoting a short messagingservice (SMS), and by the end of 2000 wewere transmitting 1,000,000 SMS messagesper day. During 2000, we introduced WirelessApplication Protocol (WAP) services andlaunched “BeeOnline”, our wireless portal.We also successfully tested General PacketRadio Services (GPRS), which we plan to im-plement in 2001 to provide high speed datatransmission rates.

A new wave of growthDue to our continued mass marketing efforts,the number of subscribers on all our networks,including those operated by our subsidiaries, in-creased by 124%, from approximately 372,300at the beginning of the year to 833,600 at theend of 2000. Most significantly, the proportionof our GSM subscriber base in the MoscowLicense Area increased from 35% to 54%. Withthe increased popularity of our GSM product,we launched a number of initiatives to increaseour market share of business users, capitalizingon our competitive advantage in network capac-ity and customer service. These initiatives in-clude a “Super GSM” package with unlimited lo-cal calls; a special VIP customer care service; ajoint corporate customer program with


Беспроводной мирВ то время как по всему миру распространя-ется беспроводная революция, ВымпелКомпроводит самую активную деятельность,обеспечивая присутствие России на перед-ней линии прогресса в области новых бес-проводных технологий и услуг. В течениепрошлого года мы занимались активнымпродвижением услуги передач коротких со-общений (SMS), так что в конце 2000 года мыпропускали до 1 миллиона SMS сообщений вдень. Также в 2000 году мы ввелив эксплуатацию услуги на основе техноло-гии WAP (протокол беспроводной связи),запустили «БиОнЛайн» — беспроводнойпортал, и провели успешные испытания тех-нологии передачи данных с пакетнойкоммутацией GPRS, которую мы внедримв 2001 году для обеспечения высокой ско-рости передачи данных.

Рост продолжаетсяКоличество абонентов во всех наших сетях,включая сети дочерних компаний, выросло в 2000 году на 124%, от приблизительно 372 300 в начале до 833 600 в конце 2000 го-да. Очень важно, что при этом доля абонен-тов московской сети GSM возросла с 35% до54%. По мере улучшения качества услуг сетиGSM мы выступили с рядом инициатив поувеличению нашей доли рынка среди биз-нес–клиентов. В частности, мы предложилипакет услуг “Super GSM” с неограниченнымобъемом местного трафика и специальнымVIP–обслуживанием абонентов. Этот пакет

Уважаемые акционеры:2000–й год стал знаковым годом для Рос-

сии, когда новое поколение руководителей

принесло стране долгожданную политичес-

кую и экономическую стабилизацию. Улуч-

шение макроэкономических параметров

вселило уверенность в потребителей и

создало благоприятные условия для даль-

нейшего интенсивного развития беспро-

водной связи. В результате этого количест-

во абонентов сотовой связи в стране вы-

росло с приблизительно 1,35 миллиона в

конце 1999 года до 3,4 миллиона в конце

2000 года. Это представляет собой рост

на 152%, однако уровень проникновения

услуги составляет всего лишь 2,4%, что

указывает на большой потенциал для

дальнейшего роста.

Увеличение числа пользователей сотовой

связи в 2000 году совпало с захватывающим

воображение развитием технологии, когда

беспроводная связь соединяется в единое

целое с Интернетом, а сотовый телефон от-

крывает невиданные перспективы по преоб-

разованию условий жизни и труда людей.

В прошедшем году мы поставили и сумелиуспешно решить четыре ключевые задачи:

• расширить зону обслуживания и повыситькачество нашей московской сети GSM;

• создать новый имидж Би Лайн как операторастандарта GSM;

• ввести новые услуги, выходящие за пределыобычной голосовой связи; и

• сосредоточить усилия на возвращении к при-быльности в течение 2001 года.

Би Лайн GSM: новый имиджВ прошедшем году нам удалось успешнопозиционировать ВымпелКом как оператора,работающего в стандарте GSM. Это происхо-дило на фоне продолжавшегося активногоразвития сети GSM в Москве и Московскойобласти. В результате зона обслуживания на-шей сети практически не уступает нашемуконкуренту — первому оператору GSM намосковском рынке, несмотря на то, что Вым-пелКом получил доступ к полной технологииGSM с пятилетним опозданием. Качество на-шей сети GSM по ряду параметров, включаякачество передачи голоса, выше чем у нашегоконкурента, благодаря преимуществу в емко-сти компоненты GSM–1800 нашей двухдиапа-зонной сети GSM–900/1800. Такое позицио-нирование Компании очень важно, посколькуGSM считается самым современным стандар-том. Российские абоненты предпочитаютGSM, что проявило себя в росте доли абонен-тов GSM в течение 2000 года с 52% до 70% отвсех абонентов мобильной связи в России.

Письмок акционерам


Combellga, an alternative overlay wireline oper-ator majority–owned by Telenor, our strategicpartner; and a “calling party pays” principle formobile–to–mobile calls between all mobile op-erators. As a result of these and other efforts,our market share of business users increased inthe second half of 2000, from approximately24% to 33%.

In 2000, we also continued the expansion of ourdistribution network, increasing the number ofpoints of sale to 2,300 from approximately1,000, and the number of points of sale for pre-paid scratch cards to 3,500 from 1,125. In aneffort to expand our network of VimpelCom–owned sales offices, we acquired the “MobileCenter” dealer network (the acquisition was fi-nalized in January 2001), increasing the number

of our own sales offices from 3 to 15. This im-provement in our distribution network will enable us to exercise more control over ourdealers and to further reduce subscriber acqui-sition costs, which decreased from $124 in the fourth quarter of 1999 to $65 in the fourthquarter of 2000.

Financial resultsThis past year was fundamental in preparingthe groundwork for our objective of returningto profitability, and during 2000 we improvedour financial results. Net operating revenuesgrew by 21.1%, to $274.1 million at year end,and our gross margin increased from 58% to65%. EBITDA doubled, from $25.7 to $52.0million, and the EBITDA margin grew from11% to 19%. These improvements wereachieved mainly due to the increase in oursubscriber base, an increased use of low–costfederal numbers, tighter control of administra-tive expenses and the reduction of our subscriberacquisition costs.

We ended the year with a loss of $34.6 million(calculated before a one-time non-cash write-down and related tax adjustments) compared toa $39.6 million net loss in 1999, largely due tothe network and marketing investments re-quired for the rapid transition of VimpelCom in-to a GSM company. The fast pace of our GSMnetwork expansion and the faster than anticipat-ed rate of migration of our business customersfrom our D–AMPS network to our GSM network

resulted in impairment of our D–AMPS relatedassets. (Impairment is an accounting term thatdescribes a condition whereby future cash flowsexpected to result from the use of the assets areless than the net book value of the assets). Itwas, therefore, appropriate that our D–AMPSnetwork be re–valued and this has resulted in awrite–down of $66.5 million ($43.3 million netof related tax adjustments). The Company willcontinue to operate the D–AMPS network tar-geting specific market segments. Reflecting this write-down, our total loss for 2000 was$77.8 million. This one time non–cashwrite–down does not affect EBITDA.

In July 2000, we successfully raised $225.4 mil-lion in an offering of equity and convertiblebonds, allowing us to close the year with over$152.1 million in cash and cash equivalents inour bank accounts — a strong strategic andcompetitive position for further developing ourMoscow operations and expanding nationwide.

We anticipate that if current trends continue toprevail, our repositioning and focus will pay offand will return our Moscow operations to prof-itability during 2001.

Leading the wayAs we look forward, we believe that futuregrowth will be driven by expanding our businessnationally. During 2000, our regional subscriberbase grew by 145%, to 53,500 subscribers,from approximately 21,800 subscribers at theend of 1999. In 2001, we intend to make signif-



реоценку сети D–AMPS, что привело к списа-нию 66,5 миллиона долларов (43,3 миллионадолларов с учетом перерасчета отложенныхналогов). Компания намерена эксплуатиро-вать сеть D–AMPS, нацеливая ее на опреде-ленные сегменты рынка. С учетом проведен-ного списания, полный чистый убыток за2000 год составил 77,8 миллиона долларов.Это единовременное списание, не затрагива-ющее денежные средства, не оказывает вли-яния на EBITDA.

В июле 2000 года ВымпелКом провел ус-пешное публичное размещение своих акцийи конвертируемых облигаций в объеме225,4 миллиона долларов. Это позволилоКомпании завершить 2000 год с суммойв 152,1 миллион долларов наличными нанашем балансе, что дает стратегическисильную позицию для дальнейшего разви-тия московских операций и экспансии в на-циональном масштабе.

Мы ожидаем, что при сохранении текущих

тенденций правильный выбор приоритетов и

проведенная работа по позиционированию

Компании как оператора GSM принесут свои

плоды и ВымпелКом выйдет на прибыль-

ность своих московских операций в 2001 году.

Взгляд в будущееМы считаем, что в перспективе рост нашего

бизнеса будет связан с его расширением до

национальных масштабов. Уже в 2000 году

услуг использует преимущество Вымпел-Кома в емкости сети GSM и в качестве або-нентского обслуживания. Мы также запусти-ли совместную программу для корпоратив-ных абонентов с компанией Комбеллга, кон-трольным пакетом которой владеет Теленор,стратегический партнер ВымпелКома. Мысделали бесплатными входящие звонкис мобильного на мобильный телефон, вклю-чая звонки с аппаратов других операторовмобильной связи. В результате наша долярынка среди бизнес–клиентов возросла вовторой половине 2000 года с 24% до 33%.

Мы продолжали развивать свою сеть сбыта,

увеличив количество точек продаж в течение

года с приблизительно 1000 до 2300, а коли-

чество точек продаж карточек предоплаты

(scratch card) с 1125 до 3500. Мы приобрели

дилерскую сеть «Мобайл–Центр» (сделка за-

вершена в январе 2001 года), что увеличило

количество наших собственных офисов про-

даж с 3 до 15. Это позволит нам осуществлять

больший контроль над дилерской сетью

и продолжить снижение удельных затрат на

привлечение абонентов, которые упали со

124 долларов в четвертом квартале 1999 года

до 65 долларов в четвертом квартале 2000 года.

Финансовые результатыПрошедший год имел фундаментальное зна-чение в процессе подготовке Компании к воз-вращению к прибыльности. Наши финансовыерезультаты улучшались в течение 2000 года:

чистая операционная выручка возросла на21,1%, достигнув на конец года 274,1 милли-она долларов, а валовая маржа возросла с58% до 65%. EBITDA удвоилась — с 25,7миллиона долларов до 52,0 миллиона долла-ров, а соответствующая маржа возрослас 11% до 19%. В основном это достигнутоблагодаря росту абонентской базы, расту-щей популярности дешевых федеральныхтелефонных номеров, более жесткому кон-тролю за административными расходамии сокращению удельных затрат на привле-чение абонентов.

Быстрое преобразование ВымпелКома в опе-ратора стандарта GSM потребовало значи-тельных вложений в развитие сети и марке-тинговые мероприятия. В результате Компа-ния пришла к концу года с убытком в 34,6 миллиона долларов (рассчитанным доединовременного списания, не затрагиваю-щего денежные средства, и связанного сэтим перерасчета отложенных налогов). Длясравнения, чистый убыток в 1999 году соста-вил 39,6 миллиона долларов.

Быстрый прогресс нашей сети GSM и болеевысокий, чем ожидалось, уровень миграциибизнес–клиентов из сети D–AMPS в сетьGSM привели к тому, что произошла уценкаактивов сети D–AMPS. (Уценка в бухгалтерииозначает, что денежные потоки, ожидаемыев будущем от использования активов, мень-ше, чем остаточная стоимость этих активов).Вследствие этого было разумно сделать пе-



ranked number one in corporate governance bythe Moscow Institute of Corporate Law andGovernance — which is headed by the formerChairman of the Federal Commission forSecurities Markets of the Russian Federation. Weare proud to be recognized as the leader in cor-porate governance and transparency in Russia.

We are committed to remaining a pioneer in theRussian market. We are preparing and evolvingour business along with the technologies thatare opening up new opportunities for the provi-sion of services which will change the way peo-ple in Russia and around the world communi-cate, access information and live in the informa-tion age. In doing so, we rely on strong supportfrom our strategic partner Telenor, which is oneof the leading global innovators of the new wire-icant efforts in the development of our regional

GSM licenses, which cover a population of ap-proximately 85 million, and transitionVimpelCom from a primarily Moscow–basedoperator to a national operator. This strategicexpansion will give us a new source of rev-enues, provide easy and convenient nationalroaming, and strategically position theCompany to participate in the process of theglobalization of the telecom industry.

Since our inception, we have managed our busi-ness in line with the highest international busi-ness standards. We were the first Russian com-pany to list on the New York Stock Exchange inNovember 1996. In May 2000, we were recog-nized as Russia’s number one company in cor-porate governance by Brunswick UBS Warburginvestment bank. In March 2001, we were


Augie K. Fabela IIChairman of the Boardand Co–Founder

Dmitry B. ZiminChief Executive Officerand Founder

less information age.

Our goals are to retain our leadership position inproduct innovation, strengthen our position in thebusiness segment, expand nationally and returnto profitability in our Moscow operations. Thiswill bring us back to the position of the premierwireless operator in Russia.

Finally, we would like to thank all of you for thetremendous support during 2000 and assureyou that the Company will spare no efforts tomeet your expectations. We will continue tostrive for providing the highest level of qualityservices to our customers and achieving maxi-mum value for our shareholders.


наша абонентская база в регионах выросла на

145%, от 21 800 абонентов в конце 1999 года

до 53 500 абонентов в конце 2000 года. В

2001 году Компания приложит значительные

усилия по реализации своих региональных

лицензий, которые охватывают территории

с населением в 85 миллионов человек.

Такое стратегически важное развитие превра-

тит ВымпелКом в оператора национального

масштаба, принесет новые источники доходов

и сделает услугу национального роуминга бо-

лее удобной и привлекательной. Кроме того,

положение национального оператора позво-

лит ВымпелКому стать заметным участником

в набирающем темпы процессе глобализации

индустрии телекоммуникаций.

С момента своего основания ВымпелКомстремился вести свои дела в соответствиис лучшими достижениями мировой практикиведения бизнеса. Мы стали первой россий-ской компанией, включенной в ноябре 1996года в листинг Нью–Йоркской фондовойбиржи. В мае 2000 года в обзоре инвестици-онного банка «Брансвик ЮБиЭс Варбург»ВымпелКом был признан лучшей российскойкомпанией в сфере корпоративного управле-ния. В марте 2001 года ВымпелКом названлучшим в области корпоративного управле-ния в докладе Института корпоративногоправа и управления, возглавляемого быв-шим председателем Федеральной комиссиипо рынкам ценных бумаг Российской Феде-рации. Мы гордимся тем, что наша Компания

признана российским лидером в областикорпоративного управления, прозрачностии открытости в ведении бизнеса.

Мы твердо намерены продолжить нашу тра-дицию новаторства на российском рынке.Мы разрабатываем наши инициативы в соот-ветствии с последними достижениями техно-логии, которые открывают новые возможно-сти по предоставлению самых современныхуслуг, кардинально меняющих образ жизнилюдей на пути человечества в информацион-ный век. При этом мы полагаемся на под-держку нашего стратегического партнера —компании Теленор, являющейся одним измировых лидеров в разработке и реализацииуслуг на основе новейших беспроводных ин-формационных технологий.

Наши задачи состоят в сохранении лидерст-ва в области новых продуктов, укреплении


Оги К. Фабела IIПредседатель Совета директорови соучредитель

Дмитрий Борисович ЗиминГенеральный директори учредитель

наших позиций в бизнес–сегменте рынка,расширении наших операций до уровнянационального масштаба и возвращениик прибыльности в операциях на москов-ском рынке. Решение этих задач вернетКомпании лидирующее положение средиоператоров беспроводной связи в России.

В заключение, мы хотим поблагодаритьвсех вас за ту колоссальную поддержку,которую мы получали на протяжении 2000года, и заверить, что Компания приложитвсе усилия для того, чтобы оправдать ва-ши ожидания. Мы будем неустанно тру-диться над тем, чтобы обеспечить нашимабонентам услуги высшего качестваи максимально увеличить ценность Ком-пании для ее акционеров.


Russian market reforms launched at the begin-ning of 1992 were pursued in a society strug-gling to find its identity after almost 75 yearsof communist rule ended with the collapseof the Soviet Union. Of course, Russia stillfaces many problems and challenges, but thenew generation of politicians and businessmenwho are coming to the forefront are better edu-cated, better informed, more experienced andgenerally better equipped to lead Russia toprogress and prosperity in the years to come —an encouraging fact that allows us to look confi-dently into the future.

Along with the election of President Putin and anew parliament, the economy has shown meas-ured improvement as the effects of ruble deval-uation of 1998 and high world commodityprices created favorable conditions for theRussian economy during 2000. Russia’s GDPgrew by 7.6%, the best result in more than adecade, and inflation decreased from 36.7% in1999 to 20.0% in 2000. Russia’s trade surpluswas $61 billion, and Central bank reserves in-creased from $12.5 billion at the end of 1999 to$28 billion at the end of 2000.

Российские рыночные реформы, начавшие-

ся в 1992 году, проводились в обществе,

находившимся в процессе поиска самоиден-

тификации после почти 75 лет коммунисти-

ческого правления, закончившегося распа-

дом Советского Союза. России предстоит

еще решить множество проблем, но обнаде-

живающим фактом стало то, что выходящее

сейчас на передний план новое поколение

политиков и предпринимателей лучше обра-

зовано, лучше информировано, более опыт-

но и в целом лучше подготовлено к тому,

чтобы вести Россию по пути прогресса и бла-

госостояния. Это позволяет нам с увереннос-

тью смотреть в будущее.

Избрание нового состава Государственной

Думы, а затем избрание В. В. Путина прези-

дентом России открывают новый этап в раз-

витии страны. Одновременно в России сло-

жились благоприятные условия для развития

экономики, которые привели в 2000 году

к росту внутреннего валового продукта на

7,6% и падению инфляции до годового уров-

ня в 20,0% с уровня в 36,7%, зафиксирован-

ного в 1999 году. Благоприятные условия

определялись главным образом продолжав-

шимся эффектом девальвации рубля в 1998 го-

ду, сделавшей экономику более конкуренто-

способной, а также высокими мировыми це-

нами на энергоносители и сырье в целом.

В 2000 году Россия имела положительный

торговый баланс в объеме 61 миллиарда

Russia: a new eraРоссия: наступление новой эры

долларов, а золотовалютные резервы Цент-

рального банка возросли с 12,5 миллиарда

долларов в конце 1999 года до 28 миллиар-

дов долларов в конце 2000 года.


Реализация технологического потенциалабеспроводной связи уже началось как в Рос-сии, так и во всем мире. Ряд новых услуг ужефункционируют, другие находятся в стадииразработки и тестирования. ВымпелКомнаходится в одном ряду с ведущими между-народными телекоммуникационными опера-торами, достигнув громадного прогрессав продвижении услуги SMS, введя одну изсамых передовых по архитектуре услуг на ос-нове технологии WAP и подготовившиськ скорому запуску услуг на основе техноло-гии GPRS. Продвигая эти услуги, проводя тер-пеливую образовательную работу, ВымпелКомготовит почву для новых, еще более совер-шенных услуг, которые захватывают вообра-жение и которые кардинально изменят образжизни людей.

