Nov. 29 (Bloomberg) -- OAO VimpelCom, Russia's second- largest mobile-phone company, said third-quarter profit rose 71 percent, beating estimates as it added subscribers who spent more on making calls.

Net income climbed to $458.1 million, or $9.02 a share, from $268.4 million, or $5.28, a year earlier, the Moscow-based company said today in an e-mailed statement. Sales rose 44 percent to $1.96 billion under U.S. accounting rules. Nine analysts in a Bloomberg News survey had a median profit estimate of $440 million on sales of $1.95 billion.

VimpelCom, whose major shareholders are billionaire Mikhail Fridman's Alfa Group and Nordic phone company Telenor ASA, has reported nine straight profit increases and the stock has more than doubled this year. The economy in Russia is in its ninth straight year of growth, encouraging customers to spend more on mobile-phone services.

``Recent optimism on the market over Russian mobile operators makes it more difficult for operators to positively surprise the market,'' said Konstantin Belov, an analyst with Moscow-based UralSib Financial Corp.

VimpelCom dropped $1.10, or 3.1 percent, to $34.90 at 12:08 p.m. in New York Stock Exchange composite trading, valuing the company at $35.5 billion.

OAO Mobile TeleSystems, VimpelCom's larger competitor in Russia, said Nov. 20 third-quarter profit rose 35 percent. Its American depositary receipts are up 80 percent this year.

Customer Growth

VimpelCom's subscriber count rose 16.4 percent to almost 61 million on Sept. 30 from a year earlier. The number of active subscribers increased 19 percent to 50.7 million. The company is also active in Ukraine, Kazakhstan, Tajikistan, Uzbekistan, Georgia and Armenia.

Operating income before depreciation and amortization rose 41 percent to $1.02 billion. Profit on that basis as a percentage of sales shrank to 51.9 percent from 52.8 percent a year earlier.

``The company is becoming stronger and stronger despite increasing competition on the CIS markets,'' Chief Executive Officer Alexander Izosimov told reporters in Moscow today.

Net income rose 51 percent to $422.6 million on sales of $1.65 billion in Russia. Average monthly revenue per Russian customer increased 26 percent to $13.40. The average number of calling minutes a month increased 38 percent to 208.9 in Russia, the company said.

In Kazakhstan, VimpelCom's second-largest market, net income was $21.7 million on sales of $166.3 million. Average monthly revenue per customer in the country fell 5.6 percent to $13.60.

Military Frequencies

In Ukraine, per-user revenue fell to $5.80 from $6.70 a year earlier because of increased competition. VimpelCom reported a loss of $6.4 million in Ukraine on sales of $36.3 million. Izosimov said he expects the Ukrainian unit to turn profitable at the end of 2008, or in early 2009 if the price competition in the market doesn't intensify.

Izosimov said the difficulty in getting frequencies from the Russian military complicates the rollout of so-called third- generation networks in Moscow, which will allow services like video calls and mobile television.

``In Moscow, 3G looks difficult for all three operators,'' he said in a conference call today. It is ``related to defense systems with which it is difficult to co-exist.''

Mobile TeleSystems, VimpelCom and OAO MegaFon, Russia's largest operator, were awarded licenses for 3G services in April.

Izosimov said the three operators are looking into finding a solution, but declined to say how long it will take.

Russian mobile operators will spend $15 billion on development by 2012, half of that on 3G, Mobile TeleSystems Chief Executive Officer Leonid Melamed said in March.

To contact the reporter on this story: Lyubov Pronina in London at lpronina@bloomberg.net.

Last Updated: November 29, 2007 12:44 EST