Jun
18
In the beginning of June, Vimpelcom has published 1H consolidated US GAAP report. The report is noticeable, because it includes Golden Telecom’s figures, which was purchased in the end of February. The report includes the March figures of GT. Thus, since 2Q, GT will be fully consolidated in Vimpelcom’s report.
In the beginning the players had some anxieties concerning Vimpelcom’s “blurry” efficiency due to addition GT into report. However, the Vimpelcom’s OIBDA margin in 1Q formed 53.4%, which is a four-year-record. Such high results were achieved by increasing Vimpelcom’s cell communications business efficiency to 57.2%.
However, due to the total GT’s consolidation the decrease of company’s efficiency may occur. In case of Vimpelcom does not make active actions to integrate the companies and to optimize expenses, OIBDA margin may fall and form 49.5% (-4 p.p.). Thus, company’s income could increase by 12%. The opinion was shared with Alexander Izosimov, the head of the company, who forecasted the effectiveness decrease to 45-50%.
The main reason why Vimpelcom managed to keep the effectiveness at such a high level is a retirement of marketing actions, which may be provided for the attraction of new subscribers, who «blurring» ARPU and decreasing efficiency. We will discuss these moments later.
We have reviewed Vimpelcom’s financial model using new data and increased our fair estimation of company’s ADR up to 39.99 USD (the previous estimation formed 30.8 USD). The given price intends the growth potential of quotes 19.9%. Therefore, we upgraded our recommendation concerning company’s shares from “HOLD” to “BUY” level.
Vimpelcom: VIP+GT a promising couple - June 17, 2008 (PDF)