Mobile communications are rapidly convergingwith the Internet making wireless communica-tions an integral part of human activities such ascomputing, banking, selling and purchasinggoods, entertainment and sharing of informa-tion. The mobile phone is becoming more thanjust a useful extension of a conventional tele-phone. It is developing as a universally availableand essential tool for an emerging new way oflife — a tool that will break barriers betweenpeople, countries and continents. As capacityand data transfer speeds of the wireless Internetincrease, not only will the wireless phone allowpeople to communicate any time, anywhere inthe world, but it will also enable people to gainaccess to other resources, information and en-tertainment unreachable in the past. One canonly imagine the enormous explosion of humanenergy and talent which will accompanymankind’s entrance into the information age.

The realization of technology potential in wire-less communications has already begun inRussia and throughout the world. Some newfeatures have been introduced while others arebeing tested and developed. VimpelCom iskeeping pace with leading international

На наших глазах происходят процессыстремительной интеграции беспроводной свя-зи и Интернета, которые превращают беспро-водную связь в неотъемлемую часть такихэлементов хозяйственной деятельности, какдокументооборот, банковское дело, продажаи покупка товаров, охватывая также индуст-рию развлечений и обмен информацией в са-мом широком смысле слова. При этом мо-бильный телефон становится не просто удоб-ным продолжением стационарного телефона,а универсальным инструментом, позволяю-щим строить новую жизнь, разрушая барьерымежду людьми, странами и континентами.С ростом емкости сетей и скорости передачиданных в беспроводном Интернете мобиль-ный телефон станет не только средством об-щения между людьми в любое время и в лю-бом месте, но он также откроет доступ к ранеенедосягаемым ресурсам и источникам ин-формации. Можно себе представить, какойвзрыв человеческой энергии и какое открытиеталантов будет сопровождать вход человече-ства в информационный век!

Capturing the imaginationБеспроводная революция

telecommunications operators, achieving abreakthrough in SMS usage, introducing one ofthe most comprehensive WAP services andpreparing for an early launch of GPRS. With theaddition of these services, and with time, pa-tience and consumer education, VimpelCom willoffer the new, user–friendly products that willemerge to truly capture the imagination and sig-nificantly change our life styles.

В 2000 году рынок признал ВымпелКом в ка-честве оператора стандарта GSM. Как под-тверждение этого признания, исследователь-ский центр «Пеком» присвоил торговой маркеВымпелКома «Би Лайн GSM» первое местов номинации «Брэнд года – 2000». В конце2000 года в нашей московской сети GSM бы-ло приблизительно 446 300 абонентов, чтосоставляет 54% от всей московской абонент-ской базы ВымпелКома. Мы ожидаем, чток концу 2001 года более двух третей нашихабонентов будут абонентами GSM.

ВымпелКом достиг своей цели и стал при-знанным оператором стандарта GSM, проведя

огромную работу по строительству сети, кото-рая с июня 2000 развивалась с темпом однабазовая станция в день. В конце 2000 годав сети GSM было 735 базовых станций на тер-ритории Москвы и Московской области. Этодало нам паритет по зоне обслуживанияс первым лицензиатом стандарта GSMи преимущество в качестве за счет большейемкости компоненты GSM–1800 в нашейдвухдиапазонной сети GSM–900/1800. Это яв-ляется замечательным достижением, так какВымпелКом пришел в индустрию телекомму-никаций, когда новые лицензии стандартаGSM не выдавались. В тех обстоятельствахВымпелКом должен был работать в американ-ском стандарте AMPS/D–AMPS, что ставилоего в невыгодные конкурентные условия,поскольку он не мог предоставить своимабонентам целый ряд услуг, таких как автома-тический международный роуминг, доступныхтолько в GSM, которые сделали его самым по-пулярным в мире стандартом сотовой связи.

Имея сильную команду менеджеров и здоро-вые принципы корпоративного управления,ВымпелКом был прекрасно подготовленк участию в развитии сетей стандарта GSM,когда в августе 1998 года Министерство свя-зи РФ выдало ему полномасштабную лицен-зию стандарта GSM на Москву и Московскуюобласть. Хотя создание сети GSM было за-держано начавшимся в том же месяце рос-сийским финансовым кризисом, сегодня мыбез сомнения можем сказать, что Вымпел-Ком является полнокровным операторомстандарта GSM.


In the year 2000, the market recognizedVimpelCom as a GSM operator. As confirmationof this recognition, Research Center “Pecom”awarded VimpelCom’s Bee Line GSM brand the“Brand of the Year” award for 2000. We endedthe year with approximately 446,300 GSM sub-scribers representing 54% of our subscriber basein Moscow as compared to approximately132,000 GSM subscribers at the beginning of theyear. We anticipate that more than two–thirds ofour subscribers will be on our GSM network bythe end of 2001.

VimpelCom achieved its goal of transforming it-self into a GSM operator in the year 2000 bybuilding out its GSM network at a rate of one basestation per day since June 2000. By the end ofthe year, we had 735 GSM base stations in theCity of Moscow and the Moscow Region, givingus parity in terms of coverage, and an advantagein quality, compared with the incumbent GSMoperator. The quality advantage is due to thehigher capacity of the GSM–1800 component ofour dual band GSM–900/1800 network.VimpelCom’s transition to a GSM operator is anextraordinary achievement in light of the fact thatwhen VimpelCom entered the market no GSM li-censes were available, forcing VimpelCom to op-erate using the American AMPS/D–AMPS stan-

dard. This was clearly a competitive disadvantageas we were unable to provide subscribers witha growing number of features available in theGSM standard, including international automaticroaming, which helped make GSM the most pop-ular cellular standard in the world.

With a strong management team and sound cor-porate principles, VimpelCom was more thanready to enter a GSM race when the Ministry ofCommunications granted VimpelCom a full scaleGSM license in Moscow in August 1998.Although the implementation of the GSM networkwas delayed due to the start of the Russian finan-cial crisis that same month, we can undoubtedlysay that today, VimpelCom is a full–fledged GSMoperator.

Bee Line GSM: a new imageБи Лайн: новый имидж



In addition to being an extra source of revenues,SMS is also the first step to and an integral partof educating customers in the usefulness ofwireless data services and introducing them tothe wireless world.

Wireless Internet andinformation accessWAP allows people to access the Internet and

Intranet websites especially adapted for small

screens of WAP–enabled handsets. We intro-

duced one of the industry’s most attractive WAP

services in August 2000, providing a large vari-

ety of information, data and entertainment,

including real time interactive games.

Further progress of WAP is firmly linked with the

ability to increase data transmission rates to the

levels that make it convenient to download and

send large electronic files. GPRS provides data

transmission using Internet protocols with in-

creased speed sufficient to make GPRS–

equipped networks a convenient means of ac-

cessing numerous applications which require

the exchange of large volumes of data.

VimpelCom has made all necessary prepara-

tions for the commercial launch of GPRS in

2001 once GPRS–enabled phones are available

in sufficient volumes. The speed currently ob-

tained through VimpelCom’s GPRS network is

between 30 Kbit/s and 40 Kbits/s, which is three

to four times higher than the 9.6 Kbit/s available

in conventional circuit switched GSM networks.

Pioneering product innovationVimpelCom has a tradition of being a pioneer in

the Russian market in more ways than one, and

has led the way in areas such as technology,

marketing, financing and corporate governance.

We encourage innovative thinking and recog-

nize that to be a market leader, we must be able

to adapt to new technologies. Today, product in-

novation in wireless communications is reshap-

ing the way we live. To keep pace with this

change, talent and creativity are essential

requirements. VimpelCom possesses strong

technical expertise and is ready to embrace and

evolve with technological changes in order to

deliver the new products and services of the fu-

ture. Our expertise is augmented by our strate-

gic partner, Telenor, a leader in product devel-

opment and implementation.

“BeeOnline” portal In the middle of 2000, we launched the“BeeOnline” portal, an important product whichprovides “personal digital services” that can beaccessed via wireless phones, as well asthrough fixed line access to the Internet. With“BeeOnline”, subscribers have access to morethan 200 channels of content with news, enter-

tainment, financial and other information.The news and finance channels give currencyexchange rates, stock quotes from the RussianTrading System (RTS), performance of major in-ternational stock indices and financial news.The entertainment channels available through“BeeOnline” include weather, horoscopes,jokes, anecdotes and quotes from famous per-sonalities, as well as Moscow cinema andnightclub guides and reviews. “BeeOnline” alsofeatures a unified messaging system (UMS),which provides e–mails with SMS notification.Another useful feature is a uniquelocation–based directory service which allowssubscribers to input a Moscow Metro stationand a particular type of service or product theyare seeking, and receive the name, address andphone number of the nearest service providersor vendors. The database contains over110,000 participating service providers andvendors providing 140 different services, in-cluding restaurants, shops, supermarkets, phar-macies, gas stations and auto repair shops.“BeeOnline” is expanding the variety of servicesavailable to both wireless subscribers and com-puter users, and continues to offer great poten-tial for further development.

Short Messaging Service (SMS)We first introduced SMS in 1999. SMS is a use-ful tool that allows people to instantly exchangetext messages on their handsets and is also themain conduit for the delivery of informationfrom “BeeOnline” to subscriber handsets.

14

Беспроводной Интернети доступ к информацииУслуги на основе технологии WAP позволяютабонентам получить доступ на сайты Интернетаи Интранета, адаптированные под небольшиеэкраны сотовых телефонов, поддерживающихWAP. В августе 2000 года мы вывели на рынокодин из самых привлекательных из всех изве-стных вариантов услуг WAP, который предо-ставляет большое количество разнообразнойинформации, справочных сведений и развлека-тельных программ, включая интерактивные иг-ры в реальном режиме времени.

Дальнейший прогресс WAP тесно связан с воз-можностью увеличения скорости передачи дан-ных до уровня, когда становится практическиудобным принимать и посылать большие элек-тронные файлы, используя телефоны мобиль-ной связи. Такие возможности предоставляеттехнология GPRS, которая обеспечивает повы-шенные скорости передачи данных, используяинтернетовские протоколы пакетной коммута-ции, что делает сети мобильной связи, поддер-живающие GPRS, удобным средством доступак различным услугам, требующим обмена боль-шими объемами информации. ВымпелКомпровел все необходимые приготовления длякоммерческого запуска GPRS в 2001 году, кактолько на рынке появится достаточное количест-во сотовых аппаратов, поддерживающих GPRS.Скорость передачи данных, достигнутаяв GPRS–сети ВымпелКома, составляет от 30 Кбит/с до 40 Кбит/с, что в три–четыре разавыше, чем 9,6 Кбит/с, реализуемым в сетях GSMс традиционной коммутацией каналов.

Развлекательные каналы включают погоду, го-роскопы, шутки, анекдоты, высказывания попу-лярных деятелей искусства, а также программымосковских кинотеатров и ночных клубов.«БиОнЛайн» также содержит унифицирован-ную систему сообщений, которая предоставля-ет услуги электронной почты с уведомлениемв форме короткого сообщения SMS. Другой по-лезной услугой, доступной через «БиОнЛайн»,является услуга «Адрес», которая позволяетабонентам получать на дисплей мобильного те-лефона адреса выбранных ими категорий объ-ектов, расположенных вблизи заданных имистанций московского метрополитена. База дан-ных включает 110 000 объектов города Москвыв 140 категориях, в том числе аптеки, магазины,автозаправочные станции, рестораны, супер-маркеты, ремонтные мастерские и т. п. «БиОн-Лайн» имеет огромный потенциал для дальней-шего развития и продолжает постоянно расши-рять объем предоставляемых услуг.

Служба коротких сообщений(SMS)Служба SMS была запущена в 1999 году. SMSявляется полезной услугой, которая позволяетабонентам мгновенно обмениваться текстовы-ми сообщениями со своих мобильных телефо-нов. SMS также служит в качестве главногомеханизма доставки информации с портала«БиОнЛайн» на абонентские телефоны.

Кроме того, что услуга SMS является дополни-тельным источником доходов, она стала первымзначительным шагом в приобщении абонентовк услугам беспроводной передачи данных,открывающим дверь в беспроводной мир.

Annual Report VimpelCom


В традициях новаторстваВымпелКом всегда был новатором на россий-ском рынке. Это касается таких различных ас-пектов деятельности, как технологии, марке-тинг, финансирование проектов и корпоратив-ное управление. У нас всегда поощрялся духноваторства, поскольку успех приходит тольковместе с новыми идеями и новыми технология-ми. Сегодня новые технологии и продукты бес-проводной связи преобразуют мир вокруг нас,и для того, чтобы идти в ногу с этими процесса-ми, необходимо привлекать талантливых, твор-чески мыслящих работников.

ВымпелКом имеет сильный состав специалис-тов, прекрасно подготовленных для разработкии доставки потребителю продуктов и услуг, из-готовленных на основе новейших технологий.В этом нас также поддерживает Теленор, явля-ющийся лидером в разработке и внедрении но-вых продуктов.

Портал «БиОнЛайн»В середине 2000 года мы ввели в эксплуатациюпортал «БиОнЛайн» — важный продукт, пре-доставляющий «персональные цифровые ус-луги». Доступ к порталу можно осуществлятькак с помощью беспроводных телефонов, таки через проводные линии связи с Интернетом.С помощью «БиОнЛайн» абоненты имеют до-ступ к более чем 200 каналам, содержащим но-вости, развлекательные программы, справоч-нуюи финансовую информацию. Последняявключает обменные курсы валют, курсы акцийв российской торговой системе (РТС) и важ-нейшие международные биржевые индексы.


перспективе рост нашего бизнеса будет опре-деляться нашими достижениями в превраще-нии ВымпелКома в национального оператора.

В 2001 году, взаимодействуя с нашими стра-тегическими партнерами, мы намеренысущественно продвинуться в реализации на-ших региональных лицензий стандарта GSM,которые охватывают территории с населени-ем в 85 миллионов человек, превратив ВымпелКом из оператора, ориентированногов основном на Москву, в национального опе-ратора мирового класса. Это даст нам новыедополнительные источники доходов, сделаетнаши услуги более привлекательными дляабонентов и утвердит ВымпелКом в качествесерьезного участника в идущем процессе гло-бализации индустрии телекоммуникаций.

Regional wireless subscribers started to grow inthe year 2000 at a rate comparable to that ofMoscow. The overall subscriber base outside ofMoscow grew from approximately 638,000 atthe end of 1999 to 1,350,000 at the end of 2000,an annual growth rate of 112%. We believe thatthis trend will transform the regions into the nextgreat growth opportunity in the Russian cellularmarket, as nationwide cellular penetration hasreached only 2.4%, or 1.0% excluding Moscow.Despite the significant upturn in the number ofcellular subscribers throughout the regions, rev-enue per user continued to be stable, averagingapproximately $40 per month, with little evi-dence so far of the erosion that has been wit-nessed in the more penetrated Moscow market.

Much higher growth rates are expected in thecoming years as economic conditions improveand competition develops. As we look forward,we believe that the growth of our business in thefuture will eventually be determined by our suc-cess in transforming VimpelCom into a nation-wide operator.

In 2001, through alliances with strategic part-ners, we intend to make a significant stepforward in the development of our regional GSM

В 2000 году количество абонентов сотовойсвязи в регионах росло со скоростью, сопо-ставимой с тем, что наблюдалось в Москве.Общее количество абонентов за пределамиМосквы выросло на 112%, с приблизитель-но 638 000 в конце 1999 года до 1 350 000в конце 2000 года. Мы считаем, что эта тен-денция приведет к тому, что регионы станутмощным резервом роста для рынка сотовойсвязи в России, тем более что среднийпо стране уровень проникновения сотовойсвязи составляет всего 2,4%, а если исклю-чить Москву, то он опустится до 1,0%. Приэтом, несмотря на значительный рост числаабонентов, средний доход на одного або-нента в регионах остается на стабильномуровне около 40 долларов в месяц, а не сни-жается, как это происходит в Москве, гдеуровень проникновения намного выше.

В предстоящие годы, по мере улучшенияэкономической ситуации и развития конку-ренции, ожидается значительное увеличениескорости роста числа абонентов сотовой свя-зи в регионах России. Мы считаем, что в

New wave of growthНовые возможности роста

licenses, which cover a population of approxi-mately 85 million, and transition from a primarilyMoscow–based operator to a world class na-tional operator throughout Russia. This willbring new sources of revenues, make our serv-ices more attractive to subscribers and ensurethat we are a significant player in the ongoingglobalization process in the telecom industry.


Оги К. Фабела IIПредседатель Совета директоров и соучредитель

Дмитрий Борисович ЗиминГенеральный директор и учредитель,ВымпелКом

Валерий ВячеславовичФронтовВице–президент, директор по обеспечениюоператорской деятельности, ВымпелКом

Валерий Павлович ГольдинВице–президент по международным связями отношениям с инвесторами, ВымпелКом

Терье ТунСтарший исполнительный вице–президент,Теленор; г–н Тун оставил свой пост в Теленоре в августе 2000 года

Хенрик ТоргерсенИсполнительный вице–президент, Теленор

Мортен Карлсен–СорбиДиректор по операциям, Теленор

Гавриил Харитонович ПоповРектор Международного университета,г. Москва

Евгений Григорьевич ЯсинНаучный руководитель Государственногоуниверситета — Высшей школы экономики,Директор Экспертного института

Георгий ВладимировичСильвестровCекретарь Совета директоров, ВымпелКом

Augie K. Fabela IIChairman of the Board and Co-Founder

Dmitry B. ZiminChief Executive Officer and Founder,VimpelCom

Valery V. FrontovVice President of Licensing, VimpelCom

Valery P. GoldinVice President of International and InvestorRelations, VimpelCom

Terje ThonSenior Executive Vice President, Telenor(retired from Telenor in August, 2000)

Henrik TorgersenExecutive Vice President, Telenor

Morten Karlsen–SorbyChief Operating Officer, Telenor MobileCommunications

Gavriil H. PopovPresident of International University, Moscow

Yevgeny G. YasinAcademic Head of the Advanced School ofEconomics, Director of the Expert Institute

Georgy V. SilvestrovSecretary of the Board, VimpelCom

Board of directorsСовет директоров

reviewsFinancial

ContentsSummary consolidated financial data 18

Management’s discussion and analysis of financial condition and results of operations 20

Report of independent auditors 30

Consolidated balance sheets 31

Consolidated statements of operations 32

Consolidated statements of shareholders’ equity 33

Consolidated statements of cash flows 34

Notes to consolidated financial statements 36

Senior management and corporate information IBC

Публикуемое ниже подробное описание финансового состояния Компании приводитсятолько на английском языке, поскольку оно базируется на консолидированной финансовойотчетности, рассчитанной в соответствии с принятыми в США (но не введенными в России)принципами бухгалтерского учета ГААП.


consolidated financial dataSummary

18 Annual Report VimpelCom

(1) Net (loss) income per share of common stock has been adjusted by afactor of 1.33 to determine net (loss) income per ADS equivalent, aseach ADS is equivalent to three-quarters of one share of common stock.

