Daily analyst comments

On August 30 Vimpelcom came out with its US GAAP financial statement for H107 and Q207.

On the whole, the mobile company's results overshot market expectations: Vimpelcom achieved stellar expansion growth and strengthened both OIBDA and net profit.

Revenue rocketed 53% compared to the same period of 2006 against a slowdown in customer base increment (+16% y-o-y). Earnings rose on the back of both regional expansion (the cellular major broke onto the Armenian market and is taking aggressive steps on other CIS markets, to be more precise, in Ukraine where its market share rose from 1.6% to 5.2%) and a 37% upsurge in ARPU. Such an increase is a strong figure showing that Vimpelcom executives were right about their focus on growing ARPU. However, we expect to see MTS's ARPU also rise, since both providers target boosting earnings from operations in Russia.

Vimpelcom's OIBDA margin turned out to be 2% above the 2006 figure, which came as a pleasant surprise to the market. Higher operating efficiency also gives credit to the operator's management team.

It's noteworthy that a jump in the cellular firm's aggregate subscriber base coincided with an increase in its active clientele. It may be concluded that new adds are assigned to the category of active users and, consequently, their ARPU will be higher than the average among Vimpelcom subscribers. Growth also stemmed from well-thought-out marketing and customer relations politicies.

Vimpelcom's US GAAP financial showings, $ mln

	H106	H107	Chng, y-o-y
Sales	1,121,546	1,717,167	53%
OIBDA	561,555	896,758	60%
OIBDA margin	50%	52%	2%.
Net profit	194,946	359,273	84%
Net margin	17%	21%	4%.
Total subscribers	50,822,100	59,049,700	16%
Active users	41,282,500	47,701,300	16%
ARPU (active users), Russia	9.0	12.3	37%
Share on the Ukrainian market	1.6%	5.2%	3.6%

Source: Company data, Finam estimates

We expect that Vimpelcom's strong results will produce a positive impact not only on Vimpelcom itself, but also on MTS: the trends displayed by the company that first released financial results (MTS will report H107 financials on September 4) will most likely find validation in the market leader's performance. We reiterate our target price of $12.75 for MTS shares, with a Buy recommendation. Meanwhile, we have no official recommendation on Vimpelcom shares.