Russia's No. 2 cellular service provider, Vimpel Communications (NYSE:VIP), will be reporting second-quarter earnings later this week. Prior to the release, we're going to peer through our magnifying glass and see what's in store.

What analysts say: 

  • Buy, sell, or waffle? Of the 20 analysts following VimpelCom, 12 of them rate the stock a buy, while seven maintain a hold, and one says sell shares. In our Motley Fool CAPS investor database, 304 of our 60,000-plus users have rated the stock, giving it a five-star rating overall.
  • Revenue. The analysts are expecting $1.59 billion in revenues for the quarter.
  • Earnings. Three Street analysts have given estimates for the quarter, with an average of $1.56, but ranging between $1.46 and $1.75.

What management says:
In VimpelCom's first quarter, the company turned in solid improvements, even during a seasonally weak period. Margins improved significantly, thanks to reduced spending, leading CEO Alexander Izosimov to comment that "it is a very good start to what we hope will become another successful year." VimpelCom has its share of challenges, though, as it battles against formidable competitors in Russia, the largest being Mobile TeleSystems (NYSE:MBT).

The company has made some significant changes in how it counts active subscribers and reports other metrics. While the company states that this change will "more accurately reflect the trends and competitive positions of the business," it will also obscure comparable past data for investors. Just as it's difficult to compare metrics of U.S. operators such as AT&T (NYSE:T) and Sprint Nextel (NYSE:S) to see who's leading and who's lagging, investors will have to dig a little deeper for operational clues in VimpelCom's numbers.

What management does:
Going forward, the company will emphasize its active subscriber base, which is lower than the registered subscriber base. It will report ARPU figures in each market and churn numbers for markets in operation more than one year. Since Russia makes up nearly 85% of VimpelCom's customer base, we'll include metrics from that region for reference.

Metric

12/05

03/06

06/06

09/06

12/06

3/07

Registered subscriber base (millions)

45.4

48.1

50.8

52.4

55.1

56.8

Churn (quarterly)

8.3%

8.4%

7.8%

9.8%

9.0%

8.6%*

Average revenue per user (ARPU)

$7.10

$6.60

$7.50

$8.70

$8.90

$8.90*
Source: Company filings.
*Churn and ARPU numbers for latest quarter reflect Russian market only.

One Fool says:
In addition to its efforts to expand services in existing markets in Russia and Kazakhstan, VimpelCom is still growing by acquisitions -- the company announced its latest purchase of CSK, a cellular operator in the Irkutsk region for $232 million. With some regions of Russia already highly saturated, acquiring current operators will be necessary to scale the business. As far as current operations, though, the expansion of existing services is vital to maintain and grow ARPU levels across its subscriber base. If the core markets don't continue to show healthy expansion, the ability to fund new acquisitions will get tougher for the company.

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Fool contributor Dave Mock mints goodwill and promotes general, all-around euphoria. He owns no shares of companies mentioned here. Dave is the author of The Qualcomm Equation. The Fool's disclosure policy is a proven endorphin stimulant.