(2) EBITDA, which represents operating (loss) income before depreciation,amortization and the one-time write-down of AMPS/D-AMPS relatedassets of $66.5 million in 2000, should not be considered in isolation asan alternative to net (loss) income, operating (loss) income or any othermeasure of performance under U.S. GAAP. VimpelCom believes thatEBITDA is viewed as a relevant supplemental measure of performance

in the cellular industry. The performance which EBITDA measuresexcludes the Group’s need to replace its capital equipment over time.

(3) Includes bank loans, equipment financing and senior convertible notes.(4) The Moscow License Area includes the City of Moscow and the area con-

stituting the Moscow Oblast (the "Moscow Region"). Population statisticsfor 1998 were published in the "Geography of Russia 1998" by the ScientificPublishing House Bolyshaya Russkaya Encyclopedia. Population statisticsfor 1999 were published in "Goscomstat". As no reliable population statis-tics are available for 2000, the population figure for 2000 is shown as the

same as for 1999 and has been used to derive penetration rates.(5) Based on the Group’s estimates of active subscribers (namely, contract

subscribers who have made payments in the last two months and pre-paid subscribers who have used their phones in the last 6 months) on itsnetworks and on the networks of the other mobile wireless telecommu-nications providers in the Moscow License Area.

(6) Total estimated Moscow License Area subscribers expressed as a per-centage of the estimated population of the Moscow License Area.

(7) All data is for the Moscow License Area, except where indicated.

The summary consolidated financial data set forth below present historical consolidated financial information of VimpelCom atDecember 31, 2000, 1999 and 1998 and for the years then ended and has been derived from VimpelCom’s audited consolidatedfinancial statements and the notes thereto (the “Financial Statements”) included elsewhere in this Annual Report. The summaryconsolidated financial data should be read in conjunction with the Consolidated Financial Statements and “Management’sDiscussion and Analysis of Financial Condition and Results of Operations.”

Operating revenues:

Service revenues and connection feesSales of handsets and accessoriesOther revenues

Total operating revenuesLess revenue-based taxes

Net operating revenues

Operating expenses:

Service costsCost of handsets and accessories soldCost of other revenuesSelling, general and administrative expensesDepreciation and amortizationImpairment of long-lived assetsProvision for doubtful accounts

Total operating expenses

Operating (loss) income

Other income and expenses:

Interest incomeOther income (Loss) gain on trading securities Write-down of Russian government securities Interest expense Net foreign exchange (loss) gain

Total other income and expenses

(Loss) income before income taxes and minority interest

Income tax (benefit) expense Minority interest in net earnings of subsidiaries

Net (loss) income

Net (loss) income per common share

Weighted average common shares outstanding (thousands)Net (loss) income per ADS equivalent (1)

Other data:

EBITDA (2)As % of net operating revenues

2000

US$252,33332,031

1,309285,673(11,537)274,136

60,91334,443

157108,48260,02266,46718,148

348,632

(74,496)

4,0392,152

(44)—

(21,089)(2,661)

(17,603)

(92,099)

(14,343)45

(77,801)

(2.57)

30,264(1.93)

51,99319.0%

1999

US$206,54231,457

638238,637(12,232)226,405

56,77937,103

24288,70454,799

—17,845

255,472

(29,067)

1,756565905

— (16,074)(2,572)

(15,420)

(44,487)

(5,564)673

(39,596)

(1.71)

23,181(1.28)

25,73211.4%

1998

US$344,79330,372

792375,957(14,959)360,998

73,73624,844

41193,53942,269

—24,360

259,159

101,839

592,146

(9,280)(17,088)(14,382)(48,125)(86,670)

15,169

17,1012,783

(4,715)

(0.24)

19,280(0.18)

144,10839.9%

Years ended

(in thousands, except per share and per ADS amounts)

Consolidated statement of operations data:

consolidated financial dataSummary


(8) Represents the total number of GSM and AMPS/D-AMPS subscribersin the Kaluga, Ryazan, Samara, Karelia, Tver, Ulyanovsk, Vladimir,Vologda and Voronezh regions, including subscribers on networks ofour subsidiaries.

(9) Based on the Company’s estimates of active subscribers (namely, con-tract subscribers who have made payments in the last two months andprepaid subscribers who used their phones in the last 6 months) on itsnetworks and on the networks of the other mobile wireless telecommu-nications providers in the Moscow License Area.

(10) The Moscow License Area is 47,000 square kilometers. (11) Average monthly minutes of airtime usage per subscriber is calculated

for each month in such period, by dividing the total number of minutesof usage for incoming and outgoing calls during such month by theaverage number of VimpelCom subscribers during that month.

(12) Average monthly service revenue per subscriber is calculated for eachmonth in such period, by dividing the VimpelCom service revenue dur-ing such month, excluding revenue from sales of handsets and acces-sories and connection fees, by the average number of VimpelCom

subscribers during that month. (13) VimpelCom defines the "churn rate" as the total number of subscribers

disconnected from the VimpelCom network in a given periodexpressed as a percentage of the midpoint of the number ofVimpelCom subscribers at the beginning and end of such period.

Consolidated balance sheet data:

Cash, cash equivalents and short-term investments Working capital (deficit)Property and equipment, net Intangible assets, net Total assetsTotal debt including current portion (3)Total liabilitiesTotal shareholders’ equity

2000

US$152,691122,270356,666

79,649700,315222,764331,692368,623

1999

US$36,112(38,782)369,053

82,991590,095161,338289,107300,988

1998

US$16,646(46,259)357,788

88,265536,067192,330333,131202,936

As of December 31

Selected industry operating data:

Estimated population of Moscow License Area (4)Estimated Moscow License Area subscribers (5)Moscow License Area penetration rate (6)

Selected group operating data (7):

End of period subscribers: Moscow License AreaThe Regions (8)Total subscribers

Market share of total Moscow License Area subscribers (9)

Estimated coverage of Moscow License Area (sq. km) (10)D-AMPSGSM

Average monthly minutes airtime usage per subscriber (11)Average monthly service revenue per subscriber (12)Churn rate (13)Number of operational base stations:

D-AMPSGSM

2000

15,038,7001,993,600

13.3%

780,10053,500

833,600 39.1%

39,70044,200

91US$3734.0%

318735

1999

15,038,700785,000

5.2%

350,45321,760

372,21345.0%

37,40034,063

137US$9925.0%

302485

1998

15,261,000281,000

1.8%

124,03711,525

135,36244.1%

36,7004,034

295US$215

53.6%

272244

As of and for the years ended December 31

(in thousands)

Selected operating dataThe following selected operating data at December 31, 2000, 1999 and 1998 and for the years then ended have been de-rived from internal company sources and from independent sources we believe to be reliable. The selected operating data set forth below should be read in conjunction with the Consolidated Financial Statements and "Management’sDiscussion and Analysis of Financial Condition and Results of Operations."

discussion and analysisManagement’s


Management’s discussion and analysis of financialcondition and results of operations

The following is a discussion of the consolidat-ed financial condition and results of operationsof Open Joint Stock Company “Vimpel-Communications” (VimpelCom), together with KB Impuls, an open joint stock companyorganized under the laws of the RussianFederation (“KBI”), Closed Joint StockCompany RTI-Service-Svyaz, Closed JointStock Company Impuls KB, Closed Joint StockCompany VimpelCom-Region, Closed JointStock Company Bee-On-Line Portal andVimpelCom’s other subsidiaries (collectively,VimpelCom or the “Group”) as of December 31,2000 and for the years ended December 31,2000, 1999 and 1998, and of certain factorsthat Management believes are likely to affectVimpelCom’s prospective financial condition.The following discussion and analysis shouldbe read in conjunction with the consolidatedfinancial statements and the notes appearingelsewhere in this Annual Report, which havebeen prepared in accordance with U.S. general-ly accepted accounting principles (U.S. GAAP).This discussion contains forward-looking state-ments that involve risks and uncertainties. Ouractual results could differ materially from thoseanticipated in the forward-looking statementsas a result of numerous factors, including therisks discussed in “Risk Factors” described inour Annual Report on Form 20-F which will befiled with the U.S. Securities & ExchangeCommission by June 30, 2001 pursuant toSection 15(d) of the United States SecuritiesExchange Act of 1934, as amended.

OverviewOur Group, operating under the “Bee Line”family of brand names, is a leading provider of

cellular telecommunications services inRussia. Currently, our primary market is theCity of Moscow and the area constituting theMoscow Oblast, which together constitute theMoscow License Area. Our share of the sub-scriber market in the Moscow License Area wasapproximately 39.1% as of December 31, 2000.

We hold GSM-900/1800 licenses to operate net-works in areas populated by approximately100.0 million people, or approximately 70% ofthe Russian population. Our GSM licenses coverthe Moscow, Central and Central Black Earth,North Caucasus, Siberia and Volga licenseareas, which comprise more than 50 adminis-trative regions of the Russian Federation. Inaddition, we hold six AMPS licenses, includingone covering the Moscow License Area wherewe operate a digital AMPS network.

SubscribersAs of December 31, 2000, the number of sub-scribers on our networks in the MoscowLicense Area had more than doubled from350,453 at year end 1999 to 780,100. Theincrease is largely due to increased coverage ofour GSM network, our mass marketing effortsand the expansion of our distribution network.Our GSM network in particular demonstratedsignificant growth with the proportion of ourGSM subscriber base in the Moscow LicenseArea increasing from 37.7% to 57.2% of ourtotal subscribers during 2000. The increasingpopularity of our GSM network can be attrib-uted in large part to its improved coverage. In2000, we increased the number of our basestations by 51.5% from 485 at the end of 1999to 735 at the end of 2000, and increased ourestimated GSM network coverage by 29.7%.We also began GSM operations in the CentralBlack Earth region by establishing a joint ven-ture with a local paging company ZAO“Cominform” in Voronezh, which, at the end of2000, had approximately 2,160 subscribers. InDecember 2000, we also established a majority-

owned GSM operating company in Tula. Thetotal number of our subscribers in the regionsoutside of the Moscow License Area increasedfrom 21,760 as of December 31, 1999 to 53,500as of December 31, 2000, representing 6.4% oftotal subscribers.

Another factor contributing to the increase inour GSM subscriber base was the introductionduring 2000 of a range of new GSM productssuch as Short Messaging Service (SMS),Wireless Application Protocol (WAP) and ourwireless portal “BeeOnLine.” The number ofmessages processed through our SMS serviceon the network in December 2000 was 20.8million per month. We also successfully testedGeneral Packet Radio Services (GPRS), tech-nology designed to provide for high speeddata transmission rates, and we have made allnecessary preparations for the commerciallaunch of GPRS in 2001 once GPRS-enabledphones are available in the market in sufficientvolumes. We believe that our large and grow-ing subscriber base provides us with an excel-lent platform from which to market these andother value-added information services.

HistoryWe commenced commercial operations inJune 1994. In November 1996, we completedthe initial public offering of our AmericanDepository Shares, or ADSs, each represent-ing three-quarters of one share of our com-mon stock. Our ADSs are listed on the NewYork Stock Exchange, or NYSE, under thesymbol “VIP.” We were the first Russian com-pany since 1917 to be listed on the NYSE andare currently one of only four Russian compa-nies listed on the NYSE.

Telenor, Norway’s leading telecommunicationscompany, became our strategic partner inDecember 1998, acquiring 31.6% of our com-mon stock, which represents 25.7% of ourvoting stock. Telenor has developed Norway



into one of the world’s most penetrated wire-less telecommunications markets and bringsto our alliance valuable experience in develop-ing and implementing new Internet-basedservices and marketing techniques.

On July 28, 2000, we completed an offering of4,858,233 ADSs (representing 3,643,675shares of our common stock) registered withthe US Securities and Exchange Commission,or the SEC, raising US$79.4 million (net of thecost of issuance). On the same date, we com-pleted the offering of senior convertible notesregistered with the SEC raising US$70.3 million(net of the cost of issuance). The notes are con-vertible into ADSs at a price of US$27.0312 atany time after September 28, 2000 (subject tocertain adjustments). The convertible notesmature on July 28, 2005, and are traded on theNYSE under the symbol “VIP 05.”

On July 28, 2000, in a private transactionexempt from registration under the SecuritiesAct of 1933, as amended, Telenor purchasedan additional 2,400,532 ADSs at the publicoffering price. As of December 31, 2000,Telenor owned 29.7% of our total outstandingcommon shares which represents 25.1% ofour voting stock.

RevenuesWe generate our revenues from providingwireless telecommunication services and sell-ing handsets and accessories. Our primarysources of revenues consist of:

• Service revenues. Our service revenuesinclude monthly contract fees, airtimecharges from contract and pre-paid sub-scribers, roaming charges and charges forvalue-added services such as voicemail andcall waiting. In the past, connection feeswere a notable component of our revenues,but have declined in importance and are notlikely to be significant going forward.

• Sales of handsets and accessories. We sellwireless handsets and accessories to oursubscribers for use on our networks.

We offer both contract and prepaid servicesand currently market our “Bee Line” productsand services under our “Bee Line,” “Bee LineGSM” and “Bee +” brands. During the pastyear, the majority of our revenue was derivedfrom our GSM products.

In 2000, the Group recognized rapid revenueincrease from roaming services, having signedroaming agreements with 52 operators from 44different countries as well as 11 operators inRussia. By December 31, 2000, we had signed213 international roaming agreements and 35agreements with Russian GSM operators.Roaming service revenue more than doubledduring 2000 from US$ 7.2 million in the firstquarter of 2000 to US$15.7 million in the fourthquarter of 2000

Our churn rate was 53.6% in 1998, 25.0% in1999 and 34.5% in 2000. In 1998, the highchurn rate was due to the effects of the Russianfinancial crisis, during which the Company dis-connected many subscribers due to credit riskand many subscribers voluntarily discontinuedservice. In 1999, the churn rate was lower as itdid not reflect the effects of rapid growth inpre-paid subscribers in the second half of 1999which contributed to a higher churn rate in2000. In addition, migration from the D-AMPSnetwork to the GSM network, as well as migra-tion between tariff plans were technicallyrecorded as churn, therefore increasing thechurn rate recorded although the Company didnot lose these subscribers.

Our average monthly revenues per subscriber,or ARPU, and our minute per user, or MOU,declined significantly for our D-AMPS sub-scribers, particularly in the second half of2000. This continued decline is attributable to

increased competition which has resulted inlower tariffs, and in part to our continuingmass marketing strategy that tends to attractlower use subscribers as well as migration ofbusiness users from the D-AMPS to the GSMnetwork. However, during the course of 2000,APRU and MOU for our GSM subscribers sta-bilized as we have been undertaking initiativesto attract “heavy” users to our GSM network.See discussion below under the heading“Impairment Charges.”

Impairment chargesBased upon a comprehensive review of long-lived assets, we determined that as ofDecember 31, 2000, our telecommunicationsD-AMPS network equipment in the MoscowLicense Area and certain of our softwarelicenses from the vendor of the equipmentwere impaired. The impairment is in largepart due to the fast pace of our GSM networkexpansion and the faster than anticipated rateof migration of our customers from our D-AMPS network to our GSM network whichstarted in the second half of 2000.Accordingly, revised revenue forecasts forthe D-AMPS network for the coming yearsare based on a lower number of subscribers.The estimate of the fair value of our assetswas based on the present value of expectedfuture cash flows using a discount rate of20%. We recorded an impairment charge ofUS$66.5 million (US$43.2 million net ofrelated tax adjustments), including US$61.0million in respect of equipment and US$5.5million in respect of licenses classified asintangible assets in our consolidated balancesheets. The amount of the impairment chargerepresents the difference between net bookvalue of D-AMPS assets and their fair value(determined as mentioned above). The Groupwill continue to operate the D-AMPS networktargeting mostly mass market consumers.Reflecting this write-down, our total net lossfor 2000 was $77.8 million. This one time non-cash write-down does not affect EBITDA.



EBITDA represents operating (loss) incomebefore depreciation, amortization and the one-time write-down of AMPS/D-AMPS relatedassets of $66.5 million in 2000, and should notbe considered in isolation as an alternative tonet (loss) income, operating (loss) income orany other measure of performance under U.S.GAAP. VimpelCom believes that EBITDA isviewed as a relevant supplemental measure ofperformance in the cellular industry. The per-formance which EBITDA measures excludesthe Group’s need to replace its capital equip-ment over time.

ExpensesWe have two categories of expenses directlyattributable to our revenues: service costs andthe cost of handsets and accessories.

Service costs include interconnect and trafficcosts, other transport costs, telephone linerental costs, roaming expenses and chargesfor connection to special lines such as 911.An increasing number of our subscribers areusing ten digit federal telephone numbers,which creates a cost advantage for us. Ourcosts for use of seven digit Moscow tele-phone numbers consist of a flat monthly linerental and usage fee based on traffic. In con-trast, for the use of federal telephone num-bers, we currently pay a much lower cost forusage based on traffic and no monthly linerental fee, resulting in significantly lowerservice costs with respect to our subscribersusing federal telephone numbers. As the por-tion of our subscribers using federal tele-phone numbers grows, we have experiencedthat our service costs per subscriber havedecreased and our service margin hasimproved from a margin of 72.4% in 1999 to75.8% in 2000.

Our costs of handsets and accessories soldrepresent the amount we pay to third partymanufacturers for equipment. We purchasehandsets and accessories from third party

manufacturers for resale to our subscribers foruse on our networks. Although we continuedto subsidize handsets and accessories sales in2000 in order to encourage the use of our net-works, we significantly reduced these subsi-dies in 2000 to US$2.4 million or 7.0% of thecost as compared to US$5.6 million or 15.1%of the cost in 1999.

In addition to costs of services and equipment,our operating expenses include:

Selling, general and administrative expenses.These expenses include distribution commis-sions, marketing and advertising expenses,salaries and outsourcing costs, rent and utili-ties, repair and maintenance and other miscel-laneous expenses such as insurance,accounting, audit and legal fees. Marketing andsales related expenses comprise a large por-tion of our selling, general and administrativeexpenses and consist of advertising expenses,expense on printing materials and distributioncommissions. We expect our subscriber acqui-sition costs to continue to decrease in 2001. In2000, we experienced a significant increase inour total subscriber acquisition costs fromUS$38.8 million in 1999 to US$46.3 million in2000. However, on a per subscriber basis, ouracquisition costs decreased in 2000 to $74 persubscriber from $137 in 1999. This reductionof 46.0% in the per subscriber acquisition costis due to the continuing increase in the numberof subscribers. During 2000, we made certainimprovements in our distribution network andincreased the number of our sales offices andpoints of sale. In the first quarter of 2001, weacquired the “Mobile Center” dealer network,one of the largest dealer networks in Moscow,adding an additional 12 points of sale to ourdistribution network.

