OREANDA-NEWS. November 23, 2009. We expect Vimpelcom to report its 3Q09 US GAAP results next week. Overall, the results will likely show a seasonal improvement, though slightly weaker than MTS’s presented last week, in our view, reported the press-centre of VTB Capital.

Russian mobile revenues are likely to show 5.5% QoQ rouble growth vs. MTS’s 7% (calculated as reported ARPU times the average number of customers during the quarter), mainly due to a seasonal effect (which usually play more for MTS), MTS’s stronger content revenues and higher customer base growth. Vimpelcom’s Russia MOU might post 1% QoQ growth, in our view, unlike MTS’s one (down 1.4%) due to the slightly better quality of Vimpelcom’s new customer base.

Vimpelcom’s Kazakh mobile revenues are likely to follow the trend of its major rival Kazakhstan-GSM. We expect ARPU to increase 10% QoQ in tenge terms on the back of a slight recovery in the Kazakh economy and strong seasonality.

We do not expect to see strong revenue growth in fixed-line business (up 3% QoQ in rouble terms) due to weak seasonality in residential and business revenues, with the latter being also depressed by the USD’s depreciation.

The operator’s OIBDA margin is likely to post some decline (-0.6pp QoQ vs. MTS’s -0.3pp) on the back of a noticeable increase in advertising costs (likely moving back to a pre-crisis level) and an increase in gross sales (and hence, dealer commission costs). We note that in 1H09 Vimpelcom has slashed its advertising costs (in 1Q09 68% QoQ in rouble terms).

We expect the operator’s net income to slide from USD 702mn seen in 2Q09 due to high FX gains to USD 518mn. Vimpelcom continues shifting its debt more towards rouble, likely to hold most of its cash in foreign currencies (to match with future debt payments in FX) and continues to hedge a major portion of its USD denominated debt positions. We also expect some increase of Vimpelcom’s interest expenses (up 6% QoQ) due to a higher cost of rouble borrowings.