MTL Spinoff news and GS assesment.

News
Russian news agency, Interfax, reports that Mechel is considering a plan to
segregate its mining business and conduct an IPO of this new company on the
TSX potentially raising up to $2 bn. According to the article, the new
company could sell up to one-third of its stake.

Analysis
The company has historically been under pressure from the market to unlock
its conglomerate structure, which unites steel and mining assets (coal, iron
ore and nickel). Such a move, were it to be confirmed by the company, should
release the pure-play value of these assets, which we believe is higher than
the current value of the conglomerate, as well as help raise funds for the

development of existing and recently purchased coal assets. That said, the
valuation mentioned (implied equity value of newco of $6.7 bn) does not make
a lot of sense to us as, on our estimates, it implies a 2008 EBITDA multiple
of around 5.2x (based on our 2008 mining segment EBITDA estimate of $1.66 bn
and assuming debt of $2.0 bn), which is lower than Mechel’s current
‘conglomerate’ multiple of 5.3x.

Implications
We believe such an event would be positive for the stock. While where the
upside is coming from should be reasonably clear, we would also voice two
concerns, namely: (1) to what extent management of two separate entities
would be as smooth as that of the current conglomerate given the scarcity of
management resources; (2) to what extent investors might be willing to switch
from the parent conglomerate into the standalone mining business when (and
if) the deal takes place. We reiterate Mechel as our key idea in the Russian
mining and steel space (as well a Russian Focus List idea) with a 12-month
SOTP price target of $112. Risks to our price target include the performance
of Mechel’s steel assets, labor cost inflation, iron ore and coal prices. The
level of demand for coal in Russia and consolidation risks for recently
acquired assets are additional risks.

VIP conference call details..

Pardon the typoes.. i will update as it goes..

Operator: Good day, everyone, and welcome to this conference call to discuss VimpelCom’s Second Quarter [Third Quarter] 2007 Earnings Results. Today’s call is being recorded. At this time, I would like to turn the call over to Mr. Peter Schmidt. Please go ahead sir.

<<Peter Schmidt, Financial Dynamics>>

Good morning, and welcome to VimpelCom’s conference call to discuss the company’s third quarter and nine months 2007 financial and operating results. Before getting started, I would like to remind everyone that except for historical information, statements made on this conference call may constitute forward-looking statements that involve certain risks and uncertainties. These statements relate in part to, one, the company’s strategy and development plans in Russia and the CIS; two, market growth and the competitive environment in Russia and the CIS; three, 3G development; and four, projections relating to the company’s cash position, dividend payment and capital expenditures.

Certain factors may cause actual results to differ materially from those contained in the forward-looking statements, including the risks detailed in, one, the company’s press release announcing third quarter and nine months 2007 financial and operating results; two, the company’s earnings presentation entitled presentation of “3Q 2007 Financial and Operating Results”; three, the company’s Annual Report on Form 20-F for the year ended December 31, 2006; and four, other public filings made by the company with the United States Securities and Exchange Commission, each of which are posted on the company’s website at www.vimpelcom.com.

In addition, the company’s third quarter and nine months 2007 financial

quarter and nine months 2007 financial and operating results press release and Form 20-F are posted on the SEC’s website at www.sec.gov. VimpelCom disclaims any obligation to update developments of these risk factors or to announce publicly any revision to any of these forward-looking statements made on this conference call or to make corrections to reflect future events or developments. If you’ve not received a copy of the third quarter and nine months 2007 financial and operating results press release, please contact FD at 212-850-5600 and it will be forwarded to you. In addition, the press release and the earnings presentation, each of which includes reconciliations of non-GAAP financial measures presented on this conference call, can be downloaded from the VimpelCom website.

At this time, I would like to turn the call over to Alexander Izosimov, Chief Executive Officer of Vimpel-Communications. Alexander?

<<Alexander V. Izosimov, Chief Executive Officer>>

Thank you. Thank you and hello everyone. Thank you for joining our conference call today. Let me introduce the team participating on this call. Here with me are Elena Shmatova, our Chief Financial Officer; Nikolai Pryanishnikov, our Executive Vice President who is in charge of operations in Russia; Kent McNeley, our Chief Marketing Officer; and Alexander Boreyko, our Director for International and Investor Relations.

Today’s presentation will start with a general overview of our performance in the third quarter of 2007. After that we’ll review each of the markets where we operate in more detail. Now, let me ask Elena to present our consolidated financial results.

<<Elena A. Shmatova, Executive Vice President, Chief Financial Officer>>

Thank you, Alexander. Discussing our third quarter results, I would like to highlight a few key numbers. First, we are very pleased with revenue and OIBDA growth both over 40% year-over-year. It is particularly important to note such level of growth in the third quarter, because now we can see a proper comparison not affected by changes in connection (ph) in Russia and the corresponding tariff rebalancing (ph). Second, our third quarter

Second, our third quarter OIBDA margin was strong as 51.9%, it was slightly less however, than what we saw year ago or in the previous quarter. But, it’s excluded 17 million of additional accruals connected with stock option as a result of high stock price agility (ph). However, OIBDA margin will be approximately 0.9 percentage points high, this accrual was reflected in Russia, and that’s impacted the Russian OIBDA margin as well.

Third, it is important to mentioned, our very strong growth in net income more than 70% year-over-year, which is some extent helps by rubella (ph) position (ph) against US Dollars, and the slowdown in the position expense. Based on this operational results, we continue to, just potential improvement in our cash generation. Consequentially, our free cash flow over the last 12 months it’s more than $1 billion, two factors contributed to this.

Strong operating cash flow, and relatively modest capital investment during the first nine months of this year. Although, our annual CapEx profile was traditionally Q2 in the fourth quarter, we believe that year-end our free cash flow will not be so much from what we see now. This strong cash generation gives us good growth for the development and dividend.