Depreciation and amortization expenses. Wedepreciate the capitalized costs of our tangi-ble assets, which consist mainly of equip-ment and buildings owned by us and

equipment under capital leases. In addition,we amortize our intangible assets, whichconsist primarily of purchases of telephoneline capacity for seven digit Moscow tele-phone numbers, frequency allocation undercertain of our GSM license amendments andgoodwill. Intangible assets constitute 11.4%of our assets and 21.6% of shareholder’sequity. The depreciation period for intangibleassets relating to our GSM licenses is equalto the term of the licenses. In contrast toMoscow telephone numbers, we currently donot have to purchase telephone line capacityfor federal telephone numbers. Looking for-ward, we expect that an increasing portion ofour subscriber base will use federal numbers.Consequently, we do not expect to experi-ence increased amortization expense for tele-phone line capacity purchases despite theanticipated growth in our subscriber base. In2000, the total additions to fixed assets(including equipment under construction)amounted to approximately US$93.2 million,which included US$78.0 million for networkequipment (including other telephone equip-ment and network equipment acquired underfinancing agreements and equipment underconstruction) mainly for our GSM network.

In our efforts to improve GSM coverage, weinstalled an additional 259 GSM base stations,bringing our total from 485 stations in 1999 to735 in 2000. The additional number of basestations caused our depreciation and amorti-zation expenses to increase by 9.5%.

Provision for doubtful accounts. We include inour operating expenses an estimate of theamount of our accounts receivable that willultimately be uncollectable. We base the esti-mate on historical data and other relevant fac-tors, such as the financial condition of theeconomy as a whole.

This past year was fundamental in preparingthe groundwork for our objective of returning

to profitability. During 2000, after excluding theeffect of the one-time, non-recurring impair-ment charges, we improved our financialresults mainly due to the increase in our sub-scriber base, increased subscriber use of low-cost federal numbers, tighter control ofadministrative expenses and a reduction ofour acquisition costs per subscriber. Thiscombination of factors contributed to growthin net operating revenues by 21.1%, growth ingross margin from 58.4% to 65.2%, a

decrease of 72.4% in operating loss in 2000(after excluding the effect of one-time non-recurring impairment charges), doubling ofEBITDA from US$25.7 to US$52.0 million, andgrowth of EBITDA margin from 11.4% to 19.0%.

Results of operationsThe tables below show, for the periods indi-cated, the following statement of operationsdata expressed as a percentage of net operat-ing revenues.

Year ended December 31, 2000compared to year endedDecember 31, 1999Net operating revenues. Our total operatingrevenues, net of revenue-based taxes,increased by 21.1% to US$274.1 million in2000 from US$226.4 million in 1999.Combined, service revenues and connectionfees increased by 22.2% to US$252.3 millionin 2000 compared to US$206.5 million in1999. This was a result of the more than dou-bling of our subscriber base and pricedecreases due to our mass market strategyand increased competition.

Gross revenues from handset and accessorysales were US$32.0 million in 2000, which is a1.6% increase from the US$31.5 million report-ed for 1999. As a percentage of net operatingrevenues, handset and accessory salesdecreased to 11.7% in 2000 from 13.9% in 1999.We subsidized handsets as part of our massmarket strategy in 2000, but decreased our totalsubsidies by 57.3% as compared to 1999.

We estimate that service revenues will contin-ue to increase in 2001 as our subscriber baseand roaming revenues grow. It is likely that ourARPU will continue to fall as the penetrationrate increases and our subscriber baseexpands. We intend to continue to offer mod-erate handset subsidies and we expect rev-enues from handset and accessory sales toremain stable as economic conditions remainstable and our subscriber base increases. Seethe discussion above under the heading“Revenues.”

Service costs. Our service costs increased7.2% to US$60.9 million in 2000 fromUS$56.8 million in 1999. This, combined withservice growth of 22.2% in 2000, led to animprovement in service margin by 28.1% fromUS$148.9 million in 1999 to US$190.7 millionin 2000. Reduced interconnect and line rental



Consolidated statement of operations data

Operating revenues:


Total operating revenues Less revenue-based taxes

Net operating revenues

Operating expenses:

Service costsCost of handsets and accessories soldCost of other revenuesSelling, general and administrative expensesDepreciation and amortizationImpairment of long-livd assetsProvision for doubtful accounts


Operating income (loss)


Interest incomeOther income(Loss) gain on trading securitiesWrite-down of Russian government securitiesInterest expenseNet foreign exchange loss



Income tax (benefit) expense Minority interest in net earnings of subsidiaries

Net loss

2000

92.0%11.70.5

104.2(4.2)

100.0%

22.2%12.6

0.139.621.924.2

6.6127.2%

(27.2)%

(1.5)%0.80.0

—(7.7)(1.0)

(6.4)%

(33.6)%

(5.2)%0.0

(28.4)%

1999

91.2%13.90.3

105.4(5.4)

100.0%

25.1%16.3

0.139.224.2

—7.9

112.8%

(12.8)%

(0.8)%0.20.4—

(7.1)(1.1)

(6.8)%

(19.7)%

(2.5)%0.3

(17.5)%

1998

95.5%8.40.2

104.1(4.1)

100.0%

20.4%6.90.2

25.911.7

—6.7

71.8%

28.2%

0.0%0.6

(2.6)(4.7)(4.0)

(13.3)(24.0)%

4.2%

4.7%0.8

(1.3)%

Years ended December 31,



fees accounted for much of the expensedecline. As a percentage of net operating rev-enues, our service costs decreased to 22.2%in 2000 from 25.1% in 1999. We expect ourservice costs to decrease further in 2001 on apercentage basis as the portion of our sub-scribers using federal telephone numbers con-tinues to grow. We pay no monthly line rentalfee and incur a much lower usage cost basedon traffic for federal telephone numbers.Additionally, we expect that competitive pres-sures and new technologies may reduce cer-tain service costs in the future, most likelyincluding interconnect, traffic costs and othertransport costs.

Cost of handsets and accessories sold. Ourcost of handsets and accessories solddecreased by 7.3% to US$34.4 million in 2000from US$37.1 million in 1999 due todecreased handset subsidies. Most sub-scribers purchase their handsets either fromus or through one of our dealers when estab-lishing service on our network.

Selling, general and administrative expenses.Our selling, general and administrative expens-es increased 22.3% to US$108.5 million in2000 from US$88.7 million in 1999, which is inproportion with our revenue growth. Excludingadvertising and distribution expenses — theexpenses most closely related to the mass mar-ket subscriber component of our business strat-egy — our general and administrative expensesincreased only 12.8%. As a percentage of netoperating revenues, our selling, general andadministrative expenses were 39.6%, essential-ly the same level as in 1999 (39.2%). The acqui-sition costs that are a component of our selling,general and administrative expenses — adver-tising and distribution expenses — increased toUS$43.9 million in 2000 from US$33.2 millionin 1999. At the same time, the number of ournewly acquired subscribers increased 121.5%

in 2000 compared to 1999. Therefore, althoughour total acquisition costs have increased alongwith subscriber growth, the acquisition cost pernew subscriber decreased from US$137 in1999 to US$74 in 2000. Looking forward, weexpect this trend to continue.

Depreciation and amortization. Depreciationcharges for network equipment, buildings andother assets increased 6.0% to US$47.5 millionin 2000 from US$44.8 million in 1999. Thisincrease resulted primarily from equipment pur-chases related to the development of our GSMnetwork. We expect to continue making signifi-cant capital expenditures in the next few yearsas we expand our existing GSM-900/1800 network in the Moscow License Area and as we initiate development of our regional GSMlicenses, which will increase our future depre-ciation expense.

Amortization expense increased 26.0% toUS$12.6 in 2000 from US$10.0 million in1999. This increase stemmed from an increasein goodwill as a result of the purchase of 12.0%of shares in KB Impuls, a subsidiary ofVimpelCom, from Alcatel. The fair market valueof the net assets acquired was US$12.7 millionless than the acquisition cost.

Provision for doubtful accounts. Our provisionfor doubtful accounts increased 1.7% toUS$18.1 million in 2000 from US$17.8 millionin 1999 which is the result of significantgrowth in our customer base and churn rate.However, we experienced an improvement inour collection practice as bad debt expense asa percentage of gross revenue in 2000decreased from 7.5% in 1999 to 6.3% at theend of 2000. Looking forward, we expect ourprovision for doubtful accounts to continue todecrease as a percentage of total revenues dueto the increased number of pre-paid sub-scribers and due to the anticipated subscriber

use of an advance payment system which weare planning to launch in 2001. Additionally,we are continually reviewing our collectionpractices to identify ways to improve how wemonitor and collect accounts receivable.

Operating loss. We experienced an operatingloss of US$74.5 million in 2000 due in part toa one time write-down for AMPS/D-AMPSrelated assets. Our operating loss without thisone-time adjustment would be US$8.0 millionwhich is a significant improvement comparedto our operating loss of US$29.1 million in1999. See discussion above under the heading“Impairment Charges.”

Foreign currency exchange loss. Our foreign cur-rency exchange loss in 2000 was US$2.7 millioncompared to a loss of US$2.6 million in 1999.Our foreign currency exchange loss in 2000related principally to the monetary liabilitiesdenominated in Euros and monetary assetsdenominated in rubles. Foreign currencyexchange loss in 1999 related principally tothe monetary assets denominated in rubles.

Other income. Our other income mainly con-sists of interest income which was equal toUS$4.0 million in 2000 and to US$1.8 millionin 1999. This increase is explained by the suf-ficient amount of cash we had in our accountswhich we held in short-term deposits. Anothersignificant item included in other income isour share of earnings of investee companiesaccounted for using the equity method.

Interest expense. Our interest expenseincreased to US$21.1 million in 2000 fromUS$16.1 in 1999 due to the increase in ourinterest-bearing debt.

Income tax (benefit) expense. In 2000, we rec-ognized an income tax benefit in the amount ofUS$14.3 million mainly due to a deferred tax



benefit attributable to the one-time non-cashwrite-down for AMPS/D-AMPS related assets.In 1999, we recorded a US$5.6 million incometax benefit which arose due to a decrease inthe income tax rate from 35.0% to 30.0%which became effective on April 1, 1999. In2000, we recorded a US$2.7 million incometax expense which arose due to an increase inthe income tax rate from 30.0% to 35.0%effective January 1, 2001. See discussionabove under the heading “ImpairmentCharges.”

Net loss and net loss per share. We ended theyear with a net loss of US$34.6 million (calcu-lated before a one-time non-cash write-downfor AMPS/D-AMPS related assets and relatedtax adjustments), 12.9% less than theUS$39.6 million net loss reported for 1999.Our net loss for the year ended December 31,2000, including an impairment charge andrelated tax adjustments, was US$77.8 million.In the year ended December 31, 2000, we recorded an impairment charge of US$66.5 million (US$43.2 million net of relat-ed tax adjustments). No similar charge wasrecorded in the year ended December 31,1999. See discussion above under the heading“Impairment Charges.”

Our net loss per share of common stock wasUS$2.57 in the year ended December 31,2000, compared to US$1.71 in the year endedDecember 31, 1999. The increase in loss pershare of common stock was due to theincrease in net loss, partially offset by anincrease in the number of weighted averageshares to 30,264,000 in the year endedDecember 31, 2000, compared to 23,181,000in the year ended December 31, 1999. Theincrease in weighted average shares resultedfrom the issue of common stock in 2000, par-tially offset by the acquisition of treasury stockin 2000. Out net loss per share calculatedbefore a one-time non-cash write-down for

AMPS/D-AMPS related assets and related taxadjustments was US$1.14 for the year endedDecember 31, 2000.

Year ended December 31, 1999compared to year endedDecember 31, 1998Net operating revenues. Our total operating rev-enues, net of revenue-based taxes, decreased by37.3% to US$226.4 million in 1999 fromUS$361.0 million in 1998. Although our sub-scriber base grew substantially during this sameperiod, both MOU and our tariffs decreased sig-nificantly. The increase in the number of prepaidsubscribers relative to contract subscribers andgreater competition were the primary reasonstotal operating revenues declined.

Competition among wireless providers inMoscow prompted us to lower the prices of ourservices. Combined, service revenues and con-nection fees decreased by 40.1% to US$206.5million in 1999 from US$344.8 million in 1998.Connection fees decreased by 82.7% to US$0.9million in 1999 from US$5.2 million in 1998.

With the continued development of our dualband GSM-900/1800 network, in particularour GSM-900 component, we focused in 1999on establishing and developing relationshipsthat allowed us to offer roaming services. In1999, we reported US$17.8 million in grossroaming revenues.

Gross revenues from handset and accessorysales were US$31.5 million in 1999, a slightincrease from US$30.4 million in 1998. As apercentage of net operating revenues, handsetand accessory sales increased to 13.9% in1999 from 8.4% in 1998. We subsidized hand-sets as part of our mass market strategy andconsequently recorded a US$5.6 million losson handset and accessory sales in 1999 com-pared to a profit of US$5.5 million in 1998.

The decrease in service revenues and connec-tion fees as a percentage of net operating rev-enues and the corresponding increase inhandset and accessories sales as a percentageof net operating revenues is due in large partto the shift in our subscriber base to lower useand prepaid subscribers and the use of federaltelephone numbers.

Service costs. Our service costs decreased22.9% to US$56.8 million in 1999 fromUS$73.7 million in 1998. Lower MOU by oursubscribers and reduced interconnect andline rental fees accounted for much of thedecline. As a percentage of net operating rev-enues, however, our service costs increasedto 25.1% in 1999 from 20.4% in 1998because the decrease in our tariffs wasgreater than the decrease in our variablecosts, and in addition, there were certainfixed components of our service costs thatcould not be reduced. In 1999, we paid nomonthly line rental fee and incurred a muchlower usage cost based on traffic for federaltelephone numbers.

Cost of handsets and accessories sold. Ourcost of handsets and accessories soldincreased by 49.6% to US$37.1 million in1999 from US$24.8 million in 1998. The per-centage increase in the cost of handsets andaccessories sold is less than the percentageincrease in the subscriber base because thebulk of our subscriber growth has been frommass market subscribers, who typically pur-chase less expensive handsets.

Selling, general and administrative expenses.Our selling, general and administrativeexpenses decreased 5.1% to US$88.7 millionin 1999 from US$93.5 million in 1998.Excluding advertising and distribution expens-es — the expenses most closely related to themass market subscriber component of ourbusiness strategy — our selling, general



and administrative expenses decreased 17.9% in 1999. However, as a percentage ofnet operating revenues, our selling, generaland administrative expenses increased to39.2% in 1999 from 25.9% in 1998. Thisincrease as a percentage of net operating rev-enues reflects our investment in our massmarket strategy. The acquisition costs that area component of our selling, general andadministrative expenses — marketing, adver-tising and distribution expenses — increasedby 49.2% to US$38.8 million in 1999 fromUS$26.0 million in 1998. It is this investmentin our mass market strategy that enabled us toincrease our subscriber base in 1999 by182.5% compared to 1998.

Depreciation. Depreciation charges for net-work equipment, buildings and other assetsincreased 29.5% to US$44.8 million in 1999from US$34.6 million in 1998. This increaseresulted primarily from equipment purchasesrelated to the development of our networks.

Amortization. Amortization expense increased31.6% to US$10.0 million in 1999 fromUS$7.6 million in 1998. This increasestemmed from increased telephone linecapacity purchases in the middle of 1998 andin large part to the purchase of frequency allo-cation under amendments to certain of ourGSM-900/1800 licenses.

Provision for doubtful accounts. Our provisionfor doubtful accounts decreased 27.0% toUS$17.8 million in 1999 from US$24.4 millionin 1998. However, as a percentage of net rev-enues, the provision increased to 7.9% in1999 from 6.7% in 1998, reflecting the contin-ued effect of the August 1998 financial crisis.

Operating (loss) income. We experienced anoperating loss of US$29.1 million in 1999 ascompared to an operating profit of US$101.8million in 1998. This decrease was due prima-

rily to the significant decline in service rev-enues, higher subscriber acquisition costs andhandset subsidies.

Foreign currency exchange loss and write-down of Russian government securities. Ourforeign currency exchange loss in 1999 wasUS$2.6 million compared to a loss of US$48.1million in 1998. Further, in 1998, we recog-nized a loss of US$17.1 million related to awrite-down of Russian government securities.The foreign currency losses in 1998 were dueprimarily to the significant decline in the rublerelative to the U.S. dollar during the last fivemonths of the year precipitated by the August1998 financial crisis.

Income tax (benefit) expense. In 1999, werecorded a US$5.6 million income tax benefit,which consisted of a US$6.9 million deferredincome tax benefit primarily resulting from adecrease in the statutory tax rate that becameeffective April 1, 1999, plus a US$1.3 millionincome tax expense. In 1998, current incometax expense was US$16.6 million and deferredtax expense was US$0.5 million, totalingUS$17.1 million.

Liquidity and capital resourcesAs of December 31, 2000, our liquidityimproved significantly compared to December31, 1999. As of December 31, 2000, our cashand cash equivalents balance was US$152.1million, and our working capital wasUS$122.3 million, compared to a workingcapital deficit of US$38.8 million as ofDecember 31, 1999.

Operating activities. In 1999, we generatedUS$23.0 million of net cash from operatingactivities, a 75.2% decrease from US$92.8 mil-lion of net cash from operating activities in1998. In 2000, we generated only US$8.6 mil-lion of net cash from operating activities, a

62.6% decrease from 1999. The decrease innet cash generated by operating activities isattributable to an increase in accounts receiv-able caused by the growth of our subscriberbase, VAT receivables and a decrease inaccounts payable and accrued liabilities.

Financing activities. Lower cash from operat-ing activities in 1999 necessitated that welook elsewhere for additional capital to fundour scheduled capital expenditures. Weentered into two key financing transactions in1999. In order to finance the development ofour networks and systems, we issued toTelenor 31.6% of our common stock, whichrepresented 25.7% of our voting stock, forUS$162.0 million, of which US$137.6 million,net of expenses, was paid in 1999. The lastpayment of US$22.7 million was made onJanuary 5, 2000.

In January 1999, we entered into a US$27.8million standby two-year credit facility withSberbank, Russia’s largest bank. We utilizedUS$15.0 million of this credit facility in April1999 and US$5.0 million in May 1999. In June1999, we repaid in full all outstanding amountsand terminated the Sberbank facility.

In 2000, we entered into three key financingtransactions to fund our scheduled capitalexpenditures.

On April 28, 2000, Sberbank opened a four-year secured credit line of US$80.0 million toVimpelCom, which initially bears interest at arate of 13.25% per annum. The interest ratemay change if certain events occur, such as achange in Russian law or increased costs ofSberbank to provide this credit line.VimpelCom has the right to draw down theentire amount before April 28, 2001, subject tothe provision of specific collateral for drawdowns in excess of specified amounts. The



loan will be repaid in eight equal installments,on a quarterly basis, commencing July 10,2002. Collateral for the credit facility was pro-vided in the form of buildings, telecommunica-tions equipment and shares of VimpelCom’scommon stock held by entities controlled byour Chief Executive Officer, Dmitri B. Zimin. Asof December 31, 2000, VimpelCom has madedrawings under the credit line in the totalamount of US$66.8 million.

