Russian cellular service provider Vimpel Communications (NYSE:VIP) is on tap to report first-quarter earnings on Friday. Let's call ahead and take a look at what's in store for the company.

What analysts say:                                                      

  • Buy, sell, or waffle? Of the 13 analysts who weigh in with an opinion on VimpelCom, eight of them rate the stock a buy, while five maintain a hold rating. No analyst is brave enough to issue a sell rating at this point. In our Motley Fool CAPS investor database, almost 200 of our 50,000 users have rated the stock, giving it a five-star rating overall.
  • Revenue. The lone analyst revenue estimate for the company is pegged at $1.46 billion this quarter.
  • Earnings. Analysts on average are expecting earnings of $1.40 per share.

What management says:
The cold Russian winter wasn't enough to dampen VimpelCom's results in 2006, as the company turned in a number of positive operational metrics. CEO Alexander Izosimov states that the company has "successfully dealt with challenges in Russia related to a more demanding competitive landscape" and continues to add new subscribers as it expands in new markets outside Russia.

But Russia's predominantly prepaid wireless services market leads to very high churn rates. Like main competitor Mobile TeleSystems (NYSE:MBT), the company is still grappling with customer defection. To improve in this area, the company says it "is focused on protecting its revenue base by employing a segmented approach with the emphasis on higher ARPU consumer segments." Now, I don't speak a lick of Russian, but it sounds to me like the company is acknowledging that churn will continue at a high rate, but its impact will be lessened with more focus on premium customers and services. So rather than micromanaging churn directly like stateside operators Verizon (NYSE:VZ) or AT&T (NYSE:T), it appears VimpelCom will focus more on ARPU expansion.

What management does:
The metrics VimpelCom has been reporting show just that -- churn continues to grow, as does average revenue per user.

Metric

9/05

12/05

03/06

06/06

09/06

12/06

Subscriber base (millions)

40.1

45.4

48.1

50.8

52.4

55.1

Churn (quarterly)

8.8%

8.3%

8.4%

7.8%

9.8%

9.0%

Average revenue per user (ARPU)

$7.80

$7.10

$6.60

$7.50

$8.70

$8.90
Source: Company filings

One Fool says:
While ideally VimpelCom's churn rates would be dropping, not rising, this trend is only a major concern if ARPU stagnates, as is the case with operators such as Vodafone (NYSE:VOD) that operate in mostly mature markets. High churn rates in prepaid markets often result from operators dropping infrequent users or those with inactive accounts -- customers that wireless providers don't want to spend much money courting anyway. Fortunately, VimpelCom is fairly transparent in reporting both metrics across all its markets, so investors should get a good sense tomorrow of how well or poorly the company is executing.

More Foolish musings (in English, not Russian) can be found here:

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Fool contributor Dave Mock's California roots have him ill-prepared for any winter weather not warm enough for shorts. He owns no shares of companies mentioned here. Vodafone is a Motley Fool Inside Value recommendation. Dave is the author ofThe Qualcomm Equation. The Fool has a disclosure policy.