Our balance sheet continues to good strong with net debt decreasing since the beginning of the year by 20%. Last 12 months OIBDA interest ratio more than 17, show that our ability to reliable service debt, and looking at our business ratio where we can see that’s were able to more than double our debt is needed for all development purposes.

Let me now turn the floor back to Alexander to discuss in more detail development in our key market.

<<Alexander V. Izosimov, Chief Executive Officer>>

Thank you, Elena. And let’s start with Russia, overall Russian telecom market continues to be very strong and the competition remains fairly benign over the past several quarters. Against this backdrop we believe our third quarter results are very good

results were very good.

We of course did 9% quarter-on-quarter of ARPU driven predominantly by continuing growth in US. Our, of the subscriber base keeps increasing and in the third quarter it grew by 4%. Growth in ARPU an active subscribers led to a strong 15% sequential and 35% year-on-year in our revenues in Russia. Although also margin remained strong a 52.7%, as already mentioned it would be approximately 1 percentage point higher if we exclude the non-cash effect of high volatility and by the way very high growth in our stock price in the third quarter. Our CapEx in Russia as percentage of revenue continue to decline in the third quarter and is now firmly within the target corridor (ph) of 15 to 20%.

We are on track with our 3G implementation schedule and as we said before 3G is not going to have any significant effect on this year’s numbers. As usual we’ll provide a 2008 CapEx guidance grew in next year up, I will tell our budget is approved by the Board of Directors.

Before the (indiscernible) implement Russia, I would like to draw your attention to the fact that the contribution to our business from the countries of the CIS continues to grow. In the third quarter 29% of our year-on-year revenue increased and 31% of our, (indiscernible) that growth incur the CIS. In terms of subscriber growth 63% of new editions came from the CIS countries. The third quarter aggregating with their margin in the CIS was 47%, the significant improvement from approximately 40% recorded a year ago.

I would also now, that in addition to GK stock (ph), we recently received 3G licenses in Uzbekistan and Armenia which was further bolster (ph) long-term growth in the CIS.

Lets now move to Kazakhstan, our second largest market. Our Kazak operations continue to show strong growth, the number of record subscriber

The number of active subscribers grew by almost 13% compared to the second quarter. Minutes of use, was also up dramatically. We work to built a habit of increased usage in low network utilization period. Our promotional activity offers on-net minutes at very low prices resulting in a temporary decline in average price per minute.

We believe that these average make sense as our usage has historically been less than half over the level of Russia. Our strong operational performance translated into good financial result. Our revenues increase by 12% compared to the second quarter, and by more than 60% compared to the third quarter of last year. OIBDA increased by almost 10% on a sequential and almost 805 on a year-on-year basis, OIBDA margin was 52.7% slightly below our exceptionally high margin of 53.7% in the second quarter. Although we are still in the network build-out phase in Kazakhstan, our CapEx as a percentage of revenue is rapidly declining. On a last 12 months basis, CapEx fell to 30% of revenue in the third quarter as compared with 64% recorded for the same period a year ago.

Our penetration in Kazakhstan will likely exceed 805 by year-end, and as competition for subscriber isn’t defined. In our view it is fine to begin shifting our focus to the acquisition of high-quality subscribers and revenue market share. The game actually were (indiscernible) was in Russia.

Now let’s move to Ukraine. We are glad to note that very good progress happened here. For the second consecutive quarter, we increase prices per minute despite continued aggressive pricing environment. This coupled with seasonally high guest roaming allowed us to increase our work for by 38% on a quarter-on-quarter basis. On top of that our active subscriber base grew 21% quarter-on-quarter, and is now up 189% year-on-year.

year-on-year as a result our subscriber and ARPU growth we were able to achieve impressive 60% quarter-on-quarter revenue growth. On a year-on-year basis, revenue growth was over 200% in other words we tripled our revenue in 12 months. At the same time our sales and general and admin expenses remain flat quarter-on-quarter. This allowed us to reach positive OIBDA in the third quarter essentially in line with our early prediction. Our focus in Ukraine remains on increasing our subscriber base paying particular attention to the profitability of the business. We also demonstrated very strong subscriber growth in Uzbekistan. Our active subscriber base more than tripled year-on-year and grew by 33% quarter-on-quarter. We increased our subscriber market share from 25% a year ago to 36% in the third quarter of this year.

Our financial performance in Uzbekistan was also very good. Impressive subscriber growth coupled with almost a 6% increase in ARPU led to a healthy 29% revenue growth and OIBDA margin expansion in the third quarter as compared to the second quarter. With Vimpel (ph) penetration rate of only about 17% our focus in Uzbekistan remains on growing our subscriber base. to that end we (ph) look to delivery natural build-out and continue developing our sales and distribution network.

Let’s now move to Armenia. Armenian business acquired in fourth quarter of 2006 continues to show stable financial performance. Our mobile revenues demonstrated over the 11% sequential growth and OIBDA margin remained strong at the level of 51.9%. At the same time our subscriber market share in the mobile market remains our key area of concern. According to in the parent research in October it experienced further drop to 25%. Inventory build-up attrition (ph) we have already launched a focus

already launched a focus program (ph) which includes changing management if anything presence in retail, increasing marketing efforts, launching new terrace and actively writing network construction. Vimpel (ph) already seen initial (indiscernible) progress however it will fix time to the (indiscernible) full effect of these efforts.