On July 28, 2000, VimpelCom completed theoffering of 4,858,233 ADSs (representing3,643,675 shares of its common stock) regis-tered with the US SEC raising US$79.4 million(net of cost of issuance). Simultaneously,VimpelCom completed an offering of seniorconvertible notes registered with the US SECraising US$70.3 million (net of cost of issuance).The convertible notes will mature on July 28,2005. Holders of the convertible notes mayconvert the notes into ADSs at any time afterSeptember 28, 2000 at the conversion price ofUS$27.0312 per ADS, subject to certain adjust-ments. VimpelCom will pay cash interest on theconvertible notes at the rate of 5.5% per annumfrom July 28, 2000, payable semi-annually onJanuary 28 and July 28 of each year, com-mencing January 28, 2001. Unless previouslyconverted or redeemed, VimpelCom will repaythe convertible notes at 135.41% of their prin-cipal amount which represents a yield to matu-rity of 11.0% compounded on a semi-annualbasis. The senior convertible notes were issuedby VimpelCom B.V., a wholly-owned subsidiaryof VimpelCom Finance B.V., which is a wholly-owned subsidiary of VimpelCom. VimpelComirrevocably, fully and unconditionally guaranteedVimpelCom B.V.’s obligations under the seniorconvertible notes, including the performance byVimpelCom B.V. of its conversion obligation.

Concurrent with the offerings made on July28, 2000, Telenor, in a private transaction

exempt from registration under Securities Act1933, as amended, purchased 2,400,532ADSs at the public offering price for US$51.9million. Prior to this purchase, on June 23,2000, VimpelCom entered into a US$50.0 mil-lion working capital bridge facility with Telenorand drew the full amount of the facility. Thetotal amount of borrowings plus accrued inter-est of US$0.3 million and structuring and facil-ity fees of US$0.8 million, was repaid toTelenor on July 28, 2000.

We rely heavily on equipment financing todevelop our GSM and D-AMPS networks. Thefollowing is a summary of our key arrange-ments of this type:

• Equipment financing. We entered into anequipment financing arrangement withAlcatel in connection with the build-out ofour GSM-900/1800 network in the MoscowLicense Area. As of December 31, 1999, ourindebtedness to Alcatel under the arrange-ment was US$87.4 million and as ofDecember 31, 2000, US$79.3 million. As ofMarch 31, 2000, we have agreements withAlcatel for an additional US$8.0 million (8.8 million Euro) for the provision of GSMequipment in 2001.

• Lease arrangement. For the development ofour D-AMPS network, we relied significantlyon lease financing provided by Ericsson. InJuly 2000, we purchased the leased equip-ment and the capital lease obligation ofUS$54.0 million and accrued interest ofUS$1.5 million were repaid in full.

Investing activities. We purchase networkequipment, telephone line capacity, frequencyallocations, buildings and other assets as apart of the ongoing development of our wire-less networks. In 1999, we paid US$70.2 mil-lion for network equipment, telephone line

capacity and other assets and costs related tothe allocation of frequency under certain GSMlicenses. In addition, as part of the purchaseprice for equipment valued at US$21.8 mil-lion, in 1996, KB Impuls issued to Alcatelcommon shares representing 12.0% of thecapital stock of KB Impuls. In 1999, we accel-erated our purchase of Alcatel’s shares in KB Impuls for US$29.5 million. In 2000, wespent US$81.8 million on equipment, intangi-ble assets and other assets. On March 13,2000, VimpelCom acquired the remaining50.0% of voting shares in RTI Service-Svyazthat it did not previously own for US$3.0 mil-lion, thus increasing its ownership interest inRTI Service-Svyaz to 100%.

Future capital requirements. Wireless serviceproviders require significant amounts of capitalto construct networks and attract subscribers.In 2001, we expect our capital requirements toinclude approximately US$108.0 million for thebuild-out of our networks in the MoscowLicense Area, US$37.0 million for principaldebt repayments to Alcatel, US$32.0 millionrelated to the development of our regional net-works, US$20.0 million to improve our IT infra-structure and billing systems, US$10.0 millionfor investments into new products, includingwireless Internet-related opportunities andUS$7.5 million for real estate. These expendi-tures will include:

• Network equipment;

• License payments; and

• Non-network expenditures, including com-puter equipment and software.

We anticipate that the funds necessary to meetour future capital requirements will come from:

• the proceeds of last offering;

• vendor financing;



• borrowings under bank financing;

• future offerings of debt or equity; and

• operating cash flows.

We believe that the vendor financing, creditfacilities, coupled with cash on hand, andoperating cash flows, will be sufficient tomeet our projected capital requirements forapproximately 12 months. It is our intentionto find a strategic partner in order to accel-erate the development of our regional GSMlicenses. In such event, we will increase theamount of capital we will spend for regionaldevelopment and fund the increased capitalexpenditures through investments by thestrategic partner. However, there can be noassurance that we will be successful inentering into an arrangement with a strategicpartner on terms acceptable to us or at all. Ifwe are not able to fund the accelerateddevelopment of our regional licenses, we willfocus our regional development on certainregions within our licensed territories whilecontinuing to seek a partner for carrying outour long-term regional development plans.

In 2002 we will start to pay back our Sberbankloan out of our operating cash flows.

Basis of presentation offinancial resultsWe maintain our records and prepare ourstatutory financial statements in accordancewith Russian accounting principles and taxlegislation and accounting principles general-ly accepted in the United States, or U.S.GAAP. Our consolidated financial statementshave been prepared in accordance with U.S.GAAP. They differ from our financial state-ments issued for statutory purposes inRussia in that they reflect certain adjust-ments not recorded in our books that arenecessary to present our financial position,

results of operations and cash flows in accor-dance with U.S. GAAP. The principal adjust-ments relate to:

• revenue recognition;

• recognition of interest expense and otheroperating expenses;

• valuation and depreciation of property andequipment;

• foreign currency translation;

• deferred income taxes;

• capitalization and amortization of telephoneline capacity;

• valuation allowances for unrecoverableassets;

• capital leases; and

• consolidation and accounting for sub-sidiaries.

Our consolidated financial statements appear-ing in this prospectus include the accounts ofVimpelCom and its majority-owned sub-sidiaries KB Impuls, Closed Joint StockCompany RTI Service-Svyaz, Closed JointStock Company Impuls KB, Closed JointStock Company VimpelCom-Region, ClosedJoint Stock Company BeeOnLine-Portal andVimpelCom’s other subsidiaries. All inter-company accounts and transactions havebeen eliminated. We have used the equitymethod of accounting for companies in whichVimpelCom has significant influence.Generally this represents voting stock owner-ship of at least 20% and not more than 50%.

We pay taxes computed on income reportedfor Russian tax purposes. We base this com-putation on Russian tax rules, which differsubstantially from U.S. GAAP. Certain itemsthat are capitalized under U.S. GAAP are rec-

ognized under Russian accounting principlesas an expense in the year paid. In contrast,numerous expenses reported in the financialstatements prepared under U.S. GAAP arenot tax deductible under Russian legislation.As a consequence, our effective tax charge isdifferent under Russian tax rules and underU.S. GAAP.

Inflation and ruble exchangeratesThe Russian government has battled inflationfor the last decade and had made significantprogress by the mid-1990s. In 2000, inflationfell from 36.5% in 1999 to 20.2%. We setprices for our products and services in U.S.dollars in order to help insulate us from thevolatility of the ruble. However, inflationaffects the purchasing power of our massmarket subscribers.

Foreign currency translationWe report to Russian tax authorities andmaintain accounting records in rubles. Theconsolidated financial statements have beenprepared in accordance with U.S. GAAP andare stated in U.S. dollars which is our func-tional currency. Accordingly, transactions andbalances not already measured in U.S. dollarshave been translated into U.S. dollars inaccordance with the relevant provisions ofU.S. Statement of Financial AccountingStandard (“SFAS”) No. 52, “ForeignCurrency Translation.” Under SFAS No. 52,revenues, costs, capital and non-monetaryassets and liabilities are translated at histor-ical exchange rates prevailing on the trans-action dates. Monetary assets and liabilitiesare translated at exchange rates prevailingon the balance sheet date. Exchange gainsand loses arising from translation of mone-tary assets and liabilities that are notdenominated in U.S. dollars are credited orcharged to operations.



The ruble is not fully convertible outside Russia.From 1995 until August 17, 1998, the Russiangovernment and the Central Bank of Russia had generally kept the ruble trading within a fixed band. However, after the government’sannouncement on August 17, 1998 to widen theruble corridor to plus or minus 9.5 rubles perU.S. dollar, the value of the ruble plummetedfrom approximately 6.2 rubles per U.S. dollar to20.7 rubles per U.S. dollar, losing over 70.0% ofits value. The ruble continued to devalue in1999, but stabilized in 2000. On December 31,1999, the ruble-U.S. dollar exchange rate was27.00 rubles per U.S. dollar and on December31, 2000 it was 28.16 per U.S. dollar.

To the extent permitted by Russian law we keepour readily available cash in U.S. dollars in orderto manage against the risk of ruble devaluation.

We have implemented a number of risk man-agement activities to minimize currency riskand exposure. To minimize the risk of rublefluctuations and devaluation, we have adopteda number of measures, including listing tariffsand calculating monthly bills in U.S. dollarequivalent units while receiving payment inrubles, in accordance with applicable law. As aresult, subscribers now pay their bills at theprevailing U.S. dollar-ruble exchange rate onthe date that payment is made. Subscribersare also charged a 1.0% surcharge to coverthe cost of converting rubles to U.S. dollars.

We have certain foreign currency liabilities,primarily associated with the purchase of net-work equipment. Under our agreement withAlcatel, we must remit payments in U.S. dol-lars and Euro. Under applicable law and basedupon permissions received from the CentralBank of Russia, we are permitted to buy hardcurrency to settle these contracts. To decreasethe risk of fluctuation of the Euro versus theU.S. Dollar, we attempt to purchase Euro inadvance at the lowest possible rate.

Recent accountingpronouncementsIn June 1998, the Financial AccountingStandards Board issued SFAS No. 133,“Accounting for Derivative Instruments andHedging Activities,” which was amended inJune 1999. VimpelCom will adopt the newstatement, which is effective for fiscal yearsbeginning after June 15, 2000, on January 1,2001. The statement requires VimpelCom torecognize all derivatives on the balance sheetat fair value. VimpelCom does not anticipatethat the adoption of the new statement willhave a significant effect on its results of oper-ations or financial position.

independent auditorsReport of


The Board of Directors and ShareholdersOpen Joint Stock Company “Vimpel-Communications”

We have audited the accompanying consolidated balance sheets of Open Joint Stock Company“Vimpel-Communications” (“VimpelCom”) as of December 31, 2000 and 1999, and the relatedconsolidated statements of operations, shareholders’ equity and cash flows for each of the threeyears in the period ended December 31, 2000. These consolidated financial statements are theresponsibility of VimpelCom’s management. Our responsibility is to express an opinion on theseconsolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the UnitedStates of America. Those standards require that we plan and perform the audit to obtain reason-able assurance about whether the financial statements are free of material misstatement. An au-dit includes examining, on a test basis, evidence supporting the amounts and disclosures in thefinancial statements. An audit also includes assessing the accounting principles used and signif-icant estimates made by management, as well as evaluating the overall financial statement pres-entation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all mate-rial respects, the consolidated financial position of Open Joint Stock Company “Vimpel-Communications” at December 31, 2000 and 1999, and the consolidated results of its operationsand its cash flows for each of the three years in the period ended December 31, 2000, in con-formity with accounting principles generally accepted in the United States of America.

March 20, 2001

balance sheetsConsolidated


Assets

Current assets:Cash and cash equivalents (Note 4)Short-term investmentsTrade accounts receivable, net of allowance for doubtfulaccounts of US$6,979 in 2000 and US$5,910 in 1999 (Note 16)InventoryDeferred income taxes (Note 15)Other current assets (Note 5)

Total current assets

Property and equipment, net (Note 6)Intangible assets, net (Note 7)Due from related parties (Note 17)Unamortised bond issue costs (Note 12)Other assets (Note 9)Total assets

Liabilities and shareholders’ equity

Current liabilities:Accounts payableDue to related parties (Note 17)Accrued liabilitiesDeferred revenueCustomer depositsCapital lease obligation, current portion (Note 11)Equipment financing obligation, current portion (Note 13)

Total current liabilities

Deferred income taxes (Note 15)Bank loans (Note 10)5.5% Senior convertible notes due July 2005 (Note 12)Capital lease obligation, less current portion (Note 11)Equipment financing obligation, less current portion (Note 13)

Minority interestShareholders’ equity (Note 14):

Convertible voting preferred stock (.005 rubles nominal value per share),10,000,000 shares authorized; 6,426,600 shares issued and outstandingCommon stock (.005 rubles nominal value per share), 90,000,000 sharesauthorized; 35,182,201 shares issued (1999: 26,980,000)Additional paid-in capitalRetained earningsTreasury stock, at cost, 2,330,926 shares of common stock (1999: 0)

Total shareholders’ equityTotal liabilities and shareholders’ equity

2000

US$152,141550

29,66610,97611,31230,829

235,474

356,66679,6491,2234,380

22,923US$700,315

US$28,3562,003

13,1341,747

33,243—

34,721113,204

29,92266,80076,702

—44,541

523

—

89412,680

18,447(62,593)368,623

US$700,315

1999

US$35,609503

24,3569,5326,041

30,748106,789

369,05382,991

1,376—

29,886US$590,095

US$33,396348

12,413—

31,34121,73946,334

145,571

40,329——

41,29351,972

9,942

—

88201,986

98,914—

300,988US$590,095

December 31,

See accompanying notes

(In thousands of US Dollars, except share amounts)

statements of operationsConsolidated


Operating revenues:


Total operating revenues

Revenue-based taxesNet operating revenues

Operating expenses:

Service costsCost of handsets and accessories soldCost of other revenuesSelling, general and administrative expensesDepreciationAmortizationImpairment of long-lived assets (Note 8)Provision for doubtful accounts


Operating (loss) income


Interest incomeOther incomeGain (loss) on trading securitiesWrite-down of Russian government securitiesInterest expenseNet foreign exchange (loss) gain



Income tax (benefit) expense (Note 15) Minority interest in net earnings of subsidiaries

Net loss

Net loss per common share

Weighted average common shares outstanding

Net loss per ADS equivalent

2000

US$252,33332,031

1,309285,673

(11,537)274,136

60,91334,443

157108,482

47,45812,56466,46718,148

348,632

(74,496)

4,0392,152

(44)—

(21,089)(2,661)

(17,603)

(92,099)

(14,343)45

US$(77,801)

US$(2.57)

30,264

US$(1.93)

1998

US$344,79330,372

792375,957

(14,959)360,998

73,73624,844

41193,53934,6237,646

—24,360

259,159

101,839

592,146

(9,280)(17,088)(14,382)(48,125)(86,670)

15,169

17,1012,783

US$(4,715)

US$(0.24)

19,280

US$(0.18)



(In thousands of US Dollars, except per share (ADS) amounts)

1999

US$206,54231,457

638238,637

(12,232)226,405

56,77937,103

24288,70444,8019,998

— 17,845

255,472

(29,067)

1,756565905

—(16,074)(2,572)

(15,420)

(44,487)

(5,564)673

US$(39,596)

US$(1.71)

23,181

US$(1.28)

statements of shareholders’ equityConsolidated


Balances at December 31, 1997Net loss

Balances at December 31, 1998Proceeds from issue of common stock to Telenorunder the Share Purchase Agreement datedDecember 1, 1998 net of cost of issuance(US$4,913)Net loss

Balances at December 31, 1999Proceeds from issue of common stock to Telenorunder the Share Purchase Agreement datedDecember 1, 1998Proceeds from public offering net of cost ofissuance (US$8,177)Issuance and sale of ADSs to a consolidatedaffiliateProceeds from sale of ADSs to Telenor in atransaction exempt from registrationconsummated concurrently with the publicoffering net of cost of issuance (US$928)Acquisition of treasury stock – 353,239 sharesSales of treasury stock – 103,239 sharesNet loss

Balances at December 31, 2000

Total

US$207,651(4,715)

202,936

137,648(39,596)300,988

22,741

79,373

—

50,981(10,517)

2,858 (77,801)

US$368,623

Treasury

Stock

US$———

———

—

—

(57,600)

— (10,517)

5,524—

US$(62,593)

Retained

Earnings

US$143,225(4,715)

138,510

—(39,596)

98,914

—

—

—

——

(2,666) (77,801)

US$18,447

Additional

Paid-in

Capital

US$64,340—

64,340

137,646—

201,986

22,741

79,372

57,600

50,981———

US$412,680

Amount

US$86—86

2—88

—

1

—

—— ——

US$89

Shares

19,280,000—

19,280,000

7,700,000—

26,980,000

1,202,201

3,118,675

2,080,926

1,800,399———

35,182,201

Years ended December 31, 2000, 1999, and 1998


(In thousands of US Dollars, except shares)

Common Stock


Operating activities

Net lossAdjustments to reconcile net (loss) income to net cashprovided by operating activities:

DepreciationAmortizationImpairment of long-lived assetsMark-to-market adjustments for short-terminvestmentsProvision for deferred taxesLoss (gain) on foreign currency translationProvision for doubtful accountsMinority interest in net earnings (losses) of subsidiariesOther adjusments

Changes in operating assets and liabilities:Short-term investmentsTrade accounts receivableInventoryOther current assetsDue from related partiesDue to related partiesAccounts payableCustomer depositsDeferred revenueAccrued liabilities

Net cash provided by operating activities

Financing activities

Proceeds from bank and other loansRepayments of bank and other loansProceeds from loan from related partyRepayment of loan from related partyProceeds from sale of convertible notesPayments of fees in respect of sale of convertible notesand other debt issueRepayment of lease obligationsRepayment of equipment financing obligationsProceeds from sale of capital stockPayments of fees in respect of capital contributionsPurchase of treasury sharesProceeds from sale of treasury sharesNet cash provided by (used in) financing activities

2000

US$(77,801)

47,45812,56466,467

(47)(15,676)

2,66118,148

45(731)

—(23,458)

(1,444)(15,661)

1531,655

(3,791)1,9021,747

(5,640)8,551

117,240(50,440)

50,000(50,000)

72,937

(2,968)(62,677)(26,351)162,201(9,106)

(10,517)2,858

193,177

1999

US$(39,596)

44,8019,998

—

986(6,920)

2,57217,845

673—

678(8,745)

(668)(10,916)

(614)348

14,814(14,873)

— 12,61222,995

24,700(35,454)

— ——

—(27,730)

142,561(4,913)

——

99,164

1998

US$(4,715)

34,6237,646

—

10,267477

48,12524,360

2,783—

11,735(46,797)

(141)(2,618)

(690)—

7,164(5,524)

— 6,067

92,762

15,585(15,832)

———

— (12,350)

— ————

(12,597)


(In thousands of US Dollars)


statements of cash flowsConsolidated

statements of cash flowsConsolidated


Investing activities

Purchases of property and equipmentPurchases of intangible assetsPurchase of KBI stockPurchase of RTI Service Svyaz stockPurchases of other assetsNet cash used in investing activities

Effect of exchange rate changes on cash and cashequivalents

Net increase in cash

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

Supplemental cash flow information

Cash paid during the period:Income taxInterest

Non-cash activities:Equipment acquired under financing agreements,including capitalized interestAccounts payable for equipment and license

2000

US$(65,245)(7,366)

—(3,026)(9,183)

(84,820)

(376)

116,532

35,609

US$152,141

US$1,62425,670

25,78411,587

1999

US$(54,520)(15,696)(29,536)

——

(99,752)

(1,277)

21,130

14,479

US$35,609

US$2,5608,487

18712,425

1998

US$(36,786)(32,383)

——

(3,372)(72,541)

(7,478)

146

14,333

US$14,479

US$17,74710,209

42,57823,170


(In thousands of US Dollars)


consolidatedfinancial statementsNotes to


December 31, 2000, 1999 and 1998 (Amounts presented are in thousands of US Dollars unless otherwise indicated)

1. Description of business

Open Joint Stock Company “Vimpel-Communications” (“VimpelCom”) was regis-tered in the Russian Federation on September15, 1992 as a closed joint stock company, re-registered as an open joint stock company onJuly 28, 1993 and began full-scale commercialoperations in June 1994. On November 20,1996, VimpelCom completed an initial publicoffering (“IPO”) of its shares in the UnitedStates of America via the issuance ofAmerican Depositary Shares (“ADS”), each ofwhich represents three-quarters of one shareof VimpelCom’s common stock. The proceedsof the IPO totaled US$63,251, net of relatedexpenses of US$7,778. As of December 31,2000, 15.83% of VimpelCom’s outstandingcommon stock was owned by VimpelCom’sChief Executive Officer, and two legal entitiescontrolled by VimpelCom’s Chief ExecutiveOfficer; 51.43% by the holders of the ADSs;29.71% by Telenor East Invest AS and 3.03%by others.

