VimpelComRegion Merger - PowerPoint PPT Presentation

Title: VimpelComRegion Merger


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VimpelCom-Region Merger
Capturing 100 of the growth
September 2003
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Disclaimer
This presentation contains "forward-looking
statements", as the phrase is defined in Section
27A of the Securities Act and Section 21E of the
Exchange Act. These statements relate, in part,
to the consummation of the merger and related
transactions which are subject to shareholder,
regulatory and certain other approvals, as well
as certain other conditions precedent, including
the transfer of VimpelCom-Regions licenses and
permissions to VimpelCom. If any of the approvals
are not obtained or any condition precedent is
not met, the merger will not be consummated. The
forward-looking statements relate to the
Company's development and are based on
management's best assessment of the Company's
ability to consummate the merger and related
transactions, its strategic and financial
position and future market conditions and trends.
These discussions involve risks and
uncertainties. The actual outcome may differ
materially from these statements as a result of
unforeseen developments from regulatory
authorities, competition, governmental
regulations of the wireless telecommunications
industry, general political uncertainties in
Russia, general economic developments in Russia
and other factors. As a result of such risks and
uncertainties, there can be no assurance that the
merger will be consummated. Certain factors that
could cause actual results to differ materially
from those discussed in any forward-looking
statements include the risks described in the
Company's Annual Report on Form 20-F for the year
ended December 31, 2002 and other public filings
made by the Company with the United States
Securities and Exchange Commission, which risk
factors are incorporated herein by reference.
VimpelCom disclaims any obligation to update
developments of these risk factors or to announce
publicly any revision to any of the
forward-looking statements contained in this
presentation, or to make corrections to reflect
future events or developments.
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Presentation team

• Jo Lunder
• Elena A. Shmatova
• Valery P. Goldin

Chief Executive Officer, Chairman-Elect Chief
Financial Officer Vice President - International
and Investor Relations
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VimpelCom overview
VimpelCom subscriber base, million

• Second largest cellular operator in Central and
  Eastern Europe
• GSM license portfolio covering 134 million people
  in Russia
• 49 market share in Moscow and 30 in Russia
• ten-fold increase in subscriber base since the
  beginning of 2001
• First Russian company to list on NYSE
• 2.9 billion market cap. (as of August 28, 2003)
• 50 free float
• 55.3 ownership in VimpelCom-Region (VIP-R)
• VIP-R EBITDA and net income positive in 2003
• Benchmark for transparency and corporate
  governance in Russia

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8
7
6
5
4
3
2
1
0
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
28/08
2001
2002
2003
Moscow license area
Regions
Source VimpelCom
5
VimpelCom 2Q2003 financial highlights
Net revenues, million
Net income, million
75.6
139.9

EBITDA, million
EBITDA margin
95.0
Source VimpelCom
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Significant milestones
Phase 1
Phase 2
Phase 3
Commercial launch of BeeLine GSM 900/1800 network
1 million subscribers in Moscow
Alfa invests 103m of equity into VimpelCom
Moscow
Strategic alliance with Telenor
4.8 million subscribers in Moscow
No.1 market share in Moscow
Return to profitability
1998
1999
2001
2002
2003
Merger announced
Dec
Jul Aug
May
Feb
Jun
Aug
Mar
Sep
Nov
Nov
Dec
Alfa and Telenor each invest 58.5m into VIP-R
3.7 million subscribers in the regions
Strategic alliance with Alfa Group
1 million subscribers in the regions
VimpelCom invests 117m into VIP-R
Regions
VIP-R established to develop super-regions with
licenses in Central, Volga, Siberia, North
Caucasus
Alfa invests further 58.5m into VIP-R
Acquisition of license for Urals super-region
Acquisition of GSM license for Northwest
super-region incl. St. Petersburg
Profitability in the regions
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Attractive growth opportunities in the regions
Population, million
Wireless penetration,
Moscow
St. Petersburg
Regions
Mobile subscribers, million
GDP per capita (2002),
Regions
Moscow
St. Petersburg
Source Goskomstat, SP, ACM Consulting, JSon
Partners
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VimpelCom in the regions
VimpelCom market share,

