OREANDA-NEWS. April 1, 2011. Joint Kyivstar — the Ukraine VimpelCom Ltd. Business Unit which incorporates Kyivstar and Beeline-Ukraine operators — demonstrated stable leadership in the residential telecommunications market and showed steady growth in the main operating figures, including the volume of mobile subscribers base, the traffic level consumed by the clients, and the general level of the company profit-earning capacity at year-end 2010.

The important fact for a common subscriber is that in 2010 the volume of mobile services obtained by the clients was 35 per cent more than in the previous year, while the "average bill" remained almost at the level of 2009.

Subscribers’ Base and ARPU

Kyivstar demonstrated positive results in its subscribers’ base in 2010. The active clients’ base in the mobile segment resumed its growth and increased by 1.5% to 24.4 mln people. Meanwhile the average revenue per user (ARPU) increased by 1.3%. In 2010 the growth of subscribers base in the fixed internet segment was "explosive" — the number of users increased by 143.5%.

The Drivers of Growth

Mobile telephony keeps occupying the leading place: more than 80% in the operator’s income structure.

In 2010 the markeing decisions of Kyivstar in the development of mobile communications were channeled to the inducement of consumption and promotion of unlimited tariffs in all segments.

A new tariff of "Single Price" with the oubound tarification of 0,25 UAH per minute in all directions was introduced to the mass segment. There were also introduced such tariffs as "Freedom", "SMS and Calls", and "25 Million", the first tariff for the consolidated subscribers base of Kyivstar and Beeline-Ukraine.

The line of new unlimited tariffs was introduced for business-clients. It includes "Unlimited Convenient", "Unlimited + Internet", "Unlimited + StarSvit", "Unlimited VIP", and "Absolute Unlimited" tariffs.

DJUICE brand demonstrated essential success. The tariff innovations and active development of "fun territory" definition let stop the subscriber churn and bring this youth brand out to the new round of development. "The Bomb" innovative tariff with common outbound tarification of 0,10 UAH per minute in all directions, the "DJUICE Unlimited + Music" updated tariff with the internet-traffic package volume included, and also an active promotion of popular modern digital music played an essential part here.

At year-end 2010, these steps led to the growth of telephony service consumption with MOU increasing by 34.7%, and to increase of ARPU by 1.3% correspondingly. It also let strengthen the subscribers base and minimize the migration of subscribers to other operators.

In 2010 the total voice traffic made 142 bln minutes. Taking into consideration the growing volume of telecommunication services consumption in 2010 the wireless capacity of Kyivstar was increased by 17%.

In 2010 the essential growth of modem sales took place due to the price reduction and delivery of promo traffic; 315 thousand devices were sold by the year results, which is 110% more than in 2009. This led to the increase of mobile traffic consumption through "large screen" devices. In 2010 the volume of data transmission in Kyivstar wireless network made 2.5 thousand terrabytes (which equals 2 mln movie copies). The ammount of sold modems has reached 0.5 mln items since 2008.

At year-end 2010 the general number of mobile internet users made around 1.8 mln. The revenues from the mobile data transmission are increasing and they are also becoming an essential part of total revenue.

In 2010 Kyivstar earned UAH 326 mln from multimedia services. It makes around 3 % of the company annual income. Last year the company earned UAH 135 mln from the sales of digital music only.

Under the auspices of DJUICE brand the interent community (almost 3 thousand young bands and musicians that present their content) was created on the dmd.djuice.com.ua portal. 57 mln tracks were downloaded in the portal in 2010; it equals approximately 4 mln CD—discs.

The voting and rating system let select the highest quality product from this content and relocate it on the commercial level where it is sold in the form of ringtones, full-tracks, and dijingles. The average price for a track is around UAH 2.

The integration of Kyivstar, the best Ukrainian brand and No1 mobile operator, and Beeline-Ukraine, a strong and experienced player in the fixed communications market for business and broadband access on the FTTB-base, let create a multiservice operator with unique competencies and experience.

In 2010 Kyivstar increased its FTTB-geography by 60%. More than 4 km of fiber-optic cable was laid, the internet-channel capacity was increased, the network capacity was increased from 40 Gbps to 95 Gbps.

In 2010 the broadband "Home Internet" service from Kyivstar was hooked up in 27 new Ukrainian cities and towns, and became available in 37 cities and towns, in more than 2 mln appartments in 21 thousand dwelling-houses at year-end. At year-end 2010 Kyivstar was serving more than 266 thousand subscribers of "Home Internet". In 2010 the IP-traffic volume which was received and transferred by the "Home Internet" subscribers, exceeded 95 petabytes (almost 100 mln gigabytes).

As a result, in 2010 the income from "Home Internet" increased by 104.4% and made UAH 97.7 mln. The share of income from FTTB in the total income of joint Kyivstar in 2010 still made 1.3 %, with this area being a potential driver of the growth of income of the operator.

The Growth of Profit and Income

The increase in general profit-making capacity of the company is demonstrated in OIBDA margin figure, which increased by 1.5 percentage points and made 53.6% in 2010. It is the highest figure both for Ukrainian market and for the VimpelCom Ltd operators group.

It became possible due to the effective marketing decisions combined with synergistic effect from the intergration of operators and effective cost management decreased by 0.2% inspite of general inflation and five-fold increase in mandatory payments for using frequency resource.

The income from mobile connections in 2010 in comparison with the year of 2009 increased by 0.2%, meanwhile the essential shortage of inflow from interconnect (around 20%) took place.

Operators Integration

Merging of the Ukrainian VimpelCom assets on the Kyivstar basis became one of the key events in 2010 on the Ukrainian telecom market. Integration processes of joint Kyivstar goes according to the plan and have already given the first results — synergistic effect achieved in 2010 is estimated at about USD  52 mln.

Investments into Development

In 2010 the capital investments y-o-y grew by 38%. They were channeled to the mobile network development, and of the capacities aimed to provide the growing traffic in particular, and also to the development of the fixed internet on the FTTB-base ("Home Internet" service).