On December 1, 1998, VimpelCom andTelenor East Invest AS (“Telenor”), a wholly-owned subsidiary of Telenor AS, a Norwegiantelecommunications company, signed anagreement (the “Share Purchase Agreement”)under which Telenor agreed to purchase astrategic investment interest in VimpelCom.Telenor made all required payments in accor-dance with the Share Purchase Agreement(Note 14).

On July 28, 2000, VimpelCom completed the of-fering of its common stock and senior convert-ible notes registered with the US Securities andExchange Commission (“SEC”) (Notes 12, 14).

VimpelCom earns revenues by providing wire-less telecommunications services and sellingcellular telephones and accessories under the

trade name “Bee-Line” in the city of Moscow,the Moscow region, and other regions of theRussian Federation.

Open Joint Stock Company KB Impuls(“KBI”), a wholly-owned subsidiary ofVimpelCom, was established in March 1991and has been involved in the development andprovision of wireless telecommunicationsservices under the trade name “Bee-Line” inRussia. KBI was granted the first license toprovide Personal Communications Services(“PCS”) using the GSM-1800 system in theMoscow license area and began full-scalecommercial operations in June 1997. ThePCS license expires in April 2008.

In April 1998, VimpelCom was awarded fournew GSM-1800 licenses, covering theCentral and Central Black Earth, Volga, NorthCaucasus and Siberian regions of theRussian Federation.

In August 1998, VimpelCom and KBI receivedamendments to the original GSM-1800 licens-es for the Moscow License Area and theCentral and Central Black Earth License Area ofRussia, to operate dual band GSM 900/1800networks in these license areas. The cost of theallocation of frequencies under these amend-ments was US$30,000.

In August 1999, VimpelCom received amend-ments to the original GSM-1800 licenses forthe Volga, North Caucasus and Siberian re-gions of the Russian Federation, to operatedual band GSM 900/1800 networks in these li-cense areas. There was no additional cost as-sociated with these amendments.

In April 2000, VimpelCom’s amended GSM-1800 licenses covering the Central and CentralBlack Earth, Volga, North Caucasus andSiberian regions of the Russian Federationwere re-issued to Closed Joint Stock Company

VimpelCom-Region (“VimpelCom-Region”), awholly-owned subsidiary of VimpelCom.

In addition, VimpelCom operates an AMPS/D-AMPS mobile telephone system under a li-cense issued by the State Committee of theRussian Federation for Communications andInformatization, which expires in November2007. VimpelCom determined that its long-lived assets relating to AMPS/D-AMPS networkin Moscow and the Moscow region were im-paired as of December 2000 due to the migra-tion of customers from its AMPS/D-AMPS sys-tem to its GSM system (Note 8).

VimpelCom has also been granted AMPS li-censes to operate cellular networks in theKaluga, Karelia, Ryazan, Tver, Ulyanovsk,Vladimir and Vologda license areas.VimpelCom’s affilate, Bee-Line Samara, wasgranted a license to operate an AMPS cellularnetwork in the Samara region.

2. Basis of presentationand significant accounting policies

Basis of presentationVimpelCom maintains its records and pre-pares its financial statements in accordancewith Russian accounting and tax legislationand accounting principles generally acceptedin the United States of America (“US GAAP”).The accompanying consolidated financialstatements differ from the financial state-ments issued for statutory purposes inRussia in that they reflect certain adjust-ments, not recorded in VimpelCom’s books,which are appropriate to present the financialposition, results of operations and cash flowsin accordance with US GAAP. The principaladjustments relate to: (1) revenue recogni-tion; (2) recognition of interest expense andother operating expenses; (3) valuation and

consolidated financial statementsNotes to


2. Basis of presentation and significant accounting policies (continued)

depreciation of property and equipment; (4) foreign currency translation; (5) deferredincome taxes; (6) capitalization and amorti-zation of telephone line capacity; (7) valua-tion allowances for unrecoverable assets; (8) capital leases; and (9) consolidation andaccounting for subsidiaries.

Principles of consolidationThe accompanying consolidated financial state-ments include the accounts of VimpelCom andits majority-owned subsidiaries KBI, Closed JointStock Company RTI Service-Svyaz, Closed JointStock Company Impuls KB, Vimpelcom-Region,Closed Joint Stock Company BeeOnLine-Portal,VC ESOP N.V., Vimpelcom Finance B.V. andVimpelCom B.V., a wholly-owned subsidiary ofVimpelCom Finance B.V. The accompanyingconsolidated financial statements also includethe accounts of VimpelCom (BVI) Limited, a special-purpose entity affiliated with and con-trolled by VimpelCom, and VC Limited, a wholly-owned subsidiary of VimpelCom (BVI) Limited.

All intercompany accounts and transactionshave been eliminated.

The equity method of accounting is used forcompanies in which VimpelCom has signifi-cant influence. Generally this represents vot-ing stock ownership of at least 20% and not more than 50%.

Foreign currency translationVimpelCom’s functional currency is the USdollar because the majority of its revenues,costs, property and equipment purchased, anddebt and trade liabilities are either priced, in-curred, payable or otherwise measured in USdollars. Accordingly, transactions and bal-ances not already measured in US dollars (pri-marily Russian rubles) have been re-measuredinto US dollars in accordance with the relevantprovisions of US Statement of FinancialAccounting Standards (“SFAS”) No. 52,“Foreign Currency Translation”.

Under SFAS 52, revenues, costs, capital andnon-monetary assets and liabilities are trans-lated at historical exchange rates prevailing onthe transaction dates. Monetary assets and liabilities are translated at exchange rates pre-vailing on the balance sheet date. Exchangegains and losses arising from re-measurementof monetary assets and liabilities that are notdenominated in US dollars are credited orcharged to operations.

The ruble is not a fully convertible currency out-side the territory of the Russian Federation.Within the Russian Federation, official exchangerates are determined daily by the Central Bank ofRussia (CBR). Market rates may differ from theofficial rates but the differences are, generally,within narrow parameters monitored by theCBR. As of December 31, 2000 and 1999, the of-ficial rates of exchange were 28.16 rubles =US$1 and 27.00 rubles = US$1, respectively.The translation of ruble-denominated assets andliabilities into US dollars for the purposes ofthese financial statements does not indicate thatVimpelCom could realize or settle, in US dollars,the reported values of these assets and liabilities. Likewise, it does not indicate thatVimpelCom could return or distribute the report-ed US dollar value of capital to its shareholders.

Use of estimatesThe preparation of consolidated financialstatements in conformity with US GAAP re-quires management to make estimates and as-sumptions that affect the amounts reported inthe consolidated financial statements and ac-companying notes. Actual results may differfrom those estimates.

Cash and cash equivalentsVimpelCom considers all highly liquid invest-ments with a remaining maturity of 90 days orless at the time of purchase to be cash equiv-alents. Cash equivalents are carried at costwhich approximates fair value.

Short-term investmentsShort-term investments consist primarily ofpromissory notes and trading securities.Short-term investments are considered to betrading securities and are stated at fair value,with unrealized gains and losses included ingain (loss) on trading securities.

InventoryInventory consists of telephones and acces-sories for resale and is stated at the lower ofcost or market. Cost is computed using theaverage cost method.

Property and equipmentProperty and equipment is stated at histori-cal cost. Telecommunications equipment, in-cluding equipment acquired under capitalleases, is depreciated using the straight linemethod over its estimated useful life of nineand one-half years. Buildings and leaseholdimprovements are depreciated using thestraight line method over estimated usefullives of twenty years. Office and measuringequipment, and vehicles and furniture aredepreciated using the straight line methodover estimated useful lives ranging from fiveto ten years.

Intangible assetsVimpelCom capitalizes payments made tothird party suppliers to acquire access to andfor use of telephone lines (telephone line ca-pacity). These payments are accounted for asintangible assets and are amortized on astraight line basis over ten years.

Other intangible assets, principally licens-es, are amortized on a straight-line basisover their estimated useful lives, generallyfour to ten years.

In accordance with Accounting PrinciplesBoard (“APB”) Opinion No. 17, “IntangibleAssets”, VimpelCom continues to evaluate the




amortization period to determine whetherevents or circumstances warrant revisedamortization periods. Additionally, VimpelComconsiders whether the carrying value of suchassets should be reduced based on the futurebenefits of its intangible assets.

Software costsUnder the provision of Statement of Position No. 98-1, “Accounting for the Costs of ComputerSoftware Developed or Obtained for InternalUse”, VimpelCom capitalizes costs associatedwith software developed or obtained for internaluse when both the preliminary project stage iscompleted and VimpelCom management hasauthorized further funding of the project which itdeems probable will be completed and used toperform the function intended. Capitalization ofsuch costs ceases no later than the point atwhich the project is substantially complete andready for its intended purpose.

Research and development costs and othercomputer software maintenance costs re-lated to software development are expensedas incurred. Capitalized software develop-ment costs are amortized using thestraight-line method over the expected lifeof the product.

Long-lived assetsIn accordance with SFAS No. 121, “Accountingfor the Impairment of Long-lived Assets andfor Long-lived Assets to be Disposed of”, long-lived assets to be held and used byVimpelCom are reviewed to determinewhether an event or change in circumstancesindicates that the carrying amount of the assetmay not be recoverable. For long-lived assetsto be held and used, VimpelCom bases itsevaluation on such impairment indicators asthe nature of the assets, any historical or fu-ture profitability measurements, as well asother external market conditions or factorsthat may be present. No impairment expenses

were recognized in 1998 or 1999. During2000, certain impairment indicators werepresent which indicated that the carryingamount of certain assets may not be recover-able. VimpelCom determined that an impair-ment of certain assets had occurred as ofDecember 2000 (Note 8).

Revenue recognitionVimpelCom earns service revenues for usageof its wireless networks. Revenue is recog-nized when the service is rendered. Revenuesfrom equipment sales and other services arerecognized in the period in which the equip-ment is sold and services rendered. Revenueon prepaid cards is deferred and recognizedwhen services are rendered. Revenues are stated net of value-added taxes chargedto customers.

In accordance with the provisions of the USSEC Staff Accounting Bulletin No. 101,“Revenue Recognition in Financial State-ments”, VimpelCom has deferred telecommu-nications connection fees. The deferral of revenue will be recognized over the estimatedaverage subscriber life.

Advertising VimpelCom expenses the cost of advertisingas incurred. Advertising expenses for theyears ended December 31, 2000, 1999 and1998 were US$18,488 US$8,934 andUS$9,669 respectively.

RentVimpelCom leases office space and premiseswhere telecommunication equipment is in-stalled. There were no non-cancelable operat-ing leases in 2000 and 1999.

Rent expense under all operating leases andrental contracts in 2000, 1999 and 1998was US$5,768, US$3,488 and US$2,431,respectively.

Deferred taxesVimpelCom computes and records income taxin accordance with SFAS No. 109, “Accountingfor Income Taxes”. Under the asset and liabili-ty method of SFAS 109, deferred tax assetsand liabilities are recognized for the future taxconsequences attributable to differences be-tween the financial statement carryingamounts of existing assets and liabilities andtheir respective tax bases.

Investment incentivedeductionsInvestment incentive deductions are account-ed for as a reduction of current taxable incomein the year in which the deduction arises.

Government pension fundVimpelCom contributes to the RussianFederation state pension fund on behalf of itsemployees. VimpelCom’s contribution repre-sented 28% of employees’ salaries and was ex-pensed as incurred. Total amounts expensed inconnection with contributions to the state pen-sion fund for the years ended December 31,2000, 1999 and 1998 were US$2,793,US$4,838 and US$8,256, respectively.

Net income per common shareNet income per common share for all periodspresented has been determined in accordancewith SFAS No. 128, “Earnings per Share”, bydividing income available to common share-holders by the weighted average number ofcommon shares outstanding during the peri-od. Basic earnings per share and earnings pershare assuming dilution are the same. Net in-come per share of common stock has beenadjusted by a factor of 1.33 to determine netincome per ADS equivalent as each ADS isequivalent to three-quarters of one share ofcommon stock.

Securities that could potentially dilute basicearnings per share in the future that were not




included in the computation of earnings pershare assuming dilution because they wouldhave been antidilutive for the periods present-ed in the accompanying consolidated financialstatements include convertible voting preferredstock (Note 14), senior convertible notes (Note 12) and employee stock options (Note 18).

Concentration of credit riskTrade accounts receivable consist of amountsdue from customers for airtime usage andequipment sales. In certain circumstances,VimpelCom requires deposits as collateral forairtime usage. In 1999, a prepaid service forboth DAMPS and GSM networks was intro-duced. Equipment sales are typically paid inadvance of delivery. VimpelCom’s credit riskarising from its trade accounts receivable ismitigated due to the large number of its sub-scribers, of which approximately 65% sub-scribed to a prepaid service and, accordingly,do not give rise to credit risk.

VimpelCom deposits available cash with finan-cial institutions in the Russian Federation.Deposit insurance is not offered to financial in-stitutions operating in Russia. To manage thiscredit risk, VimpelCom allocates its availablecash to a variety of Russian banks and Russianaffiliates of international banks. Managementperiodically reviews the credit worthiness ofthe banks in which it deposits cash.

Fair value of financialinstrumentsThe carrying amounts for financial instru-ments, consisting of cash and cash equiva-lents, short-term investments, trade accountsreceivable, obligations under accountspayable, bank loans and equipment financingliabilities approximate their fair value.

The fair value of senior convertible notesbased on quoted market prices wasUS$58,688 and US$67,125 as of December31, 2000 and March 20, 2001, respectively.

ReclassificationsCertain reclassifications have been made to theprior years’ consolidated financial statementsto conform to the current year presentation.

Comprehensive incomeSFAS No. 130, “Reporting ComprehensiveIncome”, requires the reporting of comprehen-sive income in addition to net income (loss).Comprehensive income is a more inclusive fi-nancial reporting methodology that includesdisclosure of certain financial information thathistorically has not been recognized in the cal-culation of net income but as an adjustment toshareholders’ equity. VimpelCom does not havecomprehensive income items. Accordingly, netincome (loss) is equivalent to comprehensiveincome for each of the years presented.

Segment informationEffective January 1, 1998, VimpelCom adoptedSFAS No. 131, “Disclosure about Segments ofan Enterprise and Related Information”. SFASNo. 131 changes the way public companies re-port segment information in annual financialstatements and also requires those companiesto report selected segment information in inter-im financial reports to shareholders. It also es-tablishes standards for related disclosures aboutproducts and services, geographic areas, andmajor customers. Management believesVimpelCom’s operations comprise only onesegment and, therefore, adoption of FAS No. 131 did not impact the disclosures made inVimpelCom’s consolidated financial statements.

Stock-based compensationVimpelCom follows the provisions of SFASNo 123, “Accounting for Stock-BasedCompensation”, for its stock option plan. SFASNo. 123 generally allows companies to eitheraccount for stock-based compensation underthe new provisions of SFAS No. 123 or underthe provisions of Accounting Principles BoardOpinion (“APB”) No. 25, “Accounting for Stock

Issued to Employees”. Because the fair valueaccounting requires use of option valuationmodels that were not developed for use invaluing employee stock options (see Note 18),VimpelCom has elected to account for itsstock-based compensation in accordance withthe provisions of APB No. 25 and relatedInterpretations and present pro forma disclo-sures of results of operations as if the fair val-ue method had been adopted.

Derivative instruments andhedging activitiesIn June 1998, the Financial AccountingStandards Board issued SFAS No. 133,“Accounting for Derivative Instruments andHedging Activities”, which was amended inJune 1999. VimpelCom will adopt the newstatement, which is effective for fiscal yearsbeginning after June 15, 2000, on January 1,2001. The statement requires to recognize allderivatives on the balance sheet at fair value.VimpelCom does not anticipate that theadoption of the new statement will have asignificant effect on its results of operationsor financial position.

3. Acquisitions

On December 15, 1999, VimpelCom paidUS$29,536 to Alcatel SEL AG (“Alcatel”) forthe 12% of KBI’s common stock, whichVimpelCom did not previously own. In ac-cordance with Russian legislation, legalownership of shares is effective as at thedate of registration of the transaction in theregister of shareholders. The purchase ofKBI’s shares by VimpelCom was registeredon January 3, 2000. The excess of acquisi-tion cost over the fair market value of 12%of the net assets of KBI amounted toUS$12,699 and was recorded as goodwill.Goodwill is being amortized on a straight-line basis over its estimated useful life, 8 years. It is included in intangible assets in



3. Acquisitions (continued)

the accompanying consolidated balancesheet as of December 31, 2000.

On March 13, 2000, VimpelCom increased itsshare of ownership in RTI Service-Svyaz to100% by acquiring the remaining 50% of vot-ing shares it did not previously own forUS$3,026. The excess of the fair market valueof 50% of the net assets of RTI Service-Svyazover acquisition cost reduced the value ofproperty and equipment in the accompanyingconsolidated financial statements.

4. Cash and cash equivalents

Cash and cash equivalents consisted of thefollowing at December 31:

5. Other current assets

Other current assets consisted of the followingat December 31:

Rubles US dollars EURO and other currencies

2000

US$15,180136,820

141

US$152,141

1999

US$5,70429,905

—

US$35,609

Value added tax

Prepayment to Alcatel in respect of purchase of KBI shares (Note 3)

Advances to suppliers

Other

2000

US$23,519

—

3,342

3,968

US$30,829

1999

US$14,394

10,879

3,792

1,683

US$30,748



6. Property and equipment

Property and equipment, at cost, except forimpaired assets, consisted of the following atDecember 31:

In July 2000, VimpelCom purchased all thetelecommunications equipment previouslyheld under capital lease agreements (Note 11).

Accumulated depreciation on telecommunica-tions equipment held under capital leaseagreements amounted to US$0 andUS$54,449 at December 31, 2000 and 1999,respectively. Depreciation expense in respectof telecommunications equipment held undercapital lease amounted to US$9,789 (until July2000), US$19,339 and US$16,800 for theyears ended December 31, 2000, 1999 and1998, respectively, and was included in depre-ciation expense in the accompanying consoli-dated statements of operations.