Finally a couple of words about Georgia and Tajikistan. We launch authorization in Georgia in the end of the first quarter so currently we are still in the early case (ph). We continue to build the network and develop our sales in distribution channel. In the third quarter we reached approximately 27,000 active subscribers and doubled our revenues. In Tajikistan we continue to demonstrate excellent dynamics with consistent growth in our market share. On a quarter-on-quarter basis the company reported 48% growth in revenues backside 31% growth in number of active subscribers. Subscriber market share increased to almost 17% from just 2% a year ago with current mobile penetration level in the country of just 25% we see this dynamics as very primacy. OIBDA which turn positive in the second quarter continued to grow in the third quarter with OIBDA margin expanding to 21.5%. Simply (ph) in summary it was another record quarter for the company, company is strong and setting stronger and we are very optimistic about growth potential in each of our market. So with this I’d like to thank you for your attention and let me now open the floor for questions.

Q&A

Operator: Thank you. [Operator Instructions].

[Operator Instructions]. We will take our first question from Sergei Arsenyev with Goldman Sachs.

<Q>: Good afternoon.

<A>: Good afternoon.

<Q>: I would like to ask you about your acquisition strategy and especially given the way in terms of press speculation about your interest in Golden Telecom and the potential for deal in Golden Telecom. And I appreciate that you come and talk about this specific transaction especially if you are in the process of it. But I am just wondering whether you can make a generic comment on how you would rationalize acquiring a business which strive (ph) you the significant premium to your own multiple and that will result in a also pretty considerable short term and medium term earnings dilution for you.

<A>: Actually you are absolutely right. We are not commenting on the rumors, because it would be very difficult to run the business otherwise. In terms of logical tenure (ph) of acquisitions, which we do, they have the (indiscernible) strategy. Now, the strategy being clearly communicated. It includes three major growth platforms, so platform number one, that’s a consolidation of the market in Russia. And to that extent acquisition targets in the mobile sector in Russia would be of interest to us. Number two, that would be continuing to expand geographically both in the CIS and outside of CIS, so any country inside in CIS is of interest to us. Further in CIS we say that everything which is south (ph) and east of Moscow would be of interest and we would go with classical strategy where we target major markets and unless we can establish a presence

can establish a presence over (indiscernible) in major market probably would be going for a smaller one. Hence, the discussion with these numbers would be inline with us.

The third element, third like of strategy we said that we will be exploring opportunity to enter adjacent businesses. And our adjacent businesses would be either of a new nature but let’s say mobile TV which doesn’t exist. We are actually territory which well established but where we believe would have a competitive hedge or we have a passage which could be leveraged effectively in that area, that would include wholesale in the long distance for example of the capacity as tracking the growth event territory wirelessly and invoice that. If reputing that strategy if we see an opportunity which allows us to either accelerate or to do it more efficiently our asset swiping games so despite then will pursue it. To that end as you as soon you start looking at the businesses which operate in the different domain, in a different environment, to say that everything should be either they say multiple as we are all well issued gasp rating industry margins would dramatically limit the opportunity for us to enter into the new areas. So each case, we will be very carefully analyze and each case would be judged on the merit of strategic sales and delivering value to shareholders.

<Q>: And what would be the timeframe for delivering the end value to the shareholder from an acquisition in the circumstances that you’ve described?

<A>: If we look

If we are looking at our earnings diluted our position from that perspective I think in our industry normally that we would be looking two years (indiscernible).

<Q>: Okay, great. Thank you very much.

Operator: Our next question comes from Alex Kuznetsov with Bear Stearns.

<Q>: Good afternoon. I would like to ask you a couple of questions. First of all your MOU expanded to 171 minutes in Russia last quarter and day (ph) its my understanding is that is prices close to the European level. What further upside for MOU expansion do you expect? And secondly could you provide us with some further information on your expansion in Vietnam please maybe you can give us some key after (indiscernible) you expect to achieve by said in Vietnam. Thank you.

<A>: Let me start with (indiscernible). We believe that there is potential for growth of minutes of use in Russia. If you compare us our numbers will be European its important to note that European operator calculate mobile to mobile a minutes as one minute and we calculate it two minutes which is (indiscernible) software in to a big different comparison. And its clear that if you talk — if you take our Minutes of Use per active subscriber which is a right now 200 minutes, its only 6 minutes per day which is not too much. And its clear that we have continuous economical growth in Russia with the subscriber becoming more mature with our continuous traffic stimulation program very clear potential and we would like to explore it then to used it

explore it then to use this but that’s a low income (ph) forwards.

<A>: And as far as Vietnam (indiscernible) penetrations there concerned, we prefer not to talk much about it and that’s why we didn’t include anything into our press release and into our presentation. I had mentioned it answering the previous question on the administration to the strategic production. The reason why we are doing that as we mentioned before, we would be the first company ever to establish a joint venture and actually direct that to the presence in telecom industry in some major fashion. And that became possible only after a session of Vietnam to (indiscernible) and that’s happened early this spring. And all the legislation and the regulatory of framework is not robust here. So we are now in a fairly intensive and lengthy process of negotiating the structure and joint venture with the government (ph). And our partner there will be ministered the public security. So the idea is to establish joint venture which wold be a fourth GSM operator in the country.

Said all this when we look at the penetration level in Vietnam which is currently operating around 30%, because there are also not requirements for (indiscernible) person when they getting the numbers there are multiple (indiscernible) same story as in Russia and all of (indiscernible) that use actually to as a payment terms rather than real (ph) sim cards. So that all gives us a hope that penetration game is far from really being played out and a (indiscernible) a room for the fourth player market size of 85 million

market size of 85 million people to adjust that. And our initial assessment was targeting 10 million subscribers and that’s were the number of 1 billion actually which is been indicated in the press than our earlier statements came from. Our normal level of investment is about $100 per stock. So if you take this 7 million subscribers and you end-up with building the investment. Our strength always been that we investors would grow. And the initial investment of 1 billion allows us to create the fixed (ph) network was adequate coverage. But if we see that we’ve computing successfully which I would I wouldn’t rule-out. Then we will of course readjust our plans. But initially we think along those lines.

