By
Dave Mock
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More Articles
August 30, 2007
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Editor's note: A previous version of this article incorrectly stated VimpleCom's market cap. The Fool regrets the error.
In its second-quarter earnings release, scrappy Vimpel Communications (NYSE: VIP ) reported a 53% increase in revenue to $1.72 billion. Net income rose 84% to $359 million, thanks to increased margins fueled by higher average spending from its subscriber base.
VimpelCom is clearly "rising with the tide" in its major markets, as customers are increasing their use of a variety of mobile voice and data services. ARPU levels are up dramatically, particularly in Russia, where average revenue per user came in at $12.30 versus $10.90 last quarter and $9.00 in the year-ago quarter. This is all great news, but one concern is that market share ticked down slightly in a few places, including Russia and Kazakhstan, showing that competition is intense.
Investors will have to sharpen a few more pencils to make it through changes in the math VimpelCom uses to report its metrics. For starters, the company is now reporting its active subscriber base, rather than the registered base. This will prop up the subscriber-based metrics such as ARPU and minutes of use (MOU), but should give a better indication of operations. U.S. operators AT&T (NYSE: T ) , Sprint Nextel (NYSE: S ) , and Verizon Wireless -- a joint venture between Verizon Communications (NYSE: VZ ) and Vodafone (NYSE: VOD ) -- all slice and dice their operating metrics different ways and periodically change them as well, so this is not too unusual.
Also, the company is now using an independent source to measure its market share in its operating regions. The reporting of churn levels has changed as well -- the cancellation metric is now being reported in each operating region rather than on a consolidated basis. I'll wait a few moments now until your head stops spinning.
But wading through all the new math still shows VimpelCom performing well in highly saturated Russia, as well as taking advantage of new growth opportunities. The company is up-front about noting areas of its business that need improvement and focuses on the different needs of each market. With a new 3G license now in hand for Russia, there are more growth opportunities ahead while VimpelCom fine-tunes its performance against its larger counterpart.
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Fool contributor Dave Mock keeps a tide chart handy to know when things are rising or falling. He owns no shares of companies mentioned here. Dave is the author of
The Qualcomm Equation. Vodafone is an Inside Value recommendation. The Fool's disclosure policy doesn't need a muscle shirt to show off those sweet rocks.
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