VimpelCom recorded an impairment charge ofUS$61,000 in respect of telecommunicationsequipment as of December 2000 (Note 8).

7. Intangible assets

Intangible assets consisted of the following atDecember 31:

VimpelCom recorded an impairment charge ofUS$5,467 in respect of other intangible assetsas of December 2000 (Note 8).

Telecommunications equipment held under capital lease agreements

Telecommunications equipment

Building and leasehold improvements

Office and measuring equipment

Vehicles

Furniture

Other equipment

Accumulated depreciation

Assets under construction

2000

US$—

254,556

34,904

23,264

1,664

2,746

4,894

322,028

(69,568)

104,206

US$356,666

1999

US$185,478

151,842

32,859

16,363

1,635

2,668

4,608

395,453

(103,988)

77,588

US$369,053

Telephone line capacity

GSM-900/1800 license (Note 1)

Goodwill (Note 3)

Other intangible assets

Accumulated amortization

2000

US$74,167

30,000

12,699

1,933

118,799

(39,150)

US$79,649

1999

US$73,285

30,000

—

6,287

109,572

(26,581)

US$82,991



8. Impairment charges

Based upon a comprehensive review of long-lived assets, VimpelCom determined that as ofDecember 2000, its telecommunicationAMPS/D-AMPS network equipment inMoscow and Moscow region and licensesfrom the vendor of the equipment were im-paired. A recent marketing research study per-formed by VimpelCom indicated that the mi-gration rate of subscribers from VimpelCom’sAMPS/D-AMPS network to its GSM systemhad increased. Accordingly, revised revenueforecasts for the AMPS/D-AMPS network arebased on a lower number of subscribers.VimpelCom recorded an impairment charge ofUS$66,467, including US$61,000 in respect ofequipment and US$5,467 in respect of licens-es classified as intangible assets in the ac-companying consolidated balance sheets.These amounts represent an excess of the car-rying amount of assets over their fair value.Fair value was determined as the present val-ue of estimated future cash flows expected toresult from the use of the assets.

9. Other assets

Other assets consisted of the following atDecember 31:

10. Bank loans

On January 20, 1999, Sberegatelny Bank ofthe Russian Federation (“Sberbank”) providedVimpelCom a US$27,750, dollar denominated,line of credit. Interest on amounts outstandingaccrued at a rate of 16.0%. The line of creditwas collateralized by common stock ofVimpelCom held by an entity controlled byVimpelCom’s Chief Executive Officer.Borrowings of US$15,000 and US$5,000 un-der the line of credit were made on April 30,1999 and May 31, 1999, respectively. The loanwas fully repaid as of June 9, 1999.

On April 28, 2000, Sberbank opened a four-yearcredit line of US$80,000 to VimpelCom.VimpelCom has the right to draw down the entireamount before April 28, 2001. The loan will be re-paid in eight equal installments, on a quarterlybasis, commencing July 10, 2002. The interestrate as at the date of signing was 13.25% per an-num and is subject to change by Sberbank.

As of December 31, 2000, VimpelCom has madedrawings under the credit line in the totalamount of US$66,800. Certain items of telecom-munication equipment with the approximatecarrying amount of US$33,291 were pledged ascollateral. In addition, certain shareholders of

VimpelCom pledged 3,426,987 shares ofVimpelCom’s common stock.

11. Capital lease obligation

VimpelCom has entered into eight equipmentsupply agreements with Ericsson RadioSystems AB (“Ericsson”) with respect toequipment purchases and expansion of theAMPS network with a maximum total value ofUS$193,600. The Ericsson agreements hadsale and lease arrangements with options topurchase the equipment. Six shareholders en-tered into pledge agreements dated January27, 1998. Under these pledge agreements,13.5% of VimpelCom’s outstanding shares ofcommon stock held by these shareholders hasbeen pledged as security against the capitallease obligations.

In connection with seven of the eight equip-ment supply agreements referred to above,VimpelCom entered into supply agreement as-signments whereby VimpelCom assigned all itsrights, title, and interest to the equipment ac-quired under the second, third, and fourth ex-pansions to AB LM Ericsson Finans, and itsrights, title, and interest to the equipment ac-quired under the fifth, sixth, seventh and eighthexpansions to Ericsson Project Finance AB.

In addition, VimpelCom entered into agree-ments with AB LM Ericsson Finans to leasethis equipment. The second, fifth, sixth, sev-enth and eighth expansion agreements weredenominated in US dollars and the outstand-ing principal accrued interest at LondonInterbank Offered Rate (“LIBOR”) plus 4.5%.The third and fourth expansion agreementswere denominated in Swedish krona and theoutstanding principal accrues interest at theStockholm Interbank Offered Rate (“STIBOR”)plus 4.5%. As of December 31, 1999, the three

Software, at costAccumulated depreciation

Prepayment to Alcatel in respect of purchase of KBI shares (Note 3) Prepayments to suppliers Equity investments Other assets

2000

US$9,528(1,618)

7,910

—8,6933,9412,379

US$22,923

1999

US$2,210 (1,067)

1,143

18,6575,3512,9501,785

US$29,886



11. Capital lease obligation (continued)

month LIBOR and three month STIBOR were6.000% and 3.605%, respectively.

Under these agreements, VimpelCom had var-ious options at specified dates to purchase theleased equipment. Equipment supplied underthese agreements has been accounted for ascapital leases.

In January 1998, agreements betweenEricsson Project Finance AB, AB LM EricssonFinans, (collectively, “Ericsson Finance”) andING Bank N.V., a Dutch bank serving as a fa-cility agent for a syndicate of banks, trans-ferred ultimate collection rights under theEricsson equipment supply agreements fromEricsson Finance to ING Bank N.V. WhileVimpelCom continued to make payments toEricsson Finance, VimpelCom was subject tocertain defined debt covenant restrictions, in-cluding several related to financial condition.In addition, certain of VimpelCom’s assets, in-cluding cash, trade accounts receivable, andtelephone line capacity, have been pledged toEricsson Finance as collateral to the extentneeded to fulfill VimpelCom’s scheduled obli-gations in the event of default. As of December31, 1999, the aggregate carrying value of as-sets pledged amounted to US$97,243.

In July 2000, the capital lease obligation ofUS$53,969 and accrued interest of US$1,451were repaid in full with the purchase of theleased equipment. The excess of the amountpaid over the balance of the lease obligationand accrued interest amounted to US$1,932and was recorded as an increase in the carry-ing amount of the equipment.

12. Senior convertiblenotes

On July 28, 2000, the offering of senior con-vertible notes registered with the US SEC rais-

ing a total of US$70,320 (net of cost of is-suance of US$4,680) was completed.Unamortised balance of debt issue costs ofUS$4,380 was included in non-current assetsin the accompanying condensed consolidatedbalance sheet.

The convertible notes will mature on July 28,2005. Holders of the convertible notes mayconvert the notes into ADSs at any time afterSeptember 28, 2000 at the conversion price ofUS$27.0312 per ADS, subject to certain adjust-ments. VimpelCom will pay cash interest on theconvertible notes at the rate of 5.5% per an-num from July 28, 2000, payable semi-annual-ly on January 28 and July 28 of each year,commencing January 28, 2001. Unless previ-ously converted or redeemed, VimpelCom willrepay the convertible notes at 135.41% of theirprincipal amount, which represents a yield tomaturity of 11% per annum compounded on asemi-annual basis. Amortization of discount onthe notes and debt issuance costs is includedin interest expense in the accompanying con-solidated financial statements.

The convertible notes are redeemable byVimpelCom starting from July 28, 2003 attheir accreted value, plus accrued but unpaidcash interest and any additional amounts, ifthe market price of the ADSs on the NYSE ex-ceeds 140% of the conversion price during aperiod of 30 consecutive trading days.

Senior convertible notes were issued byVimpelCom B.V., a wholly-owned subsidiary ofVimpelCom Finance B.V., which is a wholly-owned subsidiary of VimpelCom. VimpelComB.V. is a company with no assets, operations,revenues or cash flows other than those relat-ed to the issuance, administration and repay-ment of senior convertible notes.

VimpelCom irrevocably, fully and uncondition-ally guaranteed VimpelCom B.V.’s obligations

under the senior convertible notes, includingthe performance by VimpelCom B.V. of itsconversion obligation.

13. Equipment financingobligation

KBI entered into an agreement with Alcatel forthe purchase and installation in four phases ofmobile telecommunications GSM networkequipment with a total contract value ofUS$135,000. In order to finance the transac-tion, KBI and Alcatel entered into a deferredpayment agreement in the aggregate principalamount of US$113,242 plus interest (the“Alcatel Agreement”). In addition, Alcatel re-ceived shares of KBI’s common stock repre-senting the remaining 12% of the outstandingcapital stock of KBI after giving effect to suchissuance. These shares were valued atUS$21,758 in accordance with the market val-ue of the equipment and services to be provid-ed, adjusted for put and call options attachedto the issuance.

The put and call options referred to abovewere in respect of 50% of the shares held byAlcatel and have been recorded as an equip-ment financing obligation in the accompany-ing consolidated balance sheet as ofDecember 31, 1999. As described in Note 3,on January 3, 2000, Vimpelcom purchased the12% of KBI shares held by Alcatel forUS$29,536.

The Alcatel Agreement requires interest to bepaid at the US dollar LIBOR rate plus 4.0% overa period to be determined by the timing of theinitiation of the four different phases of theAlcatel Agreement. Financing of the contract byAlcatel provides for repayment of Phase 1 andPhase 2 to commence no later than four yearsfrom the date of the contract. For the firstphase, initiated in 1996, two annexes have been



13. Equipment financing obligation (continued)

signed. The first annex related to equipmentvalued at US$21,758 which was contributed inkind to the charter capital of KBI. The secondannex related to a delivery of equipment valuedat US$21,511 under the equipment financingagreement. For the second phase, initiated in1997, one annex was signed for equipment val-ued at US$47,598. For the third phase, initiatedin 1998, one annex was signed for equipmentvalued at EURO 20,389 (US$21,485) acquiredin 1999. The fourth phase, initiated in 1999, wassigned for equipment valued at EURO 19,919(US$18,356) acquired in 2000.

Repayment of amounts due under the AlcatelAgreement for the first and second phaseswere to begin after a grace period of threeyears from the date of acceptance of the relat-ed equipment and services, however, thisgrace period was to expire no later than May26, 2000. Principal and interest repaymentswere to be made in eight semi-annual install-ments beginning May 27, 2000.

On May 19, 2000, KBI and Alcatel signed thefifth amendment to the deferred paymentagreement. The Fifth Amendment providesfor the deferral of payment of the amount ofEURO 15,936 (US$14,792 at exchange rateas of December 31, 2000) in respect of fu-ture deliveries of equipment under the fourthphase of the agreement on the purchase andinstallation of mobile telecommunicationsnetwork equipment. The liability will accrueinterest at the EURO six month EURIBOR rateplus 9%. The accrual of interest will start 30 days after the delivery of the last con-signment of the equipment. Principal repay-ments are to be made in two equal installments, no later than July 5, 2001 and December 15, 2001. Interest should berepaid on the same dates in the full amountaccrued as of the respective date. The FifthAmendment changed the initial terms of pay-ment under the fourth phase.

Under the initial terms, payments in respect offuture deliveries of equipment were to be madewithin 30 days after the delivery of equipment.As of December 31, 2000, all the equipmentunder the forth phase was delivered.

On May 19, 2000, KBI and Alcatel signed thesixth amendment to the deferred paymentagreement (the “Sixth amendment”). The Sixthamendment provided for the deferral of pay-ment of the amount of US$15,000 under thesecond phase of the agreement on the purchaseand installation of mobile telecommunicationsnetwork equipment. The initial payment dateunder the second phase was May 27, 2000. Thenew payment date under the Sixth amendmentwas September 1, 2000 and the Company paidthe entire amount on due date. The interest wasaccrued and paid for the period of May 27, 2000through September 1, 2000, at the US dollarsix-month LIBOR rate plus 6.25% in the totalamount of US$538.

On May 19, 2000, KBI and Alcatel signed a newagreement on the purchase and installation intwo phases (fifth and sixth phases) of mobiletelecommunications GSM network equipmentin the total value of EURO 26,135 (US$24,260at exchange rate as of December 31, 2000).Under the new agreement, further phases maybe agreed. On May 19, 2000, an annex for the fifth phase was signed for the amount ofEURO 7,135 (US$6,623 at exchange rate as ofDecember 31, 2000). On June 30, 2000, an an-nex for the sixth phase was signed for theamount of EURO 19,000 (US$17,637 at ex-change rate as of December 31, 2000).

On August 23, 2000, KBI and Alcatel signed thedeferred payment agreement for the fifth phase.This agreement provides for the deferral of pay-ment of the amount of EURO 5,566 (US$5,166at exchange rate as of December 31, 2000) inrespect of future deliveries of equipment underthe fifth phase. The liability will accrue interest

at the EURO six-month EURIBOR rate plus3.5%. The accrual of interest will start 30 daysafter the delivery of the second consignmentof the equipment. Principal repayments are tobe made in six equal and consecutive semi-an-nual installments. The first installment be-comes due six months after the acceptance ofthe related equipment, but no later thanDecember 1, 2001. Interest should be repaidon the same dates in the full amount accruedas of the respective date. As of December 31,2000, there were no deliveries under theequipment financing terms for the fifth phase.

On September 7, 2000, KBI and Alcatel signedthe deferred payment agreement for the sixthphase that provides for the deferral of paymentof the amount of EURO 16,150 (US$14,991 atexchange rate as of December 31, 2000) in re-spect of future deliveries of equipment underthe sixth phase. The sixth phase was divided intwo sub-phases with the following amounts ofdeferred payments: sub-phase 1 in the amountof EURO 14,450 (US$13,413 at exchange rateas of December 31, 2000) and sub-phase 2 inthe amount of EURO 1,700 (US$1,578 at ex-change rate as of December 31, 2000). The li-ability for sub-phases 1 and 2 will accrue interest at the EURO six month EURIBOR rateplus 3.5%. The accrual of interest for sub-phases 1 and 2 will start 30 days after the de-livery of the first consignment of the equipmentincluded in sub-phases 1 and 2, respectively.Principal repayments for each sub-phase areto be made in six equal and consecutive semi-annual installments. The first installment foreach sub-phase becomes due six months afterthe acceptance of the related equipment, butno later than October 1 and November 24,2001 for sub-phases 1 and 2, respectively.Interest in respect of the liability for each sub-phase should be repaid on the same dates inthe full amount accrued as of the respectivedate. As of December 31, 2000, the equipmentin the amount of EURO 12,789 was delivered



under the equipment financing terms of thesixth phase.

On December 20, 2000, an annex for the seventhphase was signed for the amount of EURO 8,000(US$7,426 at exchange rate as of December31, 2000). On December 26, 2000, KBI andAlcatel signed the deferred payment agreementfor the seventh phase. This agreement providesfor the deferral of payment of the amount ofEURO 6,800 (US$6,312 at exchange rate as ofDecember 31, 2000) in respect of future deliv-eries of equipment under the seventh phase.The liability will accrue interest at the EUROsix-month EURIBOR rate plus 3.5%. The accru-al of interest will start 30 days after the deliveryof the first consignment of the equipment.Principal repayments are to be made in sixequal and consecutive semi-annual install-ments. The first installment becomes due sixmonths after the acceptance of the relatedequipment, but no later than February 15,2002. Interest should be repaid on the samedates in the full amount accrued as of the re-spective date. As of December 31, 2000, therewere no deliveries under the equipment financ-ing terms for the seventh phase.

During 2000, 1999, and 1998, interest ofUS$0, US$0 and US$2,455, respectively, wascapitalized and interest of US$8,117,US$7,730 and US$4,382, respectively, wasaccrued under all the agreements between KBIand Alcatel.

VimpelCom made all the payments to Alcatelin respect of principal and accrued interestamounts in accordance with the above men-tioned agreements.

Amounts outstanding in connection withVimpelCom’s equipment financing obligationconsisted of the following at December 31:

Future payments under bank loans, seniorconvertible notes and supplier credit facilitiesare as follows:

13. Equipment financing obligation (continued)

Supplier credit facilities

Accrued interest

Put and call option

Less current portion

Total long-term equipment financing

2000

US$78,636

626

—79,262

(34,721)

US$44,541

1999

US$69,296

18,131

10,87998,306

(46,334)

US$51,972

2001

2002

2003

2004

2005

US$34,095

37,981

54,681

18,679

75,000

US$220,436



14. Shareholders’ equity

During September and November 1996, an ag-gregate 6,426,600 shares of preferred stockwere issued to VimpelCom’s Chief ExecutiveOfficer or to entities controlled by him in con-junction with the acquisition of KBI. Eachshare of preferred stock entitles its holder toone vote, to receive a fixed dividend of .001 ru-ble per share per year, and to receive a fixedliquidation value of .005 rubles per share in theevent of VimpelCom’s liquidation, to the extentthere are sufficient funds available. As ofDecember 31, 2000, this liquidation prefer-ence amounted to approximately US$2.1 atthe official year end exchange rate. Each shareof preferred stock is convertible into one shareof common stock at any time after June 30,2016 at the election of the holder upon pay-ment to VimpelCom of a conversion premiumequal to 100% of the market value of oneshare of common stock at the time of conver-sion. With the approval of three-quarters ofthe board of directors, VimpelCom has theright to purchase, and the holders of the pre-ferred stock have the obligation to sell, all or aportion of the preferred stock at a purchaseprice of .005 rubles per share. Pursuant tocontractual arrangements with VimpelCom, allshares of preferred stock are subject to trans-fer restrictions until June 30, 2016.

On December 1, 1998, VimpelCom and Telenorsigned the Share Purchase Agreement underwhich Telenor agreed to purchase a strategicinvestment interest in VimpelCom, subject tocertain regulatory approvals and conditionsprecedent. Under the terms of the SharePurchase Agreement, Telenor agreed to ac-quire 8,902,201 newly-issued shares ofVimpelCom’s common stock which, upon fullissuance, will represent 25.7% of VimpelCom’stotal outstanding voting capital stock and31.6% of VimpelCom’s total outstanding com-

mon stock, for US$162,000, or US$18.19 pershare (US$13.64 per ADS equivalent), plus in-terest at a rate of 4.25% per annum on unpaidamounts accruing from the date of VimpelComshareholders’ approval on January 29, 1999.

On January 29, 1999, the agreement betweenVimpelCom and Telenor was approved by a ma-jority of VimpelCom’s shareholders. All the re-quired approvals from regulatory authorities andwaivers of certain conditions of the agreementbetween VimpelCom, Ericsson Project FinanceAB and AB LM Ericsson Finance were received,and the transaction was closed on May 28, 1999.

Telenor made all required payments in accor-dance with the Share Purchase Agreement.The last payment of US$22,741 was made onJanuary 5, 2000, which entitled Telenor to ad-ditional voting rights and other rights of ashareholder in respect of 1,202,201 shares.