<Q>: And do you have any guidance in terms of ARPU?

<A>: Of course not because we haven’t decided enough operation there. We haven’t got the license we are (indiscernible). So of course we don’t guide on anything in the sense (ph).

<Q>: Thank you very much.

Operator: Our next question comes from (indiscernible) with UBS.

<Q>: Good afternoon. Question I’m just wondering about the concern (ph) the way you see better than anything (ph) developing in Russia. Could you tell me first of all how much revenues you derive from (indiscernible) acquisition and I’m right kind of my assumption (ph) it looks like from the long term trend of growing faster than MTS at least in absolute terms is no longer there. I mean any comments on that do you believe that the (indiscernible) is actually disappeared or MTS management have gotten stronger. Or is it the 10% basically above you have been very impressed with the years gaining market share away from them. Is it still possible going forward?

is it still possible going forward, or do you think the competitive situation change? Thanks.

<A>: It’s from in Kutska (ph) operations we got 8 million additional revenues and that’s half of the quarter, because acquisition was in the middle of the third quarter. as compared to competitive situation we believe it’s in general virtual behavior of all players, so all players right now are more concentrated on revenue growth and we see clearly that interesting steps of all players, but we are trying to work harder and that’s actually our target is continuous revenue growth in Russia. We believe we are delivering that and that’s the real focus going forward.

<Q>: All right, thanks and Izosimov (ph) the other question on the Ukraine, how much of revenues – how much of total lead of the roaming revenues in Q3, and do you believe that this is deteriorated relatively a little bit of this stage while the data base is still low?

<A>: I will just start that in our consolidated revenues, revenues from roaming was we are representing 6% of total revenues. And in Russia it was slightly higher it was approximately 8% of Russian revenues. In Ukraine we will just check_

<Q>: Curious about Ukraine in particular, because obviously quarter-on-quarter ARPU dynamics was really impressive, but just wondering how it might_.

<A>: We could show, we usually don’t view this exact number, how much roaming revenue was sitting in each of the market on each of countries. And you can contact our office actually, we will probably can give you some trend

probably can give you some trend in general, but I would confirm that you’re feeling is absolutely right, and that’s what we’re trying to say now press release that the volatility of the top-line in Ukraine would be much more pronounced, because of two reasons, it roaming effect of people coming into now. But also a lot of Russian, because still there is no requirement for ID (ph), well acquiring SIM price a lot of Russian visitors coming and buying or non-Russian as well, coming and buying SIM cost, and the use it only for the short visit. And in terms of overall trends, what we can assign for the roaming in the sense would be about probably 14% of third quarter revenue.

Operator: Thank you. Our next question comes from Alexander Kazbegi with Renaissance Capital. Please go ahead.

<Q>: Yes, good evening, on Russia, I was just wondering, I mean you had one of the slowest growths in terms of subscriber numbers in this quarter. But, yes your sales and marketing actually grew quite considerably, and adding to the margin. And so, if you could maybe discuss the reasons for that, and what should we expect specifically in Q4 and possibly going forward. And the other question probably is gong to be on Kazakhstan, you mentioned about the competitive situation, but I just wanted to also know you, how do you view the current for the economic house of the country potential slowdown of the economy in specific probably next year, and some pressure probably for 10 (ph) through depreciate than what sort of input that’s could have in the numbers. Thank you.

<A>: Alex, thank you, first of all, I will first effective base was lot that slow actually we grew from 14 million active

million actives were subscribers in the second quarter 241.8. There is (indiscernible) condition there included but of course even without that it was more than 1 million growth of after users. And as we think that all for_

<Q>: Yes, organically because one of the slowest in the last three quarters?

<A>: (indiscernible) on a_

<Q>: Sorry, its, you know doesn’t matter. Let’s get to your answer.

<A>: Yeah, but first of all, just to confirm if you look to dynamic all (indiscernible) its not there. It’s not the slowest. You can see it clearly on our chart. And if you see that sales of growth that, of that quarter that was not small dealer. Actually our growth additions were more than 5 million (indiscernible) year in the quarter. But of course we can see that in general been Russian market, we see them some indicators of a saturation as you can see that most of the market, most of the regions are in saturation based. And of course the recent growth but as we indeed in rural areas and that’s not front out. Most important going forward will be of course MOU and ARPU growth. That will be the main driver for the rest Europe and Russia.

<Q>: Alex, I just want, I just check out the (indiscernible) anything to the same, checking the numbers increased last year between quarter 3 and quarter 2 in Russia but it starts was ind . And the organic increased this year is 900,000. So we growth them the same phase for

And on Kazakhstan, in terms of economy we really, don’t incorporate this into our calculations from, to be honest, right, so we don’t take microeconomic factors and the reason again that we wouldn’t do anything different, as a management, because we have, we experiencing still is very, very strong growth which currently outpace our ability almost to develop in net worth and therefore we will continue to group investments in Kazakhstan and develop sales growth, also it seems to me that, ability of ARPU which was fairly remarkable when you have such a growth in subscriber base were never experience anything like that in Russia, at that stage of development in the market so, having virtual lets let ARPU their abilities at least so far of, our subscriber base and yes of course the food inflation on the (indiscernible), particularly hitting Kazakhstan and because there is so on (ph), might have some effect, but we believe that we are very low in the food change you wish to experience in the substantial, substantial pressure.

<Q>: Okay, thank you.

Operator: Our next question comes from (indiscernible) with Merrill Lynch.

<Q>: Yes hi, good afternoon, I have two questions, one on the bill of commissions in Russia, there was a big jump in Q3 versus Q2 even on upper growth had basis, there anything to happening here and then the second is on what percentage of

on what percentage of your revenue comes from that broadband services?

