"Everyone knows cellular is the most dynamic business, so the combination of Russia and telecommunications just hypnotized investors," said Valery Antonov, a telecommunications analyst with Creditanstalt Grant.
VimpelCom, which operates under the Beeline trademark in Moscow, on Friday offered roughly 20 percent of its outstanding shares as American Depositary Receipts on the New York exchange. The price of VimpelCom ADRs, each of which represents three-quarters of a share of underlying stock, rose more than 40 percent from the initial offering price to close at $29.
Analysts said the original filing price of $17.50 was based on conservative sales and earnings projections, and discounted for the fact that Russia's economy has yet to thrive. Growth in gross domestic product is still negative, and "the economy simply isn't stable," said analyst Linda Killian of Renaissance Capital in Greenwich, Connecticut.
"There were other risk factors too," she said. "But I would compare them to those of Brazilian or Argentinean companies as far as disclosure on inflation, currency, and differences in financial law."
The share issue was underwritten by the investment firm Donaldson, Lufkin & Jenrette and the Moscow-based brokerage firm Renaissance Capital, which is not related to the Greenwich firm.
By industry standards, VimpelCom is still somewhat of a bargain based on traditional price-to-earnings or price-to-sales ratios.
U.S.-based wireless company Millicom, which operates in Africa, South America and parts of Europe, has yet to post a profit, but the stock still trades at 12 times sales, Killian said. Britain-based Vodafone Ltd. trades at a multiple of five, although the company's annual revenues are much larger at $2 billion. On a sales ratio, VimpelCom comes in at a multiple of about seven, and the company has been profitable since its inception in 1992.United City Bank analyst Natalia Ivanova said she expected 1996 sales of about $190 million and earnings of $42 million, compared with 1995 sales of $100.9 million and earnings of $27.6 million.
VimpelCom's first phones were popular with entrepreneurs and other well-heeled Russians. The average Russian mobile phone subscriber uses it for 480 minutes a month, compared with 145 minutes in the United States.
VimpelCom has a market capitalization of $750 million. After paying off some debt and start-up costs, VimpelCom estimates it will commit about $125 million in 1996 and $108 million in 1997 to capital expenditures, focusing promotion of its Bee Line brand in the Moscow license area in 1996 and in Russia's regions in 1997.
The company's aim is to build a state-of-the-art network on a new, 1900-megahertz digital standard advanced enough to keep competitors Moscow Cellular Communications and Mobile Telesystems at bay.
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