• Six super-regional licenses
• 150 revenue growth in first half 2003
• Positive contribution to EBITDA since 3Q02 and to
  net income since 1Q03
• No. 1 in Siberia super-region
• No. 2 and fastest growing in Central and Volga
  super-regions
• Solid growth in South and promising start in
  Northwest
• Urals to be launched in 4Q2003
• Regional and Moscow operations now equally
  important parts of our business

60
50
40
30
20
10
0
1Q01
2Q01
3Q01
4Q01
1Q02
2Q02
3Q02
4Q02
1Q03
2Q03
VimpelCom regional subscribers, 000s
3,695
3,005
2,242
1,440
723
431
285
200
123
57
100
1Q01
2Q01
3Q01
4Q01
1Q02
2Q02
3Q02
4Q02
1Q03
2Q03
28.08.03
Source VimpelCom
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Why accelerate the merger

• The 2001 VimpelCom-Region Shareholders Agreements
  give all parties the right to accelerate the
  merger process prior to December 2007
• Risk profile of the regions has changed - the
  VimpelCom-Region structure has now served its
  purpose
• VimpelComs management sees significant benefits
  in merging now
• attractive terms achievable
• capturing 100 growth in the regions instead of
  only 55
• unlocking synergies and achieving greater
  efficiencies
• unified platform for further consolidation

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The merger transaction

• In connection with the merger of VimpelCom and
  VIP-R, Alfa and Telenor will exchange their
  aggregate 44.7 interest in VIP-R for 10.9
  million new VimpelCom common shares (equal to
  14.6 million ADSs)
• VimpelCom the surviving entity
• 21.4 economic ownership dilution at closing (on
  a fully diluted basis)
• Fairness opinion received from UBS Limited
• EGM called for 24 October 2003 (on certain
  issues, only disinterested shareholders may vote)
• 50 of disinterested shareholders are required to
  approve the transaction

The new VimpelCom ownership structure
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Relative valuation
Subscribers

• Valuation ratio of 0.91 1 between VIP-R and the
  rest of VimpelCom (predominantly Moscow)
• implying that 33.6 of VimpelComs market cap. is
  attributable to its 55.3 stake in VIP-R
• Number of subscribers in the regions to exceed
  Moscow during 2004
• Revenues in the regions to exceed Moscowduring
  2005
• EBITDA in the regions to equal Moscow during
  2005
• Merger expected to be EPS accretive in 2005
• assuming synergies from tax, interest
  expense, GA

Net revenues
EBITDA
Source VimpelCom
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Our capital expenditure program
Capital expenditure, million

• Strong funding position
• Strong cash flow generation
• Strong balance sheet
• Access to debt capital markets

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A strong balance sheet
VimpelComs balance sheet (as of June 30, 2003)
Pro forma
Actual
VIP-R
consolidated
consolidated
000
Cash and cash equivalents
188,490
246,990
28,640
Total assets
1,977,365
2,613,647
753,687
Interest bearing debt
755,897
755,897
340,610
Total shareholders equity
760,000
1,491,269
271,397
Debt / total shareholders equity
99
51
Debt / total assets
38
29
Debt / EBITDA
1.74
1.74
Pro forma for Alfa Group's 58.5 million VIP-R
equity contribution and VimpelCom / VIP-R merger
Includes long-term inter-company loans due to
VimpelCom of 94,363
Interest bearing debt only
EBITDA - Operating income before
depreciation amortization for the 12 months
ended June 30, 2003
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Summary

• Strong strategic rationale for merging with
  VimpelCom-Region
• A strong platform for further consolidation
• Poised to capture 100 of returns from the
  regions
• Attractive merger terms achievable
• EGM shareholder support required