<A>: First on the dealer commissions, the increase was not that height was $2 distance between two quarters, and that was driven by the revenue growth, because our dealer commissions are paid as a percentage of revenues and of course with revenue and ARPU growth we have for our slides an slight increase. And in terms of percentage of revenue that comes from non-voice it was 13.6% (ph) in the last quarter which is essentially consistent with both the previous quarter and year ago.

<Q>: Great, thank you.

Operator: Next is William Kerby with NHCFAE Capital (ph). Please go ahead.

<Q>: Yeah, thank you. I have two questions. Firstly your tax rate in Q3 was lower than we have seen in earlier quarters or earlier at is, what’s your guidance for that in the future? And secondly, what level of advertising inflation you are seeing in Russia? And are you likely to make any changes to your advertising volume for the amount you advertise in the future?

<A>: So, let me talk with effective tax-rates. Yes, in the third quarter effective tax-rate was around 26%, and in the second quarter it was 27%. So, the effect from the side about to the contribution of TASS conscious acceptable (ph) income is becoming higher, and effective tax-rate there is slightly lower. And going forward we assume that tax-rate will be a kind of in the range between

in the range between 24 and maybe 29% because you see the develop full is the at largely increases that we are (indiscernible) since what we extended because we have to make certain clue and valuation on potential fact exposures and this made change quarter-on-quarter. So, in general Vimpel website it will be well in the guidance (ph) which I indicated.

<A>: And with regard to advertising inflations with the change in the advertising widen the restriction now on the amount of advertising that you can have per hour and per gain networks. Our expectation is that from a total market standpoint that TV will increase by 60% and potentially even a little bit more. And overall that the will be in the 30 to 40% when you look at the mix including out (indiscernible) radio center. And in terms of our specific strategy we are really that just closing the specific support we do of course as the first inflations rates in different media vehicles will reevaluate what the most effiecent way to deliver our message to consumer.

Okay thank you and so what will be the effect on our SG&A line do you see that growing significantly in the future normally bad control that. We have consistently say that said from marketing standpoint we would planned to spent between 4 to 5% in total marketing and we would maintain that guidance

we would maintain that guidance.

<Q>: Okay, thank you.

Operator: Our next question comes from Alex Wright [Alexander Wright] with UBS. Please go ahead.

<Q>: Yes, good afternoon. Two questions please. One on Ukrainian SG&A which is been very stable amount for quarters likely very strong growth in revenue and subscribers. Could you tell us how you’ve achieved that in present trend and to what extent you think that is sustainable (indiscernible)? And the second question is on the Kazakh (ph) business here you highlighted you decide to focus more on the share of revenue and high quality to subscriber base going forward, could you give any examples of some how you intend to implement that strategy in the short-term specifically? Thank you.

<A>: Right on Ukrainian SG&A indeed it was lot of focus state by the management team and (indiscernible) actually. The management team under the group level to achieve that. So few factors that initial scale then achieved than we’ve been saying that we now positioned well to continue to grow without putting additional people on the ground and (indiscernible) additional expenses on maintenance of the network (indiscernible). so we are benefited from sort of upfront investment if you wish. Also it’s a really strict budget control exercised in the country because when you in red zone and the price were ranging around the of course you have to apply (inaudible). And thirdly, which was probably felt more seasonal or political seasonality say, (inaudible) it was very happy on resizing around the election campaign and we just decided not to waste our money because it would be difficult to get share of

it will be very difficult to get sure of mind. It will therefore it was with the whole third quarter was particularly low when (indiscernible). And in terms of process timing and addressing high quality subscriber number one the practices that we’ve been using to because partner with dealers and to acquire to our own – our own offices we think that affected in delivering as far as some practices that have been done only in (indiscernible) and in other markets where SIM cards are given away for free or virtually for free we will weight those as we do in Russia which would help the network their subscriber very strong And then as we noted in the press release and in presentation we are focused on building the MOU of our customers trying to build that habit of higher usage and then over time based on all of our kept being an experience specially to extend ARPU.

<Q>: Thanks. Can I just follow up from (indiscernible) you trying in terms of that the outlook I mean did your sales you bring to the extent to now that’s you have the SG&A shifts out to growth again or do you think its still more scale games that you can make in the coming quarters?

<A>: Well, I mean clearly that current level of SG&A in the present revenues very too high. And therefore it will continue to decline, so even if we see increase in SG&A it will much slower then the top line growth.

<Q>: Sure. Okay, yes thanks.

Operator: Next is Andrey Bogdanov with Troika.

<Q>: Good evening. A few questions, one was Russia. Can you give us some generic guideline as far as the

some January guideline as far as the instead of a uses versus our performance has concerned. I know you that you have a flat that was (indiscernible) and third quarter which actually very good results. So do you think that such impressive performance (indiscernible) will continue with instead of a flat user, instead of or real to stable price increment which in another which will result in (indiscernible) ARPU going forwards. Second question is with regard to Ukraine. Am I right to assume that your corporation, with Orkut (ph) Telecom can initially help you in getting the market share in Ukraine? As far in this stand, you could (indiscernible) business in early November instead the major downs in outside of them, so (indiscernible) still to be Orkut Telecom new customers will effectively using your service in FM outside of those suffix periods even that right assumption. What impact do you see on your business from that corporation? Thank you.

<A>: On a Russian MOU ARPU development, I would say that in the second and third quarter, we had a special some more promotion which was driving additional minutes of use that at the low price on that traffic. This promotion we finished on the first of September. And in the fourth quarter, that’s why, its (indiscernible) be slight to less minutes to use and increase in the third equity this particular promotion. We will talk about overall seasonal trends of course I should say that in general MOU in that second and third quarter, summer months are higher and in that

are higher, and in the first and fourth quarter are lower. And just overall impression on Russian markets that we don’t need further current reduction to keep growing in the (indiscernible). That’s why we will try to be as conservative as what’s amount in our pricing and not to allow prices to go down.