Under the agreement dated December 1, 1998,prior to the occurrence of certain transactions,VimpelCom has the right to purchase fromTelenor a part of the shares previously issued toTelenor. The number of shares that can be pur-chased is limited by a condition that Telenor’sshare in VimpelCom’s total outstanding votingcapital stock should not become less than 25%plus one share after the call option is exercised.In December 2000, VimpelCom purchased250,000 shares of common stock for US$4,993from Telenor under its call option to provide forshares to support grants under VimpelCom’sstock option plan (see Note 18). These shareswere treated as treasury shares in the accom-panying consolidated financial statements.

On June 26, 2000, VimpelCom purchased103,239 shares of its common stock forUS$5,524.

On July 28, 2000, VimpelCom completed the of-fering of 3,643,675 shares (4,858,233 ADSs) of

its common stock registered with the US SEC,which included 3,118,675 newly issued shares(4,158,233 ADSs) raising US$79,372 (net ofcost of issuance of US$8,177), 421,761shares (562,348 ADSs) purchased fromVimpelCom’s executive officer at the gross of-fering price and 103,239 shares of treasurystock (137,652 ADSs). The amount ofUS$2,666 representing the excess of the costof acquisition of the treasury stock over theproceeds from the sales of treasury stock wasdeducted from retained earnings in the ac-companying consolidated financial state-ments. In a transaction exempt from registra-tion under Securities Act 1933, as amended,consummated concurrently with the offering,Telenor purchased 2,400,532 ADSs at the pub-lic offering price.

On June 23, 2000, VimpelCom entered into aUS$50,000 working capital bridge facility withTelenor and made drawings for the fullamount of the facility. The interest rate on thefacility was six-month US dollar LIBOR rateplus 3% per annum, and structuring and facil-ity fees amounted to US$800. VimpelComwas required to repay the facility in full priorto the closing of the offering of its equity se-curities, and Telenor was required to use thefunds received from such repayment to pur-chase VimpelCom’s equity securities at thepublic offering price in transactions that wereexempt from registration. The total amount ofborrowings plus accrued interest of US$320and structuring and facility fees of US$800was repaid to Telenor on July 28, 2000.Accordingly, structuring and facility fees ofUS$800 were included in the cost of issuanceof common stock.

As of December 31, 2000, 2,080,926 newly is-sued shares (2,774,568 ADSs) ofVimpelCom’s common stock were held by VCLimited, a consolidated affiliate ofVimpelCom. These shares were treated as

treasury shares in the accompanying consoli-dated financial statements.

Each outstanding share of VimpelCom’s com-mon stock entitles its holder to participate inshareholder meetings, to receive dividends insuch amounts as have been validly determinedby the board of directors or the shareholders,and in the event of VimpelCom’s liquidation, toreceive part of VimpelCom’s assets to the ex-tent there are sufficient funds available.

In accordance with Russian legislation,VimpelCom can distribute all profits as divi-dends or transfer them to reserves.Dividends may only be declared from accu-mulated undistributed and unreserved earn-ings as shown in the Russian statutory fi-nancial statements, not out of amounts pre-viously transferred to reserves. Dividendsare subject to a 15% withholding tax whichmay be reduced or eliminated by double taxtreaties. Transfers to reserves have been in-significant through December 31, 1999.VimpelCom had no retained earnings distrib-utable under Russian legislation as ofDecember 31, 2000 and 1999.

As of December 31, 2000, the amount of con-solidated retained earnings of VimpelCom rep-resented by undistributed earnings of compa-nies which are accounted for using the equitymethod was US$3,638.

15. Income taxes

The Russian Federation was the only tax juris-diction in which VimpelCom’s income wassubject to taxation.

On 31 March 1999, the Profits tax law wasamended to enact a change in the statutory taxrate from 35% to 30% effective 1 April 1999.On August 5, 2000, the Profits tax law wasamended to allow local authorities to increase

the statutory tax rate by up to 5%. OnNovember 29, 2000, the authorities of Moscowenacted an increase in the statutory tax ratefrom 30% to 35% effective January 1, 2001.

Income tax expense (benefit) consisted of thefollowing for the years ended December 31:

A reconciliation between the income tax ex-pense reported in the accompanying consoli-dated financial statements and income beforetaxes multiplied by the statutory tax rates of30% (since April 1, 1999) and 35% (in 1998and through March 31, 1999) for the yearsended December 31 is as follows:



14. Shareholders’ equity (continued)

Current income taxes

Deferred taxes

2000

US$1,333

(15,676)

US$(14,343)

1998

US$16,624

477

US$17,101

1999

US$1,356

(6,920)

US$(5,564)

Income tax expense (benefit) computed onincome before taxes at statutory tax rate

Effect of investment incentive deductions

Effect of non-deductible expenses and otherpermanent differences

Effect of deductible temporary differences not recognized as measured by the change invaluation allowance

Effect of changes in tax rate

Income tax expense (benefit) reported inaccompanying consolidated financial statements

2000

US$(27,630)

(1,472)

13,152

(1,052)

2,659

US$(14,343)

1998

US$5,309

(5,647)

11,468

5,971

—

US$17,101

1999

US$(13,600)

(885)

15,216

(725)

(5,570)

US$(5,564)



The deferred tax balances were calculated byapplying the presently enacted statutory taxrate applicable to the period in which the tem-porary differences between the tax basis of as-sets and liabilities are expected to reverse. Theamounts reported in the accompanying con-solidated financial statements at December 31consisted of the following:

For financial reporting purposes, a valuation al-lowance has been recognized to reflect manage-ment’s estimate for realization of the deferredtax assets. Valuation allowances are providedwhen it is more likely than not that some or all ofthe deferred tax assets will not be realized in thefuture. These evaluations are based on expecta-tions of future taxable income and reversals ofthe various taxable temporary differences.

For Russian income tax purposes, VimpelComhas accumulated tax losses incurred in 1998,which may be carried forward for use againstfuture income in separate 20% incrementswith one increment available for use in each ofthe following five years. In addition, its use isfurther restricted to a maximum of 50% of tax-able income in any single year. Tax loss carryforwards may be eroded by future devaluationof the rouble. As of December 31, 2000, forRussian income tax purposes, the Companyhad tax losses available to carry forward of ap-proximately $15,654 expiring as follows:

15. Income taxes (continued)

Deferred tax assets:

Accrued operating and interest expenses

Deferred revenue

Loss carry-forwards

Valuation allowance

Deferred tax liabilities:

Revenue accrual, net of bad debts

Non-current assets

Net deferred tax liabilitiesAdd current deferred tax assets

Total long-term net deferred tax liability

2000

US$16,895

3,010

5,47925,384

(5,479)19,905

8,593

29,92238,515

18,61011,312

US$29,922

1999

US$11,514

1,818

6,53119,863

(6,531)13,332

8,232

39,38847,620

34,2886,041

US$40,329

December 31, 2001

December 31, 2002

December 31, 2003

US$5,218

5,218

5,218

US$15,654



16. Valuation and qualifying accounts

The following summarizes the changes in theallowance for doubtful accounts for the yearsended December 31, 2000, 1999 and 1998:

The provision for bad debts included in the ac-companying consolidated statements of oper-ations is net of related value-added taxes ofUS$3,630, US$3,569 and US$4,872 for theyears ended December 31, 2000, 1999 and1998 respectively.

17. Related party transactions

Transactions between VimpelCom and its re-lated parties, except for the transactions de-scribed below, consist primarily of servicesfrom the related parties, which are not materi-al to the financial results of VimpelCom.

Balances due from related parties, which areequity investees, consisted of the following asof December 31:

Balance as of December 31, 1997

Provision for bad debts

Accounts receivable written off

Foreign exchange gain




Foreign exchange gain





US$5,803

29,232

(19,441)

(2,584)

13,010

21,414

(26,740)

(1,774)

5,910

21,778

(20,709)

US$6,979

Bee-Line Samara

LLC Restline

Closed Joint Stock Company Variant Inform

N-Tecs

Others

2000

US$31

422

416

203

151

US$1,223

1999

US$109

422

416

44

385

US$1,376



On April 1, 1999, VimpelCom and TelenorRussia AS, a company registered in Norway, asubsidiary of Telenor AS, signed a ServiceObligation Agreement (“Telenor ServiceObligation Agreement”). Total expense in re-spect of management fees under the TelenorService Obligation Agreement included in sell-ing, general and administrative expenses in theaccompanying consolidated statements of op-erations for the years ended December 31,2000 and 1999 amounted to US$672 andUS$489, respectively. As of December 31, 2000and 1999, the liability to Telenor amounted toUS$305 and US$348, respectively.

On June 30, 2000, the Board of Directors ofVimpelCom approved a transaction with one ofexecutive officers of VimpelCom (the “ExecutiveOfficer”). VimpelCom is obliged to pay remu-neration to the Executive Officer for the pledgeof shares of VimpelCom’s common stock as acollateral for borrowings under the credit linefrom Sberbank. The remuneration is calculat-ed as 2% of the outstanding amount of borrowings under the credit line. Total remu-neration accrued and included in interest ex-pense in the accompanying consolidatedstatement of operations for the year endedDecember 31, 2000 amounted to US$1,119.As of December 31, 2000, the liability toExecutive Officer was US$1,119.

On July 6, 2000, VimpelCom and AXFConsulting LLC (“AXF”), a company registeredin the USA, signed a Service ObligationAgreement. AXF is controlled by one ofDirectors of VimpelCom. In accordance withthe Service Obligation Agreement, AXF pro-vides consulting services to VimpelCom. Totalcost in respect of the Service ObligationAgreement recorded in the accompanyingconsolidated financial statements for the yearended December 31, 2000 amounted toUS$804. As of December 31, 2000, the liabili-ty to AXF was US$323.

18. Stock option plan

VimpelCom’s 2000 Stock Option Plan adoptedon December 20, 2000 authorized the grant ofoptions to management personnel for up to250,000 shares of VimpelCom’s commonstock. 231,375 options were granted and out-standing as of December 31, 2000. In 2000, nofurther grants were made, no grants were exer-cised and no grants were canceled, forfeited orexpired. The exercise price for all the optionsgranted is US$23.60 per share (US$17.70 perADS equivalent). No compensation expensewas recognized, because the exercise price ofVimpelCom’s employee stock options exceedsthe market price of the underlying stock on thedate of grant, US$21.55 per share (US$16.16per ADS equivalent). The weighted averagegrant-date fair value of options granted duringthe year ended December 31, 2000 and out-standing as of December 31, 2000 wasUS$13.36 (US$10.02 per ADS equivalent).

All the options granted expire in four years.VimpelCom can accelerate the expiration date. Asof December 31, 2000, weighted average con-tractual life of outstanding options was four years.

The options granted vest at varying rates overtwo to three year periods as follows:

If certain events provided for in 2000 StockOption Plan occur, the vesting period for cer-tain employees will be accelerated.

No options were exercisable as of December31, 2000.

Pro forma information regarding net loss andnet loss per common share is required bySFAS No. 123, and has been determined as ifVimpelCom has accounted for its employeestock options under the fair value method ofthat Statement. The fair value of these optionswas estimated at the date of grant using aBlack-Scholes option pricing model with thefollowing weighted-average assumptions:risk-free interest rate of 4.3%; dividends yieldof 0%; volatility factor of the expected marketprice of VimpelCom’s common stock of 1.172;and a weighted average expected life of theoption of 2.3 years. VimpelCom recognizescompensation costs for awards with gradedvesting schedules on a straight-line basis overtwo to three year periods.

The Black-Scholes option valuation model wasdeveloped for use in estimating the fair value oftraded options which have no vesting restric-tions and are fully transferable. In addition,

17. Related party transactions (continued)

37,500

11,250

26,250

37,500

118,875

231,375

1 year

70%

67%

36%

35%

50%

3 years

28%

50%

2 years

30%

33%

36%

15%

50%

Number of options Vesting period



option valuation models require the input ofhighly subjective assumptions including theexpected stock price volatility. BecauseVimpelCom’s employee stock options havecharacteristics significantly different fromthose of traded options, and becausechanges in the subjective input assumptionscan materially affect the fair value estimate,in management’s opinion, the existing mod-els do not necessarily provide a reliable sin-gle measure of the fair value of its employeestock options.

The effects of applying SFAS No. 123 for pro-viding the following pro forma disclosures arenot likely to be representative of the effects onreported net income (loss) for future years.VimpelCom’s pro forma information for theyear ended December 31, 2000 follows (inthousands except per share information):

Pro forma net loss US$(77,843)

Pro forma net loss per common share US$(2.57)

19. Contingencies

The Russian economy displays emergingmarket characteristics. These characteristicsinclude high inflation, lack of liquidity in thecapital markets, and the existence of curren-cy controls that causes the national currencyto be illiquid outside of the RussianFederation. The success and stability of theRussian Federation’s economy will be signif-icantly impacted by the government’s actionswith regard to supervisory, legal, and eco-nomic reforms.

The taxation system in Russia is evolving asthe central government transforms itself froma command to a market oriented economy.There were many Russian Federation tax lawsand related regulations introduced in 2000 and

previous years, which were not always clearlywritten and their interpretation is subject to theopinions of the local tax inspectors, CentralBank officials and the Ministry of Finance.Instances of inconsistent opinions between local, regional and federal tax authorities andbetween the Central Bank and the Ministry of Finance are not unusual. Management be-lieves that it has paid or accrued all taxes thatare applicable.

Where uncertainty exists, VimpelCom has ac-crued tax liabilities based on management’sbest estimate.

As of December 31, 2000, VimpelCom doesnot believe that any material matters exist re-lating to the developing markets and evolvingfiscal and regulatory environment in Russia,including current pending or future govern-mental claims and demands, which would require adjustment to the accompanying finan-cial statements in order for those statementsnot to be misleading.

In the ordinary course of business, VimpelCommay be party to various legal and tax proceed-ings, and subject to claims, certain of whichrelate to the developing markets and evolvingfiscal and regulatory environments in whichVimpelCom operates. In the opinion of man-agement, VimpelCom’s liability, if any, in allpending litigation, other legal proceeding orother matter other than what is discussedabove, will not have a material effect upon thefinancial condition, results of operations or liq-uidity of VimpelCom.

VimpelCom’s operations and financial posi-tion will continue to be affected by Russianpolitical developments including the applica-tion of existing and future legislation and taxregulations. The likelihood of such occur-rences and their effect on VimpelCom could have a significant impact on the

VimpelCom’s ability to continue operations.VimpelCom does not believe that these con-tingencies, as related to its operations, areany more significant than those of similarenterprises in Russia.

VimpelCom’s ability to generate revenues inMoscow and the Moscow region is dependentupon the operation of the mobile telephonesystems under its licenses. VimpelCom’sAMPS/D-AMPS license to operate in the city ofMoscow and the Moscow region expires inNovember 2007, while the GSM licenses ex-pire in April 2008. Resolution No. 642, datedJune 5, 1994, of the Government of theRussian Federation defines the circumstancesunder which a license may be revoked. Underthis resolution, grounds for termination areboth broad and subjective and there is littleprecedent upon which to determine the practi-cal likelihood of termination.

VimpelCom is dependent upon a small num-ber of suppliers, principally Alcatel, for pur-chases of mobile telephone equipment.Similarly, as there is only a small number oftelephone line capacity suppliers in Moscow,VimpelCom purchases telephone line capacityprimarily from five suppliers: Telmos;Sovintel; Golden Telecom Inc.; AO ASVT; andMTU Inform.

VimpelCom’s AMPS licenses to operate cel-lular networks in the regions (not includingMoscow and the Moscow region) include acondition to make non-returnable contribu-tions to the development of the publicswitched telecommunications network ofthe Russian Federation. The amount of con-tribution is unspecified and will be agreedwith or determined by the respective localadministrations. VimpelCom has made nosignificant payments and it is not possibleto determine the amount that will eventuallybecome payable.

18. Stock option plan (continued)

20. Quarterly financialdata (unaudited)

The following table sets forth selected high-lights for each of the fiscal quarters during theyears ended December 31, 2000 and 1999 (US dollars in thousands, except per share data):

21. Subsequent events

Equipment financingagreementsOn January 10, 2001, KBI and Alcatel signed anamendment to the deferred payment agreementfor the sixth phase of the purchase and installa-tion of mobile telecommunications GSM net-work equipment. The terms of the initial deferredpayment agreement dated September 7, 2000(Note 13) were changed. The amount of de-ferred payments is divided in sub-phases 1, 2and 3 in the amounts of EURO 12,828(US$12,137 at exchange rate as of January 10,2001), EURO 1,700 (US$1,608 at exchange rateas of January 10, 2001) and EURO 1,622(US$1,535 at exchange rate as of January 10,2001), respectively. The first installments undersub-phases 1, 2 and 3 become due no later thanOctober 1, 2001, November 24, 2001 andJanuary 30, 2002, respectively.

On February 16, 2001, KBI and Alacatel signedan annex for the eighth phase of the purchaseand installation of mobile telecommunicationsGSM network equipment for the amount of EURO 8,769 (US$8,057 at exchange rate as ofFebruary 16, 2001). On February 16, 2001, KBIand Alcatel signed the deferred payment agree-ment in respect of future deliveries of equip-ment under the eighth phase. The eighth phaseis divided in three sub-phases with the follow-ing amounts of deferred payments: sub-phase 1in the amount of EURO 553 (US$508 at ex-change rate as of February 16, 2001), sub-phase 2 in the amount of EURO 1,147(US$1,054 at exchange rate as of February 16,2001) and sub-phase 3 in the amount of EURO 5,754 (US$5,287 at exchange rate as ofFebruary 16, 2001). The liability for all the threesub-phases will accrue interest at the EURO six-month EURIBOR rate plus 3.5%. The accrual ofinterest for sub-phases 1, 2 and 3 will start

30 days after the delivery of the first consign-ment of the equipment included in sub-phases1, 2 and 3, respectively.

Principal repayments for each sub-phase are tobe made in six equal and consecutive semi-annual installments. The first installment foreach sub-phase becomes due six months afterthe acceptance of the related equipment, but nolater than February 15, April 15 and April 30,2002 for sub-phases 1, 2 and 3, respectively.Interest in respect of the liability for each sub-phase should be repaid on the same dates in thefull amount accrued as of the respective date.

Acquisition of MSS StartIn January 2001, VimpelCom acquired 100% ofshares of common stock of Closed Joint StockCompany MSS Start operating under a trademark “Mobile Center”, a retail dealer for mobilecommunication companies, for US$3,193.



2000

Net operating revenuesImpairment of long-lived assetsOperating lossNet lossNet loss per common share

1999

Net operating revenuesOperating lossNet lossNet loss per common share

Year

US$274,136(66,467)(74,496)(77,801)

(2.57)

US$226,405 (29,067)(39,596)

(1.71)

Dec. 31

US$74,832(66,467) (69,309)(53,427)

(1.62)

US$63,174 (19,398)(26,291)

(0.98)

Sept. 30

US$70,716—

(918)(5,875)

(0.19)

US$53,018 (1,744)(2,560) (0.10)

June 30

US$65,613—

(1,469)(6,666)(0.24)

US$54,868 (3,071) (5,668) (0.27)

March 31

US$62,975—

(2,800)(11,833)

(0.42)

US$55,345(4,854) (5,077) (0.26)

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