VimpelCom First-Quarter Profit Drops 36% on Russian Unit

VimpelCom Ltd., the world’s sixth-largest wireless operator by subscribers, said first-quarter profit dropped 36 percent as competition made its Russian business less profitable.

Net income fell to $318 million from $500 million a year earlier, hurt by tax expenses and exchange-rate fluctuations, Amsterdam-based VimpelCom said today in a statement. Profit was less than the $412.5 million average of two estimates compiled by Bloomberg. Sales excluding acquisitions gained 3 percent to $5.6 billion.

VimpelCom, Russia’s third-largest wireless company by subscribers, has begun reorganization to cut costs after buying Wind Telecom SpA last year. Earnings before interest, taxes, depreciation and amortization from the Russian wireless division, the largest unit, narrowed to 41.3 percent of sales from 42.1 percent a year earlier as the price per minute of voice calls declined and low-margin handset sales increased.

Talks to sell a stake in the company’s Djezzy unit to the Algerian government are continuing, Chief Executive Officer Jo Lunder said in an interview, reiterating the company’s intention to remain in Algeria. The company may sell units in its smaller markets or merge them with competitors, Lunder said, without giving details.

“The situation is improving but there are still things that prevent VimpelCom from growing, most importantly the situation in Algeria,” said Sergey Libin, a Moscow-based analyst at Raffeisenbank. “Compared to the fourth quarter, net profit is actually quite good.”

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