And before I answer the question on Ukraine, I would like to correct myself. On my previous answer that might have sound a bit too optimistic on the fourth quarter, because whether my answer related to the next [Audio Inaudible] that will feed the ratio going down. As fourth quarter usually more in terms of communication and that was spent on advertising and promotion, and on top of it the top-line will be affected by roaming not being there, and seasonal users not being there. That ratio of G&A growing slower and significantly slower down the top-line might not hold for the fourth quarter. So I would like to qualify by answer for that is, if we transfer the next year projections.

As slides our relationship with over the telecom, this is just a test and we are trying to understand whether we can reach any seeing the audience effect there, but so far we are not point we are seeking (ph) in whatever shape of form effects of that compilation (ph) and July (ph) wants provisional projection.

Operator: Thank you. Our next question comes from Anastasia Obukhova with Deutsche Bank.

<Q>: Good evening. And congratulation for your good result, the question is about the roaming lining (ph) is, can you please split them between your own one and the guest ones? And the second question

And the second question can you please provide the percentage of adverse revenues in the ARPU, thank you?

<A>: In our roaming revenues 30% keying from gifts and 70% from our subscribers who where on struggling. And it’s percentage of evaluate (indiscernible) presented to that it was mentioned 13.6% of services revenues came from (indiscernible).

<Q>: Thank you.

<A>: That’s in Russia, I will just close coverage time if the very similar percentage.

<Q>: Thank you.

Operator: Thank you. Our next question comes from Nadezhda Golubeva with Aton.

<Q>: Good afternoon. My just question is about our coats inflations of where give some media inflation in Russia do you believe file there are certain Negroes for (indiscernible) which could immediately investor margin. And all do you believe prime margin our level more or less than stable next year. Secondly could you possible bit new on the promotion in fourth quarter or the made under probably planned and do risk. We see that’s was the risk of some of price pressure in fourth quarter and also possibly what’s your felling one 2008 whether there was risk of invisible price competition. And third question is I may do you believe we can see (indiscernible) of use such gross in Russia next year as they newly doing subscribers more are do you see incur the growth rates I mean the (indiscernible) are pig pound. Thank you.

<A>: Okay let me start from of course it will be some

Of course it will be some cost which will have some negative effect and of course we’ll have media inflation with that salary growth in Russia and some other alliance. But saying that we are trying to be as efficient as possible, as an example we launched OpEx deficiency program in VimpelCom where we looked to all items and we look for new savings and it’s actually was a very successful investigation we identified number of project which are right now are delivering significant saving this year and then bringing even more results next year. That’s why it will be of course not an easy for the development of the business but we will try to do our best and to be as efficient as possible. For the promotions I can say that during the fourth quarter we’re not making any serious price promotion actually we already launched our New Year campaign which is an interesting gift for children and their parents and that’s goods on new product but without reduction interest. And that would be our strategy for the next year as well. Stable tariffs not aggressive behavior in terms of tariff but more different say at marketing and innovative resolution.

<Q>: And just to add one of the thing that the so far in the fourth quarter we’ve launched a couple of other promotions that we think are important, one is promotion that filled our MMS revenue and trying

and trying to drive penetration of MMS. And another one is with discounts on long distance we changed our tariff structure for long distance both at city and international long distance.

Operator: Thank you. Our next question comes from Will (indiscernible) with (indiscernible) Research.

<Q>: Thanks. And just a links back to a couple of the questions already asked on inflation, but I mean you got inflation running I think about 11% in Russia and obviously, so the advertising inflation is running a lot higher than that. And against that backdrop it sort of seems that we due to pricing in Russia is it full it felt 13% in this quarter year-over-year and I just wonder you mention that you hope you can stabilize pricing going forward, but is there a reason why pricing year-over-year is falling, I mean obviously that CPP price right (ph) is annualized now, but it does seem the prices are falling quite sharply against inflation that’s going up quite fast in Russia? I think (ph) you can comment on that?

<A>: Yeah. And we expect to finish the year at roughly the same (indiscernible) that we started the year. We have had an impact in pricing as we have talked about last quarters call, and this quarter which is was specifically driven towards sharing higher instant storing before processing (ph) customers to try and help build a habit in Russia or we improve we have in Russia, but in general we expect the beginning and the end point for ATPM to be very consistent to the beginning and the end of the year.

<Q>: Yeah, I guess that was more thinking looking out into 2008?

<A>: Overall, I would just give a comment on inflation, I mean to how you did advertising the next (indiscernible), I am sorry, the intention is keep prices flat, and therefore we managed to do that, and proved a great achiever (ph)

Surviving the bear market.

A few people asked me how to make money in a bear market. It’s not as easy as it is when everything goes up, and you can jump on any hot stock and ride it to the moon (think CROX, VMW, HANS, LULU, AAPL, etc a few months ago.
My number one rule is never to keep any long positions overnight. There are almost always bad news in the morning, and when that happens does not matter how good of an equity you are holding – it will get killed with the rest of the market. That’s not to say you should never have a long position at all… in fact as it often happens selling gets overdone for some stocks and picking up something in the morning and selling in 2-3 hours for 5-10% profit is always a nice way to start a day.
Short the momentum stocks that lost their momentum. Right now there are too many of those in this market. The only caveat – buy out of money calls to protect your shorts. You don’t want to get killed if the stock starts running again.. and on good news there will be these pops.
This is why is like to short or buy puts on the indexes. It’s much safer to assume they will go down over 3-4 sessions. SPY, QQQQ are the obvious indexes to play with.
I am saving the best for last. There are so many Ultra short ETFs now that let you bet against an industry without a risk of options (expiring) or shorts (blowing up and taking all your money, having to cover). These ETFs move 2% up for every 1% down for the underlying indexes, My favorite Ultra short ETFs are:
- SKF (Ultra short financial). It’s safe to say that there will be more selling in that sector and I bet someone big will go under.
- FXP (Ultra short China). That bloated market is bound to implode.
- QID (Ultra short Nasdaq 100). Technology seems to have followed the financials in the last couple of month.
As you can see there are plenty of ways to making money in a bear market, just have to be more careful – eventually the bear market will end.. you can’t stay bearish forever.

