By David Weissman
VimpelCom (NYSE:VIP) is the second largest cellular carrier in Russia with over 25% market share and continued expansion in regions of the Commonwealth of Independent States (CIS), operating GSM-based wireless services. We are encouraged with VimpelCom’s successful sales growth trend and the company’s ability to retain subscribers on a recurring basis, even as overall economic factors remain weak.
The company has initiated expansion into other Asian markets along with entry in fixed wireline communication offerings. We believe long-term fundamentals remain firm, although investors must evaluate the risk associated with equity markets in Russia.
The acquisitions of Golden Telecom and Corbina have widened the periphery for growth opportunities, which further solidifies VimpelCom’s position in the Russian telecom market. Leveraging these acquisitions, the company has expanded its offerings beyond wireless to fiber-based infrastructure with the launch of an array of value-added services, such as IPTV, Triple-Play (voice, Internet and video) service, Pay-TV and wireless broadband (WiFi).
From a financial standpoint, cost synergies may be derived from consolidating backbone operations, which eventually may translate to improved earnings performance for the company. Currently, VimpelCom offers broadband services in 22 Russian cities, and with the consolidation of Golden Telecom it is expected to increase to 65 cities or more by 2012, placing the company in a strong market position.