Case for a bear market.

At this point I believe the bull market is coming to an end and the bear market is just beginning. I have exited almost all my long positions and loaded with Ultra shorts and puts. I do hope this will be quick and painless, however my expectation is that for the next 6 months we will see a lot more bad news.

There are too many reasons for this, but I believe the primary cause is the subprime meltdown. Here is my reasoning.

1) There are anywhere between 1.3 trillion and 2 trillion in subprime mortgage. I have seen both a lot of numbers, but lets say it’s 1.5 trillion.. on a low side. Today’s market price of this is about 68c on a dollar. check here for the most current . Again, this is the AAA, the highest rated subprime (now below junk rating). So at the market rate we are talking about 500bln in write downs. So far we had about 50bln, so we are in the 1st inning. Every time a new wave ot write downs is announced the financials tank (and it’s about 19% of the whole market) and they take everyone else for the ride.
2) Can the Feds save us? They did save us before, emergency rate cut, plus another .25 point. We rallied on both news. But look what it did to the commodities (dollar denominated).. oil is approaching $100, gold is through the roof, silver, metals. People and institutions are shifting from equities to commodities. Dollar is being destroyed. I think FED is done cutting for a while
3) When did the bear market start. DOW, NAS, S&P are all still up for a year.. if measured in $ value. But what if we look at a real value (basket of currencies). Dollar is down vs. Yen, Euro, Canadian $ – every major currency. So in real term the market is DOWN for the year. Lets take S&P and EURO. S&P is up 4% for the year.. $ vs Euro is down 13% – real performance down 9%.
4) What about the consumer? Consume did pull us out of last slump.. I would argue they did it because they saw the real estate values increase, so it was easy to borrow money ( think all the lines of credit – HELOCs) taken out. Now that real estate prices are falling and lots of people upside down on their home they will be a lot more cautious in their spendings.

The feds just came out today and reduced growth forecasts. I hope we will avoid recession, however I will stay short in this market for a while.

Buying a new car.

Buying a car is one of the largest expenses a person makes in their life aside from buying a house. It’s understandable how most have at least some anxiety associated with making such a big purchase. I have been asked on my than one occasion to help negotiate the best deal on a car, and have been able to help almost everyone.

I will give some general and more specific tips – things you should know before you go to the dealership to buy a car you should go and test drive all the cars you are interested in.

Make sure these are two separate trips, never buy a car right after the test drive. This is important and will save you from the regrets of the impulsive buys.

The first thing to do is to create a list of all potential cars you are interested in. Sites like edmunds.com will give you some good information, reviews, etc. Once you picked 2-3 cars you are considering go and test drive. When the sales people try to force you to make a decision tell them this

“I have a list of cars I like to test drive before making a final decision which car is right for me. I am not ready to buy a car today”. They will get lost and let you drive the car you like.

Now you found the car you like and ready to buy it. Research the MSRP of the car with all the options as well as the Invoice price:  carsdirect.com is the best resource to get both prices. carsdirect.com will also give you a great idea of what is the price in your area. This is NOT the price you will be targeting, as a rule of thumb you can get additional 1-2% off carsdirect.com price. Reading some forums will help you determine the best price you can get on any given cars, but in general it will be between invoice and invoice + $1 500.

Now you know the car you like, with the options you like and the price you want to pay for it. We should proceed to the most difficult step – convincing the car dealer that they should let you have that car at that price.

I suggest going to a different dealer from the one where you did a test drive.  Go on a slow day, you will get a much easier deal on Wednesday mornings compare to Saturday afternoon. They will pay more attention to you when you are the only customer on the dealership.

When the salesman comes to you give them the exact model, color, options you would like and have them come back to you with the price. Once they come back with the price you tell them exactly how much  you are willing to pay for this car and how you came up with this number (usually invoice +).

So lets say you are willing to pay $1000 above invoice on that BMW. And they are saying “they will never approve it”. They will make you wait, a manager will come out, or whatever other techniques they like to use.  Your statement should stay firm:

“I am your model customer, I came here, I know exactly what I want, I don’t waste your time and ready to make a deal right now. You will make at least $1000 on this car for 15 minute of work, which is a good deal does not matter how you look at it. Lets do a deal now”.

If they say you are “difficult” “unreasonable” or “not wanting to make a deal” keep showing them the number and tell them “if you are not willing to make a deal I will go back to (name of dealership when you test drove the car) and they will give you just  that deal.

I have never seen this strategy not work, but I would appreciate your experiences with this or any other/better technique you used.

VMware (VMW) analysis

Overview

VMware is a virtualization company. Their product runs on top of x86 hardware (host) and allows for multiple virtual machines (guests) to be created. VMware emulates hardware such as video controllers, disk controllers, and network adapters. An administrator can easily move Virtual servers between physical hardware with minimal interuption of the services.

There are two main products that VMware produces.

• VMware server – a free product, available for a free download. It runs on top of your base operating system (Windows or Linux) and gives you an ability to create Virtual Machines on top of you existing OS.
• VMware ESX server – this is the enterprise product, which run on bare hardware for maximum performance and has a suite of accompanying software.

Benefits
The main benefit of server virtulization is an ability to merge a large number of physical hosts into now a small number of physical servers, without having to deal with contention of the different type of application running within the same operating system. This does not only save money on hardware, but also on datacenter space, air conditioning, and power. These resources are very valuable for most organization and in the cost/benefit analysis almost always outweigh the cost of VMware software. Other benefits include an ability to seamlessly move guests from one physical host to another in case of hardware maintenance or failure, ability to easily replicate to Disaster Recovery site, common management infrastructure.

Competition.

Despite the claims by the number of different companies that claim to have the competing product at the current time there is no real competition to the flagship ESX product. Recent purchase of Citrix of XEN is the only close competitor in sight, however they are still years behind VMware development in management tools, and virtualization platform itself.

The other competition is Microsoft, they currently don’t have a product to compete with ESX, only with a free server. They claim that the real competition is coming in the middle of 2008, which knowing Microsoft means sometimes in 2009 and it will take them another 2 years and 5 service packs to work out the major bugs.

Technical analysis

VMware trading range since IPO is 51.50 – 125.25. With yesterdays close at 91.88. They closed just slightly below 50 day SMA of 92.34, which to me indicates a short term bearish pattern. On it’s way to 125 VMware managed to outrun all the support levels, which lead to a 34 point decline over 10 days. The next support level is 82, following a strong support at 78. I will be a buyer of VMware again as long as it manages to stay about 78 levels.

Fundamentals and long term forecast

VMware hefty market cap (38bln) gives it a currentP/E of183. For a company like VMware current P/E is somewhat meaningless and we should be looking at the future growth. By the IDC forecasts the number of PC servers shipped to run Virtual machines will be 1.7 million (representing 14.6% of total shipments). My forecast is higher, placing the number of servers to run VMs at 2mln with 80% of them to run VMware ESX product. This puts VMware 2010 sales at 1.6mln licenses, which adds up to about 9.6bln in sales + support and professional services for total sales of conservatively 13bln/year. Figuring market cap for a software company to be 6x sales (in line with MSFT and ORCL) we get a market cap of 78B with a share price of $189/share.

Recommendation

Wait for the pullback to low 80ies level to get back into this stock for a great long term perspective.

VIP upgrade.

VIP (Vimpelcom) is one of my big holdings. Got upgraded by DEUTSCHE BANK today with a price target of 43.
Here is a full text of the upgrade:

Synopsis:
In a report on the mobile sector, MTS & Vimpelcom: Pricing in a $20 Russian
ARPU, published earlier today, we raised our target price for Vimpelcom by 43%
to $43. We argued that visibility has improved sufficiently for the market to
start appreciating Russia’s usage-fuelled ARPU growth potential, and
dramatically increased our long-term Russian ARPU forecast, from $13 to $20.
This led to a 36% increase in our 2007-16 EBITDA forecasts. Our new Vimpelcom
target price offers 41% potential upside and hence we reiterated our Buy rating
on the stock.
We use an APT-derived RWACC of 11.0% (a RROE of 11.4%, including an equity risk
premium of 4.3%, a corporate governance risk premium of 0.7% and a liquidity
risk premium of 0.1%). We have assigned our terminal growth rate of 4% based on
the belief that competitive pressures on the sector will prevent mobile telecoms
from growing in line with nominal GDP (5%) beyond our explicit forecast period
(2007-16).
The key downside risks stem from competition possibly being greater than
expected, thus jeopardising the ongoing Russian ARPU recovery. The main risk is
that the ARPU margin, which is currently increasing, may provoke stronger
competition for a redistribution of the telecoms companies’ market
shares. Company-specific risks for Vimpelcom include potential greater pressure
on margins from inflation in Russia, wage pressures and rising advertising
rates. In Kazakhstan, risks for Vimpelcom stem from the potential aggressive
entry of a third player leading to a deterioration of the currently benign
competitive environment (essentially a duopoly at this stage). Other
Vimpelcom-specific risks relate to the performance of its expansion plans for
recently acquired operators in CIS markets (Armenia and Georgia).

The interesting part is I have been talking about growing APRU on yahoo finance blog

siting the same number ($20) on October 9th. I guess the analysts are a little slow. Here is my full post on that subject
I am still holding on to VIP. While i think the number of subscribers in Russia is now tapped out, and we will not see an increase there are still catalysts for growth.
- Revenue per customer. It’s been growing consistently. GDP has been growing, so people have more money to spend. It went from $8/month to $12.something a month in the last year. I believe it will be 20-25/month within 2 years easily, giving 100% revenue upside from existing customers.
- Other former USSR countries. A lot of the have not reached the saturation point Russia has. They will grow subscribers as well as revenue per subscribers.
- Deals with Asia.. it’s hard to quantify Vietnam deal impact, but it will be real. If China licenses go through it will be a huge boost.

If i see the financials deteriorate i will sell the stock, however for now there is nothing that looks “tapped out”.

Why am I doing this?

Today is an exciting day for me. After year and years of reading other peoples blogs and comments I decided to write my own… I hope to never have to use “seemed like a good idea at the time” to explain why exactly I am doing this.

Who am I?

I was never properly psychoanalyzed, so I am sure my answer to the question will not please those of you who read Freud over breakfast, however here are some quick highlights.

• I am a 31 year old male human being.
• I live in Syracuse over the weekends and in New York City during the week – I will elaborate on why/how this happened int he future.
• I own an IT consulting company, to which I am the only employee
• I am a fairly sophisticated investor

And here comes the WHY…

Over the last few years I have accumulated a wealth of information about investing, taxes, credit, business, etc. I like to share this information with people and help them make (or save) some money. On the other hand I love to learn things from others, and hopefully get some interesting feedback on my posts.

I will post on a number of subjects here

• investing (stocks, bonds, ETFs, derivatives, etc).
• credit cards
• buying tips for big item purchases
• banking
• real estate
• anything else that I find interesting to share.